Stein Roe Advisor Funds
Annual Report
Sept. 30, 1998
Photo of: hands holding small tree
Stein Roe Advisor Funds
Growth Funds
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
LOGO:
Stein Roe Mutual Funds
Sensible Risks. Intelligent Investments. (sm)
<PAGE>
Contents
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Fund Performance.......................................................... 1
How the Stein Roe Advisor growth
funds have done over time
Q&A
Interviews with the portfolio managers and
summaries of investment activity
Stein Roe Advisor Special Fund............................................ 3
Stein Roe Advisor Special Venture Fund.................................... 5
Portfolios of Investments................................................. 7
Complete lists of investments with market values
Financial Statements...................................................... 12
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements............................................. 18
Financial Highlights...................................................... 21
Selected per-share data
Report of Independent
Public Accountants...................................................... 23
Must be preceded or accompanied by a prospectus.
<PAGE>
Fund Performance
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There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
<TABLE>
Average Annual Total Returns
Periods ended Sept. 30, 1998
- ------------------------------------------------------------------------------------------------
<CAPTION>
Past 1 Past 3 Past 5 Past 10
Year Years Years Years
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stein Roe Advisor Special Fund -18.70% 8.42% 8.19% 13.12%
S&P 500 9.08 22.61 19.91 17.27
S&P MidCap 400 -6.07 14.21 13.74 16.71
<CAPTION>
Past 1 Past 3 Life
Year Years of Fund(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stein Roe Advisor Special Venture Fund -32.19% 2.69% 8.32%
Russell 2000 -19.02 6.86 11.13
</TABLE>
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have a gain or loss when you sell shares. The
Adviser currently limits annual expenses to 1.45% and 1.50% of average daily net
assets, respectively, of the Stein Roe Advisor Special Fund and the Stein Roe
Advisor Special Venture Fund; absent these limits, total returns would be less.
Historical performance for Class K shares for the period prior to Feb. 14, 1997,
is based on the performance of SR&F Special Portfolio and SR&F Special Venture
Portfolio, respectively, restated to reflect the 12b-1 fees and any other
expenses applicable to that class, without giving effect to any fee waivers and
assuming reinvestment of dividends and capital gains. Total return performance
includes changes in share price and reinvestment of income and capital gains
distributions. The S&P 500, the S&P MidCap and the Russell 2000 are unmanaged
groups of stocks that differ from the composition of any Stein Roe fund; they
are not available for direct investment.
(1) Performance Inception Date: Advisor Special Venture Fund -- Oct. 17, 1994.
Because index returns are calculated on a monthly basis, the index returns
marked "Life of Fund" are calculated from the month-end results that fell
closest to the Fund's inception date.
<PAGE>
Investment Comparison
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Comparison of change in value of a $10,000 investment.
- --------------------------------------------------------------------------------
Stein Roe Advisor Special Fund
S&P 500 Advisor Special Fund S&P MidCap 400
9/30/88 10000 10000 10000
9/30/89 13295 13966 13729
9/30/90 12067 12708 11749
9/30/91 15819 16755 17658
9/30/92 17565 18210 19858
9/30/93 19843 23132 24630
9/30/94 20573 23541 25025
9/30/95 26685 26912 31475
9/30/96 32108 31646 35881
9/30/97 45087 42185 49913
9/30/98 49182 34297 46765
Stein Roe Advisor Special Venture Fund
Advisor Special Fund Russell 2000
10/17/94 10000 10000
3/31/95 11051 10804
9/30/95 12666 12399
3/31/96 14321 14036
9/30/96 16653 16343
3/31/97 15717 15436
9/30/97 20227 19893
3/31/98 19991 15436
9/30/98 13716 19893
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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. These
graphs compare the performance of the Stein Roe funds to the S&P 500, the S&P
400 and the Russell 2000, each an unmanaged group of stocks that differs from
the composition of any Stein Roe fund; they are not available for direct
investment. The Adviser currently limits annual expenses to 1.45% and 1.50% of
average daily net assets, respectively, of the Stein Roe Advisor Special Fund
and the Stein Roe Advisor Special Venture Fund; absent these limits, total
returns would be less. Historical performance for Class K shares for the period
prior to Feb. 14, 1997, is based on the performance of SR&F Special Portfolio
and SR&F Special Venture Portfolio, respectively, restated to reflect the 12b-1
fees and any other expenses applicable to that class, without giving effect to
any fee waivers and assuming reinvestment of dividends and capital gains. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
<PAGE>
Q&A
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An Interview with Gerry Sandel, Portfolio Manager of Advisor Special Fund
and SR&F Special Portfolio
Fund Data
Investment Objective:
Seeks to achieve capital appreciation by investing primarily in a diversified
portfolio of equity 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.
Q: How did the Fund perform?
A: The Fund performed poorly for the fiscal year ended Sept. 30, 1998, returning
- -18.70 percent compared to the midcap peer group return of -11.32 percent.
Q: What affected performance?
A: The market for value stocks -- or stocks priced low compared to their growth
potential -- was unfavorable. When markets are uncertain, investors have a
tendency to back away from companies exhibiting any sort of problem, which is a
typical characteristic of value stocks.
This situation enhanced underperformance.
Q: What sectors hurt performance?
A: Although stocks in many sectors lost value, our energy holdings declined the
most due to reduced oil prices. We also held companies that are sensitive to
economic activity such as chemical producers or distributors of capital goods
and these stocks declined when the market corrected. Additionally, any company
that wasn't completely problem-free declined in value. For example, Columbia/HCA
Healthcare (0.5 percent of total net assets) lost value in the fourth quarter of
the fiscal year, during the market sell off, not because of exposure to Asia or
economic conditions, but because of some minor operations issues.
Q: When will value stocks rebound?
A: We believe value stocks are going to trade at current depressed levels until
the market turns around. With lower interest rates we believe investors'
perceptions of the market may stabilize and become more positive. If this
occurs, midcap value stocks should gain the favor of investors looking for
growth at attractive valuations.
Q: How did you reposition the portfolio this year?
A: When the market was up early in the year, we sold some of our holdings,
including Boston Scientific and Cardinal Healthcare, at prices higher than our
purchase price. When the market declined in August, the type of companies we
like to purchase -- solid companies priced at low valuation levels -- expanded
dramatically, so we added about 12 new stocks to the portfolio. Since we usually
buy what others are selling, the recent market correction provided us with some
great buying opportunities.
For example, we purchased Andrew Corp. (1.7 percent of total net assets),
an antenna maker benefiting from the growth in wireless communications. Growth
investors sold-off the company during the unsteady market. However, we believe
global growth in this industry is firm; the company has high return on equity,
low debt and a dominant market position. Another company we purchased is Crown
Cork & Seal (0.7 percent of total net assets), one of the largest makers of cans
and bottles. This strong global business also was sold off and now is
attractively priced. Six months ago we would not have been able to purchase such
high quality names.
Q: What stocks helped the portfolio during the recent period of volatility?
A: We bought Barrick Gold (1.2 percent of total net assets) earlier in the year
after gold prices experienced a steep decline. This company and other precious
metals holdings supported performance with favorable earnings prospects in an
environment where most other companies are suffering from reduced earnings.
Q: Are there any sectors you favor going forward?
A: Chemical companies lost a lot of their value during the year in response to
slowing economic activity. The prices on these stocks are so low that they are
trading at levels below what they were during the last recession. We believe
that companies in this sector will rebound and deliver strong price increases.
<PAGE>
Q: What is your outlook?
A: This Fund's performance should react to changes in the economy. Value stocks
are often economically sensitive companies, so performance may continue to
suffer if the market continues to be volatile. However, when the market rebounds
our holdings may recover stronger than non-economically sensitive stocks. If
interest rates continue to move lower, we believe this will stimulate stronger
economic growth and investors will look to invest in companies with good growth
potential and low valuations to make the most of a strong rebound. If this
happens, we believe the Fund's performance will benefit.
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. Holdings are disclosed as a percentage of the SR&F Special Portfolio's
total net assets. Portfolio holdings are as of Sept. 30, 1998, and are subject
to change. The Adviser currently limits annual expenses to 1.45% of average
daily net assets; absent this limit, total returns would be less. Historical
performance for Class K shares for the period prior to Feb. 14, 1997, is based
on the performance of SR&F Special Portfolio restated to reflect 12b-1 fees and
any other expenses applicable to that class, without giving effect to fee
waivers and assuming reinvestment of dividends and capital gains. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The S&P 500 and the S&P 400 are unmanaged groups of
stocks that differ from the composition of each Stein Roe fund; they are not
available for direct investment. According to Lipper Analytical Services, Inc.,
a monitor of mutual fund performance, the median returns for the Fund's midcap
fund peer group for the one-, five- and 10-year periods were -11.32 percent,
10.42 percent and 13.41 percent, respectively.
<PAGE>
Q&A
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An Interview with Dick Peterson and John McLandsborough, Portfolio Managers for
Advisor Special Venture Fund and SR&F Special Venture Portfolio
Fund Data
Investment Objective:
Seeks to achieve long-term capital appreciation with a diversified portfolio
that invests in entrepreneurially managed companies. The portfolio emphasizes
investments in financially strong small- and medium-sized companies based
principally on management appraisal and stock valuation. Funds that emphasize
investments in smaller companies may experience greater volatility.
Effective Oct. 7, 1998, the portfolio managers of Stein Roe Advisor Special
Venture Fund and SR&F Special Venture Portfolio are James P. Haynie and
Michael E. Rega.
Sales of Advisor Special Venture Fund were suspended as of Nov. 5, 1998, and the
Fund will be liquidated by Dec. 7, 1998. The Fund's small asset size and current
market conditions prompted this move. For more information, see note #6 in the
Notes to Financial Statement Section on page 20.
Q: How did the Fund perform?
A: The Fund had a total return of -32.19 percent for the year ended Sept. 30,
1998, underperforming the Lipper small-cap fund peer group return of -21.01
percent.
Q: What happened in the small-cap market this year?
A: Negative influences from international currency and economic crises plagued
the small-cap market. Investors fled higher-risk stocks in favor of more liquid
larger-cap stocks. During this uncharacteristically prolonged period where
large-cap stocks outperformed small- and midcap stocks, many small companies
suffered severely -- losing more than 70 percent of their value. We believe the
extent of these declines was extreme, as companies were negative recipients of
the flight to quality by many investors.
Q: What caused the Fund to underperform its peer group?
A: Our current concentration of under 50 stocks is less defensive than the broad
range of small-cap stocks many of our competitors hold. A concentrated strategy
should allow us to take greater advantage of market upswings, while it can have
the opposite affect in a down market.
Our underexposure to the utilities sector, given its defensive nature in a
down market, affected the Fund's performance relative to its peer group. The
Russell 2000, for example, has a five percent weighting in this sector, as do
many of the funds in the peer group. We held about one percent of the
portfolio's assets in utilities.
Q: What specific industries or holdings underperformed?
A: From an industry perspective, technology and energy holdings underperformed
the most due to their exposure to the global economic crisis. As oil prices
declined, energy companies lost value. Technology companies suffered from lack
of demand in Asian markets. For example, CMP Media (2.2 percent of total net
assets), a technology magazine publisher, lost advertising revenues as
technology companies restricted their advertising due to declining Asian demand
for their products.
Several of our other holdings, including Triarc and Black Box (3.3 percent
and 3.2 percent of total net assets, respectively), are sound businesses, but
suffered as investors favored larger-cap, higher-quality investments.
Q: Which holdings performed well?
A: Metro Networks (5.0 percent of total net assets), an information report
provider for television and radio stations, was a strong-performing holding for
the Fund throughout the year. Xomed Surgical Products (5.1 percent of total net
assets), a less-invasive surgical equipment manufacturer, also performed well.
Many of the stocks we had the greatest amount of confidence in have been the
best performers this year. These two companies were among the portfolio's
largest holdings.
Q: Did you sell any holdings?
A: We spend a lot of time researching the companies we own and we only buy
companies where we have confidence in the management, their business plans and
growth potential. Because of that, we don't sell stocks based solely on price
disappointments. However, we will sell a company when its business fundamentals
change, or if it fails or disappoints us in any other way. Unfortunately, we had
a few such situations this year. We sold two holdings that had deteriorating
fundamentals -- Paula Financial and Sola International.
<PAGE>
Q: Where did you make purchases?
A: We added positions in School Specialty and National Computer Systems (2.6
percent and 3.8 percent of total net assets), two companies that do business in
the education industry. We believe the education sector is healthy and will
continue to show demand regardless of market conditions.
Q: What's your outlook for the small-cap market?
A: Small-cap stocks are now exhibiting their lowest-valuations and their highest
relative earnings-per-share growth potential that we've seen in 20 years. This
indicates that the small-cap market has the potential to outperform other asset
classes if equity markets rebound. In addition, small-cap stocks are projected
to achieve earnings growth of 10 percent in the next two quarters, compared with
three to five percent for the large-cap S&P 500 Index. However, it appears that
investors who have been weary of smaller-cap names for some time will need an
extended period of stability before moving away from the big-name stocks. On the
positive side, because large-cap stocks make up 80 to 85 percent of the equity
market, it won't take a lot of money coming into small-cap stocks to give the
group a boost. Another reason for our optimism is that the last two times the
Russell 2000 was down 30 percent -- in 1979 and in 1990 -- a strong rally
followed and we're hopeful this will happen again.
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. Holdings
are disclosed as a percentage of the SR&F Special Venture Portfolio's total net
assets. Portfolio holdings are as of Sept. 30, 1998, and are subject to change.
The Adviser currently limits annual expenses to 1.50% of average daily net
assets; absent this limit, total returns would be less. Historical performance
for Class K shares for the period prior to Feb. 14, 1997, is based on the
performance of SR&F Special Venture Portfolio restated to reflect 12b-1 fees and
any other expenses applicable to that class, without giving effect to fee
waivers and assuming reinvestment of dividends and capital gains. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. Life of Fund is from performance inception on Oct.
17, 1994; benchmark performance is from Oct. 31, 1994. The Russell 2000 Index is
an unmanaged group of stocks that differs from the composition of the Fund; it
is not available for direct investment. According to Lipper Analytical Services,
Inc., a monitor of mutual fund performance, the median returns for the Fund's
small-cap fund peer group for the one-year and Life of Fund periods were -21.01
percent and 11.25 percent, respectively. Funds that emphasize investments in
smaller companies may experience greater volatility.
<PAGE>
<TABLE>
<CAPTION>
SR&F Special Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at September 30, 1998
(Dollar amounts in thousands)
Number Market
Common Stocks (78.1%) of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advertising (0.9%)
Interpublic Group of Companies................................................................... 147,800 $ 7,972
Banks (2.5%)
Golden West Financial............................................................................ 227,900 18,645
Washington Mutual................................................................................ 122,600 4,138
-------
22,783
Broadcasting (0.5%)
Grupo Radio Centro ADRs.......................................................................... 185,000 1,179
Scandinavian Broadcasting System (a)............................................................. 181,600 3,859
-------
5,038
Business Services (3.0%)
Danka Business Systems ADRs...................................................................... 903,500 5,703
Interim Services (a)............................................................................. 550,000 11,309
Unitog........................................................................................... 514,950 10,814
-------
27,826
Chemicals (0.7%)
Wellman.......................................................................................... 500,000 6,375
Computer Services (0.9%)
Silicon Graphics (a)............................................................................. 870,000 8,156
Consumer-Related (2.0%)
Newell........................................................................................... 183,000 8,429
Saks (a)......................................................................................... 433,200 9,720
-------
18,149
Diversified Operations (0.1%)
Alexander & Baldwin.............................................................................. 25,800 513
Drugs (4.9%)
Novartis......................................................................................... 13,000 20,839
Perrigo (a)...................................................................................... 2,621,500 23,921
-------
44,760
Electrical Equipment (2.3%)
Littelfuse (a)................................................................................... 690,000 13,714
Littelfuse warrants (a).......................................................................... 547,200 7,592
-------
21,306
Electronics and Instrumentation (5.1%)
AVX.............................................................................................. 758,300 11,280
Kent Electronics (a)............................................................................. 511,000 5,110
Molex, class A................................................................................... 1,129,916 30,649
-------
47,039
Energy and Related Services (4.8%)
Cross Timbers Oil................................................................................ 1,766,225 26,604
Diamond Offshore Drilling........................................................................ 100,000 2,600
Ocean Energy (a)................................................................................. 5,300 70
Petroleum Geo-Services ADRs (a).................................................................. 647,400 10,277
R & B Falcon (a)................................................................................. 185,000 2,220
Tidewater........................................................................................ 100,000 2,075
-------
43,846
<PAGE>
<CAPTION>
SR&F Special Portfolio Continued
- ---------------------------------------------------------------------------------------------------------------------------------
Number Market
of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Services (1.9%)
American Express................................................................................. 97,700 $ 7,584
Household International.......................................................................... 270,000 10,125
-------
17,709
Health Services and Equipment (12.4%)
Acuson (a)....................................................................................... 1,206,700 20,589
Columbia/HCA Healthcare.......................................................................... 244,900 4,913
First Health Group (a)........................................................................... 712,200 17,271
Invacare......................................................................................... 1,228,650 28,873
Mallinckrodt..................................................................................... 340,000 6,906
STERIS (a)....................................................................................... 232,000 6,554
Stryker.......................................................................................... 392,100 13,331
Sybron International (a)......................................................................... 800,000 15,300
-------
113,737
Industrial Products (2.5%)
Carlisle Companies............................................................................... 595,200 23,176
Insurance Companies (6.2%)
National Mutual Asia Limited..................................................................... 19,014,000 9,263
Progressive Corp................................................................................. 198,200 22,347
20th Century Industries.......................................................................... 992,700 25,438
-------
57,048
Leisure and Entertainment (0.9%)
Carnival, class A................................................................................ 86,700 2,758
CBS.............................................................................................. 242,300 5,876
-------
8,634
Machinery - General Industry (2.4%)
Robbins & Myers.................................................................................. 139,300 2,951
Stewart & Stevenson Services..................................................................... 1,654,400 19,439
-------
22,390
Manufacturing - General Industry (0.5%)
Dexter Corp...................................................................................... 173,400 4,248
Metals (1.9%)
Barrick Gold..................................................................................... 550,000 11,000
Freeport-McMoran Copper & Gold................................................................... 400,000 4,750
Newmont Mining................................................................................... 51,400 1,247
-------
16,997
Mining and Agriculture (2.7%)
Cyprus Amax Minerals............................................................................. 895,000 11,859
Placer Dome...................................................................................... 947,300 13,085
-------
24,944
Motor Vehicles (3.0%)
Harley-Davidson.................................................................................. 400,700 11,771
Superior Industries International................................................................ 700,200 16,017
-------
27,788
Packaging (0.7%)
Crown Cork & Seal................................................................................ 250,000 6,688
Retail (3.1%)
Borders Group (a)................................................................................ 460,000 10,235
Consolidated Stores (a).......................................................................... 456,250 8,954
Zale Corp. (a)................................................................................... 347,500 8,905
-------
28,094
<PAGE>
<CAPTION>
SR&F Special Portfolio Continued
- ---------------------------------------------------------------------------------------------------------------------------------
Number Market
of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Security (2.1%)
Pittston Brink's Group........................................................................... 540,200 $ 18,907
Specialty Chemicals (3.9%)
Imperial Chemical Industries ADRs................................................................ 225,400 7,156
Minerals Technologies............................................................................ 250,500 11,038
OM Group......................................................................................... 609,500 17,180
------------
35,374
Technology Services (2.0%)
Seagate Technology (a)........................................................................... 735,800 18,441
Telecommunications (3.3%)
AirTouch Communications (a)...................................................................... 123,800 7,057
Andrew Corp. (a)................................................................................. 1,181,900 15,660
Telephone & Data Systems......................................................................... 224,000 7,812
------------
30,529
Textiles and Apparel (0.9%)
Unifi............................................................................................ 513,475 7,927
------------
Total Common Stocks (Cost $556,681).............................................................. 716,394
------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM OBLIGATIONS (19.6%) Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (19.6%)
Associates Corp. of North America 5.750% 10/1/98................................................. $ 39,850 39,850
Enron 5.720% 10/5/98............................................................................. 30,000 29,981
Sunstrand 5.900% 10/1/98......................................................................... 45,000 45,000
Texas Utilities 5.820% 10/1/98................................................................... 40,000 40,000
Union Carbide 5.650% 10/1/98..................................................................... 25,000 25,000
------------
Total Short-Term Obligations (Cost $179,831)..................................................... 179,831
------------
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments (97.7%)
(Cost $736,512) (b).............................................................................. 896,225
Other Assets, Less Liabilities (2.3%)............................................................ 20,926
------------
Total Net Assets (100.0%)........................................................................ $917,151
============
- ---------------------------------------------------------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At September 30, 1998, the cost of investments for federal income tax
purposes was $739,712. Net unrealized appreciation was $156,513, consisting of
gross unrealized appreciation of $222,272 and gross unrealized depreciation
of $65,759.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Special Venture Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at September 30, 1998
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (92.7%) of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Broadcast and Media (6.8%)
Central European Media Enterprises, class A (a).................................................. 224,600 $ 2,162
Metro Networks (a)............................................................................... 157,500 5,768
-------
7,930
Building Supplies (1.3%)
Fastenal ........................................................................................ 62,000 1,550
Business Services (6.5%)
Alternative Resources (a)........................................................................ 410,400 2,616
Interim Services (a)............................................................................. 123,000 2,529
Metamor Worldwide (a)............................................................................ 86,100 2,368
-------
7,513
Commercial Banks (1.7%)
National Bancorp of Alaska....................................................................... 61,000 1,998
Computer Services (12.7%)
Artesyn Technologies (a)......................................................................... 224,600 3,874
BARRA (a)........................................................................................ 121,200 2,485
National Computer Systems........................................................................ 151,400 4,466
SPSS (a)......................................................................................... 170,400 3,898
-------
14,723
Cosmetics (1.7%)
Nu Skin Enterprises, class A (a)................................................................. 177,900 1,957
Distribution (5.8%)
Henry Schein (a)................................................................................. 79,800 2,773
School Specialty (a)............................................................................. 194,000 2,983
U.S.A. Floral Products (a)....................................................................... 166,000 1,017
-------
6,773
Diversified Operations (5.6%)
Fisher Companies................................................................................. 38,700 2,641
Triarc Companies (a)............................................................................. 250,300 3,895
-------
6,536
Drugs (1.0%)
Ligand Pharmaceuticals, class B (a).............................................................. 128,700 1,174
Electrical Equipment (7.8%)
Ballantyne of Omaha (a).......................................................................... 522,450 4,278
Black Box (a).................................................................................... 153,500 3,723
Kent Electronics (a)............................................................................. 110,600 1,106
-------
9,107
Health Services and Equipment (10.5%)
BioSource International (a)...................................................................... 112,000 350
National Dentex (a).............................................................................. 108,200 1,948
Urologix (a)..................................................................................... 172,300 1,034
Uroquest Medical (a)............................................................................. 181,700 295
Xomed Surgical Products (a)...................................................................... 143,900 5,918
Young Innovations (a)............................................................................ 190,400 2,666
-------
12,211
Insurance (6.2%)
Meadowbrook Insurance Group...................................................................... 290,300 7,256
<PAGE>
<CAPTION>
SR&F Special Venture Portfolio Continued
- ---------------------------------------------------------------------------------------------------------------------------------
Number Market
of Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Marketing (2.9%)
Catalina Marketing (a)........................................................................... 73,000 $ 3,431
Oil and Gas (2.8%)
Meridian Resource Corp. (a)...................................................................... 497,900 2,147
Petroleum Geo-Services ADRs (a).................................................................. 70,000 1,111
------------
3,258
Publishing (3.4%)
CMP Media, class A (a)........................................................................... 237,900 2,557
IDG Books Worldwide, class A (a)................................................................. 88,200 970
Information Holdings (a)......................................................................... 39,900 424
------------
3,951
Real Estate Services (5.7%)
CB Richard Ellis Services (a).................................................................... 272,000 5,457
LaSalle Partners (a)............................................................................. 34,700 1,134
------------
6,591
Retail (7.0%)
Regis ........................................................................................... 161,700 5,094
Saks (a)......................................................................................... 93,000 2,087
Video Update, class A (a)........................................................................ 933,000 991
------------
8,172
Textile and Apparel (3.3%)
Columbia Sportswear (a).......................................................................... 232,200 3,805
------------
Total Common Stocks ($133,292)................................................................... 107,936
------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM OBLIGATIONS (8.3%) Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper (8.3%)
Associates Corp. of North America 5.750% 10/1/98................................................. $ 4,650 4,650
Conagra 5.670% 10/1/98........................................................................... 3,000 3,000
Rite Aid 5.880% 10/1/98.......................................................................... 2,000 2,000
------------
Total Short-Term Obligations (Cost $9,650)....................................................... 9,650
------------
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments (101.0%)
(Cost $142,942).................................................................................. 117,586
Other Assets, Less Liabilities (-1.0%)........................................................... (1,201)
------------
Total Net Assets (100.0%)........................................................................ $116,385
============
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At September 30, 1998, the cost of investments for federal income tax
purposes was $143,913. Net unrealized depreciation was $26,327 consisting of
gross unrealized appreciation of $10,004 and gross unrealized depreciation of
$36,331.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------
September 30, 1998
(All amounts in thousands, except per-share data)
<CAPTION>
Advisor
Advisor Special
Special Venture
Fund Fund
------ --------
<S> <C> <C>
Assets
Investment in Portfolio, at value ................................ $ 151 $ 83
Cash ............................................................. 46 49
Other assets ..................................................... 5 5
------ -----
Total assets .................................................. 202 137
------ -----
Liabilities
Payable to investment adviser .................................... 39 39
Payable to transfer agent ........................................ 2 1
Other liabilities ................................................ 18 17
------ -----
Total liabilities ............................................. 59 57
------ -----
Net assets .................................................... $ 143 $ 80
====== =====
Analysis of Net Assets
Paid-in capital .................................................. $ 516 $ 272
Net unrealized appreciation (depreciation) on investments ........ 147 (101)
Accumulated net realized losses on investments ................... (520) (91)
------ -----
Net assets .................................................... $ 143 $ 80
====== =====
Shares outstanding (unlimited number authorized) ................. 14 10
====== =====
Net asset value per share ........................................ $10.13 $8.00
====== =====
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the Year Ended September 30, 1998
(All amounts in thousands)
<CAPTION>
Advisor
Advisor Special
Special Venture
Fund Fund
----- -----
<S> <C> <C>
Investment Income
Dividends allocated from Portfolio .............................................. $ 5 $ 1
Interest allocated from Portfolio ............................................... 6 1
----- -----
Total investment income ...................................................... 11 2
----- -----
Expenses
Accounting fees ................................................................. 25 25
SEC and state registration fees ................................................. 19 19
Amortization of organization costs .............................................. 15 15
Audit and legal fees ............................................................ 10 10
Trustee's fees .................................................................. 7 7
Printing and postage ............................................................ 6 6
Expenses allocated from Portfolio ............................................... 6 3
Transfer agent fees ............................................................. 2 1
12b-1 distribution and service fees ............................................. 2 1
Administrative fees ............................................................. 1 1
Other ........................................................................... 1 --
----- -----
Total expenses ............................................................... 94 88
Reimbursement of expenses by investment adviser ................................. (83) (83)
----- -----
Net expenses ................................................................. 11 5
----- -----
Net investment loss .......................................................... -- (3)
----- -----
Realized and Unrealized Gains (Losses) on Investments
Net realized losses on investments allocated from Portfolio ..................... (515) (87)
Net realized losses on foreign currency transactions allocated from Portfolio ... (1) --
Net change in unrealized appreciation or depreciation on investments
and foreign currency translations ............................................ 116 (123)
----- -----
Net losses on investments .................................................... (400) (210)
----- -----
Net Decrease in Net Assets Resulting from Operations ............................ $(400) $(213)
===== =====
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Year Ended September 30, 1998 and the Period Ended September 30, 1997
(All amounts in thousands)
<CAPTION>
Advisor Special
Advisor Special Fund Venture Fund
1998 1997 (a) 1998 1997 (a)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operations
Net investment loss .................................................... $ -- $ -- $ (3) $ --
Net realized losses on investments ..................................... (516) (6) (87) (4)
Net change in unrealized appreciation or depreciation on investments ... 116 31 (123) 22
------- ------- ------- -------
Net increase (decrease) in net assets resulting from operations ..... (400) 25 (213) 18
------- ------- ------- -------
Share Transactions
Subscriptions to fund shares ........................................... 2,443 100 776 100
Redemptions of fund shares ............................................. (2,025) -- (601) --
------- ------- ------- -------
Net increase from share transactions ................................ 418 100 175 100
------- ------- ------- -------
Net increase (decrease) in net assets ............................... 18 125 (38) 118
Total Net Assets
Beginning of period .................................................... 125 -- 118 --
------- ------- ------- -------
End of period .......................................................... $ 143 $ 125 $ 80 $ 118
======= ======= ======= =======
Undistributed Net Investment Income .................................... $ -- $ -- $ -- $ --
======= ======= ======= =======
Analysis of Changes in Shares of Beneficial Interest
Subscriptions to fund shares ........................................... 204 10 73 10
Redemptions of fund shares ............................................. (200) -- (73) --
------- ------- ------- -------
Net increase in fund shares ......................................... 4 10 -- 10
Shares outstanding at beginning of period .............................. 10 -- 10 --
------- ------- ------- -------
Shares outstanding at end of period .................................... 14 10 10 10
======= ======= ======= =======
(a) From commencement of operations on February 14, 1997.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 1998
(All amounts in thousands)
<CAPTION>
SR&F
SR&F Special
Special Venture
Portfolio Portfolio
-------- --------
<S> <C> <C>
Assets
Investments, at market value (cost of $736,512 and $142,942, respectively) ......... $896,225 $117,586
Receivable for investments sold .................................................... 24,754 491
Dividends receivable ............................................................... 751 19
Cash ............................................................................... 3 49
Other assets ....................................................................... -- 10
-------- --------
Total assets .................................................................... 921,733 118,155
-------- --------
Liabilities
Payable for investments purchased .................................................. 3,889 1,618
Payable to investment adviser ...................................................... 558 76
Other liabilities .................................................................. 135 76
-------- --------
Total liabilities ............................................................... 4,582 1,770
-------- --------
Net assets applicable to investors' beneficial interest ......................... $917,151 $116,385
======== ========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the Year Ended September 30, 1998
(All amounts in thousands)
<CAPTION>
SR&F
SR&F Special
Special Venture
Portfolio Portfolio
--------- ---------
<S> <C> <C>
Investment Income
Dividends ....................................................................... $ 7,439 $ 814
Interest ........................................................................ 9,120 779
--------- ---------
16,559 1,593
Foreign taxes withheld .......................................................... (73) --
--------- ---------
Total investment income ...................................................... 16,486 1,593
--------- ---------
Expenses
Management fees ................................................................. 8,772 1,533
Accounting fees ................................................................. 55 29
Trustees' fees .................................................................. 34 14
Audit and legal fees ............................................................ 18 18
Custodian fees .................................................................. 30 2
Other ........................................................................... 153 79
--------- ---------
Total expenses ............................................................... 9,062 1,675
--------- ---------
Net investment income (loss) ................................................. 7,424 (82)
--------- ---------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains on investments ............................................... 212,838 823
Net realized losses on foreign currency transactions ............................ (1,539) --
Net change in unrealized appreciation or depreciation on investments
and foreign currency translations ............................................ (441,553) (67,684)
--------- ---------
Net losses on investments and foreign currency transactions .................. (230,254) (66,861)
--------- ---------
Net Decrease in Net Assets Resulting from Operations ............................ $(222,830) $ (66,943)
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Year Ended September 30, 1998 and
the Period Ended September 30, 1997
(All amounts in thousands)
<CAPTION>
SR&F Special
SR&F Special Portfolio Venture Fund
1998 1997 (a) 1998 1997 (a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ........................................... $ 7,424 $ 2,236 $ (82) $ 387
Net realized gains on investments and foreign currency transactions .... 211,299 92,652 823 7,866
Net change in unrealized appreciation or depreciation on investments
and foreign currency translations ................................... (441,553) 190,726 (67,684) 27,038
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations ..... (222,830) 285,614 (66,943) 35,291
----------- ----------- ----------- -----------
Transactions in Investors' Beneficial Interest
Contributions .......................................................... 60,926 1,189,884 25,934 218,483
Withdrawals ............................................................ (249,583) (146,860) (78,647) (17,733)
----------- ----------- ----------- -----------
Net increase (decrease) from transactions in
investors' beneficial interest .................................. (188,657) 1,043,024 (52,713) 200,750
----------- ----------- ----------- -----------
Net increase (decrease) in net assets ............................... (411,487) 1,328,638 (119,656) 236,041
Total Net Assets
Beginning of period .................................................... 1,328,638 -- 236,041 --
----------- ----------- ----------- -----------
End of period .......................................................... $ 917,151 $ 1,328,638 $ 116,385 $ 236,041
=========== =========== =========== ===========
(a) From commencement of operations on February 3, 1997.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Stein Roe Advisor Special Fund and Stein Roe Advisor Special Venture Fund (the
"Funds") are series of Stein Roe Advisor Trust (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust.
Advisor Special Fund and Advisor Special Venture Fund invest substantially all
of their assets in SR&F Special Portfolio and SR&F Special Venture Portfolio
(the "Portfolios"), respectively. SR&F Special Portfolio seeks capital
appreciation by investing primarily in equity securities that are considered to
have limited downside risk relative to their potential for above-average growth.
SR&F Special Venture Portfolio seeks to achieve long-term capital appreciation
by investing primarily in entrepreneurially managed companies.
The Portfolios are series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. The Portfolios commenced operations on February 3, 1997. At commencement,
Stein Roe Special Fund and Stein Roe Special Venture Fund contributed $1,096,779
and $160,940 in securities and other assets to SR&F Special Portfolio and SR&F
Special Venture Portfolio, respectively, in exchange for beneficial ownership of
those Portfolios. At February 14, 1997, Advisor Special Fund and Advisor Special
Venture Fund each contributed cash of $100 to their respective Portfolios. The
Portfolios allocate income, expenses, realized and unrealized gains and losses
to each investor on a daily basis, based on their respective percentage of
ownership. At September 30, 1998, Special Fund and Advisor Special Fund owned
99.98 percent and .02 percent, respectively, of SR&F Special Portfolio; and
Special Venture Fund and Advisor Special Venture Fund owned 99.93 percent and
.07 percent, respectively, of SR&F Special Venture Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Funds and
Portfolios. 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. Dividend income is
recorded on the ex-dividend date, and interest income is recorded on the
accrual basis. Interest income includes discount accretion on fixed income
securities. Realized gains and losses from investment transactions are reported
on an identified cost basis.
SECURITY VALUATIONS
All securities are valued as of September 30, 1998. Securities are
valued at, depending on the security involved, the last reported sales price,
last bid or asked price, or the mean between last bid and asked prices as of the
close of the appropriate exchange or other designated time. A security that is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary exchange for such security. Securities and
other assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees.
CURRENCY TRANSLATIONS
For purposes of valuation, assets and liabilities are translated into U.S.
dollars using currency exchange rates that represent the midpoint between the
bid and asked rates as of 4 p.m., London time. Purchases and sales of securities
are translated into U.S. dollars using the prevailing exchange rate on the dates
of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains and losses is reflected as a component of
such gains and losses.
FORWARD CURRENCY EXCHANGE
Contracts During the year ended September 30, 1998, SR&F Special
Portfolio entered into forward foreign currency exchange contracts under which
it was obligated to exchange currencies at specified rates on specified future
dates. Risks arise from the possible inability of counterparties to meet the
terms of their contracts and from movements in currency values. There were no
outstanding contracts at September 30, 1998.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Funds elect to be
taxed as "regulated investment companies" and make distributions to their
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolios are treated as partnerships for
federal income tax purposes and all of their income is allocated to their
owners based on their respective percentages of ownership.
<PAGE>
The Funds intend to utilize provisions of federal income tax law, which
allow them to carry a realized capital loss forward up to eight years following
the year of the loss, and offset such losses against any future realized gains.
At September 30, 1998, Advisor Special Fund had a capital loss carryforward of
$518, which expires in 2005 and 2006; Advisor Special Venture Fund had a capital
loss carryforward of $4 which expires in 2005.
DISTRIBUTIONS TO SHAREHOLDERS
Each Fund annually declares and pays dividends of any net investment income and
net realized capital gains. Shareholder distributions are recorded on the
ex-dividend date. Dividends are determined in accordance with income tax
principles, which may treat certain transactions differently from generally
accepted accounting principles. Distributions in excess of tax basis earnings
are reported in the financial statements as a return of capital. 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 Funds and Portfolios pay monthly management and administrative fees to Stein
Roe & Farnham Incorporated (the "Adviser"), an indirect, wholly-owned subsidiary
of Liberty Financial Companies, Inc. ("Liberty"), for its services as investment
adviser and manager. The management fee for SR&F Special Portfolio is computed
at an annual rate of .75 of 1 percent of average daily net assets up to $500
million, .70 of 1 percent of the next $500 million, .65 of 1 percent of the next
$500 million, and .60 of 1 percent thereafter. The management fee for SR&F
Special Venture Portfolio is computed at an annual rate of .75 of 1 percent of
average daily net assets. The administrative fee for Advisor Special Fund is
computed at an annual rate of .15 of 1 percent of average daily net assets up to
$500 million, .125 of 1 percent of the next $500 million, .10 of 1 percent of
the next $500 million, and .075 of 1 percent thereafter. The administrative fee
for Advisor Special Venture Fund is computed at an annual rate of .15 of 1
percent of average daily net assets.
The Adviser also provides fund accounting services. For the year ended
September 30, 1998, Advisor Special Fund, Advisor Special Venture Fund, SR&F
Special Portfolio and SR&F Special Venture Portfolio incurred charges of $25,
$25, $55, and $29, respectively.
The Adviser has agreed to reimburse Advisor Special Fund and Advisor Special
Venture Fund to the extent that annual expenses exceed 1.45 percent and 1.50
percent of average daily net assets, respectively. These expense limitations
expire on January 31, 2000, subject to earlier termination by the Adviser on 30
days notice.
Shares of the Funds are distributed by Liberty Funds Distributor, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of Liberty. 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
each Fund a fee at an annual rate not to exceed 0.25 percent of average daily
net assets.
Transfer agent fees are paid to Liberty Funds Services, Inc., an indirect,
wholly-owned subsidiary of Liberty. Prior to October 15, 1997, transfer agent
fees were paid to SteinRoe Services Inc., a direct, wholly-owned subsidiary of
Liberty.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Advisor Special
Fund, Advisor Special Venture Fund, SR&F Special Portfolio and SR&F Special
Venture Portfolio for the year ended September 30, 1998, was $7, $7, $34 and
$14, respectively. No remuneration was paid to any other trustee or officer of
the Trust.
NOTE 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Funds and Portfolios maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Funds nor the Portfolios had borrowings during the year ended September 30,
1998.
<PAGE>
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the year ended September 30, 1998, were:
PURCHASES SALES
SR&F Special Portfolio $487,478 $729,593
SR&F Special Venture Portfolio 171,391 211,542
NOTE 6. SUBSEQUENT EVENT
The Board of Trustees voted on November 3, 1998, to liquidate Advisor Special
Venture Fund. The Board directed that sales of fund shares be suspended as of
November 5, 1998, and that the Fund be liquidated on December 7, 1998, or sooner
if all shareholders have redeemed their interests in the Fund.
The Board's decision to liquidate the Fund was prompted by the Fund's
relatively small size and the belief that, under current conditions, the Fund
would not be likely to attract significant new assets in the near future. Funds
of nominal asset size generally tend to be inefficient for shareholders. Such
funds may have higher expense ratios and less investment flexibility and,
consequently, lower rates of return over the long term.
Adoption of the liquidation basis of accounting had no material affect on
the financial statements of Advisor Special Venture Fund as assets and
liabilities are already stated at fair value.
<PAGE>
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------
Advisor Special Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
Year Ended Period Ended
September 30, September 30,
1998 1997 (c)
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period............................................ $ 12.46 $ 10.00
--------- ---------
Income From Investment Operations
Net investment loss.......................................................... -- (0.03)
Net realized and unrealized gains (losses) on investments.................... (2.33) 2.49
--------- ---------
Net Asset Value, End of Period.................................................. $ 10.13 $ 12.46
========= =========
Ratio of net expenses to average net assets (a)................................. 1.45% 1.45% (d)
Ratio of net investment loss to average net assets (b).......................... -- (0.46%) (d)
Total return (b)................................................................ (18.70%) 24.60%
Net assets, end of period (000's)............................................... $ 143 $ 125
(a) If the Fund had paid all of its expenses and there had been no reimbursement
of expenses by the investment adviser, this ratio would have been 12.56 percent
for the year ended September 30, 1998, and 86.39 percent for the period ended
September 30, 1997.
(b) Computed giving effect to the investment adviser's expense limitation undertaking.
(c) From commencement of operations on February 14, 1997.
(d) Annualized
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
SR&F Special Portfolio
<CAPTION>
Year Ended Period Ended
September 30, September 30,
1998 1997 (a)
-------------- ------------
<S> <C> <C>
Ratio of net expenses to average net assets .................................... 0.73% 0.75% (b)
Ratio of net investment income to average net assets............................ 0.60% 0.31% (b)
Portfolio turnover rate......................................................... 46% 8%
(a) From commencement of operations on February 3, 1997.
(b) Annualized
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
- --------------------------------------------------------------------------------
Advisor Special Venture Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
Year Ended Period Ended
September 30, September 30,
1998 1997 (c)
--------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period............................................. $ 11.84 $ 10.00
--------- ---------
Income From Investment Operations
Net investment loss........................................................... (0.29) (0.03)
Net realized and unrealized gains (losses) on investments..................... (3.51) 1.87
--------- ---------
Total from investment operations (3.80) 1.84
--------- ---------
Distributions
Net investment income......................................................... (0.01) --
Net realized capital gains.................................................... (0.03) --
--------- ---------
Total distributions (0.04) --
--------- ---------
Net Asset Value, End of Period................................................... $ 8.00 $ 11.84
========= =========
Ratio of net expenses to average net assets (a).................................. 1.50% 1.50% (d)
Ratio of net investment loss to average net assets (b)........................... (0.82%) (0.42%)(d)
Total return (b)................................................................. (32.19%) 18.40%
Net assets, end of period (000's)................................................ $ 80 $ 118
(a) If the Fund had paid all of its expenses and there had been no reimbursement
of expenses by the investment adviser, this ratio would have been 24.69 percent
for the year ended September 30, 1998, and 88.96 percent for the period ended
September 30, 1997.
(b) Computed giving effect to the investment adviser's expense
limitation undertaking.
(c) From commencement of operations on February 14, 1997.
(d) Annualized
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
SR&F Special Venture Portfolio
<CAPTION>
Year Ended Period Ended
September 30, September 30,
1998 1997 (a)
-------------------------------
<S> <C> <C>
Ratio of net expenses to average net assets .................................... 0.82% 0.82% (a)
Ratio of net investment income to average net assets............................ (0.04%) 0.31% (a)
Portfolio turnover rate......................................................... 91% 58%
(a) From commencement of operations on February 3, 1997.
(b) Annualized
</TABLE>
<PAGE>
To the Board of Trustees and Shareholders of:
Stein Roe Advisor Trust
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
SR&F Base Trust
SR&F Special Portfolio
SR&F Special Venture Portfolio
We have audited the accompanying statements of assets and liabilities of Stein
Roe Advisor Special Fund and Stein Roe Advisor Special Venture Fund (in the
process of liquidation; see Note 6) and the accompanying statements of assets
and liabilities, including the portfolio of investments, of SR&F Special
Portfolio and SR&F Special Venture Portfolio as of September 30, 1998, and the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated thereon. These financial statements and
financial highlights are the responsibility of the Funds' and Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures for the SR&F Special Portfolio and SR&F Special
Venture Portfolio included confirmation of securities owned as of September 30,
1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly
the financial position of the Stein Roe Advisor Special Fund, Stein Roe Advisor
Special Venture Fund, SR&F Special Portfolio and SR&F Special Venture Portfolio
as of September 30, 1998, the results of their operations, the changes in their
net assets and their financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 16, 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 Director, 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
Daniel K. Cantor, Vice President
Kevin M. Carome, Vice President,
Assistant Secretary
Erik P. Gustafson, Vice President
James P. Haynie, Vice President
Harvey B. Hirschhorn, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Arthur J. McQueen, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Gita R. Rao, Vice President
Michael E. Rega, Vice President
M. Gerard Sandel, Vice President
Gloria J. Santella, Vice President
Heidi J. Walter, Vice President, Secretary
Sharon R. Robertson, Controller
Janet B. Rysz, Assistant Secretary
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant Treasurer
AGENTS AND ADVISERS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Arthur Andersen LLP
Independent Public Accountants
<PAGE>
Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com
Liberty Funds Distributor, Inc. 11/98
