LIBERTY STEIN ROE FUNDS INCOME TRUST, N-30D, 2000-03-01

LIBERTY STEIN ROE FUNDS INCOME TRUST
N-30D, 2000-03-01

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STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
DECEMBER 31, 1999

[PHOTO OF BONDS]

STEIN ROE FIXED INCOME FUNDS

TAXABLE BOND FUNDS

INTERMEDIATE BOND FUND
INCOME FUND
HIGH YIELD FUND

LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENT

<PAGE>

CONTENTS
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FROM THE PRESIDENT................................................ 1

Steve Gibson's thoughts on the markets and investing

QUESTIONS & ANSWERS

Interview with the portfolio manager and
a summary of investment activity

STEIN ROE INTERMEDIATE BOND FUND............................... 5
STEIN ROE INCOME FUND.......................................... 9
STEIN ROE HIGH YIELD FUND...................................... 13

PORTFOLIO OF INVESTMENTS.......................................... 18

A complete list of investments with market values

FINANCIAL STATEMENTS.............................................. 32

Statements of assets and liabilities, operations
and changes in net assets

NOTES TO FINANCIAL STATEMENTS..................................... 42

FINANCIAL HIGHLIGHTS.............................................. 47

Selected per-share data

Must be preceded or accompanied by a prospectus.

<PAGE>

FROM THE PRESIDENT
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TO OUR SHAREHOLDERS

On November 1, 1999, Tom Butch resigned as president of Stein Roe Mutual Funds.
I would like to take this opportunity to wish him well. As the new president, I
am pleased to present the semiannual report for the Stein Roe taxable bond funds
- -- Stein Roe Intermediate Bond Fund, Stein Roe Income Fund and Stein Roe High
Yield Fund -- for the period ended December 31, 1999.
In the past six months, most bonds turned in disappointing returns. Factors
that affected the bond market were inflation worries, rising interest rates and
Y2K concerns. Throughout the period, strong U.S. economic growth, coupled with
improving conditions in Japan, Europe and the emerging markets, prompted the
Federal Reserve to raise interest rates in preemptive strikes against potential
inflation. In response to rising rates, yields on Treasury bonds, which move in
the opposite direction of their price, climbed to 6.47% by year end.
Despite interest rate concerns, a few factors were at work supporting the
corporate bond market. Strong corporate earnings and an unraveling of investors'
flight to higher-quality Treasury securities allowed corporate bonds to post
relatively strong performance in the final months of the year. Overseas,
European bonds increasingly strained under the weight of growing interest rate
fears as economic conditions across the continent improved. In contrast,
emerging market bonds improved as conditions in those regions stabilized and
investor sentiment turned more favorable.
On the pages that follow, each Fund's portfolio manager reviews the events
that affected the Fund's performance during the period. As always, we thank you
for choosing one of Stein Roe's mutual funds and for giving us the opportunity
to serve your investment needs.

Respectfully,

/s/ Stephen E. Gibson
Stephen E. Gibson
President
February 11, 2000

Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.

<PAGE>

FUND PERFORMANCE
- --------------------------------------------------------------------------------
SIX-MONTH CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURNS
Periods Ended December 31, 1999

6 MONTHS 1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
STEIN ROE INTERMEDIATE BOND FUND 1.00% 1.27% 7.54% 7.34%
Lehman Intermediate Government/
Corporate Bond Index 0.98% 0.39% 7.10% 7.26%
Lipper Intermediate Investment
Grade Debt Fund Average (Peer Group) 0.30% -1.31% 6.79% 7.09%
Number of Funds in Peer Group 291 279 145 33

STEIN ROE INCOME FUND 1.32% 1.23% 7.69% 7.91%
Lehman Intermediate Corporate
Bond Index 0.97% 0.16% 7.77% 7.89%
Lipper Corporate
Debt Fund Average (Peer Group) 0.13% -1.68% 7.67% 7.98%
Number of Funds in Peer Group 138 132 49 19

6 MONTHS 1 YEAR LIFETIME1
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STEIN ROE HIGH YIELD FUND 2.35% 8.11% 9.74%
Merrill Lynch High Yield Master Index II 0.02% 2.51% 6.02%
Lipper High Current Yield Fund
Average (Peer Group) 0.93% 4.53% 5.40%
Number of Funds in Peer Group 352 339 173
- --------------------------------------------------------------------------------

1 Stein Roe High Yield Fund commenced operations on 11/1/96. Index and peer
group comparisons are from 10/31/96.

2 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 1.00% was in effect for Stein Roe High Yield Fund for
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. 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. Source of data: Lipper,
Inc., a monitor of mutual fund performance; Bloomberg; Liberty Funds
Distributor, Inc.

3 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.

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INVESTMENT COMPARISONS
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GROWTH of a $10,000 INVESTMENT December 31, 1989 through December 31, 1999

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<TABLE>
<CAPTION>
STEIN ROE INTERMEDIATE BOND FUND
Lehman Brothers Intermediate Government/ Lipper Intermediate Investment Grade
Intermediate Bond Fund Corporate Bond Index Debt Fund Average (33 Funds)
<S> <C> <C> <C>
12/31/89 10000 10000 10000
12/31/90 10705 10585 10916
12/31/91 12308 12323 12512
12/31/92 13255 13256 13409
12/31/93 14472 14648 14588
12/31/94 14100 14131 14306
12/31/95 16473 16530 16499
12/31/96 17224 17046 17167
12/31/97 18826 18529 18519
12/31/98 20035 19902 20082
12/31/99 20314 19641 20160

</TABLE>

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STEIN ROE INCOME FUND
<TABLE>
<CAPTION>

Lehman Brothers Intermediate Lipper Corporate BBB Rated
Income Fund Corporate Bond Index Debt Fund Average (19 Funds)
<S> <C> <C> <C>
12/31/89 10000 10000 10000
12/31/90 10605 10443 10764
12/31/91 12425 12424 12552
12/31/92 13559 13565 13581
12/31/93 15376 15468 15093
12/31/94 14784 14666 14691
12/31/95 17700 17749 17483
12/31/96 18560 18527 18175
12/31/97 20338 20431 19694
12/31/98 21151 21674 21327
12/31/99 21413 21309 21361

</TABLE>

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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. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. Each illustration above assumes a $10,000
investment on December 31, 1989 and each index 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. Source of data: Lipper,
Inc., a monitor of mutual fund performance; Bloomberg and Liberty Funds
Distributor, Inc.
<PAGE>

INVESTMENT COMPARISON
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GROWTH of a $10,000 INVESTMENT November 1, 1996 to December 31, 1999

- -------------------------------------------------------------------------------

STEIN ROE HIGH YIELD FUND

Merrill Lynch High Lipper High Current Yield
High Yield Fund Yield Master II Index Fund Average (177 Funds)

11/30/96 10000 10000 10000
12/31/96 10192 10123 10077
3/31/97 10342 10199 10182
6/30/97 11002 10743 10666
9/30/97 11565 11316 11085
12/31/97 11808 11474 11371
3/31/98 12552 11967 11687
6/30/98 12585 12014 11884
9/30/98 11781 11133 11458
12/31/98 12316 11452 11786
3/31/99 12944 11777 11914
6/30/99 13022 11857 11994
9/30/99 12784 11674 11844
12/31/99 13319 11968 11970

QUESTIONS & ANSWERS
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AN INTERVIEW WITH MICHAEL KENNEDY, PORTFOLIO MANAGER OF STEIN ROE
INTERMEDIATE BOND FUND, STEIN ROE ADVISOR INTERMEDIATE BOND FUND
AND SR&F INTERMEDIATE BOND PORTFOLIO

FUND DATA
INVESTMENT OBJECTIVE:

Seeks high current income consistent with capital preservation by investing
primarily in a diversified portfolio of marketable debt securities. The
dollar-weighted average life of its portfolio is expected to be between three
and 10 years.

FUND INCEPTION:

Dec. 5, 1978

Net Assets:

$401.0 million

Photo of: Mike Kennedy

Q: HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999?
KENNEDY: Stein Roe Intermediate Bond Fund generated a return of 1.00%, which was
in line with the Lehman Intermediate Government/Corporate Bond Index return of
0.98%.

Q: A LARGE PART OF YOUR STRATEGY IN RECENT YEARS HAS BEEN TO SHIFT ASSETS FROM
CORPORATE BONDS TO TREASURY BONDS AND VICE VERSA BASED ON YOUR OUTLOOK FOR EACH
MARKET. CAN YOU TELL US WHERE YOU SHIFTED ASSETS DURING THE PERIOD?

KENNEDY: Corporate securities gathered a lot of our attention during the period.
At the end of the six months, nearly 73% of the Portfolio's assets were
dedicated to this asset class. We did boost our allocation to Treasury bonds for
a short time during the beginning of the period as potential new issue corporate
bond supply made corporate bonds less attractive.
Investors feared that any company looking to issue debt in the near future
would issue before the end of the year to avoid any potential problems related
to Y2K. Toward the end of September, it became clear the market had grossly
overestimated corporate bond supply and the yields on corporate bonds had risen
intensely. Therefore, we moved the majority of Treasury bonds back to corporate
bonds, ending the period with just 2.6% of assets in Treasury securities. This
shift worked well for the Portfolio as corporate bonds outperformed Treasury
bonds from October through December.

Q: DID YOU ADJUST THE PORTFOLIO'S OVERALL CREDIT QUALITY?
KENNEDY: We shifted the Portfolio's overall quality lower as recovery in
international economies led to an unwinding of the flight to quality we saw last
year. By the end of the period, we held a larger-than normal position in
investment-grade bonds rated BBB as

<PAGE>

QUESTIONS & ANSWERS CONTINUED
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well as high-yield bonds. This benefited performance as lower-rated holdings
performed the best.

Q: DID YOU CHANGE THE PORTFOLIO'S DURATION AS INTEREST RATES INCREASED?
KENNEDY: Yes. Relative to our peer group we were maintaining a shorter duration
as interest rates were increasing. Toward the end of the period we believed that
most of the increases in rates were behind us, and we will begin to hold a more
normal duration, comparable to our peer group. Short-term rates may rise further
in the months ahead but we do not believe that will have a big impact on
long-term interest rates.

Q: THE PORTFOLIO'S POSITION IN MORTGAGE-BACKED SECURITIES INCREASED DURING THE
PERIOD TO 21.6%. HOW DID THIS SECTOR PERFORM AND WHAT MOTIVATED YOU TO INCREASE
YOUR POSITION?
KENNEDY: Mortgage-backed securities performed exceptionally well in the second
quarter of this fiscal year - from October through December. For us, it's
usually a matter of what sectors are priced better in the market. Earlier in the
year, Treasury securities were priced a little better, and before that it was
corporate bonds. By the end of the period, we found the valuations of
mortgage-backed securi ties to be attractive, and increased our holdings to what
we consider a more normal position.

Q: WHAT INDUSTRIES OR INDIVIDUAL ISSUES DID YOU FIND NOTEWORTHY DURING THE
PERIOD?
KENNEDY: We continue to pay a lot of attention to bonds in the energy sector.
The increase in the price of oil has continued to support the performance of
this group, and at the end of the period, we held about 9.9% of the Portfolio's
investments in energy. The insurance industry got a lot of our attention in the
latter part of the six-month period. After a strong rally, we sold many of our
insurance company holdings. However, we continue to own Royal & Sun Alliance
from the United Kingdom (1.5% of net assets). We also purchased Lockheed-Martin
(1.6% of net assets), a beaten-down aerospace and defense company that we
believe is turning its operations around. This bond has performed well for the
Fund since we purchased it in November.

Q: WHAT WAS YOUR INTERNATIONAL POSITION THROUGHOUT THE PERIOD?

KENNEDY: Twenty-five percent of the Portfolio's holdings was in
dollar-denominated non-U.S., or Yankee bonds, at year-end. Recovery in
international economies, particularly Asia and Latin America, supported
performance for the group during the period. We think this area will continue to
perform well because the outlook for the global economy is positive. The largest
of

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------
our non-U.S. holdings were in United Kingdom bonds during the period. The
rest of our allocation is a diversified mix of Asia, Europe and Latin America.
In Latin America we've been able to buy bonds backed by oil. This way we're not
directly exposed to that country's economy and politics, as the oil is a strong
asset backing up the bond.

Q: WHAT MARKET EVENTS WILL AFFECT THE FUND IN COMING MONTHS?
KENNEDY: Sector allocation will continue to be important. With a strong global
economy and good earnings growth, we expect corporate bonds will do well in the
coming months, and we plan to invest the majority of the Portfolio's assets in
that area.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU LESS SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. Portfolio holdings are as of 12/31/99 and are subject to
change.

Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Foreign investments involve
market, political, accounting and currency risks not associated with other
investments. The Lehman Brothers Intermediate Government/Corporate Bond Index is
an unmanaged group of bonds that vary in quality; it is not available for direct
investment. Source of Lipper data: Lipper, Inc.

<PAGE>

PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SR&F INTERMEDIATE BOND PORTFOLIO
SECURITIES TYPE BREAKDOWN

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- --------------------------------------------------------------------------------
Corporate Bonds 72.5% 68.7%
Mortgage-Backed Securities 19.5 18.2
Asset-Backed Securities 3.7 2.4
U.S. Treasuries Securities 2.6 10.3
Cash and Equivalents 1.7 0.4
- --------------------------------------------------------------------------------
Total Investments 100.0% 100.0%

PORTFOLIO STATISTICS

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- -------------------------------------------------------------------------------
Adjusted Duration 4.9 years 4.9 years
Average Weighted Life 9.5 years 8.2 years
Average Weighted Coupon 7.6% 7.2%

- -------------------------------------------------------------------------------

PIE CHART:
MATURITY
As of December 31, 1999 As of June 30, 1999
Greater than 20 Years 11.9% 8.8%
10-20 Years 9.6% 9.7%
5-10 Years 38.4% 47.3%
1-5 Years 39.0% 33.8%
Less than 1 Year 1.1% 0.4%

- -------------------------------------------------------------------------------

PIE CHART:
QUALITY
As of December 31, 1999 As of June 30, 1999
BB and Below 13.9% 13.4%
BBB 25.6% 24.0%
A 27.8% 26.0%
AA 7.7% 8.1%
AAA 25.0% 28.5%

Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon the Advisor's defined criteria as used in the investment process.

<PAGE>

QUESTIONS & ANSWERS
- --------------------------------------------------------------------------------
AN INTERVIEW WITH STEVE LOCKMAN, PORTFOLIO MANAGER OF STEIN ROE INCOME FUND AND
SR&F INCOME PORTFOLIO

FUND DATA
INVESTMENT OBJECTIVE:

Seeks high current income by investing principally in medium-quality debt
securities. The Fund also may invest in higher-quality securities and, to a
lesser extent, lower-quality securities which may involve greater credit and
other risks.

FUND INCEPTION:

March 5, 1986

NET ASSETS:

$249.8 million

Photo of: Steve Lockman

Q: HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1999?
LOCKMAN: Stein Roe Income Fund produced a return of 1.32%, beating the Lehman
Intermediate Corporate Bond Index return of 0.97%.

Q: IN WHAT WAS AN EXTREMELY DIFFICULT PERIOD FOR BONDS AS TECHNOLOGY STOCKS DREW
INVESTOR INTEREST, HOW DID YOU MANAGE TO FARE BETTER THAN YOUR PEERS?
LOCKMAN: A key factor in the Portfolio's strong performance was a below-average
duration - or lower sensitivity to changes in interest rates - as interest rates
rose. This allowed us to take advantage of issues with better rates when they
came to the market. We continued to focus on investments in the BBB- and
lower-rated areas of the market, and improvement in worldwide economies helped
shift investor focus from more-conservative Treasury investments into this area.
Although the number of bonds whose credit ratings were downgraded exceeded those
that were upgraded in these credit ranges, the foresight of our credit and
trading staff kept us abreast of declining situations and ahead of our peer
group. And, although the booming stock market shadowed bond market interest,
strong corporate earnings helped the spreads in the corporate market improve
over earlier in 1999.

Q: WHERE DID YOU FIND VALUE IN LOWER-RATED BONDS AS YOU SHIFTED THE PORTFOLIO'S
OVERALL QUALITY LOWER?
LOCKMAN: The high-yield market faced the challenges of low demand and thus a
dramatic decrease in supply as companies faced the inability to place debt.
There was also an increase in the number of defaults. These factors dramatically
restricted liquidity and the market for certain sales and purchases. We

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------
focused the purchases we made on liquid issuers with improving credit
situations. This strategy draws us to companies with higher market
capitalizations, and these companies performed better than smaller companies
during the period. A number of the Portfolio's high-yield bond holdings were
upgraded or tendered for such as CSC Holdings (1.4% of net assets), a cable
operator, CalEnergy, a leading energy production company, Premier Parks (0.3% of
net assets), owner of amusement parks, and Export-Import Bank of Korea (1.1% of
net assets). We sold CalEnergy because it reached an attractive relative value
level, but continued to hold the other bonds mentioned.

Q: WHAT OTHER SHIFTS DID YOU MAKE TO THE PORTFOLIO'S HOLDINGS DURING THE PERIOD?
LOCKMAN: We purchased bonds of Husky Oil (1.1% of net assets), and otherwise
increased our allocation to oil and gas companies as prices of these commodities
increased and our outlook for the sector improved. We increased our exposure to
banks, taking advantage of the turnaround in Europe as many European countries
become one "financial nation" with a single currency. Mergers and deregulation
supported growth in that market. KBC Bank (1.4% of net assets), a Belgian bank,
was one such addition to holdings. The bond was priced well, and has
subsequently provided positive performance since we added it to the Portfolio.
We also increased holdings in the retail sector as low unemployment continued to
provide support. We added to our holdings in communications company
Rogers-Cantel (1.3% of net assets) after management improved the Company's
underlying business and reduced their debt. We increased the Portfolio's
allocation to transportation services such as airlines, cargo, and consumer
transport. We bought Coach USA, a bus touring company. The company was acquired
by Stagecoach during the period and we added to the position (1.6% of net
assets) because the price was good and we believed in the profitability of the
combined outfit. We continue to own real estate investment trust bonds and
Yankee securities. Although as groups these bonds did provide the best returns,
our holdings provided extra yield for the Portfolio when interest rates
increased.

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------
Q: WHAT SECTORS DID YOU SELL OR AVOID?
LOCKMAN: We reduced our holdings in textile and apparel due to the challenge
from tremendous foreign competition and merger complications at several
companies. We sold a few electric utility bonds because they have historically
underperformed in rising rate environments. At the end of the period we held no
Treasury securities based on our fear of rising interest rates. Our cash
position, which qualifies as a not rated holding was somewhat higher at year end
for the same reason, bringing our percentage of holdings in the CCC/not rated
category to 6.7% from 5.5% at the start of the six months. And, although cable
is still an industry that we favor, our holdings were down at the end of the
period after we sold some issues that appreciated to fairly rich levels. We had
difficulty selling some issues due to minimal liquidity, but consistent with the
Fund's history, were able to avoid any default situations.

Q: WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE FISCAL YEAR?
LOCKMAN: The market's action in the second half of the year remains contingent
upon the strength of the corporate economy. Global consumer and capital spending
will be among the key factors to watch. Although we don't expect market-shaking
interest rate increases, we believe efforts to slow the domestic economy will
increase. In anticipation of near-term interest rate increases at many central
banks, we expect to maintain the Portfolio's duration at slightly below normal
to allow for better purchasing ability if more attractive issues hit the market.
Then, if the market levels off and serious threats of inflation remain benign,
we anticipate moving duration to a more normal position of 5.5 or above. We
expect further positive global economic signs in 2000, which would continue to
support performance in investment grade bonds compared to Treasury securities.
We plan to focus purchases in the normal to below-average credit quality range,
while, as always, focusing on lower-volatility industries. And our credit staff
will continue to strive to uncover ideal investment opportunities before the
rest of the market.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return includes changes in share price and reinvestment of income and capital
gains distributions. Portfolio holdings are as of 12/31/99 and are subject to
change.

Investing in high yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Foreign investments involve
market, political, accounting and currency risks not associated with other
investments. The Lehman Brothers Intermediate Corporate Bond Index is an
unmanaged group of bonds that vary in quality; it is not available for direct
investment. Source of Lipper data: Lipper, Inc.

<PAGE>

PORTFOLIO HIGHLIGHTS
- -------------------------------------------------------------------------------
SR&F INCOME PORTFOLIO
SECURITIES TYPE BREAKDOWN

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- -------------------------------------------------------------------------------

Financial 28.5% 33.0%
Industrial 27.3 20.5
Media/Communications 10.5 13.7
Consumer Noncyclical 7.2 11.8
Foreign Sovereign 6.9 0.0
Utilities 6.2 7.6
Energy 6.2 6.4
Consumer Cyclical 5.8 5.5
Technology 1.4 1.5
- -------------------------------------------------------------------------------
Total Investments 100.0% 100.0%

PORTFOLIO STATISTICS

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- -------------------------------------------------------------------------------
Adjusted Duration 5.5 years 5.6 years
Average Weighted Maturity 10.4 years 10.4 years
Average Weighted Coupon 8.0% 8.0%

- -------------------------------------------------------------------------------
PIE CHART:
MATURITY
As of December 31, 1999 As of June 30, 1999

Greater than 20 Years 15.2% 11.9%
10-20 Years 12.7% 12.3%
5-10 Years 41.3% 48.0%
1-5 Years 26.5% 26.9%
Less than 1 Year 4.3% 0.9%

- -------------------------------------------------------------------------------

PIE CHART:
QUALITY
As of December 31, 1999 As of June 30, 1999
CCC/Not Rated* 6.7% 5.5%
BB and Below 29.2% 27.5%
BBB 36.6% 37.1%
A 18.4% 18.7%
AAA & AA 9.2% 11.2%

*Includes Cash

<PAGE>

FUND DATA

INVESTMENT OBJECTIVE:

Seeks high current income and capital appreciation by investing principally
in high yield, high-risk, medium and lower-quality debt securities.

FUND INCEPTION:

November 1, 1996

NET ASSETS:

$37.5 million

Q: DISCUSS THE FUND'S RETURN FOR THE PERIOD.
LOCKMAN: For the six-month period ended December 31, 1999, Stein Roe High Yield
Fund continued to exceed its peers, returning 2.35%, while the Merrill Lynch
High Yield Master II Index showed a mere 0.02% increase.

Q: WHAT STRATEGIES KEPT YOU AHEAD IN SUCH A DIFFICULT HIGH-YIELD BOND MARKET?
LOCKMAN: Our strategy starts with research. Primarily we look for value and
quality in the companies we buy. Digging deeper, we look at the entire
infrastructure of the industry and what could affect the issue over time. With
this strategy, we strive to uncover high value purchases, and don't focus on
"hot" or potentially volatile ideas that other investors may be chasing. We also
"rebuy" our Portfolio every day. By this I mean that every day we look at our
Portfolio and confirm or deny our confidence on the issues we hold. I stress to
my analysts that it's better to pay attention to what we own rather than don't
own and watch for declines in the issues we favor. This is how we have
consistently avoided defaults and maintained high-quality holdings. As an
example, we purchased Venetian Hotel in Las Vegas, ahead of a strong demand for
the issue, after our analyst assessed its potential to bond investors.
Upon returning to the facility for a pre-opening viewing, our analyst sensed
shortcomings and recommended a sell. The issue performed well while we owned it,
but more important is the fact that our research helped us detect the right time
to buy and sell.
I should note that out of the Fund's return of 2.35% for the six months ended
December 31, 1999, 0.45% (or 19.1% of the Fund's return for the period) was
attributable to short-term investments in initial public offerings of common
stocks of companies that had issued bonds purchased by the Portfolio. While the
Fund was able to take advantage of

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------

these opportunities in this period, such investments are not part of the Fund's
principal investment strategy. Because the Fund may not have such opportunities
in the future, returns from such investments should not be considered
sustainable.

Q: WHAT WENT ON IN THE HIGH-YIELD MARKET DURING THE PERIOD?
LOCKMAN: There were an extremely high number of defaults in the market, and low
demand was evidenced by strong mutual fund outflows in the category. Liquidity
dried up and restricted supply, as companies could not find a market to place
their debt. We focused our purchases in companies that had liquidity, primarily
companies with several underwriters and otherwise strong financial backing.

Q: WHAT OTHER REPOSITIONING DID YOU DO DURING THE SIX-MONTH PERIOD?
LOCKMAN: We made adjustments so that the Portfolio was less interest rate
sensitive as interest rates increased. We reduced our holdings in BB-rated bonds
because that category has shown more duration sensitivity and thus was affected
by the higher rates. Zero-coupon bonds outperformed during the period,
especially in the media and telecommunications sector. We held a strong position
during the period, and this contributed to our performance.
We increased our exposure to chemicals when we saw a valley in chemical
prices. We increased our allocation to supermarket bonds, avoiding the poor
performers in that arena. We increased our exposure to the telecommunications
area, focusing, as we do with all purchases, on companies with business plans
that are fully funded. We look for companies that have financial backing, are
not topping out their credit limits, have good management, and dedicated
investors. We were not heavily invested in deep cyclical industries such as
steel, paper, forestry and metals because we do not favor their volatility.
However, these bonds all performed well during the period.

Q: THE MEDIA/TELECOMMUNICATIONS SECTOR CONTINUES TO BE A MAJOR FOCUS FOR THE
PORTFOLIO. CAN YOU TELL US WHY THIS AREA IS SO IMPORTANT?
LOCKMAN: This area is not only vital to the Portfolio, but the entire high-yield
market. Media/telecommunications bonds made up more than 35% of the total
high-yield bond market's issues in 1999, and at the end of the period held more
than 40% of the Portfolio's assets. The sector has tremendous growth potential
as telecommunications services expand throughout the world, shaping the

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------
way people live and do business. The large amount of capital dedicated to the
industry's growth, and merger activity both supported the total return of the
market as a whole. In this sector, we avoided negative performing sectors such
as movie theaters and satellite companies. Although satellite companies offered
high yield, and much promise in the ability to allow cellular service to
anywhere in the world, their technology was not perfected, and therefore, in our
opinion, was too risky for our lower-volatility philosophy.
Several telecommunications purchases were in European companies. The European
telecommunications and wireless markets have abundant growth potential as the
previously government-run utilities are being sold off. This allowed for
competition in European telecommunications for the first time in history. Amid
this booming growth is the underlying element of a need for infrastructure and
bandwidth in order for service to reach expanded markets. For that reason, we
focus on companies that have that foresight and whether on their own, or through
alliances, are helping the entire industry expand. Viatel (1.1% of net assets),
for example, provides Internet links and fiber networks in Europe. Other
holdings that support the industry are Level 3 Communications (0.6% of net
assets), and PSInet (1.6% of net assets). The media/ telecommunications sector
is so important that one of our analysts is dedicated solely to that sector.
This is vital to how well we know the companies and the industry.

Q: WHAT MOTIVATED YOUR ALLOCATION TO THE INVESTMENT-GRADE BOND SECTOR THIS
PERIOD?
LOCKMAN: We have the ability to make purchases in investment-grade bonds, and we
take advantage of this on occasions when we find attractive purchases. We bought
a few investment-grade bonds that displayed unique relative value while interest
rates increased.

Q: WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE FISCAL YEAR?
LOCKMAN: What will transpire in the high-yield market for the remainder of the
year is dependent on domestic and worldwide economies. We anticipate interest
rate increases and will monitor their affects on margin pressures and corporate
cash flows. Further recovery out of Asia and Latin America would support
worldwide economic recovery through the remainder of the fiscal year. The
companies that will most likely be in favor are those that have the resources to
generate internal

<PAGE>

QUESTIONS & ANSWERS CONTINUED
- --------------------------------------------------------------------------------
financing, those that can retain quality employees, and those that will realize
productivity gains from improvements in the worldwide economy. Focusing on these
companies may lead us to upgrade the quality of the bonds we own. We plan to
maintain a cautious position with a moderate amount of cash until we have
confirmation of corporate earnings growth and low inflation.
The high-yield market will need to experience a positive flow of mutual fund
investments to turn around. If there is demand, the new issue calendar should
provide a strong amount of supply to the market. We also believe the default
rate may have reached a peak.
Now that the media/tele com munications sector has done so well, we might
lower our weighting there and dedicate more assets to coupon bonds. Zero coupons
have had a strong run and higher interest rates may prevent them from narrowing
versus coupon bonds going forward.

Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Foreign investments involve
market, political, accounting and currency risks not associated with other
investments. The Merrill Lynch High Yield Master II Index is an unmanaged group
of bonds that vary in quality; it is not available for direct investment. Source
of Lipper data: Lipper, Inc.

<PAGE>

PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SR&F HIGH YIELD PORTFOLIO

SECURITIES TYPE BREAKDOWN

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- --------------------------------------------------------------------------------

Media/Communications 41.2% 33.2%
Industrial 25.2 26.6
Consumer Noncyclical 13.6 16.9
Consumer Cyclical 11.2 16.9
Energy 4.6 1.8
Financial 2.4 1.0
Technology 1.8 3.6
- --------------------------------------------------------------------------------
Total Investments 100.0% 100.0%
PORTFOLIO STATISTICS

PORTFOLIO PORTFOLIO
DECEMBER 31, 1999 JUNE 30, 1999
- --------------------------------------------------------------------------------
Adjusted Duration 5.4 years 5.6 years
Average Weighted Maturity 8.3 years 10.4 years
Average Weighted Coupon 8.8% 8.0%

- --------------------------------------------------------------------------------
PIE CHART:
MATURITY
As of December 31, 1999 As of June 30, 1999

Greater than 10 Years 5.1% 4.4%
5-10 Years 87.2% 89.5%
1-5 Years 4.4% 3.5%
Less than 1 Year 3.3% 2.6%

- --------------------------------------------------------------------------------
PIE CHART:
QUALITY
As of December 31, 1999 As of June 30, 1999
CCC/Not Rated* 9.6% 5.5%
BB 15.1% 27.5%
BBB 6.6% 37.1%
B 18.4% 18.7%
AAA & AA 9.2% 11.2%

*Includes Cash

<PAGE>

SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1999
(All amounts in thousands)
(Unaudited)

LONG-TERM OBLIGATIONS (98.3%) PAR VALUE
- --------------------------------------------------------------------------------

U.S. GOVERNMENT OBLIGATIONS (2.6%)
U.S. Treasury Notes
6.000% 8/15/09.................................... $ 1,500 $ 1,453
6.250% 2/15/03.................................... 9,000 8,973
--------
10,426
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (7.3%)
FHLMC Gold
12.000% 7/1/20.................................... 1,610 1,795
FNMA
8.500% 4/1/01..................................... 111 114
6.000% 4/1/09..................................... 7,735 7,433
6.000% 1/1/14..................................... 5,878 5,580
6.000% 1/1/24..................................... 1,954 1,805
6.000% 3/1/24..................................... 722 667
6.500% 10/1/28.................................... 6,641 6,257
FNMA Remic Trusts
9.250% 3/25/18 Series 1988-4 Class Z.............. 1,508 1,573
GNMA
8.000% 2/15/08.................................... 2,350 2,390
9.000% 6/15/16.................................... 60 63
9.000% 10/15/16................................... 122 129
6.625% 7/20/25 ARM................................ 1,421 1,434
--------
29,240
AEROSPACE (3.0%)
Lockheed Martin...................................... 6,500 6,503
Air 2 US 1999-A 8.027% 10/01/19...................... 5,450 5,412
--------
11,915
AIRLINES (2.2%)
United Airlines Series 1991-A1 9.200% 3/22/08........ 2,937 3,078
Delta Airlines 8.300% 12/15/29....................... 6,000 5,811
--------
8,889
ASSET-BACKED OBLIGATIONS (3.7%)
First Boston Mortgage Securities Series 1993-H1 Class A-IO
(Effective Yield 12.820%) 9/28/13................. 5,225 26
Green Tree Home Improvement Loan Trust
Series 1994-A Class A
7.050% 3/15/14.................................... 807 797
Green Tree Recreational, Equipment & Consumer Trust
Series 1998-C Class A6 6.700% 2/15/14............. 4,500 4,352
JPMC 199-C8 A2 7/15/31
7.400% 7/15/31.................................... 10,000 9,841
--------
15,016

<PAGE>

SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
CONTINUED
PAR VALUE
- --------------------------------------------------------------------------------

AUTOMOTIVE (1.2%)
Federal-Mogul 7.500% 7/1/04.......................... $ 5,000 $ 4,709

BANKING (12.8%)
Asset Securitizatiion Corp. 6.750% 2/14/41........... 6,500 6,221
Barclays Bank PLC. 7.400% 12/15/09................... 6,000 5,882
Citicorp 8.040% 12/15/19............................. 9,000 8,841
Countrywide Home 6.850% 6/15/04...................... 7,500 7,338
Deutsche Bank 7.872% 12/29/49 (a).................... 4,500 4,224
Korea Development Bank 7.150% 4/22/04................ 3,000 2,993
Merita Bank Limited 7.150% 9/11/49................... 4,500 4,381
Republic of Argentina (zero coupon) 10/15/03......... 7,000 4,585
Sanwa Bank LTD. 8.350% 7/15/29....................... 4,100 4,115
Sovereign Bank 10.500% 11/15/06...................... 2,750 2,797
--------
51,377
BUILDING AND CONSTRUCTION (1.5%)
Owens Corning 7.000% 3/15/09......................... 4,750 4,152
PYCSA Panama 10.280% 12/15/12 (a).................... 3,182 1,909
--------
6,061
ENERGY SERVICES (0.9%)
AES Eastern Energy 9.670% 1/2/29 (a)................. 4,000 3,738

FINANCIAL (13.9%)
Amvescap 6.600% 5/15/05 (a).......................... 5,000 4,721
Bistro Trust 9.500% 12/31/02 (a)..................... 3,000 2,813
Dana Credit Corp. 7.250% 12/16/02.................... 5,000 4,980
Duke Capital Corp. 7.25% 10/01/04.................... 4,000 3,982
Cigna CBO Series 1996-1 Class A-2 6.460%11/15/08 (a). 5,000 5,013
Corporacion Andina de Fomento (Yankee Issue) 7.100% 2/1/03 6,000 5,897
First Industrial L.P.
7.500% 12/1/17.................................... 6,000 5,023
7.600% 7/15/28.................................... 1,250 1,013
Jackson National Life European 9.060% 10/3/01........ 1,000 1,006
KBC Bank Fund Trust 3, 9.860% 11/29/04............... 5,500 5,641
Stagecoach Holdings 8.625 % 11/15/09................. 6,000 5,972
Sunamerica Euro 5.750 2/16/09........................ 4,750 4,194
TPSA Finance BV 7.750% 12/10/08...................... 6,000 5,600
--------
55,855
FOREIGN SOVEREIGN REGIONAL BONDS (1.6%)
Republic of Philippines 7.125% 1/15/09............... 3,000 2,957
State of Qatar 9.500% 5/21/09 (a).................... 3,500 3,678
--------
6,635
HEALTH SERVICE AND EQUIPMENT (1.9%)
Tenet Healthcare 7.875% 1/15/03...................... 4,000 3,920
Lilly Del Mar 7.170% 8/01/29......................... 3,750 3,632
--------
7,552

<PAGE>

HOTELS AND ENTERTAINMENT (1.9%)
Prime Hospitality 9.250% 1/15/06..................... $ 2,750 $ 2,778
Marriott International 7.875% 9/15/09................ 5,000 4,927
--------
7,705
INSURANCE (5.2%)
Florida Windstorm 7.125% 2/25/19 (a)................. 2,375 2,185
Prudential Insurance 7.650% 7/1/07 (a)............... 7,250 7,191
Royal and Sun Alliance 8.950% 10/15/29............... 6,000 5,844
Zurich Capital Trust 8.376% 6/1/37 (a)............... 6,000 5,725
--------
20,945
MANUFACTURING (5.4%)
Abitibi-Consolidated 8.500% 8/01/29.................. 1,500 1,435
Buhrmann US Inc. 12.250% 11/01/09.................... 3,000 3,120
PDVSA Finance 8.750% 2/15/04 (a)..................... 3,500 3,386
PDVSA Finance Limited Series 1998-1D 7.400% 8/15/16 (a) 2,500 1,846
Tyco International Group (Yankee Issue) 6.875% 9/05/02 5,500 5,401
USX Corp 7.200% 2/15/04.............................. 6,800 6,710
--------
21,898
MINING AND AGRICULTURE (2.6%)
Freeport-McMoRan Copper & Gold 7.500% 11/15/06....... 2,700 1,890
PT Alatief Freeport (Yankee Issue) 9.750% 4/15/01.... 3,000 2,655
Yosemite Securities Trust 8.250% 11/15/04............ 6,000 5,915
--------
10,460
MORTGAGE-BACKED SECURITIES (10.6%)
American Mortgage Trust Series 1993-3 Class 3B
8.190% 9/27/22.................................... 1,464 1,420
Diversified Reit Trust Series 1999-1A Class C
6.780% 3/18/11 (a)................................ 5,000 4,480
Kidder Peabody Acceptance Series 1994-C3 Class A2
8.500% 4/1/07..................................... 3,239 3,363
Lehman Brothers Commercial Conduit Mortgage Trust
6.210% 10/15/08................................... 10,000 9,150
Mellon Residential Funding Series 1998-TBC1 Class A3
5.610% 10/25/28................................... 4,500 4,312
Merrill Lynch Mortgage Investors Series 1995-C3 Class A3
7.060% 12/26/25................................... 4,000 3,918
Merrill Lynch Trust Series 20 Class D 8.000% 12/20/18 1,275 1,273
Nomura Asset Securities Series 1996-MD5 Class A-1B
7.120% 4/13/36.................................... 3,000 2,900
Option One Mortgage Securities Series 1999-B Class CTFS
9.660% 3/26/29 (a)................................ 3,714 3,655
PNC Mortgage Securities Series 1996-1 Class A
7.500% 6/25/26.................................... 3,357 3,241
Structured Assets Securities
Series 1996-CFL Class C
6.525% 2/25/28.................................. 3,684 3,656
Series 1996-CFL Class X1-IO
Zero Coupon (Yield to Maturity 9.806%) 2/25/28.. 26,007 1,342
--------
42,710

<PAGE>

NATURAL GAS AND OIL (5.4%)
Baker Hughes 6.875% 1/15/29 (a)...................... $ 6,250 $ 5,465
Gulf Canada Resources (Yankee Issue) 8.250% 3/15/17.. 3,000 2,640
Noble Drilling 7.500% 3/15/19........................ 5,310 4,990
Petroleos Mexicanos 9.657% 7/15/05................... 4,000 3,900
YPF Sociedad Anonima (Yankee Issue)
7.500% 10/26/02.................................. 2,568 2,532
10.000% 11/02/28.................................. 2,000 2,194
--------
21,721
PRINTING AND PUBLISHING (0.5%)
World Color Press 7.750% 2/15/09 (a)................. 2,000 1,877

REAL ESTATE INVESTMENT TRUST (2.9%)
Federal Realty Investment Trust
6.625% 12/1/05.................................... 2,750 2,444
7.480% 8/15/26.................................... 3,500 3,138
Meditrust 7.820% 9/10/26............................. 4,200 2,961
Storage USA 7.125% 11/1/03........................... 3,250 3,092
--------
11,635
RETAIL (2.6%)
Tommy Hilfiger USA 6.850% 6/1/08..................... 3,000 2,691
Price/Costco 7.125% 6/15/05.......................... 5,250 5,166
Kmart Corp. 8.375% 12/01/04.......................... 2,500 2,472
--------
10,329
SAVINGS AND LOANS (0.8%)
GS Escrow 7.000% 8/1/03 (a).......................... 3,000 2,766

TELECOMMUNICATIONS (2.6%)
CSC Holdings 7.875% 2/15/18.......................... 4,250 4,046
Frontier Corp. 7.250% 5/15/04........................ 7,000 6,457
--------
10,503
TRANSPORTATION (0.7%)
Federal Express Pass-Through Certificates
Series A1 7.530% 9/23/06........................... 3,150 3,109

UTILITIES (4.5%)
Israel Electric Corp. LTD. 8.250% 10/15/09........... 3,250 3,222
Edison International Inc. 6.875% 9/15/04............. 8,875 8,710
Oglethorpe Power 6.974% 6/30/11 (a).................. 3,685 3,497
Utilicorp United Inc. 7.625 11/15/09................. 3,000 2,805
--------
18,234
TOTAL LONG-TERM OBLIGATIONS
(cost of $412,084)(b)............................. 395,305
--------
- --------------------------------------------------------------------------------

<PAGE>

SR&F INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
CONTINUED
VALUE
- --------------------------------------------------------------------------------

OTHER ASSETS, LESS LIABILITIES (1.7%)................ $ 7,024
--------
NET ASSETS (100.0%).................................. $402,329
========
- --------------------------------------------------------------------------------

NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements requirements of the Securities
Act of 1933. These securities generally are issued to qualified
institutional buyers, such such as the Portfolio, and any resale must be in
an exempt transaction, normally to other qualified institutional investors.
At December 31, 1999, the aggregate value of the Portfolio's private
placement securities was $68,169 which represented 15.8% of net assets.
(b) At December 31, 1999, the cost of investments for financial statement and
federal income tax purposes was identical.

The following short futures contracts were open at December 31, 1999:

NUMBER OF UNREALIZED
TYPE CONTRACTS POSITION EXPIRATION GAIN
----------- ---------- ---------- ---------- ----------
U.S. T-Note 15 Short Mar-00 $72

See accompanying Notes to Financial Statements.

<PAGE>

SR&F INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1999
(All amounts in thousands)
(Unaudited)

LONG-TERM OBLIGATIONS (94.9%) PAR VALUE
- --------------------------------------------------------------------------------

AEROSPACE AND MILITARY TECHNOLOGY (4.1%)
Air 2 US 8.027% 10/1/19.............................. $ 2,750 $ 2,731
Derlan Manufacturing (Yankee Issue) 10.000% 1/15/07.. 1,019 1,006
L-3 Communications Series B 10.375% 5/1/07........... 1,500 1,545
Lockheed Martin 8.500% 12/1/29....................... 5,000 5,002
--------
10,284
AIRLINES (2.6%)
American Airlines Pass-Through Certificates
Series 1991-A 9.710% 1/2/07....................... 2,499 2,661
Continental Airlines-Pass Through Certificates
Series CI 7.420% 4/1/07........................... 940 913
Delta Airlines 8.300% 12/15/29....................... 3,000 2,905
--------
6,479
AUTOMOTIVE (0.7%)
Ford Motor 6.375% 2/1/29............................. 2,000 1,681

BANKING (12.6%)
Barclay's Bank PLC 7.400% 12/15/09................... 2,000 1,961
BBV International Finance(Cayman Islands)
(Yankee Issue) 6.875% 10/27/05.................... 4,000 3,927
CitiCorp 8.040% 12/15/19 (a)......................... 4,000 3,929
Deutsche Bank Capital Funding 7.872% 12/29/49 (a).... 3,000 2,816
KBC Bank Fund Trust III 9.860% 11/29/49.............. 3,500 3,590
Merrill Lynch Bank & Trust (Cayman) 8.390% 8/1/01 (a) 3,000 3,050
Sanwa Bank 8.350% 7/15/09............................ 2,600 2,609
Swiss Bank 7.375% 7/15/15............................ 4,000 3,816
Sovereign Bank 10.500% 11/15/06...................... 1,500 1,526
Yosemite Securities Trust I 8.250% 11/15/04.......... 4,500 4,437
--------
31,661
BUILDING AND CONSTRUCTION (3.0%)
Beazer Homes USA 8.875% 4/1/08....................... 2,750 2,775
Building Materials Corp. 7.750% 7/15/05.............. 3,000 2,730
PYCSA Panama 10.280% 12/15/12 (a).................... 3,182 1,909
--------
7,414
BUSINESS SERVICES (2.4%)
Buhrmann US, Inc. 12.250% 11/1/09.................... 3,000 3,120
Iron Mountain 10.125% 10/1/06........................ 2,000 2,035
Nationsrent 10.375% 12/15/08......................... 1,000 978
--------
6,133
CABLE & MEDIA (4.8%)
Century Communications 9.750% 2/15/02................ 1,850 1,878
Continental Cablevision 8.875% 9/15/05............... 3,500 3,717
Rogers Cantel (Yankee Issue) 9.375% 6/1/08........... 3,000 3,150
Time Warner Entertainment 8.875% 10/1/12............. 3,000 3,208
--------
11,953
CONTAINERS (3.1%)
BWAY Series B 10.250% 4/15/07........................ 1,900 1,862
Coca-Cola Bottling Series A 8.560% 2/26/02........... 2,000 2,047
Owens-Illinois 8.100% 5/15/07........................ 4,000 3,820
--------
7,729

<PAGE>

S&F INCOME PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

PAR VALUE
- --------------------------------------------------------------------------------

ELECTRONICS (0.3%)
Ametek, Inc. 7.200% 7/15/2008........................ $ 1,000 $ 888

ENERGY (3.5%)
PDVSA Finance Series 1998-1-D 7.400% 8/15/16......... 2,500 1,846
PDVSA Finance Series 1999-1A 8.750% 2/15/04 (a)...... 2,000 1,935
CMS Energy 8.375% 2/15/03............................ 5,000 4,931
--------
8,712
FINANCIAL (8.3%)
Bistro Trust 1997-2000 9.500% 12/31/02............... 3,000 2,813
Credit Suisse First Boston 7.900% 5/29/49............ 3,500 3,327
GS Escrow Corp. 7.125% 8/1/05........................ 3,000 2,708
Option One 9.660% 03/26/29 (a)....................... 2,744 2,700
Prudential Property INV
6.625% 4/1/09 (a)................................. 3,000 2,712
7.125% 7/1/07..................................... 4,000 3,785
TPSA Finance BV 7.750% 12/10/08 (a).................. 3,000 2,800
--------
20,845
FOOD & BEVERAGE (1.3%)
Panamerica Beverages 7.250% 7/1/09................... 2,000 1,685
Pepsi-Gomex (Yankee Issue) Series B 9.750% 3/30/04... 1,500 1,496
--------
3,181
FOREIGN SOVEREIGN REGIONAL BONDS (5.9%)
Corporacion Andina De Fomento 7.750% 3/1/04.......... 5,500 5,485
Export-Import Bank of Korea 6.375% 2/15/06........... 3,000 2,754
Financiera Energetica Euro 9.375% 6/15/06............ 6,000 2,445
Republic of Panama 7.875% 2/13/02.................... 2,000 1,927
State of Qatar 9.500% 5/21/09 (a).................... 2,000 2,102
--------
14,713
HOSPITALS AND NURSING HOMES (1.1%)
Universal Health Services 8.750% 8/15/05............. 2,800 2,744

HOTELS AND ENTERTAINMENT (5.5%)
Hyatt Equities 7.000% 5/15/02 (a).................... 5,000 4,950
Marriott International 6.875% 11/15/05............... 5,000 4,732
Premier Parks 9.750% 1/15/06......................... 750 767
Prime Hospitality 9.750% 4/1/07...................... 3,500 3,395
--------
13,844
INSURANCE CARRIERS (3.4%)
Florida Windstorm 7.125% 2/25/19 (a)................. 2,000 1,840
Sunamerica Euro 5.750% 2/16/09....................... 3,250 2,870
Royal & Sun Alliance Insurance 8.950% 10/15/29 (a)... 4,000 3,896
--------
8,606
MACHINERY, METALS AND FABRICATED METAL PRODUCTS (3.4%)
Cincinnati Milacron 8.375% 3/15/04................... 2,000 1,966
Owens Corning 7.000% 3/15/09......................... 3,250 2,841
USX Corp. 6.850% 3/1/08.............................. 4,000 3,763
--------
8,570
MINING AND AGRICULTURE (0.9%)
PT Alatief Freeport Financial (Yankee Issue)
9.750% 4/15/01..................................... 2,500 2,213

<PAGE>

SR&F INCOME PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

PAR VALUE
- --------------------------------------------------------------------------------

NATURAL GAS AND OIL (5.1%)
Colorado Interstate Gas 10.000% 6/15/05.............. $ 1,500 $ 1,654
Husky Oil 8.900% 8/15/28............................. 3,000 2,827
Lyondell Petro 9.750% 9/4/03......................... 2,000 1,922
Noble Drilling 7.500% 3/15/19........................ 3,500 3,289
YPF Sociedad Anonima (Yankee Issue) 7.500% 10/26/02.. 3,242 3,198
--------
12,890
PAPER PRODUCTS (0.4%)
Abitibi Consolidated 8.500% 8/1/29................... 1,000 957

PHARMACEUTICAL (0.9%)
Lilly Del Mar 7.717% 8/1/29.......................... 2,250 2,179

REAL ESTATE INVESTMENT TRUST (9.0%)
American Healthcare Properties 7.050% 1/15/02........ 3,000 2,828
Carramerica 7.200% 7/1/04............................ 3,000 2,851
First Industrial LP 7.500% 12/1/17................... 6,000 5,023
First Industrial Realty Trust 7.600% 7/15/28......... 1,250 1,013
Meditrust 7.375% 7/15/20............................. 2,000 1,944
Property Trust of America 6.875% 4/1/09.............. 2,000 1,890
Storage USA 7.125% 11/1/03........................... 3,000 2,854
Trinet 7.300% 5/15/01................................ 4,500 4,309
--------
22,712
SERVICES (1.5%)
ARA Services 10.625% 8/1/00.......................... 800 816
Aramark Services 8.150% 5/1/05....................... 2,000 1,987
Dynacorp 9.500% 3/1/07............................... 1,000 880
--------
3,683
TELECOMMUNICATIONS (4.0%)
CSC Holdings 7.875% 2/15/18.......................... 3,750 3,570
Comtel Brasileria (Yankee Issue) 10.75% 9/26/04 (a).. 2,000 1,940
Frontier Corp. 7.250% 5/15/04........................ 5,000 4,612
--------
10,122
TEXTILE AND APPAREL (0.9%)
Tommy Hilfiger 6.850% 6/1/08......................... 2,500 2,242

TRANSPORT SERVICES (1.6%)
Stagecoach Holdings PLC 8.625% 11/15/09.............. 4,000 3,981

UTILITIES (4.6%)
AES Eastern Energy 9.670% 1/2/29 (a)................. 2,500 2,336
AES 8.375% 8/15/07................................... 2,000 1,855
Israel Electric Corp. LTD 8.250% 10/15/09 (a)........ 1,750 1,735
National Power 9.000% 7/5/02......................... 1,500 1,504
Texas Utilities 9.750% 5/1/21........................ 2,000 2,132
UtiliCorp United Inc. 7.625% 11/15/09................ 2,000 1,917
--------
11,479
TOTAL LONG-TERM OBLIGATIONS
(cost of $250,118)................................ 237,895
--------
- --------------------------------------------------------------------------------

<PAGE>

SR&F INCOME PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

SHORT-TERM OBLIGATIONS (3.1%) PAR VALUE
- --------------------------------------------------------------------------------

COMMERCIAL PAPER
Associates Corp. of North America 6.950% 1/3/00
(cost of $7,831).................................. $ 7,835 $ 7,833
--------
- --------------------------------------------------------------------------------

TOTAL INVESTMENTS (98.0%)
(cost of $257,949) (b)............................ 245,728
OTHER ASSETS, LESS LIABILITIES (2.0%)................ 5,047
--------
NET ASSETS (100.0%).................................. $250,775
========
- --------------------------------------------------------------------------------

NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements of the Securities Act of 1933.
These securities generally are issued only to qualified institutional
investors, and any resale must be in an exempt transaction, normally to
other qualified institutional investors. At December 31, 1999, the
aggregate of the Portfolio's private placement securities was $40,650.
which represented 16.2% of net assets.
(b) At December 31, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical.

See accompanying Notes to Financial Statements.

<PAGE>

SR&F HIGH YIELD PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1999
(All amounts in thousands)
(Unaudited)

LONG-TERM OBLIGATIONS (93.4%) PAR VALUE
- --------------------------------------------------------------------------------

AEROSPACE AND MILITARY TECHNOLOGY (3.8%)
BE Aerospace:
9.500% 11/01/08.................................. $ 750 $ 705
10.750% 07/15/08.................................. 1,000 870
Derlan Manufacturing (Yankee Issue) 10.000% 01/15/07. 583 576
Fairchild Corp. 10.750% 04/15/09..................... 1,000 850
Level 3 Communications Series B 10.375% 05/01/07 (a). 1,000 605
-------
3,606
AUTOMOTIVE (2.3%)
Budget Group 9.125% 04/01/06......................... 1,500 1,395
Penda Series B 10.750% 03/01/04...................... 800 760
-------
2,155
BANKING (1.3%)
Sovereign Bank 10.500% 11/15/06...................... 1,250 1,271

BUILDING AND CONSTRUCTION (3.3%)
Beazer Homes USA 8.875% 04/01/08..................... 1,000 925
D R Horton 8.000% 02/01/09........................... 1,500 1,380
PYCSA Panama 10.280% 12/15/12 (a).................... 1,469 881
-------
3,186
BUSINESS SERVICES (2.1%)
Penhall Acquisition 12.000% 08/01/06................. 1,000 1,010
Nationsrent 10.375% 12/15/08......................... 1,000 978
-------
1,988
CABLE AND MEDIA (2.5%)
Charter Communication (b) (Yield to Maturity
4.094%) 04/01/11................................... 2,500 1,466
Perry-Judd 10.625% 12/15/07.......................... 1,000 880
-------
2,346
CHEMICALS (2.7%)
Biovail Corporation International 10.875% 11/15/05... 1,000 1,050
Metromedia Fiber Network 10.000% 12/15/09............ 1,500 1,530
-------
2,580
COAL MINING (1.0%)
AEI Resources 11.500% 12/15/06 (a)................... 1,500 975

COMPUTER EQUIPMENT (4.0%)
Axia 10.750% 07/15/08................................ 1,500 1,376
Rhythms Netconn 12.750% 04/15/09..................... 1,500 1,448
Voicestream Wire 10.375% 11/15/09.................... 1,000 1,030
-------
3,854
CONTAINERS (0.5%)
Allied Waste N.A. 10.000% 08/01/09 (a)............... 500 445

CONSUMER PRODUCTS (1.1%)
Sleepmaster 11.000% 05/15/09 (a)..................... 1,000 1,001

FINANCIAL (1.5%)
TPSA Finance 7.750% 12/10/08......................... 1,500 1,400

<PAGE>

SR&F HIGH YIELD PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

PAR VALUE
- --------------------------------------------------------------------------------

FOOD AND BEVERAGES (3.7%)
Marsh Supermarket Series B 8.875% 08/01/07........... $ 1,000 $ 970
Pepsi-Gemex Series B (Yankee Issue) 9.750% 03/30/04.. 1,000 998
Stater Brothers Holdings 10.750% 08/15/06............ 1,500 1,515
-------
3,483
HEALTH SERVICES AND EQUIPMENT (3.9%)
Express Scripts 9.625% 06/15/09...................... 1,500 1,523
Hanger Orthopedic Group 11.250% 06/15/09............. 1,000 1,028
Insight Health Services Series B 9.625% 06/15/08..... 1,250 1,175
-------
3,726
HOSPITALS AND NURSING HOME CARE (3.3%)
Lifepoint Hospitals 10.750% 05/15/09................. 2,000 2,075
Triad Hospitals 11.000% 05/15/09..................... 1,000 1,035
-------
3,110
HOTELS AND ENTERTAINMENT (7.2%)
Boyd Gaming 9.500% 07/15/07.......................... 750 742
Horseshoe Gaming 8.625% 05/15/09..................... 1,500 1,444
Mohegan Tribal Gaming 8.750% 01/01/09................ 1,500 1,489
Premier Parks:
9.250% 04/01/06................................... 250 246
9.750% 01/15/07................................... 250 256
(b) (Yield to Maturity 4.939%) 04/01/08........... 1,750 1,207
Prime Hospitality Series B 9.750% 04/01/07........... 1,490 1,445
-------
6,829
INDUSTRIAL (2.7%)
Chippac International 12.750% 08/01/09 (a)........... 1,500 1,575
Companhia Petrolifera Marlim 13.125% 12/17/04 (a).... 1,000 1,030
-------
2,605
INTERNET SERVICES (4.5%)
Concentric Network 12.750% 12/15/07 (a).............. 1,500 1,575
ICG Services (b) (Yield to Maturity 4.884%) 05/01/08. 2,250 1,166
PSINet 10.000% 02/15/05.............................. 1,500 1,485
-------
4,226
LEISURE PRODUCTS (0.4%)
Boyds Collection 9.000% 05/15/08..................... 448 419

MANUFACTURING (0.6%)
Westinghouse Air Brake 9.375% 06/15/05............... 600 600

METALS AND STEEL (1.8%)
LTV Corp. 11.750% 11/15/09 (a)....................... 1,000 1,050
Republic Technologies International
13.750% 07/15/09 (a)............................... 1,000 660
-------
1,710
NONDEPOSITORY CREDIT INSTITUTION (0.9%)
Mego 1997-3 CTFS 8.010% 08/25/23..................... 1,000 806

OIL AND GAS (3.2%)
Key Energy Services 14.000% 01/15/09................. 1,500 1,639
Lomac Petroleum 8.750 01/15/07....................... 1,500 1,376
-------
3,015
PAPER PRODUCTS (2.0%)
Buhrmann US Inc. 9.125% 11/01/09..................... 1,500 1,560
Indah Kiat Finance 10.000% 07/01/07.................. 500 370
-------
1,930

<PAGE>

SR&F HIGH YIELD PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

PAR VALUE
- --------------------------------------------------------------------------------

PRINTING AND PUBLISHING (2.0%)
World Color Press 8.375% 11/15/08.................... $ 2,000 $ 1,955

RESTAURANTS (0.3%)
AFC Enterprises 10.250% 05/15/07..................... 250 251

RUBBER, PLASTIC AND RELATED MATERIALS (1.3%)
Key Plastics Series B 10.250% 03/15/07............... 500 190
Tekni-Plex 9.250% 03/01/08........................... 1,000 1,015
-------
1,205
TELECOMMUNICATIONS (16.5%)
Carrier One 13.250% 02/15/09......................... 1,000 1,020
Exodus Communications 10.750 12/15/09 (a)............ 1,000 1,020
Focal Communications Series B (b)
(Yield to Maturity 5.967%) 02/15/08 (a)............ 2,000 1,320
Global Crossing 9.125% 11/15/06 (a).................. 1,500 1,483
Globenet Communications 13.000% 07/15/07(a).......... 1,500 1,522
MGC Communications Series B 13.000% 10/01/04......... 1,000 1,005
Metronet Communications (Yankee Issue):
12.000% 08/15/07.................................. 1,000 1,169
(b) (Yield to Maturity 6.132%) 06/15/08........... 1,000 802
Nextlink Communications:
10.750% 06/1/09................................... 1,000 1,038
(b) (Yield to Maturity 6.034%) 06/01/09........... 1,000 615
RCN Corp. 10.125% 02/15/05........................... 1,500 1,498
Tele1 Europe 13.000% 05/15/09 (a).................... 1,000 1,130
Versatel Communications 11.875% 07/15/09............. 1,000 1,020
Viatel 11.250% 04/15/08.............................. 1,000 1,005
-------
15,647
TELEPHONE (6.8%)
Allegiance Telecom Series B (b)
(Yield to Maturity 5.870%) 02/15/08................ 1,500 1,087
BTI Telecom 10.500% 09/15/07......................... 1,000 920
Comtel Brasileira (Yankee Issue) 10.750% 09/26/04 (a) 250 243
Intermedia Communications Series B (b)
(Yield to Maturity 6.046%) 03/01/09................ 3,000 1,800
Knology Holdings (b) (Yield to Maturity
5.840%) 10/15/07................................... 2,000 1,340
Primus Telecom 12.750% 04/15/09...................... 1,000 1,040
-------
6,430
TEXTILE AND APPAREL (1.9%)
William Carter Series A 10.375% 12/01/06............. 2,000 1,760

TRANSPORTATION AND TRANSPORTATION EQUIPMENT (4.3%)
Atlas Air 9.375% 11/15/06............................ 2,000 1,950
Holt Group 9.750% 01/15/06........................... 1,000 650
Railworks 11.500% 04/15/09........................... 1,500 1,519
-------
4,119
TOTAL LONG-TERM OBLIGATIONS
(cost of $91,786)................................. 88,633
-------

- --------------------------------------------------------------------------------

<PAGE>

SR&F HIGH YIELD PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

COMMON STOCK (C) (0.2%) SHARES VALUE
- --------------------------------------------------------------------------------

TELECOMMUNICATIONS 0.2%
Viatel, Inc.
(cost of $15)..................................... 4 $ 216
-------
- --------------------------------------------------------------------------------

PREFERRED STOCK 0.5%
- --------------------------------------------------------------------------------

TELEPHONE 0.5%
21st Century Telecom Group (a)
(cost of $537 )................................... 1 521
-------

- --------------------------------------------------------------------------------

WARRANTS (C) (0.7%)
- --------------------------------------------------------------------------------

INTERNET SERVICES (0.3%)
Concentric Network (expires 12/15/07) (a)............ 1 250

OIL AND GAS (0.1%)
Key Energy Services (expires 01/15/09)............... 2 38

TELECOMMUNICATIONS (0.3%)
Carrier One (expires 02/15/09)....................... 1 20
Metronet Communications (expires 08/15/07) (a)....... 1 116
MGC Communications (expires 10/01/04) (a)............ 1 175
-------
311
TELEPHONE (0.0%)
Allegiance Telecom (expires 02/03/08) (a)............ 2 14
Knology Holdings (expires 10/15/07) (a).............. 2 4
21st Century Telecommunications (expires 02/15/10) (a) 1 10
-------
28
TOTAL WARRANTS
(cost of $20)..................................... 627
-------

- --------------------------------------------------------------------------------

<PAGE>

SR&F HIGH YIELD PORTFOLIO CONTINUED
- --------------------------------------------------------------------------------

SHORT-TERM OBLIGATION (3.2%) PAR VALUE
- --------------------------------------------------------------------------------

COMMERCIAL PAPER (3.2%)
Associates Corp. of North America 5.600% 01/03/00
(cost of $3,029).................................. $ 3,030 $ 3,029
-------
- --------------------------------------------------------------------------------

TOTAL INVESTMENTS (98.0%)
(cost of $95,387) (d)............................. 93,026
OTHER ASSETS, LESS LIABILITIES (2.0%)................ 1,909
-------
NET ASSETS (100.0%).................................. $94,935
=======
- --------------------------------------------------------------------------------

NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements equirements of the Securities Act
of 1933. These securities generally are issued only to qualified
institutional investors, and any resale must be in an exempt transaction,
normally to other qualified institutional investors. At December 31, 1999,
the aggregate value of the Portfolio's private placement securities was
$19,071, which represented 20.1% of net assets.
(b) Zero coupon bond.
(c) Non-income producing.
(d) At December 31, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical.

See accompanying Notes to Financial Statements.

<PAGE>

STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1999 (Unaudited)
(All amounts in thousands)

SR&F
INTERMEDIATE SR&F SR&F
BOND INCOME HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- ----------
ASSETS
Investments, at market value (cost of
$412,084, $257,949 and $95,387,
respectively) ........................... $395,305 $245,728 $ 93,026
Receivable for investments sold ............ 10,911 1 --
Interest receivable ........................ 6,169 5,031 1,916
Dividend receivable ........................ -- 117 2
Cash ....................................... 863 5 3
Variation margin on futures ................ 61 -- --
-------- -------- --------
Total assets ............................ 413,309 250,882 94,947
-------- -------- --------

LIABILITIES
Payable for investments purchased .......... 10,713 1 --
Other liabilities .......................... 267 106 12
-------- -------- --------
Total liabilities ....................... 10,980 107 12
-------- -------- --------
Net assets applicable to investors'
beneficial interest ................... $402,329 $250,775 $ 94,935
======== ======== ========

See accompanying Notes to Financial Statements.

<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
(All amounts in thousands)

<CAPTION>
SR&F
INTERMEDIATE SR&F SR&F
BOND INCOME HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest .................................................. $ 15,992 $ 11,054 $ 5,310
Dividend .................................................. 155 116 21
-------- -------- --------
Total income ........................................... 16,147 11,170 5,331
EXPENSES
Management fees ........................................... 747 658 222
Transfer Agent fees ....................................... 3 3 3
Accounting fees ........................................... 17 15 13
Trustees fees ............................................. 8 8 5
Custodian fees ............................................ 4 5 --
Audit fees ................................................ 8 8 8
Legal fees ................................................ 2 2 --
Other ..................................................... 16 20 5
-------- -------- --------
Total expenses ......................................... 805 719 256
-------- -------- --------
Net investment income .................................. 15,342 10,451 5,075
-------- -------- --------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES TRANSACTIONS
Net realized loss on investments .......................... (4,009) (2,964) (1,923)
Net realized gain on futures transactions ................. 624 -- --
Net change in unrealized appreciation/depreciation on
investments and futures transactions ................... (6,742) (3,496) (496)
-------- -------- --------
Net loss on investments and futures tranactions ........ (10,127) (6,460) (2,419)
-------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 5,215 $ 3,991 $ 2,656
======== ======== ========

See accompanying Notes to Financial Statements.

</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------

(All amounts in thousands)
<CAPTION>
SR&F SR&F
INTERMEDIATE INCOME
BOND PORTFOLIO PORTFOLIO
---------------------------- -----------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1999 1999 1999 1999
------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income .............................................. $ 15,342 $ 29,891 $ 10,451 $ 26,822
Net realized gain (loss) on investments and
futures transactions ............................................ (3,385) 147 (2,964) (9,978)
Net change in unrealized appreciation/depreciation
on investments and futures transactions ......................... (6,742) (17,001) (3,496) (14,331)
--------- --------- --------- ---------
Net increase in net assets resulting from operations ............ 5,215 13,037 3,991 2,513
--------- --------- --------- ---------

TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ...................................................... 111,897 97,305 42,003 13,011
Withdrawals ........................................................ (148,342) (116,948) (91,930) (167,955)
--------- --------- --------- ---------
Net increase (decrease) from transactions in investors'
beneficial interest .......................................... (36,445) (19,643) (49,927) (154,944)
--------- --------- --------- ---------
Net increase (decrease) in net assets ........................... (31,230) (6,606) (45,936) (152,431)

NET ASSETS
Beginning of period ................................................ 433,559 440,165 296,711 449,142
--------- --------- --------- ---------
End of period ...................................................... $ 402,329 $ 433,559 $ 250,775 $ 296,711
========= ========= ========= =========

SR&F
HIGH YIELD
PORTFOLIO
------------------------------
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1999 1999
------------ ---------
<S> <C> <C>
OPERATIONS
Net investment income ................................................................... $ 5,075 $ 7,208
Net realized gain (loss) on investments and futures transactions ........................ (1,923) (632)
Net change in unrealized appreciation/depreciation on investments
and futures transactions ............................................................. (496) (2,238)
-------- --------
Net increase in net assets resulting from operations ................................. 2,656 4,338
-------- --------

TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions ........................................................................... 43,820 51,100
Withdrawals ............................................................................. (39,864) (45,602)
-------- --------
Net increase (decrease) from transactions in investors' beneficial interest .......... 3,956 5,498
-------- --------
Net increase (decrease) in net assets ................................................ 6,612 9,836

NET ASSETS
Beginning of period ..................................................................... 88,323 78,487
-------- --------
End of period ........................................................................... $ 94,935 $ 88,323
======== ========

See accompanying Notes to Financial Statements.

</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 (Unaudited)
(All amounts in thousands, except per-share data)

<CAPTION>
STEIN ROE
INTERMEDIATE STEIN ROE STEIN ROE
BOND INCOME HIGH YIELD
FUND FUND FUND
----------- --------- ----------
<S> <C> <C> <C>
ASSETS
Investment in Portfolio, at value ............................................... $ 401,779 $ 250,669 $ 37,683
Receivable for fund shares sold ................................................. 5,136 32 156
Cash ............................................................................ 25 25 62
Expense reimbursement due from Advisor .......................................... -- -- 30
Other assets .................................................................... 36 43 --
--------- --------- ---------
Total assets ................................................................. 406,976 250,769 37,931
--------- --------- ---------

LIABILITIES
Payable for fund shares redeemed ................................................ 1,082 678 330
Dividends payable ............................................................... 4,816 277 81
Other liabilities ............................................................... 42 48 18
--------- --------- ---------
Total liabilities ............................................................ 5,940 1,003 429
--------- --------- ---------
Net Assets ................................................................... $ 401,036 $ 249,766 $ 37,502
========= ========= =========

ANALYSIS OF NET ASSETS
Paid-in capital ................................................................. $ 429,600 $ 275,653 $ 39,760
Undistributed (overdistributed) net investment income ........................... (308) 97 90
Accumulated net realized loss on investments and futures transactions ........... (11,634) (13,766) (1,509)
Net unrealized depreciation on investments and futures transactions ............. (16,622) (12,218) (839)
--------- --------- ---------
Net Assets ................................................................... $ 401,036 $ 249,766 $ 37,502
========= ========= =========
Shares outstanding (unlimited number authorized) ................................ 47,614 27,180 3,803
========= ========= =========
Net asset value per share ....................................................... $ 8.42 $ 9.19 $ 9.86
========= ========= =========

See accompanying Notes to Financial Statements.

</TABLE>
<PAGE>
<TABLE>

STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
(All amounts in thousands)

<CAPTION>
STEIN ROE
INTERMEDIATE STEIN ROE STEIN ROE
BOND INCOME HIGH YIELD
FUND FUND FUND
------------ --------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income allocated from Portfolio .............................................. $ 15,955 $ 10,607 $ 1,949
Dividend income allocated from Portfolio .............................................. 155 561 45
-------- -------- --------
Total investment income ............................................................ 16,110 11,168 1,994
-------- -------- --------

EXPENSES
Expenses allocated from Portfolio ..................................................... 803 719 96
Administrative fees ................................................................... 320 182 25
Accounting fees ....................................................................... 18 15 13
Transfer agent fees ................................................................... 319 203 27
Trustees fees ......................................................................... 5 4 4
Custodian fees ........................................................................ 3 -- 1
Legal fees ............................................................................ 2 7 3
Audit fees ............................................................................ 2 -- 5
Registration fees ..................................................................... 23 20 11
Reports to shareholders ............................................................... 6 -- --
Other ................................................................................. 43 31 20
-------- -------- --------
Total expenses ..................................................................... 1,544 1,181 205
Reimbursement of expenses by investment Advisor ....................................... -- -- (38)
-------- -------- --------
Net expenses ....................................................................... 1,544 1,181 167
-------- -------- --------
Net investment income .............................................................. 14,566 9,987 1,827
-------- -------- --------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized loss on investments and futures transactions allocated from Portfolio .... (3,359) (2,963) (750)
Net change in unrealized appreciation/depreciation on investments and futures
transactions ....................................................................... (6,734) (3,495) (106)
-------- -------- --------
Net loss on investments and futures transactions ................................... (10,093) (6,458) (856)
-------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................. $ 4,473 $ 3,529 $ 971
======== ======== ========

See accompanying Notes to Financial Statements.

</TABLE>
<PAGE>
<TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

(All amounts in thousands)

<CAPTION>
STEIN ROE INTERMEDIATE
BOND FUND STEIN ROE INCOME FUND
--------------------------- ---------------------------
(UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1999 1999 1999 1999
------------ --------- ------------ ---------
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .................................................. $ 14,566 $ 28,145 $ 9,987 $ 25,601
Net realized gain (loss) on investments and futures transactions ....... (3,359) 178 (2,963) (9,974)
Net change in unrealized appreciation/depreciation on investments
and futures transactions ............................................. (6,734) (16,916) (3,495) (14,328)
--------- --------- --------- ---------
Net increase in net assets resulting from operations ................ 4,473 11,407 3,529 1,299
--------- --------- --------- ---------

DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income ............................... (14,582) (28,795) (9,941) (25,599)
Distributions from net capital gains ................................... -- -- -- --
--------- --------- --------- ---------
Total distributions to shareholders ................................. (14,582) (28,795) (9,941) (25,599)
--------- --------- --------- ---------

SHARE TRANSACTIONS
Subscriptions to fund shares ........................................... 187,469 218,839 60,704 67,976
Value of distributions reinvested ...................................... 13,069 21,841 8,771 22,401
Redemptions of fund shares ............................................. (220,516) (229,625) (107,937) (219,840)
--------- --------- --------- ---------
Net increase (decrease) from share transactions ..................... (19,978) 11,055 (38,462) (129,463)
--------- --------- --------- ---------
Net increase (decrease) in net assets ............................... (30,087) (6,333) (44,874) (153,763)

NET ASSETS
Beginning of period .................................................... 431,123 437,456 294,640 448,403
--------- --------- --------- ---------
End of period .......................................................... $ 401,036 $ 431,123 $ 249,766 $ 294,640
========= ========= ========= =========
Undistributed (overdistributed) net investment income .................. $ (308) $ (292) $ 97 $ 51
========= ========= ========= =========

ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares ........................................... 21,923 24,753 6,551 6,948
Issued in reinvestment of distributions ................................ 1,532 2,470 946 2,304
Redemptions of fund shares ............................................. (25,815) (26,004) (11,637) (22,635)
--------- --------- --------- ---------
Net increase (decrease) in fund shares .............................. (2,360) 1,219 (4,140) (13,383)
Shares outstanding at beginning of period .............................. 49,974 48,755 31,320 44,703
--------- --------- --------- ---------
Shares outstanding at end of period .................................... 47,614 49,974 27,180 31,320
========= ========= ========= =========

STEIN ROE HIGH YIELD
FUND
------------------------
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1999 1999
------------ ---------
<S> <C> <C>
OPERATIONS
Net investment income....................................................... $ 1,827 $ 3,120
Net realized gain (loss) on investments and futures transactions............ (750) (759)
Net change in unrealized appreciation/depreciation on investments
and futures transactions.................................................. (106) (869)
-------- --------
Net increase in net assets resulting from operations..................... 971 1,492
-------- --------

DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income.................................... (1,724) (3,133)
Distributions from net capital gains........................................ -- (1,156)
-------- --------
Total distributions to shareholders...................................... (1,724) (4,289)
-------- --------

SHARE TRANSACTIONS
Subscriptions to fund shares................................................ 53,176 53,537
Value of distributions reinvested........................................... 1,493 3,686
Redemptions of fund shares.................................................. (49,180) (63,131)
-------- --------
Net increase (decrease) from share transactions.......................... 5,489 (5,908)
-------- --------
Net increase (decrease) in net assets.................................... 4,736 (8,705)

NET ASSETS
Beginning of period......................................................... 32,766 41,471
-------- --------
End of period............................................................... $37,502 $32,766
======== ========
Undistributed (overdistributed) net investment income....................... $ 90 $ (13)
======== ========

ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares................................................ 5,394 5,211
Issued in reinvestment of distributions..................................... 151 362
Redemptions of fund shares.................................................. (4,970) (6,117)
-------- --------
Net increase (decrease) in fund shares................................... 575 (544)
Shares outstanding at beginning of period................................... 3,228 3,772
-------- --------
Shares outstanding at end of period......................................... 3,803 3,228
======== ========

See accompanying Notes to Financial Statements.

</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(ALL AMOUNTS IN THOUSANDS) (UNAUDITED)

NOTE 1. ORGANIZATION

Stein Roe Intermediate Bond Fund, Stein Roe Income Fund and Stein Roe High Yield
Fund are series of Liberty-Stein Roe Income Trust (the "Trust"), formerly Stein
Roe Income Trust, an open-end management investment company organized as a
Massachusetts business trust. Stein Roe Intermediate Bond Fund, Stein Roe Income
Fund and Stein Roe High Yield Fund invest substantially all of their assets in
SR&F Intermediate Bond Portfolio, SR&F Income Portfolio and SR&F High Yield
Portfolio (the "Portfolios"), respectively.
The Portfolios are series of the 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 Portfolio commenced operations on November 1, 1996, in
conjunction with High Yield Fund. SR&F Intermediate Bond Portfolio and SR&F
Income Portfolio commenced operations on February 2, 1998. At commencement,
Stein Roe Intermediate Bond Fund and Stein Roe Income Fund contributed $427,315
and $432,720 in securities and other assets to SR&F Intermediate Bond Portfolio
and SR&F Income Portfolio, respectively, in exchange for beneficial ownership of
those Portfolios. On February 4, 1998, Stein Roe Advisor Intermediate Bond Fund
and Stein Roe Advisor Income Fund each contributed cash of $100 to their
respective Portfolios. 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 December 31, 1999, Stein Roe
Intermediate Bond Fund owned 99.9% of SR&F Intermediate Bond Portfolio; Stein
Roe Income Fund owned 100.0% of SR&F Income Portfolio; and Stein Roe High Yield
Fund owned 39.7% of SR&F High Yield Portfolio.

- --------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the significant accounting policies of the Funds and
the 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.

<PAGE>

NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME

Investment transactions are accounted for on trade date. Interest income,
including discount accretion and premium amortization, is recorded daily on the
accrual basis. Realized gains or losses from investment transactions are
reported on an identified cost basis.
Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. The values of such
securities are subject to market fluctuations during this period. None of the
Portfolios had when-issued or delayed delivery purchase commitments as of
December 31, 1999.

SECURITY VALUATIONS

Long-term debt securities are valued using market quotations if readily
available at the time of valuation. If market quotations are not readily
available, they are valued at a fair value using a procedure determined in good
faith by the Board of Trustees, which has authorized the use of market
valuations provided by a pricing service. Short-term debt securities with
remaining maturities of 60 days or less are valued at their amortized cost.
Those with remaining maturities of more than 60 days for which market quotations
are not readily available are valued by use of a matrix, prepared by the
Advisor, based on quotations for comparable securities. Other assets are valued
by a method that the Board of Trustees believes represents a fair value.

FUTURES CONTRACTS

During the six months ended December 31, 1999, SR&F Intermediate Bond Portfolio
entered into U.S. Treasury security futures contracts to either hedge against
expected declines in the value of their securities or as a temporary substitute
for the purchase of individual bonds. Risks of entering into futures contracts
include the possibility that there may be an illiquid market at the time the
Portfolios seek to close out a contract, and changes in the value of the futures
contract may not correlate with changes in the value of the securities being
hedged.
Upon entering into a futures contract, the Portfolio deposits cash or
securities with its custodian in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Portfolio equal to
the daily change in the contract value and are recorded as unrealized gains or
losses. The Fund or the Portfolio recognizes a realized gain or loss when the
contract is closed or expires. See SR&F Intermediate Bond Portfolio's Portfolio
of Investments for a summary of open futures contracts at December 31,

<PAGE>

NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------

1999. No other Portfolios entered into any futures contracts during the period.

FEDERAL INCOME TAXES

No provision is made for federal income taxes, since (a) the Funds elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all federal income tax 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.
The Funds intend to utilize provisions of the federal income tax law that
allow them to carry a realized capital loss forward for eight years following
the year of the loss and offset such losses against any future realized gains.
At June 30, 1999, the Funds had capital loss carryforwards as follows:

Year of
Fund Amount Expiration

Stein Roe Intermediate
Bond Fund $7,092 2003-2005
Stein Roe Income Fund 6,779 2002-2007
Stein Roe High Yield Fund 758 2007

DISTRIBUTIONS TO SHAREHOLDERS

Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Distributions in
excess of tax basis earnings are reported in the financial statements as a
return of capital. 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

SR&F Intermediate Bond Portfolio invests primarily in marketable debt securities
with an expected average life between three and ten years. SR&F Income Portfolio
invests principally in medium-quality debt securities. SR&F High Yield Portfolio
invests primarily in high yield, high-risk medium- and lower- quality debt
securities.
See each Portfolio's Portfolio of Investments for information regarding
individual securities as well as industry diversification. See each Portfolio's
Fund Highlights for unaudited information regarding portfolio quality and
average maturity.

<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------

NOTE 4. TRUSTEES FEES AND TRANSACTIONS WITH AFFILIATES

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 Intermediate Bond Portfolio is computed at an
annual rate of 0.35% of the average daily net assets. The management fee for
SR&F Income Portfolio is 0.50% of the first $100 million of average daily net
assets and 0.475% thereafter. The management fee for SR&F High Yield Portfolio
is 0.50% of the first $500 million of average daily net assets and 0.475%
thereafter.
The administrative fee for Stein Roe Intermediate Bond Fund is computed at an
annual rate of 0.15% of average daily net assets. The administrative fee for
Stein Roe Income Fund is 0.15% of the first $100 million of average daily net
assets and 0.125% thereafter. The administrative fee for the Stein Roe High
Yield Fund is 0.15% of the first $500 million of average daily net assets and
0.125% thereafter.
The Advisor also provides fund accounting services.
The Advisor has agreed to reimburse Stein Roe High Yield Fund for expenses in
excess of 1.00% of average annual net assets. This commitment expires on October
31, 2000, subject to earlier termination by the Advisor on 30 days' notice.
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 and receives reimbursement for certain out-of-pocket
expenses.
Certain officers and trustees of the Trust are also officers of the Advisor.
Compensation is paid to trustees not affiliated with the Advisor. No
remuneration was paid to any other trustee or officer of the Trust who is
affiliated with the Advisor.

<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------

NOTE 5. SHORT-TERM DEBT

To facilitate portfolio liquidity, the Funds and the Portfolios maintain
borrowing arrangements under which they can borrow against portfolio securities.
There were no borrowings during the six months ended December 31, 1999.

- --------------------------------------------------------------------------------
NOTE 6. INVESTMENT TRANSACTIONS

The aggregate cost of purchases and proceeds from sales of securities or
maturities, other than short-term obligations, for the six months ended December
31, 1999, were:
Purchases Sales
--------- ---------
SR&F Intermediate Bond Portfolio................... $778,960 $799,240
SR&F Income Portfolio.............................. 343,980 390,513
SR&F High Yield Portfolio.......................... 68,831 64,080

Unrealized appreciation (depreciation) at December 31, 1999 for both financial
statement and federal income tax purposes was:

SR&F SR&F SR&F
Intermediate Income High Yield
Bond Portfolio Portfolio Portfolio
-------------- --------- ----------
Gross unrealized appreciation.... $ 1,372 $ 1,328 $ 3,838
Gross unrealized depreciation ... (18,151) (13,549) (6,199)
-------- -------- -------
Net unrealized depreciation...... $(16,779) $(12,221) $(2,361)
======== ======== =======

<PAGE>

FINANCIAL HIGHLIGHTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
SR&F INTERMEDIATE BOND PORTFOLIO
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1999 1999 1998(a)
------------ -------- --------
<S> <C> <C> <C>
SELECT RATIOS
Ratio of net expenses to average net assets........... 0.38%(b) 0.36% 0.39%(b)
Ratio of net investment income to average net assets.. 7.21%(b) 6.41% 6.77%(b)
Portfolio turnover rate............................... 188%(c) 253% 86%(c)

(a) From commencement of operations on February 2, 1998.
(b) Annualized.
(c) Not annualized.
</TABLE>

- --------------------------------------------------------------------------------
<TABLE>
SR&F INCOME PORTFOLIO
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR PERIOD
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1999 1999 1998(a)
------------ -------- --------
<S> <C> <C> <C>
SELECT RATIOS
Ratio of net expenses to average net assets........... 0.53%(b) 0.50% 0.51%(b)
Ratio of net investment income to average net assets.. 7.74%(b) 7.17% 7.23%(b)
Portfolio turnover rate............................... 131%(c) 203% 77%(c)

(a) From commencement of operations on February 2, 1998.
(b) Annualized.
(c) Not annualized.
</TABLE>

- --------------------------------------------------------------------------------
<TABLE>
SR&F HIGH YIELD PORTFOLIO
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1998 1997(a)
------------ -------- -------- --------
SELECT RATIOS
<S> <C> <C> <C> <C>
Ratio of net expenses to average net assets........... 0.58%(b) 0.57% 0.65% 0.89%(b)
Ratio of net investment income to average net assets.. 11.50%(b) 8.27% 8.13% 8.24%(b)
Portfolio turnover rate............................... 78%(c) 296% 426% 168%(c)

(a) From commencement of operations on November 1, 1996.
(b) Annualized.
(c) Not annualized.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

STEIN ROE INTERMEDIATE BOND FUND

Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...... $ 8.63 $ 8.97 $ 8.74 $ 8.58 $ 8.67 $ 8.44
-------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income.. 0.30 0.56 0.58 0.60 0.59 0.58
Net realized and
unrealized
gain (loss) on
investments and
futures transactions (0.21) (0.33) 0.23 0.17 (0.10) 0.23
-------- -------- -------- -------- -------- --------
Total from investment
operations....... 0.09 0.23 0.81 0.77 0.49 0.81
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.. (0.30) (0.57) (0.58) (0.61) (0.58) (0.58)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD............ $ 8.42 $ 8.63 $ 8.97 $ 8.74 $ 8.58 $ 8.61
======== ======== ======== ======== ======== ========
Ratio of net expenses
to average
net assets (a)......... 0.73%(b) 0.72% 0.72% 0.73% 0.70% 0.70%
Ratio of net investment
income to average
net assets............. 6.89%(b) 6.31% 6.51% 6.97%(c) 6.79%(c) 6.94%(c)
Portfolio turnover........ -- -- 138%(d) 210% 202% 162%
Total return.............. 1.00%(e) 2.60% 9.51% 9.31%(c) 5.76%(c) 10.11%
Net assets, end of
period (000's).......... $401,036 $431,123 $437,456 $328,784 $298,112 $301,733

(a) If the Fund had paid all of its expenses and there had been no reimbursement
by the Advisor, this ratio would have been 0.75%, 0.75% and 0.71% for the
years ended June 30, 1997, 1996 and 1995, respectively.
(b) Annualized.
(c) Computed giving effect to the Advisor's expense limitation undertaking.
(d) Prior to commencement of operations of the Portfolio.
(e) Not annualized.

</TABLE>
<PAGE>
<TABLE>

FINANCIAL HIGHLIGHTS CONTINUED
- ------------------------------------------------------------------------------------------

STEIN ROE INCOME FUND

Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...... $ 9.41 $ 10.03 $ 9.88 $ 9.63 $ 9.79 $ 9.36
-------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income.. 0.34 0.67 0.69 0.70 0.71 0.71
Net realized and
unrealized
gain (loss) on
investments......... (0.22) (0.62) 0.15 0.25 (0.16) 0.43
-------- -------- -------- -------- -------- --------
Total from
investment
operations........ 0.12 0.05 0.84 0.95 0.55 1.14
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS
Net investment income.. (0.34) (0.67) (0.69) (0.70) (0.71) (0.71)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD........... $ 9.19 $ 9.41 $ 10.03 $ 9.88 $ 9.63 $ 9.79
======== ======== ======== ======== ======== ========
Ratio of net expenses
to average
net assets (a)......... 0.87%(b) 0.84% 0.83% 0.84% 0.82% 0.82%
Ratio of net investment
income to average
net assets............. 7.37%(b) 6.91% 6.89% 7.26%(c) 7.26%(c) 7.55%(c)
Portfolio turnover........ -- -- 59%(d) 138% 135% 64%
Total return.............. 1.32%(e) 0.52% 8.72% 10.34%(c) 5.70%(c) 12.79%(c)
Net assets,
end of period (000's).. $249,766 $294,640 $448,403 $375,272 $309,564 $179,327

(a) If the Fund had paid all of its expenses and there had been no reimbursement
by the Advisor, this ratio would have been 0.85%, 0.88% and 0.85% for the
years ended June 30, 1997, 1996 and 1995, respectively.
(b) Annualized.
(c) Computed giving effect to the Advisor's expense limitation undertaking.
(d) Prior to commencement of operations of the Portfolio.
(e) Not annualized.

</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS CONTINUED
- --------------------------------------------------------------------------------

STEIN ROE HIGH YIELD FUND
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1998 1997(c)
------------ -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 10.15 $ 11.00 $ 10.54 $ 10.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.77 0.85 0.85 0.52
Net realized and unrealized gain (loss)
on investments allocated from
SR&F High Yield Portfolio.......... (0.54) (0.53) 0.61 0.54
-------- -------- -------- --------
Total from investment operations.... 0.23 0.32 1.46 1.06
-------- -------- -------- --------
DISTRIBUTIONS
Net investment income................. (0.52) (0.85) (0.85) (0.52)
Net realized gains.................... -- (0.32) (0.15) --
-------- -------- -------- --------
Total distributions................. (0.52) (1.17) (1.00) (0.52)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD........... $ 9.86 $ 10.15 $ 11.00 $ 10.54
======== ======== ======== ========
Ratio of net expenses to average net assets (a) 1.00%(d) 1.00% 1.00% 1.00%(d)
Ratio of net investment income to average
net assets (b) 10.96%(d) 8.23% 7.79% 8.05%(d)
Total return (b) 2.35%(e) 3.50% 14.38% 10.88%(e)
Net assets, end of period (000's) $ 37,502 $ 32,766 $ 41,471 $ 13,482

(a) If the Fund had paid all of its expenses and there had been no reimbursement
by the Advisor, this ratio would have been 1.23% for the six months ended
December 31, 1999, 1.22% and 1.32% for the years ended June 30, 1999 and
1998 and 2.29% for the period ended June 30, 1997, respectively.
(b) Computed giving effect to the Advisor's expense limitation undertaking.
(c) From commencement of operations on November 1, 1996.
(d) Annualized.
(e) Not annualized.

</TABLE>
<PAGE>

TO CONTACT US. . .
- --------------------------------------------------------------------------------

BY PHONE 800-338-2550

You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe account, including Stein Roe Traditional, Roth and Education IRAs. We're
available Monday through Friday, from 8 a.m. to 8 p.m. ET, and Saturdays and
Sundays from 10 a.m. to 2 p.m. ET.

STEIN ROE'S FUNDS-ON-CALL(R)
24-HOUR SERVICE LINE

Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:

o Exchange shares between your Stein Roe accounts;
o Purchase fund shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.

RETIREMENT PLAN ACCOUNTS

Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on Traditional, Roth and Education IRA plans, call
us toll free at 800-338-2550.

BY MAIL OR E-MAIL

If you prefer to contact us by mail, please address all correspondence to: P.O.
Box 8900, Boston, MA 02205-8900. To contact us by e-mail, send correspondence
directly to: [email protected] or visit us at www.steinroe.com on the
Internet.

ADDITIONAL REPORTS

The Funds mail one shareholder report to each shareholder address. If you would
like more than one report, please call 800-338-2550 and additional reports will
be sent to you.

Must be preceded or accompanied by a prospectus.

<PAGE>

LIBERTY-STEIN ROE FUNDS INCOME TRUST
- --------------------------------------------------------------------------------

TRUSTEES

John A. Bacon, Jr.
Private Investor
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Executive Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Executive Vice President and Chief Financial
Officer, United Airlines
Janet Langford Kelly
Executive Vice President, Secretary and General
Counsel, Kellogg Company
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Director, William Blair Capital Partners

OFFICERS

Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President,
Secretary
Loren A. Hansen, Executive Vice President
Kevin Connaughton, Vice President, Treasurer
Timothy Jacoby, Senior Vice President
Michael T. Kennedy, Vice President
Gail Knudsen, Vice President, Controller
Stephen F. Lockman, Vice President
Lynn C. Maddox, Vice President
Mary D. McKenzie, Vice President
Jane M. Naeseth, Vice President
Nicholas S. Norton, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Michael G. Fisher, Assistant Treasurer
Christine Balzano, Vice President
Denise E. Chasmer, Vice President

AGENTS AND ADVISORS

Stein Roe & Farnham Incorporated
Investment Advisor
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

<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

* 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

Liberty Funds Distributor, Inc.

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