1933 Act Registration No. 333-17255
1940 Act File No. 811-07955
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
STEIN ROE ADVISOR TRUST
Registrant
One South Wacker Drive, Chicago, Illinois 60606
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
& Secretary Three First National Plaza
Stein Roe Advisor Trust Suite 3300
One South Wacker Drive 70 W. Madison Street
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
Approximate Date of Proposed Public Offering: As soon as
practicable after effectiveness of the Registration Statement.
Registrant hereby elects to register under the Securities Act of
1933 an indefinite number of its shares of beneficial interest,
without par value, of the series of shares designated Stein Roe
Advisor Growth & Income Fund, Stein Roe Advisor International Fund,
Stein Roe Advisor Young Investor Fund, Stein Roe Advisor Special
Venture Fund, Stein Roe Advisor Balanced Fund, Stein Roe Advisor
Growth Stock Fund, and Stein Roe Advisor Special Fund.
Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, or
until the Registration Statement shall become effective, or such
date as the Commission, acting pursuant to said Section 8(a), may
determine.
This Registration Statement has also been signed by SR&F Base Trust.
<PAGE>
STEIN ROE ADVISOR TRUST
CROSS REFERENCE SHEET
ITEM
NO. CAPTION
- ----- -------
PART A (PROSPECTUS)
1 Front cover
2 Fee Table; Summary
3 (a) Inapplicable
(b) Inapplicable
(c) Investment Return
(d) Inapplicable
4 Organization and Description of Shares; The Fund;
Investment Policies; Investment Restrictions; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser, Fees and
Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see statement of
additional information: General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) For More Information
(f) Distributions and Income Taxes
(g) Distributions and Income Taxes
(h) Special Considerations Regarding Master Fund/Feeder Fund
Structure
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares; Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Management--Fees and Expenses
8 (a) How to Redeem Shares
(b) How to Purchase Shares
(c) How to Redeem Shares
(d) How to Redeem Shares
9 Inapplicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Distributor
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent and Shareholder Servicing
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares
(b) Purchases and Redemptions; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22 Investment Performance
23 Balance Sheet
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
STEIN ROE ADVISOR GROWTH & INCOME FUND
The investment objective of Advisor Growth & Income Fund is to
provide both growth of capital and current income. Advisor Growth
& Income Fund invests all of its net investable assets in shares
of SR&F Growth & Income Portfolio, a portfolio of SR&F Base Trust
that has the same investment objective and substantially the same
investment policies as Advisor Growth & Income Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor Growth & Income Fund may be purchased only
through Intermediaries, including retirement plan service
providers.
Advisor Growth & Income Fund has no sales or redemption charges.
Advisor Growth & Income Fund is a series of Stein Roe Advisor
Trust and Growth & Income 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 Growth & Income Fund. Please read it
carefully and retain it for future reference.
A Statement of Additional Information dated February __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary...................................2
Fee Table ................................3
The Fund..................................4
Investment Policies.......................5
Performance Information...................5
Risks and Investment Considerations ......6
Investment Restrictions ..................7
Portfolio Investments and Strategies......8
Net Asset Value .........................10
How to Purchase Shares...................11
How to Redeem Shares ....................12
Distributions and Income Taxes...........12
Management ..............................13
Organization and Description of Shares...15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure......16
For More Information ....................18
SUMMARY
Stein Roe Advisor Growth & Income Fund ("Advisor Growth & Income
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 Growth & Income Fund
are not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Growth & Income Fund is to provide both growth of capital
and current income. Advisor Growth & Income Fund invests all of
its net investable assets in SR&F Growth & Income Portfolio
("Growth & Income Portfolio") which has the same investment
objective and investment policies substantially similar to those
of Advisor Growth & Income Fund. The Fund is designed for
investors seeking a diversified portfolio of securities that
offers the opportunity for long-term growth of capital while also
providing a steady stream of income. In seeking to meet this
objective, Growth & Income Portfolio invests primarily in well-
established companies whose common stocks are believed to have
both the potential to appreciate in value and to pay dividends to
shareholders.
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
Growth & Income Fund and Growth & Income Portfolio will achieve
their common investment objective.
INVESTMENT RISKS. Advisor Growth & Income Fund is designed for
long-term investors who desire to participate in the stock market
with moderate investment risk while seeking to limit market
volatility. Growth & Income 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 Growth & Income Fund
may be purchased only through Intermediaries, including retirement
plan service providers. For information on purchasing and
redeeming Advisor Growth & Income 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 Growth & Income Portfolio. In
addition, it provides administrative services to Advisor Growth &
Income Fund and Growth & Income 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)..................................0.60%
12b-1 Fees.........................................0.25%
Other Expenses ....................................0.55%
-----
Total Operating Expenses (after reimbursement).....1.40%
=====
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
------- --------
$14 $44
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 Growth & Income Fund. The
Fee Table reflects the combined expenses of both Advisor Growth &
Income Fund and Growth & Income Portfolio. Anticipated Total
Operating Expenses for Advisor Growth & Income 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 Growth & Income Fund for a portion of its
operating expenses and its pro rata share of the fees and expenses
payable by Growth & Income Portfolio. The Adviser has undertaken
to reimburse Advisor Growth & Income Fund for its operating
expenses and its pro rata share of Growth & Income Portfolio's
operating expenses to the extent such expenses exceed 1.40% of
Advisor Growth & Income 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 Growth & Income Fund. Absent such reimbursement, Advisor
Growth & Income Fund's share of Growth & Income Portfolio's
Management Fee and the Fund's Administrative Fee and Total
Operating Expenses would be 0.75% and 1.55%, respectively. Any
such reimbursement will lower Advisor Growth & Income Fund's
overall expense ratio and increase its overall return to
investors. (Also see Management--Fees and Expenses.)
Advisor Growth & Income Fund pays the Adviser an administrative
fee based on its average daily net assets and Growth & Income
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 Growth & Income
Fund, including its share of the expenses of Growth & Income
Portfolio, would be more or less than if Advisor Growth & Income
Fund invested directly in the securities held by Growth & Income
Portfolio, and concluded that Advisor Growth & Income 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 Growth &
Income 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 Growth & Income Fund pays a 12b-1 fee, long-term
investors in Advisor Growth & Income 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 Growth & Income Fund's 12b-1 fee, see Management--
Distributor or call your financial representative.
THE FUND
STEIN ROE ADVISOR GROWTH & INCOME FUND ("Advisor Growth & Income
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 Growth & Income
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 Growth & Income Fund invests all of its net
investable assets in shares of SR&F Growth & Income Portfolio
("Growth & Income Portfolio"), which is a series of SR&F Base
Trust ("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Growth & Income Portfolio and
administrative services to Advisor Growth & Income Fund and Growth
& Income Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Growth & Income Fund is to
provide both growth of capital and current income. Advisor Growth
& Income Fund invests all of its net investable assets in Growth &
Income Portfolio, which has the same investment objective and
investment policies substantially similar to Advisor Growth &
Income Fund. Advisor Growth & Income Fund is designed for
investors seeking a diversified portfolio of securities that
offers the opportunity for long-term growth of capital while also
providing a steady stream of income. In seeking to meet this
objective, Growth & Income Portfolio invests primarily in well-
established companies whose common stocks are believed to have
both the potential to appreciate in value and to pay dividends to
shareholders.
Although it may invest in a broad range of securities (including
common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, and warrants or rights to purchase
common stocks), normally Growth & Income Portfolio emphasizes
investments in equity securities of companies having market
capitalizations in excess of $1 billion. Securities of these
well-established companies are believed to be generally less
volatile than those of companies with smaller capitalizations
because companies with larger capitalizations tend to have
experienced management; broad, highly diversified product lines;
deep resources; and easy access to credit.
Further information on investment techniques that may be employed
by Growth & Income 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 Growth & Income
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 Growth & Income 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 Growth & Income Fund
had no past performance. However, Stein Roe Growth & Income 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 Growth & Income Fund, also invests all of its net
investable assets in Growth & Income Portfolio. The average
annual total return for the periods ended September 30, 1996 for a
1-year, 5-year and since-inception (March 23, 1987) investment in
Stein Roe Growth & Income Fund were 22.67%, 15.76% and 11.80%,
respectively. Stein Roe Growth & Income Fund has a different fee
structure than Advisor Growth & Income 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 Growth & Income Fund, and
should not be interpreted as indicative of Advisor Growth & Income
Fund's future performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Growth & Income Fund is designed for long-term investors
who desire to participate in the stock market with moderate
investment risk while seeking to limit market volatility. Growth
& Income 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 Growth & Income Fund or Growth & Income
Portfolio will achieve its objective.
Growth & Income 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.
Growth & Income 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Growth & Income Portfolio may be found under Portfolio
Investments and Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Growth & Income Fund nor Growth & Income Portfolio
may invest more than 5% of its assets in the securities of any one
issuer. This restriction applies only to 75% of its 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 Growth & Income 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 Growth
& Income 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, Growth & Income
Portfolio could experience both losses and delays in liquidating
its collateral.
- ---------------
Neither Advisor Growth & Income Fund nor Growth & Income Portfolio
will acquire more than 10% of the outstanding voting securities of
any one issuer. Advisor Growth & Income 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 Growth & Income Fund nor Growth & Income 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 Growth & Income Fund and Growth &
Income Portfolio may not borrow money, except for non-leveraging,
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 Growth & Income Fund and Growth & Income 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
Growth & Income Fund and Growth & Income 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
Growth & Income Fund and Growth & Income 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.
Investment in debt securities is limited to those that are rated
within the four highest grades (generally referred to as
investment grade). If the rating of a security held by Growth &
Income Portfolio is lost or reduced below investment grade, the
Portfolio is not required to dispose of the security--the Adviser
will, however, consider that fact in determining whether Growth &
Income Portfolio should continue to hold the security. When the
Adviser deems a temporary defensive position advisable, Growth &
Income Portfolio may invest, without limitation, in high-quality
fixed income securities, or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
Growth & Income Portfolio may invest in sponsored or unsponsored
ADRs. In addition to, or in lieu of, such direct investment,
Growth & Income 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, Growth &
Income 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. Growth &
Income 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, Growth & Income
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, Growth & Income 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, Growth & Income 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.
Growth & Income Portfolio may make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
Growth & Income Portfolio may participate in an interfund lending
program, subject to certain restrictions described in the
Statement of Additional Information. Growth & Income 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 Growth & Income 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. Growth & Income 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.
Growth & Income 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 Growth & Income 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. Growth & Income
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, Growth & Income 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. Growth & Income
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, Growth & Income
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. Growth &
Income Portfolio may write a call or put option only if the option
is covered. As the writer of a covered call option, Growth &
Income 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 Growth & Income 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 Growth & Income 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. 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 Growth & Income
Fund's shares is its net asset value per share. Advisor Growth &
Income 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. Growth & Income Portfolio allocates net asset
value, income, and expenses to Advisor Growth & Income Fund and
any other of its feeder funds in proportion to their respective
interests in Growth & Income 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 Growth & Income 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 Growth & Income Fund shares only through
broker-dealers, banks, or other intermediaries, including
retirement plan service providers ("Intermediaries"). The Adviser
and Advisor Growth & Income Fund do not recommend, endorse, or
receive payments from any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
Growth & Income Fund's shares is made at Advisor Growth & Income
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 Growth &
Income 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 Growth & Income 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 Growth & Income 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 Growth & Income 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 Growth & Income 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 Growth & Income 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. 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 Growth & Income
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 Growth & Income 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 Growth & Income Fund or its authorized
agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid each
calendar quarter. Advisor Growth & Income 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 Growth
& Income 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 Growth & Income 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 Growth &
Income Fund is treated as a separate taxable entity distinct from
the other series of Advisor Trust. Growth & Income 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 Growth & Income 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 Growth & Income
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 Growth & Income Fund and
Growth & Income 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 Growth & Income Fund
and Growth & Income Portfolio and other feeder funds investing in
Growth & Income 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 Growth & Income Portfolio and the business
affairs of Advisor Growth & Income Fund, Growth & Income
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. Daniel K. Cantor has been portfolio manager
of Growth & Income Portfolio since its inception in 1997 and had
managed its predecessor since 1995. Mr. Cantor is a senior vice
president of the Adviser, which he joined in 1985. A chartered
financial analyst, he received a B.A. degree from the University
of Rochester (1981) and an M.B.A. from the Wharton School of the
University of Pennsylvania (1985). As of December 31, 1996, Mr.
Cantor was responsible for managing $241 million in mutual fund
net assets. Jeffrey C. Kinzel is associate portfolio manager.
Mr. Kinzel received a B.A. from Northwestern University (1979), a
J.D. from the University of Michigan Law School (1983), and an
M.B.A. from the Wharton School of the University of Pennsylvania
(1991). Mr. Kinzel is a vice president and intermediate research
analyst with the Adviser. Before joining the Adviser in 1991 as
an equity research analyst, Mr. Kinzel was employed by the law
firm of Butler and Binion; the law firm of Miller, Canfield,
Paddock and Stone; and 1838 Investment Advisers.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Growth & Income 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 Growth &
Income Portfolio, computed and accrued daily, at an annual rate of
0.60% of the first $500 million of average net assets, 0.55% of
the next $500 million, and 0.50% thereafter. However, as noted
above under Fee Table, the Adviser may voluntarily undertake to
reimburse Advisor Growth & Income Fund for a portion of its
operating expenses and its pro rata share of Growth & Income
Portfolio's operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Growth & Income 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 Growth &
Income Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Growth &
Income Fund and Growth & Income 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 Growth
& Income Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Growth & Income 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
Growth & Income 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 Growth & Income 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 Growth & Income Fund including its expenses
related to the sale and promotion of Fund shares, the Distributor
receives from Advisor Growth & Income 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 Growth &
Income Fund shares and provide services to Advisor Growth & Income
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 Growth & Income Fund during any year may be more or less
than the cost of distribution or other services provided to
Advisor Growth & Income 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 Growth & Income Fund and Growth & Income 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 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 Growth & Income 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 Growth & Income Fund. The
initial shareholder of Advisor Growth & Income Fund approved this
policy of permitting Advisor Growth & Income Fund to act as a
feeder fund by investing in Growth & Income 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
Growth & Income Fund and Growth & Income Portfolio. The
management and expenses of both Advisor Growth & Income Fund and
Growth & Income Portfolio are described under the Fee Table and
Management. Advisor Growth & Income 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 Growth & Income 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 Growth & Income Fund and other
investors in Growth & Income Portfolio will each be liable for all
obligations of Growth & Income Portfolio that are not satisfied by
the Portfolio. However, the risk of Advisor Growth & Income Fund
incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance existed and
Growth & Income Portfolio itself were unable to meet its
obligations. Accordingly, the trustees of Advisor Trust believe
that neither Advisor Growth & Income Fund nor its shareholders
will be adversely affected by reason of Advisor Growth & Income
Fund's investing in Growth & Income Portfolio.
The Declaration of Trust of Base Trust provides that Growth &
Income Portfolio will terminate 120 days after the withdrawal of
Advisor Growth & Income Fund or any other investor in Growth &
Income Portfolio, unless the remaining investors vote to agree to
continue the business of Growth & Income Portfolio. The trustees
of Advisor Trust may vote Advisor Growth & Income Fund's interests
in Growth & Income Portfolio for such continuation without
approval of Advisor Growth & Income Fund's shareholders.
The common investment objective of Advisor Growth & Income Fund
and Growth & Income Portfolio is non-fundamental and may be
changed without shareholder approval. The fundamental policies of
Advisor Growth & Income Fund and the corresponding fundamental
policies of Growth & Income Portfolio can be changed only with
shareholder approval.
If Advisor Growth & Income Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
Growth & Income Portfolio or any other matter pertaining to Growth
& Income Portfolio (other than continuation of the business of
Growth & Income Portfolio after withdrawal of another investor),
Advisor Growth & Income Fund will solicit proxies from its
shareholders and vote its interest in Growth & Income Portfolio
for and against such matters proportionately to the instructions
to vote for and against such matters received from Advisor Growth
& Income Fund shareholders. Advisor Growth & Income 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 Growth & Income
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 Growth & Income Portfolio investors.
If other investors hold a majority interest in Growth & Income
Portfolio, they could have voting control over Growth & Income
Portfolio.
In the event that Growth & Income Portfolio's fundamental policies
were changed so as to be inconsistent with those of Advisor Growth
& Income Fund, the Board of Trustees of Advisor Trust would
consider what action might be taken, including changes to Advisor
Growth & Income Fund's fundamental policies, withdrawal of Advisor
Growth & Income Fund's assets from Growth & Income 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 Growth & Income Fund's
shareholders. Advisor Growth & Income 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 Growth & Income Fund's assets could result
in a distribution in kind of portfolio securities (as opposed to a
cash distribution) to Advisor Growth & Income Fund. Should such a
distribution occur, Advisor Growth & Income 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
Growth & Income Fund and could affect the liquidity of Advisor
Growth & Income Fund.
Each investor in Growth & Income Portfolio, including Advisor
Growth & Income Fund, may add to or reduce its investment in
Growth & Income Portfolio on each day the NYSE is open for
business. The investor's percentage of the aggregate interests in
Growth & Income 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 Growth & Income
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 Growth & Income Portfolio effected on such day; and
(ii) the denominator of which is the aggregate beginning of the
day net asset value of Growth & Income 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 Growth & Income
Portfolio by all investors in Growth & Income Portfolio. The
percentage so determined will then be applied to determine the
value of the investor's interest in Growth & Income Portfolio as
of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Growth & Income Portfolio,
but members of the general public may not invest directly in
Growth & Income Portfolio. Other investors in Growth & Income
Portfolio are not required to sell their shares at the same public
offering price as Advisor Growth & Income Fund, might incur
different administrative fees and expenses than Advisor Growth &
Income Fund, and their shares might be sold with a sales
commission. Therefore, Advisor Growth & Income Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in Growth &
Income Portfolio. Investment by such other investors in Growth &
Income 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
Growth & Income Portfolio could result in untimely liquidations of
Growth & Income Portfolio's security holdings, loss of investment
flexibility, and increases in the operating expenses of Growth &
Income Portfolio as a percentage of its net assets. As a result,
Growth & Income Portfolio's security holdings may become less
diverse, resulting in increased risk.
Growth & Income Portfolio commenced operations in February 1997
when Stein Roe Growth & Income Fund, a mutual fund that had
invested directly in securities since 1987, converted into a
feeder fund by investing all of its assets in the Portfolio.
Currently Stein Roe Growth & Income Fund, which is a series of
Stein Roe Investment Trust, is the only other investment company
investing in Growth & Income Portfolio. Information regarding any
investment company that may invest in Growth & Income 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 Growth & Income Fund, call
Retirement Services at 800-322-1130 or Advisor/Broker Services at
800-322-0590.
______________________
<PAGE>
STEIN ROE ADVISOR INTERNATIONAL FUND
The investment objective of Advisor International Fund is to
provide long-term growth of capital by investing in a diversified
portfolio of foreign securities. Advisor International Fund
invests all of its net investable assets in shares of SR&F
International Portfolio, a portfolio of SR&F Base Trust that has
the same investment objective and substantially the same
investment policies as Advisor International Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor International Fund may be purchased only through
Intermediaries, including retirement plan service providers.
Advisor International Fund has no sales or redemption charges.
Advisor International Fund is a series of Stein Roe Advisor Trust
and International 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 International Fund. Please read it carefully
and retain it for future reference.
A Statement of Additional Information dated February __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary..................................2
Fee Table ...............................3
The Fund.................................4
Investment Policies......................5
Performance Information..................6
Risks and Investment Considerations .....6
Investment Restrictions .................8
Portfolio Investments and Strategies.....9
Net Asset Value ........................13
How to Purchase Shares..................13
How to Redeem Shares ...................14
Distributions and Income Taxes..........15
Management .............................16
Organization and Description of Shares..18
Special Considerations Regarding the
Master Fund/Feeder Fund Structure.....19
For More Information ...................21
SUMMARY
Stein Roe Advisor International Fund ("Advisor International
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 International Fund are
not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor International Fund is to provide long-term growth of
capital by investing in a diversified portfolio of foreign
securities. Advisor International Fund invests all of its net
investable assets in SR&F International Portfolio ("International
Portfolio") which has the same investment objective and investment
policies substantially similar to those of Advisor International
Fund. International Portfolio invests primarily in equity
securities. Under normal market conditions, it will invest at
least 65% of its total assets (taken at market value) in foreign
securities of at least three countries outside the United States.
International Portfolio diversifies its investments among several
countries and does not concentrate investments in any particular
industry.
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
International Fund and International Portfolio will achieve their
common investment objective.
INVESTMENT RISKS. Advisor International Fund is intended for
long-term investors who can accept the risks entailed in investing
in foreign securities.
Since International Portfolio invests primarily in foreign
securities, investors should understand and consider carefully the
risks involved in foreign investing. Investing in foreign
securities involves certain considerations involving both risks
and opportunities not typically associated with investing in U.S.
securities. Such risks include fluctuations in exchange rates on
foreign currencies, less public information, less government
supervision, less liquidity, and greater price volatility.
Please see Investment Policies, Portfolio Investments and
Strategies, and Risks and Investment Considerations for further
information.
PURCHASES AND REDEMPTIONS. Shares of Advisor International Fund
may be purchased only through Intermediaries, including retirement
plan service providers. For information on purchasing and
redeeming Advisor International 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 International Portfolio. In
addition, it provides administrative services to Advisor
International Fund and International 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)......................................0.95%
12b-1 Fees............................................0.25%
Other Expenses .......................................0.55%
------
Total Operating Expenses (after reimbursement)........1.75%
======
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
------ -------
$18 $55
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 International Fund. The Fee
Table reflects the combined expenses of both Advisor International
Fund and International Portfolio. Anticipated Total Operating
Expenses for Advisor International 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 International Fund for a portion of its
operating expenses and its pro rata share of the fees and expenses
payable by International Portfolio. The Adviser has undertaken to
reimburse Advisor International Fund for its operating expenses
and its pro rata share of International Portfolio's operating
expenses to the extent such expenses exceed 1.75% of Advisor
International 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
International Fund. Absent such reimbursement, Advisor
International Fund's share of International Portfolio's Management
Fee and the Fund's Administrative Fee, and Total Operating
Expenses would be 1.00% and 1.80%, respectively. Any such
reimbursement will lower Advisor International Fund's overall
expense ratio and increase its overall return to investors. (Also
see Management--Fees and Expenses.)
Advisor International Fund pays the Adviser an administrative fee
based on its average daily net assets and International 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 International Fund, including
its share of the expenses of International Portfolio, would be
more or less than if Advisor International Fund invested directly
in the securities held by International Portfolio, and concluded
that Advisor International 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 International
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 International Fund pays a 12b-1 fee, long-term
investors in Advisor International 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 International Fund's 12b-1 fee, see Management--
Distributor or call your financial representative.
THE FUND
STEIN ROE ADVISOR INTERNATIONAL FUND ("Advisor International
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 International
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 International Fund invests all of its net
investable assets in shares of SR&F International Portfolio
("International Portfolio"), which is a series of SR&F Base Trust
("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to International Portfolio and
administrative services to Advisor International Fund and
International Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor International Fund is to
provide long-term growth of capital by investing in a diversified
portfolio of foreign securities. Advisor International Fund
invests all of its net investable assets in International
Portfolio, which has the same investment objective and investment
policies substantially similar to Advisor International Fund.
Current income is not a primary factor in the selection of
portfolio securities. International Portfolio invests primarily
in common stocks and other equity-type securities (such as
preferred stocks, securities convertible or exchangeable for
common stocks, and warrants or rights to purchase common stocks).
International Portfolio may invest in securities of smaller
emerging companies as well as securities of well-seasoned
companies of any size. Smaller companies, however, involve higher
risks in that they typically have limited product lines, markets,
and financial or management resources. In addition, the
securities of smaller companies may trade less frequently and have
greater price fluctuation than larger companies, particularly
those operating in countries with developing markets.
International Portfolio diversifies its investments among several
countries and does not concentrate investments in any particular
industry. In pursuing its objective, International Portfolio
varies the geographic allocation and types of securities in which
it invests based on the Adviser's continuing evaluation of
economic, market, and political trends throughout the world.
While International Portfolio has not established limits on
geographic asset distribution, it ordinarily invests in the
securities markets of at least three countries outside the United
States, including but not limited to Western European countries
(such as Belgium, France, Germany, Ireland, Italy, The
Netherlands, the countries of Scandinavia, Spain, Switzerland, and
the United Kingdom); countries in the Pacific Basin (such as
Australia, Hong Kong, Japan, Malaysia, the Philippines, Singapore,
and Thailand); and countries in the Americas (such as Argentina,
Brazil, Colombia, and Mexico).
Under normal market conditions, International Portfolio will
invest at least 65% of its total assets (taken at market value) in
foreign securities. If, however, investments in foreign
securities appear to be relatively unattractive in the judgment of
the Adviser because of current or anticipated adverse political or
economic conditions, International Portfolio may hold cash or
invest any portion of its assets in securities of the U.S.
Government and equity and debt securities of U.S. companies, as a
temporary defensive strategy. To meet liquidity needs,
International Portfolio may also hold cash in domestic and foreign
currencies and invest in domestic and foreign money market
securities (including repurchase agreements and foreign money
market positions).
In the past, the U.S. Government has from time to time imposed
restrictions, through taxation and otherwise, on foreign
investments by U.S. investors such as International Portfolio. If
such restrictions should be reinstated, it might become necessary
for International Portfolio to invest all or substantially all of
its assets in U.S. securities. In such an event, International
Portfolio would review its investment objective and policies to
determine whether changes are appropriate.
International Portfolio may purchase foreign securities in the
form of American Depositary Receipts (ADRs), European Depositary
Receipts (EDRs), or other securities representing underlying
shares of foreign issuers. International Portfolio may invest in
sponsored or unsponsored ADRs. (For a description of ADRs and
EDRs, see the Statement of Additional Information.)
Further information on investment techniques that may be employed
by International 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 International 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 International 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 International Fund had
no past performance. However, Stein Roe International 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
International Fund, also invests all of its net investable assets
in International Portfolio. The average annual total return for
the periods ended September 30, 1996 for a 1-year and since-
inception (March 1, 1994) investment in Stein Roe International
Fund were 8.23% and 4.98%, respectively. Stein Roe International
Fund has a different fee structure than Advisor International
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
International Fund, and should not be interpreted as indicative of
Advisor International Fund's future performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor International Fund is intended for long-term investors who
can accept the risks entailed in investing in foreign securities.
International 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 International Fund or International
Portfolio will achieve its objective.
International 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.
FOREIGN INVESTING. Advisor International Fund provides long-term
investors with an opportunity to invest a portion of their assets
in a diversified portfolio of foreign securities. Non-U.S.
investments may be attractive because they increase
diversification, as compared to a portfolio comprised solely of
U.S. investments. In addition, many foreign economies have, from
time to time, grown faster than the U.S. economy, and the returns
on investments in these countries have exceeded those of similar
U.S. investments--there can be no assurance, however, that these
conditions will continue. International diversification also
allows International Portfolio and an investor to take advantage
of changes in foreign economies and market conditions.
Investors should understand and consider carefully the greater
risks involved in foreign investing. Investing in foreign
securities--positions which are generally denominated in foreign
currencies--and utilization of forward foreign currency exchange
contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulations or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in the securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements. These risks are greater for emerging market
countries.
Although International Portfolio will try to invest in companies
and governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, and other adverse political,
social or diplomatic developments that could adversely affect
investment in these nations.
The price of securities of small, rapidly growing companies is
expected to fluctuate more widely than the general market due to
the difficulty in assessing financial prospects of companies
developing new products or operating in countries with developing
markets.
The strategy for selecting investments will be based on various
criteria. A company proposed for investment should have a good
market position in a fast-growing segment of the economy, strong
management, preferably a leading position in its business,
prospects of superior financial returns, ability to self-finance,
and securities available for purchase at a reasonable market
valuation. Because of the foreign domicile of such companies,
however, information on some of the above factors may be
difficult, if not impossible, to obtain.
To the extent portfolio securities are issued by foreign issuers
or denominated in foreign currencies, investment performance is
affected by the strength or weakness of the U.S. dollar against
these currencies. If the dollar falls relative to the Japanese
yen, for example, the dollar value of a yen-denominated stock held
in the portfolio will rise even though the price of the stock
remains unchanged. Conversely, if the dollar rises in value
relative to the yen, the dollar value of the yen-denominated stock
will fall. (See the discussion of portfolio and transaction
hedging under Portfolio Investments and Strategies.)
Further information on investment techniques that may be employed
by International Portfolio may be found under Portfolio
Investments and Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor International Fund nor International Portfolio may
invest more than 5% of its assets in the securities of any one
issuer. This restriction applies only to 75% of its 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 International 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
International 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, International
Portfolio could experience both losses and delays in liquidating
its collateral.
- ------------------
Neither Advisor International Fund nor International Portfolio
will acquire more than 10% of the outstanding voting securities of
any one issuer. Advisor International 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 International Fund nor International 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 International Fund and
International Portfolio may not borrow money, except for non-
leveraging, 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 International Fund and International 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
International Fund and International 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
International Fund and International 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.
Nothing in the investment restrictions outlined here shall be
deemed to prohibit International Portfolio from purchasing the
securities of any issuer pursuant to the exercise of subscription
rights distributed to International Portfolio by the issuer. No
such purchase may be made if, as a result, International Portfolio
will no longer be a diversified investment company as defined in
the Investment Company Act of 1940 or if International Portfolio
will fail to meet the diversification requirements of the Internal
Revenue Code.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, International Portfolio may
invest up to 35% of its total assets in debt securities.
Investments in debt securities are limited to those that are rated
within the four highest grades (generally referred to as
"investment grade") assigned by a nationally recognized
statistical rating organization. Investments in unrated debt
securities are limited to those deemed to be of comparable quality
by the Adviser. If the rating of a security held by International
Portfolio is lost or reduced below investment grade, the Portfolio
is not required to dispose of the security--the Adviser will,
however, consider that fact in determining whether International
Portfolio should continue to hold the security.
SETTLEMENT TRANSACTIONS.
When International Portfolio enters into a contract for the
purchase or sale of a foreign portfolio security, it usually is
required to settle the purchase transaction in the relevant
foreign currency or receive the proceeds of the sale in that
currency. In either event, International Portfolio is obliged to
acquire or dispose of an appropriate amount of foreign currency by
selling or buying an equivalent amount of U.S. dollars. At or
near the time of the purchase or sale of the foreign portfolio
security, International Portfolio may wish to lock in the U.S.
dollar value of a transaction at the exchange rate or rates then
prevailing between the U.S. dollar and the currency in which the
security is denominated. Known as "transaction hedging," this may
be accomplished by purchasing or selling such foreign securities
on a "spot," or cash, basis. Transaction hedging also may be
accomplished on a forward basis, whereby International Portfolio
purchases or sells a specific amount of foreign currency, at a
price set at the time of the contract, for receipt or delivery at
either a specified date or at any time within a specified time
period. In so doing, International Portfolio will attempt to
insulate itself against possible losses and gains resulting from a
change in the relationship between the U.S. dollar and the foreign
currency during the period between the date the security is
purchased or sold and the date on which payment is made or
received. Similar transactions may be entered into by using other
currencies if International Portfolio seeks to move investments
denominated in one currency to investments denominated in another.
CURRENCY HEDGING.
Most of International Portfolio's portfolio will be invested in
foreign securities. As a result, in addition to the risk of
change in the market value of portfolio securities, the value of
the portfolio in U.S. dollars is subject to fluctuations in the
exchange rate between the foreign currencies and the U.S. dollar.
When, in the opinion of the Adviser, it is desirable to limit or
reduce exposure in a foreign currency to moderate potential
changes in the U.S. dollar value of the portfolio, International
Portfolio may enter into a forward currency exchange contract to
sell or buy such foreign currency (or another foreign currency
that acts as a proxy for that currency)--through the contract, the
U.S. dollar value of certain underlying foreign portfolio
securities can be approximately matched by an equivalent U.S.
dollar liability. This technique is known as "currency hedging."
By locking in a rate of exchange, currency hedging is intended to
moderate or reduce the risk of change in the U.S. dollar value of
International Portfolio's portfolio only during the period of the
forward contract. Forward contracts usually are entered into with
banks and broker-dealers; are not exchange traded; and although
they are usually less than one year, may be renewed. A default on
the contract would deprive International Portfolio of unrealized
profits or force International Portfolio to cover its commitments
for purchase or sale of currency, if any, at the current market
price.
Neither type of foreign currency transaction will eliminate
fluctuations in the prices of International Portfolio's portfolio
securities or prevent loss if the price of such securities should
decline. In addition, such forward currency exchange contracts
will diminish the benefit of the appreciation in the U.S. dollar
value of that foreign currency. (For further information on
forward foreign currency exchange transactions, see the Statement
of Additional Information.)
International Portfolio may utilize spot and forward foreign
exchange transactions to reduce the risk caused by exchange rate
fluctuations between one currency and another when securities are
purchased or sold on a when-issued basis. It may also invest in
synthetic money market instruments. International Portfolio may
invest in repurchase agreements, provided that it will not invest
more than 15% of its net assets in repurchase agreements maturing
in more than seven days and any other illiquid securities. (See
the Statement of Additional Information.)
CONVERTIBLE SECURITIES.
By investing in convertible securities, International 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, International 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.
International Portfolio may make loans of its portfolio securities
to broker-dealers and banks subject to certain restrictions
described in the Statement of Additional Information.
International Portfolio may participate in an interfund lending
program, subject to certain restrictions described in the
Statement of Additional Information. International 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 International 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. International 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.
International 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 International 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. International
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, International 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. International
Portfolio does not expect to invest more than 5% of its net assets
in any type of Derivative except for options, futures contracts,
futures options, and forward contracts.
In seeking to achieve its desired investment objective, provide
additional revenue, or to hedge against changes in security
prices, interest rates or currency fluctuations, International
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. International
Portfolio may write a call or put option only if the option is
covered. As the writer of a covered call option, International
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 International 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 International 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 International Fund's
shares is its net asset value per share. Advisor International
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.
International Portfolio allocates net asset value, income, and
expenses to Advisor International Fund and any other of its feeder
funds in proportion to their respective interests in International
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 International Fund should be determined on
any such day, in which case the determination will be made at 3:00
p.m., central time.
In computing the net asset value of International Portfolio, the
values of portfolio securities are generally based upon market
quotations. Depending upon local convention or regulation, these
market quotations may be the last sale price, last bid or asked
price, or the mean between the last bid and asked prices as of, in
each case, the close of the appropriate exchange or other
designated time. Trading in securities on European and Far
Eastern securities exchanges and over-the-counter markets is
normally completed at various times before the close of business
on each day on which the NYSE is open. Trading of these
securities may not take place on every NYSE business day. In
addition, trading may take place in various foreign markets on
Saturdays or on other days when the NYSE is not open and on which
International Portfolio's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio
securities used in such calculation and the value of International
Portfolio's portfolio may be significantly affected on days when
shares of International Portfolio may not be purchased or
redeemed.
HOW TO PURCHASE SHARES
You may purchase Advisor International Fund shares only through
broker-dealers, banks, or other intermediaries, including
retirement plan service providers ("Intermediaries"). The Adviser
and Advisor International Fund do not recommend, endorse, or
receive payments from any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
International Fund's shares is made at Advisor International
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
International 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 International 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 International 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 International 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 International 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 International 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. 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 International
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 International 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 International Fund or its authorized
agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid annually.
Advisor International 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 International 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 International Fund will be reinvested in additional shares
unless your Intermediary elects to have distributions paid by
check. Reinvestment normally occurs on the payable date.
U.S. FEDERAL INCOME TAXES. For federal income tax purposes,
Advisor International Fund is treated as a separate taxable entity
distinct from the other series of Advisor Trust. International
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 International 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 International
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.
FOREIGN INCOME TAXES. Investment income received by International
Portfolio from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries that
entitle International Portfolio to a reduced rate of tax or
exemption from tax on such income. It is impossible to determine
the effective rate of foreign tax in advance since the amount of
International Portfolio's assets to be invested within various
countries will fluctuate and the extent to which tax refunds will
be recovered is uncertain. International Portfolio intends to
operate so as to qualify for treaty-reduced tax rates where
applicable.
To the extent that International Portfolio is liable for foreign
income taxes withheld at the source, the Portfolio also intends to
operate so as to meet the requirements of the U.S. Internal
Revenue Code to "pass through" to International Advisor Fund's
shareholders foreign income taxes paid, but there can be no
assurance that it will be able to do so.
This discussion of U.S. and foreign taxation 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. The
foregoing information applies to U.S. shareholders. Foreign
shareholders should consult their tax advisors as to the tax
consequences of ownership of Fund shares.
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 International Fund and
International 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 International Fund and
International Portfolio and other feeder funds investing in
International 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 International Portfolio and the business
affairs of Advisor International Fund, International 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. Bruno Bertocci and David P. Harris, have been
co-portfolio managers of International Portfolio since its
inception in 1997 and of its corresponding "feeder fund" Stein Roe
International Fund (a series of Stein Roe Investment Trust) since
its inception in 1994. (Mr. Harris served as an associate
portfolio manager until May 1995.) In addition, they have been
co-portfolio managers of Stein Roe Emerging Markets Fund (a series
of Stein Roe Investment Trust), since its inception in 1997. They
joined the Adviser in 1995 as senior vice president and vice
president, respectively, to create Stein Roe Global Capital
Management, a dedicated global and international equity management
unit. Messrs. Bertocci and Harris are also employed by Colonial
Management Associates, Inc., a subsidiary of Liberty Financial and
an affiliate of the Adviser, as vice presidents. Prior to joining
the Adviser, Mr. Bertocci was a senior global equity portfolio
manager with Rockefeller & Co. ("Rockefeller") from 1983 to 1995.
While at Rockefeller, he served as portfolio manager for the
Portfolio's predecessor, when Rockefeller was that Fund's sub-
adviser. Mr. Bertocci managed Rockefeller's London office from
1987 to 1989 and its Hong Kong office from 1989 to 1990. Prior to
working at Rockefeller, he served for three years at T. Rowe Price
Associates. Mr. Bertocci is a graduate of Oberlin College and
holds an M.B.A. from Harvard University. Mr. Harris was a
portfolio manager with Rockefeller from 1990 to 1995. After
earning a bachelor's degree from the University of Michigan, he
was an actuarial associate for GEICO before returning to school to
earn an M.B.A. from Cornell University. As of December 31, 1996,
Messrs. Bertocci and Harris were responsible for managing $141
million in mutual fund net assets.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor International Fund, computed and
accrued daily, at an annual rate of 0.15% of average net assets;
and a monthly management fee from International Portfolio,
computed and accrued daily, at an annual rate of 0.85% of average
net assets. However, as noted above under Fee Table, the Adviser
may voluntarily undertake to reimburse Advisor International Fund
for a portion of its operating expenses and its pro rata share of
International Portfolio's operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor International 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 International Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor
International Fund and International 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
International Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for International 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
International 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 International 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 International Fund including its expenses
related to the sale and promotion of Fund shares, the Distributor
receives from Advisor International 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
International Fund shares and provide services to Advisor
International 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 International Fund during any year may be more or
less than the cost of distribution or other services provided to
Advisor International 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 International Fund and International 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 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 International 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 International Fund. The
initial shareholder of Advisor International Fund approved this
policy of permitting Advisor International Fund to act as a feeder
fund by investing in International 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 International
Fund and International Portfolio. The management and expenses of
both Advisor International Fund and International Portfolio are
described under the Fee Table and Management. Advisor
International 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 International 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 International Fund and other investors
in International Portfolio will each be liable for all obligations
of International Portfolio that are not satisfied by the
Portfolio. However, the risk of Advisor International Fund
incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance existed and
International Portfolio itself were unable to meet its
obligations. Accordingly, the trustees of Advisor Trust believe
that neither Advisor International Fund nor its shareholders will
be adversely affected by reason of Advisor International Fund's
investing in International Portfolio.
The Declaration of Trust of Base Trust provides that International
Portfolio will terminate 120 days after the withdrawal of Advisor
International Fund or any other investor in International
Portfolio, unless the remaining investors vote to agree to
continue the business of International Portfolio. The trustees of
Advisor Trust may vote Advisor International Fund's interests in
International Portfolio for such continuation without approval of
Advisor International Fund's shareholders.
The common investment objective of Advisor International Fund and
International Portfolio is non-fundamental and may be changed
without shareholder approval. The fundamental policies of Advisor
International Fund and the corresponding fundamental policies of
International Portfolio can be changed only with shareholder
approval.
If Advisor International Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
International Portfolio or any other matter pertaining to
International Portfolio (other than continuation of the business
of International Portfolio after withdrawal of another investor),
Advisor International Fund will solicit proxies from its
shareholders and vote its interest in International Portfolio for
and against such matters proportionately to the instructions to
vote for and against such matters received from Advisor
International Fund shareholders. Advisor International 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 International
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 International Portfolio investors.
If other investors hold a majority interest in International
Portfolio, they could have voting control over International
Portfolio.
In the event that International Portfolio's fundamental policies
were changed so as to be inconsistent with those of Advisor
International Fund, the Board of Trustees of Advisor Trust would
consider what action might be taken, including changes to Advisor
International Fund's fundamental policies, withdrawal of Advisor
International Fund's assets from International 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 International Fund's
shareholders. Advisor International 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 International Fund's assets could result in
a distribution in kind of portfolio securities (as opposed to a
cash distribution) to Advisor International Fund. Should such a
distribution occur, Advisor International 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
International Fund and could affect the liquidity of Advisor
International Fund.
Each investor in International Portfolio, including Advisor
International Fund, may add to or reduce its investment in
International Portfolio on each day the NYSE is open for business.
The investor's percentage of the aggregate interests in
International 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 International 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
International Portfolio effected on such day; and (ii) the
denominator of which is the aggregate beginning of the day net
asset value of International 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 International
Portfolio by all investors in International Portfolio. The
percentage so determined will then be applied to determine the
value of the investor's interest in International Portfolio as of
the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in International Portfolio, but
members of the general public may not invest directly in
International Portfolio. Other investors in International
Portfolio are not required to sell their shares at the same public
offering price as Advisor International Fund, might incur
different administrative fees and expenses than Advisor
International Fund, and their shares might be sold with a sales
commission. Therefore, Advisor International Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in
International Portfolio. Investment by such other investors in
International 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
International Portfolio could result in untimely liquidations of
International Portfolio's security holdings, loss of investment
flexibility, and increases in the operating expenses of
International Portfolio as a percentage of its net assets. As a
result, International Portfolio's security holdings may become
less diverse, resulting in increased risk.
International Portfolio commenced operations in February 1997 when
Stein Roe International 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
International Fund, which is a series of Stein Roe Investment
Trust, is the only other investment company investing in
International Portfolio. Information regarding any investment
company that may invest in International 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 International Fund, call
Retirement Services at 800-322-1130 or Advisor/Broker Services at
800-322-0590.
______________________
<PAGE>
STEIN ROE ADVISOR YOUNG INVESTOR FUND
The investment objective of Advisor Young Investor Fund is to
provide long-term capital appreciation. Advisor Young Investor
Fund invests all of its net investable assets in shares of SR&F
Growth Investor Portfolio, a portfolio of SR&F Base Trust that has
the same investment objective and substantially the same
investment policies as Advisor Young Investor Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Advisor Young Investor Fund also has an educational objective. It
seeks to provide a financial education to young investors and
their parents.
Shares of Advisor Young Investor Fund may be purchased only
through Intermediaries, including retirement plan service
providers.
Advisor Young Investor Fund has no sales or redemption charges.
Advisor Young Investor Fund is a series of Stein Roe Advisor Trust
and Growth Investor 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 Young Investor Fund. Please read it
carefully and retain it for future reference.
A Statement of Additional Information dated February __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
. Page
Summary.................................2
Fee Table ..............................3
The Fund................................4
Investment Policies.....................5
Performance Information.................5
Risks and Investment Considerations ....6
Investment Restrictions ................7
Portfolio Investments and Strategies....8
Net Asset Value .......................10
How to Purchase Shares.................11
How to Redeem Shares ..................12
Distributions and Income Taxes.........13
Management ............................13
Organization and Description of Shares.16
Special Considerations Regarding the
Master Fund/Feeder Fund Structure....16
For More Information ..................19
SUMMARY
Stein Roe Advisor Young Investor Fund ("Advisor Young Investor
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 Young Investor Fund
are not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Young Investor Fund is to provide long-term capital
appreciation by investing in common stocks and other equity-type
securities that the Adviser believes to have long-term
appreciation potential. Advisor Young Investor Fund invests all
of its net investable assets in SR&F Growth Investor Portfolio
("Growth Investor Portfolio") which has the same investment
objective and investment policies substantially similar to those
of Advisor Young Investor Fund. Growth Investor Portfolio invests
primarily in securities of companies that affect the lives of
young people. Advisor Young Investor Fund is designed for long-
term investors.
In addition to the investment objective and policies, Advisor
Young Investor Fund also has an educational objective. It seeks
to teach young people about Advisor Young Investor Fund, basic
economic principles, and personal finance through a variety of
educational materials prepared and paid for by Advisor Young
Investor Fund.
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
Young Investor Fund and Growth Investor Portfolio will achieve
their common investment objective.
INVESTMENT RISKS. Advisor Young Investor Fund is designed for
long-term investors who desire to participate in the stock market
and places an emphasis on companies that affect the lives of young
people. These investors can accept more investment risk and
volatility than the stock market in general but want less
investment risk and volatility than aggressive capital
appreciation funds. Growth Investor 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 Young Investor Fund
may be purchased only through Intermediaries, including retirement
plan service providers. For information on purchasing and
redeeming Advisor Young Investor 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 Growth Investor Portfolio. In
addition, it provides administrative services to Advisor Young
Investor Fund and Growth Investor 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 ................................0.60%
-----
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 Young Investor Fund. The Fee
Table reflects the combined expenses of both Advisor Young
Investor Fund and Growth Investor Portfolio. Anticipated Total
Operating Expenses for Advisor Young Investor 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 Young Investor Fund for a portion of its
operating expenses and its pro rata share of the fees and expenses
payable by Growth Investor Portfolio. The Adviser has undertaken
to reimburse Advisor Young Investor Fund for its operating
expenses and its pro rata share of Growth Investor Portfolio's
operating expenses to the extent such expenses exceed 1.50% of
Advisor Young Investor 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 Young Investor Fund. Absent such reimbursement, Advisor
Young Investor Fund's share of Growth Investor Portfolio's
Management Fee and the Fund's Administrative Fee, and Total
Operating Expenses would be 0.80% and 1.65%, respectively. Any
such reimbursement will lower Advisor Young Investor Fund's
overall expense ratio and increase its overall return to
investors. (Also see Management--Fees and Expenses.)
Advisor Young Investor Fund pays the Adviser an administrative fee
based on its average daily net assets and Growth Investor
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 Young Investor
Fund, including its share of the expenses of Growth Investor
Portfolio, would be more or less than if Advisor Young Investor
Fund invested directly in the securities held by Growth Investor
Portfolio, and concluded that Advisor Young Investor 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 Young
Investor 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 Young Investor Fund pays a 12b-1 fee, long-term
investors in Advisor Young Investor 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 Young Investor Fund's 12b-1 fee, see Management--
Distributor or call your financial representative.
THE FUND
STEIN ROE ADVISOR YOUNG INVESTOR FUND ("Advisor Young Investor
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 Young Investor
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 Young Investor Fund invests all of its net
investable assets in shares of SR&F Growth Investor Portfolio
("Growth Investor Portfolio"), which is a series of SR&F Base
Trust ("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Growth Investor Portfolio and
administrative services to Advisor Young Investor Fund and Growth
Investor Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Young Investor Fund is to
provide long-term capital appreciation. Advisor Young Investor
Fund invests all of its net investable assets in Growth Investor
Portfolio, which has the same investment objective and investment
policies substantially similar to Advisor Young Investor Fund.
Growth Investor Portfolio seeks to achieve this objective by
investing primarily in common stocks and other equity-type
securities that, in the opinion of the Adviser, have long-term
appreciation potential.
Under normal circumstances, at least 65% of the total assets of
Growth Investor Portfolio will be invested in securities of
companies that, in the opinion of the Adviser, directly or through
one or more subsidiaries, affect the lives of young people. Such
companies may include companies that produce products or services
that young people use, are aware of, or could potentially have an
interest in. Although Growth Investor Portfolio invests primarily
in common stocks and other equity-type securities (such as
preferred stocks, securities convertible into or exchangeable for
common stocks, and warrants or rights to purchase common stocks),
it may invest up to 35% of its total assets in debt securities.
Further information on investment techniques that may be employed
by Growth Investor 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.
In addition to the investment objective and policies, Advisor
Young Investor Fund also has an educational objective. Advisor
Young Investor Fund seeks to educate its shareholders by providing
educational materials regarding personal finance and investing as
well as materials on the Fund and its portfolio holdings.
PERFORMANCE INFORMATION
The total return from an investment in Advisor Young Investor 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 Young Investor 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 Young Investor Fund had
no past performance. However, Stein Roe Young Investor 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 Young
Investor Fund, also invests all of its net investable assets in
Growth Investor Portfolio. The average annual total return for
the periods ended September 30, 1996 for a 1-year and since-
inception (April 24, 1994) investment in Stein Roe Young Investor
Fund were 35.55% and 31.82%, respectively. Stein Roe Young
Investor Fund has a different fee structure than Advisor Young
Investor 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 Young Investor Fund, and should not be interpreted as
indicative of Advisor Young Investor Fund's future performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Young Investor Fund is designed for long-term investors
who desire to participate in the stock market and places an
emphasis on companies that affect the lives of young people.
These investors can accept more investment risk and volatility
than the stock market in general but want less investment risk and
volatility than aggressive capital appreciation funds. Growth
Investor 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 Young Investor Fund or Growth Investor
Portfolio will achieve its objective. Advisor Young Investor Fund
also has an educational objective. It seeks to provide a
financial education to young investors and their parents.
Growth Investor 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.
Growth Investor Portfolio may invest in securities of smaller
emerging companies as well as securities of well-seasoned
companies of any size. Smaller companies, however, involve higher
risks in that they typically have limited product lines, markets,
and financial or management resources. In addition, the
securities of smaller companies may trade less frequently and have
greater price fluctuation than larger companies, particularly
those operating in countries with developing markets.
Growth Investor 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Growth Investor Portfolio may be found under Portfolio
Investments and Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Young Investor Fund nor Growth Investor Portfolio
may invest more than 5% of its assets in the securities of any one
issuer. This restriction applies only to 75% of its 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 Young Investor 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 Growth
Investor 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, Growth Investor
Portfolio could experience both losses and delays in liquidating
its collateral.
- ---------------
Neither Advisor Young Investor Fund nor Growth Investor Portfolio
will acquire more than 10% of the outstanding voting securities of
any one issuer. Advisor Young Investor 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 Young Investor Fund nor Growth Investor 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 Young Investor Fund and Growth
Investor Portfolio may not borrow money, except for non-
leveraging, 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 Young Investor Fund and Growth Investor 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
Young Investor Fund and Growth Investor 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
Young Investor Fund and Growth Investor 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.
A debt security is an obligation of a borrower to make payments of
principal and interest to the holder of the security. To the
extent Growth Investor Portfolio invests in debt securities, such
holdings will be subject to interest rate risk and credit risk.
Interest rate risk is the risk that the value of a portfolio will
fluctuate in response to changes in interest rates. Generally,
the debt component of a portfolio will tend to decrease in value
when interest rates rise and increase in value when interest rates
fall. Credit risk is the risk that an issuer will be unable to
make principal and interest payments when due. Investments in
debt securities are limited to those that are rated within the
four highest grades (generally referred to as "investment grade")
assigned by a nationally recognized statistical rating
organization. Investments in unrated debt securities are limited
to those deemed to be of comparable quality by the Adviser.
Securities rated within the fourth highest grade may possess
speculative characteristics. If the rating of a security held by
Growth Investor Portfolio is lost or reduced below investment
grade, Growth Investor Portfolio is not required to dispose of the
security--the Adviser will, however, consider that fact in
determining whether it should continue to hold the security. When
the Adviser considers a temporary defensive position advisable,
Growth Investor Portfolio may invest without limitation in high-
quality fixed income securities, or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
Growth Investor Portfolio may invest in sponsored or unsponsored
ADRs. In addition to, or in lieu of, such direct investment,
Growth Investor 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, Growth
Investor 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. Growth
Investor 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, Growth Investor
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, Growth Investor 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, Growth Investor 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.
Growth Investor Portfolio may make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
Growth Investor Portfolio may participate in an interfund lending
program, subject to certain restrictions described in the
Statement of Additional Information. Growth Investor 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 Growth Investor 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. Growth Investor 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.
Growth Investor 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 Growth Investor 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. Growth Investor
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, Growth Investor 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. Growth Investor
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, Growth Investor
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. Growth
Investor Portfolio may write a call or put option only if the
option is covered. As the writer of a covered call option, Growth
Investor 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 Growth Investor 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 Growth Investor 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. 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 Young Investor Fund's
shares is its net asset value per share. Advisor Young Investor
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.
Growth Investor Portfolio allocates net asset value, income, and
expenses to Advisor Young Investor Fund and any other of its
feeder funds in proportion to their respective interests in Growth
Investor 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 Young Investor 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 Young Investor Fund shares only through
broker-dealers, banks, or other intermediaries, including
retirement plan service providers ("Intermediaries"). The Adviser
and Advisor Young Investor Fund do not recommend, endorse, or
receive payments from any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor Young
Investor Fund's shares is made at Advisor Young Investor 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 Young
Investor 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 Young Investor 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 Young Investor 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 Young Investor 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 Young Investor 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 Young Investor 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. 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 Young Investor
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 Young Investor 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 Young Investor Fund or its authorized
agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid annually.
Advisor Young Investor 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 Young Investor 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 Young Investor 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 Young
Investor Fund is treated as a separate taxable entity distinct
from the other series of Advisor Trust. Growth Investor 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 Young Investor 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 Young Investor
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 Young Investor Fund and
Growth Investor 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 Young Investor Fund and
Growth Investor Portfolio and other feeder funds investing in
Growth Investor 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 Growth Investor Portfolio and the business
affairs of Advisor Young Investor Fund, Growth Investor 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. Erik P. Gustafson, David P. Brady and Arthur
J. McQueen have been portfolio managers of Growth Investor
Portfolio since its inception in 1997 and had managed its
predecessor since February 1995, March 1995 and April 1996,
respectively. As of December 31, 1996, Messrs. Gustafson, Brady
and McQueen were responsible for co-managing $877 million, $877
million and $271 million in mutual fund net assets, respectively.
Messrs. Gustafson and McQueen are senior vice presidents of the
Adviser and Mr. Brady is a vice president of the Adviser. Before
joining the Adviser, Mr. Gustafson was an attorney with Fowler,
White, Burnett, Hurley, Banick & Strickroot from 1989 to 1992. He
holds a B.A. from the University of Virginia (1985) and M.B.A. and
J.D. degrees from Florida State University (1989). Mr. Brady, who
joined the Adviser in 1993, was an equity investment analyst with
State Farm Mutual Automobile Insurance Company from 1986 to 1993.
A chartered financial analyst, Mr. Brady earned a B.S. in Finance,
graduating Magna Cum Laude, from the University of Arizona (1986),
and an M.B.A. from the University of Chicago (1989). Mr. McQueen
earned a B.S. from Villanova University (1980) and an M.B.A. from
the Wharton School of the University of Pennsylvania (1987). Mr.
McQueen has been employed by the Adviser as an equity analyst
since 1987 and was previously employed by Citibank and GTE.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Young Investor Fund, computed and
accrued daily, at an annual rate of 0.20% of the first $500
million of average net assets, 0.15% of the next $500 million, and
0.125% thereafter; and a monthly management fee from Growth
Investor Portfolio, computed and accrued daily, at an annual rate
of 0.60% of the first $500 million of average net assets, 0.55% of
the next $500 million, and 0.50% thereafter. However, as noted
above under Fee Table, the Adviser may voluntarily undertake to
reimburse Advisor Young Investor Fund for a portion of its
operating expenses and its pro rata share of Growth Investor
Portfolio's operating expenses.
Because Advisor Young Investor Fund also has as an educational
objective, its non-advisory expenses may be higher than other
mutual funds due to the distribution of educational and other
reports to shareholders.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Young Investor 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 Young Investor
Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Young
Investor Fund and Growth Investor 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 Young
Investor Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Growth Investor 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
Young Investor 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 Young Investor 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 Young Investor Fund including its expenses
related to the sale and promotion of Fund shares, the Distributor
receives from Advisor Young Investor 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 Young
Investor Fund shares and provide services to Advisor Young
Investor 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 Young Investor Fund during any year may be more or
less than the cost of distribution or other services provided to
Advisor Young Investor 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 Young Investor Fund and Growth Investor 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 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 Young Investor 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 Young Investor Fund. The
initial shareholder of Advisor Young Investor Fund approved this
policy of permitting Advisor Young Investor Fund to act as a
feeder fund by investing in Growth Investor 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 Young
Investor Fund and Growth Investor Portfolio. The management and
expenses of both Advisor Young Investor Fund and Growth Investor
Portfolio are described under the Fee Table and Management.
Advisor Young Investor 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 Growth Investor 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 Young Investor Fund and other
investors in Growth Investor Portfolio will each be liable for all
obligations of Growth Investor Portfolio that are not satisfied by
the Portfolio. However, the risk of Advisor Young Investor Fund
incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance existed and
Growth Investor Portfolio itself were unable to meet its
obligations. Accordingly, the trustees of Advisor Trust believe
that neither Advisor Young Investor Fund nor its shareholders will
be adversely affected by reason of Advisor Young Investor Fund's
investing in Growth Investor Portfolio.
The Declaration of Trust of Base Trust provides that Growth
Investor Portfolio will terminate 120 days after the withdrawal of
Advisor Young Investor Fund or any other investor in Growth
Investor Portfolio, unless the remaining investors vote to agree
to continue the business of Growth Investor Portfolio. The
trustees of Advisor Trust may vote Advisor Young Investor Fund's
interests in Growth Investor Portfolio for such continuation
without approval of Advisor Young Investor Fund's shareholders.
The common investment objective of Advisor Young Investor Fund and
Growth Investor Portfolio is non-fundamental and may be changed
without shareholder approval. The fundamental policies of Advisor
Young Investor Fund and the corresponding fundamental policies of
Growth Investor Portfolio can be changed only with shareholder
approval.
If Advisor Young Investor Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
Growth Investor Portfolio or any other matter pertaining to Growth
Investor Portfolio (other than continuation of the business of
Growth Investor Portfolio after withdrawal of another investor),
Advisor Young Investor Fund will solicit proxies from its
shareholders and vote its interest in Growth Investor Portfolio
for and against such matters proportionately to the instructions
to vote for and against such matters received from Advisor Young
Investor Fund shareholders. Advisor Young Investor 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 Growth Investor
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 Growth Investor Portfolio investors.
If other investors hold a majority interest in Growth Investor
Portfolio, they could have voting control over Growth Investor
Portfolio.
In the event that Growth Investor Portfolio's fundamental policies
were changed so as to be inconsistent with those of Advisor Young
Investor Fund, the Board of Trustees of Advisor Trust would
consider what action might be taken, including changes to Advisor
Young Investor Fund's fundamental policies, withdrawal of Advisor
Young Investor Fund's assets from Growth Investor 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 Young Investor Fund's
shareholders. Advisor Young Investor 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 Young Investor Fund's assets could result in
a distribution in kind of portfolio securities (as opposed to a
cash distribution) to Advisor Young Investor Fund. Should such a
distribution occur, Advisor Young Investor 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
Young Investor Fund and could affect the liquidity of Advisor
Young Investor Fund.
Each investor in Growth Investor Portfolio, including Advisor
Young Investor Fund, may add to or reduce its investment in Growth
Investor Portfolio on each day the NYSE is open for business. The
investor's percentage of the aggregate interests in Growth
Investor 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 Growth Investor 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
Growth Investor Portfolio effected on such day; and (ii) the
denominator of which is the aggregate beginning of the day net
asset value of Growth Investor 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 Growth Investor
Portfolio by all investors in Growth Investor Portfolio. The
percentage so determined will then be applied to determine the
value of the investor's interest in Growth Investor Portfolio as
of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Growth Investor Portfolio,
but members of the general public may not invest directly in
Growth Investor Portfolio. Other investors in Growth Investor
Portfolio are not required to sell their shares at the same public
offering price as Advisor Young Investor Fund, might incur
different administrative fees and expenses than Advisor Young
Investor Fund, and their shares might be sold with a sales
commission. Therefore, Advisor Young Investor Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in Growth
Investor Portfolio. Investment by such other investors in Growth
Investor 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
Growth Investor Portfolio could result in untimely liquidations of
Growth Investor Portfolio's security holdings, loss of investment
flexibility, and increases in the operating expenses of Growth
Investor Portfolio as a percentage of its net assets. As a
result, Growth Investor Portfolio's security holdings may become
less diverse, resulting in increased risk.
Growth Investor Portfolio commenced operations in February 1997
when Stein Roe Young Investor 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 Young Investor Fund, which is a series of
Stein Roe Investment Trust, is the only other investment company
investing in Growth Investor Portfolio. Information regarding any
investment company that may invest in Growth Investor 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 Young Investor Fund, call
Retirement Services at 800-322-1130 or Advisor/Broker Services at
800-322-0590.
______________________
<PAGE>
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 shares of 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 __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary.................................2
Fee Table ..............................3
The Fund................................4
Investment Policies.....................5
Performance Information.................5
Risks and Investment Considerations ....6
Investment Restrictions ................7
Portfolio Investments and Strategies....8
Net Asset Value .......................10
How to Purchase Shares.................11
How to Redeem Shares ..................12
Distributions and Income Taxes.........13
Management ............................13
Organization and Description of Shares.15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure....16
For More Information ..................18
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 shares of 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 return for the periods ended September 30, 1996 for a
1-year and since-inception (October 17, 1994) investment 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. 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 its assets in the securities of any one
issuer. This restriction applies only to 75% of its 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 non-leveraging,
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. 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 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
800-322-0590.
______________________
<PAGE>
STEIN ROE ADVISOR BALANCED FUND
The investment objective of Advisor Balanced Fund is to provide
long-term growth of capital and current income, consistent with
reasonable investment risk. Advisor Balanced Fund invests all of
its net investable assets in shares of SR&F Balanced Portfolio, a
portfolio of SR&F Base Trust that has the same investment
objective and substantially the same investment policies as
Advisor Balanced Fund. (SEE SPECIAL CONSIDERATIONS REGARDING
MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor Balanced Fund may be purchased only through
Intermediaries, including retirement plan service providers.
Advisor Balanced Fund has no sales or redemption charges. Advisor
Balanced Fund is a series of Stein Roe Advisor Trust and Balanced
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 Balanced Fund. Please read it carefully and
retain it for future reference.
A Statement of Additional Information dated February __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary..................................2
Fee Table ...............................3
The Fund.................................4
Investment Policies......................4
Performance Information..................5
Risks and Investment Considerations .....5
Investment Restrictions .................6
Portfolio Investments and Strategies.....7
Net Asset Value ........................10
How to Purchase Shares..................10
How to Redeem Shares ...................11
Distributions and Income Taxes..........12
Management .............................13
Organization and Description of Shares..15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure.....15
For More Information ...................18
SUMMARY
Stein Roe Advisor Balanced Fund ("Advisor Balanced 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 Balanced Fund are not
qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Balanced Fund is to provide long-term growth of capital
and current income, consistent with reasonable investment risk.
Advisor Balanced Fund invests all of its net investable assets in
SR&F Balanced Portfolio ("Balanced Portfolio") which has the same
investment objective and investment policies substantially similar
to those of Advisor Balanced Fund. The assets of Balanced
Portfolio are allocated among equities, debt securities, and cash.
The portfolio manager determines those allocations based on the
views of the Adviser's investment strategists regarding economic,
market, and other factors relative to investment opportunities.
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
Balanced Fund and Balanced Portfolio will achieve their common
investment objective.
INVESTMENT RISKS. Advisor Balanced Fund is designed for long-term
investors who can accept the fluctuations in portfolio value and
other risks associated with seeking long-term capital appreciation
through investments in securities. Balanced 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 Balanced Fund may be
purchased only through Intermediaries, including retirement plan
service providers. For information on purchasing and redeeming
Advisor Balanced 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 Balanced Portfolio. In
addition, it provides administrative services to Advisor Balanced
Fund and Balanced 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)......................................0.55%
12b-1 Fees............................................0.25%
Other Expenses .......................................0.55%
-----
Total Operating Expenses (after reimbursement)........1.35%
=====
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
------ -------
$14 $43
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 Balanced Fund. The Fee Table
reflects the combined expenses of both Advisor Balanced Fund and
Balanced Portfolio. Anticipated Total Operating Expenses for
Advisor Balanced 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 Balanced Fund for a portion of its operating
expenses and its pro rata share of the fees and expenses payable
by Balanced Portfolio. The Adviser has undertaken to reimburse
Advisor Balanced Fund for its operating expenses and its pro rata
share of Balanced Portfolio's operating expenses to the extent
such expenses exceed 1.35% of Advisor Balanced 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 Balanced Fund. Absent such
reimbursement, Advisor Balanced Fund's share of Balanced
Portfolio's Management Fee and the Fund's Administrative Fee and
Total Operating Expenses would be 0.70% and 1.50%, respectively.
Any such reimbursement will lower Advisor Balanced Fund's overall
expense ratio and increase its overall return to investors. (Also
see Management--Fees and Expenses.)
<.R>
Advisor Balanced Fund pays the Adviser an administrative fee based
on its average daily net assets and Balanced 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 Balanced Fund, including its share
of the expenses of Balanced Portfolio, would be more or less than
if Advisor Balanced Fund invested directly in the securities held
by Balanced Portfolio, and concluded that Advisor Balanced 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 Balanced
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 Balanced Fund pays a 12b-1 fee, long-term
investors in Advisor Balanced 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
Balanced Fund's 12b-1 fee, see Management--Distributor or call
your financial representative.
THE FUND
STEIN ROE ADVISOR BALANCED FUND ("Advisor Balanced 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 Balanced 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 Balanced Fund invests all of its net investable assets in
shares of SR&F Balanced Portfolio ("Balanced Portfolio"), which is
a series of SR&F Base Trust ("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Balanced Portfolio and
administrative services to Advisor Balanced Fund and Balanced
Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Balanced Fund is to provide
long-term growth of capital and current income, consistent with
reasonable investment risk. Advisor Balanced Fund invests all of
its net investable assets in Balanced Portfolio, which has the
same investment objective and investment policies substantially
similar to Advisor Balanced Fund. The assets of Balanced
Portfolio are allocated among equities, debt securities and cash.
The portfolio manager determines those allocations based on views
of the Adviser's investment strategists regarding economic, market
and other factors relative to investment opportunities.
The equity portion of the portfolio is invested primarily in well-
established companies having market capitalizations in excess of
$1 billion. Debt securities will make up at least 25% of Balanced
Portfolio's total assets. Investments in debt securities are
limited to those that are within the four highest grades
(generally referred to as "investment grade") assigned by a
nationally recognized statistical rating organization or, if
unrated, determined by the Adviser to be of comparable quality.
Further information on investment techniques that may be employed
by Balanced 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 Balanced 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 Balanced 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 Balanced Fund had no
past performance. However, Stein Roe Balanced 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 Balanced
Fund, also invests all of its net investable assets in Balanced
Portfolio. The average annual total return for the periods ended
September 30, 1996 for a 1-year, 5-year and 10-year investment in
Stein Roe Balanced Fund were 14.83%, 10.93% and 10.58%,
respectively. Stein Roe Balanced Fund has a different fee
structure than Advisor Balanced 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 Balanced Fund, and should not be
interpreted as indicative of Advisor Balanced Fund's future
performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Balanced Fund is designed for long-term investors who can
accept the fluctuations in portfolio value and other risks
associated with seeking long-term capital appreciation through
investments in securities. Balanced 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 Balanced Fund or Balanced
Portfolio will achieve its objective.
Balanced 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.
Balanced 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Balanced Portfolio may be found under Portfolio Investments and
Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Balanced Fund nor Balanced Portfolio may invest
more than 5% of its assets in the securities of any one issuer.
This restriction applies only to 75% of its 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 Balanced 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
Balanced 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, Balanced
Portfolio could experience both losses and delays in liquidating
its collateral.
- -------------
Neither Advisor Balanced Fund nor Balanced Portfolio will acquire
more than 10% of the outstanding voting securities of any one
issuer. Advisor Balanced 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 Balanced Fund nor Balanced 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 Balanced Fund and Balanced Portfolio may not
borrow money, except for non-leveraging, 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 Balanced Fund and Balanced 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
Balanced Fund and Balanced 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 Balanced Fund and Balanced
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.
Investment in debt securities is limited to those that are rated
within the four highest grades (generally referred to as
investment grade). If the rating of a security held by Balanced
Portfolio is lost or reduced below investment grade, the Portfolio
is not required to dispose of the security--the Adviser will,
however, consider that fact in determining whether Balanced
Portfolio should continue to hold the security. When the Adviser
deems a temporary defensive position advisable, Balanced Portfolio
may invest, without limitation, in high-quality fixed income
securities, or hold assets in cash or cash equivalents.
FOREIGN SECURITIES.
Balanced Portfolio may invest in sponsored or unsponsored ADRs.
In addition to, or in lieu of, such direct investment, Balanced
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, Balanced
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. Balanced
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, Balanced
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, Balanced 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, Balanced 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.
Balanced Portfolio may make loans of its portfolio securities to
broker-dealers and banks subject to certain restrictions described
in the Statement of Additional Information. Balanced Portfolio
may participate in an interfund lending program, subject to
certain restrictions described in the Statement of Additional
Information. Balanced 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
Balanced 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. Balanced 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.
Balanced 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 Balanced 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. Balanced Portfolio does not expect to
commit more than 20% 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, Balanced 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. Balanced 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, Balanced
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. Balanced
Portfolio may write a call or put option only if the option is
covered. As the writer of a covered call option, Balanced
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 Balanced 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 Balanced 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.
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 Balanced Fund's
shares is its net asset value per share. Advisor Balanced 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.
Balanced Portfolio allocates net asset value, income, and expenses
to Advisor Balanced Fund and any other of its feeder funds in
proportion to their respective interests in Balanced 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 Balanced 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 Balanced Fund shares only through broker-
dealers, banks, or other intermediaries, including retirement plan
service providers ("Intermediaries"). The Adviser and Advisor
Balanced Fund do not recommend, endorse, or receive payments from
any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
Balanced Fund's shares is made at Advisor Balanced 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 Balanced
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 Balanced 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 Balanced 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 Balanced 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 Balanced 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 Balanced 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. 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 Balanced 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 Balanced 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 Balanced Fund or its authorized agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid each
calendar quarter. Advisor Balanced 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 Balanced 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 Balanced 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 Balanced
Fund is treated as a separate taxable entity distinct from the
other series of Advisor Trust. Balanced 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 Balanced 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 Balanced 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 Balanced Fund and Balanced
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 Balanced Fund and Balanced
Portfolio and other feeder funds investing in Balanced 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 Balanced Portfolio and the business
affairs of Advisor Balanced Fund, Balanced 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. Harvey B. Hirschhorn has been portfolio
manager of Balanced Portfolio since its inception in 1997 and had
managed its predecessor since April 1996. Mr. Hirschhorn is
Executive Vice President and Chief Economist & Investment
Strategist of the Adviser, which he joined in 1973. He received
an A.B. degree from Rutgers College (1971) and an M.B.A. from the
University of Chicago (1973), and is a chartered financial
analyst. As of December 31, 1996, Mr. Hirschhorn was responsible
for managing $557 million in mutual fund net assets. William
Garrison and Sandra L. Knight are associate portfolio managers of
Balanced Portfolio. Mr. Garrison joined the Adviser in 1989. He
received his A.B. from Princeton University in 1988. Ms. Knight
earned a B.S. degree from Lawrence Technological University (1984)
and an M.B.A. from Loyola University of Chicago (1991). She has
been employed by the Adviser as an economic analyst since 1991.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Balanced 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 Balanced
Portfolio, computed and accrued daily, at an annual rate of 0.55%
of the first $500 million of average net assets, 0.50% of the next
$500 million, and 0.45% thereafter. However, as noted above under
Fee Table, the Adviser may voluntarily undertake to reimburse
Advisor Balanced Fund for a portion of its operating expenses and
its pro rata share of Balanced Portfolio's operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Balanced 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 Balanced Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Balanced
Fund and Balanced 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
Balanced Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Balanced 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
Balanced 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 Balanced 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 Balanced Fund including its expenses related
to the sale and promotion of Fund shares, the Distributor receives
from Advisor Balanced 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 Balanced Fund shares and
provide services to Advisor Balanced 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 Balanced Fund
during any year may be more or less than the cost of distribution
or other services provided to Advisor Balanced 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 Balanced Fund and Balanced 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 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 Balanced 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 Balanced Fund. The initial
shareholder of Advisor Balanced Fund approved this policy of
permitting Advisor Balanced Fund to act as a feeder fund by
investing in Balanced 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 Balanced Fund and Balanced
Portfolio. The management and expenses of both Advisor Balanced
Fund and Balanced Portfolio are described under the Fee Table and
Management. Advisor Balanced 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 Balanced 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 Balanced Fund and other investors in
Balanced Portfolio will each be liable for all obligations of
Balanced Portfolio that are not satisfied by the Portfolio.
However, the risk of Advisor Balanced Fund incurring financial
loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and Balanced Portfolio
itself were unable to meet its obligations. Accordingly, the
trustees of Advisor Trust believe that neither Advisor Balanced
Fund nor its shareholders will be adversely affected by reason of
Advisor Balanced Fund's investing in Balanced Portfolio.
The Declaration of Trust of Base Trust provides that Balanced
Portfolio will terminate 120 days after the withdrawal of Advisor
Balanced Fund or any other investor in Balanced Portfolio, unless
the remaining investors vote to agree to continue the business of
Balanced Portfolio. The trustees of Advisor Trust may vote
Advisor Balanced Fund's interests in Balanced Portfolio for such
continuation without approval of Advisor Balanced Fund's
shareholders.
The common investment objective of Advisor Balanced Fund and
Balanced Portfolio is non-fundamental and may be changed without
shareholder approval. The fundamental policies of Advisor
Balanced Fund and the corresponding fundamental policies of
Balanced Portfolio can be changed only with shareholder approval.
If Advisor Balanced Fund, as a Portfolio investor, is requested to
vote on a proposed change in fundamental policy of Balanced
Portfolio or any other matter pertaining to Balanced Portfolio
(other than continuation of the business of Balanced Portfolio
after withdrawal of another investor), Advisor Balanced Fund will
solicit proxies from its shareholders and vote its interest in
Balanced Portfolio for and against such matters proportionately to
the instructions to vote for and against such matters received
from Advisor Balanced Fund shareholders. Advisor Balanced 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 Balanced 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 Balanced Portfolio investors. If other investors hold
a majority interest in Balanced Portfolio, they could have voting
control over Balanced Portfolio.
In the event that Balanced Portfolio's fundamental policies were
changed so as to be inconsistent with those of Advisor Balanced
Fund, the Board of Trustees of Advisor Trust would consider what
action might be taken, including changes to Advisor Balanced
Fund's fundamental policies, withdrawal of Advisor Balanced Fund's
assets from Balanced 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 Balanced Fund's shareholders. Advisor
Balanced 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
Balanced Fund's assets could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) to
Advisor Balanced Fund. Should such a distribution occur, Advisor
Balanced 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 Balanced Fund and could affect the
liquidity of Advisor Balanced Fund.
Each investor in Balanced Portfolio, including Advisor Balanced
Fund, may add to or reduce its investment in Balanced Portfolio on
each day the NYSE is open for business. The investor's percentage
of the aggregate interests in Balanced 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
Balanced 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 Balanced Portfolio effected on such day; and (ii)
the denominator of which is the aggregate beginning of the day net
asset value of Balanced 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 Balanced Portfolio by all
investors in Balanced Portfolio. The percentage so determined
will then be applied to determine the value of the investor's
interest in Balanced Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Balanced Portfolio, but
members of the general public may not invest directly in Balanced
Portfolio. Other investors in Balanced Portfolio are not required
to sell their shares at the same public offering price as Advisor
Balanced Fund, might incur different administrative fees and
expenses than Advisor Balanced Fund, and their shares might be
sold with a sales commission. Therefore, Advisor Balanced Fund
shareholders might have different investment returns than
shareholders in another investment company that invests
exclusively in Balanced Portfolio. Investment by such other
investors in Balanced 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 Balanced Portfolio could result in untimely
liquidations of Balanced Portfolio's security holdings, loss of
investment flexibility, and increases in the operating expenses of
Balanced Portfolio as a percentage of its net assets. As a
result, Balanced Portfolio's security holdings may become less
diverse, resulting in increased risk.
Balanced Portfolio commenced operations in February 1997 when
Stein Roe Balanced Fund, a mutual fund that, together with its
corporate predecessor, had invested directly in securities since
1949, converted into a feeder fund by investing all of its assets
in the Portfolio. Currently Stein Roe Balanced Fund, which is a
series of Stein Roe Investment Trust, is the only other investment
company investing in Balanced Portfolio. Information regarding
any investment company that may invest in Balanced 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 Balanced Fund, call Retirement
Services at 800-322-1130 or Advisor/Broker Services at 800-322-
0590.
______________________
<PAGE>
STEIN ROE ADVISOR GROWTH STOCK FUND
The investment objective of Advisor Growth Stock Fund is to
provide long-term capital appreciation by investing in common
stocks and other equity-type securities. Advisor Growth Stock
Fund invests all of its net investable assets in shares of SR&F
Growth Stock Portfolio, a portfolio of SR&F Base Trust that has
the same investment objective and substantially the same
investment policies as Advisor Growth Stock Fund. (SEE SPECIAL
CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE.)
Shares of Advisor Growth Stock Fund may be purchased only through
Intermediaries, including retirement plan service providers.
Advisor Growth Stock Fund has no sales or redemption charges.
Advisor Growth Stock Fund is a series of Stein Roe Advisor Trust
and Growth Stock 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 Growth Stock Fund. Please read it carefully
and retain it for future reference.
A Statement of Additional Information dated February __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary...................................2
Fee Table ................................3
The Fund..................................4
Investment Policies.......................5
Performance Information...................5
Risks and Investment Considerations ......6
Investment Restrictions ..................6
Portfolio Investments and Strategies......7
Net Asset Value .........................10
How to Purchase Shares...................11
How to Redeem Shares ....................11
Distributions and Income Taxes...........12
Management ..............................13
Organization and Description of Shares...15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure......16
For More Information ....................18
SUMMARY
Stein Roe Advisor Growth Stock Fund ("Advisor Growth Stock 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 Growth Stock Fund are not
qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of
Advisor Growth Stock Fund is to provide long-term capital
appreciation by investing in common stocks and other equity-type
securities. Advisor Growth Stock Fund invests all of its net
investable assets in SR&F Growth Stock Portfolio ("Growth Stock
Portfolio") which has the same investment objective and investment
policies substantially similar to those of Advisor Growth Stock
Fund. Growth Stock Portfolio normally invests at least 65% of its
total assets in common stocks and other equity-type securities
that the Adviser believes to have long-term 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
Growth Stock Fund and Growth Stock Portfolio will achieve their
common investment objective.
INVESTMENT RISKS. Advisor Growth Stock 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 an
aggressive capital appreciation fund. Growth Stock 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 Growth Stock Fund
may be purchased only through Intermediaries, including retirement
plan service providers. For information on purchasing and
redeeming Advisor Growth Stock 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 Growth Stock Portfolio. In
addition, it provides administrative services to Advisor Growth
Stock Fund and Growth Stock 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).......................................0.60%
12b-1 Fees..............................................0.25%
Other Expenses (after reimbursement)....................0.50%
-----
Total Operating Expenses (after reimbursement)..........1.35%
=====
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
------ -------
$14 $43
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 Growth Stock Fund. The Fee
Table reflects the combined expenses of both Advisor Growth Stock
Fund and Growth Stock Portfolio. Anticipated Total Operating
Expenses for Advisor Growth Stock 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 Growth Stock Fund for a portion of its operating
expenses and its pro rata share of the fees and expenses payable
by Growth Stock Portfolio. The Adviser has undertaken to
reimburse Advisor Growth Stock Fund for its operating expenses and
its pro rata share of Growth Stock Portfolio's operating expenses
to the extent such expenses exceed 1.35% of Advisor Growth Stock
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 Growth
Stock Fund. Absent such reimbursement, Advisor Growth Stock
Fund's share of Growth Stock Portfolio's Management Fee and the
Fund's Administrative Fee, Other Expenses and Total Operating
Expenses would be 0.75%, 0.55% and 1.55%, respectively. Any such
reimbursement will lower Advisor Growth Stock Fund's overall
expense ratio and increase its overall return to investors. (Also
see Management--Fees and Expenses.)
Advisor Growth Stock Fund pays the Adviser an administrative fee
based on its average daily net assets and Growth Stock 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 Growth Stock Fund, including
its share of the expenses of Growth Stock Portfolio, would be more
or less than if Advisor Growth Stock Fund invested directly in the
securities held by Growth Stock Portfolio, and concluded that
Advisor Growth Stock 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 Growth Stock
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 Growth Stock Fund pays a 12b-1 fee, long-term
investors in Advisor Growth Stock 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 Growth Stock Fund's 12b-1 fee, see Management--Distributor
or call your financial representative.
THE FUND
STEIN ROE ADVISOR GROWTH STOCK FUND ("Advisor Growth Stock 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 Growth Stock
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 Growth Stock Fund invests all of its net
investable assets in shares of SR&F Growth Stock Portfolio
("Growth Stock Portfolio"), which is a series of SR&F Base Trust
("Base Trust").
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to Growth Stock Portfolio and
administrative services to Advisor Growth Stock Fund and Growth
Stock Portfolio.
INVESTMENT POLICIES
The investment objective of Advisor Growth Stock Fund is to
provide long-term capital appreciation by investing in common
stocks and other equity-type securities. Advisor Growth Stock
Fund invests all of its net investable assets in Growth Stock
Portfolio, which has the same investment objective and investment
policies substantially similar to Advisor Growth Stock Fund.
Growth Stock Portfolio attempts to achieve its objective by
normally investing at least 65% of its total assets in common
stocks and other equity-type securities (such as preferred stocks,
securities convertible into or exchangeable for common stocks, and
warrants or rights to purchase common stocks) that, in the opinion
of the Adviser, have long-term appreciation possibilities.
Further information on investment techniques that may be employed
by Growth Stock 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 Growth Stock 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 Growth Stock 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 Growth Stock Fund had
no past performance. However, Stein Roe Growth Stock 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 Growth Stock
Fund, also invests all of its net investable assets in Growth
Stock Portfolio. The average annual total return for the periods
ended September 30, 1996 for a 1-year, 5-year and 10-year
investment in Stein Roe Growth Stock Fund were 21.04%, 13.75% and
14.12%, respectively. Stein Roe Growth Stock Fund has a different
fee structure than Advisor Growth Stock 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 Growth Stock Fund, and
should not be interpreted as indicative of Advisor Growth Stock
Fund's future performance.
RISKS AND INVESTMENT CONSIDERATIONS
Advisor Growth Stock 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 an aggressive capital
appreciation fund. Growth Stock 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 Growth Stock Fund or Growth
Stock Portfolio will achieve its objective.
Growth Stock 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.
Growth Stock 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Growth Stock Portfolio may be found under Portfolio Investments
and Strategies.
INVESTMENT RESTRICTIONS
Neither Advisor Growth Stock Fund nor Growth Stock Portfolio may
invest more than 5% of its assets in the securities of any one
issuer. This restriction applies only to 75% of its 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 Growth Stock 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 Growth
Stock 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, Growth Stock
Portfolio could experience both losses and delays in liquidating
its collateral.
- -------------
Neither Advisor Growth Stock Fund nor Growth Stock Portfolio will
acquire more than 10% of the outstanding voting securities of any
one issuer. Advisor Growth Stock 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 Growth Stock Fund nor Growth Stock 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 Growth Stock Fund and Growth Stock
Portfolio may not borrow money, except for non-leveraging,
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 Growth Stock Fund and Growth Stock 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
Growth Stock Fund and Growth Stock 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 Growth Stock
Fund and Growth Stock 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.
In pursuing its investment objective, Growth Stock Portfolio may
invest up to 35% of its total assets in debt securities of
corporate and governmental issuers. Investment in debt securities
is limited to those that are rated within the four highest grades
(generally referred to as investment grade). If the rating of a
security held by Growth Stock Portfolio is lost or reduced below
investment grade, it is not required to dispose of the security--
the Adviser will, however, consider that fact in determining
whether Growth Stock Portfolio should continue to hold the
security. When the Adviser deems a temporary defensive position
advisable, Growth Stock Portfolio may invest, without limitation,
in high-quality fixed income securities, or hold assets in cash or
cash equivalents.
FOREIGN SECURITIES.
Growth Stock Portfolio may invest in sponsored or unsponsored
ADRs. In addition to, or in lieu of, such direct investment,
Growth Stock 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, Growth
Stock 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. Growth
Stock 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, Growth Stock
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, Growth Stock 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, Growth Stock 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.
Growth Stock Portfolio may make loans of its portfolio securities
to broker-dealers and banks subject to certain restrictions
described in the Statement of Additional Information. Growth
Stock Portfolio may participate in an interfund lending program,
subject to certain restrictions described in the Statement of
Additional Information. Growth Stock 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 Growth Stock 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. Growth Stock
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.
Growth Stock 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 Growth Stock 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. Growth Stock
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, Growth Stock 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. Growth Stock
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, Growth Stock
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. Growth Stock
Portfolio may write a call or put option only if the option is
covered. As the writer of a covered call option, Growth Stock
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 Growth Stock 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 Growth Stock 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.
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 Growth Stock Fund's
shares is its net asset value per share. Advisor Growth Stock
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.
Growth Stock Portfolio allocates net asset value, income, and
expenses to Advisor Growth Stock Fund and any other of its feeder
funds in proportion to their respective interests in Growth Stock
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 Growth Stock 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 Growth Stock Fund shares only through
broker-dealers, banks, or other intermediaries, including
retirement plan service providers ("Intermediaries"). The Adviser
and Advisor Growth Stock Fund do not recommend, endorse, or
receive payments from any Intermediary.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Advisor
Growth Stock Fund's shares is made at Advisor Growth Stock 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 Growth
Stock 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 Growth Stock 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 Growth
Stock 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 Growth Stock 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 Growth Stock 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 Growth Stock 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. 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 Growth Stock
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 Growth Stock 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 Growth Stock Fund or its authorized agent.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared and paid annually.
Advisor Growth Stock 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 Growth Stock 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 Growth Stock 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 Growth
Stock Fund is treated as a separate taxable entity distinct from
the other series of Advisor Trust. Growth Stock 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 Growth Stock 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 Growth Stock
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 Growth Stock Fund and Growth
Stock 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 Growth Stock Fund and Growth
Stock Portfolio and other feeder funds investing in Growth Stock
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 Growth Stock Portfolio and the business
affairs of Advisor Growth Stock Fund, Growth Stock 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. Erik P. Gustafson has been portfolio manager
of Growth Stock Portfolio since its inception in 1997 and had
managed its predecessor since 1994. Mr. Gustafson is a senior
vice president of the Adviser, having joined it in 1992. From
1989 to 1992 he was an attorney with Fowler, White, Burnett,
Hurley, Banick & Strickroot. He holds a B.A. from the University
of Virginia (1985) and M.B.A. and J.D. degrees from Florida State
University (1989). As of December 31, 1996, Mr. Gustafson was
responsible for managing $877 million in mutual fund net assets.
David P. Brady is associate portfolio manager. Mr. Brady is a
vice president of the Adviser, which he joined in 1993, and was an
equity investment analyst with State Farm Mutual Automobile
Insurance Company from 1986 to 1993. A chartered financial
analyst, Mr. Brady earned a B.S. in Finance, graduating Magna Cum
Laude, from the University of Arizona (1986), and an M.B.A. from
the University of Chicago (1989).
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Advisor Growth Stock 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 Growth
Stock Portfolio, computed and accrued daily, at an annual rate of
0.60% of the first $500 million of average net assets, 0.55% of
the next $500 million, and 0.50% thereafter. However, as noted
above under Fee Table, the Adviser may voluntarily undertake to
reimburse Advisor Growth Stock Fund for a portion of its operating
expenses and its pro rata share of Growth Stock Portfolio's
operating expenses.
The Adviser provides office space and executive and other
personnel to Advisor Trust and Base Trust. All expenses of
Advisor Growth Stock 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 Growth Stock Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Advisor Growth
Stock Fund and Growth Stock 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 Growth
Stock Fund.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts for Growth Stock 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
Growth Stock 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 Growth Stock 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 Growth Stock Fund including its expenses
related to the sale and promotion of Fund shares, the Distributor
receives from Advisor Growth Stock 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 Growth Stock
Fund shares and provide services to Advisor Growth Stock 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
Growth Stock Fund during any year may be more or less than the
cost of distribution or other services provided to Advisor Growth
Stock 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 Growth Stock Fund and Growth Stock 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 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 Growth Stock 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 Growth Stock Fund. The
initial shareholder of Advisor Growth Stock Fund approved this
policy of permitting Advisor Growth Stock Fund to act as a feeder
fund by investing in Growth Stock 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 Growth Stock
Fund and Growth Stock Portfolio. The management and expenses of
both Advisor Growth Stock Fund and Growth Stock Portfolio are
described under the Fee Table and Management. Advisor Growth
Stock 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 Growth Stock 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 Growth Stock Fund and other investors
in Growth Stock Portfolio will each be liable for all obligations
of Growth Stock Portfolio that are not satisfied by the Portfolio.
However, the risk of Advisor Growth Stock Fund incurring financial
loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and Growth Stock Portfolio
itself were unable to meet its obligations. Accordingly, the
trustees of Advisor Trust believe that neither Advisor Growth
Stock Fund nor its shareholders will be adversely affected by
reason of Advisor Growth Stock Fund's investing in Growth Stock
Portfolio.
The Declaration of Trust of Base Trust provides that Growth Stock
Portfolio will terminate 120 days after the withdrawal of Advisor
Growth Stock Fund or any other investor in Growth Stock Portfolio,
unless the remaining investors vote to agree to continue the
business of Growth Stock Portfolio. The trustees of Advisor Trust
may vote Advisor Growth Stock Fund's interests in Growth Stock
Portfolio for such continuation without approval of Advisor Growth
Stock Fund's shareholders.
The common investment objective of Advisor Growth Stock Fund and
Growth Stock Portfolio is non-fundamental and may be changed
without shareholder approval. The fundamental policies of Advisor
Growth Stock Fund and the corresponding fundamental policies of
Growth Stock Portfolio can be changed only with shareholder
approval.
If Advisor Growth Stock Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
Growth Stock Portfolio or any other matter pertaining to Growth
Stock Portfolio (other than continuation of the business of Growth
Stock Portfolio after withdrawal of another investor), Advisor
Growth Stock Fund will solicit proxies from its shareholders and
vote its interest in Growth Stock Portfolio for and against such
matters proportionately to the instructions to vote for and
against such matters received from Advisor Growth Stock Fund
shareholders. Advisor Growth Stock 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 Growth Stock 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
Growth Stock Portfolio investors. If other investors hold a
majority interest in Growth Stock Portfolio, they could have
voting control over Growth Stock Portfolio.
In the event that Growth Stock Portfolio's fundamental policies
were changed so as to be inconsistent with those of Advisor Growth
Stock Fund, the Board of Trustees of Advisor Trust would consider
what action might be taken, including changes to Advisor Growth
Stock Fund's fundamental policies, withdrawal of Advisor Growth
Stock Fund's assets from Growth Stock 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 Growth Stock Fund's shareholders. Advisor
Growth Stock 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
Growth Stock Fund's assets could result in a distribution in kind
of portfolio securities (as opposed to a cash distribution) to
Advisor Growth Stock Fund. Should such a distribution occur,
Advisor Growth Stock 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 Growth Stock Fund
and could affect the liquidity of Advisor Growth Stock Fund.
Each investor in Growth Stock Portfolio, including Advisor Growth
Stock Fund, may add to or reduce its investment in Growth Stock
Portfolio on each day the NYSE is open for business. The
investor's percentage of the aggregate interests in Growth Stock
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 Growth Stock 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 Growth Stock
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of Growth
Stock 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 Growth Stock Portfolio by all investors in Growth
Stock Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in
Growth Stock Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Growth Stock Portfolio, but
members of the general public may not invest directly in Growth
Stock Portfolio. Other investors in Growth Stock Portfolio are
not required to sell their shares at the same public offering
price as Advisor Growth Stock Fund, might incur different
administrative fees and expenses than Advisor Growth Stock Fund,
and their shares might be sold with a sales commission.
Therefore, Advisor Growth Stock Fund shareholders might have
different investment returns than shareholders in another
investment company that invests exclusively in Growth Stock
Portfolio. Investment by such other investors in Growth Stock
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 Growth
Stock Portfolio could result in untimely liquidations of Growth
Stock Portfolio's security holdings, loss of investment
flexibility, and increases in the operating expenses of Growth
Stock Portfolio as a percentage of its net assets. As a result,
Growth Stock Portfolio's security holdings may become less
diverse, resulting in increased risk.
Growth Stock Portfolio commenced operations in February 1997 when
Stein Roe Growth Stock Fund, a mutual fund that, together with its
corporate predecessor, had invested directly in securities since
1958, converted into a feeder fund by investing all of its assets
in the Portfolio. Currently Stein Roe Growth Stock Fund, which is
a series of Stein Roe Investment Trust, is the only other
investment company investing in Growth Stock Portfolio.
Information regarding any investment company that may invest in
Growth Stock 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 Growth Stock Fund, call
Retirement Services at 800-322-1130 or Advisor/Broker Services at
800-322-0590.
______________________
<PAGE>
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 shares of
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 __, 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 800-322-0590.
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 __, 1997.
TABLE OF CONTENTS
Page
Summary........... .2
Fee Table ......... ...3
The Fund......... ...4
Investment Policies.......... ..5
Performance Information........... .5
Risks and Investment Considerations .........6
Investment Restrictions .....................7
Portfolio Investments and Strategies.........8
Net Asset Value ............................10
How to Purchase Shares......................11
How to Redeem Shares .......................12
Distributions and Income Taxes..............12
Management .................................13
Organization and Description of Shares......15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure.........16
For More Information .......................18
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
shares of 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 return for the periods ended
September 30, 1996 for a 1-year, 5-year and 10-year investment 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 non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. 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 its assets in the securities of any one issuer. This
restriction applies only to 75% of its 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 non-leveraging, 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 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 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. 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 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-
0590.
______________________
<PAGE>
Statement of Additional Information Dated February __, 1997
STEIN ROE ADVISOR TRUST
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
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
This Statement of Additional Information is not a prospectus,
but provides additional information that should be read in
conjunction with each Fund's prospectus dated February __, 1997,
and any supplements thereto ("Prospectus"). A Prospectus may be
obtained at no charge by calling the Adviser. For additional
information, call Retirement Services at 800-322-1130 or
Advisor/Broker Services at 800-322-0590.
TABLE OF CONTENTS
Page
General Information and History..........................2
Investment Policies......................................3
Stein Roe Advisor Balanced Fund.......................3
Stein Roe Advisor Growth & Income Fund................3
Stein Roe Advisor Growth Stock Fund...................4
Stein Roe Advisor Young Investor Fund.................4
Stein Roe Advisor Special Fund........................4
Stein Roe Advisor Special Venture Fund................5
Stein Roe Advisor International Fund..................5
Portfolio Investments and Strategies.....................6
Investment Restrictions.................................23
Additional Investment Considerations....................26
Purchases and Redemptions...............................27
Management..............................................28
Principal Shareholders..................................32
Investment Advisory Services............................32
Distributor.............................................34
Transfer Agent And Shareholder Servicing................35
Custodian...............................................35
Independent Public Accountants..........................36
Portfolio Transactions..................................36
Additional Income Tax Considerations....................37
Investment Performance..................................39
Appendix--Ratings.......................................44
GENERAL INFORMATION AND HISTORY
The seven mutual funds listed on the cover page (referred to
collectively as the "Funds") are separate series of Stein Roe
Advisor Trust ("Advisor Trust"). On September 13, 1996, the
spelling of the name of the Trust was changed from Stein Roe
Adviser Trust to Stein Roe Advisor Trust.
Currently seven series of Advisor Trust are authorized and
outstanding. Each share of a series, without par value, is
entitled to participate pro rata in any dividends and other
distributions declared by the Board on shares of that series, and
all shares of a series have equal rights in the event of
liquidation of that series. Each whole share (or fractional
share) outstanding on the record date established in accordance
with the By-Laws shall be entitled to a number of votes on any
matter on which it is entitled to vote equal to the net asset
value of the share (or fractional share) in United States dollars
determined at the close of business on the record date (for
example, a share having a net asset value of $10.50 would be
entitled to 10.5 votes). As a business trust, Advisor Trust is
not required to hold annual shareholder meetings. However,
special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies, or approving an
investment advisory contract. If requested to do so by the
holders of at least 10% of Advisor Trust's outstanding shares,
Advisor Trust will call a special meeting for the purpose of
voting upon the question of removal of a trustee or trustees and
will assist in the communications with other shareholders as if
Advisor Trust were subject to Section 16(c) of the Investment
Company Act of 1940. All shares of all series of Advisor Trust
are voted together in the election of trustees. On any other
matter submitted to a vote of shareholders, shares are voted in
the aggregate and not by individual series, except that shares are
voted by individual series when required by the Investment Company
Act of 1940 or other applicable law, or when the Board of Trustees
determines that the matter affects only the interests of one or
more series, in which case shareholders of the unaffected series
are not entitled to vote on such matters.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
Rather than invest in securities directly, each Fund acts as
a "feeder fund"; that is, it seeks to achieve its objective by
pooling its assets with assets of other investment companies for
investment in a separate "master fund" having the same investment
objective and substantially the same investment policies as the
Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. Each master fund is a
series of SR&F Base Trust ("Base Trust") (the master funds are
referred to collectively as the "Portfolios"). For more
information, please refer to each Fund's Prospectus under the
caption Special Considerations Regarding the Master Fund/Feeder
Fund Structure.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative and accounting and recordkeeping services to each
Fund and each Portfolio and provides investment advisory services
to each Portfolio.
INVESTMENT POLICIES
In pursuing its respective objective, each Portfolio will
invest as described below and may employ the investment techniques
described under Portfolio Investments and Strategies. The
investment objective is a non-fundamental policy and may be
changed by the Board of Trustees without the approval of a
"majority of the outstanding voting securities"./1/
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/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding shares
of the Fund or the Portfolio are present or represented by proxy
or (ii) more than 50% of the outstanding shares of the Fund or the
Portfolio.
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STEIN ROE ADVISOR BALANCED FUND
Stein Roe Advisor Balanced Fund ("Advisor Balanced Fund")
seeks to achieve its objective by investing in SR&F Balanced
Portfolio ("Balanced Portfolio"). Their common investment
objective is to seek long-term growth of capital and current
income, consistent with reasonable investment risk. Balanced
Portfolio allocates its investments among equities, debt
securities and cash. The portfolio manager determines those
allocations based on the views of the Adviser's investment
strategists regarding economic, market and other factors relative
to investment opportunities.
The equity portion of the investment portfolio is invested
primarily in well-established companies having market
capitalizations in excess of $1 billion. Fixed-income senior
securities will make up at least 25% of Balanced Portfolio's total
assets. Investments in debt securities are limited to those that
are within the four highest grades (generally referred to as
"investment grade") assigned by a nationally recognized
statistical rating organization or, if unrated, determined by the
Adviser to be of comparable quality.
STEIN ROE ADVISOR GROWTH & INCOME FUND
Stein Roe Advisor Growth & Income Fund ("Advisor Growth &
Income Fund") seeks to achieve its objective by investing in SR&F
Growth & Income Portfolio ("Growth & Income "Portfolio"). Their
common investment objective is to provide both growth of capital
and current income. Advisor Growth & Income Fund is designed for
investors seeking a diversified portfolio of securities that
offers the opportunity for long-term growth of capital while also
providing a steady stream of income. Growth & Income Portfolio
invests primarily in well-established companies whose common
stocks are believed to have both the potential to appreciate in
value and to pay dividends to shareholders.
Although it may invest in a broad range of securities
(including common stocks, preferred stocks, securities convertible
into or exchangeable for common stocks, and warrants or rights to
purchase common stocks), normally Growth & Income Portfolio
emphasizes investments in equity securities of companies having
market capitalizations in excess of $1 billion. Securities of
these well-established companies are believed to be generally less
volatile than those of companies with smaller capitalizations
because companies with larger capitalizations tend to have
experienced management; broad, highly diversified product lines;
deep resources; and easy access to credit.
STEIN ROE ADVISOR GROWTH STOCK FUND
Stein Roe Advisor Growth Stock Fund ("Advisor Growth Stock
Fund") seeks to achieve its objective by investing in SR&F Growth
Stock Portfolio ("Growth Stock Portfolio"). Their common
investment objective is long-term capital appreciation. Growth
Stock Portfolio attempts to achieve this objective by normally
investing at least 65% of its total assets in common stocks and
other equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks) that, in the opinion of the
Adviser, have long-term appreciation possibilities.
STEIN ROE ADVISOR YOUNG INVESTOR FUND
Stein Roe Advisor Young Investor Fund ("Advisor Young
Investor Fund") seeks to achieve its objective by investing in
SR&F Growth Investor Portfolio ("Growth Investor Portfolio").
Their common investment objective is long-term capital
appreciation. Growth Investor Portfolio invests primarily in
common stocks and other equity-type securities that, in the
opinion of the Adviser, have long-term appreciation potential.
Under normal circumstances, at least 65% of the total assets
of Growth Investor Portfolio will be invested in securities of
companies that, in the opinion of the Adviser, directly or through
one or more subsidiaries, affect the lives of young people. Such
companies may include companies that produce products or services
that young people use, are aware of, or could potentially have an
interest in. Although Growth Investor Portfolio invests primarily
in common stocks and other equity-type securities (such as
preferred stocks, securities convertible into or exchangeable for
common stocks, and warrants or rights to purchase common stocks),
it may invest up to 35% of its total assets in debt securities.
STEIN ROE ADVISOR SPECIAL FUND
Stein Roe Advisor Special Fund ("Advisor Special Fund") seeks
to achieve its objective by investing in SR&F Special Portfolio
("Special Portfolio"). Their common investment objective is to
invest in securities selected for possible capital appreciation.
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 may invest more than 5% of
its net assets 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;
however, Special Portfolio does not currently intend to invest
more than 5% of its net assets in any of these types of
securities. Securities of smaller, newer companies may be subject
to greater price volatility than securities of larger more 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
will invest primarily in common stocks, it may also invest in
other equity-type securities, including preferred stocks and
securities convertible into equity securities.
STEIN ROE ADVISOR SPECIAL VENTURE FUND
Stein Roe Advisor Special Venture Fund ("Advisor Special
Venture Fund") seeks to achieve its objective by investing in SR&F
Special Venture Portfolio ("Special Venture Portfolio"). Their
common investment objective is to seek long-term capital
appreciation. Special Venture Portfolio invests primarily in a
diversified portfolio of common stocks and other equity-type
securities (such as preferred stocks, securities convertible or
exchangeable for common stocks, and warrants or rights to purchase
common stocks) of entrepreneurially managed companies that the
Adviser believes represent special opportunities. Special Venture
Portfolio emphasizes investments in financially strong small and
medium-sized companies based principally on appraisal of their
management and stock valuations. 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.
STEIN ROE ADVISOR INTERNATIONAL FUND
Stein Roe Advisor International Fund ("Advisor International
Fund") pursues its objective by investing in SR&F International
Portfolio ("International Portfolio"). Their common investment
objective is to seek long-term growth of capital. International
Portfolio seeks to achieve this objective by investing primarily
in a diversified portfolio of foreign securities. Current income
is not a primary factor in the selection of portfolio securities.
International Portfolio invests primarily in common stocks and
other equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks). International Portfolio may
invest in securities of smaller emerging companies as well as
securities of well-seasoned companies of any size. Smaller
companies, however, involve higher risks in that they typically
have limited product lines, markets, and financial or management
resources. In addition, the securities of smaller companies may
trade less frequently and have greater price fluctuation than
larger companies, particularly those operating in countries with
developing markets.
International Portfolio diversifies its investments among
several countries and does not concentrate investments in any
particular industry. In pursuing its objective, International
Portfolio varies the geographic allocation and types of securities
in which it invests based on the Adviser's continuing evaluation
of economic, market, and political trends throughout the world.
While International Portfolio has not established limits on
geographic asset distribution, it ordinarily invests in the
securities markets of at least three countries outside the United
States, including but not limited to Western European countries
(such as Belgium, France, Germany, Ireland, Italy, The
Netherlands, the countries of Scandinavia, Spain, Switzerland, and
the United Kingdom); countries in the Pacific Basin (such as
Australia, Hong Kong, Japan, Malaysia, the Philippines, Singapore,
and Thailand); and countries in the Americas (such as Argentina,
Brazil, Colombia, and Mexico). In addition, it does not currently
intend to invest more than 1% of its total assets in Russian
securities.
Under normal market conditions, International Portfolio will
invest at least 65% of its total assets (taken at market value) in
foreign securities. If, however, investments in foreign
securities appear to be relatively unattractive in the judgment of
the Adviser because of current or anticipated adverse political or
economic conditions, International Portfolio may hold cash or
invest any portion of its assets in securities of the U.S.
Government and equity and debt securities of U.S. companies, as a
temporary defensive strategy. To meet liquidity needs,
International Portfolio may also hold cash in domestic and foreign
currencies and invest in domestic and foreign money market
securities (including repurchase agreements and "synthetic"
foreign money market positions).
In the past, the U.S. Government has from time to time
imposed restrictions, through taxation and otherwise, on foreign
investments by U.S. investors such as International Portfolio. If
such restrictions should be reinstated, it might become necessary
for International Portfolio to invest all or substantially all of
its assets in U.S. securities. In such an event, International
Portfolio would review its investment objective and policies to
determine whether changes are appropriate.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES
In pursuing its investment objective, each Portfolio may
invest in debt securities of corporate and governmental issuers.
The risks inherent in debt securities depend primarily on the term
and quality of the obligations in the investment 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.
Investments in debt securities by Growth & Income Portfolio,
Balanced Portfolio, Growth Stock Portfolio, and International
Portfolio are limited to those that are within the four highest
grades (generally referred to as "investment grade") assigned by a
nationally recognized statistical rating organization or, if
unrated, deemed to be of comparable quality by the Adviser. Each
of Special Venture Portfolio, Growth Investor Portfolio, and
Special Portfolio may invest up to 35% of its net assets in debt
securities, but do not expect to invest more than 5% of net assets
in debt securities that are rated below investment grade.
Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held by a
Portfolio is lost or reduced below investment grade, the Portfolio
is not required to dispose of the security, but the Adviser will
consider that fact in determining whether that Portfolio should
continue to hold the security.
Securities that are rated below investment grade 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 determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, the Portfolios may invest without limitation in high-
quality fixed income securities or hold assets in cash or cash
equivalents.
DERIVATIVES
Consistent with its objective, each 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.
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because it is more
efficient or less costly than direct investment that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. 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.
No Portfolio, other than International Portfolio, currently
intends to invest more than 5% of its net assets in any type of
Derivative except for options, futures contracts, and futures
options. International Portfolio currently intends to invest no
more than 5% of its net assets in any type of Derivative other
than options, futures contracts, futures options, and forward
contracts. (See Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by a
Portfolio on purchase of such securities; in addition, the
proceeds of prepayment would likely be invested at lower interest
rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social, and market factors.
If mortgages are pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by the Portfolio on purchase of the CMO, and the
proceeds of prepayment would likely be invested at lower interest
rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans that finance payments on the securities
themselves.
Floating rate instruments provide for periodic adjustments in
coupon interest rates that are automatically reset based on
changes in amount and direction of specified market interest
rates. In addition, the adjusted duration of some of these
instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%.
CONVERTIBLE SECURITIES
By investing in convertible securities, a 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. While convertible securities purchased by a Portfolio are
frequently rated investment grade, each Portfolio 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 (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being 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 in the purchase of such securities than other
factors.
FOREIGN SECURITIES
Each Portfolio other than International Portfolio, which
invests primarily in foreign securities, may invest up to 25% of
its total assets in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate
fluctuations, tax provisions, or expropriation of assets) than
investment in securities of domestic issuers. For this purpose,
foreign securities do not include American Depositary Receipts
(ADRs) or securities guaranteed by a United States person. ADRs
are receipts typically issued by an American bank or trust company
evidencing ownership of the underlying securities. The Portfolios
may invest in sponsored or unsponsored ADRs. In the case of an
unsponsored ADR, a Portfolio is likely to bear its proportionate
share of the expenses of the depositary and it may have greater
difficulty in receiving shareholder communications than it would
have with a sponsored ADR. No Portfolio, other than International
Portfolio, intends to invest more than 5% of its net assets in
unsponsored ADRs. International Portfolio may also purchase
foreign securities in the form of European Depositary Receipts
(EDRs) or other securities representing underlying shares of
foreign issuers. Positions in these securities are not
necessarily denominated in the same currency as the common stocks
into which they may be converted. EDRs are European receipts
evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for the U.S. securities markets and EDRs, in
bearer form, are designed for use in European securities markets.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, a
Portfolio's investment performance is affected by the strength or
weakness of the U.S. dollar against these currencies. For
example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the
portfolio will rise even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the yen-denominated stock will fall.
(See discussion of transaction hedging and portfolio hedging under
Currency Exchange Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions in which are generally denominated in foreign
currencies, and utilization of forward foreign currency exchange
contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements.
Although the Portfolios will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
The Portfolios' foreign currency exchange transactions are
limited to transaction and portfolio hedging involving either
specific transactions or portfolio positions. Transaction hedging
is the purchase or sale of forward contracts with respect to
specific receivables or payables of a Portfolio arising in
connection with the purchase and sale of its portfolio securities.
Portfolio hedging is the use of forward contracts with respect to
portfolio security positions denominated or quoted in a particular
foreign currency. Portfolio hedging allows the Portfolio to limit
or reduce its exposure in a foreign currency by entering into a
forward contract to sell such foreign currency (or another foreign
currency that acts as a proxy for that currency) at a future date
for a price payable in U.S. dollars so that the value of the
foreign-denominated portfolio securities can be approximately
matched by a foreign-denominated liability. A Portfolio may not
engage in portfolio hedging with respect to the currency of a
particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in
its portfolio denominated or quoted in that particular currency,
except that a Portfolio may hedge all or part of its foreign
currency exposure through the use of a basket of currencies or a
proxy currency where such currencies or currency act as an
effective proxy for other currencies. In such a case, a Portfolio
may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency held in a Portfolio.
No Portfolio may engage in "speculative" currency exchange
transactions.
At the maturity of a forward contract to deliver a particular
currency, a Portfolio may either sell the portfolio security
related to such contract and make delivery of the currency, or it
may retain the security and either acquire the currency on the
spot market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same
currency trader obligating it to purchase on the same maturity
date the same amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for a
Portfolio to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the
security is less than the amount of currency the Portfolio is
obligated to deliver and if a decision is made to sell the
security and make delivery of the currency. Conversely, it may be
necessary to sell on the spot market some of the currency received
upon the sale of the portfolio security if its market value
exceeds the amount of currency a Portfolio is obligated to
deliver.
If a Portfolio retains the portfolio security and engages in
an offsetting transaction, the Portfolio will incur a gain or a
loss to the extent that there has been movement in forward
contract prices. If a Portfolio engages in an offsetting
transaction, it may subsequently enter into a new forward contract
to sell the currency. Should forward prices decline during the
period between a Portfolio's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting
contract for the purchase of the currency, the Portfolio will
realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, a Portfolio will suffer
a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
A default on the contract would deprive the Portfolio of
unrealized profits or force the Portfolio to cover its commitments
for purchase or sale of currency, if any, at the current market
price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for a Portfolio to hedge against a devaluation that is so
generally anticipated that the Portfolio is not able to contract
to sell the currency at a price above the devaluation level it
anticipates. The cost to a Portfolio of engaging in currency
exchange transactions varies with such factors as the currency
involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are
involved.
Synthetic Foreign Money Market Positions. International
Portfolio may invest in money market instruments denominated in
foreign currencies. In addition to, or in lieu of, such direct
investment, International Portfolio may construct a synthetic
foreign money market position by (a) purchasing a money market
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.
For example, a synthetic money market position in Japanese yen
could be constructed by purchasing a U.S. dollar money market
instrument, and entering concurrently into a forward contract to
deliver a corresponding amount of U.S. dollars in exchange for
Japanese yen on a specified date and at a specified rate of
exchange. Because of the availability of a variety of highly
liquid short-term U.S. dollar money market instruments, a
synthetic money market position utilizing such U.S. dollar
instruments may offer greater liquidity than direct investment in
foreign currency money market instruments. The result of a direct
investment in a foreign currency and a concurrent construction of
a synthetic position in such foreign currency, in terms of both
income yield and gain or loss from changes in currency exchange
rates, in general should be similar, but would not be identical
because the components of the alternative investments would not be
identical. Except to the extent a synthetic foreign money market
position consists of a money market instrument denominated in a
foreign currency, the synthetic foreign money market position
shall not be deemed a "foreign security" for purposes of the
policy that, under normal conditions, International Portfolio will
invest at least 65% of its total assets in foreign securities.
LENDING OF PORTFOLIO SECURITIES
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, each Portfolio may lend
its portfolio securities to broker-dealers and banks. Any such
loan must be continuously secured by collateral in cash or cash
equivalents maintained on a current basis in an amount at least
equal to the market value of the securities loaned by the
Portfolio. The Portfolio would continue to receive the equivalent
of the interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The
Portfolio would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five
business days. The Portfolio would not have the right to vote the
securities during the existence of the loan but would call the
loan to permit voting of the securities if, in the Adviser's
judgment, a material event requiring a shareholder vote would
otherwise occur before the loan was repaid. In the event of
bankruptcy or other default of the borrower, the Portfolio could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses, including (a)
possible decline in the value of the collateral or in the value of
the securities loaned during the period while the Portfolio seeks
to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c)
expenses of enforcing its rights.
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements, provided
that it will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to a
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, a Portfolio could experience both losses
and delays in liquidating its collateral.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE
AGREEMENTS
Each Portfolio may purchase securities on a when-issued or
delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time a 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. The Portfolios make such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if the Adviser deems it
advisable for investment reasons. No Portfolio currently intends
to make commitments to purchase when-issued securities in excess
of 5% of its net assets. International Portfolio may utilize spot
and forward foreign currency exchange transactions to reduce the
risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a
when-issued or delayed-delivery basis.
Each Portfolio may enter into reverse repurchase agreements
with banks and securities dealers. A reverse repurchase agreement
is a repurchase agreement in which a Portfolio is the seller of,
rather than the investor in, securities and agrees to repurchase
them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later
repurchase of securities because it avoids certain market risks
and transaction costs.
At the time a Portfolio enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the
Portfolio having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books
of the Portfolio and held by the custodian throughout the period
of the obligation. The use of these investment strategies, as
well as borrowing under a line of credit as described below, may
increase net asset value fluctuation.
SHORT SALES "AGAINST THE BOX"
Each Portfolio may sell securities short against the box;
that is, enter into short sales of securities that it currently
owns or has the right to acquire through the conversion or
exchange of other securities that it owns at no additional cost.
A Portfolio may make short sales of securities only if at all
times when a short position is open the Portfolio owns at least an
equal amount of such securities or securities convertible into or
exchangeable for securities of the same issue as, and equal in
amount to, the securities sold short, at no additional cost.
In a short sale against the box, a Portfolio does not deliver
from its portfolio the securities sold. Instead, the Portfolio
borrows the securities sold short from a broker-dealer through
which the short sale is executed, and the broker-dealer delivers
such securities, on behalf of the Portfolio, to the purchaser of
such securities. The Portfolio is required to pay to the broker-
dealer the amount of any dividends paid on shares sold short.
Finally, to secure its obligation to deliver to such broker-dealer
the securities sold short, the Portfolio must deposit and
continuously maintain in a separate account with the Portfolio's
custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities at
no additional cost. A Portfolio is said to have a short position
in the securities sold until it delivers to the broker-dealer the
securities sold. A Portfolio may close out a short position by
purchasing on the open market and delivering to the broker-dealer
an equal amount of the securities sold short, rather than by
delivering portfolio securities.
Short sales may protect a Portfolio against the risk of
losses in the value of its portfolio securities because any
unrealized losses with respect to such portfolio securities should
be wholly or partially offset by a corresponding gain in the short
position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding
loss in the short position. The extent to which such gains or
losses are offset will depend upon the amount of securities sold
short relative to the amount the Portfolio owns, either directly
or indirectly, and, in the case where the Portfolio owns
convertible securities, changes in the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time a Portfolio replaces the borrowed security, the
Portfolio will incur a loss and if the price declines during this
period, the Portfolio will realize a short-term capital gain. Any
realized short-term capital gain will be decreased, and any
incurred loss increased, by the amount of transaction costs and
any premium, dividend or interest which the Portfolio may have to
pay in connection with such short sale. Certain provisions of the
Internal Revenue Code may limit the degree to which a Portfolio is
able to enter into short sales. There is no limitation on the
amount of each Portfolio's assets that, in the aggregate, may be
deposited as collateral for the obligation to replace securities
borrowed to effect short sales and allocated to segregated
accounts in connection with short sales. Balanced Portfolio may
invest up to 20% of its total assets in short sales against the
box; no other Portfolio will invest more than 5% of its total
assets in short sales against the box.
RULE 144A SECURITIES
Each Portfolio may purchase securities that have been
privately placed but that are eligible for purchase and sale under
Rule 144A under the 1933 Act. That Rule permits certain qualified
institutional buyers, such as the Portfolio, to trade in privately
placed securities that have not been registered for sale under the
1933 Act. The Adviser, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Portfolio's restriction
of investing no more than 15% of its net assets in illiquid
securities. A determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this
determination, the Adviser will consider the trading markets for
the specific security, taking into account the unregistered nature
of a Rule 144A security. In addition, the Adviser could consider
the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market,
and (4) nature of the security and of marketplace trades (e.g.,
the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The liquidity
of Rule 144A securities would be monitored and if, as a result of
changed conditions, it is determined that a Rule 144A security is
no longer liquid, the Portfolio's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to
assure that the Portfolio does not invest more than 15% of its
assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of a Portfolio's
assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities. No Portfolio
expects to invest as much as 5% of its total assets in Rule 144A
securities that have not been deemed to be liquid by the Adviser.
(See restriction (n) under Investment Restrictions.)
LINE OF CREDIT
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, each Portfolio may
establish and maintain a line of credit with a major bank in order
to permit borrowing on a temporary basis to meet share redemption
requests in circumstances in which temporary borrowing may be
preferable to liquidation of portfolio securities.
INTERFUND BORROWING AND LENDING PROGRAM
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, each Fund has received permission to lend
money to, and borrow money from, other mutual funds advised by the
Adviser. A Fund will borrow through the program when borrowing is
necessary or appropriate and the costs are equal to or lower than
the costs of bank loans.
PORTFOLIO TURNOVER
Although the Portfolios do not purchase securities with a
view to rapid turnover, there are no limitations on the length of
time that portfolio securities must be held. At times, Special
Portfolio may invest for short-term capital appreciation.
Portfolio turnover can occur for a number of reasons such as
general conditions in the securities markets, more favorable
investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio
investment. Because of the Portfolios' flexibility of investment
and emphasis on growth of capital, they may have greater portfolio
turnover than that of mutual funds that have primary objectives of
income or maintenance of a balanced investment position. The
future turnover rate may vary greatly from year to year. A high
rate of portfolio turnover in a Portfolio, if it should occur,
would result in increased transaction expenses, which must be
borne by that Portfolio. High portfolio turnover may also result
in the realization of capital gains or losses and, to the extent
net short-term capital gains are realized, any distributions
resulting from such gains will be considered ordinary income for
federal income tax purposes. (See Risks and Investment
Considerations and Distributions and Income Taxes in each Fund's
Prospectus, and Additional Income Tax Considerations in this
Statement of Additional Information.)
OPTIONS ON SECURITIES AND INDEXES
Each Portfolio may purchase and sell put options and call
options on securities, indexes or foreign currencies in
standardized contracts traded on recognized securities exchanges,
boards of trade, or similar entities, or quoted on Nasdaq. Each
Portfolio may purchase agreements, sometimes called cash puts,
that may accompany the purchase of a new issue of bonds from a
dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)
A Portfolio will write call options and put options only if
they are "covered." For example, in the case of a call option on
a security, the option is "covered" if the Portfolio owns the
security underlying the call or has an absolute and immediate
right to acquire that security without additional cash
consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount are held in a segregated
account by its custodian) upon conversion or exchange of other
securities held in its portfolio.
If an option written by a Portfolio expires, the Portfolio
realizes a capital gain equal to the premium received at the time
the option was written. If an option purchased by a Portfolio
expires, the Portfolio realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when a Portfolio desires.
A Portfolio will realize a capital gain from a closing
purchase transaction if the cost of the closing option is less
than the premium received from writing the option, or, if it is
more, the Portfolio will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium
paid to purchase the option, the Portfolio will realize a capital
gain or, if it is less, the Portfolio will realize a capital loss.
The principal factors affecting the market value of a put or a
call option include supply and demand, interest rates, the current
market price of the underlying security or index in relation to
the exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration
date.
A put or call option purchased by a Portfolio is an asset of
the Portfolio, valued initially at the premium paid for the
option. The premium received for an option written by a Portfolio
is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at
the closing price on the exchange on which it is traded or, if not
traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when a Portfolio seeks to close out an option position. If a
Portfolio were unable to close out an option that it had purchased
on a security, it would have to exercise the option in order to
realize any profit or the option would expire and become
worthless. If a Portfolio were unable to close out a covered call
option that it had written on a security, it would not be able to
sell the underlying security until the option expired. As the
writer of a covered call option on a security, a Portfolio
foregoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call
option above the sum of the premium and the exercise price of the
call.
If trading were suspended in an option purchased or written
by a Portfolio, the Portfolio would not be able to close out the
option. If restrictions on exercise were imposed, the Portfolio
might be unable to exercise an option it has purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Each Portfolio may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of
a specified quantity of a financial instrument or the cash value
of an index /2/ at a specified price and time. A public market
exists in futures contracts covering a number of indexes
(including, but not limited to: the Standard & Poor's 500 Index,
the Value Line Composite Index, and the New York Stock Exchange
Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies).
Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts
will be developed and traded.
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/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
- ------------
The Portfolios may purchase and write call and put futures
options. Futures options possess many of the same characteristics
as options on securities, indexes and foreign currencies
(discussed above). A futures option gives the holder the right,
in return for the premium paid, to assume a long position (call)
or short position (put) in a futures contract at a specified
exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true. A
Portfolio might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of
stock prices, anticipated changes in interest rates or currency
fluctuations that might adversely affect either the value of the
Portfolio's securities or the price of the securities that the
Portfolio intends to purchase. Although other techniques could be
used to reduce or increase that Portfolio's exposure to stock
price, interest rate and currency fluctuations, the Portfolio may
be able to achieve its exposure more effectively and perhaps at a
lower cost by using futures contracts and futures options.
Each Portfolio will only enter into futures contracts and
futures options that are standardized and traded on an exchange,
board of trade, or similar entity, or quoted on an automated
quotation system.
The success of any futures transaction depends on the Adviser
correctly predicting changes in the level and direction of stock
prices, interest rates, currency exchange rates and other factors.
Should those predictions be incorrect, a Portfolio's return might
have been better had the transaction not been attempted; however,
in the absence of the ability to use futures contracts, the
Adviser might have taken portfolio actions in anticipation of the
same market movements with similar investment results but,
presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made by a
Portfolio, the Portfolio is required to deposit with its custodian
(or broker, if legally permitted) a specified amount of cash or
U.S. Government securities or other securities acceptable to the
broker ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded
and may be modified during the term of the contract. The initial
margin is in the nature of a performance bond or good faith
deposit on the futures contract, which is returned to the
Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied. A Portfolio expects
to earn interest income on its initial margin deposits. A futures
contract held by a Portfolio is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Portfolio pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract. This
process is known as "marking-to-market." Variation margin paid or
received by a Portfolio does not represent a borrowing or loan by
the Portfolio but is instead settlement between the Portfolio and
the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In
computing daily net asset value, each Portfolio will mark-to-
market its open futures positions.
Each Portfolio is also required to deposit and maintain
margin with respect to put and call options on futures contracts
written by it. Such margin deposits will vary depending on the
nature of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and
other futures positions held by the Portfolio.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Portfolio engaging in the
transaction realizes a capital gain, or if it is more, the
Portfolio realizes a capital loss. Conversely, if an offsetting
sale price is more than the original purchase price, the Portfolio
engaging in the transaction realizes a capital gain, or if it is
less, the Portfolio realizes a capital loss. The transaction
costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the Portfolio's portfolio, and, in the case of
interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in
the Portfolio's portfolio. A decision as to whether, when and how
to use futures contracts involves the exercise of skill and
judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when a Portfolio seeks to close out a futures or futures
option position. The Portfolio would be exposed to possible loss
on the position during the interval of inability to close, and
would continue to be required to meet margin requirements until
the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a
significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue
to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
each Portfolio may also use those investment vehicles, provided
the Board of Trustees determines that their use is consistent with
the Portfolio's investment objective.
A Portfolio will not enter into a futures contract or
purchase an option thereon if, immediately thereafter, the initial
margin deposits for futures contracts held by that Portfolio plus
premiums paid by it for open futures option positions, less the
amount by which any such positions are "in-the-money," /3/ would
exceed 5% of the Portfolio's total assets.
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/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
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When purchasing a futures contract or writing a put option on
a futures contract, a Portfolio must maintain with its custodian
(or broker, if legally permitted) cash or cash equivalents
(including any margin) equal to the market value of such contract.
When writing a call option on a futures contract, the Portfolio
similarly will maintain with its custodian cash or cash
equivalents (including any margin) equal to the amount by which
such option is in-the-money until the option expires or is closed
out by the Portfolio.
A Portfolio may not maintain open short positions in futures
contracts, call options written on futures contracts or call
options written on indexes if, in the aggregate, the market value
of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent the Portfolio has
written call options on specific securities in its portfolio, the
value of those securities will be deducted from the current market
value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," each Portfolio will use commodity futures or commodity
options contracts solely for bona fide hedging purposes within the
meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the
assets of a Portfolio, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered
into [in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].
TAXATION OF OPTIONS AND FUTURES
If a Portfolio exercises a call or put option that it holds,
the premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by a Portfolio, the difference between the cash
received at exercise and the premium paid is a capital gain or
loss.
If a call or put option written by a Portfolio is exercised,
the premium is included in the proceeds of the sale of the
underlying security (call) or reduces the cost basis of the
security purchased (put). For cash settlement options and futures
options written by a Portfolio, the difference between the cash
paid at exercise and the premium received is a capital gain or
loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by a Portfolio was in-
the-money at the time it was written and the security covering the
option was held for more than the long-term holding period prior
to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
If a Portfolio writes an equity call option /4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
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/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
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A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If a
Portfolio delivers securities under a futures contract, the
Portfolio also realizes a capital gain or loss on those
securities.
For federal income tax purposes, a Portfolio generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on futures,
futures options and non-equity options positions ("year-end mark-
to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held by a
Portfolio: (1) will affect the holding period of the hedged
securities; and (2) may cause unrealized gain or loss on such
securities to be recognized upon entry into the hedge.
If a Portfolio were to enter into a short index future, short
index futures option or short index option position and the
Portfolio's portfolio were deemed to "mimic" the performance of
the index underlying such contract, the option or futures contract
position and the Portfolio's stock positions would be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss
deferral rules.
In order for a Portfolio to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). In addition,
gains realized on the sale or other disposition of securities held
for less than three months must be limited to less than 30% of the
Portfolio's annual gross income. Any net gain realized from
futures (or futures options) contracts will be considered gain
from the sale of securities and therefore be qualifying income for
purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held less than three months, the
Portfolio may be required to defer the closing out of certain
positions beyond the time when it would otherwise be advantageous
to do so.
Each Fund distributes to shareholders annually any net
capital gains that have been recognized for federal income tax
purposes (including year-end mark-to-market gains) on options and
futures transactions. Such distributions are combined with
distributions of capital gains realized on the other investments,
and shareholders are advised of the nature of the payments.
INVESTMENT RESTRICTIONS
The Funds and the Portfolios operate under the following
investment restrictions. No Fund or Portfolio may:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities or repurchase agreements for
such securities, and [Funds only] except that all or substantially
all of the assets of the Fund may be invested in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
[Funds only] except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, [Funds only] except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(5) make loans, although it may (a) lend portfolio securities
and participate in an interfund lending program with other Stein
Roe Funds and Portfolios provided that no such loan may be made
if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the
time of such loans); (b) purchase money market instruments and
enter into repurchase agreements; and (c) acquire publicly-
distributed or privately-placed debt securities;
(6) borrow except that it may (a) borrow for non-leveraging,
temporary or emergency purposes, (b) engage in reverse repurchase
agreements and make other borrowings, provided that the
combination of (a) and (b) shall not exceed 33 1/3% of the value
of its total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law, and (c) enter into futures and options
transactions; it may borrow from banks, other Stein Roe Funds and
Portfolios, and other persons to the extent permitted by
applicable law;
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular
industry, /5/ except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Funds only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or
- ----------------
/5/ For purposes of this investment restriction, International
Portfolio uses industry classifications contained in Morgan
Stanley Capital International Perspective, which is published by
Morgan Stanley, an international investment banking and brokerage
firm.
- ----------------
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions (other than bracketed portions thereof
and, in the case of Advisor Special Fund and Special Portfolio,
other than restrictions 1 and 2) are fundamental policies and may
not be changed without the approval of a "majority of the
outstanding voting securities" as defined above. The Funds and
the Portfolios (and, in the case of Advisor Special Fund and
Special Portfolio, together with restrictions 1 and 2 above) are
also subject to the following non-fundamental restrictions and
policies, which may be changed by the Board of Trustees. None of
the following restrictions shall prevent a Fund from investing all
or substantially all of its assets in another investment company
having the same investment objective and substantially the same
investment policies as the Fund. No Fund or Portfolio may:
(a) invest in any of the following: (i) interests in oil,
gas, or other mineral leases or exploration or development
programs (except readily marketable securities, including but not
limited to master limited partnership interests, that may
represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles,
spreads, or any combination thereof (except that it may enter into
transactions in options, futures, and options on futures); (iii)
shares of other open-end investment companies, except in
connection with a merger, consolidation, acquisition, or
reorganization; and (iv) limited partnerships in real estate
unless they are readily marketable;
(b) invest in companies for the purpose of exercising control
or management;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of the its total assets (valued at time of purchase)
in the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to
be made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets;
(d) purchase or hold securities of an issuer if 5% of the
securities of such issuer are owned by those officers, trustees,
or directors of the Trust or of its investment adviser, who each
own beneficially more than 1/2 of 1% of the securities of that
issuer;
(e) mortgage, pledge, or hypothecate its assets, except as
may be necessary in connection with permitted borrowings or in
connection with options, futures, and options on futures;
(f) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchange or [Advisor International Fund and International
Portfolio only] a recognized foreign exchange;
(g) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(h) [all Funds and Portfolios except Advisor International
Fund and International Portfolio] invest more than 25% of its
total assets (valued at time of purchase) in securities of foreign
issuers (other than securities represented by American Depositary
Receipts (ADRs) or securities guaranteed by a U.S. person);
(i) buy or sell an option on a security, a futures contract,
or an option on a futures contract unless the option, the futures
contract, or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on
a recognized exchange or similar entity;
(j) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(k) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions),
or sell securities short unless (i) it owns or has the right to
obtain securities equivalent in kind and amount to those sold
short at no added cost or (ii) the securities sold are "when
issued" or "when distributed" securities which it expects to
receive in a recapitalization, reorganization, or other exchange
for securities the it contemporaneously owns or has the right to
obtain and provided that transactions in options, futures, and
options on futures are not treated as short sales;
(l) invest more than 5% of its total assets (taken at market
value at the time of a particular investment) in securities of
issuers (other than issuers of federal agency obligations or
securities issued or guaranteed by any foreign country or asset-
backed securities) that, together with any predecessors or
unconditional guarantors, have been in continuous operation for
less than three years ("unseasoned issuers");
(m) [all Funds and Portfolios except Advisor International
Fund and International Portfolio] invest more than 5% of its total
assets (taken at market value at the time of a particular
investment) in restricted securities, other than securities
eligible for resale pursuant to Rule 144A under the Securities Act
of 1933; [Advisor International Fund and International Portfolio
only] invest more than 10% of its total assets (taken at market
value at the time of a particular investment) in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933;
(n) invest more than 15% of its total assets (taken at
market value at the time of a particular investment) in restricted
securities and securities of unseasoned issuers; or
(o) invest more than 15% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities, including repurchase agreements maturing in more than
seven days.
Notwithstanding the foregoing investment restrictions,
International Portfolio may purchase securities pursuant to the
exercise of subscription rights, subject to the condition that
such purchase will not result in International Portfolio's ceasing
to be a diversified investment company. Far Eastern and European
corporations frequently issue additional capital stock by means of
subscription rights offerings to existing shareholders at a price
substantially below the market price of the shares. The failure
to exercise such rights would result in International Portfolio's
interest in the issuing company being diluted. The market for
such rights is not well developed in all cases and, accordingly,
International Portfolio may not always realize full value on the
sale of rights. The exception applies in cases where the limits
set forth in the investment restrictions would otherwise be
exceeded by exercising rights or would have already been exceeded
as a result of fluctuations in the market value of International
Portfolio's portfolio securities with the result that
International Portfolio would be forced either to sell securities
at a time when it might not otherwise have done so, to forego
exercising the rights.
ADDITIONAL INVESTMENT CONSIDERATIONS
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
build wealth for generations, it has been guided by three primary
objectives which it believes are the foundation of a successful
investment program. These objectives are preservation of capital,
limited volatility through managed risk, and consistent above-
average returns, as appropriate for the particular client or
managed account. Because every investor's needs are different,
Stein Roe mutual funds are designed to accommodate different
investment objectives, risk tolerance levels, and time horizons.
In selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
In addition, the Adviser believes that investment in a high
yield fund provides an opportunity to diversify an investment
portfolio because the economic factors that affect the performance
of high-yield, high-risk debt securities differ from those that
affect the performance of high-quality debt securities or equity
securities.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in each Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
and Net Asset Value, and that information is incorporated herein
by reference. It is the responsibility of any investment dealers,
banks, or other institutions, including retirement plan service
providers, through whom you purchase or redeem shares to establish
procedures insuring the prompt transmission to Advisor Trust of
any such purchase order.
The net asset value of each Fund and each Portfolio is
determined on days on which the New York Stock Exchange (the
"NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in
February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays
falls on a Saturday or Sunday, the NYSE will be closed on the
preceding Friday or the following Monday, respectively. Net asset
value will not be determined on days when the NYSE is closed
unless, in the judgment of the Board of Trustees, net asset value
of a Fund should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.
Advisor Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets of Advisor Trust during
any 90-day period for any one shareholder. However, redemptions
in excess of such limit may be paid wholly or partly by a
distribution in kind of securities. If redemptions were made in
kind, the redeeming shareholders might incur transaction costs in
selling the securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, Advisor Trust reserves the right to redeem shares in any
account for their then-current value (which will be promptly paid
to the investor) if at any time the shares in the account do not
have a value of at least $1,000. An investor will be notified
that the value of his account is less than that minimum and
allowed at least 30 days to bring the value of the account up to
at least $1,000 before the redemption is processed. The Agreement
and Declaration of Trust also authorizes Advisor Trust to redeem
shares under certain other circumstances as may be specified by
the Board of Trustees.
Advisor Trust reserves the right to suspend or postpone
redemptions of shares of any Fund during any period when: (a)
trading on the NYSE is restricted, as determined by the Securities
and Exchange Commission, or the NYSE is closed for other than
customary weekend and holiday closings; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c)
an emergency, as determined by the Securities and Exchange
Commission, exists, making disposal of portfolio securities or
valuation of net assets of such Fund not reasonably practicable.
MANAGEMENT
The following table sets forth certain information with
respect to the trustees and officers of Advisor Trust:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AGE WITH THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
Gary A. Anetsberger 41 Senior Vice-President Chief Financial Officer of the Mutual Funds
(4) division of Stein Roe & Farnham Incorporated (the
"Adviser"); senior vice president of the Adviser
since April, 1996; vice president of the Adviser
prior thereto
Timothy K. Armour 48 President; Trustee President of the Mutual Funds division of the
(1)(2)(4) Adviser and director of the Adviser since June,
1992; senior vice president and director of
marketing of Citibank Illinois prior thereto
Jilaine Hummel Bauer 41 Executive Vice-President; General counsel and secretary of the Adviser since
(4) Secretary November 1995; senior vice president of the Adviser
since April, 1992; vice president of the Adviser
prior thereto
Bruno Bertocci 42 Vice-President Vice president of Colonial Management Associates,
Inc. since January, 1996; senior vice president of
the Adviser since May, 1995; global equity portfolio
manager with Rockefeller & Co. prior thereto
Kenneth L. Block 76 Trustee Chairman emeritus of A. T. Kearney, Inc.
(3)(4) (international management consultants)
William W. Boyd (3) 70 Trustee Chairman and director of Sterling Plumbing Group,
(4) Inc. (manufacturer of plumbing products) since
1992; chairman, president, and chief executive
officer of Sterling Plumbing Group, Inc. prior
thereto
David P. Brady 32 Vice-President Vice president of the Adviser since November, 1995;
portfolio manager for the Adviser since 1993;
equity investment analyst, State Farm Mutual
Automobile Insurance Company prior thereto
Thomas W. Butch 40 Executive Vice-President Senior vice president of the Adviser since
September, 1994; first vice president, corporate
communications, of Mellon Bank Corporation prior
thereto
Daniel K. Cantor 37 Vice-President Senior vice president of the Adviser
Lindsay Cook (1)(4) 44 Trustee Senior vice president of Liberty Financial
Companies, Inc. (the indirect parent of the
Adviser)
Philip J. Crosley 50 Vice-President Senior Vice President of the Adviser since
February, 1996; Vice President, Institutional
Sales-Advisor Sales, Invesco Funds Group prior
thereto
E. Bruce Dunn 62 Vice-President Senior vice president of the Adviser
Erik P. Gustafson 33 Vice-President Senior portfolio manager of the Adviser; senior
vice president of the Adviser since April, 1996;
vice president of the Adviser from May, 1994 to
April, 1996; associate of the Adviser from April,
1992 to May, 1994; associate attorney with Fowler
White Burnett Hurley Banick & Strickroot prior
thereto
Douglas A. Hacker 41 Trustee Senior vice president and chief financial officer,
(3)(4) United Airlines, since July, 1994; senior vice
president, finance, United Airlines, February, 1993
to July, 1994; vice president, American Airlines
prior thereto
David P. Harris 32 Vice-President Vice president of Colonial Management Associates,
Inc. since January, 1996; vice president of the
Adviser since May, 1995; global equity portfolio
manager with Rockefeller & Co. prior thereto
Harvey B. Hirschhorn 47 Vice-President Executive vice president, senior portfolio manager, and
chief economist, and investment strategeist of the Adviser;
director of research of the Adviser, 1991 to 1995
Janet Langford Kelly 39 Trustee Senior Vice President, Secretary and General
(3)(4) Counsel, Sara Lee Corporation (branded, packaged,
consumer-products manufacturer), since 1995;
partner, Sidley & Austin (law firm), 1991 through
1994
Eric S. Maddix 33 Vice-President Vice president of the Adviser since November, 1995;
portfolio manager or research assistant for the
Adviser since 1987
Lynn C. Maddox 56 Vice-President Senior vice president of the Adviser
Anne E. Marcel 39 Vice-President Vice president of the Adviser since April, 1996;
manager, Mutual Fund Sales & Services of the
Adviser since October, 1994; supervisor of the
Counselor Department of the Adviser from October,
1992 to October, 1994; vice president of Selected
Financial Services prior thereto
Francis W. Morley 76 Trustee Chairman of Employer Plan Administrators and
(3)(4) Consultants Co. (designer, administrator, and
communicator of employee benefit plans)
Charles R. Nelson 54 Trustee Van Voorhis Professor of Political Economy,
(3)(4) Department of Economics of the University of
Washington
Nicolette D. Parrish 47 Vice-President; Senior compliance administrator and assistant
(4) Assistant Secretary secretary of the Adviser since November, 1995;
senior legal assistant for the Adviser prior
thereto
Richard B. Peterson 56 Vice-President Senior vice president of the Adviser since June,
1991; officer of State Farm Investment Management
Corp. prior thereto
Cynthia A. Prah (4) 34 Vice-President Manager of Shareholder Transaction Processing for
the Adviser
Sharon R. Robertson 35 Controller Accounting manager for the Adviser's Mutual Funds
(4) division
Janet B. Rysz (4) 41 Assistant Secretary Senior compliance administrator and assistant
secretary of the Adviser
Gloria J. Santella 39 Vice-President Senior vice president of the Adviser since
November, 1995; vice president of the Adviser
prior thereto
Thomas P. Sorbo 36 Vice-President Senior vice president of the Adviser since January,
1994; vice president of the Adviser from September,
1992 to December, 1993; associate of Travelers
Insurance Company prior thereto
Thomas C. Theobald 59 Trustee Managing director, William Blair Capital Partners
(3)(4) (private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation, 1987-1994
Heidi J. Walter (4) 29 Vice-President Legal counsel for the Adviser since March, 1995;
associate with Beeler Schad & Diamond, P.C., prior
thereto
Stacy H. Winick (4) 31 Vice-President Senior legal counsel for the Adviser since October,
1996; associate of Bell, Boyd & Lloyd (law firm), June,
1993 to September, 1996; associate of Debevoise &
Plimpton prior thereto
Hans P. Ziegler (4) 55 Executive Vice-President Chief executive officer of the Adviser since May,
1994; president of the Investment Counsel division
of the Adviser from July, 1993 to June, 1994;
president and chief executive officer, Pitcairn
Financial Management Group prior thereto
Margaret O. Zwick(4) 30 Treasurer Compliance manager for the Adviser's Mutual Funds
division since August 1995; compliance accountant,
January 1995 to July 1995; section manager, January
1994 to January 1995; supervisor, February 1990 to
December 1993
</TABLE>
_________________________
(1) Trustee who is an "interested person" of Advisor Trust and of
the Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
(4) This person holds the corresponding officer or trustee
position with the Base Trust.
Certain of the trustees and officers of Advisor Trust and
Base Trust are trustees or officers of other investment companies
managed by the Adviser. Mr. Armour, Ms. Bauer, Mr. Cook, and Ms.
Walter are vice presidents of the Fund's distributor, Liberty
Securities Corporation. The address of Mr. Block is 11 Woodley
Road, Winnetka, Illinois 60093; that of Mr. Boyd is 2900 Golf
Road, Rolling Meadows, Illinois 60008; that of Mr. Cook is 600
Atlantic Avenue, Boston, Massachusetts 02210; that of Mr. Hacker
is P.O. Box 66100, Chicago, IL 60666; that of Ms. Kelly is Three
First National Plaza, Chicago, Illinois 60602; that of Mr. Morley
is 20 North Wacker Drive, Suite 2275, Chicago, Illinois 60606;
that of Mr. Nelson is Department of Economics, University of
Washington, Seattle, Washington 98195; that of Mr. Theobald is
Suite 3300, 222 West Adams Street, Chicago, IL 60606; that of
Messrs. Bertocci, Cantor, and Harris is 1330 Avenue of the
Americas, New York, New York 10019; and that of the other officers
is One South Wacker Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from Advisor Trust. In compensation for
their services to Advisor Trust, trustees who are not "interested
persons" of Advisor Trust or the Adviser are paid an annual
retainer of $8,000 (divided equally among the series of Advisor
Trust) plus an attendance fee from each series for each meeting of
the Board or standing committee thereof attended at which business
for that series is conducted. The attendance fees (other than for
a Nominating Committee meeting) are based on each series' net
assets as of the preceding December 31. For a series with net
assets of less than $50 million, the fee is $50 per meeting; with
$51 to $250 million, the fee is $200 per meeting; with $251
million to $500 million, $350; with $501 million to $750 million,
$500; with $751 million to $1 billion, $650; and with over $1
billion in net assets, $800. For Advisor High Yield Fund and any
other series of Advisor Trust participating in the master
fund/feeder fund structure, the trustees' attendance fee is paid
solely by the master portfolio. Each non-interested trustee also
receives $500 from Advisor Trust for attending each meeting of the
Nominating Committee. Advisor Trust has no retirement or pension
plan. The following table sets forth compensation paid to the
trustees by the Stein Roe Fund complex:
Estimated
Compensation from Total Compensation
Stein Roe Advisor from the Stein Roe
Trust for Fiscal Fund Complex for
Year Ending the year ended
Name of Trustee September 30, 1997* September 30, 1996**
- ------------------ ------------------- --------------------
Timothy K. Armour -0- -0-
Lindsay Cook -0- -0-
Janet Langford Kelly $6,000 -0-
Douglas A. Hacker 8,000 $11,650
Thomas C. Theobald 8,000 11,650
Kenneth L. Block 8,000 81,817
William W. Boyd 8,000 88,317
Francis W. Morley 8,000 82,017
Charles R. Nelson 8,000 88,317
Gordon R. Worley 2,000 82,217
_______________
* Assuming less than $50 million in net assets and no nominating
committee meeting held during the period.
** During this period, the Stein Roe Fund Complex consisted of six
series of Stein Roe Income Trust, four series of Stein Roe
Municipal Trust, eight series of Stein Roe Investment Trust,
and one series of SR&F Base Trust. Messrs. Hacker and Theobald
were elected trustees of those Trusts on June 18, 1996, and,
therefore, did not receive any compensation for the year ended
June 30, 1996. Mr. Worley retired as a trustee on December 31,
1996; and Ms. Kelly became a trustee on January 1, 1997.
PRINCIPAL SHAREHOLDERS
As of the date of this Statement of Additional Information,
each Fund had only one shareholder, _____, which held ___ shares
of each Fund.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides administrative
services to each Fund and each Portfolio and portfolio management
services to each Portfolio. The Adviser is a wholly owned
subsidiary of SteinRoe Services Inc. ("SSI"), the Funds' transfer
agent, which is a wholly owned subsidiary of Liberty Financial
Companies, Inc. ("Liberty Financial"), which is a majority owned
subsidiary of LFC Holdings, Inc., which is a wholly owned
subsidiary of Liberty Mutual Equity Corporation, which is a wholly
owned subsidiary of Liberty Mutual Insurance Company. Liberty
Mutual Insurance Company is a mutual insurance company,
principally in the property/casualty insurance field, organized
under the laws of Massachusetts in 1912.
The directors of the Adviser are Kenneth R. Leibler, Harold
W. Cogger, C. Allen Merritt, Jr., Timothy K. Armour, and Hans P.
Ziegler. Mr. Leibler is President and Chief Executive Officer of
Liberty Financial; Mr. Cogger is Executive Vice President of
Liberty Financial; Mr. Merritt is Senior Vice President and
Treasurer of Liberty Financial; Mr. Armour is President of the
Adviser's Mutual Funds division; and Mr. Ziegler is Chief
Executive Officer of the Adviser. The business address of Messrs.
Leibler, Cogger, and Merritt is Federal Reserve Plaza, Boston,
Massachusetts 02210; and that of Messrs. Armour, and Ziegler is
One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of December 31, 1996, the Adviser
managed over $26.7 billion in assets: over $8 billion in equities
and over $18.7 billion in fixed income securities (including $1.6
billion in municipal securities). The $26.7 billion in managed
assets included over $7.5 billion held by open-end mutual funds
managed by the Adviser (approximately 16% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 227,000 shareholders. The $7.5 billion in
mutual fund assets included over $743 million in over 47,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 6,500 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At December 31, 1996, the Adviser
employed 19 research analysts and 55 account managers. The
average investment-related experience of these individuals was 22
years.
Please refer to the description of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under Management and Fee
Table in each Prospectus, which is incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to the Funds, and bears any sales or promotional
expenses. Each Fund pays all expenses other than those paid by
the Adviser, including but not limited to printing and postage
charges and securities registration and custodian fees and
expenses incidental to its organization.
Each Fund's administrative agreement provides that the
Adviser shall reimburse the Fund to the extent that total annual
expenses of the Fund (including fees paid to the Adviser, but
excluding taxes, interest, commissions and other normal charges
incident to the purchase and sale of portfolio securities, and
expenses of litigation to the extent permitted under applicable
state law) exceed the applicable limits prescribed by any state in
which shares of the Fund are being offered for sale to the public;
provided, however, the Adviser is not required to reimburse a Fund
an amount in excess of fees paid by the Fund under that agreement
for such year. In addition, in the interest of further limiting
expenses of a Fund, the Adviser may voluntarily waive its
management fee and/or absorb certain expenses for a Fund, as
described under Fee Table in its Prospectus. Any such
reimbursement will enhance the yield of such Fund.
Each Portfolio's management agreement provides that neither
the Adviser, nor any of its directors, officers, stockholders (or
partners of stockholders), agents, or employees shall have any
liability to Advisor Trust or any shareholder of Advisor Trust for
any error of judgment, mistake of law or any loss arising out of
any investment, or for any other act or omission in the
performance by the Adviser of its duties under the agreement,
except for liability resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties
or from reckless disregard by it of its obligations and duties
under the agreement.
Any expenses that are attributable solely to the
organization, operation, or business of a Fund shall be paid
solely out of that Fund's assets. Any expenses incurred by
Advisor Trust that are not solely attributable to a particular
Fund are apportioned in such manner as the Adviser determines is
fair and appropriate, unless otherwise specified by the Board of
Trustees.
BOOKKEEPING AND ACCOUNTING AGREEMENT
Pursuant to separate agreements with Advisor Trust and Base
Trust, the Adviser receives a fee for performing certain
bookkeeping and accounting services for each Fund and each
Portfolio. For services provided to the Funds, the Adviser
receives an annual fee of $25,000 per Fund plus .0025 of 1% of
average net assets over $50 million.
DISTRIBUTOR
Shares of each Fund are distributed by Liberty Securities
Corporation ("LSC") under a Distribution Agreement as described
under Management in each Prospectus, which is incorporated herein
by reference. The Distribution Agreement continues in effect from
year to year, provided such continuance is approved annually (i)
by a majority of the trustees or by a majority of the outstanding
voting securities of Advisor Trust, and (ii) by a majority of the
trustees who are not parties to the Agreement or interested
persons of any such party. Advisor Trust has agreed to pay all
expenses in connection with registration of its shares with the
Securities and Exchange Commission and auditing and filing fees in
connection with registration of its shares under the various state
blue sky laws and assumes the cost of preparation of prospectuses
and other expenses.
As agent, LSC offers shares of each Fund to investors in
states where the shares are qualified for sale, at net asset
value, without sales commissions or other sales load to the
investor. LSC offers the Funds' shares only on a best-efforts
basis.
The trustees of Advisor Trust have adopted a plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plan").
The Plan provides that, as compensation for the promotion and
distribution of shares of the Funds including its expenses related
to the sale and promotion of Fund shares, the Distributor receives
from each 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 Fund shares and provide services to
each 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
a Fund during any year may be more or less than the cost of
distribution or other services provided to the 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.
TRANSFER AGENT AND SHAREHOLDER SERVICING
SSI performs certain transfer agency services for Advisor
Trust, as described under Management in each Prospectus. For
performing these services, SSI receives from each Fund a fee based
on an annual rate of 0.05% of the Fund's average net assets.
Advisor Trust believes the charges by SSI to the Funds are
comparable to those of other companies performing similar
services. (See Investment Advisory Services.)
Some intermediaries that maintain nominee accounts with the
Funds 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.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Advisor Trust and Base Trust. It is responsible for holding all
securities and cash, receiving and paying for securities
purchased, delivering against payment securities sold, receiving
and collecting income from investments, making all payments
covering expenses, and performing other administrative duties, all
as directed by authorized persons. The custodian does not
exercise any supervisory function in such matters as purchase and
sale of portfolio securities, payment of dividends, or payment of
expenses.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S.
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network and foreign
depositories ("foreign sub-custodians"). Each of the domestic and
foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with
regulations under the Investment Company Act of 1940.
The Board of Trustees of each Trust reviews, at least
annually, whether it is in the best interest of each Portfolio,
each Fund, and its shareholders to maintain assets in each of the
countries in which it invests with particular foreign sub-
custodians in such countries, pursuant to contracts between such
respective foreign sub-custodians and the Bank. The review
includes an assessment of the risks of holding assets in any such
country (including risks of expropriation or imposition of
exchange controls), the operational capability and reliability of
each such foreign sub-custodian, and the impact of local laws on
each such custody arrangement. The Board of Trustees is aided in
its review by the Bank, which has assembled the network of foreign
sub-custodians utilized, as well as by the Adviser and counsel.
However, with respect to foreign sub-custodians, there can be no
assurance that a Fund, and the value of its shares, will not be
adversely affected by acts of foreign governments, financial or
operational difficulties of the foreign sub-custodians,
difficulties and costs of obtaining jurisdiction over, or
enforcing judgments against, the foreign sub-custodians, or
application of foreign law to foreign sub-custodial arrangements.
Accordingly, an investor should recognize that the non-investment
risks involved in holding assets abroad are greater than those
associated with investing in the United States.
The Portfolios may invest in obligations of the custodian and
may purchase or sell securities from or to the custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for each Fund and each
Portfolio are Arthur Andersen LLP, 33 West Monroe Street, Chicago,
Illinois 60603. The accountants audit and report on the annual
financial statements, review certain regulatory reports and the
federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by a Trust.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
each Portfolio's portfolio securities and options and futures
contracts. The Adviser's overriding objective in effecting
portfolio transactions is to seek to obtain the best combination
of price and execution. The best net price, giving effect to
brokerage commissions, if any, and other transaction costs,
normally is an important factor in this decision, but a number of
other judgmental factors may also enter into the decision. These
include: the Adviser's knowledge of negotiated commission rates
currently available and other current transaction costs; the
nature of the security being traded; the size of the transaction;
the desired timing of the trade; the activity existing and
expected in the market for the particular security;
confidentiality; the execution, clearance and settlement
capabilities of the broker or dealer selected and others which are
considered; the Adviser's knowledge of the financial stability of
the broker or dealer selected and such other brokers or dealers;
and the Adviser's knowledge of actual or apparent operational
problems of any broker or dealer. Recognizing the value of these
factors, a Portfolio may pay a brokerage commission in excess of
that which another broker or dealer may have charged for effecting
the same transaction. Evaluations of the reasonableness of
brokerage commissions, based on the foregoing factors, are made on
an ongoing basis by the Adviser's staff while effecting portfolio
transactions. The general level of brokerage commissions paid is
reviewed by the Adviser, and reports are made annually to the
Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for a
Portfolio, the Adviser often selects a broker or dealer that has
furnished it with research products or services such as research
reports, subscriptions to financial publications and research
compilations, compilations of securities prices, earnings,
dividends, and similar data, and computer data bases, quotation
equipment and services, research-oriented computer software and
services, and services of economic and other consultants.
Selection of brokers or dealers is not made pursuant to an
agreement or understanding with any of the brokers or dealers;
however, the Adviser uses an internal allocation procedure to
identify those brokers or dealers who provide it with research
products or services and the amount of research products or
services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate,
including the Portfolios, to such brokers or dealers to ensure the
continued receipt of research products or services the Adviser
feels are useful. In certain instances, the Adviser receives from
brokers and dealers products or services that are used both as
investment research and for administrative, marketing, or other
non-research purposes. In such instances, the Adviser makes a
good faith effort to determine the relative proportion of such
products or services which may be considered as investment
research. The portion of the costs of such products or services
attributable to research usage may be defrayed by the Adviser
(without prior agreement or understanding, as noted above) through
brokerage commissions generated by transactions by clients
(including the Portfolios), while the portion of the costs
attributable to non-research usage of such products or services is
paid by the Adviser in cash. No person acting on behalf of a
Portfolio is authorized, in recognition of the value of research
products or services, to pay a commission in excess of that which
another broker or dealer might have charged for effecting the same
transaction. The Adviser may receive research in connection with
selling concessions and designations in fixed price offerings in
which the Portfolios participate. Research products or services
furnished by brokers and dealers may be used in servicing any or
all of the clients of the Adviser and not all such research
products or services are used in connection with the management of
the Portfolios.
With respect to a Portfolio's purchases and sales of
portfolio securities transacted with a broker or dealer on a net
basis, the Adviser may also consider the part, if any, played by
the broker or dealer in bringing the security involved to the
Adviser's attention, including investment research related to the
security and provided to the Portfolio.
Advisor Trust and Base Trust have arranged for the custodian
to act as a soliciting dealer to accept any fees available to the
custodian as a soliciting dealer in connection with any tender
offer for portfolio securities. The custodian will credit any
such fees received against its custodial fees. In addition, the
Board of Trustees has reviewed the legal developments pertaining
to and the practicability of attempting to recapture underwriting
discounts or selling concessions when portfolio securities are
purchased in underwritten offerings. However, the Board has been
advised by counsel that recapture by a mutual fund currently is
not permitted under the Rules of Fair Practice of the National
Association of Securities Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund and each Portfolio intend to comply with the
special provisions of the Internal Revenue Code that relieve it of
federal income tax to the extent of its net investment income and
capital gains currently distributed to shareholders.
Because dividend and capital gain distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would
nonetheless be taxable to him, even if the net asset value of
shares were reduced below his cost. However, for federal income
tax purposes the shareholder's original cost would continue as his
tax basis.
Each Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent a Portfolio invests in foreign securities, it
may be subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% its total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Portfolio may file an election with the Internal
Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid even though not actually received, (ii)
treat such respective pro rata shares as foreign income taxes paid
by them, and (iii) deduct such pro rata shares in computing their
taxable incomes, or, alternatively, use them as foreign tax
credits, subject to applicable limitations, against their United
States income taxes. Shareholders who do not itemize deductions
for federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign taxes paid by the Fund,
although such shareholders will be required to include their share
of such taxes in gross income. Shareholders who claim a foreign
tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents
income from each foreign country, if the Fund qualifies to pass
along such credit.
Passive Foreign Investment Companies. International
Portfolio may purchase the securities of certain foreign
investment funds or trusts called passive foreign investment
companies ("PFICs"). In addition to bearing their proportionate
share of International Portfolio's expenses (management fees and
operating expenses), shareholders will also indirectly bear
similar expenses of PFICs. Capital gains on the sale of PFIC
holdings will be deemed to be ordinary income regardless of how
long International Portfolio holds its investment. In addition,
International Portfolio may be subject to corporate income tax and
an interest charge on certain dividends and capital gains earned
from PFICs, regardless of whether such income and gains are
distributed to shareholders.
In accordance with tax regulations, International Portfolio
intends to treat PFICs as sold on the last day of International
Portfolio's fiscal year and recognize any gains for tax purposes
at that time; losses will not be recognized. Such gains will be
considered ordinary income which International Portfolio will be
required to distribute even though it has not sold the security
and received cash to pay such distributions.
INVESTMENT PERFORMANCE
A Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the
net asset value per share for a period. A "Total Return
Percentage" may be calculated by dividing the value of a share at
the end of a period 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 computed by finding the average annual
compounded rate that would equate a hypothetical initial amount
invested of $1,000 to the ending redeemable value.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
The Funds commenced operations on the date of this Statement
of Additional Information, and have no past performance. However,
seven mutual funds that are series of Stein Roe Investment Trust,
each of which has a name similar to a Fund, the same investment
objective, and substantially the same investment policies as that
Fund (each a "Corresponding Fund"), also invest in the seven
Portfolios described herein. The following information shows the
total return for each Corresponding Fund, and should not be
interpreted as indicative of the Funds' future performance. The
Corresponding Funds have a different fee structure than the Funds
(and do not pay 12b-1 fees). Had these fees been reflected, the
total returns shown below would have been lower. The average
annual returns for the Corresponding Funds as of September 30,
1996 were as follows:
TOTAL RETURN AVERAGE ANNUAL
PERCENTAGE TOTAL RETURN
------------ --------------
Stein Roe Growth & Income Fund
1 year 22.67% 22.67%
5 years 107.90 15.76
Life of Fund* 189.30 11.80
Stein Roe Balanced Fund
1 year 14.83 14.83
5 years 67.99 10.93
10 years 173.47 10.58
Stein Roe Growth Stock Fund
1 year 21.04 21.04
5 years 58.40 13.75
10 years 274.49 14.12
Stein Roe Young Investor Fund
1 year 35.55 35.55
Life of Fund* 95.13 31.82
Stein Roe Special Fund
1 year 17.89 17.89
5 years 91.27 13.85
10 years 323.62 15.53
Stein Roe Special Venture Fund
1 year 31.81 31.81
Life of Fund* 67.35 30.22
Stein Roe International Fund
1 year 8.23 8.23
Life of Fund* 13.37 4.98
______________________________________
*Life of Fund is from its date of public offering: 3/23/87 for
Stein Roe Growth & Income Fund, 10/17/94 for Stein Roe Special
Venture Fund, 4/29/94 for Stein Roe Young Investor Fund, and
3/1/94 for Stein Roe International Fund.
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of a Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing a Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
In advertising and sales literature, a Fund may compare its
performance with that of other mutual funds, indexes or averages
of other mutual funds, indexes of related financial assets or
data, and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes or averages differs from that of the
Funds. Comparison of a Fund to an alternative investment should
be made with consideration of differences in features and expected
performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which the Funds
believe to be generally accurate. A Fund may also note its
mention or recognition in newspapers, magazines, or other media
from time to time. However, the Funds assume no responsibility
for the accuracy of such data. Newspapers and magazines which
might mention the Funds include, but are not limited to, the
following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Associated Press
Barron's
Bloomberg
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Decoder
Gourmet
Individual Investor
Investment Adviser
Investment Dealers' Digest
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
All of the Funds may compare their performance to the
Consumer Price Index (All Urban), a widely recognized measure of
inflation.
Each Fund's performance may be compared to the following
indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange Composite Index
Standard & Poor's 400 Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
(These indexes are widely (These indexes generally reflect
recognized indicators of the performance of stocks
general U.S. stock market traded in the indicated
results.) markets.)
In addition, the Funds may compare performance as indicated
below:
BENCHMARK FUND(S)
- ------------------------------------- ----------------------------
Lipper Balanced Fund Average Advisor Balanced Fund
Lipper Balanced Fund Index Advisor Balanced Fund
Lipper Equity Fund Average All Funds
Lipper General Equity Fund Average All Funds
Lipper Growth & Income Fund Average Advisor Growth & Income Fund
Lipper Growth & Income Fund Index Advisor Growth & Income Fund
Lipper Growth Fund Average Advisor Growth Stock Fund, Advisor
Young Investor Fund, Advisor
Special Fund
Lipper Growth Fund Index Advisor Growth Stock Fund, Advisor
Young Investor Fund, Advisor
Special Fund
Lipper International & Global Funds Average Advisor International Fund
Lipper International Fund Index Advisor International Fund
Lipper Small Company Growth Fund Average Advisor Special Venture Fund
Lipper Small Company Growth Fund Index Advisor Special Venture Fund
Morningstar All Equity Funds Average Advisor Young Investor Fund,
Advisor International Fund
Morningstar Advisor Balanced Fund Average Advisor Balanced Fund
Morningstar Domestic Stock Average All Funds except Advisor
International Fund
Morningstar Equity Fund Average Advisor Young Investor Fund,
Advisor International Fund
Morningstar General Equity Average* Advisor Young Investor Fund,
Advisor International Fund
Morningstar Growth & Income Fund Average Advisor Growth & Income Fund
Morningstar Growth Fund Average Advisor Growth Stock Fund, Young
Investor Fund, Advisor Special
Fund
Morningstar Hybrid Fund Average Advisor Balanced Fund, Advisor
Young Investor Fund, Advisor
International Fund
Morningstar International Stock Average Advisor International Fund
Morningstar Small Company Growth Fund
Average Advisor Special Venture Fund
Morningstar Total Fund Average All Funds
Morningstar U.S. Diversified Average Advisor Young Investor Fund,
Advisor International Fund
Value Line Index Advisor Special Fund, Advisor
Widely recognized indicator of Special Venture Fund
the performance of small- and medium-
sized company stocks)
The Lipper averages are unweighted averages of total return
performance as classified, calculated, and published by Lipper.
Lipper Growth Fund index reflects the net asset value weighted
total return of the largest thirty growth funds and thirty growth
and income funds, respectively, as calculated and published by
Lipper.
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. The Funds may also use
comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent
service. Should Lipper or another service reclassify a Fund to a
different category or develop (and place a Fund into) a new
category, that Fund may compare its performance or ranking with
those of other funds in the newly assigned category, as published
by the service.
A Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function
of the fund's monthly returns less the 3-month T-bill return) from
its load-adjusted total return score. This numerical score is
then translated into rating categories, with the top 10% labeled
five star, the next 22.5% labeled four star, the next 35% labeled
three star, the next 22.5% labeled two star, and the bottom 10%
one star. A high rating reflects either above-average returns or
below-average risk, or both.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Funds may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
_____________________
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 150,484 82,067 97,780 117,014
20 62,943 75,543 91,947 59,362 68,109 78,351
15 41,684 47,304 54,099 40,358 44,675 49,514
10 24,797 26,820 29,098 24,453 26,165 28,006
5 11,178 11,613 12,072 11,141 11,546 11,965
1 2,072 2,096 2,121 2,072 2,096 2,121
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
APPENDIX--RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However,
the ratings are general and are not absolute standards of quality
or guarantees as to the creditworthiness of an issuer.
Consequently, the Adviser believes that the quality of debt
securities in which a Fund invests should be continuously reviewed
and that individual analysts give different weightings to the
various factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest
is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within the
major rating categories. Foreign debt is rated on the same basis
as domestic debt measuring the creditworthiness of the issuer;
ratings of foreign debt do not take into account currency exchange
and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or
currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will
exhibit no volatility or variability in total return.
_______________________
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. Financial statements included in Part A of this
Registration Statement: None.
2. Financial statements included in Part B of this Registration
Statement:
(a) Balance sheet as of ______, 1997.*
(b) Report of independent auditors.*
(b) Exhibits:
1. Agreement and Declaration of Trust as amended through
December 13, 1996.
2. By-Laws of Registrant. (Incorporated by reference to
Exhibit 1 to Registrant's Registration Statement on
Form N-1A, No. 333-17255.)
3. None.
4. None.
5. None.
6. Underwriting agreement.*
7. None.
8. Custodian contract.*
9. (a) Shareholder servicing and transfer agency agreement.*
(b) Administrative agreement.*
(c) Accounting and bookkeeping agreement.*
10. Opinion and consent of Bell, Boyd & Lloyd.
11. Consent of Arthur Andersen LLP.*
12. None.
13. Subscription agreement.*
14. None.
15. Form of 12b-1 plan and agreement.
16. Inapplicable.
17. Inapplicable.
18. Inapplicable.
19. (Miscellaneous.) Fund Application.*
_____________
* To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlling, controlled by, or under common control with other
persons within the meaning of this Item. See "Investment Advisory
Services," "Management," and "Transfer Agent" in the Statement of
Additional Information, each of which is incorporated herein by
reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
Title of Series as of January 29, 1996
--------------- -----------------------
Stein Roe Advisor Growth & Income Fund 0
Stein Roe Advisor International Fund 0
Stein Roe Advisor Young Investor Fund 0
Stein Roe Advisor Special Venture Fund 0
Stein Roe Advisor Balanced Fund 0
Stein Roe Advisor Growth Stock Fund 0
Stein Roe Advisor Special Fund 0
ITEM 27. INDEMNIFICATION.
Article VIII of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including persons who serve or
have served at Registrant's request as directors, officers, or
trustees of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act")
provides that neither the Agreement and Declaration of Trust nor
the By-Laws of Registrant, nor any other instrument pursuant to
which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section 17(h) of the 1940 Act, Article VIII shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article VIII does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable to the Registrant or its shareholders
by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office, indemnification is permitted under Article VIII if (a)
approved as in the best interest of the Registrant, after notice
that it involves such indemnification, by at least a majority of
the Trustees who are disinterested persons are not "interested
persons" as defined in Section 2(a)(19) of the 1940 Act
("disinterested trustees"), upon determination, based upon a review
of readily available facts (but not a full trial-type inquiry) that
such Covered Person is not liable to the Registrant or its
shareholders by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office or (b) there has been
obtained a opinion in writing of independent legal counsel, based
upon a review of readily available facts (but not a full trial-type
inquiry) to the effect that such indemnification would not protect
such Covered Person against any liability to the Trust to which
such Covered Person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; and
(iii) Registrant will not advance expenses, including counsel
fees(but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), incurred by a Covered Person
unless Registrant receives an undertaking by or on behalf of the
Covered Person to repay the advance if it is ultimately determined
that indemnification of such expenses is not authorized by Article
VII and (a) the Covered Person provides security for his
undertaking, or (b) Registrant is insured against losses arising by
reason of such Covered Person's failure to fulfill his undertaking,
or (c) a majority of the disinterested trustees of Registrant or an
independent legal counsel as expressed in a written opinion,
determine, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that
the Covered Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article VIII does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article VIII as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction to have been liable to the
Trust or its shareholders by reason of wilful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Article VIII also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser, and persons
affiliated with them are insured against certain expenses in
connection with the defense of actions, suits, or proceedings, and
certain liabilities that might be imposed as a result of such
actions, suits, or proceedings. Registrant will not pay any
portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of wilful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Registrant, its trustees, officers, employees and representatives
and each person, if any, who controls the Registrant within the
meaning of Section 15 of the Securities Act of 1933 are
indemnified by the distributor of Registrant's shares (the
"distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of wilful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly-owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary of
LFC Holdings, Inc., which in turn is a subsidiary of Liberty Mutual
Equity Corporation, which in turn is a subsidiary of Liberty Mutual
Insurance Company. The Adviser acts as investment adviser to
individuals, trustees, pension and profit-sharing plans, charitable
organizations, and other investors. In addition to Registrant, it
also acts as investment adviser to other investment companies
having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
Stein Roe Investment Trust, Stein Roe Municipal Trust, SR&F Base
Trust, Stein Roe Income Trust, Stein Roe Institutional Trust, Stein
Roe Trust, SteinRoe Variable Investment Trust and LFC Utilities
Trust, investment companies managed by the Adviser. (The listed
entities are located at One South Wacker Drive, Chicago, Illinois
60606, except for SteinRoe Variable Investment Trust, which is
located at Federal Reserve Plaza, Boston, MA 02210 and LFC Utilities
Trust, which is located at One Financial Center, Boston, MA 02111.)
A list of such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Hans P. Ziegler Director, President, Vice Chairman
Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
Michael T. Kennedy Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn 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
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Thomas W. Butch Vice-President
Joanne T. Costopoulos Vice-President
Philip J. Crosley Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE TRUST and STEIN ROE ADVISOR TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn 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
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INSTITUTIONAL TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Securities
Corporation, is a wholly owned subsidiary of Liberty Investment
Services, Inc., a wholly owned subsidiary of Liberty Financial
Services, Inc. which, in turn, is a wholly owned subsidiary of
Liberty Financial Companies, Inc. Liberty Financial Companies,
Inc. is a public corporation whose majority shareholder is LFC
Holdings, Inc., a wholly owned subsidiary of Liberty Mutual Equity
Corporation. Liberty Mutual Equity Corporation is a wholly owned
subsidiary of Liberty Mutual Insurance Company.
Liberty Securities Corporation is principal underwriter for the
following investment companies:
Stein Roe Income Trust
Stein Roe Municipal Trust
Stein Roe Investment Trust
Stein Roe Insitutional Trust
Stein Roe Advisor Trust
Stein Roe Trust
Set forth below is information concerning the directors and
officers of Liberty Securities Corporation:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------------------ -------------------- ---------------
Porter P. Morgan Chairman of the Board; Director None
Frank L. Tarantino President; Chief Operating
Officer; Director None
Robert L. Spadafora Executive Vice President -
Sales and Marketing None
John T. Treece, Jr. Senior Vice President - Operations None
John W. Reading Senior Vice President and
Assistant Secretary None
Valerie A. Arendell Senior Vice President - Sales None
Gerald H. Stanney, Vice President and Compliance
Jr. Officer (Boston) None
Jilaine Hummel Bauer Vice President and Compliance Exec. V-P &
Officer (Chicago) Secretary
Bruce F. Ripepi Vice President, General Counsel None
and Assistant Secretary
Timothy K. Armour Vice President President,
Trustee
Lindsay Cook Vice President Trustee
Ralph E. Nixon Vice President None
Joyce B. Riegel Vice President None
Heidi J. Walter Vice President V-P
Glenn E. Williams Assistant Vice President None
Philip J. Iudice Treasurer None
John A. Benning Secretary None
John A. Davenport Assistant Secretary None
Marjorie M. Pluskota Assistant Secretary None
C. Allen Merritt, Jr. Assistant Treasurer; Assistant
Secretary; Director None
The principal business address of Mr. Armour,Ms. Bauer, Ms.
Pluskota, Ms. Riegel and Ms. Walter is One South Wacker Drive,
Chicago, IL 60606; that of Mr. Williams is Two Righter Parkway,
Wilmington, DE 19803; and that of the other officers is 600
Atlantic Avenue, Boston, MA 02210-2214.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Jilaine Hummel Bauer
Executive Vice-President and Secretary
One South Wacker Drive, Suite 3500
Chicago, Illinois 60606
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to file a post-effective amendment
using financial statements, which need not be certified, within
four to six months from the effective date of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and
State of Illinois on the 29th day of January, 1997.
STEIN ROE ADVISOR TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
TIMOTHY K. ARMOUR President and Trustee January 29, 1997
Timothy K. Armour
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President January 29, 1997
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller January 29, 1997
Sharon R. Robertson
Principal Accounting Officer
KENNETH L. BLOCK Trustee January 29, 1997
Kenneth L. Block
WILLIAM W. BOYD Trustee January 29, 1997
William W. Boyd
LINDSAY COOK Trustee January 29, 1997
Lindsay Cook
DOUGLAS A. HACKER Trustee January 29, 1997
Douglas A. Hacker
FRANCIS W. MORLEY Trustee January 29, 1997
Francis W. Morley
CHARLES R. NELSON Trustee January 29, 1997
Charles R. Nelson
THOMAS C. THEOBALD Trustee January 29, 1997
Thomas C. Theobald
________________ Trustee _________________
Janet Langford Kelly
*This Registration Statement has also been signed by the above persons
in their capacities as trustees and officers of SR&F Base Trust
<PAGE>
STEIN ROE ADVISOR TRUST
INDEX TO EXHIBITS FILED WITH THIS REGISTRATION STATEMENT
Exhibit
Number Description
- ------- -------------
1 Agreement and Declaration of Trust
10 Opinion and consent of Bell, Boyd & Lloyd
15 12b-1 Plan
EXHIBIT 1
<PAGE>
STEIN ROE ADVISOR TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the duly elected
and qualified Trustees of Stein Roe Advisor Trust, a
voluntary association with transferable shares organized
under the laws of the Commonwealth of Massachusetts pursuant
to an Agreement and Declaration of Trust dated July 31, 1996
(the "Declaration of Trust"), do hereby amend the Declaration
of Trust as follows and hereby consent to such amendment:
Article VI, Section II of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 2. Any holder of Shares of the Trust may by
presentation of a written request, together with his or
her certificates, if any, for such Shares, in proper
form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the
Trust, redeem his or her Shares for the net asset value
thereof determined and computed in accordance with the
provisions of this Section 2 and the provisions of
Section 7 of this Article VI.
Upon receipt by the Trust or its transfer agent of
such written request for redemption of Shares, such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such Shares are tendered in proper order for transfer to
the Trust or determined as of such other time fixed by
the Trustees as may be permitted or required by the 1940
Act, provided that no such tender shall be required in
the case of Shares for which a certificate or
certificates have not been issued, and in such case such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such request has been received or determined at such
other time fixed by the Trustees as may be permitted or
required by the 1940 Act.
The amount payable by the Trust upon redemption shall
be reduced by such redemption fee, if any, as the
Trustees may authorize.
The obligation of the Trust to redeem its Shares of
each series or class as set forth above in this Section
2 shall be subject to the conditions that during any
time of emergency, as hereinafter defined, such
obligation may be suspended by the Trust by or under
authority of the Trustees for such period of periods
during such time of emergency as shall be determined by
or under authority of the Trustees. If there is such a
suspension, any Shareholder may withdraw any demand for
redemption and any tender of Shares which has been
received by the Trust during any such period and any
tender of Shares, the applicable net asset value of
which would but for such suspension be calculated as of
a time during such period. Upon such withdrawal, the
Trust shall return to the Shareholder the certificates
therefor, if any. For the purposes of any such
suspension, "time of emergency" shall mean, either with
respect to all Shares of any series of Shares, any
period during which:
a. the New York Stock Exchange is closed other than for
customary weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust
shall have determined, in compliance with any
applicable rules and regulations of the Securities
and Exchange Commission, either that trading on the
New York Stock Exchange is restricted, or that an
emergency exists as a result of which (i) disposal
by the Trust of securities owned by it is not
reasonably practicable or (ii) it is not reasonably
practicable for the Trust fairly to determine the
current value of its net assets; or
c. the suspension or postponement of such obligations
is permitted by order of the Securities and Exchange
Commission.
The Trust may also purchase, repurchase or redeem
Shares in accordance with such other methods, upon such
other terms and subject to such other conditions as the
Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to
purchase or repurchase is made.
This instrument may be executed in several counterparts,
each of which shall be deemed to be an original, but all
taken together shall be one instrument.
Dated: December 13, 1996
TIMOTHY K. ARMOUR DOUGLAS A. HACKER
Timothy K. Armour Douglas A. Hacker
KENNETH L. BLOCK FRANCIS W. MORLEY
Kenneth L. Block Francis W. Morley
WILLIAM W. BOYD CHARLES R. NELSON
William W. Boyd Charles R. Nelson
LINDSAY COOK THOMAS C. THEOBALD
Lindsay Cook Thomas C. Theobald
GORDON R. WORLEY
Gordan R. Worley
<PAGE>
STEIN ROE ADVISER TRUST
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
Stein Roe Adviser Trust (the "Trust"), a voluntary
association with transferable shares organized under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement
and Declaration of Trust dated July 31, 1996 (the
"Declaration of Trust"), hereby certifies that, pursuant to
the unanimous vote of all trustees at a meeting of the Board
of Trustees held in accordance with the By-Laws of the Trust
on September 13, 1996, the following amendment to the
Declaration of Trust has been duly adopted:
Article I, Section 1, of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 1. The Trust shall be known as "Stein Roe
Advisor Trust" and the Trustees shall conduct the
business of the Trust under that name or any other
name as they may from time to time determine.
IN WITNESS WHEREOF, the Trust has caused this amendment
to be signed and sealed in its name and on its behalf by
Timothy K. Armour, President and Trustee of the Trust, on
Septmber 30, 1996.
STEIN ROE ADVISER TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour,
President and Trustee
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named
Timothy K. Armour, known to me to be the President and a
Trustee of Stein Roe Adviser Trust, and acknowledged the
foregoing instrument to be his free act and deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires: 10/30/97
<PAGE> 1
STEIN ROE ADVISER TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 31st day of July, 1996 by the Trustees
hereunder, and by the holders of shares of beneficial
interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the
business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts
business trust in accordance with the provisions hereinafter
set forth.
NOW, THEREFORE, the Trustees hereby declare that they
will hold all cash, securities and other assets, which they
may from time to time acquire in any manner as Trustees
hereunder, IN TRUST to manage and dispose of the same upon
the following terms and conditions for the pro rata benefit
of the holders from time to time of Shares in this Trust as
hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Name
Section 1. This Trust shall be known as "Stein Roe
Adviser Trust", and the Trustees shall conduct the
business of the Trust under that name or any other name as
they may from time to time determine.
<PAGE> 2
Definitions
Section 2. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business
trust established by this Agreement and Declaration of Trust,
as amended from time to time;
(b) "Trustees" refers to the Trustee or Trustees of the
Trust named herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than one
series of Shares is authorized by the Trustees, the equal
proportionate units into which each series of Shares shall be
divided from time to time or, if more than one class of
Shares of any series is authorized by the Trustees, the equal
proportionate units into which each class of such series of
Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Affiliated Person," "Assignment,"
"Commission," "Interested Person," "Principal Underwriter"
and "Majority Shareholder Vote" (the 67% or 50% requirement
of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) shall have the meanings given
them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to
time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time.
ARTICLE II
PURPOSE
The purpose of the Trust is to engage in the business of
a management investment company and to provide investors a
managed investment primarily in securities, commodities and
debt instruments.
<PAGE> 3
ARTICLE III
SHARES
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in
one or more series as the Trustees may, without Shareholder
approval, authorize. The Trustees may, without Shareholder
approval, divide the Shares of any series into two or more
classes, Shares of each such class having such preferences or
special or relative rights or privileges (including
conversion rights, if any) as the Trustees may determine and
as are not inconsistent with any provision of this
Declaration of Trust. Each series shall be preferred over
all other series in respect of the assets allocated to that
series. The beneficial interest in each series shall at all
times be divided into Shares, without par value, each of
which shall, except as the Trustees may otherwise authorize
in the case of any series that is divided into two or more
classes, represent an equal proportionate interest in the
series with each other Share of the same series, none having
priority or preference over another. The number of Shares
authorized shall be unlimited, and the Shares so authorized
may be represented in part by fractional shares. The
Trustees may from time to time divide or combine the Shares
of any series or class into a greater or lesser number
without thereby changing the proportionate beneficial
interests in the series or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on
the books of the Trust or its transfer or similar agent. No
certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates,
the transfer of Shares and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar
agent of the Trust, as the case may be, shall be conclusive
as to who are the Shareholders of each series and class and
as to the number of Shares of each series and class held from
time to time by each Shareholder.
Investments in the Trust; Assets of the Series
Section 3. The Trustees may accept investments in the
Trust from such persons and on such terms and, subject to any
requirements of law, for such consideration, which may
consist of cash or tangible or intangible property or a
combination thereof, as they from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of each series, together with all income,
earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived
<PAGE> 4
from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received by the Trust for
all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Trust
and are herein referred to as "assets of" such series.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or
other right to receive, purchase or subscribe for any
additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal
property giving only the rights provided in this instrument.
Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of
a Shareholder during the continuance of the Trust shall not
operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the
Trust, shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to
call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
Derivative Claims
Section 6. No Shareholder shall have the right to bring
or maintain any court action, proceeding or claim on behalf
of this Trust or any series without first making demand on
the Trustees requesting the Trustees to bring or maintain
such action, proceeding or claim. Such demand shall be
excused only when the plaintiff makes a specific showing that
irreparable injury to the Trust or series would otherwise
result. Such demand shall be mailed to the Secretary of the
Trust at the Trust's principal office and shall set forth in
reasonable detail the nature of the proposed court action,
proceeding or claim and the essential facts relied upon by
the Shareholder to support the allegations made in the
demand. The Trustees shall consider such demand within 45
days of its receipt by the Trust. In their sole discretion,
the Trustees may submit the matter to a vote of Shareholders
of the Trust or series, as appropriate. Any decision by the
Trustees to bring, maintain or settle (or not to bring,
maintain or settle) such court action, proceeding or claim,
or to submit the matter to a vote of Shareholders shall be
made by the Trustees in their business judgment and shall be
binding upon the Shareholders.
<PAGE> 5
ARTICLE IV
THE TRUSTEES
Election; Removal
Section 1. The number of Trustees shall be fixed by the
Trustees, except that, subsequent to any sale of Shares
pursuant to a public offering, there shall be not less than
three Trustees. Any vacancies occurring in the Board of
Trustees may be filled by the Trustees if, immediately after
filling any such vacancy, at least two-thirds of the Trustees
then holding office shall have been elected to such office by
the Shareholders. In the event that at any time less than a
majority of the Trustees then holding office were elected to
such office by the Shareholders, the Trustees shall call a
meeting of Shareholders for the purpose of electing Trustees.
Each Trustee elected by the Shareholders or by the Trustees
shall serve until the next meeting of Shareholders called for
the purpose of electing Trustees and until the election and
qualification of his or her successor, or until he or she
sooner dies, resigns or is removed. The initial Trustees,
each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or
her successor is elected and qualified, or until he or she
sooner dies, resigns or is removed, shall be Antonio
DeSpirito, III and such other persons as the Trustee or
Trustees then in office shall, prior to any sale of Shares
pursuant to a public offering, appoint. By vote of a
majority of the Trustees then in office, the Trustees may
remove a Trustee with or without cause. At any meeting
called for the purpose, a Trustee may be removed, with or
without cause, by vote of the holders of two-thirds of the
outstanding Shares.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one
of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
Section 3. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be
managed by the Trustees, and they shall have all powers
necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt By-
Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and
may amend and repeal them to the extent that such By-Laws do
not reserve that right to the Shareholders; they may fill
vacancies in their number, including vacancies resulting from
increases in their number, and may elect and remove such
officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number,
and terminate, any one or more committees consisting of two
or more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of
the power and authority of the Trustees as the Trustees may
determine;
<PAGE> 6
they may appoint an advisory board, the members of which
shall not be Trustees and need not be Shareholders; they may
employ one or more custodians of the assets of the Trust and
may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems
for the central handling of securities, retain a transfer
agent or a Shareholder services agent, or both, provide for
the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various
matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest in securities, options,
futures contracts, options on futures contracts and other
property, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the
assets of the Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and
discretion with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities or other assets;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of
the Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3,
to allocate assets, liabilities and expenses of the Trust to
a particular series of Shares or to apportion the same among
two or more series, provided that any liabilities or expenses
incurred by a particular series of Shares shall be payable
solely out of the assets of that series; and to the extent
necessary or appropriate to give effect to the preferences
and special or relative rights and privileges of any classes
of Shares, to allocate assets, liabilities, income and
expenses of a series to a particular class of Shares of that
series or to apportion the same among two or more classes of
Shares of that series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security of which is or was held in the
<PAGE> 7
Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay
calls or subscriptions with respect to any security held in
the Trust;
(h) To join with other security holders in acting
through a committee, depositary, voting trustee or otherwise,
and in that connection to deposit any security with, or
transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust on any matter in
controversy, including but not limited to claims for taxes;
(j) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(k) To borrow funds, securities or other assets;
(1) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all of such
obligations or obligations incurred pursuant to subparagraph
(k) hereof;
(m) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters or
independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted
by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal
underwriter or independent contractor, including any action
taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(n) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and
<PAGE> 8
provisions, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by
any present or future law or custom in regard to investments
by Trustees. Except as otherwise provided herein or from
time to time in the By-Laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within
or without Massachusetts, including any meeting held by means
of a conference telephone or other communications equipment
by means of which all persons participating in the meeting
can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in
office.
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust,
or partly out of principal and partly out of income, as they
deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
investment adviser or manager, principal underwriter,
auditor, counsel, custodian, transfer agent, Shareholder
services agent and such other agents or independent
contractors, and such other expenses and charges, as the
Trustees may deem necessary or proper to incur, provided,
however, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a
particular series of Shares, as determined by the Trustees,
shall be payable solely out of the assets of that series.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of
Shares and of the Trust shall at all times be considered as
vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder
Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or
management services with Stein Roe & Farnham Incorporated, or
any other partnership, corporation, trust, association or
other organization (the "Adviser"), every such contract to
comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from
time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the
Trust shall be held uninvested, and to make changes
<PAGE> 9
in the Trust's investments. The Trustees may also, at any
time and from time to time, contract with the Adviser or any
other corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter or
distributor or agent of or for any corporation, trust,
association or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract may have been or may hereafter be made,
or that any organization, or any parent or affiliate thereof,
is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract or
principal underwriter's or distributor's contract, or
transfer, Shareholder services or other agency contract may
have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract with one or more other corporations,
trusts, associations or other organizations, or has other
business or interests
shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Voting Powers
Section 1. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article
IV, Section 1, (ii) with respect to any Adviser as provided
in Article IV, Section 6, (iii) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in
Article IX, Section 7, and (v) with respect to such
additional matters relating to the Trust as may be required
by law, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Securities and Exchange
Commission (or
<PAGE> 10
any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share (or
fractional share) outstanding on the record date established
in accordance with the By-Laws shall be entitled to a number
of votes on any matter on which it is entitled to vote equal
to the net asset value of the share (or fractional share) in
United States dollars determined at the close of business on
the record date (for example, a share having a net asset
value of $10.50 would be entitled to 10.5 votes).
Notwithstanding any other provision of this Declaration of
Trust, on any matter submitted to a vote of Shareholders, all
Shares of the Trust then entitled to vote shall be voted in
the aggregate as a single class without regard to series or
class except: (1) when required by the 1940 Act or when the
Trustees shall have determined that the matter affects one or
more series or classes materially differently, Shares shall
be voted by individual series or class; and (2) when the
Trustees have determined that the matter affects only the
interests of one or more series or classes, then only
Shareholders of such series or classes shall be entitled to
vote thereon. There shall be no cumulative voting in the
election of Trustees.
Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on
the challenger. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably
designed to verify that such instructions have been
authorized by such shareholder shall constitute execution of
such proxy by or on behalf of such shareholder in writing.
At all meetings of Shareholders, unless inspectors of
election have been appointed, all questions relating to the
qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the
chairman of the meeting. Unless otherwise specified in the
proxy, the proxy shall apply to all Shares of each series of
the Trust owned by the Shareholder.
Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by
law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Voting Power and Meetings
Section 2. Meetings of Shareholders of the Trust or of
any series or class may be called by the Trustees or such
other person or persons as may be specified in the By-Laws
and held from time to time for the purpose of taking action
upon any matter requiring the vote or the authority of the
Shareholders of the Trust or any series or class as herein
provided or upon any other matter deemed by the Trustees to
be necessary or desirable. Meetings of Shareholders of the
Trust or of any series or class shall be called by the
Trustees or such other person or persons as may be specified
in the By-Laws upon written application. The
<PAGE> 11
Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. Shares representing thirty percent of the
votes entitled to vote shall be a quorum for the transaction
of business at a Shareholders' meeting, except that where any
provision of law or of this Declaration of Trust permits or
requires that holders of any series or class shall vote as a
series or class, then Shares representing thirty percent of
the votes of that series or class entitled to vote shall be
necessary to constitute a quorum for the transaction of
business by that series or class. Any lesser number,
however, shall be sufficient for adjournments. Any adjourned
session or sessions may be held within a reasonable time
after the date set for the original meeting without the
necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the
By-Laws, Shares representing a majority of the votes voted
shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of this
Declaration of Trust permits or requires that the holders of
any series or class shall vote as a series or class, then
Shares representing a majority of the votes of that series or
class voted on the matter (or a plurality with respect to the
election of a Trustee) shall decide that matter insofar as
that series or class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion
thereof as shall be required by any express provision of this
Declaration of Trust or the By-Laws) consent to the action in
writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The ByLaws may include further provisions
for Shareholders' votes and meetings and related matters.
<PAGE> 12
ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
AND DETERMINATION OF NET ASSET VALUE
Distributions
Section 1. The Trustees may, but need not, each year
distribute to the Shareholders of each series or class such
income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses
and liabilities (including such reserves as the Trustees may
establish) determined in accordance with good accounting
practices. The Trustees shall have full discretion to
determine which items shall be treated as income and which
items as capital and their determination shall be binding
upon the Shareholders. Distributions of each year's income
of each series, if any be made, may be made in one or more
payments, which shall be in Shares, in cash or otherwise and
on a date or dates and as of a record date or dates
determined by the Trustees. At any time and from time to
time in their discretion, the Trustees may distribute to the
Shareholders of any one or more series or classes as of a
record date or dates determined by the Trustees, in Shares,
in cash or otherwise, all or part of any gains realized on
the sale or disposition of property of the series or
otherwise, or all or part of any other principal of the Trust
attributable to the series. In the case of any series not
divided into two or more classes of Shares, each distribution
pursuant to this Section 1 shall be made ratably according to
the number of Shares of the series held by the several
Shareholders on the applicable record date thereof, provided
that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made,
after such time or times as the Trustees may determine. In
the case of any series divided into two or more classes, each
distribution pursuant to this Section 1 may be made in whole
or in such parts as the Trustees may determine to the
Shareholders of any one or more classes, and the distribution
to the Shareholders of any class shall be made ratably
according to the number of Shares of the class (but need not
be made ratably according to the number of Shares of the
series, considered without regard to class) held by the
several Shareholders on the record date thereof, provided
that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made,
after such time or times as the Trustees may determine. Any
such distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with Section
7 of this Article VI.
Redemptions and Repurchases
Section 2. Any holder of Shares of the Trust may by
presentation of a written request, together with his or her
certificates, if any, for such Shares, in proper form for
transfer, at the office of the Trust or at a principal office
of a transfer agent appointed by the Trust, redeem his or her
Shares for the net asset value thereof determined and
computed in accordance with the provisions of this Section 2
and the provisions of Section 7 of this Article VI.
<PAGE> 13
Upon receipt by the Trust or its transfer agent of such
written request for redemption of Shares, such Shares shall
be redeemed at the net asset value per share of the
appropriate series next determined after such Shares are
tendered in proper order for transfer to the Trust or
determined as of such other time fixed by the Trustees as may
be permitted or required by the 1940 Act, provided that no
such tender shall be required in the case of Shares for which
a certificate or certificates have not been issued, and in
such case such Shares shall be redeemed at the net asset
value per share of the appropriate series next determined
after such request has been received or determined at such
other time fixed by the Trustees as may be permitted or
required by the 1940 Act.
The obligation of the Trust to redeem its Shares of each
series or class as set forth above in this Section 2 shall be
subject to the conditions that during any time of emergency,
as hereinafter defined, such obligation may be suspended by
the Trust by or under authority of the Trustees for such
period or periods during such time of emergency as shall be
determined by or under authority of the Trustees. If there
is such a suspension, any Shareholder may withdraw any demand
for redemption and any tender of Shares which has been
received by the Trust during any such period and any tender
of Shares, the applicable net asset value of which would but
for such suspension be calculated as of a time during such
period. Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any. For the
purposes of any such suspension, "time of emergency" shall
mean, either with respect to all Shares or any series of
Shares, any period during which:
a. the New York Stock Exchange is closed other than for
customary weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust
shall have determined, in compliance with any applicable
rules and regulations of the Securities and Exchange
Commission, either that trading on the New York Stock
Exchange is restricted, or that an emergency exists as a
result of which (i) disposal by the Trust of securities owned
by it is not reasonably practicable or (ii) it is not
reasonably practicable for the Trust fairly to determine the
current value of its net assets; or
c. the suspension or postponement of such obligations
is permitted by order of the Securities and Exchange
Commission.
The Trust may also purchase, repurchase or redeem Shares
in accordance with such other methods, upon such other terms
and subject to such other conditions as the Trustees may from
time to time authorize at a price not exceeding the net asset
value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
<PAGE> 14
Payment in Kind
Section 3. Subject to any generally applicable
limitation imposed by the Trustees, any payment on redemption
of Shares may, if authorized by the Trustees, be made wholly
or partly in kind, instead of in cash. Such payment in kind
shall be made by distributing securities or other property
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed
(but not necessarily involving a portion of each of the
series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of
which payment is made.
Redemptions at the Option of the Trust
Section 4. The Trust shall have the right at its option
and at any time to redeem Shares of any Shareholder at the
net asset value thereof as determined in accordance with
Section 7 of Article VI of this Declaration of Trust: (i) if
at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees; or (ii)
to the extent that such Shareholder owns Shares of a
particular series of Shares equal to or in excess of a
percentage of the outstanding Shares of that series
(determined without regard to class) determined from time to
time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a
percentage equal to or in excess of such percentage of the
aggregate number of outstanding Shares of the Trust or the
aggregate net asset value of the Trust determined from time
to time by the Trustees.
Dividends, Distributions, Redemptions and Repurchases
Section 5. No dividend or distribution (including,
without limitation, any distribution paid upon termination of
the Trust or of any series) with respect to, nor any
redemption or repurchase of, the Shares of any series (or of
any class) shall be effected by the Trust other than from the
assets of such series (or of the series of which such class
is a part).
Additional Provisions Relating to Redemptions and
Repurchases
Section 6. The completion of redemption of Shares shall
constitute a full discharge of the Trust and the Trustees
with respect to such shares, and the Trustees may require
that any certificate or certificates issued by the Trust to
evidence the ownership of such Shares shall be surrendered to
the Trustees for cancellation or notation.
<PAGE> 15
Determination of Net Asset Value
Section 7. The term "net asset value" of the Shares of
each series or class shall mean: (i) the value of all the
assets of such series or class; (ii) less the total
liabilities of such series or class; (iii) divided by the
number of Shares of such series or class outstanding, in each
case at the time of each determination. The "number of
Shares of such series or class outstanding" for the purposes
of such computation shall be exclusive of any Shares of such
series or class to be redeemed and not then redeemed as to
which the redemption price has been determined, but shall
include Shares of such series or class presented for
repurchase and not then repurchased and Shares of such series
or class to be redeemed and not then redeemed as to which the
redemption price has not been determined and Shares of such
series or class the sale of which has been confirmed. Any
fractions involved in the computation of net asset value per
share shall be adjusted to the nearer cent unless the
Trustees shall determine to adjust such fractions to a
fraction of a cent.
The Trustees, or any officer or officers or agent of
this Trust designated for the purpose by the Trustees, shall
determine the net asset value of the Shares of each series or
class, and the Trustees shall fix the times as of which the
net asset value of the Shares of each series or class shall
be determined and shall fix the periods during which any such
net asset value shall be effective as to sales, redemptions
and repurchases of, and other transactions in, the Shares of
such series or class, except as such times and periods for
any such transaction may be fixed by other provisions of this
Declaration of Trust or by the By-Laws.
In valuing the portfolio investments of any series or
class for determination of net asset value per share of such
series or class:
(a) Each security for which market quotations are
readily available shall be valued at current market value
determined by methods specified by the Board of Trustees;
(b) Each other security, including any security within
(a) for which the specified price does not appear to
represent a dependable quotation for such security as of the
time of valuation, shall be valued at a fair value as
determined in good faith by the Trustees;
(c) Any cash on hand shall be valued at the face amount
thereof;
(d) Any cash on deposit, accounts receivable, and cash
dividends and interest declared or accrued and not yet
received, any prepaid expenses, and any other current asset
shall be valued at the face amount thereof, unless the
Trustees shall determine that any such item is not worth its
face amount, in which case such asset shall be valued at a
fair value determined in good faith by the Trustees; and
<PAGE> 16
(e) Any other asset shall be valued at a fair value
determined in good faith by the Trustees.
Notwithstanding the foregoing, short-term debt obligations,
commercial paper and repurchase agreements may be, but need
not be, valued on the basis of quoted yields for securities
of comparable maturity, quality and type, or on the basis of
amortized cost.
Liabilities of any series or class for accounts payable
for investments purchased and for Shares tendered for
redemption and not then redeemed as to which the redemption
price has been determined shall be stated at the amounts
payable therefor. In determining the net asset value of any
series or class, the person or persons making such
determination on behalf of the Trust may include in
liabilities such reserves, estimated accrued expenses and
contingencies as such person or persons may in its, his or
their best judgment deem fair and reasonable under the
circumstances. Any income dividends and gains distributions
payable by the Trust shall be deducted as of such time or
times on the record date therefor as the Trustees shall
determine.
The manner of determining the net assets of any series
or class or of determining the net asset value of the Shares
of any series or class may from time to time be altered as
necessary or desirable in the judgment of the Trustees to
conform to any other method prescribed or permitted by any
applicable law or regulation.
Determinations under this Section 7 made in good faith
and in accordance with the provisions of the 1940 Act shall
be binding on all parties concerned.
ARTICLE VII
COMPENSATION AND LIMITATION
OF LIABILITY OF TRUSTEES
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the
amount of their compensation. Nothing herein shall in any
way prevent the employment of any Trustee for advisory,
management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any
officer, agent, employee, adviser or principal underwriter of
the Trust, nor shall any Trustee be responsible for the act
or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to
which he or she would
<PAGE> 17
otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate,
Share or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees
or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or
with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally
liable thereon.
ARTICLE VIII
INDEMNIFICATION
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action,
suit or other proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom,
before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as
a party or otherwise or with which such person may be or may
have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person, except
that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Expenses, including counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be
paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (a) such
Covered Person shall provide security for his undertaking,
(b) the Trust shall be insured against losses arising by
reason of such Covered Person's failure to fulfill his
undertaking or (c) a majority of the Trustees who are
disinterested persons and who are not Interested Persons
(provided that a majority of such Trustees then in office act
on the matter), or independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (but not a full
<PAGE> 18
trial-type inquiry), that there is reason to believe such
Covered Person ultimately will be entitled to
indemnification.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or
otherwise) without an adjudication in a decision on the
merits by a court, or by any other body before which the
proceeding was brought, that such Covered Person is liable to
the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office, indemnification shall be provided if
(a) approved as in the best interest of the Trust, after
notice that it involves such indemnification, by at least a
majority of the Trustees who are disinterested persons and
are not Interested Persons (provided that a majority of such
Trustees then in office act on the matter), upon a
determination, based upon a review of readily available facts
(but not a full trial-type inquiry) that such Covered Person
is not liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a
review of readily available facts (but not a full-trial type
inquiry) to the effect that such indemnification would not
protect such Covered Person against any liability to the
Trust to which such Covered Person would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct
of his office.
Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Indemnification Not Exclusive; Definitions
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which
any such Covered Person may be entitled. As used in this
Article VIII, the term "Covered Person" shall include such
person's heirs, executors and administrators, and a
"disinterested person" is a person against whom none of the
actions, suits or other proceedings in question or another
action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in
this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase
and maintain liability insurance on behalf of such persons.
<PAGE> 19
Shareholders
Section 4. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by
reason of his or her being or having been a Shareholder and
not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal
representatives or, in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability, but only out of
the assets of the particular series of Shares of which he or
she is or was a Shareholder.
ARTICLE IX
MISCELLANEOUS
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular
series of Shares shall look only to the assets of the Trust
or the assets of that particular series of Shares for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers
or officer shall give notice that this Declaration of Trust
is on file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or
Trustee or as officers or officer and not individually and
that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable for his or her own
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts
<PAGE> 20
with respect to the meaning and operation of this Declaration
of Trust, and shall be under no liability for any act or
omission in accordance with such advice or for failing to
follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred
to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of Shareholders holding
at least two-thirds of the Shares of each series entitled to
vote or by the Trustees by written notice to the
Shareholders. Any series of Shares may be terminated at any
time by vote of Shareholders holding at least two-thirds of
the votes represented by the outstanding Shares of such
series entitled to vote or by the Trustees by written notice
to the Shareholders of such series.
Upon termination of the Trust or of any one or more
series of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees,
the Trust shall in accordance with such procedures as the
Trustees consider appropriate reduce the remaining assets to
distributable form in cash or shares or other securities, or
any combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according to the
number of Shares of such series held by the several
Shareholders of such series on the date of termination,
except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of
any classes of Shares of that series, provided that any
distribution to the Shareholders of a particular class of
Shares shall be made to such Shareholders pro rata in
proportion to the number of Shares of such class held by each
of them.
Filing of Copies, References, Headings
Section 5. The original or a copy of this instrument
and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City
of Boston, as well as any other governmental office where
such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments
have been made and as to any matters in connection with the
Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy
<PAGE> 21
certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all
expressions such as "herein," "hereof" and "hereunder," shall
be deemed to refer to this instrument as amended or affected
by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction or
effect of this instrument. This instrument may be executed
in any number of counterparts, each of which shall be deemed
an original.
Applicable Law
Section 6. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the
type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a
trust.
Amendments
Section 7. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of
the then Trustees when authorized so to do by a vote of the
holders of a majority of the votes represented by outstanding
Shares entitled to vote, except that an amendment which shall
affect the holders of one or more series or classes of Shares
but not the holders of all outstanding series and classes
shall be authorized by vote of holders of a majority of the
votes represented by outstanding Shares entitled to vote of
each series and class affected and no vote of Shareholders of
a series or class not affected shall be required. Amendments
having the purpose of changing the name of the Trust or of
supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by
Shareholder vote.
<PAGE> 22
IN WITNESS WHEREOF the undersigned has hereunto set his hand
in the City of Boston, Massachusetts for himself and his
assigns, as of this 31st day of July, 1996.
ANTONIO DE SPIRITO, III
Antonio DeSpirito, III
One International Place
Boston, MA 02110
THE COMMONWEALTH OF MASSACHUSETTS
Boston ss. July 31, 1996
Then personally appeared the above-named Trustee and
acknowledged the foregoing instrument to be his free act and
deed, before me,
DIANE ROTONDI
Notary Public
My commission expires: 9/23/99
(Notary's Seal)
The address of the Trust is One South Wacker Drive, Chicago,
Illinois 60606
The Resident Agent is CT Corporation, 2 Oliver Street,
Boston, MA 02109.
BELL, BOYD & LLOYD
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
312 372-1121
Fax 312 372-2098
January 27, 1997
Stein Roe Advisor Trust
One South Wacker Drive, #3500
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
Stein Roe Advisor Trust
We have acted as counsel for Stein Roe Advisor Trust (the
"Trust") in connection with the registration under the Securities
Act of 1933 (the "Act") of an indefinite number of shares of
beneficial interest (the "Shares") of the respective series of
the Trust designated as follows:
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
(each a "Fund") in registration statement no.333-17255 on form N-
1A (the "Registration Statement").
In this connection we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such
documents, corporate and other records, certificates and other
papers as we deemed it necessary to examine for the purpose of
this opinion, including the agreement and declaration of trust
(the "Trust Agreement") and by-laws (the "By-laws") of the Trust,
actions of the board of trustees of the Trust authorizing the
issuance of shares of the Funds and the Registration Statement.
We assume that, upon sale of the Shares, the Trust will
receive the authorized consideration therefor, which will at
least equal the net asset value of the Shares.
Based on such examination, we are of the opinion that upon
the issuance and delivery of the Shares of each Fund after the
Registration Statement has been declared effective and in
accordance with the Trust Agreement and the actions of the board
of trustees authorizing the issuance of the Shares, and the
receipt by the Trust of the authorized consideration therefor,
the Shares so issued will be validly issued, fully paid and
nonassessable (although shareholders of a Fund may be subject to
liability under certain circumstances as described in the
statement of additional information of the Trust included as Part
B of the Registration Statement under the caption "Declaration of
Trust").
In rendering the foregoing opinion, we have relied upon the
opinion of Ropes & Gray expressed in their letter to us dated
January 23, 1997.
We consent to the filing of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not
admit that we are in the category of persons whose consent is
required under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
CSA gf
EXHIBIT 15
STEIN ROE
RULE 12b-1 PLAN AND AGREEMENT
Pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the ("Act"), this Rule 12b-1
Plan and Agreement (the "Plan") is hereby adopted by Stein
Roe Advisor Trust (the "Trust") for each of the series (the
"Fund") identified in the attached Schedule A, by a majority
of the trustees of the Trust, including a majority of the
trustees who are not "interested persons" of the Trust (as
defined in the Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan (the "non-interested
trustees"). For each fund, this Plan shall become effective
on the date the registration statement of the applicable
Trust becomes effective for such Fund or such other date
indicated in Schedule A.
Section 1. Fee. Each Fund shall pay to Liberty
Securities Corporation (the "Distributor"), at the end of
each month, a fee equal to the average daily net assets of
the Fund multiplied by that portion of the percentage amount
specified in Schedule A which the number of days in the month
bears to 365. Such payment represents compensation for
expenses incurred by the Distributor for the promotion and
distribution of the shares of the Fund making the payment,
including, but not limited to the printing of prospectuses
and reports used for sales purposes, advertisements, expenses
of preparation and printing of sales literature and other
sales or promotional expense, including any compensation,
paid to any securities dealer or others person who has
incurred such expense pursuant to a Selling Agreement
executed by such party and the Distributor.
Section 2. No payments are to be made by the Trust or
any Fund to finance or promote sales of shares other than
pursuant to this Plan.
Section 3. The Distributor shall prepare written
reports to the Trust's board of trustees on a quarterly basis
showing all amounts paid under this Plan and the purposes for
which such payments were made, plus a summary of the expenses
incurred by the Distributor hereunder, together with such
other information as from time to time shall be reasonably
requested by the board of trustees of the Trust.
Section 4. For each Fund, the Plan shall remain in
effect until April, 1997 and shall continue in effect from
year to year thereafter only so long as such continuance is
specifically approved at least annually by the vote of a
majority of the trustees of the Trust, including a majority
of the non-interested trustees of each Trust who have no
direct or indirect financial interest in the Plan or in any
agreements related to the Plan, cast in person at a meeting
called for such purpose.
Section 5. So long as the Plan is in effect, nominees
for election as non-interested trustees of each Trust listed
in Schedule A shall be selected by the non-interested
trustees as required by Rule 12b-1 under the Act.
Section 6. The Plan may be terminated as to a Fund,
without penalty, at any time by either a majority of the non-
interested trustees of the applicable Trust or by a vote of a
majority of the outstanding voting securities of that Fund,
and shall terminate automatically in the event of any act
that terminates the Underwriting Agreement with the
Distributor.
Section 7. As to any Fund, the Plan may not be amended
to increase materially the amount authorized by this Plan to
be spent for services described hereunder without approval by
a majority of that Fund's outstanding voting securities, and
all material amendments to the Plan shall be approved by a
vote of a majority of the trustees of the Trust, including a
majority of the non-interested trustees of the Trust who have
no direct or indirect financial interest in the Plan, cast in
person at a meeting called for such purpose.
Section 8. Any obligation of any Trust hereunder shall
be binding only upon the assets of the Trust (or the
applicable Fund) and shall not be binding upon any trustee,
officer, employee, agent, or shareholder of that Trust.
Neither the authorization of any action by the trustees or
shareholders of the Trust nor the execution of this Plan on
behalf of the Trust shall impose any liability upon any
trustee or any shareholder.
This Plan and the terms and provisions thereof are
hereby accepted and agreed to by the Trust and the
Distributor as evidenced by their execution hereof.
Dated as of September 13, 1996
STEIN ROE ADVISOR TRUST LIBERTY SECURITIES CORPORATION
_________________________ ____________________________
By: By:
<PAGE>
SCHEDULE A
12b-1 fee
---------
Stein Roe Growth Stock Advisor Fund 0.25%
Stein Roe Balanced Advisor Fund 0.25%
Stein Roe Growth & Income Advisor Fund 0.25%
Stein Roe Capital Opportunities Advisor Fund 0.25%
Stein Roe Special Advisor Fund 0.25%
Stein Roe Special Venture Advisor Fund 0.25%
Stein Roe International Advisor Fund 0.25%
Stein Roe Young Investor Advisor Fund 0.25%