STEIN ROE ADVISOR FUNDS
SEMIANNUAL REPORT
MARCH 31, 1999
PHOTO OF: CORN IN FIELD
STEIN ROE ADVISOR FUNDS
GROWTH AND INCOME FUNDS
STEIN ROE ADVISOR GROWTH & INCOME FUND
logo
STEIN ROE MUTUAL FUNDS
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Sensible Risk. Intelligent Investments(R).
<PAGE>
CONTENTS
PERFORMANCE..................................................................1
How the Stein Roe Advisor Growth & Income Fund has done over time
QUESTIONS & ANSWERS
Interview with the portfolio manager and summary of investment activity......2
PORTFOLIO OF INVESTMENTS.....................................................4
A complete list of investments with market values
FINANCIAL STATEMENTS.........................................................7
Statements of assets and liabilities, operations and changes in net assets
NOTES TO FINANCIAL STATEMENTS...............................................13
FINANCIAL HIGHLIGHTS........................................................15
Selected per-share data
Must be accompanied or preceded by a prospectus.
<PAGE>
Fund Performance
There are several ways to evaluate a fund's historical performance. You can look
at the total percentage change in value, the average annual percentage change or
the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value). Six-Month Cumulative and Average Annual
Total Returns Periods ended March 31, 1999
Past 6 Past 1 Past 5 Past 10
Months Year Years Years
-------------------------------------
STEIN ROE ADVISOR GROWTH & INCOME FUND 20.00% 8.22% 19.86% 16.55%
Standard & Poor's 500 Index 27.32 18.49 26.23 18.95
Lipper Growth & Income Fund Average 20.06 5.47 19.53 14.92
Number of Funds in Peer Group 872 808 321 151
Source: Lipper, Inc., a monitor of mutual fund performance.
INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
ADVISOR LIPPER GROWTH &
GROWTH & INCOME S&P 500 INCOME FUND
FUND INDEX AVERAGE (151 FUNDS)
- ----------------------------------------------------------------------
3/31/89 10000 10000 10000
3/31/90 11756 11922 11342
3/31/91 13276 13637 12699
3/31/92 15540 15139 14387
3/31/93 17951 17441 16459
3/31/94 18927 17697 17139
3/31/95 20439 20447 18866
3/31/96 26882 27004 24123
3/31/97 31291 32356 27918
3/31/98 43770 47875 39180
3/31/99 47460 56725 41095
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. This
illustration assumes a $10,000 investment on March 31, 1989, and reinvestment of
income and capital gains distributions. The S&P 500 Index is an unmanaged group
of securities that differs from the composition of each Stein Roe fund; it is
not available for direct investment. The Advisor currently limits expenses to
1.40% of average daily net assets of the Stein Roe Advisor Growth & Income 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 the SR&F Growth & Income 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.
<PAGE>
Q&A
- --------------------------------------------------------------------------------
AN INTERVIEW WITH DAN CANTOR, PORTFOLIO MANAGER
OF STEIN ROE ADVISOR GROWTH & INCOME FUND AND SR&F GROWTH & INCOME PORTFOLIO
FUND DATA
INVESTMENT OBJECTIVE:
Stein Roe Advisor Growth & Income Fund seeks
both growth of capital and current income by investing primarily in common
stocks of well-established companies having large market capitalizations.
The portfolio manager looks for common stocks that have the potential to
appreciate in value and pay dividends.
Q: HOW DID THE FUND PERFORM BETWEEN OCTOBER 1998 AND MARCH 1999?
CANTOR: Our results were good, especially considering that some cyclical and
consumer stocks were out-of-favor for much of the time. The Fund generally kept
pace with the average fund in Lipper, Inc.'s growth & income fund category as
shown on page 1, providing a total return of 20.00% for the six months ended
March 31, 1999.
We're pleased to report that we held positions in six of
the top seven performing stocks in the unmanaged Standard & Poor's 500 Index in
calendar 1998. Several of these companies, including Wal-Mart, General Electric,
IBM and Cisco Systems (3.3%, 2.3%, 2.7% and 0.6% of net assets) were among the
portfolio's and the market's top performers during the first half of fiscal
1999.
The stock market enjoyed a remarkable recovery this past autumn and the
Fund benefited from an unprecedented rally that took the Dow Jones Industrial
Average past the 10,000 level in late March. We achieved success amid increased
market volatility and maintained a portfolio turnover rate of just 3%,
significantly less than most of our peers.*
Q: WHAT SECTORS DID WELL FOR THE FUND?
CANTOR: The portfolio's retail stock holdings rose sharply in value during
the first half of fiscal 1999 as consumer confidence remained high and the
nation's unemployment rate dropped. When strong-performing holdings Walgreen Co.
(1.9% of net assets) and Wal-Mart reached the price targets we had set for them,
we reduced their participation in the Portfolio and increased our position in
Kmart (0.7% of net assets) which we considered undervalued.
In the fourth quarter of 1998, large-company technology stocks were
among the leaders of the market's robust advance, and our positioning in firms
such as IBM served us well. We achieved strong results in the first three months
of 1999 with the help of financial and energy stocks. We'd like to think our
shareholders can sleep a little better at night knowing that we're striving to
limit the potential volatility that is often characteristic of more aggressive
equity funds.
This past winter, the profit outlook for certain money-center banks
such as Chase Manhattan and Citigroup (2.5% and 2.7% of net assets,
respectively) improved, bolstering prices of financial stocks. Energy stocks
benefited from merger activity and a rebound in oil prices.
Q: Were there any disappointments?
CANTOR: Concern about weakness in personal computer sales and company-specific
problems led to share price declines among some technology firms in the first
calendar quarter. Economically sensitive stocks such as chemicals and railroads
were weak throughout the period.
Q: What do you look for when researching a company?
CANTOR: We typically look for companies that can expand earnings by 10% to 20%
a year for several years. A higher growth rate involves more investment risk
than we are comfortable with for this Fund. We'd like to think our shareholders
can sleep a little better at night knowing that we're striving to limit the
potential volatility that is often characteristic of more aggressive equity
funds.
Some of the other characteristics we look for are a price/earnings
ratio that is lower than the average of a stock's peer group, a favorable
debt-to-capital ratio, and strong management teams.
Q: HOW DOES THE PORTFOLIO DIFFER FROM THE UNMANAGED S&P 500 INDEX?
CANTOR: We strive for a sensible mix of stocks that exhibit strong earnings
growth potential. We have a much more concentrated portfolio than the Index,
with just 59 stocks as of March 31, 1999. Historically, we have been
underweighted in utility and energy stocks, which we think have limited growth
prospects.
Q: WHAT'S YOUR OUTLOOK FOR THE REMAINDER OF FISCAL 1999?
CANTOR: We think the portfolio is well-positioned for what lies ahead,
especially given the volatility in interest rates during the first quarter,
increasing international tensions and earnings disappointments from some
large-cap growth stocks such as Coca-Cola.
<PAGE>
By focusing on stocks that offer a blend of growth and value
characteristics, we believe we can offer investors the best of both worlds --
capital appreciation potential with a discipline that avoids excessive risks. We
feel a portfolio built solely on an aggressive growth discipline seems less than
prudent given that the stock market has risen more than 20% for four consecutive
calendar years, an unprecedented feat. We believe the Fund is well-positioned if
the market's current enthusiasm for growth stocks broadens.
We select stocks one-by-one through fundamental research rather than
attempting to predict what will happen in the U.S. economy. By focusing on
stocks that offer a blend of growth and value characteristics, we believe we can
offer investors the best of both worlds -- capital appreciation potential with a
discipline that avoids excessive risks. However, what we see gives us continued
optimism about the future. Domestic inflation has been quite low. This should
help support stock prices. Additionally, personal income appears strong, and
that should help bolster domestic consumption.
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. Total
return includes changes in share price and reinvestment of all distributions.
Holdings are disclosed as a percentage of the SR&F Growth & Income Portfolio's
total net assets. Portfolio holdings are as of 3/31/99 and are subject to
change. The S&P 500 Index is an unmanaged group of stocks that differs from the
composition of any Stein Roe fund; indices are not available for direct
investment. The Advisor currently limits expenses to 1.40% of average daily net
assets of the Stein Roe Advisor Growth & Income Fund; 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 the SR&F Growth & Income
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.
* As of 3/31/99, the average fund in Advisor Growth & Income Fund's Morningstar
category (large-cap blend) had a portfolio turnover rate of 63%.
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO
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Portfolio of Investments at March 31, 1999
(Dollar amounts in thousands) (Unaudited)
Number Market
COMMON STOCKS (85.2%) of Shares Value
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AEROSPACE (1.0%)
Boeing................................................ 119,600 $ 4,081
AUTO/TRUCK PARTS & EQUIPMENT (2.3%)
Federal-Mogul......................................... 81,200 3,492
Lear (a).............................................. 150,000 6,403
-----------
9,895
BANKS (8.0%)
BankAmerica.......................................... 67,896 4,795
Chase Manhattan...................................... 128,800 10,473
Citigroup............................................ 176,540 11,276
Republic New York.................................... 50,000 2,306
Wells Fargo & Company................................ 136,660 4,792
-----------
33,642
BROADCASTING AND COMMUNICATIONS (1.9%)
Interpublic Group of Companies....................... 60,600 4,719
Tribune.............................................. 50,000 3,272
-----------
7,991
CHEMICALS (0.7%)
E.I. du Pont de Nemours.............................. 50,000 2,903
COMPUTERS AND COMPUTER-RELATED (5.5%)
Applied Materials.................................... 20,000 1,234
Cisco Systems (a).................................... 22,500 2,465
Compaq Computer...................................... 195,000 6,179
Intel................................................ 15,000 1,783
International Business Machines...................... 65,000 11,521
-----------
23,182
CONSUMER-RELATED (5.3%)
Avon Products........................................ 80,000 3,765
Cendant (a).......................................... 144,186 2,271
Gillette............................................. 144,400 8,583
Procter & Gamble..................................... 81,000 7,933
-----------
22,552
DISTRIBUTION (8.3%)
Kmart Corporation.................................... 170,000 2,858
TJX.................................................. 312,800 10,635
Wal-Mart Stores...................................... 150,000 13,828
Walgreen Co. ........................................ 280,000 7,910
-----------
35,231
ELECTRICAL EQUIPMENT (2.5%)
Emerson Electric..................................... 100,000 5,294
Hubbell, class B..................................... 130,400 5,216
-----------
10,510
ENERGY (4.4%)
BP Amoco ADR......................................... 121,405 12,254
Enron................................................ 62,500 4,016
Conoco............................................... 104,800 2,574
-----------
18,844
ENTERTAINMENT (0.5%)
Walt Disney.......................................... 66,105 2,057
<PAGE>
SR&F Growth & Income Portfolio Continued
Number Market
of Shares Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (11.3%)
American Express.................................... 104,000 $ 12,220
Associates First Capital............................ 95,000 4,275
Fannie Mae.......................................... 161,000 11,149
Kansas City Southern Industries..................... 266,900 15,213
Nationwide Financial Services....................... 37,000 1,554
Washington Mutual................................... 78,000 3,188
-----------
47,599
FOOD, BEVERAGE AND TOBACCO (4.0%)
PepsiCo............................................. 160,000 6,270
Philip Morris....................................... 203,000 7,143
Sara Lee............................................ 144,000 3,564
-----------
16,977
HEALTH CARE (9.7%)
Abbott Laboratories................................. 117,000 5,477
Baxter International................................ 120,000 7,920
Bristol-Myers Squibb................................ 170,000 10,933
Roche Holdings Limited.............................. 200 2,439
SmithKline Beecham ADRs............................. 40,000 2,860
Warner-Lambert...................................... 170,000 11,252
-----------
40,881
MULTI-INDUSTRY (6.1%)
General Electric................................... 88,000 9,735
Honeywell.......................................... 99,000 7,505
Monsanto........................................... 185,000 8,498
-----------
25,738
PAPER AND FOREST PRODUCTS (2.1%)
Georgia-Pacific.................................... 95,000 7,054
Georgia-Pacific Timber Group....................... 75,000 1,683
-----------
8,737
RUBBER, PLASTICS AND RELATED PRODUCTS (0.5%)
Goodyear Tire & Rubber............................. 45,000 2,242
SPECIALTY CHEMICALS (4.5%)
Ecolab............................................. 330,000 11,716
Solutia............................................ 141,100 6,376
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18,822
TELECOMMUNICATIONS (3.4%)
AT&T............................................... 30,222 2,412
Bell Atlantic...................................... 190,320 9,838
Lucent Technologies................................ 19,588 2,111
-----------
14,361
TRANSPORTATION (3.2%)
Burlington Northern Santa Fe....................... 240,000 7,890
Continental Airlines, Class B (a).................. 150,000 5,700
-----------
13,590
-----------
TOTAL COMMON STOCKS (Cost $186,232)................ 359,835
-----------
<PAGE>
SR&F Growth & Income Portfolio Continued
Principal Market
Amount Value
- --------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS (14.9%)
COMMERCIAL PAPER (14.2%)
Rite Aid 5.150% 4/1/99............................ $ 19,965 $ 19,965
Texas Utilities 5.080% 4/6/99..................... 20,000 19,986
Volvo Treasury NA 5.050% 4/6/99................... 20,000 19,986
-----------
(COST $59,918).................................... 59,937
U.S. GOVERNMENT OBLIGATION (0.7%)
U.S. Treasury Note 7.125% 9/30/99 (b)
(COST $2,964)..................................... 3,000 3,035
-----------
TOTAL SHORT-TERM OBLIGATIONS (Cost $62,882)....... 62,972
-----------
TOTAL INVESTMENTS (100.1%) (Cost $249,114) (c).... 422,807
-----------
OTHER ASSETS, LESS LIABILITIES (-0.1%)........... 245)
-----------
TOTAL NET ASSETS (100.0%)........................ $422,562
===========
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Security was pledged to cover margin requirements for open futures
contracts. The following contracts were open at March 31, 1999:
Number of Contract Unrealized
Type Position Contracts Value Expiration Loss
---- --------- ---------- -------- ----------- ----
S&P 500 Index Long 75 $24,249 Jun-99 $210
(c) At March 31, 1999, the cost of investments for federal income tax
purposes was $249,276. Net unrealized appreciation was $173,531,
consisting of gross unrealized appreciation of $177,654 and gross
unrealized depreciation of $4,123.
ACRONYM NAME
-------- ------
ADR American Depositary Receipt
See accompanying Notes to Financial Statements.
<PAGE>
ADVISOR GROWTH & INCOME FUND
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STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
(All amounts in thousands, except per-share data)
(Unaudited)
ASSETS
Investment in Portfolio, at value..................................... $2,189
Cash.................................................................. 24
--------
Total assets................................................. 2,213
--------
LIABILITIEs
Payable to distributor................................................ 3
Payable to advisor.................................................... 1
Other liabilities..................................................... 34
--------
Total liabilities............................................ 38
--------
Net assets................................................... $2,175
========
ANALYSIS OF NET ASSETS
Paid-in capital....................................................... $2,004
Net unrealized appreciation on investments............................ 412
Accumulated overdistributed net investment income..................... (1)
Accumulated net realized loss on investments.......................... (240)
--------
Net assets................................................... $2,175
========
Shares outstanding (unlimited number authorized)...................... 157
========
Net asset value per share............................................. $13.83
========
See accompanying Notes to Financial Statements.
<PAGE>
ADVISOR GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
March 31, 1999
(All amounts in thousands)
(Unaudited)
INVESTMENT INCOME
Interest allocated from Portfolio.................................... $ 10
Dividends allocated from Portfolio................................... 14
--------
Total investment income..................................... 24
--------
EXPENSES
Accounting fees...................................................... 12
SEC and state registration fees...................................... 10
Expenses allocated from Portfolio.................................... 8
Audit and legal fees................................................. 7
12b-1 distribution and service fees.................................. 6
Administrative fees.................................................. 2
Trustees' fees....................................................... 1
Other................................................................ 3
--------
Total expenses.............................................. 49
Reimbursement of expenses by investment advisor...................... (32)
--------
Net expenses................................................ 17
--------
Net investment income....................................... 7
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments allocated from Portfolio............ 16
Net change in unrealized appreciation on
investments and futures transactions................................. 405
--------
Net gain on investments..................................... 421
--------
Net Increase in Net Assets Resulting from Operations................. $ 428
========
See accompanying Notes to Financial Statements.
<PAGE>
ADVISOR GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited)
Six months Year
ended ended
March 31, September 30,
1999 1998
----------- -------------
<S> <C> <C>
OPERATIONS
Net investment income................................ $ 7 $ 5
Net realized gain (loss) on investments.............. 16 (250)
Net change in unrealized appreciation or
depreciation on investments.................... 405 (13)
-------- --------
Net increase (decrease) in net assets
resulting from operations................ 428 (258)
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income............. (12) (1)
-------- --------
SHARE TRANSACTIONS
Subscriptions to fund shares......................... 427 3,150
Value of distributions reinvested.................... 4 1
Redemptions of fund shares........................... (681) (997)
-------- --------
Net increase (decrease) from
share transactions........................ (250) 2,154
-------- --------
Net increase in net assets.................. 166 1,895
TOTAL NET ASSETS
Beginning of period.................................. 2,009 114
-------- --------
End of period........................................ $2,175 $2,009
======== ========
ACCUMULATED UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME......................... $ (1) $ 4
======== ========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares......................... 34 248
Redemptions of fund shares........................... (51) (84)
-------- --------
Net increase (decrease) in fund shares...... (17) 164
Shares outstanding at beginning of period............ 174 10
-------- --------
Shares outstanding at end of period.................. 157 174
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
(All amounts in thousands)
(Unaudited)
ASSETS
Investments, at market value (cost of $249,114)..................... $422,807
Dividends and interest receivable................................... 476
Cash................................................................ 2
----------
Total assets............................................... 423,285
----------
LIABILITIES
Variation margin payable for futures transactions................... 420
Payable to investment advisor....................................... 217
Other liabilities................................................... 86
----------
Total liabilities.......................................... 723
----------
Net assets applicable to investors' beneficial interest.... $422,562
==========
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1999
(All amounts in thousands)
(Unaudited)
INVESTMENT INCOME
Interest....................................................... $ 1,643
Dividends...................................................... 2,324
----------
3,967
Foreign taxes withheld......................................... (18)
----------
Total investment income............................... 3,949
----------
EXPENSES
Management fees................................................ 1,225
Accounting fees................................................ 17
Trustees' fees................................................. 12
Audit and legal fees........................................... 8
Custodian fees................................................. 6
Other.......................................................... 1
----------
Total expenses........................................ 1,269
----------
Net investment income................................. 2,680
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments............................... 4,678
Net realized gain on futures transactions...................... 4,573
----------
Net gain.............................................. 9,251
----------
Net change in unrealized appreciation on
investments and futures transactions................... 61,108
----------
Net gain on investments and futures transactions...... 70,359
----------
Net Increase in Net Assets Resulting from Operations........... $73,039
==========
See accompanying Notes to Financial Statements.
<PAGE>
SR&F GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited)
Six months Year
ended ended
March 31, September 30,
1999 1998
----------- -------------
<S> <C> <C>
OPERATIONS
Net investment income............................. $ 2,680 $ 5,246
Net realized gain on investments.................. 9,251 7,017
Net change in unrealized appreciation or
depreciation on investments................. 61,108 (242)
----------- -----------
Net increase in net assets
resulting from operations............ 73,039 12,021
----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions..................................... 15,227 36,636
Withdrawals....................................... (18,897) (33,209)
----------- -----------
Net increase (decrease) from transactions
in investors' beneficial interest....... (3,670) 3,427
----------- -----------
Net increase in net assets............... 69,369 15,448
TOTAL NET ASSETS
Beginning of period............................... 353,193 337,745
----------- -----------
End of period..................................... $422,562 $353,193
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(ALL AMOUNTS IN THOUSANDS) (UNAUDITED)
NOTE 1. ORGANIZATION
Stein Roe Advisor Growth & Income 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 Growth & Income Portfolio (the "Portfolio").
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 3, 1997. At commencement,
Stein Roe Growth & Income Fund contributed $239,175 in securities and other
assets to SR&F Growth & Income Portfolio, in exchange for beneficial ownership
of the Portfolio. At February 14, 1997, Stein Roe Advisor Growth & Income Fund
contributed cash of $100 to the Portfolio. The Portfolio allocates income,
expenses, realized and unrealized gains and losses to each investor on a daily
basis, based on the respective percentage of ownership. At March 31, 1999, Stein
Roe Advisor Growth & Income Fund owned .52 percent 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. 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 March 31, 1999. 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.
FUTURES CONTRACTS
During the six months ended March 31, 1999, SR&F Growth & Income Portfolio
entered into stock index futures contracts to either hedge against expected
declines of its portfolio securities or as a temporary substitute for the
purchase of individual stocks. 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.
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 the owners
based on their respective percentages of ownership.
The Fund intends to utilize provisions of federal income tax law, which
allows it to carry a realized capital loss forward up to eight years following
the year of the loss, and offset such losses against any future realized gains.
At September 30, 1998, Advisor Growth & Income Fund had a capital loss
carryforward of $257, which expires in 2005 and 2006.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays dividends of any net investment income
at least quarterly, and any net realized capital gains annually. 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Fund and the Portfolio pay monthly management and administrative fees to
Stein Roe & Farnham Incorporated (the "Advisor"), an indirect, wholly-owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty"), for its services as
investment advisor and administrator. The management fee for the Portfolio is
computed at an annual rate of .60 of 1 percent of average daily net assets up to
$500 million, .55 of 1 percent of the next $500 million, and .50 of 1 percent
thereafter. The administrative fee for the 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, and .10 of 1 percent thereafter.
The Advisor also provides fund accounting services. For the six months
ended March 31, 1999, the Fund and the Portfolio incurred charges of $12 and
$17, respectively.
The Advisor has agreed to reimburse the Fund to the extent that annual
expenses exceed 1.40 percent of average daily net assets. The expense limitation
expires on January 31, 2000, subject to earlier termination by the Advisor on 30
days notice.
Shares of the Fund 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 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 Liberty Funds Services, Inc., ("LFS"),
an indirect, wholly-owned subsidiary of Liberty.
Certain officers and trustees of the Trust are also officers of the
Advisor. The compensation of trustees not affiliated with the Advisor, the Fund
and the Portfolio for the six months ended March 31, 1999, was $1 and $12,
respectively. 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 the Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. Neither
the Fund nor the Portfolio had short-term borrowings during the six months ended
March 31, 1999.
NOTE 5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales other than short-term
obligations for the six months ended March 31, 1999, were $10,253 and $13,638,
respectively.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ADVISOR GROWTH & INCOME FUND
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1997(A)
---------------- -------------- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..................... $11.58 $11.36 $10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................ 0.04 0.13 0.03
Net realized and unrealized gain on investments 2.27 0.23 1.33
-------- -------- --------
Total from investment operations............... 2.31 0.36 1.36
-------- -------- --------
Distributions
Net investment income............................ (0.06) (0.14) --
-------- -------- --------
Net Asset Value, End of Period............................ $13.83 $11.58 $11.36
======== ======== ========
Ratio of net expenses to average net assets (b)........... 1.40%(c) 1.40% 1.40%(c)
Ratio of net investment income to average net assets (d).. 0.58%(c) 0.58% 0.54%(c)
Total return (d).......................................... 20.00% 3.18% 13.60%
Net assets, end of period (000's)......................... $2,175 $2,009 $ 114
</TABLE>
(a) From commencement of operations on February 14, 1997.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
of expenses by the investment advisor, this ratio would have been 4.15
percent for the six months ended March 31, 1999, 10.68 for the year ended
September 30, 1998 and 88.76 percent for the period ended September 30,
1997.
(c) Annualized.
(d) Computed giving effect to the investment advisor's expense limitation
undertaking.
- --------------------------------------------------------------------------------
SR&F GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended Year Ended Period Ended
March 31, September 30, September 30,
1999 1998 1997(a)
---------------- -------------- --------------
<S> <C> <C> <C>
Ratio of net expenses to average net assets.............. 0.63%(b) 0.65% 0.65%(b)
Ratio of net investment income to average net assets..... 1.33%(b) 1.44% 2.04%(b)
Portfolio turnover rate.................................. 3% 11% 7%
</TABLE>
(a) From commencement of operations on February 3, 1997.
(b) Annualized.
<PAGE>
STEIN ROE ADVISOR TRUST
- --------------------------------------------------------------------------------
TRUSTEES
John A. Bacon, Jr.
Private Investor
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
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
J. Kevin Connaughton, Vice President
Erik P. Gustafson, Vice President
James P. Haynie, Vice President
Harvey B. Hirschhorn, Vice President
Timothy Jacoby, Vice President
Michael T. Kennedy, Vice President
Gail D. Knudsen, Vice President
Stephen M. Lockman, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Arthur J. McQueen, Vice President
Maureen Newman, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Brian D. Pollard, Vice President
Gita R. Rao, Vice President
Michael E. Rega, Vice President
M. Gerard Sandel, Vice Preisdent
Gloria J. Santella, Vice President
Sharlene Thomas, Vice President
Heidi J. Walter, Vice President, Secretary
Janet B. Rysz, Assistant Secretary
Scott E. Volk, Treasurer
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Fund
Ernst & Young LLP
Independent Auditors
<PAGE>
Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com
Liberty Funds Distributor, Inc. 5/99
