<PAGE>
Stein Roe Mutual Funds
Annual Report
June 30, 1997
Stein Roe Institutional Client High Yield Fund
<PAGE>
An Interview with Steve Lockman, Portfolio Manager of Stein Roe
Institutional Client High Yield Fund
Stephen F. Lockman, was promoted to portfolio manager of Institutional
Client High Yield Fund and SR&F High Yield Portfolio on March 3, 1997.
He previously served as associate portfolio manager for both Fund and
Portfolio.
Fund Data
Investment Objective:
Seeks high current income and capital appreciation by investing
principally in high yield, high-risk, medium- and lower-quality debt
securities.
Fund Inception:
February 14, 1997
Total Net Assets:
$25.7 million
Q: How has the Fund performed since its launch on February 14, 1997?
A: Institutional Client High Yield Fund's total return from inception
through June 30, 1997, was 5.48 percent. As of June 30, 1997, the Fund's
30-day standardized yield was 8.65 percent.
Q: Since the inception of the Fund, the high yield market has displayed
considerable fundamental strength. What are some of the factors
contributing to this?
A: A healthy economy, lower interest rates, narrower spreads, very
liquid capital markets and extremely strong investor demand all
contributed to strong fundamentals for high yield debt. An additional
support for the strength of the high yield market has been the very low
default rate in these issues that we've seen over the last two years.
Q: There has been a tremendous issuance of high yield debt over the last
six months. How did this influence your investment strategy?
A: After our initial startup, our purchase strategy was influenced by
the new issue calendar. We saw new issues as a much more efficient means
of putting new money coming into the Fund to work. We maintained our
cash position at a level that would help us benefit from the strength of
the market, yet allow us to participate in new issue opportunities. The
market easily absorbed the new issue supply except for two brief
periods. The first was in mid-spring when the Federal Reserve tightened
interest rates and the stock market sold off. The second came at the end
of the Fund's fiscal year, when the supply of new issues temporarily
exceeded demand.
Q: Why is there so much new issuance in the high yield bond market?
A: First, there's been tremendous growth in the demand for high yield
bonds, as yields offered by Treasuries and investment-grade corporate
bonds remain at historically low levels. The search for yield has led
many investors to the high yield market. For example, both retail and
institutional investors who normally invest in the investment-grade
market have crossed over and increased their allocations of high yield
bonds. We think they are doing this to try to satisfy their yield
requirements, while at the same time to provide somewhat of a hedge to
the stock market--which has been on such a tremendous run.
Another factor leading to heavy new issuance is the continuation of
strong flows into high yield mutual funds. According to the Investment
Company Institute, over the last 12 months more than $15 billion has
flowed into these funds.
Third, there has been enormous growth in the collateralized bond
obligation (CBO) market. These are pools of bonds that are divided into
short-, medium- and long-term sections called tranches, each paying a
different yield. We think CBOs are growing in popularity because they
provide a flexible alternative to owning the bonds directly. The growing
popularity of CBOs has created demand for the underlying high yield
bonds.
Q: And all this demand leads issuers to bring more high yield debt to
market?
A: Exactly--especially in 1997. According to First Boston, close to $60
billion of new issues has come to market in the first six months of
1997. That's about 75 percent of the total issuance in 1996. The size of
the high yield market is approaching $400 billion. It was $352 billion
in 1996, $300 billion in 1995 and $275 billion in 1994.
In addition, a number of new issues are being used to call or tender for
existing bonds. As interest rates have moved lower, issuers have taken
advantage of the lower cost of funding and called or bought back older,
higher-cost bonds, and those having more restrictive covenants such as
bank debt.
Q: How do you address the credit risk associated with high yield bonds?
A: We take an equity-like approach to managing credit risk. To help
ensure that our investments are sound, our investment process
incorporates intensive credit research and estimates of a company's
future earnings potential. We constantly monitor stock and bond prices,
as well as earnings reports and news items about our holdings. We
believe this approach helps us identify not only those issues with good
upside potential, but also those that may be greater credit risks. In
fact, several of the issues we passed on ran into trouble in the first
quarter of 1997. Because of the quality of our research we did not
invest in them.
Q: What is your outlook for the Fund?
A: We're somewhat cautious because of the large number of new issues
scheduled to be offered in the near term--we believe the market may
experience some indigestion because of the amount of supply. We hope to
take advantage of any spread widening.
In addition to the heavy supply, we saw the size and credit quality of
many of the individual issues decline in the last few weeks of the year.
As a result, we are taking a much more selective approach to the new
issue market. Many of the companies bringing the smaller issues--in the
$100 million range--are not public, so information about them is not as
readily available. We believe these are important factors to take into
consideration before investing because they could lead to liquidity
problems in the future.
Past performance is no guarantee of future results. Share price and
investment return will vary, so you may have a gain or a loss when you
sell shares. Portfolio holdings as of June 30, 1997; portfolio data
subject to change. Total return performance includes changes in share price
and reinvestment of income and capital gains distributions. The Adviser
currently limits expenses to .50 of 1 percent of average net assets,
subject to 30 days' notice to the Fund. Absent this limit, the Fund's
30-day standardized yield at June 30, 1997, would have been 6.56 percent
and total return would have been less.
Investing in high yield bonds involves greater credit and other risks
not associated with investing in higher-quality securities.
<PAGE>
SR&F High Yield Portfolio
Investments as of June 30, 1997
Dollar Amounts In Thousands)
Principal Market
Amount Value
--------- -------
Long-Term Obligations (94.4%)
Aerospace & Transportation Equipment (3.9%)
*Derlan Manufacturing 10.000% 1/15/07 $ 250 $253
*L-3 Communications Corp. 10.375% 5/01/07 500 530
*WR Carpenter North America 10.625% 6/15/07 750 750
-----
1,533
Automotive (2.6%)
*Oxford Automotive 10.125% 6/15/07 500 503
Penda Corporation Series B 10.750% 3/01/04 500 501
-----
1,004
Building & Construction (1.9%)
Standard Pacific Corp. 8.500% 6/15/07 500 496
*William Scotsman Inc. 9.875% 6/01/07 250 249
-----
745
Business Services (4.3%)
Iron Mountain Inc. 10.125% 10/01/06 500 530
Lamar Advertising Co. 9.625% 12/01/06 200 205
*Outdoor Systems, Inc. 8.875% 6/15/07 750 731
*Safelite Glass Corp. 9.875% 12/15/06 200 212
-----
1,678
Cable/Media (7.2%)
*Capstar Broadcasting 9.250% 7/01/07 750 728
Frontiervision 11.000% 10/15/06 250 260
*Jacor Communications, Inc. 8.750% 6/15/07 500 492
*Radio One Inc. 7.000% 5/15/04 500 449
Rogers Communications, Inc. (Yankee Issue)
9.125% 1/15/06 200 202
SFX Broadcasting Series B 10.750% 5/15/06 150 163
*TV Azteca 10.500% 2/15/07 250 256
Young Broadcasting Corp. 10.125% 2/15/05 250 263
-----
2,813
Communications (5.4%)
Dobson Communications Corp. 11.750% 4/15/07 250 240
*GlobalStar Telecommunications Ltd 11.250% 6/15/04 500 469
*ITC Deltacom Inc. 11.000% 6/01/07 500 505
Pricecellular Wire 10.750% 11/01/04 150 155
*Viasystems Inc. 9.750% 6/01/07 750 761
-----
2,130
Consumer Products (2.9%)
*Coleman Escrow Corp. Zero Coupon 5/15/01
First Priority (Effective Yield 11.125%) 250 158
Second Priority (Effective Yield 12.875%) 750 435
Renaissance Cosmetics 11.750% 2/15/04 500 526
-----
1,119
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Containers (3.9%)
*Consumers International 10.250% 4/01/05 $500 $537
*Silgan Corp. 9.000% 6/01/09 750 754
*Vicap S.A. 10.250% 5/15/02 250 257
-----
1,548
Energy - Services (7.6%)
Dawson Production Services 9.375% 2/01/07 250 254
Forcenergy Inc. Series B 8.500% 2/15/07 500 487
*ICO Inc. 10.375% 6/01/07 500 515
*Transamerican Energy 11.500% 6/15/02 750 731
Triton Energy Ltd. 8.750% 4/15/02 500 518
*United Refining Co. 10.750% 6/15/07 500 495
-----
3,000
Financial & Financial Services (2.6%)
*Navistar Financial Corp. 9.000% 6/01/02 500 512
Penncorp Financial Group 9.250% 12/15/03 500 525
----
1,037
Food & Beverages (5.2%)
*Archibald Candy Corp. 10.250% 7/01/04 500 509
*DGS International Finance Co. 10.000% 6/01/07 500 515
*Pepsi-Gemex S.A. 9.750% 3/30/04 500 514
*Windy Hill Pet Food Co. 9.750% 5/15/07 500 500
-----
2,038
Foreign Sovereign Regional Bonds (2.6%)
*City of Moscow 9.500% 5/31/00 500 505
*Guangdong Enterprises (Yankee
Issue) 8.875% 5/22/07 500 514
-----
1,019
Health Services & Equipment (3.9%)
Dynacare Inc. 10.750% 1/15/06 500 520
*Leiner Health 9.625% 7/01/07 500 509
Loewen Group International Inc. Series 4
8.250% 10/15/03 500 516
-----
1,545
Hospitals & Nursing Home Care (3.0%)
*Integrated Health Services 9.500% 9/15/07 400 410
Tenet Healthcare Corp. 8.625% 1/15/07 750 761
-----
1,171
Hotels & Entertainment (5.1%)
Boyd Gaming Corp. 9.250% 10/01/03 500 498
Lady Luck Gaming 11.875% 3/01/01 500 507
Premier Parks Inc. 9.750% 1/15/07 250 260
Prime Hospitality Series B 9.750% 4/01/07 500 525
Station Casinos Inc. 10.125% 3/15/06 200 202
-----
1,992
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Machinery & Fabricated Metal Products (8.4%)
*BMAY Corp. 10.250% 4/15/07 $350 $376
*Federal-Mogul Co. 8.800% 4/15/07 350 366
*Hayes Wheels International, Inc. 9.125% 7/15/07 500 500
*IMPSA 9.500% 5/31/02 500 500
Titan Wheel International Inc. 8.750% 4/01/07 500 512
*Wells Aluminum 10.125% 6/01/05 500 516
US Can Corp. 10.125% 10/15/06 500 533
3,303
-----
Miscellaneous Services (1.3%)
*Dyncorp Inc. 9.500% 3/01/07 500 508
Paper (2.0%)
APP International Finance Company (Yankee Issue)
10.250% 10/01/00 150 154
*Indah Kiat Finance 10.000% 7/01/07 500 497
Specialty Paperboard Inc. 9.375% 10/15/06 150 152
-----
803
Restaurants (0.6%)
*AFC Enterprises 10.250% 5/15/07 250 250
Retail (4.1%)
Cole National Group 9.875% 12/31/06 200 210
*Quality Food Centers 8.700% 3/15/07 500 504
*Ralphs Grocery Co. 11.000% 6/15/05 350 380
*Specialty Retailers 8.500% 7/15/05 500 502
-----
1,596
Rubber, Plastic & Related Materials (3.0%)
*Key Plastics Inc. 10.250% 3/15/07 500 529
Plastic Containers Inc. Series B 10.000% 12/15/06 350 363
*Tekni-Plex Inc. 11.250% 4/01/07 250 270
-----
1,162
Sanitary Services (1.4%)
*Allied Waste Industries Inc. Zero Coupon
(Effective Yield 11.300%) (steps up to
11.300% coupon rate at 6/01/02) 6/01/07 900 565
Telephone (2.6%)
*Brooks Fiber Properties 10.000% 6/01/07 750 758
*Comtel Brasileira Ltd. (Yankee Issue)
10.750% 9/26/04 250 269
-----
1,027
Textile & Apparel (3.2%)
*Anvil Knitwear Inc. 10.875% 3/15/07 500 507
*Hedstrom Corp. 10.000% 6/01/07 250 254
*Tultex Corp. 9.625% 4/15/07 250 266
William Carter 10.375% 12/01/06 200 210
-----
1,237
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Transportation & Transportation Equipment (2.6%)
*Coach USA Inc. 9.375% 7/1/07 $500 $495
*Greyhound Lines 11.50% 4/15/07 500 533
-----
1,028
Utilities (3.1%)
California Energy Company Inc. 9.500% 9/15/06 500 535
*Energy Corp. of America 9.500% 5/15/07 500 493
Midland Funding II Series B 13.250% 7/23/06 150 183
-----
1,211
-----
Total Long-Term Obligations
(Cost basis $36,513) 37,062
Short-Term Obligation (3.1%)
Commercial Paper
Associates Corp. of North America 6.200% 7/01/97 1,220 1,220
(Amortized cost $1,220) -----
Total Investments (97.5%)
(Cost basis $37,733) 38,282
Other Assets, Less Liabilities (2.5%) 991
-----
Total Net Assets (100%) $39,273
======
*Represents private placement securities issued under Rule 144A,
which are exempt from the registration requirements of the Securities
Act of 1933. These securities generally are issued to qualified
institutional buyers, such as the Portfolio, and any resale must be in
an exempt transaction, normally to other qualified institutional
investors. At June 30, 1997, the aggregate value of the Portfolio's
private placement securities was $25,096 (aggregate cost of $25,114),
which represented 63.9 percent of net assets.
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional Client High Yield Fund
June 30, 1997
Balance Sheet
(Amounts in thousands, except per-share amount)
Assets
Investment in SR&F High Yield Portfolio, at value $25,685
Unamortized organization costs 23
Receivable from investment adviser 48
Cash and other assets 35
-------
Total Assets $25,791
=======
Liabilities
Payable to the investment adviser for
organization costs incurred $36
Payable to investment adviser and transfer agent
for services provided 3
Dividends payable 61
Accrued expenses payable 17
-------
Total Liabilities 117
-------
Capital
Paid in capital 25,278
Accumulated net realized gains 116
Net unrealized appreciation of investment 280
-------
Total Capital (Net Assets) 25,674
-------
Total Liabilities and Capital $25,791
=======
Shares Outstanding (Unlimited number authorized) 2,515
=======
Net Asset Value (Capital) Per Share $10.21
=======
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional Client High Yield Fund
Statement of Operations
Period Ended June 30, 1997 (a)
(Amounts in thousands)
Investment Income
Investment income allocated from SR&F High Yield
Portfolio $399
----
Expenses
Expenses allocated from SR&F High Yield Portfolio 46
Amortization of organization expense 13
Trustees fees 14
Accounting fees 10
Legal and audit fees 11
Administrative fees 6
Printing and postage 6
Other 6
----
112
Reimbursement of expenses by investment adviser (90)
----
Total Net Expenses 22
----
Net Investment Income 377
----
Realized and Unrealized Gains on Investment
Net realized gains on investments allocated from
SR&F High Yield Portfolio 116
Net change in unrealized appreciation
allocated from SR&F High Yield Portfolio 280
----
Net Gains on investment 396
----
Net Increase in Net Assets Resulting from Operations $773
====
(a) From commencement of operations on February 14, 1997.
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional Client High Yield Fund
Statement of Changes in Net Assets
Period Ended June 30, 1997 (a)
(Amounts in thousands)
Operations
Net investment income $377
Net realized gains on investments allocated from SR&F
High Yield Portfolio 116
Net change in unrealized appreciation
allocated from SR&F High Yield Portfolio 280
------
Net Increase in Net Assets Resulting from Operations 773
------
Distributions to Shareholders
Dividends from net investment income (377)
------
Share Transactions
Subscriptions to fund shares 24,962
Investment income dividends reinvested 316
------
Net Increase from Share Transactions 25,278
------
Net Increase in Net Assets 25,674
Total Net Assets
Beginning of Period -
------
End of Period $25,674
======
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 2,484
Investment income dividends reinvested 31
------
Net increase in fund shares 2,515
Shares outstanding beginning of period -
------
Shares outstanding end of period 2,515
======
(a) From commencement of operations on February 14, 1997.
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
Balance Sheet
(All Amounts in Thousands)
June 30,
1997
--------
Assets
Investments, at market value $38,282
Receivable for investments sold 1,468
Accrued interest receivable 550
Other assets 9
--------
Total Assets 40,309
Liabilities
Payable for investments purchased $997
Payable to investment adviser 28
Other liabilities 11
-------
Total Liabilities 1,036
-------
Net Assets applicable to investors'
beneficial interests $39,273
======
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
Statement of Operations
For the Period Ended
June 30, 1997(a)
(All Amounts in Thousands)
Investment Income
Interest income $969
----
Expenses
Management fees 53
Accounting fees 17
Audit and legal fees 17
Trustees' fees 4
Custodian fees 3
Other 1
-----
Total Expenses 95
-----
Net Investment Income 874
-----
Realized and Unrealized Gains on Investments
Net realized gains on investments 336
Net change in unrealized appreciation
on investments 549
-----
Net gains on Investments 885
-----
Net Increase in Net Assets Resulting
from Operations $1,759
=====
(a) From the commencement of operations on November 1, 1996.
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
Statement of Changes in Net Assets
For the Period Ended
June 30, 1997(a)
(All Amounts in Thousands)
Operations
Net investment income $ 874
Net realized gains on investments 336
Net change in unrealized appreciation
of investments 549
-----
1,759
-----
Transactions in investors' beneficial
interests
Contributions 38,807
Withdrawals (1,293)
-----
Net Increase from transactions in
investors' beneficial interest 37,514
-----
Net Increase in Net Assets 39,273
Total Net Assets
Beginning of Period -
-----
End of Period $39,273
======
(a) From the commencement of operations on November 1, 1996.
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
June 30, 1997
Note 1. Organization of the SR&F High Yield Portfolio
The SR&F High Yield Portfolio (the "Portfolio") is a separate series of
the SR&F Base Trust, a Massachusetts common trust organized under an
Agreement and Declaration of Trust dated August 23, 1993. The
Declaration of Trust permits the Trustees to issue nontransferable
interests in the Portfolio. The Portfolio commenced operations on
November 1, 1996.
The Portfolio allocates net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At June
30, 1997, Stein Roe High Yield Fund, Stein Roe Institutional Client High
Yield Fund and Stein Roe Institutional High Yield Fund owned 34.3 percent,
65.4 percent and 0.3 percent, respectively.
Note 2. Significant Accounting Policies
The following are the significant accounting policies of Stein Roe
Institutional Client High Yield Fund (the "Fund"), a series of the Stein
Roe Trust, an open-end diversified management investment company
organized as a Massachusetts business trust (the "Trust"), and the
Portfolio.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increases
and decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
Amortization of Organization Costs
Organization costs are amortized on a straight-line basis against
income over various periods of up to sixty months from the commencement
of public offering by the Fund, depending on the nature of the
individual cost.
Security Valuations
All securities are valued as of June 30, 1997. Long-term debt
securities are valued using market quotations if readily available at
the time of valuation. If market quotations are not readily available,
they are valued at a fair value using a procedure determined in good
faith by the Board of Trustees, which has authorized the use of market
valuations provided by a pricing service. Short-term debt securities
with remaining maturities of 60 days or less are valued at their
amortized cost. Those with remaining maturities of more than 60 days
for which market quotations are not readily available are valued by use
of a matrix, prepared by the Adviser, based on quotations for comparable
securities. Other assets are valued by a method that the Board of
Trustees believes represents a fair value.
Futures Contracts
The Portfolio may enter into U.S. Treasury bond futures contracts to
either hedge against expected declines of its securities or as a
temporary substitute for the purchase of individual bonds. Risks of
entering into futures contracts include the possibility that there may
be an illiquid market at the time the Portfolio seeks to close out a
contract, and changes in the value of the futures contract may not
correlate with changes in the value of the securities being hedged.
Upon entering into a futures contract, the Portfolio deposits cash
or securities with its custodian in an amount sufficient to meet the
initial margin requirement. Subsequent payments are made or received by
the Portfolio equal to the daily change in the contract value and are
recorded as unrealized gains or losses. The Portfolio recognizes a
realized gain or loss when the contract is closed or expires. The
Portfolio did not enter into any futures contracts during the period
ended June 30, 1997.
Federal Income Taxes
No provision is made for federal income taxes, since (a) the Fund elects
to be taxed as a "regulated investment company" and makes such
distributions to its shareholders as to be relieved of all federal
income tax under provisions of current federal tax law and (b) the
Portfolio is treated as a partnership for federal income tax purposes
and all of its income is allocated to its owners based on respective
percentages of ownership.
Distributions to Fund Shareholders
Dividends from net investment income are declared daily and paid
monthly. Capital gains distributions, if any, are distributed annually.
Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital.
Other Information
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
Securities purchased on a when-issued basis may be settled a month
or more after the transaction date. These securities are subject to
market fluctuation during this period. The Portfolio did not have any
when-issued or delayed delivery purchase commitments as of June 30,
1997.
All amounts, except per-share amounts, are shown in thousands.
Note 3. Portfolio Composition
The Fund invests all of its net investable assets in the Portfolio. The
Portfolio invests primarily in high yield, high-risk medium- and lower-
quality debt securities. See the Portfolio's schedule of
investments for information on individual securities.
Note 4. Trustees' Fees and Transactions with Affiliates
The Portfolio pays monthly management fees, computed and accrued daily,
to Stein Roe & Farnham Incorporated (the "Adviser"), an indirect,
majority-owned subsidiary of Liberty Mutual Insurance Company, for its
services as investment adviser and manager.
The management fee for the Portfolio is .50 of 1 percent of the
first $500 million of average daily net assets and .475 of 1 percent
thereafter.
The Fund pays monthly administrative fees to the Adviser. The
administrative fee for the Fund is .15 of 1 percent of the first $500
million of average daily net assets and .125 of 1 percent thereafter.
The administrative agreement of the Fund provides that the Adviser
will reimburse the Fund to the extent that its annual expenses,
excluding certain expenses, exceed the applicable limits prescribed by
any state in which the Fund's shares are offered for sale. In addition,
the Adviser has agreed to reimburse the Fund to the extent that expenses
exceed .50 of 1 percent of average net assets. The expense limitation
expires January 31, 2000, subject to earlier termination by the Adviser
on 30 days' notice to the Fund.
The transfer agent fees of the Fund are paid to SteinRoe Services,
Inc. (SSI), an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company. SSI has entered into an agreement with Colonial
Investors Service Center, Inc. an indirect, majority-owned subsidiary
of Liberty Mutual Insurance Company, to act as sub-transfer agent for
the Fund.
The Adviser also provides fund accounting services.
Certain officers and trustees of the Trust are also officers of the
Adviser. Compensation is paid to trustees not affiliated with the
Adviser. No remuneration was paid to any other trustee or officer of
the Trust.
Note 5. Short-Term Debt
To facilitate portfolio liquidity, the Fund and Portfolio maintain
borrowing arrangements under which they can borrow against portfolio
securities. There were no borrowings during the period ended June 30,
1997.
Note 6. Investment Transactions
The aggregate cost of purchases and proceeds from sales (other than
short-term obligations) for the SR&F High Yield Portfolio for the period
ended June 30, 1997, were $65,058 and $28,880, respectively.
At June 30, 1997, cost of investments for financial reporting purposes
and for federal tax purposes were the same. Unrealized appreciation and
depreciation on investments of the Portfolio were $698 and $149,
respectively.
<PAGE>
Stein Roe Institutional Client High Yield Fund
Financial Highlights
Selected per-share date (for a share outstanding throughout the
period), ratios, and supplemental data.
Period
Ended
June 30,
1997 (a)
---------
Net Asset Value, Beginning of Period $10.00
------
Income From Investment Operations
Net investment income 0.33
Net realized and unrealized gains
on investments 0.21
------
Total from investment operations 0.54
Distribution from net investment income (0.33)
-----
Net Asset Value, End of Period $10.21
======
Ratio of net expenses to average net
assets (b) 0.50%*
Ratio of net investment income to
average net assets (c) 8.76%*
Total return (c) 5.48%**
Net assets, end of period (000s) $25,674
* Annualized
**Not Annualized
(a) From commencement of operations on February 14, 1997.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser, this ratio would have been 2.59
percent for the period ended June 30, 1997.
(c) Computed giving effect to Adviser's expense limitation undertaking.
<PAGE>
SR&F High Yield Portfolio
Financial Highlights
Period
Ended
June 30,
1997(a)
--------
Ratios to Average Net Assets
Ratio of net investment income to
average net assets 8.24%*
Ratio of expenses to average
net assets 0.89%*
Portfolio turnover 168%
*Annualized
See accompanying notes to financial statements.
(a) The Portfolio commenced operations on November 1, 1996.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of the Stein Roe Trust and the SR&F
Base Trust
We have audited the accompanying balance sheets, including
the schedule of investments, of Stein Roe Institutional
Client High Yield Fund and SR&F High Yield Portfolio as of
June 30, 1997 and the related statements of operations and
changes in net assets, and financial highlights for the
period February 14, 1997 to June 30, 1997 for the Stein Roe
Institutional Client High Yield Fund and for the period
November 1, 1996 to June 30, 1997 for the SR&F High Yield
Portfolio. These financial statements and financial
highlights are the responsibility of the Fund's and
Portfolio's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June 30,
1997, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial positions of Stein Roe Institutional
Client High Yield Fund and SR&F High Yield Portfolio at June
30, 1997, and the results of their operations, the changes in
their net assets, and their financial highlights for the
periods referred to above, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1997
