Stein Roe Advisor Mutual Funds
Annual Report
Sept. 30, 1997
International Funds
Advisor International Fund
Contents
Performance................................................................ 1
How the Stein Roe Advisor International Fund has done over time
Q&A........................................................................ 2
Interview with the portfolio managers and a summary of investment
activity
Investments................................................................ 5
A complete list of investments with market values
Financial Statements....................................................... 9
Balance sheets, statements of operations and changes in net assets
Notes to Financial Statements.............................................. 15
Financial Highlights....................................................... 18
Selected per-share data
Report of Independent Public Accountants................................... 20
<PAGE>
Fund Performance
There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
Average Annual Total Returns
Periods ended Sept. 30, 1997
PAST 1 PAST 3 LIFE
YEAR YEARS OF FUND(1)
ADVISOR INTERNATIONAL FUND 8.86% 5.17% 6.04%
MSCI EAFE 12.18 8.83 7.54
Investment Comparison*
COMPARISON of change in value of a $10,000 investment.
Advisor
Date International Fund MSCI EAFE
3/31/94 10000 10000
6/30/94 9990 10058
9/30/94 10610 10068
12/31/94 10097 9965
3/31/95 9535 10151
6/30/95 9994 10224
9/30/95 10475 10650
12/31/95 10489 11082
3/31/96 10913 11402
6/30/96 11575 11582
9/30/96 11337 11567
12/31/96 11364 11752
3/31/97 11500 11598
6/30/97 12838 13069
9/30/97 12342 12977
* Historical performance for class K shares for the period prior to Feb. 14,
1997, is based on the performance of SR&F International Portfolio, restated to
reflect the 12b-1 fees and any other expenses applicable to that class, without
giving any effect to fee waivers and assuming reinvestment of dividends and
capital gains. Historical performance as restated does not represent Advisor
International Fund's future performance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The Morgan Stanley Capital International
Europe, Australia and Far East (MSCI EAFE) Index is an unmanaged group of stocks
that differs from the composition of any Stein Roe fund; it is not available for
direct investment.
1 SR&F International Portfolio Inception Date March 1, 1994. Index returns are
calculated on a monthly basis; therefore, index returns marked "Life of Fund'
are calculated from the month-end results that fell closest to SR&F
International Portfolio's inception date.
1
<PAGE>
Fund Data
Investment Objective:
Seeks long-term growth of capital by investing primarily in a diversified
portfolio of foreign securities. Under normal market conditions, the
Portfolio will invest at least 65 percent of its total assets in foreign
securities of at least three countries outside of the United States.
Q&A
AN INTERVIEW WITH BRUNO BERTOCCI AND DAVID HARRIS, PORTFOLIO MANAGERS OF
ADVISOR INTERNATIONAL FUND
Q: HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A: For the 12-months ended Sept. 30, 1997, the Fund returned 8.86 percent.
That trailed the Morgan Stanley International Europe, Australia and Far East
Index (MSCI EAFE) return of 12.18 percent and the 18.59 percent return of the
Lipper peer group median, for the same time period. The Fund's long-term return
of 5.17 percent for the three-year period ended Sept. 30, 1997, trailed the MSCI
EAFE by 3.66 percent and the Lipper peer group by 4.99 percent.
Q: WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM?
A: A number of factors hampered fund performance. First, although the Fund
is very underweighted in Japan versus its index, the Fund does hold shares of
companies that would have benefited from an economic recovery that did not
occur. Although the Japanese economy did show intermittent signs of improvement,
a domestic expansion didn't happen and these shares did not help the Fund's
performance. Second, the Fund does not own many of the very largest
capitalization companies in Europe that were the dominant performers over the
past year. We have felt for some time that many of these shares were less
attractive than some of the smaller- to mid-cap stocks that we own in Europe.
However, investor attention has been concentrated on the largest European
companies. Finally, the Fund has had a weighting in emerging markets, especially
Asian emerging markets, which have suffered from economic and political turmoil.
2
<PAGE>
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PAST YEAR?
A: In Europe the Fund invested in a broad variety of companies including
some mid-capitalization companies that we felt would benefit from economic
recovery in Europe and continued strength in the United States. The Fund also
invested in some companies that have been restructuring their businesses to
become more efficient and competitive. Many of these shares have done well in
1997. However, the largest blue chip companies in Europe have had the best
performance, and while the Fund does own some of these, such as Deutsche Bank,
Mannesman, and BNP (1.7 percent, 1.7 percent and 1.8 percent of total net
assets, respectively), we don't own them exclusively. During the year, just
under 20 percent of the Fund's assets were invested in Japan, which is both our
biggest underweighting versus the index and our largest sector weighting. We
expected that the lowest interest rates since World War II would give Japan's
economy the boost it needed to begin to recover. While Japan did periodically
experience strong relative performance, a sustained economic recovery has not
happened. Despite this, we still believe that a recovery may eventually take
place and are maintaining our weighting for now.
Q: WHAT CAN YOU TELL US ABOUT THE FUND'S HOLDINGS IN THE EMERGING MARKETS?
A: We like developing markets because we think they can offer strong
economic growth at very attractive valuations. Unfortunately, the Fund's
holdings in emerging markets didn't add to performance during the past fiscal
year. The Fund was especially hurt by the selloff in Asian emerging markets in
which the fund is concentrated. However, we think the valuations of many of the
emerging markets, especially in Asia, are attractive and we see many long-term
investment opportunities. As for the Fund's investments in Latin America, stocks
such as YPF and Telecom de Argentina (1.7 percent and 1.2 percent of total net
assets, respectively) performed well.
Q: WHAT MARKETS HAVE STRONG PROSPECTS GOING FORWARD?
A: Although it has been struck by currency volatility, real estate and
banking troubles and political turmoil, we're enthusiastic about Southeast Asia.
We believe that the economic news is already reflected in attractive share
prices there. Even though the Asian economies are likely to slow down, and some,
such as Thailand, will be in recession, we think the future is still very
bright. Asia has been investing heavily in modern infrastructure, savings rates
are high, worker productivity is excellent, and its country's industrial plants
are modern. We believe that Asia is in much better shape than Latin America
after its crisis and that share prices will rise fairly soon in anticipation of
a recovery.
<PAGE>
Q: WHERE ELSE DID YOU FIND VALUE DURING THE PAST YEAR?
A: Low inflation across Europe and the widely held belief that world
economies are improving helped cyclical stocks perform well. Two paper
manufacturing companies in Finland, Enso and Metsa-Serla (1.6 percent and 1.8
percent of total net assets, respectively), are among the most efficient in
their industry and added to the fund's performance. SSAB (1.4 percent of total
net assets), a Swedish steel company that is one of the lowest-cost carbon steel
manufacturers in the world, also contributed to performance.
Q: WHAT'S YOUR OUTLOOK FOR THE YEAR AHEAD?
A: We think that emerging markets, especially in Asia, and companies with
attractive valuations will come back into favor. We think that the emerging
markets have better valuations than developed markets. We also believe that
investors will move away from a narrow selection of the largest blue chip
companies that are on relatively high valuations and focus more on some of the
mid-cap names the fund owns.
The adviser currently limits expenses on class K shares to 1.75 percent of
average net assets, subject to termination on 30 days' notice to the Fund.
Absent this limit, total return would be less.
Historical performance for class K shares for the period prior to Feb. 14,
1997, is based on the performance of SR&F International Portfolio, restated to
reflect the 12b-1 fees and any other expenses applicable to that class, without
giving effect to any fee waivers and assuming reinvestment of dividends and
capital gains. Historical performance as restated does not represent Advisor
International Fund's future performance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Sept. 30, 1997, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The MSCI EAFE Index and the S&P 500 are unmanaged
groups of stocks that differ from the composition of any Stein Roe fund; they
are not available for direct investment. According to Lipper Analytical
Services, Inc., an independent monitor of mutual fund performance, the median
returns for the Fund's international fund peer group for the one-year and Life
of Fund periods ended Sept. 30, 1997, were 18.59 percent and 8.13 percent,
respectively. Because benchmark returns are calculated on a monthly basis, those
marked "Life of Fund" are from the month-end date that fell closest to the
Fund's inception date.
Holdings are disclosed as a percentage of the SR&F International Portfolio's
total net assets.
3
<PAGE>
<TABLE>
<CAPTION>
SR&F International Portfolio
- -------------------------------------------------------------------------------
Investments as of September 30, 1997
(Dollar amounts in thousands)
NUMBER MARKET
STOCKS (88.8%) OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA (2.9%)
Telecom Argentina ADRs............................... 65,200 $ 1,985
YPF Sociedad Anonima ADRs............................ 76,000 2,803
--------
4,788
AUSTRALIA (1.0%)
Reinsurance Australia ............................... 585,617 1,595
BELGIUM (1.4%)
Generale de Banque................................... 5,720 2,323
BRAZIL (1.0%)
*Globex Utilidades S.A. Pfd.......................... 71,000 859
*Perdigao S.A. ...................................... 364,700,000 732
--------
1,591
FINLAND (6.7%)
Enso Gutzeit (Ordinary R Shares)..................... 252,000 2,584
Kemira Oy........................................... 128,000 1,245
Merita LTD........................................... 542,000 2,573
Metsa-Serla Oy (B Shares)............................ 318,000 2,930
Neste Oy............................................. 66,600 1,812
--------
11,144
FRANCE (6.9%)
Alcatel Alsthom...................................... 17,786 2,366
Banque Nationale De Paris............................ 60,100 3,028
Generale Des Eaux.................................... 17,940 2,111
*Generale Des Eaux Warrants.......................... 17,673 10
*Moulinex............................................ 48,700 1,170
Total Petroles CIass B............................... 24,616 2,818
--------
11,503
GERMANY (7.3%)
AGIV AG.............................................. 83,100 2,019
*Deutsche Bank AG.................................... 39,800 2,794
Friedrick Grohe ..................................... 6,300 1,794
Henkel KGAA
Ordinary Shares................................... 6,500 324
Preferred Shares.................................. 42,100 2,372
Mannesmann AG....................................... 6,100 2,901
--------
12,204
HONG KONG (2.1%)
Companion Building................................... 10,118,752 654
Hong Kong Ferry...................................... 530,000 1,096
Jardine Matheson Holdings ........................... 165,805 1,343
Vitasoy.............................................. 999,364 436
--------
3,529
INDIA (1.0%)
Indian Petrochem GDRs................................ 92,000 943
+Reliance Industries GDSs............................ 29,000 664
--------
1,607
5
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
- -------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (1.2%)
CP Indonesia......................................... 1,037,500 $ 174
*Ever Shine Tex...................................... 2,019,688 447
Kawasan Industri Jababeka............................ 1,438,333 902
Matahari Putra Prima................................. 1,361,000 468
--------
1,991
ISRAEL (0.5%)
Koor Industries...................................... 39,500 815
ITALY (4.2%)
Banca Popolare di Milano............................. 375,800 2,199
*Olivetti............................................ 2,776,320 1,528
Telecom Italia Savings Shares........................ 852,326 3,317
--------
7,044
JAPAN (16.6%)
Canon ............................................... 86,000 2,515
DDI.................................................. 281 1,410
Hitachi.............................................. 212,000 1,843
Ito Yokado........................................... 50,000 2,708
*Japan OTC Fund...................................... 840 410
Jusco ............................................... 86,000 1,959
Kaneshita Construction............................... 73,000 459
Kokusai Securities................................... 123,000 932
Matsushita Electric Industrial....................... 138,000 2,492
Mori Seiki........................................... 119,000 1,390
Murata Manufacturing................................. 54,000 2,335
Promise Co.......................................... 61,400 3,204
Suzuki Motor......................................... 201,000 1,931
Tokyo Style.......................................... 116,000 1,163
*World Equity Benchmark Shares - Japan............... 134,000 1,667
Yamazen Corporation................................. 521,000 1,260
--------
27,678
MALAYSIA (0.2%)
IOI Properties ...................................... 298,000 287
MEXICO (0.4%)
Transportation Maritima Mexicana ADRs................ 78,500 618
NETHERLANDS (3.0%)
Fortis AMEV.......................................... 65,586 2,740
KPN.................................................. 45,069 1,772
Sphinx Kon Gustavsberg............................... 56,427 524
--------
5,036
NEW ZEALAND (1.0%)
Brierley Investments................................. 1,824,883 1,612
NORWAY (4.0%)
Helikopter Service................................... 129,000 1,565
Norsk Hydro AS....................................... 44,800 2,675
Saga Petroleum ...................................... 117,500 2,486
--------
6,726
PANAMA (1.3%)
Bladex ADRs.......................................... 50,200 2,246
5
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
- -------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
PERU (0.5%)
Southern Peru Copper ADRs............................ 43,000 $ 782
PHILIPPINES (0.5%)
Metro Pacific........................................ 7,220,000 872
PORTUGAL (1.1%)
*Portugal Telecom ADRs............................... 42,157 1,831
RUSSIA (0.7%)
*Fleming Russia Securities Fund...................... 40,400 1,172
SOUTH KOREA (4.7%)
Kookmin Bank......................................... 500 6
Korea Exchange Bank.................................. 279,995 1,506
*LG Electronics...................................... 58,000 1,153
LG Securities........................................ 52,950 625
Samchully ........................................... 23,843 1,147
Samsung Electronics
GDRs.............................................. 15,248 369
Ordinary Shares................................... 1,337 125
Preferred Shares.................................. 25,774 1,038
SK Telecom........................................... 104 64
+Yukong GDRs......................................... 92,500 1,720
--------
7,753
SWEDEN (4.6%)
Avesta-Sheffield..................................... 252,000 2,410
*Biora .............................................. 32,200 603
SSAB Svenskt Stal AB B shares........................ 109,800 2,273
*Diligentia AB....................................... 172,500 2,321
--------
7,607
SWITZERLAND (2.6%)
Bucher AG........................................... 1,368 1,399
Danzas Holding AG.................................... 5,100 1,090
Novartis AG.......................................... 1,200 1,843
--------
4,332
THAILAND (1.3%)
IFCT ................................................ 696,100 906
Precious Shipping ................................... 347,100 316
*Property Perfect ................................... 690,000 86
Siam Commercial Bank................................. 200,000 650
Sino Thai Engineering & Construction................. 151,200 250
--------
2,208
UNITED KINGDOM (10.1%)
*Billiton Plc........................................ 261,400 1,009
BG Plc............................................... 699,000 3,043
*Celsis International Plc............................ 487,905 812
*Centrica International Plc.......................... 699,000 1,050
Inchcape Plc......................................... 655,902 3,046
Intrum Justita Plc................................... 305,000 374
Powerscreen International Plc........................ 137,730 1,649
SmithKline Beecham Plc .............................. 265,054 2,576
*Tele-Communications International Plc............... 138,000 2,260
Transtec Plc......................................... 595,054 1,062
--------
16,881
6
<PAGE>
<CAPTION>
SR&F International Portfolio CONTINUED
- -------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Total Stocks (Cost $135,520)...................................... $147,775
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (12.0%)
UNITED STATES (12.0%)
COMMERCIAL PAPER (12.0%)
Associates Corp of North America
6.400% 10/01/97................................... $ 7,925 7,925
Enron 5.750% 10/01/97................................ 6,000 6,000
Goldman Sachs Group 5.750% 10/02/97.................. 6,000 5,999
--------
(Amortized cost $19,924)....................................... 19,924
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(Cost Basis $155,444) ......................................... 167,699
OTHER ASSETS, LESS LIABILITIES (-0.8%)............................ (1,269)
--------
TOTAL NET ASSETS (100.0%)......................................... $166,430
========
- -------------------------------------------------------------------------------
<FN>
* Non-income producing.
+ These securities are subject to contractual or legal restrictions on their
resale. At September 30, 1997, the aggregate value of these securities
represented 1.4 percent of net assets.
See accompanying notes to financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
STEIN ROE ADVISOR INTERNATIONAL FUND
BALANCE SHEET
SEPTEMBER 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
<S> <C>
ASSETS
Investment in SR&F International Portfolio, at value $107
Cash 17
Other assets 16
------
Total Assets $140
======
LIABILITIES
Payable to investment adviser and transfer agent $ 20
Other liabilities 13
------
Total Liabilities 33
------
CAPITAL
Paid-in capital 98
Net unrealized appreciation of investments 7
Accumulated undistributed net realized gains on investments 2
------
TOTAL CAPITAL (NET ASSETS) 107
------
TOTAL LIABILITIES AND CAPITAL $140
======
SHARES OUTSTANDING (UNLIMITED NUMBER AUTHORIZED) 10
======
NET ASSET VALUE (CAPITAL) PER SHARE $10.70
======
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
<TABLE>
STEIN ROE ADVISOR INTERNATIONAL FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997(a)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends and interest allocated from SR&F International Portfolio $ 2
----
EXPENSES
Amortization of organization expenses 20
Accounting fees 16
Audit and legal fees 12
Trustees fees 4
Printing and postage 3
Other 3
----
58
Reimbursement of expenses by investment adviser (57)
----
Total Expenses 1
----
Net Investment Income 1
----
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gains on investments allocated
from SR&F International Portfolio 2
Net realized losses on foreign currency transactions allocated
from SR&F International Portfolio (3)
Net change in unrealized appreciation or depreciation of investments
and foreign currency transactions 7
----
Net Gains on Investments and Foreign Currency Transactions 6
----
Net Increase in Net Assets Resulting from Operations 7
====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
9
<PAGE>
<TABLE>
STEIN ROE ADVISOR INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
OPERATIONS
Net investment income $ 1
Net realized losses on investments and foreign currency transactions (1)
Net change in unrealized appreciation or depreciation of investments
and foreign currency transactions 7
-----
Net Increase in Net Assets Resulting from Operations 7
-----
SHARE TRANSACTIONS
Subscriptions to fund shares (10 shares) 100
-----
Net Increase from Share Transactions 100
-----
Net Increase in Net Assets 107
TOTAL NET ASSETS
Beginning of Period --
-----
End of Period $ 107
=====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
10
<PAGE>
<TABLE>
SR&F INTERNATIONAL PORTFOLIO
BALANCE SHEET
SEPTEMBER 30, 1997
(All amounts in thousands)
<CAPTION>
<S> <C>
ASSETS
Investments, at market value $167,699
Receivable for investments sold 458
Dividends receivable 233
Cash 4
Other assets 2
--------
Total Assets 168,396
--------
LIABILITIES
Payable for investments purchased 1,830
Payable to investment adviser 118
Other liabilities 18
--------
Total Liabilities 1,966
--------
Net Assets applicable to investors' beneficial interest $166,430
========
See accompanying notes to financial statements.
</TABLE>
11
<PAGE>
<TABLE>
SR&F INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,588
Interest income 269
--------
2,857
Foreign taxes withheld (322)
--------
Total Investment Income 2,535
--------
EXPENSES
Management fees 839
Accounting fees 18
Audit and legal fees 18
Other 97
--------
Total Expenses 972
--------
Net Investment Income 1,563
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gains on investments 6,092
Net realized losses on foreign currency transactions (97)
Net change in unrealized appreciation or depreciation of
investments and foreign currency transactions 5,615
--------
Net Gains on Investments and Foreign
Currency Transactions 11,610
--------
Net Increase in Net Assets Resulting from Operations $ 13,173
========
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
12
<PAGE>
<TABLE>
SR&F INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
OPERATIONS
Net Investment income $ 1,563
Net realized gains on investments and foreign
currency transactions 5,995
Net change in unrealized appreciation or depreciation
of investments 5,615
---------
Net Increase in Net Assets Resulting
from Operations 13,173
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 171,752
Withdrawals (18,495)
---------
Net Increase from Transactions in
Investors' Beneficial Interests 153,257
---------
Net Increase in Net Assets 166,430
TOTAL NET ASSETS
Beginning of Period --
---------
End of Period $ 166,430
=========
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION OF THE SR&F INTERNATIONAL PORTFOLIO
The SR&F International Portfolio (the "Portfolio") is a separate series of the
SR&F Base Trust, a Massachusetts common law 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 February 3, 1997. At commencement, the Stein Roe
International Fund contributed $132,942 in securities and other assets. On
February 14, 1997, Stein Roe Advisor International Fund contributed cash of
$100.
The Portfolio allocates net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At September
30, 1997, Stein Roe International Fund and Stein Roe Advisor International Fund
owned 99.94 percent and .06 percent, respectively.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of Stein Roe Advisor
International Fund (the "Fund"), a series of the Stein Roe Advisor Trust (a
Massachusetts business trust) and the Portfolio. These policies are in
conformity with generally accepted accounting principles. 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.
SECURITY VALUATIONS
All securities are valued as of September 30, 1997. Securities are valued,
depending on the security involved, at the last reported sales price, last bid
or asked price, or the mean between last bid and asked price as of the close of
the appropriate exchange or other designated time. A security which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary exchange for such security. Other assets and
securities of the Portfolio are valued by a method that the Board of Trustees
believes represents a fair value.
CURRENCY TRANSLATIONS
For purposes of valuation, assets and liabilities are translated into U.S.
dollars using currency exchange rates that represent the mid-point between the
bid and asked rates as of 4:00 p.m., London time. Purchases and sales of
securities are translated into U.S. dollars using the prevailing exchange rate
on the dates of such transactions. The effect of changes in foreign exchange
rates on realized and unrealized security gains and losses is reflected as a
component of such gains and losses.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward contracts under which the Portfolio is
obligated to exchange currencies at specified future dates. Risks arise from the
possible inability of counterparties to meet the terms of their contracts and
from movements in currency values. The Portfolio did not have any open contracts
at September 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 make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on respective percentages of ownership.
DISTRIBUTION TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income and net
realized capital gains annually, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles. These differences are primarily due to differing treatments of
certain transactions, such as foreign currency transactions. Distributions in
excess of tax basis earnings are reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings that result in temporary
overdistributions are classified as distributions in excess of net investment
income or net realized gains. Permanent differences are reclassified to the
appropriate capital account.
OTHER INFORMATION
The books and records of the Fund and Portfolio are maintained in
U.S. dollars.
Dividend income is recognized on the ex-dividend date and interest income
is recognized on an accrual basis.
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
All amounts, except per-share amounts, are shown in thousands.
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to Stein Roe & Farnham Incorporated (the "Adviser"), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its
services as investment adviser and manager. The management fee for the Portfolio
is computed at an annual rate of .85 percent of average daily net assets. The
administrative fee for the Fund is computed at an annual rate of .15 percent of
average daily net assets.
The administrative agreement for the Fund provides that the Adviser will
reimburse the Fund to the extent that 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 1.75 percent of average
daily net assets. This expense limitation expires on January 31, 1998, subject
to earlier termination by the Adviser on 30 days' notice.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The transfer agent fees were paid to SteinRoe Services Inc. (SSI), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI
entered into an agreement with Colonial Investors Service Center, Inc. (CISC),
an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to
act as subtransfer agent for the Fund. Effective October 15, 1997, CISC
replaced SSI as transfer agent for the Fund.
The Adviser also provides certain fund accounting services. For the period
ended September 30, 1997, the Fund and Portfolio incurred charges of $16 and
$18, respectively.
Certain officers and trustees of the Trusts are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for the
Fund and Portfolio for the period ended September 30, 1997, was $4 and $11,
respectively. No remuneration was paid to any other trustee or officer of the
Trusts.
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Fund nor the Portfolio had borrowings during the period ended September 30,
1997.
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales for the Portfolio (other
than short-term obligations) for the period ended September 30, 1997, were
$28,503 and $25,340, respectively.
At September 30, 1997, the cost of investments in the Portfolio, for
federal income tax purposes and for financial reporting were $156,341 and
$155,444, respectively. Unrealized appreciation and depreciation on a tax basis
were $30,162 and $18,804, respectively.
NOTE 6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25 percent are computed annually as a
percentage of average daily net assets.
16
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
STEIN ROE ADVISOR INTERNATIONAL FUND
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
<CAPTION>
Period
Ended
September 30,
1997 (a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06
Net realized and unrealized gains on investments 0.64
----------
Total from investment operations 0.70
----------
NET ASSET VALUE, END OF PERIOD $ 10.70
==========
Ratio of net expenses to average net assets (b) 1.75%*
Ratio of net investment income to average net assets (c) 0.87%*
Total return 7.00%
Net assets, end of period $ 107
<FN>
* 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 of expenses by the investment adviser, this ratio would
have been 88.15 percent for the period ended September 30, 1997.
(c) Computed giving effect to the investment adviser's expense
limitation undertaking.
</FN>
See accompanying notes to financial statements.
</TABLE>
17
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SR&F INTERNATIONAL PORTFOLIO
<CAPTION>
Period
Ended
September 30,
1997(a)
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets 1.58%*
Ratio of net expenses to average net assets 0.98%*
Portfolio turnover rate 18%
Average commissions (per share) (b) $ 0.0002
<FN>
* Annualized
(a) From commencement of operations on February 3, 1997
(b) Foreign commissions usually are lower than U.S. commissions when
expressed as cents per share due to the lower per share price of many
non-U.S. securities.
</FN>
</TABLE>
18
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of:
Stein Roe Advisor International Fund
SR&F International Portfolio
We have audited the accompanying balance sheet of the Stein Roe Advisor
International Fund and the accompanying balance sheet, including the schedule of
investments, of the SR&F International Portfolio as of September 30, 1997, and
the related statements of operations, changes in net assets and the financial
highlights for the periods indicated thereon. 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 and financial highlights 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 for the SR&F International Portfolio included
confirmation of securities owned as of September 30, 1997, by correspondence
with the custodian and brokers. As to securities purchased but not received, we
requested confirmation from brokers and, when replies were not received, we
carried out alternative auditing procedures. An audit also includes assessing
the 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 referred to above present
fairly the financial position of the Stein Roe Advisor International Fund and
the SR&F International Portfolio at September 30, 1997, the result of their
operations, the changes in their net assets and their financial highlights for
the periods indicated thereon, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 24, 1997
19
<PAGE>
Stein Roe Advisor Trust
TRUSTEES
Timothy K. Armour
President, Mutual Fund Division and Director,
Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A.T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General Counsel,
Sara Lee Corporation
Francis W. Morley
Chairman, Employer Plan Administrators and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
AGENTS AND ADVISERS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
Colonial Investors Service Center, Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Arthur Andersen LLP
Independent Public Accountants
OFFICERS
Timothy K. Armour, President
William D. Andrews, Executive Vice President
Jilaine H. Bauer, Executive Vice President, Secretary
Thomas W. Butch, Executive Vice President
Loren A. Hansen, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief
Financial Officer
Bruno Bertocci, Vice President
David P. Brady, Vice President
Daniel K. Cantor, Vice President
Philip J. Crosley, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Harvey B. Hirschhorn, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
John S. McLandsborough, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Richard B. Peterson, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant Treasurer
Janet B. Rysz, Assistant Secretary
20
<PAGE>
Liberty Financial Investments, Inc., distributor
Member SIPC 11/97
<PAGE>
