File No. 333-87177
Rule 497(e)
STEIN ROE ADVISOR FLOATING RATE FUND
Class A, B, C and Z Shares
Supplement to Prospectuses dated November 1, 1999
The Fund's Prospectuses are amended as follows:
(1) The section "Net Asset Value" in the Prospectuses is amended
and restated in its entirety as follows:
The purchase or redemption price of shares is generally the net
asset value per share except for Class A share purchases at the
public offering price. The Fund determines the net asset value of
its shares as of the close of regular session trading on the NYSE
(currently 4 p.m., Eastern time) by dividing the difference
between the values of its assets and liabilities by the number of
shares outstanding. Net asset value will not be determined on
days when the NYSE is closed unless, in the judgment of the Board
of Trustees, the net asset value should be determined on any such
day, in which case the determination will be made at 4 p.m.,
Eastern time.
The Senior Loans in which the Fund will invest generally are not
listed on any securities exchange. Certain Senior Loans are
traded by institutional investors in an over-the-counter secondary
market for Senior Loan obligations that has developed over the
past several years. This secondary market for those Senior Loans
generally is comparatively illiquid relative to markets for other
income securities and no active trading market exists for many
Senior Loans. In determining net asset value, the Fund will
utilize the valuations of Senior Loans furnished to Stein Roe by
an independent third-party pricing service. The pricing service
provider has no obligation to provide a valuation for a Senior
Loan if it believes that it cannot determine such a valuation.
There can be no assurance that the pricing service provider will
continue to provide these services or will provide a value for
each Senior Loan held by the Fund. However, Stein Roe believes
that if the pricing service provider declines to continue to act
as such for the Fund, or does not provide values for a significant
portion of the Senior Loans in the Fund's portfolio, one or more
alternative independent third-party pricing service providers will
be available to provide comparable services on similar terms.
A pricing service provider typically will value Senior Loans at
the mean of the highest bona fide bid and lowest bona fide ask
prices when current quotations are readily available. Senior
Loans for which current quotations are not readily available are
valued at a fair value as determined by the pricing service
provider using a wide range of market data and other information
and analysis, including credit considerations considered relevant
by the pricing service provider to determine valuations. The
procedures of any pricing service provider and its valuations will
be reviewed by the officers of Stein Roe under the general
supervision of the Board. If Stein Roe believes that a value
provided by a pricing service provider does not represent a fair
value as a result of information, specific to that Senior Loan or
Borrower or its affiliates, of which Stein Roe believes that the
pricing agent may not be aware, Stein Roe may in its discretion
value the Senior Loan subject to procedures approved by the Board
and reviewed on a periodic basis, and the Fund will utilize that
price instead of the price as determined by the pricing service
provider. In addition to such information, Stein Roe will
consider, among other factors, (i) the creditworthiness of the
Borrower and (ii) the current interest rate, the period until next
interest rate reset and maturity of such Senior Loan interests in
determining a fair value of a Senior Loan. If the pricing service
does not provide a value for a Senior Loan or if no pricing
service provider is then acting, a value will be determined by
Stein Roe in the manner described above.
It is expected that the Fund's net asset value will fluctuate as a
function of interest rate and credit factors. Although the Fund's
net asset value will vary, Stein Roe expects the Fund's policy of
acquiring interests in floating or variable rate Senior Loans to
minimize fluctuations in net asset value as a result of changes in
interest rates. Accordingly, Stein Roe expects the value of the
investment portfolio to fluctuate significantly less than a
portfolio of fixed-rate, longer term obligations as a result of
interest rate changes.
Other long-term debt securities for which market quotations are
not readily available are valued at fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. The value of interest rate
swaps, caps, and floors will be determined in accordance with a
formula and then confirmed periodically by obtaining a quotation.
Short-term debt securities with remaining maturities of 60 days or
less are valued at their amortized cost, which does not take into
account unrealized gains or losses. The Board believes that the
amortized cost represents a fair value for such securities.
Short-term debt securities 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 Stein Roe based on
quotations for comparable securities. Other assets and securities
held by the Fund for which these valuation methods do not produce
a fair value are valued by a method that the Board believes will
determine a fair value.
(2) The section of the Class A, B and C share Prospectus
"Multiple Share Classes - Class A Shares" is amended to provide
that purchases of Class A shares of $1 million to $5 million are
not subject to an initial sales charge but may be subject to a
1.00% Early Withdrawal Charge if the shares are sold within 18
months of the time of each purchase. On Class A share purchases
of $1 million or more, financial advisors receive a commission
from the Distributor as follows:
Amount Purchased Commission %
- ----------------- ------------
First $3 million 1.00%
Next $2 million 0.50%
Over $5 million 0.25%
(3) The minimum initial investment for the purchase of Class A, B
and C shares is $2,500.
761-36/356A-0200 February 1, 2000
