<PAGE>
Stein Roe Mutual Funds
Annual Report
June 30, 1997
Stein Roe Institutional High Yield Fund
<PAGE>
An Interview with Steve Lockman, Portfolio Manager of Stein Roe Institutional
Client High Yield Fund
Stephen F. Lockman, was promoted to portfolio manager of Institutional
Client High Yield Fund and SR&F High Yield Portfolio on March 3, 1997. He
previously served as associate portfolio manager for both Fund and
Portfolio.
Fund Data
Investment Objective:
Seeks high current income and capital appreciation by investing
principally in high yield, high-risk, medium- and lower-quality debt
securities.
Fund Inception:
February 14, 1997
Total Net Assets:
$25.7 million
Q: How has the Fund performed since its launch on February 14, 1997?
A: Institutional Client High Yield Fund's total return from inception through
June 30, 1997, was 5.48 percent. As of June 30, 1997, the Fund's 30-day
standardized yield was 8.65 percent.
Q: Since the inception of the Fund, the high yield market has displayed
considerable fundamental strength. What are some of the factors contributing
to this?
A: A healthy economy, lower interest rates, narrower spreads, very liquid
capital markets and extremely strong investor demand all contributed to strong
fundamentals for high yield debt. An additional support for the strength of
the high yield market has been the very low default rate in these issues that
we've seen over the last two years.
Q: There has been a tremendous issuance of high yield debt over the last six
months. How did this influence your investment strategy?
A: After our initial startup, our purchase strategy was influenced by the new
issue calendar. We saw new issues as a much more efficient means of putting
new money coming into the Fund to work. We maintained our cash position at a
level that would help us benefit from the strength of the market, yet allow us
to participate in new issue opportunities. The market easily absorbed the new
issue supply except for two brief periods. The first was in mid-spring when
the Federal Reserve tightened interest rates and the stock market sold off.
The second came at the end of the Fund's fiscal year, when the supply of new
issues temporarily exceeded demand.
Q: Why is there so much new issuance in the high yield bond market?
A: First, there's been tremendous growth in the demand for high yield bonds,
as yields offered by Treasuries and investment-grade corporate bonds remain at
historically low levels. The search for yield has led many investors to the
high yield market. For example, both retail and institutional investors who
normally invest in the investment-grade market have crossed over and increased
their allocations of high yield bonds. We think they are doing this to try to
satisfy their yield requirements, while at the same time to provide somewhat
of a hedge to the stock market--which has been on such a tremendous run.
Another factor leading to heavy new issuance is the continuation of strong
flows into high yield mutual funds. According to the Investment Company
Institute, over the last 12 months more than $15 billion has flowed into these
funds.
Third, there has been enormous growth in the collateralized bond obligation
(CBO) market. These are pools of bonds that are divided into short-, medium-
and long-term sections called tranches, each paying a different yield. We
think CBOs are growing in popularity because they provide a flexible
alternative to owning the bonds directly. The growing popularity of CBOs has
created demand for the underlying high yield bonds.
Q: And all this demand leads issuers to bring more high yield debt to market?
A: Exactly--especially in 1997. According to First Boston, close to $60
billion of new issues has come to market in the first six months of 1997.
That's about 75 percent of the total issuance in 1996. The size of the high
yield market is approaching $400 billion. It was $352 billion in 1996, $300
billion in 1995 and $275 billion in 1994.
In addition, a number of new issues are being used to call or tender for
existing bonds. As interest rates have moved lower, issuers have taken
advantage of the lower cost of funding and called or bought back older,
higher-cost bonds, and those having more restrictive covenants such as bank
debt.
Q: How do you address the credit risk associated with high yield bonds?
A: We take an equity-like approach to managing credit risk. To help ensure
that our investments are sound, our investment process incorporates intensive
credit research and estimates of a company's future earnings potential. We
constantly monitor stock and bond prices, as well as earnings reports and news
items about our holdings. We believe this approach helps us identify not only
those issues with good upside potential, but also those that may be greater
credit risks. In fact, several of the issues we passed on ran into trouble in
the first quarter of 1997. Because of the quality of our research we did not
invest in them.
Q: What is your outlook for the Fund?
A: We're somewhat cautious because of the large number of new issues scheduled
to be offered in the near term--we believe the market may experience some
indigestion because of the amount of supply. We hope to take advantage of any
spread widening.
In addition to the heavy supply, we saw the size and credit quality of many of
the individual issues decline in the last few weeks of the year. As a result,
we are taking a much more selective approach to the new issue market. Many of
the companies bringing the smaller issues--in the $100 million range--are
not public, so information about them is not as readily available. We believe
these are important factors to take into consideration before investing
because they could lead to liquidity problems in the future.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or a loss when you sell shares.
Portfolio holdings as of June 30, 1997; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. The Adviser currently limits expenses
to .50 of 1 percent of average net assets, subject to 30 days' notice to the
Fund. Absent this limit, the Fund's 30-day standardized yield at June 30,
1997, would have been 6.56 percent and total return would have been less.
Investing in high yield bonds involves greater credit and other risks not
associated with investing in higher-quality securities.
<PAGE>
SR&F High Yield Portfolio
Investments as of June 30, 1997
Dollar Amounts In Thousands)
Principal Market
Amount Value
--------- -------
Long-Term Obligations (94.4%)
Aerospace & Transportation Equipment (3.9%)
*Derlan Manufacturing 10.000% 1/15/07 $ 250 $253
*L-3 Communications Corp. 10.375% 5/01/07 500 530
*WR Carpenter North America 10.625% 6/15/07 750 750
-----
1,533
Automotive (2.6%)
*Oxford Automotive 10.125% 6/15/07 500 503
Penda Corporation Series B 10.750% 3/01/04 500 501
-----
1,004
Building & Construction (1.9%)
Standard Pacific Corp. 8.500% 6/15/07 500 496
*William Scotsman Inc. 9.875% 6/01/07 250 249
-----
745
Business Services (4.3%)
Iron Mountain Inc. 10.125% 10/01/06 500 530
Lamar Advertising Co. 9.625% 12/01/06 200 205
*Outdoor Systems, Inc. 8.875% 6/15/07 750 731
*Safelite Glass Corp. 9.875% 12/15/06 200 212
-----
1,678
Cable/Media (7.2%)
*Capstar Broadcasting 9.250% 7/01/07 750 728
Frontiervision 11.000% 10/15/06 250 260
*Jacor Communications, Inc. 8.750% 6/15/07 500 492
*Radio One Inc. 7.000% 5/15/04 500 449
Rogers Communications, Inc. (Yankee Issue)
9.125% 1/15/06 200 202
SFX Broadcasting Series B 10.750% 5/15/06 150 163
*TV Azteca 10.500% 2/15/07 250 256
Young Broadcasting Corp. 10.125% 2/15/05 250 263
-----
2,813
Communications (5.4%)
Dobson Communications Corp. 11.750% 4/15/07 250 240
*GlobalStar Telecommunications Ltd 11.250% 6/15/04 500 469
*ITC Deltacom Inc. 11.000% 6/01/07 500 505
Pricecellular Wire 10.750% 11/01/04 150 155
*Viasystems Inc. 9.750% 6/01/07 750 761
-----
2,130
Consumer Products (2.9%)
*Coleman Escrow Corp. Zero Coupon 5/15/01
First Priority (Effective Yield 11.125%) 250 158
Second Priority (Effective Yield 12.875%) 750 435
Renaissance Cosmetics 11.750% 2/15/04 500 526
-----
1,119
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Containers (3.9%)
*Consumers International 10.250% 4/01/05 $500 $537
*Silgan Corp. 9.000% 6/01/09 750 754
*Vicap S.A. 10.250% 5/15/02 250 257
-----
1,548
Energy - Services (7.6%)
Dawson Production Services 9.375% 2/01/07 250 254
Forcenergy Inc. Series B 8.500% 2/15/07 500 487
*ICO Inc. 10.375% 6/01/07 500 515
*Transamerican Energy 11.500% 6/15/02 750 731
Triton Energy Ltd. 8.750% 4/15/02 500 518
*United Refining Co. 10.750% 6/15/07 500 495
-----
3,000
Financial & Financial Services (2.6%)
*Navistar Financial Corp. 9.000% 6/01/02 500 512
Penncorp Financial Group 9.250% 12/15/03 500 525
----
1,037
Food & Beverages (5.2%)
*Archibald Candy Corp. 10.250% 7/01/04 500 509
*DGS International Finance Co. 10.000% 6/01/07 500 515
*Pepsi-Gemex S.A. 9.750% 3/30/04 500 514
*Windy Hill Pet Food Co. 9.750% 5/15/07 500 500
-----
2,038
Foreign Sovereign Regional Bonds (2.6%)
*City of Moscow 9.500% 5/31/00 500 505
*Guangdong Enterprises (Yankee
Issue) 8.875% 5/22/07 500 514
-----
1,019
Health Services & Equipment (3.9%)
Dynacare Inc. 10.750% 1/15/06 500 520
*Leiner Health 9.625% 7/01/07 500 509
Loewen Group International Inc. Series 4
8.250% 10/15/03 500 516
-----
1,545
Hospitals & Nursing Home Care (3.0%)
*Integrated Health Services 9.500% 9/15/07 400 410
Tenet Healthcare Corp. 8.625% 1/15/07 750 761
-----
1,171
Hotels & Entertainment (5.1%)
Boyd Gaming Corp. 9.250% 10/01/03 500 498
Lady Luck Gaming 11.875% 3/01/01 500 507
Premier Parks Inc. 9.750% 1/15/07 250 260
Prime Hospitality Series B 9.750% 4/01/07 500 525
Station Casinos Inc. 10.125% 3/15/06 200 202
-----
1,992
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Machinery & Fabricated Metal Products (8.4%)
*BMAY Corp. 10.250% 4/15/07 $350 $376
*Federal-Mogul Co. 8.800% 4/15/07 350 366
*Hayes Wheels International, Inc. 9.125% 7/15/07 500 500
*IMPSA 9.500% 5/31/02 500 500
Titan Wheel International Inc. 8.750% 4/01/07 500 512
*Wells Aluminum 10.125% 6/01/05 500 516
US Can Corp. 10.125% 10/15/06 500 533
3,303
-----
Miscellaneous Services (1.3%)
*Dyncorp Inc. 9.500% 3/01/07 500 508
Paper (2.0%)
APP International Finance Company (Yankee Issue)
10.250% 10/01/00 150 154
*Indah Kiat Finance 10.000% 7/01/07 500 497
Specialty Paperboard Inc. 9.375% 10/15/06 150 152
-----
803
Restaurants (0.6%)
*AFC Enterprises 10.250% 5/15/07 250 250
Retail (4.1%)
Cole National Group 9.875% 12/31/06 200 210
*Quality Food Centers 8.700% 3/15/07 500 504
*Ralphs Grocery Co. 11.000% 6/15/05 350 380
*Specialty Retailers 8.500% 7/15/05 500 502
-----
1,596
Rubber, Plastic & Related Materials (3.0%)
*Key Plastics Inc. 10.250% 3/15/07 500 529
Plastic Containers Inc. Series B 10.000% 12/15/06 350 363
*Tekni-Plex Inc. 11.250% 4/01/07 250 270
-----
1,162
Sanitary Services (1.4%)
*Allied Waste Industries Inc. Zero Coupon
(Effective Yield 11.300%) (steps up to
11.300% coupon rate at 6/01/02) 6/01/07 900 565
Telephone (2.6%)
*Brooks Fiber Properties 10.000% 6/01/07 750 758
*Comtel Brasileira Ltd. (Yankee Issue)
10.750% 9/26/04 250 269
-----
1,027
Textile & Apparel (3.2%)
*Anvil Knitwear Inc. 10.875% 3/15/07 500 507
*Hedstrom Corp. 10.000% 6/01/07 250 254
*Tultex Corp. 9.625% 4/15/07 250 266
William Carter 10.375% 12/01/06 200 210
-----
1,237
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio CONTINUED
Principal Market
Amount Value
--------- -------
Transportation & Transportation Equipment (2.6%)
*Coach USA Inc. 9.375% 7/1/07 $500 $495
*Greyhound Lines 11.50% 4/15/07 500 533
-----
1,028
Utilities (3.1%)
California Energy Company Inc. 9.500% 9/15/06 500 535
*Energy Corp. of America 9.500% 5/15/07 500 493
Midland Funding II Series B 13.250% 7/23/06 150 183
-----
1,211
-----
Total Long-Term Obligations
(Cost basis $36,513) 37,062
Short-Term Obligation (3.1%)
Commercial Paper
Associates Corp. of North America 6.200% 7/01/97 1,220 1,220
(Amortized cost $1,220) -----
Total Investments (97.5%)
(Cost basis $37,733) 38,282
Other Assets, Less Liabilities (2.5%) 991
-----
Total Net Assets (100%) $39,273
======
*Represents private placement securities issued under Rule 144A,
which are exempt from the registration requirements of the Securities
Act of 1933. These securities generally are issued to qualified
institutional buyers, such as the Portfolio, and any resale must be in
an exempt transaction, normally to other qualified institutional
investors. At June 30, 1997, the aggregate value of the Portfolio's
private placement securities was $25,096 (aggregate cost of $25,114),
which represented 63.9 percent of net assets.
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional High Yield Fund
June 30, 1997
Balance Sheet
(Amounts in thousands, except per-share amount)
Assets
Investment in SR&F High Yield Portfolio, at value $ 107
Unamortized organization costs 30
Receivable from investment adviser 26
Cash and other assets 20
------
Total Assets $ 183
=======
Liabilities
Payable to the investment adviser for
organization costs incurred $ 55
Payable to investment adviser and transfer agent
for services provided 2
Accrued expenses payable 19
-------
Total Liabilities 76
-------
Capital
Paid in capital 104
Accumulated net realized gains 1
Net unrealized appreciation of investment 2
-------
Total Capital (Net Assets) 107
-------
Total Liabilities and Capital $ 183
=======
Shares Outstanding (Unlimited number authorized) 10
-------
Net Asset Value (Capital) Per Share $ 10.27
=======
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional High Yield Fund
Statement of Operations
Period Ended June 30, 1997 (a)
(Amounts in thousands)
Investment Income
Investment income allocated from SR&F High Yield Portfolio $ 4
----
Expenses
Trustees fees 28
Amortization of organization expense 25
Accounting fees 12
Legal and audit fees 11
Printing and postage 7
Other 3
----
86
Reimbursement of expenses by investment adviser (86)
----
Total Net Expenses -
----
Net Investment Income 4
----
Realized and Unrealized Gains on Investment
Net realized gains on investments allocated from SR&F
High Yield Portfolio 1
Net change in unrealized appreciation
allocated from SR&F High Yield Portfolio 2
----
Net Gains on investment 3
----
Net Increase in Net Assets Resulting from Operations $ 7
====
(a) From commencement of operations on January 3, 1997.
See accompanying notes to financial statements.
<PAGE>
Stein Roe Institutional High Yield Fund
Statement of Changes in Net Assets
Period Ended June 30, 1997 (a)
(Amounts in thousands)
Operations
Net investment income $ 4
Net realized gains on investments allocated from
SR&F High Yield Portfolio 1
Net change in unrealized appreciation
allocated from SR&F High Yield Portfolio 2
-----
Net Increase in Net Assets Resulting from Operations 7
-----
Distributions to Shareholders
Dividends from net investment income (4)
-----
Share Transactions
Subscriptions to fund shares 100
Investment income dividends reinvested 4
-----
Net Increase from Share Transactions 104
-----
Net Increase in Net Assets 107
Total Net Assets
Beginning of Period -
------
End of Period $ 107
======
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 10
Investment income dividends reinvested -
------
Net increase in fund shares 10
Shares outstanding beginning of period -
Shares outstanding end of period 10
=====
(a) From commencement of operations on January 3, 1997.
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
June 30, 1997
Balance Sheet
(All Amounts in Thousands)
Assets
Investments, at market value $38,282
Receivable for investments sold 1,468
Accrued interest receivable 550
Other assets 9
--------
Total Assets 40,309
Liabilities
Payable for investments purchased $997
Payable to investment adviser 28
Other liabilities 11
-------
Total Liabilities 1,036
-------
Net Assets applicable to investors'
beneficial interests $39,273
======
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
For the Period Ended
June 30, 1997(a)
Statement of Operations
(All Amounts in Thousands)
Investment Income
Interest income $969
----
Expenses
Management fees 53
Accounting fees 17
Audit and legal fees 17
Trustees' fees 4
Custodian fees 3
Other 1
-----
Total Expenses 95
-----
Net Investment Income 874
-----
Realized and Unrealized Gains on Investments
Net realized gains on investments 336
Net change in unrealized appreciation
on investments 549
-----
Net gains on Investments 885
-----
Net Increase in Net Assets Resulting
from Operations $1,759
=====
(a) From the commencement of operations on November 1, 1996.
See accompanying notes to financial statements.
<PAGE>
SR&F High Yield Portfolio
Statement of Changes in Net Assets
For the Period Ended
June 30, 1997(a)
(All Amounts in Thousands)
Operations
Net investment income $ 874
Net realized gains on investments 336
Net change in unrealized appreciation
of investments 549
-------
1,759
-------
Transactions in investors' beneficial
interests
Contributions 38,807
Withdrawals (1,293)
-------
Net Increase from transactions in
investors' beneficial interest 37,514
-------
Net Increase in Net Assets 39,273
Total Net Assets
Beginning of Period -
-------
End of Period $39,273
=======
(a) From the commencement of operations on November 1, 1996.
See accompanying notes to financial statements.
<PAGE>
Note 1. Organization of the SR&F High Yield Portfolio
The SR&F High Yield Portfolio (the "Portfolio") is a separate series of the
SR&F Base Trust, a Massachusetts common trust organized under an Agreement
and Declaration of Trust dated August 23, 1993. The Declaration of Trust
permits the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio commenced operations on November 1, 1996.
The Portfolio allocates net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At June
30, 1997, Stein Roe High Yield Fund, Stein Roe Institutional Client High
Yield Fund and Stein Roe Institutional High Yield Fund owned 34.3 percent,
65.4 percent and 0.3 percent, respectively.
Note 2. Significant Accounting Policies
The following are the significant accounting policies of
Stein Roe Institutional High Yield Fund (the "Fund"), a
series of the Stein Roe Institutional Trust, an open-end
diversified management investment company organized as a
Massachusetts business trust (the "Trust"), and the
Portfolio.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Amortization of Organization Expenses
Organization costs are amortized on a straight-line basis against income over
various periods of up to sixty months from the commencement of public offering
by the Fund, depending on the nature of the individual cost.
Security Valuations
All securities are valued as of June 30, 1997. Long-term debt securities are
valued using market quotations if readily available at the time of valuation.
If market quotations are not readily available, they are valued at a fair
value using a procedure determined in good faith by the Board of Trustees,
which has authorized the use of market valuations provided by a pricing
service. Short-term debt securities with remaining maturities of 60 days or
less are valued at their amortized cost. Those with remaining maturities of
more than 60 days for which market quotations are not readily available are
valued by use of a matrix, prepared by the Adviser, based on quotations for
comparable securities. Other assets are valued by a method that the Board of
Trustees believes represents a fair value.
Futures Contracts
The Portfolio may enter into U.S. Treasury bond futures contracts to either
hedge against expected declines of its securities or as a temporary substitute
for the purchase of individual bonds. Risks of entering into futures
contracts include the possibility that there may be an illiquid market at the
time the Portfolio seeks to close out a contract, and changes in the value of
the futures contract may not correlate with changes in the value of the
securities being hedged.
Upon entering into a futures contract, the Portfolio deposits cash or
securities with its custodian in an amount sufficient to meet the initial
margin requirement. 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. The Portfolio did not enter into any futures
contracts during the period ended June 30, 1997.
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 such distributions to its
shareholders as to be relieved of all federal income tax under provisions of
current federal tax law and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on respective percentages of ownership.
Distributions to Fund Shareholders
Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Distributions
in excess of tax basis earnings are reported in the financial statements as a
return of capital.
Other Information
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
Securities purchased on a when-issued basis may be settled a month or
more after the transaction date. These securities are subject to market
fluctuation during this period. The Portfolio did not have any when-issued or
delayed delivery purchase commitments as of June 30, 1997.
All amounts, except per-share amounts, are shown in thousands.
Note 3. Portfolio Composition
The Fund invests all of its net investable assets in the Portfolio. The
Portfolio invests primarily in high yield, high-risk medium- and lower-quality
debt securities. See the Portfolio's schedule of investments for information
on individual securities.
Note 4. Trustees' Fees and Transactions with Affiliates
The Portfolio pays monthly management fees, computed and accrued daily, to
Stein Roe & Farnham Incorporated (the "Adviser"), an indirect, majority-owned
subsidiary of Liberty Mutual Insurance Company, for its services as investment
adviser and manager.
The management fee for the Portfolio is .50 of 1 percent of the first
$500 million of average daily net assets and .475 of 1 percent thereafter.
The Fund pays monthly administrative fees to the Adviser. The
administrative fee for the Fund is .15 of 1 percent of the first $500 million
of average daily net assets and .125 of 1 percent thereafter.
The administrative agreement of the Fund provides that the Adviser will
reimburse the Fund to the extent that its annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which the
Fund's shares are offered for sale. Effective May 28,1997, the Adviser has
agreed to reimburse the Fund to the extent that expenses exceed .60 of 1
percent of average net assets. The expense limitation expires October 31,
1999, subject to earlier termination by the Adviser on 30 days' notice to the
Fund. Prior to May 28, 1997, expenses were limited to .75 of 1 percent of
average net assets.
The transfer agent fees of the Fund are paid to SteinRoe Services, Inc.
(SSI), an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. SSI has entered into an agreement with Colonial Investors Service
Center, Inc. an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company, to act as sub-transfer agent for the Fund.
The Adviser also provides fund accounting services.
Certain officers and trustees of the Trust are also officers of the
Adviser. Compensation is paid to trustees not affiliated with the Adviser.
No remuneration was paid to any other trustee or officer of the Trust.
Note 5. Short-Term Debt
To facilitate portfolio liquidity, the Fund and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings during the period ended June 30, 1997.
Note 6. Investment Transactions
The aggregate cost of purchases and proceeds from sales (other than short-term
obligations) for the SR&F High Yield Portfolio for the period ended June 30,
1997 were $65,058 and $28,880, respectively.
At June 30, 1997, cost of investments for financial reporting purposes and for
federal tax purposes were the same. Unrealized appreciation and depreciation
on investments of the Portfolio were $698 and $149, respectively.
<PAGE>
Stein Roe Institutional High Yield Fund
Financial Highlights
Selected per-share data (for a share outstanding throughout the period),
ratios, and supplemental data.
Period
Ended
June 30,
1997 (a)
---------
Net Asset Value, Beginning of Period $ 10.00
---------
Income From Investment Operations
Net investment income 0.40
Net realized and unrealized gains on in-
vestments 0.27
---------
Total from investment operations 0.67
Distribution from net investment income (0.40)
---------
Net Asset Value, End of Period $ 10.27
=========
Ratio of net expenses to average net
assets (b) 0.72%*
Ratio of net investment income to average
net assets (b) 8.13%*
Total return (c) 6.89%**
Net assets, end of period (000s) $ 107
* Annualized
**Not Annualized
(a) From commencement of operations on January 3, 1997.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser, this ratio would have been 171.3
percent for the period ended June 30, 1997.
(c) Computed giving effect to Adviser's expense limitation undertaking.
<PAGE>
SR&F High Yield Portfolio
Financial Highlights
Period
Ended
June 30,
1997(a)
--------
Ratios to Average Net Assets
Ratio of net investment income to
average net assets 8.24%*
Ratio of expenses to average
net assets 0.89%*
Portfolio turnover 168%**
*Annualized
**Not Annualized
(a) The Portfolio commenced operations on November 1, 1996.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of the Stein Roe Institutional Trust and the
SR&F Base Trust
We have audited the accompanying balance sheets, including the schedule of
investments, of Stein Roe Institutional High Yield Fund and SR&F High Yield
Portfolio as of June 30, 1997 and the related statements of operations and
changes in net assets, and financial highlights for the period January 3, 1997
to June 30, 1997 for the Stein Roe Institutional High Yield Fund and for the
period November 1, 1996 to June 30, 1997 for the SR&F High Yield Portfolio.
These financial statements and financial highlights are the responsibility of
the Fund's and Portfolio's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Stein Roe Institutional High Yield Fund and SR&F High Yield Portfolio at June
30, 1997, and the results of their operations, the changes in their net
assets, and their financial highlights for the periods referred to above, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1997
