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File No. 333-17255
Rule 497(e)
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STEIN ROE ADVISOR TRUST
Stein Roe Advisor Special Venture Fund
Supplement to February 14, 1997 Prospectus
________________
As of July 7, 1997, John S. McLandsborough has been
named co-portfolio manager, along with Richard B. Peterson,
of SR&F Special Venture Portfolio. Prior to joining the
Adviser in April 1996, Mr. McLandsborough was an equity
research analyst with CS First Boston from June 1994 until
January 1996 and with National City Bank of Cleveland prior
thereto. Mr. McLandsborough, a char-tered financial analyst,
earned a bachelor's degree in finance in 1989 from Miami
University and a master's degree in 1992 from Indiana
University.
This Supplement is Dated June 26, 1997
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STEIN ROE ADVISOR SPECIAL VENTURE FUND
The investment objective of Advisor Special Venture Fund is to
provide long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of entrepreneurially
managed companies. It emphasizes investments in financially
strong small and medium-sized companies, based principally on
management appraisal and stock valuation. Advisor Special Venture
Fund invests all of its net investable assets in SR&F Special
Venture Portfolio, a portfolio of SR&F Base Trust that has the
same investment objective and substantially the same investment
policies as Advisor Special Venture Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor Special Venture Fund may be purchased only
through Intermediaries, including retirement plan service
providers.
Advisor Special Venture Fund has no sales or redemption charges.
Advisor Special Venture Fund is a series of Stein Roe Advisor
Trust and Special Venture Portfolio is a series of SR&F Base
Trust. Each Trust is a diversified open-end management investment
company.
This prospectus contains information you should know before
investing in Advisor Special Venture Fund. Please read it
carefully and retain it for future reference.
A Statement of Additional Information dated February 14, 1997,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information may be obtained without charge
by writing to Stein Roe Mutual Funds, Suite 3200, One South Wacker
Drive, Chicago, Illinois 60606, or by calling the Adviser. For
additional information, call Retirement Services at 800-322-1130
or Advisor/Broker Services at 800-322-0593.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February 14, 1997.
TABLE OF CONTENTS
Page
Summary.................................3
Fee Table ..............................4
The Fund................................5
Investment Policies.....................6
Performance Information.................7
Risks and Investment Considerations ....9
Investment Restrictions ...............10
Portfolio Investments and Strategies...14
Net Asset Value .......................14
How to Purchase Shares.................15
How to Redeem Shares ..................16
Distributions and Income Taxes.........17
Management ............................20
Organization and Description of Shares.
Special Considerations Regarding the
Master Fund/Feeder Fund Structure....21
For More Information ..................24
SUMMARY
Stein Roe Advisor Special Venture Fund ("Advisor Special Venture
Fund") is a series of Stein Roe Advisor Trust, an open-end
diversified management investment company organized as a
Massachusetts business trust. (See The Fund and Organization and
Description of Shares.) This prospectus is not a solicitation in
any jurisdiction in which shares of Advisor Special Venture Fund
are not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Special Venture Fund is to provide long-term capital
appreciation by investing primarily in a diversified portfolio of
equity securities of entrepreneurially managed companies. It
emphasizes investments in financially strong small and medium-
sized companies, based principally on management appraisal and
stock valuation. Advisor Special Venture Fund invests all of its
net investable assets in SR&F Special Venture Portfolio ("Special
Venture Portfolio") which has the same investment objective and
investment policies substantially similar to those of Advisor
Special Venture Fund. Special Venture Portfolio emphasizes
investments in financially strong small and medium-sized
companies, based principally on management appraisal and stock
valuation.
For a more detailed discussion of the investment objectives and
policies, please see Investment Policies and Portfolio Investments
and Strategies. There is, of course, no assurance that Advisor
Special Venture Fund and Special Venture Portfolio will achieve
their common investment objective.
INVESTMENT RISKS. Advisor Special Venture Fund is designed for
long-term investors who want greater return potential than is
available from the stock market in general, and who are willing to
tolerate the greater investment risk and market volatility
associated with investments in small and medium-sized companies.
Special Venture Portfolio may invest in foreign securities, which
may entail a greater degree of risk than investing in securities
of domestic issuers. Please see Investment Restrictions and Risks
and Investment Considerations for further information.
PURCHASES AND REDEMPTIONS. Shares of Advisor Special Venture Fund
may be purchased only through Intermediaries, including retirement
plan service providers. For information on purchasing and
redeeming Advisor Special Venture Fund shares, please see How to
Purchase Shares, How to Redeem Shares, and Management--
Distributor.
MANAGEMENT AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") is investment adviser to Special Venture Portfolio. In
addition, it provides administrative services to Advisor Special
Venture Fund and Special Venture Portfolio. For a description of
the Adviser and these service arrangements, see Management.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.......................None
Sales Load Imposed on Reinvested Dividends............None
Deferred Sales Load...................................None
Redemption Fees.......................................None
Exchange Fees.........................................None
ANNUAL FUND OPERATING EXPENSES (as a percentage of
average net assets; after reimbursement)
Management and Administrative Fees (after
reimbursement).....................................0.75%
12b-1 Fees............................................0.25%
Other Expenses (after reimbursement)..................0.50%
-----
Total Operating Expenses (after reimbursement)........1.50%
=====
EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; and (2) redemption at the end of
each time period:
1 year 3 years
------ -------
$15 $47
The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in Advisor Special Venture Fund. The
Fee Table reflects the combined expenses of both Advisor Special
Venture Fund and Special Venture Portfolio. Anticipated Total
Operating Expenses for Advisor Special Venture Fund are annualized
projections based upon current administrative fees and management
fees. Other Expenses are estimated amounts for the current fiscal
year. The figures assume that the percentage amounts listed under
Annual Fund Operating Expenses remain the same during each of the
periods and that all income dividends and capital gain
distributions are reinvested in additional shares.
From time to time, the Adviser may voluntarily undertake to
reimburse Advisor Special Venture Fund for a portion of its
operating expenses and its pro rata share of the fees and expenses
payable by Special Venture Portfolio. The Adviser has undertaken
to reimburse Advisor Special Venture Fund for its operating
expenses and its pro rata share of Special Venture Portfolio's
operating expenses to the extent such expenses exceed 1.50% of
Advisor Special Venture Fund's annual average net assets. This
commitment expires on January 31, 1998, subject to earlier review
and possible termination by the Adviser on 30 days' notice to
Advisor Special Venture Fund. Absent such reimbursement, Advisor
Special Venture Fund's share of Special Venture Portfolio's
Management Fee and the Fund's Administrative Fee, Other Expenses
and Total Operating Expenses would be 0.90%, 0.55% and 1.70%,
respectively. Any such reimbursement will lower Advisor Special
Venture Fund's overall expense ratio and increase its overall
return to investors. (Also see Management--Fees and Expenses.)
Advisor Special Venture Fund pays the Adviser an administrative
fee based on its average daily net assets and Special Venture
Portfolio pays the Adviser a management fee based on its average
daily net assets. The trustees of Advisor Trust have considered
whether the annual operating expenses of Advisor Special Venture
Fund, including its proportionate share of the expenses of Special
Venture Portfolio, would be more or less than if Advisor Special
Venture Fund invested directly in the securities held by Special
Venture Portfolio, and concluded that Advisor Special Venture
Fund's expenses would not be materially greater in such case.
The figures in the Example are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown in the
Example and Fee Table is useful in reviewing Advisor Special
Venture Fund's expenses and in providing a basis for comparison
with other mutual funds, it should not be used for comparison with
other investments using different assumptions or time periods.
Because Advisor Special Venture Fund pays a 12b-1 fee, long-term
investors in Advisor Special Venture Fund may pay more over long
periods of time in distribution expenses than the maximum front-
end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD"). For further information on
Advisor Special Venture Fund's 12b-1 fee, see Management--
Distributor or call your financial representative.
THE FUND
STEIN ROE ADVISOR SPECIAL VENTURE FUND ("Advisor Special Venture
Fund") is a series of Stein Roe Advisor Trust ("Advisor Trust"),
which is an open-end diversified management investment company
authorized to issue shares of beneficial interest in separate
series.
Rather than invest in securities directly, Advisor Special Venture
Fund seeks to achieve its investment objective by using the
"master fund/feeder fund structure." Under that structure, a
feeder fund and one or more feeder funds pool their assets in a
master portfolio that has the same investment objective and
substantially the same investment policies as the feeder funds.
(See Special Considerations Regarding Master Fund/Feeder Fund
Structure.) Advisor Special Venture Fund invests all of its net
investable assets in SR&F Special Venture Portfolio ("Special
Venture Portfolio"), which is a series of SR&F Base Trust ("Base
Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Special Venture Portfolio and
administrative services to Advisor Special Venture Fund and
Special Venture Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Special Venture Fund is to
provide long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of entrepreneurially
managed companies. It emphasizes investments in financially
strong small and medium-sized companies, based principally on
management appraisal and stock valuation. Advisor Special Venture
Fund invests all of its net investable assets in Special Venture
Portfolio, which has the same investment objective and investment
policies substantially similar to Advisor Special Venture Fund.
The Adviser considers "small" and "medium-sized" companies to be
those with market capitalizations of less than $1 billion and $1
to $3 billion, respectively.
In both its initial and ongoing appraisals of a company's
management, the Adviser seeks to know both the principal owners
and senior management and to assess their business judgment and
strategies through personal visits. The Adviser favors companies
whose management has an owner/operator, risk-averse orientation
and a demonstrated ability to create wealth for investors.
Attractive company characteristics include unit growth, favorable
cost structures or competitive positions, and financial strength
that enables management to execute business strategies under
difficult conditions. A company is attractively valued when its
stock can be purchased at a meaningful discount to the value of
the underlying business.
Further information on investment techniques that may be employed
by Special Venture Portfolio and the risks associated with such
techniques may be found under Risks and Investment Considerations
and Portfolio Investments and Strategies in this prospectus and in
the Statement of Additional Information.
PERFORMANCE INFORMATION
The total return from an investment in Advisor Special Venture
Fund is measured by the distributions received (assuming
reinvestment), plus or minus the change in the net asset value per
share for a given period. A total return percentage may be
calculated by dividing the value of a share at the end of the
period (including reinvestment of distributions) by the value of
the share at the beginning of the period and subtracting one. For
a given period, an average annual total return may be calculated
by finding the average annual compounded rate that would equate a
hypothetical $1,000 investment to the ending redeemable value.
Comparison of Advisor Special Venture Fund's total return with
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. Of course, past performance is
not necessarily indicative of future results. Share prices may
vary, and your shares when redeemed may be worth more or less than
your original purchase price.
As of the date of this Prospectus, Advisor Special Venture Fund
had no past performance. However, Stein Roe Special Venture Fund,
a different Stein Roe Fund which is a series of Stein Roe
Investment Trust and has a similar name, the same investment
objective and substantially the same investment policies as
Advisor Special Venture Fund, also invests all of its net
investable assets in Special Venture Portfolio. The average
annual total returns for the periods ended September 30, 1996, for
1-year and since-inception (October 17, 1994) investments in Stein
Roe Special Venture Fund were 31.81% and 30.22%, respectively.
Stein Roe Special Venture Fund has a different fee structure than
Advisor Special Venture Fund, and does not pay 12b-1 fees. Had
these fees been reflected, the total returns shown in the table
would have been lower. The information shown above reflects the
performance of Stein Roe Special Venture Fund, and should not be
interpreted as indicative of Advisor Special Venture Fund's future
performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Special Venture Fund is designed for long-term investors
who want greater return potential than is available from the stock
market in general, and who are willing to tolerate the greater
investment risk and market volatility associated with investments
in small and medium-sized companies. Special Venture Portfolio
usually allocates its investments among a number of different
industries rather than concentrating in a particular industry or
group of industries, but this does not eliminate all risk. It
will not, however, invest more than 25% of the total value of its
assets (at the time of investment) in the securities of companies
in any one industry. There can be no guarantee that Advisor
Special Venture Fund or Special Venture Portfolio will achieve its
objective.
Special Venture Portfolio may invest up to 35% of its total assets
in debt securities. Debt securities rated in the fourth highest
grade may have some speculative characteristics, and changes in
economic conditions or other circumstances may lead to a weakened
capacity of the issuers of such securities to make principal and
interest payments. Securities rated below investment grade may
possess speculative characteristics, and changes in economic
conditions are more likely to affect the issuer's capacity to pay
interest or repay principal.
Special Venture Portfolio may invest up to 25% of its total assets
in foreign securities. For purposes of this limit, foreign
securities exclude American Depositary Receipts (ADRs), foreign
debt securities denominated in U.S. dollars, and securities
guaranteed by a U.S. person. Investment in foreign securities may
represent a greater degree of risk (including risk related to
exchange rate fluctuations, tax provisions, exchange and currency
controls, and expropriation of assets) than investment in
securities of domestic issuers. Other risks of foreign investing
include less complete financial information on issuers, different
accounting, auditing and financial reporting standards, different
settlement practices, less market liquidity, more market
volatility, less developed and regulated markets, and greater
political instability. In addition, various restrictions by
foreign governments on investments by nonresidents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
nonresidents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Special Venture Portfolio may be found under Portfolio
Investments and Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Special Venture Fund nor Special Venture Portfolio
may invest more than 5% of their assets in the securities of any one
issuer. This restriction applies only to 75% of the investment
portfolio, and does not apply to securities of the U.S. Government
or repurchase agreements /1/ for such securities. This
restriction also does not prevent Advisor Special Venture Fund
from investing all of its assets in shares of another investment
company having the identical investment objective under a
master/feeder structure.
- ----------------
/1/ A repurchase agreement involves a sale of securities to
Special Venture Portfolio in which the seller agrees to repurchase
the securities at a higher price, which includes an amount
representing interest on the purchase price, within a specified
time. In the event of bankruptcy of the seller, Special Venture
Portfolio could experience both losses and delays in liquidating
its collateral.
- ----------------
Neither Advisor Special Venture Fund nor Special Venture Portfolio
will acquire more than 10% of the outstanding voting securities of
any one issuer. Advisor Special Venture Fund may, however, invest
all of its assets in shares of another investment company having
the identical investment objective under a master/feeder
structure.
Neither Advisor Special Venture Fund nor Special Venture Portfolio
may make loans except that it may (1) purchase money market
instruments and enter into repurchase agreements; (2) acquire
publicly distributed or privately placed debt securities; (3) lend
its portfolio securities under certain conditions; and (4)
participate in an interfund lending program with other Stein Roe
Funds and Portfolios. Advisor Special Venture Fund and Special
Venture Portfolio may not borrow money, except for nonleveraging,
temporary, or emergency purposes or in connection with
participation in the interfund lending program. Neither the
aggregate borrowings (including reverse repurchase agreements) nor
the aggregate loans at any one time may exceed 33 1/3% of the
value of total assets. Additional securities may not be purchased
when borrowings less proceeds receivable from sales of portfolio
securities exceed 5% of total assets.
Advisor Special Venture Fund and Special Venture Portfolio may
invest in repurchase agreements, provided that neither will invest
more than 15% of its net assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
The policies summarized in the first three paragraphs under this
section and the policy with respect to concentration of
investments in any one industry described under Risks and
Investment Considerations are fundamental policies of Advisor
Special Venture Fund and Special Venture Portfolio and, as such,
can be changed only with the approval of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940. The common investment objective of Advisor
Special Venture Fund and Special Venture Portfolio is non-
fundamental and, as such, may be changed by the Board of Trustees
without shareholder approval. All of the investment restrictions
are set forth in the Statement of Additional Information.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
Special Venture Portfolio may invest up to 35% of its net assets
in debt securities, but it does not currently intend to invest
more than 5% of its net assets in debt securities rated below
investment grade. The risks inherent in debt securities depend
primarily on the term and quality of the obligations in Special
Venture Portfolio's portfolio as well as on market conditions. A
decline in the prevailing levels of interest rates generally
increases the value of debt securities, while an increase in rates
usually reduces the value of those securities. When the Adviser
determines that adverse market or economic conditions exist and
considers a temporary defensive position advisable, Special
Venture Portfolio may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
Special Venture Portfolio may invest in sponsored or unsponsored
ADRs. In addition to, or in lieu of, such direct investment,
Special Venture Portfolio may construct a synthetic foreign debt
position by (a) purchasing a debt instrument denominated in one
currency, generally U.S. dollars; and (b) concurrently entering
into a forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and
at a specified rate of exchange. Because of the availability of a
variety of highly liquid U.S. dollar debt instruments, a synthetic
foreign debt position utilizing such U.S. dollar instruments may
offer greater liquidity than direct investment in foreign currency
debt instruments.
In connection with the purchase of foreign securities, Special
Venture Portfolio may enter into foreign currency forward and
futures contracts to hedge the currency risk in settlement of a
particular security transaction or relative to the entire
portfolio. A forward contract to purchase an amount of foreign
currency sufficient to pay the purchase price of securities at
settlement date involves the risk that the value of the foreign
currency may decline relative to the value of the dollar prior to
the settlement date. This risk is in addition to the risk that
the value of the foreign security purchased may decline. Special
Venture Portfolio also may enter into foreign currency contracts
as a hedging technique to limit or reduce exposure of the entire
portfolio to currency fluctuations. In addition, Special Venture
Portfolio may use options and futures contracts, as described
below, to limit or reduce exposure to currency fluctuations.
CONVERTIBLE SECURITIES.
By investing in convertible securities, Special Venture Portfolio
obtains the right to benefit from the capital appreciation
potential in the underlying stock upon exercise of the conversion
right, while earning higher current income than would be available
if the stock were purchased directly. In determining whether to
purchase a convertible, the Adviser will consider substantially
the same criteria that would be considered in purchasing the
underlying stock. Although convertible securities are frequently
rated investment grade, Special Venture Portfolio also may
purchase unrated securities or securities rated below investment
grade if the securities meet the Adviser's other investment
criteria. Convertible securities rated below investment grade
tend to be more sensitive to interest rate and economic changes,
may be obligations of issuers who are less creditworthy than
issuers of higher quality convertible securities, and may be more
thinly traded due to the fact that such securities are less well
known to investors than either common stock or conventional debt
securities. As a result, the Adviser's own investment research
and analysis tends to be more important than other factors in the
purchase of convertible securities.
LENDING PORTFOLIO SECURITIES; WHEN-ISSUED AND DELAYED-DELIVERY
SECURITIES.
Special Venture Portfolio may make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
Special Venture Portfolio may participate in an interfund lending
program, subject to certain restrictions described in the
Statement of Additional Information. Special Venture Portfolio
may invest in securities purchased on a when-issued or delayed-
delivery basis. Although the payment terms of these securities
are established at the time Special Venture Portfolio enters into
the commitment, the securities may be delivered and paid for a
month or more after the date of purchase, when their value may
have changed. Special Venture Portfolio will make such
commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if
it is deemed advisable for investment reasons.
SHORT SALES AGAINST THE BOX.
Special Venture Portfolio may sell short securities it owns or has
the right to acquire without further consideration, using a
technique called selling short "against the box." Short sales
against the box may protect Special Venture Portfolio against the
risk of losses in the value of its portfolio securities because
any unrealized losses with respect to such securities should be
wholly or partly offset by a corresponding gain in the short
position. However, any potential gains in such securities should
be wholly or partially offset by a corresponding loss in the short
position. Short sales against the box may be used to lock in a
profit on a security when, for tax reasons or otherwise, the
Adviser does not want to sell the security. Special Venture
Portfolio does not expect to commit more than 5% of its net assets
to short sales against the box. For a more complete explanation,
please refer to the Statement of Additional Information.
DERIVATIVES.
Consistent with its objective, Special Venture Portfolio may
invest in a broad array of financial instruments and securities,
including conventional exchange-traded and non-exchange-traded
options, futures contracts, futures options, securities
collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that
securitize assets of various types ("Derivatives"). In each case,
the value of the instrument or security is "derived" from the
performance of an underlying asset or a "benchmark" such as a
security index, an interest rate, or a currency. Special Venture
Portfolio does not expect to invest more than 5% of its net assets
in any type of Derivative except for options, futures contracts,
and futures options.
In seeking to achieve its desired investment objective, provide
additional revenue, or to hedge against changes in security
prices, interest rates or currency fluctuations, Special Venture
Portfolio may: (1) purchase and write both call options and put
options on securities, indexes and foreign currencies; (2) enter
into interest rate, index and foreign currency futures contracts;
(3) write options on such futures contracts; and (4) purchase
other types of forward or investment contracts linked to
individual securities, indexes or other benchmarks. Special
Venture Portfolio may write a call or put option only if the
option is covered. As the writer of a covered call option,
Special Venture Portfolio foregoes, during the option's life, the
opportunity to profit from increases in market value of the
security covering the call option above the sum of the premium and
the exercise price of the call. There can be no assurance that a
liquid market will exist when Special Venture Portfolio seeks to
close out a position. In addition, because futures positions may
require low margin deposits, the use of futures contracts involves
a high degree of leverage and may result in losses in excess of
the amount of the margin deposit.
Derivatives are most often used to manage investment risk or to
create an investment position indirectly because they are more
efficient or less costly than direct investment. They also may be
used in an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives. For additional
information on Derivatives, please refer to the Statement of
Additional Information.
PORTFOLIO TURNOVER.
Although Special Venture Portfolio does not purchase securities
with a view to rapid turnover, there are no limitations on the
length of time portfolio securities must be held. Accordingly,
the portfolio turnover rate may vary significantly from year to
year, but is not expected to exceed 100% under normal market
conditions. Flexibility of investment and emphasis on capital
appreciation may involve greater portfolio turnover than that of
mutual funds that have the objectives of income or maintenance of
a balanced investment position. A high rate of portfolio turnover
may result in increased transaction expenses and the realization
of capital gains and losses. (See Distributions and Income
Taxes.)
NET ASSET VALUE
The purchase and redemption price of Advisor Special Venture
Fund's shares is its net asset value per share. Advisor Special
Venture Fund determines the net asset value of its shares as of
the close of trading on the New York Stock Exchange ("NYSE")
(currently 3:00 p.m., central time) by dividing the difference
between the value of its assets and liabilities by the number of
shares outstanding. Special Venture Portfolio allocates net asset
value, income, and expenses to Advisor Special Venture Fund and
any other of its feeder funds in proportion to their respective
interests in Special Venture Portfolio.
Net asset value will not be determined on days when the NYSE is
closed unless, in the judgment of the Board of Trustees, the net
asset value of Advisor Special Venture Fund should be determined
on any such day, in which case the determination will be made at
3:00 p.m., central time.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation 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.
Long-term straight-debt obligations and securities convertible
into stocks are valued at a fair value using a procedure
determined in good faith by the Board of Trustees. Pricing
services approved by the Board provide valuations (some of which
may be "readily available market quotations"). These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the obligation using a method that the Board
believes represents fair value. The Board may approve the use of
other pricing services and any pricing service used may employ
electronic data processing techniques, including a so-called
"matrix" system, to determine valuations. Other assets and
securities are valued by a method that the Board believes
represents fair value.
HOW TO PURCHASE SHARES
You may purchase Advisor Special Venture Fund shares only through
broker-dealers, banks, or other intermediaries, including
retirement plan service providers ("Intermediaries"). The Adviser
and Advisor Special Venture Fund do not recommend, endorse, or
receive payments from any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
Special Venture Fund's shares is made at Advisor Special Venture
Fund's net asset value (see Net Asset Value) next determined after
receipt by the Fund or through an authorized agent of an order in
good form, including receipt of payment.
CONDITIONS OF PURCHASE. Each purchase order for Advisor Special
Venture Fund must be accepted by an authorized officer of Advisor
Trust or its authorized agent and is not binding until accepted
and entered on the books of Advisor Special Venture Fund. Once
your purchase order has been accepted, you may not cancel or
revoke it; you may, however, redeem the shares. Advisor Trust
reserves the right not to accept any purchase order that it
determines not to be in the best interests of Advisor Trust or of
Advisor Special Venture Fund's shareholders.
PURCHASES THROUGH INTERMEDIARIES. You must purchase shares
through Intermediaries. These Intermediaries may charge for their
services or place limitations on the extent to which you may use
the services offered by Advisor Trust. In addition, each
Intermediary will establish its own procedures for the purchase of
shares of Advisor Special Venture Fund, including minimum initial
and additional investments, and the acceptable methods of payment
for shares. Your Intermediary may be closed on days when the NYSE
is open. As a result, prices of Fund shares may be significantly
affected on days when you have no access to your Intermediary to
buy shares. If you wish to purchase shares, please contact your
Intermediary for instructions.
Retirement Plans. If you purchase shares through a retirement
plan, you should be aware that retirement plan administrators may
aggregate purchase and redemption orders for participants in the
plan. Therefore, there may be a delay between the time you place
your order with the plan administrator and the time the order is
forwarded for execution.
HOW TO REDEEM SHARES
You may redeem shares only through Intermediaries. Each
Intermediary will establish its own procedures for the sale of
shares of Advisor Special Venture Fund. Your Intermediary may be
closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when you have no
access to your Intermediary to sell shares. If you wish to redeem
shares through an Intermediary, please contact the Intermediary
for instructions.
EXCHANGE PRIVILEGE. Through an account with an Intermediary, you
may redeem all or any portion of your Advisor Special Venture Fund
shares and use the proceeds to purchase shares of any other Fund
that is a series of Advisor Trust offered for sale in the state in
which the Intermediary is located. Each Intermediary will
establish its own exchange policies and procedures. In particular,
individual participants of qualified retirement plans may exchange
shares through the plan sponsor or administrator. Those
participants may exchange shares only for shares of other Advisor
Trust Funds that are included in the plan. An exchange
transaction is a sale and purchase of shares for federal income
tax purposes and may result in capital gain or loss. Before
exchanging into another Advisor Trust Fund, you should obtain the
prospectus for the Advisor Trust Fund in which you wish to invest
and read it carefully. The registration of the account to which
you are making an exchange must be exactly the same as that of the
account from which the exchange is made. Advisor Special Venture
Fund reserves the right to suspend, limit, modify, or terminate
the Exchange Privilege or its use in any manner by any person or
class; Intermediaries would be notified of such a change.
GENERAL REDEMPTION POLICIES. Redemption instructions may not be
cancelled or revoked once they have been received and accepted by
Advisor Trust. Advisor Trust cannot accept a redemption request
that specifies a particular date or price for redemption or any
special conditions.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received by the Intermediary. (See Net Asset
Value.) Because the redemption price you receive depends upon
Advisor Special Venture Fund's net asset value per share at the
time of redemption, it may be more or less than the price you
originally paid for the shares and may result in a realized
capital gain or loss.
Advisor Trust will pay redemption proceeds as soon as practicable,
and in no event later than seven days after proper instructions
are received by Advisor Special Venture Fund or its authorized
agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid annually.
Advisor Special Venture Fund intends to distribute by the end of
each calendar year at least 98% of any net capital gains realized
from the sale of securities during the twelve-month period ended
October 31 in that year. Advisor Special Venture Fund intends to
distribute any undistributed net investment income and net
realized capital gains in the following year.
All income dividends and capital gain distributions on shares of
Advisor Special Venture Fund will be reinvested in additional
shares unless your Intermediary elects to have distributions paid
by check. Reinvestment normally occurs on the payable date.
INCOME TAXES. For federal income tax purposes, Advisor Special
Venture Fund is treated as a separate taxable entity distinct from
the other series of Advisor Trust. Special Venture Portfolio
intends to qualify for the special tax treatment afforded
regulated investment companies under Subchapter M of the Internal
Revenue Code, so that it will be relieved of federal income tax on
that part of its net investment income and net capital gain that
is distributed to shareholders.
Advisor Special Venture Fund will distribute substantially all of
its ordinary income and net capital gains on a current basis.
Generally distributions are taxable as ordinary income, except
that any distributions of net long-term capital gains will be
taxed as such. However, distributions by Advisor Special Venture
Fund to plans that qualify for tax-exempt treatment under federal
income tax laws will not be taxable. Special tax rules apply to
investments through such plans.
This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.
MANAGEMENT
TRUSTEES AND INVESTMENT ADVISER. The Board of Trustees of Advisor
Trust and the Board of Trustees of Base Trust have overall
management responsibility for Advisor Special Venture Fund and
Special Venture Portfolio, respectively. See Management in the
Statement of Additional Information for the names of and other
information about the trustees and officers. Since Advisor Trust
and Base Trust have the same trustees, the trustees have adopted
conflict of interest procedures to monitor and address potential
conflicts between the interests of Advisor Special Venture Fund
and Special Venture Portfolio and other feeder funds investing in
Special Venture Portfolio that share a common Board of Trustees
with Advisor Trust and Base Trust.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolio of Special Venture Portfolio and the business
affairs of Advisor Special Venture Fund, Special Venture
Portfolio, Advisor Trust, and Base Trust, subject to the direction
of the respective Board. The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940. The
Adviser was organized in 1986 to succeed to the business of Stein
Roe & Farnham, a partnership that had advised and managed mutual
funds since 1949. The Adviser is a wholly owned subsidiary of
Liberty Financial Companies, Inc. ("Liberty Financial"), which in
turn is a majority owned indirect subsidiary of Liberty Mutual
Insurance Company.
PORTFOLIO MANAGERS. E. Bruce Dunn and Richard B. Peterson have
been co-portfolio managers of Special Venture Portfolio since its
inception in 1997 and had managed its predecessor since 1994.
Each is a senior vice president of the Adviser. Mr. Dunn has been
associated with the Adviser since 1964. He received his A.B.
degree from Yale University (1956) and his M.B.A. from Harvard
University (1958) and is a chartered investment counselor. Mr.
Peterson, who began his investment career with the Adviser in 1965
after graduating with a B.A. from Carleton College (1962) and the
Woodrow Wilson School at Princeton University with a Masters in
Public Administration (1964), rejoined the Adviser in 1991 after
15 years of equity research and portfolio management experience
with State Farm Investment Management Corp. As of December 31,
1996, Messrs. Dunn and Peterson were responsible for co-managing
$1.5 billion in mutual fund net assets.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Special Venture Fund, computed and
accrued daily, at an annual rate of 0.15% of average net assets;
and a monthly management fee from Special Venture Portfolio,
computed and accrued daily, at an annual rate of 0.75% of average
net assets. However, as noted above under Fee Table, the Adviser
may voluntarily undertake to reimburse Advisor Special Venture
Fund for a portion of its operating expenses and its pro rata
share of Special Venture Portfolio's operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Special Venture Fund (other than those paid by the
Adviser), including, but not limited to, printing and postage
charges, securities registration fees, custodian and transfer
agency fees, legal and auditing fees, compensation of trustees not
affiliated with the Adviser, and expenses incidental to its
organization, are paid out of the assets of Advisor Special
Venture Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Special
Venture Fund and Special Venture Portfolio including computation
of net asset value and calculation of its net income and capital
gains and losses on disposition of assets.
In addition, the Adviser is free to make additional payments out
of its own assets to promote the sale of shares of Advisor Special
Venture Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Special Venture Portfolio. In doing so, the Adviser
seeks to obtain the best combination of price and execution, which
involves a number of judgmental factors.
TRANSFER AGENT AND SHAREHOLDER SERVICES. SteinRoe Services Inc.
("SSI"), One South Wacker Drive, Chicago, Illinois 60606, a wholly
owned subsidiary of Liberty Financial, is the agent of Advisor
Trust for the transfer of shares, disbursement of dividends, and
maintenance of shareholder accounting records.
Some Intermediaries that maintain nominee accounts with Advisor
Special Venture Fund for their clients who are Fund shareholders
may be paid a fee from SSI of up to 0.25% of the average net
assets held in such accounts for shareholder servicing and
accounting services they provide with respect to the underlying
Fund shares.
DISTRIBUTOR. The shares of Advisor Special Venture Fund are
offered for sale through Liberty Securities Corporation
("Distributor") without any sales commissions. The Distributor is
a wholly owned indirect subsidiary of Liberty Financial. The
business address of the Distributor is 600 Atlantic Avenue,
Boston, Massachusetts 02210; however, all Fund correspondence
(including purchase and redemption orders) should be mailed to
SteinRoe Services Inc. at P.O. Box 8900, Boston, Massachusetts
02205.
The trustees of Advisor Trust have adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 ("Plan"). The Plan
provides that, as compensation for the promotion and distribution
of shares of Advisor Special Venture Fund including its expenses
related to the sale and promotion of Fund shares, the Distributor
receives from Advisor Special Venture Fund a fee at an annual rate
of 0.25% of its average net assets. The Distributor generally
pays this amount to institutions that distribute Advisor Special
Venture Fund shares and provide services to Advisor Special
Venture Fund and its shareholders. Those institutions may use the
payments for, among other purposes, compensating employees engaged
in sales and/or shareholder servicing. The amount of fees paid by
Advisor Special Venture Fund during any year may be more or less
than the cost of distribution or other services provided to
Advisor Special Venture Fund. NASD rules limit the amount of
annual distribution fees that may be paid by a mutual fund and
impose a ceiling on the cumulative distribution fees paid.
Advisor Trust's Plan complies with those rules.
CUSTODIAN. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Advisor Special Venture Fund and Special Venture Portfolio.
Foreign securities are maintained in the custody of foreign banks
and trust companies that are members of the Bank's Global Custody
Network or foreign depositories used by such members. (See
Custodian in the Statement of Additional Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
Advisor Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
July 31, 1996, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either Advisor
Trust's shareholders or its trustees. Advisor Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, seven series are authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Advisor Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of Advisor Trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against, Advisor Trust
or any particular series shall look only to the assets of Advisor
Trust or of the respective series for payment under such credit,
contract or claim, and that the shareholders, trustees and
officers of Advisor Trust shall have no personal liability
therefor. The Declaration of Trust requires that notice of such
disclaimer of liability be given in each contract, instrument or
undertaking executed or made on behalf of Advisor Trust. The
Declaration of Trust provides for indemnification of any
shareholder against any loss and expense arising from personal
liability solely by reason of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is believed to be remote, because
it would be limited to circumstances in which the disclaimer was
inoperative and Advisor Trust was unable to meet its obligations.
The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of Advisor
Trust is also believed to be remote, because it would be limited
to claims to which the disclaimer did not apply and to
circumstances in which the other series was unable to meet its
obligations.
SPECIAL CONSIDERATIONS REGARDING THE
MASTER FUND/FEEDER FUND STRUCTURE
Advisor Special Venture Fund, an open-end management investment
company, seeks to achieve its objective by investing all of its
assets in shares of another mutual fund having an investment
objective identical to that of Advisor Special Venture Fund. The
initial shareholder of Advisor Special Venture Fund approved this
policy of permitting Advisor Special Venture Fund to act as a
feeder fund by investing in Special Venture Portfolio. Please
refer to the Investment Policies, Portfolio Investments and
Strategies, and Investment Restrictions for a description of the
investment objectives, policies, and restrictions of Advisor
Special Venture Fund and Special Venture Portfolio. The
management and expenses of both Advisor Special Venture Fund and
Special Venture Portfolio are described under the Fee Table and
Management. Advisor Special Venture Fund bears its proportionate
share of Portfolio expenses.
The Adviser has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
SR&F Special Venture Portfolio is a separate series of SR&F Base
Trust ("Base Trust"), a Massachusetts common law trust organized
under an Agreement and Declaration of Trust ("Declaration of
Trust") dated August 23, 1993. The Declaration of Trust of Base
Trust provides that Advisor Special Venture Fund and other
investors in Special Venture Portfolio will each be liable for all
obligations of Special Venture Portfolio that are not satisfied by
the Portfolio. However, the risk of Advisor Special Venture Fund
incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance existed and
Special Venture Portfolio itself were unable to meet its
obligations. Accordingly, the trustees of Advisor Trust believe
that neither Advisor Special Venture Fund nor its shareholders
will be adversely affected by reason of Advisor Special Venture
Fund's investing in Special Venture Portfolio.
The Declaration of Trust of Base Trust provides that Special
Venture Portfolio will terminate 120 days after the withdrawal of
Advisor Special Venture Fund or any other investor in Special
Venture Portfolio, unless the remaining investors vote to agree to
continue the business of Special Venture Portfolio. The trustees
of Advisor Trust may vote Advisor Special Venture Fund's interests
in Special Venture Portfolio for such continuation without
approval of Advisor Special Venture Fund's shareholders.
The common investment objective of Advisor Special Venture Fund
and Special Venture Portfolio is non-fundamental and may be
changed without shareholder approval. The fundamental policies of
Advisor Special Venture Fund and the corresponding fundamental
policies of Special Venture Portfolio can be changed only with
shareholder approval.
If Advisor Special Venture Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
Special Venture Portfolio or any other matter pertaining to
Special Venture Portfolio (other than continuation of the business
of Special Venture Portfolio after withdrawal of another
investor), Advisor Special Venture Fund will solicit proxies from
its shareholders and vote its interest in Special Venture
Portfolio for and against such matters proportionately to the
instructions to vote for and against such matters received from
Advisor Special Venture Fund shareholders. Advisor Special
Venture Fund will vote shares for which it receives no voting
instructions in the same proportion as the shares for which it
receives voting instructions. If there are other investors in
Special Venture Portfolio, there can be no assurance that any
matter receiving a majority of votes cast by Fund shareholders
will receive a majority of votes cast by all Special Venture
Portfolio investors. If other investors hold a majority interest
in Special Venture Portfolio, they could have voting control over
Special Venture Portfolio.
In the event that Special Venture Portfolio's fundamental policies
were changed so as to be inconsistent with those of Advisor
Special Venture Fund, the Board of Trustees of Advisor Trust would
consider what action might be taken, including changes to Advisor
Special Venture Fund's fundamental policies, withdrawal of Advisor
Special Venture Fund's assets from Special Venture Portfolio and
investment of such assets in another pooled investment entity, or
the retention of another investment adviser. Any of these actions
would require the approval of Advisor Special Venture Fund's
shareholders. Advisor Special Venture Fund's inability to find a
substitute master fund or comparable investment management could
have a significant impact upon its shareholders' investments. Any
withdrawal of Advisor Special Venture Fund's assets could result
in a distribution in kind of portfolio securities (as opposed to a
cash distribution) to Advisor Special Venture Fund. Should such a
distribution occur, Advisor Special Venture Fund would incur
brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for Advisor
Special Venture Fund and could affect the liquidity of Advisor
Special Venture Fund.
Each investor in Special Venture Portfolio, including Advisor
Special Venture Fund, may add to or reduce its investment in
Special Venture Portfolio on each day the NYSE is open for
business. The investor's percentage of the aggregate interests in
Special Venture Portfolio will be computed as the percentage equal
to the fraction (i) the numerator of which is the beginning of the
day value of such investor's investment in Special Venture
Portfolio on such day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's
investment in Special Venture Portfolio effected on such day; and
(ii) the denominator of which is the aggregate beginning of the
day net asset value of Special Venture Portfolio on such day plus
or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in Special Venture
Portfolio by all investors in Special Venture Portfolio. The
percentage so determined will then be applied to determine the
value of the investor's interest in Special Venture Portfolio as
of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Special Venture Portfolio,
but members of the general public may not invest directly in
Special Venture Portfolio. Other investors in Special Venture
Portfolio are not required to sell their shares at the same public
offering price as Advisor Special Venture Fund, might incur
different administrative fees and expenses than Advisor Special
Venture Fund, and their shares might be sold with a sales
commission. Therefore, Advisor Special Venture Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in Special
Venture Portfolio. Investment by such other investors in Special
Venture Portfolio would provide funds for the purchase of
additional portfolio securities and would tend to reduce the
Portfolio's operating expenses as a percentage of its net assets.
Conversely, large-scale redemptions by any such other investors in
Special Venture Portfolio could result in untimely liquidations of
Special Venture Portfolio's security holdings, loss of investment
flexibility, and increases in the operating expenses of Special
Venture Portfolio as a percentage of its net assets. As a result,
Special Venture Portfolio's security holdings may become less
diverse, resulting in increased risk.
Special Venture Portfolio commenced operations in February 1997
when Stein Roe Special Venture Fund, a mutual fund that had
invested directly in securities since 1994, converted into a
feeder fund by investing all of its assets in the Portfolio.
Currently Stein Roe Special Venture Fund, which is a series of
Stein Roe Investment Trust, is the only other investment company
investing in Special Venture Portfolio. Information regarding any
investment company that may invest in Special Venture Portfolio in
the future may be obtained by writing to SR&F Base Trust, Suite
3200, One South Wacker Drive, Chicago, Illinois 60606, or by
calling 800-338-2550. The Adviser may provide administrative or
other services to one or more of such investors.
FOR MORE INFORMATION
For more information about Advisor Special Venture Fund, contact
Retirement Services at 800-322-1130 or Advisor/Broker Services at
800-322-0593.
______________________
The Stein Roe Advisor Funds
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor Young Investor Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor International Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-8900
Retirement Services: 1-800-322-1130
Adviser/Broker Services: 1-800-322-0593
http://www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive,
32nd Floor.
Liberty Securities Corporation, Distributor
Member, SIPC
<PAGE>
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Special Fund
Supplement to February 14, 1997 Prospectus
________________
Gerry M. Sandel has been named the portfolio manager of
SR&F Special Portfolio and senior vice president and
principal of the Adviser, each as of July 7, 1997.
Prior to joining the Adviser in July 1997, Mr. Sandel
was portfolio man-ager of the Marshall Mid-Cap Value Fund and
its predecessor fund and vice president of M&I Investment
Management Corporation since October 1993. Prior thereto,
Mr. Sandel was vice president of Acorn Asset Management
Corpo-ration. A chartered financial analyst, Mr. Sandel
earned a bachelor's degree in 1977 from the University of
Southern Mississippi and a master's degree in 1984 from the
American Graduate School.
Co-manager Richard B. Peterson now will dedicate his
time to co-managing SR&F Special Venture Portfolio. Mr.
Peterson will continue to be available to work with Mr.
Sandel during the transition period.
This Supplement is Dated June 26, 1997
<PAGE> 1
STEIN ROE ADVISOR SPECIAL FUND
The investment objective of Advisor Special Fund is to provide
capital appreciation by investing in securities that are
considered to have limited downside risk relative to their
potential for above-average growth, including securities of
undervalued, underfollowed, or out-of-favor companies. Advisor
Special Fund invests all of its net investable assets in
SR&F Special Portfolio, a portfolio of SR&F Base Trust that has
the same investment objective and substantially the same
investment policies as Advisor Special Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor Special Fund may be purchased only through
Intermediaries, including retirement plan service providers.
Advisor Special Fund has no sales or redemption charges. Advisor
Special Fund is a series of Stein Roe Advisor Trust and Special
Portfolio is a series of SR&F Base Trust. Each Trust is a
diversified open-end management investment company.
This prospectus contains information you should know before
investing in Advisor Special Fund. Please read it carefully and
retain it for future reference.
A Statement of Additional Information dated February 14, 1997,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information may be obtained without charge
by writing to Stein Roe Mutual Funds, Suite 3200, One South Wacker
Drive, Chicago, Illinois 60606, or by calling the Adviser. For
additional information, call Retirement Services at 800-322-1130
or Advisor/Broker Services at 800-322-0593.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February 14, 1997.
TABLE OF CONTENTS
Page
Summary........... .3
Fee Table ......... ...4
The Fund......... ...6
Investment Policies.......... ..6
Performance Information........... .7
Risks and Investment Considerations .........8
Investment Restrictions .....................9
Portfolio Investments and Strategies........10
Net Asset Value ............................13
How to Purchase Shares......................14
How to Redeem Shares .......................15
Distributions and Income Taxes..............16
Management .................................17
Organization and Description of Shares......20
Special Considerations Regarding the
Master Fund/Feeder Fund Structure.........21
For More Information .......................24
SUMMARY
Stein Roe Advisor Special Fund ("Advisor Special Fund") is a
series of Stein Roe Advisor Trust, an open-end diversified
management investment company organized as a Massachusetts
business trust. (See The Fund and Organization and Description of
Shares.) This prospectus is not a solicitation in any
jurisdiction in which shares of Advisor Special Fund are not
qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Special Fund is to provide capital appreciation by
investing in securities that are considered to have limited
downside risk relative to their potential for above-average
growth, including securities of undervalued, underfollowed, or
out-of-favor companies. Advisor Special Fund invests all of its
net investable assets in SR&F Special Portfolio ("Special
Portfolio") which has the same investment objective and investment
policies substantially similar to those of Advisor Special Fund.
Particular emphasis is placed on securities that are considered to
have limited downside risk relative to their potential for above-
average growth--including securities of undervalued, underfollowed
or out-of-favor companies, and companies that are low-cost
producers of goods or services, financially strong, or run by
well-respected managers. Special Portfolio's investments may
include securities of seasoned, established companies that appear
to have appreciation potential, as well as securities of
relatively small, new companies; securities with limited
marketability; new issues of securities; securities of companies
that, in the Adviser's opinion, will benefit from management
change, new technology, new product or service development, or
change in demand; and other securities that the Adviser believes
have capital appreciation possibilities.
For a more detailed discussion of the investment objectives and
policies, please see Investment Policies and Portfolio Investments
and Strategies. There is, of course, no assurance that Advisor
Special Fund and Special Portfolio will achieve their common
investment objective.
INVESTMENT RISKS. Advisor Special Fund is designed for long-term
investors who desire to participate in the stock market with more
investment risk and volatility than the stock market in general,
but with less investment risk and volatility than aggressive
capital appreciation funds. Special Portfolio may invest in
foreign securities, which may entail a greater degree of risk than
investing in securities of domestic issuers. Please see
Investment Restrictions and Risks and Investment Considerations
for further information.
PURCHASES AND REDEMPTIONS. Shares of Advisor Special Fund may be
purchased only through Intermediaries, including retirement plan
service providers. For information on purchasing and redeeming
Advisor Special Fund shares, please see How to Purchase Shares,
How to Redeem Shares, and Management--Distributor.
MANAGEMENT AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") is investment adviser to Special Portfolio. In
addition, it provides administrative services to Advisor Special
Fund and Special Portfolio. For a description of the Adviser and
these service arrangements, see Management.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.....................None
Sales Load Imposed on Reinvested Dividends..........None
Deferred Sales Load.................................None
Redemption Fees.....................................None
Exchange Fees.......................................None
ANNUAL FUND OPERATING EXPENSES (as a percentage
of average net assets; after reimbursement)
Management and Administrative Fees (after
reimbursement)...................................0.65%
12b-1 Fees..........................................0.25%
Other Expenses .....................................0.55%
-----
Total Operating Expenses (after reimbursement)......1.45%
=====
EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; and (2) redemption at the end of
each time period:
1 year 3 years
------ -------
$15 $46
The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in Advisor Special Fund. The Fee Table
reflects the combined expenses of both Advisor Special Fund and
Special Portfolio. Anticipated Total Operating Expenses for
Advisor Special Fund are annualized projections based upon current
administrative fees and management fees. Other Expenses are
estimated amounts for the current fiscal year. The figures assume
that the percentage amounts listed under Annual Fund Operating
Expenses remain the same during each of the periods and that all
income dividends and capital gain distributions are reinvested in
additional shares.
From time to time, the Adviser may voluntarily undertake to
reimburse Advisor Special Fund for a portion of its operating
expenses and its pro rata share of the fees and expenses payable
by Special Portfolio. For the period ending June 30, 1997, the
Adviser has agreed to reduce the portion of Adviser Special Fund's
fee payable by Special Portfolio by subtracting 0.05% from the
applicable annual rate of management fee. In addition, the
Adviser has undertaken to reimburse Advisor Special Fund for its
operating expenses and its pro rata share of Special Portfolio's
operating expenses to the extent such expenses exceed 1.45% of
Advisor Special Fund's annual average net assets. This commitment
expires on January 31, 1998, subject to earlier review and
possible termination by the Adviser on 30 days' notice to Advisor
Special Fund. Absent the rebate and reimbursement, Advisor
Special Fund's share of Special Portfolio's Management Fee and the
Fund Administrative Fee and Total Operating Expenses would be
0.85% and 1.65%, respectively. Any such reimbursement will lower
Advisor Special Fund's overall expense ratio and increase its
overall return to investors. (Also see Management--Fees and
Expenses.)
Advisor Special Fund pays the Adviser an administrative fee based
on its average daily net assets and Special Portfolio pays the
Adviser a management fee based on its average daily net assets.
The trustees of Advisor Trust have considered whether the annual
operating expenses of Advisor Special Fund, including its share of
the expenses of Special Portfolio, would be more or less than if
Advisor Special Fund invested directly in the securities held by
Special Portfolio, and concluded that Advisor Special Fund's
expenses would not be materially greater in such case.
The figures in the Example are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown in the
Example and Fee Table is useful in reviewing Advisor Special
Fund's expenses and in providing a basis for comparison with other
mutual funds, it should not be used for comparison with other
investments using different assumptions or time periods.
Because Advisor Special Fund pays a 12b-1 fee, long-term investors
in Advisor Special Fund may pay more over long periods of time in
distribution expenses than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
("NASD"). For further information on Advisor Special Fund's 12b-1
fee, see Management--Distributor or call your financial
representative.
THE FUND
STEIN ROE ADVISOR SPECIAL FUND ("Advisor Special Fund") is a
series of Stein Roe Advisor Trust ("Advisor Trust"), which is an
open-end diversified management investment company authorized to
issue shares of beneficial interest in separate series.
Rather than invest in securities directly, Advisor Special Fund
seeks to achieve its investment objective by using the "master
fund/feeder fund structure." Under that structure, a feeder fund
and one or more feeder funds pool their assets in a master
portfolio that has the same investment objective and substantially
the same investment policies as the feeder funds. (See Special
Considerations Regarding Master Fund/Feeder Fund Structure.)
Advisor Special Fund invests all of its net investable assets in
SR&F Special Portfolio ("Special Portfolio"), which is a
series of SR&F Base Trust ("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Special Portfolio and
administrative services to Advisor Special Fund and Special
Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Special Fund is to provide
capital appreciation by investing in securities that are
considered to have limited downside risk relative to their
potential for above-average growth, including securities of
undervalued, underfollowed, or out-of-favor companies. Advisor
Special Fund invests all of its net investable assets in Special
Portfolio, which has the same investment objective and investment
policies substantially similar to Advisor Special Fund. Special
Portfolio may invest in securities of seasoned, established
companies that appear to have appreciation potential, as well as
securities of relatively small, new companies. In addition, it
may invest in securities with limited marketability; new issues of
securities; securities of companies that, in the Adviser's
opinion, will benefit from management change, new technology, new
product or service development, or change in demand; and other
securities that the Adviser believes have capital appreciation
possibilities. Securities of smaller, newer companies may be
subject to greater price volatility than securities of larger,
well-established companies. In addition, many smaller companies
are less well known to the investing public and may not be as
widely followed by the investment community. Although Special
Portfolio invests primarily in common stocks, it may also invest
in other equity-type securities, including preferred stocks and
securities convertible into equity securities.
Further information on investment techniques that may be employed
by Special Portfolio and the risks associated with such techniques
may be found under Risks and Investment Considerations and
Portfolio Investments and Strategies in this prospectus and in the
Statement of Additional Information.
PERFORMANCE INFORMATION
The total return from an investment in Advisor Special Fund is
measured by the distributions received (assuming reinvestment),
plus or minus the change in the net asset value per share for a
given period. A total return percentage may be calculated by
dividing the value of a share at the end of the period (including
reinvestment of distributions) by the value of the share at the
beginning of the period and subtracting one. For a given period,
an average annual total return may be calculated by finding the
average annual compounded rate that would equate a hypothetical
$1,000 investment to the ending redeemable value.
Comparison of Advisor Special Fund's total return with alternative
investments should consider differences between the Fund and the
alternative investments, the periods and methods used in
calculation of the return being compared, and the impact of taxes
on alternative investments. Of course, past performance is not
necessarily indicative of future results. Share prices may vary,
and your shares when redeemed may be worth more or less than your
original purchase price.
As of the date of this Prospectus, Advisor Special Fund had no
past performance. However, Stein Roe Special Fund, a different
Stein Roe Fund which is a series of Stein Roe Investment Trust and
has a similar name, the same investment objective and
substantially the same investment policies as Advisor Special
Fund, also invests all of its net investable assets in Special
Portfolio. The average annual total returns for the periods ended
September 30, 1996, for 1-year, 5-year and 10-year investments in
Stein Roe Special Fund were 17.89%, 13.85% and 15.53%,
respectively. Stein Roe Special Fund has a different fee
structure than Advisor Special Fund, and does not pay 12b-1 fees.
Had these fees been reflected, the total returns shown in the
table would have been lower. The information shown above reflects
the performance of Stein Roe Special Fund, and should not be
interpreted as indicative of Advisor Special Fund's future
performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Special Fund is designed for long-term investors who
desire to participate in the stock market with more investment
risk and volatility than the stock market in general, but with
less investment risk and volatility than aggressive capital
appreciation funds. Special Portfolio usually allocates its
investments among a number of different industries rather than
concentrating in a particular industry or group of industries, but
this does not eliminate all risk. It will not, however, invest
more than 25% of the total value of its assets (at the time of
investment) in the securities of companies in any one industry.
There can be no guarantee that Advisor Special Fund or Special
Portfolio will achieve its objective.
Special Portfolio may invest up to 35% of its total assets in debt
securities. Debt securities rated in the fourth highest grade may
have some speculative characteristics, and changes in economic
conditions or other circumstances may lead to a weakened capacity
of the issuers of such securities to make principal and interest
payments. Securities rated below investment grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest or
repay principal.
Special Portfolio may invest up to 25% of its total assets in
foreign securities. For purposes of this limit, foreign
securities exclude American Depositary Receipts (ADRs), foreign
debt securities denominated in U.S. dollars, and securities
guaranteed by a U.S. person. Investment in foreign securities may
represent a greater degree of risk (including risk related to
exchange rate fluctuations, tax provisions, exchange and currency
controls, and expropriation of assets) than investment in
securities of domestic issuers. Other risks of foreign investing
include less complete financial information on issuers, different
accounting, auditing and financial reporting standards, different
settlement practices, less market liquidity, more market
volatility, less developed and regulated markets, and greater
political instability. In addition, various restrictions by
foreign governments on investments by nonresidents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
nonresidents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Special Portfolio may be found under Portfolio Investments and
Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Special Fund nor Special Portfolio may invest more
than 5% of their assets in the securities of any one issuer. This
restriction applies only to 75% of the investment portfolio, and
does not apply to securities of the U.S. Government or repurchase
agreements /1/ for such securities. This restriction also does
not prevent Advisor Special Fund from investing all of its assets
in shares of another investment company having the identical
investment objective under a master/feeder structure.
- ----------------
/1/ A repurchase agreement involves a sale of securities to
Special Portfolio in which the seller agrees to repurchase the
securities at a higher price, which includes an amount
representing interest on the purchase price, within a specified
time. In the event of bankruptcy of the seller, Special Portfolio
could experience both losses and delays in liquidating its
collateral.
- ----------------
Neither Advisor Special Fund nor Special Portfolio will acquire
more than 10% of the outstanding voting securities of any one
issuer. Advisor Special Fund may, however, invest all of its
assets in shares of another investment company having the
identical investment objective under a master/feeder structure.
Neither Advisor Special Fund nor Special Portfolio may make loans
except that it may (1) purchase money market instruments and enter
into repurchase agreements; (2) acquire publicly distributed or
privately placed debt securities; (3) lend its portfolio
securities under certain conditions; and (4) participate in an
interfund lending program with other Stein Roe Funds and
Portfolios. Advisor Special Fund and Special Portfolio may not
borrow money, except for nonleveraging, temporary, or emergency
purposes or in connection with participation in the interfund
lending program. Neither the aggregate borrowings (including
reverse repurchase agreements) nor the aggregate loans at any one
time may exceed 33 1/3% of the value of total assets. Additional
securities may not be purchased when borrowings less proceeds
receivable from sales of portfolio securities exceed 5% of total
assets.
Advisor Special Fund and Special Portfolio may invest in
repurchase agreements, provided that neither will invest more than
15% of its net assets in illiquid securities, including repurchase
agreements maturing in more than seven days.
The policies summarized in the third paragraph under this section
and the policy with respect to concentration of investments in any
one industry described under Risks and Investment Considerations
are fundamental policies of Advisor Special Fund and Special
Portfolio and, as such, can be changed only with the approval of a
"majority of the outstanding voting securities" as defined in the
Investment Company Act of 1940. The common investment objective
of Advisor Special Fund and Special Portfolio is nonfundamental
and, as such, may be changed by the Board of Trustees without
shareholder approval. All of the investment restrictions are set
forth in the Statement of Additional Information.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
Special Portfolio may invest up to 35% of its net assets in debt
securities, but does not expect to invest more than 5% of its net
assets in debt securities that are rated below investment grade
and that, on balance, are considered predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer
default and bankruptcy. When the Adviser deems a temporary
defensive position advisable, Special Portfolio may invest,
without limitation, in high-quality fixed income securities, or
hold assets in cash or cash equivalents.
FOREIGN SECURITIES.
Special Portfolio may invest in sponsored or unsponsored ADRs. In
addition to, or in lieu of, such direct investment, Special
Portfolio may construct a synthetic foreign debt position by (a)
purchasing a debt instrument denominated in one currency,
generally U.S. dollars; and (b) concurrently entering into a
forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and
at a specified rate of exchange. Because of the availability of a
variety of highly liquid U.S. dollar debt instruments, a synthetic
foreign debt position utilizing such U.S. dollar instruments may
offer greater liquidity than direct investment in foreign currency
debt instruments.
In connection with the purchase of foreign securities, Special
Portfolio may enter into foreign currency forward and futures
contracts to hedge the currency risk in settlement of a particular
security transaction or relative to the entire portfolio. A
forward contract to purchase an amount of foreign currency
sufficient to pay the purchase price of securities at settlement
date involves the risk that the value of the foreign currency may
decline relative to the value of the dollar prior to the
settlement date. This risk is in addition to the risk that the
value of the foreign security purchased may decline. Special
Portfolio also may enter into foreign currency contracts as a
hedging technique to limit or reduce exposure of the entire
portfolio to currency fluctuations. In addition, Special
Portfolio may use options and futures contracts, as described
below, to limit or reduce exposure to currency fluctuations.
CONVERTIBLE SECURITIES.
By investing in convertible securities, Special Portfolio obtains
the right to benefit from the capital appreciation potential in
the underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, the Adviser will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. Although convertible securities are frequently rated
investment grade, Special Portfolio also may purchase unrated
securities or securities rated below investment grade if the
securities meet the Adviser's other investment criteria.
Convertible securities rated below investment grade tend to be
more sensitive to interest rate and economic changes, may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and may be more thinly
traded due to the fact that such securities are less well known to
investors than either common stock or conventional debt
securities. As a result, the Adviser's own investment research
and analysis tends to be more important than other factors in the
purchase of convertible securities.
LENDING PORTFOLIO SECURITIES; WHEN-ISSUED AND DELAYED-DELIVERY
SECURITIES.
Special Portfolio may make loans of its portfolio securities to
broker-dealers and banks subject to certain restrictions described
in the Statement of Additional Information. Special Portfolio may
participate in an interfund lending program, subject to certain
restrictions described in the Statement of Additional Information.
Special Portfolio may invest in securities purchased on a when-
issued or delayed-delivery basis. Although the payment terms of
these securities are established at the time Special Portfolio
enters into the commitment, the securities may be delivered and
paid for a month or more after the date of purchase, when their
value may have changed. Special Portfolio will make such
commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if
it is deemed advisable for investment reasons.
SHORT SALES AGAINST THE BOX.
Special Portfolio may sell short securities it owns or has the
right to acquire without further consideration, using a technique
called selling short "against the box." Short sales against the
box may protect Special Portfolio against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such securities should be wholly or partly
offset by a corresponding gain in the short position. However,
any potential gains in such securities should be wholly or
partially offset by a corresponding loss in the short position.
Short sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, the Adviser does not
want to sell the security. Special Portfolio does not expect to
commit more than 5% of its net assets to short sales against the
box. For a more complete explanation, please refer to the
Statement of Additional Information.
DERIVATIVES.
Consistent with its objective, Special Portfolio may invest in a
broad array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options,
futures contracts, futures options, securities collateralized by
underlying pools of mortgages or other receivables, floating rate
instruments, and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency. Special Portfolio does not expect
to invest more than 5% of its net assets in any type of Derivative
except for options, futures contracts, and futures options.
In seeking to achieve its desired investment objective, provide
additional revenue, or to hedge against changes in security
prices, interest rates or currency fluctuations, Special Portfolio
may: (1) purchase and write both call options and put options on
securities, indexes and foreign currencies; (2) enter into
interest rate, index and foreign currency futures contracts; (3)
write options on such futures contracts; and (4) purchase other
types of forward or investment contracts linked to individual
securities, indexes or other benchmarks. Special Portfolio may
write a call or put option only if the option is covered. As the
writer of a covered call option, Special Portfolio foregoes,
during the option's life, the opportunity to profit from increases
in market value of the security covering the call option above the
sum of the premium and the exercise price of the call. There can
be no assurance that a liquid market will exist when Special
Portfolio seeks to close out a position. In addition, because
futures positions may require low margin deposits, the use of
futures contracts involves a high degree of leverage and may
result in losses in excess of the amount of the margin deposit.
Derivatives are most often used to manage investment risk or to
create an investment position indirectly because they are more
efficient or less costly than direct investment. They also may be
used in an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives. For additional
information on Derivatives, please refer to the Statement of
Additional Information.
PORTFOLIO TURNOVER.
Although Special Portfolio does not purchase securities with a
view to rapid turnover, there are no limitations on the length of
time portfolio securities must be held. Accordingly, the
portfolio turnover rate may vary significantly from year to year,
but is not expected to exceed 100% under normal market conditions.
At times the Fund may invest for short-term capital appreciation.
Flexibility of investment and emphasis on capital appreciation may
involve greater portfolio turnover than that of mutual funds that
have the objectives of income or maintenance of a balanced
investment position. A high rate of portfolio turnover may result
in increased transaction expenses and the realization of capital
gains and losses. (See Distributions and Income Taxes.)
NET ASSET VALUE
The purchase and redemption price of Advisor Special Fund's shares
is its net asset value per share. Advisor Special Fund determines
the net asset value of its shares as of the close of trading on
the New York Stock Exchange ("NYSE") (currently 3:00 p.m., central
time) by dividing the difference between the value of its assets
and liabilities by the number of shares outstanding. Special
Portfolio allocates net asset value, income, and expenses to
Advisor Special Fund and any other of its feeder funds in
proportion to their respective interests in Special Portfolio.
Net asset value will not be determined on days when the NYSE is
closed unless, in the judgment of the Board of Trustees, the net
asset value of Advisor Special Fund should be determined on any
such day, in which case the determination will be made at 3:00
p.m., central time.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation 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.
Long-term straight-debt obligations and securities convertible
into stocks are valued at a fair value using a procedure
determined in good faith by the Board of Trustees. Pricing
services approved by the Board provide valuations (some of which
may be "readily available market quotations"). These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the obligation using a method that the Board
believes represents fair value. The Board may approve the use of
other pricing services and any pricing service used may employ
electronic data processing techniques, including a so-called
"matrix" system, to determine valuations. Other assets and
securities are valued by a method that the Board believes
represents fair value.
HOW TO PURCHASE SHARES
You may purchase Advisor Special Fund shares only through broker-
dealers, banks, or other intermediaries, including retirement plan
service providers ("Intermediaries"). The Adviser and Advisor
Special Fund do not recommend, endorse, or receive payments from
any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
Special Fund's shares is made at Advisor Special Fund's net asset
value (see Net Asset Value) next determined after receipt by the
Fund or through an authorized agent of an order in good form,
including receipt of payment.
CONDITIONS OF PURCHASE. Each purchase order for Advisor Special
Fund must be accepted by an authorized officer of Advisor Trust or
its authorized agent and is not binding until accepted and entered
on the books of Advisor Special Fund. Once your purchase order
has been accepted, you may not cancel or revoke it; you may,
however, redeem the shares. Advisor Trust reserves the right not
to accept any purchase order that it determines not to be in the
best interests of Advisor Trust or of Advisor Special Fund's
shareholders.
PURCHASES THROUGH INTERMEDIARIES. You must purchase shares
through Intermediaries. These Intermediaries may charge for their
services or place limitations on the extent to which you may use
the services offered by Advisor Trust. In addition, each
Intermediary will establish its own procedures for the purchase of
shares of Advisor Special Fund, including minimum initial and
additional investments, and the acceptable methods of payment for
shares. Your Intermediary may be closed on days when the NYSE is
open. As a result, prices of Fund shares may be significantly
affected on days when you have no access to your Intermediary to
buy shares. If you wish to purchase shares, please contact your
Intermediary for instructions.
Retirement Plans. If you purchase shares through a retirement
plan, you should be aware that retirement plan administrators may
aggregate purchase and redemption orders for participants in the
plan. Therefore, there may be a delay between the time you place
your order with the plan administrator and the time the order is
forwarded for execution.
HOW TO REDEEM SHARES
You may redeem shares only through Intermediaries. Each
Intermediary will establish its own procedures for the sale of
shares of Advisor Special Fund. Your Intermediary may be closed
on days when the NYSE is open. As a result, prices for Fund
shares may be significantly affected on days when you have no
access to your Intermediary to sell shares. If you wish to redeem
shares through an Intermediary, please contact the Intermediary
for instructions.
EXCHANGE PRIVILEGE. Through an account with an Intermediary, you
may redeem all or any portion of your Advisor Special Fund shares
and use the proceeds to purchase shares of any other Fund that is
a series of Advisor Trust offered for sale in the state in which
the Intermediary is located. Each Intermediary will establish its
own exchange policies and procedures. In particular, individual
participants of qualified retirement plans may exchange shares
through the plan sponsor or administrator. Those participants may
exchange shares only for shares of other Advisor Trust Funds that
are included in the plan. An exchange transaction is
a sale and purchase of shares for federal income tax purposes and
may result in capital gain or loss. Before exchanging into
another Advisor Trust Fund, you should obtain the prospectus for
the Advisor Trust Fund in which you wish to invest and read it
carefully. The registration of the account to which you are
making an exchange must be exactly the same as that of the account
from which the exchange is made. Advisor Special Fund reserves
the right to suspend, limit, modify, or terminate the Exchange
Privilege or its use in any manner by any person or class;
Intermediaries would be notified of such a change.
GENERAL REDEMPTION POLICIES. Redemption instructions may not be
cancelled or revoked once they have been received and accepted by
Advisor Trust. Advisor Trust cannot accept a redemption request
that specifies a particular date or price for redemption or any
special conditions.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received by the Intermediary. (See Net Asset
Value.) Because the redemption price you receive depends upon
Advisor Special Fund's net asset value per share at the time of
redemption, it may be more or less than the price you originally
paid for the shares and may result in a realized capital gain or
loss.
Advisor Trust will pay redemption proceeds as soon as practicable,
and in no event later than seven days after proper instructions
are received by Advisor Special Fund or its authorized agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid annually.
Advisor Special Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the twelve-month period ended
October 31 in that year. Advisor Special Fund intends to
distribute any undistributed net investment income and net
realized capital gains in the following year.
All income dividends and capital gain distributions on shares of
Advisor Special Fund will be reinvested in additional shares
unless your Intermediary elects to have distributions paid by
check. Reinvestment normally occurs on the payable date.
INCOME TAXES. For federal income tax purposes, Advisor Special
Fund is treated as a separate taxable entity distinct from the
other series of Advisor Trust. Special Portfolio intends to
qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal Revenue
Code, so that it will be relieved of federal income tax on that
part of its net investment income and net capital gain that is
distributed to shareholders.
Advisor Special Fund will distribute substantially all of its
ordinary income and net capital gains on a current basis.
Generally distributions are taxable as ordinary income, except
that any distributions of net long-term capital gains will be
taxed as such. However, distributions by Advisor Special Fund to
plans that qualify for tax-exempt treatment under federal income
tax laws will not be taxable. Special tax rules apply to
investments through such plans.
This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.
MANAGEMENT
TRUSTEES AND INVESTMENT ADVISER. The Board of Trustees of Advisor
Trust and the Board of Trustees of Base Trust have overall
management responsibility for Advisor Special Fund and Special
Portfolio, respectively. See Management in the Statement of
Additional Information for the names of and other information
about the trustees and officers. Since Advisor Trust and Base
Trust have the same trustees, the trustees have adopted conflict
of interest procedures to monitor and address potential conflicts
between the interests of Advisor Special Fund and Special
Portfolio and other feeder funds investing in Special Portfolio
that share a common Board of Trustees with Advisor Trust and Base
Trust.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolio of Special Portfolio and the business affairs
of Advisor Special Fund, Special Portfolio, Advisor Trust, and
Base Trust, subject to the direction of the respective Board. The
Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940. The Adviser was organized in
1986 to succeed to the business of Stein Roe & Farnham, a
partnership that had advised and managed mutual funds since 1949.
The Adviser is a wholly owned subsidiary of Liberty Financial
Companies, Inc. ("Liberty Financial"), which in turn is a majority
owned indirect subsidiary of Liberty Mutual Insurance Company.
PORTFOLIO MANAGERS. E. Bruce Dunn and Richard B. Peterson have
been co-portfolio managers of Special Portfolio since its
inception in 1997 and had managed its predecessor since 1991.
Each is a senior vice president of the Adviser. Mr. Dunn has been
associated with the Adviser since 1964. He received his A.B.
degree from Yale University (1956) and his M.B.A. from Harvard
University (1958) and is a chartered investment counselor. Mr.
Peterson, who began his investment career with the Adviser in 1965
after graduating with a B.A. from Carleton College (1962) and the
Woodrow Wilson School at Princeton University with a Masters in
Public Administration (1964), rejoined the Adviser in 1991 after
15 years of equity research and portfolio management experience
with State Farm Investment Management Corp. As of December 31,
1996, Messrs. Dunn and Peterson were responsible for co-managing
$1.5 billion in mutual net fund assets.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Special Fund, computed and accrued
daily, at an annual rate of 0.15% of the first $500 million of
average net assets, 0.125% of the next $500 million, and 0.10%
thereafter; and a monthly management fee from Special Portfolio,
computed and accrued daily, at an annual rate of 0.75% of the
first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million, and 0.60% thereafter.
However, as noted above under Fee Table, the Adviser may
voluntarily undertake to reimburse Advisor Special Fund for a
portion of its operating expenses and its pro rata share of
Special Portfolio's operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Special Fund (other than those paid by the Adviser),
including, but not limited to, printing and postage charges,
securities registration fees, custodian and transfer agency fees,
legal and auditing fees, compensation of trustees not affiliated
with the Adviser, and expenses incidental to its organization, are
paid out of the assets of Advisor Special Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Special
Fund and Special Portfolio including computation of net asset
value and calculation of its net income and capital gains and
losses on disposition of assets.
In addition, the Adviser is free to make additional payments out
of its own assets to promote the sale of shares of Advisor Special
Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Special Portfolio. In doing so, the Adviser seeks
to obtain the best combination of price and execution, which
involves a number of judgmental factors.
TRANSFER AGENT AND SHAREHOLDER SERVICES. SteinRoe Services Inc.
("SSI"), One South Wacker Drive, Chicago, Illinois 60606, a wholly
owned subsidiary of Liberty Financial, is the agent of Advisor
Trust for the transfer of shares, disbursement of dividends, and
maintenance of shareholder accounting records.
Some Intermediaries that maintain nominee accounts with Advisor
Special Fund for their clients who are Fund shareholders may be
paid a fee from SSI of up to 0.25% of the average net assets held
in such accounts for shareholder servicing and accounting services
they provide with respect to the underlying Fund shares.
DISTRIBUTOR. The shares of Advisor Special Fund are offered for
sale through Liberty Securities Corporation ("Distributor")
without any sales commissions. The Distributor is a wholly owned
indirect subsidiary of Liberty Financial. The business address of
the Distributor is 600 Atlantic Avenue, Boston, Massachusetts
02210; however, all Fund correspondence (including purchase and
redemption orders) should be mailed to SteinRoe Services Inc. at
P.O. Box 8900, Boston, Massachusetts 02205.
The trustees of Advisor Trust have adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 ("Plan"). The Plan
provides that, as compensation for the promotion and distribution
of shares of Advisor Special Fund including its expenses related
to the sale and promotion of Fund shares, the Distributor receives
from Advisor Special Fund a fee at an annual rate of 0.25% of its
average net assets. The Distributor generally pays this amount to
institutions that distribute Advisor Special Fund shares and
provide services to Advisor Special Fund and its shareholders.
Those institutions may use the payments for, among other purposes,
compensating employees engaged in sales and/or shareholder
servicing. The amount of fees paid by Advisor Special Fund during
any year may be more or less than the cost of distribution or
other services provided to Advisor Special Fund. NASD rules limit
the amount of annual distribution fees that may be paid by a
mutual fund and impose a ceiling on the cumulative distribution
fees paid. Advisor Trust's Plan complies with those rules.
CUSTODIAN. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Advisor Special Fund and Special Portfolio. Foreign securities
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network or foreign
depositories used by such members. (See Custodian in the
Statement of Additional Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
Advisor Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
July 31, 1996, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either Advisor
Trust's shareholders or its trustees. Advisor Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, seven series are authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Advisor Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of Advisor Trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against, Advisor Trust
or any particular series shall look only to the assets of Advisor
Trust or of the respective series for payment under such credit,
contract or claim, and that the shareholders, trustees and
officers of Advisor Trust shall have no personal liability
therefor. The Declaration of Trust requires that notice of such
disclaimer of liability be given in each contract, instrument or
undertaking executed or made on behalf of Advisor Trust. The
Declaration of Trust provides for indemnification of any
shareholder against any loss and expense arising from personal
liability solely by reason of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is believed to be remote, because
it would be limited to circumstances in which the disclaimer was
inoperative and Advisor Trust was unable to meet its obligations.
The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of Advisor
Trust is also believed to be remote, because it would be limited
to claims to which the disclaimer did not apply and to
circumstances in which the other series was unable to meet its
obligations.
SPECIAL CONSIDERATIONS REGARDING THE
MASTER FUND/FEEDER FUND STRUCTURE
Advisor Special Fund, an open-end management investment company,
seeks to achieve its objective by investing all of its assets in
shares of another mutual fund having an investment objective
identical to that of Advisor Special Fund. The initial
shareholder of Advisor Special Fund approved this policy of
permitting Advisor Special Fund to act as a feeder fund by
investing in Special Portfolio. Please refer to the Investment
Policies, Portfolio Investments and Strategies, and Investment
Restrictions for a description of the investment objectives,
policies, and restrictions of Advisor Special Fund and Special
Portfolio. The management and expenses of both Advisor Special
Fund and Special Portfolio are described under the Fee Table and
Management. Advisor Special Fund bears its proportionate share of
Portfolio expenses.
The Adviser has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
SR&F Special Portfolio is a separate series of SR&F Base Trust
("Base Trust"), a Massachusetts common law trust organized under
an Agreement and Declaration of Trust ("Declaration of Trust")
dated August 23, 1993. The Declaration of Trust of Base Trust
provides that Advisor Special Fund and other investors in Special
Portfolio will each be liable for all obligations of Special
Portfolio that are not satisfied by the Portfolio. However, the
risk of Advisor Special Fund incurring financial loss on account
of such liability is limited to circumstances in which both
inadequate insurance existed and Special Portfolio itself were
unable to meet its obligations. Accordingly, the trustees of
Advisor Trust believe that neither Advisor Special Fund nor its
shareholders will be adversely affected by reason of Advisor
Special Fund's investing in Special Portfolio.
The Declaration of Trust of Base Trust provides that Special
Portfolio will terminate 120 days after the withdrawal of Advisor
Special Fund or any other investor in Special Portfolio, unless
the remaining investors vote to agree to continue the business of
Special Portfolio. The trustees of Advisor Trust may vote Advisor
Special Fund's interests in Special Portfolio for such
continuation without approval of Advisor Special Fund's
shareholders.
The common investment objective of Advisor Special Fund and
Special Portfolio is non-fundamental and may be changed without
shareholder approval. The fundamental policies of Advisor Special
Fund and the corresponding fundamental policies of Special
Portfolio can be changed only with shareholder approval.
If Advisor Special Fund, as a Portfolio investor, is requested to
vote on a proposed change in fundamental policy of Special
Portfolio or any other matter pertaining to Special Portfolio
(other than continuation of the business of Special Portfolio
after withdrawal of another investor), Advisor Special Fund will
solicit proxies from its shareholders and vote its interest in
Special Portfolio for and against such matters proportionately to
the instructions to vote for and against such matters received
from Advisor Special Fund shareholders. Advisor Special Fund will
vote shares for which it receives no voting instructions in the
same proportion as the shares for which it receives voting
instructions. If there are other investors in Special Portfolio,
there can be no assurance that any matter receiving a majority of
votes cast by Fund shareholders will receive a majority of votes
cast by all Special Portfolio investors. If other investors hold
a majority interest in Special Portfolio, they could have voting
control over Special Portfolio.
In the event that Special Portfolio's fundamental policies were
changed so as to be inconsistent with those of Advisor Special
Fund, the Board of Trustees of Advisor Trust would consider what
action might be taken, including changes to Advisor Special Fund's
fundamental policies, withdrawal of Advisor Special Fund's assets
from Special Portfolio and investment of such assets in another
pooled investment entity, or the retention of another investment
adviser. Any of these actions would require the approval of
Advisor Special Fund's shareholders. Advisor Special Fund's
inability to find a substitute master fund or comparable
investment management could have a significant impact upon its
shareholders' investments. Any withdrawal of Advisor Special
Fund's assets could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) to Advisor Special
Fund. Should such a distribution occur, Advisor Special Fund
would incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution
in kind could result in a less diversified portfolio of
investments for Advisor Special Fund and could affect the
liquidity of Advisor Special Fund.
Each investor in Special Portfolio, including Advisor Special
Fund, may add to or reduce its investment in Special Portfolio on
each day the NYSE is open for business. The investor's percentage
of the aggregate interests in Special Portfolio will be computed
as the percentage equal to the fraction (i) the numerator of which
is the beginning of the day value of such investor's investment in
Special Portfolio on such day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's
investment in Special Portfolio effected on such day; and (ii) the
denominator of which is the aggregate beginning of the day net
asset value of Special Portfolio on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals
from the aggregate investments in Special Portfolio by all
investors in Special Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest
in Special Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Special Portfolio, but
members of the general public may not invest directly in Special
Portfolio. Other investors in Special Portfolio are not required
to sell their shares at the same public offering price as Advisor
Special Fund, might incur different administrative fees and
expenses than Advisor Special Fund, and their shares might be sold
with a sales commission. Therefore, Advisor Special Fund
shareholders might have different investment returns than
shareholders in another investment company that invests
exclusively in Special Portfolio. Investment by such other
investors in Special Portfolio would provide funds for the
purchase of additional portfolio securities and would tend to
reduce the Portfolio's operating expenses as a percentage of its
net assets. Conversely, large-scale redemptions by any such other
investors in Special Portfolio could result in untimely
liquidations of Special Portfolio's security holdings, loss of
investment flexibility, and increases in the operating expenses of
Special Portfolio as a percentage of its net assets. As a result,
Special Portfolio's security holdings may become less diverse,
resulting in increased risk.
Special Portfolio commenced operations in February 1997 when Stein
Roe Special Fund, a mutual fund that, together with its corporate
predecessor, had invested directly in securities since 1968,
converted into a feeder fund by investing all of its assets in the
Portfolio. Currently Stein Roe Special Fund, which is a series of
Stein Roe Investment Trust, is the only other investment company
investing in Special Portfolio. Information regarding any
investment company that may invest in Special Portfolio in the
future may be obtained by writing to SR&F Base Trust, Suite 3200,
One South Wacker Drive, Chicago, Illinois 60606, or by calling 800-
338-2550. The Adviser may provide administrative or other
services to one or more of such investors.
FOR MORE INFORMATION
For more information about Advisor Special Fund, call Retirement
Services at 800-322-1130 or Advisor/Broker Services at 800-322-
0593.
______________________
The Stein Roe Advisor Funds
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor Young Investor Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor International Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-8900
Retirement Services: 1-800-322-1130
Adviser/Broker Services: 1-800-322-0593
http://www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive,
32nd Floor.
Liberty Securities Corporation, Distributor
Member, SIPC
