N-30D 1 0001.txt STEIN ROE TAX-EXEMPT BOND FUNDS STEIN ROE MUTUAL FUNDS ANNUAL REPORT JUNE 30, 2000 [BRIDGE PHOTO] STEIN ROE TAX-EXEMPT BOND FUNDS TAX-EXEMPT FUNDS STEIN ROE MUNICIPAL MONEY MARKET FUND STEIN ROE INTERMEDIATE MUNICIPALS FUND STEIN ROE MANAGED MUNICIPALS FUND STEIN ROE HIGH-YIELD MUNICIPALS FUND [STEIN ROE LOGO] STEIN ROE MUTUAL FUNDS SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R) Contents -------------------------------------------------------------------------------- From the President................................................ 1 Stephen Gibson's thoughts on the markets and investing Questions & Answers Interviews with the portfolio manager(s) and a summary of investment activity Stein Roe Municipal Money Market Fund.................................................. 5 Stein Roe Intermediate Municipals Fund.............................................. 8 Stein Roe Managed Municipals Fund.............................. 12 Stein Roe High-Yield Municipals Fund........................... 16 Portfolios of Investments......................................... 20 A complete list of investments with market values Financial Statements.............................................. 46 Statements of assets and liabilities, operations and changes in net assets Notes to Financial Statements..................................... 56 Financial Highlights.............................................. 62 Selected per-share data Report of Independent Auditors ................................... 66 Must be preceded or accompanied by a prospectus. From the President -------------------------------------------------------------------------------- To Our Shareholders Consumer confidence remained high and spending was strong, posting near-record sales in certain industries during the 12-month period ending June 30, 2000. The U.S. economy continued its steady growth through the second half of 1999, and though it has shown signs of slowing in the first two quarters of 2000, it has not stabilized sufficiently to satisfy the Federal Reserve Board (the Fed). As always, the most influential factor in the bond market was the actions of the Fed. Fueled by fears of inflation resulting from rapid economic growth, the Fed raised short-term interest rates five times during the period, increasing them from 5% to 6.5%. As bond prices declined in the face of rising interest rates, bond performance was negatively affected. However, the demand for municipal bonds has increased in the last few months. This was driven in part by their relatively high tax-equivalent yields. In addition, the rising stock market has enabled many investors to increase their wealth and subsequently look for tax-exempt income. We remain confident that municipal bonds can be a rewarding asset class for tax-sensitive investors. The following report will provide you with more specific information about your Fund's performance and the strategies used during the period. I thank you for choosing Stein Roe Tax-Exempt Bond Funds and for giving us the opportunity to serve your investment needs. Sincerely, /s/ Stephen E. Gibson Stephen E. Gibson President August 18, 2000 -------------------------------------------------------------------------------- Stephen E. Gibson [STEPHEN GIBSON PHOTO] 1 Fund Performance -------------------------------------------------------------------------------- Average Annual Total Returns Periods Ended June 30, 2000 1 YEAR 5 YEARS 10 YEARS -------------------------------------------------------------------------------- Stein Roe Municipal Money Market Fund 3.20% 3.05% 3.00% U.S. Consumer Price Index (Inflation) 3.67% 2.47% 2.86% Lipper Tax-Exempt Money Market Fund Average 3.09% 3.01% 3.05% Number of Funds in Peer Group 136 114 74 Stein Roe Intermediate Municipals Fund 3.10% 4.89% 6.12% Lehman Brothers 10-Year Municipal Bond Index 4.47% 5.97% 7.23% Lipper Intermediate Municipal Debt Fund Average 2.50% 4.68% 6.01% Number of Funds in Peer Group 122 98 23 Stein Roe Managed Municipals Fund 1.86% 5.30% 6.44% Lehman Brothers Municipal Bond Index 3.25% 5.88% 7.06% Lipper General Municipal Debt Fund Average 0.98% 4.76% 6.40% Number of Funds in Peer Group 268 183 83 Stein Roe High-Yield Municipals Fund (0.16)% 5.36% 6.17% Lehman Brothers Municipal Bond Index 3.25% 5.88% 7.06% Lipper High-Yield Municipal Debt Fund Average (2.16)% 4.54% 6.02% Number of Funds in Peer Group 66 35 17 -------------------------------------------------------------------------------- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. An expense limitation of 0.70% was in effect for Stein Roe Municipal Money Market Fund and Stein Roe Intermediate Municipals Fund for part of the periods shown. Returns would have been lower without the limitation. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Each index shown above is an unmanaged group of fixed-income securities that differs from the composition of each Stein Roe fund; they are not available for direct investment. The U.S. Consumer Price Index is the government's measure of annual changes in the cost of living. Income may be subject to state or local taxes and the federal alternative minimum tax. Capital gains, if any, are subject to federal, state and local taxes. Sources: Lipper, Inc., a monitor of mutual fund performance. Performance results reflect any voluntary waivers or reimbursement of Fund expenses by the Advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. 2 Total Return Comparison -------------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- Growth of a $10,000 Investment June 30, 1990 to June 30, 2000 Intermediate Lehman Brothers Municipals 10-Year Municipal Fund Bond Index 6/30/90 10000 10000 6/30/91 10820 10924 6/30/92 11931.2 12160.6 6/30/93 13234.1 13690.4 6/30/94 13387.6 13825.9 6/30/95 14269.9 15039.9 6/30/96 15054.7 16000.9 6/30/97 16114.6 17335.4 6/30/98 17216.8 18805.4 6/30/99 17574.9 19236.1 6/30/00 18119.2 20095.9 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. The line chart assumes a $10,000 investment on June 30, 1990, reinvestment of distributions, and compares fund performance to an index, which is an unmanaged group of fixed income securities that differs from the composition of any Stein Roe fund; it is not available for direct investment. Source: Lipper, Inc. Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Growth of a $10,000 Investment June 30, 1990 to June 30, 2000 [CHART DATA] Managed Lehman Brothers Municipals Fund Municipal Bond Index 6/30/90 10000 10000 6/30/91 10894 10901 6/30/92 12191.5 12184 6/30/93 13508.1 13641.3 6/30/94 13469 13664.5 6/30/95 14428 14869.6 6/30/96 15332.6 15857 6/30/97 16640.5 17165.2 6/30/98 18033.3 18651.7 6/30/99 18334.4 19166.5 6/30/00 18674.5 19789.4 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. The line chart assumes a $10,000 investment on June 30, 1990, reinvestment of distributions, and compares fund performance to an index, which is an unmanaged group of fixed income securities that differs from the composition of any Stein Roe fund; it is not available for direct investment. Source: Lipper, Inc. 3 Total Return Comparison Continued -------------------------------------------------------------------------------- Stein Roe High-Yield Municipals Fund -------------------------------------------------------------------------------- Growth of a $10,000 Investment June 30, 1990 to June 30, 2000 [CHART DATA] High-Yield Lehman Brothers Municipals Fund Municipal Bond Index 6/30/90 10000 10000 6/30/91 10881 10901 6/30/92 11857 12184 6/30/93 12791.4 13641.3 6/30/94 12912.9 13664.5 6/30/95 14016.9 14869.6 6/30/96 14979.9 15857 6/30/97 16310.1 17165.2 6/30/98 17667.1 18651.7 6/30/99 18228.9 19166.5 6/30/00 18199.4 19789.4 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. The line chart assumes a $10,000 investment on June 30, 1990, reinvestment of distributions, and compares fund performance to an index, which is an unmanaged group of fixed income securities that differs from the composition of any Stein Roe fund; it is not available for direct investment. Source: Lipper, Inc. 4 Questions & Answers -------------------------------------------------------------------------------- An Interview with Veronica M. Wallace, Portfolio Manager of Stein Roe Municipal Money Market Fund and SR&F Municipal Money Market Portfolio Q: Describe the economic environment as it related to the Fund during the period. WALLACE: Beginning in June of last year, the Federal Reserve Board (the Fed) began to raise interest rates in an effort to slow the rapid economic growth and preempt inflationary pressure. In fact, the Fed raised interest rates a total of five times during the period. This trend made it wise to proceed cautiously with purchases. The yearly trend of taxpayers liquidating assets to provide needed cash during tax time continued into May this year. This affected the variable rate securities market because issuers raised rates to attract buyers. The Fund was well positioned to take advantage of these rates. Fund Data Investment Objective: Stein Roe Municipal Money Market Fund seeks maximum current income exempt from federal income tax, consistent with capital preservation and maintenance of liquidity by investing principally in a diversified portfolio of short-term municipal securities. Fund Inception: March 15, 1983 Net Assets: $113.8 million Q: What strategy did you use to manage the Portfolio for the past year? WALLACE: During the period, we spent much of the time remaining liquid in anticipation of tightening by the Federal Reserve Board. We exercised caution in purchasing, allowing the average maturity of the Portfolio to gradually decrease. This served as the backdrop for the entire year. In keeping with this strategy, the bulk of investing during the period involved variable-rate securities, which are purchased at par and vary in interest rate. These gave the Portfolio daily and weekly liquidity. In addition, yields on variable-rate securities peaked as high as six percent in May, which aided Fund performance. Veronica M. Wallace [VERONICA WALLACE PHOTO] 5 Questions & Answers Continued -------------------------------------------------------------------------------- Q: What is your outlook for the Portfolio in the next few months? WALLACE: For the next few months, we will continue to exercise caution. With the possibility that the Fed will raise rates again in August balanced by a slowing in economic growth, we feel that the most prudent course of action is to wait and see what August brings, maintaining our current average maturity rate of 39.9 days. As always, however, we have our eyes open for attractive purchases that we believe should benefit the Fund. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. TOTAL RETURN INCLUDES REINVESTMENT OF INCOME. YIELDS FLUCTUATE AND ARE NOT GUARANTEED. An investment in the Portfolio is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. There can be no assurance that the $1.00 net asset value per share will be maintained. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio. The Advisor currently limits expenses to .70% of average net assets. Absent these limits, the 7-day current tax-free yield as of 6/30/00 would have been 6.49% and the total return would have been less. Tax-free income is exempt from federal taxes but may be subject to the alternative minimum tax. Current yield is net of all fees and represents annualization of dividends declared and payable to shareholders for the last seven days of investment. Portfolio composition is disclosed for SR&F Municipal Money Market Portfolio. Portfolio holdings are as of 6/30/00 and subject to change. Source of Lipper data: Lipper, Inc., a monitor of fund performance. 6 Portfolio Highlights -------------------------------------------------------------------------------- SR&F Municipal Money Market Portfolio SECURITY TYPE BREAKDOWN PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 --------------------------------- Variable-Rate Notes 77.7% 75.0% Tax-Exempt Bonds 8.7 14.8 Other Tax-Exempt Notes 6.7 4.3 Put Bonds 3.9 3.8 Tax & Revenue Anticipation Notes 1.6 1.4 Commercial Paper 1.4 0.7 --------------------------------- Total Investments 100.0% 100.0% PORTFOLIO STATISTICS PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------------------------------------------------------- 7-Day Dollar-Weighted Average Maturity 40 days 45 days 7-Day Current Yield* 3.91% 2.74% * Net of all fees and expenses and represents an annualization of dividends declared and payable to shareholders for the last seven days of investments. -------------------------------------------------------------------------------- MATURITY As of June 30, 2000 [CHART DATA] Greater than 299 Days 6.3% 180-299 Days 1.5% 90-179 Days 8.7% 30-89 Days 4.2% 1-29 Days 79.3% As of June 30, 1999 [CHART DATA] Greater than 299 Days 7.1% 180-299 Days 3.5% 90-179 Days 7.8% 30-89 Days 4.7% 1-29 Days 76.9% 7 Questions & Answers -------------------------------------------------------------------------------- An Interview with Bill Loring, Portfolio Manager of Stein Roe Intermediate Municipals Fund Q: How did the Fund perform between July 1, 1999 and June 30, 2000? A: Rising interest rates hurt municipal bond performance during the period, and the Fund's performance reflects the market's difficulties. The Fund returned 3.10% for the 12-month period ended June 30, 2000. This return outperformed the Lipper Intermediate Municipal Debt Fund peer group average return of 2.50%. The Lehman Brothers 10-Year Municipal Bond Average, a benchmark of bond market performance, returned 4.47% for the same period. Q: What changes did you make in response to rising interest rates? A: Like many investors, we believed that short-term interest rate hikes, which totaled 1.5% over the past 12 months, would ultimately slow economic growth, bringing it down to a non-inflationary level. Such a scenario would create a better environment for bonds, so we have generally structured the Fund's portfolio to take advantage of that favorable outcome. However, it appeared that it would take some time for the Fed's preemptive strikes against inflation to have the desired effect--perhaps a year or more. As a result, we chose to maintain the portfolio's basic structure. Bill Loring [BILL LORING PHOTO] Fund Data Investment Objective: Seeks a high level of total return, consisting of current income exempt from federal income tax, consistent with the preservation of capital. Fund Inception: October 9, 1985 Net Assets: $135.8 million Q: Did the condition of the bond market create any unique strategic opportunities? A: Rising interest rates and declining municipal bond prices created the opportunity to do some "tax swapping." We sold some of our poorer performing bonds at a loss, in order to offset current and future capital gains elsewhere in the portfolio. We then invested the proceeds from these sales in higher-yielding bonds when the opportunity arose. These tax swaps helped improve the Fund's tax efficiency, and also helped boost the Fund's 30-day SEC yield. As of June 30, 2000, the Fund's 30-day SEC yield was 4.65%. 8 Questions & Answers Continued -------------------------------------------------------------------------------- Q: Did you make any changes to the Fund's overall credit quality? A: We normally keep the bulk of the Funds' portfolio in the higher end of the quality spectrum. However, we may move the credit quality of the portfolio up or down according to whether higher- or lower-quality securities are more attractive during any given period. As interest rates rose during the period, investors demanded more yield for lower-rated bonds as compensation for the additional risk incurred. Wider spreads (which represent the difference between the yields of higher- and lower-rated bonds) caused the Fund's relatively small stake in lower-quality bonds to underperform. However, spreads did stabilize in the last few months of the period as demand for municipal bonds rose. If this trend continues, spreads should continue to narrow and performance of the high-yield sector should improve. Q: Where have you been finding the best values lately? A: We found some compelling values among discount bonds, which trade below their face value. We were able to purchase some discounts which were trading at prices we believed to be well below their fair market value, locking in attractive yields at the same time. We also found value among intermediate bonds in the 15- to 20-year maturity range. Yields on longer-maturity bonds generally show a greater increase in response to rising interest rates, so these bonds offered attractive yields when compared to other maturities. Q: What is your outlook for the year to come? A: At this time, we believe the Fed's interest rate increases will have their desired effect of slowing the economy and stifling inflation. If this is the case, interest rates are likely to stabilize and may eventually start to decline. This could be good news for investors in the bond market, because bonds generally perform better in periods of slower economic growth and declining interest rates. There may be favorable trends in the municipal market, as well. In recent years, strong economies and high tax revenues have allowed state and local entities to fund new projects with cash rather than debt, causing the supply of municipal bonds to dwindle. However, as the economy starts to slow, supply of municipal bonds should return to historical levels. Municipals should also continue to be priced attractively in comparison with their Treasury counterparts. 9 Questions & Answers Continued -------------------------------------------------------------------------------- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURNS WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Portfolio holdings are as of 6/30/00 and are subject to change. The Advisor currently limits expenses to 0.70% of average net assets. Fund return as of 6/30/00 would have been lower without the limit. Absent past limits, the 30-day SEC and tax-equivalent yields as of 6/30/00 would have been 7.70% and 4.50%, respectively. Income distributions are exempt from federal income taxes but may be subject to the federal alternative minimum tax and state and local taxes. Capital gains, if any, are also taxable. The Lehman Brothers 10 -Year Municipal Bond Index is an unmanaged group of investment-grade municipal bonds; it is not available for direct investment. Tax-exempt investing offers tax-free income, but also involves certain risks. The value of the Fund will be affected by interest rate changes and the creditworthiness of issues held in the Fund. The municipal bond management team seeks to identify problems and opportunities and react quickly to market changes. Source of Lipper data: Lipper, Inc. 10 Fund Highlights -------------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund TOP FIVE STATES PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------------------------------------------------------- New York 15.9% New York 10.7% Illinois 9.9 Georgia 10.0 Arizona 6.2 Illinois 9.9 Texas 5.9 Texas 8.6 Georgia 5.7 Arizona 6.7 PORTFOLIO STATISTICS PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------- Average Duration 6.2 years 5.9 years Average Weighted Maturity 9.4 years 8.6 years Average Weighted Coupon 6.12% 6.28% -------------------------------------------------------------------------------- MATURITY As of June 30, 2000 [CHART DATA] Greater than 15 Years 17.6% 10-15 Years 20.6% 5-10 Years 34.6% 0-5 Years 27.2% As of June 30, 1999 [CHART DATA] Greater than 15 Years 18.9% 10-15 Years 40.5% 5-10 Years 26.6% 0-5 Years 14.0% -------------------------------------------------------------------------------- PORTFOLIO QUALITY As of June 30, 2000 [CHART DATA] Cash equivalents 0.1% BBB and Below 8.1% A 17.9% AA 13.9% AAA 56.4% Non-rated 3.6% As of June 30, 1999 [CHART DATA] BBB and Below 9.7% A 14.5% AA 8.2% AAA 67.6% 11 Questions & Answers -------------------------------------------------------------------------------- An Interview with Brian Hartford and Bill Loring, Portfolio Managers of Stein Roe Managed Municipals Fund Q: How did the Fund perform during the 12 months ended June 30, 2000? A: Rising interest rates throughout the period were problematic for the Stein Roe Managed Municipals Fund. Although the Fund returned 1.86% for the 12 months ended June 30, 2000, it outperformed its peers in a volatile market environment. The average return of the Fund's Lipper General Municipal Debt Fund peer group was 0.98% for the period. The Lehman Brothers Municipal Bond Index, a benchmark of market performance, returned 3.25% for the same period. Q: Why did interest rates rise during the period? A: Unprecedented economic growth in the United States triggered worries of rising inflation. In a continued attempt to slow the economy and thereby avoid inflationary pressures, the Federal Reserve Board (the Fed) raised short-term interest rates five times during the period, for a total increase of 1.5%. Because bond prices fall when interest rates rise, the prices of both Treasury bonds and municipal bonds suffered in response to repeated rate hikes. Brian Hartford [BRIAN HARTFORD PHOTO] Bill Loring [BILL LORING PHOTO] Fund Data Investment Objective: Seeks a high level of total return consistent with prudent risk, consisting of current income exempt from federal income tax and opportunities for capital appreciation. Fund Inception: February 23, 1977 Net Assets: $458.2 million Q: How did bond yields react in this environment? A: Higher interest rates increase the cost of doing business for entities that borrow money, and it is generally held that more financially sound entities can withstand this strain better than those that have more risk (i.e., have lower credit ratings). With the sustained rise in interest rates over the past year, investors have demanded ever-higher yields from low-rated or non-investment grade bonds. The general outcome was a widening of the difference, or "spread," between the yields of high- and low-quality bonds. Wider yield spreads translated 12 Questions & Answers Continued -------------------------------------------------------------------------------- into additional income from the Fund's high-yield bonds. Q: What factors helped the Fund outpace its peers? A: A shorter-than-average duration allowed the Fund to perform better than its peers during the period. Duration measures a fund's sensitivity to changes in interest rates. The shorter a fund's duration, the less its share price will fall when interest rates rise (and vice versa). Q: Is there a "bright side" to the bond market's recent slump? A: Rising interest rates and weaker municipal bond prices allowed us to engage in "tax swapping." We sold some of the Fund's bonds at a loss to offset current and future capital gains incurred elsewhere in the Portfolio. When the market presented us with an attractive opportunity, we invested the proceeds from these sales in higher-yielding bonds. These tax swaps helped improve the Fund's tax efficiency and also helped boost the Fund's 30-day SEC yield, which was 5.14% as of June 30, 2000. In addition, we took a defensive position with the Fund's duration, in order to reduce the impact of advancing interest rates. Q: Where have you been finding the best values lately? A: We've found some attractive values among higher-yielding, lower-quality municipal bonds. We are extremely selective in choosing high-yield bonds, but in the past year we encountered some opportunities to add holdings which we believe have excellent potential. We've also identified some attractive values among discount bonds, which trade below their par (face) value. Because of increasing interest rates, discount bonds generally posted larger losses than par and premium bonds, which trade above their face value. Given their poor performance during much of 1999, we were able to add some discount bonds to the Fund at very attractive prices. Q: What is your outlook for the next fiscal year? A:Although the past year has been a difficult period for municipal bonds, our outlook for the future is quite positive. The Federal Reserve Board continues to be proactive in the battle against higher inflation. It appears that some of the issues which most concerned the Fed, such as higher energy prices and mounting employment costs, have worked their way through the system and no longer pose major threats. Productivity gains continue, and excess production capacity worldwide should help to keep prices down. We expect to see more indications of slowing in the coming months. 13 Questions & Answers Continued -------------------------------------------------------------------------------- If the economy does lose some of its vigor, interest rates could fall, allowing bond prices to rally. We see some favorable trends in the municipal market, as well. In recent years, strong economies and high tax revenues have allowed state and local entities to fund new projects with cash rather than debt, causing the supply of municipal bonds to dwindle. However, as the economy starts to slow, supply of municipal bonds should return to historical levels. Municipals should also continue to be priced attractively in comparison with their Treasury counterparts. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Portfolio holdings are as of 6/30/00 and are subject to change. Income distributions are exempt from federal income taxes but may be subject to the federal alternative minimum tax and state and local taxes. Capital gains, if any, are also taxable. The Lehman Brothers Municipal Bond Index is an unmanaged group of investment-grade municipal bonds; it is not available for direct investment. Tax-exempt investing offers current tax-free income, but also involves certain risks. The value of the Fund will be affected by interest rate changes and the creditworthiness of issues held in the Fund. The municipal bond management team seeks to identify opportunities and react quickly to market changes. Source of Lipper data: Lipper, Inc. 14 Fund Highlights -------------------------------------------------------------------------------- Stein Roe Managed Municipals Fund TOP FIVE STATES PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------------------------------------------------------- Georgia 12.5% Georgia 10.5% Illinois 9.7 Illinois 10.4 Massachusetts 9.4 Massachusetts 9.9 New York 6.6 New York 9.2 California 5.9 Washington 6.0 PORTFOLIO STATISTICS PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------- Average Duration 9.4 years 7.8 years Average Weighted Maturity 16.1 years 16.3 years Average Weighted Coupon 5.77% 5.90% -------------------------------------------------------------------------------- MATURITY As of June 30, 2000 [CHART DATA] Greater than 25 Years 12.4% 20-25 Years 18.5% 15-20 Years 21.1% 10-15 Years 27.8% 5-10 Years 12.8% Less than 5 Years 7.4% As of June 30, 1999 [CHART DATA] Greater than 25 Years 14.3% 20-25 Years 17.0% 15-20 Years 20.2% 10-15 Years 29.6% 5-10 Years 10.2% Less than 5 Years 8.7% -------------------------------------------------------------------------------- PORTFOLIO QUALITY As of June 30, 2000 [CHART DATA] Non-rated 4.6% Cash equivalents 0.5% BBB and Below 9.8% A 20.2% AA 22.0% AAA 42.9% As of June 30, 1999 [CHART DATA] BBB and Below 11.2% A 25.0% AA 29.2% AAA 34.6% 15 Questions & Answers -------------------------------------------------------------------------------- An Interview with Maureen Newman, Portfolio Manager of Stein Roe High-Yield Municipals Fund and the SR&F High-Yield Municipals Portfolio Q: How did the Fund perform during the 12-month period ended June 30, 2000? Q: In an extremely difficult year for the municipal bond market, the Stein Roe High-Yield Municipal Fund had a total return of negative 0.16% for the 12-month period ended June 30, 2000. However, the Fund performed relatively well compared to its Lipper peers, as the 12-month return on the Lipper High-Yield Municipal Debt Fund average was negative 2.16%. The Lehman Brothers Municipal Bond Index, a broad gauge of the municipal market's performance, returned 3.25% for the same period. Q: What factors helped the Fund to keep pace with its peers? A: The Portfolio's performance advantage was fueled in large part by the strong performance of several individual holdings. We entered into an agreement to sell the underlying assets of a defaulted security, and received a better-than-expected price on the sale, which also helped the Fund to remain competitive. Additionally, the Fund was helped by the fact that it maintained a low weighting in lower-quality securities and hospital bonds, which underperformed during the period. Maureen Newman [MAUREEN NEWMAN PHOTO HERE] Fund Data Investment Objective: Seeks a high level of total return consisting of current income exempt from ordinary federal income tax and opportunities for capital appreciation. Fund Inception: March 5, 1984 Net Assets: $253.8 million Q: What caused the Fund's weak return for the period? A: The weak return was largely attributable to rising interest rates throughout the period. Record economic growth in the United States and the recovery of several foreign economies spawned concerns that inflationary increases could be just around the corner. In an effort to slow the economy and head off inflation, the Federal Reserve Board (the Fed) increased key short-term interest rates five times during the 12-month period, for a total increase of 1.5%. Both municipal bonds and Treasurys experienced price declines 16 Questions & Answers Continued -------------------------------------------------------------------------------- as a result of the market's reaction to these interest rate hikes. However, municipal bonds are less volatile than Treasurys, and thus experienced smaller price drops than Treasury bonds as interest rates rose. Q: Did you make any changes in response to rising interest rates? A: A portfolio's price sensitivity to interest rate changes is measured by its duration. The shorter the duration, the less the Fund's value is impacted by interest rate fluctuations, and vice versa. Throughout the 12-month period, we maintained a neutral duration for the Fund. This means that the Portfolio was neither more nor less sensitive to rising interest rates than the overall high-yield market. I chose this stance because it was unclear how interest rate hikes would be interpreted -- either as preemptive measures to guard against inflation or as an indication that inflationary pressures had already taken hold. As it turns out, the market reacted in a generally negative way to the rate increases, so the Portfolio's performance was not adversely impacted by this neutral stance. Q: Were there any sectors that had a significant impact on the Fund's performance? A: During the first half of the fiscal year, there were some attractive values in the hospital sector. The industry had come under pressure due to a combination of cutbacks in Medicare reimbursement, some well-publicized problems with scattered facilities across the country, and the pullback on the part of some municipal bond insurers from lower-rated hospitals. That environment produced selective opportunities for the Portfolio to add high-yielding hospital bonds at attractive prices. Since we were underweighted in this underperforming sector, the Fund's relative performance was helped. Q: What is your outlook for the year ahead? A: In the months to come, we anticipate stronger performance in the bond market. We believe the Fed's efforts to rein in the economy will be successful, and that economic growth will begin to slow. If this anticipated slowdown does occur, we believe that interest rates will stabilize, 17 Questions & Answers Continued -------------------------------------------------------------------------------- creating an environment in which the bond market could rally. However, there are still strong indications that things could go either way. Consumer confidence and spending remain very high. Workers continue to demand higher wages. The prices of oil and other commodities continue to rise. Any of these factors could trigger higher inflation, which would have a negative impact on the bond market. As for high-yield municipal bonds, we believe they will perform well relative to their investment-grade counterparts. The supply and demand imbalance which caused them to underperform during the period should subside in the months to come. In addition, we expect municipal bonds to remain an attractive alternative to taxable fixed-income securities for investors in higher tax brackets. For example, the Fund's 30-day SEC yield was 5.38% as of June 30, 2000, which translates to a tax-equivalent yield of 8.91% for investors in the highest 39.6% federal tax bracket. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Portfolio holdings are disclosed as a percentage of SR&F High-Yield Municipals Portfolio as of 6/30/00 and are subject to change. Investing in high-yield bonds involves greater credit risks than investing in higher-quality bonds. Income distributions are exempt from federal income taxes but may be subject to the federal alternative minimum tax and state and local taxes. Capital gains, if any, are also taxable. The Lehman Brothers Municipal Bond Index is an unmanaged group of investment-grade municipal bonds; it is not available for direct investments. High-yield investing offers the potential for high income and attractive total returns, but also involves certain risks. These include credit risks associated with lower-rated bonds, changes in interest rates, and certain risks associated with foreign investments. Source of Lipper data: Lipper, Inc. 18 Portfolio Highlights -------------------------------------------------------------------------------- SR&F High-Yield Municipals Portfolio TOP FIVE STATES PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------------------------------------------------------- Pennsylvania 10.5% Indiana 11.9% Florida 9.3 Pennsylvania 11.2 Indiana 9.1 Colorado 8.0 Colorado 6.2 Texas 5.6 Texas 5.4 New York 4.5 PORTFOLIO STATISTICS PORTFOLIO PORTFOLIO JUNE 30, 2000 JUNE 30, 1999 -------------------------------- Average Duration 7.4 years 7.9 years Average Weighted Maturity 16.9 years 17.1 years Average Weighted Coupon 6.65% 6.68% -------------------------------------------------------------------------------- MATURITY As of June 30, 2000 [CHART DATA] Greater than 25 Years 21.0% 20-25 Years 20.6% 15-20 Years 21.4% 10-15 Years 12.8% 5-10 Years 10.3% Less than 5 Years 13.9% As of June 30, 1999 [CHART DATA] Greater than 25 Years 23.4% 20-25 Years 18.4% 15-20 Years 18.8% 10-15 Years 13.2% 5-10 Years 12.3% Less than 5 Years 13.9% -------------------------------------------------------------------------------- PORTFOLIO QUALITY As of June 30, 2000 [CHART DATA] AAA 16.3% AA 8.8% A 16.1% Cash equivalents 1.6% BBB 22.1% BB 8.7% Non-rated 26.4% As of June 30, 1999 [CHART DATA] AAA 18.4% AA 6.9% A 19.5% BBB 23.3% BB and Below / Not Rated 31.9% 19 SR&F Municipal Money Market Portfolio -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands) MUNICIPAL SECURITIES 102.6% Par Value -------------------------------------------------------------------------------- ALABAMA - 1.3% Huntsville: Series 1998 D, 4.000% 11/1/00..................... $ 600 $ 600 Series 1998 A, 4.000% 11/1/00..................... 1,000 1,000 ------- 1,600 ARIZONA - 1.8% Phoenix Industrial Development Authority, Spring Air Mattress Co., Series 1999, VRDB 5.000% 04/01/2019 .............. 1,870 1,870 Scottsdale, Series 1992 C, 7.750% 7/1/00............. 450 450 ------- 2,320 CALIFORNIA - 0.8% California Higher Education Loan Authority, Series 1994 A, 4.700% 07/01/2005 (a)............................. 1,000 1,000 ------- COLORADO - 4.1% Colorado Springs, Catalano Family L.L.P., Series 1998, VRDB 4.950% 07/01/2018 (a)....................... 1,145 1,145 Colorado State, 5.000% 6/27/01....................... 1,000 1,006 Lowry Economic Redevelopment Authority, Series 1998 B, VRDB 4.700% 12/1/20............................... 1,000 1,000 SBC Metropolitan District Colorado, 4.000% 12/7/29... 2,000 2,000 ------- 5,151 DISTRICT OF COLUMBIA - 0.8% District of Columbia Housing Finance Agency, Series 2000 E, 4.600% 7/23/01.................................... 1,000 1,000 ------- GEORGIA - 2.1% Douglas County, Series 1995, 4.375% 11/1/00.......... 400 400 Gwinnett County Development Authority, Price Co., Inc., Series 1995, VRDB 4.950% 06/01/2010 (a)........................ 2,200 2,200 ------- 2,600 IDAHO - 0.8% State Housing & Finance Association, Balmoral Apartments Project, Series 2000, 4.800% 5/1/32........................ 1,000 1,000 ------- ILLINOIS - 25.0% ABN AMRO Munitops Certificates Series 1998-14, VRDB 4.800% 10/4/06 (b)........................... 1,000 1,000 Chicago, Archer Court Apartments, Series 1999 B, 4.820% 6/1/19...................... 1,010 1,010 Chicago, Crane Carton Co., Series 1992, 4.850% 6/1/12..................................... 2,150 2,150 Chicago, De LaSalle Institute, Series 1997, 4.850% 4/1/27..................................... 900 900 Chicago, Midway Airport, VRDB Series 1999, 3.600% 1/1/29..................................... 1,960 1,960 Chicago, PS Greetings, Inc., Series 1999, 4.900% 5/1/24..................................... 1,420 1,420 Chicago Single Family Mortgage, Series 2000 B, 4.400% 3/1/01..................................... 1,000 1,000 Chicago, Stockyards Redevelopment Project, Series 199 A, VRDB 4.850% 12/1/11............................... 1,470 1,470 De Kalb County Community United School, District No.428, Series 1999, 4.100% 12/1/00....................... 1,205 1,205 Glendale Heights, Judy LLC IDRSeries 1998, VRDB 4.950% 8/1/28..................................... 1,540 1,540 Lake County Community College District No.532, Series 1999 B, 9.000% 11/1/00.................................... 805 818 Melrose Park, Ninos Enterprises, Inc., Series 1999, VRDB 5.000% 12/1/24.................. 3,500 3,500 20 SR&F Municipal Money Market Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- ILLINOIS (CONTINUED) Morton, Morton Welding Co., Inc., Series 1996 A, VRDB 5.050% 04/01/2016 (a).................................... $ 870 $ 870 Northbrook Park District, Series 1999 A, 4.850% 11/1/00.................................... 300 300 Palatine, Series 1998, 4.800% 12/1/28................ 1,000 1,000 Phillips Brothers, Inc., Series 1998, 4.950% 6/1/18 (a)................................. 1,350 1,350 Quad Cities Regional Economic Development Authority, Steel Warehouse Quad Cities, Series 1998, VRDB 4.950% 12/01/2013 (a)............................. 2,200 2,200 Sauget, Monsanto Co., Series 1996, 4.900% 9/1/14..... 2,200 2,200 Springfield IDR Oak Terrace Joint Venture L.P., Series 1999, 4.800% 12/01/2025........................................ 1,000 1,000 State Development Finance Authority, Wheaton Academy, Series 1998, 4.800% 10/1/28.................................... 1,000 1,000 State Development Finance Authority, Rest Haven Illiana Christian Convalescent Home, Series 1997, 4.800% 1/1/27..................................... 1,000 1,000 State Educational Facilities Authority, Aurora University, Series 1989, 4.850% 1/1/09..................................... 1,400 1,400 State Health Facilities Authority, University of Chicago, Series 1985 A, 4.150% 8/1/15..................................... 1,000 1,000 ------- 31,293 INDIANA - 10.7% Elkhart, Adorn, Inc., Series 1995, VRDB 5.100% 8/1/05..................................... 1,200 1,200 Franklin, Lakeview Apartments, Series 1994, VRDB 4.830% 09/01/2030 (a)............................. 2,789 2,789 Kokomo, Village Community Partners IV L.P., Series 1995, VRDB 4.830% 09/01/2030 (a)........................ 2,940 2,940 Marion County, Indiana Weslyan University, Series 2000, VRDB 4.850% 6/1/30..................................... 1,500 1,500 Plymouth, Hillcrest Apartments, Series 1998 A, VRDB 4.900% 4/1/28 (a)................................. 1,000 1,000 St. Joseph County, Pine Oaks, Series 1997 A, VRDB 4.900% 6/1/27.................................... 2,365 2,365 State Development Finance Authority, Carr Metal Products, Inc., Series 1999, VRDB 5.250% 1/1/09................... 1,300 1,300 State University, Series 1990 G, 7.000% 8/1/10....... 300 314 ------- 13,408 IOWA - 12.1% Clinton IDR Sethness Products Co., Series 1996, VRDB 4.850% 09/01/2011 (a)............................. 3,700 3,700 Dallas Center Grimes Community School District, Series 2000, 5.000% 5/1/01..................................... 260 261 Muscatine County, Monsanto Co., Series 1992, VRDB 4.900% 10/1/07.................................... 2,100 2,100 Scott County, Nichols Aluminum Project, Series 1999, VRDB 4.900% 6/1/14..................................... 2,800 2,800 State Higher Education Loan Authority, St. Ambrose University: Series 1995, VRDB 4.850% 2/1/05................... 1,100 1,100 Series 1999, 4.750% 10/1/09....................... 295 295 American Institute of Business, Series 1998, 4.850% 11/1/13.................................... 1,700 1,700 State, Iowa School Corp. Warrants, Series 2000-2001 A, 5.500% 6/22/01.................................... 1,000 1,009 Woodbury County, Siouxland Medical Educational Foundation, Series 1996, VRDB 4.800% 11/1/16.................. 2,150 2,150 ------- 15,115 KANSAS - 1.1% Kansas City Industrial Development Authority, Lanter Co., Series 1987 A, VRDB 4.950% 2/1/03................................ 515 515 Olathe, Garmin International, Inc., Series 1995, VRDB 3.450% 01/01/2025 (a)........................ 800 800 ------- 1,315 21 SR&F Municipal Money Market Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- KENTUCKY - 3.4% Covington, Whitle Castle Distributing, Inc., Series 1991, VRDB 4.950% 04/01/2006 (a).................................... $ 2,830 $ 2,830 Shelby County, Roll Forming Corp., Series 1996, VRDB 4.950% 04/01/2016 (a).................................... 1,460 1,460 ------- 4,290 LOUISIANA - 0.4% State Housing Finance Agency, Series 2000 C, 5.250% 6/1/01..................................... 500 500 ------- MARYLAND - 1.1% Anne Arundel County, Baltimore Gas & Electric Co., Series 1988, 4.250% 12/1/18 (a)................................ 1,000 1,000 Baltimore, Series 2000 A, 4.750% 7/1/01.............. 365 366 ------- 1,366 MICHIGAN - 2.8% ABN AMRO Munitops Certificates Series 1998-13, VRDB 4.770% 10/4/06 (b)........................... 2,000 2,000 Kentwood, Series 2000, 4.350% 5/1/01................. 495 495 Muni Bond Authority, Series 2000B-1, 5.000% 7/2/01..................................... 1,000 1,006 ------- 3,501 MINNESOTA - 0.8% Minnesota Housing Finance Authority, Series 2000, 4.350% 5/1/01..................................... 1,000 1,000 ------- MISSOURI - 2.8% Jefferson County Industrial Development Authority, Sinclair & Rush, Inc., Series 1994 A, VRDB 4.950% 11/01/2009 (a)......... 3,445 3,445 ------- MONTANA - 1.2% Montana State, Series 2000 D, 5.250% 8/1/00.......... 1,460 1,461 ------- NEW MEXICO - 0.8% New Mexico State, Series 1995 B, 4.400% 7/1/00....... 1,000 1,000 ------- NEVADA - 0.8% Nevada State, Series 1990, 7.000% 8/1/05............. 1,000 1,032 ------- OHIO - 0.9% Environment Improvement Authority, U.S. Steel Corp. Project, VRDB 4.540% 12/1/01............................... 400 400 Hancock County, Crystal Glen Apartments Project, Series 1998 B, VRDB 4.950% 01/01/2031(a)......................... 750 750 ------- 1,150 PENNSYLVANIA - 1.9% Bucks County Industrial Development Authority, USX Corp., Series 1995, 4.250% 11/1/17....................... 1,000 1,000 Quakertown General Authority, Series 1996 A, VRDB 3.200% 7/1/26................................ 1,428 1,428 ------- 2,428 SOUTH CAROLINA - 1.9% Newberry County, Series 1999, 4.250% 9/1/00.......... 310 310 South Carolina Economic Development Authority, Specialty Equipment Co., Inc., Series 1995, 3.600% 11/01/2010 (a).......... 2,045 2,046 ------- 2,356 SOUTH DAKOTA - 0.2% South Dakota State Health & Educational Facilities Authority, Prince of Peace Hospital, Series 1993, 4.600% 7/1/00........ 260 260 ------- 22 SR&F Municipal Money Market Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TENNESSEE - 3.5% Rutherford County Industrial Development Board, Farmers CoOp Project, Series B, VRDB 4.950% 11/1/14..................... $ 1,000 $ 1,000 Wilson County Industrial Development Board, Briskin Manufacturing Co., Series 1999, VRDB 5.000% 7/1/29................... 3,355 3,355 ------- 4,355 TEXAS - 7.4% Brownsville Industrial Development Corp., Tella Tool & Manufacturing Co., Series 2000, VRDB 4.950% 6/1/20................... 1,300 1,300 Fort Bend County Industrial Development Corp., W.W.Grainger, Inc., Series 1989, VRDB 4.900% 12/1/02.................. 1,110 1,110 Garland, Series 1992 B, 5.700% 8/15/00............... 400 401 Grand Prarie Industrial Development Authority, Series 1986, VRDB 5.150% 12/1/11............................... 900 900 Gulf Coast Waste Disposal Authority: Amoco Oil Co., Series 1997, 4.900% 01/01/26 (a)... 100 100 Monsanto Co.: Series 1994, 4.900% 4/1/13..................... 900 900 Series 1996, 4.900% 7/1/01 (a)................. 300 300 Harris County General Obligations Corporate Notes Series: 4.500% 8/3/00..................................... 750 750 4.650% 8/3/00..................................... 100 100 Harris County Industrial Development Authority, Precision General, Inc., Series 1991, VRDB 4.950% 10/01/2016 (a)........... 2,060 2,060 Robertson County Industrial Development Corp., Sanderson Farms, Inc., Series 1995, VRDB 4.900% 11/1/05.................. 300 300 Texas State, Series 1999 A, 4.500% 8/31/00........... 1,000 1,001 ------- 9,222 UTAH - 0.6% State Municipal Power Agency, Series 1993 A, 4.900% 7/1/00..................................... 750 750 ------- WASHINGTON - 1.7% King County School District No.414, Series 1990, 7.000% 12/1/02.................................... 1,000 1,014 Washington Housing Finance Commission, Hamilton Place Senior Living, Series 1996 A, VRDB 4.850% 07/01/2028 (a)......... 1,110 1,110 ------- 2,124 WISCONSIN - 9.2% Chase, Belgiosio Cheese, Inc., Series 1998, 4.950% VRDB 04/01/2011 (a)........................ 1,000 1,000 Chippewa Falls Area Unified School District, Series 2000, 5.850% 4/1/01........................ 215 216 Fond du Lac, Brenner Tank, Inc., Series 1994, VRDB 4.950% 11/01/2004 (a).......................... 2,125 2,125 Holland, White Clover Dairy, Inc., Series 1994, VRDB 4.950% 05/01/2005 (a)................................... 2,275 2,275 Kenosha, Monarch Plastics, Inc., Series 1994, 4.950% VRDB 12/01/2009 (a)............................... 1,750 1,750 Monroe Joint Venture, Inc., Series 2000, 4.900% 1/1/30..................................... 500 500 Outagamie County, Series 1999, 4.000% 10/1/00........ 365 365 Racine, Series 1999 B, 4.600% 12/1/00................ 690 692 Wisconsin State Health & Educational Facilities Authority, Grace Lutheran Foundation, Series 1999, VRDB 4.950% 7/1/14....... 2,555 2,555 ------- 11,478 WEST VIRGINIA - 0.6% State, Series 1992, 5.500% 4/1/01.................... 800 807 ------- 23 SR&F Municipal Money Market Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (cost of $128,327) (c)............................ 128,327 -------------------------------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES - (2.6)% ............. (3,248) ------- NET ASSETS - 100.0%.................................. $125,079 ======== -------------------------------------------------------------------------------- NOTES TO INVESTMENT PORTFOLIO: -------------------------------------------------------------------------------- (a) Security is subject to federal alternative minimum tax. At June 30, 2000, the aggregated amortized cost of these securities represented 33.8% of total net assets. (b) Represents private placement securities issued under Rule 144A, which are exempt from the registration of the Securities Act of 1933. These securities are generally issued to qualified institutional buyers, such as the Portfolio, and any resale by the Portfolio must be an exempt transaction, normally to other qualified institutional investors. At June 30, 2000, the aggregate value of the Portfolio's private placement securities was $3,000 which represented 2.4% of net assets. (c) At June 30, 2000, the cost of investments for financial reporting and federal tax purposes was identical. Variable rate demand bonds (VRDB) are securities whose yields are periodically reset at levels that are generally comparable to tax-exempt commercial paper. These securities are payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit with a major bank. Acronym Name ---------- ------------ IDR Industrial Development Revenue See accompanying Notes to Financial Statements. 24 Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands) MUNICIPAL BONDS - 98.2% Par Value -------------------------------------------------------------------------------- EDUCATION - 1.7% EDUCATION - 0.4% WV State University, Series 2000 A (a) 4/1/15..... $ 1,250 $ 539 STUDENT LOAN - 1.3% ME State Educational Loan Authority, Series 1992 A-2, 6.65% 12/1/02.................................. 515 526 TX State Higher Education Coordinating Board, Texas College, Series 1991, 7.45% 10/1/06..................... 1,280 1,312 ------- 1,838 HEALTHCARE - 8.0% HOSPITAL - 7.7% CA State Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.13% 12/1/19........... 1,250 1,261 LA State Public Facilities Authority, Touro Infirmary, Series 1999, 5.20% 8/15/10.................................. 755 682 MA State Health & Educational Facilities Authority, Daughters of Charity, Series 1990 C, 7.25% 7/1/00................................... 200 200 NJ State Health Care Facilities Financing Authority, Christ Hospital, Series 1994, 7.00% 7/1/03...................... 1,730 1,832 NY State Dormitory Authority, Mount Sinai Health Obligation Group, Series 2000, 6.50% 7/1/25...................... 400 412 PA Dauphin County General Authority, Hapsco Group, Inc., Series 1992 B, 5.80% 7/1/02....... 1,600 1,632 SC Sumter County, Tuomey Regional Medical Center, Series 1991, 6.63% 11/15/04............ 1,040 1,111 TN Knox City Health Educational & Housing Facilities Board, Baptist Health Systems of East Tennessee, 5.50% 4/15/11.................. 2,000 2,016 WV State Hospital Finance Authority, Series 2000 A, 6.75% 9/1/22.................... 1,350 1,355 ------- 10,501 NURSING HOME - 0.3% MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.40% 3/1/08...................... 500 459 HOUSING - 0.6% SINGLE FAMILY - 0.6% CA State Housing Finance Agency, Series B-1, 5.90% 2/1/04................................... 765 788 OTHER - 10.5% POOL/BOND BANK - 1.7% IN Indianapolis Local Public Improvement Bond Bank, Series 1992 D, 6.50% 2/1/06.................... 2,100 2,249 REFUNDED/ESCROWED (B) - 8.8% AZ Maricopa County, Samaritan Health Services, Series 1978, 7.63% 1/1/08...................... 1,935 2,122 IL Chicago, Skyway Toll Bridge, Series 1994, 6.75% 1/1/17................................... 1,500 1,619 IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion Project, Series 1992 A: 7.25% 6/15/05.................................. 385 424 7.25% 6/15/05.................................. 1,145 1,266 25 Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- OTHER - CONT. REFUNDED/ESCROWED (B) - (CONTINUED) IN State Toll Road Commission, Series 1980, 9.00% 1/1/15................................... $ 2,240 $ 3,014 MA State Health & Educational Facilities Authority, Carney Hospital, Series 1994 D, 6.00% 7/1/09.................... 1,000 1,056 MI State Hospital Finance Authority, Daughters of Charity and Providence, Series 1991, 6.50% 11/1/01.................................. 585 595 PA Westmoreland County Municipal Authority, Municipal Services, Series 1993-C, (a) 8/15/17........................................ 1,250 464 SC Piedmont Municipal Power Agency, Series 1991 A, 6.13% 1/1/07........................... 335 358 SC Sumter County, Tuomey Regional Medical Center, Series 1991, 6.63% 11/15/04.................... 960 1,028 ------- 11,946 OTHER REVENUE - 0.7% RECREATION - 0.7% OR State Department of Administrative Services, Series 1999 B, 5.25% 4/1/15................................... 1,000 984 RESOURCE RECOVERY - 3.3% DISPOSAL - 1.7% IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.05% 1/1/10...................... 615 526 MI State Strategic Fund, United Waste Systems, Inc., Series 1995, 5.20% 4/1/10................................... 1,000 864 PA Westmoreland County Industrial Development Authority, Mid-America Waste Systems, Inc., Series 1993, 5.10% 5/1/18...................... 1,000 871 ------- 2,261 RESOURCE RECOVERY - 1.6% NJ Bergen County Utilities Authority, Series 1992 A, 6.25% 6/15/06.................... 2,000 2,140 TAX-BACKED - 39.2% LOCAL GENERAL OBLIGATIONS - 17.6% AZ Cochise County Unified School District No. 68, Sierra V Project, Series 1990 B, 9.00% 7/1/01.................... 1,115 1,164 AZ Maricopa County Unified School District No. 97, Series 1996 A, 6.25% 7/1/06................................... 1,750 1,879 AZ Pima County, Series 1992, 6.30% 7/1/02......... 2,500 2,582 AZ Tempe Unified School District No. 213, Series 1994, 7.00% 7/1/08...................... 500 568 CA Union Elementary School District, Series 1999 A (a) 9/1/20....................... 1,000 310 CA Yuba City Unified School District, Series 2000 (a) 9/1/16......................... 1,700 691 CO Adams County, School District No. 12, Series 1995 A (a) 12/15/12..................... 1,300 643 HI Honolulu City & County, Series 1990 A, 7.35% 7/1/06................................... 1,000 1,123 IL Chicago Board of Education, Series 1996, 6.25% 12/1/12.................................. 2,100 2,296 LA Orleans Levee District, Series 1995 A, 5.95% 11/1/07.................................. 2,200 2,331 NY New York City: Series 1996 C, 5.70% 2/1/06.................... 1,000 1,036 Series 1997 H, 6.00% 8/1/17.................... 2,000 2,042 Series 1997 J, 6.13% 8/1/11.................... 5,000 5,281 OH Olmsted Falls School District, Series 1999, 5.50% 12/1/04.................................. 420 408 WA Snohomish County School District No. 002, Series 1993, 7.00% 12/1/02..................... 1,500 1,579 ------- 23,933 26 Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TAX-BACKED - CONT. SPECIAL NON-PROPERTY TAX - 6.0% IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion Project,Series 1992 A, 7.25% 6/15/05.................................. $ 1,220 $ 1,340 MI State, Underground Storage Tank Financial Assistance, Series 1996 I, 6.00% 5/1/05........ 4,000 4,201 NM Santa Fe, Series 1996 A, 6.50% 6/1/06.......... 1,555 1,683 NY State Local Government Assistance Corp., Series 1993 E, 5.25% 4/1/16................................... 1,000 978 ------- 8,202 SPECIAL PROPERTY TAX - 3.2% FL Stoneybrook Community Development District, Series 1998 B, 5.70% 5/1/08.................... 2,870 2,777 MO State Development Finance Board, Midtown Redevelopment Project, Series 2000 A, 6.00% 4/1/14................................... 1,500 1,579 ------- 4,356 STATE APPROPRIATED - 7.8% KY State Turnpike Authority, Series 1992, 5.80% 1/1/04................................... 2,500 2,575 MO State, Regional Convention & Sports Facility Project, Series 1991 A, 6.60% 8/15/03.......... 830 871 NY Metropolitan Transportation Authority, Series 1993 O, 5.50% 7/1/17.................... 1,000 989 NY State Dormitory Authority, Series 1995 A, 6.50% 5/15/05.................................. 1,000 1,067 NY State Dormitory Authority, City University of New York, Series 1995, 5.63% 7/1/16......... 5,000 5,125 ------- 10,627 STATE GENERAL OBLIGATIONS - 4.6% MA Massachusetts Bay Transportation Authority, Series 1994 A, 7.00% 3/1/07.................... 2,250 2,515 MA State College Building Authority, Series 1994 A, 7.50% 5/1/14.................... 500 601 TX State, Series 1998 B, 5.13% 10/1/14............ 3,250 3,149 ------- 6,265 TRANSPORTATION - 8.6% AIR TRANSPORTATION - 2.1% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000A, 6.75% 11/1/11.................... 1,200 1,226 OH Cleveland, Series 1999, 5.70% 12/1/19.......... 2,000 1,684 ------- 2,910 AIRPORT - 4.7% GA Atlanta, Airport Facilities, Series 1996, 6.50% 1/1/07 (e)............................... 4,000 4,341 IL Chicago, Midway Airport, Series 1994 A, 5.70% 1/1/04................................... 1,000 1,026 IN State Transportation Finance Authority, Airport Facilities Lease, Series 1992 A, 6.50% 11/1/07................... 1,040 1,088 ------- 6,455 TOLL FACILITIES - 1.0% CO E-470 Public Highway Authority, Series 2000 B, (a) 9/1/18............................. 1,000 342 OH State Turnpike Commission, Series 1998 A, 5.50% 2/15/24.................................. 1,000 981 ------- 1,323 TRANSPORTATION - 0.8% CO State Department of Transportation, Series 2000, 6.00% 6/15/12..................... 1,000 1,066 UTILITY - 25.6% INDEPENDENT POWER PRODUCER - 0.4% MI Midland County Economic Development Corp., Series 2000, 6.88% 7/23/09..................... 500 502 27 Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- UTILITY - CONT. INVESTOR OWNED - 1.9% NH State Business Finance Authority, United Illuminating Co., Series 1999, 5.40% 12/1/29..................... $ 1,000 $ 999 NV Clark County, Southern California Edison Co., Series 1990 A, 7.13% 6/1/09.................... 1,500 1,542 ------- 2,541 JOINT POWER AUTHORITY - 7.4% GA Municipal Electric Authority Power, Series 1997 Y, 6.40% 1/1/13........................... 3,000 3,305 NC Eastern Municipal Power Agency, Series 1993 C, 5.50% 1/1/07........................... 3,100 3,060 NC State Municipal Power Agency, Catawba No. 1, Series 1992, 5.90% 1/1/03...................... 1,500 1,538 SC Piedmont Municipal Power Agency, Series 1991 A, 6.13% 1/1/07.................... 2,015 2,137 ------- 10,040 MUNICIPAL ELECTRIC - 1.1% TX Lower Colorado River Authority, Series 1999 A, 5.50% 5/15/21................... 1,500 1,448 WATER & SEWER - 14.8% AR Beaver Water District, Benton & Washington Counties, Series 1994, 6.00% 11/15/04 (e)................ 2,580 2,704 CA Metropolitan Water District, Series 1998 A, 4.75% 7/1/22................................... 2,000 1,745 DE State Economic Development Authority, Wilmington Suburban Water Corp., Series 1992 B, 6.45% 12/1/07................... 1,165 1,251 IL Chicago, Series 1993, 6.50% 11/1/09 (e)........ 2,155 2,368 IL Du Page County Special Service Area No. 11, Series 1995, 6.75% 1/1/14...................... 1,090 1,162 MA State Water Pollution Abatement Trust, Series 1999 A, 6.00% 8/1/19.................... 2,500 2,634 NY State Environmental Facilities Corp., Series 1994 D, 6.30% 5/15/05................... 3,000 3,202 TN Metropolitan Government of Nashville & Davisdon Counties, Series 1993, 6.50% 1/1/10... 2,750 3,041 TX Houston Water Conveyance System, Series J, 6.13% 12/15/06....................... 1,000 1,061 TX Water Development Board, Series 1996 B, 5.13% 7/15/18.................................. 1,000 939 ------- 20,107 ------- TOTAL MUNICIPAL BONDS (cost of $128,949) ............................... 133,480 -------------------------------------------------------------------------------- OPTIONS - 0.1% Contracts -------------------------------------------------------------------------------- September 2000 Treasury Bond Put, Strike Price 92.000, Expiration 9/22/00..................... 7,700 11 September 2000 Treasury Bond Call, Strike Price 100.000, Expiration 9/22/00.................... 16,100 73 ------- TOTAL OPTIONS (cost of $241).................................... 84 -------------------------------------------------------------------------------- 28 Stein Roe Intermediate Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS - 0.1% -------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (C) IL Galesburg, Knox College, Series 1999, (cost of $100) 3.85% 7/1/24.................... $ 100 $ 100 ------- TOTAL INVESTMENTS (cost of $129,290) (d)............................ 133,664 -------------------------------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES - 1.6%................ 2,146 ------- NET ASSETS - 100.0%.................................. $135,810 ======= -------------------------------------------------------------------------------- NOTES TO INVESTMENT PORTFOLIO: -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of the principal and interest. (c) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specified dates. These securities are payable on demand and are secured by either letters of credit or other credit support agreements from banks. The rates listed are as of June 30, 2000. (d) Cost for financial statement and federal income tax purposes is the same. (e) These securities, or a portion thereof, with a total market value of $6,520, are being used to collateralize open futures contracts. Short futures contracts open at June 30, 2000: Par value Unrealized covered by Expiration depreciation Type contracts month at 6/30/00 ---- ---------------- --------- ---------- Treasury Note 5,300 September $157 See accompanying Notes to Financial Statements. 29 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands) MUNICIPAL BONDS 96.7% Par Value -------------------------------------------------------------------------------- EDUCATION - 2.4% EDUCATION - 0.8% MA State Development Finance Agency, Boston University, Series 1999 P, 5.450% 5/15/59...... $ 1,000 $ 871 MN Victoria, Holy Family Catholic High School, Series 1999 A, 5.850% 9/1/24................... 1,000 895 PR Commonwealth of Puerto Rico, Ana G. Mendez University System, Series 1999, 5.375% 2/1/29.. 600 525 WV State University,Series 2000 A, (a) 4/1/18..... 3,800 1,340 ------- 3,631 STUDENT LOANS - 1.6% AK State Student Loan Corp., Series 1994 A, 6.200% 7/1/09 (e).............................. 3,870 4,035 ME State Educational Loan Marketing Corp., Series 1994 B-1, 6.500% 11/1/09................ 3,000 3,080 ------- 7,115 HEALTHCARE - 8.7% CONGREGATE CARE RETIREMENT - 0.9% OR Clackamas County Hospital Facilities Authority, Willamette View, Series 1999 A, 7.500% 11/1/29................................. 1,000 976 PA Montgomery County Industrial Development Authority, Adult Communities Total Services, Series 1996 B, 5.750% 11/15/17................. 3,500 3,161 ------- 4,137 HEALTH SERVICES - 0.4% MA State Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650% 2/1/19.................................. 310 269 WI State Health & Educational Facilities Authority, Marshfield Clinic, Series 1999, 6.250% 2/15/29................................. 1,600 1,607 ------- 1,876 HOSPITALS - 6.6% CA State Health Facilities Financing Authority, Cedars-Sinai Medical Center, Series 1999 A, 6.125% 12/1/30.......... 700 696 IL State Development Finance Authority, Adventist Health System, Series 1999, 5.500% 11/15/20................... 3,000 2,440 IL State Health Facilities Authority, Swedish American Hospital, Series 2000, 6.875% 11/15/30................... 1,000 996 LA State Public Facilities Authority, Touro Infirmary, Series 1999, 5.625% 8/15/29................................. 2,900 2,404 MA State Health & Educational Facilities Authority: Dana Farber Cancer Institute, Series 1995 G-1, 6.250% 12/1/22................................. 6,500 6,317 Massachusetts General Hospital, Series 1992 F, 6.250% 7/1/12................... 5,750 6,273 South Shore Hospital, Series 1999 F, 5.750% 7/1/29.................................. 2,500 2,189 MD State Health & Educational Facilities Authority, University of Maryland Medical System, 6.750% 7/1/30.................................. 500 503 MI Dickinson County, Series 1999, 5.800% 11/1/24.. 1,000 773 NC State Medical Care Commission, Gaston Health Care, Series 1998, 5.000% 2/15/29....... 1,000 805 NV Henderson, Catholic Healthcare West, Series 1999 A, 6.750% 7/1/20................... 1,000 978 NY State Dormitory Authority, Mount Sinai Health Obligation Group, Series 2000, 6.500% 7/1/25..................... 1,000 1,031 OH Franklin County, Doctors OhioHealth Corp., Series 1998 A, 5.600% 12/1/28.................. 3,000 2,156 30 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- HEALTHCARE - CONT. HOSPITALS - (CONTINUED) TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625% 12/1/28.... $ 500 $ 392 WV State Hospital Finance Authority, Series 2000 A, 6.750% 9/1/30.......................... 2,500 2,490 ------- 30,443 INTERMEDIATE CARE FACILITIES - 0.5% IN State Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125% 6/1/34................... 2,485 2,205 NURSING HOME - 0.3% IN State Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998, 6.400% 12/1/33................................. 1,400 1,164 MN Minneapolis, Walker Methodist Senior Services Group, Series 1998 A, 5.875% 11/15/18.......... 450 383 ------- 1,547 HOUSING - 8.4% MULTI-FAMILY - 2.0% Charter Mac Equity Issue Trust, 6.625% 6/30/49.... 2,000 1,915 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500% 7/1/40............................ 1,500 1,502 FL Clay County Housing Finance Authority: Madison Commons Apartments, Series 2000 A, 7.450% 7/1/40.................................. 750 746 Palms at Brentwood Apartments, Series 1998 K, 6.500% 12/1/34................................. 2,000 1,750 IL State Development Finance Authority, Catholic Charities Housing Development Corp., Series 1993 C, 5.950% 1/1/09............ 1,450 1,381 Munimae Equity Issue Trust, 7.750% 11/1/10........ 2,000 2,050 ------- 9,344 SINGLE FAMILY - 6.4% IA State Housing Finance Authority, Series 1991 B, 7.450% 7/1/23................... 590 609 ID State Housing Agency, Series 1990 E, 7.875% 7/1/24.................................. 745 765 IL Chicago, Series 2000 A, 7.150% 9/1/31.......... 1,000 1,097 MN Minneapolis-St. Paul Housing Finance Board, Series 1991: 7.250% 8/1/21.................................. 1,555 1,587 7.300% 8/1/31.................................. 2,310 2,357 MN State Housing Finance Authority, Series 1991 A, 7.450% 7/1/22................... 945 964 MO State Housing Development Commission, Series 1985, 9.375% 4/1/16..................... 5 5 NM State Mortgage Finance Authority, Series 2000 A-2, 7.100% 9/1/30................. 1,500 1,618 NV State Housing Division,Series 1991 A-2, 7.750% 4/1/22.................................. 2,055 2,110 OK Tulsa County Home Finance Authority, Series 1991 B, 7.550% 5/1/23................... 1,360 1,390 RI State Housing & Mortgage Finance Corp., Series 1-E, 7.550% 10/1/22..................... 5,650 5,829 TN State Housing Development Agency, Series 1990 T, 7.300% 7/1/11.................................. 10,000 10,138 TX Travis County Housing Finance Corp., Series 1990, 8.000% 9/1/10.................................. 635 652 ------- 29,121 INDUSTRIAL - 8.5% FOOD PRODUCTS - 3.9% GA Cartersville Development Authority, Anheuser Busch Cos., Inc., Series 1999, 7.375% 5/1/09..................... 9,000 10,228 31 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- INDUSTRIAL - CONT. FOOD PRODUCTS - (CONTINUED) IN Hammond, American Maize Products Co., Series 1994, 8.000% 12/1/24................................. $ 5,000 $ 5,361 MI State Strategic Fund, Michigan Sugar Co., Carolton Project: Series 1998 B, 6.450% 11/1/25.................. 700 604 Series 1998 C, 6.550% 11/1/25.................. 800 698 PA State Economic Development Financing Authority, USG Corp., Series 1999, 6.000% 6/1/31.......... 1,000 900 ------- 17,791 FOREST PRODUCTS - 3.9% LA De Soto Parish, International Paper Company, Series A, 7.700% 11/1/18....................... 3,250 3,495 SC Richland County, Union Camp Corp., Series 1991 B, 7.125% 9/1/21.................................. 5,000 5,106 WA Port Longview Industrial Development Corp., Weyerhaeuser Corp., Series 1992, 6.875% 10/1/08................................. 8,750 9,265 ------- 17,866 MANUFACTURING - 0.4% MO State Development Finance Board, Proctor & Gamble Co., Series 1999, 5.200% 3/15/29...... 1,000 906 NM Albuquerque Industrial Development Authority, Motorola, Inc., Series 1983 A, 10.000% 6/1/13................................. 1,000 1,019 ------- 1,925 METALS & MINING - 0.3% VA Peninsula Ports Authority, Ziegler Coal Project, Series 1997, 6.900% 5/2/22..................... 1,500 1,202 OTHER - 9.9% REFUNDED/ESCROWED(B) - 9.9% CA Foothill/Eastern Transportation Corridor Agency, Series 1995 A, (a) 1/1/18...................... 10,000 3,701 CA Southern California Public Power Authority, Southern Transmission Project, Series 1988 A, (a) 7/1/14...................... 8,155 3,857 FL State, Jacksonville Transportation Authority, Series 1985, 9.200% 1/1/15..................... 2,000 2,696 GA Fulton County, Series 1992, 6.375% 1/1/14...... 13,270 14,633 MD Washington Suburban Sanitary District, Series 1994, 6.625% 6/1/17..................... 1,660 1,771 NC Eastern Municipal Power Agency, Series 1991 A, 6.500% 1/1/18.................................. 4,315 4,781 NY New York City, Series 1995 D, 6.000% 2/15/25... 5,165 5,454 SC Calhoun County, Solid Waste Disposal Facilities, Eastmen Kodak Co., Series 1992, 6.750% 5/1/17.. 3,000 3,355 SD State Student Loan Assistance Corp., Series 1989 B, 7.450% 8/1/00................... 5,000 5,012 ------- 45,260 OTHER REVENUE - 2.3% RECREATION - 2.1% CA Long Beach Aquarium of the Pacific, Series 1995 A: 6.125% 7/1/15.................................. 4,000 3,969 6.125% 7/1/23.................................. 6,000 5,559 ------- 9,528 32 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- OTHER REVENUE - CONT. RETAIL - 0.2% NJ State Economic Development Authority, Glimcher Properties L.P. Project, 6.000% 11/1/28........ $ 850 $ 751 RESOURCE RECOVERY - 0.2% DISPOSAL - 0.2% IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050% 1/1/10............... 500 428 MI State Strategic Fund, United Waste Systems, Inc., Series 1995, 5.200% 4/1/10..................... 500 432 ------- 860 TAX-BACKED - 26.4% LOCAL APPROPRIATED - 2.3% CA San Diego Convention Center, Expansion Financing Authority, Series 1998 A, 4.750% 4/1/28........ 5,000 4,292 IL Chicago Board of Education, Series 1992 A, 6.000% 1/1/16.................................. 5,000 5,285 IN Crown Point School Building Corp., Series 2000: (a) 1/15/18.................................... 1,550 552 (a) 1/15/19.................................... 1,665 554 ------- 10,683 LOCAL GENERAL OBLIGATIONS - 8.3% AK North Slope Borough,Series 1999 B, (a) 6/30/10........................................ 2,515 1,462 CA Golden West School Financing Authority, Series 1999 A, (a) 8/1/15...................... 2,500 1,090 CA Union Elementary School District, Series 1999 A, (a) 9/1/17...................... 2,300 872 CA Yuba City Unified School District, Series 2000, (a) 9/1/18........................ 1,160 410 FL Broward County, Series 1986: 12.500% 1/1/03................................. 1,000 1,180 12.500% 1/1/04................................. 1,195 1,486 12.500% 1/1/05................................. 2,000 2,608 HI Honolulu, Series 1998, 4.500% 7/1/28........... 2,000 1,597 IL Champaign County, Series 1999, 8.250% 1/1/20... 1,015 1,304 IL Chicago Board of Education: Series 1996, 6.250% 12/1/12.................... 2,500 2,733 Series 1998 B-1, (a) 12/1/23................... 5,000 1,205 IL Chicago Public Building Commission, Series 1999 B, 5.250% 12/1/18.................. 2,000 1,909 IL Chicago, Series 1999, 5.500% 1/1/23............ 2,250 2,174 IL Coles & Cumberland Countys Unified School District, Series 2000, (a) 12/1/13...... 3,120 1,475 IL Will County Forest Preservation District, Series 1999, (a) 12/1/1........................ 4,660 1,805 LA New Orleans, Series 1991, (a) 9/1/12........... 6,250 3,214 MO Springfield School District No.R-12, Series 1991 B, 9.500% 3/1/07................... 600 754 NY New York City, Series 1998 H, 5.125% 8/1/25.... 2,190 1,953 NY Yonkers, Series 1999 A, 4.500% 12/1/17......... 1,000 852 TX Houston Independent School District, Series 1999 A, 4.750% 2/15/26.................. 2,000 1,691 TX Hurst Euless Bedford, Independent School District, Series 1998, 4.500% 8/15/25.......... 5,000 4,055 VA Virginia Beach, Series 1986, 12.750% 7/15/01... 2,000 2,166 ------- 37,995 33 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TAX-BACKED - CONT. SPECIAL NON-PROPERTY TAX - 3.8% IL Metropolitan Pier & Exposition Authority, Series 1996 A: (a) 6/15/12.................................... $ 5,000 $ 2,592 (a) 12/15/12................................... 8,300 4,186 IL State, Series 1992 Q, 6.000% 6/15/12........... 10,000 10,648 ------- 17,426 SPECIAL PROPERTY TAX - 0.6% CA Capistrano Unified School District, Ladera Community Facilities District No.98-2, Series 1999, 5.750% 9/1/29..................... 1,000 881 CA Santa Margarita Water District, Series 1999, 6.250% 9/1/29.................................. 750 711 FL Indigo Community Development District, Series 1999 B, 6.400% 5/1/06................... 1,000 993 ------- 2,585 STATE APPROPRIATED - 1.0% KY State Turnpike Authority, Series 1992, (a) 1/1/10..................................... 7,500 4,529 STATE GENERAL OBLIGATIONS - 10.4% FL State, Broward County Expressway, Series 1984, 9.875% 7/1/09..................... 1,100 1,423 MA Massachusetts Bay Transportation Authority: Series 1992 B, 6.200% 3/1/16................... 9,825 10,637 Series 1994 A: 7.000% 3/1/14................................ 3,150 3,641 7.000% 3/1/19................................ 2,500 2,894 Series 1998, 4.750% 3/1/21..................... 1,000 863 MA State College Building Authority Project: Series A, 7.500% 5/1/11........................ 1,500 1,794 Series 1994 A, 7.500% 5/1/14................... 3,500 4,208 NJ State General Obligation, Series D, 6.000% 2/15/11................................. 5,150 5,526 NV Clark County, Series 1998 B, 4.500% 12/1/17.... 2,675 2,265 PA State, Series 1992 2, 6.250% 7/1/12............ 11,200 12,261 TX State, Series 1998 C, 5.000% 8/1/14............ 2,380 2,262 ------- 47,774 TRANSPORTATION - 10.4% AIR TRANSPORTATION - 1.8% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000 A, 6.750% 11/1/11................................. 1,600 1,635 IN Indianapolis Airport Authority, United Airlines Project, Series A, 6.500% 11/15/31................................ 5,000 4,656 NJ State Economic Development Authority, Continental Airlines, Inc., Series 1999, 6.400% 9/15/23.................... 2,000 1,843 ------- 8,134 AIRPORTS - 2.5% GA Atlanta, Airport Facilities, Series 1996, 6.500% 1/1/10.................................. 2,000 2,206 HI State, Airport System Revenue, Series 1991, 6.900% 7/1/12.................................. 6,000 6,715 IN State Transportation Finance Authority, Airport Facilities Lease, Series 1992 A, 6.250% 11/1/16.................. 1,475 1,497 MA State Port Authority, Series 1999, 8.016% 7/1/29.................................. 1,000 1,011 ------- 11,429 TOLL FACILITIES - 5.0% CO E-470 Public Highway Authority, Series 2000 B: (a) 9/1/18..................................... 4,600 1,574 (a) 9/1/19..................................... 3,500 1,119 NY Triborough Bridge & Tunnel Authority: Series 1991 X, 6.625% 1/1/12................... 9,915 11,154 Series 1992 Y, 6.125% 1/1/21................... 5,500 5,836 34 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TRANSPORTATION - CONT. TOLL FACILITIES - (CONTINUED) PA State Turnpike Commission, Series 1998 A, 4.750% 12/1/27................................. $ 2,415 $ 2,036 VA Richmond Metropolitan Authority, Series 1998, 5.250% 7/15/22................................. 1,100 1,041 ------- 22,760 TRANSPORTATION - 1.1% GA Metropolitan Atlanta Rapid Transit Authority, Series 1992 P, 6.250% 7/1/20................... 4,000 4,295 OH Toledo-Lucas County Port Authority, CSX Transportation, Inc., Series 1992, 6.450% 12/15/21................................ 1,000 969 ------- 5,264 UTILITY - 19.5% INDEPENDENT POWER PRODUCER - 0.3% NY Suffolk County Industrial Development Agency, Nissequogue Cogen Partners, Series 1998, 5.500% 1/1/23.................................. 1,000 836 PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, 6.625% 6/1/26.................................. 650 662 ------- 1,498 INVESTOR OWNED - 3.3% IN Michigan City, Northern Indiana Public Service Co., Series 1973 A, 5.700% 10/1/03................................. 6,995 7,005 KY Trimble County, Louisville Gas & Electric Co., Series 1990 A, 7.625% 11/1/20.................. 6,670 6,849 MS State Business Finance Corp., Systems Energy Resources, Inc., Series 1999, 5.900% 5/1/22.................................. 1,600 1,384 ------- 15,238 JOINT POWER AUTHORITY - 8.9% GA Municipal Electric Authority Power, Series V, 6.600% 1/1/18 (e).................... 21,300 23,835 NC Eastern Municipal Power Agency, Series 1991 A, 6.500% 1/1/18................... 2,185 2,205 NC State Municipal Power Agency, Catawba No. 1, Series 1992, (a) 1/1/09........................ 2,360 1,498 TX State Municipal Power Agency, (a) 9/1/08....... 1,475 961 WA State Public Power Supply System, Nuclear Project No. 2: Series 1992 A, 6.300% 7/1/12................... 3,500 3,795 Series 1989 B, (a) 7/1/08...................... 7,000 4,542 Nuclear Project No. 3, Series 1989 B, (a) 7/1/05.. 5,000 3,871 ------- 40,707 MUNICIPAL ELECTRIC - 2.6% NC University of North Carolina at Chapel Hill, Series 1997, (a) 8/1/20........................ 1,750 538 NY Long Island Power Authority, Series 2000 A, (a) 6/1/20..................................... 1,000 317 SD Heartland Consumers Power District, Series 1992, 6.000% 1/1/17..................... 8,000 8,439 TX Austin, Series 1998, 5.250% 5/15/25............ 3,000 2,821 ------- 12,115 WATER & SEWER - 4.4% DE State Economic Development Authority, Wilmington Suburban Water Corp.: Series 1992 B, 6.450% 12/1/07................ 1,160 1,246 Series 1992 A, 6.800% 12/1/23................ 3,500 3,530 FL Jacksonville, General Waterworks Corp., Series 1992, 6.750% 6/1/22..................... 1,500 1,556 GA Fulton County, Series 1992, 6.375% 1/1/14 (e).. 430 470 MA State Water Resources Authority, Series 1998 B, 4.500% 8/1/22................... 1,000 823 PA Allegheny County Sanitation Authority, Series 1991 A, (a) 6/1/07...................... 2,370 1,658 35 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- UTILITY - CONT. WATER & SEWER - (CONTINUED) PA Dauphin County Industrial Development Authority, Dauphin Water Supply Co., Series 1992 A, 6.900% 6/1/24.................................. $ 3,400 $ 3,722 TX Houston, Series 1991 C: (a) 12/1/08.................................... 4,000 2,573 (a) 12/1/09.................................... 4,000 2,428 (a) 12/1/10.................................... 3,750 2,146 ------- 20,152 TOTAL MUNICIPAL BONDS (cost of $425,951)................................ $442,891 -------------------------------------------------------------------------------- OPTIONS - 0.1% Contracts -------------------------------------------------------------------------------- September 2000 Treasury Bond Put, Strike Price 92, Expiration 08/19/00............................ 51,700 73 September 2000 Treasury Bond Call, Strike Price 98, Expiration 08/19/00............................ 54,200 245 September 2000 Treasury Bond Call, Strike Price 100, Expiration 08/19/00............................ 23,800 257 ------- TOTAL OPTIONS (cost of $1,400).................................. 575 -------------------------------------------------------------------------------- Short-Term Obligations - 0.5% Par -------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (D) CO State Educational & Cultural Facilities Authority, National Cable Television Center, Series 1999, 4.750% 10/1/06.................... 300 300 IA State Finance Authority, Burlington Medical Center, Series 1997, 4.700% 6/1/27..................... 100 100 IA State Higher Education Loan Authority, St.Ambrose University, Series 1999, 4.750% 10/1/09................................. 300 300 IL State Educational Facilities Authority, 4.800% 12/1/25................................. 920 920 IN Allen County, Golden Years Homestead, Inc., Series 1996, 4.750% 8/1/21..................... 100 100 WI State Health & Educational Facilities Authority, Monroe Joint Venture, Inc., Series 2000, 4.900% 1/1/30...................... 500 500 ------- TOTAL SHORT-TERM OBLIGATIONS (cost of $2,220)........ 2,220 -------------------------------------------------------------------------------- TOTAL INVESTMENT (cost of $429,571)(c)............................. 445,686 -------------------------------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES - 2.7%................ 12,519 ------- NET ASSETS - 100.0%.................................. $458,205 ======== 36 Stein Roe Managed Municipals Fund -------------------------------------------------------------------------------- Continued -------------------------------------------------------------------------------- NOTES TO INVESTMENT PORTFOLIO: -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of the interest and principal. (c) Cost for financial statement and federal income tax purposes is identical. (d) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specified dates. These securities are payable on demand and are secured either by letters of credit or other credit support agreements from banks. The rates listed are as of June 30, 2000. (e) These securities, or a portion thereof, with a total market value of $28,340 are being used to collateralize open futures contracts. Long futures contract open at June 30, 2000: Par Value Unrealized covered by Expiration appreciation Type contracts Month at 06/30/00 ---- ---------------- --------- ---------- Treasury Bond 28,700 September $416 See accompanying Notes to Financial Statements. 37 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands) MUNICIPAL BONDS - 94.2% Par Value -------------------------------------------------------------------------------- EDUCATION - 3.8% EDUCATION - 1.2% IL State Development Finance Authority, Latin School of Chicago, Series 1998, 5.650% 8/1/28.. $ 1,725 $ 1,518 MN Victoria, Holy Family Catholic High School, Series 1999 A, 5.875% 9/1/29................... 1,200 1,065 WV State University, Series 2000 A, (a) 4/1/19.... 1,250 412 ------- 2,995 STUDENT LOAN - 2.6% NE Nebhelp, Inc., Series 1993 A-6, 6.450% 6/1/18, (b).................................... 4,000 4,248 NM State Educational Assistance Foundation, Series 1996 A-2, 6.650% 11/1/25................ 1,955 2,030 TX Brazos Higher Educational Facilities Authority, Series 1993 C-2, 5.875% 6/1/04................. 390 391 ------- 6,669 HEALTHCARE - 19.1% CONGREGATE CARE RETIREMENT - 5.1% FL Orange County Health Facilities Authority, Orlando Lutheran Towers, Inc., Series 1996, 8.625% 7/1/20.................................. 3,000 3,128 MA State Development Finance Agency, Series 1999 A: 5.625% 7/1/15.................................. 500 421 5.750% 7/1/23.................................. 250 201 NJ State Economic Development Authority, Winchester Gardens, Series 1996 A, 8.625% 11/1/25......... 2,000 2,110 PA Lancaster Industrial Development Authority, Garden Spot Village, Series 2000 A, 7.625% 5/1/31.................................. 500 491 TN Metropolitan Government, Nashville and Davidson County, Blakeford at Green Hills, Series 1998, 5.650% 7/1/24.................................. 1,500 1,136 TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligation Group: Series 1998 A, 5.900% 11/15/25............... 2,100 1,646 Series 1999, 6.000% 11/15/29................. 500 393 WI State Health & Educational Facilities Authority: Attic Angel Obligated Group, 5.750% 11/15/27... 1,250 984 Clement Manor, Series 1998, 5.750% 8/15/24..... 3,000 2,389 ------- 12,899 HEALTH SERVICES - 0.1% MA State Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650% 2/1/19.................................. 250 217 ------- HOSPITAL - 10.2% AZ Health Facilities Authority, Phoenix Memorial Hospital, Series 1991, 8.125% 6/1/12........... 2,500 2,516 CO La Junta, Arkansas Valley Regional Medical Center, Series 1999, 6.100% 4/1/24............. 500 434 CO State Health Care Facilities Authority, National Jewish Medical & Research Center, Series 1998, 5.375% 1/1/23..................... 250 194 FL Orange County Health Facilities Authority, Orlando Regional Healthcare System, Series 1999, 6.000% 10/1/26................................. 875 833 38 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- HEALTHCARE - CONT. HOSPITALS - (CONTINUED) IL Southwestern Illinois Development Authority, Anderson Hospital, Series 1999: 5.500% 8/15/20............................... $ 500 $ 402 5.625% 8/15/29............................... 250 196 IN State Health Facilities Financing Authority, Riverview Hospital, Series 1999, 5.500% 8/1/24.................................. 575 465 KS Wichita, CSJ Health System of Wichita, Inc., Series 1991 X, 7.000% 11/15/18................. 2,000 2,102 LA State Public Facilities Authority, Touro Infirmary, Series 1999, 5.625% 8/15/29......... 1,500 1,243 MA State Health & Educational Facilities Authority, Dana Farber Cancer Institute, Series 1995 G-1, 6.250% 12/1/22................................. 2,000 1,944 MI Dickinson County, Series 1999, 5.800% 11/1/24.. 1,300 1,004 MI Flint Hospital Building Authority, Hurley Medical Center, Series 1998 B, 5.375% 7/1/28... 1,250 894 MI State Hospital Finance Authority, Detroit Medical Center, Series 1998 A, 5.250% 8/15/28.. 1,000 705 MN Maplewood, Healtheast, Inc., Series 1996, 5.700% 11/15/02................................ 500 486 NC State Medical Care Commission, Stanley Memorial Hospital, Series 1999, 6.375% 10/1/29.......... 1,000 994 NH State Higher Educational & Health Facilities Authority, Littleton Hospital Assoc., Inc., Series 1998 A, 6.000% 5/1/28................... 1,000 794 OH Franklin County, Doctors Ohio Health Corp., Series 1998 A, 5.600% 12/1/28.................. 2,650 1,904 OH Highland County Joint Township Hospital District, Series 1999, 6.750% 12/1/29.......... 1,250 1,066 OH Miami County, Upper Valley Medical Center, Inc., Series 1996-A, 6.375% 5/15/26.................. 1,015 902 PA Philadelphia Hospitals & Higher Education Facilities Authority, Temple University Hospital, Series 1997, 5.875% 11/15/23......... 2,110 1,749 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625% 12/1/28................................. 1,200 940 TX Tyler Health Facilities Development Corp., Mother Frances Hospital, Series 1997 A, 5.625% 7/1/13.................................. 1,785 1,552 WA State Health Care Facilities Authority, Sacred Heart Medical Center, Series 1992, 6.875% 2/15/12.................... 1,500 1,575 WV State Hospital Finance Authority, Series 2000 A, 6.750% 9/1/30................... 1,000 996 ------- 25,890 INTERMEDIATE CARE FACILITIES - 0.6% IL State Development Finance Authority, Hoosier Care, Inc., Series 1999-A, 7.125% 6/1/34....... 150 133 INHealth Facilities Financing Authority Revenue, Hoosier Care Project, Series A, 7.125% 6/1/34.. 1,500 1,331 ------- 1,464 NURSING HOME - 3.1% AK Juneau, St. Ann's Care Center, Series 1999, 6.875% 12/1/25................................. 700 631 CO State Health Facilities Authority, Volunteers of America Care Facilities, Inc., Series 1999 A, 5.750% 7/1/10................... 1,095 980 IN State Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998, 6.400% 12/1/33................................. 1,500 1,247 MA State Development Finance Agency, Alliance Health Care Facilities, Series 1999, 7.100% 7/1/32..................... 855 783 MN Carlton Inter-Faith Social Services, Inc., Series 2000, 7.750% 4/1/29..................... 750 726 39 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- HEALTHCARE - CONT. NURSING HOME - (CONTINUED) MN Minneapolis, Walker Methodist Senior Services Group, Series 1998-C, 6.000% 11/15/28.......... $ 1,300 $ 1,082 MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.875% 3/1/29..................... 900 719 MN Sartell, Foundation for Healthcare, Series 1999-A, 6.625% 9/1/29.......................... 2,000 1,743 ------- 7,911 HOUSING - 8.2% ASSISTED LIVING/SENIOR - 2.4% DE Kent County, Heritage at Dover, Series 1999, 7.625% 1/1/30.................................. 1,500 1,427 GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000% 11/15/29.......... 1,000 906 LA State Public Facilities Authority, Progressive Healthcare Providers, Inc., Series 1998, 6.375% 10/1/28................................. 2,000 1,725 NC State Medical Care Commission, DePaul Community Facilities Project, Series 1999, 7.625% 11/1/29........................................ 1,250 1,198 NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999, 5.875% 5/1/19...... 1,100 910 ------- 6,166 MULTI-FAMILY - 3.9% CO State Health Facilities Authority, Birchwood Manor Series 1991-A, 7.250% 4/1/11............. 595 606 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500% 7/1/40.................................. 750 751 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000-A, 7.450% 7/1/40.................................. 750 746 FL Housing Finance Agency, Palm Aire Retirement Facility Project, Series 1989-S,10.000% 1/1/20, (d).................................... 2,568 2,517 GA Clayton County Housing Authority, Magnolia Park Apartments, Series 1999-A, 6.250% 6/1/30.. 1,000 884 IL State Development Finance Authority, Catholic Charities Housing Development Corp., Series 1993-C, 5.950% 1/1/09................... 1,400 1,334 IL State Housing Development Authority, Series 1991-C, 7.400% 7/1/23.................................. 140 145 IN New Castle, Raintree Apartments, Series 1988-B, (a) 3/1/18, (d)........................ 30,655 77 MO State Health & Educational Facilities Authority, Lutheran Senior Services, Series 1997, 5.750% 2/1/17.................................. 2,000 1,789 OH Greater Allen County Housing Development Authority, Steiner-McBride Apartments, 10.250% 9/1/03................................. 1,130 1,130 ------- 9,979 SINGLE FAMILY - 1.9% IA State Housing Finance Authority, Series 1984-A, (a) 9/1/16............................. 7,590 1,267 ID State Housing Agency, Series 1991-B, 7.500% 7/1/24.................................. 1,405 1,448 MT State Housing Board: Series 1991 B-2, 7.500% 4/1/23................. 310 317 Series 1991 B-1, 7.300% 10/1/17................ 285 292 UT State Housing Finance Agency: Series 1991 B-2, 7.750% 1/1/23................. 50 51 Series 1991 C-3, 7.550% 7/1/23................. 120 123 40 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- HOUSING - CONT. SINGLE FAMILY - (CONTINUED) WA State Housing Finance Commission: Series 1991 C, (a) 1/1/22................................... $ 980 $ 200 (a) 7/1/22................................... 1,090 214 (a) 1/1/23................................... 1,090 207 (a) 7/1/23................................... 1,090 199 (a) 1/1/24................................... 1,090 192 (a) 7/1/24................................... 1,090 185 ------- 4,695 INDUSTRIAL - 9.8% FOOD PRODUCTS - 2.2% IN Hammond, American Maize Products Co., Series 1994, 8.000% 12/1/24................................. 4,000 4,289 MI State Strategic Fund, Michigan Sugar Co., Carollton Project, Series 1998-C, 6.550% 11/1/25................................. 1,500 1,309 ------- 5,598 FOREST PRODUCTS - 4.4% GA Rockdale County Development Authority, Solid Waste Disposal, Visy Paper, Inc., Series 1993, 7.500% 1/1/26.................................. 1,000 1,024 IN Jasper County, Georgia Pacific Corp., Series 1999, 5.600% 4/1/29..................... 1,000 844 LA De Soto Parish, International Paper Co., Series-A, 7.700% 11/1/18....................... 2,500 2,689 MS Lowndes County, Weyerhaeuser Corp., Series 1992-A, 6.800% 4/1/22................... 5,995 6,542 ------- 11,099 METALS & MINING - 2.3% IN State Development Finance Authority, Inland Steel, Series A, 5.750% 10/1/11................ 5,000 4,338 NV State Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A, 8.000% 9/1/14.................................. 250 248 VA Greensville County Industrial Development Authority, Wheeling Steel, Series 1999 A: 6.375% 4/1/04................................ 115 111 7.000% 4/1/14................................ 555 505 VA Peninsula Ports Authority, Ziegler Coal Project, Series 1997, 6.900% 5/2/22............ 825 661 ------- 5,863 OIL AND GAS - 0.9% TX Texas City Industrial Development Corp., Arco Pipe Line Co. Project, Series 1990, 7.375% 10/1/20................................. 2,000 2,359 ------- OTHER - 13.7% REFUNDED/ESCROWED (E) CO Adams County, Series 1991B: 11.250% 9/1/11 (b)............................. 325 465 11.250% 9/1/11................................. 360 527 11.250% 9/1/11................................. 220 329 11.250% 9/1/12................................. 1,440 2,189 CO Denver City & County Airport, Series D, 7.750% 11/15/21................................ 830 881 CO State Health Facilities Authority, Healthtone, Series 1991B, 8.500% 2/15/21................... 3,250 3,396 FL Leesburg, Leesburg Regional Medical Center, Series 1991A, 7.375% 7/1/11.................... 775 829 41 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- OTHER - CONT. REFUNDED/ESCROWED (E) - (CONTINUED) IL Chicago, Skyway Toll Bridge, Series 1994, 6.750% 1/1/17.................................. $ 1,500 $ 1,619 IL Health Facility Authority, Edward Hospital Association Project, Series 1992, 7.000% 2/15/22................................. 685 722 IL Health Facility Authority, United Medical Center-Formerly, Series 1991, 8.125% 7/1/06.... 2,015 2,136 IN Indianapolis Local Public Improvement Bond Bank, Series 1999E, 6.700% 1/1/17, (b)......... 5,900 6,184 LA State Public Facilities Authority, Womens Hospital Foundation, Series 1992, 7.250% 10/1/22................................. 2,300 2,459 MS Adams County, Jefferson Davis Memorial Hospital, Series 1991, 7.900% 10/1/08.................... 750 795 NC Eastern Municipal Power Agency, Series 1991A, 6.500% 1/1/18, (b)............................. 3,320 3,678 PA Allentown Area Hospital Authority, Sacred Heart Hospital of Allentown, Series 1991, 7.500% 7/1/06.................................. 3,460 3,598 SD State Student Loan Assistance Corp., Series 1989C, 7.450% 8/1/00.................... 2,700 2,707 WA Quincy, Series 1990-I, 9.250% 11/1/10.......... 2,255 2,290 ------- 34,804 OTHER REVENUE - 1.7% RECREATION CA Long Beach Aquarium of the Pacific, Series 1995-A, 6.125% 7/1/23................... 4,750 4,400 ------- RESOURCE RECOVERY - 0.1% DISPOSAL IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050% 1/1/10... 250 214 ------- TAX-BACKED - 9.5% LOCAL APPROPRIATED - 1.0% PA Philadelphia Municipal Authority, Series 1993-D, 6.250% 7/15/13................................. 2,500 2,507 ------- LOCAL GENERAL OBLIGATIONS - 0.4% NY New York City, Series 1996-B, 7.250% 8/15/07... 1,000 1,128 ------- SPECIAL NON-PROPERTY TAX - 1.2% MO St. Louis County Industrial Development Authority, Kiel Center Arena, Series 1992, 7.875% 12/1/24................................. 3,000 3,139 ------- SPECIAL PROPERTY TAX - 3.5% CA Orange County Community Facilities District, Ladera Ranch, Series 1999-A, 6.500% 8/15/21.... 1,000 980 FL Heritage Palms Community Development District, Series 1999, 6.250% 11/1/04.................... 1,000 995 FL Heritage Springs Community Development District, Series 1999-B, 6.250% 5/1/05................... 1,050 1,043 FL Indigo Community Development District, Series 1999-B, 6.400% 5/1/06................... 1,000 993 FL Lexington Oaks Community Development District, Series 2000, 7.200% 5/1/30..................... 600 602 Series 2000-D, 6.700% 5/1/07................... 750 752 42 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- TAX-BACKED - CONT. SPECIAL PROPERTY TAX - (CONTINUED) FL Northern Palm Beach County Improvement District, Series 1999, 6.000% 8/1/29..................... $ 750 $ 671 FL Orlando, Conroy Road Interchange Project: Series 1998-A, 5.500% 5/1/10................... 200 191 5.800% 5/1/26.................................. 500 439 FL Stoneybrook Community Development District: Series 1998-A, 6.100% 5/1/19................... 330 309 Series 1998-B, 5.700% 5/1/08................... 875 847 MO State Development Finance Board, Midtown Redevelopment Project, Series 2000-A, 5.750% 4/1/22.................................. 1,000 1,000 ------- 8,822 STATE APPROPRIATED - 0.9% NY Triborough Bridge & Tunnel Authority, Javits Convention Center Project, Series E, 7.250% 1/1/10.................................. 2,000 2,223 ------- STATE GENERAL OBLIGATIONS - 2.5% MA Massachusetts Bay Transportation Authority, Series 1992-B, 6.200% 3/1/16................... 5,825 6,307 ------- TRANSPORTATION - 7.1% AIR TRANSPORTATION - 4.7% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000-A, 6.750% 11/1/11................................. 800 818 IN Indianapolis Airport Authority, Federal Express Corp., Series 1994, 7.100% 1/15/17..... 4,000 4,142 PA Philadelphia Authority for Industrial Development, Aero Philadelphia, Series 1999, 5.500% 1/1/24............................ 1,000 831 TX Alliance Airport Authority, AMR Corp., Series 1991, 7.000% 12/1/11.................... 4,070 4,282 TX Houston Airport System, Continental Airline Terminal, Series B, 6.125% 7/15/17............. 2,000 1,760 ------- 11,833 AIRPORT - 1.7% CO Denver City and County Airport, Series D, 7.750% 11/15/21................................ 3,170 3,330 IN State Transportation Finance Authority, Airport Facilities Lease, Series 1992-A, 6.250% 11/1/16................................. 950 964 ------- 4,294 TOLL FACILITIES - 0.7% CO State Public Highway Authority, Arapahoe County, E470 Series 2000 B: (a) 9/1/18................................... 4,000 1,369 (a) 9/1/35................................... 8,750 619 ------- 1,988 UTILITY - 21.2% INDEPENDENT POWER PRODUCER - 4.8% MI Midland County Economic Development Corp., Series 2000, 6.875% 7/23/09.................... 500 502 PA State Economic Development Financing Authority, Northampton Generating: Series A, 6.500% 1/1/13...................... 2,000 1,932 Series 1994-B, 6.750% 1/1/07................. 3,000 3,017 43 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued Par Value -------------------------------------------------------------------------------- UTILITY - CONT. INDEPENDENT POWER PRODUCER - (CONTINUED) VA Pittsylvania County Industrial Development Authority, Multitrade of Pittsyvania, Series 1994 A: 7.450% 1/1/09................................ $ 3,500 $ 3,623 7.550% 1/1/19................................ 3,100 3,185 ------- 12,259 INVESTOR OWNED - 6.7% CT State Development Authority, Connecticut Light & Power Co., Series 1993-A, 5.850% 9/1/28...... 2,900 2,545 LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999, 5.450% 7/1/10.................................. 500 464 LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999-B, 6.600% 9/1/28............. 250 233 MS State Business Finance Corp., Systems Energy Resources, Inc. Series 1999, 5.900% 5/1/22..... 1,250 1,081 NM Farmington, Public Service Co. of New Mexico, Series 1996-A, 6.300% 12/1/16.................. 3,300 3,166 NM Farmington, Tucson Electric Power Co., Series 1997-A, 6.950% 10/1/20.................. 2,000 1,978 NV Humboldt County Pollution Control Revenue, Idaho Power Co. Project, 8.300% 12/1/14........ 2,000 2,216 PA Beaver County Industrial Development Authority, Toledo Edison Co., Series 1995, 7.625% 5/1/20.. 4,900 5,200 ------- 16,883 JOINT POWER AUTHORITY - 5.4% GA Municipal Electric Authority, Series 1991-V, 6.600% 1/1/18.................................. 4,065 4,485 NC Eastern Municipal Power Agency, Series 1991 A, 6.500% 1/1/18.................................. 1,680 1,696 WA State Public Power Supply System, Nuclear Project No. 2: Series 1991-A, (a) 7/1/07...................... 6,945 4,775 Series 1992-A, 6.300% 7/1/12................... 2,500 2,711 ------- 13,667 WATER & SEWER - 4.3% FL Tampa Bay Water Utility Systems Revenue, 7.428% 10/1/29................................. 7,500 7,416 PA Dauphin County Industrial Development Authority, Dauphin Water Supply Co., Series 1992 A, 6.900% 6/1/24................... 3,200 3,503 ------- 10,919 ------- TOTAL MUNICIPAL BONDS (cost of $243,261)................................ 239,191 -------------------------------------------------------------------------------- PREFERRED STOCK - 0.8% -------------------------------------------------------------------------------- Charter Mac Equity Issue Trust, 6.625% 6/30/49 (cost of $2,000)(c)............................ 2,000 1,915 ------- -------------------------------------------------------------------------------- 44 SR&F High-Yield Municipals Portfolio -------------------------------------------------------------------------------- Continued SHORT-TERM OBLIGATIONS - 1.6% Par Value -------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (G) IA State Higher Education Loan Authority, St. Ambrose University, Series 1999, 4.750% 10/1/09.................... $ 400 $ 400 IA Woodbury County, Siouxland Medical Educational Foundation, Series 1996, 4.800% 11/1/16........ 1,500 1,500 IN State Health Facilities Financing Authority, Series 2000, 4.850% 1/12/20.................... 1,300 1,300 MI Farmington Hills Hospital Finance Authority, Botsford General Hospital, Series 1991-B, 4.650% 2/15/16................................. 800 800 ------- TOTAL SHORT-TERM OBLIGATIONS (cost of $4,000)........ 4,000 -------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost of $249,261)(f)............................. 245,106 -------------------------------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES - 3.4%................ 8,541 ------- NET ASSETS - 100.0%.................................. $253,647 ======= -------------------------------------------------------------------------------- NOTES TO INVESTMENT PORTFOLIO: -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) These securities, or a portion thereof, with a total market value of $14,575, are being used to collateralize open futures contracts. (c) This security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2000, the value of this security amounted to $1,915 or 0.8% of net assets. (d) This issuer is in default of certain debt covenants. Income is not being accrued. (e) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust solely for the payment of principal and interest. (f) Cost for financial statement and federal income tax purposes is identical. (g) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on specified dates. These securities are payable on demand and are secured by either letters of credit or other credit support agreements from banks. The rates listed are as of June 30, 2000. Short futures contracts open at June 30, 2000: Unrealized Par value Expiration depreciation Type covered by contracts month at 6/30/00 ---- ---------------- --------- ---------- Municipal Bond 7,800 September 70 Treasury Note 11,600 September 60 ---------- $130 ---------- See accompanying Notes to Financial Statements. 45 Statements of Assets and Liabilities -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands, except per-share data)
MUNICIPAL MONEY INTERMEDIATE MANAGED HIGH-YIELD MARKET MUNICIPALS MUNICIPALS MUNICIPALS FUND FUND FUND FUND ----------- ----------- ----------- ----------- ASSETS Investment in Portfolio, at value........................... $110,749 $ -- $ -- $253,607 Investments, at market value (cost $129,290 and $429,571, respectively)............................ -- 133,664 445,686 -- Interest receivable......................................... -- 2,451 8,301 -- Receivable for investments sold............................. -- -- 4,592 -- Receivable for fund shares sold............................. 3,688 100 912 670 Expense reimbursement due from Advisor...................... 9 -- 1 -- Cash........................................................ -- 1 21 -- Other....................................................... 18 24 329 273 --------- --------- --------- --------- Total assets............................................. 114,464 136,240 459,842 254,550 --------- --------- --------- --------- LIABILITIES Dividends payable........................................... 102 194 1,018 445 Payable for fund shares repurchased......................... 264 91 284 174 Payable due to Advisor...................................... -- 11 -- -- Variation margin on futures................................. -- 6 45 -- Accrued: Management fee........................................... -- 45 146 -- Administration fee....................................... 23 16 39 47 Transfer Agent fee....................................... 16 19 60 61 Bookkeeping fee.......................................... 2 2 3 3 Other....................................................... 242 46 42 33 --------- --------- --------- --------- Total liabilities........................................ 649 430 1,637 763 --------- --------- --------- --------- Net assets............................................... $113,815 $135,810 $458,205 $253,787 ======== ======== ======== ======== ANALYSIS OF NET ASSETS Paid-in capital............................................. $113,741 $131,609 $441,511 $264,405 Undistributed (overdistributed) net investment income.................................. 93 (20) (202) 116 Accumulated net realized gains (losses) on investments and futures contracts................... (16) 4 365 (6,390) Net unrealized appreciation on investments and futures contracts.................................. (3) 4,217 16,531 (4,344) --------- --------- --------- --------- Net assets............................................... $113,815 $135,810 $458,205 $253,787 ======== ======== ======== ========= Shares outstanding (unlimited number authorized)............ 113,682 12,391 52,988 22,987 ======== ======== ======== ========= Net asset value per share................................... $ 1.00 $ 10.96 $ 8.65 $ 11.04 ======== ======== ======== =========
See accompanying Notes to Financial Statements. 46-47 [SPREAD] Statements of Operations -------------------------------------------------------------------------------- For the Year Ended June 30, 2000 (All amounts in thousands)
MUNICIPAL MONEY INTERMEDIATE MANAGED HIGH-YIELD MARKET MUNICIPALS MUNICIPALS MUNICIPALS FUND FUND FUND FUND ----------- ----------- ----------- ----------- INVESTMENT INCOME Interest allocated from Portfolio ............................... $ 4,483 $ -- $ -- $ 17,894 Interest ........................................................ -- 8,233 29,673 -- -------- -------- -------- -------- Total investment income ...................................... 4,483 8,233 29,673 17,894 -------- -------- -------- -------- EXPENSES Management fees ................................................. -- 644 1,923 -- Expenses allocated from Portfolio ............................... 345 -- -- 1,284 Transfer agent fees ............................................. 182 215 716 392 Administrative fees ............................................. 289 208 563 317 Bookkeeping fees ................................................ 27 27 36 30 Trustees' fees .................................................. 12 17 19 11 Custodian fees .................................................. 1 3 11 1 Audit fees ...................................................... 9 21 21 10 Legal fees ...................................................... 2 3 10 2 Registration fees ............................................... 33 30 22 37 Reports to shareholders ......................................... 15 29 39 39 Other ........................................................... 3 -- -- -- -------- -------- -------- -------- Total expenses ............................................... 918 1,197 3,360 2,123 Reimbursement of expenses by investment Advisor ................. (111) (168) -- -- -------- -------- -------- -------- Net expenses ................................................. 807 1,029 3,360 2,123 -------- -------- -------- -------- Net investment income ........................................ 3,676 7,204 26,313 15,771 -------- -------- -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS Net realized gain (loss) on investments and futures transactions allocated from Portfolio ................................... (8) -- -- 3,179 Net realized gain on investments and futures transactions ................................... -- 64 2,359 -- Net change in unrealized appreciation/depreciation on investments and futures transactions allocated from Portfolio ................................... (3) (3,059) (21,196) (20,047) -------- -------- -------- -------- Net loss ..................................................... (11) (2,995) (18,837) (16,868) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 3,666 $ 4,209 $ 7,476 $ (1,097) ======== ======== ======== ========
See accompanying Notes to Financial Statements. 48-49 [SPREAD] Statements of Changes in Net Assets -------------------------------------------------------------------------------- (All amounts in thousands)
MUNICIPAL MONEY INTERMEDIATE MARKET FUND MUNICIPALS FUND -------------------------- ---------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2000 1999 2000 1999 -------------------------- --------------------------- OPERATIONS Net investment income ......................................... $ 3,676 $ 3,249 $ 7,204 $ 8,888 Net realized gain (loss) on investments and futures transactions ..................... (8) -- 64 1,053 Net change in unrealized appreciation/depreciation on investments and futures transactions .................. (3) -- (3,059) (5,460) --------- --------- --------- --------- Net increase in net assets resulting from operations ....... 3,665 3,249 4,209 4,481 --------- --------- --------- --------- DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income ...................... (3,595) (3,252) (7,275) (8,885) Distributions from net capital gains .......................... -- -- (735) (926) --------- --------- --------- --------- Total distributions to shareholders ........................ (3,595) (3,252) (8,010) (9,811) --------- --------- --------- --------- SHARE TRANSACTIONS Subscriptions to fund shares .................................. 136,193 197,191 18,308 31,678 Value of distributions reinvested ............................. 3,197 2,897 5,595 6,806 Redemptions of fund shares .................................... (144,677) (196,332) (53,188) (59,909) --------- --------- --------- --------- Net increase (decrease) from share transactions ............ (5,287) 3,756 (29,285) (21,425) --------- --------- --------- --------- Net increase (decrease) in net assets ...................... (5,217) 3,753 (33,086) (26,755) TOTAL NET ASSETS Beginning of period ........................................... 119,032 115,279 168,896 195,651 --------- --------- --------- --------- End of period ................................................. $ 113,815 $ 119,032 $ 135,810 $ 168,896 ========= ========= ========= ========= Undistributed (overdistributed) net investment income ......... 93 24 (20) 51 --------- --------- --------- --------- ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST Subscriptions to fund shares .................................. 136,193 197,191 1,669 2,720 Issued in reinvestment of distributions ....................... 3,197 2,897 510 586 Redemptions of fund shares .................................... (144,677) (196,332) (4,830) (5,169) --------- --------- --------- --------- Net increase (decrease) in fund shares ..................... (5,287) 3,756 (2,651) (1,863) Shares outstanding at beginning of period ..................... 118,970 115,214 15,042 16,905 --------- --------- --------- --------- Shares outstanding at end of period ........................... 113,683 118,970 12,391 15,042 ========= ========= ========= =========
See accompanying Notes to Financial Statements. 50-51 [SPREAD] Statements of Changes in Net Assets -------------------------------------------------------------------------------- (All amounts in thousands)
MANAGED HIGH-YIELD MUNICIPALS FUND MUNICIPALS FUND --------------------------- --------------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2000 1999 2000 1999 --------------------------- --------------------------- OPERATIONS Net investment income..................................... $ 26,313 $ 28,799 $ 15,771 $ 17,255 Net realized gain (loss) on investments and futures transactions............................. 2,359 5,166 3,179 3,655 Net change in unrealized appreciation/depreciation on investments and futures transactions.............. (21,196) (23,858) (20,047) (10,380) --------- --------- --------- --------- Net increase (decrease) in net assets resulting from operations............................ 7,476 10,107 (1,097) 10,530 --------- --------- --------- --------- DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income.................. (26,352) (28,945) (15,496) (17,606) Distributions from net capital gains...................... (5,798) -- -- -- --------- --------- --------- --------- Total distributions to shareholders.................... (32,150) (28,945) (15,496) (17,606) --------- --------- --------- --------- SHARE TRANSACTIONS Subscriptions to fund shares.............................. 29,618 43,856 53,142 57,493 Value of distributions reinvested......................... 17,510 16,296 9,880 11,152 Redemptions of fund shares................................ (102,571) (86,130) (90,516) (105,475) --------- --------- --------- --------- Net decrease from share transactions................... (55,443) (25,978) (27,494) (36,830) --------- --------- --------- --------- Net decrease in net assets............................. (80,117) (44,816) (44,087) (43,906) TOTAL NET ASSETS Beginning of period....................................... 538,322 583,138 297,874 341,780 --------- --------- --------- --------- End of period............................................. $ 458,205 $ 538,322 $ 253,787 $ 297,874 ========= ========= ========= ========= Undistributed (overdistributed) net investment income..... (202) (163) 116 (241) --------- --------- --------- --------- ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST Subscriptions to fund shares.............................. 3,224 4,661 4,745 4,792 Issued in reinvestment of distributions................... 2,205 1,735 882 932 Redemptions of fund shares................................ (11,819) (9,176) (8,083) (8,823) --------- --------- --------- --------- Net decrease in fund shares............................ (6,390) (2,780) (2,456) (3,099) Shares outstanding at beginning of period................. 59,378 62,158 25,443 28,542 --------- --------- --------- --------- Shares outstanding at end of period....................... 52,988 59,378 22,987 25,443 ========= ========= ========= =========
See accompanying Notes to Financial Statements. 52-53 [SPREAD] Statements of Assets and Liabilities -------------------------------------------------------------------------------- June 30, 2000 (All amounts in thousands) SR&F SR&F MUNICIPAL HIGH-YIELD MONEY MARKET MUNICIPALS PORTFOLIO PORTFOLIO ---------- ---------- ASSETS Investments, at market value (cost $128,327 and $249,261, respectively).................... $128,327 $245,106 Interest receivable................................. 896 4,834 Receivable for investments sold..................... 1,210 3,769 Cash................................................ 10 65 Other............................................... 27 -- --------- --------- Total assets..................................... 130,470 253,774 --------- --------- LIABILITIES Payable for investments purchased................... 5,163 -- Payable for variation margin on futures............. -- 15 Accrued: Management fees.................................. 26 87 Bookkeeping fees................................. 2 2 Transfer agent fees.............................. 1 1 Other............................................... 199 22 --------- --------- Total liabilities................................ 5,391 127 --------- --------- Net assets applicable to investors' beneficial interest............................ $125,079 $253,647 ========= ========= Statements of Operations -------------------------------------------------------------------------------- For the Year Ended June 30, 2000 (All amounts in thousands) SR&F SR&F MUNICIPAL HIGH-YIELD MONEY MARKET MUNICIPALS PORTFOLIO PORTFOLIO ---------- ---------- INVESTMENT INCOME Interest .................................... $ 5,062 $ 17,913 -------- -------- EXPENSES Management fees ............................. 316 1,163 Bookkeeping fees ............................ 27 30 Audit fees .................................. 16 19 Trustees' fees .............................. 17 21 Custodian fees .............................. 6 7 Legal fees .................................. 2 3 Transfer agent fees ......................... 6 6 Other ....................................... -- 36 -------- -------- Total expenses ........................... 390 1,285 -------- -------- Net investment income .................... 4,672 16,628 -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ..... (9) 3,144 Net change in unrealized appreciation/depreciation on investments (3) (20,040) -------- -------- Net loss on investments .................. (12) (16,896) -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. $ 4,660 $ (268) ======== ======== See accompanying Notes to Financial Statements. 54 Statements of Changes in Net Assets -------------------------------------------------------------------------------- (All amounts in thousands) SR&F SR&F HIGH-YIELD MUNICIPAL MONEY MUNICIPALS MARKET PORTFOLIO PORTFOLIO -------------------- -------------------- YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2000 1999 2000 1999 --------- --------- --------- --------- OPERATIONS Net investment income............. $ 4,672 $ 4,189 $ 16,628 $ 18,389 Net realized loss on investments.. (9) -- 3,144 3,631 Net change in unrealized appreciation/depreciation on investments................. (3) -- (20,040) (10,388) --------- --------- --------- --------- Net increase (decrease) in net assets resulting from operations.............. 4,660 4,189 (268) 11,632 --------- --------- --------- --------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST Contributions..................... 104,696 101,419 26,251 27,867 Withdrawals....................... (118,326) (103,577) (71,999) (83,002) --------- --------- --------- --------- Net decrease from transactions in investors' beneficial interest..................... (13,630) (2,158) (45,748) (55,135) --------- --------- --------- --------- Net increase (decrease) in net assets................ (8,970) 2,031 (46,016) (43,503) TOTAL NET ASSETS Beginning of period............... 134,049 132,018 299,663 343,166 --------- --------- --------- --------- End of period..................... $125,079 $134,049 $253,647 $299,663 ========= ========= ======== ========= See accompanying Notes to Financial Statements. 55 Notes to Financial Statements -------------------------------------------------------------------------------- (All amounts in thousands) NOTE 1. ORGANIZATION Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and Stein Roe High-Yield Municipals Fund (the "Funds") are series of Liberty-Stein Roe Municipal Trust (the "Trust"), formerly Stein Roe Municipal Trust, an open-end management investment company organized as a Massachusetts business trust. Stein Roe Municipal Money Market Fund and Stein Roe High-Yield Municipals Fund invest substantially all of their assets in SR&F Municipal Money Market Portfolio and SR&F High-Yield Municipals Portfolio (the "Portfolios"), respectively. The Portfolios are series of SR&F Base Trust, a Massachusetts common law trust organized under an Agreement and Declaration of Trust dated August 23, 1993. SR&F High-Yield Municipals Portfolio commenced operations on February 2, 1998. At commencement, Stein Roe High-Yield Municipals Fund contributed $335,711 in securities and other assets to SR&F High-Yield Municipals Portfolio in exchange for beneficial ownership of the Portfolio. On February 4, 1998, Stein Roe Advisor High-Yield Municipals Fund contributed cash of $100 to the Portfolio. The Portfolios allocate income, expenses, realized and unrealized gains and losses to each investor on a daily basis, based on methods approved by the Internal Revenue Service. At June 30, 2000 Stein Roe Municipal Money Market Fund owned 88.5% of SR&F Municipal Money Market Portfolio; and Stein Roe High-Yield Municipals Fund owned 99.9% of SR&F High-Yield Municipals Portfolio. -------------------------------------------------------------------------------- NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following summarizes the significant accounting policies of the Funds and Portfolios. These policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are accounted for on trade date. Interest income, including discount accretion and premium amortization, is recorded daily on the accrual basis. Realized gains or losses from investment transactions are reported on an identified cost basis. Securities purchased on a when-issued or delayed delivery basis may be settled a month or more after the 56 Notes to Financial Statements Continued -------------------------------------------------------------------------------- transaction date. The values of such securities are subject to market fluctuations during this period. None of the Funds or the Portfolios had when-issued or delayed delivery purchase commitments as of June 30, 2000. SECURITY VALUATIONS Municipal securities are valued at a fair value using a procedure determined in good faith by the Board of Trustees, which has authorized the use of bid valuations provided by a pricing service, except for SR&F Municipal Money Market Portfolio. This Portfolio utilizes the amortized cost method to value its investments. This technique approximates market value and involves valuing a security initially at cost and, thereafter, assuming a constant amortization to maturity of any discount or premium. In the event that a deviation of 0.50% or more exists between Stein Roe Municipal Money Market Fund's $1.00 per share net asset value, calculated at amortized cost, and the net asset value calculated by reference to market quotations, its Board of Trustees would consider what action, if any, should be taken. Other securities and assets are valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Stein Roe Municipal Money Market Fund attempts to maintain a per-share net asset value of $1.00, which management believes will be possible under most conditions. FUTURES CONTRACTS Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and SR&F High-Yield Municipals Portfolio may enter into futures contracts to either hedge against expected declines of their portfolio securities or as a temporary substitute for the purchase of individual bonds. Risks of entering into futures contracts include the possibility that there may be an illiquid market at the time a fund seeks to close out a contract, and changes in the value of the futures contract may not correlate with changes in the value of the portfolio securities being hedged. Upon entering into a futures contract, the Fund/Portfolio deposits with its custodian cash or securities in an amount sufficient to meet the initial margin requirements. Sub sequent payments are made or received by the Fund/Portfolio equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Fund/Portfolio recognizes a realized gain or loss when the contract is closed or expires. FEDERAL INCOME TAXES No provision is made for federal income taxes since (a) the Funds elect 57 Notes to Financial Statements Continued -------------------------------------------------------------------------------- to be taxed as "regulated investment companies" and make distributions to their shareholders to be relieved of all federal income taxes under provisions of current federal tax law; and (b) the Portfolios are treated as partnerships for federal income tax purposes and all of their income is allocated to their owners based on methods approved by the Internal Revenue Service. All dividends paid from net investment income by the Funds constitute tax-exempt interest that is not taxable for federal income tax purposes; however, a portion of the dividends paid may be inclusive in the alternative minimum tax calculation. The Funds intend to utilize provisions of the federal income tax laws, which allow them to carry a realized capital loss forward up to eight years following the year of the loss, and offset such losses against any future realized gains. At June 30, 2000, the Funds had capital loss carryforwards as follows: Year of Fund Amount Expiration Stein Roe High-Yield Municipals Fund $5,934 2006 Stein Roe Municipal Money Market Fund 8 2002-2008 Stein Roe Intermediate Municipal Fund $ 252 2008 DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income are declared daily and paid monthly. Capital gains distributions, if any, are distributed annually. Dividends are determined in accordance with income tax principles, which may treat certain transactions differently than generally accepted accounting principles. Distributions in excess of tax basis earnings are reported in the financial statements as a return of capital. Permanent differences in the recognition or classification of income between the financial statements and tax earnings are reclassified to paid-in capital. NOTE 3. PORTFOLIO COMPOSITION The Funds and Portfolios invest in municipal securities including, but not limited to, general obligation bonds, revenue bonds and escrowed bonds (i.e., bonds that have been refinanced, the proceeds of which have been invested in U.S. or state and local government obligations that are set aside to pay off the original issue at the first call date or maturity). See Fund Highlights for unaudited information regarding breakdown of securities held by type at June 30, 2000. The Funds and the Portfolios hold investments that are insured by private insurers who guarantee the payment of principal and interest in the event of default. At June 30, 2000 investments in these securities for Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and 58 Notes to Financial Statements Continued -------------------------------------------------------------------------------- SR&F High-Yield Municipals Portfolio represented 46.6%, 35.1% and 3.7% of holdings, respectively. SR&F Municipal Money Market Portfolio invests in certain short-term securities that are backed by bank letters of credit used to provide liquidity to the issuer and/or additional security in the event of default. At June 30, 2000, 72.8% of the Portfolio was backed by bank letters of credit. See the Portfolio of Investments for each Fund or Portfolio for additional information regarding portfolio composition. -------------------------------------------------------------------------------- NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES MANAGEMENT & ADMINISTRATIVE FEES The Funds and the Portfolios pay monthly management and administrative fees, computed and accrued daily, to Stein Roe & Farnham Incorporated (the "Advisor"), an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its services as investment advisor and manager. The management fee for SR&F Municipal Money Market Portfolio is computed at an annual rate of 0.25% of average daily net assets. The management fee for Stein Roe Intermediate Municipals Fund and SR&F High-Yield Municipals Portfolio is 0.45% of the first $100 million of average daily net assets, 0.425% of the next $100 million and 0.40% thereafter. The management fee for Stein Roe Managed Municipals Fund is 0.45% of the first $100 million of average daily net assets, 0.425% of the next $100 million, 0.40% of the next $800 million and 0.375% thereafter. The administrative fee for the Stein Roe Municipal Money Market Fund is computed at an annual rate of 0.25% of average daily net assets up to $500 million, 0.20% of average daily net assets for the next $500 million and 0.15% thereafter. The administrative fee for Stein Roe Intermediate Municipals Fund and Stein Roe High-Yield Municipals Fund is computed at an annual rate of 0.15% of the first $100 million of average daily net assets, 0.125% of the next $100 million and 0.10% thereafter. The administrative fee for Stein Roe Managed Municipals Fund is 0.15% of the first $100 million of average daily net assets, 0.125% of the next $100 million, 0.10% of the next $800 million and 0.075% thereafter. BOOKKEEPING FEES The Advisor provides bookkeeping and pricing services to each Fund and Portfolio for a monthly fee equal to $25 annually plus 0.0025% annually of each Fund's and Portfolio's average daily net assets over $50 million. 59 Notes to Financial Statements Continued -------------------------------------------------------------------------------- EXPENSE LIMITS The Advisor has agreed to reimburse Stein Roe Municipal Money Market Fund and Stein Roe Intermediate Municipals Fund for expenses in excess of 0.70% of average annual net assets. This commitment expires on October 31, 2001, subject to earlier termination by the Advisor on 30 days' notice. TRANSFER AGENT FEES Transfer agent fees are paid to SteinRoe Services, Inc. (SSI) (the Transfer Agent), an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI has entered into an agreement with Liberty Funds Services, Inc., also an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to act as subtransfer agent for the Funds. The Transfer Agent provides shareholder services for a monthly fee equal to 0.14% annually of each Fund's average net assets except Stein Roe Municipal Money Market which is equal to 0.15% annually and receives reimbursement for certain out-of-pocket expenses. OTHER Certain officers and trustees of the Trust are also officers of the Advisor. No remuneration was paid to any other trustee or officer of the Trust who is affiliated with the Advisor. -------------------------------------------------------------------------------- NOTE 5. LINE OF CREDIT The Trust (excluding the Stein-Roe High Yield Municipals Fund and Stein-Roe Municipal Money Fund), the Liberty Stein-Roe Investment Trust and the SR&F Base Trust (collectively, the "Trusts") participate in unsecured line of credit agreements provided by the custodian bank consisting of two components. The committed line of credit entitles the Trusts to borrow from the custodian at any time upon notice from the Trusts. The uncommitted line of credit permits the Trusts to borrow from the custodian at the custodian's sole discretion. The aggregate borrowings available to the Trusts for the committed and uncommitted lines of credit are $200 million and $100 million, respectively. Borrowings may be made to temporarily finance the repurchase of Fund shares. Interest is charged to each Trust and, ultimately, each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 5% per year. In addition, a commitment fee of 0.10% per annum on each Fund's borrowings shall be paid quarterly by each Fund based on the relative asset size of each Fund. For the year ended June 30, 2000, the Trusts had no borrowings under the agreement. 60 Notes to Financial Statements Continued -------------------------------------------------------------------------------- Note 6. Portfolio Information The aggregate cost of purchases and proceeds from sales or maturities of securities, excluding short-term obligations, for the year ended June 30, 2000 were as follows: Purchases Sales ------------- ------------- Stein Roe Intermediate Municipals Fund........... $ 36,676 $ 66,179 Stein Roe Managed Municipals Fund................ 212,363 290,972 SR&F High-Yield Municipals Portfolio............. 38,352 74,363 Unrealized appreciation (depreciation) at June 30, 2000 for both financial statement and federal income tax purposes was: Stein Roe Stein Roe SR&F Intermediate Managed High-Yield Municipals Municipals Municipals Fund Fund Portfolio ----------------------------------------- Gross unrealized appreciation $5,146 $24,474 $ 8,320 Gross unrealized depreciation (929) (8,358) (12,475) ------ ------- -------- Net unrealized appreciation (depreciation) $4,217 $16,116 $ (4,155) ====== ======= ======== 61 Financial Highlights -------------------------------------------------------------------------------- Municipal Money Market Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
YEARS ENDED JUNE 30, 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 -------- -------- -------- -------- -------- Net investment income.......... 0.031 0.027 0.031 0.030 0.031 Distributions from net investment income........... (0.031) (0.027) (0.031) (0.030) (0.031) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ======== ======= ======= ======= ======= Ratio of net expenses to average net assets (a)......... 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income to average net assets (b)......... 3.19% 2.69% 3.06% 2.98% 3.09% Total return (b).................. 3.20% 2.73% 3.10% 3.04% 3.13% Net assets, end of period (000's). $113,815 $119,032 $115,279 $118,424 $120,432
(a) If the Fund had paid all of its expenses and there had been no reimbursement by the Advisor, this ratio would have been 0.80, 0.79, 0.86, 0.86 and 0.84 percent for the years ended June 30, 2000, 1999, 1998, 1997, and 1996, respectively. (b) Computed giving effect to Advisor's expense limitation undertaking. -------------------------------------------------------------------------------- Federal Income Tax Information (unaudited) For the taxable year ended June 30, 2000, 100% of distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. -------------------------------------------------------------------------------- SR&F Municipal Money Market Portfolio
PERIOD ENDED YEARS ENDED JUNE 30, JUNE 30, 2000 1999 1998 1997 1996(a) -------- -------- -------- -------- -------- SELECTED RATIOS Ratio of net expenses to average net assets 0.30% 0.30% 0.34% 0.32% 0.30%(b) Ratio of net investment income to average net assets........................................ 3.57% 3.07% 3.41% 3.36% 3.50%(b)
(a) From commencement of operations on September 28, 1995. (b) Annualized 62 Financial Highlights Continued -------------------------------------------------------------------------------- Intermediate Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
YEARS ENDED JUNE 30, 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.23 $ 11.57 $ 11.38 $ 11.22 $ 11.16 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income.......... 0.28 0.54 0.54 0.55 0.55 Net realized and unrealized gains (losses) on investments............... (0.27) (0.30) 0.22 0.22 0.06 -------- -------- -------- -------- -------- Total from investment operations.............. 0.01 0.24 0.76 0.77 0.61 -------- -------- -------- -------- -------- DISTRIBUTIONS Net investment income.......... (0.26) (0.54) (0.54) (0.55) (0.55) Net realized gains............. (0.02) (0.04) (0.03) (0.06) -- -------- -------- -------- -------- -------- Total distributions......... (0.28) (0.58) (0.57) (0.61) (0.55) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.... $ 10.96 $ 11.23 $ 11.57 $ 11.38 $ 11.22 ======== ======= ======= ======= ======= Ratio of net expenses to average net assets (a)....... 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income to average net assets (b).... 4.93% 4.58% 4.70% 4.84% 4.82% Portfolio turnover rate........... 26% 48% 29% 44% 66% Total return (b).................. 3.10% 2.08% 6.84% 7.07% 5.47% Net assets, end of period (000's). $135,810 $168,896 $195,651 $196,006 $204,726
(a) If the Fund had paid all of its expenses and there had been no reimbursement by the Advisor, this ratio would have been 0.81, 0.79, 0.81, 0.82 and 0.81 percent for the years ended June 30, 2000, 1999, 1998, 1997 and 1996, respectively. (b) Computed giving effect to Advisor's expense limitation undertaking. -------------------------------------------------------------------------------- Federal Income Tax Information (unaudited) For the taxable year ended June 30, 2000, 100% of distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. The Fund designates 100% of capital gain distributions paid as long term capital gain. 63 Financial Highlights Continued -------------------------------------------------------------------------------- Managed Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
YEARS ENDED JUNE 30, 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 9.07 $ 9.38 $ 9.11 $ 8.85 $ 8.79 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income.......... 0.47 0.47 0.48 0.48 0.48 Net realized and unrealized gains (losses) on investments...... (0.32) (0.31) 0.27 0.26 0.06 -------- -------- -------- -------- -------- Total from investment operations.............. 0.15 0.16 0.75 0.74 0.54 -------- -------- -------- -------- -------- DISTRIBUTIONS Net investment income.......... (0.47) (0.47) (0.48) (0.48) (0.48) Net realized gains............. (0.10) -- -- -- -- -------- -------- -------- -------- -------- Total distributions......... (0.57) (0.47) (0.48) (0.48) (0.48) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.... $ 8.65 $ 9.07 $ 9.38 $ 9.11 $ 8.85 ======== ======= ======= ======= ======= Ratio of net expenses to average net assets........... 0.69% 0.72% 0.72% 0.73% 0.72% Ratio of net investment income to average net assets .......... 5.39% 5.02% 5.14% 5.31% 5.41% Portfolio turnover rate........... 19% 17% 12% 16% 40% Total return ..................... 1.86% 1.67% 8.37% 8.56% 6.24% Net assets, end of period (000's). $458,205 $538,322 $583,138 $582,366 $606,359
------------------------------------------------------------------------------- Federal Income Tax Information (unaudited) For the taxable year ended June 30, 2000, 99% of distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. The Fund designates 100% of capital gain distributions paid as long term capital gain, and additionally designates $1,897,502 as long term capital gains earned. 64 Financial Highlights Continued ------------------------------------------------------------------------------- High-Yield Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
YEARS ENDED JUNE 30, 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.71 $ 11.97 $ 11.67 $ 11.40 $ 11.31 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income.......... 0.65 0.63 0.65 0.72 0.67 Net realized and unrealized gains (losses) on investments...... (0.68) (0.25) 0.30 0.27 0.09 -------- -------- -------- -------- -------- Total from investment operations.............. (0.03) 0.38 0.95 0.99 0.76 -------- -------- -------- -------- -------- DISTRIBUTIONS Net investment income.......... (0.64) (0.64) (0.65) (0.72) (0.67) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.... $ 11.04 $ 11.71 $ 11.97 $ 11.67 $ 11.40 ======== ======= ======= ======= ======= Ratio of net expenses to average net assets........... 0.78% 0.77% 0.75% 0.77% 0.85% Ratio of net investment income to average net assets..................... 5.82% 5.26% 5.48% 6.20% 5.86% Portfolio turnover rate........... N/A N/A 8%(a) 11% 34% Total return...................... (0.16)% 3.18%(b) 8.32% 8.91% 6.83% Net assets, end of period (000's). $253,787 $297,874 $341,780 $306,070 $282,956
(a) Prior to commencement of operations of the Portfolio. (b) 0.50% of the return is attributable to a one-time revaluation of a portfolio security reflecting the restructuring of this security. Absent this revaluation, the total return would have been 2.68%. -------------------------------------------------------------------------------- Federal Income Tax Information (unaudited) For the taxable year ended June 30, 2000, 99.5% of distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. -------------------------------------------------------------------------------- SR&F High-Yield Municipals Portfolio PERIOD ENDED YEARS ENDED JUNE 30, JUNE 30, 2000 1999 1998 --------- -------- -------- SELECTED RATIOS Ratio of net expenses to average net assets.................. 0.47% 0.45% 0.47%(a) Ratio of net investment income to average net assets............... 6.11% 5.55% 5.72%(a) Portfolio turnover rate.................. 14% 19% 3%(b) (a) From commencement of operations on February 2, 1998. (b) Annualized 65 Report of Ernst & Young LLP, Independent Auditors -------------------------------------------------------------------------------- To the Shareholders, Holders of Investors' Beneficial Interest and Board of Trustees of Liberty-Stein Roe Funds Municipal Trust and SR&F Base Trust Stein Roe Municipal Money Market Fund Stein Roe Intermediate Municipals Fund Stein Roe Managed Municipals Fund Stein Roe High-Yield Municipals Fund SR&F Municipal Money Market Portfolio SR&F High Yield Municipals Portfolio We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund (two series of Liberty-Stein Roe Funds Municipal Trust, formerly, Stein Roe Municipal Trust), SR&F Municipal Money Market Portfolio and SR&F High-Yield Municipals Portfolio (two series of SR&F Base Trust), and the accompanying statements of assets and liabilities of Stein Roe Municipal Money Market Fund and Stein Roe High-Yield Municipals Fund (two series of Liberty-Stein Roe Funds Municipal Trust, formerly, Stein Roe Municipal Trust) as of June 30, 2000, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state ments and financial highlights. Our procedures included confirmation of securities owned as of June 30, 2000, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant 66 Report of Ernst & Young LLP, Independent Auditors Continued -------------------------------------------------------------------------------- estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the aforementioned series of Liberty-Stein Roe Funds Municipal Trust and SR&F Base Trust at June 30, 2000, the results of their operations, the changes in their net assets, and their financial highlights for the periods indicated therein, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Boston, Massachusetts August 18, 2000 67 To Contact Us. . . -------------------------------------------------------------------------------- BY PHONE 800-338-2550 You can discuss your investment questions with a Stein Roe account representative by calling us toll free. We'll be happy to answer questions about your current account, or to provide you with information about opening a Stein Roe account, including Stein Roe Traditional, Roth and Education IRAs. We're available Monday through Friday from 7 a.m. to 7 p.m. CT, and Saturdays and Sundays from 9 a.m. to 1 p.m. CT. STEIN ROE'S FUNDS-ON-CALL(R) 24-HOUR SERVICE LINE Using a touch-tone phone, call our toll-free number, day or night, for your current account balance, the latest Stein Roe Fund prices and yields, and other information. In addition, if you have a Personal Identification Number (PIN), you may place orders for the following transactions 24 hours a day: o Exchange shares between your Stein Roe accounts; o Purchase fund shares by electronic transfer; o Order additional account statements and money market fund checks; o Redeem shares by check, wire or electronic transfer. RETIREMENT PLAN ACCOUNTS Call us for information about how we can assist you with your defined contribution plan, including 401(k) plans. You can reach us toll free at 800-322-1130. For information on Traditional, Roth and Education IRA plans, call us toll free at 800-338-2550. BY MAIL OR E-MAIL If you prefer to contact us by mail, please address all correspondence to: P.O. Box 8900, Boston, MA 02205-8900. To contact us by email, send correspondence directly to: comments@steinroe.com or visit us at www.steinroe.com on the Internet. ADDITIONAL REPORTS The Funds mail one shareholder report to each shareholder address. If you would like more than one report, please call 800-338-2550 and additional reports will be sent to you. Must be preceded or accompanied by a prospectus. 68 Liberty-Stein Roe Funds Municipal Trust -------------------------------------------------------------------------------- TRUSTEES John A. Bacon Jr. Private Investor William W. Boyd Chairman and Director, Sterling Plumbing Group Inc. Lindsay Cook Executive Vice President, Liberty Financial Companies, Inc. Douglas A. Hacker Executive Vice President and Chief Financial Officer, UAL, Inc. Janet Langford Kelly Executive Vice President, Secretary and General Corporate Development, Kellogg Company Charles R. Nelson Van Voorhis Professor of Political Economy, University of Washington Thomas C. Theobald Managing Director, William Blair Capital Partners OFFICERS Stephen E. Gibson, President William D. Andrews, Executive Vice President Kevin M. Carome, Executive Vice President Loren A. Hansen, Executive Vice President Joseph Palombo, Executive Vice President Nancy L. Conlin, Senior Vice President, Secretary Pamela McGrath, Senior Vice President, Treasurer J. Kevin Connaughton, Controller AGENTS AND ADVISORS Stein Roe & Farnham Incorporated Investment Adviser State Street Bank and Trust Company Custodian Stein Roe Services Inc. Transfer Agent Bell, Boyd & Lloyd LLC Legal Counsel to the Trust Ernst & Young LLP Independent Auditors 69 THE STEIN ROE MUTUAL FUNDS FIXED INCOME FUNDS Cash Reserves Fund Municipal Money Market Fund Intermediate Municipals Fund Managed Municipals Fund High-Yield Municipals Fund Intermediate Bond Fund Income Fund High Yield Fund EQUITY FUNDS Balanced Fund Growth & Income Fund Disciplined Stock Fund* Growth Stock Fund Growth Investor Fund Young Investor Fund Large Company Focus Fund Midcap Growth Fund** Capital Opportunities Fund International Fund Small Company Growth Fund INTERNATIONAL FUNDS Asia Pacific Fund Small Cap Tiger Fund * Formerly Special Fund ** Formerly Growth Opportunities Fund Stein Roe Mutual Funds P.O. Box 8900 Boston, MA 02205-8900 Financial Advisors call: 800-322-0593 Shareholders call: 800-338-2550 www.steinroe.com In Chicago, visit our Fund Center at One South Wacker Drive Liberty Funds Distributor, Inc. DIR-02/136C-0700(8/00) 00/1372