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]
Post Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
STEIN ROE ADVISOR TRUST
(Exact Name of Registrant as Specified in Charter)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 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
(Name and Address of Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on October 15, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has previously elected 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.
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) Financial Highlights
(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) Master Fund/Feeder Fund: Structure and Risk Factors
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares; Net Asset Value
(c) How to Purchase Shares
(d) How to Purchase Shares
(e) Inapplicable
(f) Management--Fees and Expenses
(g) Inapplicable
8 (a) How to Sell (Redeem) Shares
(b) How to Purchase Shares
(c) How to Sell (Redeem) Shares
(d) How to Sell (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 Sell (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(a) Inapplicable
(b) 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>
The prospectuses relating to 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 and Stein Roe Advisor Special Fund,
series of Stein Roe Advisor Trust, are not affected by the filing
of this post-effective amendment No. 3.
<PAGE>
PRELIMINARY PROSPECTUS DATED OCTOBER 6, 1997
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to
completion or amendment. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall
there be any sales of these securities in any state in which such
offer, solicitation, or sale would be unlawful prior to
registration or qualification under the securities laws of any
such state.
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 SR&F Growth Stock
Portfolio, which has the same investment objective and
substantially the same investment policies as Advisor Growth Stock
Fund. (See Master Fund/Feeder Fund: Structure and Risk Factors.)
Advisor Growth Stock Fund is a multi-class series of Stein Roe
Advisor Trust and SR&F Growth Stock Portfolio is a series of SR&F
Base Trust. Each Trust is an 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. Please consult your full-
service financial adviser to determine how investing in this
mutual fund may suit your unique needs, time horizon and risk
tolerance.
A Statement of Additional Information dated October 15, 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 and most recent financial
statements may be obtained without charge by calling (800) 426-
3750.
Advisor Growth Stock Fund offers four classes of shares: (i)
Class A shares are offered at net asset value plus a sales charge
imposed at the time of purchase and subject to an annual
distribution fee; (ii) Class B shares are offered at net asset
value and are subject to an annual distribution fee and a
declining contingent deferred sales charge on redemptions made
within six years after purchase; (iii) Class C shares are offered
at net asset value and are subject to an annual distribution fee
and a contingent deferred sales charge on redemptions made within
one year after purchase; and (iv) Class K shares are offered at
net asset value and are subject to an annual distribution fee.
Class B shares automatically convert to Class A shares after
approximately eight years. See How to Purchase Shares.
NOT FDIC INSURED MAY LOSE VALUE
NO BANK GUARANTEE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE 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 October 15, 1997.
TABLE OF CONTENTS
Page
Summary...................................2
Fee Table.................................3
Financial Highlights......................5
The Fund..................................6
Investment Policies.......................6
Performance Information...................6
Risks and Investment Considerations ......7
Investment Restrictions ..................7
Portfolio Investments and Strategies......8
Net Asset Value .........................10
How to Purchase Shares...................11
How to Sell (Redeem) Shares .............13
Distributions and Income Taxes...........15
Management ..............................15
Organization and Description of Shares...17
Master Fund/Feeder Fund: Structure
and Risk Factors.......................18
For More Information ....................19
SUMMARY
Stein Roe Advisor Growth Stock Fund ("Advisor Growth Stock Fund")
is a series of Stein Roe Advisor Trust, an open-end 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 Objective 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 a diversified portfolio of 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 objective 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 are
available through your full-service financial service firm ("FSF")
or other financial intermediaries having special selling
arrangements with the Distributor, including certain bank trust
departments, wrap fee programs and retirement plan service
providers ("Intermediaries"). For information on purchasing and
redeeming Advisor Growth Stock Fund shares, please see How to
Purchase Shares, How to Sell (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
Expenses are one of several factors to consider when investing in
Advisor Growth Stock Fund. The following tables summarize your
maximum transaction costs and annual expenses for an investment in
each class of shares of Advisor Growth Stock Fund. See Management
for more complete descriptions of the various costs and expenses
of Advisor Growth Stock Fund.
Shareholder Transaction Expenses /1/,/2/
Class A Class B Class C Class K
Maximum Initial Sales Charges
(as a percentage of offering price)/3/ 5.75% 0.00%/5/ 0.00%/5/ 0.00%
Maximum Contingent Deferred Sales
Charge (as a % of offering price) 1.00%/4/ 5.00% 1.00% 0.00%
- ----------
/1/ For accounts less than $500 an annual fee of $10 may be
deducted. See How to Purchase Shares.
/2/ Redemption proceeds exceeding $500 sent via federal funds
wire will be subject to a $7.50 charge per transaction.
/3/ Does not apply to reinvested dividends.
/4/ Applies only to purchases of $1 million to $5 million
redeemed within approximately 18 months after purchase. See
How to Purchase Shares.
/5/ Because of the 0.75% distribution fee applicable to Class B
and Class C shares, long-term Class B and Class C
shareholders may pay more in aggregate sales charges than
the maximum initial sales charge permitted by the National
Association of Securities Dealers, Inc. (the "NASD").
However, because Class B shares automatically convert to
Class A shares after approximately eight years, this is less
likely for Class B shares than for a class without a
conversion feature.
Estimated Annual Operating Expenses
Class A Class B Class C Class K
Management and Administrative Fee 0.73% 0.73% 0.73% 0.73%
12b-1 Fees 0.30% 1.00% 1.00% 0.25%
Other Expenses (after reimbursement) 0.37% 0.37% 0.37% 0.37%
Total Operating Expenses (after
reimbursement) 1.40% 2.10% 2.10% 1.35%
==== ==== ===== =====
Example.
You would pay the following expenses on a $1,000 investment in
each class assuming 5% annual return.
Example 1 (assumes redemption at end of period):
Class A Class B Class C Class K
Period:
1 Year $71 $71 $31 $14
3 Years 99 96 66 43
Example 2 (assumes no redemption at end of period):
Class A Class B Class C Class K
Period:
1 Year $71 $21 $21 $14
3 Years 99 66 66 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 each class of 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 Estimated Annual Fund Operating Expenses
remain the same during each of the periods and that all income
dividends and capital gains distributions are reinvested in
additional shares.
Other Expenses and Total Operating Expenses reflect fee
reimbursements by the Adviser or the Distributor, as hereinafter
defined. Absent such reimbursements, Other Expenses and Total
Operating Expenses for Class A shares would have been 0.47% and
1.50%, respectively; for Class B and C shares, 0.47% and 2.20%,
respectively, and for Class K shares, 52% and 1.50%, respectively.
Any such reimbursement will lower the overall expense ratio for
each respective class and increase the 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 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 charges permitted by the NASD. For further information
on Advisor Growth Stock Fund's 12b-1 fee, see Management--
Distributor or call your financial representative.
FINANCIAL HIGHLIGHTS (A)
The table below reflects the results of operations of Class K
shares of Advisor Growth Stock Fund on a per-share basis for the
period shown and has not been audited by independent public
accountants. The table should be read in conjunction with Advisor
Growth Stock Fund's financial statements and notes thereto. The
financial statements, which may be obtained from Advisor Trust
without charge upon request, contain additional performance
information.
Period Ended June 30,
1997 (b)
-----------------
Net Asset Value, Beginning of Period.............$10.00
Income from Investment Operations
Net realized and unrealized losses
on investments.............................0.67
Total from investment operations...........0.67
------
Net Asset Value, End of Period.......... .......$10.67
======
Ratio of net expenses to average net assets (c) 1.35%*
Ratio of net investment income to average net
assets (d)...................................-0.06%*
Total return.....................................6.70%
Net assets, end of period (000 omitted)...........$267
________________
(a) The financial history presented in this section for Class K
shares is that of the Advisor Growth Stock Fund. The
historical performance of Class K shares for the period prior
to February 14, 1997, and the historical performance of each
other class of shares of Advisor Growth Stock Fund for all
periods are based on the performance of Growth Stock
Portfolio, restated to reflect the sales loads, 12b-1 fees and
other expenses applicable to that class, without giving effect
to any expense reimbursements described herein and assuming
reinvestment of dividends and capital gains.
(b) From commencement of operations on February 14, 1997, reflects
information relating to the initial shares of Advisor Growth
Stock Fund that were redesignated Class K shares as of October
15, 1997. No shares of Class A, Class B or Class C were
outstanding during the period.
(c) If Advisor Growth Stock Fund had paid all of its expenses and
there had been no reimbursement of expenses, this ratio would
have been 74.73% for the period ended June 30, 1997.
(d) Computed giving effect to the expense limitation undertaking.
THE FUND
Stein Roe Advisor Growth Stock Fund ("Advisor Growth Stock Fund")
is a multi-class series of Stein Roe Advisor Trust ("Advisor
Trust"), which is an open-end 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 other 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 Master Fund/Feeder Fund: Structure and Risk Factors.)
Advisor Growth Stock Fund invests all of its net investable assets
in 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 a class of shares of
Advisor Growth Stock Fund is measured by the distributions
received, plus or minus the change in the net asset value per
share for a given period, assuming reinvestment of all
distributions and payment of the maximum initial sales charge of
5.75% on Class A shares and the contingent deferred sales charges
applicable to the time period quoted on Class B and Class C
shares. 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. When the Fund
compares the total return of its shares to those of other mutual
funds or relevant indices, its total return may be computed
without reflecting any sales charges so long as the sales charge
is stated separately in connection with the comparison.
Comparison of each class' total return with alternative
investments should consider differences between the class and the
alternative investments, the periods and methods used in
calculation of the return being compared including the inclusion
of initial or contingent deferred sales charges, 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.
Each class' performance may be compared to various indices.
Performance and quotations from various publications may be
included in sales literature and advertisements.
Advisor Growth Stock Fund invests all of its net investable assets
in Growth Stock Portfolio, which has the same investment objective
and substantially the same investment policies as Advisor Growth
Stock Fund. Advisor Growth Stock Fund commenced operations on
February 14, 1997, but until October 15, 1997, offered only the
shares that are now designated Class K shares. The historical
performance of Class K shares for the period prior to February 14,
1997, and the historical performance of each other class of shares
of Advisor Growth Stock Fund for all periods are based on the
performance of Growth Stock Portfolio, restated to reflect the
sales charges, 12b-1 fees and other expenses applicable to the
class as set forth in the Fee Table, without giving effect to any
fee reimbursements described therein and assuming reinvestment of
dividends and capital gains. Historical performance as restated
should not be interpreted as indicative of Advisor Growth Stock
Fund's future performance. The average annual returns for each
class of shares as of September 30, 1997 were as follows:
Class A Class B Class C Class K
1 year 25.07% 26.77% 30.77% 32.76%
3 years 24.48 25.44 26.07 27.02
5 years 15.52 15.86 16.08 16.95
10 years 11.73 11.76 11.61 12.45
Inception 10.73 10.74 10.13 10.96
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 nonresidents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
nonresidents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Growth Stock Portfolio may be found under Portfolio Investments
and Strategies.
INVESTMENT RESTRICTIONS
Each of Advisor Growth Stock Fund and Growth Stock Portfolio is
diversified as that term is defined in the Investment Company Act
of 1940.
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 the investment
portfolio, and does not apply to securities of the U.S. Government
or repurchase agreements /1/ for such securities. This restriction
also does not prevent Advisor Growth Stock Fund from investing all
of its assets in shares of another investment company (Growth
Stock Portfolio) 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, except that Advisor Growth Stock Fund may invest all
of its assets in shares of another investment company (such as
Growth Stock Portfolio) having the identical investment objective
under a master/feeder structure.
Neither Advisor Growth Stock Fund nor Growth Stock Portfolio may
make loans except that each may (1) purchase money market
instruments and enter into repurchase agreements; (2) acquire
publicly distributed or privately placed debt securities; (3) lend
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 nonleveraging, temporary, or
emergency purposes or in connection with participation in the
interfund lending program. Neither the aggregate borrowings
(including reverse repurchase agreements) nor the aggregate loans
at any one time may exceed 33 1/3% of the value of total assets.
Additional securities may not be purchased when borrowings less
proceeds receivable from sales of portfolio securities exceed 5%
of total assets.
Growth Stock Portfolio may invest in repurchase agreements,
provided that it will not 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 second, third, and fourth
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 nonfundamental
and, as such, may be changed by the Board of Trustees without
shareholder approval. All of the investment restrictions are set
forth in the Statement of Additional Information.
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities. 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
security, 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 (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 investment grade convertible securities, common stock or
conventional debt securities. As a result, the Adviser's own
investment research and analysis tend 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 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
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 or 4:00 p.m., eastern
time) by dividing the difference between the value of its assets
and liabilities allocable to that class by the number of shares of
that class 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 or 4:00 p.m., eastern 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
Shares of each class of Advisor Growth Stock Fund are offered
continuously. Orders for a class received in good order prior to
the time at which Advisor Growth Stock Fund values the shares of
that class (or placed with a FSF or an Intermediary before such
time and transmitted by the FSF or Intermediary before Advisor
Growth Stock Fund processes that day's share transactions) will be
processed based on that day's closing net asset value for the
class, plus any applicable initial sales charge.
The initial purchase minimum per account is $1,000; subsequent
investments may be as small as $50. The minimum initial
investment for the Fundamatic program (as discussed in the
Statement of Additional Information) is $50, and the minimum
initial investment for a retirement account sponsored by Colonial
Management Associates, Inc. an affiliate of the Adviser and the
Distributor, is $25. Advisor Growth Stock Fund may refuse any
purchase order for its shares. See How to Sell (Redeem) Shares
and the Statement of Additional Information for more information.
Class A Shares. Class A shares are offered at net asset value
plus an initial sales charge as follows and subject to an annual
distribution fee:
Initial Sales Charge
-----------------------------------
Retained by
as % of Financial
------------------- Service
Amount Offering Firm as % of
Amount Purchased Invested Price Offering Price
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than $100,000 4.71 4.50 3.75
$100,000 to less than $250,000 3.63 3.50 2.75
$250,000 to less than $500,000 2.56 2.50 2.00
$500,000 to less than $1,000,000 2.04 2.00 1.75
$1,000,000 or more 0.00 0.00 0.00
On purchases of $1 million or more, Liberty Financial Investments,
Inc. (the "Distributor") pays the FSF or Intermediary a cumulative
commission as follows:
Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50
Over $5,000,000 0.251
____________________
1. Paid over 12 months but only to the extent the shares remain
outstanding.
In determining the sales charge and commission applicable to a new
purchase under the above schedules, the amount of the current
purchase is added to the current value of shares previously
purchased and still held by an investor. If a purchase results in
an account having a value from $1 million to $5 million, then the
shares purchased will be subject to a 1.00% contingent deferred
sales charge payable to the Distributor, if redeemed within 18
months from the first day of the month following the purchase. If
the purchase results in an account having a value in excess of $5
million, the contingent deferred sales charge will not apply to
the portion of the purchased shares comprising such excess amount.
Purchases of $1 million to $5 million are subject to a 1.00%
contingent deferred sales charge payable to the Distributor on
redemptions within 18 months from the first day of the month
following the purchase. The contingent deferred sales charge does
not apply to the excess of any purchase over $5 million. From
October 16, 1997 through December 31, 1997, the Distributor will
pay FSFs a commission of 5.75% on Class A share purchases.
Thereafter the commission will be 5.00%.
Class B Shares. Class B shares are offered at net asset value,
without an initial sales charge, and are subject to a 0.75% annual
distribution fee for approximately eight years (at which time they
automatically convert to Class A shares not bearing a distribution
fee) and a declining contingent deferred sales charge if redeemed
within six years after purchase. As shown below, the amount of
the contingent deferred sales charge depends on the number of
years after purchase that the redemption occurs:
Years After Purchase Contingent Deferred Sales Charge
0-1 5.00%
1-2 4.00
2-3 3.00
3-4 3.00
4-5 2.00
5-6 1.00
More than 6 0.00
Year one ends one year after the end of the month in which the
purchase was accepted and so on. From October 16, 1997 through
December 31, 1997, the Distributor will pay FSFs a commission of
4.50% on Class B share purchases. Thereafter the commission will
be 4.00%.
Class C Shares. Class C shares are offered at net asset value
without an initial sales charge and are subject to a 0.75% annual
distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month after
purchase was accepted.
The Distributor pays FSFs an initial commission of 1.00% on
purchases of Class C shares and an ongoing commission of 0.75%
annually commencing after the shares purchased have been
outstanding for one year. Payment of the ongoing commission is
conditioned on receipt by the Distributor of the 0.75% annual
distribution fee referred to above. The commission may be reduced
or eliminated if the distribution fee with respect to Class C
shares paid by Advisor Growth Stock Fund is reduced or eliminated
for any reason.
Class K Shares. Class K shares are offered at net asset value,
without an initial sales charge, and are subject to a 0.25% annual
distribution fee. Class K shares may be purchased only through
certain Intermediaries, including certain bank trust departments,
wrap fee programs and retirement plans.
General. All contingent deferred sales charges are deducted from
the amount redeemed, not the amount remaining in the account, and
are paid to the Distributor. Shares issued upon distribution
reinvestment and amounts representing appreciation are not subject
to a contingent deferred sales charge. The contingent deferred
sales charge is imposed on redemptions which result in the account
value falling below its Base Amount (the total dollar value of
purchase payments (including initial sales charges, if any) in the
account, reduced by prior redemptions on which a contingent
deferred sales charge was paid and any exempt redemptions). When
a redemption subject to a contingent deferred sales charge is
made, generally older shares will be redeemed first unless the
shareholder instructs otherwise. See the Statement of Additional
Information for more information.
Which class is more beneficial to an investor depends on the
amount and intended length of the investment. Investments in Class
B shares have 100% of the purchase invested immediately. Those
investing for a relatively short period of time might consider
Class C shares. Purchases of $250,000 or more must be for Class
A, Class C or Class K shares. Purchases of $1,000,000 or more
must be for Class A or Class K shares. Consult your FSF or
Intermediary.
FSFs may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional
compensation for FSFs or Intermediaries which have made or may
make significant sales. See the Statement of Additional
Information for more information.
Special Purchase Programs. Advisor Growth Stock Fund allows
certain investors or groups of investors to purchase shares with
reduced or without initial or contingent deferred sales charges.
The programs are described in the Statement of Additional
Information under Purchases and Redemptions--Programs for Reducing
or Eliminating Sales Charges.
Conditions of Purchase. Each purchase order for Advisor Growth
Stock Fund must be accepted by an authorized officer of the
Distributor or its authorized agent and is not binding until
accepted and entered on the books of Advisor Growth Stock Fund.
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.
Shareholder Services and Account Fees. A variety of shareholder
services are available. For more information about these services
or your account call (800) 345-6611. Some services are described
in the attached account application. A Shareholder's Manual
explaining all available services will be provided upon request.
In June of any year, the Fund may deduct $10 (payable to the
Transfer Agent) from accounts valued at less than $1,000 unless
the account value has dropped below $1,000 solely as a result of
share value depreciation. Shareholders will receive 60 days'
written notice to increase the account value before the fee is
deducted. The Fund may also deduct annual maintenance and
processing fees (payable to the Transfer Agent) in connection with
certain retirement plan accounts. These low balance account fees
and maintenance and processing fees do not apply to accounts that
consist solely of Class K shares. See Purchases and Redemptions--
Special Purchase Programs/Investor Services in the Statement of
Additional Information.
HOW TO SELL (REDEEM) SHARES
Selling Shares Directly to Advisor Growth Stock Fund. You may
redeem all or a portion of your shares by submitting a written
request in good order. Send a signed letter of instruction to the
Transfer Agent. The sale price is the net asset value (less any
contingent deferred sales charge) next determined after receipt of
your redemption request in good order. Signatures must be
guaranteed by a bank, a member firm of a national stock exchange
or another eligible guarantor institution. Additional
documentation is required for sales by corporations, agents,
fiduciaries, surviving joint owners and individual retirement
account holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
(800) 345-6611
Selling Shares through FSFs or Intermediaries. FSFs or
Intermediaries must receive requests prior to the time at which
Advisor Growth Stock Fund values it shares to receive that day's
price, are responsible for furnishing all necessary documentation
to the Transfer Agent, and may charge for this service. Your FSF
or Intermediary may be closed on days when the NYSE is open. As a
result, prices for shares may be significantly affected on days
when you have no access to your FSF or Intermediary to sell
shares. If you wish to sell shares through your FSF or
Intermediary, please contact it for instructions.
Exchange Privilege. With respect to Class A, Class B and Class C
shares, exchanges at net asset value may be made among shares of
the same class of any other fund that is a series of Advisor Trust
or of most funds advised by Colonial Management Associates, Inc.
or distributed by the Distributor, each an affiliate of the
Adviser. For more information on the Colonial Funds, see your
financial adviser or call (800) 426-3750. With respect to Class K
shares, exchanges at net asset value may be made among shares of
the same class of any other Fund that is a series of Advisor
Trust. Not all Advisor Trust Funds offer Class A, Class B, Class
C and Class K shares at this time. In addition, no funds other
than the Advisor Trust Funds offer Class K shares. 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 fund, you should obtain the prospectus for
the 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 (including
the telephone exchange privilege) or its use in any manner by any
person or class. Advisor Growth Stock Fund will terminate the exchange
privilege as to a particular shareholder if the Adviser determines, in
its sole and absolute discretion, that the shareholder's exchange
activity is likely to adversely impact the Adviser's ability to manage
the investment portfolio in accordance with the investment objective
or otherwise harm Advisor Growth Stock Fund or its remaining shareholders.
Shares will continue to age without regard to the exchange for
purposes of conversion and determining the contingent deferred
sales charge, if any, upon redemption.
Class A Shares. An exchange from a money market fund into a non-
money market fund will be at the applicable offering price next
determined (including sales charge), except for amounts on which
an initial sales charge was paid. Non-money market fund shares
must be held for five months before qualifying for exchange into a
fund with a higher sales charge, after which an exchange is made
at the net asset value next determined.
Class B Shares. Exchanges of Class B shares are not subject to
the contingent deferred sales charge. However, if shares received
in the exchange are redeemed within six years after the original
purchase, a contingent deferred sales charge will be assessed
using the schedule of the fund into which the original investment
was made.
Class C Shares. Exchanges of Class C shares are not subject to
the contingent deferred sales charge. However, if shares received
in the exchange are redeemed within one year after the original
purchase, a 1.00% contingent deferred sales charge will be
assessed. Only one "round-trip" exchange of the Class C shares
may be made per three-month period, measured from the date of the
initial purchase (a round-trip being the exchange out of a fund
into another fund, and then back to that fund).
Class K Shares. Individual participants in a qualified retirement
plan may exchange Class K shares through the plan sponsor or
administrator only for Class K shares of other Advisor Trust Funds
that are included in the plan.
Telephone Transactions. Shareholders and/or their financial
advisers are automatically eligible to exchange shares and redeem
shares up to $50,000 by calling (800) 422-3737 any business day
between 10:00 a.m., central time (or 9:00 a.m., eastern time) and
the time Advisor Growth Stock Fund values its shares. Telephone
redemption privileges for larger amounts may be elected on the
account application.
The Transfer Agent employs procedures reasonably designed to
confirm that instructions communicated by telephone are genuine.
If Advisor Growth Stock Fund and/or the Transfer Agent does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions. Such procedures
include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone
shortly after an address change, recording of telephone lines and
requirements that the redeeming shareholder and/or his/her
financial adviser provide certain identifying information.
Shareholders and/or their financial advisers wishing to redeem or
exchange shares by telephone may experience difficulty in reaching
Advisor Growth Stock Fund at the toll free number during periods
of drastic economic or market changes. In that event,
shareholders and/or their financial advisers should follow the
procedures for redemption or exchange by mail as described above
under How to Sell (Redeem) Shares. The Transfer Agent and
Advisor Growth Stock Fund reserve the right to change, modify or
terminate the telephone redemption or exchange services at any
time upon prior written notice to shareholders. Shareholders
and/or their financial advisers are not obligated to transact by
telephone.
General Redemption Policies. Shares of Advisor Growth Stock Fund
may be sold on any day the NYSE is open, either directly with
Advisor Growth Stock Fund or through your FSF or Intermediary.
Advisor Trust will pay redemption proceeds (less any applicable
contingent deferred sales charge) as soon as practicable,
generally within seven days after proper instructions are
received. However, for shares recently purchased by check,
Advisor Growth Stock Fund will send proceeds as soon as the check
has cleared (which may take up to 15 days). 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 receipt of your redemption
request in good order by Advisor Growth Stock Fund. (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, may result in a realized capital
gain or loss and may be subject to a contingent deferred sales
charge. The contingent deferred sales charge may be waived under
certain circumstances. See the Statement of Additional
Information for more information.
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 12-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 gains distributions on shares of
Advisor Growth Stock Fund will be reinvested in additional shares
of the same class of Advisor Growth Stock Fund unless you elect to
have distributions paid by check. Reinvestment normally occurs on
the payable date. Regardless of your election, distributions of
$10 or less will not be paid by check to the shareholder, but will
be reinvested in additional shares of the same class of Advisor
Growth Stock Fund at net asset value. To change your election,
call the Transfer Agent for instructions.
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. Advisor Growth Stock Fund
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 gains that
is distributed to shareholders.
Generally distributions are taxable as ordinary income, except
that any distributions of net long-term capital gains will be
taxed as such. However, distributions 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.
The Taxpayer Relief Act of 1997 (the "Act") reduced from 28% to
20% the maximum tax rate on long-term capital gains. This reduced
rate generally applies to securities held for more than 18 months
and sold after July 28, 1997, and securities held for more than
one year and sold between May 6, 1997 and July 29, 1997.
If you buy shares shortly before a distribution is declared, the
distribution will be taxable although it is, in effect, a partial
return of the amount invested.
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
and its predecessor have advised and managed mutual funds since
1949. The Adviser is a wholly owned indirect 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 June 30, 1997, Mr. Gustafson was
responsible for managing $1.2 billion 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 Advisor Growth Stock Fund's 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
Growth Stock Portfolio's 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.
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. Colonial Investors
Service Center, Inc. ("Transfer Agent"), P.O. Box 1722, Boston, MA
02105-1722, an indirect 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 by the Transfer Agent 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 Financial Investments, Inc. The
Distributor is an indirect subsidiary of Liberty Financial. The
business address of the Distributor is One Financial Center,
Boston, Massachusetts 02111-2621; however, all Fund correspondence
(including purchase and redemption orders) should be mailed to
Colonial Investors Service Center, Inc., the Transfer Agent, at
P.O. Box 1722, Boston, Massachusetts 02105-1722.
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 personal service and/or the
maintenance of shareholder accounts, the Distributor receives from
Advisor Growth Stock Fund a service fee at an annual rate not to
exceed 0.25% of the Fund's net assets attributed to each class of
shares other than Class K shares. The Plan also provides that, as
compensation for expenses related to the promotion and
distribution of shares of Advisor Growth Stock Fund including its
expenses related to the sale and promotion of Advisor Growth Stock
Fund shares, the Distributor receives from Advisor Growth Stock
Fund a distribution fee at an annual rate not exceeding 0.10% of
the average net assets attributed to Class A shares, 0.75% of the
average net assets attributed to each of its Class B and Class C
shares, and 0.25% of the average net assets attributable to its
Class K shares. At this time, the Distributor has voluntarily
agreed to limit the Class A distribution fee to 0.05% annually.
The Distributor may terminate this voluntary limitation without
shareholder approval. Class B shares automatically convert to
Class A shares approximately eight years after the Class B shares
were purchased. Class C and Class K shares do not convert. The
Distributor generally pays this compensation 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 sales
charges paid.
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 are authorized and
outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Advisor Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the 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 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 also is 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.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Advisor Growth Stock Fund, an open-end management investment
company, seeks to achieve its objective by investing all of its
assets in 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 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
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.
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 was 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 nonfundamental 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. Class A shareholders with accounts of $1,000,000 or
more, and holders of Class B or Class C shares may incur a
contingent deferred sales charge if they redeem shares in response
to a change in investment objective.
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. 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 and might incur different
administrative fees and expenses than Advisor Growth Stock Fund.
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 (800)
345-6611.
<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 SR&F Growth Stock
Portfolio, which has the same investment objective and
substantially the same investment policies as Advisor Growth Stock
Fund. (See Master Fund/Feeder Fund: Structure and Risk Factors.)
Shares of Advisor Growth Stock Fund may be purchased only through
Intermediaries, including retirement plan service providers.
Advisor Growth Stock Fund is a multi-class series of Stein Roe
Advisor Trust and Growth Stock Portfolio is a series of SR&F Base
Trust. Each Trust is an open-end management investment company.
This prospectus relates only to Class K shares of Advisor Growth
Stock Fund. For information on Class A, B, and C shares, please
call 800-345-6611. Class K shares of Advisor Growth Stock Fund
have no sales or redemption charges.
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 October 15, 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 and most recent financial
statements may be obtained without charge by writing to Stein Roe
Mutual Funds, Suite 3200, One South Wacker Drive, Chicago,
Illinois 60606, or by calling the Adviser. For additional
information, call Retirement Services at 800-322-1130 or
Advisor/Broker Services at 800-322-0593.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE 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 October 15, 1997.
TABLE OF CONTENTS
Page
Summary....................................2
Fee Table .................................3
Financial Highlights.......................4
The Fund...................................5
Investment Policies........................5
Performance Information....................5
Risks and Investment Considerations .......6
Investment Restrictions ...................7
Portfolio Investments and Strategies.......8
Net Asset Value ..........................11
How to Purchase Shares....................11
How to Sell (Redeem) Shares ..............12
Distributions and Income Taxes............12
Management ...............................13
Organization and Description of hares.....15
Master Fund/Feeder Fund: Structure
and Risk Factors.......................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 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 Objective 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 a diversified portfolio of 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 objective 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 Sell (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
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets; after
reimbursement)
Management and Administrative Fees .................0.73%
12b-1 Fees..........................................0.25%
Other Expenses (after reimbursement)................0.37%
-----
Total Operating Expenses (after reimbursement)..1.35%
=====
______________
1. For accounts less than $500, an annual fee of $10 may be
deducted. See How to Purchase Shares.
2. Redemption proceeds exceeding $500 sent via federal funds
wire will be subject to a $7.50 charge per transaction.
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 Class K shares of 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 Class K shares of 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 Estimated Annual Fund
Operating Expenses remain the same during each of the periods and
that all income dividends and capital gains distributions are
reinvested in additional shares.
Other Expenses and Total Operating Expenses reflect fee
reimbursements by the Adviser or the Distributor, as hereinafter
defined. Absent such reimbursements, Other Expenses and Total
Operating Expenses for Class K shares would have been 0.52% and
1.50%, respectively. Any such reimbursement will lower the
overall expense ratio for Class K shares 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 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.
FINANCIAL HIGHLIGHTS
The table below reflects the results of operations of Class K
shares of Advisor Growth Stock Fund on a per-share basis for the
period shown and has not been audited by independent public
accountants. The table should be read in conjunction with Advisor
Growth Stock Fund's financial statements and notes thereto. The
financial statements, which may be obtained from Advisor Trust
without charge upon request, contain additional performance
information.
Period Ended June 30,
1997 (a)
-----------------
Net Asset Value, Beginning of Period.............$10.00
Income from Investment Operations
Net realized and unrealized losses
on investments.............................0.67
Total from investment operations...........0.67
------
Net Asset Value, End of Period.......... .......$10.67
======
Ratio of net expenses to average net assets (b) 1.35%*
Ratio of net investment income to average net
assets (c)...................................-0.06%*
Total return.....................................6.70%
Net assets, end of period (000 omitted)...........$267
___________
*Annualized
(a) From commencement of operations on February 14, 1997,
reflects information relating to the initial shares of Advisor
Growth Stock Fund that were redesignated Class K shares as of
October 15, 1997. The historical performance of Class K
shares prior to February 14, 1997, is based on the performance
of Growth Stock Portfolio, restated to reflect 12b-1 fees and
other expenses applicable to Class K, without giving effect to
any expense reimbursements described herein and assuming
reinvestment of dividends and capital gains.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses, this ratio would have been 74.73%
for the period ended June 30, 1997.
(c) Computed giving effect to the expense limitation undertaking.
THE FUND
Stein Roe Advisor Growth Stock Fund ("Advisor Growth Stock Fund")
is a multi-class series of Stein Roe Advisor Trust ("Advisor
Trust"), which is an open-end 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 other 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 Master Fund/Feeder Fund: Structure and Risk Factors.)
Advisor Growth Stock Fund invests all of its net investable assets
in 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 Class K shares of Advisor
Growth Stock Fund is measured by the distributions received, plus
or minus the change in the net asset value per share for a given
period, assuming reinvestment of all distributions. 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 Class K's total return with alternative investments
should consider differences between the class and the alternative
investments, the periods and methods used in calculation of the
return being compared, and the impact of taxes on alternative
investments. Class K's performance may be compared to various
indices. Performance and quotations from various publications may
be included in sales literature and advertisements. 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.
Advisor Growth Stock Fund invests all of its net investable assets
in Growth Stock Portfolio, which has the same investment
objective and substantially the same investment policies as
Advisor Growth Stock Fund. Advisor Growth Stock Fund commenced
operations on February 14, 1997, but until October 15, 1997,
offered only the shares that are now designated Class K shares.
The historical performance of Class K shares for the period prior
to February 14, 1997, and the historical performance of each other
class of shares of Advisor Growth Stock Fund for all periods is
based on the performance of Growth Stock Portfolio, restated to
reflect the sales charges, 12b-1 fees and other expenses
applicable to the class as set forth in the Fee Table, without
giving effect to any fee reimbursements described therein and
assuming reinvestment of dividends and capital gains. Historical
performance as restated should not be interpreted as indicative of
Advisor Growth Stock Fund's future performance. The average
annual total returns for the periods ended September 30, 1997, for
1-year, 3-year, 5-year, and 10-year investments were 32.76%,
27.02%, 16.95%, and 12.45%, respectively.
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 nonresidents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
nonresidents. Foreign investments also tend to involve higher
transaction and custody costs.
Further information on investment techniques that may be employed
by Growth Stock Portfolio may be found under Portfolio Investments
and Strategies.
INVESTMENT RESTRICTIONS
Each of Advisor Growth Stock Fund and Growth Stock Portfolio is
diversified as that term is defined in the Investment Company Act
of 1940.
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 the investment
portfolio, and does not apply to securities of the U.S. Government
or repurchase agreements /1/ for such securities. This restriction
also does not prevent Advisor Growth Stock Fund from investing all
of its assets in shares of another investment company (Growth
Stock Portfolio) 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, except that Advisor Growth Stock Fund may invest all
of its assets in shares of another investment company (such as
Growth Stock Portfolio) having the identical investment objective
under a master/feeder structure.
Neither Advisor Growth Stock Fund nor Growth Stock Portfolio may
make loans except that each may (1) purchase money market
instruments and enter into repurchase agreements; (2) acquire
publicly distributed or privately placed debt securities; (3) lend
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 nonleveraging, temporary, or
emergency purposes or in connection with participation in the
interfund lending program. Neither the aggregate borrowings
(including reverse repurchase agreements) nor the aggregate loans
at any one time may exceed 33 1/3% of the value of total assets.
Additional securities may not be purchased when borrowings less
proceeds receivable from sales of portfolio securities exceed 5%
of total assets.
Growth Stock Portfolio may invest in repurchase agreements,
provided that it will not 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 second, third, and fourth
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 nonfundamental
and, as such, may be changed by the Board of Trustees without
shareholder approval. All of the investment restrictions are set
forth in the Statement of Additional Information.
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities. 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
security, 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 (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 investment grade convertible securities, common stock or
conventional debt securities. As a result, the Adviser's own
investment research and analysis tend 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 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
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, or 4:00 p.m., eastern
time) by dividing the difference between the value of its assets
and liabilities allocable to that class by the number of shares of
that class 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, or 4:00 p.m., eastern 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 Class K shares of Advisor Growth Stock Fund
shares only through wrap fee programs, 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.
Class K shares of Advisor Growth Stock Fund are offered
continuously. Orders received in good order prior to the time at
which Advisor Growth Stock Fund values its shares (or placed with
an Intermediary before such time and transmitted by the
Intermediary before Advisor Growth Stock Fund processes that day's
share transactions) will be processed based on that day's closing
net asset value.
Conditions of Purchase. Each purchase order for Advisor Growth
Stock Fund must be accepted by an authorized officer of the
Distributor or its authorized agent and is not binding until
accepted and entered on the books of Advisor Growth Stock Fund.
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.
HOW TO SELL (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. In
particular, individual participants of qualified retirement plans
may exchange shares through the plan sponsor or administrator.
Those participants may exchange shares only for shares of other
Advisor Trust Funds that are included in the plan. An exchange
transaction is a sale and purchase of shares for federal income
tax purposes and may result in capital gain or loss. Before
exchanging into another Advisor Trust Fund, you should obtain the
prospectus for the Advisor Trust Fund in which you wish to invest
and read it carefully. The registration of the account to which
you are making an exchange must be exactly the same as that of the
account from which the exchange is made. Advisor 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. Advisor Growth Stock Fund will
terminate the exchange privilege as to a particular shareholder if
the Adviser determines, in its sole discretion, that the
shareholder's exchange activity is likely to adversely impact the
Adviser's ability to manage the investment portfolio in accordance
with the investment objectives or otherwise harm Advisor Growth
Stock Fund or its remaining shareholders. 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 the
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,
generally within seven days after proper instructions are
received.
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 12-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 gains distributions on shares of
Advisor Growth Stock Fund will be reinvested in additional shares
of the same class unless your Intermediary elects to have
distributions paid by check. Reinvestment normally occurs on the
payable date. Regardless of your election, distributions of $10
or less will not be paid by check to the shareholder, but will be
reinvested in additional shares of the same class of Advisor
Growth Stock Fund at net asset value. To change your election,
call the Transfer Agent for instructions.
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. Advisor Growth Stock Fund
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 gains that
are distributed to shareholders.
Generally distributions are taxable as ordinary income, except
that any distributions of net long-term capital gains will be
taxed as such. However, distributions 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.
The Taxpayer Relief Act of 1997 (the "Act") reduced from 28% to
20% the maximum tax rate on long-term capital gains. This reduced
rate generally applies to securities held for more than 18 months
and sold after July 28, 1997, and securities held for more than
one year and sold between May 6, 1997 and July 29, 1997.
If you buy shares shortly before a distribution is declared, the
distribution will be taxable although it is, in effect, a partial
return of the amount invested.
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
and its predecessor have advised and managed mutual funds since
1949. The Adviser is a wholly owned indirect 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 June 30, 1997, Mr. Gustafson was
responsible for managing $1.2 billion 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.
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. Colonial Investors
Service Center, Inc. ("Transfer Agent"), P. O. Box 1722, Boston,
Massachusetts 02105, an indirect 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 by the Transfer Agent for shareholder servicing and
accounting services they provide with respect to the underlying
Fund shares.
Distributor. Class K shares of Advisor Growth Stock Fund are
offered for sale through Liberty Financial Investments, Inc.
("Distributor") without any sales commissions. The Distributor is
an indirect subsidiary of Liberty Financial. The business address
of the Distributor is One Financial Center, Boston, Massachusetts
02111; however, all Fund correspondence (including purchase and
redemption orders) should be mailed to Colonial Investors Service
Center, Inc., the Transfer Agent, at P.O. Box 1722, Boston,
Massachusetts 02105.
The trustees of Advisor Trust have adopted a plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Plan"). With
respect to Class K shares, the Plan provides that as compensation
for the promotion and distribution of shares of Advisor Growth
Stock Fund including its expenses related to sale and promotion of
Fund shares, the Distributor receives from Advisor Growth Stock
Fund a fee at an annual rate of 0.25% of the average net assets
attributable to Class K shares. The Distributor generally pays
this amount to institutions that distribute 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 sales charges paid.
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 are authorized and
outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Advisor Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the 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 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 also is 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.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Advisor Growth Stock Fund, an open-end management investment
company, seeks to achieve its objective by investing all of its
assets in 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 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
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 nonfundamental 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. 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
800-322-0593.
______________________
<PAGE>
Statement of Additional Information Dated February 14, 1997
as revised and supplemented through October 15, 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 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 14, 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 800-322-0593.
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 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..............................24
Additional Investment Considerations.................27
Management...........................................27
Financial Statements.................................31
Principal Shareholders...............................32
Investment Advisory Services.........................32
Custodian............................................33
Independent Public Accountants.......................34
Distributor..........................................34
Transfer Agent and Shareholder Servicing.............36
Purchases And Redemptions............................36
Portfolio Transactions...............................37
Additional Income Tax Considerations.................39
Investment Performance...............................40
Appendix--Ratings....................................45
Statements of Net Assets.............................48
GENERAL INFORMATION AND HISTORY
The six mutual funds listed on the cover page (referred to
collectively as the "Funds") are separate series of Stein Roe
Advisor Trust ("Advisor Trust"). Each Fund offers one class of
shares, Class K. 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 its 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
Each Fund acts as a "feeder fund" rather than investing in
securities directly; that is, it seeks to achieve its objective by
pooling its assets with those 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 Master Fund/Feeder Fund: Structure and Risk Factors.
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/
- -----------
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
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- ------------
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 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
invests 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 2% 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, 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 none
expects to invest more than 5% of its 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,
and are commonly referred to as "junk bonds."
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 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 its 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 restriction on 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.
Swaps, Caps, Floors and Collars
Each Portfolio may enter into swaps and may purchase or sell
related caps, floors and collars. A Portfolio would enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
anticipates purchasing at a later date. The Portfolios intend to
use these techniques as hedges and not as speculative investments
and will not sell interest rate income stream they may be
obligated to pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease a Portfolio's exposure to
changes in the value of an index of securities in which a
Portfolio might invest, the value of a particular security or
group of securities, or foreign currency values. Swap agreements
can take many different forms and are known by a variety of names.
Each Portfolio may enter into any form of swap agreement if the
Adviser determines it is consistent with its investment objective
and policies.
A swap agreement tends to shift investment exposure from one
type of investment to another. For example, if a Portfolio agrees
to exchange payments in dollars at a fixed rate for payments in a
foreign currency the amount of which is determined by movements of
a foreign securities index, the swap agreement would tend to
increase its exposure to foreign stock market movements and
foreign currencies. Depending on how it is used, a swap agreement
may increase or decrease the overall volatility of a Portfolio's
investments and its net asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from a
Portfolio. If a swap agreement calls for payments by a Portfolio,
it must be prepared to make such payments when due. If the
counterparty's creditworthiness declines, the value of a swap
agreement would be likely to decline, potentially resulting in a
loss. No Portfolio will enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction,
the unsecured long-term debt of the counterparty, combined with
any credit enhancements, is rated at least A by Standard & Poor's
Corporation or Moody's or has an equivalent rating from a
nationally recognized statistical rating organization or is
determined to be of equivalent credit quality by the Adviser.
The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is
a combination of a cap and floor that preserves a certain return
within a predetermined range of interest rates or values.
At the time a Portfolio enters into swap arrangements or
purchases or sells caps, floors or collars, liquid assets of the
Portfolio having a value at least as great as the commitment
underlying the obligations will be segregated on its books and
held by the custodian throughout the period of the obligation.
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 and 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.
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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).
- ------------
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). 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.
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.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
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 nonleveraging,
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) 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;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) [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);
(g) 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;
(h) 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;
(i) [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;
(j) 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.
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 ADVISOR TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
Gary A. Anetsberger (4) 41 Senior Vice-President; Chief financial officer of the Mutual Funds
Treasurer 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 Adviser and
(1) (2) (4) director of the Adviser
Jilaine Hummel Bauer (4) 42 Executive Vice-President; General counsel and secretary (since November, 1995) and
Secretary senior vice president of the Adviser
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 (3)(4) 77 Trustee Chairman emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd(2)(3)(4) 70 Trustee Chairman and director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products)
David P. Brady 33 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 (4) 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 38 Vice-President Senior vice president of the Adviser
Lindsay Cook (1)(4) 45 Trustee Executive vice president of Liberty Financial Companies,
Inc. (the indirect parent of the Adviser) since March,
1997; senior vice president prior thereto
Philip J. Crosley 51 Vice-President Senior vice president of the Adviser since February,
1996; vice president, institutional sales - advisor
sales, Invesco Funds Group prior thereto
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 prior thereto
Douglas A. Hacker(3)(4) 41 Trustee Senior vice president and chief financial officer of
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 33 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 strategist of the Adviser;
director of research of the Adviser, 1991 to 1995
Janet Langford Kelly 39 Trustee Senior vice president, secretary and general counsel of
(3) (4) Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner, Sidley &
Austin (law firm) prior thereto
Eric S. Maddix 33 Vice-President Vice president of the Adviser since November, 1995;
portfolio manager or research assistant for the Adviser
since 1987
John S. McLandsborough 30 Vice-President Portfolio manager for the Adviser since April, 1996;
securities analyst, CS First Boston from June, 1993 to
December, 1995; securities analyst, National City Bank
of
Cleveland from November, 1992 to June, 1993
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 prior thereto
Arthur J. McQueen 39 Vice-President Senior vice president of the Adviser
Lynn C. Maddox 56 Vice-President Senior vice president of the Adviser
Francis W. Morley (3)(4) 77 Trustee Chairman of Employer Plan Administrators and Consultants
Co. (designer, administrator, and communicator of
employee benefit plans)
Charles R. Nelson(3)(4) 55 Trustee Van Voorhis Professor of Political Economy, Department of
Economics of the University of Washington
Nicolette D. Parrish (4) 47 Vice-President; Senior compliance administrator and assistant secretary
Assistant 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
Sharon R. Robertson (4) 35 Controller Accounting manager for the Adviser's Mutual Funds
division
Janet B. Rysz (4) 41 Assistant Secretary Senior compliance administrator and assistant secretary
of the Adviser
M. Gerard Sandel 43 Vice-President Senior vice president of the Adviser since July, 1997;
vice president of M&I Investment Management Corporation
from October 1993 to June, 1997; vice president of Acorn
Asset Management Corporation prior thereto
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 prior thereto
Thomas C. Theobald(3)(4) 60 Trustee Managing director, William Blair Capital Partners
(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) 30 Vice-President Legal counsel for the Adviser since March, 1995;
associate with Beeler Schad & Diamond PC (law firm) prior
thereto
Stacy H. Winick (4) 32 Vice-President Senior legal counsel for the Adviser since October, 1996;
associate of Bell, Boyd & Lloyd (law firm) from June,
1993 to September, 1996; associate of Debevoise &
Plimpton (law firm) prior thereto
Hans P. Ziegler (4) 56 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) 31 Assistant Treasurer Project manager for the Adviser's Mutual Funds
division since April 1997; compliance manager from August
1995 to April 1997; compliance accountant, January 1995
to July 1995; section manager, January 1994 to January
1995; supervisor prior thereto
</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. 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 or Compensation 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 any
series participating in the master fund/feeder fund structure, the
trustees' attendance fees are paid solely by the master portfolio.
Each non-interested trustee also receives $500 from Advisor Trust
for attending each meeting of the Nominating Committee and
Compensation 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
_______________
* 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 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. Ms. Kelly
became a trustee on January 1, 1997.
FINANCIAL STATEMENTS
Please refer to the audited balance sheet of Advisor Trust
dated February 6, 1997 included at the end of this statement of
additional information and to the Funds' March 31, 1997 unaudited
Financial Statements (balance sheets and schedules of investments
as of March 31, 1997 and the statements of operations, changes in
net assets, and notes thereto) contained in the Funds' March 31,
1997 semiannual reports. The Financial Statements are
incorporated herein by reference. The semiannual reports may be
obtained at no charge by telephoning 800-322-1130.
PRINCIPAL SHAREHOLDERS
As of September 30, 1997, Liberty Financial Companies, Inc.
("Liberty Financial"), 600 Atlantic Avenue, Boston, Massachusetts
02210 (the parent company of the Adviser), owned 10,000 shares, or
100%, 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., 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 Executive 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 June 30, 1997, the Adviser managed
over $28 billion in assets: over $9 billion in equities and over
$19 billion in fixed income securities (including $1.7 billion in
municipal securities). The $28 billion in managed assets included
over $7.9 billion held by open-end mutual funds managed by the
Adviser (approximately 15% of the mutual fund assets were held by
clients of the Adviser). These mutual funds were owned by over
259,000 shareholders. The $7.9 billion in mutual fund assets
included over $766 million in over 50,000 IRA accounts. In
managing those assets, the Adviser utilizes a proprietary
computer-based information system that maintains and regularly
updates information for approximately 7,000 companies. The
Adviser also monitors over 1,400 issues via a proprietary credit
analysis system. At June 30, 1997, the Adviser employed 16
research analysts and 55 account managers. The average
investment-related experience of these individuals was 24 years.
Please refer to the descriptions of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under Management and Fee
Table in the Prospectuses, which are 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.
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 Bank 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 interests 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. Each 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 Bank and may
purchase or sell securities from or to the Bank.
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.
DISTRIBUTOR
Shares of Funds are distributed by Liberty Financial
Investments, Inc. (the "Distributor"), an indirect subsidiary of
Liberty Financial, under a Distribution Agreement as described
under Management in the Prospectuses, which are 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 ("independent trustees").
The Distributor has no obligation, as underwriter, to buy Fund
shares, and purchases shares only upon receipt of orders from
authorized Intermediaries. 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.
Each Fund offers one class of shares (Class K) and may in the
future offer other classes of shares. Class K shares are offered
at net asset value, subject to a Rule 12b-1 fee.
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 personal service
and/or the maintenance of shareholder accounts, the Distributor
receives a service fee at an annual rate not to exceed 0.25% of
net assets attributed to each class of shares other than Class K
shares. The Plan also provides that as compensation for the
promotion and distribution of shares of the Funds including its
expenses related to sale and promotion of Fund shares, the
Distributor receives from each Fund a fee at an annual rate of not
exceeding 0.10% of the average net assets attributed to Class A
shares, 0.75% of the average net assets attributed to each of its
Class B and Class C shares, and 0.25% of the average net assets
attributable to Class K shares. At this time, the Distributor has
voluntarily agreed to limit the Class A distribution fee to 0.05%
annually. The Distributor may terminate this voluntary limitation
without shareholder approval. Class B shares automatically
convert to Class A shares approximately eight years after the
Class B shares are purchased. Class C and Class K shares do not
convert. The Distributor generally pays this amount to
institutions that distribute Fund shares and provide services to
the Funds and their 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
the Funds 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 sales charges
paid. Advisor Trust's Plan complies with those rules.
The trustees believe that the 12b-1 plan could be a
significant factor in the growth and retention of Fund assets
resulting in a more advantageous expense ratio and increased
investment flexibility which could benefit each class of
shareholders. The 12b-1 Plan will continue in effect from year to
year so long as continuance is specifically approved at least
annually by a vote of the trustees, including the independent
trustees. The 12b-1 plan may not be amended to increase the fee
materially without approval by a vote of a majority of the
outstanding voting securities of the relevant class of shares and
all material amendments of the Plans must be approved by the
trustees in the manner provided in the foregoing sentence. The
12b-1 plan may be terminated at any time by a vote of a majority
of the independent trustees or by a vote of a majority of the
outstanding voting securities of the relevant Class of shares.
TRANSFER AGENT AND SHAREHOLDER SERVICING
Colonial Investors Service Center, Inc. (the "Transfer
Agent"), an indirect subsidiary of Liberty Financial, performs
certain transfer agency services for Advisor Trust, as described
under Management in the Prospectuses. For performing these
services, the Transfer Agent receives from each Fund a fee based
on the following annual rates:
Class K Shares
Account maintenance and trade processing 0.05%
Client services 0.25%
Total 0.30%
Advisor Trust believes the charges by the Transfer Agent to the
Funds are comparable to those of other companies performing
similar services.
Some broker-dealers, banks, or other intermediaries,
including retirement plan service providers ("Intermediaries")
that maintain nominee accounts with the Funds for their clients
who are Fund shareholders may be paid a fee from the Transfer
Agent for shareholder servicing and accounting services they
provide with respect to the underlying Fund shares.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectuses
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 per share for each Fund 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 January, 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 the Funds 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 a Fund not reasonably practicable.
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 also 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 the Association 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 a 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 a 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 Funds will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid and (ii)
the portion of 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 February 14, 1997, and have
no past performance. However, six 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 six 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 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. 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 Young Investor Fund, Advisor
Special Fund
Lipper Growth Fund Index 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 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 Special
(Widely recognized indicator of Venture Fund
the performance of small- and medium-
sized company stocks)
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>
Stein Roe Advisor Trust
Statements of Net Assets
February 6, 1997
<TABLE>
<CAPTION>
Advisor Advisor Advisor Advisor Advisor Advisor Advisor
Balanced Growth & Income Growth Stock Special Special Venture International Young Investor
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Unamortized organization
costs 35,000 35,000 35,000 35,000 35,000 35,000 35,000
-------- -------- -------- -------- -------- -------- --------
Total Assets 135,000 135,000 135,000 135,000 135,000 135,000 135,000
======== ======== ======== ======== ======== ======== ========
Liabilities:
Payable to the Adviser for
organization costs incurred 35,000 35,000 35,000 35,000 35,000 35,000 35,000
Capital:
Paid in Capital (net assets) 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Total Liablities and
Capital $135,000 $135,000 $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ======== ======== ========
Shares Outstanding (Unlimited
number authorized) 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Net Asset Value (Capital) Per
Share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
======== ======== ======== ======== ======== ======== ========
</TABLE>
Stein Roe Advisor Trust
Notes to Statements of Net Assets
February 6, 1997
Note 1. Organization:
Stein Roe Advisor Balanced Fund, Advisor Growth & Income Fund,
Advisor Growth Stock Fund, Advisor Special Fund, Advisor Special
Venture Fund, Advisor International Fund, and Advisor Young
Investor Fund (the "Funds") are separate series of the Stein Roe
Advisor Trust (the "Trust"), an open-end diversified management
investment company organized as a Massachusetts business trust.
Each Fund will invest all of its net investable assets in SR&F
Balanced Portfolio, SR&F Growth & Income Portfolio, SR&F Growth
Stock Portfolio, SR&F Special Portfolio, SR&F Special Venture
Portfolio, SR&F International Portfolio, or SR&F Growth Investor
Portfolio (the "Portfolios"), respectively, each a separate series
of the SR&F Base Trust. The Funds are inactive except for matters
relating to their organization and registration as open-end
investment companies under the Investment Company Act of 1940, and
the sale of 10,000 shares of each of the Funds for $100,000 to
Liberty Financial Companies, Inc. Organization costs will be
amortized on a straight-line basis against income over various
periods of up to sixty months from the commencement of public
offering by the Funds, depending on the nature of the individual
costs.
Note 2. Transactions with Affiliates:
Stein Roe & Farnham Incorporated (the "Adviser") receives a
management fee from each Portfolio computed and accrued daily, at
an annual rate, as a percentage of average net assets as follows:
Management Fees
($ amounts in thousands)
------------------------
Balanced Portfolio .55% up to $500,
.50 next $500,
.45% thereafter.
Growth & Income Portfolio, and .60% up to $500,
Growth Stock Portfolio, and .55% next $500,
Growth Investor Portfolio .50% thereafter.
Special Portfolio .75% up to $500,
.70% next $500,
.65% next $500,
.60% thereafter.
Special Venture Portfolio .75% of average net assets
International Portfolio .85% of average net assets
The Adviser also receives an administrative fee from each Fund
computed and accrued daily, at an annual rate, as a percentage
of average net assets as follows:
Administrative Fee
($ amounts in thousands)
------------------------
Advisor Balanced Fund, and .15% up to $500,
Advisor Growth & Income Fund, and .125% next $500,
Advisor Growth Stock Fund .10% thereafter.
Advisor Young Investor Fund .20% up to $500,
.15% next $500,
.125% thereafter
Advisor Special Fund .15% up to $500,
.125% next $500,
.10% next $500,
.075% thereafter.
Advisor Special Venture Fund, and .15% of average net assets
Advisor International Fund
<PAGE>
To the Shareholder and Board of Trustees of
Stein Roe Advisor Trust
We have audited the accompanying statements of net assets of Stein
Roe Advisor Trust (a Massachusetts business trust), comprising the
Stein Roe Advisor Balanced Fund, Stein Roe Advisor Growth & Income
Fund, Stein Roe Advisor Growth Stock Fund, Stein Roe Advisor
Special Fund, Stein Roe Advisor Special Venture Fund, Stein Roe
Advisor International Fund and Stein Roe Advisor Young Investor
Fund (the "Funds"), as of February 6, 1997. The statements of net
assets are the responsibility of Stein Roe Advisor Trust's
management. Our responsibility is to express an opinion on the
statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statements of net assets are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statements of net assets. Our
procedures included confirmation of cash held by the custodian as
of February 6, 1997. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the statements of net
assets provides a reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above
present fairly, in all material respects, the net assets of the
Funds constituting the Stein Roe Advisor Trust as of February 6,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1997
<PAGE>
Statement of Additional Information Dated October 15, 1997
STEIN ROE ADVISOR TRUST
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
Stein Roe Advisor Growth Stock Fund
This Statement of Additional Information is not a prospectus,
but provides additional information that should be read in
conjunction with the prospectus dated October 15, 1997, and any
supplements thereto ("Prospectus"). A Prospectus may be obtained
at no charge by calling (800) 426-3720.
TABLE OF CONTENTS
Page
General Information and History...........................2
Investment Policies.......................................3
Portfolio Investments and Strategies......................3
Investment Restrictions..................................20
Additional Investment Considerations.....................22
Management...............................................23
Financial Statements.....................................27
Principal Shareholders...................................27
Investment Advisory Services.............................28
Custodian................................................29
Independent Public Accountants...........................30
Distributor..............................................30
Transfer Agent and Shareholder Servicing.................32
Purchases And Redemptions................................33
Portfolio Transactions...................................42
Additional Income Tax Considerations.....................44
Investment Performance...................................45
Appendix--Ratings........................................48
Balance Sheet............................................51
Financial Statements as of June 30, 1997.................54
GENERAL INFORMATION AND HISTORY
Stein Roe Advisor Growth Stock Fund is a separate multi-class
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 its 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
Advisor Growth Stock Fund acts as a "feeder fund" rather than
investing in securities directly; that is, it seeks to achieve its
objective by pooling its assets with those of other investment
companies for investment in a separate "master fund" having the
same investment objective and substantially the same investment
policies as Advisor Growth Stock 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"). For more information, please refer to the
Prospectus under the caption Master Fund/Feeder Fund: Structure
and Risk Factors.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative and accounting and recordkeeping services to
Advisor Growth Stock Fund and Growth Stock Portfolio and provides
investment advisory services to Growth Stock Portfolio.
INVESTMENT POLICIES
In pursuing its objective, Growth Stock 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/
- --------
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
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- --------
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.
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities
In pursuing its investment objective, Growth Stock 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 Stock 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.
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 Growth
Stock Portfolio is lost or reduced below investment grade, it is
not required to dispose of the security, but the Adviser will
consider that fact in determining whether to 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
and are commonly referred to as "junk bonds."
When the Adviser determines that adverse market or economic
conditions exist and considers 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.
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.
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.
Growth Stock Portfolio does not currently intend to invest
more than 5% of its net assets in any type of Derivative except
for options, futures contracts, and futures options. (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, 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. While convertible securities
purchased by Growth Stock Portfolio are frequently rated
investment grade, it 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
Growth Stock Portfolio 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. Growth Stock
Portfolio may invest in sponsored or unsponsored ADRs. In the
case of an unsponsored ADR, it 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. Growth Stock Portfolio does not
currently intend to invest more than 5% of its net assets in
unsponsored ADRs.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, Growth Stock
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 Growth
Stock 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 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 Growth Stock 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, 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.
Growth Stock Portfolio's 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 Growth Stock
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 Growth Stock 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. Growth Stock 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 it
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, Growth Stock 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. Growth Stock Portfolio may not
engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, Growth Stock 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 Growth
Stock 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 it 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 it is obligated to deliver.
If Growth Stock Portfolio retains the portfolio security and
engages in an offsetting transaction, it will incur a gain or a
loss to the extent that there has been movement in forward
contract prices. If Growth Stock 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 Growth Stock 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, it 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, Growth Stock 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 Growth Stock Portfolio of unrealized
profits or force it 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 Growth Stock Portfolio to hedge against a devaluation
that is so generally anticipated that it is not able to contract
to sell the currency at a price above the devaluation level it
anticipates. The cost to Growth Stock 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.
Lending of Portfolio Securities
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, Growth Stock 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 Growth
Stock Portfolio. Growth Stock 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. Growth Stock 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. Growth Stock 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, it 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 it
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
Growth Stock 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 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.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
Growth Stock 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 it
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 makes 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. Growth
Stock Portfolio does not currently intend to make commitments to
purchase when-issued securities in excess of 5% of its net assets.
Growth Stock Portfolio may enter into reverse repurchase
agreements with banks and securities dealers. A reverse
repurchase agreement is a repurchase agreement in which it 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 Growth Stock 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)
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on its books 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"
Growth Stock 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. Growth Stock Portfolio may make short sales of securities
only if at all times when a short position is open it 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, Growth Stock Portfolio does
not deliver from its portfolio the securities sold. Instead,
Growth Stock 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 Growth Stock
Portfolio, to the purchaser of such securities. Growth Stock
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, Growth Stock Portfolio must deposit and continuously
maintain in a separate account with its custodian an equivalent
amount of the securities sold short or securities convertible into
or exchangeable for such securities at no additional cost. Growth
Stock Portfolio is said to have a short position in the securities
sold until it delivers to the broker-dealer the securities sold.
Growth Stock 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 Growth Stock 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 Growth Stock
Portfolio owns, either directly or indirectly, and, in the case
where it 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 Growth Stock Portfolio replaces the borrowed
security, it will incur a loss and if the price declines during
this period, it 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 Growth Stock Portfolio may
have to pay in connection with such short sale. Certain
provisions of the Internal Revenue Code may limit the degree to
which Growth Stock Portfolio is able to enter into short sales.
There is no limitation on the amount of 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. Growth Stock
Portfolio will not invest more than 5% of its total assets in
short sales against the box.
Rule 144A Securities
Growth Stock 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 Growth Stock 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 restriction
on 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, Growth Stock Portfolio's holdings of illiquid
securities would be reviewed to determine what, if any, steps are
required to assure that it 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 its assets
invested in illiquid securities if qualified institutional buyers
are unwilling to purchase such securities. Growth Stock Portfolio
does not expect 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.
Swaps, Caps, Floors and Collars
Growth Stock Portfolio may enter into swaps and may purchase
or sell related caps, floors and collars. Growth Stock Portfolio
would enter into these transactions primarily to preserve a return
or spread on a particular investment or portion of its portfolio,
to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of
securities it anticipates purchasing at a later date. Growth
Stock Portfolio intends to use these techniques as hedges and not
as speculative investments and will not sell interest rate income
stream they may be obligated to pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease Growth Stock Portfolio's
exposure to changes in the value of an index of securities in
which it might invest, the value of a particular security or group
of securities, or foreign currency values. Swap agreements can
take many different forms and are known by a variety of names.
Growth Stock Portfolio may enter into any form of swap agreement
if the Adviser determines it is consistent with its investment
objective and policies.
A swap agreement tends to shift investment exposure from one
type of investment to another. For example, if Growth Stock
Portfolio agrees to exchange payments in dollars at a fixed rate
for payments in a foreign currency the amount of which is
determined by movements of a foreign securities index, the swap
agreement would tend to increase its exposure to foreign stock
market movements and foreign currencies. Depending on how it is
used, a swap agreement may increase or decrease the overall
volatility of Growth Stock Portfolio's investments and its net
asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from
Growth Stock Portfolio. If a swap agreement calls for payments by
Growth Stock Portfolio, it must be prepared to make such payments
when due. If the counterparty's creditworthiness declines, the
value of a swap agreement would be likely to decline, potentially
resulting in a loss. Growth Stock Portfolio will not enter into
any swap, cap, floor or collar transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of
the counterparty, combined with any credit enhancements, is rated
at least A by Standard & Poor's Corporation or Moody's or has an
equivalent rating from a nationally recognized statistical rating
organization or is determined to be of equivalent credit quality
by the Adviser.
The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is
a combination of a cap and floor that preserves a certain return
within a predetermined range of interest rates or values.
At the time Growth Stock Portfolio enters into swap
arrangements or purchases or sells caps, floors or collars, liquid
assets of Growth Stock Portfolio having a value at least as great
as the commitment underlying the obligations will be segregated on
its books and held by the custodian throughout the period of the
obligation.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, Growth Stock 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, Advisor Growth Stock Fund has received
permission to lend money to, and borrow money from, other mutual
funds advised by the Adviser. Advisor Growth Stock Fund will
borrow through the program when borrowing is necessary and
appropriate and the costs are equal to or lower than the costs of
bank loans.
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 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 Growth Stock
Portfolio investment. Because of Growth Stock Portfolio's
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 if it should
occur, would result in increased transaction expenses, which must
be borne by Growth Stock 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
the Prospectus, and Additional Income Tax Considerations in this
Statement of Additional Information.)
Options on Securities and Indexes
Growth Stock 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. Growth
Stock 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.)
Growth Stock 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 Growth Stock
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 Growth Stock Portfolio expires, it
realizes a capital gain equal to the premium received at the time
the option was written. If an option purchased by Growth Stock
Portfolio expires, it 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 Growth Stock Portfolio desires.
Growth Stock 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, it will realize a capital loss. If the premium received
from a closing sale transaction is more than the premium paid to
purchase the option, Growth Stock Portfolio will realize a capital
gain or, if it is less, it 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 Growth Stock Portfolio is
an asset, valued initially at the premium paid for the option.
The premium received for an option written by Growth Stock
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 Growth Stock Portfolio seeks to close out an option position.
If Growth Stock 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 Growth Stock 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, Growth Stock 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 Growth Stock Portfolio, it would not be able to close out the
option. If restrictions on exercise were imposed, It might be
unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
Growth Stock 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.
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Growth Stock Portfolio 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. Growth Stock 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 securities or
the price of the securities that Growth Stock Portfolio intends to
purchase. Although other techniques could be used to reduce or
increase portfolio exposure to stock price, interest rate and
currency fluctuations, it may be able to achieve its exposure more
effectively and perhaps at a lower cost by using futures contracts
and futures options.
Growth Stock 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, Growth Stock 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
Growth Stock Portfolio, it 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 Growth
Stock Portfolio upon termination of the contract, assuming all
contractual obligations have been satisfied. Growth Stock
Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by Growth Stock Portfolio is
valued daily at the official settlement price of the exchange on
which it is traded. Each day Growth Stock 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 Growth
Stock Portfolio does not represent a borrowing or loan by it but
is instead settlement between Growth Stock 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, Growth Stock Portfolio will mark-
to-market its open futures positions.
Growth Stock 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 Growth Stock
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, Growth Stock Portfolio realizes
a capital gain, or if it is more, it realizes a capital loss.
Conversely, if an offsetting sale price is more than the original
purchase price, it realizes a capital gain, or if it is less, it
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
Growth Stock 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 investment 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 investment 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 Growth Stock Portfolio seeks to close out a futures or
futures option position. Growth Stock 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,
Growth Stock Portfolio may also use those investment vehicles,
provided the Board of Trustees determines that their use is
consistent with the investment objective.
Growth Stock 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 it 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 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, Growth Stock 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,
Growth Stock 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.
Growth Stock 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 Growth Stock Portfolio and
the positions. For this purpose, to the extent Growth Stock
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," Growth Stock 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, 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 Growth Stock 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 it, 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 Growth Stock 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 Growth Stock 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 Growth Stock
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 Growth Stock 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 Growth
Stock Portfolio delivers securities under a futures contract, it
also realizes a capital gain or loss on those securities.
For federal income tax purposes, Growth Stock 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 Growth
Stock 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 Growth Stock Portfolio were to enter into a short index
future, short index futures option or short index option position
and its portfolio were deemed to "mimic" the performance of the
index underlying such contract, the option or futures contract
position and its stock positions would be deemed to be positions
in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for Growth Stock 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). 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.
Advisor Growth Stock 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.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
Advisor Growth Stock Fund and Growth Stock Portfolio operate
under the following investment restrictions. They may not:
(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 [Advisor Growth Stock Fund 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,
[Advisor Growth Stock Fund 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, [Advisor Growth Stock Fund
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 nonleveraging,
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,12 except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Advisor Growth Stock Fund
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
(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
are fundamental policies and may not be changed without the
approval of a "majority of the outstanding voting securities" as
defined above. Advisor Growth Stock Fund and Growth Stock
Portfolio 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
Advisor Growth Stock 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. Advisor Growth Stock Fund and Growth Stock Portfolio
may not:
(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) 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;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) 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);
(g) 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;
(h) 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;
(i) 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;
(j) 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.
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. The Adviser's focus on a long-term investment
style can result in lower turnover rates, often leading to
increased tax efficiencies for shareholders subject to income tax.
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.
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 ADVISOR TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
Gary A. Anetsberger (4) 41 Senior Vice-President; Chief financial officer of the Mutual Funds
Treasurer 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 Adviser and
(1) (2) (4) director of the Adviser
Jilaine Hummel Bauer (4) 42 Executive Vice-President; General counsel and secretary (since November, 1995) and
Secretary senior vice president of the Adviser
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 (3)(4) 77 Trustee Chairman emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd(2)(3)(4) 70 Trustee Chairman and director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products)
David P. Brady 33 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 (4) 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 38 Vice-President Senior vice president of the Adviser
Lindsay Cook (1)(4) 45 Trustee Executive vice president of Liberty Financial Companies,
Inc. (the indirect parent of the Adviser) since March,
1997; senior vice president prior thereto
Philip J. Crosley 51 Vice-President Senior vice president of the Adviser since February,
1996; vice president, institutional sales - advisor
sales, Invesco Funds Group prior thereto
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 prior thereto
Douglas A. Hacker(3)(4) 41 Trustee Senior vice president and chief financial officer of
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 33 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 strategist of the Adviser;
director of research of the Adviser, 1991 to 1995
Janet Langford Kelly 39 Trustee Senior vice president, secretary and general counsel of
(3) (4) Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner, Sidley &
Austin (law firm) prior thereto
Eric S. Maddix 33 Vice-President Vice president of the Adviser since November, 1995;
portfolio manager or research assistant for the Adviser
since 1987
John S. McLandsborough 30 Vice-President Portfolio manager for the Adviser since April, 1996;
securities analyst, CS First Boston from June, 1993 to
December, 1995; securities analyst, National City Bank
of
Cleveland from November, 1992 to June, 1993
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 prior thereto
Arthur J. McQueen 39 Vice-President Senior vice president of the Adviser
Lynn C. Maddox 56 Vice-President Senior vice president of the Adviser
Francis W. Morley (3)(4) 77 Trustee Chairman of Employer Plan Administrators and Consultants
Co. (designer, administrator, and communicator of
employee benefit plans)
Charles R. Nelson(3)(4) 55 Trustee Van Voorhis Professor of Political Economy, Department of
Economics of the University of Washington
Nicolette D. Parrish (4) 47 Vice-President; Senior compliance administrator and assistant secretary
Assistant 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
Sharon R. Robertson (4) 35 Controller Accounting manager for the Adviser's Mutual Funds
division
Janet B. Rysz (4) 41 Assistant Secretary Senior compliance administrator and assistant secretary
of the Adviser
M. Gerard Sandel 43 Vice-President Senior vice president of the Adviser since July, 1997;
vice president of M&I Investment Management Corporation
from October 1993 to June, 1997; vice president of Acorn
Asset Management Corporation prior thereto
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 prior thereto
Thomas C. Theobald(3)(4) 60 Trustee Managing director, William Blair Capital Partners
(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) 30 Vice-President Legal counsel for the Adviser since March, 1995;
associate with Beeler Schad & Diamond PC (law firm) prior
thereto
Stacy H. Winick (4) 32 Vice-President Senior legal counsel for the Adviser since October, 1996;
associate of Bell, Boyd & Lloyd (law firm) from June,
1993 to September, 1996; associate of Debevoise &
Plimpton (law firm) prior thereto
Hans P. Ziegler (4) 56 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) 31 Assistant Treasurer Project manager for the Adviser's Mutual Funds
division since April 1997; compliance manager from August
1995 to April 1997; compliance accountant, January 1995
to July 1995; section manager, January 1994 to January
1995; supervisor prior thereto
</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. 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 or Compensation 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 any
series participating in the master fund/feeder fund structure, the
trustees' attendance fees are paid solely by the master portfolio.
Each non-interested trustee also receives $500 from Advisor Trust
for attending each meeting of the Nominating Committee and
Compensation 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
_______________
* 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 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. Ms. Kelly
became a trustee on January 1, 1997.
FINANCIAL STATEMENTS
Please refer to the February 6, 1997 audited balance sheet of
Advisor Trust and to the June 30, 1997 unaudited financial
statements (balance sheets and schedules of investments as of June
30, 1997 and the statements of operations, changes in net assets,
and notes thereto) attached to this statement of additional
information.
PRINCIPAL SHAREHOLDERS
As of September 30, 1997, Liberty Financial Companies, Inc.
("Liberty Financial"), 600 Atlantic Avenue, Boston, Massachusetts
02210 (the parent company of the Adviser), owned 10,000 shares, or
approximately 41% of Adviser Growth Stock Fund; and FTC & Company,
P.O. Box 173736, Denver, Colorado 80217, owned 12,280 shares, or
approximately 59%, of Adviser Growth Stock Fund.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides administrative
services to Advisor Growth Stock Fund and Growth Stock Portfolio
and portfolio management services to Growth Stock Portfolio. The
Adviser is a wholly owned subsidiary of SteinRoe Services Inc.,
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 Executive 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 June 30, 1997, the Adviser managed
over $28 billion in assets: over $9 billion in equities and over
$19 billion in fixed income securities (including $1.7 billion in
municipal securities). The $28 billion in managed assets included
over $7.9 billion held by open-end mutual funds managed by the
Adviser (approximately 15% of the mutual fund assets were held by
clients of the Adviser). These mutual funds were owned by over
259,000 shareholders. The $7.9 billion in mutual fund assets
included over $766 million in over 50,000 IRA accounts. In
managing those assets, the Adviser utilizes a proprietary
computer-based information system that maintains and regularly
updates information for approximately 7,000 companies. The
Adviser also monitors over 1,400 issues via a proprietary credit
analysis system. At June 30, 1997, the Adviser employed 16
research analysts and 55 account managers. The average
investment-related experience of these individuals was 24 years.
Please refer to the descriptions of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under Management and Fee
Table in the Prospectus, which is incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to Advisor Growth Stock Fund, and bears any sales or
promotional expenses. Advisor Growth Stock 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.
The administrative agreement provides that the Adviser shall
reimburse Advisor Growth Stock Fund to the extent that its total
annual expenses (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 its
shares are being offered for sale to the public; provided,
however, the Adviser is not required to reimburse Advisor Growth
Stock Fund an amount in excess of fees paid under that agreement
for such year. In addition, in the interest of further limiting
expenses of Advisor Growth Stock Fund, the Adviser may voluntarily
waive its management fee and/or absorb certain expenses for
Advisor Growth Stock Fund, as described under Fee Table in the
Prospectus. Any such reimbursement will enhance the yield of
Advisor Growth Stock Fund.
Growth Stock 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 series of Advisor Trust
shall be paid solely out of the assets of that series. 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 Advisor Growth Stock Fund
and Growth Stock Portfolio. For services provided to Advisor
Growth Stock Fund, the Adviser receives an annual fee of $25,000
per Fund plus .0025 of 1% of average net assets over $50 million.
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 Bank 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 interests of Growth Stock
Portfolio, Advisor Growth Stock 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. Each 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 Advisor Growth Stock
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.
Growth Stock Portfolio may invest in obligations of the Bank
and may purchase or sell securities from or to the Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Advisor Growth Stock
Fund and Growth Stock 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.
DISTRIBUTOR
Shares of Advisor Growth Stock Fund are distributed by
Liberty Financial Investments, Inc. (the "Distributor"), an
indirect subsidiary of Liberty Financial, under a Distribution
Agreement as described under Management in the 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 ("independent
trustees"). The Distributor has no obligation, as underwriter, to
buy shares of Advisor Growth Stock Fund, and purchases shares only
upon receipt of orders from authorized financial service firms or
investors. 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.
12b-1 Plans, Contingent Deferred Sales Charges, and Conversion of
Shares
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 personal service
and/or the maintenance of shareholder accounts, the Distributor
receives a service fee at an annual rate not to exceed 0.25% of
net assets attributed to each class of shares other than Class K
shares. The Plan also provides that as compensation for the
promotion and distribution of shares of Advisor Growth Stock Fund
including its expenses related to sale and promotion of Fund
shares, the Distributor receives from Advisor Growth Stock Fund a
fee at an annual rate not exceeding 0.10% of the average net
assets attributed to Class A shares, 0.75% of the average net
assets attributed to each of its Class B and Class C shares, and
0.25% of the average net assets attributable to Class K shares.
At this time, the Distributor has voluntarily agreed to limit the
Class A distribution fee to 0.05% annually. The Distributor may
terminate this voluntary limitation without shareholder approval.
Class B shares automatically convert to Class A shares
approximately eight years after the Class B shares are purchased.
Class C and Class K shares do not convert. The Distributor
generally pays this amount to institutions that distribute 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 sales charges paid. Advisor Trust's Plan complies with
those rules.
The trustees believe that the 12b-1 plan could be a
significant factor in the growth and retention of Fund assets
resulting in a more advantageous expense ratio and increased
investment flexibility which could benefit each class of
shareholders. The 12b-1 Plan will continue in effect from year to
year so long as continuance is specifically approved at least
annually by a vote of the trustees, including the independent
trustees. The 12b-1 plan may not be amended to increase the fee
materially without approval by a vote of a majority of the
outstanding voting securities of the relevant class of shares and
all material amendments of the Plans must be approved by the
trustees in the manner provided in the foregoing sentence. The
12b-1 plan may be terminated at any time by a vote of a majority
of the independent trustees or by a vote of a majority of the
outstanding voting securities of the relevant Class of shares.
Advisor Growth Stock Fund offers four classes of shares
(Class A, Class B, Class C, and Class K). Advisor Growth Stock
Fund may in the future offer other classes of shares. Class K
shares are offered at net asset value, subject to a Rule 12b-1
fee; Class A shares are offered at net asset value plus a front-
end sales charge to be imposed at the time of purchase and are
subject to a Rule 12b-1 fee; Class B shares are offered at net
asset value subject to a Rule 12b-1 fee and a declining contingent
deferred sales charge on redemptions made within six years of
purchase; Class C shares are offered at net asset value, subject
to a Rule 12b-1 fee and a contingent deferred sales charge on
redemptions made within one year of purchase. The contingent
deferred sales charges are described in the Prospectus.
No contingent deferred sales charge will be imposed on shares
derived from reinvestment of distributions or amounts representing
capital appreciation. In determining the applicability and rate
of any contingent deferred sales charge, it will be assumed that a
redemption is made first of shares representing capital
appreciation, next of shares representing reinvestment of
distributions, and finally of other shares held by the shareholder
for the longest time.
Eight years after the end of the month in which a Class B
share is purchased, such shares and a pro-rated portion of any
shares issued on the reinvestment of distributions will be
automatically invested into Class A shares having an equal value,
which are not subject to the distribution or service fee.
TRANSFER AGENT AND SHAREHOLDER SERVICING
Colonial Investors Service Center, Inc. (the "Transfer
Agent"), an indirect subsidiary of Liberty Financial, performs
certain transfer agency services for Advisor Trust, as described
under Management in the Prospectus. For performing these
services, the Transfer Agent receives from Advisor Growth Stock
Fund a fee based on the following annual rates:
Class K Class A Class B Class C
Account maintenance
and trade processing 0.05% Bundled Fee Bundled Fee Bundled Fee
Client services 0.25%
Total 0.30% 0.236% 0.236% 0.236%
Advisor Trust believes the charges by the Transfer Agent to
Advisor Growth Stock Fund are comparable to those of other
companies performing similar services.
Some financial services firms ("FSF") or other intermediaries
having special selling arrangements with the Distributor,
including certain bank trust departments, wrap fee programs and
retirement plan service providers ("Intermediaries") that maintain
nominee accounts with Advisor Growth Stock Fund for their clients
who are Fund shareholders may be paid a fee from the Transfer
Agent for shareholder servicing and accounting services they
provide with respect to the underlying Fund shares.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Sell (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 order.
Advisor Growth Stock Fund will accept unconditional orders
for shares to be executed at the public offering price based on
the net asset value per share next determined after the order is
received in good order. The public offering price is the net
asset value plus the applicable sales charge, if any. In the case
of orders for purchase of shares placed through FSFs or
Intermediaries, the public offering price will be determined on
the day the order is placed in good order, but only if the FSF or
Intermediary receives the order prior to the time at which shares
are valued and transmits it to Advisor Growth Stock Fund before
that day's transactions are processed. If the FSF or Intermediary
fails to transmit before Advisor Growth Stock Fund processes that
day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF or
Intermediary. If the FSF or Intermediary receives the order after
the time at which Advisor Growth Stock Fund values its shares, the
price will be based on the net asset value determined as of the
close of the NYSE on the next day it is open. If funds for the
purchase of shares are sent directly to the Transfer Agent, they
will be invested at the public offering price next determined
after receipt in good order. Payment for shares of the Fund must
be in U.S. dollars; if made by check, the check must be drawn on a
U.S. bank.
Advisor Growth Stock Fund receives the entire net asset value
of shares sold. For Class A shares, which are subject to an
initial sales charge, the Distributor's commission is the sales
charge shown in the Prospectus less any applicable FSF or
Intermediary discount. The FSF or Intermediary discount is the
same for all FSFs or Intermediaries, except that the Distributor
retains the entire sales charge on any sales made to a shareholder
who does not specify an FSF or Intermediary on the application,
and except that the Distributor may from time to time reallow
additional amounts to all or certain FSFs or Intermediaries. The
Distributor generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such
charges generally reimburse the Distributor for any up-front
and/or ongoing commissions paid to FSFs or Intermediaries.
Checks presented for the purchase of shares of Advisor Growth
Stock Fund which are returned by the purchaser's bank will subject
the purchaser to a $15 service fee for each check returned.
The Transfer Agent acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, the designated
FSF or Intermediary will receive the applicable sales commission.
Shareholders may change FSFs or Intermediaries at any time by
written notice to the Transfer Agent, provided the new FSF or
Intermediary has a sales agreement with the Distributor.
Determination of Net Asset Value
The net asset value per share for each Class is determined as
of the close of business (normally 3:00 p.m., central time, or
4:00 p.m., eastern time) 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 January, 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 Advisor Growth Stock
Fund should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.
Growth Stock Portfolio may invest in securities that are
listed primarily on foreign exchanges that are open and allow
trading on days on which Advisor Growth Stock Fund does not
determine net asset value. This may significantly affect the net
asset value of Advisor Growth Stock Fund's redeemable securities
on days when an investor cannot redeem such securities. Debt
securities generally are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. However,
in circumstances where such prices are not available or where the
Adviser deems it appropriate to do so, an over-the-counter or
exchange bid quotation is used. Securities listed on an exchange
or on Nasdaq are valued at the last sale price. Listed securities
for which there were no sales during the day and unlisted
securities are valued at the last quoted bid price. Options are
valued at the last sale price or in the absence of a sale, the
mean between the last quoted bid and offering prices. Short-term
obligations with a maturity of 60 days or less are valued at
amortized cost pursuant to procedures adopted by the Board of
Trustees. The values of foreign securities quoted in foreign
currencies are translated into U.S. dollars at the exchange rate
for that day. Positions for which there are no such valuations
and other assets are valued at fair value as determined in good
faith under the direction of the Board of Trustees.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the NYSE. Trading on certain foreign
securities markets may not take place on all NYSE business days,
and trading on some foreign securities markets takes places on
days that are not NYSE business days and on which net asset value
is not calculated. The values of these securities used in
determining net asset value are computed as of such times. Also,
because of the amount of time required to collect and process
trading information as to large numbers of securities issues, the
values of certain securities (such as convertible bonds, U.S.
government securities, and tax-exempt securities) are determined
based on market quotations collected earlier in the day at the
latest practicable time prior to the close of the NYSE.
Occasionally, events affecting the value of such securities may
occur between such time and the close of the NYSE which will not
be reflected in the computation of the net asset value. If events
materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair
value following procedures approved by the Board of Trustees.
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 may deduct $10 (payable to the Transfer
Agent) from accounts valued at less than $500 unless the account
value has dropped below $500 solely as a result of share
depreciation. An investor will be notified that the value of his
account is less than that minimum and allowed at least 60 days to
bring the value of the account up to at least $1,000 before the
fee is deducted. 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 Advisor Growth Stock 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 Advisor Growth Stock Fund
not reasonably practicable.
Special Purchase Programs/Investor Services
The following special purchase programs/investor services may
be changed or eliminated at any time.
Fundamatic Program (Classes A, B and C only). As a
convenience to investors, Class A, B and C shares of Advisor
Growth Stock Fund may be purchased through the Colonial Fundamatic
Program. Preauthorized monthly bank drafts or electronic funds
transfer for a fixed amount of at least $50 are used to purchase
Advisor Growth Stock Fund shares at the public offering price next
determined after the Transfer Agent receives the proceeds from the
draft (normally the 5th or the 20th of each month, or the next
business day thereafter). If your Fundamatic purchase is by
electronic funds transfer, you may request the Fundamatic purchase
for any day. Further information and application forms are
available from FSFs or Intermediaries or from the Distributor.
Tax-Sheltered Retirement Plans (Classes A, B and C only).
The Distributor offers prototype tax-qualified plans, including
IRAs and pension and profit-sharing plans for individuals,
corporations, employees and the self-employed. The minimum
initial investment for a retirement account sponsored by Colonial
Management Associates, Inc., an affiliate of the Adviser and the
Distributor, is $25. The First National Bank of Boston is the
trustee of the Distributor's prototype plans and charges a $10
annual fee. Detailed information concerning these retirement
plans and copies of the retirement plans are available from the
Distributor.
Participants in other prototype retirement plans (other than
IRAs) also are charged a $10 annual fee unless the plan maintains
an omnibus account with the Transfer Agent. Participants in
prototype plans offered by the Distributor (other than IRAs) who
liquidate the total value of their account will also be charged a
$15 close-out processing fee payable to the Transfer Agent. The
fee is in addition to any applicable contingent deferred sales
charge. The fee will not apply if the participant uses the
proceeds to open an IRA Rollover account in any fund, or if the
plan maintains an omnibus account.
Consultation with a competent financial and tax advisor
regarding these plans and consideration of the suitability of
Advisor Growth Stock Fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is
recommended.
Telephone Address Change Services. By calling the Transfer
Agent, shareholders, beneficiaries or their FSF or Intermediary of
record may change an address on a recorded telephone line.
Confirmations of address change will be sent to both the old and
the new addresses. Telephone redemption privileges are suspended
for 30 days after an address change is effected.
Colonial Cash Connection. Dividends and any other
distributions, including Systematic Withdrawal Plan (SWP)
payments, on Class A, Class B or Class C shares may be
automatically deposited to a shareholder's bank account via
electronic funds transfer. Shareholders wishing to avail
themselves of this electronic transfer procedure should complete
the appropriate sections of the Application.
Programs for Reducing or Eliminating Sales Charges
Right of Accumulation and Statement of Intent (Class A shares
only). Reduced sales charges on Class A shares can be effected by
combining a current purchase with prior purchases of Class A, B,
C, T, and Z shares of other funds managed by Colonial Management
Associates, Inc. or distributed by the Distributor (such funds
hereinafter referred to as "Colonial Funds"). The applicable
sales charged is based on the combined total of: (1) the current
purchase and (2) the value at the public offering price at the
close of business on the previous day of all Colonial Funds' Class
A shares held by the shareholder (except shares of any Colonial
money market fund, unless such shares were acquired by exchange
from Class A shares of another Colonial Fund other than a money
market fund and Class B, C, T and Z shares).
The Distributor must be promptly notified of each purchase
which entitles a shareholder to a reduced sales charge. Such
reduced sales charge will be applied upon confirmation of the
shareholder's holdings by the Transfer Agent. A Colonial Fund may
terminate or amend this right of Accumulation.
Any person may qualify for reduced sales charges on purchase
of Class A shares made within a 13-month period pursuant to a
Statement of Intent ("Statement"). A shareholder may include, as
an accumulation credit toward the completion of such Statement,
the value of all Class A, B, C, T and Z shares held by the
shareholder on the date of the Statement in Advisor Trust Funds
and Colonial Funds (except shares of any Colonial money market
fund, unless such shares were acquired by exchange from Class A
shares of another non-money market Colonial Fund). The value is
determined at the public offering price on the date of the
Statement. Purchases made through reinvestment of distributions
do not count toward satisfaction of the Statement.
During the term of a Statement, the Transfer Agent will hold
shares in escrow to secure payment of the higher sales charge
applicable to Class A shares actually purchased. Dividends and
capital gains will be paid on all escrowed shares and these shares
will be released when the amount indicated has been purchased. A
Statement does not obligate the investor to buy or Advisor Growth
Stock Fund to sell the amount of the Statement.
If a shareholder exceeds the amount of the Statement and
reaches an amount which would qualify for a further quantity
discount, a retroactive price adjustment will be made at the time
of expiration of the Statement. The resulting difference in
offering price will purchase additional shares for the
shareholder's account at the then-current applicable offering
price. As a part of this adjustment, the FSF or Intermediary
shall return to the Distributor the excess commission previously
paid during the 13-month period.
If the amount of the Statement is not purchased, the
shareholder shall remit to the Distributor an amount equal to the
difference between the sales charge paid and the sales charge that
should have been paid. If the shareholder fails within 20 days
after a written request to pay such difference in sales charge,
the Transfer Agent will redeem that number of escrowed Class A
shares equal to such difference. The additional amount of FSF or
Intermediary discount from the applicable offering price shall be
remitted to the shareholder's FSF or Intermediary of record.
Additional information about and the terms of Statements of
Intent are available from your FSF or Intermediary or from the
Transfer Agent at 1-800-345-6611.
Reinstatement Privilege. An investor who has redeemed
Advisor Growth Stock Fund shares may, upon request, reinstate
within one year a portion or all of the proceeds of such sale in
shares of the same class of Advisor Growth Stock Fund at the net
asset value next determined after the Transfer Agent receives a
written reinstatement request and payment. Any contingent
deferred sales charge paid at the time of the redemption will be
credited to the shareholder upon reinstatement. The period
between the redemption and the reinstatement will not be counted
in aging the reinstated shares for purposes of calculating any
contingent deferred sales charge or conversion date. Investors
who desire to exercise this privilege should contact their FSF or
Intermediary or the Distributor. Shareholders may exercise this
privilege an unlimited number of times. Exercise of this
privilege does not alter the federal income tax treatment of any
capital gains realized on the prior sale of Advisor Growth Stock
Fund shares, but to the extent any such shares were sold at a
loss, some or all of the loss may be disallowed for tax purposes.
Consult your tax advisor.
Shareholders may reinvest all or a portion of a recent cash
distribution without a sales charge. A shareholder request must
be received within 30 calendar days of the distribution. A
shareholder may exercise this privilege only once. No charge is
currently made for reinvestment.
Privileges of Adviser Employees, FSFs or Intermediaries.
Class A shares of Advisor Growth Stock Fund may be sold at net
asset value to the following individuals whether currently
employed or retired: Trustees of funds advised or administered by
the Adviser or an affiliate of the Adviser; directors, officers
and employees of the Adviser or an affiliate of the Adviser,
including the Transfer Agent and the Distributor; registered
representatives and employees of FSFs or Intermediaries (including
their affiliates) that are parties to dealer agreements or other
sales arrangements with the Distributor; and such persons'
families and their beneficial accounts.
Sponsored Arrangements. Class A shares of Advisor Growth
Stock Fund may be purchased at reduced or no sales charge pursuant
to sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group
solicitation of, its employees, members or participants in
connection with the purchase of shares of Advisor Growth Stock
Fund on an individual basis. The amount of the sales charge
reduction will reflect the anticipated reduction in sales expense
associated with sponsored arrangements. The reduction in sales
expense, and therefore the reduction in sales charge, will vary
depending on factors such as the size and stability of the
organization's group, the term of the organization's existence and
certain characteristics of the members of its group. Advisor
Growth Stock Fund reserves the right to revise the terms of or to
suspend or discontinue sales pursuant to sponsored plans at any
time.
Class A shares of Advisor Growth Stock Fund may also be
purchased at reduced or no sales charge by clients of dealers,
brokers or registered investment advisers that have entered into
agreements with the Distributor pursuant to which Advisor Growth
Stock Fund is included as an investment option in programs
involving fee-based compensation arrangements.
Waiver of Contingent Deferred Sales Charges (Classes A with
accounts in excess of $1,000,000, B and C). Contingent deferred
sales charges may be waived on redemptions in the following
situations with the proper documentation:
1. Death. Contingent deferred sales charges may be waived on
redemptions within one year following the death of (i) the sole
shareholder on an individual account, (ii) a joint tenant where
the surviving joint tenant is the deceased's spouse, or (iii) the
beneficiary of a Uniform Gifts to Minors Act ("UGMA"), Uniform
Transfers to Minors Act ("UTMA") or other custodial account. If,
upon the occurrence of one of the foregoing, the account is
transferred to an account registered in the name of the deceased's
estate, the contingent deferred sales charge will be waived on any
redemption from the estate account occurring within one year after
the death. If the shares are not redeemed within one year of the
death, they will remain subject to the applicable contingent
deferred sales charge, when redeemed from the transferee's
account. If the account is transferred to a new registration and
then a redemption is requested, the applicable contingent deferred
sales charge will be charged.
2. Systematic Withdrawal Plan (SWP). Contingent deferred
sales charges may be waived on redemptions occurring pursuant to a
monthly, quarterly or semiannual SWP established with the Transfer
Agent, to the extent the redemptions do not exceed, on an annual
basis, 12% of the account's value, so long as at the time of the
first SWP redemption the account had distributions reinvested for
a period at least equal to the period of the SWP (e.g., if it is a
quarterly SWP, distributions must have been reinvested at least
for the three month period prior to the first SWP redemption);
otherwise contingent deferred sales charges will be charged on SWP
redemptions until this requirement is met; this requirement does
not apply to Class B or C accounts if the SWP is set up at the
time the account is established, and distributions are being
reinvested. See below under How to Sell Shares--Systematic
Withdrawal Plan.
3. Disability. Contingent deferred sales charges may be
waived on redemptions occurring within one year after the sole
shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in
Section 72(m)(7) of the Internal Revenue Code). To be eligible
for such waiver, (i) the disability must arise after the purchase
of shares and (ii) the disabled shareholder must have been under
age 65 at the time of the initial determination of disability. If
the account is transferred to a new registration and then a
redemption is requested, the applicable contingent deferred sales
charge will be charged.
4. Death of a trustee. Contingent deferred sales charges may
be waived on redemptions occurring upon dissolution of a revocable
living or grantor trust following the death of the sole trustee
where (i) the grantor of the trust is the sole trustee and the
sole life beneficiary, (ii) death occurs following the purchase
and (iii) the trust document provides for dissolution of the trust
upon the trustee's death. If the account is transferred to a new
registration (including that of a successor trustee), the
applicable contingent deferred sales charge will be charged upon
any subsequent redemption.
5. Returns on excess contributions. Contingent deferred sales
charges may be waived on redemptions required to return excess
contributions made to retirement plans or IRAs, so long as the FSF
or Intermediary agrees to return the applicable portion of any
commission paid by the Distributor.
6. Qualified Retirement Plans. Contingent deferred sales
charges may be waived on redemptions required to make
distributions from qualified retirement plans following (i) normal
retirement (as stated in the plan document) or (ii) separation
from service. For shares purchased in a prototype 401K plan after
September 1, 1997, contingent deferred sales charges will not be
waived upon separation from service except if such plan is held in
an omnibus account. Contingent deferred sales charges also will
be waived on SWP redemptions made to make required minimum
distributions from qualified retirement plans that have invested
in Advisor Growth Stock Fund for at least two years.
The contingent deferred sales charge also may be waived where
the FSF or Intermediary agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being
redeemed.
How to Sell ("Redeem") Shares
Shares may also be sold on any day the NYSE is open, either
directly to Advisor Growth Stock Fund or through an FSF or
Intermediary. Sale proceeds generally are sent within seven days
(usually on the next business day after your request is received
in good form). However, for shares recently purchased by check,
Advisor Growth Stock Fund will send proceeds as soon as the check
has cleared (which may take up to 15 days).
To sell shares directly to Advisor Growth Stock Fund, send a
signed letter of instruction to the Transfer Agent. The sale
price is the net asset value next determined (less any applicable
contingent deferred sales charge) after Advisor Growth Stock Fund
or an FSF or Intermediary receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a
national stock exchange or another eligible guarantor institution.
Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and IRA holders. Call
the Transfer Agent for more information 1-800-345-6611.
FSFs and Intermediaries must receive requests before the time
at which Advisor Growth Stock Fund's shares are valued to receive
that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this
service.
Systematic Withdrawal Plan (Class A, B and C shares). If a
shareholder's account balance is at least $5,000, the shareholder
may establish a SWP. A specified dollar amount or percentage of
the then current net asset value of the shareholder's investment
in Advisor Growth Stock Fund designated by the shareholder will be
paid monthly, quarterly or semiannually to a designated payee.
The amount or percentage the shareholder specifies generally may
not, on an annualized basis, exceed 12% of the value, as of the
time the shareholder makes the election of the shareholder's
investment. Withdrawals from Class B and C shares under a SWP
will be treated as redemptions of shares purchased through the
reinvestment of Advisor Growth Stock Fund distributions, or, to
the extent such shares in the shareholder's account are
insufficient to cover plan payments, as redemptions from the
earliest purchased shares of Advisor Growth Stock Fund in the
shareholder's account. No contingent deferred sales charges apply
to a redemption pursuant to a SWP of 12% or less, even if, after
giving effect to the redemption, the shareholder's account balance
is less than the shareholder's base amount. Qualified plan
participants who are required by Internal Revenue Code regulation
to withdraw more than 12%, on an annual basis, of the value of
their Class B or C share account may do so but will be subject to
a contingent deferred sales charge ranging from 1% to 5% of the
excess over 12%. If a shareholder wishes to participate in a SWP,
the shareholder must elect to have all of the shareholder's income
dividends and other distributions payable in shares of Advisor
Growth Stock Fund rather than in cash.
A shareholder or its FSF or Intermediary of record may
establish a SWP account by telephone on a recorded line. However,
SWP checks will be payable only to the shareholder and sent to the
address of record. SWPs from retirement accounts cannot be
established by telephone.
Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is
ordinarily disadvantageous because of duplicative sales charges.
For this reason, a shareholder may not maintain a plan for the
accumulation of shares of Advisor Growth Stock Fund (other than
through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may
result in a gain or loss for tax purposes, may involve the use of
principal and may eventually use up all of the shares in a
shareholder's account.
Advisor Growth Stock Fund may terminate a shareholder's SWP
if the shareholder's account balance falls below $5,000 due to any
transfer or liquidation of shares other than pursuant to the SWP.
SWP payments will be terminated on receiving satisfactory evidence
of the death or incapacity of a shareholder. Until this evidence
is received, the Transfer Agent will not be liable for any payment
made in accordance with the provisions of a SWP.
The cost of administering SWPs for the benefit of
shareholders who participate in them is borne by Advisor Growth
Stock Fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by
certain FSFs or Intermediaries may not be able to participate in a
SWP. If a shareholder's Advisor Growth Stock Fund shares are held
in "street name," the shareholder should consult his or her FSF or
Intermediary to determine whether he or she may participate in a
SWP.
Telephone Redemptions. Telephone redemption privileges are
described in the Prospectus.
Non Cash-Redemptions. For redemptions of any single
shareholder within any 90-day period exceeding the lesser of
$250,000 or 1% of Advisor Growth Stock Fund's net asset value,
Advisor Growth Stock Fund may make the payment or a portion of the
payment with portfolio securities held by Advisor Growth Stock
Fund instead of cash, in which case the redeeming shareholder may
incur brokerage and other costs in selling the securities
received.
How to Exchange Shares
With respect to Class A, Class B and Class C shares,
exchanges at net asset value may be made among shares of the same
class of any other fund that is a series of Advisor Trust or of
most Colonial Funds. For more information on the Colonial Funds,
see your FSF or Intermediary or call (800) 345-6611. With respect
to Class K shares, exchanges at net asset value may be made among
shares of the same class of any other fund that is a series of
Advisor Trust. Shares may be exchanged on the basis of the net
asset value per share at the time of exchange and only one "round-trip"
exchange of Class C shares may be made per three-month period,
measured from the date of the initial purchase. Before exchanging
into another fund, you should obtain the prospectus for the fund
in which you wish to invest and read it carefully. Prospectuses
of Colonial Funds are available by calling (800) 426-3750.
Consult the Transfer Agent before requesting an exchange.
By calling the Transfer Agent, shareholders or their FSF or
Intermediary of record may exchange among accounts with identical
registrations, provided that the shares are held on deposit.
During periods of unusual market changes and/or shareholder
activity, shareholders may experience delays in contacting the
Transfer Agent by telephone to exercise the telephone exchange
privilege. Because an exchange involves a redemption and
reinvestment in another fund, completion of an exchange may be
delayed under unusual circumstances, such as if Advisor Growth
Stock Fund suspends repurchases or postpones payment for Advisor
Growth Stock Fund shares being exchanged in accordance with
federal securities law. The Transfer Agent will also make
exchanges upon receipt of a written exchange request. If the
shareholder is a corporation, partnership, agent, or surviving
joint owner, the Transfer Agent will require customary additional
documentation.
A loss to a shareholder may result from an unauthorized
transaction reasonably believed to have been authorized. No
shareholder is obligated to use the telephone to execute
transactions.
In all cases, the shares to be exchanged must be registered
on the records of Advisor Growth Stock Fund in the name of the
shareholder desiring to exchange.
An exchange is a capital sale transaction for federal income
tax purposes. The exchange privilege may be revised, suspended or
terminated at any time.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
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, Growth Stock 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 Growth
Stock 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 Growth Stock Portfolio, 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 Growth Stock Portfolio), 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 Growth
Stock 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 also receive
research in connection with selling concessions and designations
in fixed price offerings in which Growth Stock Portfolio
participates. 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 Growth Stock Portfolio.
With respect to 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 Growth Stock 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 the Association of the National
Association of Securities Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
Advisor Growth Stock Fund and Growth Stock 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.
Advisor Growth Stock Fund expects that less than 100% of its
dividends will qualify for the deduction for dividends received by
corporate shareholders.
Growth Stock 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 the Fund'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 the Portfolio holds its investment. In addition, the
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, Growth Stock Portfolio
intends to treat securities of PFICs as sold on the last day of
its 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 it will be required to distribute
even though it has not sold the security and received cash to pay
such distributions.
INVESTMENT PERFORMANCE
Advisor Growth Stock Fund may quote certain total return
figures from time to time. A "Total Return" on a per class share
basis is the amount of dividends distributed per class share plus
or minus the change in the net asset value per class share for a
period. A "Total Return Percentage" may be calculated by dividing
the value of a share of a particular class of shares 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).
Advisor Growth Stock Fund invests all of its net investable
assets in SR&F Growth Stock Portfolio, which has the same
investment objective and substantially the same investment
policies as Advisor Growth Stock Fund. Advisor Growth Stock Fund
commenced operations on February 14, 1997 and as of October 15,
1997 offered only shares that are now designated Class K shares.
The historical performance of Class K shares for the period prior
to February 14, 1997 and the historical performance of each other
class of shares of Advisor Growth Stock Fund for all periods are
based on the performance SR&F Growth Stock Portfolio restated to
reflect the sales charges, 12b-1 fees and other expenses as set
forth in the prospectus, without giving effect to any fee
reimbursements described therein and assuming reinvestment of
dividends and capital gains. Historical performance as restated
should not be interpreted as indicative of Advisor Growth Stock
Fund's future performance. The average annual total returns for
each class of Advisor Growth Stock Fund as of September 30, 1997,
were as follows:
1 year 5 years 10 years
Class A with sales charge of 5.75% 25.07% 15.52% 11.73%
Class A without sales charge 32.70 16.90 12.39
Class B with applicable CDSC 26.77 15.86 11.76
Class B without applicable CDSC 31.77 16.08 11.76
Class C with sales charge of
1.00% and applicable CDSC 30.77 16.08 11.61
Class C without sales charge or CDSC 31.77 16.08 11.61
Class K 32.76 16.95 12.45
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. The performance of Advisor Growth Stock Fund
is a result of conditions in the securities markets, portfolio
management, and operating expenses. Although investment
performance information is useful in reviewing Advisor Growth
Stock 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, Advisor Growth Stock
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 Advisor Growth Stock Fund. Comparison of
Advisor Growth Stock 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 Advisor
Trust believes to be generally accurate. Advisor Growth Stock
Fund may also note its mention or recognition in newspapers,
magazines, or other media from time to time. However, Advisor
Trust assumes no responsibility for the accuracy of such data.
Newspapers and magazines which might mention Advisor Growth Stock
Fund 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
Advisor Growth Stock Fund may compare its performance to the
Consumer Price Index (All Urban), a widely recognized measure of
inflation.
The performance of Advisor Growth Stock Fund 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, Advisor Growth Stock Fund may compare its
performance to the following benchmarks:
Lipper Equity Fund Average
Lipper General Equity Fund Average
Lipper Growth Fund Average
Lipper Growth Fund Index
Morningstar Domestic Stock Average
Morningstar Growth Fund Average
Morningstar Total Fund Average
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. Advisor
Growth Stock Fund 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 Advisor Growth Stock Fund to a different category or
develop (and place it into) a new category, the Fund may compare
its performance or ranking with those of other funds in the newly
assigned category, as published by the service.
Advisor Growth Stock 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, Advisor Growth Stock Fund 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
_____________________
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 Advisor Growth Stock 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>
Stein Roe Advisor Trust
Statements of Net Assets
February 6, 1997
<TABLE>
<CAPTION>
Advisor Advisor Advisor Advisor Advisor Advisor Advisor
Balanced Growth & Income Growth Stock Special Special Venture International Young Investor
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Unamortized organization
costs 35,000 35,000 35,000 35,000 35,000 35,000 35,000
-------- -------- -------- -------- -------- -------- --------
Total Assets 135,000 135,000 135,000 135,000 135,000 135,000 135,000
======== ======== ======== ======== ======== ======== ========
Liabilities:
Payable to the Adviser for
organization costs incurred 35,000 35,000 35,000 35,000 35,000 35,000 35,000
Capital:
Paid in Capital (net assets) 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Total Liablities and
Capital $135,000 $135,000 $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ======== ======== ========
Shares Outstanding (Unlimited
number authorized) 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Net Asset Value (Capital) Per
Share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
======== ======== ======== ======== ======== ======== ========
</TABLE>
Note 1. Organization:
Stein Roe Advisor Balanced Fund, Advisor Growth & Income Fund,
Advisor Growth Stock Fund, Advisor Special Fund, Advisor Special
Venture Fund, Advisor International Fund, and Advisor Young
Investor Fund (the "Funds") are separate series of the Stein Roe
Advisor Trust (the "Trust"), an open-end diversified management
investment company organized as a Massachusetts business trust.
Each Fund will invest all of its net investable assets in SR&F
Balanced Portfolio, SR&F Growth & Income Portfolio, SR&F Growth
Stock Portfolio, SR&F Special Portfolio, SR&F Special Venture
Portfolio, SR&F International Portfolio, or SR&F Growth Investor
Portfolio (the "Portfolios"), respectively, each a separate series
of the SR&F Base Trust. The Funds are inactive except for matters
relating to their organization and registration as open-end
investment companies under the Investment Company Act of 1940, and
the sale of 10,000 shares of each of the Funds for $100,000 to
Liberty Financial Companies, Inc. Organization costs will be
amortized on a straight-line basis against income over various
periods of up to sixty months from the commencement of public
offering by the Funds, depending on the nature of the individual
costs.
Note 2. Transactions with Affiliates:
Stein Roe & Farnham Incorporated (the "Adviser") receives a
management fee from each Portfolio computed and accrued daily, at
an annual rate, as a percentage of average net assets as follows:
Management Fees
($ amounts in thousands)
------------------------
Balanced Portfolio .55% up to $500,
.50 next $500,
.45% thereafter.
Growth & Income Portfolio, and .60% up to $500,
Growth Stock Portfolio, and .55% next $500,
Growth Investor Portfolio .50% thereafter.
Special Portfolio .75% up to $500,
.70% next $500,
.65% next $500,
.60% thereafter.
Special Venture Portfolio .75% of average net assets
International Portfolio .85% of average net assets
The Adviser also receives an administrative fee from each Fund
computed and accrued daily, at an annual rate, as a percentage
of average net assets as follows:
Administrative Fee
($ amounts in thousands)
------------------------
Advisor Balanced Fund, and .15% up to $500,
Advisor Growth & Income Fund, and .125% next $500,
Advisor Growth Stock Fund .10% thereafter.
Advisor Young Investor Fund .20% up to $500,
.15% next $500,
.125% thereafter
Advisor Special Fund .15% up to $500,
.125% next $500,
.10% next $500,
.075% thereafter.
Advisor Special Venture Fund, and .15% of average net assets
Advisor International Fund
<PAGE>
To the Shareholder and Board of Trustees of
Stein Roe Advisor Trust
We have audited the accompanying statements of net assets of Stein
Roe Advisor Trust (a Massachusetts business trust), comprising the
Stein Roe Advisor Balanced Fund, Stein Roe Advisor Growth & Income
Fund, Stein Roe Advisor Growth Stock Fund, Stein Roe Advisor
Special Fund, Stein Roe Advisor Special Venture Fund, Stein Roe
Advisor International Fund and Stein Roe Advisor Young Investor
Fund (the "Funds"), as of February 6, 1997. The statements of net
assets are the responsibility of Stein Roe Advisor Trust's
management. Our responsibility is to express an opinion on the
statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statements of net assets are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statements of net assets. Our
procedures included confirmation of cash held by the custodian as
of February 6, 1997. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the statements of net
assets provides a reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above
present fairly, in all material respects, the net assets of the
Funds constituting the Stein Roe Advisor Trust as of February 6,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1997
<PAGE>
INSERT Financial Statements as of June 30, 1997
<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 February 6, 1997.
(b) Report of independent public accountants.
(c) Unaudited financial statements (schedules of
investments, balance sheets, statements of operations,
statements of changes in net assets, and notes thereto)
as of September 30, 1997, relating to the series Stein
Roe Advisor Growth & Income Fund, Stein Roe Advisor
Balanced Fund, Stein Roe Advisor International Fund,
Stein Roe Advisor Young Investor Fund, Stein Roe
Advisor Special Venture Fund, Stein Roe Advisor Growth
Stock Fund, and Stein Roe Advisor Special Fund are
incorporated by reference to the Registrant's September
30, 1997 annual reports.
(b) Exhibits: [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1933, No.
333-17255. The terms "Pre-Effective Amendment" and "PEA"
refer, respectively, to a pre-effective amendment and a post-
effective amendment to the Registration Statement.]
1. Agreement and Declaration of Trust as amended through
December 13, 1996. (Exhibit 1 to Pre-Effective Amendment
#1.)*
2. By-Laws of Registrant. (Exhibit 2 to Registration
Statement.)*
3. None.
4. None.
5. None.
6. (a) Underwriting agreement between Registrant and Liberty
Securities Corporation dated April 30, 1997. (Exhibit
6 to PEA No. 1.)*
(b) Form of underwriting agreement between Registrant and
Colonial Investment Services, Inc.
(c) Selling agreement. (Exhibit 6(c) to PEA #2.)*
7. None.
8. Custodian contract between Registrant and State Street
Bank and Trust Company dated February 13, 1997. (Exhibit 8
to PEA #1.)*
9. (a) Shareholder servicing and transfer agency agreement
between Registrant and SteinRoe Services Inc. dated
February 14, 1997. (Exhibit 9(a) to PEA #1.)*
(b) Administrative agreement between Registrant and Stein
Roe & Farnham Incorporated dated February 14, 1997.
(Exhibit 9(b) to PEA #1.)*
(c) Accounting and bookkeeping agreement between Registrant
and Stein Roe & Farnham Incorporated dated February 14,
1997. (Exhibit 9(c) to PEA #1.)*
(d) Sub-transfer agent agreement between SteinRoe Services
Inc. and Colonial Investors Service Center, Inc. as
amended through June 30, 1997. (Exhibit 9(d) to PEA
#1.)*
(e) Form of shareholders servicing and transfer agency
agreement between Registrant and Colonial Investors
Service Center, Inc. (Exhibit 9(e) to PEA #2.)*
10. Opinion and consent of Bell, Boyd & Lloyd. (Exhibit 10 to
Pre-Effective Amendment #1.)*
11. Consent of Arthur Andersen LLP.
12. None.
13. Subscription agreements. (Exhibit 13 to Pre-Effective
Amendment No. 2.)*
14. None.
15. (a) 12b-1 plan and agreement. (Exhibit 15 to Pre-
Effective Amendment No. 2.)*
(b) Amended 12b-1 plan. (Exhibit 15(b) to PEA #2.)*
16. Schedule of computation of performance data.
17 (a) Financial data schedule--Stein Roe Advisor Growth &
Income Fund
(b) Financial data schedule--Stein Roe Advisor
International Fund
(c) Financial data schedule--Stein Roe Advisor Young
Investor Fund
(d) Financial data schedule--Stein Roe Advisor Special
Venture Fund
(e) Financial data schedule--Stein Roe Advisor Balanced
Fund
(f) Financial data schedule--Stein Roe Advisor Growth
Stock Fund
(g) Financial data schedule--Stein Roe Advisor Special Fund
18. Rule 18f-3 plan.
- -----------
*Incorporated by reference.
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 September 30, 1997
--------------- ------------------------
Stein Roe Advisor Growth & Income Fund 1
Stein Roe Advisor International Fund 1
Stein Roe Advisor Young Investor Fund 2
Stein Roe Advisor Special Venture Fund 1
Stein Roe Advisor Balanced Fund 1
Stein Roe Advisor Growth Stock Fund 2
Stein Roe Advisor Special Fund 1
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
willful 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
willful 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 willful 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 willful 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 willful 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
willful 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 willful 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 willful 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 willful 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 willful 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,
SR&F Base Trust, and/or other 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 and Keyport Variable Investment Trust, which are
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 Sr. Vice-President; Treasurer
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Secy.
Thomas W. Butch Executive 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; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
Gary A. Anetsberger Sr. Vice-President; Treasurer
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Thomas W. Butch Executive Vice-President Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Stephen F .Lockman 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; STEIN ROE ADVISOR TRUST
Gary A. Anetsberger Sr. Vice-President; Treasurer
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Executive Vice-President 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
Arthur J. McQueen Vice-President
Richard B. Peterson Vice-President
Marion Gerry Sandel 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 Sr. Vice-President; Treasurer
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Thomas W. Butch Executive Vice-President 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
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer 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
Deborah A. Jansen Vice President
KEYPORT VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Colonial Investment Services,
Inc., a subsidiary of Colonial Management Associates, Inc., also
acts in the same capacity to Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial
Trust VI and Colonial Trust VII; and sponsor for Colony Growth
Plans (public offering of which was discontinued on June 14, 197l).
The table below lists each director or officer of Colonial
Investment Services, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- ---------------
Anderson, Judith Vice President None
Babbitt, Debra VP & Compliance Officer None
Ballou, Rich Regional Vice President None
Balzano, Christine R. Vice President None
Bartlett, John Senior Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Carroll, Greg Regional Vice President None
Chrzanowski, Daniel Regional Vice President None
Clapp, Elizabeth A. Vice President None
Crossfield, Andrew Regional Vice President None
Daniszewski, Joseph J. Vice President None
Davey, Cynthia Regional Sr. Vice President None
Desilets, Marian Vice President None
DiMaio, Steve Vice President None
Donovan, John Regional Vice President None
Downey, Christopher Vice President None
Eckelman, Bryan Senior Vice President None
Emerson, Kim P. Regional Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Senior Vice President None
Feldman, David Senior Vice President None
Fifield, Robert Regional Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director, Chairman of Board None
Goldberg, Matthew Regional Vice President None
Harasimowicz, Stephen Vice President None
Harrington, Tom Sr. Regional Vice President None
Hodgkins, Joseph Sr. Regional Vice President None
Iudice, Jr., Philip Treasurer and CFO None
Karagiannis, Marilyn Senior Vice President None
Kelley, Terry M. Regional Vice President None
Kelson, David W. Senior Vice President None
Menchen, Catherine Vice President None
Moberly, Ann R. Regional Sr. Vice President None
Morner, Patrick Vice President None
Nerney, Andrew Regional Vice President None
Nolin, Kevin Vice President None
O'Shea, Kevin Senior Vice President None
Predmore, Tracy Regional Vice President None
Reed, Christopher B. Sr. Regional Vice President None
Scarlott, Rebecca Vice President None
Schulman, David Regional Vice President None
Scoon, Davey Director None
Scott, Michael W. Senior Vice President None
Spanos, Gregory J. Senior Vice President None
Stern, Arthur O. Clerk and Counsel, Director None
Studer, Eric Regional Vice President None
Sutton, R. Andrew Regional Vice President None
Van Etten, Keith J. Vice President None
Villanova, Paul Regional Vice President None
Wallace, John Vice President None
Welsh, Stephen Treasurer None
Wess, Valerie Regional Vice President None
Young, Deborah Vice President None
- ---------
*The address for each individual is One Financial Center,
Boston, MA 02111.
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.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for
effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused
this amendment to the 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 6th day of
October, 1997.
STEIN ROE ADVISOR TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the 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 October 6, 1997
Timothy K. Armour
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President; October 6, 1997
Gary A. Anetsberger Treasurer
Principal Financial Officer
SHARON R. ROBERTSON Controller October 6, 1997
Sharon R. Robertson
Principal Accounting Officer
KENNETH L. BLOCK Trustee October 6, 1997
Kenneth L. Block
WILLIAM W. BOYD Trustee October 6, 1997
William W. Boyd
LINDSAY COOK Trustee October 6, 1997
Lindsay Cook
DOUGLAS A. HACKER Trustee October 6, 1997
Douglas A. Hacker
JANET LANGFORD KELLY Trustee October 6, 1997
Janet Langford Kelly
FRANCIS W. MORLEY Trustee October 6, 1997
Francis W. Morley
CHARLES R. NELSON Trustee October 6, 1997
Charles R. Nelson
THOMAS C. THEOBALD Trustee October 6, 1997
Thomas C. Theobald
*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 AMENDMENT
Exhibit
Number Description
- ------- -------------
6(b) Underwriting agreement
11 Consent of Arthur Andersen LLP
16 Schedule of computation of performance data
17(a) Financial data schedule--Stein Roe Advisor Growth &
Income Fund
(b) Financial data schedule--Stein Roe Advisor International
Fund
(c) Financial data schedule--Stein Roe Advisor Young
Investor Fund
(d) Financial data schedule--Stein Roe Advisor Special
Venture Fund
(e) Financial data schedule--Stein Roe Advisor Balanced Fund
(f) Financial data schedule--Stein Roe Advisor Growth
Stock Fund
(g) Financial data schedule--Stein Roe Advisor Special Fund
18 Rule 18f-3 plan
EXHIBIT 6(b)
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE ADVISOR TRUST
AND COLONIAL INVESTMENT SERVICES, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 1st day of October, 1997 by and between Stein Roe Advisor
Trust, a business trust organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter called the
"Fund"), and Colonial Investment Services, Inc., a
corporation organized and existing under the laws of the
Commonwealth of Massachusetts (hereinafter called the
"Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the Investment
Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and the laws of each state (including the District
of Columbia and Puerto Rico) in which it engages in business
to the extent such law requires, and is a member of the
National Association of Securities Dealers ("NASD") (such
registrations and membership are referred to collectively as
the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its Shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its transfer,
shareholder recordkeeping, dividend disbursing and redemption
agents, if any; all expenses of notices, proxy solicitation
material and reports to shareholders; all expenses of
preparation of annual or more frequent revisions of the
Fund's Prospectus and Statement of Additional Information
("SAI") and of supplying copies thereof to shareholders; all
expenses of registering and maintaining the registration of
the Fund under ICA-40 and of the Fund's Shares under the
Securities Act of 1933, as amended ("SA-33"); all expenses of
qualifying and maintaining qualification of such Fund and of
the Fund's Shares for sale under securities laws of various
states or other jurisdictions and of registration and
qualification of the Fund under all laws applicable to the
Fund or its business activities; and
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, or its affiliates, may pay expenses
incurred in the sale and promotion of the Fund except as
provided in the Fund's 12b-1 plan;
NOW, THEREFORE, in consideration of the premises and the
mutual promises hereinafter set forth, the parties hereto
agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in Sections
2(a)(29) of ICA-40) of its Shares for each series or class of
the Fund set forth on Schedule A hereto.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form of
agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Distribution of Shares.
(a) Subject to the provisions of Paragraphs 6, 7, 10, 11,
12, 13 and 14 hereof, and to such minimum purchase and other
requirements as may from time to time be indicated in the
Fund's Prospectus, Distributor, acting as principal for its
own account and not as agent for the Fund, shall have the
right to purchase Shares from the Fund. Distributor shall
sell Shares only in accordance with the Fund's Prospectus, on
a "best efforts" basis. Distributor shall purchase Shares
from the Fund at a price equal to the net asset value, shall
sell Shares at the public offering price as defined in
Paragraph 8, and shall retain all sales charges.
(b) The Fund shall pay all expenses associated with notices,
proxy solicitation material, the preparation of annual or
more frequent revisions to the Fund's Prospectus and SAI and
of printing and supplying the currently effective Prospectus
and SAI to shareholders, other than those necessitated by
Distributor's activities or rules and regulations related to
Distributor's activities where such amendments or supplements
result in expenses which the Fund would not otherwise have
incurred.
(c) The Distributor (or its affiliates) shall pay the costs
of printing and supplying all copies of the Prospectus and
SAI that it may reasonably request for use in connection with
the distribution of Shares. The Distributor will also pay
the expenses of the preparation, excluding legal fees, and
printing of all amendments and supplements to the Fund's
Prospectus and SAI if the amendment or supplement arises from
Distributor's activities or rules and regulations related to
Distributor's activities and those expenses would not
otherwise have been incurred by the Fund. Distributor will
pay all expenses incurred by Distributor in advertising,
promoting and selling Fund Shares.
(d) Prior to the continuous offering of any Fund Shares,
commencing on a date agreed upon by the Fund and the
Distributor, it is contemplated that the Distributor may
solicit subscriptions for such Shares during a subscription
period which shall last for such period as may be agreed upon
by the parties hereto. The subscriptions will be payable
within three business days after the termination of the
subscription period, at which time the Fund will commence
operations.
4. Selling Agreements. Distributor is authorized to
enter into agreements with other broker-dealers providing for
the solicitation of unconditional orders for purchases of the
Fund's Shares authorized for issuance and registered under
SA-33 and fix therein the portion of the sales charge which
may be reallowed to the selected dealers, as permitted under
that Fund's prospectus. All such agreements shall be either
in the form of agreement attached hereto or in such other
form as may be approved by the officers of the Fund ("Selling
Agreement"). Within the United States, the Distributor shall
offer and sell Shares to such selected dealers as are members
in good standing of the NASD; "banks" as such term is defined
in Section 3(a)(6) of the Exchange Act or a "bank holding
company" as such term is defined in the Bank Holding Company
Act of 1956, as amended, duly organized, validly existing and
in good standing under the laws of the jurisdiction in which
it was organized; and such other entities or purchasers as
otherwise mutually agreed in writing.
5. Conduct of Business. Other than as set forth in the
Fund's currently effective prospectus, Distributor will not
distribute any sales material or statements except literature
or advertising which conforms to the requirements of federal
and state securities laws and regulations which have been
filed, where necessary, with the appropriate regulatory
authorities. Upon the Fund's request, Distributor will
furnish the Fund with copies of all such materials prior to
their use. Any sales material or statements the substance of
which is not included in the Prospectus or SAI shall be
submitted for advance approval by the Fund.
6. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding Shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
7. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares that
are duly authorized and registered and available for sale by
the Fund, including redeemed or repurchased Shares if and to
the extent that they may be legally sold and if, but only if,
the Fund authorizes the Distributor to sell them.
8. Public Offering Price. The public offering price
for the Fund's Shares will be the net asset value per Share
next determined by the Fund after the Distributor or its
appointed agent receives the order plus any sales charge as
set forth in the Fund's Prospectus. The net asset value per
Share shall be determined in the manner provided in the
Fund's Agreement and Declaration of Trust as now in effect or
as they may be amended, and as reflected in the Fund's then
current Prospectus and SAI.
9. Compensation.
(a). Sales Charge. Distributor shall be entitled to charge a
sales charge on the sale or redemption, as appropriate, of
each series and class of each Fund's Shares as set forth in
the Fund's then current Prospectus. Distributor may allow any
dealers with which it has signed selling agreements such
commissions or discounts from and not exceeding the total
sales charge as Distributor shall deem advisable, so long as
any such commissions or discounts are set forth in the Fund's
current Prospectus to the extent required by the applicable
federal and state securities laws. Distributor may also make
payments to dealers from Distributor's own resources, subject
to the following conditions: (a) any such payments shall
not create any obligation for or recourse against the Fund or
any series or class, and (b) the terms and conditions of any
such payments are consistent with the Fund's Prospectus and
applicable federal and state securities laws and are
disclosed in the Prospectus or SAI to the extent such laws
may require.
(b). Distribution Plans. Distributor shall also be entitled
to compensation for its services as provided in any
Distribution Plan adopted as to any series and class of any
Fund's Shares pursuant to Rule 12b-1 under the 1940 Act.
10. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, the Distributor shall
not accept orders for Shares except for unconditional orders
placed before the suspension. In addition, the Fund reserves
the right to suspend sales of Shares if, in the judgment of
the Board of the Fund, it is in the best interest of the Fund
to do so, such suspension to continue for such period as may
be determined by the Board of the Fund; and in that event,
(i) at the direction of the Fund, Distributor shall suspend
receipt and acceptance of orders to purchase Shares of the
Fund until otherwise instructed by the Fund and (ii) the
Distributor shall not accept orders to purchase Shares while
such suspension remains in effect unless otherwise directed
by the Board.
11. Orders and Payment for Shares.
(a) Distributor shall direct orders for the purchase of
Shares of any series to the Fund's transfer agent. At or
prior to the time of delivery of any Shares the Distributor
will pay or cause to be paid to the custodian of the Fund's
assets, for the account of such series, an amount in cash
equal to the purchase price of such Shares. The Fund's
custodian and transfer agent shall be identified in its
Prospectus.
(b) The Fund, or any agent of the Fund designated in writing
by the Fund, shall be promptly advised of all purchase orders
for Fund Shares received by the Distributor. Any order may
be rejected by the Fund; provided, however, that the Fund
will not arbitrarily or without reasonable cause refuse to
accept or confirm orders for the purchase of Fund Shares from
eligible investors.
12. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding Fund Shares may be tendered to
the transfer agent for redemption at any time, other than
when the Fund suspends redemptions as permitted by the
Prospectus or applicable law, and the Fund agrees to
repurchase or redeem the Shares so tendered in accordance
with its obligations as set forth in its Articles of
Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the
Prospectus and SAI. The price to be paid to redeem or
repurchase the Shares shall be equal to the net asset value
calculated in accordance with the provisions of the Fund's
Prospectus and SAI, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set
forth in the Prospectus or SAI of the Fund. All payments by
the Fund hereunder shall be made in the manner set forth
below.
(b) If Shares are tendered to the transfer agent for
redemption or repurchase by the Fund within seven business
days after Distributor's acceptance of the original purchase
order for such Shares, Distributor will immediately refund to
the Fund the full sales commission (net of allowances to
dealers or brokers) allowed to Distributor on the original
sale, and will promptly, upon receipt thereof, pay to the
Fund any refunds from dealers or brokers of the balance of
sales commissions reallowed by Distributor. The transfer
agent shall notify Distributor of such tender for redemption
within ten days of the day on which notice of such tender for
redemption is received by the transfer agent.
(c) The transfer agent shall pay the total amount of the
redemption price as defined in the above paragraph 12(a),
pursuant to the instructions of the Distributor in Federal
Funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form
except as otherwise provided in the Prospectus or SAI of the
Fund. The proceeds of any redemption of Shares shall be paid
by the transfer agent as follows: (i) any applicable CDSC
shall be paid to the Distributor, and (ii) the balance shall
be paid to or for the account of the shareholder, in each
case in accordance with the applicable provision of the
Prospectus and SAI.
13. Purchases for your own Account. Distributor may
purchase Shares for its own investment account upon
Distributor's written assurance that the purchase is for
investment purposes and that the Shares will not be resold
except through redemption by the Fund.
14. Stein Roe & Farnham Incorporated Investment
Programs. In connection with any program under which Stein
Roe & Farnham Incorporated or one of its affiliates offers
investment advice to shareholders, the Distributor is
authorized to offer and sell Shares of the Fund, as
principal, to participants in such program. The terms of
this Agreement shall apply to such sales, including terms as
to the offering price of Shares, the proceeds to be paid to
the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
15. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
16. Registration of Additional Shares. The Fund hereby
agrees to register an indefinite number of Shares pursuant to
Rule 24f-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the Fund,
and to maintain such qualification; provided, however, that
nothing herein shall be deemed to prevent the Fund from
registering its Shares without approval of the Distributor in
any state it deems appropriate.
17. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform in
all respects with applicable federal and state laws and the
rules and regulations of the NASD. Distributor will use its
best efforts to maintain its registrations in good standing
during the term of this Agreement and will promptly notify
the Fund and Stein Roe & Farnham Incorporated in the event of
the suspension or termination of any of the registrations.
18. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
Distributor may appoint sub-agents or distribute through
dealers or otherwise as Distributor may determine from time
to time, but this Agreement shall not be construed as
authorizing any dealer or other person to accept orders for
sale or repurchase on the Fund's behalf or otherwise act as
the Fund's agent for any purpose.
19. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the meaning
of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to which
the Fund or such of the members of its Board and of its
officers, employees, representatives, or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise, arising out of or based
upon (i) any violation of an applicable law, rule or
regulation or wrongful act by Distributor or any of
Distributor's directors, officers, employees or
representatives, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, Prospectus, SAI, shareholder report
or other information covering Shares of the Fund filed or
made public by the Fund 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 statements therein not misleading if
such statement or omission was made in reliance upon
information furnished to the Fund by Distributor in writing.
In no case (i) is Distributor's indemnity in favor of the
Fund, or any person indemnified, to be deemed to protect the
Fund or such indemnified person against any liability to
which the Fund or such person would otherwise be subject by
reason of willful 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 this Agreement or (ii) is Distributor to be liable
under its indemnity agreement contained in this paragraph
with respect to any claim made against the Fund or any person
indemnified unless the Fund or such person, as the case may
be, shall have notified Distributor in writing of the claim
within a reasonable time after the summons, or other first
written notification, giving information of the nature of the
claim served upon the Fund or upon such person (or after the
Fund or such person shall have received notice of such
service on any designated agent). However, failure to notify
Distributor of any such claim shall not relieve Distributor
from any liability which Distributor may have to the Fund or
any person against whom such action is brought otherwise than
on account of Distributor's indemnity agreement contained in
this Paragraph.
Distributor shall be entitled to participate, at its own
expense, in the defense, or, if Distributor so elects, to
assume the defense of any suit brought to enforce any such
claim but, if Distributor elects to assume the defense, such
defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain such
legal counsel, persons indemnified who are defendants in the
suit shall bear the fees and expenses of any additional legal
counsel retained by them. If Distributor does not elect to
assume the defense of any such suit, Distributor will
reimburse persons indemnified who are defendants in such suit
for the reasonable fees of any legal counsel retained by them
in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33 against
any and all losses, liabilities, damages, claims or expenses
(including the damage, claim or expense and reasonable legal
counsel fees incurred in connection therewith) to which
Distributor or such of its directors, officers, employees,
representatives or controlling person or persons may become
subject under SA-33, under any other statute, at common law,
or otherwise arising out of or based upon (i) any violation
of applicable law, rule or regulation or wrongful act by the
Fund or any of the members of the Fund's Board, or the Fund's
officers, employees or representatives other than
Distributor, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, Prospectus, SAI, shareholder report or other
information covering Shares filed or made public by the Fund
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
statements therein not misleading unless such statement or
omission was made in reliance upon information furnished by
Distributor to the Fund. In no case (i) is the Fund's
indemnity in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or such
indemnified person against any liability to which Distributor
or such indemnified person would otherwise be subject by
reason of willful 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 this Agreement, or (ii) is the Fund to be liable under
its indemnity agreement contained in this Paragraph with
respect to any claim made against Distributor or any person
indemnified unless Distributor, or such person, as the case
may be, shall have notified the Fund in writing of the claim
within a reasonable time after the summons, or other first
written notification, giving information of the nature of the
claim served upon Distributor or upon such person (or after
Distributor or such person shall have received notice of such
service on any designated agent). However, failure to notify
a Fund of any such claim shall not relieve the Fund from any
liability which the Fund may have to Distributor or any
person against whom such action is brought otherwise than on
account of the Fund's indemnity agreement contained in this
Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but, if
the Fund elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants in
the suit. In the event that the Fund elects to assume the
defense of any such suit and retain such legal counsel, the
persons indemnified who are defendants in the suit shall bear
the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the persons
indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by
them in such litigation.
20. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement shall
become effective upon its execution ("Effective Date") and
unless terminated as provided herein, shall remain in effect
through June 30, 1998, and from year to year thereafter, but
only so long as such continuance is specifically approved at
least annually (a) by a vote of majority of the members of
the Board of the Fund who are not interested persons of the
Distributor or of the Fund, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by
the vote of either the Board of the Fund or a majority of the
outstanding Shares of the Fund. This Agreement may be
terminated by and between an individual Fund and Distributor
at any time, without the payment of any penalty (a) on 60
days' written notice, by the Board of the Fund or by a vote
of a majority of the outstanding Shares of the Fund, or by
Distributor, or (b) immediately, on written notice by the
Board of the Fund, in the event of termination or suspension
of any of the Registrations. This Agreement will
automatically terminate in the event of its assignment. In
interpreting the provisions of this Paragraph 20 the
definitions contained in Section 2(a) of ICA-40 (particularly
the definitions of "interested person", "assignment", and
"majority of the outstanding Shares") shall be applied.
21. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best interests
of the Fund that any amendment of this Agreement be made in
order to comply with the recommendations or requirements of
the SEC or any other governmental authority or to obtain any
advantage under state or Federal tax laws and notifies
Distributor of the form of such amendment, and the reasons
therefor, and if Distributor should decline to assent to such
amendment, the Fund may terminate this Agreement forthwith.
If Distributor should at any time request that a change be
made in the Fund's Agreement and Declaration of Trust or By-
Laws or in its methods of doing business, in order to comply
with any requirements of Federal law or regulations of the
SEC, or of a national securities association of which
Distributor is or may be a member, relating to the sale of
Shares, and the Fund should not make such necessary changes
within a reasonable time, Distributor may terminate this
Agreement forthwith.
22. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. A copy of the
Declaration of Trust and of each amendment thereto has been
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.
23. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
24. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other party
at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: One Financial Center
Boston, Massachusetts 02111
Attn: Secretary
COLONIAL INVESTMENT SERVICES, INC.
By:_____________________________
ATTEST:
__________________________
STEIN ROE ADVISOR TRUST
By:______________________________
Timothy K. Armour
President
ATTEST:
__________________________
Nicolette D. Parrish
Assistant Secretary
<PAGE>
Schedule A to Underwriting Agreement
Between the Stein Roe Advisor Trust and
Colonial Investment Services, Inc.
The series of the Trust covered by this agreement are:
Name of Series Effective Date
Stein Roe Advisor Growth &
Income Fund -- K Shares , 1997
Stein Roe Advisor International
Fund -- K Shares , 1997
Stein Roe Advisor Young Investor
Fund -- K Shares , 1997
Stein Roe Advisor Special
Venture Fund -- K Shares , 1997
Stein Roe Advisor Balanced Fund
-- K Shares , 1997
Stein Roe Advisor Growth Stock Fund --
K Shares .1997
A Shares .1997
B Shares .1997
C Shares , 1997
Stein Roe Advisor Special Fund --
K Shares , 1997
Dated: _______________, 1997
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
use of our report dated February 6, 1997, and to all
references to our Firm included in or made a part of this
Registration Statement on Form N-1A of the Stein Roe Advisor
Trust, (comprising the Stein Roe Advisor Balanced Fund, Stein
Roe Advisor Growth & Income Fund, Stein Roe Advisor Growth
Stock Fund, Stein Roe Advisor Special Fund, Stein Roe Advisor
Special Venture Fund, Stein Roe Advisor International Fund
and Stein Roe Advisor Young Investor Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 1, 1997
EXHIBIT 16
Stein Roe Advisor Growth Stock Fund - Class A Shares, assuming
a maximum sales charge of 5.75%
Total Return for the periods ended September 30, 1997
<TABLE>
<CAPTION>
Total
Total Return Distributions +/- Appr/Depr = Return + Principal = ERV (ERV/Princ)-1
- -------------- ------------- --------- ------ --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
1 Year $60.67 $190.03 $250.70 $1,000 $1,250.70 25.07%
3 Years 329.74 599.11 928.85 1,000 1,928.85 92.89
5 Years 457.78 599.46 1,057.24 1,000 2,057.24 105.72
10 Years 961.03 1,070.75 2,031.78 1,000 3,031.78 203.18
Inception (7/1/58) 26,867.48 26,760.23 53,627.71 1,000 54,627.71 5,362.77
</TABLE>
Average Annual n
Total Return P T n P(1+T) = ERV
- --------------- ------ ------- ------- --------------
1 Year $1,000 25.07% 1 $ 1,250.70
3 Years 1,000 24.48 3 1,928.85
5 Years 1,000 15.52 5 2,057.24
10 Years 1,000 11.73 10 3,031.78
Inception (7/1/58) 1,000 10.73 39.25 54,627.71
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE ADVISOR GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 93
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 24
<TOTAL-ASSETS> 117
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23
<TOTAL-LIABILITIES> 23
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6)
<NET-ASSETS> 94
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (6)
<NET-CHANGE-FROM-OPS> (6)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 94
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 98
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.65)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.37
<EXPENSE-RATIO> 86.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> STEIN ROE ADVISOR INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 99
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 24
<TOTAL-ASSETS> 123
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23
<TOTAL-LIABILITIES> 23
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 2
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 99
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 65.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> STEIN ROE ADVISOR YOUNG INVESTOR FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 89
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<OTHER-ITEMS-ASSETS> 24
<TOTAL-ASSETS> 113
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<OTHER-ITEMS-LIABILITIES> 23
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
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<ACCUMULATED-NET-GAINS> (3)
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<ACCUM-APPREC-OR-DEPREC> (7)
<NET-ASSETS> 90
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 0
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<REALIZED-GAINS-CURRENT> (3)
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<NET-CHANGE-FROM-OPS> (10)
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<NUMBER-OF-SHARES-SOLD> 100
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<NET-CHANGE-IN-ASSETS> 90
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<GROSS-ADVISORY-FEES> 0
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<AVERAGE-NET-ASSETS> 97
<PER-SHARE-NAV-BEGIN> 10.00
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<EXPENSE-RATIO> 109.87
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 4
<NAME> STEIN ROE ADVISOR SPECIAL VENTURE FUND
<S> <C>
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<OVERDISTRIBUTION-GAINS> 0
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<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> (1)
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 92
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 97
<PER-SHARE-NAV-BEGIN> 10.00
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<PER-SHARE-NAV-END> 9.20
<EXPENSE-RATIO> 87.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 5
<NAME> STEIN ROE ADVISOR BALANCED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
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<INVESTMENTS-AT-VALUE> 95
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<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 24
<TOTAL-ASSETS> 119
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23
<TOTAL-LIABILITIES> 23
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 96
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> (4)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 96
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 97
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.46)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.58
<EXPENSE-RATIO> 93.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STEIN ROE ADVISOR GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
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<TOTAL-LIABILITIES> 23
<SENIOR-EQUITY> 0
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<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5)
<NET-ASSETS> 89
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<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
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<APPREC-INCREASE-CURRENT> (5)
<NET-CHANGE-FROM-OPS> (11)
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<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 0
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<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
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<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 88.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEIN ROE ADVISOR SPECIAL FUND
<S> <C>
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<PERIOD-START> FEB-14-1997
<PERIOD-END> MAR-31-1997
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<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
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<ACCUM-APPREC-OR-DEPREC> 0
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<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> (8)
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<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 97
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.80)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.20
<EXPENSE-RATIO> 87.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 18
STEIN ROE ADVISOR TRUST
Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940
Effective _______, 1997
Each series (each an "Advisor Fund") of Stein Roe Advisor Trust
(the "Trust") identified in the attached schedule may from time to
time issue one or more of the following classes of shares as
authorized by the Board of Trustees and as provided for herein:
Class A shares, Class B shares, Class C shares and Class K shares.
Each class is subject to such investment minimums and other
conditions of eligibility as set forth in the Advisor Funds'
prospectuses and statements of additional information as from time
to time in effect. The differences in expenses among these
classes of shares, and the conversion and exchange features of
each class of shares, are set forth below. These differences are
subject to change, to the extent permitted by law and by the
Declaration of Trust and By-laws of the Trust, by action of the
Board of Trustees.
Class A shares
Class A shares are offered at net asset value ("NAV") plus the
initial sales charges described in the Advisor Funds' prospectuses
and statements of additional information as from time to time in
effect. Initial sales charges may not exceed 6.50%, and may be
reduced or waived as permitted by Rule 22d-1 under the Investment
Company Act of 1940 ( the "1940 Act") and as described in the
Advisor Funds' prospectuses and statements of additional
information from time to time in effect.
Purchases of $1 million to $5 million of Class A shares that are
redeemed within 18 months from purchase are subject to a
contingent deferred sales charge ("CDSC") of 1% of either the
purchase price or the NAV of the shares redeemed, whichever is
less. Class A shares are not otherwise subject to a CDSC. The
CDSC may be reduced or waived as permitted by Rule 6c-10 under the
1940 Act and as described in the Advisor Funds' prospectuses and
statements of additional information as from time to time in
effect.
Class A shares pay distribution and service fees pursuant to a
plan adopted pursuant to Rule 12b-1 under the 1940 Act ("12b-1
Plan") as described in the Funds' prospectuses and statements of
additional information in effect from time to time. Such fees may
be in amounts up to but may not exceed, respectively, 0.10% and
0.25% per annum of the average daily net assets attributable to
such class.
Class A shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Advisor
Funds' prospectuses and statements of additional information in
effect from time to time. Total transfer agency fees, including
such service component, may not exceed 0.236% of average annual
net assets attributable to the class.
Class A shares of any Advisor Fund may be exchanged, at the
holder's option, for Class A shares of another Advisor Fund or
Class A shares of most funds advised by Colonial Management
Associates, Inc. or distributed by Colonial Investment Services,
Inc. ("Colonial Funds") or its successor without the payment of a
sales charge, except that if shares of any other Advisor Fund or
non-money market Colonial Fund are exchanged within five months
after purchase for shares of another Advisor Fund or Colonial Fund
with a higher sales charge, then the difference in sales charges
must be paid on the exchange.
Class B shares
Class B shares are offered at NAV, without an initial sales
charge. Class B shares that are redeemed within the period of
time after purchase (not more than 6 years) specified in each
Advisor Fund's prospectus and statement of additional information
as from time to time in effect are subject to a CDSC of up to 5%
of either the purchase price or the NAV of the shares redeemed,
whichever is less; such percentage may be lower for certain Funds
and declines the longer the shares are held, all as described in
the Advisor Funds' prospectuses and statements of additional
information as from time to time in effect. Class B shares
purchased with reinvested distributions are not subject to a CDSC.
The CDSC is subject to reduction or waiver in certain
circumstances, as permitted by Rule 6c-10 under the 1940 Act and
as described in the Advisor Funds' prospectuses and statements of
additional information as from time to time in effect.
Class B shares pay distribution and service fees pursuant to a
12b-1 Plan as described in the Advisor Funds' prospectuses and
statements of additional information in effect from time to time.
Such fees may be in amounts up to but may not exceed,
respectively, 0.75% and 0.25% per annum of the average daily net
assets attributable to such class.
Class B shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Advisor
Funds' prospectuses and statements of additional information in
effect from time to time. Total transfer agency fees, including
such service component, may not exceed 0.236% of average annual
net assets attributable to the class.
Class B shares automatically convert to Class A shares of the same
Advisor Fund eight years after purchase, except that Class B
shares purchased through the reinvestment of dividends and other
distributions on Class B shares convert to Class A shares
proportionally to the amount of Class B shares otherwise being
converted.
Class B shares of any Advisor Fund may be exchanged, at the
holder's option, for Class B shares of another Advisor Fund or a
Colonial Fund offering Class B shares, without the payment of a
CDSC. The holding period for determining the CDSC and the
conversion to Class A shares will include the holding period of
the shares exchanged. If the Class B shares received in the
exchange are subsequently redeemed, the amount of the CDSC, if
any, will be determined by the schedule of the Advisor Fund or
Colonial Fund in which the original investment was made.
Class C shares
Class C shares are offered at NAV without an initial sales charge.
Class C shares that are redeemed within one year from purchase may
be subject to a CDSC of 1% of either the purchase price or the NAV
of the shares redeemed, whichever is less. Class C shares
purchased with reinvested dividends or capital gain distributions
are not subject to a CDSC. The CDSC may be reduced or waived in
certain circumstances as permitted by Rule 6c-10 under the 1940
Act and as described in the Advisor Funds' prospectuses and
statements of additional information as from time to time in
effect.
Class C shares pay distribution and service fees pursuant to a
12b-1 Plan as described in the Advisor Funds' prospectuses and
statements of additional information in effect from time to time.
Such fees may be in amounts up to but may not exceed,
respectively, 0.75% and 0.25% per annum of the average daily net
assets attributable to such class.
Class C shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Advisor
Funds' prospectuses and statements of additional information in
effect from time to time. Total transfer agency fees, including
such service component, may not exceed 0.236% of average annual
net assets attributable to the class.
Class C shares of any Advisor Fund may be exchanged, at the
holder's option, for Class C shares of another Advisor Fund or a
Colonial Fund offering Class C shares, without the payment of a
CDSC. The holding period for determining the CDSC will include
the holding period of the shares exchanged. If the Class C shares
received in the exchange are subsequently redeemed, the amount of
the CDSC, if any, will be determined by the schedule of the
Advisor Fund or Colonial Fund in which the original investment was
made. Only one exchange of any Advisor Fund or Colonial Fund's
Class C shares may be made in any three month period. For this
purpose, an exchange into an Advisor Fund or Colonial Fund and a
prior or subsequent exchange out of an Advisor Fund or Colonial
Fund constitutes an "exchange."
Class K shares
Class K shares are offered at NAV, without an initial sales charge
or CDSC.
Class K shares pay distribution fees pursuant to a 12b-1 Plan as
described in the Advisor Funds' prospectuses and statements of
additional information in effect from time to time. Such fees may
not exceed 0.25% per annum of the average daily net assets
attributable to such class. Class K shares generally do not pay
service fees pursuant to a 12b-1 Plan.
Class K shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Advisor
Funds' prospectuses and statements of additional information in
effect from time to time. Such fees may not exceed 0.25% per
annum of the average daily net assets attributable to such class.
Class K shares of any Advisor Fund may be exchanged, at the
holder's option, for Class K shares of another Advisor Fund.
