STEIN ROE ADVISOR TRUST, N-30D, 1998-09-02

STEIN ROE ADVISOR TRUST
N-30D, 1998-09-02

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Stein Roe Advisor Funds
Annual Report
June 30, 1998

Picture of Bonds

Stein Roe Advisor Funds

Taxable Bond Funds
Stein Roe Advisor Intermediate Bond Fund

Logo of: STEIN ROE ADVISOR INTERMEDIATE BOND FUND
Sensible Risks. Intelligent Investments (SM)

<PAGE>

Contents

Fund Performance....................................................... 1

How the Stein Roe Advisor Intermediate Bond
Fund has done over time

Q&A

Interview with the portfolio manager and summary of investment activity
Stein Roe Advisor Intermediate Bond Fund............................... 2

Portfolio of Investments............................................... 3

Complete lists of investments with market values

Financial Statements................................................... 8

Statements of assets and liabilities, operations
and changes in net assets

Notes to Financial Statements.......................................... 14

Financial Highlights................................................... 16

Selected per-share data

Report of Independent Auditors......................................... 18

Must be preceded or accompanied by a prospectus.

<PAGE>

Fund Performance
- --------------------------------------------------------------------------------

There are several ways to evaluate a fund's historical performance. You
can look at the cumulative return percentage, the average annual return
percentage or the growth of a hypothetical $10,000 investment. Each performance
figure includes changes in a fund's share price, plus reinvestment of any
dividends (net investment income) and capital gain distributions (the profits
the fund earns when fixed income securities grow in value).

Average Annual Total Returns
Periods ended June 30, 1998
- ----------------------------------------------------------------------------------------------------------------------------

Past 1 Past 3 Past 5 Past 10
Year Years Years Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR INTERMEDIATE BOND FUND 9.24% 7.92% 6.50% 8.23%
Lehman Intermediate Government/
Corporate Bond Index 8.54 6.91 6.11 8.25

</TABLE>

GROWTH of a $10,000 investment for the years ended June 30.

- --------------------------------------------------------------------------------
Stein Roe Advisor Intermediate Bond Fund

Chart of Stein Roe Advisor Intermediate Bond Fund

Advisor Intermediate Lehman Intermediate
Bond Fund Government/Corporate Bond Index

6/30/88 10000 10000
6/30/89 11069 11022
6/30/90 11630 11884
6/30/91 12833 13135
6/30/92 14596 14864
6/30/93 16098 16424
6/30/94 15982 16382
6/30/95 17553 18081
6/30/96 18488 18987
6/30/97 20195 20357
6/30/98 22062 22096

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. TOTAL
RETURN PERFORMANCE INCLUDES CHANGES IN SHARE PRICE AND REINVESTMENT OF INCOME
AND CAPITAL GAIN DISTRIBUTIONS. Total return figures do not include sales
charges or contingent deferred sales charges (CDSC). Class K shares may be
purchased only through certain intermediaries, including certain bank trust
departments, wrap fee programs and retirement plans. The Advisor currently
limits expenses on Class K shares to 1.00% of average net assets. Absent this
limit, total return would be less. Historical performance for Class K shares for
the period prior to 2/4/98 is based on the performance of the SR&F Intermediate
Bond Portfolio, restated to reflect 12b-1 fees and any other expenses applicable
to that class, without giving any effect to fee waivers and assuming
reinvestment of dividends and capital gains. This graph compares the performance
of the Stein Roe Advisor Intermediate Bond Fund to the Lehman Intermediate
Government/Corporate Bond Index, an unmanaged group of stocks not associated
with any Stein Roe fund.

<PAGE>

Q&A
- --------------------------------------------------------------------------------

An Interview with Mike Kennedy, Portfolio Manager of Advisor Intermediate Bond
Fund and SR&F Intermediate Bond Portfolio

Fund Data

Investment Objective:

Seeks high current income consistent with capital preservation by
investing primarily in a diversified portfolio of marketable debt securities.
The dollar-weighted average life of its portfolio is expected to be between
three and 10 years.

Q: How did the Fund perform?
A: For the fiscal year ended June 30, 1998, Advisor Intermediate Bond Fund
returned 9.24 percent, amply outperforming the 8.54 percent return of the Lehman
Intermediate Government/Corporate Bond Index, yet underperforming the 9.53
percent return of the Lipper intermediate investment grade debt fund peer group.

Q: How did events in the corporate bond market affect the portfolio's holdings?

A: The fiscal year started out strong for corporate bonds. Then in October, the
currency crisis in Asia spread to worldwide markets. As a result, bond investors
focused on safer Treasury bonds, which led to a subsequent rally. Corporate
bonds historically falter more than other fixed income securities in periods of
stock market volatility because, by their nature, they reflect the activity of
stocks. When the equity markets stabilized in the first quarter of 1998,
corporate bonds rebounded. Then in the most recent quarter, corporate bonds
decreased in value slightly as low interest rates generated excess supply from
corporations wishing to borrow at low rates. In addition, turmoil in Asia
resurfaced. We believe that together, these factors caused interest in U.S.
corporate bonds to once again waver.

Q: How did you position the portfolio throughout the year?

A: Because corporate bonds led the market this year, they also drove most of our
decisions regarding the portfolio's trading activity. Although we were
overweighted in corporate bonds for the entire year -- compared to other
investments -- we shifted assets between the corporate and Treasury sectors in
response to changing market conditions. We made shifts based on supply and
demand and sector performance. For example, during the fourth quarter of 1997,
the Asian currency crisis created fears that corporate earnings would be
negatively impacted and affect bond prices. In response, we shifted our position
in Treasuries from four percent to more than 20 percent of the portfolio's total
net assets. This move allowed us to take advantage of the Treasury market rally
and helped to offset the Asian crisis' negative impact on our performance. Then,
around mid-January, when we saw a turnaround in the corporate market, we sold
all of our Treasury holdings to acquire a full position in corporate bonds. We
recently shifted back to Treasuries to take advantage of the rally triggered by
continuing turmoil in Asia, but near the end of the fiscal year, we began
rebuilding our position in corporate bonds.

Q: What's your current outlook for corporate bonds?

A: We think corporate bonds are at their most attractive levels in three years.
Their credit quality is good and yields are attractive. We plan to focus our
investing in this sector in coming months. However, it seems that many investors
are waiting for sustained interest-rate stability and an easing of supply before
they invest in corporate bonds. We think the key to a shift in confidence will
be stability in the Asian markets and specifically, evidence that Japan is
effectively addressing its financial problems. We also believe that if the
economy continues to grow at a moderate pace in coming months, that interest
rates will remain stable.

Q: What is your current outlook for the mortgage securities sector?

A: Although the attractiveness of the mortgage securities sector is improving,
in our opinion it is still not as attractive as the corporate bond sector.
Therefore, we will wait for mortgage yields to become more attractive relative
to corporate bonds before we shift significant assets to that sector.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of June 30, 1998; portfolio data is subject to change. Holdings
are disclosed as a percentage of SR&F Intermediate Bond Portfolio's total net
assets. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. The Lehman Intermediate
Government/Corporate Bond Index represents an unmanaged group of bonds that
differs from the composition of the portfolio; it is not available for direct
investment. According to Lipper Analytical Services, Inc., an independent
monitor of mutual fund performance, the median returns for the Fund's
intermediate investment grade debt fund peer group for the one-, five- and
10-year periods ended June 30, 1998, were 9.53 percent, 6.05 percent and 8.21
percent, respectively.

SR&F Intermediate Bond Fund Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Investments at June 30 1998
(Dollar amounts in thousands)

PRINCIPAL MARKET
LONG-TERM OBLIGATIONS (94.4%) AMOUNT VALUE
U.S.-GOVERNMENT-OBLIGATIONS-(4.6%)--------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes
7.250% 5/15/04................................................................................ $ 2,500 $ 2,712
5.625% 5/15/08................................................................................ 3,750 3,801
U.S. Treasury Bonds
7.500% 11/15/16............................................................................... 1,850 2,220
6.125% 11/15/27............................................................................... 10,650 11,415
-------
20,148
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (6.0%)
FHLMC Gold
12.000% 7/1/20................................................................................ 2,589 2,971
FHLMC Remic Trust
9.500% 4/15/19 Series 11 Class C.............................................................. 134 137
FNMA
8.500% 4/1/01................................................................................. 1 1
8.500% 5/1/03................................................................................. 8 8
8.500% 9/1/03................................................................................. 63 65
8.500% 11/1/03................................................................................ 106 109
6.000% 4/1/09................................................................................. 10,282 10,177
11.250% 11/1/13 (FHA/VA guaranteed)........................................................... 112 127
6.000% 1/1/24................................................................................. 800 781
6.000% 3/1/24................................................................................. 2,327 2,273
FNMA Remic Trusts
7/25/98 Series 1991-91 Class SA-IO............................................................ 1,331 17
9.250% 3/25/18 Series 1988-4 Class Z.......................................................... 2,747 2,920
GNMA
8.000% 1/15/08................................................................................ 379 394
8.000% 2/15/08................................................................................ 262 272
8.000% 4/15/08................................................................................ 323 335
8.000% 5/15/08................................................................................ 335 348
8.000% 6/15/08................................................................................ 2,011 2,088
8.000% 7/15/08................................................................................ 394 409
9.000% 6/15/16................................................................................ 107 116
9.000% 8/15/16................................................................................ 66 72
9.000% 10/15/16............................................................................... 146 158
7.125% 7/20/25 ARM (Floating Rate)............................................................ 2,782 2,836
-------
26,614
AIRLINES (0.8%)
United Airlines Series 1991-A1 9.200% 3/22/08.................................................... 3,060 3,501

ASSET-BACKED OBLIGATIONS (3.3%)
ALPS Pass-Through Trust
Series 1994-1 Class C 9.350% 9/15/04.......................................................... 3,482 3,717
Contimortgage Home Equity Loan Trust
7.420% 3/15/28 Series 1997-1 Class M1......................................................... 750 763
7.670% 3/15/28 Series 1997-1 Class M2......................................................... 2,875 2,927
First Boston Mortgage Securities Series 1993-H1 Class A-IO
(Effective Yield 12.820%) 9/28/13............................................................. 14,275 558
Greentree Home Improvement Loan Pass-ThroughTrust
Series 1994-A Class A 7.050% 3/15/14.......................................................... 1,460 1,486
IMC Home Equity Loan Trust Series 1997-3 Class M2
7.550% 8/20/28................................................................................ 5,000 5,116
-------
14,567

SR&F Intermediate Bond Fund Portfolio CONTINUED
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
AUTOMOTIVE-(1.6%)-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Chrysler 7.450% 3/1/27........................................................................... $ 1,750 $ 1,952
Federal-Mogul 7.500% 7/1/04...................................................................... 5,000 5,007
-------
6,959
BANKING (8.1%)
Bank One Texas 6.250% 2/15/08.................................................................... 5,000 4,988
BankBoston 6.375 4/15/08......................................................................... 13,000 13,029
Deutsche Ausgleichsbank Series E Medium-Term Note
7.000% 9/24/01................................................................................ 4,000 4,146
First Federal of Michigan
Zero Coupon (Yield to Maturity 7.343%) 2/26/05................................................ 6,500 4,426
Merita Bank 7.150% 12/29/49...................................................................... 4,500 4,580
Riggs Capital Trust 8.625% 12/31/26 (a).......................................................... 4,000 4,315
-------
35,484
BUILDING & CONSTRUCTION (2.6%)
Hanson Overseas (Yankee Issue) 7.375% 1/15/03.................................................... 6,000 6,297
Kaufman & Broad Home 7.750% 10/15/04............................................................. 2,000 1,985
PYCSA Panama 10.280% 12/15/12 (a)................................................................ 3,250 3,118
-------
11,400
CABLE & MEDIA (4.9%)
Groupe Videotron (Yankee Issue) 10.625% 2/15/05.................................................. 3,000 3,315
News America Holdings 8.625% 2/1/03.............................................................. 7,500 8,170
Paramount Communications 7.500% 1/15/02.......................................................... 3,000 3,113
Rogers Cablesystems (Yankee Issue) 9.625% 8/1/02................................................. 3,000 3,195
Viacom International 10.250% 9/15/01............................................................. 3,500 3,876
-------
21,669
CHEMICALS (1.4%)
BOC Group 5.875% 1/29/01......................................................................... 6,100 6,084

ELECTRONICS (2.0%)
Pan Pacific Industrial Investment (Yankee Issue)
Zero Coupon (Yield to Maturity 8.834%) 4/28/07 (a)............................................ 10,000 3,536
Sony 6.125% 3/4/03............................................................................... 5,000 5,026
-------
8,562
FOOD & BEVERAGE (0.1%)
NBTY Series B 8.625% 9/15/07..................................................................... 625 634

FINANCIAL (10.1%)
Amvescap 6.600% 5/15/05 (a)...................................................................... 7,500 7,576
Banctec 7.500% 6/1/08 (a)........................................................................ 4,000 4,066
Bistro Trust 9.500% 12/31/02 (a)................................................................. 3,000 3,026
Cigna CBO Series 1996-1 Class A-2 6.460%11/15/08 (a)............................................. 5,000 5,456
GMAC Series E Medium-Term Note 6.750% 7/10/02.................................................... 9,000 9,157
Halifax Series E Medium-Term Note 6.000% 2/26/08................................................. 2,000 1,985
Health Care Properties 6.875% 6/8/05............................................................. 5,000 5,003
Merrill Lynch 6.550% 8/1/04...................................................................... 6,000 6,143
Salomon (Traveler's Group ) 6.750% 1/15/06....................................................... 2,000 2,048
-------
44,460
FOREIGN SOVEREIGN REGIONAL BONDS (3.7%)
Corporacion Andina de Fomento (Yankee Issue)
7.375% 7/21/00................................................................................ 6,000 6,078
Financiera Energetica 9.000% 11/8/99 (a)......................................................... 4,250 4,292
Republic of Slovenia 7.000% 8/6/01 (a)........................................................... 6,000 6,143
-------
16,513

HOTELS & ENTERTAINMENT (3.5%)
MGM Grand 6.950% 2/1/05.......................................................................... 5,000 4,970
Prime Hospitality 9.250% 1/15/06................................................................. 2,500 2,650
Rank Group Finance (Yankee Issue) 6.750% 11/30/04................................................ 7,900 8,021
-------
15,641
INSURANCE (3.3%)
Prudential Insurance 7.650% 7/1/07 (a)........................................................... 7,250 7,841
Zurich Capital Trust 8.376% 6/1/37 (a)........................................................... 6,000 6,650
-------
14,491
MANUFACTURING (3.5%)
Owens-Illinois 7.850% 5/15/04.................................................................... 4,000 4,173
Tyco International Group (Yankee Issue) 6.375% 6/15/05........................................... 6,000 6,018
USX 6.850% 3/1/08................................................................................ 5,000 5,044
-------
15,235
MINING (1.1%)
Freeport-McMoran Copper & Gold 7.500% 11/15/06................................................... 2,700 2,018
PT Alatief Freeport Financial (Yankee Issue) 9.750% 4/15/01...................................... 3,500 3,080
-------
5,098
MORTGAGE-BACKED SECURITIES (7.3%)
American Mortgage Trust Series 1993-3 Class 3B
8.190% 9/27/22................................................................................ 2,789 2,766
First Union-Lehman Brothers Commercial Mortgage Series 1997-C2
Series A3 6.650% 12/18/07..................................................................... 7,000 7,197
Kidder Peabody Acceptance Series 1994-C3 Class A2
8.500% 4/1/07................................................................................. 3,500 3,934
Merrill Lynch Mortgage Investors Series 1995-C3
Class A3 7.088% 12/26/25...................................................................... 4,000 4,250
Merrill Lynch Trust Series 20 Class D 8.000% 12/20/18............................................ 2,441 2,490
Nomura Asset Securities Series 1996-MD5 Class A-1B
7.120% 4/13/36................................................................................ 3,000 3,229
Resolution Trust Series 1992-C5 Class C
8.850% 5/25/22................................................................................ 2,334 2,394
Structured Assets Securities
6.525% 2/25/28 Series 1996-CFL Class C........................................................ 3,684 3,684
Zero Coupon (Yield to Maturity 9.806%) 2/25/28
Series 1996-CFL Class X1-IO................................................................. 44,174 2,340
-------
32,284
NATURAL GAS & OIL (5.5%)
Gulf Canada Resources (Yankee Issue) 8.250% 3/15/17.............................................. 3,000 3,363
Newfield Exploration 7.450% 10/15/07 (a)......................................................... 1,500 1,526
Northwest Pipeline 6.625% 12/1/07................................................................ 6,000 6,196
PDVSA Finance Series 1998-1D 7.400% 8/15/16 (a).................................................. 2,500 2,497
Vastar Resources 6.000% 4/20/00.................................................................. 4,000 4,002
YPF Sociedad Anonima (Yankee Issues)
7.500% 10/26/02............................................................................... 3,756 3,840
7.250% 3/15/03................................................................................ 3,000 2,916
-------
24,340
REAL ESTATE INVESTMENT TRUSTS (4.6%)
Dynex Capital 7.875% 7/15/02..................................................................... 3,250 3,222
Federal Realty Investment Trust
6.625% 12/1/05................................................................................ 2,750 2,730
7.480% 8/15/26................................................................................ 3,500 3,661
Felcor Suites 7.375% 10/1/04 (a)................................................................. 3,000 2,923

SR&F Intermediate Bond Fund Portfolio CONTINUED
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
<S> <C> <C>
Meditrust 7.820% 9/10/26......................................................................... $ 4,200 $ 4,297
Susa Partnership 7.125% 11/1/03.................................................................. 3,250 3,336
--------
20,169
RETAIL (4.1%)
Dayton Hudson 6.750% 1/1/28...................................................................... 3,000 3,031
Tommy Hilfiger USA 6.850% 6/1/08................................................................. 6,750 6,738
Price/Costco 7.125% 6/15/05...................................................................... 1,650 1,725
Rite Aid 7.625% 4/15/05.......................................................................... 6,000 6,405
--------
17,899
TELECOMMUNICATIONS (5.3%)
Cable & Wireless Communications (Yankee Issue)
6.625% 3/6/05................................................................................. 3,250 3,280
GTE Hawaiian Telephone Series A 7.000% 2/1/06.................................................... 5,500 5,738
PanAmSat 6.125% 1/15/05 (a)...................................................................... 9,000 8,887
WorldCom 9.375% 1/15/04.......................................................................... 5,000 5,251
--------
23,156
TRANSPORTATION (0.7%)
Federal Express Pass-Through Certificates
Series A1 7.530% 9/23/06...................................................................... 3,150 3,315

UTILITIES (5.3%)
National Power 7.125% 7/11/01.................................................................... 5,000 5,147
National Rural Utilities
6.000% 1/15/04................................................................................ 11,500 11,456
6.375% 10/15/04............................................................................... 2,500 2,535
Oglethorpe Power 6.974% 6/30/11.................................................................. 4,000 4,112
--------
23,250
--------
TOTAL LONG-TERM OBLIGATIONS
(Cost $408,225)............................................................................... 415,550
- ------------------------------------------------------------------------------------------------------------------------------------

NUMBER OF
EQUITY-RELATED SECURITIES (0.9%) SHARES
- ------------------------------------------------------------------------------------------------------------------------------------

PREFERRED STOCK (0.9%)
FINANCIAL (0.9%)
Pinto Totta International Finance $7.770 (gtd. by
Banco Pinto Totto Mayor) (a) (Cost $4,014).................................................... 4,000 4,161
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL INVESTMENTS (99.5%)
(Cost $430,684) (b)........................................................................... 438,156
OTHER ASSETS, LESS LIABILITIES (0.5%)............................................................ 2,009
--------
TOTAL NET ASSETS (100.0%)........................................................................ $440,165
========
</TABLE>

NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements of the Securities Act of 1933.
These securities generally are issued to qualified institutional buyers,
such as the Portfolio, and any resale by the Portfolio must be in an exempt
transaction, normally to other qualified institutional investors. At June
30, 1998, the aggregate value of the Portfolio's private placement
securities was $76,013 (aggregate cost $75,438) which represented 17.3
percent of net assets.
(b) At June 30, 1998, the cost of investments for federal income tax purposes
was $430,758. Net unrealized appreciation was $7,398, consisting of gross
unrealized appreciation of $9,914 and gross unrealized depreciation of
$2,516.
(c) The following futures contracts were open at June 30, 1998:

NUMBER OF CONTRACT UNREALIZED
TYPE POSITION CONTRACTS VALUE EXPIRATION LOSS
----------- ---------- ---------- ---------- ---------- ---------
10 YR T-Note Long 473 $53,848 9/98 $435

See accompanying Notes to Financial Statements.

<PAGE>

Stein Roe Advisor Intermediate Bond Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1998
(All amounts in thousands, except per-share amount)

ASSETS
Investment in SR&F Intermediate Bond Portfolio, at value..... $2,124
Cash......................................................... 15
Receivable for fund shares sold.............................. 5
Other assets................................................. 2
---------
Total assets.............................................. 2,146
---------
LIABILITIES
Payable to investment adviser ............................... 8
Dividends payable............................................ 5
Other liabilities............................................ 11
---------
Total liabilities......................................... 24
---------
Net assets................................................ $2,122
=========
ANALYSIS OF NET ASSETS
Paid-in capital.............................................. $2,117
Net unrealized appreciation on investments................... 9
Accumulated net realized losses on investments .............. (4)
---------
Net assets................................................ $2,122
=========
Shares outstanding (unlimited number authorized)............. 212
=========
Net asset value per share.................................... $10.01
=========

See accompanying Notes to Financial Statements.

<PAGE>

Stein Roe Advisor Intermediate Bond Fund
- --------------------------------------------------------------------------------
Statement of Operations
For the period ended June 30, 1998 (a)
(All amounts in thousands)
INVESTMENT INCOME
Interest allocated from SR&F Intermediate Bond Portfolio................ $ 22
-------
EXPENSES
Audit and legal fees.................................................... 11
Accounting fees......................................................... 10
Trustees' fees.......................................................... 3
SEC and state registration fees......................................... 2
Expenses allocated from SR&F Intermediate Bond Portfolio................ 1
Printing and postage.................................................... 1
Transfer agent fees..................................................... 1
12b-1 distribution and service fees..................................... 1
Other................................................................... 2
-------
Total expenses....................................................... 32
Reimbursement of expenses by investment adviser......................... (29)
-------
Net expenses......................................................... 3
-------
Net investment income................................................ 19
-------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized losses on investments and futures transactions allocated
from SR&F Intermediate Bond Portfolio................................ (4)
Change in unrealized appreciation or depreciation on investments........ 9
-------
Net gains on investments............................................. 5
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ 24
=======

(a) From commencement of operations on February 4, 1998.

See accompanying Notes to Financial Statements.

<PAGE>

Stein Roe Advisor Intermediate Bond Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets For the period ended June 30, 1998 (a) (All
amounts in thousands)

OPERATIONS
Net investment income................................................. $ 19
Net realized losses on investments.................................... (4)
Net change in unrealized appreciation or depreciation on investments.. 9
--------
Net increase in net assets resulting from operations............... 24
--------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.............................. (19)
--------
SHARE TRANSACTIONS
Subscriptions to fund shares.......................................... 2,200
Value of distributions reinvested..................................... 3
Redemptions of fund shares............................................ (86)
--------
Net increase from share transactions............................... 2,117
--------
Net increase in net assets......................................... 2,122

TOTAL NET ASSETS
Beginning of period................................................... --
--------
End of period......................................................... $ 2,122
========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ......................................... 220
Issued in reinvestment of distributions............................... 1
Redemptions of fund shares............................................ (9)
--------
Net increase in fund shares........................................ 212
Shares outstanding at beginning of period............................. --
--------
Shares outstanding at end of period................................... 212
========

(a) From commencement of operations on February 4, 1998.

See accompanying Notes to Financial Statements.

<PAGE>

SR&F Intermediate Bond Portfolio
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
June 30, 1998
(All amounts in thousands)

ASSETS
Investments, at market value (cost $430,684)................... $438,156
Accrued interest receivable.................................... 8,063
Receivable for investments sold................................ 2,501
Other assets................................................... 29
------------
Total assets................................................ 448,749
------------
LIABILITIES
Cash overdraft................................................. 8,345
Payable to investment adviser.................................. 137
Variation margin payable on futures............................ 89
Other liabilities.............................................. 13
------------
Total liabilities........................................... 8,584
------------
Net assets applicable to investors' beneficial interest..... $440,165
============

See accompanying Notes to Financial Statements.

<PAGE>

SR&F Intermediate Bond Portfolio
- --------------------------------------------------------------------------------

Statement of Operations
For the period ended June 30, 1998 (a)
(All amounts in thousands)
INVESTMENT INCOME
Interest income....................................................... $12,185
-------
EXPENSES
Management fees....................................................... 596
Audit and legal fees.................................................. 16
Accounting fees....................................................... 14
Trustees' fees........................................................ 9
Other................................................................. 28
-------
Total expenses..................................................... 663
-------
Net investment income.............................................. 11,522
-------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investments..................................... 976
Net realized gains on futures transactions............................ 77
Net change in unrealized appreciation or depreciation on investments.. (623)
-------
Net gains on investments .......................................... 430
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $11,952
=======

(a) From commencement of operations on February 2, 1998.

See accompanying Notes to Financial Statements.

<PAGE>

SR&F Intermediate Bond Portfolio
- --------------------------------------------------------------------------------

Statement of Changes in Net Assets For the period ended June 30, 1998 (a) (All
amounts in thousands)

OPERATIONS
Net investment income................................................. $ 11,522
Net realized gains on investments..................................... 1,053
Net change in unrealized appreciation or depreciation on investments.. (623)
---------
Net increase in net assets resulting from operations............... 11,952
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions......................................................... 461,444
Withdrawals........................................................... (33,231)
---------
Net increase from transactions in investors' beneficial interest... 428,213
---------
Net increase in net assets......................................... 440,165

TOTAL NET ASSETS
Beginning of period................................................... --
---------
End of period......................................................... $ 440,165
=========

(a) From commencement of operations on February 2, 1998.

See accompanying Notes to Financial Statements.

<PAGE>

Notes to Financial Statements
- --------------------------------------------------------------------------------
(All amounts in thousands)

Note 1. Organization

Stein Roe Advisor Intermediate Bond Fund (the "Fund") is a series of Stein Roe
Advisor Trust (the "Trust"), an open-end management investment company organized
as a Massachusetts business trust. The Fund invests substantially all of its
assets in SR&F Intermediate Bond Portfolio (the "Portfolio"), which seeks high
current income consistent with capital preservation by investing primarily in a
diversified portfolio of marketable debt securities with an expected average
life between three and 10 years.

The Portfolio is a series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolio commenced operations on February 2, 1998. At commencement,
Stein Roe Intermediate Bond Fund contributed $427,315 in securities and other
assets in exchange for beneficial ownership of the Portfolio. At February 4,
1998, Stein Roe Advisor Intermediate Bond Fund contributed $100 in securities
and other assets. The Portfolio allocates income, expenses, realized and
unrealized gains and losses to each investor on a daily basis, based on their
respective percentage of ownership. At June 30, 1998, Stein Roe Intermediate
Bond Fund and Stein Roe Advisor Intermediate Bond Fund owned 99.5 percent and
0.5 percent, respectively, of the Portfolio.

Note 2. Significant Accounting Policies

The following summarizes the significant accounting policies of the Fund and
Portfolio. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Investment Transactions and Investment Income

Investment transactions are accounted for on trade date. Interest income,
including discount accretion and premium amortization, is recorded daily on the
accrual basis. Realized gains or losses from investment transactions are
reported on an identified cost basis.

Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. The values of such
securities are subject to market fluctuations during this period. There were no
when-issued or delayed delivery purchase commitments as of June 30, 1998.

Investment Valuations

All securities are valued as of June 30, 1998. Long-term debt securities are
valued using market quotations if readily available at the time of valuation. If
market quotations are not readily available, they are valued at a fair value
using a procedure determined in good faith by the Board of Trustees, which has
authorized the use of market valuations provided by a pricing service.
Short-term debt securities with remaining maturities of 60 days or less are
valued at their amortized cost. Those with remaining maturities of more than 60
days for which market quotations are not readily available are valued by use of
a matrix, prepared by the Adviser, based on quotations for comparable
securities. Other securities and assets are valued at fair value as determined
in good faith by or under the direction of the Board of Trustees.

Futures Contracts

During the period ended June 30, 1998, the Portfolio entered into U.S. Treasury
security futures contracts to either hedge against expected declines of its
portfolio securities or as a temporary substitute for the purchase of individual
bonds. Risks of entering into futures contracts include the possibility that
there may be an illiquid market at the time the Portfolio seeks to close out a
contract, and changes in the value of the futures contract may not correlate
with changes in the value of the portfolio securities being hedged.

Upon entering into a futures contract, the Portfolio deposits with its
custodian cash or securities in an amount sufficient to meet the initial margin
requirements. Subsequent payments are made or received by the Portfolio equal to
the daily change in the contract value and are recorded as unrealized gains or
losses. The Portfolio recognizes a realized gain or loss when the contract is
closed or expires. See the Portfolio's schedule of investments for a summary of
open futures contracts at June 30, 1998.

<PAGE>

Notes to Financial Statements CONTINUED
- --------------------------------------------------------------------------------

Federal Income Taxes

No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and makes distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on their respective percentages of ownership.

Distributions to Shareholders

Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Dividends are
determined in accordance with income tax principles, which may treat certain
transactions differently than generally accepted accounting principles.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax earnings are
reclassified to paid-in capital.

Note 3. Trustees' Fees and Transactions with Affiliates

The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to Stein Roe & Farnham Incorporated (the "Adviser"), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its
services as investment adviser and manager.

The management fee for the Portfolio is computed at an annual rate of .35 of
1 percent of average daily net assets. The administrative fee for the Fund is
computed at an annual rate of .15 of 1 percent of average daily net assets.

The Adviser also provides fund accounting services.

The Adviser has agreed to reimburse the Fund to the extent that expenses
exceed 1.00 percent of average annual net assets. This expense limitation
expires on January 31, 1999, subject to earlier termination by the Adviser on 30
days notice.

Shares of the Fund are distributed by Liberty Funds Distributor, Inc. (the
"Distributor"), an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company. The trustees of the Trust have adopted a plan of distribution
and service pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Plan"). The Plan provides that, as compensation for services and/or
distribution, the Distributor receives from the Fund a fee at an annual rate not
to exceed 0.25 percent of average daily net assets.

Transfer agent fees are paid to Colonial Investor Services Inc. (CISC),
an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company.

Certain officers and trustees of the Trust are also officers of the Adviser. No
remuneration was paid to any other trustee or officer of the Trust.

Note 4. Short-Term Debt

To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings by either the Fund or the Portfolio during the period ended
June 30, 1998.

Note 5. Investment Transactions

The Portfolio's aggregate cost of purchases and proceeds from sales or
maturities of securities, excluding short-term obligations, for the period ended
June 30, 1998, were $364,428 and $346,687, respectively.

<PAGE>

Financial Highlights
- --------------------------------------------------------------------------------

Stein Roe Advisor Intermediate Bond Fund

Selected per-share data (for a share outstanding throughout the period), ratios
and supplemental data.

PERIOD
ENDED
JUNE 30,
1998 (A)
------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................... 0.24
Net realized and unrealized gain ........................ 0.01
-----------
Total from investment operations....................... 0.25
-----------

DISTRIBUTIONS
Net investment income.................................... (0.24)
-----------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.01
============

Ratio of net expenses to average net assets (b)............. 1.00%(d)
Ratio of net investment income to average net assets (c).... 6.06%(d)
Total return (c)............................................ 2.52%
Net assets, end of period (000's)........................... $ 2,122

(a) From commencement of operations on February 4, 1998.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this ratio would have been 10.50% for the period ended June
30, 1998.
(c) Computed giving effect to Adviser's expense limitation undertaking. (d)
Annualized

<PAGE>

Financial Highlights CONTINUED
- --------------------------------------------------------------------------------

SR&F Intermediate Bond Portfolio

PERIOD
ENDED
JUNE 30,
1998 (A)
------------
SELECTED RATIOS
Ratio of net expenses to average net assets................ 0.39%(b)
Ratio of net investment income to average net assets....... 6.77%(b)
Portfolio turnover rate.................................... 86%

(a) From commencement of operations on February 2, 1998.
(b) Annualized

<PAGE>

Report of Independent Auditors
- --------------------------------------------------------------------------------

To the Board of Trustees of the Stein Roe Advisor Trust and the SR&F Base Trust

We have audited the accompanying statement of assets and liabilities of Stein
Roe Advisor Intermediate Bond Fund as of June 30, 1998 and the related statement
of operations, statement of changes in net assets and financial highlights for
the period February 4, 1998 to June 30, 1998. We have also audited the
accompanying statement of assets and liabilities, including the portfolio of
investments, of SR&F Intermediate Bond Portfolio as of June 30, 1998 and the
related statement of operations, statement of changes in net assets and
financial highlights for the period February 2, 1998 to June 30, 1998. These
financial statements and financial highlights are the responsibility of the
Fund's and Portfolio's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian and brokers. 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 audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
Stein Roe Advisor Intermediate Bond Fund and SR&F Intermediate Bond Portfolio at
June 30, 1998, and the results of their operations, the changes in their net
assets, and their financial highlights for the periods referred to above, in
conformity with generally accepted accounting principles.

Signature of Ernst & Young LLP

Chicago, Illinois
August 14, 1998

<PAGE>

Stein Roe Advisor Trust
- --------------------------------------------------------------------------------

Trustees
Thomas W. Butch
President, Mutual Fund Division and Director,
Stein Roe & Farnham Incorporated
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial
Officer, United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General
Counsel, Sara Lee Corporation
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners

Officers
Thomas W. Butch, President
William D. Andrews, Executive Vice President
Loren A. Hansen, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief Financial Officer
David P. Brady, Vice President
Kevin M. Carome, Vice President, Assistant Secretary
Daniel K. Cantor, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Harvey B. Hirschhorn, Vice President
Michael T. Kennedy, Vice President
Stephen F. Lockman, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
M. Jane McCart, Vice President
John S. McLandsborough, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Richard B. Peterson, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Heidi J. Walter, Vice President, Secretary
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant Treasurer
Janet B. Rysz, Assistant Secretary

Agents and Advisers
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
Colonial Investors Service Center, Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors

<PAGE>

Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com

Liberty Funds Distributor, Inc.