STEIN ROE MUTUAL FUNDS
ANNUAL REPORT
JUNE 30, 2000
[BRIDGE PHOTO]
STEIN ROE TAX-EXEMPT BOND FUNDS
TAX-EXEMPT FUNDS
STEIN ROE MUNICIPAL MONEY MARKET FUND
STEIN ROE INTERMEDIATE MUNICIPALS FUND
STEIN ROE MANAGED MUNICIPALS FUND
STEIN ROE HIGH-YIELD MUNICIPALS FUND
[STEIN ROE LOGO]
STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
Contents
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From the President................................................ 1
Stephen Gibson's thoughts on the markets and investing
Questions & Answers
Interviews with the portfolio manager(s) and a summary of investment activity
Stein Roe Municipal Money
Market Fund.................................................. 5
Stein Roe Intermediate
Municipals Fund.............................................. 8
Stein Roe Managed Municipals Fund.............................. 12
Stein Roe High-Yield Municipals Fund........................... 16
Portfolios of Investments......................................... 20
A complete list of investments with market values
Financial Statements.............................................. 46
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements..................................... 56
Financial Highlights.............................................. 62
Selected per-share data
Report of Independent Auditors ................................... 66
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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To Our Shareholders
Consumer confidence remained high and spending was strong, posting near-record
sales in certain industries during the 12-month period ending June 30, 2000. The
U.S. economy continued its steady growth through the second half of 1999, and
though it has shown signs of slowing in the first two quarters of 2000, it has
not stabilized sufficiently to satisfy the Federal Reserve Board (the Fed).
As always, the most influential factor in the bond market was the actions of
the Fed. Fueled by fears of inflation resulting from rapid economic growth, the
Fed raised short-term interest rates five times during the period, increasing
them from 5% to 6.5%. As bond prices declined in the face of rising interest
rates, bond performance was negatively affected.
However, the demand for municipal bonds has increased in the last few months.
This was driven in part by their relatively high tax-equivalent yields. In
addition, the rising stock market has enabled many investors to increase their
wealth and subsequently look for tax-exempt income.
We remain confident that municipal bonds can be a rewarding asset class for
tax-sensitive investors. The following report will provide you with more
specific information about your Fund's performance and the strategies used
during the period. I thank you for choosing Stein Roe Tax-Exempt Bond Funds and
for giving us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
August 18, 2000
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Stephen E. Gibson
[STEPHEN GIBSON PHOTO]
1
<PAGE>
Fund Performance
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Average Annual Total Returns
Periods Ended June 30, 2000
1 YEAR 5 YEARS 10 YEARS
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Stein Roe Municipal Money
Market Fund 3.20% 3.05% 3.00%
U.S. Consumer Price Index (Inflation) 3.67% 2.47% 2.86%
Lipper Tax-Exempt Money Market
Fund Average 3.09% 3.01% 3.05%
Number of Funds in Peer Group 136 114 74
Stein Roe Intermediate Municipals Fund 3.10% 4.89% 6.12%
Lehman Brothers 10-Year Municipal
Bond Index 4.47% 5.97% 7.23%
Lipper Intermediate Municipal
Debt Fund Average 2.50% 4.68% 6.01%
Number of Funds in Peer Group 122 98 23
Stein Roe Managed Municipals Fund 1.86% 5.30% 6.44%
Lehman Brothers Municipal Bond Index 3.25% 5.88% 7.06%
Lipper General Municipal Debt Fund Average 0.98% 4.76% 6.40%
Number of Funds in Peer Group 268 183 83
Stein Roe High-Yield Municipals Fund (0.16)% 5.36% 6.17%
Lehman Brothers Municipal Bond Index 3.25% 5.88% 7.06%
Lipper High-Yield Municipal Debt
Fund Average (2.16)% 4.54% 6.02%
Number of Funds in Peer Group 66 35 17
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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.
An expense limitation of 0.70% was in effect for Stein Roe Municipal Money
Market Fund and Stein Roe Intermediate Municipals Fund for part of the periods
shown. Returns would have been lower without the limitation. Total return
includes changes in share price and reinvestment of income and capital gains
distributions, if any. Each index shown above is an unmanaged group of
fixed-income securities that differs from the composition of each Stein Roe
fund; they are not available for direct investment. The U.S. Consumer Price
Index is the government's measure of annual changes in the cost of living.
Income may be subject to state or local taxes and the federal alternative
minimum tax. Capital gains, if any, are subject to federal, state and local
taxes. Sources: Lipper, Inc., a monitor of mutual fund performance.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
2
<PAGE>
Total Return Comparison
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Stein Roe Intermediate Municipals Fund
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Growth of a $10,000 Investment June 30, 1990 to June 30, 2000
Intermediate Lehman Brothers
Municipals 10-Year Municipal
Fund Bond Index
6/30/90 10000 10000
6/30/91 10820 10924
6/30/92 11931.2 12160.6
6/30/93 13234.1 13690.4
6/30/94 13387.6 13825.9
6/30/95 14269.9 15039.9
6/30/96 15054.7 16000.9
6/30/97 16114.6 17335.4
6/30/98 17216.8 18805.4
6/30/99 17574.9 19236.1
6/30/00 18119.2 20095.9
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. The line chart assumes a $10,000 investment on
June 30, 1990, reinvestment of distributions, and compares fund performance to
an index, which is an unmanaged group of fixed income securities that differs
from the composition of any Stein Roe fund; it is not available for direct
investment. Source: Lipper, Inc.
Stein Roe Managed Municipals Fund
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Growth of a $10,000 Investment June 30, 1990 to June 30, 2000
[CHART DATA]
Managed Lehman Brothers
Municipals Fund Municipal Bond Index
6/30/90 10000 10000
6/30/91 10894 10901
6/30/92 12191.5 12184
6/30/93 13508.1 13641.3
6/30/94 13469 13664.5
6/30/95 14428 14869.6
6/30/96 15332.6 15857
6/30/97 16640.5 17165.2
6/30/98 18033.3 18651.7
6/30/99 18334.4 19166.5
6/30/00 18674.5 19789.4
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The line chart assumes a $10,000 investment on
June 30, 1990, reinvestment of distributions, and compares fund performance to
an index, which is an unmanaged group of fixed income securities that differs
from the composition of any Stein Roe fund; it is not available for direct
investment. Source: Lipper, Inc.
3
<PAGE>
Total Return Comparison Continued
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Stein Roe High-Yield Municipals Fund
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Growth of a $10,000 Investment June 30, 1990 to June 30, 2000
[CHART DATA]
High-Yield Lehman Brothers
Municipals Fund Municipal Bond Index
6/30/90 10000 10000
6/30/91 10881 10901
6/30/92 11857 12184
6/30/93 12791.4 13641.3
6/30/94 12912.9 13664.5
6/30/95 14016.9 14869.6
6/30/96 14979.9 15857
6/30/97 16310.1 17165.2
6/30/98 17667.1 18651.7
6/30/99 18228.9 19166.5
6/30/00 18199.4 19789.4
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The line chart assumes a $10,000 investment on
June 30, 1990, reinvestment of distributions, and compares fund performance to
an index, which is an unmanaged group of fixed income securities that differs
from the composition of any Stein Roe fund; it is not available for direct
investment. Source: Lipper, Inc.
4
<PAGE>
Questions & Answers
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An Interview with Veronica M. Wallace, Portfolio Manager of Stein Roe
Municipal Money Market Fund and SR&F Municipal Money Market Portfolio
Q: Describe the economic environment as it related to the Fund during the
period.
WALLACE: Beginning in June of last year, the Federal Reserve Board (the Fed)
began to raise interest rates in an effort to slow the rapid economic growth and
preempt inflationary pressure. In fact, the Fed raised interest rates a total of
five times during the period. This trend made it wise to proceed cautiously with
purchases. The yearly trend of taxpayers liquidating assets to provide needed
cash during tax time continued into May this year. This affected the variable
rate securities market because issuers raised rates to attract buyers. The Fund
was well positioned to take advantage of these rates.
Fund Data
Investment Objective:
Stein Roe Municipal Money Market Fund seeks maximum current income exempt
from federal income tax, consistent with capital preservation and maintenance
of liquidity by investing principally in a diversified portfolio of
short-term municipal securities.
Fund Inception:
March 15, 1983
Net Assets:
$113.8 million
Q: What strategy did you use to manage the Portfolio for the past year?
WALLACE: During the period, we spent much of the time remaining liquid in
anticipation of tightening by the Federal Reserve Board. We exercised caution in
purchasing, allowing the average maturity of the Portfolio to gradually
decrease. This served as the backdrop for the entire year. In keeping with this
strategy, the bulk of investing during the period involved variable-rate
securities, which are purchased at par and vary in interest rate. These gave the
Portfolio daily and weekly liquidity. In addition, yields on variable-rate
securities peaked as high as six percent in May, which aided Fund performance.
Veronica M. Wallace
[VERONICA WALLACE PHOTO]
5
<PAGE>
Questions & Answers Continued
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Q: What is your outlook for the Portfolio in the next few months?
WALLACE: For the next few months, we will continue to exercise caution. With the
possibility that the Fed will raise rates again in August balanced by a slowing
in economic growth, we feel that the most prudent course of action is to wait
and see what August brings, maintaining our current average maturity rate of
39.9 days. As always, however, we have our eyes open for attractive purchases
that we believe should benefit the Fund.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. TOTAL RETURN INCLUDES
REINVESTMENT OF INCOME. YIELDS FLUCTUATE AND ARE NOT GUARANTEED. An investment
in the Portfolio is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any government agency. There can be no assurance
that the $1.00 net asset value per share will be maintained. Although the
Portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Portfolio. The Advisor currently
limits expenses to .70% of average net assets. Absent these limits, the 7-day
current tax-free yield as of 6/30/00 would have been 6.49% and the total return
would have been less. Tax-free income is exempt from federal taxes but may be
subject to the alternative minimum tax. Current yield is net of all fees and
represents annualization of dividends declared and payable to shareholders for
the last seven days of investment. Portfolio composition is disclosed for SR&F
Municipal Money Market Portfolio. Portfolio holdings are as of 6/30/00 and
subject to change. Source of Lipper data: Lipper, Inc., a monitor of fund
performance.
6
<PAGE>
Portfolio Highlights
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SR&F Municipal Money Market Portfolio
SECURITY TYPE BREAKDOWN
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
---------------------------------
Variable-Rate Notes 77.7% 75.0%
Tax-Exempt Bonds 8.7 14.8
Other Tax-Exempt Notes 6.7 4.3
Put Bonds 3.9 3.8
Tax & Revenue Anticipation Notes 1.6 1.4
Commercial Paper 1.4 0.7
---------------------------------
Total Investments 100.0% 100.0%
PORTFOLIO STATISTICS
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
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7-Day Dollar-Weighted Average Maturity 40 days 45 days
7-Day Current Yield* 3.91% 2.74%
* Net of all fees and expenses and represents an annualization of dividends
declared and payable to shareholders for the last seven days of
investments.
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MATURITY
As of June 30, 2000
[CHART DATA]
Greater than 299 Days 6.3%
180-299 Days 1.5%
90-179 Days 8.7%
30-89 Days 4.2%
1-29 Days 79.3%
As of June 30, 1999
[CHART DATA]
Greater than 299 Days 7.1%
180-299 Days 3.5%
90-179 Days 7.8%
30-89 Days 4.7%
1-29 Days 76.9%
7
<PAGE>
Questions & Answers
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An Interview with Bill Loring, Portfolio Manager of Stein Roe Intermediate
Municipals Fund
Q: How did the Fund perform between July 1, 1999 and June 30, 2000?
A: Rising interest rates hurt municipal bond performance during the period, and
the Fund's performance reflects the market's difficulties. The Fund returned
3.10% for the 12-month period ended June 30, 2000. This return outperformed the
Lipper Intermediate Municipal Debt Fund peer group average return of 2.50%. The
Lehman Brothers 10-Year Municipal Bond Average, a benchmark of bond market
performance, returned 4.47% for the same period.
Q: What changes did you make in response to rising interest rates?
A: Like many investors, we believed that short-term interest rate hikes, which
totaled 1.5% over the past 12 months, would ultimately slow economic growth,
bringing it down to a non-inflationary level. Such a scenario would create a
better environment for bonds, so we have generally structured the Fund's
portfolio to take advantage of that favorable outcome. However, it appeared that
it would take some time for the Fed's preemptive strikes against inflation to
have the desired effect--perhaps a year or more. As a result, we chose to
maintain the portfolio's basic structure.
Bill Loring
[BILL LORING PHOTO]
Fund Data
Investment Objective:
Seeks a high level of total return, consisting of current income exempt from
federal income tax, consistent with the preservation of capital.
Fund Inception:
October 9, 1985
Net Assets:
$135.8 million
Q: Did the condition of the bond market create any unique strategic
opportunities?
A: Rising interest rates and declining municipal bond prices created the
opportunity to do some "tax swapping." We sold some of our poorer performing
bonds at a loss, in order to offset current and future capital gains elsewhere
in the portfolio. We then invested the proceeds from these sales in
higher-yielding bonds when the opportunity arose. These tax swaps helped improve
the Fund's tax efficiency, and also helped boost the Fund's 30-day SEC yield. As
of June 30, 2000, the Fund's 30-day SEC yield was 4.65%.
8
<PAGE>
Questions & Answers Continued
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Q: Did you make any changes to the Fund's overall credit quality?
A: We normally keep the bulk of the Funds' portfolio in the higher end of the
quality spectrum. However, we may move the credit quality of the portfolio up or
down according to whether higher- or lower-quality securities are more
attractive during any given period. As interest rates rose during the period,
investors demanded more yield for lower-rated bonds as compensation for the
additional risk incurred. Wider spreads (which represent the difference between
the yields of higher- and lower-rated bonds) caused the Fund's relatively small
stake in lower-quality bonds to underperform. However, spreads did stabilize in
the last few months of the period as demand for municipal bonds rose. If this
trend continues, spreads should continue to narrow and performance of the
high-yield sector should improve.
Q: Where have you been finding the best values lately?
A: We found some compelling values among discount bonds, which trade below their
face value. We were able to purchase some discounts which were trading at prices
we believed to be well below their fair market value, locking in attractive
yields at the same time. We also found value among intermediate bonds in the 15-
to 20-year maturity range. Yields on longer-maturity bonds generally show a
greater increase in response to rising interest rates, so these bonds offered
attractive yields when compared to other maturities.
Q: What is your outlook for the year to come?
A: At this time, we believe the Fed's interest rate increases will have their
desired effect of slowing the economy and stifling inflation. If this is the
case, interest rates are likely to stabilize and may eventually start to
decline. This could be good news for investors in the bond market, because bonds
generally perform better in periods of slower economic growth and declining
interest rates. There may be favorable trends in the municipal market, as well.
In recent years, strong economies and high tax revenues have allowed state and
local entities to fund new projects with cash rather than debt, causing the
supply of municipal bonds to dwindle. However, as the economy starts to slow,
supply of municipal bonds should return to historical levels. Municipals should
also continue to be priced attractively in comparison with their Treasury
counterparts.
9
<PAGE>
Questions & Answers Continued
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions, if any. Portfolio holdings are as of 6/30/00 and are
subject to change. The Advisor currently limits expenses to 0.70% of average net
assets. Fund return as of 6/30/00 would have been lower without the limit.
Absent past limits, the 30-day SEC and tax-equivalent yields as of 6/30/00 would
have been 7.70% and 4.50%, respectively. Income distributions are exempt from
federal income taxes but may be subject to the federal alternative minimum tax
and state and local taxes. Capital gains, if any, are also taxable. The Lehman
Brothers 10 -Year Municipal Bond Index is an unmanaged group of investment-grade
municipal bonds; it is not available for direct investment.
Tax-exempt investing offers tax-free income, but also involves certain risks.
The value of the Fund will be affected by interest rate changes and the
creditworthiness of issues held in the Fund. The municipal bond management team
seeks to identify problems and opportunities and react quickly to market
changes.
Source of Lipper data: Lipper, Inc.
10
<PAGE>
Fund Highlights
--------------------------------------------------------------------------------
Stein Roe Intermediate Municipals Fund
TOP FIVE STATES
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
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New York 15.9% New York 10.7%
Illinois 9.9 Georgia 10.0
Arizona 6.2 Illinois 9.9
Texas 5.9 Texas 8.6
Georgia 5.7 Arizona 6.7
PORTFOLIO STATISTICS
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
--------------------------------
Average Duration 6.2 years 5.9 years
Average Weighted Maturity 9.4 years 8.6 years
Average Weighted Coupon 6.12% 6.28%
--------------------------------------------------------------------------------
MATURITY
As of June 30, 2000
[CHART DATA]
Greater than 15 Years 17.6%
10-15 Years 20.6%
5-10 Years 34.6%
0-5 Years 27.2%
As of June 30, 1999
[CHART DATA]
Greater than 15 Years 18.9%
10-15 Years 40.5%
5-10 Years 26.6%
0-5 Years 14.0%
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
As of June 30, 2000
[CHART DATA]
Cash equivalents 0.1%
BBB and Below 8.1%
A 17.9%
AA 13.9%
AAA 56.4%
Non-rated 3.6%
As of June 30, 1999
[CHART DATA]
BBB and Below 9.7%
A 14.5%
AA 8.2%
AAA 67.6%
11
<PAGE>
Questions & Answers
--------------------------------------------------------------------------------
An Interview with Brian Hartford and Bill Loring, Portfolio Managers of Stein
Roe Managed Municipals Fund
Q: How did the Fund perform during the 12 months ended June 30, 2000?
A: Rising interest rates throughout the period were problematic for the Stein
Roe Managed Municipals Fund. Although the Fund returned 1.86% for the 12 months
ended June 30, 2000, it outperformed its peers in a volatile market environment.
The average return of the Fund's Lipper General Municipal Debt Fund peer group
was 0.98% for the period. The Lehman Brothers Municipal Bond Index, a benchmark
of market performance, returned 3.25% for the same period.
Q: Why did interest rates rise during the period?
A: Unprecedented economic growth in the United States triggered worries of
rising inflation. In a continued attempt to slow the economy and thereby avoid
inflationary pressures, the Federal Reserve Board (the Fed) raised short-term
interest rates five times during the period, for a total increase of 1.5%.
Because bond prices fall when interest rates rise, the prices of both Treasury
bonds and municipal bonds suffered in response to repeated rate hikes.
Brian Hartford
[BRIAN HARTFORD PHOTO]
Bill Loring
[BILL LORING PHOTO]
Fund Data
Investment Objective:
Seeks a high level of total return consistent with prudent risk, consisting
of current income exempt from federal income tax and opportunities for
capital appreciation.
Fund Inception:
February 23, 1977
Net Assets:
$458.2 million
Q: How did bond yields react in this environment?
A: Higher interest rates increase the cost of doing business for entities that
borrow money, and it is generally held that more financially sound entities can
withstand this strain better than those that have more risk (i.e., have lower
credit ratings). With the sustained rise in interest rates over the past year,
investors have demanded ever-higher yields from low-rated or non-investment
grade bonds. The general outcome was a widening of the difference, or "spread,"
between the yields of high- and low-quality bonds. Wider yield spreads
translated
12
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
into additional income from the Fund's high-yield bonds.
Q: What factors helped the Fund outpace its peers?
A: A shorter-than-average duration allowed the Fund to perform better than its
peers during the period. Duration measures a fund's sensitivity to changes in
interest rates. The shorter a fund's duration, the less its share price will
fall when interest rates rise (and vice versa).
Q: Is there a "bright side" to the bond market's recent slump?
A: Rising interest rates and weaker municipal bond prices allowed us to engage
in "tax swapping." We sold some of the Fund's bonds at a loss to offset current
and future capital gains incurred elsewhere in the Portfolio. When the market
presented us with an attractive opportunity, we invested the proceeds from these
sales in higher-yielding bonds. These tax swaps helped improve the Fund's tax
efficiency and also helped boost the Fund's 30-day SEC yield, which was 5.14% as
of June 30, 2000. In addition, we took a defensive position with the Fund's
duration, in order to reduce the impact of advancing interest rates.
Q: Where have you been finding the best values lately?
A: We've found some attractive values among higher-yielding, lower-quality
municipal bonds. We are extremely selective in choosing high-yield bonds, but in
the past year we encountered some opportunities to add holdings which we believe
have excellent potential. We've also identified some attractive values among
discount bonds, which trade below their par (face) value. Because of increasing
interest rates, discount bonds generally posted larger losses than par and
premium bonds, which trade above their face value. Given their poor performance
during much of 1999, we were able to add some discount bonds to the Fund at very
attractive prices.
Q: What is your outlook for the next fiscal year?
A:Although the past year has been a difficult period for municipal bonds, our
outlook for the future is quite positive. The Federal Reserve Board continues to
be proactive in the battle against higher inflation. It appears that some of the
issues which most concerned the Fed, such as higher energy prices and mounting
employment costs, have worked their way through the system and no longer pose
major threats. Productivity gains continue, and excess production capacity
worldwide should help to keep prices down. We expect to see more indications of
slowing in the coming months.
13
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
If the economy does lose some of its vigor, interest rates could fall, allowing
bond prices to rally. We see some favorable trends in the municipal market, as
well. In recent years, strong economies and high tax revenues have allowed state
and local entities to fund new projects with cash rather than debt, causing the
supply of municipal bonds to dwindle. However, as the economy starts to slow,
supply of municipal bonds should return to historical levels. Municipals should
also continue to be priced attractively in comparison with their Treasury
counterparts.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions, if any. Portfolio holdings are as of 6/30/00 and are
subject to change. Income distributions are exempt from federal income taxes but
may be subject to the federal alternative minimum tax and state and local taxes.
Capital gains, if any, are also taxable. The Lehman Brothers Municipal Bond
Index is an unmanaged group of investment-grade municipal bonds; it is not
available for direct investment.
Tax-exempt investing offers current tax-free income, but also involves certain
risks. The value of the Fund will be affected by interest rate changes and the
creditworthiness of issues held in the Fund. The municipal bond management team
seeks to identify opportunities and react quickly to market changes.
Source of Lipper data: Lipper, Inc.
14
<PAGE>
Fund Highlights
--------------------------------------------------------------------------------
Stein Roe Managed Municipals Fund
TOP FIVE STATES
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
Georgia 12.5% Georgia 10.5%
Illinois 9.7 Illinois 10.4
Massachusetts 9.4 Massachusetts 9.9
New York 6.6 New York 9.2
California 5.9 Washington 6.0
PORTFOLIO STATISTICS
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
--------------------------------
Average Duration 9.4 years 7.8 years
Average Weighted Maturity 16.1 years 16.3 years
Average Weighted Coupon 5.77% 5.90%
--------------------------------------------------------------------------------
MATURITY
As of June 30, 2000
[CHART DATA]
Greater than 25 Years 12.4%
20-25 Years 18.5%
15-20 Years 21.1%
10-15 Years 27.8%
5-10 Years 12.8%
Less than 5 Years 7.4%
As of June 30, 1999
[CHART DATA]
Greater than 25 Years 14.3%
20-25 Years 17.0%
15-20 Years 20.2%
10-15 Years 29.6%
5-10 Years 10.2%
Less than 5 Years 8.7%
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
As of June 30, 2000
[CHART DATA]
Non-rated 4.6%
Cash equivalents 0.5%
BBB and Below 9.8%
A 20.2%
AA 22.0%
AAA 42.9%
As of June 30, 1999
[CHART DATA]
BBB and Below 11.2%
A 25.0%
AA 29.2%
AAA 34.6%
15
<PAGE>
Questions & Answers
--------------------------------------------------------------------------------
An Interview with Maureen Newman, Portfolio Manager of Stein Roe High-Yield
Municipals Fund and the SR&F High-Yield Municipals Portfolio
Q: How did the Fund perform during the 12-month period ended June 30, 2000?
Q: In an extremely difficult year for the municipal bond market, the Stein Roe
High-Yield Municipal Fund had a total return of negative 0.16% for the 12-month
period ended June 30, 2000. However, the Fund performed relatively well compared
to its Lipper peers, as the 12-month return on the Lipper High-Yield Municipal
Debt Fund average was negative 2.16%. The Lehman Brothers Municipal Bond Index,
a broad gauge of the municipal market's performance, returned 3.25% for the same
period.
Q: What factors helped the Fund to keep pace with its peers?
A: The Portfolio's performance advantage was fueled in large part by the strong
performance of several individual holdings. We entered into an agreement to sell
the underlying assets of a defaulted security, and received a
better-than-expected price on the sale, which also helped the Fund to remain
competitive. Additionally, the Fund was helped by the fact that it maintained a
low weighting in lower-quality securities and hospital bonds, which
underperformed during the period.
Maureen Newman
[MAUREEN NEWMAN PHOTO HERE]
Fund Data
Investment Objective:
Seeks a high level of total return consisting of current income exempt from
ordinary federal income tax and opportunities for capital appreciation.
Fund Inception:
March 5, 1984
Net Assets:
$253.8 million
Q: What caused the Fund's weak return for the period?
A: The weak return was largely attributable to rising interest rates throughout
the period. Record economic growth in the United States and the recovery of
several foreign economies spawned concerns that inflationary increases could be
just around the corner. In an effort to slow the economy and head off inflation,
the Federal Reserve Board (the Fed) increased key short-term interest rates five
times during the 12-month period, for a total increase of 1.5%. Both municipal
bonds and Treasurys experienced price declines
16
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
as a result of the market's reaction to these interest rate hikes. However,
municipal bonds are less volatile than Treasurys, and thus experienced smaller
price drops than Treasury bonds as interest rates rose.
Q: Did you make any changes in response to rising interest rates?
A: A portfolio's price sensitivity to interest rate changes is measured by its
duration. The shorter the duration, the less the Fund's value is impacted by
interest rate fluctuations, and vice versa. Throughout the 12-month period, we
maintained a neutral duration for the Fund. This means that the Portfolio was
neither more nor less sensitive to rising interest rates than the overall
high-yield market. I chose this stance because it was unclear how interest rate
hikes would be interpreted -- either as preemptive measures to guard against
inflation or as an indication that inflationary pressures had already taken
hold. As it turns out, the market reacted in a generally negative way to the
rate increases, so the Portfolio's performance was not adversely impacted by
this neutral stance.
Q: Were there any sectors that
had a significant impact on the Fund's performance?
A: During the first half of the fiscal year, there were some attractive values
in the hospital sector. The industry had come under pressure due to a
combination of cutbacks in Medicare reimbursement, some well-publicized problems
with scattered facilities across the country, and the pullback on the part of
some municipal bond insurers from lower-rated hospitals. That environment
produced selective opportunities for the Portfolio to add high-yielding hospital
bonds at attractive prices. Since we were underweighted in this underperforming
sector, the Fund's relative performance was helped.
Q: What is your outlook for the year ahead?
A: In the months to come, we anticipate stronger performance in the bond market.
We believe the Fed's efforts to rein in the economy will be successful, and that
economic growth will begin to slow. If this anticipated slowdown does occur, we
believe that interest rates will stabilize,
17
<PAGE>
Questions & Answers Continued
--------------------------------------------------------------------------------
creating an environment in which the bond market could rally. However, there are
still strong indications that things could go either way. Consumer confidence
and spending remain very high. Workers continue to demand higher wages. The
prices of oil and other commodities continue to rise. Any of these factors could
trigger higher inflation, which would have a negative impact on the bond market.
As for high-yield municipal bonds, we believe they will perform well relative
to their investment-grade counterparts. The supply and demand imbalance which
caused them to underperform during the period should subside in the months to
come. In addition, we expect municipal bonds to remain an attractive alternative
to taxable fixed-income securities for investors in higher tax brackets. For
example, the Fund's 30-day SEC yield was 5.38% as of June 30, 2000, which
translates to a tax-equivalent yield of 8.91% for investors in the highest 39.6%
federal tax bracket.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions, if any. Portfolio holdings are disclosed as a percentage of
SR&F High-Yield Municipals Portfolio as of 6/30/00 and are subject to change.
Investing in high-yield bonds involves greater credit risks than investing in
higher-quality bonds. Income distributions are exempt from federal income taxes
but may be subject to the federal alternative minimum tax and state and local
taxes. Capital gains, if any, are also taxable. The Lehman Brothers Municipal
Bond Index is an unmanaged group of investment-grade municipal bonds; it is not
available for direct investments.
High-yield investing offers the potential for high income and attractive total
returns, but also involves certain risks. These include credit risks associated
with lower-rated bonds, changes in interest rates, and certain risks associated
with foreign investments.
Source of Lipper data: Lipper, Inc.
18
<PAGE>
Portfolio Highlights
--------------------------------------------------------------------------------
SR&F High-Yield Municipals Portfolio
TOP FIVE STATES
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
Pennsylvania 10.5% Indiana 11.9%
Florida 9.3 Pennsylvania 11.2
Indiana 9.1 Colorado 8.0
Colorado 6.2 Texas 5.6
Texas 5.4 New York 4.5
PORTFOLIO STATISTICS
PORTFOLIO PORTFOLIO
JUNE 30, 2000 JUNE 30, 1999
--------------------------------
Average Duration 7.4 years 7.9 years
Average Weighted Maturity 16.9 years 17.1 years
Average Weighted Coupon 6.65% 6.68%
--------------------------------------------------------------------------------
MATURITY
As of June 30, 2000
[CHART DATA]
Greater than 25 Years 21.0%
20-25 Years 20.6%
15-20 Years 21.4%
10-15 Years 12.8%
5-10 Years 10.3%
Less than 5 Years 13.9%
As of June 30, 1999
[CHART DATA]
Greater than 25 Years 23.4%
20-25 Years 18.4%
15-20 Years 18.8%
10-15 Years 13.2%
5-10 Years 12.3%
Less than 5 Years 13.9%
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
As of June 30, 2000
[CHART DATA]
AAA 16.3%
AA 8.8%
A 16.1%
Cash equivalents 1.6%
BBB 22.1%
BB 8.7%
Non-rated 26.4%
As of June 30, 1999
[CHART DATA]
AAA 18.4%
AA 6.9%
A 19.5%
BBB 23.3%
BB and Below / Not Rated 31.9%
19
<PAGE>
SR&F Municipal Money Market Portfolio
--------------------------------------------------------------------------------
June 30, 2000 (All amounts in thousands)
MUNICIPAL SECURITIES 102.6% Par Value
--------------------------------------------------------------------------------
ALABAMA - 1.3%
Huntsville:
Series 1998 D, 4.000% 11/1/00..................... $ 600 $ 600
Series 1998 A, 4.000% 11/1/00..................... 1,000 1,000
-------
1,600
ARIZONA - 1.8%
Phoenix Industrial Development Authority, Spring Air
Mattress Co.,
Series 1999, VRDB 5.000% 04/01/2019 .............. 1,870 1,870
Scottsdale, Series 1992 C, 7.750% 7/1/00............. 450 450
-------
2,320
CALIFORNIA - 0.8%
California Higher Education Loan Authority,
Series 1994 A,
4.700% 07/01/2005 (a)............................. 1,000 1,000
-------
COLORADO - 4.1%
Colorado Springs, Catalano Family L.L.P., Series 1998,
VRDB 4.950% 07/01/2018 (a)....................... 1,145 1,145
Colorado State, 5.000% 6/27/01....................... 1,000 1,006
Lowry Economic Redevelopment Authority, Series 1998 B,
VRDB 4.700% 12/1/20............................... 1,000 1,000
SBC Metropolitan District Colorado, 4.000% 12/7/29... 2,000 2,000
-------
5,151
DISTRICT OF COLUMBIA - 0.8%
District of Columbia Housing Finance Agency,
Series 2000 E,
4.600% 7/23/01.................................... 1,000 1,000
-------
GEORGIA - 2.1%
Douglas County, Series 1995, 4.375% 11/1/00.......... 400 400
Gwinnett County Development Authority, Price Co., Inc.,
Series 1995,
VRDB 4.950% 06/01/2010 (a)........................ 2,200 2,200
-------
2,600
IDAHO - 0.8%
State Housing & Finance Association, Balmoral
Apartments Project,
Series 2000, 4.800% 5/1/32........................ 1,000 1,000
-------
ILLINOIS - 25.0%
ABN AMRO Munitops Certificates Series 1998-14,
VRDB 4.800% 10/4/06 (b)........................... 1,000 1,000
Chicago, Archer Court Apartments,
Series 1999 B, 4.820% 6/1/19...................... 1,010 1,010
Chicago, Crane Carton Co., Series 1992,
4.850% 6/1/12..................................... 2,150 2,150
Chicago, De LaSalle Institute, Series 1997,
4.850% 4/1/27..................................... 900 900
Chicago, Midway Airport, VRDB Series 1999,
3.600% 1/1/29..................................... 1,960 1,960
Chicago, PS Greetings, Inc., Series 1999,
4.900% 5/1/24..................................... 1,420 1,420
Chicago Single Family Mortgage, Series 2000 B,
4.400% 3/1/01..................................... 1,000 1,000
Chicago, Stockyards Redevelopment Project, Series 199 A,
VRDB 4.850% 12/1/11............................... 1,470 1,470
De Kalb County Community United School, District No.428,
Series 1999, 4.100% 12/1/00....................... 1,205 1,205
Glendale Heights, Judy LLC IDRSeries 1998, VRDB
4.950% 8/1/28..................................... 1,540 1,540
Lake County Community College District No.532,
Series 1999 B,
9.000% 11/1/00.................................... 805 818
Melrose Park, Ninos Enterprises, Inc.,
Series 1999, VRDB 5.000% 12/1/24.................. 3,500 3,500
20
<PAGE>
SR&F Municipal Money Market Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
Morton, Morton Welding Co., Inc., Series 1996 A,
VRDB 5.050%
04/01/2016 (a).................................... $ 870 $ 870
Northbrook Park District, Series 1999 A,
4.850% 11/1/00.................................... 300 300
Palatine, Series 1998, 4.800% 12/1/28................ 1,000 1,000
Phillips Brothers, Inc., Series 1998,
4.950% 6/1/18 (a)................................. 1,350 1,350
Quad Cities Regional Economic Development Authority,
Steel Warehouse Quad Cities, Series 1998, VRDB
4.950% 12/01/2013 (a)............................. 2,200 2,200
Sauget, Monsanto Co., Series 1996, 4.900% 9/1/14..... 2,200 2,200
Springfield IDR Oak Terrace Joint Venture L.P.,
Series 1999, 4.800%
12/01/2025........................................ 1,000 1,000
State Development Finance Authority, Wheaton Academy,
Series 1998,
4.800% 10/1/28.................................... 1,000 1,000
State Development Finance Authority, Rest Haven
Illiana Christian Convalescent Home, Series 1997,
4.800% 1/1/27..................................... 1,000 1,000
State Educational Facilities Authority, Aurora
University, Series 1989,
4.850% 1/1/09..................................... 1,400 1,400
State Health Facilities Authority, University of
Chicago, Series 1985 A,
4.150% 8/1/15..................................... 1,000 1,000
-------
31,293
INDIANA - 10.7%
Elkhart, Adorn, Inc., Series 1995, VRDB
5.100% 8/1/05..................................... 1,200 1,200
Franklin, Lakeview Apartments, Series 1994, VRDB
4.830% 09/01/2030 (a)............................. 2,789 2,789
Kokomo, Village Community Partners IV L.P.,
Series 1995,
VRDB 4.830% 09/01/2030 (a)........................ 2,940 2,940
Marion County, Indiana Weslyan University,
Series 2000, VRDB
4.850% 6/1/30..................................... 1,500 1,500
Plymouth, Hillcrest Apartments, Series 1998 A, VRDB
4.900% 4/1/28 (a)................................. 1,000 1,000
St. Joseph County, Pine Oaks, Series 1997 A, VRDB
4.900% 6/1/27.................................... 2,365 2,365
State Development Finance Authority, Carr Metal
Products, Inc.,
Series 1999, VRDB 5.250% 1/1/09................... 1,300 1,300
State University, Series 1990 G, 7.000% 8/1/10....... 300 314
-------
13,408
IOWA - 12.1%
Clinton IDR Sethness Products Co., Series 1996, VRDB
4.850% 09/01/2011 (a)............................. 3,700 3,700
Dallas Center Grimes Community School District,
Series 2000,
5.000% 5/1/01..................................... 260 261
Muscatine County, Monsanto Co., Series 1992, VRDB
4.900% 10/1/07.................................... 2,100 2,100
Scott County, Nichols Aluminum Project,
Series 1999, VRDB
4.900% 6/1/14..................................... 2,800 2,800
State Higher Education Loan Authority, St. Ambrose
University:
Series 1995, VRDB 4.850% 2/1/05................... 1,100 1,100
Series 1999, 4.750% 10/1/09....................... 295 295
American Institute of Business, Series 1998,
4.850% 11/1/13.................................... 1,700 1,700
State, Iowa School Corp. Warrants, Series 2000-2001 A,
5.500% 6/22/01.................................... 1,000 1,009
Woodbury County, Siouxland Medical Educational
Foundation,
Series 1996, VRDB 4.800% 11/1/16.................. 2,150 2,150
-------
15,115
KANSAS - 1.1%
Kansas City Industrial Development Authority,
Lanter Co., Series 1987 A,
VRDB 4.950% 2/1/03................................ 515 515
Olathe, Garmin International, Inc., Series 1995,
VRDB 3.450% 01/01/2025 (a)........................ 800 800
-------
1,315
21
<PAGE>
SR&F Municipal Money Market Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
KENTUCKY - 3.4%
Covington, Whitle Castle Distributing, Inc.,
Series 1991, VRDB 4.950%
04/01/2006 (a).................................... $ 2,830 $ 2,830
Shelby County, Roll Forming Corp., Series 1996,
VRDB 4.950%
04/01/2016 (a).................................... 1,460 1,460
-------
4,290
LOUISIANA - 0.4%
State Housing Finance Agency, Series 2000 C,
5.250% 6/1/01..................................... 500 500
-------
MARYLAND - 1.1%
Anne Arundel County, Baltimore Gas & Electric Co.,
Series 1988,
4.250% 12/1/18 (a)................................ 1,000 1,000
Baltimore, Series 2000 A, 4.750% 7/1/01.............. 365 366
-------
1,366
MICHIGAN - 2.8%
ABN AMRO Munitops Certificates Series 1998-13,
VRDB 4.770% 10/4/06 (b)........................... 2,000 2,000
Kentwood, Series 2000, 4.350% 5/1/01................. 495 495
Muni Bond Authority, Series 2000B-1,
5.000% 7/2/01..................................... 1,000 1,006
-------
3,501
MINNESOTA - 0.8%
Minnesota Housing Finance Authority, Series 2000,
4.350% 5/1/01..................................... 1,000 1,000
-------
MISSOURI - 2.8%
Jefferson County Industrial Development Authority,
Sinclair & Rush, Inc.,
Series 1994 A, VRDB 4.950% 11/01/2009 (a)......... 3,445 3,445
-------
MONTANA - 1.2%
Montana State, Series 2000 D, 5.250% 8/1/00.......... 1,460 1,461
-------
NEW MEXICO - 0.8%
New Mexico State, Series 1995 B, 4.400% 7/1/00....... 1,000 1,000
-------
NEVADA - 0.8%
Nevada State, Series 1990, 7.000% 8/1/05............. 1,000 1,032
-------
OHIO - 0.9%
Environment Improvement Authority, U.S. Steel
Corp. Project,
VRDB 4.540% 12/1/01............................... 400 400
Hancock County, Crystal Glen Apartments Project,
Series 1998 B,
VRDB 4.950% 01/01/2031(a)......................... 750 750
-------
1,150
PENNSYLVANIA - 1.9%
Bucks County Industrial Development Authority,
USX Corp.,
Series 1995, 4.250% 11/1/17....................... 1,000 1,000
Quakertown General Authority, Series 1996 A,
VRDB 3.200% 7/1/26................................ 1,428 1,428
-------
2,428
SOUTH CAROLINA - 1.9%
Newberry County, Series 1999, 4.250% 9/1/00.......... 310 310
South Carolina Economic Development Authority,
Specialty Equipment Co.,
Inc., Series 1995, 3.600% 11/01/2010 (a).......... 2,045 2,046
-------
2,356
SOUTH DAKOTA - 0.2%
South Dakota State Health & Educational Facilities
Authority, Prince of
Peace Hospital, Series 1993, 4.600% 7/1/00........ 260 260
-------
22
<PAGE>
SR&F Municipal Money Market Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TENNESSEE - 3.5%
Rutherford County Industrial Development Board,
Farmers CoOp Project,
Series B, VRDB 4.950% 11/1/14..................... $ 1,000 $ 1,000
Wilson County Industrial Development Board, Briskin
Manufacturing Co.,
Series 1999, VRDB 5.000% 7/1/29................... 3,355 3,355
-------
4,355
TEXAS - 7.4%
Brownsville Industrial Development Corp., Tella
Tool & Manufacturing Co.,
Series 2000, VRDB 4.950% 6/1/20................... 1,300 1,300
Fort Bend County Industrial Development Corp.,
W.W.Grainger, Inc.,
Series 1989, VRDB 4.900% 12/1/02.................. 1,110 1,110
Garland, Series 1992 B, 5.700% 8/15/00............... 400 401
Grand Prarie Industrial Development Authority,
Series 1986,
VRDB 5.150% 12/1/11............................... 900 900
Gulf Coast Waste Disposal Authority:
Amoco Oil Co., Series 1997, 4.900% 01/01/26 (a)... 100 100
Monsanto Co.:
Series 1994, 4.900% 4/1/13..................... 900 900
Series 1996, 4.900% 7/1/01 (a)................. 300 300
Harris County General Obligations Corporate
Notes Series:
4.500% 8/3/00..................................... 750 750
4.650% 8/3/00..................................... 100 100
Harris County Industrial Development Authority,
Precision General, Inc.,
Series 1991, VRDB 4.950% 10/01/2016 (a)........... 2,060 2,060
Robertson County Industrial Development Corp.,
Sanderson Farms, Inc.,
Series 1995, VRDB 4.900% 11/1/05.................. 300 300
Texas State, Series 1999 A, 4.500% 8/31/00........... 1,000 1,001
-------
9,222
UTAH - 0.6%
State Municipal Power Agency, Series 1993 A,
4.900% 7/1/00..................................... 750 750
-------
WASHINGTON - 1.7%
King County School District No.414, Series 1990,
7.000% 12/1/02.................................... 1,000 1,014
Washington Housing Finance Commission, Hamilton
Place Senior Living,
Series 1996 A, VRDB 4.850% 07/01/2028 (a)......... 1,110 1,110
-------
2,124
WISCONSIN - 9.2%
Chase, Belgiosio Cheese, Inc., Series 1998,
4.950% VRDB 04/01/2011 (a)........................ 1,000 1,000
Chippewa Falls Area Unified School District,
Series 2000, 5.850% 4/1/01........................ 215 216
Fond du Lac, Brenner Tank, Inc., Series 1994, VRDB
4.950% 11/01/2004 (a).......................... 2,125 2,125
Holland, White Clover Dairy, Inc., Series 1994,
VRDB 4.950%
05/01/2005 (a)................................... 2,275 2,275
Kenosha, Monarch Plastics, Inc., Series 1994, 4.950%
VRDB 12/01/2009 (a)............................... 1,750 1,750
Monroe Joint Venture, Inc., Series 2000,
4.900% 1/1/30..................................... 500 500
Outagamie County, Series 1999, 4.000% 10/1/00........ 365 365
Racine, Series 1999 B, 4.600% 12/1/00................ 690 692
Wisconsin State Health & Educational Facilities
Authority, Grace Lutheran
Foundation, Series 1999, VRDB 4.950% 7/1/14....... 2,555 2,555
-------
11,478
WEST VIRGINIA - 0.6%
State, Series 1992, 5.500% 4/1/01.................... 800 807
-------
23
<PAGE>
SR&F Municipal Money Market Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(cost of $128,327) (c)............................ 128,327
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - (2.6)% ............. (3,248)
-------
NET ASSETS - 100.0%.................................. $125,079
========
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Security is subject to federal alternative minimum tax. At June 30, 2000,
the aggregated amortized cost of these securities represented 33.8% of
total net assets.
(b) Represents private placement securities issued under Rule 144A, which are
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 $3,000 which represented 2.4% of net assets.
(c) At June 30, 2000, the cost of investments for financial reporting and
federal tax purposes was identical.
Variable rate demand bonds (VRDB) are securities whose yields are periodically
reset at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit with a major bank.
Acronym Name
---------- ------------
IDR Industrial Development Revenue
See accompanying Notes to Financial Statements.
24
<PAGE>
Stein Roe Intermediate Municipals Fund
--------------------------------------------------------------------------------
June 30, 2000 (All amounts in thousands)
MUNICIPAL BONDS - 98.2% Par Value
--------------------------------------------------------------------------------
EDUCATION - 1.7%
EDUCATION - 0.4%
WV State University, Series 2000 A (a) 4/1/15..... $ 1,250 $ 539
STUDENT LOAN - 1.3%
ME State Educational Loan Authority,
Series 1992 A-2,
6.65% 12/1/02.................................. 515 526
TX State Higher Education Coordinating Board,
Texas College,
Series 1991, 7.45% 10/1/06..................... 1,280 1,312
-------
1,838
HEALTHCARE - 8.0%
HOSPITAL - 7.7%
CA State Health Facilities Financing Authority,
Cedars-Sinai Medical
Center, Series 1999 A, 6.13% 12/1/19........... 1,250 1,261
LA State Public Facilities Authority, Touro
Infirmary, Series 1999,
5.20% 8/15/10.................................. 755 682
MA State Health & Educational Facilities
Authority, Daughters of Charity, Series 1990 C,
7.25% 7/1/00................................... 200 200
NJ State Health Care Facilities Financing
Authority, Christ Hospital,
Series 1994, 7.00% 7/1/03...................... 1,730 1,832
NY State Dormitory Authority, Mount Sinai
Health Obligation Group,
Series 2000, 6.50% 7/1/25...................... 400 412
PA Dauphin County General Authority, Hapsco
Group, Inc., Series 1992 B, 5.80% 7/1/02....... 1,600 1,632
SC Sumter County, Tuomey Regional Medical
Center, Series 1991, 6.63% 11/15/04............ 1,040 1,111
TN Knox City Health Educational & Housing
Facilities Board, Baptist Health Systems of
East Tennessee, 5.50% 4/15/11.................. 2,000 2,016
WV State Hospital Finance Authority,
Series 2000 A, 6.75% 9/1/22.................... 1,350 1,355
-------
10,501
NURSING HOME - 0.3%
MN New Hope, North Ridge Care Center, Inc.,
Series 1999, 5.40% 3/1/08...................... 500 459
HOUSING - 0.6%
SINGLE FAMILY - 0.6%
CA State Housing Finance Agency, Series B-1,
5.90% 2/1/04................................... 765 788
OTHER - 10.5%
POOL/BOND BANK - 1.7%
IN Indianapolis Local Public Improvement Bond Bank,
Series 1992 D, 6.50% 2/1/06.................... 2,100 2,249
REFUNDED/ESCROWED (B) - 8.8%
AZ Maricopa County, Samaritan Health Services,
Series 1978, 7.63% 1/1/08...................... 1,935 2,122
IL Chicago, Skyway Toll Bridge, Series 1994,
6.75% 1/1/17................................... 1,500 1,619
IL Metropolitan Pier & Exposition Authority,
McCormick Place Expansion Project,
Series 1992 A:
7.25% 6/15/05.................................. 385 424
7.25% 6/15/05.................................. 1,145 1,266
25
<PAGE>
Stein Roe Intermediate Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
OTHER - CONT.
REFUNDED/ESCROWED (B) - (CONTINUED)
IN State Toll Road Commission, Series 1980,
9.00% 1/1/15................................... $ 2,240 $ 3,014
MA State Health & Educational Facilities Authority,
Carney Hospital,
Series 1994 D, 6.00% 7/1/09.................... 1,000 1,056
MI State Hospital Finance Authority, Daughters
of Charity and Providence, Series 1991,
6.50% 11/1/01.................................. 585 595
PA Westmoreland County Municipal Authority,
Municipal Services, Series 1993-C, (a)
8/15/17........................................ 1,250 464
SC Piedmont Municipal Power Agency, Series
1991 A, 6.13% 1/1/07........................... 335 358
SC Sumter County, Tuomey Regional Medical Center,
Series 1991, 6.63% 11/15/04.................... 960 1,028
-------
11,946
OTHER REVENUE - 0.7%
RECREATION - 0.7%
OR State Department of Administrative Services,
Series 1999 B,
5.25% 4/1/15................................... 1,000 984
RESOURCE RECOVERY - 3.3%
DISPOSAL - 1.7%
IL Development Finance Authority, Waste
Management, Inc.,
Series 1997, 5.05% 1/1/10...................... 615 526
MI State Strategic Fund, United Waste Systems,
Inc., Series 1995,
5.20% 4/1/10................................... 1,000 864
PA Westmoreland County Industrial Development
Authority, Mid-America Waste Systems, Inc.,
Series 1993, 5.10% 5/1/18...................... 1,000 871
-------
2,261
RESOURCE RECOVERY - 1.6%
NJ Bergen County Utilities Authority,
Series 1992 A, 6.25% 6/15/06.................... 2,000 2,140
TAX-BACKED - 39.2%
LOCAL GENERAL OBLIGATIONS - 17.6%
AZ Cochise County Unified School District No. 68,
Sierra V Project,
Series 1990 B, 9.00% 7/1/01.................... 1,115 1,164
AZ Maricopa County Unified School District
No. 97, Series 1996 A,
6.25% 7/1/06................................... 1,750 1,879
AZ Pima County, Series 1992, 6.30% 7/1/02......... 2,500 2,582
AZ Tempe Unified School District No. 213,
Series 1994, 7.00% 7/1/08...................... 500 568
CA Union Elementary School District,
Series 1999 A (a) 9/1/20....................... 1,000 310
CA Yuba City Unified School District,
Series 2000 (a) 9/1/16......................... 1,700 691
CO Adams County, School District No. 12,
Series 1995 A (a) 12/15/12..................... 1,300 643
HI Honolulu City & County, Series 1990 A,
7.35% 7/1/06................................... 1,000 1,123
IL Chicago Board of Education, Series 1996,
6.25% 12/1/12.................................. 2,100 2,296
LA Orleans Levee District, Series 1995 A,
5.95% 11/1/07.................................. 2,200 2,331
NY New York City:
Series 1996 C, 5.70% 2/1/06.................... 1,000 1,036
Series 1997 H, 6.00% 8/1/17.................... 2,000 2,042
Series 1997 J, 6.13% 8/1/11.................... 5,000 5,281
OH Olmsted Falls School District, Series 1999,
5.50% 12/1/04.................................. 420 408
WA Snohomish County School District No. 002,
Series 1993, 7.00% 12/1/02..................... 1,500 1,579
-------
23,933
26
<PAGE>
Stein Roe Intermediate Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TAX-BACKED - CONT.
SPECIAL NON-PROPERTY TAX - 6.0%
IL Metropolitan Pier & Exposition Authority,
McCormick Place Expansion Project,Series 1992 A,
7.25% 6/15/05.................................. $ 1,220 $ 1,340
MI State, Underground Storage Tank Financial
Assistance, Series 1996 I, 6.00% 5/1/05........ 4,000 4,201
NM Santa Fe, Series 1996 A, 6.50% 6/1/06.......... 1,555 1,683
NY State Local Government Assistance Corp.,
Series 1993 E,
5.25% 4/1/16................................... 1,000 978
-------
8,202
SPECIAL PROPERTY TAX - 3.2%
FL Stoneybrook Community Development District,
Series 1998 B, 5.70% 5/1/08.................... 2,870 2,777
MO State Development Finance Board, Midtown
Redevelopment Project, Series 2000 A,
6.00% 4/1/14................................... 1,500 1,579
-------
4,356
STATE APPROPRIATED - 7.8%
KY State Turnpike Authority, Series 1992,
5.80% 1/1/04................................... 2,500 2,575
MO State, Regional Convention & Sports Facility
Project, Series 1991 A, 6.60% 8/15/03.......... 830 871
NY Metropolitan Transportation Authority,
Series 1993 O, 5.50% 7/1/17.................... 1,000 989
NY State Dormitory Authority, Series 1995 A,
6.50% 5/15/05.................................. 1,000 1,067
NY State Dormitory Authority, City University
of New York, Series 1995, 5.63% 7/1/16......... 5,000 5,125
-------
10,627
STATE GENERAL OBLIGATIONS - 4.6%
MA Massachusetts Bay Transportation Authority,
Series 1994 A, 7.00% 3/1/07.................... 2,250 2,515
MA State College Building Authority,
Series 1994 A, 7.50% 5/1/14.................... 500 601
TX State, Series 1998 B, 5.13% 10/1/14............ 3,250 3,149
-------
6,265
TRANSPORTATION - 8.6%
AIR TRANSPORTATION - 2.1%
IL Chicago O'Hare International Airport,
United Airlines, Inc.,
Series 2000A, 6.75% 11/1/11.................... 1,200 1,226
OH Cleveland, Series 1999, 5.70% 12/1/19.......... 2,000 1,684
-------
2,910
AIRPORT - 4.7%
GA Atlanta, Airport Facilities, Series 1996,
6.50% 1/1/07 (e)............................... 4,000 4,341
IL Chicago, Midway Airport, Series 1994 A,
5.70% 1/1/04................................... 1,000 1,026
IN State Transportation Finance Authority,
Airport Facilities Lease,
Series 1992 A, 6.50% 11/1/07................... 1,040 1,088
-------
6,455
TOLL FACILITIES - 1.0%
CO E-470 Public Highway Authority, Series
2000 B, (a) 9/1/18............................. 1,000 342
OH State Turnpike Commission, Series 1998 A,
5.50% 2/15/24.................................. 1,000 981
-------
1,323
TRANSPORTATION - 0.8%
CO State Department of Transportation,
Series 2000, 6.00% 6/15/12..................... 1,000 1,066
UTILITY - 25.6%
INDEPENDENT POWER PRODUCER - 0.4%
MI Midland County Economic Development Corp.,
Series 2000, 6.88% 7/23/09..................... 500 502
27
<PAGE>
Stein Roe Intermediate Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
UTILITY - CONT.
INVESTOR OWNED - 1.9%
NH State Business Finance Authority, United
Illuminating Co.,
Series 1999, 5.40% 12/1/29..................... $ 1,000 $ 999
NV Clark County, Southern California Edison Co.,
Series 1990 A, 7.13% 6/1/09.................... 1,500 1,542
-------
2,541
JOINT POWER AUTHORITY - 7.4%
GA Municipal Electric Authority Power, Series
1997 Y, 6.40% 1/1/13........................... 3,000 3,305
NC Eastern Municipal Power Agency, Series
1993 C, 5.50% 1/1/07........................... 3,100 3,060
NC State Municipal Power Agency, Catawba No. 1,
Series 1992, 5.90% 1/1/03...................... 1,500 1,538
SC Piedmont Municipal Power Agency,
Series 1991 A, 6.13% 1/1/07.................... 2,015 2,137
-------
10,040
MUNICIPAL ELECTRIC - 1.1%
TX Lower Colorado River Authority,
Series 1999 A, 5.50% 5/15/21................... 1,500 1,448
WATER & SEWER - 14.8%
AR Beaver Water District, Benton & Washington Counties,
Series 1994, 6.00% 11/15/04 (e)................ 2,580 2,704
CA Metropolitan Water District, Series 1998 A,
4.75% 7/1/22................................... 2,000 1,745
DE State Economic Development Authority,
Wilmington Suburban Water Corp.,
Series 1992 B, 6.45% 12/1/07................... 1,165 1,251
IL Chicago, Series 1993, 6.50% 11/1/09 (e)........ 2,155 2,368
IL Du Page County Special Service Area No. 11,
Series 1995, 6.75% 1/1/14...................... 1,090 1,162
MA State Water Pollution Abatement Trust,
Series 1999 A, 6.00% 8/1/19.................... 2,500 2,634
NY State Environmental Facilities Corp.,
Series 1994 D, 6.30% 5/15/05................... 3,000 3,202
TN Metropolitan Government of Nashville &
Davisdon Counties, Series 1993, 6.50% 1/1/10... 2,750 3,041
TX Houston Water Conveyance System,
Series J, 6.13% 12/15/06....................... 1,000 1,061
TX Water Development Board, Series 1996 B,
5.13% 7/15/18.................................. 1,000 939
-------
20,107
-------
TOTAL MUNICIPAL BONDS
(cost of $128,949) ............................... 133,480
--------------------------------------------------------------------------------
OPTIONS - 0.1% Contracts
--------------------------------------------------------------------------------
September 2000 Treasury Bond Put, Strike Price
92.000, Expiration 9/22/00..................... 7,700 11
September 2000 Treasury Bond Call, Strike Price
100.000, Expiration 9/22/00.................... 16,100 73
-------
TOTAL OPTIONS
(cost of $241).................................... 84
--------------------------------------------------------------------------------
28
<PAGE>
Stein Roe Intermediate Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.1%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (C)
IL Galesburg, Knox College, Series 1999,
(cost of $100) 3.85% 7/1/24.................... $ 100 $ 100
-------
TOTAL INVESTMENTS
(cost of $129,290) (d)............................ 133,664
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 1.6%................ 2,146
-------
NET ASSETS - 100.0%.................................. $135,810
=======
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the principal and interest.
(c) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of June 30, 2000.
(d) Cost for financial statement and federal income tax purposes is the same.
(e) These securities, or a portion thereof, with a total market value of
$6,520, are being used to collateralize open futures contracts.
Short futures contracts open at June 30, 2000:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 6/30/00
---- ---------------- --------- ----------
Treasury Note 5,300 September $157
See accompanying Notes to Financial Statements.
29
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
June 30, 2000 (All amounts in thousands)
MUNICIPAL BONDS 96.7% Par Value
--------------------------------------------------------------------------------
EDUCATION - 2.4%
EDUCATION - 0.8%
MA State Development Finance Agency, Boston
University, Series 1999 P, 5.450% 5/15/59...... $ 1,000 $ 871
MN Victoria, Holy Family Catholic High School,
Series 1999 A, 5.850% 9/1/24................... 1,000 895
PR Commonwealth of Puerto Rico, Ana G. Mendez
University System, Series 1999, 5.375% 2/1/29.. 600 525
WV State University,Series 2000 A, (a) 4/1/18..... 3,800 1,340
-------
3,631
STUDENT LOANS - 1.6%
AK State Student Loan Corp., Series 1994 A,
6.200% 7/1/09 (e).............................. 3,870 4,035
ME State Educational Loan Marketing Corp.,
Series 1994 B-1, 6.500% 11/1/09................ 3,000 3,080
-------
7,115
HEALTHCARE - 8.7%
CONGREGATE CARE RETIREMENT - 0.9%
OR Clackamas County Hospital Facilities Authority,
Willamette View, Series 1999 A,
7.500% 11/1/29................................. 1,000 976
PA Montgomery County Industrial Development
Authority, Adult Communities Total Services,
Series 1996 B, 5.750% 11/15/17................. 3,500 3,161
-------
4,137
HEALTH SERVICES - 0.4%
MA State Development Finance Agency, Boston
Biomedical Research Institute, Series 1999,
5.650% 2/1/19.................................. 310 269
WI State Health & Educational Facilities Authority,
Marshfield Clinic, Series 1999,
6.250% 2/15/29................................. 1,600 1,607
-------
1,876
HOSPITALS - 6.6%
CA State Health Facilities Financing Authority,
Cedars-Sinai Medical
Center, Series 1999 A, 6.125% 12/1/30.......... 700 696
IL State Development Finance Authority,
Adventist Health System,
Series 1999, 5.500% 11/15/20................... 3,000 2,440
IL State Health Facilities Authority,
Swedish American Hospital,
Series 2000, 6.875% 11/15/30................... 1,000 996
LA State Public Facilities Authority,
Touro Infirmary, Series 1999,
5.625% 8/15/29................................. 2,900 2,404
MA State Health & Educational Facilities Authority:
Dana Farber Cancer Institute, Series 1995 G-1,
6.250% 12/1/22................................. 6,500 6,317
Massachusetts General Hospital,
Series 1992 F, 6.250% 7/1/12................... 5,750 6,273
South Shore Hospital, Series 1999 F,
5.750% 7/1/29.................................. 2,500 2,189
MD State Health & Educational Facilities Authority,
University of Maryland Medical System,
6.750% 7/1/30.................................. 500 503
MI Dickinson County, Series 1999, 5.800% 11/1/24.. 1,000 773
NC State Medical Care Commission, Gaston
Health Care, Series 1998, 5.000% 2/15/29....... 1,000 805
NV Henderson, Catholic Healthcare West,
Series 1999 A, 6.750% 7/1/20................... 1,000 978
NY State Dormitory Authority, Mount Sinai
Health Obligation Group,
Series 2000, 6.500% 7/1/25..................... 1,000 1,031
OH Franklin County, Doctors OhioHealth Corp.,
Series 1998 A, 5.600% 12/1/28.................. 3,000 2,156
30
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
HEALTHCARE - CONT.
HOSPITALS - (CONTINUED)
TX Richardson Hospital Authority, Baylor Richardson
Medical Center, Series 1998, 5.625% 12/1/28.... $ 500 $ 392
WV State Hospital Finance Authority, Series
2000 A, 6.750% 9/1/30.......................... 2,500 2,490
-------
30,443
INTERMEDIATE CARE FACILITIES - 0.5%
IN State Health Facilities Financing Authority,
Hoosier Care, Inc.,
Series 1999 A, 7.125% 6/1/34................... 2,485 2,205
NURSING HOME - 0.3%
IN State Health Facilities Financing Authority,
Metro Health Indiana, Inc., Series 1998,
6.400% 12/1/33................................. 1,400 1,164
MN Minneapolis, Walker Methodist Senior Services
Group, Series 1998 A, 5.875% 11/15/18.......... 450 383
-------
1,547
HOUSING - 8.4%
MULTI-FAMILY - 2.0%
Charter Mac Equity Issue Trust, 6.625% 6/30/49.... 2,000 1,915
FL Broward County Housing Finance Authority,
Chaves Lake Apartment Project, Series
2000, 7.500% 7/1/40............................ 1,500 1,502
FL Clay County Housing Finance Authority:
Madison Commons Apartments, Series 2000 A,
7.450% 7/1/40.................................. 750 746
Palms at Brentwood Apartments, Series 1998 K,
6.500% 12/1/34................................. 2,000 1,750
IL State Development Finance Authority,
Catholic Charities Housing Development
Corp., Series 1993 C, 5.950% 1/1/09............ 1,450 1,381
Munimae Equity Issue Trust, 7.750% 11/1/10........ 2,000 2,050
-------
9,344
SINGLE FAMILY - 6.4%
IA State Housing Finance Authority,
Series 1991 B, 7.450% 7/1/23................... 590 609
ID State Housing Agency, Series 1990 E,
7.875% 7/1/24.................................. 745 765
IL Chicago, Series 2000 A, 7.150% 9/1/31.......... 1,000 1,097
MN Minneapolis-St. Paul Housing Finance Board,
Series 1991:
7.250% 8/1/21.................................. 1,555 1,587
7.300% 8/1/31.................................. 2,310 2,357
MN State Housing Finance Authority,
Series 1991 A, 7.450% 7/1/22................... 945 964
MO State Housing Development Commission,
Series 1985, 9.375% 4/1/16..................... 5 5
NM State Mortgage Finance Authority,
Series 2000 A-2, 7.100% 9/1/30................. 1,500 1,618
NV State Housing Division,Series 1991 A-2,
7.750% 4/1/22.................................. 2,055 2,110
OK Tulsa County Home Finance Authority,
Series 1991 B, 7.550% 5/1/23................... 1,360 1,390
RI State Housing & Mortgage Finance Corp.,
Series 1-E, 7.550% 10/1/22..................... 5,650 5,829
TN State Housing Development Agency, Series 1990 T,
7.300% 7/1/11.................................. 10,000 10,138
TX Travis County Housing Finance Corp., Series 1990,
8.000% 9/1/10.................................. 635 652
-------
29,121
INDUSTRIAL - 8.5%
FOOD PRODUCTS - 3.9%
GA Cartersville Development Authority, Anheuser Busch Cos., Inc.,
Series 1999, 7.375% 5/1/09..................... 9,000 10,228
31
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
INDUSTRIAL - CONT.
FOOD PRODUCTS - (CONTINUED)
IN Hammond, American Maize Products Co., Series 1994,
8.000% 12/1/24................................. $ 5,000 $ 5,361
MI State Strategic Fund, Michigan Sugar Co.,
Carolton Project:
Series 1998 B, 6.450% 11/1/25.................. 700 604
Series 1998 C, 6.550% 11/1/25.................. 800 698
PA State Economic Development Financing Authority,
USG Corp., Series 1999, 6.000% 6/1/31.......... 1,000 900
-------
17,791
FOREST PRODUCTS - 3.9%
LA De Soto Parish, International Paper Company,
Series A, 7.700% 11/1/18....................... 3,250 3,495
SC Richland County, Union Camp Corp., Series 1991 B,
7.125% 9/1/21.................................. 5,000 5,106
WA Port Longview Industrial Development Corp.,
Weyerhaeuser Corp., Series 1992,
6.875% 10/1/08................................. 8,750 9,265
-------
17,866
MANUFACTURING - 0.4%
MO State Development Finance Board, Proctor
& Gamble Co., Series 1999, 5.200% 3/15/29...... 1,000 906
NM Albuquerque Industrial Development Authority,
Motorola, Inc., Series 1983 A,
10.000% 6/1/13................................. 1,000 1,019
-------
1,925
METALS & MINING - 0.3%
VA Peninsula Ports Authority, Ziegler Coal Project,
Series 1997, 6.900% 5/2/22..................... 1,500 1,202
OTHER - 9.9%
REFUNDED/ESCROWED(B) - 9.9%
CA Foothill/Eastern Transportation Corridor Agency,
Series 1995 A, (a) 1/1/18...................... 10,000 3,701
CA Southern California Public Power Authority,
Southern Transmission Project,
Series 1988 A, (a) 7/1/14...................... 8,155 3,857
FL State, Jacksonville Transportation Authority,
Series 1985, 9.200% 1/1/15..................... 2,000 2,696
GA Fulton County, Series 1992, 6.375% 1/1/14...... 13,270 14,633
MD Washington Suburban Sanitary District,
Series 1994, 6.625% 6/1/17..................... 1,660 1,771
NC Eastern Municipal Power Agency, Series 1991 A,
6.500% 1/1/18.................................. 4,315 4,781
NY New York City, Series 1995 D, 6.000% 2/15/25... 5,165 5,454
SC Calhoun County, Solid Waste Disposal Facilities,
Eastmen Kodak Co., Series 1992, 6.750% 5/1/17.. 3,000 3,355
SD State Student Loan Assistance Corp.,
Series 1989 B, 7.450% 8/1/00................... 5,000 5,012
-------
45,260
OTHER REVENUE - 2.3%
RECREATION - 2.1%
CA Long Beach Aquarium of the Pacific, Series 1995 A:
6.125% 7/1/15.................................. 4,000 3,969
6.125% 7/1/23.................................. 6,000 5,559
-------
9,528
32
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
OTHER REVENUE - CONT.
RETAIL - 0.2%
NJ State Economic Development Authority, Glimcher
Properties L.P. Project, 6.000% 11/1/28........ $ 850 $ 751
RESOURCE RECOVERY - 0.2%
DISPOSAL - 0.2%
IL Development Finance Authority, Waste Management,
Inc., Series 1997, 5.050% 1/1/10............... 500 428
MI State Strategic Fund, United Waste Systems, Inc.,
Series 1995, 5.200% 4/1/10..................... 500 432
-------
860
TAX-BACKED - 26.4%
LOCAL APPROPRIATED - 2.3%
CA San Diego Convention Center, Expansion Financing
Authority, Series 1998 A, 4.750% 4/1/28........ 5,000 4,292
IL Chicago Board of Education, Series 1992 A,
6.000% 1/1/16.................................. 5,000 5,285
IN Crown Point School Building Corp., Series 2000:
(a) 1/15/18.................................... 1,550 552
(a) 1/15/19.................................... 1,665 554
-------
10,683
LOCAL GENERAL OBLIGATIONS - 8.3%
AK North Slope Borough,Series 1999 B, (a)
6/30/10........................................ 2,515 1,462
CA Golden West School Financing Authority,
Series 1999 A, (a) 8/1/15...................... 2,500 1,090
CA Union Elementary School District,
Series 1999 A, (a) 9/1/17...................... 2,300 872
CA Yuba City Unified School District,
Series 2000, (a) 9/1/18........................ 1,160 410
FL Broward County, Series 1986:
12.500% 1/1/03................................. 1,000 1,180
12.500% 1/1/04................................. 1,195 1,486
12.500% 1/1/05................................. 2,000 2,608
HI Honolulu, Series 1998, 4.500% 7/1/28........... 2,000 1,597
IL Champaign County, Series 1999, 8.250% 1/1/20... 1,015 1,304
IL Chicago Board of Education:
Series 1996, 6.250% 12/1/12.................... 2,500 2,733
Series 1998 B-1, (a) 12/1/23................... 5,000 1,205
IL Chicago Public Building Commission,
Series 1999 B, 5.250% 12/1/18.................. 2,000 1,909
IL Chicago, Series 1999, 5.500% 1/1/23............ 2,250 2,174
IL Coles & Cumberland Countys Unified
School District, Series 2000, (a) 12/1/13...... 3,120 1,475
IL Will County Forest Preservation District,
Series 1999, (a) 12/1/1........................ 4,660 1,805
LA New Orleans, Series 1991, (a) 9/1/12........... 6,250 3,214
MO Springfield School District No.R-12,
Series 1991 B, 9.500% 3/1/07................... 600 754
NY New York City, Series 1998 H, 5.125% 8/1/25.... 2,190 1,953
NY Yonkers, Series 1999 A, 4.500% 12/1/17......... 1,000 852
TX Houston Independent School District,
Series 1999 A, 4.750% 2/15/26.................. 2,000 1,691
TX Hurst Euless Bedford, Independent School
District, Series 1998, 4.500% 8/15/25.......... 5,000 4,055
VA Virginia Beach, Series 1986, 12.750% 7/15/01... 2,000 2,166
-------
37,995
33
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TAX-BACKED - CONT.
SPECIAL NON-PROPERTY TAX - 3.8%
IL Metropolitan Pier & Exposition Authority,
Series 1996 A:
(a) 6/15/12.................................... $ 5,000 $ 2,592
(a) 12/15/12................................... 8,300 4,186
IL State, Series 1992 Q, 6.000% 6/15/12........... 10,000 10,648
-------
17,426
SPECIAL PROPERTY TAX - 0.6%
CA Capistrano Unified School District, Ladera
Community Facilities District No.98-2,
Series 1999, 5.750% 9/1/29..................... 1,000 881
CA Santa Margarita Water District, Series 1999,
6.250% 9/1/29.................................. 750 711
FL Indigo Community Development District,
Series 1999 B, 6.400% 5/1/06................... 1,000 993
-------
2,585
STATE APPROPRIATED - 1.0%
KY State Turnpike Authority, Series 1992,
(a) 1/1/10..................................... 7,500 4,529
STATE GENERAL OBLIGATIONS - 10.4%
FL State, Broward County Expressway,
Series 1984, 9.875% 7/1/09..................... 1,100 1,423
MA Massachusetts Bay Transportation Authority:
Series 1992 B, 6.200% 3/1/16................... 9,825 10,637
Series 1994 A:
7.000% 3/1/14................................ 3,150 3,641
7.000% 3/1/19................................ 2,500 2,894
Series 1998, 4.750% 3/1/21..................... 1,000 863
MA State College Building Authority Project:
Series A, 7.500% 5/1/11........................ 1,500 1,794
Series 1994 A, 7.500% 5/1/14................... 3,500 4,208
NJ State General Obligation, Series D,
6.000% 2/15/11................................. 5,150 5,526
NV Clark County, Series 1998 B, 4.500% 12/1/17.... 2,675 2,265
PA State, Series 1992 2, 6.250% 7/1/12............ 11,200 12,261
TX State, Series 1998 C, 5.000% 8/1/14............ 2,380 2,262
-------
47,774
TRANSPORTATION - 10.4%
AIR TRANSPORTATION - 1.8%
IL Chicago O'Hare International Airport,
United Airlines, Inc., Series 2000 A,
6.750% 11/1/11................................. 1,600 1,635
IN Indianapolis Airport Authority, United
Airlines Project, Series A,
6.500% 11/15/31................................ 5,000 4,656
NJ State Economic Development Authority,
Continental Airlines, Inc.,
Series 1999, 6.400% 9/15/23.................... 2,000 1,843
-------
8,134
AIRPORTS - 2.5%
GA Atlanta, Airport Facilities, Series 1996,
6.500% 1/1/10.................................. 2,000 2,206
HI State, Airport System Revenue, Series 1991,
6.900% 7/1/12.................................. 6,000 6,715
IN State Transportation Finance Authority,
Airport Facilities Lease,
Series 1992 A, 6.250% 11/1/16.................. 1,475 1,497
MA State Port Authority, Series 1999,
8.016% 7/1/29.................................. 1,000 1,011
-------
11,429
TOLL FACILITIES - 5.0%
CO E-470 Public Highway Authority, Series 2000 B:
(a) 9/1/18..................................... 4,600 1,574
(a) 9/1/19..................................... 3,500 1,119
NY Triborough Bridge & Tunnel Authority:
Series 1991 X, 6.625% 1/1/12................... 9,915 11,154
Series 1992 Y, 6.125% 1/1/21................... 5,500 5,836
34
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TRANSPORTATION - CONT.
TOLL FACILITIES - (CONTINUED)
PA State Turnpike Commission, Series 1998 A,
4.750% 12/1/27................................. $ 2,415 $ 2,036
VA Richmond Metropolitan Authority, Series 1998,
5.250% 7/15/22................................. 1,100 1,041
-------
22,760
TRANSPORTATION - 1.1%
GA Metropolitan Atlanta Rapid Transit Authority,
Series 1992 P, 6.250% 7/1/20................... 4,000 4,295
OH Toledo-Lucas County Port Authority, CSX
Transportation, Inc., Series 1992,
6.450% 12/15/21................................ 1,000 969
-------
5,264
UTILITY - 19.5%
INDEPENDENT POWER PRODUCER - 0.3%
NY Suffolk County Industrial Development Agency,
Nissequogue Cogen Partners, Series 1998,
5.500% 1/1/23.................................. 1,000 836
PR Commonwealth of Puerto Rico Industrial,
Educational, Medical & Environmental Cogeneration
Facilities, AES Project, Series 2000,
6.625% 6/1/26.................................. 650 662
-------
1,498
INVESTOR OWNED - 3.3%
IN Michigan City, Northern Indiana Public
Service Co., Series 1973 A,
5.700% 10/1/03................................. 6,995 7,005
KY Trimble County, Louisville Gas & Electric Co.,
Series 1990 A, 7.625% 11/1/20.................. 6,670 6,849
MS State Business Finance Corp., Systems Energy
Resources, Inc., Series 1999,
5.900% 5/1/22.................................. 1,600 1,384
-------
15,238
JOINT POWER AUTHORITY - 8.9%
GA Municipal Electric Authority Power,
Series V, 6.600% 1/1/18 (e).................... 21,300 23,835
NC Eastern Municipal Power Agency,
Series 1991 A, 6.500% 1/1/18................... 2,185 2,205
NC State Municipal Power Agency, Catawba No. 1,
Series 1992, (a) 1/1/09........................ 2,360 1,498
TX State Municipal Power Agency, (a) 9/1/08....... 1,475 961
WA State Public Power Supply System,
Nuclear Project No. 2:
Series 1992 A, 6.300% 7/1/12................... 3,500 3,795
Series 1989 B, (a) 7/1/08...................... 7,000 4,542
Nuclear Project No. 3, Series 1989 B, (a) 7/1/05.. 5,000 3,871
-------
40,707
MUNICIPAL ELECTRIC - 2.6%
NC University of North Carolina at Chapel Hill,
Series 1997, (a) 8/1/20........................ 1,750 538
NY Long Island Power Authority, Series 2000 A,
(a) 6/1/20..................................... 1,000 317
SD Heartland Consumers Power District,
Series 1992, 6.000% 1/1/17..................... 8,000 8,439
TX Austin, Series 1998, 5.250% 5/15/25............ 3,000 2,821
-------
12,115
WATER & SEWER - 4.4%
DE State Economic Development Authority,
Wilmington Suburban Water Corp.:
Series 1992 B, 6.450% 12/1/07................ 1,160 1,246
Series 1992 A, 6.800% 12/1/23................ 3,500 3,530
FL Jacksonville, General Waterworks Corp.,
Series 1992, 6.750% 6/1/22..................... 1,500 1,556
GA Fulton County, Series 1992, 6.375% 1/1/14 (e).. 430 470
MA State Water Resources Authority,
Series 1998 B, 4.500% 8/1/22................... 1,000 823
PA Allegheny County Sanitation Authority,
Series 1991 A, (a) 6/1/07...................... 2,370 1,658
35
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
UTILITY - CONT.
WATER & SEWER - (CONTINUED)
PA Dauphin County Industrial Development Authority,
Dauphin Water Supply Co., Series 1992 A,
6.900% 6/1/24.................................. $ 3,400 $ 3,722
TX Houston, Series 1991 C:
(a) 12/1/08.................................... 4,000 2,573
(a) 12/1/09.................................... 4,000 2,428
(a) 12/1/10.................................... 3,750 2,146
-------
20,152
TOTAL MUNICIPAL BONDS
(cost of $425,951)................................ $442,891
--------------------------------------------------------------------------------
OPTIONS - 0.1% Contracts
--------------------------------------------------------------------------------
September 2000 Treasury Bond Put, Strike Price 92,
Expiration 08/19/00............................ 51,700 73
September 2000 Treasury Bond Call, Strike Price 98,
Expiration 08/19/00............................ 54,200 245
September 2000 Treasury Bond Call, Strike Price 100,
Expiration 08/19/00............................ 23,800 257
-------
TOTAL OPTIONS
(cost of $1,400).................................. 575
--------------------------------------------------------------------------------
Short-Term Obligations - 0.5% Par
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (D)
CO State Educational & Cultural Facilities
Authority, National Cable Television Center,
Series 1999, 4.750% 10/1/06.................... 300 300
IA State Finance Authority, Burlington Medical Center,
Series 1997, 4.700% 6/1/27..................... 100 100
IA State Higher Education Loan Authority,
St.Ambrose University, Series 1999,
4.750% 10/1/09................................. 300 300
IL State Educational Facilities Authority,
4.800% 12/1/25................................. 920 920
IN Allen County, Golden Years Homestead, Inc.,
Series 1996, 4.750% 8/1/21..................... 100 100
WI State Health & Educational Facilities Authority,
Monroe Joint Venture, Inc.,
Series 2000, 4.900% 1/1/30...................... 500 500
-------
TOTAL SHORT-TERM OBLIGATIONS (cost of $2,220)........ 2,220
--------------------------------------------------------------------------------
TOTAL INVESTMENT
(cost of $429,571)(c)............................. 445,686
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 2.7%................ 12,519
-------
NET ASSETS - 100.0%.................................. $458,205
========
36
<PAGE>
Stein Roe Managed Municipals Fund
--------------------------------------------------------------------------------
Continued
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the interest and principal.
(c) Cost for financial statement and federal income tax purposes is identical.
(d) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured either by letters of credit or other credit
support agreements from banks. The rates listed are as of June 30, 2000.
(e) These securities, or a portion thereof, with a total market value of
$28,340 are being used to collateralize open futures contracts.
Long futures contract open at June 30, 2000:
Par Value Unrealized
covered by Expiration appreciation
Type contracts Month at 06/30/00
---- ---------------- --------- ----------
Treasury Bond 28,700 September $416
See accompanying Notes to Financial Statements.
37
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
June 30, 2000 (All amounts in thousands)
MUNICIPAL BONDS - 94.2% Par Value
--------------------------------------------------------------------------------
EDUCATION - 3.8%
EDUCATION - 1.2%
IL State Development Finance Authority, Latin
School of Chicago, Series 1998, 5.650% 8/1/28.. $ 1,725 $ 1,518
MN Victoria, Holy Family Catholic High School,
Series 1999 A, 5.875% 9/1/29................... 1,200 1,065
WV State University, Series 2000 A, (a) 4/1/19.... 1,250 412
-------
2,995
STUDENT LOAN - 2.6%
NE Nebhelp, Inc., Series 1993 A-6, 6.450%
6/1/18, (b).................................... 4,000 4,248
NM State Educational Assistance Foundation,
Series 1996 A-2, 6.650% 11/1/25................ 1,955 2,030
TX Brazos Higher Educational Facilities Authority,
Series 1993 C-2, 5.875% 6/1/04................. 390 391
-------
6,669
HEALTHCARE - 19.1%
CONGREGATE CARE RETIREMENT - 5.1%
FL Orange County Health Facilities Authority,
Orlando Lutheran Towers, Inc., Series 1996,
8.625% 7/1/20.................................. 3,000 3,128
MA State Development Finance Agency, Series 1999 A:
5.625% 7/1/15.................................. 500 421
5.750% 7/1/23.................................. 250 201
NJ State Economic Development Authority, Winchester
Gardens, Series 1996 A, 8.625% 11/1/25......... 2,000 2,110
PA Lancaster Industrial Development Authority,
Garden Spot Village, Series 2000 A,
7.625% 5/1/31.................................. 500 491
TN Metropolitan Government, Nashville and Davidson
County, Blakeford at Green Hills, Series 1998,
5.650% 7/1/24.................................. 1,500 1,136
TX Abilene Health Facilities Development Corp.,
Sears Methodist Retirement Obligation Group:
Series 1998 A, 5.900% 11/15/25............... 2,100 1,646
Series 1999, 6.000% 11/15/29................. 500 393
WI State Health & Educational Facilities Authority:
Attic Angel Obligated Group, 5.750% 11/15/27... 1,250 984
Clement Manor, Series 1998, 5.750% 8/15/24..... 3,000 2,389
-------
12,899
HEALTH SERVICES - 0.1%
MA State Development Finance Agency, Boston
Biomedical Research Institute, Series 1999,
5.650% 2/1/19.................................. 250 217
-------
HOSPITAL - 10.2%
AZ Health Facilities Authority, Phoenix Memorial
Hospital, Series 1991, 8.125% 6/1/12........... 2,500 2,516
CO La Junta, Arkansas Valley Regional Medical
Center, Series 1999, 6.100% 4/1/24............. 500 434
CO State Health Care Facilities Authority,
National Jewish Medical & Research Center,
Series 1998, 5.375% 1/1/23..................... 250 194
FL Orange County Health Facilities Authority,
Orlando Regional Healthcare System, Series 1999,
6.000% 10/1/26................................. 875 833
38
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
HEALTHCARE - CONT.
HOSPITALS - (CONTINUED)
IL Southwestern Illinois Development Authority,
Anderson Hospital, Series 1999:
5.500% 8/15/20............................... $ 500 $ 402
5.625% 8/15/29............................... 250 196
IN State Health Facilities Financing Authority,
Riverview Hospital, Series 1999,
5.500% 8/1/24.................................. 575 465
KS Wichita, CSJ Health System of Wichita, Inc.,
Series 1991 X, 7.000% 11/15/18................. 2,000 2,102
LA State Public Facilities Authority, Touro
Infirmary, Series 1999, 5.625% 8/15/29......... 1,500 1,243
MA State Health & Educational Facilities Authority,
Dana Farber Cancer Institute, Series 1995 G-1,
6.250% 12/1/22................................. 2,000 1,944
MI Dickinson County, Series 1999, 5.800% 11/1/24.. 1,300 1,004
MI Flint Hospital Building Authority, Hurley
Medical Center, Series 1998 B, 5.375% 7/1/28... 1,250 894
MI State Hospital Finance Authority, Detroit
Medical Center, Series 1998 A, 5.250% 8/15/28.. 1,000 705
MN Maplewood, Healtheast, Inc., Series 1996,
5.700% 11/15/02................................ 500 486
NC State Medical Care Commission, Stanley Memorial
Hospital, Series 1999, 6.375% 10/1/29.......... 1,000 994
NH State Higher Educational & Health Facilities
Authority, Littleton Hospital Assoc., Inc.,
Series 1998 A, 6.000% 5/1/28................... 1,000 794
OH Franklin County, Doctors Ohio Health Corp.,
Series 1998 A, 5.600% 12/1/28.................. 2,650 1,904
OH Highland County Joint Township Hospital
District, Series 1999, 6.750% 12/1/29.......... 1,250 1,066
OH Miami County, Upper Valley Medical Center, Inc.,
Series 1996-A, 6.375% 5/15/26.................. 1,015 902
PA Philadelphia Hospitals & Higher Education
Facilities Authority, Temple University
Hospital, Series 1997, 5.875% 11/15/23......... 2,110 1,749
TX Richardson Hospital Authority, Baylor
Richardson Medical Center, Series 1998,
5.625% 12/1/28................................. 1,200 940
TX Tyler Health Facilities Development Corp.,
Mother Frances Hospital, Series 1997 A,
5.625% 7/1/13.................................. 1,785 1,552
WA State Health Care Facilities Authority,
Sacred Heart Medical Center,
Series 1992, 6.875% 2/15/12.................... 1,500 1,575
WV State Hospital Finance Authority,
Series 2000 A, 6.750% 9/1/30................... 1,000 996
-------
25,890
INTERMEDIATE CARE FACILITIES - 0.6%
IL State Development Finance Authority, Hoosier
Care, Inc., Series 1999-A, 7.125% 6/1/34....... 150 133
INHealth Facilities Financing Authority Revenue,
Hoosier Care Project, Series A, 7.125% 6/1/34.. 1,500 1,331
-------
1,464
NURSING HOME - 3.1%
AK Juneau, St. Ann's Care Center, Series 1999,
6.875% 12/1/25................................. 700 631
CO State Health Facilities Authority, Volunteers
of America Care Facilities, Inc.,
Series 1999 A, 5.750% 7/1/10................... 1,095 980
IN State Health Facilities Financing Authority,
Metro Health Indiana, Inc., Series 1998,
6.400% 12/1/33................................. 1,500 1,247
MA State Development Finance Agency, Alliance
Health Care Facilities,
Series 1999, 7.100% 7/1/32..................... 855 783
MN Carlton Inter-Faith Social Services, Inc.,
Series 2000, 7.750% 4/1/29..................... 750 726
39
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
HEALTHCARE - CONT.
NURSING HOME - (CONTINUED)
MN Minneapolis, Walker Methodist Senior Services
Group, Series 1998-C, 6.000% 11/15/28.......... $ 1,300 $ 1,082
MN New Hope, North Ridge Care Center, Inc.,
Series 1999, 5.875% 3/1/29..................... 900 719
MN Sartell, Foundation for Healthcare, Series
1999-A, 6.625% 9/1/29.......................... 2,000 1,743
-------
7,911
HOUSING - 8.2%
ASSISTED LIVING/SENIOR - 2.4%
DE Kent County, Heritage at Dover, Series 1999,
7.625% 1/1/30.................................. 1,500 1,427
GA Columbus Housing Authority, The Gardens at
Calvary, Series 1999, 7.000% 11/15/29.......... 1,000 906
LA State Public Facilities Authority, Progressive
Healthcare Providers, Inc., Series 1998,
6.375% 10/1/28................................. 2,000 1,725
NC State Medical Care Commission, DePaul Community
Facilities Project, Series 1999, 7.625%
11/1/29........................................ 1,250 1,198
NY Huntington Housing Authority, Gurwin Jewish
Senior Center, Series 1999, 5.875% 5/1/19...... 1,100 910
-------
6,166
MULTI-FAMILY - 3.9%
CO State Health Facilities Authority, Birchwood
Manor Series 1991-A, 7.250% 4/1/11............. 595 606
FL Broward County Housing Finance Authority,
Chaves Lake Apartment Project, Series 2000,
7.500% 7/1/40.................................. 750 751
FL Clay County Housing Finance Authority,
Madison Commons Apartments, Series 2000-A,
7.450% 7/1/40.................................. 750 746
FL Housing Finance Agency, Palm Aire Retirement
Facility Project, Series 1989-S,10.000%
1/1/20, (d).................................... 2,568 2,517
GA Clayton County Housing Authority, Magnolia
Park Apartments, Series 1999-A, 6.250% 6/1/30.. 1,000 884
IL State Development Finance Authority, Catholic
Charities Housing Development Corp.,
Series 1993-C, 5.950% 1/1/09................... 1,400 1,334
IL State Housing Development Authority, Series 1991-C,
7.400% 7/1/23.................................. 140 145
IN New Castle, Raintree Apartments, Series
1988-B, (a) 3/1/18, (d)........................ 30,655 77
MO State Health & Educational Facilities Authority,
Lutheran Senior Services, Series 1997,
5.750% 2/1/17.................................. 2,000 1,789
OH Greater Allen County Housing Development
Authority, Steiner-McBride Apartments,
10.250% 9/1/03................................. 1,130 1,130
-------
9,979
SINGLE FAMILY - 1.9%
IA State Housing Finance Authority, Series
1984-A, (a) 9/1/16............................. 7,590 1,267
ID State Housing Agency, Series 1991-B,
7.500% 7/1/24.................................. 1,405 1,448
MT State Housing Board:
Series 1991 B-2, 7.500% 4/1/23................. 310 317
Series 1991 B-1, 7.300% 10/1/17................ 285 292
UT State Housing Finance Agency:
Series 1991 B-2, 7.750% 1/1/23................. 50 51
Series 1991 C-3, 7.550% 7/1/23................. 120 123
40
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
HOUSING - CONT.
SINGLE FAMILY - (CONTINUED)
WA State Housing Finance Commission:
Series 1991 C,
(a) 1/1/22................................... $ 980 $ 200
(a) 7/1/22................................... 1,090 214
(a) 1/1/23................................... 1,090 207
(a) 7/1/23................................... 1,090 199
(a) 1/1/24................................... 1,090 192
(a) 7/1/24................................... 1,090 185
-------
4,695
INDUSTRIAL - 9.8%
FOOD PRODUCTS - 2.2%
IN Hammond, American Maize Products Co., Series 1994,
8.000% 12/1/24................................. 4,000 4,289
MI State Strategic Fund, Michigan Sugar Co.,
Carollton Project, Series 1998-C,
6.550% 11/1/25................................. 1,500 1,309
-------
5,598
FOREST PRODUCTS - 4.4%
GA Rockdale County Development Authority, Solid
Waste Disposal, Visy Paper, Inc., Series 1993,
7.500% 1/1/26.................................. 1,000 1,024
IN Jasper County, Georgia Pacific Corp.,
Series 1999, 5.600% 4/1/29..................... 1,000 844
LA De Soto Parish, International Paper Co.,
Series-A, 7.700% 11/1/18....................... 2,500 2,689
MS Lowndes County, Weyerhaeuser Corp.,
Series 1992-A, 6.800% 4/1/22................... 5,995 6,542
-------
11,099
METALS & MINING - 2.3%
IN State Development Finance Authority, Inland
Steel, Series A, 5.750% 10/1/11................ 5,000 4,338
NV State Department of Business & Industry,
Wheeling-Pittsburgh Steel Corp., Series 1999 A,
8.000% 9/1/14.................................. 250 248
VA Greensville County Industrial Development
Authority, Wheeling Steel, Series 1999 A:
6.375% 4/1/04................................ 115 111
7.000% 4/1/14................................ 555 505
VA Peninsula Ports Authority, Ziegler Coal
Project, Series 1997, 6.900% 5/2/22............ 825 661
-------
5,863
OIL AND GAS - 0.9%
TX Texas City Industrial Development Corp., Arco
Pipe Line Co. Project, Series 1990,
7.375% 10/1/20................................. 2,000 2,359
-------
OTHER - 13.7%
REFUNDED/ESCROWED (E) CO Adams County, Series 1991B:
11.250% 9/1/11 (b)............................. 325 465
11.250% 9/1/11................................. 360 527
11.250% 9/1/11................................. 220 329
11.250% 9/1/12................................. 1,440 2,189
CO Denver City & County Airport, Series D,
7.750% 11/15/21................................ 830 881
CO State Health Facilities Authority, Healthtone,
Series 1991B, 8.500% 2/15/21................... 3,250 3,396
FL Leesburg, Leesburg Regional Medical Center,
Series 1991A, 7.375% 7/1/11.................... 775 829
41
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
OTHER - CONT.
REFUNDED/ESCROWED (E) - (CONTINUED)
IL Chicago, Skyway Toll Bridge, Series 1994,
6.750% 1/1/17.................................. $ 1,500 $ 1,619
IL Health Facility Authority, Edward Hospital
Association Project, Series 1992,
7.000% 2/15/22................................. 685 722
IL Health Facility Authority, United Medical
Center-Formerly, Series 1991, 8.125% 7/1/06.... 2,015 2,136
IN Indianapolis Local Public Improvement Bond
Bank, Series 1999E, 6.700% 1/1/17, (b)......... 5,900 6,184
LA State Public Facilities Authority, Womens
Hospital Foundation, Series 1992,
7.250% 10/1/22................................. 2,300 2,459
MS Adams County, Jefferson Davis Memorial Hospital,
Series 1991, 7.900% 10/1/08.................... 750 795
NC Eastern Municipal Power Agency, Series 1991A,
6.500% 1/1/18, (b)............................. 3,320 3,678
PA Allentown Area Hospital Authority, Sacred Heart
Hospital of Allentown, Series 1991,
7.500% 7/1/06.................................. 3,460 3,598
SD State Student Loan Assistance Corp.,
Series 1989C, 7.450% 8/1/00.................... 2,700 2,707
WA Quincy, Series 1990-I, 9.250% 11/1/10.......... 2,255 2,290
-------
34,804
OTHER REVENUE - 1.7%
RECREATION
CA Long Beach Aquarium of the Pacific,
Series 1995-A, 6.125% 7/1/23................... 4,750 4,400
-------
RESOURCE RECOVERY - 0.1%
DISPOSAL
IL Development Finance Authority, Waste
Management, Inc., Series 1997, 5.050% 1/1/10... 250 214
-------
TAX-BACKED - 9.5%
LOCAL APPROPRIATED - 1.0%
PA Philadelphia Municipal Authority, Series 1993-D,
6.250% 7/15/13................................. 2,500 2,507
-------
LOCAL GENERAL OBLIGATIONS - 0.4%
NY New York City, Series 1996-B, 7.250% 8/15/07... 1,000 1,128
-------
SPECIAL NON-PROPERTY TAX - 1.2%
MO St. Louis County Industrial Development
Authority, Kiel Center Arena, Series 1992,
7.875% 12/1/24................................. 3,000 3,139
-------
SPECIAL PROPERTY TAX - 3.5%
CA Orange County Community Facilities District,
Ladera Ranch, Series 1999-A, 6.500% 8/15/21.... 1,000 980
FL Heritage Palms Community Development District,
Series 1999, 6.250% 11/1/04.................... 1,000 995
FL Heritage Springs Community Development District,
Series 1999-B, 6.250% 5/1/05................... 1,050 1,043
FL Indigo Community Development District,
Series 1999-B, 6.400% 5/1/06................... 1,000 993
FL Lexington Oaks Community Development District,
Series 2000, 7.200% 5/1/30..................... 600 602
Series 2000-D, 6.700% 5/1/07................... 750 752
42
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
TAX-BACKED - CONT.
SPECIAL PROPERTY TAX - (CONTINUED)
FL Northern Palm Beach County Improvement District,
Series 1999, 6.000% 8/1/29..................... $ 750 $ 671
FL Orlando, Conroy Road Interchange Project:
Series 1998-A, 5.500% 5/1/10................... 200 191
5.800% 5/1/26.................................. 500 439
FL Stoneybrook Community Development District:
Series 1998-A, 6.100% 5/1/19................... 330 309
Series 1998-B, 5.700% 5/1/08................... 875 847
MO State Development Finance Board, Midtown
Redevelopment Project, Series 2000-A,
5.750% 4/1/22.................................. 1,000 1,000
-------
8,822
STATE APPROPRIATED - 0.9%
NY Triborough Bridge & Tunnel Authority, Javits
Convention Center Project, Series E,
7.250% 1/1/10.................................. 2,000 2,223
-------
STATE GENERAL OBLIGATIONS - 2.5%
MA Massachusetts Bay Transportation Authority,
Series 1992-B, 6.200% 3/1/16................... 5,825 6,307
-------
TRANSPORTATION - 7.1%
AIR TRANSPORTATION - 4.7%
IL Chicago O'Hare International Airport,
United Airlines, Inc., Series 2000-A,
6.750% 11/1/11................................. 800 818
IN Indianapolis Airport Authority, Federal
Express Corp., Series 1994, 7.100% 1/15/17..... 4,000 4,142
PA Philadelphia Authority for Industrial
Development, Aero Philadelphia, Series
1999, 5.500% 1/1/24............................ 1,000 831
TX Alliance Airport Authority, AMR Corp.,
Series 1991, 7.000% 12/1/11.................... 4,070 4,282
TX Houston Airport System, Continental Airline
Terminal, Series B, 6.125% 7/15/17............. 2,000 1,760
-------
11,833
AIRPORT - 1.7%
CO Denver City and County Airport, Series D,
7.750% 11/15/21................................ 3,170 3,330
IN State Transportation Finance Authority,
Airport Facilities Lease, Series 1992-A,
6.250% 11/1/16................................. 950 964
-------
4,294
TOLL FACILITIES - 0.7%
CO State Public Highway Authority, Arapahoe
County, E470 Series 2000 B:
(a) 9/1/18................................... 4,000 1,369
(a) 9/1/35................................... 8,750 619
-------
1,988
UTILITY - 21.2%
INDEPENDENT POWER PRODUCER - 4.8%
MI Midland County Economic Development Corp.,
Series 2000, 6.875% 7/23/09.................... 500 502
PA State Economic Development Financing Authority,
Northampton Generating:
Series A, 6.500% 1/1/13...................... 2,000 1,932
Series 1994-B, 6.750% 1/1/07................. 3,000 3,017
43
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
Par Value
--------------------------------------------------------------------------------
UTILITY - CONT.
INDEPENDENT POWER PRODUCER - (CONTINUED)
VA Pittsylvania County Industrial Development
Authority, Multitrade of Pittsyvania,
Series 1994 A:
7.450% 1/1/09................................ $ 3,500 $ 3,623
7.550% 1/1/19................................ 3,100 3,185
-------
12,259
INVESTOR OWNED - 6.7%
CT State Development Authority, Connecticut Light
& Power Co., Series 1993-A, 5.850% 9/1/28...... 2,900 2,545
LA Calcasieu Parish Industrial Development
Board, Entergy Gulf States, Inc., Series 1999,
5.450% 7/1/10.................................. 500 464
LA West Feliciana Parish, Entergy Gulf States,
Inc., Series 1999-B, 6.600% 9/1/28............. 250 233
MS State Business Finance Corp., Systems Energy
Resources, Inc. Series 1999, 5.900% 5/1/22..... 1,250 1,081
NM Farmington, Public Service Co. of New Mexico,
Series 1996-A, 6.300% 12/1/16.................. 3,300 3,166
NM Farmington, Tucson Electric Power Co.,
Series 1997-A, 6.950% 10/1/20.................. 2,000 1,978
NV Humboldt County Pollution Control Revenue,
Idaho Power Co. Project, 8.300% 12/1/14........ 2,000 2,216
PA Beaver County Industrial Development Authority,
Toledo Edison Co., Series 1995, 7.625% 5/1/20.. 4,900 5,200
-------
16,883
JOINT POWER AUTHORITY - 5.4%
GA Municipal Electric Authority, Series 1991-V,
6.600% 1/1/18.................................. 4,065 4,485
NC Eastern Municipal Power Agency, Series 1991 A,
6.500% 1/1/18.................................. 1,680 1,696
WA State Public Power Supply System, Nuclear
Project No. 2:
Series 1991-A, (a) 7/1/07...................... 6,945 4,775
Series 1992-A, 6.300% 7/1/12................... 2,500 2,711
-------
13,667
WATER & SEWER - 4.3%
FL Tampa Bay Water Utility Systems Revenue,
7.428% 10/1/29................................. 7,500 7,416
PA Dauphin County Industrial Development
Authority, Dauphin Water Supply Co.,
Series 1992 A, 6.900% 6/1/24................... 3,200 3,503
-------
10,919
-------
TOTAL MUNICIPAL BONDS
(cost of $243,261)................................ 239,191
--------------------------------------------------------------------------------
PREFERRED STOCK - 0.8%
--------------------------------------------------------------------------------
Charter Mac Equity Issue Trust, 6.625% 6/30/49
(cost of $2,000)(c)............................ 2,000 1,915
-------
--------------------------------------------------------------------------------
44
<PAGE>
SR&F High-Yield Municipals Portfolio
--------------------------------------------------------------------------------
Continued
SHORT-TERM OBLIGATIONS - 1.6% Par Value
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (G)
IA State Higher Education Loan Authority,
St. Ambrose University,
Series 1999, 4.750% 10/1/09.................... $ 400 $ 400
IA Woodbury County, Siouxland Medical Educational
Foundation, Series 1996, 4.800% 11/1/16........ 1,500 1,500
IN State Health Facilities Financing Authority,
Series 2000, 4.850% 1/12/20.................... 1,300 1,300
MI Farmington Hills Hospital Finance Authority,
Botsford General Hospital, Series 1991-B,
4.650% 2/15/16................................. 800 800
-------
TOTAL SHORT-TERM OBLIGATIONS (cost of $4,000)........ 4,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost of $249,261)(f)............................. 245,106
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 3.4%................ 8,541
-------
NET ASSETS - 100.0%.................................. $253,647
=======
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$14,575, are being used to collateralize open futures contracts.
(c) This security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2000,
the value of this security amounted to $1,915 or 0.8% of net assets.
(d) This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust solely for the payment of
principal and interest.
(f) Cost for financial statement and federal income tax purposes is identical.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of June 30, 2000.
Short futures contracts open at June 30, 2000:
Unrealized
Par value Expiration depreciation
Type covered by contracts month at 6/30/00
---- ---------------- --------- ----------
Municipal Bond 7,800 September 70
Treasury Note 11,600 September 60
----------
$130
----------
See accompanying Notes to Financial Statements.
45
<PAGE>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 2000
(All amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
MUNICIPAL
MONEY INTERMEDIATE MANAGED HIGH-YIELD
MARKET MUNICIPALS MUNICIPALS MUNICIPALS
FUND FUND FUND FUND
----------- ----------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C>
Investment in Portfolio, at value........................... $110,749 $ -- $ -- $253,607
Investments, at market value (cost $129,290
and $429,571, respectively)............................ -- 133,664 445,686 --
Interest receivable......................................... -- 2,451 8,301 --
Receivable for investments sold............................. -- -- 4,592 --
Receivable for fund shares sold............................. 3,688 100 912 670
Expense reimbursement due from Advisor...................... 9 -- 1 --
Cash........................................................ -- 1 21 --
Other....................................................... 18 24 329 273
--------- --------- --------- ---------
Total assets............................................. 114,464 136,240 459,842 254,550
--------- --------- --------- ---------
LIABILITIES
Dividends payable........................................... 102 194 1,018 445
Payable for fund shares repurchased......................... 264 91 284 174
Payable due to Advisor...................................... -- 11 -- --
Variation margin on futures................................. -- 6 45 --
Accrued:
Management fee........................................... -- 45 146 --
Administration fee....................................... 23 16 39 47
Transfer Agent fee....................................... 16 19 60 61
Bookkeeping fee.......................................... 2 2 3 3
Other....................................................... 242 46 42 33
--------- --------- --------- ---------
Total liabilities........................................ 649 430 1,637 763
--------- --------- --------- ---------
Net assets............................................... $113,815 $135,810 $458,205 $253,787
======== ======== ======== ========
ANALYSIS OF NET ASSETS
Paid-in capital............................................. $113,741 $131,609 $441,511 $264,405
Undistributed (overdistributed)
net investment income.................................. 93 (20) (202) 116
Accumulated net realized gains (losses)
on investments and futures contracts................... (16) 4 365 (6,390)
Net unrealized appreciation on investments
and futures contracts.................................. (3) 4,217 16,531 (4,344)
--------- --------- --------- ---------
Net assets............................................... $113,815 $135,810 $458,205 $253,787
======== ======== ======== =========
Shares outstanding (unlimited number authorized)............ 113,682 12,391 52,988 22,987
======== ======== ======== =========
Net asset value per share................................... $ 1.00 $ 10.96 $ 8.65 $ 11.04
======== ======== ======== =========
</TABLE>
See accompanying Notes to Financial Statements.
46-47 [SPREAD]
<PAGE>
Statements of Operations
--------------------------------------------------------------------------------
For the Year Ended June 30, 2000
(All amounts in thousands)
<TABLE>
<CAPTION>
MUNICIPAL
MONEY INTERMEDIATE MANAGED HIGH-YIELD
MARKET MUNICIPALS MUNICIPALS MUNICIPALS
FUND FUND FUND FUND
----------- ----------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest allocated from Portfolio ............................... $ 4,483 $ -- $ -- $ 17,894
Interest ........................................................ -- 8,233 29,673 --
-------- -------- -------- --------
Total investment income ...................................... 4,483 8,233 29,673 17,894
-------- -------- -------- --------
EXPENSES
Management fees ................................................. -- 644 1,923 --
Expenses allocated from Portfolio ............................... 345 -- -- 1,284
Transfer agent fees ............................................. 182 215 716 392
Administrative fees ............................................. 289 208 563 317
Bookkeeping fees ................................................ 27 27 36 30
Trustees' fees .................................................. 12 17 19 11
Custodian fees .................................................. 1 3 11 1
Audit fees ...................................................... 9 21 21 10
Legal fees ...................................................... 2 3 10 2
Registration fees ............................................... 33 30 22 37
Reports to shareholders ......................................... 15 29 39 39
Other ........................................................... 3 -- -- --
-------- -------- -------- --------
Total expenses ............................................... 918 1,197 3,360 2,123
Reimbursement of expenses by investment Advisor ................. (111) (168) -- --
-------- -------- -------- --------
Net expenses ................................................. 807 1,029 3,360 2,123
-------- -------- -------- --------
Net investment income ........................................ 3,676 7,204 26,313 15,771
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized gain (loss) on investments
and futures transactions
allocated from Portfolio ................................... (8) -- -- 3,179
Net realized gain on investments
and futures transactions ................................... -- 64 2,359 --
Net change in unrealized appreciation/depreciation
on investments and futures transactions
allocated from Portfolio ................................... (3) (3,059) (21,196) (20,047)
-------- -------- -------- --------
Net loss ..................................................... (11) (2,995) (18,837) (16,868)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ....................................... $ 3,666 $ 4,209 $ 7,476 $ (1,097)
======== ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
48-49 [SPREAD]
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(All amounts in thousands)
<TABLE>
<CAPTION>
MUNICIPAL MONEY INTERMEDIATE
MARKET FUND MUNICIPALS FUND
-------------------------- ----------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
-------------------------- ---------------------------
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ......................................... $ 3,676 $ 3,249 $ 7,204 $ 8,888
Net realized gain (loss) on
investments and futures transactions ..................... (8) -- 64 1,053
Net change in unrealized appreciation/depreciation
on investments and futures transactions .................. (3) -- (3,059) (5,460)
--------- --------- --------- ---------
Net increase in net assets resulting from operations ....... 3,665 3,249 4,209 4,481
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income ...................... (3,595) (3,252) (7,275) (8,885)
Distributions from net capital gains .......................... -- -- (735) (926)
--------- --------- --------- ---------
Total distributions to shareholders ........................ (3,595) (3,252) (8,010) (9,811)
--------- --------- --------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares .................................. 136,193 197,191 18,308 31,678
Value of distributions reinvested ............................. 3,197 2,897 5,595 6,806
Redemptions of fund shares .................................... (144,677) (196,332) (53,188) (59,909)
--------- --------- --------- ---------
Net increase (decrease) from share transactions ............ (5,287) 3,756 (29,285) (21,425)
--------- --------- --------- ---------
Net increase (decrease) in net assets ...................... (5,217) 3,753 (33,086) (26,755)
TOTAL NET ASSETS
Beginning of period ........................................... 119,032 115,279 168,896 195,651
--------- --------- --------- ---------
End of period ................................................. $ 113,815 $ 119,032 $ 135,810 $ 168,896
========= ========= ========= =========
Undistributed (overdistributed) net investment income ......... 93 24 (20) 51
--------- --------- --------- ---------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares .................................. 136,193 197,191 1,669 2,720
Issued in reinvestment of distributions ....................... 3,197 2,897 510 586
Redemptions of fund shares .................................... (144,677) (196,332) (4,830) (5,169)
--------- --------- --------- ---------
Net increase (decrease) in fund shares ..................... (5,287) 3,756 (2,651) (1,863)
Shares outstanding at beginning of period ..................... 118,970 115,214 15,042 16,905
--------- --------- --------- ---------
Shares outstanding at end of period ........................... 113,683 118,970 12,391 15,042
========= ========= ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
50-51 [SPREAD]
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(All amounts in thousands)
<TABLE>
<CAPTION>
MANAGED HIGH-YIELD
MUNICIPALS FUND MUNICIPALS FUND
--------------------------- ---------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
--------------------------- ---------------------------
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income..................................... $ 26,313 $ 28,799 $ 15,771 $ 17,255
Net realized gain (loss) on investments
and futures transactions............................. 2,359 5,166 3,179 3,655
Net change in unrealized appreciation/depreciation
on investments and futures transactions.............. (21,196) (23,858) (20,047) (10,380)
--------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations............................ 7,476 10,107 (1,097) 10,530
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.................. (26,352) (28,945) (15,496) (17,606)
Distributions from net capital gains...................... (5,798) -- -- --
--------- --------- --------- ---------
Total distributions to shareholders.................... (32,150) (28,945) (15,496) (17,606)
--------- --------- --------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares.............................. 29,618 43,856 53,142 57,493
Value of distributions reinvested......................... 17,510 16,296 9,880 11,152
Redemptions of fund shares................................ (102,571) (86,130) (90,516) (105,475)
--------- --------- --------- ---------
Net decrease from share transactions................... (55,443) (25,978) (27,494) (36,830)
--------- --------- --------- ---------
Net decrease in net assets............................. (80,117) (44,816) (44,087) (43,906)
TOTAL NET ASSETS
Beginning of period....................................... 538,322 583,138 297,874 341,780
--------- --------- --------- ---------
End of period............................................. $ 458,205 $ 538,322 $ 253,787 $ 297,874
========= ========= ========= =========
Undistributed (overdistributed) net investment income..... (202) (163) 116 (241)
--------- --------- --------- ---------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares.............................. 3,224 4,661 4,745 4,792
Issued in reinvestment of distributions................... 2,205 1,735 882 932
Redemptions of fund shares................................ (11,819) (9,176) (8,083) (8,823)
--------- --------- --------- ---------
Net decrease in fund shares............................ (6,390) (2,780) (2,456) (3,099)
Shares outstanding at beginning of period................. 59,378 62,158 25,443 28,542
--------- --------- --------- ---------
Shares outstanding at end of period....................... 52,988 59,378 22,987 25,443
========= ========= ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
52-53 [SPREAD]
<PAGE>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 2000
(All amounts in thousands)
SR&F SR&F
MUNICIPAL HIGH-YIELD
MONEY MARKET MUNICIPALS
PORTFOLIO PORTFOLIO
---------- ----------
ASSETS
Investments, at market value (cost $128,327
and $249,261, respectively).................... $128,327 $245,106
Interest receivable................................. 896 4,834
Receivable for investments sold..................... 1,210 3,769
Cash................................................ 10 65
Other............................................... 27 --
--------- ---------
Total assets..................................... 130,470 253,774
--------- ---------
LIABILITIES
Payable for investments purchased................... 5,163 --
Payable for variation margin on futures............. -- 15
Accrued:
Management fees.................................. 26 87
Bookkeeping fees................................. 2 2
Transfer agent fees.............................. 1 1
Other............................................... 199 22
--------- ---------
Total liabilities................................ 5,391 127
--------- ---------
Net assets applicable to investors'
beneficial interest............................ $125,079 $253,647
========= =========
Statements of Operations
--------------------------------------------------------------------------------
For the Year Ended June 30, 2000
(All amounts in thousands)
SR&F SR&F
MUNICIPAL HIGH-YIELD
MONEY MARKET MUNICIPALS
PORTFOLIO PORTFOLIO
---------- ----------
INVESTMENT INCOME
Interest .................................... $ 5,062 $ 17,913
-------- --------
EXPENSES
Management fees ............................. 316 1,163
Bookkeeping fees ............................ 27 30
Audit fees .................................. 16 19
Trustees' fees .............................. 17 21
Custodian fees .............................. 6 7
Legal fees .................................. 2 3
Transfer agent fees ......................... 6 6
Other ....................................... -- 36
-------- --------
Total expenses ........................... 390 1,285
-------- --------
Net investment income .................... 4,672 16,628
-------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ..... (9) 3,144
Net change in unrealized
appreciation/depreciation on investments (3) (20,040)
-------- --------
Net loss on investments .................. (12) (16,896)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............. $ 4,660 $ (268)
======== ========
See accompanying Notes to Financial Statements.
54
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(All amounts in thousands)
SR&F
SR&F HIGH-YIELD
MUNICIPAL MONEY MUNICIPALS
MARKET PORTFOLIO PORTFOLIO
-------------------- --------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
--------- --------- --------- ---------
OPERATIONS
Net investment income............. $ 4,672 $ 4,189 $ 16,628 $ 18,389
Net realized loss on investments.. (9) -- 3,144 3,631
Net change in unrealized
appreciation/depreciation
on investments................. (3) -- (20,040) (10,388)
--------- --------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations.............. 4,660 4,189 (268) 11,632
--------- --------- --------- ---------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST
Contributions..................... 104,696 101,419 26,251 27,867
Withdrawals....................... (118,326) (103,577) (71,999) (83,002)
--------- --------- --------- ---------
Net decrease from transactions
in investors' beneficial
interest..................... (13,630) (2,158) (45,748) (55,135)
--------- --------- --------- ---------
Net increase (decrease)
in net assets................ (8,970) 2,031 (46,016) (43,503)
TOTAL NET ASSETS
Beginning of period............... 134,049 132,018 299,663 343,166
--------- --------- --------- ---------
End of period..................... $125,079 $134,049 $253,647 $299,663
========= ========= ======== =========
See accompanying Notes to Financial Statements.
55
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund,
Stein Roe Managed Municipals Fund and Stein Roe High-Yield Municipals Fund (the
"Funds") are series of Liberty-Stein Roe Municipal Trust (the "Trust"), formerly
Stein Roe Municipal Trust, an open-end management investment company organized
as a Massachusetts business trust. Stein Roe Municipal Money Market Fund and
Stein Roe High-Yield Municipals Fund invest substantially all of their assets in
SR&F Municipal Money Market Portfolio and SR&F High-Yield Municipals Portfolio
(the "Portfolios"), respectively.
The Portfolios are series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. SR&F High-Yield Municipals Portfolio commenced operations on February 2,
1998. At commencement, Stein Roe High-Yield Municipals Fund contributed $335,711
in securities and other assets to SR&F High-Yield Municipals Portfolio in
exchange for beneficial ownership of the Portfolio. On February 4, 1998, Stein
Roe Advisor High-Yield Municipals Fund contributed cash of $100 to the
Portfolio. The Portfolios allocate 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 Municipal Money Market
Fund owned 88.5% of SR&F Municipal Money Market Portfolio; and Stein Roe
High-Yield Municipals Fund owned 99.9% of SR&F High-Yield Municipals Portfolio.
--------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Funds and
Portfolios. 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
56
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
transaction date. The values of such securities are subject to market
fluctuations during this period. None of the Funds or the Portfolios had
when-issued or delayed delivery purchase commitments as of June 30, 2000.
SECURITY VALUATIONS
Municipal securities are valued at a fair value using a procedure determined in
good faith by the Board of Trustees, which has authorized the use of bid
valuations provided by a pricing service, except for SR&F Municipal Money Market
Portfolio. This Portfolio utilizes the amortized cost method to value its
investments. This technique approximates market value and involves valuing a
security initially at cost and, thereafter, assuming a constant amortization to
maturity of any discount or premium. In the event that a deviation of 0.50% or
more exists between Stein Roe Municipal Money Market Fund's $1.00 per share net
asset value, calculated at amortized cost, and the net asset value calculated by
reference to market quotations, its Board of Trustees would consider what
action, if any, should be taken. Other securities and assets are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.
Stein Roe Municipal Money Market Fund attempts to maintain a per-share net
asset value of $1.00, which management believes will be possible under most
conditions.
FUTURES CONTRACTS
Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and
SR&F High-Yield Municipals Portfolio may enter into futures contracts to either
hedge against expected declines of their 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 a fund 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 Fund/Portfolio deposits with its
custodian cash or securities in an amount sufficient to meet the initial margin
requirements. Sub sequent payments are made or received by the Fund/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
Fund/Portfolio recognizes a realized gain or loss when the contract is closed or
expires.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Funds elect
57
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
to be taxed as "regulated investment companies" and make distributions to their
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolios are treated as partnerships for
federal income tax purposes and all of their income is allocated to their owners
based on methods approved by the Internal Revenue Service. All dividends paid
from net investment income by the Funds constitute tax-exempt interest that is
not taxable for federal income tax purposes; however, a portion of the dividends
paid may be inclusive in the alternative minimum tax calculation.
The Funds intend to utilize provisions of the federal income tax laws, which
allow 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, 2000, the Funds had capital loss carryforwards as follows:
Year of
Fund Amount Expiration
Stein Roe High-Yield
Municipals Fund $5,934 2006
Stein Roe Municipal
Money Market Fund 8 2002-2008
Stein Roe Intermediate
Municipal Fund $ 252 2008
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Dividends are
determined in accordance with income tax principles, which may treat certain
transactions differently than generally accepted accounting principles.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax earnings are
reclassified to paid-in capital.
NOTE 3. PORTFOLIO COMPOSITION
The Funds and Portfolios invest in municipal securities including, but not
limited to, general obligation bonds, revenue bonds and escrowed bonds (i.e.,
bonds that have been refinanced, the proceeds of which have been invested in
U.S. or state and local government obligations that are set aside to pay off the
original issue at the first call date or maturity). See Fund Highlights for
unaudited information regarding breakdown of securities held by type at June 30,
2000.
The Funds and the Portfolios hold investments that are insured by private
insurers who guarantee the payment of principal and interest in the event of
default. At June 30, 2000 investments in these securities for Stein Roe
Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and
58
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
SR&F High-Yield Municipals Portfolio represented 46.6%, 35.1% and 3.7% of
holdings, respectively. SR&F Municipal Money Market Portfolio invests in certain
short-term securities that are backed by bank letters of credit used to provide
liquidity to the issuer and/or additional security in the event of default. At
June 30, 2000, 72.8% of the Portfolio was backed by bank letters of credit. See
the Portfolio of Investments for each Fund or Portfolio for additional
information regarding portfolio composition.
--------------------------------------------------------------------------------
NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
MANAGEMENT & ADMINISTRATIVE FEES
The Funds and the Portfolios pay monthly management and administrative fees,
computed and accrued daily, 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 SR&F
Municipal Money Market Portfolio is computed at an annual rate of 0.25% of
average daily net assets. The management fee for Stein Roe Intermediate
Municipals Fund and SR&F High-Yield Municipals Portfolio is 0.45% of the first
$100 million of average daily net assets, 0.425% of the next $100 million and
0.40% thereafter. The management fee for Stein Roe Managed Municipals Fund is
0.45% of the first $100 million of average daily net assets, 0.425% of the next
$100 million, 0.40% of the next $800 million and 0.375% thereafter.
The administrative fee for the Stein Roe Municipal Money Market Fund is
computed at an annual rate of 0.25% of average daily net assets up to $500
million, 0.20% of average daily net assets for the next $500 million and 0.15%
thereafter. The administrative fee for Stein Roe Intermediate Municipals Fund
and Stein Roe High-Yield Municipals Fund is computed at an annual rate of 0.15%
of the first $100 million of average daily net assets, 0.125% of the next $100
million and 0.10% thereafter. The administrative fee for Stein Roe Managed
Municipals Fund is 0.15% of the first $100 million of average daily net assets,
0.125% of the next $100 million, 0.10% of the next $800 million and 0.075%
thereafter.
BOOKKEEPING FEES
The Advisor provides bookkeeping and pricing services to each Fund and Portfolio
for a monthly fee equal to $25 annually plus 0.0025% annually of each Fund's and
Portfolio's average daily net assets over $50 million.
59
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
EXPENSE LIMITS
The Advisor has agreed to reimburse Stein Roe Municipal Money Market Fund and
Stein Roe Intermediate Municipals Fund for expenses in excess of 0.70% of
average annual net assets. This commitment expires on October 31, 2001, subject
to earlier termination by the Advisor on 30 days' notice.
TRANSFER AGENT FEES
Transfer agent fees are paid to SteinRoe Services, Inc. (SSI) (the Transfer
Agent), an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. SSI has entered into an agreement with Liberty Funds Services, Inc.,
also an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company,
to act as subtransfer agent for the Funds. The Transfer Agent provides
shareholder services for a monthly fee equal to 0.14% annually of each Fund's
average net assets except Stein Roe Municipal Money Market which is equal to
0.15% annually and receives reimbursement for certain out-of-pocket expenses.
OTHER
Certain officers and trustees of the Trust are also officers of the Advisor. No
remuneration was paid to any other trustee or officer of the Trust who is
affiliated with the Advisor.
--------------------------------------------------------------------------------
NOTE 5. LINE OF CREDIT
The Trust (excluding the Stein-Roe High Yield Municipals Fund and Stein-Roe
Municipal Money Fund), the Liberty Stein-Roe Investment Trust and the SR&F Base
Trust (collectively, the "Trusts") participate in unsecured line of credit
agreements provided by the custodian bank consisting of two components. The
committed line of credit entitles the Trusts to borrow from the custodian at any
time upon notice from the Trusts. The uncommitted line of credit permits the
Trusts to borrow from the custodian at the custodian's sole discretion. The
aggregate borrowings available to the Trusts for the 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, each 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 each
Fund based on the relative asset size of each Fund. For the year ended June 30,
2000, the Trusts had no borrowings under the agreement.
60
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
Note 6. Portfolio Information
The aggregate cost of purchases and proceeds from sales or maturities of
securities, excluding short-term obligations, for the year ended June 30, 2000
were as follows:
Purchases Sales
------------- -------------
Stein Roe Intermediate Municipals Fund........... $ 36,676 $ 66,179
Stein Roe Managed Municipals Fund................ 212,363 290,972
SR&F High-Yield Municipals Portfolio............. 38,352 74,363
Unrealized appreciation (depreciation) at June 30, 2000 for both financial
statement and federal income tax purposes was:
Stein Roe Stein Roe SR&F
Intermediate Managed High-Yield
Municipals Municipals Municipals
Fund Fund Portfolio
-----------------------------------------
Gross unrealized appreciation $5,146 $24,474 $ 8,320
Gross unrealized depreciation (929) (8,358) (12,475)
------ ------- --------
Net unrealized appreciation
(depreciation) $4,217 $16,116 $ (4,155)
====== ======= ========
61
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Municipal Money Market Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Net investment income.......... 0.031 0.027 0.031 0.030 0.031
Distributions from net
investment income........... (0.031) (0.027) (0.031) (0.030) (0.031)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======= ======= ======= =======
Ratio of net expenses to
average net assets (a)......... 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income to
average net assets (b)......... 3.19% 2.69% 3.06% 2.98% 3.09%
Total return (b).................. 3.20% 2.73% 3.10% 3.04% 3.13%
Net assets, end of period (000's). $113,815 $119,032 $115,279 $118,424 $120,432
</TABLE>
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor, this ratio would have been 0.80, 0.79, 0.86,
0.86 and 0.84 percent for the years ended June 30, 2000, 1999, 1998, 1997,
and 1996, respectively.
(b) Computed giving effect to Advisor's expense limitation undertaking.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the taxable year ended June 30, 2000, 100% of distributions from net
investment income qualify as exempt-interest dividends for federal income tax
purposes.
--------------------------------------------------------------------------------
SR&F Municipal Money Market Portfolio
<TABLE>
<CAPTION>
PERIOD
ENDED
YEARS ENDED JUNE 30, JUNE 30,
2000 1999 1998 1997 1996(a)
-------- -------- -------- -------- --------
SELECTED RATIOS
<S> <C> <C> <C> <C> <C>
Ratio of net expenses to average net assets 0.30% 0.30% 0.34% 0.32% 0.30%(b)
Ratio of net investment income to average
net assets........................................ 3.57% 3.07% 3.41% 3.36% 3.50%(b)
</TABLE>
(a) From commencement of operations on September 28, 1995.
(b) Annualized
62
<PAGE>
Financial Highlights Continued
--------------------------------------------------------------------------------
Intermediate Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.23 $ 11.57 $ 11.38 $ 11.22 $ 11.16
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......... 0.28 0.54 0.54 0.55 0.55
Net realized and unrealized
gains (losses)
on investments............... (0.27) (0.30) 0.22 0.22 0.06
-------- -------- -------- -------- --------
Total from investment
operations.............. 0.01 0.24 0.76 0.77 0.61
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.......... (0.26) (0.54) (0.54) (0.55) (0.55)
Net realized gains............. (0.02) (0.04) (0.03) (0.06) --
-------- -------- -------- -------- --------
Total distributions......... (0.28) (0.58) (0.57) (0.61) (0.55)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.... $ 10.96 $ 11.23 $ 11.57 $ 11.38 $ 11.22
======== ======= ======= ======= =======
Ratio of net expenses to
average net assets (a)....... 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income
to average net assets (b).... 4.93% 4.58% 4.70% 4.84% 4.82%
Portfolio turnover rate........... 26% 48% 29% 44% 66%
Total return (b).................. 3.10% 2.08% 6.84% 7.07% 5.47%
Net assets, end of period (000's). $135,810 $168,896 $195,651 $196,006 $204,726
</TABLE>
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the Advisor, this ratio would have been 0.81, 0.79, 0.81,
0.82 and 0.81 percent for the years ended June 30, 2000, 1999, 1998, 1997
and 1996, respectively.
(b) Computed giving effect to Advisor's expense limitation undertaking.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the taxable year ended June 30, 2000, 100% of distributions from net
investment income qualify as exempt-interest dividends for federal income tax
purposes.
The Fund designates 100% of capital gain distributions paid as long term
capital gain.
63
<PAGE>
Financial Highlights Continued
--------------------------------------------------------------------------------
Managed Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.07 $ 9.38 $ 9.11 $ 8.85 $ 8.79
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......... 0.47 0.47 0.48 0.48 0.48
Net realized and unrealized gains
(losses) on investments...... (0.32) (0.31) 0.27 0.26 0.06
-------- -------- -------- -------- --------
Total from investment
operations.............. 0.15 0.16 0.75 0.74 0.54
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.......... (0.47) (0.47) (0.48) (0.48) (0.48)
Net realized gains............. (0.10) -- -- -- --
-------- -------- -------- -------- --------
Total distributions......... (0.57) (0.47) (0.48) (0.48) (0.48)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.... $ 8.65 $ 9.07 $ 9.38 $ 9.11 $ 8.85
======== ======= ======= ======= =======
Ratio of net expenses to
average net assets........... 0.69% 0.72% 0.72% 0.73% 0.72%
Ratio of net investment income to
average net assets .......... 5.39% 5.02% 5.14% 5.31% 5.41%
Portfolio turnover rate........... 19% 17% 12% 16% 40%
Total return ..................... 1.86% 1.67% 8.37% 8.56% 6.24%
Net assets, end of period (000's). $458,205 $538,322 $583,138 $582,366 $606,359
</TABLE>
-------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the taxable year ended June 30, 2000, 99% of distributions from net
investment income qualify as exempt-interest dividends for federal income tax
purposes.
The Fund designates 100% of capital gain distributions paid as long term
capital gain, and additionally designates $1,897,502 as long term capital gains
earned.
64
<PAGE>
Financial Highlights Continued
-------------------------------------------------------------------------------
High-Yield Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.71 $ 11.97 $ 11.67 $ 11.40 $ 11.31
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......... 0.65 0.63 0.65 0.72 0.67
Net realized and unrealized gains
(losses) on investments...... (0.68) (0.25) 0.30 0.27 0.09
-------- -------- -------- -------- --------
Total from investment
operations.............. (0.03) 0.38 0.95 0.99 0.76
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.......... (0.64) (0.64) (0.65) (0.72) (0.67)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.... $ 11.04 $ 11.71 $ 11.97 $ 11.67 $ 11.40
======== ======= ======= ======= =======
Ratio of net expenses to
average net assets........... 0.78% 0.77% 0.75% 0.77% 0.85%
Ratio of net investment
income to average
net assets..................... 5.82% 5.26% 5.48% 6.20% 5.86%
Portfolio turnover rate........... N/A N/A 8%(a) 11% 34%
Total return...................... (0.16)% 3.18%(b) 8.32% 8.91% 6.83%
Net assets, end of period (000's). $253,787 $297,874 $341,780 $306,070 $282,956
</TABLE>
(a) Prior to commencement of operations of the Portfolio.
(b) 0.50% of the return is attributable to a one-time revaluation of a
portfolio security reflecting the restructuring of this security. Absent
this revaluation, the total return would have been 2.68%.
--------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the taxable year ended June 30, 2000, 99.5% of distributions from net
investment income qualify as exempt-interest dividends for federal income tax
purposes.
--------------------------------------------------------------------------------
SR&F High-Yield Municipals Portfolio
PERIOD
ENDED
YEARS ENDED JUNE 30, JUNE 30,
2000 1999 1998
--------- -------- --------
SELECTED RATIOS
Ratio of net expenses to
average net assets.................. 0.47% 0.45% 0.47%(a)
Ratio of net investment income
to average net assets............... 6.11% 5.55% 5.72%(a)
Portfolio turnover rate.................. 14% 19% 3%(b)
(a) From commencement of operations on February 2, 1998.
(b) Annualized
65
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders, Holders of Investors' Beneficial Interest and Board of
Trustees of Liberty-Stein Roe Funds Municipal Trust and SR&F Base Trust
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
SR&F Municipal Money Market Portfolio
SR&F High Yield Municipals Portfolio
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Stein Roe Intermediate Municipals Fund, Stein
Roe Managed Municipals Fund (two series of Liberty-Stein Roe Funds Municipal
Trust, formerly, Stein Roe Municipal Trust), SR&F Municipal Money Market
Portfolio and SR&F High-Yield Municipals Portfolio (two series of SR&F Base
Trust), and the accompanying statements of assets and liabilities of Stein Roe
Municipal Money Market Fund and Stein Roe High-Yield Municipals Fund (two series
of Liberty-Stein Roe Funds Municipal Trust, formerly, Stein Roe Municipal 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 state ments and financial highlights. Our procedures included
confirmation of securities owned as of June 30, 2000, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant
66
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors Continued
--------------------------------------------------------------------------------
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 each
of the aforementioned series of Liberty-Stein Roe Funds Municipal 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
67
<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 7 a.m. to 7 p.m. CT, and Saturdays and
Sundays from 9 a.m. to 1 p.m. CT.
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.
68
<PAGE>
Liberty-Stein Roe Funds Municipal 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, UAL, Inc.
Janet Langford Kelly
Executive Vice President, Secretary
and General Corporate Development, Kellogg Company
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Director, William Blair Capital Partners
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President
Loren A. Hansen, Executive Vice President
Joseph Palombo, Executive Vice President
Nancy L. Conlin, Senior Vice President, Secretary
Pamela McGrath, Senior Vice President, Treasurer
J. Kevin Connaughton, Controller
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
Stein Roe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd LLC
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
69
<PAGE>
THE STEIN ROE MUTUAL FUNDS
FIXED INCOME FUNDS
Cash Reserves Fund
Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund
Intermediate Bond Fund
Income Fund
High Yield Fund
EQUITY FUNDS
Balanced Fund
Growth & Income Fund
Disciplined Stock Fund*
Growth Stock Fund
Growth Investor Fund
Young Investor Fund
Large Company Focus Fund
Midcap Growth Fund**
Capital Opportunities Fund
International Fund
Small Company Growth Fund
INTERNATIONAL FUNDS
Asia Pacific Fund
Small Cap Tiger Fund
* Formerly Special Fund
** Formerly Growth Opportunities Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive
Liberty Funds Distributor, Inc.
DIR-02/136C-0700(8/00) 00/1372
