Stein Roe Mutual Funds
ANNUAL REPORT
SEPT. 30, 1997
Photo of: Hands holding seedling.
Stein Roe Equity Fund
STEIN ROE ADVISOR GROWTH STOCK FUND
LOGO: STEIN ROE MUTUAL FUNDS
BUILDING WEALTH FOR GENERATIONS (SM)
<PAGE>
Contents
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PERFORMANCE............................................................. 1
How Stein Roe Advisor Growth Stock Fund has done over time
Q&A
GROWTH STOCK FUND....................................................... 2
An interview with the portfolio manager and
a summary of investment activity
Investments............................................................. 5
A complete list of investments with market values
Financial Statements.................................................... 7
Balance sheets, statements of operations and
changes in net assets
Notes to Financial Statements........................................... 13
Financial Highlights.................................................... 15
Selected per-share data
Report of Independent Public Accountants ............................... 17
Must be preceded or accompanied by a prospectus.
<PAGE>
Fund Performance+
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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 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
- -----------------------------------------------------------------------------
ADVISOR GROWTH STOCK FUND 32.76% 27.02% 16.95% 12.45%
S&P 500 40.43 29.89 20.75 14.73
Investment Comparison
- -----------------------------------------------------------------------------
COMPARISON of change in value of a $10,000 investment.
- -----------------------------------------------------------------------------
Advisor Growth Stock Fund
Line Chart:
Date AGSF S&P500
9/30/87 10000 10000
9/30/87 7412 8761
9/30/87 9938 11648
9/30/87 9500 10571
9/30/87 12949 13858
9/30/87 14773 15389
9/30/87 15488 17384
9/30/87 15773 18024
9/30/87 21167 23378
9/30/87 24350 28123
9/30/87 32327 39500
+ Historical performance for class K shares for the period prior to Feb. 14,
1997, is based on the performance of the SR&F Growth Stock Portfolio, restated
to reflect 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
Growth Stock 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. This
graph compares the performance of Stein Roe Advisor Growth Stock Fund to the S&P
500, an unmanaged group of stocks that differs from the composition of the fund;
it is not available for direct investment. Total return performance includes
changes in share price and reinvestment of income and capital gains
distributions.
<PAGE>
Q&A
- ------------------------------------------------------------------------------
AN INTERVIEW WITH ERIK GUSTAFSON, PORTFOLIO MANAGER OF
SR&F GROWTH STOCK PORTFOLIO AND STEIN ROE ADVISOR GROWTH STOCK FUND
Photo of: Erik Gustafson
Fund Data
Investment Objective:
Seeks long-term capital appreciation by investing in a diversified portfolio.
Under normal conditions, the portfolio will invest at least 65 percent of its
total assets in common stocks and other equity-type securities that are
believed to have long-term appreciation possibilities.
Q: HOW DID THE FUND PERFORM THIS YEAR?
A: Advisor Growth Stock Fund's total return for the fiscal year ended Sept. 30,
1997, was 32.76 percent, just shy of the Lipper growth fund peer group, which
posted a median return of 33.52 percent for the same period. The S&P 500
returned 40.43 percent. The Fund's long-term return -- 27.02 percent for the
three-year period ended Sept. 30, 1997 -- outpaced the peer group return of
24.84 percent.
Q: WHAT FACTORS DROVE PERFORMANCE?
A: In the first half of the fiscal year, our holdings in such global consumer
franchises as Coca-Cola, Gillette and Procter & Gamble (2.7 percent, 2.8 percent
and 2.7 percent of total net assets respectively) posted strong returns. Later
in the fiscal year, amid speculations of earnings disappointments from large-cap
companies, we saw investors subtly shifting their interest away from growth
companies and into cyclicals in an effort to capture some upside earning
potential.
Financial services was a particular standout. Americans are increasingly
aware of the importance of saving for retirement with investments. And with baby
boomers -- one of the largest market forces in action -- slowly approaching
retirement, we have seen an increase of dollars flowing into financial services
companies. As a result, companies in this sector -- such as Citicorp, Travelers
and American International Group -- all proved to be strong holdings for us (2.4
percent, 3.4 percent and 2.5 percent of total net assets, respectively). We also
saw positive performance from our technology issues, including Ericsson, Lucent
and Microsoft -- all companies that have continued to take advantage of
consumers' demand for new and existing technology (3.2 percent, 2.7 percent and
2.7 percent of total net assets, respectively).
Q: WHAT HINDERED PERFORMANCE?
A: Some of our holdings did have disappointing earnings, which affected the
Fund's performance in recent months. Those earnings were hurt by the strong U.S.
dollar. When the dollar is strong, large multinational companies -- companies
that generate a large portion of their revenue overseas -- realize lower
earnings as their foreign profits are translated into the stronger U.S.
currency.
Q: DESPITE THESE INFLUENCES, ARE YOU STILL CONFIDENT THAT THE PORTFOLIO'S
LARGE-CAP HOLDINGS HAVE THE POTENTIAL TO PERFORM WELL?
A: We remain positive about the growth stocks of companies we currently own. As
the world continues to modernize, we think the world will continue to
Americanize and companies that dominate in the United States are poised to do so
globally. We will remain true to our strategy, focusing on creating a portfolio
of what we think are the best businesses in the world.
Q: WHAT'S YOUR OUTLOOK?
A: We think the economy will continue along its noninflationary growth track. If
it does, we would expect a favorable environment for many of the large U.S.
companies we own -- companies that we think are well positioned competitively
and dominate the marketplace with their products.
Q: WHAT SECTORS DO YOU BELIEVE WILL PERFORM WELL IN COMING MONTHS AND WHY?
A: With baby boomers continuing to pour money into financial services, we
believe we are well positioned to take advantage of opportunities in that
sector. We also believe the Fund is well positioned in the energy sector, and
specifically in oil services, where we believe companies such as Schlumberger,
Baker-Hughes and Ensco (3.0 percent, 1.8 percent and 1.3 percent of total net
assets, respectively), have the potential to take advantage of a secular uptrend
in energy driven by supply and demand.
We have overweighted the portfolio in technology, holding 25 percent of the
portfolio's issues in this sector -- a normal weighting is roughly 17 percent.
This reflects our conviction that technology will continue to have a remarkable
impact on all of our personal lives. Specifically, we own telecommunications
companies, including Ericsson, Motorola, Tellabs, Cisco Systems and Lucent
Technologies (3.2 percent, 3.0 percent, 2.1 percent, 3.0 percent and 2.7 percent
of total net assets, respectively). We believe consumers will continue to demand
more capacity from products such as voice, video and Internet, and these
companies will benefit from that demand.
The Adviser currently limits expenses on class K shares to 1.35 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
the SR&F Growth Stock Portfolio, restated to reflect 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 Growth Stock Fund's future performance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
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 S&P 500 is an unmanaged group of stocks
that differ from the composition of the Fund; it is 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 growth
fund peer group for the one-, five- and 10-year periods ended Sept. 30, 1997,
were 33.52 percent, 18.62 percent and 13.19 percent, respectively. Holdings are
disclosed as a percentage of SR&FGrowth Stock Portfolio's total net assets.
<PAGE>
Fund Highlights
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
Growth Stock Portfolio
TOP 10 EQUITY HOLDINGS (% OF TOTAL NET ASSETS)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Travelers Group, Inc. 3.4% The Intel Corporation 3.0%
LM Ericsson Telecommunications 3.2 Cisco Systems 3.0
General Electric Company 3.1 Eli Lilly 3.0
Federal National Mortgage Assn. 3.1 Motorola, Inc. 3.0
Schlumberger Limited 3.0 Gillette Company 2.8
- ---------------------------------------------------------------------------------------------
Total 30.6%
=============================================================================================
</TABLE>
EQUITY PORTFOLIO HIGHLIGHTS
PORTFOLIO S&P 500
- ------------------------------------------------------------------
Number of Holdings 40 500
Median Market Value ($ Mil.) $41,380 $6,816
- ------------------------------------------------------------------
ECONOMIC SECTOR BREAKDOWN
As of Sept. 30, 1997
PIE CHARTS:
Equity Portfolio S&P 500
Basic Materials 0 5
Consumer Noncyclical 12 13
Consumer Cyclical 24 21
Energy 8 10
Financial 18 16
Industrial 10 10
Technology 25 17
Utilities 3 8
ASSET ALLOCATION
As of Sept. 30, 1996 As of Sept. 30, 1997
Equities 95.2 95.6
Cash & Equivalents 4.8 4.4
<PAGE>
<TABLE>
SR&F Growth Stock Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Investments as of September 30, 1997
(Dollar amounts in thousands)
<CAPTION>
Number Market
COMMON STOCKS (95.6%) of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS & SAVINGS AND LOANS (4.2%)
Citicorp......................................................................................... 110,000 $ 14,733
Wells Fargo & Company............................................................................ 40,000 11,000
-----------
25,733
BUSINESS SERVICES (3.9%)
First Data Corporation........................................................................... 300,000 11,269
Paychex, Inc. ................................................................................... 350,000 12,206
-----------
23,475
COMPUTERS AND COMPUTER SOFTWARE (8.8%)
*Cisco Systems Inc............................................................................... 250,000 18,266
Intel Corporation................................................................................ 200,000 18,463
*Microsoft Corporation........................................................................... 125,000 16,539
-----------
53,268
CONSUMER-RELATED (7.9%)
*CUC International Inc........................................................................... 450,000 13,950
Gillette Company................................................................................. 200,000 17,263
The Procter & Gamble Co.......................................................................... 240,000 16,575
-----------
47,788
DISTRIBUTION-RETAIL (5.1%)
The Home Depot, Inc.............................................................................. 300,000 15,638
*Kohl's Corporation.............................................................................. 220,000 15,620
-----------
31,258
ELECTRICAL EQUIPMENT (5.1%)
General Electric Company......................................................................... 280,000 19,058
*Thermo Electron Corp............................................................................ 300,000 12,000
-----------
31,058
ENERGY (1.6%)
*Renaissance Energy Ltd. ........................................................................ 400,000 9,980
FINANCIAL SERVICES (7.0%)
American Express Company......................................................................... 200,000 16,375
The Charles Schwab Corporation................................................................... 200,000 7,150
Federal National Mortgage Association............................................................ 400,000 18,800
-----------
42,325
FOOD, BEVERAGE & TOBACCO (4.8%)
The Coca-Cola Company............................................................................ 270,000 16,453
Philip Morris Companies Inc...................................................................... 300,000 12,469
-----------
28,922
HEALTH CARE (3.8%)
Johnson & Johnson................................................................................ 230,000 13,254
United Healthcare Corporation.................................................................... 200,000 10,000
-----------
23,254
HOTELS (2.7%)
*HFS Incorporated................................................................................ 225,000 16,748
INSURANCE (5.9%)
American International Group, Inc. .............................................................. 150,000 15,478
Travelers Group, Inc............................................................................. 300,000 20,475
-----------
35,953
See accompanying notes to financial statements.
<PAGE>
<CAPTION>
SR&F Growth Stock Portfolio CONTINUED
Investments as of September 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
Number Market
of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LEISURE & ENTERTAINMENT (1.8%)
The Walt Disney Co............................................................................... 135,000 $ 10,884
Medical Supplies (4.5%)
Baxter International Inc......................................................................... 200,000 10,450
Medtronic, Inc................................................................................... 360,000 16,920
-----------
27,370
OIL/GAS (6.1%)
Baker Hughes, Inc................................................................................ 250,000 10,937
Ensco International, Inc......................................................................... 200,000 7,888
Schlumberger Ltd................................................................................. 220,000 18,521
-----------
37,346
PHARMACEUTICAL (5.4%)
Eli Lilly & Co................................................................................... 150,000 18,103
Merck and Company, Inc........................................................................... 150,000 14,991
-----------
33,094
RESTAURANTS (1.4%)
McDonald's Corporation........................................................................... 175,000 8,334
RUBBER, PLASTIC & RELATED (2.1%)
Illinois Tool Works Inc.......................................................................... 250,000 12,484
TECHNOLOGY SERVICES (2.1%)
*Tellabs Inc..................................................................................... 250,000 12,875
TELECOMMUNICATIONS (11.4%)
LM Ericsson Telecommunications ADRs Class B...................................................... 400,000 19,175
Lucent Technologies, Inc......................................................................... 200,000 16,275
Motorola, Inc.................................................................................... 250,000 17,969
*Worldcom, Inc................................................................................... 450,000 15,919
-----------
69,338
-----------
TOTAL COMMON STOCKS (Cost $315,644).............................................................................. 581,487
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS (5.3%)
COMMERCIAL PAPER (5.3%)
Associates Corp. of North America 6.400% 10/01/97................................................ $ 22,175 22,175
Goldman Sachs Group 5.600% 10/2/97............................................................... 10,000 9,998
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $32,173)......................................................................................... 32,173
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost $347,817).................................................................................................. 613,660
OTHER ASSETS, LESS LIABILITIES (-0.9%)........................................................................... (5,289)
-----------
TOTAL NET ASSETS (100.0%)........................................................................................ $608,371
===========
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
*Non-income producing.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Stein Roe Advisor Growth Stock Fund
- --------------------------------------------------------------------------------
Balance Sheet
September 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
<S> <C>
ASSETS
Investment in SR&F Growth Stock Portfolio, at value ................ $ 252
Cash ............................................................... 13
Other assets ....................................................... 16
------
Total Assets .................................................... $ 281
======
LIABILITIES
Payable to investment adviser and transfer agent ................... $ 18
Other liabilities .................................................. 12
------
Total Liabilities ............................................... 30
------
CAPITAL
Paid-in capital .................................................... 225
Net unrealized appreciation of investments ......................... 34
Accumulated undistributed net realized losses on investment ........ (8)
------
Total Capital (Net Assets) ...................................... 251
======
Total Liabilities and Capital ................................... $ 281
======
Shares Outstanding (Unlimited Number Authorized) ................... 22
======
Net Asset Value (Capital) Per Share
$11.26
======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Stein Roe Advisor Growth Stock 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 Growth Stock Portfolio ................ $ 1
----
EXPENSES
Amortization of organization expenses ............................................ 20
Accounting fees .................................................................. 16
Audit and legal fees ............................................................. 15
Trustees' fees ................................................................... 4
Printing and postage ............................................................. 3
Other ............................................................................ 4
----
62
Reimbursement of expenses by investment adviser .................................. (61)
----
Total Expenses ................................................................ 1
----
Net Investment Loss ........................................................... --
----
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses on investments allocated from SR&F Growth Stock Portfolio .... (8)
Net change in unrealized appreciation or depreciation of investments ............. 34
----
Net Gains on Investments ...................................................... 26
----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. $ 26
====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Stein Roe Advisor Growth Stock 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 loss .............................................................. $ --
Net realized losses on investments ............................................... (8)
Net change in unrealized appreciation or depreciation of investments ............. 34
-----
Net Increase in Net Assets Resulting from Operations .......................... 26
-----
SHARE TRANSACTIONS
Subscriptions to fund shares (25 shares) ......................................... 260
Redemptions of fund shares (3 shares) ............................................ (35)
-----
Net Increase from Share Transactions (22 shares) .............................. 225
-----
Net Increase in Net Assets .................................................... 251
TOTAL NET ASSETS
Beginning of Period .............................................................. --
-----
End of Period .................................................................... $ 251
=====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Growth Stock Portfolio
- --------------------------------------------------------------------------------
Balance Sheet
September 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
<S> <C>
ASSETS
Investments, at market value ...................................... $613,660
Receivable for investments sold ................................... 506
Other assets ...................................................... 5
--------
Total Assets
614,171
========
LIABILITIES
Payable for investments purchased ................................. 5,450
Payable to investment adviser ..................................... 314
Other liabilities ................................................. 36
--------
Total Liabilities 5,800
--------
Net Assets Applicable to Investors' Beneficial Interest ........... $608,371
========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Growth Stock Portfolio
- --------------------------------------------------------------------------------
Statement of Operations
For the Period Ended September 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends ............................................................ $ 2,888
Interest ............................................................. 1,190
-------
Total Investment Income ........................................... 4,078
-------
EXPENSES
Management fees ...................................................... 2,120
Custodian fees ....................................................... 28
Accounting fees ...................................................... 25
Audit and legal fees ................................................. 17
Trustees fees ........................................................ 16
Other ................................................................ 30
-------
Total Expenses .................................................... 2,236
-------
Net Investment Income ................................................ 1,842
-------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments .................................... 26,585
Net change in unrealized appreciation or depreciation of investments . 53,294
-------
Net Gains on Investments .......................................... 79,879
-------
Net Increase in Net Assets Resulting from Operations ................. $81,721
=======
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Growth Stock 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 ...................................................... $ 1,842
Net realized gains on investments .......................................... 26,585
Net change in unrealized appreciation or depreciation of investments ....... 53,294
---------
Net Increase in Net Assets Resulting from Operations .................... 81,721
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions .............................................................. 571,598
Withdrawals ................................................................ (44,948)
---------
Net Increase from Transactions in Investors' Beneficial Interest ........ 526,650
---------
Net Increase in Net Assets .............................................. 608,371
TOTAL NET ASSETS
Beginning of Period ........................................................ --
---------
End of Period .............................................................. $ 608,371
=========
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION OF THE SR&F GROWTH STOCK PORTFOLIO
The SR&F Growth Stock 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 February 3, 1997. At commencement, the Stein Roe Growth
Stock Fund contributed $474,861 in securities and other assets. At February 14,
1997, Stein Roe Advisor Growth Stock 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 Growth Stock Fund and Stein Roe Advisor Growth Stock Fund
owned 99.96 percent and .04 percent, respectively.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of the Stein Roe Advisor
Growth Stock Fund (the "Fund"), a series of the Stein Roe Advisor Trust (a
Massachusetts business trust) and the Portfolio. The 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, the last business day of the
period. Securities traded on national securities exchanges are valued at the
last reported sales price or, if there are no sales, at the latest bid
quotation. Each over-the-counter security for which the last sale price is
available from Nasdaq is valued at that price. All other over-the-counter
securities for which reliable quotations are available are valued at the latest
bid quotation. Other assets and securities of the Portfolio are valued by a
method that the Board of Trustees believes represents a fair value.
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.
At September 30, 1997, the Fund had a capital loss carryforward of $8, which
expires in 2005.
DISTRIBUTION TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income and net
realized capital gains annually, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles. Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital. 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
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.
<PAGE>
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to Stein Roe & Farnham Incorporated (the "Adviser"), an
indirect, 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 .60 of
1 percent of average daily net assets up to $500 million, .55 of 1 percent of
the next $500 million, and .50 of 1 percent thereafter. The administrative fee
for the Fund is computed at annual rate of .15 of 1 percent of average daily net
assets up to $500 million, .125 of 1 percent of the next $500 million, and .10
of 1 percent thereafter.
The administrative agreement 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 its expenses exceed 1.35 percent of annual average net assets.
The expense limitation expires January 31, 1998, subject to earlier termination
by the Adviser on 30 days' notice.
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 accounting services. For the period ended
September 30, 1997, the Fund and Portfolio incurred charges of $16 and $25,
respectively.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for the Fund and
the Portfolio for the period ended September 30, 1997, was $4 and $16,
respectively. No remuneration was paid to any other trustee or officer of the
Trust.
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Fund nor the Portfolio had borrowings during the 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
$152,614 and $111,186.
At September 30, 1997, the cost of investments in the Portfolio for both
federal income tax purposes and for financial reporting was $347,817. Unrealized
appreciation and depreciation on a tax basis were $267,105 and $1,262,
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 the payment of costs for the
distribution of the Fund's shares, ongoing shareholder services and maintenance
of shareholder accounts.
Annual fees under each Plan of up to .25 percent are computed annually as a
percentage of average daily net assets.
NOTE 7. SUBSEQUENT EVENT
The Fund commenced offering Class A, Class B and Class C shares on October 15,
1997. All shares outstanding as of October 15, 1997, were redesignated Class K
shares.
<PAGE>
<TABLE>
Financial Highlights
- -----------------------------------------------------------------------------
Stein Roe Advisor Growth Stock 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 loss .......................................... (0.01)
Net realized and unrealized gains on investments ............. 1.27
-------
Total from investment operations ........................... 1.26
-------
NET ASSET VALUE, END OF PERIOD .................................. $ 11.26
=======
Ratio of net expenses to average net assets (b) ................. 1.35%*
Ratio of net investment income to average net assets (c) ........ (0.22%)*
Total return .................................................... 12.60%
Net assets, end of period ....................................... $ 251
<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 56.10
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>
<PAGE>
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------
SR&F Growth Stock Portfolio
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
<CAPTION>
PERIOD
ENDED
SEPTEMBER 30,
1997(A)
---------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets.............. 0.52%*
Ratio of net expenses to average net assets....................... 0.63%*
Portfolio turnover rate........................................... 22%
Average commissions (per share)................................... $0.0575
<FN>
* Annualized
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Report of Independent Public Accountants
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of:
Stein Roe Advisor Growth Stock Fund
SR&F Growth Stock Portfolio
We have audited the accompanying balance sheet of the Stein Roe Advisor Growth
Stock Fund and the accompanying balance sheet, including the schedule of
investments, of the SR&F Growth Stock 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 Growth Stock 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 Growth Stock Fund and the SR&F
Growth Stock Portfolio at September 30, 1997, the results 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
<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
<PAGE>
Liberty Financial Investments, Inc., distributor
Member SIPC 11/97
43ANN
<PAGE>
