STEIN ROE ADVISOR FUNDS
ANNUAL REPORT
JUNE 30, 2000
[BRIDGE PHOTO]
STEIN ROE ADVISOR FUND
TAX-EXEMPT FUND
STEIN ROE ADVISOR HIGH-YIELD MUNICIPALS FUND
[STEIN ROE LOGO]
STEIN ROE MUTUAL FUNDS
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SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
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Contents
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Fund Performance............................................................ 1
How the Stein Roe Advisor High-Yield Municipals Fund has done over time
Questions & Answers......................................................... 2
Interview with the portfolio manager and a summary of investment activity
Portfolio of Investments.................................................... 3
A complete list of investments with market values
Financial Statements........................................................ 10
Statements of assets and liabilities, operations and changes in net assets
Notes to Financial Statements................................................ 16
Financial Highlights......................................................... 18
Selected per-share data
Report of Independent Auditors............................................... 19
Must be preceded or accompanied by a prospectus.
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Fund Performance
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To evaluate a Fund's historical performance, one can look at the cumulative
return percentage, the average annual return percentage or the growth of a
hypothetical $10,000 investment. Below we compare Stein Roe Advisor High-Yield
Municipals Fund with its benchmark. Each performance figure includes changes in
a Fund's share price, plus reinvestment of any dividends (net investment income)
and capital gain distributions (the profits the fund earns when it sells
fixed-income securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 2000
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1 Year 5 Years 10 Years
---------------------------------
STEIN ROE ADVISOR HIGH YIELD MUNICIPALS FUND -2.37 4.71 5.71
Lehman Brothers Municipal Bond Index 3.25 5.88 7.06
Growth of a $10,000 investment for the periods ended June 30.
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STEIN ROE ADVISOR HIGH-YIELD MUNICIPALS FUND
[CHART DATA]
STEIN ROE
ADVISOR LEHMAN
HIGH-YIELD BROTHERS
MUNICIPALS MUNICIPAL
FUND BOND INDEX
6/30/90 10000 10000
6/30/91 10850 10901
6/30/92 11795 12184
6/30/93 12687.9 13641.3
6/30/94 12774.2 13664.5
6/30/95 13838.3 14869.6
6/30/96 14748.9 15857
6/30/97 16017.2 17165.2
6/30/98 17305 18651.7
6/30/99 17841.5 19166.5
6/30/00 17418.7 19789.4
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. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. Total return figures do not include sales
charges or contingent deferred sales charges (CDSC). Class K shares may be
purchased only through certain intermediaries, including certain bank trust
departments, wrap fee programs and retirement plans. The Advisor currently
limits expenses on Class K shares to 1.10% of average net assets. Absent this
limit, total return would be less. Historical performance for Class K shares for
the period prior to 2/4/98 is based on the performance of the SR&F High-Yield
Municipals 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. This graph compares the performance
of the Stein Roe Advisor High-Yield Municipals Fund to the Lehman Brothers
Municipal Bond Index, an unmanaged group of municipal bonds not associated with
any Stein Roe fund. Unlike mutual funds, it is not possible to invest directly
in an index.
1
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Questions & Answers
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FUND DATA
FUND OBJECTIVE:
Seeks a high level of total return consisting of current income exempt from
ordinary federal income tax and opportunities for capital appreciation.
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AN INTERVIEW WITH MAUREEN NEWMAN, PORTFOLIO MANAGER OF STEIN ROE ADVISOR
HIGH-YIELD MUNICIPALS FUND AND THE SR&F HIGH-YIELD MUNICIPALS PORTFOLIO
Q: HOW DID THE FUND PERFORM DURING THE 12-MONTH PERIOD ENDED JUNE 30, 2000?
A: In an extremely difficult year for the municipal bond market, the Stein Roe
Advisor High-Yield Municipals Fund had a total return of negative 2.37% for the
12-month period ended June 30, 2000. The Lehman Brothers Municipal Bond Index, a
broad gauge of the municipal market's performance, returned 3.25% for the same
period.
Q: WHAT CAUSED THE FUND'S WEAK RETURN FOR THE PERIOD?
A: The weak return was largely attributable to rising interest rates throughout
the period. Record economic growth in the United States and the recovery of
several foreign economies spawned concerns that inflationary increases could be
just around the corner. In an effort to slow the economy and head off inflation,
the Federal Reserve Board (the Fed) increased key short-term interest rates five
times during the 12-month period, for a total increase of 1.5%. Both municipal
bonds and Treasurys experienced price declines as a result of the market's
reaction to these interest rate hikes. However, municipal bonds are less
volatile than Treasurys, and thus experienced smaller price drops than Treasury
bonds as interest rates rose.
Q: DID YOU MAKE ANY CHANGES IN RESPONSE TO RISING INTEREST RATES?
A: A portfolio's price sensitivity to interest rate changes is measured by its
duration. The shorter the duration, the less the Fund's value is impacted by
interest rate fluctuations, and vice versa. Throughout the 12-month period, I
maintained a neutral duration for the Fund. This means that the Portfolio was
neither more nor less sensitive to rising interest rates than the overall
high-yield market. I chose this stance because it was unclear how interest rate
hikes would be interpreted--either as preemptive measures to guard against
inflation or as an indication that inflationary pressures had already taken
hold. As it turns out, the market reacted in a generally negative way to the
rate increases, so the Portfolio's performance was not adversely impacted by
this neutral stance.
Q: WERE THERE ANY SECTORS THAT HAD A SIGNIFICANT IMPACT ON THE FUND'S
PERFORMANCE?
A: During the first half of the fiscal year, there were some attractive values
in the hospital sector. The industry had come under pressure due to a
combination of cutbacks in Medicare reimbursement, some well-publicized problems
with scattered facilities across the country, and the pullback on the part of
some municipal bond insurers from lower-rated hospitals. That environment
produced selective opportunities for the Portfolio to add high-yielding hospital
bonds at attractive prices. Since we were underweighted in this underperforming
sector, the Fund's relative performance was helped.
Q: WHAT IS YOUR OUTLOOK FOR THE YEAR AHEAD?
A: In the months to come, we anticipate stronger performance in the bond market.
We believe the Fed's efforts to rein in the economy will be successful, and that
economic growth will begin to slow. If this anticipated slowdown does occur, we
believe that interest rates will stabilize, creating an environment in which the
bond market could rally. However, there are still strong indications that things
could go either way. Consumer confidence and spending remain very high. Workers
continue to demand higher wages. The prices of oil and other commodities
continue to rise. Any of these factors could trigger higher inflation, which
would have a negative impact on the bond market.
As for high-yield municipal bonds, we believe they will perform well
relative to their investment-grade counterparts. The supply and demand imbalance
which caused them to underperform during the period should subside in the months
to come. In addition, we expect municipal bonds to remain an attractive
alternative to taxable fixed-income securities for investors in higher tax
brackets.
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.
Total return includes changes in share price and reinvestment of income and
capital gains distributions, if any. Portfolio holdings are disclosed as a
percentage of SR&F High-Yield Municipals Portfolio as of 6/30/00 and are subject
to change. Investing in high-yield bonds involves greater credit risks than
investing in higher-quality bonds. Income distributions are exempt from federal
income taxes but may be subject to the federal alternative minimum tax and state
and local taxes. Capital gains, if any, are also taxable. The Lehman Brothers
Municipal Bond Index is an unmanaged group of investment-grade municipal bonds;
it is not available for direct investments.
High-yield investing offers the potential for high income and attractive total
returns, but also involves certain risks. These include credit risks associated
with lower-rated bonds, changes in interest rates, and certain risks associated
with foreign investments.
2
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<TABLE>
SR&F High-Yield Municipals Portfolio
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June 30, 2000, (All amounts in thousands)
<CAPTION>
MUNICIPAL BONDS - 94.2% Par Value
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EDUCATION - 3.8%
EDUCATION - 1.2%
<S> <C> <C>
IL State Development Finance Authority, Latin School of Chicago, Series 1998, 5.650% 8/1/28... $ 1,725 $ 1,518
MN Victoria, Holy Family Catholic High School, Series 1999 A,5.875% 9/1/29.................... 1,200 1,065
WV State University, Series 2000 A, (a) 4/1/19................................................ 1,250 412
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2,995
STUDENT LOAN - 2.6%
NE Nebhelp, Inc., Series 1993 A-6, 6.450% 6/1/18, (b)......................................... 4,000 4,248
NM State Educational Assistance Foundation, Series 1996 A-2, 6.650% 11/1/25................... 1,955 2,030
TX Brazos Higher Educational Facilities Authority, Series 1993 C-2, 5.875% 6/1/04............. 390 391
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6,669
HEALTHCARE - 19.1%
CONGREGATE CARE RETIREMENT - 5.1%
FL Orange County Health Facilities Authority, Orlando Lutheran Towers, Inc., Series 1996,
8.625% 7/1/20.............................................................................. 3,000 3,128
MA State Development Finance Agency, Series 1999 A:
5.625% 7/1/15.............................................................................. 500 421
5.750% 7/1/23.............................................................................. 250 201
NJ State Economic Development Authority, Winchester Gardens, Series 1996 A,
8.625% 11/1/25............................................................................. 2,000 2,110
PA Lancaster Industrial Development Authority, Garden Spot Village, Series 2000 A,
7.625% 5/1/31.............................................................................. 500 491
TN Metropolitan Government, Nashville and Davidson County, Blakeford at Green Hills,
Series 1998, 5.650% 7/1/24................................................................. 1,500 1,136
TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligation Group:
Series 1998 A, 5.900% 11/15/25........................................................... 2,100 1,646
Series 1999, 6.000% 11/15/29............................................................. 500 393
WI State Health & Educational Facilities Authority:
Attic Angel Obligated Group, 5.750% 11/15/27............................................... 1,250 984
Clement Manor, Series 1998, 5.750% 8/15/24................................................. 3,000 2,389
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12,899
HEALTH SERVICES - 0.1%
MA State Development Finance Agency, Boston Biomedical Research Institute, Series 1999,
5.650% 2/1/19.............................................................................. 250 217
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HOSPITAL - 10.2%
AZ Health Facilities Authority, Phoenix Memorial Hospital, Series 1991, 8.125% 6/1/12......... 2,500 2,516
CO La Junta, Arkansas Valley Regional Medical Center, Series 1999, 6.100% 4/1/24.............. 500 434
CO State Health Care Facilities Authority, National Jewish Medical & Research Center,
Series 1998, 5.375% 1/1/23................................................................. 250 194
FL Orange County Health Facilities Authority, Orlando Regional Healthcare System,
Series 1999, 6.000% 10/1/26................................................................ 875 833
IL Southwestern Illinois Development Authority, Anderson Hospital,
Series 1999:
5.500% 8/15/20........................................................................... 500 402
5.625% 8/15/29........................................................................... 250 196
IN State Health Facilities Financing Authority, Riverview Hospital,
Series 1999, 5.500% 8/1/24................................................................. 575 465
KS Wichita, CSJ Health System of Wichita, Inc., Series 1991 X,
7.000% 11/15/18............................................................................ 2,000 2,102
LA State Public Facilities Authority, Touro Infirmary, Series 1999,
5.625% 8/15/29............................................................................. 1,500 1,243
MA State Health & Educational Facilities Authority, Dana Farber
Cancer Institute, Series 1995 G-1, 6.250% 12/1/22.......................................... 2,000 1,944
MI Dickinson County, Series 1999, 5.800% 11/1/24.............................................. 1,300 1,004
3
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SR&F High-Yield Municipals Portfolio Continued
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Par Value
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<S> <C> <C>
HEALTHCARE - CONT.
HOSPITALS - (CONTINUED)
MI Flint Hospital Building Authority, Hurley Medical Center,
Series 1998 B, 5.375% 7/1/28............................................................... $ 1,250 $ 894
MI State Hospital Finance Authority, Detroit Medical Center,
Series 1998 A, 5.250% 8/15/28.............................................................. 1,000 705
MN Maplewood, Healtheast, Inc., Series 1996, 5.700% 11/15/02.................................. 500 486
NC State Medical Care Commission, Stanley Memorial Hospital,
Series 1999, 6.375% 10/1/29................................................................ 1,000 994
NH State Higher Educational & Health Facilities Authority,
Littleton Hospital Assoc., Inc., Series 1998 A, 6.000% 5/1/28.............................. 1,000 794
OH Franklin County, Doctors Ohio Health Corp., Series 1998 A,
5.600% 12/1/28............................................................................. 2,650 1,904
OH Highland County Joint Township Hospital District, Series 1999,
6.750% 12/1/29............................................................................. 1,250 1,066
OH Miami County, Upper Valley Medical Center, Inc., Series 1996-A,
6.375% 5/15/26............................................................................. 1,015 902
PA Philadelphia Hospitals & Higher Education Facilities Authority,
Temple University Hospital, Series 1997, 5.875% 11/15/23................................... 2,110 1,749
TX Richardson Hospital Authority, Baylor Richardson Medical Center,
Series 1998, 5.625% 12/1/28................................................................ 1,200 940
TX Tyler Health Facilities Development Corp., Mother Frances Hospital,
Series 1997 A, 5.625% 7/1/13............................................................... 1,785 1,552
WA State Health Care Facilities Authority, Sacred Heart Medical Center,
Series 1992, 6.875% 2/15/12................................................................ 1,500 1,575
WV State Hospital Finance Authority, Series 2000 A, 6.750% 9/1/30............................. 1,000 996
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25,890
INTERMEDIATE CARE FACILITIES - 0.6%
IL State Development Finance Authority, Hoosier Care, Inc., Series 1999-A, 7.125% 6/1/34...... 150 133
IN Health Facilities Financing Authority Revenue, Hoosier Care Project,
Series A, 7.125% 6/1/34.................................................................... 1,500 1,331
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1,464
NURSING HOME - 3.1%
AK Juneau, St. Ann's Care Center, Series 1999, 6.875% 12/1/25................................. 700 631
CO State Health Facilities Authority, Volunteers of America Care Facilities, Inc., Series 1999 A,
5.750% 7/1/10.............................................................................. 1,095 980
IN State Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998,
6.400% 12/1/33............................................................................. 1,500 1,247
MA State Development Finance Agency, Alliance Health Care Facilities, Series 1999,
7.100% 7/1/32.............................................................................. 855 783
MN Carlton Inter-Faith Social Services, Inc., Series 2000, 7.750% 4/1/29...................... 750 726
MN Minneapolis, Walker Methodist Senior Services Group, Series 1998-C, 6.000% 11/15/28........ 1,300 1,082
MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.875% 3/1/29........................ 900 719
MN Sartell, Foundation for Healthcare, Series 1999-A,
6.625% 9/1/29.............................................................................. 2,000 1,743
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7,911
HOUSING - 8.2%
ASSISTED LIVING/SENIOR - 2.4%
DE Kent County, Heritage at Dover, Series 1999, 7.625% 1/1/30................................. 1,500 1,427
GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000% 11/15/29........... 1,000 906
LA State Public Facilities Authority, Progressive Healthcare Providers, Inc., Series 1998,
6.375% 10/1/28............................................................................. 2,000 1,725
NC State Medical Care Commission, DePaul Community Facilities Project, Series 1999,
7.625% 11/1/29............................................................................. 1,250 1,198
NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999, 5.875% 5/1/19...... 1,100 910
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6,166
4
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SR&F High-Yield Municipals Portfolio Continued
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Par Value
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<S> <C> <C>
HOUSING - CONT.
MULTI-FAMILY - 3.9%
CO State Health Facilities Authority, Birchwood Manor Series 1991-A, 7.250% 4/1/11............ $ 595 $ 606
FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000,
7.500% 7/1/40.............................................................................. 750 751
FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000-A,
7.450% 7/1/40.............................................................................. 750 746
FL Housing Finance Agency, Palm Aire Retirement Facility Project, Series 1989-S,
10.000% 1/1/20, (d)........................................................................ 2,568 2,517
GA Clayton County Housing Authority, Magnolia Park Apartments, Series 1999-A,
6.250% 6/1/30.............................................................................. 1,000 884
IL State Development Finance Authority, Catholic Charities Housing Development Corp.,
Series 1993-C, 5.950% 1/1/09............................................................... 1,400 1,334
IL State Housing Development Authority, Series 1991-C, 7.400% 7/1/23.......................... 140 145
IN New Castle, Raintree Apartments, Series 1988-B, (a) 3/1/18, (d)............................ 30,655 77
MO State Health & Educational Facilities Authority, Lutheran Senior Services, Series 1997,
5.750% 2/1/17.............................................................................. 2,000 1,789
OH Greater Allen County Housing Development Authority, Steiner-McBride Apartments,
10.250% 9/1/03............................................................................. 1,130 1,130
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9,979
SINGLE FAMILY - 1.9%
IA State Housing Finance Authority, Series 1984-A, (a) 9/1/16................................. 7,590 1,267
ID State Housing Agency, Series 1991-B, 7.500% 7/1/24......................................... 1,405 1,448
MT State Housing Board:
Series 1991 B-2, 7.500% 4/1/23............................................................. 310 317
Series 1991 B-1, 7.300% 10/1/17............................................................ 285 292
UT State Housing Finance Agency:
Series 1991 B-2, 7.750% 1/1/23............................................................. 50 51
Series 1991 C-3, 7.550% 7/1/23............................................................. 120 123
WA State Housing Finance Commission:
Series 1991 C,
(a) 1/1/22............................................................................... 980 200
(a) 7/1/22............................................................................... 1,090 214
(a) 1/1/23............................................................................... 1,090 207
(a) 7/1/23............................................................................... 1,090 199
(a) 1/1/24............................................................................... 1,090 192
(a) 7/1/24............................................................................... 1,090 185
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4,695
INDUSTRIAL - 9.8%
FOOD PRODUCTS - 2.2%
IN Hammond, American Maize Products Co., Series 1994,
8.000% 12/1/24............................................................................. 4,000 4,289
MI State Strategic Fund, Michigan Sugar Co., Carollton Project,
Series 1998-C, 6.550% 11/1/25.............................................................. 1,500 1,309
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5,598
FOREST PRODUCTS - 4.4%
GA Rockdale County Development Authority, Solid Waste Disposal, Visy Paper, Inc.,
Series 1993, 7.500% 1/1/26................................................................. 1,000 1,024
IN Jasper County, Georgia Pacific Corp., Series 1999, 5.600% 4/1/29........................... 1,000 844
LA De Soto Parish, International Paper Co., Series-A, 7.700% 11/1/18.......................... 2,500 2,689
MS Lowndes County, Weyerhaeuser Corp., Series 1992-A, 6.800% 4/1/22........................... 5,995 6,542
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11,099
5
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SR&F High-Yield Municipals Portfolio Continued
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Par Value
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<S> <C> <C>
INDUSTRIAL - CONT.
METALS & MINING - 2.3%
IN State Development Finance Authority, Inland Steel, Series A, 5.750% 10/1/11................ $ 5,000 $ 4,338
NV State Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A,
8.000% 9/1/14.............................................................................. 250 248
VA Greensville County Industrial Development Authority, Wheeling Steel, Series 1999 A:
6.375% 4/1/04............................................................................ 115 111
7.000% 4/1/14............................................................................ 555 505
VA Peninsula Ports Authority, Ziegler Coal Project, Series 1997, 6.900% 5/2/22................ 825 661
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5,863
OIL AND GAS - 0.9%
TX Texas City Industrial Development Corp., Arco Pipe Line Co. Project, Series 1990,
7.375% 10/1/20............................................................................. 2,000 2,359
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OTHER - 13.7%
REFUNDED/ESCROWED (e) CO Adams County, Series 1991B:
11.250% 9/1/11 (b)......................................................................... 325 465
11.250% 9/1/11............................................................................. 360 527
11.250% 9/1/11............................................................................. 220 329
11.250% 9/1/12............................................................................. 1,440 2,189
CO Denver City & County Airport, Series D, 7.750% 11/15/21.................................... 830 881
CO State Health Facilities Authority, Healthtone, Series 1991B, 8.500% 2/15/21................ 3,250 3,396
FL Leesburg, Leesburg Regional Medical Center, Series 1991A, 7.375% 7/1/11.................... 775 829
IL Chicago, Skyway Toll Bridge, Series 1994, 6.750% 1/1/17.................................... 1,500 1,619
IL Health Facility Authority, Edward Hospital Association Project, Series 1992, 7.000% 2/15/22 685 722
IL Health Facility Authority, United Medical Center-Formerly, Series 1991, 8.125% 7/1/06...... 2,015 2,136
IN Indianapolis Local Public Improvement Bond Bank, Series 1999E, 6.700% 1/1/17, (b).......... 5,900 6,184
LA State Public Facilities Authority, Womens Hospital Foundation, Series 1992, 7.250% 10/1/22. 2,300 2,459
MS Adams County, Jefferson Davis Memorial Hospital, Series 1991, 7.900% 10/1/08............... 750 795
NC Eastern Municipal Power Agency, Series 1991A, 6.500% 1/1/18, (b)........................... 3,320 3,678
PA Allentown Area Hospital Authority, Sacred Heart Hospital of Allentown, Series 1991,
7.500% 7/1/06.............................................................................. 3,460 3,598
SD State Student Loan Assistance Corp., Series 1989C, 7.450% 8/1/00........................... 2,700 2,707
WA Quincy, Series 1990-I, 9.250% 11/1/10...................................................... 2,255 2,290
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34,804
OTHER REVENUE - 1.7%
RECREATION
CA Long Beach Aquarium of the Pacific, Series 1995-A, 6.125% 7/1/23........................... 4,750 4,400
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RESOURCE RECOVERY - 0.1%
DISPOSAL
IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050% 1/1/10.......... 250 214
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TAX-BACKED - 9.5%
LOCAL APPROPRIATED - 1.0%
PA Philadelphia Municipal Authority, Series 1993-D, 6.250% 7/15/13............................ 2,500 2,507
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LOCAL GENERAL OBLIGATIONS - 0.4%
NY New York City, Series 1996-B, 7.250% 8/15/07............................................... 1,000 1,128
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SPECIAL NON-PROPERTY TAX - 1.2%
MO St. Louis County Industrial Development Authority, Kiel Center Arena, Series 1992,
7.875% 12/1/24............................................................................. 3,000 3,139
6
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SR&F High-Yield Municipals Portfolio Continued
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Par Value
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<S> <C> <C>
TAX-BACKED - CONT.
SPECIAL PROPERTY TAX - 3.5%
CA Orange County Community Facilities District, Ladera Ranch, Series 1999-A,
6.500% 8/15/21............................................................................. $ 1,000 $ 980
FL Heritage Palms Community Development District, Series 1999, 6.250% 11/1/04................. 1,000 995
FL Heritage Springs Community Development District, Series 1999-B, 6.250% 5/1/05.............. 1,050 1,043
FL Indigo Community Development District, Series 1999-B, 6.400% 5/1/06........................ 1,000 993
FL Lexington Oaks Community Development District,
Series 2000, 7.200% 5/1/30................................................................. 600 602
Series 2000-D, 6.700% 5/1/07............................................................... 750 752
FL Northern Palm Beach County Improvement District, Series 1999, 6.000% 8/1/29................ 750 671
FL Orlando, Conroy Road Interchange Project:
Series 1998-A, 5.500% 5/1/10............................................................... 200 191
5.800% 5/1/26.............................................................................. 500 439
FL Stoneybrook Community Development District:
Series 1998-A, 6.100% 5/1/19............................................................... 330 309
Series 1998-B, 5.700% 5/1/08............................................................... 875 847
MO State Development Finance Board, Midtown Redevelopment
Project, Series 2000-A, 5.750% 4/1/22...................................................... 1,000 1,000
-----------
8,822
STATE APPROPRIATED - 0.9%
NY Triborough Bridge & Tunnel Authority, Javits Convention Center Project, Series E,
7.250% 1/1/10.............................................................................. 2,000 2,223
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STATE GENERAL OBLIGATIONS - 2.5%
MA Massachusetts Bay Transportation Authority, Series 1992-B, 6.200% 3/1/16................... 5,825 6,307
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TRANSPORTATION - 7.1%
AIR TRANSPORTATION - 4.7%
IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000-A, 6.750% 11/1/11. 800 818
IN Indianapolis Airport Authority, Federal Express Corp., Series 1994, 7.100% 1/15/17......... 4,000 4,142
PA Philadelphia Authority for Industrial Development, Aero Philadelphia, Series 1999,
5.500% 1/1/24.............................................................................. 1,000 831
TX Alliance Airport Authority, AMR Corp., Series 1991, 7.000% 12/1/11......................... 4,070 4,282
TX Houston Airport System, Continental Airline Terminal, Series B, 6.125% 7/15/17............. 2,000 1,760
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11,833
AIRPORT - 1.7%
CO Denver City and County Airport, Series D, 7.750% 11/15/21.................................. 3,170 3,330
IN State Transportation Finance Authority, Airport Facilities Lease, Series 1992-A,
6.250% 11/1/16................................................................................ 950 964
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4,294
TOLL FACILITIES - 0.7%
CO State Public Highway Authority, Arapahoe County, E470 Series 2000 B:
(a) 9/1/18............................................................................... 4,000 1,369
(a) 9/1/35............................................................................... 8,750 619
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1,988
UTILITY - 21.2%
INDEPENDENT POWER PRODUCER - 4.8%
MI Midland County Economic Development Corp., Series 2000, 6.875% 7/23/09..................... 500 502
PA State Economic Development Financing Authority, Northampton Generating:
Series A, 6.500% 1/1/13.................................................................. 2,000 1,932
Series 1994-B, 6.750% 1/1/07............................................................. 3,000 3,017
VA Pittsylvania County Industrial Development Authority, Multitrade of
Pittsyvania, Series 1994 A:
7.450% 1/1/09............................................................................ 3,500 3,623
7.550% 1/1/19............................................................................ 3,100 3,185
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12,259
7
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SR&F High-Yield Municipals Portfolio Continued
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Par Value
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UTILITY - CONT.
INVESTOR OWNED - 6.7%
CT State Development Authority, Connecticut Light & Power Co., Series 1993-A,
5.850% 9/1/28.............................................................................. $ 2,900 $ 2,545
LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999,
5.450% 7/1/10.............................................................................. 500 464
LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999-B, 6.600% 9/1/28............. 250 233
MS State Business Finance Corp., Systems Energy Resources, Inc. Series 1999, 5.900% 5/1/22.... 1,250 1,081
NM Farmington, Public Service Co. of New Mexico, Series 1996-A, 6.300% 12/1/16................ 3,300 3,166
NM Farmington, Tucson Electric Power Co., Series 1997-A, 6.950% 10/1/20....................... 2,000 1,978
NV Humboldt County Pollution Control Revenue, Idaho Power Co. Project, 8.300% 12/1/14......... 2,000 2,216
PA Beaver County Industrial Development Authority, Toledo Edison Co., Series 1995,
7.625% 5/1/20.............................................................................. 4,900 5,200
-----------
16,883
JOINT POWER AUTHORITY - 5.4%
GA Municipal Electric Authority, Series 1991-V, 6.600% 1/1/18................................. 4,065 4,485
NC Eastern Municipal Power Agency, Series 1991 A, 6.500% 1/1/18............................... 1,680 1,696
WA State Public Power Supply System, Nuclear Project No. 2:
Series 1991-A, (a) 7/1/07.................................................................. 6,945 4,775
Series 1992-A, 6.300% 7/1/12............................................................... 2,500 2,711
-----------
13,667
WATER & SEWER - 4.3%
FL Tampa Bay Water Utility Systems Revenue, 6.484% 10/1/29.................................... 7,500 7,416
PA Dauphin County Industrial Development Authority, Dauphin Water Supply Co.,
Series 1992 A, 6.900% 6/1/24............................................................... 3,200 3,503
-----------
10,919
-----------
TOTAL MUNICIPAL BONDS
(cost of $243,261)............................................................................ 239,191
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK - 0.8%
------------------------------------------------------------------------------------------------------------------------------------
Charter Mac Equity Issue Trust, 6.625% 6/30/49 (cost of $2,000)(c)............................... 2,000 1,915
-----------
------------------------------------------------------------------------------------------------------------------------------------
8
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio Continued
------------------------------------------------------------------------------------------------------------------------------------
Par Value
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.6%
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VARIABLE RATE DEMAND NOTES (g)
IA State Higher Education Loan Authority, St. Ambrose University, Series 1999, 4.750% 10/1/09. $ 400 $ 400
IA Woodbury County, Siouxland Medical Educational Foundation, Series 1996, 4.800% 11/1/16..... 1,500 1,500
IN State Health Facilities Financing Authority, Series 2000, 4.850% 1/12/20................... 1,300 1,300
MI Farmington Hills Hospital Finance Authority, Botsford General Hospital, Series 1991-B,
4.650% 2/15/16............................................................................. 800 800
-----------
4,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost of $249,261) (f)........................................................................ 245,106
------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 3.4%............................................................ 8,541
-----------
NET ASSETS - 100.0%.............................................................................. $253,647
===========
------------------------------------------------------------------------------------------------------------------------------------
Notes to Investment Portfolio:
------------------------------------------------------------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$14,575, are being used to collateralize open futures contracts.
(c) This security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2000,
the value of this security amounted to $1,915 or 0.1% of net assets.
(d) This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust solely for the payment of
principal and interest.
(f) Cost for financial statement and federal income tax purposes is identical.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of June 30, 2000.
Short futures contracts open at June 30, 2000:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 6/30/00
----- -------- --------- ---------
Municipal Bond 7,800 September 70
Treasury Note 11,600 September 60
----
$130
----
See accompanying Notes to Financial Statements.
</TABLE>
9
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 2000
(All amounts in thousands)
ASSETS
Investments, at market value (cost $249,261)..................... $245,106
Interest receivable.............................................. 4,834
Receivable for investments sold.................................. 3,769
Cash............................................................. 65
-----------
Total assets.................................................. 253,774
-----------
LIABILITIES
Payable for variation margin on futures.......................... 15
Accrued:
Management fees............................................... 87
Bookkeeping fees.............................................. 2
Transfer agent fees........................................... 1
Other............................................................ 22
-----------
Total liabilities............................................. 127
-----------
Net assets applicable to investors' beneficial interest....... $253,647
===========
See accompanying Notes to Financial Statements.
10
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest........................................................... $ 17,913
----------
EXPENSES
Management fees.................................................... 1,163
Bookkeeping fees................................................... 30
Audit fees......................................................... 19
Trustees' fees..................................................... 21
Custodian fees..................................................... 7
Legal fees......................................................... 3
Transfer agent fees................................................ 6
Other.............................................................. 36
----------
Total expenses.................................................. 1,285
----------
Net investment income........................................... 16,628
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments................................... 3,144
Net change in unrealized appreciation/depreciation on investments.. (20,040)
----------
Net loss on investments ........................................ (16,896)
----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $ (268)
==========
See accompanying Notes to Financial Statements.
11
<PAGE>
<TABLE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income....................................................... $ 16,628 $ 18,389
Net realized gain on investments............................................ 3,144 3,631
Net change in unrealized appreciation/depreciation on investments........... (20,040) (10,388)
----------- -----------
Net increase (decrease) in net assets resulting from operations.......... (268) 11,632
----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions............................................................... 26,251 27,867
Withdrawals................................................................. (71,999) (83,002)
----------- -----------
Net decrease from transactions in investors' beneficial interest ........ (45,748) (55,135)
----------- -----------
Net decrease in net assets............................................... (46,016) (43,503)
TOTAL NET ASSETS
Beginning of period......................................................... 299,663 343,166
----------- -----------
End of period............................................................... $253,647 $299,663
=========== ===========
See accompanying Notes to Financial Statements.
12
</TABLE>
<PAGE>
Stein Roe Advisor High-Yield Municipals Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 2000
(All amounts in thousands, except per-share data)
ASSETS
Investment in Portfolio, at value....................................... $ 41
Expense reimbursement due from Advisor.................................. 22
Other assets............................................................ 6
-----
Total assets......................................................... 69
-----
LIABILITIES
Accrued:
Bookkeeping fees..................................................... 2
Other................................................................... 10
-----
Total liabilities.................................................... 12
-----
Net Assets........................................................... $ 57
=====
ANALYSIS OF NET ASSETS
Paid-in capital......................................................... $ 120
Undistributed net investment income..................................... 1
Accumulated net realized loss on investments and futures transactions... (64)
-----
Net Assets........................................................... $ 57
=====
Shares outstanding (unlimited number authorized)........................ 6
=====
Net asset value per share............................................... $9.06
=====
See accompanying Notes to Financial Statements.
13
<PAGE>
Stein Roe Advisor High-Yield Municipals Fund
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest allocated from Portfolio................................. $ 19
---------
EXPENSES
Expenses allocated from Portfolio................................. 2
Service fees...................................................... 1
Transfer agent fees............................................... 1
Bookkeeping fees.................................................. 25
Registration fee.................................................. 23
Custodian fee..................................................... 1
Audit fee......................................................... 9
Trustees' fees.................................................... 12
Reports to shareholders........................................... 7
---------
Total expenses................................................. 81
Reimbursement of expenses by investment Advisor................... (77)
---------
Net expenses................................................... 4
---------
Net investment income.......................................... 15
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES TRANSACTIONS ALLOCATED FROM PORTFOLIO
Net realized loss on investments and futures transactions......... (35)
Net change in unrealized appreciation/depreciation on investments
and futures transactions....................................... 7
---------
Net loss on investments and futures transactions............... (28)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ (13)
=========
See accompanying Notes to Financial Statements.
14
<PAGE>
<TABLE>
Stein Roe Advisor High-Yield Municipals Fund
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
2000 1999
---------- ----------
OPERATIONS
<S> <C> <C>
Net investment income............................................................... $ 15 $ 94
Net realized loss on investments and futures transactions allocated from
SR&F High-Yield Municipals Portfolio............................................. (35) (24)
Net change in unrealized appreciation/depreciation on investments
and futures transactions allocated from SR&F High-Yield Municipals Portfolio..... 7 (8)
----- --------
Net increase (decrease) in net assets resulting from operations.................. (13) 62
----- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income............................................ (16) (95)
----- --------
SHARE TRANSACTIONS
Subscriptions to fund shares........................................................ (a) 1,604
Value of distributions reinvested................................................... 13 85
Redemptions of fund shares.......................................................... (863) (1,749)
----- --------
Net decrease from share transactions............................................. (850) (60)
----- --------
Net decrease in net assets....................................................... (879) (93)
NET ASSETS
Beginning of period................................................................. 936 1,029
----- --------
End of period....................................................................... $ 57 $ 936
===== ========
Net of overdistributed net investment income........................................ (2) (1)
----- --------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares........................................................ (a) 161
Issued in reinvestment of distributions............................................. 1 9
Redemptions of fund shares.......................................................... (91) (177)
----- --------
Net decrease in fund shares...................................................... (90) (7)
Shares outstanding at beginning of period........................................... 96 103
----- --------
Shares outstanding at end of period................................................. 6 96
===== ========
(a) Rounds to less than one.
See accompanying Notes to Financial Statements.
15
</TABLE>
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Stein Roe Advisor High-Yield Municipals 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 High-Yield Municipals Portfolio (the "Portfolio"), which
seeks a high level of tax-free income by investing in long-term municipal
securities principally of medium and lower quality.
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 2, 1998. At commencement,
Stein Roe High-Yield Municipals Fund contributed $335,711 in securities and
other assets in exchange for beneficial ownership of the Portfolio. On February
4, 1998, Stein Roe Advisor High-Yield Municipals Fund contributed $100 in
securities and other assets. The Portfolio allocates income, expenses, realized
and unrealized gains and losses to each investor on a daily basis, based on
methods approved by the Internal Revenue Service. At June 30, 2000, Stein Roe
Advisor High-Yield Municipals Fund owned less than 1.0% of the Portfolio.
--------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Fund and the
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. Interest income,
including discount accretion and premium amortization, is recorded daily on the
accrual basis. Realized gains or losses from investment transactions are
reported on an identified cost basis.
Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. The values of such
securities are subject to market fluctuations during this period. There were no
when-issued or delayed delivery purchase commitments as of June 30, 2000.
INVESTMENT VALUATIONS
Municipal securities are valued at a fair value using a procedure determined in
good faith by the Board of Trustees, which has authorized the use of bid
valuations provided by a pricing service. Other securities and assets are valued
at fair value as determined in good faith by or under the direction of the Board
of Trustees.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts to either hedge against expected
declines of its portfolio 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 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. See the Portfolio's Investment Portfolio for a summary of
open futures contracts at June 30, 2000.
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 its owners
based on methods approved by the Internal Revenue Service.
The Fund intends to utilize provisions of the federal income tax law that
allows it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized gains. At
June 30, 2000, the Fund had capital loss carryforwards as follows:
Amount Year of Expiration
------ ------------------
$44 2008
10 2007
2 2006
16
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Dividends are
determined in accordance with income tax principles, which may treat certain
transactions differently than generally accepted accounting principles.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax earnings are
reclassified to paid-in capital.
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO COMPOSITION
The Portfolio invests in municipal securities including, but not limited to,
general obligation bonds, revenue bonds and escrowed bonds (which are bonds that
have been refinanced, the proceeds of which have been invested in U.S.
government or agency obligations and set aside to pay off the original issue at
the first call date or maturity). Among the Portfolio's investments are
securities that are insured by private insurers who guarantee the payment of
principal and interest in the event of default. At June 30, 2000, investments in
these securities represented 2.3% of the Portfolio's net assets. See the
portfolio of investments for additional information regarding portfolio
composition.
--------------------------------------------------------------------------------
NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
MANAGEMENT & ADMINISTRATION FEES
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to Stein Roe & Farnham Incorporated (the "Advisor"), an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its
services as investment advisor and manager.
The management fee for the Portfolio is computed at an annual rate of 0.45%
of the first $100 million of average daily net assets, 0.425%of the next $100
million, and 0.40% thereafter. The administrative fee for the Fund is computed
at an annual rate of 0.15% of the first $100 million of average daily net
assets, 0.125% of the next $100 million, and 0.10% thereafter.
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services to the Fund and Portfolio
for a monthly fee equal to $25 annually plus 0.0025% of the Fund and Portfolio's
average daily net assets over $50 million.
EXPENSE LIMIT
The Advisor has agreed to reimburse the Fund to the extent that expenses
exceeded 1.10% of average annual net assets. This expense limitation expires on
January 31, 2001.
12B-1 FEE
Shares of the Fund are distributed by Liberty Funds Distributor, Inc. (the
"Distributor"), an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company. 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% of average daily net assets.
TRANSFER AGENT FEE
Transfer agent fees are paid to Liberty Funds Services, Inc., (the Transfer
Agent), an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. The Transfer Agent provides shareholder services for a monthly fee
equal to 0.30% annually of the Fund's average net assets and receives
reimbursement for certain out-of-pocket expenses.
OTHER
Certain officers and trustees of the Trust are also officers of the Advisor. No
remuneration was paid to any other trustee or officer of the Trust who is
affiliated with the Advisor.
--------------------------------------------------------------------------------
NOTE 5. LINE OF CREDIT
The Liberty-Stein Roe Municipals Trust (excluding Stein-Roe High Yield
Municipals Fund and Stein-Roe Municipal Money Market Fund), the Liberty
Stein-Roe Investment Trust and the SR&F Base Trust (collectively, the "Trusts"),
participate in unsecured line of credit agreements provided by the custodian
bank consisting of two components. The committed line of credit entitles the
Trusts to borrow from the custodian at any time upon notice from the Trusts. The
uncommitted line of credit permits the Trusts to borrow from the custodian at
the custodian's sole discretion. The aggregate borrowings available to the
Trusts for the
17
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
committed and uncommitted lines of credit are $200 million and $100 million,
respectively. Borrowings may be made to temporarily finance the repurchase of
Fund shares. Interest is charged to each Trust and, ultimately, the Fund based
on its borrowings at a rate equal to the Federal Funds Rate plus 5% per year. In
addition, a commitment fee of 0.10% per annum on each Fund's borrowings shall be
paid quarterly by the Fund based on the relative asset size of the Fund. For the
year ended June 30, 2000, the Trusts had no borrowings under the agreement.
--------------------------------------------------------------------------------
NOTE 6. INVESTMENT TRANSACTIONS
The Portfolio's aggregate cost of purchases and proceeds from sales or maturity
of securities, excluding short-term obligations, for the year ended June 30,
2000, were $38,352 and $74,363, respectively.
Unrealized appreciation (depreciation) at June 30, 2000 for both financial
statement and federal income tax purposes was:
Gross unrealized appreciation...... $ 8,320
Gross unrealized depreciation...... (12,475)
--------
Net unrealized depreciation...... $ (4,155)
========
18
<PAGE>
<TABLE>
Financial Highlights
--------------------------------------------------------------------------------
Stein Roe Advisor High-Yield Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998 (d)
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................ $ 9.75 $ 9.94 $ 10.00
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................................... 0.17 0.48 0.20
Net realized and unrealized loss......................................... (0.39) (0.18) (0.06)
-------- ------- -------
Total from investment operations....................................... (0.23) 0.30 0.14
-------- ------- -------
DISTRIBUTIONS
Net investment income.................................................... (0.46) (0.49) (0.20)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................................. $ 9.06 $ 9.75 $ 9.94
======== ======= =======
Ratio of net expenses to average net assets (a)............................. 1.10% 1.10% 1.10%(e)
Ratio of net investment income to average net assets (b).................... 4.97% 4.88% 5.13%(e)
Total return (d)............................................................ (2.37)% 3.08%(c) 1.42%(f)
Net assets, end of period (000's)........................................... $ 57 $ 936 $1,029
</TABLE>
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor, this ratio would have been 11.92% and 5.97%
for June 30, 2000 and 1999, respectively, and 16.25% (annualized) for the
period ended June 30, 1998.
(b) Computed giving effect to Advisor's expense limitation undertaking.
(c) 0.50% of the return for the fiscal year ended June 30, 1999 is attributable
to a one-time revaluation of a portfolio security reflecting the
restructuring of this security. Absent this revaluation, the total return
for the Fund for this period would have been 2.58%.
(d) From commencement of operations on February 4, 1998.
(e) Annualized.
(f) Not annualized.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the taxable year ended June 30, 2000, 85% of distributions from net
investment income quality as exempt-interest dividends for Federal income
tax purposes.
<TABLE>
--------------------------------------------------------------------------------
SR&F High-Yield Municipals Portfolio
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998 (a)
-------- -------- --------
<S> <C> <C> <C>
SELECTED RATIOS
Ratio of net expenses to average net assets................................. 0.47% 0.45% 0.47%(b)
Ratio of net investment income to average net assets........................ 6.11% 5.55% 5.72%(b)
Portfolio turnover rate..................................................... 14% 19% 3%(c)
(a) From commencement of operations on February 2, 1998.
(b) Annualized.
(c) Not annualized.
19
</TABLE>
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders, Holders of Investors' Beneficial Interests and Board of
Trustees of Liberty-Stein Roe Advisor Trust and SR&F Base Trust
Stein Roe Advisor High-Yield Municipals Fund
SR&F High-Yield Municipals Portfolio
We have audited the accompanying statement of assets and liabilities of Stein
Roe Advisor High-Yield Municipals Fund (a series of Liberty-Stein Roe Advisor
Trust formerly, Stein Roe Advisor Trust), and the accompanying statement of
assets and liabilities, including the portfolio of investments, of SR&F
High-Yield Municipals Portfolio(a series of SR&F Base Trust) as of June 30,
2000, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trusts' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of June 30, 2000, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. 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 position of the
aforementioned series of Liberty-Stein Roe Advisor Trust and SR&F Base Trust at
June 30, 2000, the results of their operations, the changes in their net assets,
and their financial highlights for the periods indicated therein, in conformity
with accounting principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
August 18, 2000
20
<PAGE>
To Contact Us. . .
--------------------------------------------------------------------------------
BY PHONE 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe account, including Stein Roe Traditional, Roth and Education IRAs. We're
available Monday through Friday, from 8 a.m. to 8 p.m. ET, and Saturdays from 10
a.m. to 2 p.m. ET.
STEIN ROE'S FUNDS-ON-CALL(R)
24-HOUR SERVICE LINE
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase fund shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.
RETIREMENT PLAN ACCOUNTS
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on Traditional, Roth and Education IRA plans, call
us toll free at 800-338-2550.
BY MAIL OR E-MAIL
If you prefer to contact us by mail, please address all correspondence to: P.O.
Box 8900, Boston, MA 02205-8900. To contact us by email, send correspondence
directly to: [email protected] or visit us at www.steinroe.com on the
Internet.
ADDITIONAL REPORTS
The Funds mail one shareholder report to each shareholder address. If you would
like more than one report, please call 800-338-2550 and additional reports will
be sent to you.
Must be preceded or accompanied by a prospectus.
21
<PAGE>
Liberty-Stein Roe Advisor Funds
--------------------------------------------------------------------------------
TRUSTEES
John A. Bacon, Jr.
Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing Group Inc.
Lindsay Cook
Executive Vice President, Liberty Financial Companies, Inc.
Douglas A. Hacker
Executive Vice President and Chief Financial Officer, United Airlines
Janet Langford Kelly
Executive Vice President, Secretary and General Counsel, Kellogg Company
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Director, William Blair Capital Partners
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President
Loren A. Hansen, Executive Vice President
Joseph Palombo, Executive Vice President
Nancy L. Conlin, Senior Vice President, Secretary
Pamela McGrath, Senior Vice President, Treasurer
J. Kevin Connaughton, Controller
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian
Liberty Funds Services, Inc.
Transfer Agent
Bell, Boyd & Lloyd, LLC
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
22
<PAGE>
Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com
Liberty Funds Distributor, Inc. 8/00
S98-02/459C-0700 (8/00) 00/1459
