<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
The Growth & Income Fund
Second-Quarter Report
June 30, 1997
GROWTH & INCOME
2
<PAGE>
The Growth & Income Fund SECOND-QUARTER REPORT
FUND PHILOSOPHY
The Growth & Income Fund seeks to achieve long-term total return by investing
primarily in small- and mid-cap stocks, convertible bonds, and preferreds. Our
flexible, bottom-up approach is based on value recognition and trend analysis.
We look for well-managed companies with improving fundamentals that are
positioned for growth. Our formula for long-term success also includes a
disciplined approach to managing risk: losses are eliminated quickly, and we are
constantly looking for new opportunities. In addition, the Fund also may engage
in short sales of securities it expects to decline in price.
CONTENTS
Fund Highlights 1
Report to Shareholders 2
Fund Performance - Class A Shares 6
Portfolio Summary 7
Fund Performance - Class C Shares 8
Schedule of Investments 9
Schedule of Securities Sold Short 15
Statement of Assets and Liabilities 16
Statement of Operations 17
Statement of Changes in Net Assets 18
Financial Highlights - Class A Shares 19
Financial Highlights - Class C Shares 20
Notes to Financial Statements 21
Administration 28
<PAGE>
FUND HIGHLIGHTS
OUTLOOK
We think the profitability potential of many of our small- and medium-sized
companies is still compelling and can outpace the earnings momentum of the S&P
500, where we feel valuations are fair to overpriced.
FINANCIAL HOLDINGS REDUCED
We reduced our exposure to financial stocks during the quarter after the Fed
raised funds rates earlier in the year.
TECHNOLOGY
During the quarter we increased our technology exposure.
ENERGY SERVICES
We also remain committed to our energy service investments as oil and gas
companies look to increase production.
ACQUISITION
During the quarter, BankAmerica agreed to acquire Robertson Stephens. The deal
is subject to regulatory and other approvals, and it is expected to be completed
as early as September 30, 1997.
1
<PAGE>
[PHOTO]
FUND MANAGER
John L. Wallace
Portfolio Manager
The Robertson Stephens Growth & Income Fund
DEAR SHAREHOLDER:
The Robertson Stephens Growth & Income Fund (Class A shares) was up 12.50% for
the second quarter of 1997 versus 14.01% for the Lipper Growth & Income Funds
Index and 17.40% for the S&P 500 Index. For the first half, the Fund was up
9.03% versus 15.93% for the Lipper and 20.54% for the S&P 500. For the period
from May 9, 1997 (Commencement of Operations) to June 30, 1997, the Fund's Class
C shares were up 7.01%.
MARKET ENVIRONMENT
During the second quarter, the Dow Jones Industrial Average and the S&P 500
reversed what looked to be their first official correction since 1990 and put
together a very impressive rally to new highs. Small-cap stocks participated in
this rally but had lagged considerably since the beginning of the year. Everyone
knows that small caps have underperformed large blue-chip stocks since May 1996,
but the performance gap has been dramatic.
The previous times small caps underperformed this dramatically were in 1987 and
1990. What is interesting now is that this underperformance is coming during a
bull market. At this stage of the economic cycle, we are looking for companies
and sectors that are benefiting from increases in capital spending and still
have pricing power. We remain committed to a flexible, objective approach to
equity investing but our bias
"WE REMAIN COMMITTED TO A FLEXIBLE, OBJECTIVE APPROACH TO EQUITY INVESTING
BUT OUR BIAS REMAINS MORE SMALL- TO MID-CAP...."
2
<PAGE>
remains more small- to mid-cap, where we continue to see greater value and
growth potential. We think the profitability potential of many of our small-
and medium-sized companies is still compelling and can outpace the earnings
momentum of the S&P 500, where we feel valuations are fair to overpriced.
OUTLOOK
After two very strong years in 1995 and 1996, we feel that the market might
return to a more normal pattern of price appreciation. Volatility has risen in
1997 after several years of below-average readings, and we have seen problems
associated with price momentum investing. We feel that emphasis on valuation,
stock selection, and sector rotation will return. We also believe that sustained
market strength for the rest of the year requires real economic growth to remain
moderate. The bond yield should remain below 7.25%. We must see continued signs
of caution, and the market must broaden to include small-cap stocks as well as
large-cap.
We remain focused on bottom-up research in our search for companies that we
believe have a growth catalyst that will push the stock price and earnings
higher. We continue to monitor the earnings progress of all of our holdings, and
to remain flexible and open-minded about our investments. We want shareholders
to keep in mind that capital preservation is every bit as important as growth.
PORTFOLIO
We remain optimistic about the risk/reward profile of our REITs. We believe that
the economic outlook is good, and geographically our REIT positions are
exhibiting above-average growth. Many of our REITs are yielding 5-7% and despite
some fluctuations in interest rates, we still like their total return potential.
In our convertible positions, we continue to seek those that will participate in
60-80% of any upside move of the underlying common stock.
3
<PAGE>
PORTFOLIO
The Fund's long positions remained diversified across many S&P sectors at
quarter-end, with the top ten accounting for 17.49% of the Fund. Our three
largest holdings at quarter-end were VANS, INC. (2.23%), which manufactures and
sells casual performance footwear for men, women, and children;
SCIENTIFIC-ATLANTA, INC. (1.87%), which makes terrestrial and satellite-based
communications network products for data transmission, cable T.V., and
telecommunications providers; and PIER 1 IMPORTS, INC. (1.83%), which sells a
variety of imported home furnishing and related items.
FINANCIAL HOLDINGS REDUCED
We reduced our exposure to financial stocks during the quarter after the Fed
raised funds rates in March. Although the Fed has remained neutral since then,
the fact remains that it has started to tighten for the first time in more than
two years. Thus, we believe that financial stocks are unlikely to outperform at
this juncture and have made investments in sectors that we feel have stronger
growth potential.
[PHOTO]
INVESTMENT MANAGEMENT
G. RANDY HECHT
President
Robertson Stephens
Investment Trust
[email protected]
INVESTMENT TEAM
RESEARCH
John Seabern
TRADING
Don Heidary
ADMINISTRATION
Tara Britton
4
<PAGE>
TECHNOLOGY
In total, our technology exposure increased from 18.6% at the end of the first
quarter to 21.5% at the close of the second.
Cable T.V. stocks have underperformed the market since 1993, and current
valuations are at a discount to private cable valuations, resulting in
attractive investment opportunities. In addition, new telecommunications and
cable equipment order momentum seems to be rising. During the quarter we
increased our exposure in the telecommunications services and equipment
industries. Portfolio holdings include ANTEC (0.38% of the portfolio at
quarter-end), SCIENTIFIC-ATLANTA (1.87%), TELE-COMMUNICATIONS (0.69%), and
WESTINGHOUSE (1.05%). In the PC area, capital spending remains focused on
computers and software as companies and individuals seek productivity gains. At
quarter-end, computer software and services comprised 6.60% of the portfolio,
with computer hardware and components at 0.9%.
ENERGY SERVICES
We also remain committed to our energy service investments. The major
international integrated oil and gas companies continue to increase their
capital spending as finding costs for hydrocarbons are coming down. Our oil
service investments are focused on companies that are introducing new products
to help these companies lower finding costs further and to increase
productivity.
"WE FOCUS ON AND LOOK FORWARD TO A LONG-TERM RELATIONSHIP WITH OUR
SHAREHOLDERS."
As we move forward, we want to remind investors that successful equity investing
is not a short-term proposition. We focus on and look forward to a long-term
relationship with our shareholders. On behalf of the entire Growth & Income
team, I want to thank you all for your interest and support.
Sincerely,
/s/ John L. Wallace
JOHN L. WALLACE
Portfolio Manager
July 28, 1997
TO HEAR MY ONGOING THOUGHTS ON THE FUND, CALL OUR PORTFOLIO MANAGER HOTLINE AT
1-800-766-3863.
5
<PAGE>
FUND PERFORMANCE - CLASS A SHARES
Results of a hypothetical $10,000 investment in The Robertson Stephens Growth &
Income Fund, the S&P 500 Index(1), and the Lipper Growth & Income Funds Index(2)
IF INVESTED ON JULY 12, 1995(3)
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
GROWTH & INCOME S&P 500 LIPPER GROWTH &
FOR THE PERIOD ENDED 6/30/97 FUND INDEX(1) INCOME FUNDS INDEX(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since inception (7/12/95)(3) 52.16% 64.79% 52.94%
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
GROWTH & INCOME S&P 500 LIPPER GROWTH &
FOR THE PERIOD ENDED 6/30/97 FUND INDEX(1) INCOME FUNDS INDEX(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One year 14.15% 34.72% 28.76%
Since inception (7/12/95)(3) 23.75% 28.86% 24.07%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's Composite Index of 500 Stocks ("S&P 500 Index") is a
widely recognized, unmanaged index of a selected portfolio of market
activity based on the aggregate performance of a selected portfolio of
publicly traded stocks. It is widely recognized as representative of the
stock market in general. Investment results assume the reinvestment of
dividends paid on the stocks constituting the index.
(2) The Lipper Growth & Income Funds Index is composed of 30 funds which
combine a growth of earnings orientation and an income requirement for
level and/or rising dividends. Lipper Mutual Funds indices are equally
weighted, composed of the largest mutual funds within their respective
investment objectives, and adjusted for the reinvestment of capital gains
distribution and income dividends. You cannot invest in an index itself.
(3) Date that the Fund's Class A shares were first offered to the public.
Investors should realize that all performance data presented is based upon
past performance during limited periods of time, and that past performance
is no guarantee of future performance. Investors should also realize that
both investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. The
correlation of performance between an unmanaged index and this Fund is not
usually exact.
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can
involve more volatility, less liquidity, and less publicly available
information. Short selling is the sale of a borrowed security, and the
price of the security can increase between the date the security is sold
and the date when the fund must replace it. Options and futures may not be
perfectly correlated to the underlying index or security. High-yielding,
lower-quality debt securities may be considered to be of lower standing and
more speculative.
6
<PAGE>
PORTFOLIO SUMMARY
AS OF JUNE 30, 1997
[CHART]
Cash/Cash Equivalents 0.3%
Short Positions 0.7%
Business/Commercial Services 1.2%
Building Products 1.3%
Auto Parts/Suppliers 1.3%
Tobacco 1.5%
Environmental Services 1.6%
Media 2.5%
Specialty Wholesale 3.0%
Transportation 3.3%
Oil/Gas Drilling 3.8%
Health/Medical 5.6%
Manufacturing/Chemicals 6.7%
Consumer/Retail 7.6%
Other/Other Assets, Net 2.2%
Technology 21.5%
Convertibles/Preferred 13.0%
Financial/REITs 12.9%
Energy/Energy Services 10.1%
TOP TEN HOLDINGS
1.
VANS, INC. (2.23%)
Manufactures and sells active-casual and performance footwear for sports
enthusiasts, as well as snowboard boots.
2.
SCIENTIFIC-ATLANTA, INC. (1.87%)
Makes terrestrial and satellite-based communications network products for data
transmission, cable TV, and telecommunications providers.
3.
PIER 1 IMPORTS, INC. (1.83%)
Sells a wide variety of imported home furnishing and related items.
4.
NABORS INDUSTRIALS, INC. (1.82%)
World's largest drilling contractor for land-based oil and gas projects,
operating in almost every major oil, gas, and geothermal drilling market.
5.
FISHER SCIENTIFIC INTERNATIONAL, INC. (1.82%)
Produces instruments, supplies, equipment, and related accessories to worldwide
research centers, medical and educational laboratories, and industrial
consumers.
6.
SMITH INTERNATIONAL, INC. (1.66%)
Supplies products and services used to drill oil and gas wells.
7.
COMPUWARE CORPORATION (1.65%)
Develops and maintains system software products that enable computer programmers
and analysts to improve efficiency in application program testing, test data
preparation, error analysis, and maintenance.
8.
CAMCO INTERNATIONAL, INC. (1.59%)
Provides specialized products and services for the drilling, well completion,
production, and well services markets.
9.
WORLDCOM, INC. (1.54%)
Fourth-largest U.S. long-distance carrier. Also offers local phone service,
Internet access, and international communications services using its own
fiber-optic network.
10.
NOBLE DRILLING CORPORATION (1.48%)
Owns and operates the world's largest fleet of offshore mobile oil and gas
drilling rigs, as well as 46 land rigs. Also holds labor contracts for 16
third-party-owned rigs.
7
<PAGE>
FUND PERFORMANCE - CLASS C SHARES
Results of a hypothetical $10,000 investment in The Robertson Stephens Growth &
Income Fund, the S&P 500 Index(1), and the Lipper Growth & Income Funds Index(2)
IF INVESTED ON MAY 9, 1997(3)
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
GROWTH & INCOME GROWTH & INCOME S&P 500 LIPPER GROWTH &
FOR THE PERIOD ENDED 6/30/97 FUND FUND(4) INDEX(1) INCOME FUNDS INDEX(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since inception (5/9/97)(3) 8.01% 7.01% 7.56% 6.73%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's Composite Index of 500 Stocks ("S&P 500 Index") is a
widely recognized, unmanaged index of a selected portfolio of market
activity based on the aggregate performance of a selected portfolio of
publicly traded stocks. It is widely recognized as representative of the
stock market in general. Investment results assume the reinvestment of
dividends paid on the stocks constituting the index.
(2) The Lipper Growth & Income Funds Index is composed of 30 funds which
combine a growth of earnings orientation and an income requirement for
level and/or rising dividends. Lipper Mutual Funds indices are equally
weighted, composed of the largest mutual funds within their respective
investment objectives, and adjusted for the reinvestment of capital gains
distribution and income dividends. You cannot invest in an index itself.
(3) Date that the Fund's Class C shares were first sold to the public.
(4) Reflects the contingent deferred sales charge imposed on redemptions within
the first year of purchasing shares.
Investors should realize that all performance data presented is based upon
past performance during limited periods of time, and that past performance
is no guarantee of future performance. Investors should also realize that
both investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. The
correlation of performance between an unmanaged index and this fund is not
usually exact.
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can
involve more volatility, less liquidity, and less publicly available
information. Short selling is the sale of a borrowed security, and the
price of the security can increase between the date the security is sold
and the date when the fund must replace it. Options and futures may not be
perfectly correlated to the underlying index or security. High-yielding,
lower-quality debt securities may be considered to be of lower standing and
more speculative.
8
<PAGE>
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
- -----------------------------------------------------------------------------------------------------------------------------
BANKS - 3.0%
BB&T Corporation 60,000 $ 2,700,000
Commercial Federal Corporation 75,000 2,784,376
TCF Financial Corporation 55,500 2,740,313
- -----------------------------------------------------------------------------------------------------------------------------
8,224,689
- -----------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.4%
CardioThoracic Systems, Inc.(1) 70,000 980,000
Genentech, Inc.(1) 47,500 2,799,531
- -----------------------------------------------------------------------------------------------------------------------------
3,779,531
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 1.3%
Royal Plastics Group, Ltd.(1,2) 135,000 3,617,299
- -----------------------------------------------------------------------------------------------------------------------------
3,617,299
- -----------------------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES - 0.3%
U-Ship, Inc., Restricted(1,3,6) 666,667 900,000
- -----------------------------------------------------------------------------------------------------------------------------
900,000
- -----------------------------------------------------------------------------------------------------------------------------
CLOTHING/RETAIL - 5.5%
Nautica Enterprises, Inc. 105,000 2,775,937
Pier 1 Imports, Inc. 190,000 5,035,000
Sport-Haley, Inc.(1) 65,000 1,088,750
Vans, Inc.(1) 405,000 6,125,625
- -----------------------------------------------------------------------------------------------------------------------------
15,025,312
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.9%
Superior Services, Inc.(1) 105,000 2,493,750
- -----------------------------------------------------------------------------------------------------------------------------
2,493,750
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE/COMPONENTS - 0.9%
Iomega Corporation(1) 127,500 2,534,063
- -----------------------------------------------------------------------------------------------------------------------------
2,534,063
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 3.7%
Adobe Systems, Inc. 50,000 1,753,125
BMC Software, Inc.(1) 50,000 2,768,750
Legato Systems, Inc.(1) 65,000 1,202,500
Pure Atria Corporation 110,000 1,553,750
Tandem Computers, Inc. 135,000 2,733,750
- -----------------------------------------------------------------------------------------------------------------------------
10,011,875
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 2.9%
Compuware Corporation(1) 95,000 4,536,250
Data Dimensions, Inc.(1) 60,000 1,320,000
Data General Corporation(1) 85,000 2,210,000
- -----------------------------------------------------------------------------------------------------------------------------
8,066,250
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS/SERVICES - 1.2%
Sunbeam Corporation, Inc. 90,000 3,397,500
- -----------------------------------------------------------------------------------------------------------------------------
3,397,500
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATA COMMUNICATIONS - 0.8%
Aware, Inc.(1) 160,000 $ 2,360,000
- -----------------------------------------------------------------------------------------------------------------------------
2,360,000
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.4%
ITI Technologies, Inc.(1) 44,000 1,006,500
- -----------------------------------------------------------------------------------------------------------------------------
1,006,500
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.4%
Louisiana Land and Exploration Company 35,000 1,999,375
Oryx Energy Company(1) 110,000 2,323,750
Seitel, Inc.(1) 57,500 2,185,000
- -----------------------------------------------------------------------------------------------------------------------------
6,508,125
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES - 7.7%
Baker Hughes, Inc. 60,000 2,321,250
Camco International, Inc. 80,000 4,380,000
Drilex International, Inc.(1) 145,000 2,283,750
Input/Output, Inc.(1) 130,000 2,356,250
McDermott International, Inc. 95,000 2,772,813
Santa Fe International Corporation(1) 55,000 1,870,000
Smith International, Inc.(1) 75,000 4,556,250
TransCanada Pipelines, Ltd. 30,000 603,750
- -----------------------------------------------------------------------------------------------------------------------------
21,144,063
- -----------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.8%
Ascent Entertainment Group, Inc.(1) 53,768 490,633
Sodak Gaming, Inc.(1) 120,000 1,770,000
- -----------------------------------------------------------------------------------------------------------------------------
2,260,633
- -----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.5%
Philip Environmental, Inc.(1) 130,000 2,063,750
Tetra Technologies, Inc.(1) 80,000 1,980,000
- -----------------------------------------------------------------------------------------------------------------------------
4,043,750
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.4%
American Express Company 37,500 2,793,750
Federal National Mortgage Association 57,500 2,508,438
Matrix Capital Corporation(1) 95,000 1,330,000
- -----------------------------------------------------------------------------------------------------------------------------
6,632,188
- -----------------------------------------------------------------------------------------------------------------------------
FOOD RETAIL/WHOLESALE - 0.9%
International Multifoods Corporation 100,000 2,512,500
- -----------------------------------------------------------------------------------------------------------------------------
2,512,500
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE/HMO - 1.9%
HealthCare Compare Corporation 62,500 3,273,437
Sun Healthcare Group, Inc. 100,000 2,081,250
- -----------------------------------------------------------------------------------------------------------------------------
5,354,687
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - 2.4%
Everest Reinsurance Holdings, Inc. 65,000 $ 2,575,625
Hartford Life, Inc. 25,000 937,500
Mid Ocean, Ltd. 60,000 3,146,250
- -----------------------------------------------------------------------------------------------------------------------------
6,659,375
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 4.8%
Coachmen Industries, Inc. 80,000 1,370,000
Figgie International, Inc.(1) 140,000 1,925,000
Furniture Brands International, Inc.(1) 117,700 2,280,437
Littlefuse, Inc.(1) 100,000 2,825,000
Simpson Manufacturing Company, Inc.(1) 45,500 1,205,750
Stewart and Stevenson Services, Inc. 80,000 2,080,000
Walter Industries, Inc. 100,000 1,675,000
- -----------------------------------------------------------------------------------------------------------------------------
13,361,187
- -----------------------------------------------------------------------------------------------------------------------------
MEDIA - 2.5%
Liberty Media Corporation, Grade A(1) 125,000 2,968,750
Metromedia International Group, Inc.(1) 80,000 1,015,000
Westinghouse Electric Corporation 125,000 2,890,625
- -----------------------------------------------------------------------------------------------------------------------------
6,874,375
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/DEVICES - 2.3%
Bard (C.R.), Inc. 65,000 2,360,312
Meridian Diagnostics, Inc. 125,000 1,046,875
Novoste Corporation(1) 175,000 2,865,625
- -----------------------------------------------------------------------------------------------------------------------------
6,272,812
- -----------------------------------------------------------------------------------------------------------------------------
MOTOR VEHICLES/PARTS SUPPLIERS - 1.3%
Cooper Tire and Rubber Company 92,000 2,024,000
Harley-Davidson, Inc. 35,000 1,677,812
- -----------------------------------------------------------------------------------------------------------------------------
3,701,812
- -----------------------------------------------------------------------------------------------------------------------------
NETWORK SYSTEMS - 1.1%
3Com Corporation(1) 45,000 2,025,000
PairGain Technologies, Inc.(1) 65,000 1,007,500
- -----------------------------------------------------------------------------------------------------------------------------
3,032,500
- -----------------------------------------------------------------------------------------------------------------------------
OIL/GAS DRILLING - 3.8%
Nabors Industries, Inc.(1) 200,000 5,000,000
Noble Drilling Corporation(1) 180,000 4,061,250
Rowan Companies, Inc.(1) 50,000 1,409,375
- -----------------------------------------------------------------------------------------------------------------------------
10,470,625
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
R.E.I.T. - 5.1%
Crescent Operating, Inc.(1) 6,000 $ 72,000
Crescent Real Estate Equities Trust 60,000 1,905,000
Criimi Mae, Inc. 170,000 2,720,000
Health and Retirement Property Trust 110,000 2,069,375
JP Realty, Inc. 110,000 2,983,750
Ocwen Asset Investment Corporation 40,000 810,000
Prime Retail, Inc. 60,000 806,250
Walden Residential Properties, Inc. 100,000 2,562,500
- -----------------------------------------------------------------------------------------------------------------------------
13,928,875
- -----------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 1.0%
Cypress Semiconductor Corporation(1) 70,000 1,015,000
Texas Instruments, Inc. 20,000 1,681,250
- -----------------------------------------------------------------------------------------------------------------------------
2,696,250
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY CHEMICALS - 1.9%
Crompton & Knowles Corporations 120,000 2,670,000
Imperial Chemicals Corporation plc, ADR(5) 47,000 2,673,125
- -----------------------------------------------------------------------------------------------------------------------------
5,343,125
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY PAPER - 0.9%
International Paper Company 50,000 2,428,125
- -----------------------------------------------------------------------------------------------------------------------------
2,428,125
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY WHOLESALE - 3.0%
Fisher Scientific International, Inc. 105,000 4,987,500
Tyco International, Inc. 105,000 3,300,000
- -----------------------------------------------------------------------------------------------------------------------------
8,287,500
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 3.2%
Comsat Corporation 110,000 2,619,375
Tele-Communications, Inc.(1) 127,600 1,898,050
WorldCom, Inc.(1) 132,500 4,240,000
- -----------------------------------------------------------------------------------------------------------------------------
8,757,425
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.8%
General Instrument Corporation(1) 50,000 1,250,000
Motorola, Inc. 45,000 3,420,000
Qualcomm, Inc.(1) 57,500 2,925,312
- -----------------------------------------------------------------------------------------------------------------------------
7,595,312
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.7%
ANTEC Corporation(1) 90,000 1,057,500
Corning, Inc. 47,500 2,642,188
Ericsson (L.M.) Telephone Company, ADR(5) 50,000 1,968,750
IWL Communications, Inc.(1) 133,800 719,176
Scientific-Atlanta, Inc. 235,000 5,140,626
SpecTran Corporation(1) 51,700 1,008,150
- -----------------------------------------------------------------------------------------------------------------------------
12,536,390
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOBACCO - 1.5%
Phillip Morris Companies, Inc. 45,000 $ 1,996,875
RJR Nabisco Holdings Corporation 62,500 2,062,500
- -----------------------------------------------------------------------------------------------------------------------------
4,059,375
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.3%
Consolidated Freightways Corporation(1) 175,000 2,865,625
Genesee & Wyoming, Inc., Class A(1) 115,000 3,018,750
Hvide Marine, Inc., Class A(1) 140,000 3,097,500
- -----------------------------------------------------------------------------------------------------------------------------
8,981,875
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 85.5% (Cost: $190,386,047) 234,859,653
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.2%
Mesa, Inc., 8.00%, Expires 6/30/08, Series A 489,575 3,274,030
- -----------------------------------------------------------------------------------------------------------------------------
3,274,030
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 0.8%
Crown Cork & Seal Company, Inc., 4.50%, Expires 2/26/00 45,000 2,272,500
- -----------------------------------------------------------------------------------------------------------------------------
2,272,500
- -----------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS - 1.0%
Timet Capital Trust, 6.625%, Expires 11/1/26, 144A(3,4) 50,000 2,637,500
- -----------------------------------------------------------------------------------------------------------------------------
2,637,500
- -----------------------------------------------------------------------------------------------------------------------------
PRECIOUS METALS - 1.1%
Coeur d'Alene Mines Corporation, 7.00%, Expires 3/15/00 190,000 3,182,500
- -----------------------------------------------------------------------------------------------------------------------------
3,182,500
- -----------------------------------------------------------------------------------------------------------------------------
R.E.I.T. - 0.6%
Excel Realty Trust, Inc., 2.125%, Expires 12/31/49 60,000 1,635,000
- -----------------------------------------------------------------------------------------------------------------------------
1,635,000
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.2%
IXC Communications, Inc., 144A, 7.25%, Expires 3/31/07(3,4) 27,700 3,282,450
- -----------------------------------------------------------------------------------------------------------------------------
3,282,450
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.0%
Trans World Airlines, Inc., 8.00%, Expires 12/31/49 100,000 2,631,200
- -----------------------------------------------------------------------------------------------------------------------------
2,631,200
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS - 6.9% (Cost: $18,209,031) 18,915,180
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) PAR VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS
- -----------------------------------------------------------------------------------------------------------------------------
CLOTHING/RETAIL - 0.6%
Charming Shoppes, Inc., 7.50%, Due 7/15/06 1,750,000 $ 1,734,407
- -----------------------------------------------------------------------------------------------------------------------------
1,734,407
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 0.5%
EMC Corporation, 3.25%, Due 3/15/02 1,350,000 1,488,901
- -----------------------------------------------------------------------------------------------------------------------------
1,488,901
- -----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.1%
Molten Metal Technology, 5.50%, Due 5/1/06, 144A(4) 1,000,000 358,860
- -----------------------------------------------------------------------------------------------------------------------------
358,860
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS - 0.6%
Empresas ICA Sociedad Controladoro, S.A. de C.V., Due 3/15/04 2,000,000 1,580,000
- -----------------------------------------------------------------------------------------------------------------------------
1,580,000
- -----------------------------------------------------------------------------------------------------------------------------
MACHINERY/GENERAL INDUSTRIAL - 0.3%
Robbins & Myers, Inc., 6.50%, Due 9/1/03 500,000 697,500
- -----------------------------------------------------------------------------------------------------------------------------
697,500
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 0.8%
Mascotech, Inc., 4.50%, Due 12/15/03 2,500,000 2,287,500
- -----------------------------------------------------------------------------------------------------------------------------
2,287,500
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES - 0.5%
Renal Treatment Centers, Inc., 5.625%, Due 7/15/06, 144A(4) 1,500,000 1,487,055
- -----------------------------------------------------------------------------------------------------------------------------
1,487,055
- -----------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS - 1.9%
Itron Corporation, 6.75%, Due 1/1/04, 144A(3,4) 2,300,000 2,932,500
Offshore Logistics, Inc., 6.00%, Due 12/15/03 2,000,000 2,168,000
- -----------------------------------------------------------------------------------------------------------------------------
5,100,500
- -----------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 0.4%
Cirrus Logic, Inc., 6.00%, Due 12/15/03 1,550,000 1,147,728
- -----------------------------------------------------------------------------------------------------------------------------
1,147,728
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.4%
Midcom Communications, Inc. 8.25%, Due 8/15/03, 144A(4) 1,500,000 981,570
- -----------------------------------------------------------------------------------------------------------------------------
981,570
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS - 6.1% (Cost: $15,992,791) $ 16,864,021
- -----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT BONDS
- -----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury STRIP, Due 11/15/17 3,000,000 735,639
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL GOVERNMENT BONDS - 0.3% (Cost: $668,248) 735,639
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS - 98.8% (Cost: $225,256,117) $ 271,374,493
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
DEPOSITS WITH BROKERS AND CUSTODIAN BANK FOR SECURITIES SOLD SHORT
- -----------------------------------------------------------------------------------------------------------------------------
Cash 432,752
Repurchase Agreement
State Street Bank and Trust Company, 5.50%, dated 6/30/97, due 7/1/97,
maturity value, $2,579,394 (collateralized by par value $2,615,000
U.S. Treasury Notes 6.375%, due 4/30/99) 2,579,000
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS WITH BROKERS AND CUSTODIAN BANK FOR SECURITIES SOLD SHORT - 1.1% 3,011,752
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
SECURITIES SOLD SHORT - (0.7)% (Proceeds: $2,046,307) (2,046,250)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS, NET - 0.8% 2,392,959
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 274,732,954
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Non-income-producing security.
(2) Foreign security denominated in Canadian Dollars.
(3) Fair-value security. See 1.a. Notes to Financial Statements.
(4) These securities may be resold in transactions exempt from registration
under Rule 144A of the Securities Act of 1933, normally to qualified
institutional buyers.
(5) ADR - American Depository Receipt.
(6) Restricted Security. See 4.d. in Notes to Financial Statements.
SCHEDULE OF SECURITIES SOLD SHORT
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER HARDWARE/COMPONENTS - (0.5)%
Applied Magnetics Corporation 60,000 $ 1,357,500
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES - (0.2)%
HBO & Company 10,000 688,750
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES SOLD SHORT - (0.7)% (Proceeds: $2,046,307) $ 2,046,250
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $225,256,117) $ 271,374,493
Deposits with brokers and custodian bank for securities sold short 3,011,752
Receivable for investments sold 4,531,897
Receivable for fund shares subscribed 186,102
Dividends/interest receivable 401,917
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 279,506,161
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------
Securities sold short (Proceeds: $2,046,307) 2,046,250
Payable for investments purchased 1,854,800
Payable for fund shares redeemed 454,805
Payable to adviser 190,570
Accrued expenses 170,271
Payable to distributor 56,511
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,773,207
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 274,732,954
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------
Paid-in capital 208,810,699
Accumulated undistributed net investment income 854,421
Accumulated net realized gain from investments 18,816,551
Accumulated net realized gain from securities sold short 132,850
Net unrealized appreciation on investments 46,118,376
Net unrealized appreciation on securities sold short 57
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 274,732,954
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share - Class A Shares $ 14.85
(Net assets of $274,593,331 applicable to 18,493,413 shares of beneficial interest
outstanding with no par value)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering, and redemption price per share - Class C Shares $ 14.83
(Net assets of $139,623 applicable to 9,415 shares of beneficial interest
outstanding with no par value)(1)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Redemption price per share is equal to the net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Interest $ 832,540
Dividends (net of foreign tax withheld of $4,221) 1,879,641
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,712,181
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 1,424,070
Administrative services fees 356,017
Distribution fees - Class A Shares 355,978
Transfer agent fees 87,155
Custodian fees 76,080
Shareholder reports 46,155
Interest expense 36,693
Professional fees 26,425
Registration and filing fees 21,358
Trustees' fees and expenses 11,041
Dividend expense for securities sold short 6,350
Insurance 2,413
Distribution fees - Class C Shares 120
Shareholder servicing fees - Class C Shares 40
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 2,449,895
Less: Expense waiver by adviser (592,135)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 1,857,760
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 854,421
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN /(LOSS) AND UNREALIZED APPRECIATION/(DEPRECIATION) ON INVESTMENTS AND SECURITIES SOLD SHORT
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments 15,249,507
Net realized loss from securities sold short (61,141)
Net change in unrealized appreciation on investments 7,724,072
Net change in unrealized depreciation on securities sold short (170,764)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN/(LOSS) AND UNREALIZED APPRECIATION/(DEPRECIATION) 22,741,674
ON INVESTMENTS AND SECURITIES SOLD SHORT
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 23,596,095
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 1997 (UNAUDITED) DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 854,421 $ 447,480
Net realized gain from investments 15,249,507 14,368,389
Net realized (loss)/gain from securities sold short (61,141) 129,616
Net change in unrealized appreciation on investments 7,724,072 25,033,904
Net change in unrealized (depreciation)/appreciation on securities sold short (170,764) 125,009
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 23,596,095 40,104,398
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - (457,356)
Net investment income - Class C Shares(1) - -
Realized gain on investments - Class A Shares - (7,274,370)
Realized gain on investments - Class C Shares(1) - -
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (7,731,726)
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in net assets resulting from capital share transactions (58,638,099) 140,500,320
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL SHARE TRANSACTIONS (58,638,099) 140,500,320
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL (DECREASE)/INCREASE IN NET ASSETS (35,042,004) 172,872,992
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of period 309,774,958 136,901,966
End of period $ 274,732,954 $ 309,774,958
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class C shares were first sold on May 9, 1997.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS - CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FOR THE
FOR A SHARE OUTSTANDING MONTHS ENDED YEAR ENDED PERIOD ENDED
THROUGHOUT EACH PERIOD: 6/30/97 (UNAUDITED) 12/31/96 12/31/95(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.62 $ 11.24 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.04 0.02 0.00
Net realized gain and unrealized appreciation on investments 1.19 2.70 1.24
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1.23 2.72 1.24
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income - (0.02) -
Distributions from realized gain on investments - (0.32) -
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.85 $ 13.62 $ 11.24
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 9.03% 24.16% 12.40%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000s) $ 274,593 $ 309,775 $ 136,902
Ratio of Expenses to Average Net Assets 1.30%(2) 1.71%(2) 1.94%
Ratio of Net Investment Income/(Loss) to Average Net Assets 0.60%(2) 0.18%(2) (0.01)%
Portfolio Turnover Rate 109% 212% 97%
Average Commission Rate Paid(3) $ 0.0599 $ 0.0567 -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A shares were first issued on July 12, 1995.
(2) If the Fund had paid all of its expenses and there had been no
reimbursement from the Adviser for the six months ended June 30, 1997, and
for the year ended December 31, 1996, total return would have been 8.81%
and 24.07%, respectively, and the ratio of expenses to average net assets
would have been 1.72% and 1.76%, respectively, and the ratio of net
investment income to average net assets would have been 0.18% and 0.13%,
respectively.
(3) A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged. This amount may vary from
fund to fund and period to period depending on the mix of trades executed
in various markets where trading practices and commission rate structures
may differ. This rate generally does not reflect markups, markdowns or
spreads on shares traded on a principle basis, if any.
Ratios, except for total return and portfolio turnover rate, have been
annualized.
Per-share data with respect to Class A shares for each period has been
determined by using the average number of Class A shares outstanding
throughout each period. Distributions reflect actual per-share amounts
distributed for the year.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
FINANCIAL HIGHLIGHTS - CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE
FOR A SHARE OUTSTANDING PERIOD ENDED
THROUGHOUT THE PERIOD: 6/30/97(1) (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.73
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.00
Net realized gain and unrealized appreciation on investments and securities sold short 1.10
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations 1.10
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income --
Distributions from realized gain on investments --
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.83
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 8.01%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000s) $ 140
Ratio of Expenses to Average Net Assets 2.05%(2)
Ratio of Net Investment Income to Average Net Assets 0.09%(2)
Portfolio Turnover Rate 109%
Average Commission Rate Paid(3) $ 0.0599
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class C shares were first sold on May 9, 1997.
(2) If the fund had paid all of its expenses and there had been no
reimbursement from the Adviser for the period from April 1, 1997
(Commencement of Offering), through June 30, 1997, total return would have
been 7.94%, the ratio of expenses to average net assets would have been
2.54%, and the ratio of net investment (loss) to average net assets would
have been (0.40)%.
(3) A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged. This amount may vary from
fund to fund and period to period depending on the mix of trades executed
in various markets where trading practices and commission rate structures
may differ. This rate generally does not reflect markups, markdowns or
spreads on shares traded on a principle basis, if any.
Ratios, except for total return and portfolio turnover rate, have been
annualized.
Total returns do not include the 1% contingent deferred sales charge.
Per-share data with respect to Class C shares has been determined by using
the average number of Class C shares outstanding throughout the period.
Distributions reflect actual per-share amounts distributed for the year.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Robertson Stephens Growth & Income Fund (the "Fund") is a series of the
Robertson Stephens Investment Trust (the "Trust"), a Massachusetts business
trust organized on May 11, 1987. The Fund is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Fund became effective to offer shares to the
public on July 12, 1995. The Trust offers twelve series of shares -- The
Robertson Stephens Emerging Growth Fund, The Robertson Stephens Value + Growth
Fund, The Contrarian Fund-TM-, The Robertson Stephens Developing Countries Fund,
The Robertson Stephens Growth & Income Fund, The Robertson Stephens Partners
Fund, The Information Age Fund-TM-, The Robertson Stephens Global Natural
Resources Fund, The Robertson Stephens Global Low-Priced Stock Fund, The
Robertson Stephens Diversified Growth Fund, The Robertson Stephens MicroCap
Growth Fund and The Robertson Stephens Global Value Fund. The assets for each
series are segregated and accounted for separately.
The Trustees have authorized the issuance of two classes of shares of beneficial
interest of the Fund, designated as Class A and C, respectively. The shares of
each class represent an interest in the same portfolio of investments of the
Fund. Expenses of the Fund are borne pro-rata by the holders of each class of
shares, except that each class may bear expenses unique to that class
(including, but not limited to, distribution expenses applicable to such class).
Shares of each class would receive their pro-rata share of the net assets of the
Fund, if the Fund was liquidated. In addition, the Board of Trustees declares
separate distributions of each class of shares. Each class votes as a class only
with respect to its own distribution plan or other matters for which a class
vote is required by law or determined by the Board of Trustees. Class C shares
were first sold by the Fund on May 9, 1997. Class C shares are subject to a 1%
contingent deferred sales charge if those shares are redeemed within one year of
purchase.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
The following policies are in conformity with generally accepted accounting
principles.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
a. INVESTMENT VALUATIONS:
Marketable securities are valued at the last sale price on the principal
exchange or market on which they are traded; or, if there were no sales that
day, at the mean between the closing bid and asked prices. Short-term
investments that will mature in 60 days or less are stated at amortized cost,
which approximates market value. At June 30, 1997, 96.4% of the Fund's long
positions and 100% of its short positions were valued in this manner.
Securities for which market quotations are not readily available are valued at
their fair value as determined in accordance with the guidelines and procedures
adopted by the Fund's Board of Trustees. The guidelines and procedures use
fundamental valuation methods which include, but are not limited to, the
analysis of: the effect of any restrictions on the sale of the security, product
development and trends of the security's issuer, changes in the industry and
other competing companies, significant changes in the issuer's financial
position, and any other event that could have a significant impact on the value
of the security. At June 30, 1997, 3.6% of the Fund's long positions and 100% of
its short positions were valued using these guidelines and procedures.
As its normal course of business, the Fund has invested a significant portion of
its assets in companies concentrated within a number of industries in the
technology sector and energy/energy services sector. Accordingly, the
performance of the Fund may be subject to a greater risk of market fluctuation
than that of a fund invested in a wider spectrum of market or industrial
sectors.
22
<PAGE>
b. REPURCHASE AGREEMENTS:
Repurchase agreements are fully collateralized by U.S. government securities.
All collateral is held by the Fund's custodian and is monitored daily to ensure
that the collateral's market value equals at least 100% of the repurchase price
under the agreement. However, in the event of default or bankruptcy, realization
and/or retention of the collateral may be subject to legal proceedings. The
Fund's policy is to limit repurchase agreement transactions to those parties
deemed by the Fund's Investment Adviser to have satisfactory creditworthiness.
c. FEDERAL INCOME TAXES:
The Fund intends to comply with requirements of the Internal Revenue Code,
qualifying as a regulated investment company. Therefore, the Fund does not
expect to be subject to income tax, and no provision for such tax will be made.
d. SECURITIES TRANSACTIONS:
Securities transactions are accounted for on the date securities are purchased,
sold, or sold short (trade date). Realized gains or losses on securities
transactions are determined on the basis of specific identification.
e. INVESTMENT INCOME:
Dividend income is recorded on the ex-dividend date. Interest income is accrued
and recorded daily.
f. DISTRIBUTIONS TO SHAREHOLDERS:
Dividends to shareholders are recorded on the ex-dividend date.
g. CLASS ALLOCATIONS:
Income, common expenses, and realized and unrealized gains/(losses) are
determined at the Fund level and allocated daily to each class of shares based
on the appropriate net assets of the respective classes. Transfer agent
expenses, distribution/shareholder service fees and any other class specific
expenses, if any, are calculated daily at the class level based on the
appropriate daily net assets of each class and the specific expense rate
applicable to each class.
h. CAPITAL ACCOUNTS:
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains/(losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains/(losses) were recorded by
the portfolio.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 CAPITAL SHARES
a. TRANSACTIONS:
The Fund has authorized an unlimited number of shares of beneficial interest
with no par value divided into two classes designated Class A and Class C.
Transactions in capital shares for Class A for the six months ended June 30,
1997, and for the year ended December 31, 1996, and for Class C for the period
from May 9, 1997 (Commencement of Operations) to June 30, 1997, were as follows:
CLASS A
<TABLE>
<CAPTION>
1/1/97 - 6/30/97 SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 4,131,098 $ 56,905,343
Shares reinvested - -
- -----------------------------------------------------------------------------------------------------------------------------
4,131,098 56,905,343
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (8,382,189) (115,674,298)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net decrease (4,251,091) $ (58,768,955)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1/1/96 - 12/31/96 SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 24,212,751 $ 314,442,257
Shares reinvested 543,194 7,520,835
- -----------------------------------------------------------------------------------------------------------------------------
24,755,945 321,963,092
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (14,194,773) (181,462,772)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 10,561,172 $ 140,500,320
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
5/9/97* - 6/30/97 SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 9,415 $ 130,856
Shares reinvested - -
- -----------------------------------------------------------------------------------------------------------------------------
9,415 130,856
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed - -
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 9,415 $ 130,856
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Class C shares were first sold on May 9, 1997.
NOTE 3 TRANSACTIONS WITH AFFILIATES:
a. ADVISORY FEES AND EXPENSE LIMITATION:
Under the terms of an advisory agreement, which is reviewed and approved
annually by the Board of Trustees, the Fund pays Robertson Stephens
Investment Management, L.P. ("RSIM") an investment advisory fee and an
administrative services fee calculated respectively at an annual rate of
1.00% and 0.25% of the average daily net assets of the Fund. For the six
months ended June 30, 1997, the Fund incurred investment advisory fees and
administrative fees of $1,424,070 and $356,017, respectively. RSIM has
voluntarily agreed to waive any operating expenses, excluding class-specific
expenses, of the Fund's Class A shares and Class C shares exceeding an annual
expense ratio of 1.30%. For the six months ended June 30, 1997, the Adviser
agreed to waive fees of $592,056 for Class A shares and $79 for Class C
shares.
24
<PAGE>
RSIM may recoup waived or reimbursed operating expenses over the succeeding two
years, subject to expense limitations then applicable to the Fund. No previous
expense waivers or reimbursements of operating expenses were recouped by RSIM
from the Fund during the six months ended June 30, 1997.
b. COMPENSATION OF TRUSTEES AND OFFICERS:
Trustees and officers of the Fund who are affiliated persons receive no
compensation from the Fund. Trustees of the Fund who are not interested persons
of the Trust, as defined in the 1940 Act, collectively received compensation and
reimbursement of expenses of $11,041 for the six months ended June 30, 1997.
c. DISTRIBUTION FEES:
The Fund has entered into agreements with Robertson, Stephens & Company LLC ("RS
& Co.") for distribution services with respect to its Class A and Class C shares
and has adopted Plans of Distribution pursuant to Rule 12b-1 under the 1940 Act,
where continuance is reviewed annually by the Fund's Board of Trustees. Under
these Plans, RS & Co. is compensated for services in such capacity including its
expenses in connection with the promotion and distribution of the Fund's Class A
and Class C shares. The distribution fees for Class A and Class C shares are
calculated at an annual rate of 0.25% and 0.75%, respectively, based on the
average daily net assets attributable to each class of shares, although the
Class C Plan contemplates payments at a rate of up to 1% of the Fund's average
net assets attributable to Class C Shares. For the six months ended June 30,
1997, for Class A and for the period from May 9, 1997 (Commencement of
Operations) through June 30, 1997, for Class C, the Fund incurred distribution
fees of $355,978 and $120, respectively.
d. SHAREHOLDER SERVICING FEE:
The Trust has adopted a Shareholder Servicing Plan for the Class C shares of
each fund. Under the Plan, each fund pays fees to RS & Co. at an annual rate of
up to 0.25% of the fund's average daily net assets of the Class C shares. The
Plan contemplates that financial institutions will enter into shareholder
service agreements with RS & Co. to provide administrative support services to
their customers who are fund shareholders. In return for providing these support
services, a financial institution may receive payments from RS & Co. at a rate
not exceeding 0.25% of the average daily net assets of the Class C shares of
each Fund for which the financial institution is the financial institution of
record. For the period from May 9, 1997 (Commencement of Operations) through
June 30, 1997, for Class C, the Fund incurred shareholder servicing fees of $40.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
e. BROKERAGE COMMISSIONS:
RSIM may direct orders for investment transactions to RS & Co. as broker-dealer,
subject to Fund policies as stated in the prospectus, regulatory constraints,
and the ability of RS & Co. to provide competitive prices and commission rates.
All investment transactions in which RS & Co. acts as a broker may only be
executed on an agency basis. Subject to certain constraints, the Fund may make
purchases of securities from offerings or underwritings in which RS & Co. has
been retained by the issuer. For the six months ended June 30, 1997, the Fund
paid brokerage commissions of $122,674 to RS & Co., which represented 13.6% of
total commissions paid during this period.
NOTE 4 INVESTMENTS:
a. TAX BASIS OF INVESTMENTS:
At June 30, 1997, the cost of investments purchased and proceeds of securities
sold short for federal income tax purposes was $227,302,424. Accumulated net
unrealized appreciation on investments and securities sold short was
$46,118,433, consisting of gross unrealized appreciation and depreciation of
$51,635,133 and $5,516,700, respectively.
b. INVESTMENT PURCHASES AND SALES:
For the six months ended June 30, 1997, the cost of investments purchased and
the proceeds from investments sold (excluding securities sold short and short-
term investments) were $304,201,418 and $363,385,762, respectively.
c. SHORT SALES:
Short sales are transactions in which the Fund sells a security it does not own,
in anticipation of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to deliver to the buyer
upon the short sale; the Fund then is obligated to replace the security borrowed
by purchasing it in the open market at some later date. The Fund will incur a
loss if the market price of the security increases between the date of the short
sale and the date on which the Fund replaced the borrowed security. The Fund
will typically realize a gain if the security declines in value between those
dates. All short sales must be fully collateralized. The Fund maintains the
collateral in a segregated account consisting
26
<PAGE>
of cash, equities, and/or U.S. government securities sufficient to collateralize
its obligation on the short positions. The Fund may also sell short "against the
box" (i.e., the Fund enters into a short sale as described above while holding
an offsetting long position in the security which is sold short). If the Fund
enters into a short sale against the box, it will hold an equivalent amount of
the securities to cover its position while the short sale is outstanding. The
Fund limits the value of short sale positions (excluding short sales against the
box) to 25% of the Fund's total assets. At June 30, 1997, the Fund had 0.7% of
its total assets in short positions. For the six months ended June 30, 1997, the
cost of investments purchased to cover short sales and proceeds from investments
sold short were $38,591,404 and $37,531,434, respectively.
d. RESTRICTED SECURITIES:
A restricted security cannot be resold to the general public without prior
registration under the Securities Act of 1933. If the security is subsequently
reregistered and resold, the issuers would bear the expense of all registrations
at no cost to the Fund. At June 30, 1997, the Fund held restricted securities
with an aggregate value of $900,000, which represented 0.3% of the Fund's total
assets. Restricted securities are valued according to the guidelines and
procedures adopted by the Fund's Board of Trustees as outlined in Note 1.a.,
paragraph 2.
<TABLE>
<CAPTION>
SHARES/PAR COST VALUE ACQUISITION
SECURITY (000) (000) (000) DATE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U-Ship, Inc. 667 $ 1,150 $ 900 4/29/97
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 MERGER:
On June 8, 1997, BankAmerica Corporation ("BankAmerica") entered into an
Agreement and Plan of Merger with Robertson, Stephens & Company Group, L.L.C.
and Robertson, Stephens & Company, Inc., pursuant to which each of those
entities would be merged into a subsidiary of BankAmerica. Upon the consummation
of those mergers (expected to occur as early as September 30, 1997), BankAmerica
will become the owner of the entire beneficial interest in RSIM, L.P. and RSIM,
Inc.
27
<PAGE>
ADMINISTRATION
OFFICERS AND TRUSTEES
G. Randy Hecht, Trustee
President, Chief Executive Officer
Leonard B. Auerbach, Trustee
President and Chairman of Auerbach Associates, Inc.
John W. Glynn, Jr., Trustee
Principal and Chairman of Glynn Capital Management
James K. Peterson, Trustee
Former Director of the IBM Retirement Funds
John P. Rohal, Trustee
Managing Director and Director of Research, Robertson, Stephens & Co.
Terry R. Otton
Chief Financial Officer
Dana K. Welch
Secretary
INVESTMENT ADVISER
Robertson, Stephens & Company
Investment Management, L.P.
555 California Street, Suite 2600
San Francisco, CA 94104
DISTRIBUTOR
Robertson, Stephens & Company LLC
555 California Street, Suite 2600
San Francisco, CA 94104
1-800-766-3863
TRANSFER AGENT AND DISBURSING AGENT
State Street Bank & Trust Company
c/o National Financial Data Services
Kansas City, MO
1-800-272-6944
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, CA
LEGAL COUNSEL
Ropes & Gray
Boston, MA
This report is submitted for the information of shareholders of The Robertson
Stephens Growth & Income Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
Published August 29, 1997
28
<PAGE>
Design: Broom & Broom, Inc., San Francisco
Photography: Jerry Orabona, Bill Zemanek
THE ROBERTSON STEPHENS MUTUAL FUNDS
In addition to THE GROWTH & INCOME FUND, Robertson Stephens offers the following
mutual funds:
THE CONTRARIAN FUND-TM-
A DEFENSIVE POSITION IN TODAY'S VOLATILE MARKET - Invests in attractively
priced, growing companies worldwide that are out of favor or have not been
discovered by institutional investors. Adheres to an independent, aggressive,
and flexible investment strategy. Managed by Paul Stephens.
THE DEVELOPING COUNTRIES FUND
A PORTFOLIO OF GROWING COMPANIES IN EMERGING MARKETS - Invests primarily in
publicly traded equities of developing countries, as well as in private
placement emerging market equity securities. No load. Managed by Michael
Hoffman.
THE DIVERSIFIED GROWTH FUND
FOCUSING ON SMALL- AND MID-CAP COMPANIES - Invests primarily in equity
securities to create a portfolio broadly diversified over industries and
companies. No load. Managed by John Wallace.
THE EMERGING GROWTH FUND
SEEKING TO INVEST IN AMERICA'S MOST DYNAMIC, GROWTH-ORIENTED INDUSTRIES -
Invests primarily in common stocks of emerging growth companies (predominantly
technology, specialty retailing, and health care) with above-average growth
potential. No load. Managed by Jim Callinan.
THE GLOBAL LOW-PRICED STOCK FUND
SEEKING OVERLOOKED AND UNDERVALUED COMPANIES - Invests in companies worldwide
that are low-priced (stock prices no greater than $10 per share), have future
growth potential, but are underappreciated or overlooked by other investors. No
load. Managed by Hannah Sullivan.
THE GLOBAL NATURAL RESOURCES FUND
PRIMARILY FOCUSING ON ATTRACTIVE HARD ASSET COMPANIES - Invests in equities of
companies engaged in the discovery, development, production or distribution of
natural resources, such as energy, metals, and forest products. No load. Managed
by Andy Pilara.
THE GLOBAL VALUE FUND
APPLYING A CASH FLOW VALUE METHODOLOGY WORLDWIDE - Uses a methodology that
combines traditional Graham & Dodd balance sheet analysis and cash flow
analysis. No load. Managed by Andy Pilara.
THE INFORMATION AGE FUND-TM-
FOCUSING ON INVESTMENTS IN THE INFORMATION TECHNOLOGY SECTOR - Invests in a wide
range of technology companies with strong fundamentals, market advantage, and
growth potential, including computer hardware and software, telecommunications,
and multimedia. No load. Managed by Ron Elijah.
THE MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET CAPS OF LESS THAN $250 MILLION - Invests
primarily in "micro-cap" companies with the potential for long-term capital
appreciation. No load. Managed by David Evans.
THE PARTNERS FUND
A SMALL-CAP FUND USING A VALUE METHODOLOGY - This methodology combines
traditional Graham & Dodd balance sheet analysis and cash flow analysis. No
load. Managed by Andy Pilara.
THE VALUE + GROWTH FUND
A GROWTH FUND FOR THE LONG-TERM INVESTOR - Invests primarily in growth companies
with favorable price/earnings ratios in sectors with the potential for above-
average growth. No load. Managed by Ron Elijah.
Please read the prospectus to learn about the Funds' objectives, investment
policies, and the special risks associated with The Robertson Stephens Mutual
Funds, including international investing, investing in smaller companies,
investing in a more limited number of issuers and sectors or a particular
sector, short selling, using options and futures, and investing in high-
yielding, lower-quality debt securities.
<PAGE>
ROBERTSON STEPHENS & COMPANY
BRINGING THE FUND MANAGER TO YOU
555 California Street, Suite 2600
San Francisco, California 94104
FUND NEWS & INFORMATION
ROBERTSON STEPHENS
INVESTOR SERVICES
- - Knowledgeable mutual fund representatives.
- - Automated access to daily net asset values.
- - Portfolio Manager Hotline, 24 hours a day.
1-800-766-3863
ROBERTSON STEPHENS
MUTUAL FUND E-MAIL
[email protected]
ROBERTSON STEPHENS
ON THE WEB
HTTP://WWW.RSIM.COM
ROBERTSON STEPHENS
ACCOUNTLINK
- - Automated account information, 24 hours a day.
1-800-624-8025
FUND LISTINGS
The Fund is listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS
DAILY, and most local newspapers as Gr Inc under the heading Robertson Stephens.
Its computer quotation symbol is RSGIX.
The views expressed in this report were those of the Fund's portfolio manager as
of the date specified, and may not reflect the views of the portfolio manager on
the date they are first published or at any other time thereafter. RSIM and its
affiliates may buy or sell investments at any time for the Fund, their other
clients or for their own accounts, and may not necessarily do so in a manner
consistent with the views expressed in this report. The prices at which they buy
or sell investments may be affected favorably by the contents of this report or
the timing of its publication. THE VIEWS EXPRESSED IN THIS REPORT ARE INTENDED
TO ASSIST SHAREHOLDERS OF THE FUND IN UNDERSTANDING THEIR INVESTMENT IN THE FUND
AND DO NOT CONSTITUTE INVESTMENT ADVICE; INVESTORS SHOULD CONSULT THEIR OWN
INVESTMENT PROFESSIONALS AS TO THEIR INDIVIDUAL INVESTMENT PROGRAMS.
