-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OgGXL6luiXI9vdCVmPJBRnOQ+CnwEUV7DHmd6UvGdAU1vlYBNz0DkTxw1SpCdPgf tpTkKhOrmhK4SlQJLORrMg== 0000891804-01-501685.txt : 20010910 0000891804-01-501685.hdr.sgml : 20010910 ACCESSION NUMBER: 0000891804-01-501685 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTY STEIN ROE FUNDS MUNICIPAL TRUST CENTRAL INDEX KEY: 0000773757 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363376651 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04367 FILM NUMBER: 1732729 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 8003382550 MAIL ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 FORMER COMPANY: FORMER CONFORMED NAME: STEINROE INTERMEDIATE MUNICIPALS INC DATE OF NAME CHANGE: 19880114 FORMER COMPANY: FORMER CONFORMED NAME: STEINROE MUNICIPAL TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 file001.txt STEIN ROE TAX-EXEMPT BOND FUNDS STEIN ROE TAX-EXEMPT BOND FUNDS STEIN ROE MUNICIPAL MONEY MARKET FUND STEIN ROE INTERMEDIATE MUNICIPALS FUND STEIN ROE MANAGED MUNICIPALS FUND STEIN ROE HIGH-YIELD MUNICIPALS FUND ANNUAL REPORT o JUNE 30,2001 Logo: Stein Roe Mutual Funds Contents From the President 1 Stein Roe Municipal Money Market Fund Performance Summary 2 Portfolio Manager's Report 3 Stein Roe Intermediate Municipals Fund Performance Summary 6 Portfolio Manager's Report 8 Stein Roe Managed Municipals Fund Performance Summary 12 Portfolio Managers' Report 13 Stein Roe High Yield Municipals Fund Performance Summary 18 Portfolio Manager's Report 19 Portfolio of Investments 23 Financial Statements 56 Notes to Financial Statements 72 Financial Highlights 82 Report of Independent Auditors 92 For daily performance updates on all Stein Roe funds, please visit steinroe.com. Must be preceded or accompanied by a prospectus. From the President Dear Shareholder: After an extended period of unprecedented strength in the equity market, the economic uncertainty of the past 12 months provided a much-needed recovery opportunity to the bond market. In the second half of 2000, the Federal Reserve Board (the Fed) continued to increase interest rates in an effort to rein in the unbridled economic growth. However, the Fed overshot its desired "soft landing," and the slowdown proved to be a bit too severe. Early in 2001, the Fed reversed its monetary policy and began reducing short-term interest rates in hopes of re-stimulating the sagging economy and avoiding a possible recession. We saw six rate cuts during the first six months of 2001, bringing the short-term interest rate back down from 6.5% to 3.75%. All this economic activity had a significant impact on the bond market. Extreme volatility in the stock market caused many investors to turn to more defensive investments, which helped the bond market to rally from its earlier slump. More recently, the aggressive interest rate cuts created concern in the market that inflationary pressures could surface. This uncertainty provided further incentive for investors to shift assets out of the stock market and into the bond market. Municipal bonds in particular benefited from this shift. Taken together, these conditions provided support for municipal bond prices and enabled the Stein Roe Tax-Exempt Bond Funds to achieve strong performance during the period. The following report will provide you with more detailed information about your fund's performance and the strategies used by your portfolio manager. For more information, visit us online at www.steinroe.com. As always, I thank you for choosing the 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 Photo of Stephen E. Gibson Because economic and market conditions change, there can be no assurance that the trends described in this report will continue or come to pass. 1 Performance Summary STEIN ROE MUNICIPAL MONEY MARKET FUND Average Annual Total Return (%), Year Ended June 30, 2001 1-Year 5-Year 10-Year - ----------------------------------------------------------------------- Stein Roe Municipal Money Market Fund 3.39 3.09 2.88 - ----------------------------------------------------------------------- Lipper Tax-Exempt Money Market Fund Average 3.25 3.04 2.90 - ----------------------------------------------------------------------- Mutual fund performance changes over time. Please visit steinroe.com for monthly performance updates. 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 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. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives. 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. Source: Lipper Inc. 2 Portfolio Manager's Report Fund Commentary COMMENTARY FROM VERONICA WALLACE, PORTFOLIO MANAGER OF STEIN ROE MUNICIPAL MONEY MARKET FUND For the 12 months ended June 30, 2001, the Stein Roe Municipal Money Market Fund slightly outperformed its peer group with a total return of 3.39%. In contrast, the Lipper Tax-Exempt Money Market Fund Average had a total return of 3.25% during the same period. Our fund's average maturity, which was longer than that of many of our peers, was one factor that helped the fund outperform its peer average. Average maturity and variable rate demand notes key factors At the end of 2000 before the Fed began to cut rates, the fund's average maturity was 48 days. This helped performance, particularly late last year when we were able to lock in rates on one-year securities before it became obvious that the Fed would begin to cut rates and yields would decline. The percentage of the fund's assets in tax anticipation notes, typically maturing in six months to one year, went from zero to approximately 2.5% of net assets during the period. Longer put bonds, which increased during the period as a percentage of net assets, also played a role in maintaining the fund's average maturity. At the end of June 2001, the fund's average maturity ended at 47 days, considerably above the peer group's average of 36 days. At the beginning of the calendar year, the paper we bought yielded 4% and higher. As of June 30, the one-year municipal note was yielding only 2.53%. With rates so low, the longer paper helped performance. Investment Objective and Strategy: 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 high quality, short-term municipal securities. Fund Inception: March 15, 1983 Net Assets: $108.1 million 3 Securities Type Breakdown as of 6/30/01 (unaudited) [BAR CHART] % of investments Variable Rate Notes 71.3 Tax Exempt Bonds 8.5 Other Tax-Exempt Notes 7.3 Put Bonds 5.6 Tax & Revenue Anticipation Notes 2.5 Commercial Paper 2.4 Bond Anticipation Notes 2.4 The spikes in performance of variable rate demand notes also helped the fund's performance during the period. With variable rate demand notes, we had a few periods during the fiscal year when yields were very attractive. At the end of September 2000, for example, we were able to buy variable rate demand notes yielding in the mid 5% range. At the same time, these securities, which offered us daily and weekly liquidity, gave us great flexibility. Variable rate demand notes rely more on supply and demand than on interest rates. End of rate cuts may be near We believe the yield curve may flatten even more if the Fed cuts rates one more time. At that point we expect to be near the end of the Fed's easing phase. Accompanying this should be a period of relative calm in the markets until the economy turns. When that happens, interest rates may go back up. We will be cautious in lengthening the fund's average maturity from its present level, although we plan to look for extremely attractive longer notes until August. If we see signs of rates swinging the other way, we expect to shorten the fund's average maturity. 4 Portfolio Statistics (unaudited) As of 6/30/01 As of 6/30/00 - ------------------------------------------------------------------------------ 7-Day Dollar-Weighted Average Maturity 47 days 40 days 7-Day Current Tax Free Yield* 2.69% 3.91% * Net of all fees and expenses and represents an annualization of dividends declared and payable to shareholders for the last seven days of investments. MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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. A portion of the fund's income may be subject to the alternative minimum tax. The fund may at times purchase tax-exempt securities at a discount. Some or all of this discount may be included in the fund's ordinary income, and is taxable when distributed. An investment in the fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Source of Lipper data: Lipper Inc. MATURITY (UNAUDITED) % of net assets as of 6/30/01 [PIE CHART] 1-29 days 75.1% 30-89 days 6.5% 90-179 days 9.3% 180-299 days 5.0% Greater than 299 days 4.1% 5 Performance Summary STEIN ROE INTERMEDIATE MUNICIPALS FUND Average Annual Total Return (%), Year Ended June 30, 2001 1-Year 5-Year 10-Year - ------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund, Class S 8.74 5.53 6.18 - ------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund, Class A with sales charge 8.68 5.52 6.17 without sales charge 3.49 4.49 5.65 - ------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund, Class B with sales charge 8.38 5.46 6.14 without sales charge 3.38 5.13 6.14 - ------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund, Class C with sales charge 8.59 5.50 6.16 without sales charge 7.59 5.50 6.16 - ------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index 9.49 6.58 7.25 - ------------------------------------------------------------------------- Lipper Intermediate Municipal Debt Fund Average 8.48 5.30 6.06 - ------------------------------------------------------------------------- MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 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. The Lehman Brothers 10-Year Municipal Bond Index is an unmanaged group of fixed-income securities that differs from the composition of the fund; it is not available for direct investment. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives. 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. Source: Lipper Inc. Class A, B, and C share (newer class shares) performance includes returns of the fund's class S shares (the oldest existing fund class) for periods prior to the inception dates of the newer class shares. Class S share returns are not restated to reflect any expense differential, e.g., 12b-1 fees, between class S and the newer class shares. Had the expense differential been reflected, the returns for the period prior to inception of class A, B, and C would have been lower. The "with sales charge" returns include the maximum 4.75% charge for class A shares, the appropriate class B contingent deferred sales charge for the holding period after purchase as follows: through first year - 5%, second year - 4%, third year - 3%, fourth year - 3%, fifth year - 2%, sixth year - 1%, thereafter - - 0%, and the class C contingent deferred sales charge of 1% for the first year only. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. 6 INVESTMENT COMPARISONS [LINE CHART] GROWTH OF A $10,000 INVESTMENT JUNE 30, 1991 TO JUNE 30, 2001 As of 6/30/2001 STEIN ROE LEHMAN BROTHERS INTERMEDIATE MUNICIPALS 10-YEAR MUNICIPAL FUND, CLASS S: $18,209 BOND INDEX: $20,142 1991 10000 10000 10317 10398 10682.2 10724.5 10651.2 10714.8 1992 11028.3 11132.7 11285.3 11456.7 11497.4 11681.2 11914.8 12133.3 1993 12231.7 12533.7 12607.2 12983.7 12768.6 13173.2 12227.2 12475 1994 12373.9 12658.4 12434.6 12747 12341.3 12545.6 12925 13413.8 1995 13191.3 13769.3 13556.7 14251.2 13937.6 14698.7 13858.2 14603.1 1996 13916.4 14648.4 14159.9 14941.4 14516.8 15367.2 14496.5 15364.1 1997 14896.6 15869.6 15285.4 16361.6 15604.8 16785.3 15731.2 16958.2 1998 15915.3 17214.3 16376.8 17803 16455.4 17918.7 16542.6 18020.9 1999 16244.9 17608.2 16282.2 17720.9 16223.6 17696.1 16497.8 18108.4 2000 16746.9 18396.3 17081.9 18852.5 17751.5 19599.1 18140.2 20053.8 2001 18209 20142 Performance of a $10,000 investment in all shares - ------------------------------------------------- 6/30/91-6/30/01 Stein Roe without sales with sales Intermediate Municipals charge ($) charges ($) - -------------------------------------------------------------------------- Class S 18,209 n/a - -------------------------------------------------------------------------- Class A 18,200 17,328 - -------------------------------------------------------------------------- Class B 18,149 18,149 - -------------------------------------------------------------------------- Class C 18,185 18,185 - -------------------------------------------------------------------------- MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 6/30/91, reinvestment of distributions, and compares fund performance to 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. 7 Portfolio Manager's report Fund Commentary COMMENTARY FROM BILL LORING, PORTFOLIO MANAGER OF STEIN ROE INTERMEDIATE MUNICIPALS FUND The intermediate sector of the municipal bond market enjoyed strong performance during the 12 months ended June 30, 2001. Stein Roe Intermediate Municipals Fund performed well, delivering a total return of 8.74% (Class S) and outperforming its peer group, the Lipper Intermediate Municipal Debt Funds Average, which returned 8.48% for the period. The fund underperformed its benchmark, the Lehman Brothers 10-Year Municipal Bond Index, which returned 9.49% for the same period. Longer intermediate bonds outperform The fund's performance was enhanced by its holdings in longer intermediate bonds. During the first half of the period, we increased our holdings in the 14-20 year bond sector (without raising the average weighted maturity of the portfolio beyond 10 years) and used this positioning to take advantage of market rallies during the period. These longer intermediate bonds continued to perform well throughout the period and provided significant benefits to the fund's performance. Investment Objective and Strategy: 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: $153.1 million Exposure to zero coupon bonds increased We increased our holdings in zero coupon bonds during the period in an effort to further boost performance. Zero coupon bonds do not pay periodic interest; instead, they pay interest only at maturity. Since they are traditionally sold at a deep discount to make up for the lack of 8 interest payments, the value of these bonds increases when interest rates decline. Adding zero coupon bonds to the portfolio benefited the fund's performance in an environment of declining interest rates. TOP 10 STATES AS OF 6/30/01 (UNAUDITED) [BAR CHART] % of net assets New York 12.8 Illinois 9.6 Texas 7.4 Georgia 5.9 Michigan 5.2 Massachusetts 5.2 Arizona 4.9 Indiana 4.2 Ohio 4.1 California 3.4 Managing duration in response to interest rate changes Prior to the beginning of this fiscal year, we kept the fund's duration short because it appeared that interest rates would continue to rise as long as economic growth remained unchecked. (Duration measures a fund's sensitivity to interest rate increases, so our strategy helped to keep the fund's value relatively stable.) During the first half of the period, however, the economy began to slow and interest rate increases were put on hold. In response to this development, we began extending the fund's duration in order to take advantage of the lower interest rates we anticipated. The Fed subsequently reversed its position and began a series of interest rate cuts, which benefited the fund because of its longer duration. High yield bonds struggle during the period The performance of the portfolio's high yield holdings reflected the struggling high yield market during the period. The outlook for high yield seemed to brighten during the first two months of 2001, but the high yield market stumbled again in the final months of the period. 9 As a result, the high yield portion of the fund's portfolio provided generally disappointing results. Fortunately, we maintained a relatively underweighted position in high yield issues, so the negative impact on fund performance was limited. Portfolio Quality (unaudited) % of net assets as of 6/30/01 AAA 66.3 AA 15.7 A 7.2 BBB and Below 6.9 Non-Rated 3.9 Outlook for coming months generally positive We believe the Fed has left the door wide open for further interest rate cuts and that concerns about inflation are overstated. If interest rates continue to fall, as we expect they will, we should see a rally in the bond market. We believe these gains should be greatest for longer-term securities, many of which are currently undervalued. We also believe the current rebound of the stock market may be short-lived, and we expect to see more indications of slowing in the coming months. Favorable trends in the municipal market may continue as well. In recent years, strong economies and high tax revenues have allowed state and local economies to fund new projects with cash rather than by issuing debt. This has caused the municipal bond supply to dwindle. In a slower economic environment, however, the supply of municipal bonds should return to historical levels. Portfolio Statistics (unaudited) As of 6/30/01 As of 6/30/00 - ----------------------------------------------------------------------- Average Duration 6.7 years 6.2 years Average Weighted Maturity 9.1 years 9.4 years Average Weighted Coupon 5.9% 6.12% 10 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 6/30/01 and are subject to change. The advisor currently limits expenses to 0.70% of average net assets. Fund return as of 6/30/01 would have been lower without this limit. Income distributions are exempt from federal income taxes but may be subject to 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 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 attempts to react quickly to market changes. Source of Lipper data: Lipper Inc. MATURITY (UNAUDITED) % of net assets as of 6/30/01 [PIE CHART] 0-5 years 29.1% 5-10 years 31.3% 10-15 years 20.2% Greater than 15 years 19.4% 11 Performance Summary STEIN ROE MANAGED MUNICIPALS FUND Average Annual Total Return (%), Year Ended June 30, 2001 1-Year 5-Year 10-Year - ------------------------------------------------------------------------- Stein Roe Managed Municipals Fund 10.13 6.05 6.56 - ------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index 9.98 6.54 7.16 - ------------------------------------------------------------------------- Lipper General Municipal Debt Fund Average 9.23 5.44 6.49 - ------------------------------------------------------------------------- MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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. The Lehman Brothers Municipal Bond Index is an unmanaged group of fixed-income securities that differs from the composition of the fund; it is not available for direct investment. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives. 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. and Bloomberg Business News. INVESTMENT COMPARISONS [LINE CHART] Growth of a $10,000 Investment June 30, 1991 to June 30, 2001 As of 6/30/2001 Stein Roe Managed Lehman Brothers Municipals Fund: $18,878 Municipal Bond Index: $19,963 1991 10000 10000 10363 10389 10738.1 10737 10744.6 10769.2 1992 11191.6 11177.4 11432.2 11474.7 11627.7 11683.6 12075.3 12117 1993 12399 12513.2 12794.5 12936.2 12936.5 13117.3 12258.6 12397.2 1994 12364 12533.5 12414.7 12620 12240.9 12439.5 13026.8 13319 1995 13243 13640 13598 14031.5 14276.5 14611 13963.8 14435.6 1996 14074.2 14545.4 14409.1 14878.4 14814 15257.8 14760.7 15221.2 1997 15274.4 15746.4 15766.2 16220.3 16193.5 16659.9 16308.4 16851.5 1998 16551.4 17107.6 17048 17632.8 17083.8 17738.6 17169.2 17896.5 1999 16829.2 17581.5 16681.1 17511.2 16496 17374.6 16952.9 17881.9 2000 17141.1 18152 17545.6 18591.2 18554.5 19403.7 18912.6 19834.4 2001 18878 19963.4 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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, 1991, reinvestment of distributions, and compares fund performance to 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. 12 Portfolio Managers' Report Fund Commentary COMMENTARY FROM BILL LORING AND BRIAN HARTFORD, PORTFOLIO CO-MANAGERS OF STEIN ROE MANAGED MUNICIPALS FUND The Stein Roe Managed Municipals Fund experienced strong performance during the 12-month period ended June 30, 2001, as bond markets experienced a long-awaited rebound. The fund returned 10.13% for the period, outperforming both its benchmark, the Lehman Brothers Municipal Bond Index, and its peer group, the Lipper General Municipal Debt Funds Average. The Lehman Brothers Index returned 9.98% for the period, while the Lipper peer group returned 9.23%. Long-term munis receive limited benefit from interest rate cuts In an attempt to re-stimulate the sluggish economy, the Fed lowered key short-term interest rates six times during the first half of 2001 for a total of 2.75%. While these rate cuts benefited the bond market in general, concerns about the possibility of inflation caused investors to shy away from long-term bonds. Thus, the fund's long-term holdings experienced less of a benefit from these interest rate cuts than their shorter-term counterparts. Investment Objective and Strategy: 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: $454.4 million Zero coupon holdings increased during period In an effort to amplify the effects of lower interest rates and enhance fund performance, we increased the fund's position in zero coupon bonds during the period. Zero coupon bonds, or "zeros," pay interest only at maturity, not on a periodic basis. To compensate for this 13 lack of periodic interest payments, zeros are sold at a deep discount. The value of these bonds increases when interest rates decline, and the increase is typically more dramatic than that of coupon bonds. Adding zeros to the portfolio allowed the fund to more fully benefit from interest rate declines. Top 10 States as of 6/30/01 (unaudited) [BAR CHART] % of net assets Georgia 14.0 Illinois 10.9 Massachusetts 10.0 California 6.9 Texas 5.9 Pennsylvania 5.8 New York 5.6 Washington 4.5 Florida 3.6 Indiana 3.4 Performance boosted by longer intermediate holdings The fund also did well by its holdings in longer intermediate bonds. Early in the period, we increased our holdings in the 14-20 year bond sector. These longer intermediate bonds performed well throughout the period and provided a boost to the fund's performance. Duration adjusted for economic conditions Going into this fiscal year, we had shortened the fund's duration because it appeared that interest rates would continue to rise as long as economic growth remained unchecked. (The shorter a fund's duration, the less its share price will fall when interest rates rise, and vice versa.) During the past 12 months, the economy slowed, interest rate increases were put on hold and subsequently interest rates began to decline. In response to this development, we extended the fund's duration in order to better take advantage of these lower interest rates. 14 High yield bonds continue to underperform The high yield bond market struggled during the first half of the period, as the market seemed to decide this was a bad time for taking credit risk. In the first two months of 2001, the high yield bond market made a bit of a recovery, but stumbled again in the final months of the period. As a result, the high yield sector of the fund's portfolio generally provided disappointing returns. Fortunately, we held an underweighted position in high yield bonds, so the poor performance in this sector had only a limited impact on the fund's performance. Long-term outlook remains consistent We believe the current rebound of the stock market may be short-lived, and we expect to see more indications of slowing in the coming months. We also believe the Fed has left the door open for further interest rate cuts and that concerns about inflation are overstated. If interest rates continue to fall, we should see a rally in the bond market. We believe these gains should be greatest for longer-term securities, many of which are currently undervalued. We plan to continue to invest primarily in investment-grade securities with maturities of 15 to 20 years and to seek out opportunities to increase our position in securities at the longer end of the maturity spectrum. Portfolio Quality (unaudited) % of net assets as of 6/30/01 AAA 52.7 AA 19.9 A 14.2 BBB and Below 7.6 Non-Rated 5.6 Portfolio Statistics (unaudited) As of 6/30/01 As of 6/30/00 - ----------------------------------------------------------------------- Average Duration 10.7 years 9.4 years Average Weighted Maturity 16.5 years 16.1 years Average Weighted Coupon 5.38% 5.77% 15 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 6/30/01 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 it 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 attempts to react quickly to market changes. Source of Lipper data: Lipper Inc. Maturity (unaudited) % of net assets as of 6/30/01 [PIE CHART] Less than 5 years 1.1% 5-10 years 16.4% 10-15 years 28.4% 15-20 years 23.8% 20-25 years 17.0% Greater than 25 years 13.3% 16 This page intentionally left blank 17 Performance Summary STEIN ROE HIGH-YIELD MUNICIPALS FUND Average Annual Total Return (%), Year Ended June 30, 2001 1-Year 5-Year 10-Year - ------------------------------------------------------------------------- Stein Roe High-Yield Municipals Fund 6.78 5.34 5.97 - ------------------------------------------------------------------------- Lehman Brothers Municipal Bond Index 9.98 6.54 7.16 - ------------------------------------------------------------------------- Lipper High-Yield Municipal Debt Fund Average 6.75 4.50 5.81 - ------------------------------------------------------------------------- MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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. The Lehman Brothers Municipal Bond Index is an unmanaged group of fixed-income securities that differs from the composition of the fund; it is not available for direct investment. Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives. 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. and Bloomberg Business News. INVESTMENT COMPARISONS Growth of a $10,000 Investment June 30, 1991 to June 30, 2001 As of 6/30/2001 Stein Roe High-Yield Lehman Brothers Municipals Fund: $17,859 Municipal Bond Index: $19,963 1991 10000 10000 10294 10389 10517.4 10737 10550 10769.2 1992 10897.1 11177.4 10861.1 11474.7 11079.4 11683.6 11472.7 12117 1993 11755 12513.2 12117 12936.2 12258.8 13117.3 11632.4 12397.2 1994 11867.3 12533.5 11921.9 12620 11765.8 12439.5 12589.4 13319 1995 12882.7 13640 13213.8 14031.5 13850.7 14611 13674.8 14435.6 1996 13769.1 14545.4 14061 14878.4 14471.6 15257.8 14494.8 15221.2 1997 14990.5 15746.4 15428.2 16220.3 15851 16659.9 16034.8 16851.5 1998 16240.1 17107.6 16608.7 17632.8 16690.1 17738.6 16837 17896.5 1999 16757.8 17581.5 16617.1 17511.2 16332.9 17374.6 16555.1 17881.9 2000 16730.5 18152 17090.2 18591.2 17502.1 19403.7 17738.4 19834.4 2001 17859.5 19963.4 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 6/30/91, reinvestment of distributions, and compares fund performance to 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. 18 Portfolio Manager's Report Fund Commentary COMMENTARY FROM MAUREEN NEWMAN, PORTFOLIO MANAGER OF STEIN ROE HIGH-YIELD MUNICIPALS FUND For the 12 months ended June 30, 2001, Stein Roe High-Yield Municipals Fund delivered a total return of 6.78%. The fund slightly outperformed its peer group, the Lipper High-Yield Municipal Debt Fund Average, which returned 6.75% for the same period. However, the fund's return was lower than that of its benchmark, the Lehman Brothers Municipal Bond Index, which returned 9.98%. One reason for this underperformance is that the index reflects the broad municipal bond market, while the fund invests mainly in high yield municipal issues, which underperformed other segments of the market during the period. Also, the issuer of one security in the fund's portfolio, Phoenix Memorial Hospital, declared bankruptcy in February, greatly affecting the fund's performance. Investment Objective and Strategy: 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: $224.9 million Investors diversified into bonds Economic conditions during the period benefited the bond market. Early in the period, the Fed raised interest rates in an effort to bring economic growth down to a more manageable rate. Amid signs of an economic slowdown, the Fed had to reverse course during the second half of the period, lowering interest rates six times for a total of 2.75%. Increased economic uncertainty caused high yield bonds to underperform. However, stock market declines led more investors to diversify into bond funds. 19 Economic conditions impact portfolio decisions In advance of this economic slowdown, we rotated the portfolio away from the more cyclical areas of the bond market, such as manufacturing and other industrial-based sectors. Instead, we focused on non-cyclical sectors such as multifamily housing, hospitals and transportation, which are not as strongly impacted by slowdowns in the economy. For instance, we invested in a Las Vegas monorail project (NV State Department of Business & Industry, 0.4% of net assets) designed to facilitate movement among the citycasinos. We also purchased a bond backed by revenues from a toll road connecting Denver's fast-growing suburbs to its airport (E-470 Public Highway Authority, 1.0% of net assets). We also focused on broadening diversification by industry sector and geographic location. Recently, we have found value in California bonds, which had underperformed due to the current energy crisis in the region and its potential impact on credit quality. Top 10 States as of 6/30/01 (unaudited) [BAR CHART] % of net assets Florida 9.9 Pennsylvania 8.6 Texas 6.8 Colorado 6.5 Washington 6.0 Indiana 4.5 North Carolina 4.1 Massachusetts 4.0 Mississippi 4.0 Georgia 3.5 Inverse floaters used to boost income During the period, a portion of the fund's assets was invested in inverse floaters. These securities pay interest that increases when short-term interest rates fall, as they have recently. While the use of inverse floaters provides the possibility of higher tax-exempt income, it also adds price volatility to the portfolio. 20 Portfolio Quality (unaudited) % of net assets as of 6/30/01 AAA 13.9 AA 10.6 A 14.7 BBB 18.7 BB and Below 7.0 Non-Rated 35.1 Inverse floaters are securities that are derived from bonds. All of the inverse floaters in the fund were created from AAA rated insured bonds that were placed in trusts to create the derivative securities. Though some of the fund's inverse floaters themselves do not carry ratings, the advisor believes them to be of high credit quality. The fund had 7.8% of its assets invested in inverse floaters at June 30, 2001, up from 0% at June 30, 2000. Of that 7.8%, 5.8% was non-rated. Looking ahead During the first half of 2001, the Fed aggressively cut interest rates. We feel the bond market probably overreacted to concerns about inflation stemming from these cuts and that the recent drop in bond prices has created some good opportunities in the bond market. While we do not expect to see inflation return in the months to come, we also do not expect a strong economic rebound in the second half of 2001. We anticipate further rate cuts from the Fed, although not on such an aggressive schedule, and we have positioned the fund to take advantage of lower long-term interest rates. Portfolio Statistics (unaudited) As of 6/30/01 As of 6/30/00 - ------------------------------------------------------------------- Average Duration 8.4 years 7.4 years Average Weighted Maturity 18.2 years 16.9 years Average Weighted Coupon 6.68% 6.65% 21 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT STEINROE.COM FOR MONTHLY PERFORMANCE UPDATES. 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 6/30/01 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. Investing in high yield bonds involves greater credit risks than investing in higher-quality bonds. 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 attempts to react quickly to market changes. Source of Lipper data: Lipper Inc. Maturity (unaudited) % of net assets as of 6/30/01 [PIE CHART] Less than 5 years 4.0% 5-10 years 14.0% 10-15 years 15.6% 15-20 years 23.1% 20-25 years 22.0% Greater than 25 years 21.3% 22 SR&F Municipal Money Market Portfolio INVESTMENT PORTFOLIO June 30, 2001 MUNICIPAL SECURITIES - 102.2% PAR VALUE ALABAMA - 0.5% Opelika Water Works Board, Series 2001, 4.000%, 6/1/02............................ $ 570,000 $ 575,640 ---------- ARIZONA - 2.5% Mesa, Series 1991, 6.000%, 7/1/01........... 1,000,000 1,000,057 Phoenix Industrial Development Authority, Spring Air Mattress Co., Series 1999, 3.000%, 4/1/19 (a) 1,870,000 1,870,000 Tucson Business Development Finance Authority, Series 1992, 5.850%, 7/1/01.... 100,000 100,005 ---------- 2,970,062 ---------- CALIFORNIA - 0.8% State Higher Education Loan Authority, Series 1994 A, VRDB 2.870%, 7/1/05 (a).... 1,000,000 1,000,000 ---------- COLORADO - 6.9% Boulder County, Boulder Medical Center Project, Series 1998, 2.900%, 1/1/17...... 2,300,000 2,300,000 Boulder County, Humane Society, Inc. Project, Series 2001, 2.850%, 5/1/20...... 300,000 300,000 Colorado Springs, Catalano Family L.L.P., Series 1998, 2.950%, 7/1/18 (a)........... 1,025,000 1,025,000 Denver City & County, Worldport Project, Series 2000 A, 2.950%, 12/1/29............ 1,200,000 1,200,000 Lowry Economic Redevelopment Authority, Series 1998 B, VRDB 2.650%, 12/1/20....... 900,000 900,000 SBC Metropolitan District, Series 1998, 4.450%, 12/1/17........................... 2,000,000 2,000,000 State Board of Agriculture, Series 2001, 4.000%, 12/1/01........................... 300,000 301,356 State Land & Facilities Corp, South Suburban Park & Recreation District, Series 2001, 3.250%, 12/1/01.............. 390,000 390,000 ---------- 8,416,356 ---------- DISTRICT OF COLUMBIA - 1.7% District of Columbia Housing Finance Agency, Series 2000 E, 4.600%, 7/23/01 (a)........ 1,000,000 1,000,000 District of Columbia Housing Finance Agency, Series 2001 B, 3.400%, 10/1/01............ 1,000,000 1,000,000 ---------- 2,000,000 ---------- GEORGIA - 1.5% Conyers, Series 1993, 4.380%, 7/1/02........ 150,000 151,722 Morgan County Development Authority, Ivex Corp., Series 1998, 3.050%, 6/1/08... 800,000 800,000 Winder-Barrow Industrial Building Authority, Thrall Car Manufacturing Co., Series 1988, 2.950%, 8/1/08............................ 800,000 800,000 ---------- 1,751,722 ---------- See accompanying Notes to Financial Statements. 23 Par Value IDAHO - 0.8% Idaho TAN, 3.75%, 6/28/02................... $1,000,000 $ 1,011,080 ----------- ILLINOIS - 27.7% ABN AMRO Munitops Certificates, Series 1998-14, VRDB 2.790%, 10/4/06 (b).. 1,000,000 1,000,000 Chicago, Archer Court Apartments, Series 1999 B, 2.800%, 6/1/19 (a)......... 1,010,000 1,010,000 Chicago, De LaSalle Institute Project, Series 1997, VRDB 2.750%, 4/1/27.......... 900,000 900,000 Chicago, Midway Airport, Series 1999, VRDB 3.000%, 1/1/29 (a)........................ 1,960,000 1,960,000 Chicago, PS Greetings, Inc., Series 1999, VRDB 3.000%, 5/1/24 (a)................... 1,420,000 1,420,000 Chicago, Series 1997, VRDB 4.380%, 1/1/06... 900,000 900,000 Chicago, Series 1999 A, 4.250%, 1/3/02...... 1,000,000 1,000,000 Chicago, Series 2001, 3.650%, 1/3/03........ 1,000,000 1,000,000 Chicago, Series 2001 B, 3.750%, 3/1/02...... 1,000,000 1,000,000 Chicago, Stockyards Redevelopment Project, Series 1999 A, VRDB 2.750%, 12/1/11....... 1,400,000 1,400,000 East Dundee Otto Engineering, VRDB 2.800%, 3/1/26............................ 850,000 850,000 Elk Grove Village, Series 2001, 4.000%, 12/1/01................................... 905,000 907,592 Glendale Heights, Judy L.L.C./York Corrugated, C160 Series 1998, VRDB 2.950%, 8/1/28 (a)........................ 1,480,000 1,480,000 HDA Multi-Farm Sterling, VRDB 2.950%, 10/1/35................................... 1,000,000 1,000,000 Lake County Community High School District No. 127, Series 2001, 4.000%, 11/1/01..... 315,000 315,623 Melrose Park, Ninos Enterprises, Inc., Series 1999, 3.100%, 12/1/24 (a).......... 3,400,000 3,400,000 Morton, Morton Welding Co., Inc., Series 1996 A, 3.050%, 4/1/16 (b)......... 835,000 835,000 Orlando Hills, 88th Avenue Project, Series 1985 A, 2.800%, 12/1/04............ 1,000,000 1,000,000 Palatine, Little City Community Development Project, Series 1998, VRDB 2.900%, 12/1/28................................... 1,000,000 1,000,000 Springfield, Oak Terrace Joint Venture L.P., Series 1999, VRDB 2.800%, 12/1/25......... 1,000,000 1,000,000 Springfield, Phillips Brothers, Inc., Series 1998, 2.950%, 6/1/18 (a)(b)........ 1,350,000 1,350,000 State Development Finance Authority, American Osteopathic Association, Series 1993, VRDB 2.800%, 9/15/18........................... 2,155,000 2,155,000 State Development Finance Authority, Ivex Corp. Project, VRDB 3.050%, 4/1/08........ 1,500,000 1,500,000 State Development Finance Authority, McCormick Theological Seminary, Series 1999 A, 2.800%, 6/1/19............................ 1,000,000 1,000,000 State Development Finance Authority, Roosevelt University, Series 1995, 2.800%, 4/1/25............................ 1,500,000 1,500,000 State Development Finance Authority, Wheaton Academy, Series 1998, VRDB 2.800%, 10/1/28........................... 1,000,000 1,000,000 State Educational Facilities Authority, Aurora University, Series 1989, VRDB 2.800%, 1/1/09............................ 1,400,000 1,400,000 Wood River City, Series 2001, 3.000%, 12/1/01................................... 285,000 285,000 ----------- 33,568,215 ----------- See accompanying Notes to Financial Statements. 24 Par Value INDIANA - 8.8% Elkhart County Economic Development Authority, VRDB 2.900%, 4/1/28............ $ 975,000 $ 975,000 Elkhart County, Adorn, Inc., Series 1995, 3.250%, 8/1/05 (a)........................ 1,000,000 1,000,000 Plymouth, Hillcrest Apartments, Series 1998 A, VRDB 2.900%, 4/1/28 (a).... 975,000 975,000 Portage Economic Development Revision, Pedcor Investments, Series A, 2.950%, 8/1/30.................................... 3,335,000 3,335,000 St. Joseph County, Pine Oaks Apartments, Series 1997 A, VRDB 2.900%, 6/1/27 (a).... 2,365,000 2,365,000 State Development Finance Authority, Carr Metal Products, Inc., Series 1999, 3.350%, 1/1/09 (a)........................ 1,160,000 1,160,000 State Transportation Finance Authority, Series 1992 A, 6.100%, 12/1/01............ 850,000 855,898 ----------- 10,665,898 ----------- IOWA - 12.3% Clinton, Sethness Products Co., Series 1996, VRDB 2.850%, 9/1/11 (b)................... 3,700,000 3,700,000 Muscatine County, Monsanto Co., Series 1992, 2.800%, 10/1/07........................... 1,900,000 1,900,000 Scott County, Nichols Aluminum Project, Series 1999, VRDB 2.850%, 6/1/14 (a)(b)... 2,600,000 2,600,000 State, Series 2001, 3.880%, 1/30/02......... 1,000,000 1,004,808 State, Series 2001 A, 3.750%, 6/21/02....... 1,000,000 1,010,446 State Higher Education Loan Authority, St. Ambrose University Project, Series 1995, VRDB 2.850%, 2/1/05.......... 1,800,000 1,800,000 State Higher Education Loan Authority, American Institute of Business Series 1998, VRDB 2.850%, 11/1/13......... 1,880,000 1,880,000 Woodbury County, Siouxland Medical Educational Foundation, Series 1996, VRDB 2.800%, 11/1/16...................... 1,000,000 1,000,000 ----------- 14,895,254 ----------- KENTUCKY - 1.3% Shelby County, Roll Forming Corp., Series 1996, 2.950%, 4/1/16 (a)(b)........ 1,325,000 1,325,000 State Property & Buildings Commission, Project No. 54, 5.250%, 9/1/01............ 300,000 300,930 ----------- 1,625,930 ----------- LOUISIANA - 0.8% State Public Facilities Authority, Series 2000 F, 5.000%, 10/17/01........... 1,000,000 1,001,284 ----------- Maryland - 0.3% Baltimore, Wastewater Project, Series 2000 A, 4.750%, 7/1/01............................ 365,000 365,002 ----------- MICHIGAN - 2.9% ABN AMRO Munitops Certificates, Series 1998-13, VRDB 2.730%, 10/4/06 (b).................. 2,000,000 2,000,000 State Municipal Bond Authority, Series 2000 B-1, 5.000%, 7/2/01............................ 1,500,000 1,500,049 ----------- 3,500,049 ----------- See accompanying Notes to Financial Statements. 25 Par Value MISSOURI - 0.5% Kansas City Industrial Development Authority, Lanter Co., Series 1987 A, VRDB 2.900%, 2/1/03....................... $ 350,000 $ 350,000 Springfield Public Utilities Board, Series 2001, 3.750%, 1/1/02............... 250,000 250,431 ---------- 600,431 ---------- NEVADA - 2.9% Washoe County, Sierra Nevada College Project, Series 2000, VRDB 2.850%, 7/1/25.......... 3,489,542 3,489,542 ---------- NEW JERSEY - 0.8% Bayonne, Series 2000, 5.000%, 7/12/01....... 1,000,000 1,000,157 ---------- NORTH CAROLINA - 0.6% New Hanover County, Certificates of Participation, Series 2000, 4.500%, 12/1/01................................... 775,000 775,688 ---------- OHIO - 1.0% Columbus, Series 1993 A, 4.500%, 7/1/01..... 100,000 100,002 Environment Improvement Authority, U.S. Steel Corp. Project, 3.000%, 12/1/01...... 400,000 400,000 Hancock County, Crystal Glen Apartments Project, Series 1998 B, 2.880%, 1/1/31 (a)................................ 750,000 750,000 ---------- 1,250,002 ---------- PENNSYLVANIA - 2.5% Bucks County Industrial Development Authority, USX Corp., Series 1995, VRDB 2.650%, 11/1/17........................... 1,000,000 1,000,000 Pittsburgh School District, Series 1998, 4.000%, 9/1/01............................ 700,000 700,170 Quakertown General Authority, Pooled Financing Program, Series 1996 A, 2.700%, 7/1/26............................ 1,268,000 1,268,000 ---------- 2,968,170 ---------- SOUTH CAROLINA - 2.0% Greenville County School District, Series 2001, 3.500%, 12/31/01............. 1,000,000 1,001,959 Jobs Economic Development Authority, Persona, Inc. Project, Series 1998, 2.800%, 4/1/18 (a)........................ 1,400,000 1,400,000 ---------- 2,401,959 ---------- SOUTH DAKOTA - 0.4% Sioux Falls, 4.500%, 11/15/01............... 500,000 502,940 ---------- TENNESSEE - 2.8% Maryville, Series 2001, 4.250%, 4/1/02...... 880,000 885,813 Memphis Certificates of Participation, 3.050%, 10/10/01.......................... 1,000,000 1,000,000 Memphis, Series 1992 A, 5.800%, 1/1/05...... 250,000 257,307 Memphis, Series 1992 A, 6.000%, 1/1/12...... 250,000 261,263 Oak Ridge, Series 2001, 4.250%, 4/1/02...... 1,000,000 1,006,605 ---------- 3,410,988 ---------- See accompanying Notes to Financial Statements. 26 Par Value TEXAS - 9.4% Brazos Harbor Industrial Development Corp., Monsanto Co., Series 1991, 2.800%, 3/1/21. $ 900,000 $ 900,000 Brownsville Industrial Development Corp., Tella Tool & Manufacturing Co., Series 2000, 3.050%, 6/1/20 (a)........... 1,200,000 1,200,000 Fort Bend County Industrial Development Corp., W.W.Grainger, Inc., Series 1989, VRDB 2.900%, 12/1/02........................... 1,110,000 1,110,000 Grand Prairie Industrial Development Authority, W.W.Grainger, Inc., Series 1986, VRDB 2.900%, 12/1/11 (a)....................... 900,000 900,000 Harris County, General Obligation Corporate Notes, 3.000%, 8/9/01..................... 2,000,000 2,000,000 Harris County Industrial Development Authority, Precision General, Inc., Series 1991, 2.950%, 10/1/16 (a)(b).................... 2,060,000 2,060,000 Nueces River Authority, Corpus Christi Lake Texana Project, Series 1997, 4.380%, 7/15/01................................... 50,000 50,008 Public Financing Authority, Series 1993 A, 5.000%, 10/1/01........................... 250,000 250,338 Robertson County Industrial Development Corp., Sanderson Farms, Inc., Series 1995, 2.900%, 11/1/05 (a)....................... 300,000 300,000 San Felipe Del Rio Independent School District, Series 2000, 6.000%, 8/15/01.... 580,000 581,131 Texas, TRAN, Series 2000, 5.250%, 8/31/01... 2,000,000 2,003,209 ------------ 11,354,686 ------------ UTAH - 0.3% Murray City, Series 2001, 4.000%, 6/1/02.... 370,000 372,652 ------------ WASHINGTON - 0.9% State Housing Finance Commission, Hamilton Place Senior Living, Series 1996 A, 2.850%, 7/1/28 (a)........................ 1,090,000 1,090,000 ------------ WISCONSIN - 9.3% Carlton, Wisconsin Power & Light Co., Series 1988, 3.000%, 8/1/15............... 800,000 800,000 Cedarburg School District, Series 2001 B, 5.750%, 3/1/02............................ 260,000 263,634 Chase, Belgiosio Cheese, Inc., Series 1998, VRDB 2.950%, 4/1/11 (a)(b)................ 1,000,000 1,000,000 Fond du Lac, Brenner Tank, Inc., Series 1994, 2.950%, 11/1/04 (a)....................... 1,690,000 1,690,000 Holland, White Clover Dairy, Inc., Series 1994, 2.950%, 5/1/05 (a)(b)........ 2,105,000 2,105,000 Kenosha, Monarch Plastics, Inc., Series 1994, 2.950%, 12/1/09 (a)(b).................... 1,575,000 1,575,000 Pewaukee School District, Series 2001, 3.130%, 5/30/02........................... 1,000,000 1,001,293 State Health & Educational Facilities Authority, Grace Lutheran Foundation, Series 1999, VRDB 2.750%, 7/1/14 (b)...... 2,555,000 2,555,000 See accompanying Notes to Financial Statements. 27 Par Value WISCONSIN (CONT) Whitnall School District, Series 2001, 3.550%, 4/1/02 ........................... $250,000 $ 249,870 ------------ 11,239,797 ------------ TOTAL MUNICIPAL SECURITIES (cost of $123,803,504) (c).................. 123,803,504 ------------ OTHER ASSETS & LIABILITIES, NET - (2.2%)...... (2,604,811) ------------ NET ASSETS - 100.0%........................... $121,198,693 ============ Notes to Investment Portfolio: - -------------------------------------------------------------------------- (a) Security is subject to federal alternative minimum tax. At June 30, 2001, the aggregate cost of these securities represented 32.2% of total net assets. (b) These securities are exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2001, the value of these securities amounted to $22,105,000, which represents 18.2% of net assets. (c) Cost for both financial statement and federal income tax purposes is the same. 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. The rates listed are as of June 30, 2001. Acronym Name ------- ---------------------------------- TAN Tax Anticipation Notes TRAN Tax and Revenue Anticipation Notes VRDB Variable Rate Demand Bonds See accompanying Notes to Financial Statements. 28 Stein Roe Intermediate Municipals Fund INVESTMENT PORTFOLIO June 30, 2001 Municipal Bonds - 99.9% Par Value EDUCATION - 1.9% EDUCATION - 0.9% IL Latin School of Chicago, Series 1998, 5.200%, 8/1/11............................ $ 250,000 $ 249,988 IL State Development Finance Authority: Bradley University, Series 1999, 5.375%, 8/1/19............................ 225,000 227,651 VT State Educational & Health Buildings Finance Agency, Norwich University, Series 1998, 5.750%, 7/1/13............... 100,000 101,899 WV State University, Series 2000 A, (a) 4/1/15.................................... 1,500,000 738,330 ------------ 1,317,868 ------------ STUDENT LOAN - 1.0% ME State Educational Loan Authority, Series 1992 A-2, 6.650%, 12/1/02.......... 470,000 484,316 NM State Educational Assistance Foundation, Series 1-A, 6.200%, 12/1/01............... 360,000 364,313 TX State Higher Education Coordinating Board, Texas College, Series 1991, 7.450%, 10/1/06........................... 665,000 678,500 ------------ 1,527,129 ------------ HEALTHCARE - 4.3% HOSPITAL - 3.7% AL East Health Care Authority Health Care Facilities, TANs, Series 1993, 5.625%, 9/1/04.................................... 50,000 52,138 LA State Public Facilities Authority, Touro Infirmary, Series 1999, 5.200%, 8/15/10................................... 905,000 897,814 NJ State Health Care Facilities Financing Authority, Christ Hospital, Series 1994, 7.000%, 7/1/03............................ 1,730,000 1,856,377 OH Green Springs, St. Francis Health Care Center, Series 1994 A, 7.000%, 5/15/04.... 80,000 79,800 SC Sumter County, Tuomey Regional Medical Center, Series 1991, 6.625%, 11/15/04..... 1,040,000 1,139,507 TX Health Facilities Development Corporation Hospital, All Saints Episcopal Hospitals, Series 1993-A, 5.800%, 8/15/04............ 80,000 84,962 TX Tarrant County Health Facilities Development Corporation Hospital, Fort Worth Osteopathic Hospital Series 1993, 5.800%, 5/15/04........................... 50,000 52,904 WV State Hospital Finance Authority, Series 2000 A, 6.750%, 9/1/22............. 1,475,000 1,575,536 ------------ 5,739,038 ------------ NURSING HOME - 0.6% IA State Finance Authority, Care Initiatives, Series 1998 B, 5.500%, 7/1/08............. 450,000 421,875 MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.400%, 3/1/08............... 500,000 476,875 ------------ 898,750 ------------ See accompanying Notes to Financial Statements. 29 Par Value HOUSING - 1.3% MULTI-FAMILY - 0.2% MA State Housing Finance Agency, Series 1992 C, 6.350%, 5/15/03........................... $ 200,000 $ 208,706 NJ State Housing and Mortgage Finance Agency, 6.500%, 5/1/03............................ 85,000 87,176 ------------ 295,882 ------------ SINGLE FAMILY - 1.1% CA State Housing Finance Agency, Series B-1, 5.900%, 2/1/04............................ 645,000 678,721 MD Montgomery County Housing Commission, Series A, 5.750%, 7/1/13.................. 215,000 228,149 NE State Investment Authority, Series C., 5.650%, 9/1/07............................ 495,000 524,200 RI Housing and Mortgage Finance Corporation, Homeownership Opportunity, Series 6-B: 6.500%, 4/1/03.......................... 100,000 102,018 6.500%, 10/1/03......................... 200,000 204,518 ------------ 1,737,606 ------------ INDUSTRIAL - 0.1% MANUFACTURING - 0.1% SC State Economic Development Authority, Caterpillar, Inc., Series 1998, 5.050%, 6/1/08.................................... 100,000 98,375 ------------ OTHER - 13.2% POOL/BOND BANK - 3.7% IN Indianapolis Local Public Improvement Bond Bank, Series 1992 D, 6.500%, 2/1/06.. 2,100,000 2,314,326 NY State Environmental Facilities Corp., Series 1994 D, 6.300%, 5/15/05............ 3,000,000 3,300,840 ------------ 5,615,166 ------------ REFUNDED/ESCROWED (B) - 9.5% AZ Maricopa County, Samaritan Health Services, Series 1978, 7.625%, 1/1/08............... 1,830,000 2,061,367 CA Sacramento Cogeneration Authority, Procter & Gamble Project, 6.500%, 7/1/14............ 500,000 567,335 HI Honolulu City & County, Series 1995, 6.000%, 11/1/10........................... 135,000 152,823 IL Chicago, Skyway Toll Bridge, Series 1994, 6.750%, 1/1/17............................ 1,500,000 1,647,285 IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion Project, Series 1992 A: 7.250%, 6/15/05......................... 385,000 434,950 7.250%, 6/15/05......................... 1,145,000 1,295,808 IL State Health Facilities Authority, Edgewater Medical Center, Series A, 9.250%, 7/1/24.......... 95,000 111,234 IN State Toll Road Commission, Series 1980, 9.000%, 1/1/15............................ 2,240,000 3,070,637 MA State Health & Educational Facilities Authority, Carney Hospital, Series 1994 D, 6.000%, 7/1/09............................ 1,000,000 1,082,170 MI Dickinson County, Memorial Hospital System, 7.625%, 11/1/05........................... 195,000 207,919 See accompanying Notes to Financial Statements. 30 Par Value REFUNDED/ESCROWED (CONT) MI State Hospital Finance Authority, Daughters of Charity and Providence, Series 1991, 6.500%, 11/1/01.............. $ 315,000 $ 319,023 OH Cuyahoga County, Meridia Health System, 6.300%, 8/15/06........................... 890,000 996,729 OH Olmstead Falls Local School District, 6.850%, 12/15/11.......................... 550,000 621,401 PA Westmoreland County Municipal Authority, Municipal Services, Series 1993-C, (a) 8/15/17................................... 1,250,000 538,525 SC Piedmont Municipal Power Agency, Series 1991 A, 6.125%, 1/1/07............. 335,000 371,260 SC Sumter County, Tuomey Regional Medical Center, Series 1991, 6.625%, 11/15/04..... 960,000 1,057,315 ------------ 14,535,781 ------------ OTHER REVENUE - 0.7% RECREATION - 0.7% OR State Department of Administrative Services, Series 1999 B, 5.250%, 4/1/15............. 1,000,000 1,022,450 ------------ RETAIL - 0.0% IA State Finance Authority, Mason City Shopping Center, 8.500%, 12/1/04.......... 50,000 50,508 OH Lake County, North Madison Properties, Series 1993, 8.069%, 9/1/01............... 10,000 10,031 ------------ 60,539 ------------ RESOURCE RECOVERY - 2.8% DISPOSAL - 1.2% IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050%, 1/1/10............................ 865,000 817,477 MA State Industrial Finance Agency, Peabody Monofill Associates, Inc., Series 1995, 9.000%, 9/1/05............................ 65,000 68,413 MI State Strategic Fund, United Waste Systems, Inc., Series 1995, 5.200%, 4/1/10.................................... 1,000,000 963,820 ------------ 1,849,710 ------------ RESOURCE RECOVERY - 1.6% MA State Industrial Finance Agency, Ogden Hill Project, Series 1998 A, 5.450%, 12/1/12................................... 250,000 246,068 NJ Bergen County Utilities Authority, Series 1992 A, 6.250%, 6/15/06............ 2,000,000 2,226,320 ------------ 2,472,388 ------------ TAX-BACKED - 40.1% LOCAL APPROPRIATED - 0.0% AZ Phoenix Civic Improvement Corporation, Waste Water Lease, Series 1993, 5.750%, 7/1/04............................ 50,000 53,104 ------------ LOCAL GENERAL OBLIGATIONS - 16.1% AZ Cochise County Unified School District No. 68, Sierra V Project, Series 1990 B, 9.000%, 7/1/01............................ 500,000 500,170 AZ Maricopa County Unified School District No. 69, Paradise Valley, Series 1995, 6.350%, 7/1/10............................ 500,000 574,335 See accompanying Notes to Financial Statements. 31 Par Value LOCAL GENERAL OBLIGATIONS (CONT) AZ Maricopa County Unified School District 97, Series 1996 A, 6.250%, 7/1/06............. $1,750,000 $ 1,940,400 AZ Phoenix General Obligation, 6.125%, 7/1/03 250,000 262,150 AZ Tempe Unified School District No. 213, Series 1994, 7.000%, 7/1/08............... 500,000 586,525 CA Carlsbad Unified School District, Series 1997, (a) 11/1/14............................... 300,000 154,044 CA Natomas Unified School District, Series 1999, 5.850%, 3/1/15............................ 250,000 279,115 CA Union Elementary Scholl District, Series 1999 A, (a) 9/1/20................................ 1,000,000 352,060 CA Yuba City Unified School District, Series 2000, (a) 9/1/16................................ 1,960,000 887,606 CO Adams County, School District Number 12: Series 1995 A, (a) 12/15/12............... 1,300,000 731,549 Series 2001 A, 4.750%, 12/15/19........... 1,000,000 949,260 HI Honolulu City & County: Series 1990 A, 7.350%, 7/1/06............. 1,000,000 1,154,030 Series 1995, 6.000%, 11/1/10.............. 365,000 408,709 IL Chicago Board of Education, Series 1996, 6.250%, 12/1/12........................... 2,100,000 2,411,136 KS Wyandotte County Unified School District No. 204, Series 2000 A, 6.375%, 9/1/11............. 500,000 578,245 LA Orleans Levee District, Series 1995 A, 5.950%, 11/1/07........................... 2,200,000 2,429,526 MI Anchor Bay School District, Series 2001, 5.250%, 5/1/13............................ 1,000,000 1,056,890 MI Berkley, City School District, 7.000%, 1/1/09............................ 500,000 583,375 MN West St. Paul, Independent School District No. 197, (a) 2/1/04....................... 500,000 455,650 NY New York City: Series 1996 C, 5.700%, 2/1/06............. 1,000,000 1,077,280 Series 1997 A, 7.000%, 8/1/06............. 850,000 968,422 Series 1997 H, 6.000%, 8/1/17............. 1,000,000 1,065,790 Series 1997 J, 6.125%, 8/1/11............. 1,500,000 1,642,455 OH Marion City School District, Series 2000, 6.500%, 12/1/14........................... 500,000 588,820 OH Olmsted Falls School District, Series 1999, 5.500%, 12/1/04........................... 420,000 437,850 OH Strongsville, 6.000%, 12/1/06............ 500,000 545,735 PA Westmoreland County, Series 1997, (a) 12/1/18................................... 1,000,000 393,880 WA Snohomish County School District No. 002, Series 1993, 7.000%, 12/1/02.............. 1,500,000 1,581,960 ------------ 24,596,967 ------------ SPECIAL NON-PROPERTY TAX - 8.4% FL Tampa, Series 2000, 6.000%, 10/1/08...... 1,000,000 1,117,460 GA Metropolitan Atlanta Rapid Transit Authority, Series 1998 A, 6.250%, 7/1/10............. 1,000,000 1,141,930 IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion Project, Series 1992 A, 7.250%, 6/15/05........................... 1,220,000 1,367,217 LA Sulphur Public Import Sales and Use Tax, Series 1993-ST, 5.650%, 4/1/04............ 50,000 52,848 MI State, Underground Storage Tank Financial Assistance, Series 1996 I, 6.000%, 5/1/05. 4,000,000 4,326,200 See accompanying Notes to Financial Statements. 32 Par Value SPECIAL NON-PROPERTY TAX (CONT) NM Santa Fe, Series 1996 A, 6.500%, 6/1/06.. $1,555,000 $ 1,736,640 NV State, Series 2000 A, 5.000%, 12/1/06.... 1,000,000 1,056,270 NY State Local Government Assistance Corp., Series C, 6.000%, 4/1/12.................. 150,000 170,103 NY State Local Government Assistance Corp., Series 1993 E, 5.250%, 4/1/16............. 1,000,000 1,048,190 TX Houston, Series 2001 B, (a) 9/1/17....... 2,000,000 835,340 ------------ 12,852,198 ------------ SPECIAL PROPERTY TAX - 3.0% FL Stoneybrook Community Development District, Series 1998 B, 5.700%, 5/1/08............. 2,315,000 2,300,531 MO State Development Finance Board, Midtown Redevelopment Project, Series 2000 A, 6.000%, 4/1/14............................ 2,000,000 2,198,260 ------------ 4,498,791 ------------ STATE APPROPRIATED - 8.0% KS State Development Authority Lease Juvenile Detention Facility Project, Series 1992-H, 5.750%, 6/1/02............................ 60,000 61,676 KY State Turnpike Authority, Series 1992, 5.800%, 1/1/04............................ 1,000,000 1,055,700 MO State, Regional Convention & Sports Facility Project, Series 1991 A, 6.600%, 8/15/03................................... 830,000 885,652 NY Metropolitan Transportation Authority, Series 1993 O, 5.500%, 7/1/17............. 1,000,000 1,070,620 NY State Dormitory Authority, Series 1995 A, 6.500%, 5/15/05........................... 1,000,000 1,100,990 NY State Dormitory Authority, City University, Series A, 5.625%, 7/1/16.................... 500,000 545,725 NY State Dormitory Authority, City University of New York, Series 1995, 5.625%, 7/1/16..... 5,000,000 5,457,250 NY State Dormitory Authority, Series 2000, 5.000%, 5/15/05........................... 685,000 721,421 NY State Urban Development Corp., 6.250%, 4/1/02............................ 250,000 256,485 NY State Urban Development Corp., 5.750%, 4/1/11............................ 500,000 548,460 OH State Higher Education Commission, Series II-B, 5.750%, 11/1/04.............. 500,000 535,460 ------------ 12,239,439 ------------ STATE GENERAL OBLIGATIONS - 4.6% MA Massachusetts Bay Transportation Authority, Series 1994 A, 7.000%, 3/1/07............. 2,250,000 2,585,655 MA State College Building Authority, Series 1994 A, 7.500%, 5/1/14............. 500,000 626,040 MA State, Series 1998 C, 5.250%, 8/1/12..... 250,000 262,465 NJ State, General Obligation, Series D, (a) 2/15/04..................... 90,000 82,200 TX Goose Creek Independent School District, Series 2000, 5.250%, 8/15/18.............. 3,000,000 3,015,570 TX State, Series A, 5.800%, 10/1/04......... 500,000 534,905 ------------ 7,106,835 ------------ See accompanying Notes to Financial Statements. 33 Par Value TRANSPORTATION - 12.4% AIR TRANSPORTATION - 2.1% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000 A, 6.750%, 11/1/11........................... $1,400,000 $1,439,144 MN Minneapolis & St. Paul Metropolitan Airports Commission, Northwest Airlines, Inc., Series 2001 B, 6.500%, 4/1/25............. 500,000 499,375 OH Cleveland, Series 1999, 5.700%, 12/1/19.. 1,000,000 855,000 WA Port Seattle, Northwest Airlines, Inc., Series 2000, 7.125%, 4/1/20............... 500,000 486,875 ------------ 3,280,394 ------------ AIRPORT - 5.6% FL Greater Orlando Aviation Authority, Series 1999 A, 5.250%, 10/1/09............ 320,000 336,826 GA Atlanta, Airport Facilities, Series 1996, 6.500%, 1/1/07 (c)........................ 4,000,000 4,487,680 IL Chicago, Midway Airport, Series 1994 A, 5.700%, 1/1/04............................ 1,000,000 1,045,970 IN State Transportation Finance Authority, Airport Facilities Lease, Series 1992 A, 6.500%, 11/1/07........................... 1,040,000 1,088,890 KY Louisville & Jefferson County Regional Airport Authority, Series 2001 A, 5.750%, 7/1/15............................ 1,000,000 1,062,890 NY Monroe County Airport Authority, Greater Rochester International Airport, Series 1999, 5.750%, 1/1/12............... 500,000 550,545 ------------ 8,572,801 ------------ PORTS - 0.9% WA Port of Seattle, Series A, 6.000%, 10/1/08.................................. 250,000 276,005 WA Port of Seattle, Series 2000 B, 6.000%, 2/1/13................................... 1,000,000 1,103,790 ------------ 1,379,795 ------------ TOLL FACILITIES - 2.5% CO E-470 Public Highway Authority, Series 2000 B, (a) 9/1/18................................ 1,500,000 592,785 KY State Turnpike Authority, Series 2001 A, 5.500%, 7/1/13............................ 1,000,000 1,079,440 OH State Turnpike Commission, Series 1996 A, 6.000%, 2/15/06........................... 500,000 545,145 OH State Turnpike Commission, Series 1998 A, 5.500%, 2/15/24........................... 1,000,000 1,054,650 PA State Turnpike Commission, Series 1998 A, 5.250%, 12/1/14........................... 500,000 516,910 ------------ 3,788,930 ------------ TRANSPORTATION - 1.3% CO State Department of Transportation, Series 2000, 6.000%, 6/15/12........................... 1,500,000 1,676,475 DC Metropolitan Area Transit Authority, 6.000%, 7/1/07............................ 250,000 277,303 ------------ 1,953,778 ------------ UTILITY - 23.1% INDEPENDENT POWER PRODUCER - 0.3% MI Midland County Economic Development Corp., Series 2000, 6.875%, 7/23/09.............. 500,000 515,000 ----------- See accompanying Notes to Financial Statements. 34 Par Value INVESTOR OWNED - 1.7% NH State Business Finance Authority, United Illuminating Co., Series 1999, 5.400%, 12/1/29................................... $1,000,000 $1,017,750 NV Washoe County, Sierra Pacific Power Co., Series 2001, 5.750%, 3/1/36............... 1,000,000 1,006,300 TX Brazos River Authority, Texas Utilities Electric Co., Series 1995 B, 5.050%, 6/1/30.................................... 600,000 599,466 ------------ 2,623,516 ------------ JOINT POWER AUTHORITY - 6.1% GA State Municipal Electric Authority, Series 1997 Y, 6.400%, 1/1/13............................ 3,000,000 3,463,556 NC Eastern Municipal Power Agency, Power System, Series 1993-B, 6.125%, 1/1/09............. 2,000,000 2,125,000 NC Eastern Municipal Power Agency, Series 1993 C, 5.500%, 1/1/07............................ 415,000 428,301 NC State Municipal Power Agency, Catawba No. 1, Series 1992, 5.900%, 1/1/03............... 1,000,000 1,039,500 SC Piedmont Municipal Power Agency, Series 1991 A, 6.125%, 1/1/07............................ 2,015,000 2,213,236 TX State Municipal Power Agency, (a) 9/1/15. 250,000 119,118 ------------ 9,388,711 ------------ MUNICIPAL ELECTRIC - 1.0% TX Lower Colorado River Authority, Series 1999 A, 5.500%, 5/15/21........................... 1,500,000 1,527,300 WA Grant County Public Utilities District Number 002, Electric System, Series 1993 E, 5.300%, 1/1/03............. 50,000 51,576 ------------ 1,578,876 ------------ WATER & SEWER - 14.0% AR Beaver Water District, Benton & Washington Counties, Series 1994, 6.000%, 11/15/04 (c).............................. 2,580,000 2,787,948 AZ Phoenix Civic Improvement Corp., Series 2001, 5.250%, 7/1/08............................ 1,130,000 1,207,721 AZ State Central Water Conservation District, Central Arizona Project, Series A, 5.500%, 11/1/08 250,000 271,645 CA Metropolitan Water District, Series 1998 A, 4.750%, 7/1/22............................ 2,500,000 2,318,050 DE State Economic Development Authority, Wilmington Suburban Water Corp., Series 1992 B, 6.450%, 12/1/07........................... 1,165,000 1,306,571 IL Chicago, Series 1993, 6.500%, 11/1/09.... 2,155,000 2,464,652 IL Du Page County Special Service Area No. 11, Series 1995, 6.750%, 1/1/14............... 1,040,000 1,145,300 MA State Water Pollution Abatement Trust, Series 1999 A, 6.000%, 8/1/19............. 2,500,000 2,808,000 TN Metropolitan Government of Nashville & Davisdon Counties, Series 1993, 6.500%, 1/1/10..... 2,750,000 3,158,183 TX Houston Water & Sewer System, Series C, 5.900%, 12/1/05................. 800,000 870,144 See accompanying Notes to Financial Statements. 35 Par Value WATER & Sewer - (cont) TX Houston Water Conveyance System, Series J, 6.125%, 12/15/06.......................... $1,000,000 $ 1,101,760 TX Houston, Series 2000 B, 5.250%, 12/1/23.. 2,000,000 1,979,111 ------------ 21,419,085 ------------ TOTAL MUNICIPAL BONDS (cost of $142,721,865)(d)................... 153,018,902 ------------ OTHER ASSETS & LIABILITIES, NET - 0.1%........ 113,496 ------------ NET ASSETS - 100.0%............................ $153,132,398 ============ 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) These securities, or a portion thereof, with a total market value of $7,275,628, are being used to collateralize open futures contracts. (d) Cost for both financial statement and federal income tax purposes is the same. Acronym Name -------- ----------------------- TAN Tax Anticipation Notes Long futures contracts open at June 30, 2001: Par Value Unrealized Covered by Depreciation Type Contracts Expiration at 6/30/01 ----------- ---------- ---------- ---------- Treasury Note $6,400,000 September 2001 $(45,021) See accompanying Notes to Financial Statements. 36 STEIN ROE MANAGED MUNICIPALS FUND INVESTMENT PORTFOLIO June 30, 2001 MUNICIPAL BONDS - 97.7% PAR VALUE EDUCATION - 3.0% EDUCATION - 1.4% CA State Educational Facilities Authority, Loyola Marymount University, Series 2001, (a) 10/1/20.................. $1,000,000 $ 350,460 MA State Development Finance Agency, Boston University, Series 1999, 5.450%, 5/15/59.. 1,000,000 965,610 MN Victoria, Holy Family Catholic High School, Series 1999 A, 5.850%, 9/1/24............. 1,000,000 955,000 PR Commonwealth of Puerto Rico, Ana G. Mendez University System, Series 1999, 5.375%, 2/1/29............................ 600,000 558,077 VA College Building Washington Lee University, 5.625%, 1/1/21............................ 2,000,000 2,092,540 WV State University, Series 2000 A, (a) 4/1/18.................................... 3,800,000 1,556,138 ------------ 6,477,825 ------------ STUDENT LOAN - 1.6% AK State Student Loan Corp., Series 1994 A, 6.200%, 7/1/09 (b)........................ 3,870,000 4,067,833 ME State Educational Loan Marketing Corp., Series 1994 B-1, 6.500%, 11/1/09.......... 3,000,000 3,252,450 ------------ 7,320,283 ------------ HEALTHCARE - 8.1% CONGREGATE CARE RETIREMENT - 1.0% OR Clackamas County Hospital Facilities Authority, Willamette View, Series 1999 A, 7.500%, 11/1/29........................... 1,000,000 1,046,250 PA Montgomery County Industrial Development Authority, Adult Communities Total Services, Series 1996 B, 5.750%, 11/15/17........... 3,500,000 3,412,850 ------------ 4,459,100 ------------ HEALTH SERVICES - 0.4% MA State Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650%, 2/1/19............................ 310,000 289,830 WI State Health & Educational Facilities Authority, Marshfield Clinic, Series 1999, 6.250%, 2/15/29........................... 1,600,000 1,682,543 ------------ 1,972,373 ------------ HOSPITAL - 5.9% Fl West Orange Healthcare, 5.650%, 2/1/22... 1,050,000 1,046,146 IL State Development Finance Authority, Adventist Health System, Series 1999, 5.500%, 11/15/20.......................... 3,000,000 2,758,470 IL State Health Facilities Authority, Swedish American Hospital, Series 2000, 6.875%, 11/15/30.......................... 1,000,000 1,056,020 LA State Public Facilities Authority, Touro Infirmary, Series 1999, 5.625%, 8/15/29................................... 2,900,000 2,771,820 MA State Health & Educational Facilities Authority, Massachusetts General Hospital, Series 1992 F, 6.250%, 7/1/12............................ 5,750,000 6,529,527 See accompanying Notes to Financial Statements. 37 Par Value HOSPITAL (CONT) MA State Health & Educational Facilities Authority, Dana Farber Cancer Institute, Series 1995 G-1, 6.250%, 12/1/22........................... $3,265,000 $ 3,377,968 MA State Health & Educational Facilities Authority, South Shore Hospital, Series 1999 F, 5.625%, 7/1/19............................ 1,000,000 970,820 MA State Health & Educational Facilities Authority, South Shore Hospital, Series 1999 F, 5.750%, 7/1/29............................ 2,500,000 2,409,150 MD State Health & Educational Facilities Authority, University of Maryland Medical System, 6.750%, 7/1/30............................ 500,000 532,940 MI Dickinson County, Series 1999, 5.800%, 11/1/24................................... 1,000,000 837,830 NC State Medical Care Commission, Gaston Health Care, Series 1998, 5.000%, 2/15/29........ 1,000,000 884,170 NV Henderson, Catholic Healthcare West, Series 1999 A, 6.750%, 7/1/20............................ 1,000,000 998,930 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625%, 12/1/28........................... 500,000 430,130 WV State Hospital Finance Authority, Series 2000 A, 6.750%, 9/1/30............................ 2,000,000 2,126,860 ------------ 26,730,781 ------------ INTERMEDIATE CARE FACILITIES - 0.5% IN State Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125%, 6/1/34. 2,465,000 2,166,118 ------------ NURSING HOME - 0.3% IN State Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998, 6.400%, 12/1/33 (c)....................... 1,400,000 962,500 MN Minneapolis, Walker Methodist Senior Services Group, Series 1998 A, 5.875%, 11/15/18.... 450,000 392,063 ------------ 1,354,563 ------------ HOUSING - 4.5% MULTI-FAMILY - 2.1% Charter Municipal Mortgage Acceptance Co., 6.625%, 6/30/49 (d)....................... 2,000,000 2,037,500 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500%, 7/1/40............................ 1,500,000 1,530,000 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000 A, 7.450%, 7/1/40............................ 750,000 765,000 FL Orange County Housing Finance Authority, Palms at Brentwood Apartments, Series 1998 K, 6.500%, 12/1/34........................... 2,000,000 1,817,500 IL State Development Finance Authority, Catholic Charities Housing Development Corp., Series 1993 C, 5.950%, 1/1/09............................ 1,450,000 1,404,688 Municipal Mortgage & Equity L.L.C., 7.750%, 11/1/10 (d )...................... 2,000,000 2,117,500 ------------ 9,672,188 ------------ See accompanying Notes to Financial Statements. 38 Par Value SINGLE FAMILY - 2.4% IA State Housing Finance Authority, Series 1991 B, 7.450%, 7/1/23............................ $ 500,000 $ 510,555 ID State Housing Agency, Series 1990 E, 7.875%, 7/1/24............................ 655,000 668,965 IL Chicago, Series 2000 A, 7.150%, 9/1/31... 1,000,000 1,135,750 MN Minneapolis-St. Paul Housing Finance Board, Series 1991, 7.250%, 8/1/21........................... 1,395,000 1,423,918 7.300%, 8/1/31........................... 2,085,000 2,128,222 NM State Mortgage Finance Authority, Series 2000 A-2, 7.100%, 9/1/30............................ 1,500,000 1,691,070 NV State Housing Division, Series 1991 A-2, 7.750%, 4/1/22............................ 1,790,000 1,827,554 RI State Housing & Mortgage Finance Corp., Series 1-E, 7.550%, 10/1/22............... 1,455,000 1,485,948 ------------ 10,871,982 ------------ INDUSTRIAL - 8.0% FOOD PRODUCTS - 3.7% GA Cartersville Development Authority, Anheuser Busch Cos., Inc., Series 1999, 7.375%, 5/1/09... 9,000,000 10,571,670 IN Hammond, American Maize Products Co., Series 1994, 8.000%, 12/1/24.............. 5,000,000 5,141,600 MI State Strategic Fund, Michigan Sugar Co., Carolton Project, Series 1998 B, 6.450%, 11/1/25 (e)...................... 700,000 371,000 6.550%, 11/1/25 (e)...................... 800,000 424,000 ------------ 16,508,270 ------------ FOREST PRODUCTS - 3.9% LA De Soto Parish, International Paper Company, Series A, 7.700%, 11/1/18................. 3,250,000 3,524,983 SC Richland County, Union Camp Corp., Series 1991 B, 7.125%, 9/1/21............................ 5,000,000 5,117,700 WA Port Longview Industrial Development Corp., Weyerhaeuser Corp., Series 1992, 6.875%, 10/1/08................................... 8,750,000 9,431,013 ------------ 18,073,696 ------------ MANUFACTURING - 0.4% MO State Development Finance Board, Proctor & Gamble Co., Series 1999, 5.200%, 3/15/29.. 1,000,000 972,460 NM Albuquerque Industrial Development Authority, Motorola, Inc., Series 1983 A, 10.000%, 6/1/13............................ 1,000,000 1,017,970 ------------ 1,990,430 ------------ OTHER - 8.0% OTHER - 0.2% SC Tobacco Settlement Revenue Management Authority, Series 2001 B, 6.375%, 5/15/28............ 1,100,000 1,129,865 ------------ REFUNDED/ESCROWED - 7.8% CA Foothill/Eastern Transportation Corridor Agency, Series 1995 A, (a) 1/1/18................. 10,000,000 4,230,800 CA Southern California Public Power Authority, Southern Transmission Project, Series 1988 A, (a) 7/1/14................. 8,155,000 4,350,611 See accompanying Notes to Financial Statements. 39 Par Value REFUNDED/ESCROWED (CONT) FL State, Jacksonville Transportation Authority, Series 1985, 9.200%, 1/1/15............... $ 2,000,000 $ 2,785,120 GA Fulton County, Series 1992, 6.375%, 1/1/14................................... 13,270,000 15,328,442 NC Eastern Municipal Power Agency, Series 1991 A, 6.500%, 1/1/18............ 4,315,000 5,057,957 SC Calhoun County, Solid Waste Disposal Facilities, Eastman Kodak Co., Series 1992, 6.750%, 5/1/17.............. 3,000,000 3,522,390 ------------ 35,275,320 ------------ OTHER REVENUE - 2.6% RECREATION - 2.4% CA Long Beach Aquarium of the Pacific, Series 1995 A: 6.125%, 7/1/15............................ 4,000,000 4,439,800 6.125%, 7/1/23............................ 6,000,000 6,659,700 ------------ 11,099,500 ------------ RETAIL - 0.2% NJ State Economic Development Authority, Glimcher Properties L.P. Project, 6.000%, 11/1/28........................... 850,000 802,188 ------------ RESOURCE RECOVERY - 0.2% DISPOSAL - 0.2% IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050%, 1/1/10......... 500,000 472,530 MI State Strategic Fund, United Waste Systems, Inc., Series 1995, 5.200%, 4/1/10............... 500,000 481,910 ------------ 954,440 ------------ TAX-BACKED - 31.8% LOCAL APPROPRIATED - 3.2% CA San Diego Convention Center Expansion Financing Authority, Series 1998 A, 4.750%, 4/1/28.. 5,000,000 4,555,550 IL Chicago Board of Education, Series 1992 A, 6.000%, 1/1/16............................ 5,000,000 5,577,300 IN Crown Point School Building Corp., Series 2000: (a) 1/15/18............................... 1,550,000 630,649 (a) 1/15/19............................... 1,665,000 637,229 KY Lexington Fayette County, County Detention Center, Series 1999, 4.750%, 5/1/24............... 1,420,000 1,304,483 TX Houston, Series 2000, 6.400%, 6/1/27..... 2,000,000 2,094,760 ------------ 14,799,971 ------------ LOCAL GENERAL OBLIGATIONS - 8.9% AK North Slope Borough, Series 1999 B: (a) 6/30/10............................... 2,515,000 1,646,671 (a) 6/30/10............................... 2,000,000 1,309,480 CA Golden West School Financing Authority, Series 1999 A, (a) 8/1/15................. 2,500,000 1,212,925 CA Union Elementary School District, Series 1999 A, (a) 9/1/17................................ 2,300,000 977,753 CA Yuba City Unified School District, Series 2000, (a) 9/1/18................................ 1,160,000 462,272 CO Adams County, School District Number 12, Series 2001 A, 4.750%, 12/15/19........... 4,040,000 3,835,010 FL Broward County, Series 1986, 12.500%, 1/1/04.................................... 1,195,000 1,448,280 See accompanying Notes to Financial Statements. 40 Par Value LOCAL GENERAL OBLIGATIONS (CONT) HI Honolulu, Series 1998, 4.500%, 7/1/28.... $1,500,000 $ 1,292,340 IL Champaign County, Series 1999, 8.250%, 1/1/20............................ 1,015,000 1,371,955 IL Chicago, Series 1999, 5.500%, 1/1/23..... 2,250,000 2,357,663 IL Chicago Board of Education, Series 1996, 6.250%, 12/1/12........................... 2,500,000 2,870,400 IL Chicago Board of Education, Series 1998 B-1, (a) 12/1/21............................... 1,500,000 481,710 (a) 12/1/22............................... 3,000,000 905,640 (a) 12/1/23............................... 5,000,000 1,421,100 IL Chicago Public Building Commission, Series 1999 B, 5.250%, 12/1/18........................... 2,000,000 2,052,920 IL Coles & Cumberland Counties Unified School District, Series 2000, (a) 12/1/13.................. 3,120,000 1,669,044 IL Cook County School District No. 102, Series 2001, (a) 12/1/20............................... 3,065,000 1,048,506 IL Will County Forest Preservation District, Series 1999, (a) 12/1/16.................. 1,000,000 439,000 IL Will County Unified School District No. 365-UVY, Series 1999 B, (a) 11/1/18................ 1,900,000 740,886 LA New Orleans, Series 1991, (a) 9/1/12..... 6,250,000 3,611,438 MO Springfield School District No.R-12, Series 1991 B, 9.500%, 3/1/07............. 600,000 764,004 TX Galveston County, Series 2001, (a) 2/1/20................................ 1,500,000 541,200 (a) 2/1/22................................ 3,070,000 982,707 TX Houston Independent School District, Series 1999 A, 4.750%, 2/15/22........................... 1,500,000 1,379,340 TX Hurst Euless Bedford Independent School District, Series 1998, 4.500%, 8/15/25.............. 5,000,000 4,306,250 TX Katy Independent School District, Series 2001, 4.750%, 2/15/22........................... 1,400,000 1,287,538 ------------ 40,416,032 ------------ SPECIAL NON-PROPERTY TAX - 6.0% CA Los Angeles County Metropolitan Transportation Authority, Series 1999 A, 4.750%, 7/1/28.. 2,000,000 1,816,340 IL Metropolitan Pier & Exposition Authority, Series 1996 A, (a) 6/15/12.............................. 5,000,000 2,916,150 (a) 12/15/12............................. 8,850,000 5,036,181 IL State, Series 1992 Q, 6.000%, 6/15/12.... 10,000,000 11,218,300 NY New York City Transitional Finance Authority, Series 1998 C, 4.750%, 5/1/23............. 2,500,000 2,314,025 NY State Local Government Assistance Corp., Series 1993 E, 5.000%, 4/1/21............. 1,000,000 988,790 TX Houston, Series 2001 B, (a) 9/1/19....... 3,460,000 1,276,775 WA Central Puget Sound Regional Transportation Authority, Series 1998, 5.250%, 2/1/21.... 1,500,000 1,520,145 ------------ 27,086,706 ------------ See accompanying Notes to Financial Statements. 41 Par Value SPECIAL PROPERTY TAX - 0.6% CA Capistrano Unified School District, Ladera Community Facilities District No.98-2, Series 1999, 5.750%, 9/1/29............................ $1,000,000 $ 973,750 CA Santa Margarita Water District, Series 1999, 6.250%, 9/1/29............................ 750,000 758,438 FL Indigo Community Development District, Series 1999 B, 6.400%, 5/1/06............. 1,000,000 1,010,000 ------------ 2,742,188 ------------ STATE APPROPRIATED - 1.2% KY State Turnpike Authority, Series 1992, (a) 1/1/10................................ 7,500,000 5,060,325 MI State, 525 Redevco, Inc., Series 2000, (a) 6/1/21................................ 1,000,000 337,310 ------------ 5,397,635 ------------ STATE GENERAL OBLIGATIONS - 11.9% FL State Board of Education, Series 1998 A, 4.750%, 6/1/28............................ 3,000,000 2,724,390 FL State, Broward County Expressway, Series 1984, 9.875%, 7/1/09............................ 1,100,000 1,455,179 MA Massachusetts Bay Transportation Authority, Series 1992 B, 6.200%, 3/1/16............. 9,825,000 11,261,022 Series 1994 A, 7.000%, 3/1/14............. 3,150,000 3,801,515 MA Massachusetts Bay Transportation Authority, Series 1994 A, 7.000%, 3/1/19............. 2,500,000 3,032,275 Series 1998, 4.750%, 3/1/21............... 1,000,000 930,240 MA Massachusetts Bay Transportation Authority, Series 1998, 4.500%, 3/1/26............... 3,805,000 3,314,688 MA State College Building Authority Project, Series A, 7.500%, 5/1/11............................ 1,500,000 1,866,630 MA State College Building Authority, Series 1994 A, 7.500%, 5/1/14............................ 3,500,000 4,382,280 NJ State General Obligation, Series D, 6.000%, 2/15/11........................... 5,150,000 5,812,290 NV Clark County, Series 1998 B, 4.500%, 12/1/17................................... 2,675,000 2,459,502 PA State, Series 1992-2, 6.250%, 7/1/12..... 11,200,000 12,897,024 ------------ 53,937,035 ------------ TRANSPORTATION - 11.3% AIR TRANSPORTATION - 2.1% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000 A, 6.750%, 11/1/11........................... 1,600,000 1,644,736 IN Indianapolis Airport Authority, United Airlines Project, Series A, 6.500%, 11/15/31.................................. 3,000,000 2,812,500 MN Minnesota- St. Paul Northwest Airlines 6.500%, 4/1/25............................ 500,000 499,375 7.000%, 4/1/25............................ 1,250,000 1,187,500 NC Charlotte, US Airways, Inc., Series 1998, 5.600%, 7/1/27............... 1,000,000 701,250 Series 2000, 7.750%, 2/1/28............... 1,000,000 943,750 NJ State Economic Development Authority, Continental Airlines, Inc., Series 1999, 6.400%, 9/15/23........................... 2,000,000 1,915,000 ------------ 9,704,111 ------------ See accompanying Notes to Financial Statements. 42 Par Value AIRPORT - 2.1% HI State, Airport System Revenue, Series 1991, 6.900%, 7/1/12............................ $6,000,000 $ 7,026,600 MA State Port Authority, Series 1999, 8.780%, 7/1/29............................ 1,000,000 1,100,440 MO St. Louis, Series 2001 A, 5.000%, 7/1/26. 1,600,000 1,540,352 ------------ 9,667,392 ------------ TOLL FACILITIES - 5.6% CO E-470 Public Highway Authority, Series 2000 B, (a) 9/1/18................................ 4,600,000 1,817,874 (a) 9/1/19................................ 3,500,000 1,303,470 NY Triborough Bridge & Tunnel Authority, Series 1991 X, 6.125%, 1/1/21............................ 5,500,000 6,272,640 6.625%, 1/1/12............................ 9,915,000 11,745,706 PA State Turnpike Commission, Series 1998 A, 4.750%, 12/1/27........................... 3,415,000 3,100,342 VA Richmond Metropolitan Authority, Series 1998, 5.250%, 7/15/22........................... 1,100,000 1,128,281 ------------ 25,368,313 ------------ TRANSPORTATION - 1.5% GA Metropolitan Atlanta Rapid Transit Authority, Series 1992 P, 6.250%, 7/1/20............. 4,000,000 4,603,440 NV State Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.380%, 1/20/30........................... 650,000 650,813 NV State Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.375%, 1/1/40............................ 500,000 498,125 OH Toledo-Lucas County Port Authority, CSX Transportation, Inc., Series 1992, 6.450%, 12/15/21.................................. 1,000,000 1,058,680 ------------ 6,811,058 ------------ UTILITY - 20.2% INDEPENDENT POWER PRODUCER - 0.6% NY Suffolk County Industrial Development Agency, Nissequogue Cogen Partners, Series 1998, 5.500%, 1/1/23............................ 1,000,000 901,250 PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental Cogeneration Facilities, AES Project, Series 2000, 6.625%, 6/1/26............... 650,000 683,729 VA Pittsylvania County Industrial Development Authority, Multitrade of Pittsylvania, Series 1994 A, 7.550%, 1/1/19............. 1,000,000 958,750 ------------ 2,543,729 ------------ INVESTOR OWNED - 0.9% IN Michigan City, Northern Indiana Public Service Co., Series 1973 A, 5.700%, 10/1/03............ 2,545,000 2,558,870 MS State Business Finance Corp., Systems Energy Resources, Inc.,Series 1999, 5.900%, 5/1/22............................ 1,600,000 1,510,000 ------------ 4,068,870 ------------ See accompanying Notes to Financial Statements. 43 Par Value JOINT POWER AUTHORITY - 8.7% GA Municipal Electric Authority Power, Series V, 6.600%, 1/1/18............................ $21,300,000 $ 25,104,606 NC Eastern Municipal Power Agency, Series 1991 A, 6.500%, 1/1/18............................ 2,185,000 2,358,183 NC State Municipal Power Agency, Catawba No. 1, Series 1992, (a) 1/1/09................... 2,360,000 1,670,148 TX State Municipal Power Agency, (a) 9/1/08. 1,475,000 1,070,452 WA State Public Power Supply System, Nuclear Project No. 2, Series 1992 A, 6.300%, 7/1/12...... 3,500,000 3,982,055 WA State Public Power Supply System, Nuclear Project No. 3, Series 1989 B, (a) 7/1/08.......... 7,000,000 5,104,120 ------------- 39,289,564 ------------- MUNICIPAL ELECTRIC - 3.3% MN Northern Municipal Power Agency, Series 1998 B, 4.750%, 1/1/20............................ 1,000,000 937,100 NC University of North Carolina at Chapel Hill, Series 1997, (a) 8/1/20................... 1,750,000 624,680 NY Long Island Power Authority, Series 2000 A, (a) 6/1/20................................ 1,000,000 370,280 PA Westmoreland County Municipal Authority, Series 2000 A, (a) 8/15/23................ 1,400,000 409,794 SD Heartland Consumers Power District, Series 1992, 6.000%, 1/1/17............................ 8,000,000 8,911,120 TX Austin, Series 1998, 5.250%, 5/15/25..... 3,710,000 3,760,419 ------------- 15,013,393 ------------- WATER & SEWER - 6.7% DE State Economic Development Authority, Wilmington Suburban Water Corp., Series 1992 B, 6.450%, 12/1/07........... 1,160,000 1,300,963 Series 1992 A, 6.800%, 12/1/23........... 3,500,000 3,572,135 FL Jacksonville, General Waterworks Corp., Series 1992, 6.750%, 6/1/22............................ 1,500,000 1,547,280 GA Fulton County, Series 1998, 4.750%, 1/1/28............... 6,750,000 6,166,395 Series 1992, 6.375%, 1/1/14............... 430,000 491,387 NY New York City Municipal Water Finance Authority, Series 1998 D, 4.750%, 6/15/25............ 2,500,000 2,308,225 PA Allegheny County Sanitation Authority, Series 1991 A, (a) 6/1/07................. 2,370,000 1,837,888 PA Dauphin County Industrial Development Authority, Dauphin Water Supply Co., Series 1992 A, 6.900%, 6/1/24............................ 3,400,000 3,985,106 TX Houston, Series 1998, (a) 12/1/23........ 3,500,000 1,005,655 Series 1991 C: (a) 12/1/08.............................. 4,000,000 2,870,680 (a) 12/1/09.............................. 4,000,000 2,718,200 (a) 12/1/10.............................. 3,750,000 2,411,738 ------------- 30,215,652 ------------- TOTAL MUNICIPAL BONDS (cost of $409,698,494)...................... 443,920,571 ------------- See accompanying Notes to Financial Statements. 44 Par Value SHORT-TERM OBLIGATIONS - 0.1% VRDN IL Sauget, Monsanto Co., Series 1993, 2.200%, 5/1/28............................ $300,000 $ 300,000 MO State Health & Educational Facilities Authority Washington University of St. Louis, Series 1996 D, 2.950%, 9/1/30............................ 300,000 300,000 ------------- TOTAL SHORT-TERM OBLIGATIONS (cost of $600,000) 600,000 ------------- TOTAL INVESTMENTS (cost of $410,298,494) (f).................. 444,520,571 ------------- OTHER ASSETS & LIABILITIES, NET - 2.2%........ 9,845,529 ------------- NET ASSETS - 100.0%............................ $454,366,100 ============= NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) These securities, or a portion thereof, with a total market value of $4,067,833 are being used to collateralize open futures contracts. (c) This security is in default of certain debt covenants. Income is still being accrued. (d) These securities are exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2001, the value of these securities amounted to $4,155,000, which represents 0.9% of net assets. (e) These securities are in default of certain debt covenants. Income is not being accrued. (f) Cost for both financial statement and federal income tax purposes is the same. Variable rate demand notes (VRDN) 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 credits or other credit support agreements from banks. The rates listed are as of June 30, 2001. Long futures contracts open at June 30, 2001: PAR VALUE UNREALIZED COVERED BY APPRECIATION TYPE CONTRACTS EXPIRATION AT 06/30/01 ----------- ------------ -------------- ---------- Treasury Bond $73,000,000 September 2001 $1,113,980 See accompanying Notes to Financial Statements. 45 SR&F HIGH YIELD MUNICIPALS PORTFOLIO INVESTMENT PORTFOLIO June 30, 2001 MUNICIPAL BONDS - 94.6% Par Value EDUCATION - 4.5% EDUCATION - 1.5% IL State Development Finance Authority, Latin School of Chicago, Series 1998, 5.650%, 8/1/28... $1,725,000 $1,635,300 MN Victoria, Holy Family Catholic High School, Series 1999 A, 5.875%, 9/1/29............. 1,200,000 1,137,000 WV State University, Series 2000 A, (a) 4/1/19.................................... 1,250,000 481,975 ----------- 3,254,275 ----------- STUDENT LOAN - 3.0% NE Nebhelp, Inc., Series 1993 A-6, 6.450%, 6/1/18............................ 4,000,000 4,419,520 NM State Educational Assistance Foundation, Series 1996 A-2, 6.650%, 11/1/25.......... 1,955,000 2,030,287 TX Brazos Higher Educational Facilities Authority, Series 1993 C-2, 5.875%, 6/1/04 390,000 390,039 ----------- 6,839,846 ----------- HEALTHCARE - 21.0% CONGREGATE CARE RETIREMENT - 6.9% CA Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250%, 11/15/31.......................... 1,000,000 1,001,450 FL Orange County Health Facilities Authority, Orlando Lutheran Towers, Inc., Series 1996, 8.625%, 7/1/20............................ 3,000,000 3,142,500 MA State Development Finance Agency, Series 1999 A: 5.625%, 7/1/15............................ 500,000 431,630 5.750%, 7/1/23............................ 250,000 205,288 MO State Health & Educational Facilities Authority, Lutheran Senior Services, Series 1997, 5.750%, 2/1/17............................ 2,000,000 1,892,600 NH State Higher Educational & Health Facilities Authority, Rivermead at Peterborough, Series 1998, 5.750%, 7/1/28............................ 1,000,000 795,000 NJ State Economic Development Authority: Seabrook Village, Inc., Series 2000 A, 8.250%, 11/15/30.......................... 625,000 627,344 Winchester Gardens, Series 1996 A, 8.625%, 11/1/25........................... 2,000,000 2,090,000 PA Chartiers Valley Industrial & Commercial Development Authority, Asbury Health Center, Series 1999, 6.375%, 12/1/24.............. 750,000 651,563 PA Lancaster Industrial Development Authority, Garden Spot Village, Series 2000 A, 7.625%, 5/1/31............................ 500,000 506,250 TN Metropolitan Government, Nashville and Davidson County, Blakeford at Green Hills, Series 1998, 5.650%, 7/1/24............... 1,500,000 1,186,875 See accompanying Notes to Financial Statements. 46 Par Value CONGREGATE CARE RETIREMENT (CONT) TX Abilene Health Facilities Development Corp., Sears Methodist Retirement Obligation Group: Series 1998 A, 5.900%, 11/15/25.......... $2,100,000 $ 1,685,250 Series 1999, 6.000%, 11/15/29............ 500,000 400,000 WI State Health & Educational Facilities Authority: Attic Angel Obligated Group, 5.750%, 11/15/27................................. 1,250,000 971,875 ------------ 15,587,625 ------------ HEALTH SERVICES - 1.2% MA State Development Finance Agency, Boston Biomedical Research Institute, Series 1999, 5.650%, 2/1/19............... 250,000 233,735 WI Clement Manor, Series 1998, 5.750%, 8/15/24................................... 3,000,000 2,430,000 ------------ 2,663,735 ------------ HOSPITAL - 8.7% AZ Health Facilities Authority, Phoenix Memorial Hospital, Series 1991, 8.125%, 6/1/12 (c)................................ 2,500,000 825,000 CO La Junta, Arkansas Valley Regional Medical Center, Series 1999, 6.100%, 4/1/24.................................... 500,000 451,650 CO State Health Care Facilities Authority, National Jewish Medical & Research Center, Series 1998, 5.375%, 1/1/23............. 250,000 210,045 Parkview Medical Center, Inc., Series 2001, 6.600%, 9/1/25.......................... 300,000 308,625 FL Orange County Health Facilities Authority, Orlando Regional Healthcare System, Series 1999: 5.650%, 2/1/22.......................... 1,050,000 1,046,147 6.000%, 10/1/26......................... 875,000 889,648 IL Southwestern Illinois Development Authority, Anderson Hospital, Series 1999: 5.500%, 8/15/20......................... 500,000 432,410 5.625%, 8/15/29......................... 250,000 209,560 KS Wichita, CSJ Health System of Wichita, Inc., Series 1991 X, 7.000%, 11/15/18........... 2,000,000 2,071,420 MI Dickinson County, Series 1999, 5.800%, 11/1/24................................... 1,300,000 1,089,179 MI Flint Hospital Building Authority, Hurley Medical Center, Series 1998 B, 5.375%, 7/1/28..... 1,250,000 997,463 MI State Hospital Finance Authority, Detroit Medical Center, Series 1998 A, 5.250%, 8/15/28.... 1,000,000 792,630 MN Maplewood, Healtheast, Inc., Series 1996, 5.700%, 11/15/02............. 500,000 489,375 NC State Medical Care Commission, Stanley Memorial Hospital, Series 1999, 6.375%, 10/1/29................................... 1,000,000 1,044,630 NH State Higher Educational & Health Facilities Authority, Littleton Hospital Association, Inc., Series 1998 A, 6.000%, 5/1/28............. 1,000,000 765,000 OH Highland County Joint Township Hospital District, Series 1999, 6.750%, 12/1/29................................... 1,235,000 1,088,344 OH Miami County, Upper Valley Medical Center, Inc., Series 1996 A, 6.375%, 5/15/26................................... 1,015,000 976,410 TX Richardson Hospital Authority, Baylor Richardson Medical Center, Series 1998, 5.625%, 12/1/28........................... 1,200,000 1,032,312 TX Tyler Health Facilities Development Corp., Mother Frances Hospital, Series 1997 A, 5.625%, 7/1/13............................ 1,785,000 1,602,591 See accompanying Notes to Financial Statements. 47 Par Value HOSPITAL (CONT) WA State Health Care Facilities Authority, Sacred Heart Medical Center, Series 1992, 6.875%, 2/15/12........................... $1,500,000 $ 1,566,705 WA State Health Care Facilities Authority, Kadlec Medical Center, Series 2001, 5.875%, 12/1/21........................... 600,000 607,542 WV State Hospital Finance Authority, Series 2000 A, 6.750%, 9/1/30............. 1,000,000 1,063,430 ------------ 19,560,116 ------------ INTERMEDIATE CARE FACILITIES - 0.6% IL State Development Finance Authority, Hoosier Care, Inc., Series 1999 A, 7.125%, 6/1/34............................ 1,500,000 1,318,125 IN State Health Facilities Financing Authority, Hoosier Care, Inc., Series 1999 A, 7.125%, 6/1/34............. 150,000 131,813 ------------ 1,449,938 ------------ NURSING HOME - 3.6% AK Juneau, St. Ann's Care Center, Series 1999, 6.875%, 12/1/25........................... 700,000 658,875 CO State Health Facilities Authority, Volunteers of America Care Facilities, Inc., Series 1999 A, 5.750%, 7/1/10............. 1,085,000 999,556 IA State Finance Authority, Care Initiatives, Series 1998 B, 5.500%, 7/1/08............. 645,000 604,688 IN State Health Facilities Financing Authority, Metro Health Indiana, Inc., Series 1998, 6.400%, 12/1/33........................... 1,500,000 1,031,250 MA State Development Finance Agency, Alliance Health Care Facilities, Series 1999, 7.100%, 7/1/32............................ 1,250,000 1,142,188 MN Carlton, Inter-Faith Social Services, Inc., Series 2000, 7.750%, 4/1/29............... 750,000 757,500 MN Minneapolis, Walker Methodist Senior Services Group, Series 1998 C, 6.000%, 11/15/28.......................... 500,000 426,875 MN New Hope, North Ridge Care Center, Inc., Series 1999, 5.875%, 3/1/29............... 900,000 750,375 MN Sartell, Foundation for Healthcare, Series 1999 A, 6.625%, 9/1/29............. 2,000,000 1,777,500 ------------ 8,148,807 ------------ HOUSING - 6.9% ASSISTED LIVING/SENIOR - 2.8% DE Kent County, Heritage at Dover, Series 1999, 7.625%, 1/1/30............... 1,500,000 1,342,500 GA Columbus Housing Authority, The Gardens at Calvary, Series 1999, 7.000%, 11/15/29.......................... 1,000,000 862,500 LA State Public Facilities Authority, Progressive Healthcare Providers, Inc., Series 1998, 6.375%, 10/1/28.............. 2,000,000 1,510,000 NC State Medical Care Commission, DePaul Community Facilities Project, Series 1999, 7.625%, 11/1/29.............. 1,250,000 1,218,750 See accompanying Notes to Financial Statements. 48 Par Value ASSISTED LIVING/SENIOR (CONT) NY Huntington Housing Authority, Gurwin Jewish Senior Center, Series 1999: 5.875%, 5/1/19........................... $ 1,100,000 $ 948,750 6.000%, 5/1/29........................... 375,000 315,938 ----------- 6,198,438 ----------- MULTI-FAMILY - 2.7% CO State Health Facilities Authority, Birchwood Manor, Series 1991 A, 7.250%, 4/1/11............. 555,000 558,297 FL Broward County Housing Finance Authority, Chaves Lake Apartment Project, Series 2000, 7.500%, 7/1/40............................ 750,000 765,000 FL Clay County Housing Finance Authority, Madison Commons Apartments, Series 2000 A, 7.450%, 7/1/40............................ 750,000 765,000 GA Clayton County Housing Authority, Magnolia Park Apartments, Series 1999 A, 6.250%, 6/1/30............................ 1,000,000 901,750 IL State Development Finance Authority, Catholic Charities Housing Development Corp., Series 1993 C, 5.950%, 1/1/09............. 1,400,000 1,356,250 IL State Housing Development Authority, Series 1991 C, 7.400%, 7/1/23............. 140,000 142,996 IN New Castle, Raintree Apartments, Series 1988 B, (a) 3/1/18 (c)............. 30,625,000 76,563 OH Greater Allen County Housing Development Authority, Steiner-McBride Apartments, 10.250%, 9/1/03........................... 850,000 850,927 TX El Paso County Housing Finance Corp., American Village Communities: Series 2000 C, 8.000%, 12/1/32........... 350,000 350,875 Series 2000 D, 10.000%, 12/1/32.......... 400,000 400,500 ----------- 6,168,158 ----------- SINGLE FAMILY - 1.4% IA State Housing Finance Authority, Series 1984 A, (a) 9/1/16................. 5,130,000 959,156 ID State Housing Agency, Series 1991 B, 7.500%, 7/1/24............................ 1,230,000 1,262,177 UT State Housing Finance Agency: Series 1991 B-2, 7.750%, 1/1/23........... 20,000 20,330 Series 1991 C-3, 7.550%, 7/1/23........... 70,000 71,451 WA State Housing Finance Commission, Series 1991 C: (a) 1/1/22............................... 635,000 149,181 (a) 7/1/22............................... 725,000 164,416 (a) 1/1/23............................... 725,000 158,710 (a) 7/1/23............................... 730,000 154,256 (a) 1/1/24............................... 730,000 148,905 (a) 7/1/24............................... 755,000 148,660 ----------- 3,237,242 ----------- See accompanying Notes to Financial Statements. 49 Par Value INDUSTRIAL - 8.7% FOOD PRODUCTS - 2.0% IN Hammond, American Maize Products Co., Series 1994, 8.000%, 12/1/24.............. $3,640,000 $ 3,743,085 MI State Strategic Fund, Michigan Sugar Co., Carollton Project, Series 1998 C, 6.550%, 11/1/25 (c)....................... 1,500,000 795,000 ------------ 4,538,085 ------------ FOREST PRODUCTS - 4.6% GA Rockdale County Development Authority, Solid Waste Disposal, Visy Paper, Inc., Series 1993, 7.500%, 1/1/26............... 1,000,000 1,007,500 LA De Soto Parish, International Paper Co., Series A, 7.700%, 11/1/18................. 2,500,000 2,711,525 MS Lowndes County, Weyerhaeuser Corp., Series 1992 A, 6.800%, 4/1/22............. 5,995,000 6,728,009 ------------ 10,447,034 ------------ METALS & Mining - 1.0% IN State Development Finance Authority, Inland Steel, Series A, 5.750%, 10/1/11... 2,500,000 1,484,375 NV State Department of Business & Industry, Wheeling-Pittsburgh Steel Corp., Series 1999 A, 8.000%, 9/1/14............................ 250,000 200,000 VA Greensville County Industrial Development Authority, Wheeling Steel, Series 1999 A: 6.375%, 4/1/04........................... 90,000 72,000 7.000%, 4/1/14........................... 555,000 432,206 ------------ 2,188,581 ------------ OIL AND GAS - 1.1% TX Texas City Industrial Development Corp., Arco Pipe Line Co. Project, Series 1990, 7.375%, 10/1/20........................... 2,000,000 2,478,720 ------------ OTHER - 6.3% OTHER - 0.5% SC Tobacco Settlement Revenue Management Authority, Series 2001 B, 6.375%, 5/15/28. 975,000 1,001,471 ------------ REFUNDED/ESCROWED - 5.8% (D) CO ADAMS COUNTY, SERIES 1991 B: 11.250%, 9/1/11 (b)....................... 325,000 476,083 11.250%, 9/1/11........................... 360,000 540,889 11.250%, 9/1/11........................... 220,000 339,148 11.250%, 9/1/12........................... 1,440,000 2,260,526 FL Leesburg, Leesburg Regional Medical Center, Series 1991 A, 7.375%, 7/1/11..... 775,000 825,305 GA State Municipal Electric Authority, Series V, 6.600%, 1/1/18.................. 690,000 816,518 IL Health Facility Authority, Edward Hospital Association Project, Series 1992, 7.000%, 2/15/22........................... 685,000 716,257 LA State Public Facilities Authority, Woman's Hospital Foundation, Series 1992, 7.250%, 10/1/22........................... 2,300,000 2,462,541 See accompanying Notes to Financial Statements. 50 Par Value REFUNDED/ESCROWED (D) (CONT) MI Adams County, Jefferson Davis Memorial Hospital, Series 1991, 7.900%, 10/1/08.......................... $ 750,000 $ 774,668 NC Eastern Municipal Power Agency, Series 1991 A, 6.500%, 1/1/18............. 3,320,000 3,891,638 ------------ 13,103,573 ------------ OTHER REVENUE - 2.3% RECREATION - 2.3% CA Long Beach Aquarium of the Pacific, Series 1995 A, 6.125%, 7/1/23............. 4,750,000 5,272,263 ------------ RESOURCE RECOVERY - 0.3% DISPOSAL - 0.3% IL Development Finance Authority, Waste Management, Inc., Series 1997, 5.050%, 1/1/10............................ 250,000 236,265 UT Carbon County, Laidlaw Environmental, Series A, 7.450%, 7/1/17.................. 500,000 494,375 ------------ 730,640 ------------ TAX-BACKED - 12.5% LOCAL APPROPRIATED - 1.1% PA Philadelphia Municipal Authority, Series 1993 D, 6.250%, 7/15/13............ 2,500,000 2,565,275 ------------ LOCAL GENERAL OBLIGATIONS - 0.5% NY New York City, Series 1996 B, 7.250%, 8/15/07........................... 1,000,000 1,167,620 ------------ SPECIAL NON-PROPERTY TAX - 3.9% CO State Department of Transportation: Series 832R-A, 9.170%, 6/15/14 (c)........ 3,000,000 3,411,000 Series 832R-B, 9.170%, 6/15/15 (c)........ 2,000,000 2,244,480 MO St. Louis County Industrial Development Authority, Kiel Center Arena, Series 1992, 7.875%, 12/1/24........................... 3,000,000 3,127,500 ------------ 8,782,980 ------------ SPECIAL PROPERTY TAX - 3.0% CA Orange County Community Facilities District, Ladera Ranch, Series 1999 A, 6.500%, 8/15/21........................... 1,000,000 1,045,000 FL Heritage Palms Community Development District: Series 1999, 6.250%, 11/1/04.............. 1,000,000 1,008,750 Series 1999 B, 6.250%, 5/1/05............. 650,000 655,688 FL Indigo Community Development District, Series 1999 B, 6.400%, 5/1/06............. 1,000,000 1,010,000 FL Lexington Oaks Community Development District: Series 2000 A, 7.200%, 5/1/30............. 600,000 620,250 Series 2000 D, 6.700%, 5/1/07............. 735,000 753,375 FL Northern Palm Beach County Improvement District, Series 1999, 6.000%, 8/1/29..... 750,000 709,688 See accompanying Notes to Financial Statements. 51 Par Value SPECIAL PROPERTY TAX (CONT) FL Orlando, Conroy Road Interchange Project, Series 1998 A, 5.500%, 5/1/10.......................... $ 200,000 $ 197,250 5.800%, 5/1/26.......................... 500,000 468,750 FL Stoneybrook Community Development District, Series 1998 A, 6.100%, 5/1/19... 330,000 325,875 ------------ 6,794,626 ------------ STATE APPROPRIATED - 1.0% NY Triborough Bridge & Tunnel Authority, Javits Convention Center Project, Series E, 7.250%, 1/1/10............................ 2,000,000 2,296,100 ------------ STATE GENERAL OBLIGATIONS - 3.0% MA Massachusetts Bay Transportation Authority, Series 1992 B, 6.200%, 3/1/16.. 5,825,000 6,676,382 ------------ TRANSPORTATION - 9.1% AIR TRANSPORTATION - 5.9% IL Chicago O'Hare International Airport, United Airlines, Inc., Series 2000 A, 6.750%, 11/1/11........................... 800,000 822,368 IN Indianapolis Airport Authority, Federal Express Corp., Series 1994, 7.100%, 1/15/17................................... 3,000,000 3,188,850 MN St. Paul, Northwest Airlines, 7.000%, 4/1/25.................................... 500,000 475,000 MN St. Paul Northwest Airlines, 6.500%, 4/1/25.................................... 250,000 249,688 NC Charlotte, US Airways, Inc., Series 1998, 5.600%, 7/1/27............................ 250,000 175,313 NC Charlotte, US Airways, Inc., Series 2000, 7.750%, 2/1/28............................ 750,000 707,813 PA Philadelphia Authority for Industrial Development, Aero Philadelphia, Series 1999, 5.500%, 1/1/24............................ 1,000,000 828,750 TX Alliance Airport Authority, AMR Corp., Series 1991, 7.000%, 12/1/11.............. 4,070,000 4,469,471 TX Houston Airport System, Continental Airlines Terminal, Series B, 6.125%, 7/15/17................................... 2,000,000 1,880,000 WA Port Seattle, Northwest Airlines, Inc., Series 2000, 7.250%, 4/1/30............... 500,000 488,125 ------------ 13,285,378 ------------ PORTS - 1.3% WA Port of Seattle, Series 2000: 8.610%, 2/1/10............................ 625,000 748,888 8.610%, 2/1/11............................ 1,875,000 2,259,863 ------------ 3,008,751 ------------ TOLL FACILITIES - 1.5% CO State Public Highway Authority, Araphoe County, E470, Series 2000 B: (a) 9/1/18.............................. 4,000,000 1,580,760 (a) 9/1/35.............................. 8,750,000 708,663 CO Northwest Parkway, 7.125%, 6/15/41....... 1,000,000 1,000,000 ------------ 3,289,423 ------------ See accompanying Notes to Financial Statements. 52 Par Value TRANSPORTATION - 0.4% NV State Department of Business & Industry, Las Vegas Monorail Project, Series 2000, 7.375%, 1/1/40............................ $1,000,000 $ 996,250 ------------ UTILITY - 23.0% INDEPENDENT POWER PRODUCER - 5.5% MI Midland County Economic Development Corp., Series 2000, 6.875%, 7/23/09....... 1,000,000 1,030,000 PA State Economic Development Financing Authority, Northampton Generating: Series A, 6.500%, 1/1/13................. 2,000,000 2,000,760 Series 1994 B, 6.750%, 1/1/07............ 3,000,000 3,057,780 VA Pittsylvania County Industrial Development Authority, Multitrade of Pittsylvania, Series 1994 A: 7.550%, 1/1/19........................... 3,100,000 2,972,125 7.450%, 1/1/09........................... 3,500,000 3,421,250 ------------ 12,481,915 ------------ INVESTOR OWNED - 6.4% CT State Development Authority, Connecticut Light & Power Co., Series 1993 A, 5.850%, 9/1/28............................ 2,900,000 2,887,994 LA Calcasieu Parish Industrial Development Board, Entergy Gulf States, Inc., Series 1999, 5.450%, 7/1/10............................ 500,000 484,375 LA West Feliciana Parish, Entergy Gulf States, Inc., Series 1999 B, 6.600%, 9/1/28....... 250,000 250,000 MS State Business Finance Corp., Systems Energy Resources, Inc., Series 1999, 5.900%, 5/1/22............................ 1,250,000 1,179,688 NM Farmington, Tucson Electric Power Co., Series 1997 A, 6.950%, 10/1/20............ 2,000,000 2,045,000 NV Humboldt County Pollution Control Revenue, Idaho Power Co. Project, 8.300%, 12/1/14.. 2,000,000 2,255,060 PA Beaver County Industrial Development Authority, Toledo Edison Co., Series 1995, 7.625%, 5/1/20............................ 4,900,000 5,243,000 ------------ 14,345,117 ------------ JOINT POWER AUTHORITY - 5.0% GA State Municipal Electric Authority, Series 1991 V, 6.600%, 1/1/18............. 3,375,000 3,903,221 NC Eastern Municipal Power Agency, Series 1991 A, 6.500%, 1/1/18............. 1,680,000 1,813,157 WA State, Public Power Supply System, Series 1991 A (a) 7/1/07.................. 6,945,000 5,356,745 ------------ 11,073,123 ------------ MUNICIPAL ELECTRIC - 0.5% WA Seattle, Series 2001, 5.500%, 3/1/17..... 1,000,000 1,030,930 ------------ See accompanying Notes to Financial Statements. 53 Par Value WATER & Sewer - 5.6% FL Tampa Bay Water Utility Systems Revenue, 8.180%, 10/1/29........................... $7,500,000 $ 8,220,887 NH State Industrial Development Authority, Pennichuck Water Works, Inc., Series 1988, 7.500%, 7/1/18............................ 535,000 569,775 PA Dauphin County Industrial Development Authority, Dauphin Water Supply Co., Series 1992 A, 6.900%, 6/1/24............. 3,200,000 3,750,688 ------------- 12,541,350 ------------- TOTAL MUNICIPAL BONDS (cost of $213,347,772)...................... 213,203,767 ------------- MUNICIPAL PREFERRED STOCKS - 1.4% Shares HOUSING - 1.4% MULTI-FAMILY - 1.4% Charter Municipal Mortgage Acceptance Co.: 6.625%, 6/30/49 (e)....................... 2,000,000 2,037,500 7.600%, 11/30/50 (e)...................... 1,000,000 1,056,250 ------------- TOTAL MUNICIPAL PREFERRED STOCKS (cost of $3,000,000)........................ 3,093,750 ------------- TOTAL INVESTMENTS (cost $216,347,772)(f)...................... 216,297,517 ------------- OTHER ASSETS & LIABILITIES, NET - 4.0%......... 9,077,448 ------------- NET ASSETS - 100.0%............................ $225,374,965 ============= See accompanying Notes to Financial Statements. 54 NOTES TO INVESTMENT PORTFOLIO: - -------------------------------------------------------------------------------- (a) Zero coupon bond. (b) These securities, or a portion thereof, with a total market value of $476,083 are being used to collateralize open future contracts. (c) The issuer is in default of certain debt covenants. Income is not being accrued. (d) The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust solely for the purpose of the payment of principle and income. (e) These securities are exempt from registration under rule 144A of the securities act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2001, the value of these securities amounted to $3,093,750 or 1.4% of net assets. (f) Cost for federal income tax purposes is the same. Short futures contracts open at June 30, 2001: UNREALIZED PAR VALUE APPRECIATION/ COVERED BY DEPRECIATION TYPE CONTRACTS EXPIRATION AT 06/30/01 ------------- ------------ -------------- ---------- Municipal Bond $12,200,000 September 2001 $ (54,640) Treasury Note 21,300,000 September 2001 133,618 ---------- $ 78,978 ========== Long futures contracts open at June 30, 2001: PAR VALUE UNREALIZED COVERED BY DEPRECIATION TYPE CONTRACTS EXPIRATION AT 06/30/01 ------------- ----------- -------------- ---------- Treasury Bond $30,300,000 September 2001 $(211,580) See accompanying Notes to Financial Statements. 55 FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES June 30, 2001 SR&F SR&F MUNICIPAL HIGH-YIELD MONEY MARKET MUNICIPALS PORTFOLIO PORTFOLIO ------------- ------------ ASSETS Investments, at value (cost of $123,803,504 and $216,347,772, respectively).............. $123,803,504 $216,297,517 Cash........................................ 79,674 1,868,648 Receivable for: Investments sold......................... 180,116 4,304,142 Interest................................. 787,231 4,110,386 Other assets................................ 5,105 23,072 ------------- ------------ Total Assets............................. 124,855,630 226,603,765 ------------- ------------ Payable for: Investments purchased.................... 3,611,279 1,047,932 Distributions............................ 11,534 -- Variation margin on futures contracts.... -- 99,594 Management fee........................... 25,944 75,295 Transfer agent fee....................... 500 501 Bookkeeping fee.......................... 2,239 2,294 Custody fee.............................. 502 250 Other liabilities........................... 4,939 2,934 ------------- ------------ Total Liabilities........................ 3,656,937 1,228,800 ------------- ------------ Net Assets Applicable to Investors' Beneficial Interest.................... $121,198,693 $225,374,965 ============= ============ See accompanying Notes to Financial Statements. 56 STATEMENTS OF OPERATIONS For the Year Ended June 30, 2001 SR&F SR&F MUNICIPAL HIGH-YIELD MONEY MARKET MUNICIPALS PORTFOLIO PORTFOLIO ----------- ------------ INVESTMENT INCOME Interest income............................. $5,119,544 $16,036,151 EXPENSES Management fee.............................. 320,261 1,039,675 Transfer agent fee.......................... 5,997 6,001 Bookkeeping fee............................. 26,953 29,779 Audit fee................................... 19,396 16,604 Trustees' fee............................... 8,388 12,976 Custody fee................................. 6,200 8,733 Other expenses.............................. 31,054 35,703 ----------- ------------ Total Expenses........................... 418,249 1,149,471 Custody credits earned...................... (2,729) (6,421) ----------- ------------ Net Expenses............................. 415,520 1,143,050 ----------- ------------ Net Investment Income.................... 4,704,024 14,893,101 ----------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investments and futures contracts.................... (30,258) (2,167,283) Net change in unrealized appreciation/depreciation on investments and futures contracts..... 2,978 4,173,176 ----------- ------------ Net Gain (Loss).......................... (27,280) 2,005,893 ----------- ------------ Net Increase in Net Assets from Operations.......................... $4,676,744 $16,898,994 =========== ============ See accompanying Notes to Financial Statements. 57 STATEMENTS OF CHANGES IN NET ASSETS
SR&F MUNICIPAL SR&F HIGH-YIELD MONEY MARKET PORTFOLIO MUNICIPALS PORTFOLIO ------------------------------ ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, INCREASE (DECREASE) IN NET ASSETS 2001 2000 2001 2000 ------------- ------------- ------------- ------------- OPERATIONS Net investment income .......................................... $ 4,704,024 $ 4,672,103 $ 14,893,101 $ 16,628,146 Net realized gain (loss) on investments and futures contracts .. (30,258) (9,305) (2,167,283) 3,144,211 Net change in unrealized appreciation/depreciation on investments and futures contracts ................... 2,978 (2,978) 4,173,176 (20,040,482) ------------- ------------- ------------- ------------- Net Increase (Decrease) from Operations ................ 4,676,744 4,659,820 16,898,994 (268,125) ------------- ------------- ------------- ------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST Contributions .................................................. 88,227,756 104,696,255 6,138,469 26,251,065 Withdrawals .................................................... (96,785,086) (118,326,546) (51,309,604) (71,998,834) ------------- ------------- ------------- ------------- Net Decrease from Transactions in Investors' Beneficial Interest .................................. (8,557,330) (13,630,291) (45,171,135) (45,747,769) ------------- ------------- ------------- ------------- Total Decrease in Net Assets ........................... (3,880,586) (8,970,471) (28,272,141) (46,015,894) NET ASSETS Beginning of period ............................................ 125,079,279 134,049,750 253,647,106 299,663,000 ------------- ------------- ------------- ------------- End of period .................................................. $ 121,198,693 $ 125,079,279 $ 225,374,965 $ 253,647,106 ============= ============= ============= ============= See accompanying Notes to Financial Statements. 58-59 spread STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001 STEIN ROE STEIN ROE STEIN ROE STEIN ROE MUNICIPAL INTERMEDIATE MANAGED HIGH-YIELD MONEY MARKET MUNICIPALS MUNICIPALS MUNICIPALS FUND FUND FUND FUND -------------- -------------- -------------- -------------- ASSETS Investments in Portfolio, at value............................... $108,178,342 $ -- $ -- $225,374,975 Investments at market value (cost $142,721,865, and $410,298,494, respectively).......................... -- 153,018,902 444,520,571 -- Cash............................................................. -- 530,606 108,211 -- Receivable for: Investments sold......................................... -- 50,000 7,388,800 -- Fund shares sold......................................... 323,260 39,124 173,369 93,677 Dividend................................................. -- -- 7,507,462 -- Interest................................................. -- 2,511,635 -- -- Expense reimbursement due from Advisor........................... -- 62,730 -- 2,895 Other assets..................................................... -- 7,129 -- 14,342 -------------- -------------- -------------- -------------- Total Assets............................................. 108,501,602 156,220,126 459,698,413 225,485,889 -------------- -------------- -------------- -------------- LIABILITIES Payable to custodian bank........................................ 225,627 -- -- -- Payable for: Investments purchased.................................... -- 2,276,858 3,154,507 -- Fund shares repurchased.................................. 86,934 480,374 496,047 51,179 Distributions............................................ 61,157 164,184 769,670 378,136 Variation margin on futures contracts.................... -- 54,000 615,938 -- Management fee........................................... -- 56,149 150,322 -- Administration fee....................................... 22,168 17,792 40,067 26,120 Transfer agent fee....................................... 14,155 17,744 58,520 34,089 Bookkeeping fee.......................................... 2,135 2,296 2,750 2,810 Audit fee................................................ 896 12,000 5,500 9,340 Other liabilities................................................ 11,671 6,331 38,992 34,603 -------------- -------------- -------------- -------------- Total Liabilities........................................ 424,743 3,087,728 5,332,313 536,277 -------------- -------------- -------------- -------------- Net Assets....................................................... $108,076,859 $153,132,398 $454,366,100 $224,949,612 ============== ============== ============== ============== COMPOSITION OF NET ASSETS Paid in capital.................................................. $108,097,214 $143,166,823 $419,688,521 $233,528,731 Undistributed (overdistributed) net investment income............ 21,629 (6,222) (212,743) 173,063 Accumulated net realized gain (loss) on investments and futures contracts..................... (42,395) (280,219) (445,735) (8,569,351) Net unrealized appreciation/depreciation on investments and futures contracts..................... 411 10,252,016 35,336,057 (182,831) -------------- -------------- -------------- -------------- Net Assets....................................................... $108,076,859 $153,132,398 $454,366,100 $224,949,612 ============== ============== ============== ==============
See accompanying Notes to Financial Statements. 60-61 spread STATEMENTS OF ASSETS AND LIABILITIES (CONT.) JUNE 30, 2001
MUNICIPAL INTERMEDIATE MANAGED HIGH-YIELD MONEY MARKET MUNICIPALS MUNICIPALS MUNICIPALS FUND FUND FUND FUND -------------- -------------- -------------- -------------- Net assets - Class A............................................. $ -- $ 12,988,049 $ -- $ 1,057 ============== ============== ============== ============== Shares outstanding (unlimited number authorized) - Class A....... -- 1,143,297 -- 95 ============== ============== ============== ============== Net asset value and redemption price per share - Class A......... $ -- $ 11.36 $ -- $ 11.13 ============== ============== ============== ============== Maximum offering price per share - Class A....................... $ -- $ 11.96(a) $ -- $ 11.81(b) ============== ============== ============== ============== Net assets - Class B............................................. $ -- $ 6,981,082 $ -- $ -- ============== ============== ============== ============== Shares outstanding (unlimited number authorized) - Class B....... -- 614,683 -- -- ============== ============== ============== ============== Net asset value, offering and redemption price per share - Class B................................ $ -- $ 11.36 $ -- $ -- ============== ============== ============== ============== Net assets - Class C............................................. $ -- $ 962,301 $ -- $ -- ============== ============== ============== ============== Shares outstanding (unlimited number authorized) - Class C....... -- 84,674 -- -- ============== ============== ============== ============== Net asset value, offering and redemption price per share - Class C...................................... $ -- $ 11.36 $ -- $ -- ============== ============== ============== ============== Net assets - Class S............................................. $108,076,859 $132,200,966 $454,366,100 $224,948,555 ============== ============== ============== ============== Shares outstanding (unlimited number authorized) - Class S....... 108,051,706 11,633,213 50,557,897 20,234,646 ============== ============== ============== ============== Net asset value, offering and redemption price per share - Class S...................................... $ 1.00 $ 11.36 $ 8.99 $ 11.12 ============== ============== ============== ============== (a) Computation of offering price: 100/95.25 of net asset value. (b) Computation of offering price: 100/94.25 of net asset value. See accompanying Notes to Financial Statements. 62-63 spread STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2001 STEIN ROE STEIN ROE STEIN ROE STEIN ROE MUNICIPAL INTERMEDIATE MANAGED HIGH-YIELD MONEY MARKET MUNICIPALS MUNICIPALS MUNICIPALS FUND FUND(a) FUND FUND(b) -------------- -------------- -------------- -------------- INVESTMENT INCOME Interest allocated from Portfolio................................ $4,601,699 $ -- $ -- $16,035,033 Interest income.................................................. -- 7,981,019 26,961,845 -- -------------- -------------- -------------- -------------- Total investment income.................................. 4,601,699 7,981,019 26,961,845 16,035,033 EXPENSES Expenses allocated from Portfolio................................ 373,562 -- -- 1,142,989 Management fee................................................... -- 643,093 1,930,279 -- Administration fee............................................... 286,067 206,792 538,820 315,453 Service fee - Class A............................................ -- 10,840 -- 2 Service fee - Class B............................................ -- 6,550 -- -- Service fee - Class C............................................ -- 931 -- -- Distribution fee - Class B....................................... -- 21,287 -- -- Distribution fee - Class C....................................... -- 3,025 -- -- Transfer agent fee............................................... 187,068 216,891 699,787 367,345 Bookkeeping fee.................................................. 26,545 27,386 35,345 29,761 Trustees' fee.................................................... 7,434 10,053 20,943 8,265 Custody fee...................................................... 1,232 5,435 14,505 1,185 Other expenses................................................... 56,264 162,615 205,007 90,877 -------------- -------------- -------------- -------------- Total Expenses........................................... 938,172 1,314,898 3,444,686 1,955,877 Expenses waived or borne by the Investment Advisor............... (131,456) (250,073) -- -- Expenses waived or borne by the Distributor...................... -- (3,042) (12,195) -- Custody credits earned........................................... -- (2,094) -- -- -------------- -------------- -------------- -------------- Net Expenses............................................. 806,716 1,059,689 3,432,491 1,955,877 -------------- -------------- -------------- -------------- Net Investment Income.................................... 3,794,983 6,921,330 23,529,354 14,079,156 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investments allocated from Portfolio........ (26,245) -- -- (2,167,497) Net realized gain on investments and futures contracts........... -- 209,438 2,610,060 -- Net change in unrealized appreciation/depreciation on investments, futures contracts and investments allocated from Portfolio................................. 2,624 4,602,773 18,804,629 4,172,995 -------------- -------------- -------------- -------------- Net Gain (Loss).......................................... (23,621) 4,812,211 21,414,689 2,005,498 -------------- -------------- -------------- -------------- Increase in Net Assets from Operations........................... $3,771,362 $11,733,541 $44,944,043 $16,084,654 ============== ============== ============== ============== (a) Class A, B and C shares were initially offered on January 26, 2001. (b) Class A shares were initially offered on July 31, 2000.
See accompanying Notes to Financial Statements. 64-65 spread STATEMENTS OF CHANGES IN NET ASSETS
STEIN ROE STEIN ROE MUNICIPAL MONEY INTERMEDIATE MARKET FUND MUNICIPALS FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, INCREASE (DECREASE) IN NET ASSETS 2001 2000 2001(a) 2000 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income............................................ $3,794,983 $3,676,154 $6,921,330 $7,204,525 Net realized gain on investments and futures contracts........... -- -- 209,438 63,599 Net realized loss on investments allocated from Portfolio........ (26,245) (7,875) -- -- Net change in unrealized appreciation/depreciation on investments, futures contracts and investments allocated from Portfolio..................... 2,624 (2,913) 4,602,773 (3,058,927) -------------- -------------- -------------- -------------- Net Increase from Operations............................. 3,771,362 3,665,366 11,733,541 4,209,197 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income - Class A............................. -- -- (244,149) -- From net investment income - Class B............................. -- -- (125,866) -- From net investment income - Class C............................. -- -- (20,059) -- From net investment income - Class S............................. (3,866,466) (3,595,341) (6,557,559) (7,274,968) From net realized capital gains.................................. -- -- -- (735,394) -------------- -------------- -------------- -------------- Total Distributions to Shareholders...................... (3,866,466) (3,595,341) (6,947,633) (8,010,362) SHARE TRANSACTIONS: Subscriptions - Class A.......................................... -- -- 1,108,278 -- Proceeds received in connection with merger - Class A............ -- -- 12,945,029 -- Distributions reinvested - Class A............................... -- -- 150,003 -- Redemptions - Class A............................................ -- -- (1,196,465) -- -------------- -------------- -------------- -------------- Net Increase - Class A................................... -- -- 13,006,845 -- -------------- -------------- -------------- -------------- Subscriptions - Class B.......................................... -- -- 83,707 -- Proceeds received in connection with merger - Class B............ -- -- 8,267,463 -- Distributions reinvested - Class B............................... -- -- 70,869 -- Redemptions - Class B............................................ -- -- (1,417,028) -- -------------- -------------- -------------- -------------- Net Increase - Class B................................... -- -- 7,005,011 -- -------------- -------------- -------------- -------------- Subscriptions - Class C.......................................... -- -- 2,114 -- Proceeds received in connection with merger - Class C............ -- -- 1,361,552 -- Distributions reinvested - Class C............................... -- -- 10,813 -- Redemptions - Class C............................................ -- -- (410,246) -- -------------- -------------- -------------- -------------- Net Increase - Class C................................... -- -- 964,233 -- -------------- -------------- -------------- -------------- (a) Class A, B, and C shares were initially offered on January 26, 2001.
See accompanying Notes to Financial Statements. 66-67 spread STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
STEIN ROE STEIN ROE MUNICIPAL MONEY INTERMEDIATE MARKET FUND MUNICIPALS FUND --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, INCREASE (DECREASE) IN NET ASSETS 2001 2000 2001(a) 2000 -------------- -------------- -------------- -------------- SHARE TRANSACTIONS (CONT) Subscriptions - Class S.......................................... $ 164,319,147 $136,192,297 $ 23,609,167 $ 18,308,500 Distributions reinvested - Class S............................... 3,539,356 3,196,522 4,902,426 5,594,859 Redemptions - Class S............................................ (173,501,211) (144,677,406) (36,951,191) (53,188,196) -------------- -------------- -------------- -------------- Net Decrease - Class S................................... (5,642,708) (5,288,587) (8,439,598) (29,284,837) -------------- -------------- -------------- -------------- Net Increase (Decrease) from Share Transactions.......... (5,642,708) (5,288,587) 12,536,491 (29,284,837) -------------- -------------- -------------- -------------- Total Increase (Decrease) in Net Assets.................. (5,737,812) (5,218,562) 17,322,400 (33,086,002) NET ASSETS Beginning of period.............................................. 113,814,671 119,033,233 135,809,998 168,896,000 -------------- -------------- -------------- -------------- End of period.................................................... $ 108,076,859 $113,814,671 $153,132,398 $135,809,998 ============== ============== ============== ============== Undistributed (overdistributed) net investment income............ $ 21,629 $ 93,112 $ (6,222) $ (19,335) ============== ============== ============== ============== CHANGES IN SHARES OF BENEFICIAL INTEREST Subscriptions - Class A.......................................... -- -- 97,018 -- Issued in connection with merger - Class A....................... -- -- 1,136,725 -- Issued for distributions reinvested - Class A.................... -- -- 13,207 -- Redemptions - Class A............................................ -- -- (103,653) -- -------------- -------------- -------------- -------------- Net Increase - Class A................................... -- -- 1,143,297 -- -------------- -------------- -------------- -------------- Subscriptions - Class B.......................................... -- -- 7,027 -- Issued in connection with merger - Class B....................... -- -- 725,980 -- Issued for distributions reinvested - Class B.................... -- -- 6,237 -- Redemptions - Class B............................................ -- -- (124,561) -- -------------- -------------- -------------- -------------- Net Increase - Class B................................... -- -- 614,683 -- -------------- -------------- -------------- -------------- Subscriptions - Class C.......................................... -- -- 128 -- Issued in connection with merger - Class C....................... -- -- 119,560 -- Issued for distributions reinvested - Class C.................... -- -- 952 -- Redemptions - Class C............................................ -- -- (35,966) -- -------------- -------------- -------------- -------------- Net Increase - Class C................................... -- -- 84,674 -- -------------- -------------- -------------- -------------- Subscriptions - Class S.......................................... 164,331,679 136,192,297 2,093,635 1,669,390 Issued for distributions reinvested - Class S.................... 3,539,356 3,196,522 436,242 510,120 Redemptions - Class S............................................ (173,501,211) (144,677,406) (3,287,944) (4,830,097) -------------- -------------- -------------- -------------- Net Decrease - Class S................................... (5,630,176) (5,288,587) (758,067) (2,650,587) -------------- -------------- -------------- -------------- Total Increase (Decrease) in Shares of Beneficial Interest................................... (5,630,176) (5,288,587) 1,084,587 (2,650,587) -------------- -------------- -------------- -------------- (a) Class A, B, and C shares were initially offered on January 26, 2001.
See accompanying Notes to Financial Statements. 68-69 spread Statements of Changes in Net Assets
MANAGED HIGH-YIELD MUNICIPALS FUND MUNICIPALS FUND ----------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, INCREASE (DECREASE) IN NET ASSETS 2001 2000 2001(a) 2000 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income............................................ $23,529,354 $26,313,198 $14,079,156 $15,769,857 Net realized gain on investments and futures contracts........... 2,610,060 2,359,276 -- -- Net realized gain (loss) on investments allocated from Portfolio................................. -- -- (2,167,497) 3,179,151 Net change in unrealized appreciation/depreciation on investment, futures contracts and investments allocated from Portfolio..................... 18,804,629 (21,196,000) 4,172,995 (20,046,734) -------------- -------------- -------------- -------------- Net Increase (Decrease) from Operations.................. 44,944,043 7,476,474 16,084,654 (1,097,726) -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income - Class A............................. -- -- (53) -- From net investment income - Class S............................. (23,563,083) (26,352,066) (14,034,351) (15,495,543) From net realized capital gains.................................. (3,397,797) (5,797,647) -- -- -------------- -------------- -------------- -------------- Total Distributions to Shareholders...................... (26,960,880) (32,149,713) (14,034,404) (15,495,543) -------------- -------------- -------------- -------------- SHARE TRANSACTIONS: Subscriptions - Class A.......................................... -- -- 1,000 -- Distributions reinvested - Class A............................... -- -- 53 -- -------------- -------------- -------------- -------------- Net Increase - Class A................................... -- -- 1,053 -- -------------- -------------- -------------- -------------- Subscriptions - Class S.......................................... 117,914,498 29,617,372 16,198,748 53,142,045 Distributions reinvested - Class S............................... 16,506,899 17,510,343 9,458,044 9,880,458 Redemptions - Class S............................................ (156,243,597) (102,571,199) (56,545,431) (90,516,106) -------------- -------------- -------------- -------------- Net Decrease - Class S................................... (21,822,200) (55,443,484) (30,888,639) (27,493,603) -------------- -------------- -------------- -------------- Net Decrease from Share Transactions..................... (21,822,200) (55,443,484) (30,887,586) (27,493,603) -------------- -------------- -------------- -------------- Total Decrease in Net Assets............................. (3,839,037) (80,116,723) (28,837,336) (44,086,872) NET ASSETS Beginning of period.............................................. 458,205,137 538,321,860 253,786,948 297,873,820 -------------- -------------- -------------- -------------- End of period.................................................... $454,366,100 $458,205,137 $224,949,612 $253,786,948 ============== ============== ============== ============== Undistributed (overdistributed) net investment income............ $ (212,744) $ (201,818) $ 173,063 $ 115,505 ============== ============== ============== ============== CHANGES IN SHARES OF BENEFICIAL INTEREST: Subscriptions - Class A.......................................... -- -- 90 -- Issued for distributions reinvested - Class A.................... -- -- 5 -- -------------- -------------- -------------- -------------- Net Increase - Class A................................... -- -- 95 -- -------------- -------------- -------------- -------------- Subscriptions - Class S.......................................... 13,117,052 3,224,260 1,450,026 4,744,794 Issued for distributions reinvested - Class S.................... 1,847,836 2,204,530 848,660 882,048 Redemptions - Class S............................................ (17,394,723) (11,818,907) (5,051,528) (8,082,491) -------------- -------------- -------------- -------------- Net Decrease - Class S................................... (2,429,835) (6,390,117) (2,752,842) (2,455,649) -------------- -------------- -------------- -------------- Total Decrease in Shares of Beneficial Interest.......... (2,429,835) (6,390,117) (2,752,747) (2,455,649) -------------- -------------- -------------- -------------- (a) Class A shares were initially offered on July 31, 2000.
See accompanying Notes to Financial Statements. 70-71 spread NOTES TO FINANCIAL STATEMENTS 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"), 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 $335,711,000 in securities and other net 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 $100,000 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, 2001, Stein Roe Municipal Money Market Fund owned 89.3% of SR&F Municipal Money Market Portfolio; and Stein Roe High-Yield Municipals Fund owned 100.0% of SR&F High-Yield Municipals Portfolio. Stein Roe High-Yield Municipals Fund offers two classes of shares: Class A and Class S shares. Class A shares are sold with a front-end sales charge. A 1.00% contingent deferred sales charge is assessed on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class S shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class S shares, as described in the prospectus. Stein Roe Intermediate Municipals Fund offers four classes of shares: Class A, Class B, Class C, and Class S. Class A shares are sold with a front-end sales charge. A 1.00% contingent deferred sales charge 72 is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months an original purchase of $1 million to $25 million. Class B shares are subject to an annual distribution fee and a contingent deferred sales charge. Class B shares will convert to Class A shares in three, four, or eight years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a contingent deferred sales charge on redemptions made within one year after purchase and an annual distribution fee. Class S shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class S shares, as described in the Fund's prospectus. On January 26, 2001, Liberty Intermediate Tax Exempt Fund merged into Stein Roe Intermediate Municipals Fund as follows: MUTUAL FUND UNREALIZED SHARES ISSUED NET ASSETS RECEIVED APPRECIATION1 1,982,265 $22,574,044 $1,432,367 NET ASSETS OF NET ASSETS OF NET ASSETS OF (OTHER MUTUAL FUND) THE FUND THE FUND PRIOR IMMEDIATELY PRIOR IMMEDIATELY AFTER TO COMBINATION TO COMBINATION COMBINATION $136,775,894 $22,574,044 $159,349,938 1 Unrealized appreciation is included in the Mutual Fund Net Assets Received amount shown above. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following summarizes the significant accounting policies of the Funds and the Portfolios. These policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: - ----------------------------------------------------------------- All income, expenses (other than Class A, Class B and Class C service fees and the Class B and Class C distribution fees), and 73 realized and unrealized gains (losses) are allocated to each class proportionately on a daily basis for purposes of determining the net asset value of each class. Per share data was calculated using the average shares outstanding during the period. In addition, Class A, Class B and Class C net investment income per share data reflects the service fee per share applicable to Class A, Class B and Class C shares and the distribution fee per share applicable to Class B and Class C shares only. Class A, Class B and Class C ratios are calculated by adjusting the expense and net investment income ratios for the Fund for the entire period by the service fee applicable to Class A, Class B and Class C shares and the distribution fees applicable to Class B and Class C shares only. 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. Effective July 1, 2001, the Funds will adopt the provisions of the AICPA Audit and Accounting Guide for Investment Companies and will be required to amortize the premium and discount on all debt securities. Upon the effective date, this accounting principle change will not have an impact on total net assets but will result in a reclassification between the cost of securities held and net unrealized appreciation/depreciation. The Funds currently have not determined the impact of the adoption of the new accounting policy. Securities purchased on a when-issued or delayed delivery basis may be settled a month or more after the transaction date. The values of such securities are subject to market fluctuations during this period. None of the Funds or the Portfolios had when-issued or delayed delivery purchase commitments as of June 30, 2001. SECURITY VALUATIONS - ------------------- Municipal securities are valued at a fair value using a procedure determined in good faith by the Board of Trustees (the "Trustees"), 74 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 Trustees would consider what action, if any, should be taken. Futures contracts are valued based on the difference between the last sale price and the opening price of the contract. Other securities and assets are valued at fair value as determined in good faith by or under the direction of the 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. Subsequent 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. 75 Federal Income Taxes No provision is made for federal income taxes since (a) the Funds elect to be taxed as "regulated investment companies" and make 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, 2001, the Funds had capital loss carryforwards as follows: FUND AMOUNT YEARS OF EXPIRATION - ---- ------ ------------------- Stein Roe Municipal Money Market Fund $ 32,125 2002-2009 Stein Roe Intermediate Municipals Fund 27,641 2008 Stein Roe High-Yield Municipals Fund 6,781,125 2006-2009 The capital loss carryforward for Stein Roe Intermediate Municipals Fund was inherited from its merger with Liberty Intermediate Tax Exempt Fund. 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 76 differences in the recognition or classification of income between the financial statements and tax earnings are reclassified to paid-in capital. The following reclassifications have been made to the financial statements. INCREASE (DECREASE) - -------------------------------------------------------------------------------- ACCUMULATED ACCUMULATED PAID IN NET INVESTMENT NET REALIZED FUND NAME CAPITAL INCOME (LOSS) GAIN (LOSS) - -------------------------------------------------------------------------------- Stein Roe Intermediate Municipals Fund $453,612 $39,415 $(493,027) Stein Roe Managed Municipals Fund -- 22,804 (22,804) Stein Roe High-Yield Municipals Fund -- 12,806 (12,806) These differences are primarily due to market discount. Net investment income, net realized gains (losses) and net asset were not affected by this reclassification. Additionally, the following net capital losses attributable to security transactions incurred after October 31, 2000 are treated as arising on July 1, 2001, the first day of the Funds' next taxable year: FUND CAPITAL LOSS - ---- ------------ Stein Roe Municipal Money Market Fund $10,270 Stein Roe High-Yield Municipals Fund 90,612 NOTE 3. PORTFOLIO COMPOSITION The Funds and the 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 Investment Portfolios for information regarding breakdown of securities held by type at June 30, 2001. The Funds and the Portfolios hold investments that are insured by private insurers who guarantee payment of principal and interest in the event of default. At June 30, 2001, investments in these securities for 77 Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and SR&F High-Yield Municipals Portfolio represented 53.5%, 45.0% and 14.5% 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, 2001, 74.7% of the Portfolio was backed by 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 78 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 an annual fee equal to $25,000 plus 0.0025% annually of each Fund's and Portfolio's average daily net assets over $50 million. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEEs Liberty Funds Distributor, Inc. (the "Distributor"), a subsidiary of the Advisor, is Stein Roe Intermediate Municipals Fund's principal underwriter. For the year ended June 30, 2001, the Stein Roe Intermediate Municipals Fund has been advised that the Distributor received contingent deferred sales charges ("CDSC") of $257 on Class B Share redemptions. The Stein Roe Intermediate Municipals Fund has adopted a 12b-1 plan (the "Plan"), which requires it to pay the Distributor a monthly service fee equal to 0.20% annually on Class A, Class B and Class C net assets as of the 20th of each month. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.65% annually of the average net assets attributable to Class B shares and Class C shares, only. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it does not exceed 0.20% annually. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. 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. 79 TRANSFER AGENT FEES Transfer agent fees are paid to Liberty Fund Services, Inc. (the "Transfer Agent"), an affiliate of the Advisor, 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. The Transfer Agent receives reimbursement for certain out-of-pocket expenses. The Transfer Agent receives a fixed fee of $6,000 for the Portfolios. OTHER Certain officers and trustees of the Trust are also officers of the Advisor. No remuneration was paid by the Trust 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 Municipal Money Market Fund, Liberty High Income Municipals Fund-Class A, Stein Roe High-Yield Municipals Fund) and the SR&F Base Trust (excluding the SR&F Cash Reserve Portfolio and SR&F Municipal Money Market Portfolio) (collectively, the "Trusts") participate in an unsecured line of credit agreement provided by the custodian bank. The line of credit entitles the Trusts to borrow from the custodian at any time upon notice from the Trusts. The borrowings available to the Trusts for the line of credit is $200 million. 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 0.5% 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. Because several investment companies participate, there is no assurance that an individual Fund will have access to the entire letter of credit at any particular time. For the year ended June 30, 2001, the Trusts had no borrowings under the agreement. 80 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, 2001, were as follows: PURCHASES SALES --------- ----- Stein Roe Intermediate Municipals Fund $23,793,562 $31,531,620 Stein Roe Managed Municipals Fund 76,109,207 98,432,065 SR&F High-Yield Municipals Portfolio 37,718,614 67,218,274 Unrealized appreciation (depreciation) at June 30, 2001 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 $10,453,299 $39,680,468 $11,768,884 Gross unrealized depreciation (156,262) (5,458,391) (11,819,139) ----------- ----------- ----------- Net unrealized appreciation/depreciation $10,297,037 $34,222,077 $ (50,255) =========== =========== =========== 81 FINANCIAL HIGHLIGHTS SR&F MUNICIPAL MONEY MARKET PORTFOLIO Selected data for a share outstanding throughout each period is as follows: YEAR ENDED JUNE 30, ------------------------------------ 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- SELECTED RATIOS Expenses (a).................. 0.32% 0.30% 0.30% 0.34% 0.32% Net investment income (a)..... 3.66% 3.57% 3.07% 3.41% 3.36% (a) The benefits derived from custody credits and directed brokerage arrangements had no impact. SR&F HIGH-YIELD MUNICIPALS PORTFOLIO Selected data for a share outstanding throughout each period is as follows: PERIOD YEAR ENDED JUNE 30, ENDED -------------------- JUNE 30, 2001 2000 1999 1998(a) ---- ---- ---- ------- SELECTED RATIOS Expenses (d).................. 0.47% 0.47% 0.45% 0.47%(b) Net investment income (d)..... 6.18% 6.11% 5.55% 5.72%(b) Portfolio turnover rate....... 16% 14% 19% 3%(c) (a) From commencement of operations on February 2, 1998. (b) Annualized. (c) Not annualized. (d) The benefits derived from custody credits and directed brokerage arrangements had no impact. 82-83 spread STEIN ROE MUNICIPAL MONEY MARKET FUND Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED JUNE 30, ------------------------------------------------------------------------- 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.00 $ 1.000 $ 1.000 --------- --------- --------- --------- --------- Income From Investment Operations Net investment income (a)..................... 0.033 0.031 0.027 0.031 0.030 Distributions Declared to Shareholders From net investment income............ (0.033) (0.031) (0.027) (0.031) (0.030) --------- --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ========= ========= ========= ========= ========= Total return (b).............................. 3.39% 3.20% 2.73% 3.10% 3.04% --------- --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses...................................... 0.70% 0.70% 0.70% 0.70% 0.70% Net investment income......................... 3.31% 3.19% 2.69% 3.06% 2.98% Waiver/reimbursement.......................... 0.11% 0.10% 0.09% 0.16% 0.16% Net assets at end of period (000's)........... $108,077 $113,815 $119,032 $115,279 $118,424 (a) Per share data was calculated using average shares outstanding during the period. (b) Computed giving effect to Advisor's expense limitation undertaking.
FEDERAL INCOME TAX INFORMATION (UNAUDITED) For the taxable year ended June 30, 2001, 100% of distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. 84-85 spread SR&F Intermediate Municipals Fund Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED JUNE 30, 2001 --------------------------------------------------------- Class A (a) Class B (a) Class C (a) Class S ---------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.41 $ 11.41 $ 11.41 $ 10.96 --------- --------- --------- --------- Income From Investment Operations Net investment income (b).................................... 0.22 0.19 0.21 0.54 Net realized and unrealized gain (loss) on investments....... (0.05) (0.05) (0.04) 0.40 --------- --------- --------- --------- Total from Investment Operations..................... 0.17 0.14 0.17 0.94 --------- --------- --------- --------- Distributions Declared to Shareholders From net investment income........................... (0.22) (0.19) (0.22) (0.54) --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD............................... $ 11.36 $ 11.36 $ 11.36 $ 11.36 ========= ========= ========= ========= Total return (c)............................................. 1.55%(d) 1.26%(d) 1.46%(d) 8.74% --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses (d)................................................. 0.90%(e) 1.55%(e) 1.10%(e) 0.70% Net investment income (d).................................... 4.49%(e) 3.84%(e) 4.29%(e) 4.79% Waiver/reimbursement......................................... 0.11%(e) 0.11%(e) 0.56%(e) 0.18% Portfolio turnover rate...................................... 17%(d) 17%(d) 17%(d) 17% Net assets at end of period (000's).......................... $12,988 $6,981 $962 $132,201 YEAR ENDED JUNE 30, 2001 --------------------------------------------------------- 2000 1999 1998 1997 --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.23 $ 11.57 $ 11.38 $ 11.22 --------- --------- --------- --------- Income From Investment Operations Net investment income........................................ 0.28 0.54 0.54 0.55 Net realized and unrealized gain (loss) on investments....... (0.27) (0.30) 0.22 0.22 --------- --------- --------- --------- Total from Investment Operations..................... 0.01 0.24 0.76 0.77 --------- --------- --------- --------- Distributions Declared to Shareholders From net investment income........................... (0.26) (0.54) (0.54) (0.55) From net realized gains.............................. (0.02) (0.04) (0.03) (0.06) --------- --------- --------- --------- Total Distributions Declared to Shareholders......... (0.28) (0.58) (0.57) (0.61) ========= ========= ========= ========= NET ASSET VALUE, END OF PERIOD............................... $ 10.96 $ 11.23 $ 11.57 $ 11.38 ========= ========= ========= ========= Total return (c)............................................. 3.10% 2.08% 6.84% 7.07% --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses..................................................... 0.70% 0.70% 0.70% 0.70% Net investment income........................................ 4.93% 4.58% 4.70% 4.84% Waiver/reimbursement......................................... 0.11% 0.09% 0.11% 0.12% Portfolio turnover rate...................................... 26% 48% 29% 44% Net assets at end of period (000's).......................... $135,810 $168,896 $195,651 $196,006 (a) Class A, B, and C shares were initially offered on January 26, 2001. (b) Per share data was calculated using average shares outstanding during the period. (c) Computed giving effect to the investment Adviser's, Administrator's and Distributor's expense limitation undertaking. (d) The benefits derived from custody credits and directed brokerage arrangements had no impact. (e) Not annualized. (f) Annualized.
FEDERAL INCOME TAX INFORMATION (UNAUDITED) For the taxable year ended June 30, 2001, 100% of the distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. The Fund designates $377,161 as long term capital gains earned. 86-87 spread STEIN ROE MANAGED MUNICIPALS FUND Selected data for a share outstanding throughout each period are as follows:
YEAR ENDED JUNE 30, ------------------------------------------------------------------------- 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 8.65 $ 9.07 $ 9.38 $ 9.11 $ 8.85 --------- --------- --------- --------- --------- Income From Investment Operations Net investment income................................. 0.45 (a) 0.47 0.47 0.48 0.48 Net realized and unrealized gain (loss) on investments................................ 0.41 (0.32) (0.31) 0.27 0.26 --------- --------- --------- --------- --------- Total from Investment Operations.............. 0.86 0.15 0.16 0.75 0.74 --------- --------- --------- --------- --------- Distributions Declared to Shareholders From net investment income.................... (0.45) (0.47) (0.47) (0.48) (0.48) From net realized gains....................... (0.07) (0.10) -- -- -- --------- --------- --------- --------- --------- Total Distributions Declared to Shareholders............................... (0.52) (0.57) (0.47) (0.48) (0.48) ========= ========= ========= ========= ========= NET ASSET VALUE, END OF PERIOD........................ $ 8.99 $ 8.65 $ 9.07 $ 9.38 $ 9.11 ========= ========= ========= ========= ========= Total return.......................................... 10.13% 1.86% 1.67% 8.37% 8.56% --------- --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses (b).......................................... 0.74% 0.69% 0.72% 0.72% 0.73% Net investment income (b)............................. 5.07% 5.39% 5.02% 5.14% 5.31% Portfolio turnover rate............................... 17% 19% 17% 12% 16% Net assets at end of period (000's)................... $454,366 $458,205 $538,322 $583,138 $582,366 (a) Per share data was calculated using average share outstanding during the period. (b) The benefits derived from custody credits and directed brokerage arrangements had no impact.
FEDERAL INCOME TAX INFORMATION (UNAUDITED) For the taxable year ended June 30, 2001, 100% of the distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes. The Fund designates $2,945,965 as long term capital gains earned. 88-89 spread STEIN ROE HIGH-YIELD MUNICIPALS FUND Selected data for a share outstanding throughout the period is as follows: PERIOD ENDED CLASS A JUNE 30, 2001 (A) ----------------- NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 11.11 ----------- Income From Investment Operations Net investment income (b)..................... 0.58 Net realized and unrealized gain on investments........................ 0.01 ----------- Total from Investment Operations...... 0.59 ----------- Distributions Declared to Shareholders From net investment income............ (0.57) ----------- NET ASSET VALUE, END OF PERIOD................ $ 11.13 =========== Total return.................................. 5.42%(c) ----------- RATIOS TO AVERAGE NET ASSETS Expenses...................................... 1.06%(d) Net investment income......................... 5.65%(d) Net assets at end of period (000's)........... $ 1 (a) From commencement of operations on July 31, 2000. (b) Per share data was calculated using average shares outstanding during the period. (c) Not annualized. (d) Annualized. Selected data for a share outstanding throughout each period are as follows:
YEARS ENDED JUNE 30, ------------------------------------------------------------------------- CLASS S 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 11.04 $ 11.71 $ 11.97 $ 11.67 $ 11.40 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income (a)............................. 0.65(a) 0.65 0.63 0.65 0.72 Net realized and unrealized gain (loss) on investments................................ 0.08 (0.68) (0.25) 0.30 0.27 --------- --------- --------- --------- --------- Total from Investment Operations.............. 0.73 (0.03) 0.38 0.95 0.99 --------- --------- --------- --------- --------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income.................... (0.65) (0.64) (0.64) (0.65) (0.72) --------- --------- --------- --------- --------- Net Asset Value, End of Period........................ $ 11.12 $ 11.04 $ 11.71 $ 11.97 $ 11.67 ========= ========= ========= ========= ========= Total return.......................................... 6.78% (0.16)% 3.18%(c) 8.32% 8.91% --------- --------- --------- --------- --------- RATIOS TO AVERAGE NET ASSETS Expenses 0.81% 0.78% 0.77% 0.75% 0.77% Net investment income................................. 5.86% 5.82% 5.26% 5.48% 6.20% Portfolio turnover rate............................... N/A N/A N/A 8%(b) 11% Net assets at end of period (000's)................... $224,950 $253,787 $297,874 $341,780 $306,070 (a) Per share data was calculated using average shares outstanding during the period. (b) Prior to commencement of operations of the Portfolio. (c) 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, 2001, 100% of the distributions from net investment income qualify as exempt-interest dividends for federal income tax purposes.
90-91 spread Report of Independent Auditors 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 investment portfolios, of Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund (two series of Liberty-Stein Roe Funds 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) as of June 30, 2001, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of June 30, 2001, 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 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, 2001, 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 22, 2001 92 This page intentionally left blank 93 Logo: Stein Roe Mutual Funds One Financial Center Boston, MA 02111-2621 800-338-2550 DIR-02/458G-0601 (8/01) 01/1535 -----END PRIVACY-ENHANCED MESSAGE-----