-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, POYuZs7fEOXw+qe8UNMT5QFg2GtEHrExSn4f9kwIZm7dWDpspeTeG6zNNW28Xxsj a4VnqqCMBRppqqvMtJMTjg== 0000891804-98-000301.txt : 19980302 0000891804-98-000301.hdr.sgml : 19980302 ACCESSION NUMBER: 0000891804-98-000301 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEIN ROE INSTITUTIONAL TRUST CENTRAL INDEX KEY: 0001020521 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07823 FILM NUMBER: 98552362 BUSINESS ADDRESS: STREET 1: ONE SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 8003382550 MAIL ADDRESS: STREET 1: ONE SOUTH WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 N-30D 1 STEIN ROE INSTITUTIONAL TRUST STEIN ROE MUTUAL FUNDS SEMIANNUAL REPORT DEC. 31, 1997 PHOTO OF: VARIOUS BONDS STEIN ROE FIXED INCOME FUNDS TAXABLE BOND FUND INSTITUTIONAL HIGH YIELD FUND Contents - ------------------------------------------------------------------------------- Q&A Institutional High Yield Fund .............................................. 1 Interview with the portfolio manager and a summary of investment activity Investments................................................................. 3 A complete list of investments with market values Financial Statements........................................................ 7 Statement of assets and liabilities, statement of operations and changes in net assets Notes to Financial Statements............................................... 13 Financial Highlights........................................................ 15 Selected per-share data Must be preceded or accompanied by a prospectus. Q&A - ------------------------------------------------------------------------------- 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: Jan. 3, 1997 INSTITUTIONAL HIGH YIELD FUND Q&A Q: HOW DID THE FUND PERFORM? A: For the six-month period ended Dec. 31, 1997, the Fund returned 7.70 percent, outpacing the Lipper peer group return of 6.78 percent. Q: WHAT DROVE PERFORMANCE? A: At the beginning of the reporting period, we found attractive yields among lower-tier issues. Later in the year, we invested in the increasing yields of higher and lower credit tiers. Because of the lower interest rate environment, we sold off shorter-term bonds or bonds selling on a yield-to-call basis, to purchase longer-term bonds or bonds that had better call features. We also boosted our weightings in zero coupon bonds. This move benefited performance given their attractive spreads during the positive interest rate background. Q: CAN YOU EXPLAIN ZERO COUPON BONDS? A: Zero coupon bonds are securities that are issued below face value and that pay no current interest. Their return is the difference between the issuance (or purchase) price and the final redemption price (par). Zero coupon bonds perform well if credits are improving and if interest rates are declining. If you aren't receiving an interest payment, you are taking on more credit risk. That's because your only return is principal. Many companies will issue zero coupon bonds if they need time to generate money and earnings before they can make interest payments. Q: WHAT ARE THE PROSPECTS FOR THESE SECURITIES? A: Demand for yield has made the fixed income market receptive to zero coupon bonds. Although we increased our exposure to zeros, we're mindful of the stability, strength and growth prospects of each issue's underlying company. These investments are still quite risky, so to the extent we see equity valuations change, or growth slows for these companies, we will shift to a less aggressive position. Q: THE HIGH YIELD MARKET ENJOYED FAVORABLE RETURNS AND RAPID GROWTH DURING THE LAST SIX MONTHS. DID THE PORTFOLIO BENEFIT? A: The high yield market did grow substantially during the reporting period -- from $442 billion in assets as of June 30, 1997, to $495 billion in assets on Dec. 31, 1997.* The portfolio benefited from this growth. Investor interest in high yield bonds is greater than ever. High yield bonds act a lot like equities in that they are affected by the earnings of the company issuing the bond. As a result, the high yield market has a higher correlation to the stock market than to other fixed income investments. Consequently, the high yield market followed the booming performance of the equity markets. On the other hand, as the stock market has continued to rise, investors have become increasingly concerned about equity valuations, and they find the high yield market a somewhat safer place to invest. High yield bonds offer fixed income investors diversification and a way to decrease their correlation to interest rates, which also has helped to drive demand. Q: HOW HAS THE FAVORABLE INTEREST RATE ENVIRONMENT AFFECTED DEMAND? A: A number of companies have either called or tendered for their bonds, particularly those rated BB. Investors who held called bonds needed to replace them, and demand spiked accordingly. Q: HOW HAS THE HIGH YIELD MARKET ACCOMMODATED THE INCREASED DEMAND? A: Issuance in the high yield market has not only met demand, but set records for both size and number of new issues. In the late 1980s, new high yield bonds were primarily issued by cable companies. Now, in the late 1990s, new issues in the high yield market have been dominated by the telecommunications and technology industries. We purchased several new issues in these industries, including Brooks-Fiber and Next Link (1.4 percent and 2.1 percent of total net assets, respectively). Q: MORE INTERNATIONAL ISSUES HAVE ENTERED THE HIGH YIELD MARKET. HOW HAS THAT AFFECTED THE PORTFOLIO? A: International bonds are providing additional supply and yield to the high yield market. We increased the portfolio's weighting in foreign bonds from 0.8 percent on Sept. 30, 1997, to 4.0 percent on Dec. 31, 1997, because we believe the adverse effects of the Asian currency crisis have created some long-term relative value among international issuers. A bond's credit rating is based largely on the country of issuance, and the ratings of many large companies with strong balance sheets and good credit prospects often are capped by the ratings of the country in which they are located. As a result, we are selective in our purchases. We're always mindful of a company's earnings prospects regardless of the country in which its bonds are issued. Q: WHAT'S YOUR OUTLOOK? A: We remain optimistic about the high yield market and believe spreads have the potential for some additional narrowing over the medium term. A continued favorable interest rate background will increase our confidence. Recent volatility in equity markets and the recent crisis in Asia might cause corporate earnings growth to slow from the levels experienced in previous years. We intend to upgrade the credit quality of the portfolio's holdings if the incremental yields of lower-tier credits continue to narrow or if equity prices fall. * Source: Credit Suisse/First Boston. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio holdings as of Dec. 31, 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 0.60 percent of average net assets, subject to 30 days' notice to the Fund. Absent this limit, total return would have been less. According to Lipper Analytical Services, Inc., an independent monitor of mutual fund performance, the median return for the Fund's high current yield fund peer group for the one-year period ended Dec. 31, 1997 was 12.77 percent. Investing in high yield bonds involves greater credit and other risks not associated with investing in higher-quality securities. Foreign investments involve market, political and currency risks not associated with other investments.
SR&F High Yield Portfolio - -------------------------------------------------------------------------------------------------------------------------------- Investments as of December 31, 1997 (Dollar Amounts In Thousands) (Unaudited) Principal Market LONG-TERM OBLIGATIONS (95.5%) Amount Value - -------------------------------------------------------------------------------------------------------------------------------- AEROSPACE & TRANSPORTATION EQUIPMENT (3.7%) Derlan Manufacturing 10.000% 1/15/07............................................................. $ 250 $ 263 L-3 Communications Corp. Series B 10.375% 5/01/07................................................ 500 541 *United Defense Industries 8.875% 11/15/07....................................................... 1,500 1,509 ---------- 2,313 AUTOMOTIVE (3.3%) Delco Remy International, Inc. 8.625% 12/15/07................................................... 1,000 1,013 Oxford Automotive 10.125% 6/15/07................................................................ 500 528 Penda Corporation Series B 10.750% 3/01/04....................................................... 500 505 ---------- 2,046 BUILDING & CONSTRUCTION (0.8%) Standard Pacific Corp. 8.500% 6/15/07............................................................ 500 500 BUSINESS SERVICES (2.1%) Iron Mountain Inc. 10.125% 10/01/06.............................................................. 500 553 Outdoor Systems, Inc. 8.875% 6/15/07............................................................. 750 784 ---------- 1,337 CABLE/MEDIA (8.6%) Adelphia Communications 9.250% 10/01/02.......................................................... 1,000 1,019 Capstar Broadcasting 9.250% 7/01/07.............................................................. 750 771 Frontiervision 11.000% 10/15/06.............................................................................. 250 277 *Zero Coupon (Effective Yield 12.227%) 9/15/07................................................ 750 551 *Garden State Newspaper 8.750% 10/01/09.......................................................... 1,000 1,003 *Perry-Judd 10.625% 12/15/07..................................................................... 1,000 1,025 Rogers Communications, Inc. (Yankee Issue) 9.125% 1/15/06........................................ 200 203 TV Azteca Series B 10.500% 2/15/07............................................................... 250 257 Young Broadcasting Corp. 10.125% 2/15/05......................................................... 250 264 ---------- 5,370 CONSUMER PRODUCTS (1.8%) Coleman Escrow Corp. Zero Coupon 5/15/01 11.125% (Effective Yield) First Priority Note................................................. 1,000 670 12.875% (Effective Yield) Second Priority Note................................................ 750 454 ---------- 1,124 CONTAINERS (2.1%) *Consumers International 10.250% 4/01/05......................................................... 500 550 Silgan Corp. 9.000% 6/01/09...................................................................... 750 769 ---------- 1,319 DOMESTIC TELECOMMUNICATIONS (16.6%) Brooks Fiber Properties 10.000% 6/01/07.......................................................... 750 862 *BTI Telecom Corp. 10.500% 9/15/07............................................................... 1,000 1,020 Concentric Network Corp. 12.750% 12/15/07........................................................ 1,000 1,028 GCI Inc. 9.750% 8/01/07.......................................................................... 1,000 1,035 *GlobalStar Telecommunications Ltd. 11.250% 6/15/04............................................................................... 500 501 10.750% 11/01/04.............................................................................. 1,000 973 ITC Deltacom Inc. 11.000% 6/01/07................................................................ 500 546 Knology Holdings Inc. 11.875% 10/15/07........................................................... 2,000 1,080 MGC Communications Inc. 13.000% 10/01/04......................................................... 1,000 1,003 Nextlink Communications 9.625% 10/01/07.......................................................... 1,250 1,284 *RCN Corp. 10.000% 10/15/07...................................................................... 1,000 1,038 ---------- 10,370 See accompanying notes to financial statements. SR&F High Yield Portfolio CONTINUED - -------------------------------------------------------------------------------------------------------------------------------- Principal Market Amount Value - -------------------------------------------------------------------------------------------------------------------------------- ENERGY - SERVICES (3.3%) Dawson Production Services 9.375% 2/01/07........................................................ $ 250 $ 263 Forcenergy Inc. Series B 8.500% 2/15/07.......................................................... 500 505 *Transamerican Energy 11.500% 6/15/02............................................................ 750 735 *United Refining Co. 10.750% 6/15/07............................................................. 500 526 ---------- 2,029 FINANCIAL (2.3%) Penncorp Financial Group 9.250% 12/15/03......................................................... 500 522 *Pera Financial Services 9.375% 10/15/02......................................................... 1,000 930 ---------- 1,452 FOOD & BEVERAGES (6.2%) *Archibald Candy Corp. 10.250% 7/01/04........................................................... 500 524 *NBTY Inc. 8.625% 9/15/07........................................................................ 1,000 1,000 Pepsi-Gemex S.A. Series B 9.750% 3/30/04......................................................... 1,000 1,030 Stater Brothers Holdings 9.000% 7/01/04.......................................................... 750 783 Windy Hill Pet Food Co. 9.750% 5/15/07........................................................... 500 520 ---------- 3,857 FOREIGN SOVEREIGN REGIONAL BONDS (3.8%) *Guangdong Enterprises (Yankee Issue) 8.875% 5/22/07............................................. 1,000 918 *Pycsa Panama 10.280% 12/15/12................................................................... 1,500 1,469 ---------- 2,387 FOREIGN TELECOMMUNICATIONS (4.9%) *Comtel Brasileira Ltd. (Yankee Issue) 10.750% 9/26/04........................................... 250 242 Esprit Telecom Group 11.500% 12/15/07............................................................ 1,000 1,033 Metronet Communications 12.000% 8/15/07............................................................................... 1,000 1,153 Zero Coupon (Effective Yield 10.750%) 11/01/07................................................ 1,000 613 ---------- 3,041 HEALTH SERVICES & EQUIPMENT (1.7%) Dynacare Inc. (Yankee Issue) 10.750% 1/15/06..................................................... 500 526 *Leiner Health 9.625% 7/01/07.................................................................... 500 532 ---------- 1,058 HOSPITALS & NURSING HOME CARE (5.1%) *Healthcor Holdings Inc. 11.000% 12/1/04......................................................... 1,000 1,023 *Integrated Health Services 9.500% 9/15/07....................................................... 400 412 *Sun Healthcare Group, Inc. 9.500% 7/01/07....................................................... 500 515 Tenet Healthcare Corp. 8.625% 1/15/07............................................................ 750 772 Vencor Inc. 8.625% 7/15/07....................................................................... 500 499 ---------- 3,221 HOTELS & ENTERTAINMENT (5.4%) *Alliance Gaming Corp. 10.000% 8/01/07........................................................... 500 503 *Boyd Gaming Corp. 9.500% 7/15/07................................................................ 500 524 Premier Parks Inc. 9.750% 1/15/07................................................................ 250 266 Prime Hospitality Series B 9.750% 4/01/07........................................................ 1,000 1,060 Speedway Motorsports Inc. 8.500% 8/15/07......................................................... 1,000 1,020 ---------- 3,373 MACHINERY & FABRICATED METAL PRODUCTS (4.2%) *BWAY Corp. 10.250% 4/15/07...................................................................... 350 381 Hayes Wheels International, Inc. Series B 9.125% 7/15/07......................................... 500 517 *Hylsa SA & CV 9.250% 9/15/07.................................................................... 700 693 *IMPSA 9.500% 5/31/02............................................................................ 500 480 Titan Wheel International Inc. 8.750% 4/01/07.................................................... 500 522 ---------- 2,593 MAJOR CHEMICALS (0.8%) *Huntsman Corp. 9.500% 7/01/07................................................................... 500 520 See accompanying notes to financial statements. SR&F High Yield Portfolio CONTINUED - -------------------------------------------------------------------------------------------------------------------------------- Principal Market Amount Value - -------------------------------------------------------------------------------------------------------------------------------- MISCELLANEOUS SERVICES (0.8%) Dyncorp Inc. 9.500% 3/01/07...................................................................... $ 500 $ 510 PAPER (1.1%) APP International Finance Company (Yankee Issue) 10.250% 10/01/00.............................................................................. 150 138 *Indah Kiat Finance 10.000% 7/01/07.............................................................. 500 410 Specialty Paperboard Inc. 9.375% 10/15/06........................................................ 150 154 ---------- 702 RESTAURANTS (0.4%) AFC Enterprises 10.250% 5/15/07.................................................................. 250 263 RETAIL (5.3%) Cole National Group 9.875% 12/31/06.............................................................. 200 214 *Holmes Products Corp. 9.875% 11/15/07........................................................... 1,000 1,018 Marsh Supermarkets, Inc. 8.875% 8/01/07.......................................................... 1,000 1,005 Quality Food Centers Series B 8.700% 3/15/07..................................................... 500 541 Specialty Retailers Series B 8.500% 7/15/05...................................................... 500 510 ---------- 3,288 RUBBER, PLASTIC & RELATED MATERIALS (1.8%) *Burke Industries Inc. 10.000% 8/15/07........................................................... 250 260 Key Plastics Inc. Series B 10.250% 3/15/07....................................................... 500 530 Plastic Containers Inc. Series B 10.000% 12/15/06................................................ 350 373 ---------- 1,163 SANITARY SERVICES (1.0%) *Allied Waste Industries Inc. Zero Coupon (Effective Yield 11.300%) 6/01/07...................... 900 632 TECHNOLOGY SERVICES (1.2%) *Viasystems Inc. 9.750% 6/01/07.................................................................. 750 774 TEXTILE & APPAREL (2.7%) *Pillowtex Corporation 9.000% 12/15/07........................................................... 750 769 Polysindo International Finance 9.375% 7/30/07................................................... 1,000 720 William Carter 10.375% 12/01/06.................................................................. 200 210 ---------- 1,699 TRANSPORTATION & TRANSPORTATION EQUIPMENT (1.7%) Coach USA Inc. Series B 9.375% 7/01/07........................................................... 500 515 Greyhound Lines Series B 11.500% 4/15/07......................................................... 500 552 ---------- 1,067 UTILITIES (2.1%) AES Corporation 8.375% 8/15/07................................................................... 750 748 California Energy Company Inc. 9.500% 9/15/06.................................................... 500 540 ---------- 1,288 WIRELESS COMMUNICATIONS (0.7%) Dobson Communications Corp. 11.750% 4/15/07...................................................... 250 264 Pricecellular Wire 10.750% 11/01/04.............................................................. 150 163 ---------- 427 ---------- TOTAL LONG-TERM OBLIGATIONS (Cost basis $58,641)............................................................................................. 59,723 - -------------------------------------------------------------------------------------------------------------------------------- See accompanying notes to financial statements. - -------------------------------------------------------------------------------------------------------------------------------- Principal Market Amount Value - -------------------------------------------------------------------------------------------------------------------------------- Short Term Obligation (1.6%) COMMERCIAL PAPER Associates Corp. of North America 6.750% 1/02/98 (Amortized cost $990)......................................................................... $ 990 $ 990 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (97.1%) (Cost basis $59,631)............................................................................................. 60,713 OTHER ASSETS, LESS LIABILITIES (2.9%)............................................................................ 1,795 ---------- TOTAL NET ASSETS (100%).......................................................................................... $62,508 ========== - -------------------------------------------------------------------------------------------------------------------------------- *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 December 31, 1997, the aggregate value of the Portfolio's private placement securities was $24,573, which represented 39.3 percent of net assets. See accompanying notes to financial statements.
Stein Roe Institutional High Yield Fund Statement of Assets and Liabilities December 31, 1997 (All amounts in thousands, except per-share amounts) (Unaudited)
ASSETS Investment in SR&F High Yield Portfolio, at value ....................... $115 Cash .................................................................... 2 Other assets ............................................................ 19 ---- Total Assets ......................................................... $136 ---- LIABILITIES Accrued expenses payable ................................................ 14 Payable to investment adviser and transfer agent ........................ 6 ---- Total Liabilities .................................................... 20 ---- Net Assets ........................................................... $116 ==== CAPITAL Paid-in capital ......................................................... $112 Net unrealized appreciation on investments .............................. 3 Accumulated net realized gains on investments ........................... 1 ---- Total Capital (Net Assets) ........................................... $116 ==== Shares Outstanding (Unlimited Number Authorized) ........................ 11 ==== Net Asset Value (Capital) Per Share .....................................$10.41 ====== See accompanying notes to financial statements.
Stein Roe Institutional High Yield Fund Statement of Operations For the Six Months Ended December 31, 1997 (All amounts in thousands) (Unaudited)
INTEREST INCOME......................................................... $ 5 ------ EXPENSES Trustees' fees.......................................................... 29 Amortization of organizational expenses................................. 25 SEC and state registration fees......................................... 13 Accounting fees......................................................... 12 Legal and audit fees.................................................... 7 Other................................................................... 4 ------ Total Expenses....................................................... 90 Reimbursement of expenses by investment adviser......................... (90) ------ Net Expenses......................................................... -- ------ Net Investment Income................................................ 5 ------ REALIZED AND UNREALIZED GAINS ON INVESTMENTS Net realized gains on investments....................................... 2 Net change in unrealized appreciation or depreciation on investments.... 1 ------ Net Gains on Investments............................................. 3 ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ 8 ====== See accompanying notes to financial statements.
Stein Roe Institutional High Yield Fund Statements of Changes in Net Assets (All amounts in thousands) (Unaudited)
SIX MONTHS PERIOD ENDED ENDED DECEMBER 31, JUNE 30, 1997 1997(A) OPERATIONS Net investment income............................................................... $ 5 $ 4 Net realized gains on investments................................................... 2 1 Net change in unrealized appreciation or depreciation on investments................ 1 2 ------ ------ Net Increase in Net Assets Resulting from Operations............................. 8 7 ------ ------ DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income................................................ (5) (4) Distributions from net capital gains................................................ (2) -- ------ ------ Total Distributions.............................................................. (7) (4) ------ ------ SHARE TRANSACTIONS Subscriptions to fund shares........................................................ -- 100 Investment income dividends reinvested.............................................. 6 4 Capital gains distributions reinvested.............................................. 2 -- ------ ------ Net Increase from Share Transactions............................................. 8 104 ------ ------ Net Increase in Net Assets....................................................... 9 107 TOTAL NET ASSETS Beginning of Period................................................................. 107 -- ------ ------ End of Period....................................................................... $116 $107 ====== ====== ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST Subscriptions to fund shares ....................................................... -- 10 Investment income dividends reinvested.............................................. 1 -- Capital gains distributions reinvested.............................................. -- -- ------ ------ Net Increase in Fund Shares...................................................... 1 10 Shares outstanding at beginning of period........................................... 10 -- ------ ------ Shares outstanding at end of period................................................. 11 10 ====== ====== (a) From commencement of operations on January 3, 1997. See accompanying notes to financial statements.
SR&F High Yield Portfolio Statement of Assets and Liabilities December 31, 1997 (All Amounts in Thousands) (Unaudited)
ASSETS Investments, at market value.................................................$60,713 Cash......................................................................... 505 Accrued interest receivable.................................................. 1,310 Other assets................................................................. 19 ------- Total Assets.............................................................. 62,547 ------- LIABILITIES Payable to investment adviser and transfer agent............................. 30 Other liabilities............................................................ 9 ------- Total Liabilities......................................................... 39 ------- Net Assets Applicable to Investors' Beneficial Interests.....................$62,508 ======= See accompanying notes to financial statements.
SR&F High Yield Portfolio Statement of Operations For the Six Months Ended December 31, 1997 (All Amounts in Thousands) (Unaudited)
INTEREST INCOME..............................................................$2,316 ------ EXPENSES Management fees.............................................................. 129 Accounting fees.............................................................. 13 Trustees' fees............................................................... 5 Transfer agent fees.......................................................... 3 Other........................................................................ 5 ------ Total Expenses............................................................ 155 ------ Net Investment Income........................................................ 2,161 ------ REALIZED AND UNREALIZED GAINS ON INVESTMENTS Net realized gains on investments............................................ 876 Net change in unrealized appreciation or depreciation on investments......... 533 ------ Net Gains on Investments.................................................. 1,409 ------ Net Increase in Net Assets Resulting from Operations.........................$3,570 ====== See accompanying notes to financial statements.
SR&F High Yield Portfolio Statement of Changes in Net Assets (All amounts in thousands) (Unaudited)
SIX MONTHS YEAR ENDED ENDED DEC. 31, JUNE 30, 1997 1997(A) OPERATIONS Net investment income..............................................................$ 2,161 $ 874 Net realized gains on investments.................................................. 876 336 Net change in unrealized appreciation or depreciation of investments............... 533 549 ------- ------- Net Increase in Net Assets Resulting from Operations............................ 3,570 1,759 ------- ------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS Contributions...................................................................... 22,026 38,807 Withdrawals........................................................................ (2,361) (1,293) ------- ------- Net Increase from Transactions in Investors' Beneficial Interest................ 19,665 37,514 ------- ------- Net Increase in Net Assets...................................................... 23,235 39,273 TOTAL NET ASSETS Beginning of Period................................................................ 39,273 -- ------- ------- End of Period......................................................................$62,508 $39,273 ======= ======= (a) From commencement of operations on November 1, 1996. See accompanying notes to financial statements.
Notes to Financial Statements - ------------------------------------------------------------------------------- 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 December 31, 1997, Stein Roe High Yield Fund, Stein Roe Institutional Client High Yield Fund and Stein Roe Institutional High Yield Fund owned 50.4 percent, 49.4 percent and 0.2 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 60 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 December 31, 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 December 31, 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 one 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 December 31, 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. In addition, 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 subtransfer 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 December 31, 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 December 31, 1997 were $89,454 and $69,288, respectively. At December 31, 1997, cost of investments for financial reporting purposes and for federal tax purposes were the same. Unrealized appreciation and depreciation on investments were $1,827 and $745, respectively. Financial Highlights Stein Roe Institutional High Yield Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
SIX MONTHS PERIOD ENDED ENDED DECEMBER 31, JUNE 30, 1997 1997(A) (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD............................................$ 10.00 $ 10.27 ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income........................................................ 0.40 0.45 Net realized and unrealized gains on investments............................. 0.27 0.37 ------- ------- Total from investment operations........................................... 0.67 0.82 DISTRIBUTIONS Net investment income........................................................ (0.40) (0.45) Net realized gains........................................................... -- (0.23) ------- ------- Total distributions........................................................ (0.40) (0.68) ------- ------- NET ASSET VALUE, END OF PERIOD..................................................$ 10.27 $ 10.41 ======= ======= Ratio of net expenses to average net assets (b)................................. 0.72%* 0.60%* Ratio of net investment income to average net assets (c)........................ 8.13%* 8.35%* Total return (c)................................................................ 6.89%+ 7.70%+ Net assets, end of period (000's)...............................................$ 107 $ 116 * 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, and 160.45 percent for the six months ended December 31, 1997. (c) Computed giving effect to Adviser's expense limitation undertaking.
Financial Highlights CONTINUED SR&F High Yield Portfolio
SIX MONTHS PERIOD ENDED ENDED DEC.31, JUNE 30, 1997 1997 (A) (UNAUDITED) Ratio of expenses to average net assets......................................... 0.89%* 0.60%* Ratio of net investment income to average net assets............................ 8.24%* 8.35%* Portfolio turnover rate ........................................................ 168%+ 282%* *Annualized +Not annualized. (a) From commencement of operations on November 1, 1996.
Stein Roe Institutional Trust TRUSTEES Timothy K. Armour President, Mutual Fund Division and Director, Stein Roe & Farnham Incorporated William W. Boyd Chairman and Director, Sterling Plumbing Group Inc. Lindsay Cook Senior Vice President, Liberty Financial Companies, Inc. Douglas A. Hacker Senior Vice President and Chief Financial Officer, United Airlines Janet Langford Kelly Senior Vice President, Secretary and General Counsel, Sara Lee Corporation Charles R. Nelson Van Voorhis Professor of Political Economy, University of Washington Thomas C. Theobald Managing Partner, William Blair Capital Partners OFFICERS Timothy K. Armour, President William D. Andrews, Executive Vice President Thomas W. Butch, Executive Vice President Loren A. Hanson, Executive Vice President Hans P. Ziegler, Executive Vice President Gary A. Anetsberger, Senior Vice President, Chief Financial Officer Philip J. Crosley, Vice President Michael T. Kennedy, Vice President Stephen F. Lockman, Vice President Lynn C. Maddox, Vice President Anne E. Marcel, Vice President Jane M. Naeseth, Vice President Nicolette D. Parrish, Vice President, Assistant Secretary Heidi J. Walter, Vice President Stacy H. Winick, Vice President, Secretary Janet B. Rysz, Assistant Secretary Sharon R. Robertson, Controller 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 Ernst & Young LLP Independent Public Accountants Stein Roe & Farnham One South Wacker Drive Chicago, IL 60606-4685 1-800-322-1130 http://www.steinroe.com Liberty Securities Corporation, Distributor Member SIPC -----END PRIVACY-ENHANCED MESSAGE-----