STEIN ROE ADVISOR FUNDS
SEMIANNUAL REPORT
DECEMBER 31, 1999
[PHOTO OF BONDS]
STEIN ROE FIXED INCOME FUND
TAXABLE BOND FUND
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
LOGO: STEIN ROE MUTUAL FUNDS
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................................................... 17
Selected per-share data
Must be preceded or accompanied by a prospectus.
<PAGE>
FUND PERFORMANCE
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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).
<TABLE>
<CAPTION>
CUMULATIVE SIX-MONTH AND AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------
6 Months 1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STEIN ROE ADVISOR INTERMEDIATE BOND FUND 0.91% 1.00% 7.30% 7.09%
Lehman Brothers Intermediate Government/
Corporate Bond Index 0.98% 0.39% 7.10% 7.26%
</TABLE>
GROWTH of a $10,000 investment for the ten years ended December 31
- --------------------------------------------------------------------------------
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
Lehman Brothers Intermediate Government/ Stein Roe Advisor
Corporate Bond Index Intermediate Bond Fund
12/31/89 10000 10000
12/31/90 10916 10692
12/31/91 12512 12266
12/31/92 13409 13174
12/31/93 14588 14357
12/31/94 14306 13943
12/31/95 16499 16252
12/31/96 17167 16952
12/31/97 18519 18477
12/31/98 20082 19635
12/31/99 20160 19832
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.
<PAGE>
QUESTIONS & ANSWERS
AN INTERVIEW WITH MIKE KENNEDY, PORTFOLIO MANAGER OF STEIN ROE
ADVISOR INTERMEDIATE BOND FUND AND SR&F INTERMEDIATE BOND PORTFOLIO
FUND DATA
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:
Seeks high current income consistent with capital preservation by investing
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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Q: HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999?
A: Stein Roe Advisor Intermediate Bond Fund generated a return of 0.91%,
underperforming the Lehman Intermediate Government/Corporate Bond Index return
of 0.98%.
Q: A LARGE PART OF YOUR STRATEGY IN RECENT YEARS HAS BEEN TO SHIFT ASSETS FROM
CORPORATE BONDS TO TREASURY BONDS AND VICE VERSA BASED ON YOUR OUTLOOK FOR EACH
MARKET. CAN YOU TELL US WHERE YOU SHIFTED ASSETS DURING THE PERIOD?
A: Corporate securities gathered a lot of our attention during the period. At
the end of the six months, over 70% of the Portfolio's assets were dedicated to
this asset class. We did boost our allocation to Treasury bonds for a short time
during the beginning of the period as potential new issue corporate bond supply
made corporate bonds less attractive. Investors feared that any company looking
to issue debt in the near future would issue before the end of the year to avoid
any potential problems related to Y2K. Toward the end of September, it became
clear the market had grossly overestimated corporate bond supply and the yields
on corporate bonds had risen intensely. Therefore, we moved the majority of
Treasury bonds back to corporate bonds, ending the period with just 2.6% of
assets in Treasury securities. This shift worked well for the Portfolio as
corporate bonds outperformed Treasury bonds from October through December.
Q: DID YOU ADJUST THE PORTFOLIO'S OVERALL CREDIT QUALITY?
A: We shifted the Portfolio's overall quality lower as recovery in international
economies led to an unwinding of the flight to quality we saw last year. By the
end of the period, we held a larger-than normal position in investment-grade
bonds rated BBB, as well as high yield bonds. This benefited performance as
lower-rated holdings performed the best.
Q: DID YOU SHORTEN THE PORTFOLIO'S DURATION AS INTEREST RATES INCREASED?
A: Yes. We maintained a shorter duration as interest rates rose. Toward the end
of the period we believed that most of the increases in rates were behind us,
and we increased the duration. Short-term rates may rise further in the months
ahead but we do not believe that will have a big impact on long-term interest
rates.
Q: THE PORTFOLIO'S POSITION IN MORTGAGE-BACKED SECURITIES INCREASED DURING THE
PERIOD TO 17.9%. HOW DID THIS SECTOR PERFORM AND WHAT MOTIVATED YOU TO INCREASE
YOUR POSITION?
A: Mortgage-backed securities performed exceptionally well in the second quarter
of this fiscal year - from October through December. It's usually a matter of
what issues are priced better in the market for us. Earlier in the year,
Treasury securities were priced a little better, and before that it was
corporate bonds. By the end of the period, we found the valuations of
mortgage-backed securities to be attractive, and increased our holdings to what
we consider a more normal position.
Q: WHAT INDUSTRIES DID YOU FIND NOTEWORTHY DURING THE PERIOD?
A: We continue to pay a lot of attention to bonds in the energy sector. The
increase in the price of oil has continued to support the performance of this
group. The insurance industry also got a lot of our attention in the latter part
of the six-month period. After a strong rally, we sold many of our insurance
company holdings.
Q: WHAT WAS YOUR INTERNATIONAL POSITION THROUGHOUT THE PERIOD?
A: Twenty-five percent of the Portfolio's holdings were in non-U.S., or Yankee
bonds at year-end. Recovery in international economies, particularly Asia and
Latin America, supported performance for the group during the period. We think
this area will continue to perform well because the outlook for the global
economy is positive. The largest of our non-U.S. holdings were in United Kingdom
bonds during the period. The rest of our allocation is a diversified mix of
Asia, Europe and Latin America. In Latin
<PAGE>
America we've been able to buy bonds backed by oil. This way we're not directly
exposed to that country's economy and politics, as the oil is a strong asset
backing up the bond.
Q: WHAT MARKET EVENTS WILL AFFECT THE PORTFOLIO IN COMING MONTHS?
A: Sector allocation will continue to be important. With a strong global economy
and good earnings growth, we expect corporate bonds will do well in the coming
months, and we plan to invest the majority of the Portfolio's assets in that
area.
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 LESS SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. Portfolio holdings are as of 12/31/99 and are subject to
change.
Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Foreign investments involve
market, political, accounting and currency risks not associated with other
investments. The Lehman Brothers Intermediate Government/Corporate Bond Index is
an unmanaged group of bonds that vary in quality; it is not available for direct
investment. Source of data: Lipper, Inc.
<PAGE>
SR&F INTERMEDIATE BOND PORTFOLIO
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Portfolio of Investments at December 31, 1999 (Unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
LONG-TERM OBLIGATIONS (98.3%) Par Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (2.6%)
U.S. Treasury Notes
6.000% 8/15/09................................................................ $ 1,500 $ 1,453
6.250% 2/15/03................................................................ 9,000 8,973
----------
10,426
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (7.3%)
FHLMC Gold
12.000% 7/1/20................................................................ 1,610 1,795
FNMA
8.500% 4/1/01................................................................. 111 114
6.000% 4/1/09................................................................. 7,735 7,433
6.000% 1/1/14................................................................. 5,878 5,580
6.000% 1/1/24................................................................. 1,954 1,805
6.000% 3/1/24................................................................. 722 667
6.500% 10/1/28................................................................ 6,641 6,257
FNMA Remic Trusts
9.250% 3/25/18 Series 1988-4 Class Z.......................................... 1,508 1,573
GNMA
8.000% 2/15/08................................................................ 2,350 2,390
9.000% 6/15/16................................................................ 60 63
9.000% 10/15/16............................................................... 122 129
6.625% 7/20/25 ARM............................................................ 1,421 1,434
----------
29,240
AEROSPACE (3.0%)
Lockheed Martin LMT.............................................................. 6,500 6,503
Air 2 US 1999-A 8.027% 10/01/19.................................................. 5,450 5,412
----------
11,915
AIRLINES (2.2%)
United Airlines Series 1991-A1 9.200% 3/22/08.................................... 2,937 3,078
Delta Airlines 8.300% 12/15/29................................................... 6,000 5,811
----------
8,889
ASSET-BACKED OBLIGATIONS (3.7%)
First Boston Mortgage Securities Series 1993-H1 Class A-IO
(Effective Yield 12.820%) 9/28/13............................................. 5,225 26
Green Tree Home Improvement Loan Trust
Series 1994-A Class A
7.050% 3/15/14................................................................ 807 797
Green Tree Recreational, Equipment & Consumer Trust
Series 1998-C Class A6 6.700% 2/15/14......................................... 4,500 4,352
JPMC 199-C8 A2 7/15/31
7.400% 7/15/31................................................................ 10,000 9,841
----------
15,016
AUTOMOTIVE (1.2%)
Federal-Mogul 7.500% 7/1/04...................................................... 5,000 4,709
<PAGE>
<CAPTION>
SR&F INTERMEDIATE BOND PORTFOLIO Continued
- -----------------------------------------------------------------------------------------------------------------
Par Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKING (12.8%)
Asset Securitization Corp. 6.750% 2/14/41........................................ $ 6,500 $ 6,221
Barclays Bank PLC. 7.400% 12/15/09............................................... 6,000 5,882
Citicorp 8.040% 12/15/19......................................................... 9,000 8,841
Countrywide Home 6.850% 6/15/04.................................................. 7,500 7,338
Deutsche Bank 7.872% 12/29/49 (a)................................................ 4,500 4,224
Korea Development Bank 7.150% 4/22/04............................................ 3,000 2,993
Merita Bank Limited 7.150% 9/11/49............................................... 4,500 4,381
Republic of Argentina (zero coupon) 10/15/03..................................... 7,000 4,585
Sanwa Bank LTD. 8.350% 7/15/29................................................... 4,100 4,115
Sovereign Bank 10.500% 11/15/06.................................................. 2,750 2,797
----------
51,377
BUILDING AND CONSTRUCTION (1.5%)
Owens Corning 7.000% 3/15/09..................................................... 4,750 4,152
PYCSA Panama 10.280% 12/15/12 (a)................................................ 3,182 1,909
----------
6,061
ENERGY SERVICES (0.9%)
AES Eastern Energy 9.670% 1/2/29 (a)............................................. 4,000 3,738
FINANCIAL (13.9%)
Amvescap 6.600% 5/15/05 (a)...................................................... 5,000 4,721
Bistro Trust 9.500% 12/31/02 (a)................................................. 3,000 2,813
Dana Credit Corp. 7.250% 12/16/02................................................ 5,000 4,980
Duke Capital Corp. 7.25% 10/01/04................................................ 4,000 3,982
Cigna CBO Series 1996-1 Class A-2 6.460%11/15/08 (a)............................. 5,000 5,013
Corporacion Andina de Fomento (Yankee Issue) 7.100% 2/1/03....................... 6,000 5,897
First Industrial L.P.
7.500% 12/1/17................................................................ 6,000 5,023
7.600% 7/15/28................................................................ 1,250 1,013
Jackson National Life European 9.060% 10/3/01.................................... 1,000 1,006
KBC Bank Fund Trust 3, 9.860% 11/29/04........................................... 5,500 5,641
Stagecoach Holdings 8.625 % 11/15/09............................................. 6,000 5,972
Sunamerica Euro 5.750 2/16/09.................................................... 4,750 4,194
TPSA Finance BV 7.750% 12/10/08.................................................. 6,000 5,600
----------
55,855
FOREIGN SOVEREIGN REGIONAL BONDS (1.6%)
Republic of Philippines 7.125% 1/15/09........................................... 3,000 2,957
State of Qatar 9.500% 5/21/09 (a)................................................ 3,500 3,678
----------
6,635
HEALTH SERVICE AND EQUIPMENT (1.9%)
Tenet Healthcare 7.875% 1/15/03.................................................. 4,000 3,920
Lilly Del Mar 7.170% 8/01/29..................................................... 3,750 3,632
----------
7,552
HOTELS AND ENTERTAINMENT (1.9%)
Prime Hospitality 9.250% 1/15/06................................................. 2,750 2,778
Marriott International 7.875% 9/15/09............................................ 5,000 4,927
----------
7,705
INSURANCE (5.2%)
Florida Windstorm 7.125% 2/25/19 (a)............................................. 2,375 2,185
Prudential Insurance 7.650% 7/1/07 (a)........................................... 7,250 7,191
Royal and Sun Alliance 8.950% 10/15/29........................................... 6,000 5,844
Zurich Capital Trust 8.376% 6/1/37 (a)........................................... 6,000 5,725
----------
20,945
<PAGE>
<CAPTION>
SR&F INTERMEDIATE BOND PORTFOLIO Continued
- -----------------------------------------------------------------------------------------------------------------
Par Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING (5.4%)
Abitibi-Consolidated 8.500% 8/01/29.............................................. $ 1,500 $ 1,435
Buhrmann US Inc. 12.250% 11/01/09................................................ 3,000 3,120
PDVSA Finance 8.750% 2/15/04 (a)................................................. 3,500 3,386
PDVSA Finance Limited Series 1998-1D 7.400% 8/15/16 (a).......................... 2,500 1,846
Tyco International Group (Yankee Issue) 6.875% 9/05/02........................... 5,500 5,401
USX Corp 7.200% 2/15/04.......................................................... 6,800 6,710
----------
21,898
MINING AND AGRICULTURE (2.6%)
Freeport-McMoRan Copper & Gold 7.500% 11/15/06................................... 2,700 1,890
PT Alatief Freeport (Yankee Issue) 9.750% 4/15/01................................ 3,000 2,655
Yosemite Securities Trust 8.250% 11/15/04........................................ 6,000 5,915
----------
10,460
MORTGAGE-BACKED SECURITIES (10.6%)
American Mortgage Trust Series 1993-3 Class 3B
8.190% 9/27/22................................................................ 1,464 1,420
Diversified Reit Trust Series 1999-1A Class C
6.780% 3/18/11 (a)............................................................ 5,000 4,480
Kidder Peabody Acceptance Series 1994-C3 Class A2
8.500% 4/1/07................................................................. 3,239 3,363
Lehman Brothers Commercial Conduit Mortgage Trust
6.210% 10/15/08............................................................... 10,000 9,150
Mellon Residential Funding Series 1998-TBC1 Class A3
5.610% 10/25/28............................................................... 4,500 4,312
Merrill Lynch Mortgage Investors Series 1995-C3 Class A3
7.060% 12/26/25............................................................... 4,000 3,918
Merrill Lynch Trust Series 20 Class D 8.000% 12/20/18............................ 1,275 1,273
Nomura Asset Securities Series 1996-MD5 Class A-1B
7.120% 4/13/36................................................................ 3,000 2,900
Option One Mortgage Securities Series 1999-B Class CTFS
9.660% 3/26/29 (a)............................................................ 3,714 3,655
PNC Mortgage Securities Series 1996-1 Class A
7.500% 6/25/26................................................................ 3,357 3,241
Structured Assets Securities
Series 1996-CFL Class C
6.525% 2/25/28................................................................ 3,684 3,656
Series 1996-CFL Class X1-IO
Zero Coupon (Yield to Maturity 9.806%) 2/25/28................................ 26,007 1,342
----------
42,710
NATURAL GAS AND OIL (5.4%)
Baker Hughes 6.875% 1/15/29 (a).................................................. 6,250 5,465
Gulf Canada Resources (Yankee Issue) 8.250% 3/15/17.............................. 3,000 2,640
Noble Drilling 7.500% 3/15/19.................................................... 5,310 4,990
Petroleos Mexicanos 9.657% 7/15/05............................................... 4,000 3,900
YPF Sociedad Anonima (Yankee Issue)
7.500% 10/26/02............................................................... 2,568 2,532
10.000% 11/02/28.............................................................. 2,000 2,194
----------
21,721
PRINTING AND PUBLISHING (0.5%)
World Color Press 7.750% 2/15/09 (a)............................................. 2,000 1,877
<PAGE>
<CAPTION>
SR&F INTERMEDIATE BOND PORTFOLIO Continued
- -----------------------------------------------------------------------------------------------------------------
Par Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST (2.9%)
Federal Realty Investment Trust
6.625% 12/1/05................................................................ $ 2,750 $ 2,444
7.480% 8/15/26................................................................ 3,500 3,138
Meditrust 7.820% 9/10/26......................................................... 4,200 2,961
Storage USA 7.125% 11/1/03....................................................... 3,250 3,092
----------
11,635
RETAIL (2.6%)
Tommy Hilfiger USA 6.850% 6/1/08................................................. 3,000 2,691
Price/Costco 7.125% 6/15/05...................................................... 5,250 5,166
Kmart Corp. 8.375% 12/01/04...................................................... 2,500 2,472
----------
10,329
SAVINGS AND LOANS (0.8%)
GS Escrow 7.000% 8/1/03 (a)...................................................... 3,000 2,766
TELECOMMUNICATIONS (2.6%)
CSC Holdings 7.875% 2/15/18...................................................... 4,250 4,046
Frontier Corp. 7.250% 5/15/04.................................................... 7,000 6,457
----------
10,503
TRANSPORTATION (0.7%)
Federal Express Pass-Through Certificates Series A1 7.530% 9/23/06............... 3,150 3,109
UTILITIES (4.5%)
Israel Electric Corp. LTD. 8.250% 10/15/09....................................... 3,250 3,222
Edison International Inc. 6.875% 9/15/04......................................... 8,875 8,710
Oglethorpe Power 6.974% 6/30/11 (a).............................................. 3,685 3,497
Utilicorp United Inc. 7.625 11/15/09............................................. 3,000 2,805
----------
18,234
TOTAL LONG-TERM OBLIGATIONS
(cost of $412,084)(b)......................................................... 395,305
----------
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
SR&F INTERMEDIATE BOND PORTFOLIO Continued
- -----------------------------------------------------------------------------------------------------------------
Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS, LESS LIABILITIES (1.7%)............................................ $ 7,024
----------
NET ASSETS (100.0%).............................................................. $ 402,329
==========
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</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements requirements of the Securities
Act of 1933. These securities generally are issued to qualified
institutional buyers, such such as the Portfolio, and any resale must be in
an exempt transaction, normally to other qualified institutional investors.
At December 31, 1999, the aggregate value of the Portfolio's private
placement securities was $68,169 which represented 15.8% of net assets.
(b) At December 31, 1999, the cost of investments for financial statement and
federal income tax purposes was identical.
The following short futures contracts were open at December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
TYPE CONTRACTS POSITION EXPIRATION GAIN
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. T-Note 15 Short Mar-00 $72
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (Unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at market value (cost $412,084) ........................... $395,305
Receivable for investments sold ........................................ 10,911
Interest receivable .................................................... 6,169
Cash ................................................................... 863
Variation margin on futures ............................................ 61
--------
Total assets ........................................................ 413,309
--------
LIABILITIES
Payable for investments purchased ...................................... 10,713
Other liabilities ...................................................... 267
--------
Total liabilities ................................................... 10,980
--------
Net assets applicable to investors' beneficial interest ............. $402,329
========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1999 (Unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest income ............................................................................... $ 15,992
Dividend income ............................................................................... 155
--------
Total income ............................................................................... 16,147
EXPENSES
Management fees ............................................................................... 747
Transfer Agent fees ........................................................................... 3
Accounting fees ............................................................................... 17
Trustees fees ................................................................................. 8
Custodian fees ................................................................................ 4
Audit fees .................................................................................... 8
Legal fees .................................................................................... 2
Other ......................................................................................... 16
--------
Total expenses ............................................................................. 805
--------
Net investment income ...................................................................... 15,342
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized loss on investments .............................................................. (4,009)
Net realized gain on futures transactions ..................................................... 624
Net change in unrealized appreciation/depreciation on investments and futures transactions .... (6,742)
--------
Net loss on investments and futures transactions ........................................... (10,127)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $ 5,215
========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, JUNE 30,
1999 1999
------------ ---------
<S> <C> <C>
OPERATIONS
Net investment income ....................................................................... $ 15,342 $ 29,891
Net realized gain (loss) on investments and futures transactions ............................ (3,385) 147
Net change in unrealized appreciation/depreciation on investments and futures transactions .. (6,742) (17,001)
--------- ---------
Net increase in net assets resulting from operations ..................................... 5,215 13,037
--------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ............................................................................... 111,897 97,305
Withdrawals ................................................................................. (148,342) (116,948)
--------- ---------
Net decrease from transactions in investors' beneficial interest ......................... (36,445) (19,643)
--------- ---------
Net decrease in net assets ............................................................... (31,230) (6,606)
NET ASSETS
Beginning of period ......................................................................... 433,559 440,165
--------- ---------
End of period ............................................................................... $ 402,329 $ 433,559
========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (Unaudited)
(All amounts in thousands, except per-share amount)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in SR&F Intermediate Bond Portfolio, at value ....................... $ 550
Receivable due to Advisor ...................................................... 30
Receivable for fund shares sold ................................................ 4
Other assets ................................................................... 14
-----
Total assets ................................................................ 598
-----
LIABILITIES
Dividends payable .............................................................. 1
Other liabilities .............................................................. 5
-----
Total liabilities ........................................................... 6
-----
Net assets .................................................................. $ 592
=====
ANALYSIS OF NET ASSETS
Paid-in capital ................................................................ $ 731
Undistributed net investment income ............................................ 2
Accumulated net realized loss on investments and futures transactions .......... (73)
Net unrealized depreciation on investments and futures transactions ............ (68)
-----
Net assets .................................................................. $ 592
=====
Shares outstanding (unlimited number authorized) ............................... 63
=====
Net asset value per share ...................................................... $9.41
=====
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1999 (Unaudited)
(All amounts in thousands)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest allocated from SR&F Intermediate Bond Portfolio ...................................... $ 37
----
EXPENSES
Expenses allocated from SR&F Intermediate Bond Portfolio ...................................... 2
12b-1 distribution and service fees ........................................................... 1
Transfer agent fee ............................................................................ 2
Accounting fee ................................................................................ 13
Trustees fees ................................................................................. 3
Custodian fee ................................................................................. 1
Audit fee ..................................................................................... 1
Legal fee ..................................................................................... 1
Registration fee .............................................................................. --
Other ......................................................................................... --
----
Total expenses ............................................................................. 24
Reimbursement of expenses by investment Advisor ............................................... (19)
----
Net expenses ............................................................................... 5
----
Net investment income ...................................................................... 32
----
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
ALLOCATED FROM SR&F INTERMEDIATE BOND PORTFOLIO
Net realized loss on investments and futures transactions ..................................... (31)
Net change in unrealized appreciation/depreciation on investments and futures transactions .... 6
----
Net loss on investments and futures transactions ........................................... (25)
----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $ 7
====
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STEIN ROE ADVISOR INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, JUNE 30,
1999 1999
---------- ----------
<S> <C> <C>
OPERATIONS
Net investment income .......................................................... $ 32 $ 216
Net realized loss on investments and futures transactions allocated
from SR&F Intermediate Bond Portfolio ....................................... (31) (34)
Net change in unrealized appreciation/depreciation on investments and
futures transactions allocated from SR&F Intermediate Bond Portfolio ........ 6 (83)
------- -------
Net increase in net assets resulting from operations ........................ 7 99
------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income ....................................... (32) (218)
------- -------
SHARE TRANSACTIONS
Subscriptions to fund shares ................................................... 2 2,832
Value of distributions reinvested .............................................. 29 194
Redemptions of fund shares ..................................................... (1,120) (3,323)
------- -------
Net decrease from share transactions ........................................ (1,089) (297)
------- -------
Net decrease in net assets .................................................. (1,114) (416)
NET ASSETS
Beginning of period ............................................................ 1,706 2,122
------- -------
End of period .................................................................. $ 592 $ 1,706
======= =======
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ................................................... (a) 285
Issued in reinvestment of distributions ........................................ 3 20
Redemptions of fund shares ..................................................... (117) (340)
------- -------
Net increase(decrease) in fund shares ....................................... (114) (35)
Shares outstanding at beginning of period ...................................... 177 212
------- -------
Shares outstanding at end of period ............................................ 63 177
======= =======
(a) Rounds to less than one.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(All amounts in thousands) (Unaudited)
NOTE 1. ORGANIZATION
Stein Roe Advisor Intermediate Bond Fund (the "Fund") is a series of
Liberty-Stein Roe Advisor Trust (the "Trust"), formerly Stein Roe Advisor 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 high current income consistent
with capital preservation by investing primarily in a diversified portfolio of
marketable debt securities with an expected average 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 in exchange for beneficial ownership of the 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 December 31, 1999, Stein Roe
Advisor Intermediate Bond Fund owned 0.1% 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. The Portfolio
had no when-issued or delayed delivery purchase commitments as of December 31,
1999.
INVESTMENT 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 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
During the six months ended December 31, 1999, the Portfolio entered into U.S.
Treasury security 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 Portfolio of Investments for a summary of
open futures contracts at December 31, 1999.
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
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
to its owners based on methods approved by the Internal Revenue Service.
The Fund intends to utilize provisions of the federal income tax laws which
allows them to carry a realized capital loss forward up to eight years following
the year of the loss and offset such losses against any future realized gains.
At June 30, 1999, the Fund had capital loss carryforwards of $5 expiring in
2006 and $28 expiring in 2007.
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. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
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
0.35% of average daily net assets. The administrative fee for the Fund is
computed at an annual rate of 0.15% of average daily net assets.
The Advisor also provides fund accounting services.
The Advisor has agreed to reimburse the Fund to the extent that expenses
exceed 1.00% of average annual net assets. This expense limitation expires on
January 31, 2001, subject to earlier termination by the Advisor on 30 days
notice.
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 fees are paid to Liberty Funds Distributor, Inc., 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.
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 4. SHORT-TERM DEBT
To facilitate portfolio liquidity, the Fund and the Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings by either the Fund or the Portfolio during the six months
ended December 31, 1999.
NOTE 5. INVESTMENT TRANSACTIONS
The Portfolio's aggregate cost of purchases and proceeds from sales or maturity
of securities, excluding short-term obligations, for the six months ended
December 31, 1999, were $778,960 and $799,240, respectively. Unrealized
appreciation (depreciation) at December 31, 1999 for both financial statement
and federal income tax purposes for the Portfolio was:
Gross unrealized appreciation...... $ 1,372
Gross unrealized depreciation...... (18,151)
--------
Net unrealized depreciation........ $(16,779)
========
<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>
(UNAUDITED)
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1999 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........................................... 0.36 0.60 0.24
Net realized and unrealized gain (loss)......................... (0.23) (0.36) 0.01
------ ------ ------
Total from investment operations.............................. 0.13 0.24 0.25
------ ------ ------
DISTRIBUTIONS
Net investment income........................................... (0.36) (0.61) (0.24)
------ ------ ------
NET ASSET VALUE, END OF PERIOD..................................... $ 9.41 $ 9.64 $10.01
====== ====== ======
Ratio of net expenses to average net assets (b).................... 1.00%(c) 1.00% 1.00%(c)
Ratio of net investment income to average net assets (d)........... 7.06%(c) 6.13% 6.06%(c)
Total return (d)................................................... 0.91%(e) 2.45% 2.52%(e)
Net assets, end of period (000's).................................. $ 592 $1,706 $2,122
(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 4.08% (annualized)
for the six months ended December 31, 1999, 3.86% for the year ended June
30, 1999 and 10.50% (annualized) for the period ended June 30, 1998,
respectively.
(c) Annualized.
(d) Computed giving effect to Advisor's expense limitation undertaking.
(e) Not annualized.
</TABLE>
- --------------------------------------------------------------------------------
SR&F INTERMEDIATE BOND PORTFOLIO
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1999 1999 1998 (A)
--------------- --------------- ---------------
<S> <C> <C> <C>
SELECTED RATIOS
Ratio of net expenses to average net assets...................... 0.38%(b) 0.36% 0.39%(b)
Ratio of net investment income to average net assets............. 7.21%(b) 6.41% 6.77%(b)
Portfolio turnover rate.......................................... 188%(c) 253% 86%(c)
(a) From commencement of operations on February 2, 1998.
(b) Annualized.
(c) Not annualized.
</TABLE>
<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 e-mail, 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.
<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,
Secretary
Loren Hanson, Executive Vice President,
Christine Balzano, Vice President
David P. Brady, Vice President
Daniel K. Cantor, Vice President
Denise Chasmer, Vice President
J. Kevin Connaughton, Vice President
Erik P. Gustafson, Vice President
Harvey B. Hirschhorn, Vice President
Timothy Jacoby, Vice President
Michael T. Kennedy, Vice President
Gail D. Knudsen, Vice President
Stephen F. Lockman, Vice President
Lynn C. Maddox, Vice President
Mary D. McKenzie, Vice President
Arthur J. McQueen, Vice President
Maureen Newman, Vice President
Nicholas Norton, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Michael Fisher, Assistant Treasurer
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
<PAGE>
Stein Roe & Farnham
One South Wacker Drive
Chicago, IL 60606-1130
www.steinroe.com
Liberty Funds Distributor, Inc. 2/00
DIR-03/277A-0100 (2/00) 00/213
