Stein Roe Advisor Funds
Annual Report
June 30, 2000
[CURRENCY PHOTO HERE]
Stein Roe Fixed Income Fund
Taxable Bond Fund
Stein Roe Advisor Intermediate Bond Fund
[Stein Roe logo]
STEIN ROE MUTUAL FUNDS
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Sensible Risks. Intelligent Investments.(R)
<PAGE>
Contents
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Performance.................................................................. 1
How the Stein Roe Advisor Intermediate Bond Fund has done over time
Questions & Answers.......................................................... 2
Interview with the portfolio manager and summary of investment activity
Portfolio of Investments..................................................... 4
A complete list of investments with market values
Financial Statements......................................................... 9
Statements of assets and liabilities, operations and changes in net assets
Notes to Financial Statements................................................ 15
Financial Highlights......................................................... 18
Selected per-share data
Report of Independent Auditors............................................... 19
Must be preceded or accompanied by a prospectus.
<PAGE>
Fund Performance
--------------------------------------------------------------------------------
One way to evaluate a Fund's historical performance is to look at the cumulative
return percentage, the average annual total return percentage or the growth of a
hypothetical $10,000 investment. Below, we compare Stein Roe Advisor
Intermediate Bond 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 gains distributions (the profits the fund earns
when fixed income securities grow in value).
Average Annual Returns through 6/30/00
--------------------------------------------------------------------------------
1 Year 5 Year 10 Year
-------------------------------------
STEIN ROE ADVISOR INTERMEDIATE BOND FUND K 2.25% 5.69% 7.13%
Lehman Brothers Intermediate
Government/Corporate Bond Index 4.23% 5.82% 7.28%
GROWTH of a $10,000 investment for the ten years ended June 30, 2000
--------------------------------------------------------------------------------
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
[CHART DATA]
L.B. Int. Stein Roe Advisor
Government/Corporate Intermediate
Bond Index Bond Fund K
6/30/90 10,000 10,000
6/30/91 11,052.3 11,018.1
6/30/92 12,507.3 12,561.9
6/30/93 13,820.0 13,832.9
6/30/94 13,784.9 13,725.5
6/30/95 15,214.9 15,068.9
6/30/96 15,976.9 15,926.4
6/30/97 17,129.9 17,332.1
6/30/98 18,593.3 18,979.6
6/30/99 19,371.7 19,460.5
6/30/00 20,190.7 19,909.0
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 1.00% 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 Intermediate
Bond 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 Intermediate Bond Fund to the Lehman Brothers
Intermediate Government/Corporate Bond Index, an unmanaged group of
investment-grade bonds not associated with any Stein Roe fund. Unlike mutual
funds, it is not possible to invest directly in an index.
1
<PAGE>
Questions & Answers
--------------------------------------------------------------------------------
AN INTERVIEW WITH MICHAEL KENNEDY, PORTFOLIO MANAGER OF STEIN ROE ADVISOR
INTERMEDIATE BOND FUND AND SR&F INTERMEDIATE BOND PORTFOLIO
Q: HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED JUNE 30, 2000?
Kennedy: The Stein Roe Advisor Intermediate Bond Fund generated a return of
2.25%, underperforming the 4.23% return of the Lehman Brothers Intermediate
Government/Corporate Bond Index. The Fund experienced some rough periods in
conjunction with erratic overall bond market activity, but held strong positions
in good performing sectors.
Q: WHERE DID YOU FOCUS INVESTMENTS THROUGHOUT THE YEAR, AND WHY?
Kennedy: We invested the majority of the Fund's assets in the corporate bond
market throughout the fiscal year. We held an average of 65%-75% of the Fund's
assets in this category, as this is where we found the best value for our
investment dollars.
Because of our heavy corporate bond weighting, the Fund's performance
hinged on that segment's reactions to economic events and other concerns. From
July through September of 1999, fears of Y2K affected the market and limited
overall performance of the corporate bond sector. As calendar year 1999 drew to
a close and it became evident that Y2K problems would have a
smaller-than-expected impact, the market recovered.
By that time, Y2K fears were priced into the market, providing
excellent investment opportunities as corporate bonds handsomely outperformed
Treasurys through the end of January 2000. Corporate bonds and Treasury bonds
changed favor again from the end of January until the end of May, during a
period where the Federal Reserve made several increases in short-term interest
rates and created a more conservative investment environment.
Q: WHAT OTHER SIGNIFICANT EVENTS DEFINED THE FISCAL YEAR FOR THE FUND?
Kennedy: As the Federal Reserve increased interest rates on short-term debt
(1.50% over the entire fiscal year) and the Treasury bought back longer-term
debt and drove down long-term rates, an inverted yield curve occurred. (See
chart on page 3.) This means that short-term interest rates actually exceeded
long-term interest rates, which is unusual because investors typically demand
higher returns in exchange for the increased risk associated with long-term
investing.
The inversion of the yield curve put pressure on non-Treasury sectors
from the end of January through May. However, in the final weeks of the period,
a number of key economic indicators seemed to signal that the economy was
slowing, signaling an end to the Federal Reserve's cycle of raising rates. Since
that time investor sentiment has shifted back toward higher-risk debt, improving
investment prospects for non-Treasury areas of the bond market. This is good
news for the Fund, considering our strong position in corporate bonds and other
non-Treasury positions.
Q: HOW DID THE FUND'S MORTGAGE-BACKED POSITION FARE DURING THE FISCAL YEAR?
Kennedy: The mortgage-backed securities sector rode much the same course as the
corporate market this year, losing favor from January through May due to
Treasury market outperformance. We continue to hold a significant position in
mortgage-backed securities, favoring commercial mortgage holdings that provide
high credit quality, attractive yield and good protection from an early
unfavorable loan payoff.
Q: THE FUND'S ALLOCATION TO INTERNATIONAL BONDS IS BACK UP AFTER A POOR PERIOD
FOR INTERNATIONAL INVESTING. WHAT COUNTRIES PROVIDED GOOD OPPORTUNITIES DURING
THIS REBOUND?
Kennedy: Mexican bonds were a profitable investment for us during the fiscal
year. We held nearly one percent of the Fund's assets in that country's debt,
and these holdings benefited as the country was upgraded to investment grade. A
peaceful election should support an additional upgrade by Standard & Poor's,
earning the country full investment-grade status and allowing for further
appreciation of the Fund's Mexican bond holdings. We also profited from
investments in bonds of foreign banks, particularly in Europe, where credit
quality continues to improve and bank bonds offered attractive yields.
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FUND DATA
INVESTMENT OBJECTIVE:
Seeks its total return by pursuing current income and opportunities for
capital appreciation. The Fund invests primarily in a diversified portfolio
of marketable debt securities. The dollar-weighted average life of its
portfolio is expected to be between three and 10 years.
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2
<PAGE>
Q&A Continued
--------------------------------------------------------------------------------
Q: WHAT OTHER FACTORS HELPED PERFORMANCE?
Kennedy: The Fund benefited from an overweighted position in BBB-rated bonds as
the sector performed well early in 2000. The run-up in the price of oil proved
beneficial for bond holdings such as Noble Drilling, Baker Hughes and Gulf
Canada (1.2%, 1.3% and 1.2% of net assets).
Q: WHAT AREAS DO YOU BELIEVE WILL PROVIDE GOOD INVESTMENT OPPORTUNITIES IN
COMING MONTHS?
Kennedy: With the economy slowing and interest rates stabilizing, we believe
corporate bonds and higher-yielding debt will provide strong investment
opportunities. At the end of the fiscal year we held just 10% of the Fund's
assets in high-yield bonds. The lower weighting was intentional, the result of
selling a few issues that were unattractive, and enjoying the upgrade of several
other holdings during the period. We intend to increase our allocation to
high-yield bonds now that this market is more attractive, while maintaining a
strong position in higher-quality corporate bonds.
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. Portfolio holdings are as of 06/30/00, and are subject to
change.
Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Bond investing also involves
interest rate risk, which means that bond prices may change as interest rates
increase or decrease. Foreign investments involve market, political, accounting
and currency risks not associated with other investments. The Lehman Brothers
Intermediate Corporate Bond Index is an unmanaged group of bonds that vary in
quality; it is not available for direct investment.
Inversion of the Yield Curve
--------------------------------------------------------------------------------
June 30, 1999 - June 30, 2000
[CHART DATA]
<TABLE>
<CAPTION>
3-month 1-year 5-year 10-year 30-year
Treasury Treasury Treasury Treasury Treasury
bond bond bond bond bond
yield yield yield yield yield
<S> <C> <C> <C> <C> <C>
June 30, 1999 4.75 5.05 5.65 5.79 5.97
June 30, 2000 5.86 6.06 6.18 6.02 5.9
</TABLE>
The Federal Reserve raised short-term interest rates throughout the fiscal year
while a budget surplus allowed for buyback of long Treasury. These events
combined to invert the yield curve and reshape the bond investment environment
during the year.
Past performance does not guarantee future results.
3
<PAGE>
<TABLE>
<CAPTION>
SR&F Intermediate Bond Portfolio
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At June 30, 2000 (All amounts in thousands)
BONDS & NOTES - 97.6%
CORPORATE FIXED INCOME BONDS & NOTES - 65.1% Par Value
-------------------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 24.6%
DEPOSITORY INSTITUTIONS - 6.9%
<S> <C> <C>
Citicorp, 8.040% 12/15/19 (a)............................................. $ 9,000 $ 8,957
GS Escrow Corp., 7.000% 8/1/03............................................ 3,000 2,762
Merita Bank Ltd., 7.150% 9/11/49.......................................... 4,500 4,377
National Australia Bank Ltd., 8.600% 5/19/10.............................. 3,750 3,923
Sovereign Bancorp, Inc., 10.500% 11/15/06................................. 2,750 2,728
The Bank of Tokyo-Mitsubishi, Ltd., 8.400% 4/15/10........................ 5,500 5,561
---------
28,308
FINANCIAL SERVICES - 5.4%
LaBranche & Co., Inc., 12.000% 3/1/07 (a)................................. 3,300 3,275
Registered Diversified Funding, 9.250% 3/15/30 (a)........................ 8,250 7,763
TPSA Finance BV, 7.750% 12/10/08 (a)...................................... 6,000 5,672
Zurich Capital Trust, 8.376% 6/1/37 (a)................................... 6,130 5,691
---------
22,401
HOLDING & OTHER INVESTMENT OFFICES - 4.6%
Applied Global Finance Ltd., 9.727% 10/4/01............................... 1,000 1,040
Federal Realty Investment Trust, 6.625% 12/1/05........................... 2,750 2,494
First Industrial, L.P., 7.600% 7/15/28.................................... 1,250 1,038
HSBC Holdings PLC:
9.547% 12/31/49 (a).................................................... 4,500 4,666
10.176% 12/31/49 (a)................................................... 5,000 5,324
Meditrust Cos., 7.820% 9/10/26............................................ 1,700 1,292
Storage USA, 7.125% 11/1/03............................................... 3,250 3,116
---------
18,970
INSURANCE AGENTS & BROKERS - 1.8%
GE Global Insurance Holding Corp., 7.500% 6/15/10......................... 7,500 7,419
---------
INSURANCE CARRIERS - 2.2%
Florida Windstorm Underwriting Assoc., 7.125% 2/25/19 (a)................. 2,375 2,144
Prudential Insurance Co. of America, 7.650% 7/1/07 (a).................... 7,250 7,035
---------
9,179
NONDEPOSITORY CREDIT INSTITUTIONS - 1.9%
Countrywide Home Loans, Inc., 6.850% 6/15/04.............................. 5,000 4,798
KBC Bank Fund Trust III, 9.860% 11/29/49 (a).............................. 3,000 3,061
---------
7,859
SECURITY BROKERS & DEALERS - 1.8%
Broad Index Secured Trust Offering, Series 1997 1A,
Class B, 9.500% 12/31/02 (a)......................................... 3,000 2,829
Diversified REIT Trust, Series 1999-1A, Class C,
6.780% 3/18/11 (a)................................................... 5,000 4,513
---------
7,342
MANUFACTURING - 9.9%
CHEMICALS & ALLIED PRODUCTS - 1.2%
Eastman Chemical Co., 7.625% 6/15/24...................................... 5,000 4,830
---------
ELECTRONIC & ELECTRICAL EQUIPMENT - 2.4%
Citizens Utilities Co., 7.000% 11/1/25.................................... 6,500 5,492
Raytheon Co., 8.300% 3/1/10 (a)........................................... 4,475 4,546
---------
10,038
MACHINERY & COMPUTER EQUIPMENT - 1.3%
Baker Hughes, Inc., 6.875% 1/15/29........................................ 6,250 5,491
---------
4
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SR&F Intermediate Bond Portfolio Continued
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Par Value
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MANUFACTURING - CONT.
MISCELLANEOUS MANUFACTURING - 1.7%
PDVSA Finance Ltd., Series 1-A, 7.400% 8/15/16............................ $ 2,500 $ 1,908
Reliant Energy, 8.125% 7/15/05 (a)........................................ 5,000 4,993
---------
6,901
PETROLEUM REFINING - 1.6%
USX Corp., 7.200% 2/15/04................................................. 6,800 6,674
---------
PRINTING & PUBLISHING - 0.5%
World Color Press, Inc., 7.75% 2/15/09.................................... 2,000 1,872
---------
TOBACCO PRODUCTS - 1.2%
US Tobacco, 8.800% 3/15/05................................................ 5,000 4,836
---------
MINING & ENERGY - 7.0%
METAL MINING - 1.1%
Freeport-McMoran Copper & Gold, Inc., 7.500% 11/15/06..................... 2,700 1,782
PT Alatief Freeport Financial Corp., 9.750% 4/15/01....................... 2,900 2,683
---------
4,465
OIL & GAS EXTRACTION - 3.9%
Gulf Canada Resources Ltd., 8.375% 11/15/05............................... 5,000 4,940
Noble Drilling Corp., 7.500% 3/15/19...................................... 5,310 5,035
Yosemite Securities Trust I, 8.250% 11/15/04 (a).......................... 6,000 5,958
---------
15,933
OIL & GAS FIELD SERVICES - 2.0%
Phillips Petroleum Co., 8.500% 5/25/05.................................... 3,000 3,101
Tosco Corp., 8.125% 2/15/30 (b)........................................... 4,900 4,941
---------
8,042
RETAIL TRADE - 4.4%
GENERAL MERCHANDISE STORES - 1.7%
Buhrmann US, Inc., 12.250% 11/1/09........................................ 3,000 3,120
Kmart Corp., 8.375% 12/1/04............................................... 4,100 3,887
---------
7,007
MISCELLANEOUS RETAIL - 2.7%
Price/Costco, Inc., 7.125% 6/15/05........................................ 5,250 5,159
Royal & Sun Alliance Insurance Group PLC, 8.950% 10/15/29 (a)............. 6,000 6,018
---------
11,177
SERVICES - 3.6%
AMUSEMENT & RECREATION - 0.7%
Prime Hospitality Corp., 9.250% 1/15/06................................... 2,950 2,891
---------
BUSINESS SERVICES - 0.8%
Federal Express Corp., Series A1, 7.530% 9/23/06.......................... 3,111 3,087
---------
HEALTH SERVICES - .09%
Tenet Healthcare Corp., 7.875% 1/15/03.................................... 4,000 3,905
---------
HOTELS, CAMPS & LODGING - 1.2%
Marriott International, Inc., 7.875% 9/15/09.............................. 5,000 4,813
---------
TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - 14.7%
AIR TRANSPORTATION - 1.3%
Air 2 US, 8.027% 10/1/19 (a)(b)........................................... 5,450 5,464
---------
5
<PAGE>
SR&F Intermediate Bond Portfolio Continued
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Par Value
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TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS & SANITARY SERVICES - CONT.
CABLE - 1.0%
CSC Holdings, Inc., 7.875% 2/15/18........................................ $ 4,250 $ 3,901
---------
COMMUNICATIONS - 0.8%
PDVSA Finance Ltd., Series 1999 F, 8.750% 2/15/04......................... 3,283 3,221
---------
ELECTRIC SERVICES - 7.3%
AES Eastern Energy, L.P. 9.670% 1/2/29.................................... 4,000 3,817
Endesa-Chile Overseas Co., 8.500% 4/1/09 ................................. 6,000 5,881
Israel Electric Corp., Ltd., 8.250% 10/15/09 (a).......................... 8,500 8,430
Niagara Mohawk Power Corp., 8.875% 5/15/07................................ 8,000 8,306
Oglethorpe Power Corp., 6.974% 6/30/11.................................... 3,685 3,466
---------
29,900
TELECOMMUNICATION - 3.9%
Deutsche Telekom Integrated Finance:
7.750% 6/15/05......................................................... 4,750 4,796
8.250% 6/15/30......................................................... 4,800 4,882
Frontier Corp., 7.250% 5/15/04............................................ 7,000 6,462
---------
16,140
TRANSPORTATION SERVICES - 0.4%
Stagecoach Holdings PLC, 8.625% 11/15/09.................................. 2,075 1,767
---------
WHOLESALE TRADE - 0.9%
NONDURABLE GOODS - 0.9%
Lilly Del Mar, Inc., 7.717% 8/1/29 (a)................................. 3,750 3,687
---------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $292,874)........................................................ 267,520
---------
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GOVERNMENT OBLIGATIONS - 15.5%
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 10.6%
Federal Home Loan Mortgage Association,
12.000% 2020........................................................... 1,402 1,546
---------
Federal National Mortgage Association:
6.000% 2009-2024 (b)................................................... 15,401 14,643
6.500% 2028 (b)........................................................ 6,313 5,952
8.500% 2021............................................................ 89 90
9.250% 2018 (b)........................................................ 1,386 1,450
---------
22,135
Government National Mortgage Association:
6.625% 2025 ARM (b).................................................... 1,271 1,278
8.000% 2018 (b)........................................................ 2,148 2,180
9.000% 2016 (b)........................................................ 167 174
---------
3,632
U.S. Treasury Notes:
6.500% 2/15/10......................................................... 5,000 5,171
6.750% 5/15/05 (b)..................................................... 11,000 11,256
---------
16,427
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6
<PAGE>
SR&F Intermediate Bond Portfolio Continued
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Par Value
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GOVERNMENT OBLIGATIONS - CONT.
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS - 4.9%
Korea Development Bank, 7.125% 4/22/04.................................... $ 3,000 $ 2,899
Philippines (Rep) 10.625% 3/16/25......................................... 3,000 2,571
State Of Qatar
9.500% 5/21/09 (a)..................................................... 3,500 3,599
9.750% 6/15/30 (a)..................................................... 7,500 7,359
United Mexican States, 9.875% 2/1/10...................................... 3,500 3,652
---------
20,080
---------
TOTAL GOVERNMENT OBLIGATIONS
(cost of $57,883)......................................................... 63,820
---------
-------------------------------------------------------------------------------------------------
NON AGENCY MORTGAGE-BACKED SECURITIES & ASSET-BACKED-SECURITIES - 17.0%
MORTGAGE BACKED SECURITIES - 8.6%
American Mortgage Trust, Series 1993-3,
8.190% 9/27/22......................................................... 1,391 1,252
Kidder Peabody Acceptance Corp., Series 1994-C3, Class A2,
8.500% 4/1/07.......................................................... 2,239 2,298
LB Commercial Conduit Mortgage Trust, Series 1998-C4, Class A1B,
6.210% 10/15/08........................................................ 10,000 9,069
Mellon Residential Funding Corp., Series 1998-TBC1, Class A3,
5.610% 10/25/28....................................................... 4,500 4,334
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3, Class A3,
7.059% 12/26/25........................................................ 4,000 3,907
Merrill Lynch Trust, Series 20, Class D,
8.000% 12/20/18........................................................ 1,097 1,095
Nomura Asset Securities Corp., Series 1996-MD5, Class A1B,
7.120% 4/13/36........................................................ 3,000 2,918
Option One Mortgage Securities Corp., Series 1999-B, Class 2A,
9.660% 3/26/29......................................................... 2,959 2,869
PNC Mortgage Securities Corp., Series 1996-1, Class A5,
7.500% 6/25/26......................................................... 3,314 3,230
Structured Asset Securities Corp.:
Series 1996-CFL, Class C, 6.525% 2/25/28............................... 3,420 3,393
Series 1996-CFL, Class X-IO, 1.525% 2/25/28............................ 22,930 1,146
---------
35,511
ASSET BACKED SECURITIES - 8.4%
Asset Securitization Corp., Series 1997-D5, Class A1C,
6.750% 2/14/41......................................................... 6,500 6,184
Cigna CBO 1996-1 Ltd., Series 1996-1, Class A2,
6.460% 11/15/08........................................................ 5,000 5,034
First Boston Mortgage Securities Corp., Series 1993-H1, Class A-IO,
2.108% 9/28/13......................................................... 1,298 6
Green Tree Home Improvement Loan Trust, Series 1994-A, Class A,
7.050% 3/15/14......................................................... 699 675
GS Mortgage Securities Corp., Series 1998-3, Class A,
7.750% 9/20/27 (a)..................................................... 5,616 5,581
JP Morgan Commerical Mortgage Finance Corp., Series 1999-C8, Class A2,
7.400% 7/15/31......................................................... 10,000 9,892
YPF Sociedad Anonima, 7.500% 10/26/02..................................... 2,173 2,156
YPF Sociedad Anonima, 10.000% 11/2/28..................................... 2,000 2,149
United Airlines, Inc., 9.200% 3/22/08..................................... 2,763 2,892
---------
34,569
---------
TOTAL NON AGENCY MORTGAGE-BACKED SECURITIES & ASSET-BACKED SECURITIES
(cost of $59,824)......................................................... 70,080
---------
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7
<PAGE>
SR&F Intermediate Bond Portfolio Continued
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Par Value
-------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.9%
Associates First Capital 6.950% 7/3/00 (b)................................ $ 3,895 $ 3,893
---------
(cost of $3,893)
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost of $414,474) (c).................................. 405,313
---------
OTHER ASSETS LESS LIABILITIES, NET - 1.5%................................. 6,202
---------
NET ASSETS - 100.0%....................................................... $411,515
=========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Represents private placement securities issued under Rule 144A, which
exempt from the registration of the Securities Act of 1933. These
securities are generally issued to qualified institutional buyers such
as the Portfolio, and any resale by the Portfolio must be an exempt
transaction, normally to other qualified institutional investors. At
June 30, 2000, the aggregate value of the Portfolio's private
placement securities was $116,565 which represented 28.3% of net
assets.
(b) These securities, or a portion thereof, with a total market value of
$47,338 is being used to collateralize short future contracts.
(c) Rate represents yield at date of purchase.
(d) At June 30, 2000, the cost of investments for federal tax purposes is
$414,864.
Short futures contracts open at June 30, 2000:
PAR VALUE UNREALIZED
COVERED BY EXPIRATION DEPRECIATION
TYPE CONTRACTS MONTH AT 06/30/00
----------- ---------- ---------- ----------
Treasury Bond 24,300 September $169
Treasury Note 10,800 September 109
-----
$278
=====
See accompanying Notes to Financial Statements.
8
<PAGE>
SR&F Intermediate Bond Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 2000
(All amounts in thousands)
ASSETS
Investments, at market value (cost $414,474)....... $405,313
Receivable for investments sold.................... 36,347
Interest receivable................................ 6,002
Variation margin on futures........................ 26
Cash............................................... 1
Other.............................................. 98
-----------
Total assets.................................... 447,787
-----------
LIABILITIES
Payable for investments purchased.................. 35,643
Accrued:
Management fee.................................. 118
Bookkeeping fee................................. 3
Transfer agent fee.............................. 1
Other.............................................. 507
-----------
Total liabilities............................... 36,272
-----------
Net assets applicable to
investors' beneficial interest................ $411,515
===========
See accompanying Notes to Financial Statements.
9
<PAGE>
SR&F Intermediate Bond Portfolio
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest income......................................... $32,415
Dividend income......................................... 155
---------
Total income......................................... 32,570
EXPENSES
Management fees......................................... 1,451
Transfer agent fees..................................... 6
Bookkeeping fees........................................ 34
Trustees' fees.......................................... 17
Custodian fees.......................................... 8
Audit fees.............................................. 16
Legal fees.............................................. 2
Other................................................... 24
---------
Total expenses....................................... 1,558
---------
Net investment income................................ 31,012
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized loss on investments........................ (10,966)
Net realized loss on futures transactions............... (479)
Net change in unrealized appreciation/depreciation
on investments and futures transactions............ 472
---------
Net loss on investments and futures transactions..... (10,973)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $20,039
=========
See accompanying Notes to Financial Statements.
10
<PAGE>
SR&F Intermediate Bond Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
------------- -------------
OPERATIONS
<S> <C> <C>
Net investment income.................................................... $ 31,012 $ 29,891
Net realized gain (loss) on investments and futures transactions......... (11,445) 147
Net change in unrealized appreciation/depreciation
on investments and futures transactions............................. 472 (17,001)
------------- -------------
Net increase in net assets resulting from operations.................. 20,039 13,037
------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions............................................................ 267,691 97,305
Withdrawals.............................................................. (309,774) (116,948)
------------- -------------
Net decrease from transactions in investors' beneficial interest...... (42,083) (19,643)
------------- -------------
Net decrease in net assets............................................ (22,044) (6,606)
NET ASSETS
Beginning of period...................................................... 433,559 440,165
------------- -------------
End of period............................................................ $411,515 $433,559
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
Stein Roe Advisor Intermediate Bond Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 2000
(All amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in Portfolio, at value.................................................. $ 118
Receivable due from Advisor........................................................ 87
Other.............................................................................. 4
-------
Total assets.................................................................... 209
-------
LIABILITIES
Accrued:
Bookkeeping fee................................................................. 4
Transfer agent fee.............................................................. 2
Other.............................................................................. 25
-------
Total liabilities............................................................... 31
-------
Net Assets...................................................................... $ 178
=======
ANALYSIS OF NET ASSETS
Paid-in capital.................................................................... $ 321
Accumulated net realized loss on investments and futures transactions
allocated from Portfolio........................................................ (106)
Net unrealized depreciation on investments and futures transactions
allocated from Portfolio........................................................ (37)
-------
Net Assets...................................................................... $ 178
=======
Shares outstanding (unlimited number authorized)................................... 19
=======
Net asset value per share.......................................................... $9.25
=======
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE>
Stein Roe Advisor Intermediate Bond Fund
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 2000
(All amounts in thousands)
INVESTMENT INCOME
Interest allocated from Portfolio........................... $ 45
Dividend allocated from Portfolio........................... 1
---------
46
EXPENSES
Expenses allocated from Portfolio........................... 2
12b-1 distribution and service fees......................... 2
Transfer agent fee.......................................... 2
Bookkeeping fee............................................. 26
Trustees fees............................................... 12
Custodian fee............................................... 1
Audit fee................................................... 4
Reports to shareholders..................................... 17
Registration fee............................................ 28
Other....................................................... 4
---------
Total expenses........................................... 98
Reimbursement of expenses by investment Advisor............. (92)
---------
Net expenses............................................. 6
---------
Net investment income.................................... 40
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES TRANSACTIONS
ALLOCATED FROM PORTFOLIO
Net realized loss on investments and futures transactions... (64)
Net change in unrealized appreciation/depreciation on
investments and futures transactions................... 37
---------
Net loss on investments and futures transactions......... (27)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 13
=========
See accompanying Notes to Financial Statements.
13
<PAGE>
Stein Roe Advisor Intermediate Bond Fund
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(All amounts in thousands)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
------------- -------------
OPERATIONS
<S> <C> <C>
Net investment income....................................... $ 40 $ 216
Net realized loss on investments and futures
transactions allocated from Portfolio.................. (64) (34)
Net change in unrealized appreciation/depreciation
on investments and futures transactions
allocated from Portfolio............................... 37 (83)
---------- ----------
Net increase in net assets resulting from operations..... 13 99
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.................... (40) (218)
Distributions in excess of net investment income............ (1) --
Return of capital........................................... (2) --
---------- ----------
(43) (218)
---------- ----------
SHARE TRANSACTIONS
Subscriptions to fund shares................................ 4 2,832
Value of distributions reinvested........................... 37 194
Redemptions of fund shares.................................. (1,539) (3,323)
---------- ----------
Net decrease from share transactions..................... (1,498) (297)
---------- ----------
Net decrease in net assets............................... (1,528) (416)
NET ASSETS
Beginning of period......................................... 1,706 2,122
---------- ----------
End of period............................................... $ 178 $1,706
========== ==========
Undistributed (overdistributed) net investment income....... -- 1
---------- ----------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares................................ (a) 285
Issued in reinvestment of distributions..................... 4 20
Redemptions of fund shares.................................. (162) (340)
---------- ----------
Net decrease in fund shares.............................. (158) (35)
Shares outstanding at beginning of period................... 177 212
---------- ----------
Shares outstanding at end of period......................... 19 177
========== ==========
</TABLE>
(a) Rounds to less than one.
See accompanying Notes to Financial Statements.
14
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Stein Roe Advisor Intermediate Bond Fund (the "Fund") is a series of
Liberty-Stein Roe Advisor Trust, formerly 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 Intermediate
Bond Portfolio (the "Portfolio"), which seeks a high level of current income
consistent with capital preservation by investing primarily in a diversified
portfolio of marketable debt securities with an expected life between three and
10 years.
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 Intermediate Bond Fund contributed $427,315 in securities and other
assets to SR&F Intermediate Bond Portfolio, in exchange for beneficial ownership
in that Portfolio. On February 4, 1998, Stein Roe Advisor Intermediate Bond 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 Intermediate Bond Fund and Stein Roe Advisor Intermediate Bond
Fund owned 99.9%, and less than 0.1% respectively, 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.
SECURITY VALUATIONS
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
Advisor, 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
During the year ended June 30, 2000, the Portfolio entered into U.S. Treasury
security futures contracts to either hedge against expected declines in the
value of their 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 variation margin
payable or receivable and offset in unrealized gains or losses. The Portfolio
recognizes a realized gain or loss when the contract is closed or expires. See
the Portfolio's Portfolio of Investments 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 such distributions to its
shareholders as 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 them to carry a realized capital loss forward for eight years following
the year of the loss and
15
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
offset such losses against any future realized gains.
At June 30, 1999, the Fund had a capital loss carry forwards of $56 expiring
in the years 2006 - 2008.
DISTRIBUTIONS TO FUND 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 principals. 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 primarily in high yield, high-risk medium- and
lower-quality debt securities. See the Portfolio's Investment Portfolio for
information regarding individual securities.
--------------------------------------------------------------------------------
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 0.035%
of the Portfolio's average daily net assets. The administrative fee for the Fund
is computed at an annual rate of 0.15% of the Fund's average daily net assets.
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services to the Portfolio and the
Fund for a monthly fee equal to $25 annually plus 0.0025% annually of their
average daily net assets over $50 million.
EXPENSE LIMIT
The Advisor has agreed to reimburse the Fund to the extent that annual expenses
exceed 1.00% of average daily net assets. This commitment expires January 31,
2001, subject to earlier termination by the Advisor on 30 days notice to the
Fund.
TRANSFER AGENT FEE
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 Liberty Funds Distributor, Inc., also an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to act
as subtransfer agent for the Fund. 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.
The Fund has adopted a 12b-1 plan which requires it to pay Liberty Funds
Distributor, Inc. (the Distributor), a subsidiary of the Advisor, a service fee
equal to 0.25% annually of the Fund's net assets as of the 20th of each month.
The fees received from the 12b-1 plans are used principally as repayment to
the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
OTHER
Certain officers and trustees of the Trust are also officers of the Advisor.
Compensation is paid to trustees not affiliated with 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, 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 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 borrowngs under the agreement.
16
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
NOTE 6. INVESTMENT TRANSACTIONS
The Portfolio's aggregate cost of purchases and proceeds from sales (other than
short-term obligations) for the year ended June 30, 2000, were $3,655,971 and
$3,669,365, respectively, of which $484,583 and $511,538, respectively, were
U.S. Government securities.
Unrealized appreciation (depreciation) at June 30, 2000 for federal income
tax purposes was:
Gross unrealized appreciation................. $ 2,742
Gross unrealized depreciation ................ (12,293)
--------
Net unrealized depreciation .............. $ (9,551)
========
17
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Stein Roe Advisor Intermediate Bond Fund
Selected per-share data for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998 (a)
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $ 9.64 $10.01 $10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................................... 0.61 0.60 0.24
Net realized and unrealized gain (loss)..................... (0.40) (0.36) 0.01
-------- -------- --------
Total from investment operations.......................... 0.21 0.24 0.25
-------- -------- --------
DISTRIBUTIONS
Net investment income....................................... (0.56) (0.61) (0.24)
In excess of net investment income.......................... (0.02) -- --
Return of capital........................................... (0.02) -- --
-------- -------- --------
(0.60) (0.61) (0.24)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD................................. $ 9.25 $ 9.64 $10.01
======== ======== ========
Ratio of net expenses to average net assets (b)................ 1.00% 1.00% 1.00%(c)
Ratio of net investment income to average net assets (d)....... 6.44% 6.13% 6.06%(c)
Total return (d)............................................... 2.25% 2.45% 2.52%(e)
Net assets, end of period (000's).............................. $ 178 $1,706 $2,122
</TABLE>
(a) From commencement of operations on February 4, 1998.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor, this ratio would have been 15.90% and
3.86% for the years ended June 30, 2000 and 1999, respectively, and
10.50% annualized for the period ended June 30, 1998.
(c) Annualized.
(d) Computed giving effect to Advisor's expense limitation undertaking.
(e) Not annualized.
--------------------------------------------------------------------------------
SR&F Intermediate Bond Portfolio
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1998(a)
--------------- --------------- ---------------
SELECTED RATIOS
<S> <C> <C> <C>
Ratio of net expenses to average net assets.................. 0.38% 0.36% 0.39%(b)
Ratio of net investment income to average net assets......... 7.48% 6.41% 6.77%(b)
Portfolio turnover rate...................................... 356% 253% 86%(c)
</TABLE>
(a) From commencement of operations on February 2, 1998.
(b) Annualized.
(c) Not annualized.
18
<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 Intermediate Bond Fund
SR&F Intermediate Bond Portfolio
We have audited the accompanying statement of assets and liabilities of Stein
Roe Advisor Intermediate Bond 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&FIntermediate Bond
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. 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
19
<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.
20
<PAGE>
Advisor Trust
--------------------------------------------------------------------------------
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 Partner, 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
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
21
<PAGE>
Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com
Liberty Funds Distributor, Inc. 8/00
S02-02/458C-0700 (8/00) 00/1455
