Stein Roe Advisor Mutual Funds
Annual Report
Sept. 30, 1997
Growth Funds
Stein Roe Advisor Special Venture Fund
Contents
Performance....................................................... 1
How the Stein Roe Advisor Special Venture Fund has done over time
Q&A .............................................................. 2
Interview with the portfolio managers and a summary of investment activity
Investments....................................................... 4
A complete list of investments with market values
Financial Statements.............................................. 7
Balance sheets, statements of operations and changes in net assets
Notes to Financial Statements..................................... 13
Financial Highlights.............................................. 16
Selected per-share data
Report of Independent Public Accountants.......................... 18
<PAGE>
Fund Performance*
There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
PAST 1 LIFE
YEAR OF FUND(1)
ADVISOR SPECIAL VENTURE FUND 21.46% 26.91%
Russell 2000 33.19 23.87
Investment Comparison
COMPARISON of change in value of a $10,000 investment.
Advisor Special
Date Venture Fund Russell 2000
10/31/94 10000 10000
12/31/94 10484 9854
3/31/95 11051 10309
6/30/95 11467 11275
9/30/95 12666 12389
12/31/95 13299 12657
3/31/96 14321 13303
6/30/96 15446 13969
9/30/96 16653 14016
12/31/96 17066 14745
3/31/97 15717 13983
6/30/97 18143 16250
9/30/97 20227 18668
*Historical performance for class K shares for the period prior to Feb. 14,
1997, is based on the performance of SR&F Special Venture Portfolio, restated to
reflect the 12b-1 fees and any other expenses applicable to that class, without
giving effect to any fee waivers and assuming reinvestment of dividends and
capital gains. Historical performance as restated does not represent Advisor
Special Venture Fund's future performance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The Russell 2000 is an unmanaged group of
stocks that differs from the composition of any Stein Roe fund; it is not
available for direct investment.
1Inception Date: SR&F Special Venture Portfolio -- Oct. 17, 1994. Because index
returns are calculated on a monthly basis, the index returns marked "Life of
Fund" are calculated from the month-end results that fell closest to SR&F
Special Venture Portfolio's inception date.
1
<PAGE>
Fund Data
Investment Objective:
Seeks to achieve long-term capital appreciation by investing primarily in a
diversified portfolio which invests in entrepreneurially managed companies.
The Portfolio emphasizes investments in financially strong small and
medium-sized companies based principally on management appraisal and stock
valuation. Funds that emphasize investments in smaller companies may
experience short-term volatility.
Q&A
An Interview with Dick Peterson and John McLandsborough, portfolio managers for
Advisor Special Venture Fund
John McLandsborough joined Dick Peterson as co-portfolio manager of Advisor
Special Venture Fund on June 30, 1997.
Q: HOW WAS THE FUND'S SHORT- AND LONG-TERM PERFORMANCE?
A: In our opinion, our strategy of investing in what we believe are
well-positioned, entrepreneurially managed companies has been successful over
the long term, which we define as three years or more. As of Sept. 30, 1997,
Advisor Special Venture Fund posted returns of 21.46 percent for the year and
26.91 percent since its inception three years ago -- our long-term return
handily beat the 24.91 percent median peer group return and the 23.87 percent
return for the Fund's benchmark index, the Russell 2000.
While under most circumstances a return of 21.46 percent would be considered a
successful result, for the one-year period the Fund nonetheless lagged the 29.79
percent return of the Lipper small-cap funds peer group and the 33.19 percent
return of the Russell 2000 for the one-year period.
Q: HOW DO YOU INTERPRET YOUR ONE-YEAR RESULTS?
A: The portfolio was underweighted relative to the Russell 2000 in the bank and
thrift sector, one of the year's strongest finishers. In addition, we had more
exposure to oil and gas stocks, which declined early in the year but recently
have recovered nicely.
In addition, with valuations at near-record highs, the year saw a shift in
investor interest from growth to value stocks. The disparity between
<PAGE>
growth and value performance in the last 12 months is dramatically underscored
when you look at the growth and value components of the Russell 2000. While
there is a value component to our investment style, our historical performance
has been more correlated with small-cap growth indices. For the year ended Sept.
30, 1997, the Russell 2000 Value Index returned 42.7 percent, while the Russell
2000 Growth Index returned 23.4 percent -- Advisor Special Venture's return on
its equity holdings was roughly in line with the Russell 2000 Growth Index. As a
small and recently created fund, however, we typically have held 8 percent to 10
percent in cash reserves against contingencies -- this dampened our return
during last year's "hot" stock market.
Q: WHAT STOCKS WERE DISAPPOINTING?
A: We experienced some weakness in the shares of Central European Media (2.5
percent of total net assets), which were negatively affected by regulatory
uncertainty and depreciation in the Czech currency. We retained this stock
because we think it has outstanding long-term prospects given rising consumer
confidence and prosperity in Central and Eastern Europe. For the most part,
however, we have eliminated positions in stocks that disappointed as a result of
changes in the competitive environment or management. These included Garden
Botanika, National Processing, Microware, and Firearms Training Services.
Q: WHERE HAVE YOU FOUND YOUR STRONGEST CONTRIBUTORS?
A: Financial services -- primarily real estate investment trusts (REITs), real
estate services, and specialty insurance -- proved to be good sectors for us.
Our technology investments have been profitable, with the standout being Zytec
Corporation, whose stock price tripled and was recently purchased by a leading
industry competitor at a substantial premium.
Standouts among our real estate holdings include companies specializing in
owning office properties, such as Beacon Properties -- whose stock price rose
sharply when Sam Zell's Equity Office Properties announced an intention to
purchase the company -- and Reckson Associates (3.1 percent and 2.6 percent of
total net assets, respectively). CB Commercial and LaSalle Partners, both real
estate management and brokerage firms (3.4 percent and 1.9 percent of total net
assets), also fared well.
On the insurance side, Twentieth Century Industries, MeadowBrook Insurance and
Mutual Risk Associates (3.4 percent, 2.4 percent and 1.6 percent of total net
assets, respectively) finished the reporting period with solid gains.
2
<PAGE>
Q: THE FINANCIAL SERVICES SECTOR AS A WHOLE DID WELL IN THE LAST 12
MONTHS. WHAT'S DRIVING THAT RALLY IN THE REAL ESTATE SEGMENT?
A: Positive supply-demand dynamics has led to rising rents in the
commercial real estate sector -- we think the glut in commercial
buildings left over from the late 1980s has finally worked itself out. In
addition, there has been a shift from direct investment in real estate
properties by pension funds and other institutional investors to indirect
investment through owning shares of publicly owned REITs. This has led to an
increased demand for shares of REITs.
We're very focused in the office real estate sector, where we believe
supply-demand dynamics are better than they are in most other real estate
sectors. Two of our REITs, Reckson Associates and Speiker Properties, are both
entrepreneurially managed companies that focus on office properties in specific
geographic markets. Given that market dynamics can differ greatly in each
geographic market, we believe this local market knowledge provides a competitive
advantage for these companies and often can lead to better opportunities and
decision making.
Q: WHAT TYPE OF INVESTMENT IDEAS ARE YOU PURSUING NOW?
A: We're sticking to our knitting: investing in entrepreneurially managed
companies with attractive growth businesses trading at reasonable valuation
levels. We've made recent purchases in energy stocks, where valuations have come
down to more attractive levels. Despite some turbulence in the early part of the
Fund's fiscal year, the sector has begun to experience some seasonal strength,
as typically happens going into winter, and has performed well recently. With
purchases in exploration and production companies like Renaissance Energy and
Meridian Resources (1.7 percent and 1.8 percent of total net assets,
respectively), we've expanded our exposure to energy from as low as 5.9 percent
of total net assets in June to 12.4 percent on Sept. 30, 1997.
Other recent purchases include CMP Media, a leading publisher of technology
trade periodicals; NuSkin Asia, a direct marketer and distributor of consumer
products focused on the Asian markets; and SPSS, a statistical software company
(1.9 percent, 1.5 percent, 1.6 percent of total net assets, respectively).
Q: WHAT'S YOUR OUTLOOK?
A: Despite the rally in the small-cap sector, valuations still seem attractive
especially relative to large-cap stocks. Between small-cap and large-cap stocks,
we've seen only a small tightening in the divergence of valuation levels
relative to growth rates.
On a final note, after repeatedly telling our investors about the attractiveness
of small-cap stocks in our recent quarterly shareholder reports, we're
encouraged that the sector, beginning in May, has finally begun to outperform
large-cap stocks. Studies performed by the Center for Research in Security
Prices (CRISP) show that periods of small-cap sector outperformance
historically have lasted several years on average. This, coupled with the
current attractive growth outlook and valuation characteristics of the
small-cap sector, supports our belief that the recovery in small-cap stocks
may continue for some time.
The adviser currently limits expenses on class K shares to 1.5 percent of
average net assets, subject to termination on 30 days' notice to the Fund.
Absent this limit, total return would be less.
Historical performance for class K shares for the period prior to Feb. 14, 1997,
is based on the performance of SR&F Special Portfolio, restated to reflect the
12b-1 fees and any other expenses applicable to that class, without giving any
effect to fee waivers and assuming reinvestment of dividends and capital gains.
Historical performance as restated does not represent Advisor Special Venture
Fund's future performance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of Sept. 30, 1997, and are subject to change. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. Life of Fund is from SR&F Special Venture
Portfolio's inception on Oct. 17, 1994; benchmark performance is from Oct. 31,
1994. The Russell 2000, Russell 2000 Value and Russell 2000 Growth indices are
unmanaged groups of stocks that differ from the composition of any Stein Roe
fund; they are not available for direct investment. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the median returns for the Fund's small-cap fund peer group for the one-year and
Life of Fund periods were 29.79 percent, and 24.91 percent, respectively.
Holdings are disclosed as a percentage of total net assets of the SR&F Special
Venture Portfolio.
3
<PAGE>
<TABLE>
<CAPTION>
SR&F SPECIAL VENTURE PORTFOLIO
Investments as of September 30, 1997
(Dollar amounts in thousands)
Number Market
COMMON STOCKS (91.1%) of Shares Value
<S> <C> <C>
AUTOMOBILE RENTAL (0.1%)
*Avis Rent A Car..................................... 9,000 $ 215
AUTOMOTIVE ACCESSORIES (1.8%)
Superior Industries International, Inc............... 152,000 4,209
BROADCAST/MEDIA (5.8%)
*Central European Media Enterprises Ltd.............. 224,700 6,011
*Metro Networks, Inc................................. 254,900 7,679
--------
13,690
BUSINESS SERVICES (12.0%)
*Alternative Resources Corporation................... 303,100 7,161
*CORESTAFF, Inc...................................... 30,000 971
*Covance, Inc........................................ 273,600 5,917
Danka Business Systems PLC ADRs...................... 79,000 3,516
G & K Services Inc. Class A.......................... 70,000 2,433
Interim Services, Inc................................ 293,800 8,263
--------
28,261
COMPUTER SERVICES (6.0%)
*Fiserv, Inc......................................... 159,300 6,989
*American Business Information....................... 131,700 3,572
*SPSS, Inc........................................... 130,000 3,721
--------
14,282
CONSUMER ELECTRONICS/APPLIANCES (1.2%)
*Helen of Troy Ltd................................... 142,400 2,812
COSMETICS (1.5%)
*Nu Skin Asia........................................ 180,000 3,476
DENTAL PRODUCTS (0.6%)
*National Dentex Corporation......................... 65,000 1,381
DIVERSIFIED OPERATIONS (0.7%)
Fisher Companies..................................... 14,000 1,694
DRUGS (2.4%)
*Chirex, Inc......................................... 150,000 3,825
*Ligand Pharmaceuticals.............................. 120,000 1,980
--------
5,805
ELECTRONIC COMPONENTS (0.1%)
*Sheldahl Company.................................... 5,000 108
ELECTRICAL EQUIPMENT (6.3%)
AVX Corporation...................................... 248,800 8,055
*Ballantyne of Ohama, Inc............................ 200,000 3,850
*Kent Electronics Corporation........................ 77,200 3,049
--------
14,954
ELECTRICAL POWER GENERATION (1.0%)
AES Corporation...................................... 52,000 2,275
FINANCIAL SERVICES (0.6%)
Investors Financial Services......................... 35,000 1,444
4
<PAGE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
FOOD DISTRIBUTOR (1.2%)
Richfood Holdings, Inc............................... 115,000 $ 2,983
HEALTH SERVICES & EQUIPMENT (4.4%)
*Urologix, Inc....................................... 184,800 4,389
*Uroquest Medical Corporation........................ 255,200 1,467
*Xomed Surgical Products, Inc........................ 231,000 4,591
--------
10,447
INSURANCE (7.5%)
Meadowbrook Insurance Group, Inc..................... 233,700 5,653
Mutual Risk Management Ltd........................... 75,433 3,832
20th Century Industries, Inc......................... 312,800 8,113
--------
17,598
OIL/GAS (11.5%)
*Barrett Resources Corp.............................. 151,300 5,891
*Renaissance Energy Ltd.............................. 160,000 3,992
Cross Timbers Oil Company............................ 227,700 5,550
Devon Energy Corporation............................. 81,200 3,573
*Hanover Compressor.................................. 154,000 3,773
*Meridian Resource Corporation....................... 324,800 4,283
--------
27,062
OPTICAL SUPPLIES (2.0%)
*Sola International, Inc............................. 137,000 4,701
PUBLISHING (1.9%)
*CMP Media........................................... 180,900 4,523
REAL ESTATE DEVELOPMENT/MANAGEMENT (14.7%)
Beacon Properties Corporation........................ 160,000 7,331
*CB Commercial Real Estate Services Group, Inc....... 252,300 8,073
*LaSalle Partners.................................... 129,700 4,540
Reckson Associates Realty Corporation................ 233,900 6,227
*Security Capital Group.............................. 115,400 3,967
Spieker Properties, Inc.............................. 110,000 4,462
--------
34,600
RETAIL (3.3%)
*Moovies, Inc........................................ 60,000 146
*Video Update, Inc................................... 694,200 2,559
*Whole Foods Market, Inc............................. 129,000 4,983
--------
7,688
SPECIALTY CHEMICALS (2.1%)
ChemFirst, Inc....................................... 200,500 5,038
TELECOMMUNICATIONS (1.0%)
*Western Wireless Corporation........................ 127,700 2,394
WHOLESALE DISTRIBUTION (1.4%)
*Henry Schein, Inc................................... 92,500 3,307
--------
TOTAL COMMON STOCKS (Cost $172,619)............................... 214,947
5
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
SHORT-TERM OBLIGATIONS (8.5%)
Associates Corporation of North America 6.400% 10/01/97 $ 9,770 $ 9,770
Goldman Sachs Group 5.750% 10/02/97.................. 8,000 7,999
UBS Finance 6.350% 10/01/97.......................... 2,367 2,367
--------
TOTAL SHORT-TERM OBLIGATIONS
(Amortized cost $20,136).......................................... 20,136
TOTAL INVESTMENTS (99.6%)
(Cost $192,755)................................................... 235,083
OTHER ASSETS, LESS LIABILITIES (0.4%)............................. 958
--------
TOTAL NET ASSETS (100.0%)......................................... $236,041
========
<FN>
* Non-income producing.
</FN>
See accompanying notes to financial statements.
6
</TABLE>
<PAGE>
<TABLE>
STEIN ROE ADVISOR SPECIAL VENTURE FUND
BALANCE SHEET
SEPTEMBER 30, 1997
(All amounts in thousands, except per-share data)
<CAPTION>
<S> <C>
ASSETS
Investment in SR&F Special Venture Portfolio, at value $ 119
Cash 17
Other assets 16
------
Total Assets $ 152
======
LIABILITIES
Payable to investment adviser and transfer agent $ 20
Other liabilities 14
------
Total Liabilities 34
------
CAPITAL
Paid-in capital 100
Net unrealized appreciation of investments 22
Accumulated undistributed net realized losses on investment (4)
------
TOTAL CAPITAL (NET ASSETS) 118
------
TOTAL LIABILITIES AND CAPITAL $ 152
======
SHARES OUTSTANDING (UNLIMITED NUMBER AUTHORIZED) 10
======
NET ASSET VALUE (CAPITAL) PER SHARE $11.84
======
See accompanying notes to financial statements
7
</TABLE>
<PAGE>
<TABLE>
STEIN ROE ADVISOR SPECIAL VENTURE FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends and interest allocated from SR&F Special Venture Portfolio $ 1
----
EXPENSES
Amortization of organization expenses 20
Accounting fees 15
Audit and legal fees 11
Trustees fees 4
Printing and postage 3
Other 4
----
57
Reimbursement of expenses by investment adviser (56)
----
Total Expenses 1
----
Net Investment Loss --
----
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses on investments allocated from SR&F Special
Venture Portfolio (4)
Net change in unrealized appreciation or depreciation of investments 22
----
Net Gains on Investments 18
----
Net Increase in Net Assets Resulting from Operations $ 18
====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
8
</TABLE>
<PAGE>
<TABLE>
STEIN ROE ADVISOR SPECIAL VENTURE FUND
STATMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
OPERATIONS
Net investment loss $ --
Net realized losses on investments (4)
Net change in unrealized appreciation or depreciation of investments 22
----
Net Increase in Net Assets Resulting from Operations 18
----
SHARE TRANSACTIONS
Subscriptions to fund shares (10 shares) 100
----
Net Increase from Share Transactions 100
----
Net Increase in Net Assets 118
TOTAL NET ASSETS
Beginning of Period --
----
End of Period $118
====
<FN>
(a) From commencement of operations on February 14, 1997.
</FN>
See accompanying notes to financial statements.
9
</TABLE>
<PAGE>
<TABLE>
SR&F SPECIAL VENTURE PORTFOLIO
BALANCE SHEET
SEPTEMBER 30, 1997
(All amounts in thousands)
<CAPTION>
<S> <C>
ASSETS
Investments, at market value $235,083
Receivable for investments sold 1,723
Dividends receivable 70
Cash 5
Other assets 3
--------
Total Assets 236,884
--------
LIABILITIES
Payable for investments purchased 665
Payable to investment adviser 152
Other liabilities 26
--------
Total Liabilities 843
--------
Net Assets Applicable to Investors' Beneficial Interest $236,041
========
See accompanying notes to financial statements.
10
</TABLE>
<PAGE>
<TABLE>
SR&F SPECIAL VENTURE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends $ 814
Interest 601
-------
Total Investment Income 1,415
-------
EXPENSES
Management fees 943
Accounting fees 19
Custodian fees 19
Audit and legal fees 18
Trustees fees 11
Other 18
-------
Total Expenses 1,028
-------
Net Investment Income 387
-------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments 7,866
Net change in unrealized appreciation or depreciation
of investments 27,038
-------
Net Gains on Investments 34,904
-------
Net Increase in Net Assets Resulting from Operations $35,291
=======
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
11
</TABLE>
<PAGE>
<TABLE>
SR&F SPECIAL VENTURE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (a)
(All amounts in thousands)
<CAPTION>
<S> <C>
OPERATIONS
Net investment income $ 387
Net realized gains on investments 7,866
Net change in unrealized appreciation or depreciation
of investments 27,038
---------
Net Increase in Net Assets Resulting
from Operations 35,291
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 218,483
Withdrawals (17,733)
---------
Net Increase from Transactions in Investors'
Beneficial Interest 200,750
---------
Net Increase in Net Assets 236,041
TOTAL NET ASSETS
Beginning of Period --
---------
End of Period $ 236,041
=========
<FN>
(a) From commencement of operations on February 3, 1997.
</FN>
See accompanying notes to financial statements.
12
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION OF THE SR&F SPECIAL VENTURE PORTFOLIO
The SR&F Special Venture Portfolio (the "Portfolio") is a separate series of the
SR&F Base Trust, a Massachusetts common law trust organized under an Agreement
and Declaration of Trust dated August 23, 1993. The Declaration of Trust permits
the Trustees to issue nontransferable interests in the Portfolio. The Portfolio
commenced operations on February 3, 1997. At commencement, the Stein Roe Special
Venture Fund contributed $160,940 in securities and other assets. On February
14, 1997, Stein Roe Advisor Special Venture Fund contributed cash of $100.
The Portfolio allocates net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At September
30, 1997, Stein Roe Special Venture Fund and Stein Roe Advisor Special Venture
Fund owned 99.95 percent and .05 percent, respectively.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of Stein Roe Advisor
Special Venture Fund (the "Fund"), a series of the Stein Roe Advisor Trust (a
Massachusetts business trust) and the Portfolio. These policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
SECURITY VALUATIONS
All securities are valued as of September 30, 1997. Securities are valued,
depending on the security involved, at the last reported sales price, last bid
or asked price, or the mean between last bid and asked price as of the close of
the appropriate exchange or other designated time. A security which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary exchange for such security. Other assets and
securities of the Portfolio are valued by a method that the Board of Trustees
believes represents a fair value.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on respective percentages of ownership.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Fund intends to utilize provisions of the federal income tax laws that
allow it to carry a realized capital loss forward up to eight years following
the year of the loss, and offset such losses against any future realized gains.
At September 30, 1997, the Fund had a capital loss carryforward of $3 which
expires in 2005.
DISTRIBUTION TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income and net
realized capital gains annually, which are recorded on the ex-dividend date.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently from generally accepted accounting
principles. Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings that
result in temporary overdistributions are classified as distributions in excess
of net investment income or net realized gains. Permanent differences are
reclassified to the appropriate capital account.
OTHER INFORMATION
Dividend income is recognized on the ex-dividend date and interest income is
recognized on an accrual basis.
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
All amounts, except per-share amounts, are shown in thousands.
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to Stein Roe & Farnham Incorporated (the "Adviser"), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its
services as investment adviser and manager. The management fee for the Portfolio
is computed at an annual rate of .75 of 1 percent of average daily net assets.
The administrative fees for the Fund are computed at an annual rate of .15 of 1
percent of average daily net assets.
The administrative agreement for the Fund provides that the Adviser will
reimburse the Fund to the extent that annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which the
Fund's shares are offered for sale. In addition, the Adviser has agreed to
reimburse the Fund to the extent that expenses exceed 1.50 percent of average
daily net assets. This expense limitation expires on January 31, 1998, subject
to earlier termination by the Adviser on 30 days' notice.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The transfer agent fees were paid to SteinRoe Services Inc. (SSI), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI
entered into an agreement with Colonial Investors Service Center, Inc. (CISC),
an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to
act as subtransfer agent for the Fund. Effective October 15, 1997, CISC
replaced SSI as transfer agent for the Fund.
The Adviser also provides certain fund accounting services. For the period
ended September 30, 1997, the Fund and Portfolio incurred charges of $15 and
$19, respectively.
Certain officers and trustees of the Trusts are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for the
Fund and Portfolio for the period ended September 30, 1997, was $4 and $11,
respectively. No remuneration was paid to any other trustee or officer of the
Trusts.
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Fund nor the Portfolio had borrowings during the period ended September 30,
1997.
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales for the Portfolio (other
than short-term obligations) for the period ended September 30, 1997, were
$128,841 and $101,744, respectively.
At September 30, 1997, the cost of investments in the Portfolio for federal
income tax purposes and for financial reporting were $193,371 and $192,755,
respectively. Unrealized appreciation and depreciation on a tax basis were
$43,593 and $1,881, respectively.
NOTE 6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25 percent are computed annually as a
percentage of average daily net assets.
15
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
STEIN ROE ADVISOR SPECIAL VENTURE FUND
Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.
Period
Ended
September 30,
1997 (a)
<CAPTION>
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
-------
Income From Investment Operations
Net investment loss (0.03)
Net realized and unrealized gains on investments 1.87
-------
Total from investment operations 1.84
-------
Net Asset Value, End of Period $ 11.84
========
Ratio of net expenses to average net assets (b) 1.50%*
Ratio of net investment income to average net assets (c) (0.42%)*
Total return 18.40%
Net assets, end of period $ 118
<FN>
* Annualized
(a) From commencement of operations on February 14, 1997.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would
have been 88.96 percent for the period ended September 30, 1997.
(c) Computed giving effect to the investment adviser's expense
limitation undertaking.
</FN>
See accompanying notes to financial statements.
16
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SR&F SPECIAL VENTURE PORTFOLIO
<CAPTION>
Period
Ended
September 30,
1997 (a)
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to average net assets 0.31%*
Ratio of net expenses to average net assets 0.82%*
Portfolio turnover rate 58%
Average commissions (per share) $ 0.0456
<FN>
* Annualized
(a) From commencement of operations on February 3, 1997.
17
</FN>
</TABLE>
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of:
Stein Roe Advisor Special Venture Fund
SR&F Special Venture Portfolio
We have audited the accompanying balance sheet of the Stein Roe Advisor Special
Venture Fund and the accompanying balance sheet, including the schedule of
investments, of the SR&F Special Venture Portfolio as of September 30, 1997, and
the related statements of operations, changes in net assets and the financial
highlights for the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Fund's and Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures for the SR&F Special Venture Portfolio included
confirmation of securities owned as of September 30, 1997, by correspondence
with the custodian and brokers. As to securities purchased but not received, we
requested confirmation from brokers and, when replies were not received, we
carried out alternative auditing procedures. An audit also includes assessing
the estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly
the financial position of the Stein Roe Advisor Special Venture Fund and the
SR&F Special Venture Portfolio at September 30, 1997, the result of their
operations, the changes in their net assets and their financial highlights for
the periods indicated thereon, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 24, 1997
18
<PAGE>
Stein Roe Advisor Trust
TRUSTEES
Timothy K. Armour
President, Mutual Fund Division and Director,
Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A.T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General Counsel,
Sara Lee Corporation
Francis W. Morley
Chairman, Employer Plan Administrators and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
AGENTS AND ADVISERS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
Colonial Investors Service Center, Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Arthur Andersen LLP
Independent Public Accountants
OFFICERS
Timothy K. Armour, President
William D. Andrews, Executive Vice President
Jilaine H. Bauer, Executive Vice President, Secretary
Thomas W. Butch, Executive Vice President
Loren A. Hansen, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief
Financial Officer
Bruno Bertocci, Vice President
David P. Brady, Vice President
Daniel K. Cantor, Vice President
Philip J. Crosley, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Harvey B. Hirschhorn, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
John S. McLandsborough, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Richard B. Peterson, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant Treasurer
Janet B. Rysz, Assistant Secretary
<PAGE>
Liberty Financial Investments, Inc., distributor
Member SIPC 11/97
<PAGE>
