1Annual Report
June 30, 1995
SteinRoe
Tax-Exempt Bond Funds
Municipal Money Market Fund
Intermediate Municipals
Managed Municipals
High-Yield Municipals
Photographic image of a man and woman.
Graphic: SteinRoe Logo
SteinRoe Mutual Funds
Building Wealth for GenerationsSM
<PAGE>
Contents
From the President 1
Tim Armour's thoughts on the markets and investing
Performance 3
How the SteinRoe Tax-Exempt Funds have done over time
Q&A
Municipal Money Market Fund 7
Intermediate Municipals 10
Managed Municipals 13
High-Yield Municipals 15
Interviews with the portfolio managers and a
summary of major shifts in the Funds' investments
over the past 12 months
Investments 20-43
A complete list of each Fund's investments with
market values
Financial Statements 44-51
Balance sheets, statements of operations,
and changes in net assets
Notes to Financial Statements 52-57
Financial Highlights 58-65
Selected per-share data
Report of Independent Auditors 66
General Information 67-72
A guide to products and services
<PAGE>
From the President
To Our Shareholders
We are pleased to present this annual report for the SteinRoe Tax-Exempt Funds
-- SteinRoe Municipal Money Market Fund, SteinRoe Intermediate Municipals,
SteinRoe Managed Municipals and SteinRoe High-Yield Municipals.
We never forget our relationship with you is built both on investment
management capabilities and performance and on service and communication.
That's why we have redesigned our annual report to make it simpler for you to
evaluate your fund's performance. We hope you find it easier to read and
understand.
The Market
Fixed income investors have weathered both the best and the worst of times
during the past 12 months. The first half of our fiscal year saw many fixed
income issues -- and the funds that invest in them -- struggle after the
Federal Reserve, in a bid to dampen inflation after the torrid economic growth
of 1994, pushed up short-term rates seven times in the 12-month period between
February 1994 and February 1995. These sharp rate spikes caused bond prices to
plummet, and contributed to what will long be remembered as one of the worst
bond markets in history.
Then, as economic data indicated the economy was slowing, the fixed income
markets began to rally in the second half of our fiscal year. Adding to the
strength of that rally were the many investors who, sobered by
market-shattering events like the devaluation of the Mexican peso and the
failure of one of Britain's oldest and most venerable investment banks,
returned to the relative safety of U.S. Treasury and corporate issues.
Municipal bonds also benefited from the rally, but not to the same extent as
taxables.
With investors remaining skittish after reports of flat tax proposals in
Congress and the bankruptcy of one of California's wealthiest counties, the
past year has been especially trying for the municipal markets. In addition,
rising interest rates in the first half of the fiscal year spurred a dramatic
decline in new bond and note issues. That situation eased somewhat as interest
rates fell in the second half of our fiscal year, but sales of new bonds and
notes still remain at their lowest levels in five years.
Photographic image of Tim Armour
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So, what's ahead for the fixed income market? We anticipate weak economic
activity through the third quarter, which may squeeze corporate profits. Lower
corporate profits would put pressure on stock prices and make fixed income
investments look attractive relative to equities. After the third quarter,
however, we are forecasting firmer, steady, noninflationary economic growth
throughout 1996. We also think that, following a cautious easing move early in
the third quarter of 1995, the Federal Reserve will respond further to slow
growth and improving inflation by reducing short-term interest rates in a few
more steps. Long-term interest rates, on the other hand, can be expected to
trade in a range centered on roughly 6.6 percent.
We expect to hear about flat tax proposals through the next election, and, as
a result, municipal bond investors can look for some uncertainties in the
market until 1997. You'll find a brief discussion of flat tax issues elsewhere
in the report, and I encourage you to call our account representatives if
you'd like more information about how -- and when -- these proposals could
affect your tax-exempt investments.
The Basics
While past performance is no guarantee of future results, and no one can
predict what might happen to bond funds or the markets in the future, we
believe investors must understand the factors that move the markets, not just
to profit from them, but to gain the patience to ride out short-term
volatility in their investments. As always, no matter what direction you think
the economy is heading, it is important to remember the basics. Think long
term and re-evaluate your investment portfolio from time to time to make sure
it continues to match your goals, risk tolerance and time horizon. And try to
follow a regular investment plan. By investing a certain amount of money each
month or quarter, you can take advantage of dollar-cost averaging. Of course,
not everyone is in a position to follow a regular investment plan. And it
neither ensures a profit nor protects against a loss in a declining market.
This simple strategy, however, can help you turn market volatility to your
advantage.
Please call us at 1 800 338-2550 with your comments and suggestions. As
always, we look forward to serving your investment needs.
Sincerely,
Timothy K. Armour
President
August 14, 1995
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<TABLE>
Fund Performance
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual return
percentage change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus reinvestment
of any dividends (net investment income) and capital gains (the profits the
fund earns when it sells fixed income securities that have grown in value).
Average Annual Total Returns
Periods ended June 30, 1995
<CAPTION>
Past 1 Past 3 Past 5 Past 10
Year Years Years Years
<S> <C> <C> <C> <C>
Municipal Money Market Fund 3.02% 2.29% 2.97% 3.90%
<CAPTION>
Past 1 Past 3 Past 5 From
Year Years Years Inception*
<S> <C> <C> <C> <C>
Intermediate Municipals 6.59% 6.15% 7.38% 7.26%
Lehman 10-Year Municipal Bond Index 8.78 7.34 8.51 9.15
<CAPTION>
Past 1 Past 3 Past 5 Past 10
Year Years Years Years
<S> <C> <C> <C> <C>
Managed Municipals 7.12% 5.77% 7.61% 9.21%
High-Yield Municipals 8.54 5.74 6.99 8.97
Lehman Municipal Bond Index 8.82 6.87 8.26 9.17
<FN>
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. This 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.
* Inception Date: Intermediate Municipals -- October 9, 1985. Because index
returns are calculated on a monthly basis, the index returns marked "from
inception" are calculated from the month-end results that fall closest to the
Funds' inception dates.
</TABLE>
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Investment Comparison
Comparison of change in value of $10,000 investment for the years ended June
30.
This graph compares performance of SteinRoe Intermediate Municipals to the
Lehman 10-Year Municipal Bond Index, an unmanaged group of intermediate-term
municipal bonds that differs in composition from each SteinRoe Fund.
Graph:
<TABLE>
<CAPTION>
Year Ended Intermediate Lehman 10-Year
6/30 Municipals Municipal Bond Index
<S> <C> <C>
10/31/85 10000 10000
6/30/86 10756 11203
87 11454 12351
88 12093 13205
89 12922 14475
90 13818 15504
91 14950 16937
92 16500 18854
93 18304 21226
94 18516 21436
95 19736 23318
Comparison of change in value of $10,000 investment for the years ended June
30.
This graph compares performance of SteinRoe Managed Municipals to the Lehman
Municipal Bond Index, an unmanaged group of municipal bonds that differs in
composition from each SteinRoe Fund.
Graph:
<CAPTION>
Year Ended Managed Lehman
6/30 Municipals Municipal Bond Index
<S> <C> <C>
85 10000 10000
86 12083 11652
87 13032 12656
88 14004 13595
89 15741 15144
90 16724 16175
91 18217 17633
92 20389 19709
93 22591 22066
94 22526 22103
95 24130 24053
</TABLE>
<PAGE>
<TABLE>
Investment Comparison
Comparison of change in value of $10,000 investment for the years ended June
30.
This graph compares performance of SteinRoe High-Yield Municipals to the
Lehman Municipal Bond Index, an unmanaged group of municipal bonds that
differs in composition from each SteinRoe Fund.
<CAPTION>
Graph:
Year Ended High-Yield Lehman
6/30 Municipals Municipal Bond Index
<S> <C> <C>
85 10000 10000
86 11833 11652
87 12684 12656
88 13774 13595
89 15670 15144
90 16867 16175
91 18352 17633
92 19998 19709
93 21574 22066
94 21780 22103
95 23643 24053
</TABLE>
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Investment Comparison Continued
Making the Most of Performance
The wide assortment of performance data available today can be a mixed
blessing. On one hand, a fund's performance results can be a valuable source
of information when considering an investment. On the other hand, even
seasoned investors may find the wide array of data and the different methods
of interpretation confusing.
That's why one of the most important pieces of advice we can give you is to
remember that a fund's past performance is just that -- past. While a fund's
past performance is not a guarantee of how it will perform in the future, it
can help you make rational decisions about the funds you currently hold or
about funds you might be considering. Owning bond funds, for example, can help
to reduce overall risks in a well-diversified portfolio. And because they have
an income component, bonds tend to reduce portfolio fluctuations when stocks
are down. Nonetheless, bond fund share prices will fluctuate as interest rates
change. The price and total return of a mutual fund will change daily and if
you sell your shares during a downturn in the market, you might lose money.
But, if you can ride out the market's ups and downs, your fund might achieve a
gain.
No one can make your financial decisions better than you. We hope this annual
report helps you to better understand and evaluate your fund's performance,
and serves as a helpful aid in making intelligent, appropriate investment
decisions. If you have any questions, please call a SteinRoe account
representative at 1 800 338-2550.
<PAGE>
Q&A
An Interview with Jill Netzel,
Portfolio Manager of Municipal Money Market Fund
Photographic image of Jill Netzel
Fund Data
Investment Objective:
Seeks maximum current tax-free income consistent with safety of capital and
maintenance of liquidity by investing principally in a diversified portfolio
of short-term municipal securities.
Fund Inception:
March 15, 1983
Total Net Assets:
$146.7 million
Q: How did the Fund perform?
A: For the fiscal year, Municipal Money Market Fund posted a return of 3.02
percent, nearly matching the performance of its Lipper tax-exempt money market
peer group return of 3.04 percent, while the Fund's seven-day yield on June 30
was 3.52 percent. That translates into a taxable equivalent yield of 5.84
percent.1
Q: How did the Fund respond to the fluctuations in rates this year?
A: Any movement in short-term interest rates will have a roughly corresponding
effect on a money market fund's seven-day yield. We saw a spike in rates
earlier in our fiscal year, as the Federal Reserve finished the period of
tightening that it began in February 1994 -- rates rose more than one and
three quarter points during the first half of the year. More recently,
however, rates began drifting lower as economic growth slowed and investors
began to assume that the Fed would begin easing interest rates.
Q: What factors have contributed to the Fund's performance?
A: Thanks to a high concentration in variable rate notes -- these notes "float
up" with increases in interest rates -- our return was boosted in the first
half of our fiscal year, when rates were rising. And, during the second half
of the year, when rates began to fall, we began to lock in those earlier,
higher rates by purchasing one-year notes.
The Fund's performance also was positively affected by our position in
alternative minimum tax (AMT) paper. Because investors in these
higher-yielding securities may be subject to the alternative minimum tax, many
money market funds do not own a large percentage of AMT paper in their
portfolios. We believe that the majority of our shareholders are not subject
to the alternative minimum tax, so we've sought to capture AMT paper's higher
potential for yield by expanding our holdings over the past year. Our holdings
of AMT paper increased from 18.5 percent on June 30, 1994, to 43.4 percent on
June 30, 1995.
<PAGE>
Q: With merger activity picking up and many foreign banks reporting problems,
banks have had a volatile year. Have you made any changes to your weighting in
notes backed by bank letters of credit?
A: On June 30, 44.3 percent of the portfolio was held in municipal notes
backed by bank letters of credit. During the past year, we've concentrated our
purchases of letter of credit-backed notes in those issued by U.S. banks,
which reflects our concern about the credit quality of many foreign banks --
particularly those in Japan, where the banking system is heavily burdened by
bad loans.
Q: What are your expectations for the coming months?
A: After the Federal Reserve's quarter-point easing move early in the third
quarter, we'll look for indications of a second easing of short-term rates. If
we think a second easing move is likely, you'll see us begin to modestly
extend the Fund's average maturity to take advantage of the fact that rates
are dropping. We'll do that by selling some portion of our variable rate
issues and purchasing six- and nine-month notes and commercial paper.
(1) Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. The Fund's adviser currently limits
expenses to 0.70 percent of average net assets, subject to termination upon 30
days' notice. Absent past limits, the Fund's total return would have been
less. Past performance is no guarantee of future results. The Fund strives to
maintain a $1 per share net asset value. An investment in the Fund, however,
is neither insured nor guaranteed by the U.S. government, and there is no
assurance that the Fund will be able to maintain a stable net asset value of
$1 per share. Taxable equivalent yield is shown in the 39.6 percent tax
bracket, which applies to investors with incomes higher than $250,000 per
year. Tax-free income is exempt from most federal taxes, but may be subject to
state and local taxes and federal alternative minimum tax. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the Fund's peer group invests in high-quality municipal obligations with
dollar-weighted average maturities of less than 90 days. There were 123 funds
in this peer group for the year ended June 30, 1995. Share price and
investment return will vary, so you may have a gain or a loss when you sell
shares.
<PAGE>
<TABLE>
Fund Highlights
Municipal Money Market Fund
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1994 June 30, 1995
<S> <C> <C>
General Obligation 5.0% 2.4%
Revenue:
Industrial 23.0 25.8
Utility 18.0 25.2
Other Revenue 14.0 12.4
Oil 3.0 8.8
Education 5.0 6.5
Hospital 5.0 5.8
Housing -- 5.3
Waste Disposal 9.0 4.5
Toll 2.0 1.3
Electric 4.0 1.0
Student Loan 8.0 --
Mortgage 3.0 --
Escrowed 1.0 1.0
Total 100% 100%
Maturity
Pie chart:
As of June 30, 1994 As of June 30, 1995
0-29 Days 62.3% 0-29 Days 65.6%
30-59 Days 8.8% 30-59 Days 8.2%
60-89 Days 14.9% 60-89 Days 11.6%
90-119 Days 3.1% 90-119 Days 4.9%
120-179 Days 2.4% 120-179 Days 2.1%
180-375 Days 8.5% 180-375 Days 7.6%
Shareholders Approve New Agreements
At a special meeting on June 27, 1995, shareholders of SteinRoe Municipal
Money Market Fund voted to approve a proposal that replaced the Fund's
investment advisory agreement with two new agreements. These new agreements
essentially carry forward the services Stein Roe & Farnham already provides to
shareholders, separating into two agreements the provision of administrative
and investment management services. The new agreements will take effect on
September 28, 1995.
<CAPTION>
The outcome of the vote was as follows:
<S> <C>
Record date share position: 143,533,391
Total share position voted: 76,381,518
FOR 72,857,995
AGAINST 1,561,407
ABSTENTIONS 1,962,116
</TABLE>
<PAGE>
Q&A
An Interview with Joanne Costopoulos,
Portfolio Manager of Intermediate Municipals
Photographic Image of Joanne Costopoulos
Fund Data
Investment Objective:
Seeks high current yield exempt from federal income tax, consistent with
capital preservation, through investments primarily in the three highest
grades of intermediate-term municipal securities. The dollar-weighted average
maturity of the Fund's portfolio is between three and ten years.
Fund Inception:
October 9, 1985
Total Net Assets:
$212.5 million
Q: How did the Fund perform?
A: We ended the year with a 6.59 percent return, which just trailed the 6.86
percent median return of the Fund's Lipper intermediate municipal debt peer
group. The Fund's 4.44 percent standardized yield translates into a taxable
equivalent yield of 7.36 percent.1
We underperformed the Lehman 10-Year Municipal Bond Index return of 8.8
percent, primarily because, for most of the year, the Fund's duration (a
measure of volatility) was shorter than that of the Index. The Index tends to
have an average maturity of eight to 12 years and a duration that averages
around seven. In contrast, the Fund's average maturity tends to be about eight
years, and its average duration tends to center around six. To extend our
maturity, and, thus, our duration, would require selling a great deal of our
shorter-term paper and realizing a significant amount of capital gains -- a
move that we believe would not be in the best interests of our shareholders.
In addition, we maintained a portfolio that is higher in average credit
quality than the Index -- lower-quality issues significantly outperformed
higher-quality issues during the last half of the year. We try to keep the
Fund at a relatively high quality level because we believe that the risk
tolerance of investors in an intermediate fund tends to be of a more
conservative nature.
Obviously, neither of these are ongoing situations -- portfolio quality is
subject to change, as is the Fund's maturity profile.
Q: How much does the portfolio's credit quality change during any given year?
A: We try to manage this Fund conservatively, and higher-quality issues, by
definition, carry less risk. We do move the credit quality of the portfolio up
or down according to whether higher- or lower-quality securities are looking
attractive during a given period. But, on balance, we tend to keep the bulk of
the portfolio in the higher grades -- A- to AAA-rated securities --
concentrating on the higher end of the quality spectrum.
<PAGE>
Q: What affected performance?
A: We've benefited from the strong performance of general obligation bonds
(GOs). We've also kept a significant portion (56.2 percent on June 30) of the
portfolio in revenue bonds, particularly water and sewer issues, which have
consistently outperformed many of the other types of revenue projects this
year.
We weren't expecting rates to drop as quickly as they did in the latter half
of the year, and because the portfolio was positioned conservatively, with a
relatively short duration, we were not able to participate in the recent bond
rally to the extent that we could have.
Q: What's your outlook?
A: While investors have been skittish, we believe the intermediate tax-exempt
market is poised for a comeback for a number of reasons: First, concerns over
the effect of tax reform on municipal bonds seem to have subsided as investors
realize that any changes in the tax laws will take time to implement.
Municipal bonds are currently outperforming the taxable market, so investors
who want to be in municipals, but think that tax reform is unlikely before the
end of the decade, will probably avoid committing themselves to too much
uncertainty by choosing intermediates over longer-term municipals.
Second, the relationship of municipals to Treasuries has recently been at
attractive levels, and should draw those investors who, until recently, have
been on the sidelines.
(1) Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Tax-free income is exempt from most
federal taxes, but may be subject to state and local taxes and federal
alternative minimum tax. Capital gains are subject to federal, state and local
taxes. Past performance is no guarantee of future results. Share price and
investment return will vary, so you may have a gain or a loss when you sell
shares. Taxable equivalent yield is shown in the 39.6 percent tax bracket,
which applies to investors with incomes higher than $250,000 per year. Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
defines the Fund's peer group as investing in municipal debt issues with
dollar-weighted average maturities of five to ten years. There were 103 funds
in this peer group for the year ended June 30, 1995. The Lehman 10-Year
Municipal Bond Index is an unmanaged group of intermediate-term municipal
bonds that differs from the composition of each SteinRoe Fund; the Lehman
10-Year Municipal Bond Index is not available for direct investment.
<PAGE>
<TABLE>
Fund Highlights
Intermediate Municipals
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1994 June 30, 1995
<S> <C> <C>
General Obligation 25.1% 30.9%
Revenue:
Water & Sewer 12.6 16.5
Electric 9.9 5.4
Toll 8.4 5.5
Airport 7.7 6.3
Student Loan 5.3 4.5
Hospital 4.6 5.9
Other Revenue 15.2 12.1
Escrowed 8.9 9.1
Lease/Miscellaneous 2.3 3.8
Total 100% 100%
Maturity
Pie charts:
As of June 30, 1994 As of June 30, 1995
Less Than 1 Year (2.5%) Less Than 1 Year (2.1%)
1-5 Years (12.7%) 1-5 Years (15.8%)
5-10 Years (58.5%) 5-10 Years (48.6%)
10-15 Years (22.6%) 10-15 Years (20.8%)
Over 15 Years (3.7%) Over 15 Years (12.7%)
Portfolio Quality
As of June 30, 1994 As of June 30, 1995
AAA (56.2%) AAA (58.6%)
AA (22.8%) AA (21.9%)
A (21.0%) A (18.7%)
BBB (0.8%)
</TABLE>
<PAGE>
Q&A
An Interview with Jane McCart, Portfolio Manager of Managed Municipals and
High-Yield Municipals
Photographic image of Jane McCart
Managed Municipals
Fund Data
Investment Objective:
Pursues high tax-free income consistent with capital preservation by investing
in a quality-conscious portfolio of long-term municipal securities.
Fund Inception:
February 23, 1977
Total Net Assets:
$629.7 million
Jane McCart, portfolio manager of Managed Municipals since 1991, was named
portfolio manager of High-Yield Municipals in January.
Managed Municipals Q&A
Q: How did the Fund perform?
A: At 7.12 percent for the year, the Fund's one-year return lagged the Lipper
general municipal debt peer group's median return of 7.63 percent and
underperformed the Lehman Municipal Bond Index return of 8.82 percent. The
Fund's June 30 tax-exempt standardized yield was 5.20 percent, which
translates into a taxable equivalent standardized yield of 8.61 percent.1
We underperformed the Index primarily because the Fund contains a larger
weighting in housing-related bonds and a lower weighting in general obligation
bonds than does the Index. While general obligation bonds performed well
during the year -- outperforming the housing sector in particular -- we
continue to overweight the Fund in housing securities because they offer the
potential for a high level of income and yield.
One of the more positive factors in the Fund's performance was our position in
noncallable bonds. A 30-year high-coupon callable bond that can be called out
of the market in 10 years, for example, will generally trade as if it were a
10-year bond, and that will be reflected in its price, which will be lower.
Because a noncallable bond cannot be called out of the market, its price
movement is not obstructed by call features -- more particularly, its price
tends not to be hindered from moving upward in a strong market, such as we are
now experiencing. During the past two years, we have consistently added to the
Fund's noncallable position -- more than 30 percent of the portfolio is now
held in noncallable paper.
Finally, some purchases of paper company securities (2 percent of the
portfolio) paid off recently when strong corporate earnings for paper
companies boosted the value of these bonds.
<PAGE>
Q: How does duration affect your performance?
A: Duration -- or, more correctly, adjusted duration -- is a measure of a bond
fund's sensitivity to interest rates. If a bond has a duration of five, for
example, and interest rates fall by one percent, then the bond's price should
rise by approximately 5 percent. The higher the duration, the more sensitive a
bond's price will be to changes in interest rates. A shorter duration tends to
help a bond fund's performance when interest rates are rising -- as they were
during the first half of the year -- and hinders performance when interest
rates are falling. We'd like to have lengthened our duration more than we did
in the latter half of the year, when interest rates were falling, but
lengthening duration has been a continuing challenge for us, mainly because
new issue supply has been scarce in the municipal market.
New municipal bond issues take two forms: new-money issues for general
purposes or for a special project, such as a toll road or pollution control
plant; or refundings, which take advantage of falling interest rates to
replace old debt, issued at higher rates, with new debt issued at current,
lower rates -- much like refinancing a mortgage. Recently, taxpayer revolt has
killed many new-money issues, while refundings typically don't occur when
rates are high or rising. The result has been fewer new issues coming to
market.
The scarcity of appropriate long-term market discount bonds -- bonds that are
already on the market -- is another factor. Buying long discount bonds tends
to help performance -- especially if they are lower-coupon bonds that have
call features, because these bonds are less likely to be called out of market
and replaced with new debt issued at a lower interest rate. Consequently,
lower-coupon discount bonds have greater potential for appreciation. But the
gains generated by many discount bonds are taxed as ordinary income.
Simply put, to avoid passing on ordinary income to our shareholders, we have
to pass up many market discount bonds, and the alternatives -- new issues --
are limited.
<PAGE>
Q: With talk of a flat tax in Congress, what are your expectations for the
Fund?
A: There are a number of different opinions, but we think that a flat tax is
likely at some point in the future only under certain political circumstances.
It's difficult to say what effect a flat tax would have on the market, as both
tax laws and flat tax proposals may change significantly in the next few
years.
Is a flat tax something investors need to worry about in the near term? We
don't think so. We believe that the flat tax won't be an issue until after
1997. And recent inflows into municipal bond funds suggest that investors are
starting to agree with us.
(1) Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Tax-free income is exempt from most
federal taxes, but may be subject to state and local taxes and federal
alternative minimum tax. Capital gains are subject to federal, state and local
taxes. Past performance is no guarantee of future results. Share price and
investment return will vary, so you may have a gain or a loss when you sell
shares. Taxable-equivalent yield is shown in the 39.6 percent tax bracket,
which applies to investors with incomes higher than $250,000 per year. Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
defines the Fund's peer group as investing at least 65 percent of assets in
municipal debt issues in the top four credit ratings. There were 201 funds in
this peer group for the year ended June 30, 1995. The Lehman Municipal Bond
Index is an unmanaged group of municipal bonds that differs from the
composition of each SteinRoe Fund; the Lehman Municipal Bond Index is not
available for direct investment.
<PAGE>
High-Yield Municipals
Fund Data
Investment Objective:
Seeks a high level of tax-free income consistent with capital preservation by
investing in longer-term municipal securities, principally of medium and lower
quality.
Fund Inception:
March 5, 1984
Total Net Assets:
$281.1 million
High-Yield Municipals Q&A
Q: Are there any differences in the investment process between Managed
Municipals and High-Yield Municipals?
A: Managed Municipals is a higher-grade, long-term fund, while High-Yield
Municipals, as its name suggests, seeks higher yield and is willing to take on
higher credit risk in order to find it. We're careful about what we buy for
both Funds, but research -- always important in investment management -- is
critical when it comes to buying below investment-grade and unrated issues for
High-Yield Municipals. For obvious reasons, both are inherently more risky
than higher-grade municipal bonds. SteinRoe has a number of sector specialists
and analysts to quantify potential risks and returns. In addition, because
some municipal issues -- those for industrial development or pollution
control, for example -- are actually backed by taxable corporations, both
tax-exempt and taxable bond analysts are an important part of the research
process.
Q: Did you change your investment strategy during the year?
A: The Fund has had good performance over the long term, and we wanted to
maintain that record. Of course, past performance is no guarantee of future
results, but we believe that, by taking advantage of our credit research
capabilities, we can be more aggressive than we have been in the past in
seeking higher yields -- without taking undue risk. Good research is key to
this approach, and, fortunately, that's one of SteinRoe's strengths.
Since taking over the Fund in January, we've added a number of high-yield
projects to the portfolio -- a paper de-inking plant (2.19 percent of
holdings), the Denver airport (1.52 percent of holdings) and an independent
power project (1.07 percent of holdings), all of which have performed nicely.
Still, new issue supply in the municipal bond market has been lower than usual
during the past year, so boosting the Fund's yield is taking a little longer
than we would like.
<PAGE>
Q: How did the Fund perform this year?
A: The Fund finished the year with an 8.54 percent return, outperforming its
Lipper high-yield municipal debt peer group's median return of 7.97 percent,
and trailing just behind the 8.82 percent return of the Lehman Municipal Bond
Index. As of June 30, the Fund's standardized yield was 5.51 percent, a
taxable equivalent yield of 9.12 percent.1
Lower interest rates in the past six months have benefited the portfolio, as
has the high-yield sector's solid performance. We made some astute purchases
of airline and paper company securities during the year, and those holdings
paid off as strong corporate earnings -- particularly for airlines and paper
companies -- boosted the value of these bonds.
Several nonperforming holdings have been a drag on the Fund's performance
during the year. In January, however, we received proceeds from certain
outstanding claims, and more recently we have begun seeing positive inflows
from some of those nonperforming projects.
Q: Municipal investors heard a lot about Orange County this year. What
happened?
A: The Orange County bankruptcy was an extreme example of what can go wrong
when municipalities use -- and occasionally misuse -- leveraged investing.
Leveraging tends to magnify the effect of interest rate moves. In the late
1980s and early 1990s, the yield on longer-term bonds was several points
higher than short-term interest rates, and many investors felt it was safe to
borrow money (at lower three- and six-month rates) and purchase intermediate-
and long-term bonds paying higher yields. This strategy seemed to work well:
not only did it make it possible to capture higher yields, but, as more and
more people adopted the same strategy, the increased demand helped to raise
the prices of longer-term securities. But, like all good things, it came to an
end. As soon as the Fed raised short-term interest rates, everything went into
a tailspin. Rampant borrowing -- and the resulting leveraged buying --
exaggerated the effect of rate increases, forcing many investors to sell
securities at lower prices to repay outstanding loans. The result:
still-higher rates and lower prices. Orange County's financial advisers got
caught in this vicious circle, incurring losses so massive that it forced the
municipality to declare bankruptcy in December 1994.
Could it happen again? If leveraged investors misplace their bets, any change
in interest rates can expose them to losses. That's why we put so much
emphasis on our own, internal credit research. Doing our own research allows
us to decide independently whether or not a municipality is creditworthy, as
well as whether its investment policies are sound.
<PAGE>
Q: How did the Fund weather the crisis?
A: Long before Orange County defaulted on its bonds, our analysts decided that
California municipalities were being asked to shoulder an increasingly heavy
burden for public services from the California state government, and because
of recent changes to the state constitution, municipalities had but limited
power to raise taxes to pay for those services. Consequently, our analysts
recommended that we avoid investing in California until the situation eased.
That turned out to be a very perceptive recommendation, for when Orange
County's crisis hit, we had very little exposure to the state and none at all
to Orange County itself.
(1) Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Tax-free income is exempt from most
federal taxes, but may be subject to state and local taxes and federal
alternative minimum tax. Capital gains are subject to federal, state and local
taxes. Past performance is no guarantee of future results. Share price and
investment return will vary, so you may have a gain or a loss when you sell
shares. Taxable equivalent yield is shown in the 39.6 percent tax bracket,
which applies to investors with incomes higher than $250,000 per year.
According to Lipper Analytical Services, Inc., an independent monitor of
mutual fund performance, this Fund's peer group may invest at least 50 percent
of assets in lower-rated municipal debt issues. There were 34 funds in this
peer group for the year ended June 30, 1995. The Lehman Municipal Bond Index
is an unmanaged group of municipal bonds that differs from the composition of
each SteinRoe Fund; the Lehman Municipal Bond Index is not available for
direct investment.
<PAGE>
<TABLE>
Fund Highlights
Managed Municipals
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1994 June 30, 1995
<S> <C> <C>
General Obligation 14.5% 18.3%
Lease/Miscellaneous 9.9 14.5
Escrowed 17.6 13.2
Revenue:
Housing 13.4 12.0
Electric 9.9 8.6
Water & Sewer 6.8 8.3
Toll 6.1 6.8
Hospital 5.2 6.0
Airport 2.9 4.1
Other Revenue 13.7 8.2
Total 100% 100%
Maturity
Pie Charts:
As of June 30, 1994 As of June 30, 1995
Over 25 Years 18.6% Over 25 Years 20.5%
20-25 Years 21.1% 20-25 Years 23.9%
15-20 Years 23.6% 15-20 Years 26.0%
10-15 Years 13.1% 10-15 Years 12.0%
5-10 Years 10.5% 5-10 Years 3.7%
1-5 Years 11.9% 1-5 Years 7.9%
Less Than 1 Year 1.2% Less Than 1 Year 6.0%
Portfolio Quality
As of June 30, 1994 As of June 30, 1995
AAA (37.4%) AAA (38.8%)
AA (36.1%) AA (33.9%)
A (24.0%) A (24.5%)
BBB and Below (2.5%) BBB and Below (2.8%)
</TABLE>
<PAGE>
<TABLE>
Fund Highlights
High-Yield Municipals
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1994 June 30, 1995
<S> <C> <C>
Lease/Miscellaneous 14.1% 22.4%
Escrowed 11.5 10.0
General Obligation 5.8 5.9
Revenue:
Hospital 18.3 17.8
Housing 13.9 11.5
Electric 9.9 8.5
Toll 4.8 5.6
Water & Sewer 4.5 3.6
Airport 3.6 2.3
Student Loan 0.7 0.0
Other Revenue 12.9 12.4
Total 100% 100%
Maturity
Pie Charts:
As of June 30, 1994 As of June 30, 1995
Over 25 Years 24.4% Over 25 Years 28.7%
20-25 Years 36.3% 20-25 Years 34.1%
15-20 Years 12.9% 15-20 Years 10.9%
10-15 Years 10.4% 10-15 Years 10.7%
5-10 Years 7.5% 5-10 Years 9.5%
1-5 Years 4.6% 1-5 Years 2.4%
Less Than 1 Year 3.9% Less Than 1 Year 3.7%
Portfolio Quality
As of June 30, 1994 As of June 30, 1995
AAA (15.9%) AAA (18.2%)
AA (16.2%) AA (12.7%)
A (32.0%) A (27.0%)
BBB (17.2%) BBB (21.3%)
BB (2.3%) BB (3.2%)
NR* (16.4%) NR* (17.6%)
*Nonrated
</TABLE>
<PAGE>
<TABLE>
Municipal Money Market Fund
Investments as of June 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
Municipal Securities (103.5%) Amount Value
<S> <C> <C>
Alabama (5.6%)
*Alabama I.D.A. Solid Waste Disposal Revenues (Pine City Fiber
Company L.O.C. Barclays Bank Plc) V.R.D.B. 4.150% $ 6,750 $ 6,750
*Ardmore I.D.R. (Group Dekko L.O.C. Bank
One, Indianapolis) V.R.D.B. 4.350% 1,465 1,465
--------
8,215
Arizona (0.7%)
*Cochise County Pollution Control Corporation Solid Waste Disposal
Revenue (Arizona Electric Power Cooperative gtd. by National
Rural Utilities Cooperative Finance Corp.) 4.450% Optional
Put 9/01/95 1,000 1,000
California (5.6%)
City of Orange T.R.A.N. 4.750% 8/01/95 2,000 2,001
Los Angeles School District Tax & Revenue T.R.A.N.
4.500% 7/10/95 Series 94-95 1,400 1,400
4.500% 7/03/96 Series 95-96 2,750 2,771
San Diego T.A.N. Series A 4.750% 7/03/96 2,000 2,016
--------
8,188
Colorado (1.4%)
Arapahoe County Capital Improvement Highway Revenue
Series L (gtd. by Swiss Bank Corp.) 4.450% Optional Put 8/31/95 2,000 2,000
District of Columbia (2.1%)
District of Columbia Revenue Series 1985 (American University
L.O.C. National Westminister Bank) V.R.D.B. 4.300% 3,100 3,100
Florida (8.6%)
Martin County P.C.R. (Florida Power & Light Co.)
Series 1994 V.R.D.B. 4.200% 400 400
Orlando Utilities Commission Water & Electric Revenue
(pre-refunded to 10/01/95) 8.100% 10/01/96 1,500 1,542
Putnam County Development Authority P.C.R. Series 1984 S
(Seminole Electric Cooperative, Inc. gtd. by National Rural
Utilities Cooperative Finance Corp.) V.R.D.B. 4.300% 4,100 4,100
St. Lucie County P.C.R. Series 1993 (Florida Power and Light)
4.200% V.R.D.B. 900 900
3.750% Mandatory Put 9/18/95 1,000 1,000
3.900% Mandatory Put 9/18/95 3,000 3,000
4.050% Mandatory Put 11/16/95 1,600 1,600
--------
12,542
Idaho (2.1%)
Idaho T.A.N. 4.500% 6/27/96 3,000 3,020
<PAGE>
Illinois (5.6%)
City of Chicago G.O. Tender Notes Series A (L.O.C. Morgan
Guarantee Trust Co., New York) 4.600% Mandatory Put 10/31/95 1,620 1,620
*Illinois Development Finance Authority Revenue Refunding
(L.O.C. Swiss Bank Corporation) V.R.D.B.
4.350% (Brookdale) 1,000 1,000
4.350% (River Oaks) 865 865
Illinois Health Facilities Authority Revenue (University of Chicago
Hospital) 4.500% Optional Put 8/17/95 3,500 3,500
Municipal Money Market Fund Continued
<PAGE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Illinois (continued)
*Southwestern Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.)
4.350% V.R.D.B. $ 600 $ 600
4.350% V.R.D.B. 700 700
--------
8,285
Indiana (9.1%)
Fort Wayne Hospital Authority Revenue (Parkview Memorial
Hospital L.O.C. Fuji Bank, Ltd.) V.R.D.B.
4.200% Series B 3,000 3,000
4.200% Series C 2,300 2,300
*Franklin Economic Development Revenue Refunding (L.O.C.
Federal Home Loan Bank, Indianapolis) V.R.D.B. 4.300% 3,000 3,000
*LaPorte County Economic Development Revenue (Woodland Project)
(L.O.C. Federal Home Loan Bank) V.R.D.B. 4.300% 2,000 2,000
Mt. Vernon P.C.R. (General Electric Co.)
3.900% Mandatory Put 8/28/95 2,000 2,000
Tipton Economic Development Revenue (Tipton Apartments
Project L.O.C. Bank One, Indianapolis) V.R.B.D. 4.200% 1,105 1,105
--------
13,405
Iowa (2.7%)
Iowa School Corporations Warrant Certificates
(Capital Guaranty Insured)
4.250% 7/17/95 1994-95 Series A 2,000 2,000
4.750% 6/28/96 1995-96 Series A 2,000 2,017
--------
4,017
Kentucky (3.6%)
*Covington I.D.R. Series 1991 (White Castle Distributing L.O.C.
Bank One, Columbus) V.R.D.B. 4.350% 4,255 4,255
Pendelton County Multiple County Lease
Revenue (Kentucky Association of Counties
L.O.C. PNC of Kentucky) 3.750% Mandatory Put 7/01/95 1,000 1,000
--------
5,255
Louisiana (3.3%)
*Lake Charles Harbor & Terminal District
P.C.R. (E.I. DuPont gtd. by Conoco Inc.) V.R.D.B. 4.400% 1,400 1,400
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B. 4.350% 3,400 3,400
--------
4,800
Maryland (4.8%)
Ann Arundel County E.D.R. (Baltimore Gas and Electric Company)
*4.200% Mandatory Put 7/26/95 2,000 2,000
*4.250% Mandatory Put 7/26/95 2,000 2,000
*3.750% Mandatory Put 9/01/95 1,000 1,000
3.750% Mandatory Put 10/24/95 2,000 2,000
-------
7,000
<PAGE>
Michigan (4.1%)
Michigan Job Development Authority P.C.R. Series 1985 (Mazda
Motor Manufacturing USA Corp. L.O.C. Sumitomo Bank, Ltd.)
V.R.D.B. 4.250% 4,000 4,000
Michigan Strategic Fund I.D.R. (Michigan Sugar Co. - Croswell
Project L.O.C. Trust Company Bank) V.R.D.B. 4.150% 2,000 2,000
--------
6,000
<PAGE>
Municipal Money Market Fund Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Missouri (3.1%)
Jefferson County (GHF Holdings L.O.C. Bank One, Indianapolis)
V.R.D.B. 4.350% $ 4,500 $ 4,500
New Hampshire (4.8%)
New Hampshire I.D.R. (New England Power Co.)
4.350% Mandatory Put 7/31/95 3,000 3,000
*4.250% Mandatory Put 10/16/95 1,000 1,000
*4.100% Mandatory Put 10/18/95 3,000 3,000
--------
7,000
North Carolina (0.3%)
Yancey County Industrial Facility and Pollution Control Finance
Authority Revenue Series 1988 (Avondale Mills Inc. L.O.C.
Trust Company Bank) V.R.D.B. 4.150% 490 490
Oregon (1.0%)
Klamath Falls Electric Revenue Salt Caves Hydroelectric Series D
4.400% Mandatory Put 5/01/96 1,500 1,500
Pennsylvania (6.6%)
*Carbon County I.D.R. Series B (Panther Crest Creek Partners L.O.C.
National Westminster Bank) 4.200% Mandatory Put 7/31/95 2,000 2,000
*Pennsylvania Energy Development Authority (B&W Ebensburg
Project L.O.C. Swiss Bank Corporation) Series 87 & 88
V.R.D.B. 4.350% 3,350 3,350
Schuykill County I.D.A. Resource Recovery Revenue (Westwood
Energy Properties Limited Partnership L.O.C. Fuji Bank, Ltd.)
V.R.D.B. 4.450% 4,360 4,360
--------
9,710
South Carolina (2.0%)
*South Carolina Economic Development Authority (Specialty
Equipment Companies L.O.C. Barclays Bank PLC)
V.R.D.B. 4.350% 3,000 3,000
Texas (9.5%)
Harris County Industrial Development Corp. (Exxon Corp.)
4.250% V.R.D.B. 800 800
*4.350% V.R.D.B. 2,860 2,860
Southwest Higher Education Authority Texas (Southern Methodist
University) V.R.D.B. 4.200% 700 700
Texas Association of School Boards T.A.N. Series A 4.750% 8/31/95 4,000 4,004
Texas T.R.A.N. 5.000% 8/31/95 5,600 5,606
--------
13,970
<PAGE>
Wisconsin (13.0%)
*Carlton P.C.R. Series 1988 (Wisconsin Power and Light)
V.R.D.B. 4.300% 7,000 7,000
Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Bank One, Milwaukee)
V.R.D.B. 4.350% 4,250 4,250
Fox Lake I.D.A. Revenue Bonds Series 1994 (L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.350% 2,025 2,025
*Holland I.D.R. (White Clover Daily Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.350% 3,250 3,250
*Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.350% 2,600 2,600
--------
19,125
<PAGE>
Municipal Money Market Fund Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Wyoming (3.9%)
*Lincoln County P.C.R. (Exxon Corp.)
4.250% V.R.D.B. $ 2,100 $ 2,100
4.350% V.R.D.B. 3,600 3,600
--------
5,700
Total Municipal Securities (103.5%)
(Amortized Cost $151,822) 151,822
Other Assets, Less Liabilities (-3.5%) (5,118)
--------
Total Net Assets (100.0%) $146,704
========
<FN>
* These securities are subject to alternative minimum tax. At June
30, 1995 these securities represented 43.0 percent of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Intermediate Municipals
Investments as of June 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
Municipal Securities (97.0%) Amount Value
<S> <C> <C>
Alaska (2.3%)
Kenai Peninsula Borough G.O. Refunding (AMBAC Insured)
8.300% 1/01/99 $ 1,500 $ 1,676
North Slope Borough G.O. 8.350% 6/30/98 3,000 3,273
--------
4,949
Arizona (7.6%)
Arizona Transportation Board Highway Revenue Subordinated
Series A 6.000% 7/01/00 1,000 1,050
Cochise County Unified School District No. 68 Series B
(FGIC Insured) 9.000% 7/01/01 1,115 1,361
Flagstaff G.O. Series A (FGIC Insured) 6.250% 7/01/99 1,500 1,594
Maricopa County Refunding G.O. Unlimited Tax (FGIC Insured)
6.250% 7/01/00 2,000 2,134
Maricopa County Hospital Revenue (Samaritan Health Services)
(Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,407
Phoenix Civic Improvement Wastewater System Lease Revenue
(Escrowed in U.S. Treasury Securities) (pre-refunded to 7/01/03)
6.000% 7/01/07 2,500 2,731
Pima County Refunding G.O. 6.300% 7/01/02 2,500 2,694
Pima County Unified School District No. 1 (Tucson Project)
(MBIA Insured) 8.000% 7/01/01 1,400 1,626
Tempe Unified High School District No. 213 Refunding and
Improvement (FGIC Insured) 7.000% 7/01/08 500 570
--------
16,167
Arkansas (1.3%)
Beaver Water District Benton & Washington Counties Water
Revenue Refunding (MBIA Insured) 6.000% 11/15/04 2,580 2,752
<PAGE>
California (6.1%)
*California Housing Finance Agency Revenue Home Mortgage
Series B-1 5.900% 2/01/04 1,000 1,002
Central Coast Water Authority Revenue (AMBAC Insured)
5.950% 10/01/03 2,000 2,115
East Bay Municipal Utility District Water System Revenue
(Escrowed in U.S. Treasury Securities) (AMBAC Insured)
7.000% 6/01/00 1,400 1,552
Escondido Joint Powers Financing Authority Lease Revenue
(California Center for the Arts) Zero Coupon (Effective Yield
6.015%) 9/01/08 2,070 922
Los Angeles County Public Works Authority
(Regional Parks and Open Space Revenue) 5.800% 10/01/05 1,500 1,538
Los Angeles Department of Water & Power Electric Revenue
Crossover Refunding 9.000% 9/01/03 2,500 3,127
Oakland Unified School District G.O. Series A (FGIC Insured)
Zero Coupon (Effective Yield 6.250%) 08/01/16 1,700 437
Vallejo Revenue Series B (Water Improvement Project)
(FGIC Insured) 6.000% 11/01/01 2,030 2,156
--------
12,849
Delaware (0.6%)
Delaware Economic Development Authority Water Development
Revenue Refunding (General Waterworks Corp.-Wilmington
Suburban Water Corp.) 6.450% 12/01/07 1,165 1,241
<PAGE>
Intermediate Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Florida (0.7%)
Florida Division Board Finance Department of General Services
Revenue (Department of Natural Resources)
(MBIA Insured) 6.000% 7/01/03 $ 1,000 $ 1,072
*Greater Orlando Aviation Authority Airport Facilities Revenue
(Escrowed in U.S. Treasury Securities)(pre-funded to 10/01/98)
8.250% 10/01/08 270 305
--------
1,377
Georgia (5.6%)
Atlanta Airport Facilities Revenue Refunding Series A
(AMBAC Insured) 6.500% 1/01/07 1,000 1,096
Cobb County & Marietta Water Authority Revenue Refunding
Series B 6.900% 11/01/98 1,000 1,075
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
5.625% 1/01/01 1,000 1,045
Georgia G.O. Series C 7.700% 4/01/00 1,250 1,420
Metropolitan Atlanta Rapid Transit Authority
Sales Tax Revenue Refunding (AMBAC Insured)
6.050% 7/01/01 1,600 1,708
5.800% 7/01/02 1,000 1,053
Municipal Electric Authority of Georgia Power Revenue
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98) 8.200% 1/01/04 1,250 1,387
Municipal Electric Authority of Georgia Special Obligation
Fifth Crossover Series (AMBAC Insured) 6.400% 1/01/13 3,000 3,182
--------
11,966
Hawaii (0.5%)
Honolulu (City & County) Refunding G.O. Series 1990 A
7.350% 7/01/06 1,000 1,162
Illinois (5.7%)
*Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/01/04 1,000 1,012
Chicago Skyway Toll Bridge Revenue Refunding Series 1994
6.750% 1/01/17 1,500 1,498
Chicago Water Revenue Refunding (FGIC Insured)
6.500% 11/01/09 2,130 2,286
Cook County Community College District #508 (FGIC Insured)
8.750% 01/01/03 1,000 1,219
DuPage County Forest Preserve District G.O. 8.650% 11/01/97 1,000 1,091
Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue Series 1992 A (McCormick Place Expansion Project)
5.900% 6/15/03 1,500 1,569
7.250% 6/15/05 1,750 2,002
*Southwestern Development Authority Solid Waste Disposal Revenue
(Shell Oil Co.) V.R.D.B. 4.350% 1,500 1,500
--------
12,177
<PAGE>
Indiana (4.4%)
Indiana Toll Road Commission Toll Road Revenue (Escrowed in
U.S. Treasury Securities) 9.000% 1/01/15 2,655 3,560
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A (United Airlines)
5.600% 11/01/99 1,125 1,154
6.500% 11/01/07 2,250 2,359
<PAGE>
Intermediate Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Indiana (Continued)
Indianapolis Local Public Improvement Bond Bank Series 1992 D
6.500% 2/01/06 $ 2,100 $ 2,226
--------
9,299
Iowa (0.7%)
Iowa School Corporations Warrant Certificates 1995-96 Series A
(Capital Guaranty Insured) 4.750% 6/28/96 1,500 1,514
Kentucky (3.5%)
Kentucky Turnpike Authority Economic Development Revenue
Refunding (Revitalization Projects)
5.800% 1/01/04 2,500 2,604
6.500% 7/01/07 (AMBAC Insured) 2,000 2,197
*Kenton County Airport Board Airport Revenue 8.250% 3/01/15 2,430 2,642
--------
7,443
Louisiana (1.6%)
Lafayette Public Power Authority Electric Revenue 9.000% 11/01/96 1,000 1,044
Louisiana Public Facilities Authority Student Loan Revenue Series A-1
5.900% 9/01/99 2,000 2,037
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B. 4.350% 200 200
--------
3,281
Maine (0.4%)
*Maine Educational Loan Authority Educational Loan Revenue
Supplemental Education Loan Series A-2 6.650% 12/01/02 845 874
Maryland (1.5%)
Washington Suburban Sanitation District Water Supply G.O.
5.100% 6/01/09 950 899
5.125% 6/01/10 650 612
5.200% 6/01/11 940 885
5.250% 6/01/12 925 869
--------
3,265
Massachusetts (5.2%)
Massachusetts Bay Transportation Authority Mass Refunding
General Transportation System 7.000% 3/01/07 Series A 2,250 2,539
Massachusetts Health and Educational Facilities Authority Revenue
7.250% 7/01/00 Series C (Daughters of Charity Carney Hospital) 1,000 1,059
6.000% 7/01/09 Series D (Daughters of Charity Carney Hospital) 1,000 998
6.250% 12/01/14 (Dana Farber Cancer Institution) 1,000 968
Massachusetts Water Resources Authority
Refunding Series C 6.000% 12/01/11 3,410 3,441
New England Educational Loan Marketing Corp. Student Loan
Revenue Refunding Series 1985 A 5.800% 3/01/02 2,0002,054
--------
11,059
<PAGE>
Michigan (1.8%)
Michigan Hospital Finance Authority Revenue (Daughters of Charity)
6.500% 11/01/01 (Providence Hospital) 1,780 1,875
10.000% 11/01/15 (St. Mary's Hospital) 500 519
Michigan Building Authority Revenue Refunding Series I
(AMBAC Insured) 6.000% 10/01/02 1,400 1,488
--------
3,882
Minnesota (0.4%)
*Minneapolis St. Paul Metropolitan Airport G.O. Common Series
7.800% 1/01/03 685 758
<PAGE>
Intermediate Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Missouri (0.4%)
Missouri Regional Convention & Sports Complex Authority
6.600% 8/15/03 $ 830 $ 900
Nevada (2.0%)
*Clark County P.C.R. Series 1990 A (Southern California Edison Co.)
7.125% 6/01/09 1,500 1,585
Clark County Passenger Facility Charge Revenue Series A
(McCarran International Airport)(AMBAC Insured)
5.700% 7/01/02 1,500 1,557
Las Vegas Valley Water District G.O. Limited Tax (AMBAC Insured)
(Escrowed in U.S. Treasury Securities)(pre-refunded to 8/01/00)
7.000% 8/01/08 1,000 1,121
--------
4,263
New Jersey (2.4%)
Bergen County Utility Authority Solid Waste System Revenue
Refunding Series A (FGIC Insured) 6.250% 6/15/06 2,000 2,150
New Jersey Health Care Facilities Finance Authority Revenue
6.100% 7/01/01 (Hackensack Medical Center)(FGIC Insured) 1,000 1,065
7.000% 7/01/03 (Christ Hospital Group)(Connie Lee Insured) 1,730 1,935
--------
5,150
New Mexico (1.8%)
Gallup P.C.R. (Plains Electric Transmission & Generating
Cooperative Inc.)(MBIA Insured) 6.100% 8/15/02 2,0002,134
Rio Rancho Water & Wastewater System Revenue Series A
(FSA Insured) 8.000% 5/15/03 1,350 1,599
--------
3,733
New York (2.6%)
*New York City Individual Development Agency Special Facility
Revenue (Terminal One Group Association Project)
6.000% 1/01/19 2,265 2,134
New York Environmental Facility Corp. P.C.R. State Water Series D
6.300% 5/15/05 3,000 3,265
--------
5,399
North Carolina (0.7%)
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding 5.900% 1/01/03 1,500 1,542
Ohio (3.5%)
Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,085
Hamilton County Sewer System Revenue Refunding and
Improvement Series A 6.300% 12/01/01 1,000 1,083
Loveland School District G.O. (MBIA Insured) 7.100% 12/01/09 3,000 3,343
*The Student Loan Funding Corp. Cincinnati Student Loan Revenue
Refunding Series 93A 5.750% 8/01/03 2,000 1,995
--------
7,506
<PAGE>
Oklahoma (0.5%)
Oklahoma Baptist University Authority Revenue Refunding
(FGIC Insured) 6.300% 12/01/01 1,030 1,113
Oregon (4.6%)
Lane County Area Education District G.O. 5.200% 6/01/05 2,850 2,866
Lincoln County School District G.O. (FGIC Insured)
6.000% 6/15/07 2,855 2,994
<PAGE>
Intermediate Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Oregon (Continued)
Portland Sewer System Revenue Refunding Series B (FGIC Insured)
5.400% 4/01/02 $ 2,500 $ 2,592
Oregon Department of Transportation Revenue (MBIA Insured)
5.700% 6/01/02 1,220 1,290
--------
9,742
Pennsylvania (2.9%)
Dauphin County Hospital Authority Revenue Refunding Series B
(Hapsco Group Inc.)(MBIA Insured) 5.800% 7/01/02 1,600 1,673
Pennsylvania Higher Education Assistance Agency Student Loan
Revenue Refunding Series 1985 A (FGIC Insured)
6.800% 12/01/00 2,110 2,220
Washington County Hospital Authority Lease Revenue (Escrowed
in U.S. Treasury Securities) (pre-refunded to 6/15/00)
7.450% 12/15/18 2,000 2,297
--------
6,190
South Carolina (2.6%)
Piedmont Municipal Power Agency Electric Revenue (FGIC
Insured) 6.125% 1/01/07 2,065 2,180
*South Carolina Ports Authority Revenue (AMBAC Insured)
6.200% 7/01/01 1,000 1,058
Sumter County Hospital Facilities Revenue Refunding
(Tuomey Regional Medical Center) (MBIA Insured)
6.625% 11/15/04 2,000 2,213
--------
5,451
Tennessee (1.4%)
Metropolitan Nashville & Davidson County Water & Sewer
Revenue (FGIC Insured) 6.500% 1/01/10 2,750 2,984
<PAGE>
Texas (12.9%)
Alief Independent School District G.O. (gtd. by Permanent School
Funding) 8.000% 2/15/99 1,305 1,457
Dallas-Fort Worth Regional Airport Joint Revenue Refunding
Series B 5.750% 11/01/99 1,000 1,037
Dallas Waterworks & Sewer System Revenue Refunding Series 1988
7.000% 4/01/98 2,000 2,122
Fort Bend Independent School District Unlimited Tax (gtd. by
Permanent School Funding) 7.500% 2/15/00 1,010 1,121
Fort Worth Limited Tax 8.350% 3/01/00 1,250 1,435
Houston Hotel Occupancy Tax Revenue Refunding (FSA Insured)
6.000% 7/01/06 2,170 2,254
Houston Water Conveyance System Contract Certificates of
Participation (AMBAC Insured)
7.000% 12/15/03 Series C 1,000 1,124
6.125% 12/15/06 Series J 1,000 1,060
Northside Independent School District G.O. 9.400% 4/01/98 1,850 2,079
Plano Independent School District G.O. Unlimited Tax
(FGIC Insured) 8.625% 2/15/99 1,900 2,160
Round Rock Independent School District G.O. Unlimited
Tax School Building and Refunding Series 1991
8.625% 8/15/00 Series 1991 (MBIA Insured) 1,270 1,481
7.500% 8/01/02 Series 1995 A (PSF Insured) 1,200 1,385
San Antonio Electric & Gas Revenue Refunding Series 1983 A
(Escrowed in U.S. Treasury Securities)(pre-refunded to
2/01/98) 10.500% 2/01/13 1,000 1,166
<PAGE>
Intermediate Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Texas (Continued)
San Antonio Water System Revenue Refunding (FGIC Insured)
6.000% 5/15/01 $ 3,000 $ 3,178
*Texas Veterans Land G.O. 7.625% 12/01/13 3,975 4,320
--------
27,379
Utah (0.5%)
Utah Housing Finance Agency Single Family Mortgage Issue E
Series 1986 A
8.300% 7/01/00 465 484
8.400% 7/01/01 600 625
--------
1,109
Virginia (1.4%)
*Virginia Housing Development Authority Commonwealth
Mortgages Series A
6.700% 7/01/05 Subseries A-1 1,280 1,338
6.200% 7/01/12 Subseries A-4 (MBIA Insured) 1,670 1,650
--------
2,988
Washington (6.3%)
Snohomish County School District No. 2 Refunding
G.O. (Everett) (MBIA Insured)
7.250% 12/01/00 2,540 2,833
7.000% 12/01/01 2,230 2,485
7.000% 12/01/02 1,500 1,685
Washington Multiple Purpose G.O. Series C 6.500% 07/01/04 3,800 4,143
Washington Motor Vehicle Fuel Unlimited Tax G.O. Series D
6.500% 9/01/01 2,000 2,170
--------
13,316
Wisconsin (0.6%)
Carlton P.C.R. Series 1991 (Wisconsin Power & Light)
V.R.D.B. 4.650% 1,200 1,200
Total Municipal Securities (97.0%)
(Amortized Cost $198,906) 205,980
Other Assets, Less Liabilities (3.0%) 6,509
--------
Total Net Assets (100.0%) $212,489
========
<FN>
* These securities are subject to alternative minimum tax. At June
30, 1995, these securities represented 10.5 percent of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Managed Municipals
Investments as of June 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
Municipal Securities (98.8%) Amount Value
<S> <C> <C>
Arizona (0.5%)
Phoenix G.O. Utility Refunding Series 1995A
6.000% 7/01/11 $ 1,480 $ 1,522
6.250% 7/01/17 1,800 1,873
-------
3,395
Arkansas (0.4%)
Arkansas Development Financing Authority Single Family Mortgage
Revenue Series D (FHA Insured) 8.125% 8/01/14 2,575 2,681
California (3.6%)
California Health Facilities Finance Authority Revenue
(Daughters of Charity)(Escrowed in U. S. Treasury Securities)
(pre-refunded to 5/01/96) 9.250% 11/01/15 2,000 2,125
California Public Works Board Lease Revenue Series A
5.625% 5/01/20 3,000 2,782
Central Contra Costa Sanitation District Revenue Waste Water
Facilities Improvement Project (MBIA Insured)
6.250% 9/01/13 2,025 2,065
6.250% 9/01/14 1,295 1,320
Foothill Eastern Transportation Corridor Agency Toll Road
Revenue Sr. Lien Series 1995A
Zero Coupon (Effective Yield 7.200%) 1/01/18 10,0002,107
6.000% 1/01/34 4,600 4,146
Northern California Power Agency Public Power Revenue Refunding
Series B-1 (Hydroelectric Project #1)(Escrowed in U.S.
Treasury Securities)(pre-refunded to 7/01/98) 8.000% 7/01/24 2,000 2,209
San Francisco Bay Area Rapid Transportation District Sales Tax
Revenue (FGIC Insured) 5.500% 7/01/20 2,800 2,586
Southern California Public Power Authority Revenue Refunding
5.000% 7/01/17 Series A (Power Project) 2,500 2,134
5.500% 7/01/23 (Transmission Project) 1,490 1,338
-------
22,812
Colorado (1.4%)
Colorado Housing Finance Authority Multifamily Mortgage Revenue
6.000% 10/01/09 1,490 1,475
6.000% 10/01/10 1,590 1,565
6.000% 10/01/11 1,715 1,679
6.000% 10/01/12 1,835 1,786
Municipal Subdistrict Northern Colorado Water Conservancy
District Revenue Series D 6.000% 12/01/15 2,500 2,502
-------
9,007
<PAGE>
Connecticut (0.5%)
Connecticut Special Tax Obligation Revenue (Transportation
Infrastructure Project) 6.125% 9/01/12 Series 1992 B 3,000 3,091
Delaware (0.8%)
Delaware Economic Development Authority Water Development
Revenue Refunding (General Waterworks Corp. - Wilmington
Suburban Water Corp.)
6.450% 12/01/07 Series 1992 B 1,160 1,236
*6.800% 12/01/23 Series 1992 A 3,500 3,592
-------
4,828
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Florida (2.6%)
Broward County Public Improvement Revenue Refunding G.O.
Series 1986
12.500% 1/01/03 $ 1,000 $ 1,453
12.500% 1/01/04 1,195 1,792
12.500% 1/01/05 2,000 3,078
Florida G.O. (Jacksonville Transportation Authority Project)
(Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,830
*Jacksonville Water and Sewer Development Revenue
(Jacksonville Suburban Utilities-General Waterworks Corp.)
6.750% 6/01/22 1,500 1,569
Manatee County P.C.R. (Florida Power & Light)
Series 1994 V.R.D.B. 4.200% 1,000 1,000
Putnam County Development Authority P.C.R.
(Florida Power & Light) V.R.D.B. 4.200% 300 300
Saint Lucie County P.C.R. Series 1993
(Florida Power and Light) V.R.D.B. 4.200% 4,600 4,600
-------
16,622
Georgia (10.6%)
Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured)
6.500% 1/01/08 2,750 3,005
6.500% 1/01/10 2,000 2,164
*Cartersville Development Authority Revenue Water & Waste
Works Facilities (Anheuser-Busch) 7.375% 5/01/09 9,000 10,258
Columbia County School District G.O. (MBIA Insured)
6.750% 4/01/09 1,900 2,106
7.000% 4/01/10 2,125 2,408
7.000% 4/01/11 2,370 2,686
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
6.375% 1/01/14 13,700 14,569
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding Series P (AMBAC Insured) 6.250% 7/01/20 4,000 4,215
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18 14,100 14,903
Municipal Electric Authority of Georgia Special Obligation
First Crossover Series (Crossover refunded to 1/01/98)
8.125% 1/01/17 3,100 3,398
Paulding County Georgia School District (MBIA Insured)
6.000% 2/01/10 4,235 4,379
6.000% 2/01/13 2,360 2,411
-------
66,502
Idaho (0.3%)
*Idaho Housing Agency Single Family Mortgage Revenue
(FHA/VA Insured) 7.875% 7/01/24 2,050 2,133
<PAGE>
Illinois (10.3%)
Chicago Board of Education Refunding G.O. Lease Certificates
Series A (MBIA Insured) 6.000% 1/01/16 5,000 4,947
Chicago (City of) Gas Supply Revenue Series 1985 D (Peoples
Gas Light & Coke Company)
7.500% 3/01/15 4,500 4,943
10.250% 3/01/15 550 565
Chicago (City of) Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/17 1,500 1,498
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Illinois (Continued)
Illinois Development Finance Authority
**5.950% 1/01/09 (Catholic Charities Housing Development) $ 1,450 $ 1,363
7.600% 9/01/13 P.C.R. (Central Illinois Public Service) 3,000 3,320
Illinois Health Facilities Authority Revenue Refunding
Series 1992 A (Evangelical Hospitals) 6.250% 4/15/22 1,000 992
Illinois Housing Development Authority Series A (FHA Insured)
7.800% 12/01/12 1,080 1,103
8.000% 6/01/26 8,095 8,264
Illinois Sales Tax Revenue Refunding Series Q 6.000% 6/15/12 10,000 10,029
Illinois Toll Highway Authority Priority Revenue Series A
6.300% 1/01/11 7,500 7,847
Metropolitan Fair & Exposition Authority Dedicated State
Tax Revenue (Escrowed in U.S. Treasury Securities)
(pre-refunded to 6/01/96) 8.000% 6/01/10 16,600 17,498
*Southwestern Illinois Development Authority Solid Waste
Disposal Revenue (Shell Oil Co.) V.R.D.B. 4.350% 100 100
University of Illinois University Revenue Auxiliary Facilities
(MBIA Insured) Zero Coupon (Effective Yield 6.120%) 4/01/12 5,795 2,089
-------
64,558
Indiana (5.4%)
*Hammond Sewer & Solid Waste Disposal Revenue
(American Maize Products Co.) 8.000% 12/01/24 5,000 5,297
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16 11,950 11,740
Indianapolis Local Public Improvement Bond Bank Series 1991 C
6.700% 1/01/17 8,285 8,474
Michigan City P.C.R. (Northern Indiana Public Service Company)
5.700% 10/01/03 8,795 8,775
--------
34,286
Iowa (0.2%)
*Iowa Finance Authority Single Family Mortgage Revenue Series B
(collateralized by Government & Federal National Mortgage
Association Securities) 7.450% 7/01/23 1,255 1,310
Kansas (0.5%)
Kansas Department of Transportation Highway Revenue
(Escrowed in U.S. Treasury Securities)(pre-refunded to 3/01/02)
6.500% 3/01/12 3,000 3,322
<PAGE>
Kentucky (3.2%)
*Kentucky Housing Corp. Revenue Series C (FHA/VA Insured)
8.100% 1/01/22 2,735 2,911
Kentucky Turnpike Authority Economic Development Revenue
Refunding Series 1992 (Revitalization Project)(FGIC Insured)
Zero Coupon (Effective Yield 6.600%) 1/01/10 13,500 5,773
Kentucky Turnpike Authority Revenue (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,829
*Trimble County P.C.R. Series A (Louisville Gas & Electric Co.)
7.625% 11/01/20 6,670 7,282
7.625% 11/01/20 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/00) 1,330 1,522
-------
20,317
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Louisiana (2.1%)
*De Soto Parish Environmental Impact Revenue
(International Paper Co.) Series A 7.700% 11/01/18 $ 3,250 $ 3,622
Louisiana Public Facility Authority Hospital Revenue (Hotel Dieu
Daughters of Charity Health System)(Escrowed in U.S. Treasury
Securities)(pre-refunded to 2/01/96) 9.750% 2/01/15 1,000 1,051
New Orleans G.O. (AMBAC Insured)
Zero Coupon (Effective Yield 6.125%) 9/01/12 6,250 2,203
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B.
4.200% 1,100 1,100
4.350% 1,700 1,700
Shreveport Water & Sewer Revenue Series 1994 A (FGIC Insured)
5.250% 12/01/12 2,005 1,864
5.250% 12/01/13 2,115 1,950
-------
13,490
Maine (1.2%)
*Maine Educational Loan Marketing Corporation Student Loan
Revenue Series 1994 B-1 6.500% 11/01/09 3,000 3,043
*Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19 2,520 2,584
7.550% 11/15/22 1,750 1,794
-------
7,421
Maryland (1.1%)
Washington Suburban Sanitation District G.O.
6.600% 6/01/16 2,795 2,924
6.625% 6/01/17 1,660 1,733
6.625% 6/01/19 2,320 2,423
-------
7,080
Massachusetts (8.5%)
Massachusetts Bay Transportation Authority Refunding
7.000% 3/01/14 Series 1994 A 3,150 3,527
6.200% 3/01/16 Series 1992 B 9,825 10,077
7.000% 3/01/19 Series 1994 A 2,500 2,804
Massachusetts College Building Authority Project Refunding Series A
7.500% 5/01/11 1,500 1,756
7.500% 5/01/14 3,500 4,118
Massachusetts Health & Educational Facilities Authority Revenue
6.250% 7/01/12 (Massachusetts General
Hospital Project)(AMBAC Insured) 5,750 5,969
6.750% 7/01/24 (Brigham & Women's Hospital) 7,365 7,755
6.250% 12/01/22 (Dana Farber Cancer) 6,500 6,181
Massachusetts Water Resources Authority Refunding
5.500% 11/01/15 Series 1992 B 7,500 6,888
5.250% 12/01/20 Series 1993 C 4,500 3,951
-------
53,026
<PAGE>
Michigan (1.7%)
Michigan Hospital Finance Authority Providence Hospital Revenue
Refunding (Daughters of Charity Health Systems Inc.)
10.000% 11/01/15 7,260 7,539
7.000% 11/01/21 3,000 3,168
-------
10,707
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Minnesota (1.7%)
*Minneapolis St. Paul Housing Finance Board Single Family
Mortgage Revenue (collateralized by Government National
Mortgage Association Securities)
7.250% 8/01/21 $ 2,495 $ 2,625
7.300% 8/01/31 3,685 3,849
*Minnesota Housing Finance Agency Single
Family Mortgage Series A 7.450% 7/01/22 3,990 4,249
-------
10,723
Mississippi (0.5%)
Biloxi Mortgage Revenue Refunding Series 1987 (Biloxi Regional
Medical Center)(Escrowed in U.S. Treasury Securities)
19.000% 8/15/98 2,000 2,804
Missouri (0.3%)
Little Blue Valley Sewer District Revenue Refunding (AMBAC
Insured)(Escrowed in U.S. Treasury Securities)(pre-refunded to
10/01/98) 9.000% 10/01/07 1,000 1,138
Missouri Housing Community Development Single Family
Mortgage Revenue 9.375% 4/01/16 115 121
St. Louis County Single Family Mortgage Revenue (MBIA Insured)
9.750% 4/01/10 5 5
Springfield School District Refunding G.O. Series B (FGIC
Insured) 9.500% 3/01/07 600 799
-------
2,063
Nevada (1.4%)
Clark County School District Series 1995A (MBIA Insured)
5.500% 6/15/16 5,000 4,663
*Nevada Housing Division Single Family
Mortgage (FHA/VA Insured) 7.750% 4/01/22 4,050 4,168
-------
8,831
New Jersey (0.8%)
New Jersey G.O. Series D 6.000% 2/15/11 5,150 5,290
New Mexico (0.2%)
Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13 1,000 1,040
<PAGE>
New York (6.9%)
Erie County Water Authority Water Revenue Refunding Series 1992
(AMBAC Insured) Zero Coupon (Effective Yield 7.300%)
12/01/17 660 132
New York City G.O. Series A (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/97) 8.750% 11/01/17 1,000 1,115
New York Environmental Facilities Corporation P.C.R. Water
Revolving Fund - New York City Municipal Water
5.750% 6/15/10 10,000 10,067
*New York I.D.A. Special Facility Revenue Series 1994 (Terminal
One Group, Associate L.P. Project)
6.000% 1/01/15 8,340 7,943
6.000% 1/01/19 5,490 5,174
New York Medical Care Facilities Finance Agency Revenue
Mental Health Series A (FGIC Insured)
5.250% 08/15/23 3,000 2,685
Triborough Bridge & Tunnel Authority General Purpose Revenue
6.625% 1/01/12 Series X 8,715 9,432
6.125% 1/01/21 Series Y 6,890 7,011
-------
43,559
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
North Carolina (1.1%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991 A (Escrowed in U.S.
Treasury Securities) $ 4,315 $ 4,686
6.500% 1/01/18 Series 1991 A 2,185 2,190
8.000% 1/01/21 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98) 240 265
-------
7,141
North Dakota (0.0%)
North Dakota Housing Finance Agency Single Family Program
Revenue 9.125% 7/01/16 30 31
Ohio (1.3%)
Franklin County Hospital Revenue Refunding and Improvement
(Riverside Hospital) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/15/00) 7.600% 5/15/20 3,900 4,466
Greater Ohio Housing Assistance Corporation Mortgage Revenue
Refunding (FHA Insured - Section 8)(Escrowed in U.S.
Treasury Securities)(pre-refunded to 8/01/95) 10.430% 7/01/22 3,370 3,485
-------
7,951
Oklahoma (0.3%)
*Tulsa County Home Finance Authority Mortgage Revenue Series
1991 B (collateralized by Government National Mortgage
Association Securities) 7.550% 5/01/23 1,825 1,923
Oregon (0.2%)
Port Morrow Revenue Refunding (Portland General Electric-
Boardman Project L.O.C. Industrial Bank of Japan)
V.R.D.B. 4.250% 1,360 1,360
Pennsylvania (2.5%)
Allegheny County Sanitation Authority Sewer Revenue
(FGIC Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,211
*Dauphin County I.D.A. Water Development Revenue (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24 2,400 2,584
Pennsylvania G.O. 6.250% 7/01/12 11,200 11,749
-------
15,544
Puerto Rico (0.7%)
Puerto Rico Electric Power Authority Revenue Series S
7.000% 7/01/07 2,000 2,201
University of Puerto Rico University Revenue Series M
(MBIA Insured) 5.250% 6/01/25 2,000 1,829
-------
4,030
Rhode Island (0.9%)
*Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/01/22 5,650 5,857
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
South Carolina (2.1%)
*Calhoun County Solid Waste Disposal Facilities Revenue
(Eastman Kodak Co.) 6.750% 5/01/17 $ 3,000 $ 3,210
*Richland County Solid Waste Disposal Facilities Revenue
Series 1991 B (Union Camp Corp.) 7.125% 9/01/21 5,000 5,237
*South Carolina Housing Finance Agency Single Family Mortgage
Revenue Series C 7.750% 7/01/22 4,775 4,958
-------
13,405
South Dakota (1.1%)
Heartland Consumers Power District Electric Revenue Refunding
(FSA Insured) 6.000% 1/01/17 7,000 7,016
Tennessee (1.6%)
*Tennessee Housing Development Agency (Homeownership Project)
7.300% 7/01/11 10,000 10,341
<PAGE>
Texas (12.0%)
Dallas-Fort Worth Regional Airport Joint Revenue Refunding
*** 5.625% 11/01/15 (FGIC Insured) 6,750 6,423
9.125% 11/01/15 (Escrowed in U. S. Treasury Securities)
(pre-refunded to 11/01/95) 1,000 1,039
*Harris County Industrial Development Corp. (Exxon Corp.)
Series A V.R.D.B. 4.350% 1,000 1,000
Houston Hotel Occupancy Tax Revenue Refunding
(FSA Insured) 5.500% 7/01/15 5,500 5,127
Houston Water & Sewer Systems Revenue Refunding
Zero Coupon (Effective Yield 6.800%)
12/01/08 Jr. Lien (AMBAC Insured) 4,000 1,825
Zero Coupon (Effective Yield 6.8125%)
12/01/09 Jr. Lien (AMBAC Insured) 4,000 1,697
Zero Coupon (Effective Yield 6.850%)
12/01/10 Jr. Lien (AMBAC Insured) 3,750 1,488
8.200% 12/01/15 Prior Lien (Escrowed in U.S. Treasury
Securities)(pre-refunded to 12/01/96) 2,915 3,130
8.200% 12/01/16 Prior Lien (Escrowed in U.S. Treasury
Securities)(pre-refunded to 12/01/96) 4,500 4,832
Hurst Euless Bedford Independent School District Refunding
(PSF guaranteed) 6.500% 8/15/24 7,825 8,104
Sabine River Authority P.C.R. (Southwestern Electric Power
Company) Series 1986
8.200% 7/01/14 6,000 6,313
Texas G.O. Veteran's Welfare Fund
8.300% 12/01/16 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 12/01/99) 15,275 17,516
8.300% 12/01/16 9,725 10,054
Texas Municipal Power Agency Revenue Refunding (AMBAC Insured)
Zero Coupon (Effective Yield 6.840%) 9/01/07 9,435 4,687
Zero Coupon (Effective Yield 6.900%) 9/01/08 1,475 683
*Travis County Housing Finance Agency Single Family Mortgage
(collateralized by Government National Mortgage Association
Securities)(FGIC Insured) 8.000% 9/01/10 1,450 1,515
-------
75,433
Vermont (0.2%)
*Vermont Housing Finance Agency Single Family Mortgage
Revenue Series A 8.150% 5/01/25 1,095 1,160
<PAGE>
Managed Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Virginia (1.0%)
Hanover County I.D.A. Hospital Revenue Series 1995 (Memorial
Regional Medical Center) (MBIA Insured) 5.500% 8/15/25 $ 3,500 $ 3,216
Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,790
--------
6,006
Washington (5.4%)
*Port of Longview Industrial Development Corporation Solid
Waste Disposal Revenue (Weyerhaeuser Company)
6.875% 10/01/08 8,250 8,734
Washington G.O. 5.750% 9/01/10 Refunding Series R 3,0002,983
6.000% 6/01/13 Series B 7,280 7,357
Washington Public Power Supply Systems Revenue Refunding
Zero Coupon (Effective Yield 6.700%) 7/01/05 Series 1991 B
(FGIC Insured) (Nuclear Project #3) 5,000 2,885
Zero Coupon (Effective Yield 6.950%) 7/01/08 Series B
(Nuclear Project #3) 7,000 3,175
6.300% 7/01/12 Series 1992 A (Nuclear Project #2) 3,500 3,539
6.500% 7/01/18 Series 1991 C (Nuclear Project #3) 5,000 5,078
--------
33,751
Wisconsin (1.4%)
Wisconsin G.O. Series G (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/01/99) 6.750% 5/01/11 5,000 5,433
Wisconsin Housing and Economic Development Authority Home
Ownership Revenue 7.750% 9/01/10 2,985 3,134
--------
8,567
Wyoming (0.3%)
Lincoln County P.C.R. (Exxon County) V.D.R.B. 4.250% 1,700 1,700
Total Municipal Securities (98.8%)
(Amortized Cost $593,248) 622,114
Other Assets, Less Liabilities (1.2%) 7,616
--------
Total Net Assets (100.0%) $629,730
========
<FN>
* These securities are subject to alternative minimum tax. At June
30, 1995, these securities represented 19.7 percent of net assets.
** This security is subject to contractual or legal restrictions on its
resale. At June 30, 1995, the value of this security represented 0.2 percent
of net assets.
*** Security purchased on a when-issue or delayed delivery basis for which the
Fund had not taken delivery as
of June 30, 1995.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
High-Yield Municipals
Investments as of June 30, 1995
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
Municipal Securities (97.9%) Amount Value
<S> <C> <C>
Arizona (0.9%)
Arizona Health Facilities Hospital System Revenue Refunding
(Phoenix Memorial Hospital) 8.125% 6/01/12 $ 2,500 $ 2,661
California (1.6%)
Foothill/Eastern Transportation Corridor Agency Toll Road Revenue
Sr. Lien Series 1995 A
6.500% 1/01/32 3,550 3,408
6.000% 1/01/34 1,175 1,059
-------
4,467
Colorado (4.7%)
Adams County Single Family Mortgage Revenue Series B
(Escrowed in U.S. Treasury Securities)
11.250% 9/01/11 (pre-refunded to 9/01/09) 325 502
11.250% 9/01/11 (pre-refunded to 9/01/10) 360 563
11.250% 9/01/11 220 348
11.250% 9/01/12 1,440 2,295
**Briargate Public Building Authority Landowner's Assessment
Lien Revenue
10.250% 12/15/00 Series 1985 A 611 195
9.500% 12/15/07 Series 1986 A 2,185 699
Colorado Health Facilities Authority Revenue 7.250% 4/01/11
(Birchwood Manor Apartments) (collateralized by Government
National Mortgage Association Securities) 730 757
8.500% 2/15/21 Series B (PSL Health Systems) 3,250 3,567
*Denver City and County Airport Revenue Series D
7.750% 11/15/21 4,000 4,272
-------
13,198
Florida (1.2%)
**Florida Housing Finance Agency Multi-Family
** Housing Revenue (Palm-Aire) 10.000% 1/01/20 2,835 1,701
Leesburg Capital Improvement Hospital Revenue Series 1991 A
(Leesburg Regional Medical Center) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/01) 7.375% 7/01/11 775 906
Putnam County Development Authority P.C.R.
(Florida Power & Light) V.R.D.B. 4.200% 100 100
**Sarasota County Health Facilities Authority Revenue (North Trail
Retirement Center) 9.250% 10/01/21 2,950 649
-------
3,356
<PAGE>
Georgia (5.0%)
*Cartersville Development Authority Water and Waste Water
Facilities Revenue (Anheuser Busch) 7.375% 5/01/09 5,000 5,699
Municipal Electric Authority of Georgia Power Revenue
6.600% 1/01/18 6,065 6,410
Savannah Hospital Authority Revenue Refunding and Improvement
(Candler Hospital) 7.000% 1/01/23 2,000 1,993
-------
14,102
Idaho (1.4%)
*Idaho Housing Agency Single Family Mortgage Revenue
Series B (FHA Insured) 7.500% 7/01/24 3,675 3,827
<PAGE>
High-Yield Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Illinois (3.6%)
Chicago (City of) Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/17 $ 1,500 $ 1,498
Illinois Development Finance Authority
(Catholic Charities Housing Development)
5.950% 1/01/09 1,400 1,316
Illinois Health Facilities Authority Revenue Refunding
8.125% 7/01/06 Series 1991 (United Medical Center) 2,760 3,235
7.000% 2/15/22 Series 1992 (Edward Hospital Association) 685 713
Illinois Housing Development Authority Multi-
Family Housing Series C 7.400% 7/01/23 140 146
Regional Transportation Authority Series A (AMBAC Insured)
8.000% 6/01/17 1,500 1,855
*Southwestern Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B 4.350% 1,300 1,300
-------
10,063
Indiana (15.3%)
East Chicago P.C.R. (Inland Steel Company) Series B (Project #8)
10.750% 12/01/12 425 440
*Hammond Sewer & Solid Waste Disposal Revenue
(American Maize Products Co.) 8.000% 12/01/24 4,000 4,237
Indiana Health Facilities Financing Authority Hospital
Revenue Refunding
6.875% 8/01/17 (Riverview Hospital) Series 1993 1,500 1,484
7.000% 10/01/17 Series A (St. Anthony Medical Center) 1,000 1,036
7.200% 10/01/22 (Fayette Memorial Hospital) 2,200 2,171
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16 9,500 9,333
*Indianapolis Airport Authority Revenue Special Facilities
6.500% 11/15/31 (United Airlines) 2,000 1,925
7.100% 1/15/17 (Federal Express Corp.) 5,000 5,161
**Indianapolis Economic Development Revenue First Lien
9.375% 8/01/19 (The Home Place I Project) 1,457 656
9.500% 2/01/21 (The Home Place II Project) 780 351
Indianapolis Local Public Improvement Bond Bank Series 1991 C
6.700% 1/01/17 8,900 9,103
Marion County Hospital Authority (Daughters of Charity Health
System St. Vincent's Hospital and Health Care Center, Inc.)
10.125% 11/01/15 2,125 2,203
New Castle Economic Development Revenue (Raintree Square Project)
8.650% 4/01/17 Series 1988 A (FHA Insured) 2,860 3,206
**Zero Coupon 3/01/18 Series 1988 B 30,655 77
**Westfield Economic Development Revenue First Lien (Sanders
Glen Project) 9.375% 8/01/19 2,455 1,719
-------
43,102
Iowa (1.5%)
Iowa Housing Finance Authority Single Family Housing Revenue
Zero Coupon (Effective Yield 10.262%) 9/01/16 43,655 4,142
Kansas (0.7%)
CSJ Health Systems of Wichita Revenue 7.000% 11/15/18 2,000 2,058
<PAGE>
High-Yield Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Kentucky (0.8%)
Carroll County Collateralized P.C.R. Revenue (Kentucky Utility Co.)
7.450% 9/15/16 $ 2,000 $ 2,252
Louisiana (2.0%)
*De Soto Parish Environmental Impact Revenue (International
Paper Co.) Series A 7.700% 11/01/18 2,500 2,786
Louisiana Public Facilities Authority Hospital Revenue (Women's
Hospital Foundation) 7.250% 10/01/22 2,300 2,334
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B. 4.350% 600 600
-------
5,720
Maryland (0.5%)
*Ann Arundel County E.D.R. (Baltimore Gas and Electric
Company) Mandatory Put 7/26/95 4.200% 1,500 1,501
Massachusetts (6.8%)
Massachusetts Bay Transportation Authority Refunding Series B
6.200% 3/01/16 5,825 5,975
Massachusetts G.O. Refunding Series A 6.500% 8/01/11 3,000 3,114
Massachusetts Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institution) 6.250% 12/01/22 4,000 3,804
*Massachusetts Housing Finance Agency Series A
9.000% 12/01/18 850 892
Massachusetts Water Resources Authority Series A 5.500% 7/15/22 6,000 5,416
--------
19,201
Michigan (0.3%)
Michigan Hospital Finance Authority Revenue Series A
(Brighton Hospital) 8.625% 10/01/18 850 849
Mississippi (3.6%)
Adams County Hospital Revenue (Jefferson Davis Memorial Hospital)
7.900% 10/01/08 750 810
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A 750 856
9.875% 12/01/14 Series C 1,000 1,152
7.300% 5/01/25 2,000 2,023
Lowndes County Solid Waste Disposal & P.C.R. Refunding
(Weyerhaeuser Company) 6.800% 4/01/22 4,995 5,398
-------
10,239
Missouri (1.1%)
*St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose
Arena) 7.875% 12/01/24 3,000 3,154
Montana (0.4%)
Montana Board of Housing Single Family Mortgage Revenue
(FHA/VA Insured) 7.300% 10/01/17 Series B-1 475 491
*7.500% 4/01/23 Series B-2 520 533
-------
1,024
<PAGE>
Nevada (0.8%)
Humboldt County P.C.R. (Idaho Power Company)
8.300% 12/01/14 2,000 2,326
New Jersey (0.8%)
New Jersey Health Care Facilities Financing Authority Revenue
Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,167
<PAGE>
High-Yield Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
New York (0.8%)
Erie County Water Authority Revenue Refunding (AMBAC
Insured) Zero Coupon (Effective Yield 7.300%) 12/01/17 $ 660 $ 132
Triborough Bridge & Tunnel Authority General Purpose Revenue
Series E 7.250% 1/01/10 2,000 2,233
-------
2,365
North Carolina (1.9%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991 A 1,680 1,684
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities) 3,320 3,606
-------
5,290
Ohio (3.2%)
Cleveland G.O. (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/95)
9.875% 11/01/02 950 991
9.875% 11/01/04 100 104
*Greater Allen County Housing Development Corp. Revenue First
Lien (Steiner-McBride Apartments Project) 10.250% 9/01/03 1,385 1,411
*Ohio Water Development Facilities Authority P.C.R. (Cleveland
Electric Illuminating Company) Mandatory Put
11/01/97 9.750% 5,060 5,405
Oxford Hospital Facilities Revenue Series 1986 (McCullough-Hyde
Memorial Hospital) 8.000% 5/01/17 1,000 1,029
-------
8,940
<PAGE>
Pennsylvania (11.8%)
Allentown Area Hospital Authority Revenue (Sacred Heart Hospital
of Allentown) 7.500% 7/01/06 3,460 3,667
Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo
Edison Company)7.625% 05/01/20 2,400 2,459
*Dauphin County I.D.A. Revenue Series A (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24 2,700 2,907
Delaware County Hospital Authority Revenue Series A (Mercy
Catholic Medical Center) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/97) 7.375% 11/01/12 1,100 1,196
Montgomery County Higher Education & Health Authority
Hospital Revenue
8.750% 7/01/20 (Jeanes Health Systems) (Escrowed in U.S.
Treasury Securities) (Pre-refunded to 7/01/00) 3,200 3,824
6.875% 11/15/20 (Pottstown Memorial Medical Center) 1,000 990
North Hampton County I.D.A. P.C.R. Series A (Metropolitan
Edison Company)10.500% 9/01/95 1,500 1,514
*Pennsylvania Economic Development Financing Authority
Recycling Revenue (Ponderosa Fibres Project) Series 1995 A
9.250% 01/01/22 6,000 6,182
*Pennsylvania Economic Development Financing Authority
Resource Recovery Revenue Refunding (Northhampton)
Series 1995 B 6.750% 1/01/07 3,000 3,011
Philadelphia Municipal Lease Revenue Refunding Series 1993 D
6.250% 7/15/13 2,500 2,438
Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in
U.S. Treasury Securities) 7.350% 9/01/04 4,155 4,777
<PAGE>
High-Yield Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Pennsylvania (Continued)
Schuykill County I.D.A. Resource Recovery Revenue (Westwood
Energy Properties L.O.C. Fuji Bank Ltd.) V.R.D.B. 4.500% $ 100 $ 100
-------
33,065
Puerto Rico (2.2%)
Puerto Rico Highway & Transportation Authority Highway
Revenue Refunding
6.625% 7/01/12 Series V 2,000 2,076
6.625% 7/01/18 Series T 3,200 3,311
6.625% 7/01/18 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/02) 800 907
-------
6,294
South Carolina (0.8%)
*Calhoun County Solid Waste Disposal Facilities Revenue
(Eastman Kodak Co.) 6.750% 5/01/17 2,000 2,140
Tennessee (0.8%)
Knox County Health, Educational and Housing Facilities Revenue
(Baptist Health Systems of East Tennessee) 8.600% 4/15/16 2,005 2,112
<PAGE>
Texas (13.8%)
*Alliance Airport Authority Special Facilities Revenue Series 1991
(American Airlines) 7.000% 12/01/11 4,000 4,144
Austin Combined Utility Systems Revenue Refunding
(Escrowed in U.S. Treasury Securities)
(Pre-refunded to 11/15/95) 10.250% 11/15/12 1,000 1,042
Austin Utility System Revenue (AMBAC Insured)
Zero Coupon (Effective Yield 6.450%) 11/15/09 5,000 2,124
*Bexar County Housing Financing Corp. Revenue Series B
(collateralized by Government National Mortgage Association
Securities) 9.250% 4/01/16 530 556
Harris County Housing Finance Corp. Single Family Housing
Revenue Series 1983
9.250% 3/15/96 225 227
9.625% 3/15/03 345 349
Houston Independent School District Refunding G.O.
(AMBAC Insured) Zero Coupon (Effective Yield
6.450%) 8/15/09 4,390 1,917
Houston Water & Sewer Systems Revenue Refunding Jr. Lien
Series C (AMBAC Insured) Zero Coupon
(Effective Yield 6.400%) 12/01/08 9,260 4,225
Montgomery County Health Facilities Development Corp. Hospital
Mortgage Revenue Refunding (Woodlands Medical Center)
8.850% 8/15/14 2,555 2,761
North Central Health Facilities Development Corporation Hospital
Revenue (Tri-City Health Center) 9.500% 5/01/21 8,300 9,026
Port Corpus Christi Industrial Development Corporation Revenue
Series A (Valero Refining & Marketing) 10.250% 6/01/17 4,280 4,760
San Antonio Electric & Gas Revenue Refunding Series B (FGIC
Insured) Zero Coupon (Effective Yield 6.100%) 2/01/05 12,325 7,236
*Texas Housing Agency Residential Mortgage Revenue Series D
8.400% 1/01/21 335 352
-------
38,719
<PAGE>
High-Yield Municipals Continued
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
Utah (0.7%)
*Utah Housing Finance Agency Single Family Mortgage
7.750% 1/01/23 Series B-2 (FHA Insured) $ 1,130 $ 1,174
7.550% 7/01/23 Siers C-3 (FHA/VA Insured) 815 850
--------
2,024
Washington (6.2%)
Quincy Water and Sewer Revenue Series I 9.250% 11/01/10 2,735 3,317
Washington G.O. Series B 6.400% 6/01/17 5,000 5,273
Washington Health Care Facilities Authority Revenue
(Sacred Heart Medical Center, Spokane) 6.875% 2/15/12 1,500 1,577
*Washington Housing Finance Commission Single Family
Mortgage Revenue Series C (collateralized by Government and
Federal National Mortgage Association Securities)
Zero Coupon (Effective Yield 7.750%) 1/01/22 1,720 232
Zero Coupon (Effective Yield 7.750%) 7/01/22 1,905 247
Zero Coupon (Effective Yield 7.750%) 1/01/23 1,905 238
Zero Coupon (Effective Yield 7.750%) 7/01/23 1,910 230
Zero Coupon (Effective Yield 7.750%) 1/01/24 1,920 223
Zero Coupon (Effective Yield 7.750%) 7/01/24 1,910 213
Washington Public Power Supply Systems Revenue
(Nuclear Project #2)
Zero Coupon (Effective Yield 6.888% ) 7/01/07 6,945 3,367
6.300% 7/01/12 Series 1992 A 2,500 2,528
--------
17,445
Wisconsin (1.1%)
*Wisconsin Housing and Economic Development
Authority Home Ownership Revenue 7.850% 3/01/24 2,950 3,097
Wyoming (1.6%)
Lincoln County P.C.R. (Exxon County) V.R.D.B.
4.250% 500 500
4.350% 2,100 2,100
Wyoming Community Development Authority Single Family
Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17 1,730 1,821
--------
4,421
Total Municipal Securities (97.9%)
(Amortized Cost $274,668) 275,321
Other Assets, Less Liabilities (2.1%) 5,834
--------
Total Net Assets (100.0%) $281,155
========
<FN>
*These securities are subject to the alternative minimum tax. At June 30,
1995 these securities represented
25.0 percent of net assets.
**Non-income producing securities.
</TABLE>
<PAGE>
<TABLE>
Balance Sheets
June 30, 1995
(All Amounts In Thousands)
<CAPTION>
Municipal
Money
Market Intermediate Managed High-Yield
Fund Municipals Municipals Municipals
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets
Investments, at value $151,822 $205,980 $622,114 $275,321
Receivable for investments sold 115 5,332 16,658 1,462
Receivable for fund shares sold 734 182 2,243 20
Accrued interest receivable 1,246 3,646 11,294 4,932
Cash and other assets 1,020 884 661 321
-------- -------- -------- --------
Total Assets $154,937 $216,024 $652,970 $282,056
======== ======== ======== ========
Liabilities
Payable for investments purchased $ 7,807 $ 3,020 $ 21,692 $ --
Payable for fund shares redeemed 201 49 76 60
Dividends payable 140 289 962 487
Payable to investment adviser and transfer agent 35 92 362 167
Other liabilities 50 85 148 187
-------- -------- -------- --------
Total Liabilities 8,233 3,535 23,240 901
-------- -------- -------- --------
Capital
Paid-in capital 146,706 206,504 608,776 285,513
Net unrealized appreciation of investments -- 7,074 28,866 653
Accumulated net realized gains (losses) on investments (2) (1,089) (7,912) (5,011)
-------- -------- -------- --------
Total Capital (Net Assets) 146,704 212,489 629,730 281,155
-------- -------- -------- --------
Total Liabilities and Capital $154,937 $215,765 $652,858 $282,056
======== ======== ======== ========
Shares Outstanding (Unlimited Number Authorized) 146,631 19,035 71,653 24,855
======== ======== ======== ========
Net Asset Value (Capital) Per Share $ 1.00 $ 11.16 $ 8.79 $ 11.31
======== ======== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the Year Ended
June 30, 1995
(All Amounts In Thousands)
<CAPTION>
Municipal
Money
Market Intermediate Managed High-Yield
Fund Municipals Municipals Municipals
------ ------- ------- -------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest $5,757 $12,492 $42,167 $19,673
------ ------- ------- -------
Expenses
Management fees 787 1,249 3,392 1,588
Transfer agent fees 215 192 521 279
Printing and postage 41 40 95 63
Custodian fees 50 30 42 35
Registration fees 29 23 23 22
Legal and audit fees 30 27 27 237
Trustees' fees 19 21 34 25
Accounting fees 16 17 23 18
Other expenses 35 71 75 221
------ ------- ------- -------
1,222 1,670 4,232 2,488
Reimbursement of expenses by investment adviser (120) (36) -- --
------ ------- ------- -------
Total Expenses 1,102 1,634 4,232 2,488
------ ------- ------- -------
Net Investment Income 4,655 10,858 37,935 17,185
------ ------- ------- -------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments -- 28 (1,062) (974)
Net realized losses on futures transactions -- (963) (1,686) (1,686)
Net change in unrealized appreciation or depreciation
of investments -- 3,694 7,348 7,892
------ ------- ------- -------
Net Gains on Investments -- 2,759 4,600 5,232
------ ------- ------- -------
Net Increase in Net Assets Resulting from Operations $4,655 $13,617 $42,535 $22,417
====== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Years Ended June 30, 1994 and 1995
(All Amounts In Thousands)
<CAPTION>
Municipal Money Intermediate
Market Fund Municipals
1994 1995 1994 1995
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,754 $ 4,655 $ 11,722 $ 10,858
Net realized gains (losses) on investments (15) -- 59 (935)
Net change in unrealized appreciation or
depreciation of investments -- -- (8,963) 3,694
--------- --------- -------- ---------
Net Increase in Net Assets Resulting from Operations 3,739 4,655 2,818 13,617
--------- --------- -------- ---------
Distributions To Shareholders
Dividends from net investment income (3,754) (4,655) (11,722) (10,858)
Distributions from realized gains -- -- (3,978) --
Distributions in excess of realized gains -- -- (74) --
--------- --------- -------- ---------
Total Distributions to Shareholders (3,754) (4,655) (15,774) (10,858)
--------- --------- -------- ---------
Share Transactions
Subscriptions of fund shares 316,484 239,238 84,781 65,416
Investment income dividends reinvested 3,276 4,001 7,601 6,688
Capital gain distributions reinvested -- -- 3,393 --
Redemptions of fund shares (349,812) (262,355) (90,207) (100,427)
--------- --------- -------- ---------
Net Increase (Decrease) from Share Transactions (30,052) (19,116) 5,568 (28,323)
--------- --------- -------- ---------
Net (Decrease) in Net Assets (30,067) (19,116) (7,388) (25,564)
Total Net Assets
Beginning of year 195,887 165,820 245,441 238,053
--------- --------- -------- ---------
End of year $ 165,820 $ 146,704 $238,053 $ 212,489
========= ========= ======== =========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 316,484 239,238 7,360 6,010
Investment income dividends reinvested 3,276 4,001 663 611
Capital gain distributions reinvested -- -- 293 --
--------- --------- -------- ---------
319,760 243,239 8,316 6,621
Redemptions of fund shares (349,813) (262,355) (7,882) (9,229)
--------- --------- -------- ---------
Net increase (decrease) in fund shares (30,053) (19,116) 434 (2,608)
Shares outstanding at beginning of year 195,800 165,747 21,209 21,643
--------- --------- -------- ---------
Shares outstanding at end of year 165,747 146,631 21,643 19,035
========= ========= ======== =========
See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
For the Years Ended June 30, 1994 and 1995
(All Amounts In Thousands)
<CAPTION>
Managed High-Yield
Municipals Municipals
1994 1995 1994 1995
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 41,313 $ 37,935 $ 19,543 $ 17,185
Net realized gains (losses) on investments (800) (2,748) 631 (2,660)
Net change in unrealized appreciation or depreciation
of investments (41,521) 7,348 (15,935) 7,892
--------- --------- -------- ---------
Net Increase (Decrease) in Net Assets Resulting
from Operations (1,008) 42,535 4,239 22,417
--------- --------- -------- ---------
Distributions To Shareholders
Dividends from net investment income (41,313) (37,935) (19,543) (17,185)
Distributions from realized gains (8,848) -- (4,738) --
Distributions in excess of realized gains (4,888) -- (2,171) --
--------- --------- -------- ---------
Total Distributions to Shareholders (55,049) (37,935) (26,452) (17,185)
--------- --------- -------- ---------
Share Transactions
Subscriptions of fund shares 66,157 79,659 36,146 61,571
Investment income dividends reinvested 24,661 21,933 11,040 9,681
Capital gain distributions reinvested 11,376 -- 5,379 --
Redemptions of fund shares (135,579) (163,714) (81,274) (103,510)
--------- --------- -------- ---------
Net Decrease from Share Transactions (33,385) (62,122) (28,709) (32,258)
--------- --------- -------- ---------
Net Decrease in Net Assets (89,442) (57,522) (50,922) (27,026)
Total Net Assets
Beginning of year 776,694 687,252 359,103 308,181
--------- --------- -------- ---------
End of year $ 687,252 $ 629,730 $308,181 $ 281,155
========= ========= ======== =========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 7,135 9,297 3,124 5,657
Investment income dividends reinvested 2,676 2,544 950 879
Capital gain distributions reinvested 1,221 -- 458 --
--------- --------- -------- ---------
11,032 11,841 4,532 6,536
Redemptions of fund shares (14,771) (19,210) (7,011) (9,536)
--------- --------- -------- ---------
Net decrease in fund shares (3,739) (7,369) (2,479) (3,000)
Shares outstanding at beginning of year 82,761 79,022 30,334 27,855
--------- --------- -------- ---------
Shares outstanding at end of year 79,022 71,653 27,855 24,855
========= ========= ======== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes To Financial Statements
Note 1. Significant Accounting Policies
The following are the significant accounting policies of SteinRoe Municipal
Money Market Fund, SteinRoe Intermediate Municipals, SteinRoe Managed
Municipals, and SteinRoe High-Yield Municipals (the "Funds"), each a series of
SteinRoe Municipal Trust (a Massachusetts business trust).
Security Valuations
All securities are valued as of June 30, 1995. Municipal securities are valued
at a fair value using a procedure determined in good faith by the Board of
Trustees which has authorized the use of bid valuations provided by a pricing
service except for the Municipal Money Market Fund. Municipal securities of
the Municipal Money Market Fund are valued at amortized cost, which
approximates market value. This method involves valuing an instrument at cost
on the purchase date and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument and does not take into
account unrealized securities gains or losses. In the event that a deviation
of 1/2 of 1 percent or more exists between the Fund's $1.00 per share net
asset value, calculated at amortized cost, and the net asset value calculated
by reference to market quotations, the Board of Trustees would consider what
action, if any, should be taken. Other securities and assets of the Funds are
valued by a method that the Board of Trustees believes represents a fair
value.
Futures Contracts
During the year ended June 30, 1995, Intermediate Municipals, Managed
Municipals and High-Yield Municipals entered into futures contracts to either
hedge against expected declines in the market value of its portfolio
securities or as a temporary substitute for the purchase of individual bonds.
Risks of entering into futures contracts include the possibility that there
may be an illiquid market at the time the 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 deposits with its custodian
cash or securities in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Fund equal to the
daily change in the contract value and are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
<PAGE>
Federal Income Taxes
No provision is made for Federal income taxes since the Funds elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law. 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 includable 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 for eight years following
the year of the loss and offset such losses against any future realized gains.
<TABLE>
At June 30, 1995, the Funds had capital loss carry forwards as follows:
<CAPTION>
Year of
Fund Amount Expiration
<S> <C> <C>
Intermediate Municipals $ 839 2003
Managed Municipals 4,436 2003
High Yield Municipals 1,715 2003
</TABLE>
Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly.
Capital gain distributions, if any, are distributed annually.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings
which result in temporary over-distributions are classified as distributions
in excess of net investment income or net realized gains, and any permanent
differences are reclassified to paid-in-capital. The amounts reclassified as
of June 30, 1995 for Municipal Money Market Fund, Intermediate Municipals,
Managed Municipals and High-Yield Municipals were $74, $81, $276 and $180,
respectively.
Distributions in excess of net realized gains for Intermediate Municipals,
Managed Municipals and High-Yield Municipals are primarily the result of
differences in the treatment of futures transactions or losses incurred
subsequent to when a Fund was required to make a distribution to meet excise
tax requirements.
Other Information
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
Securities purchased on a when-issued or delayed delivery basis may be settled
a month or more after transaction date. These securities are subject to market
fluctuation during this period. When-issued or delayed delivery purchase
commitments of Managed Municipals as of June 30, 1995, amounted to $6,470.
The Municipal Money Market Fund attempts to maintain its net asset value per
share at $1.00, which it believes will be possible under most conditions.
<PAGE>
Original issue discounts and premiums on municipal securities of Intermediate
Municipals, Managed Municipals, and High-Yield Municipals are amortized.
A maturity date is not shown for municipal securities bearing variable or
floating interest rates that are adjusted periodically to minimize
fluctuations in the value of such securities.
All amounts, except per-share amounts, are shown in thousands.
Note 2. Trustees' Fees and Transactions with Affiliates
The Funds pay a monthly management fee to Stein Roe & Farnham Incorporated
(the "Adviser"), an indirect subsidiary of Liberty Mutual Insurance Company,
for its services as investment adviser and manager. The management fee is
computed at an annual rate for the Municipal Money Market Fund of .50 of 1
percent of average daily net assets and for Intermediate Municipals and
High-Yield Municipals at .60 of 1 percent of the first $100 million of average
daily net assets, .55 of 1 percent of the next $100 million, and .50 of
1 percent thereafter. For Managed Municipals, the management fee is computed
at an annual rate of .60 of 1 percent of the first $100 million of average
daily net assets, .55 of 1 percent of the next $100 million, .50 of 1 percent
of the next $800 million, and .45 of 1 percent thereafter.
The investment advisory agreements of the Funds provide that the Adviser will
reimburse each Fund to the extent that its annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which each
Fund's shares are offered for sale. In addition, the Adviser has agreed to
reimburse Municipal Money Market Fund and Intermediate Municipals (effective
May 1, 1995) for expenses in excess of .70 of 1 percent of average daily net
assets. These expense limitations expire on October 31, 1995, subject to
earlier termination by the Adviser on 30 day's notice.
The transfer agent fees of the Funds are paid to SteinRoe Services, Inc., an
indirect subsidiary of Liberty Mutual Insurance Company.
Pursuant to an agreement with the Funds, the Adviser provides certain
accounting services. For the year ended June 30, 1995, the Municipal Money
Market Fund, Intermediate Municipals, Managed Municipals and High-Yield
Municipals incurred charges of $16, $17, $23 and $18, respectively.
<PAGE>
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Municipal
Money Market Fund, Intermediate Municipals, Managed Municipals and High-Yield
Municipals for the year ended June 30, 1995, was $19, $21, $34 and $25,
respectively. No remuneration was paid to any other trustee or officer of the
Trust.
Note 3. Short-Term Debt
To facilitate portfolio liquidity, Intermediate Municipals, Managed Municipals
and High-Yield Municipals maintain borrowing arrangements under which they can
borrow against portfolio securities. There were no borrowings for any of these
Funds during the year ended June 30, 1995.
<PAGE>
Notes To Financial Statements Continued
Note 4. Investment Transactions
<TABLE>
The aggregate cost of purchases and proceeds from sales or maturities of
securities (excluding short-term obligations for Intermediate Municipals,
Managed Municipals and High-Yield Municipals) for the year ended June 30,
1995, were as follows:
<CAPTION>
Fund Purchases Sales
--------- --------
<S> <C> <C>
Municipal Money Market Fund $411,026 $346,515
Intermediate Municipals 140,039 170,223
Managed Municipals 204,488 264,757
High-Yield Municipals 63,271 94,830
At June 30, 1995, the cost of investments for financial reporting purposes and
for Federal income tax purposes were equal. Unrealized appreciation and
depreciation of investments on a tax basis were as follows:
<CAPTION>
Net
Appreciation
Fund Appreciation Depreciation (Depreciation)
------------ ------------ --------------
<S> <C> <C> <C>
Municipal Money Market Fund $ -- $ -- $ --
Intermediate Municipals 7,490 416 7,074
Managed Municipals 30,277 1,411 28,866
High-Yield Municipal 15,167 14,514 653
</TABLE>
<PAGE>
Note 5. Portfolio Composition
The Funds invest in municipal securities including, but not limited to,
general obligation bonds, revenue bonds and escrowed bonds (which are bonds
that have been refinanced, the proceeds of which have been invested in U.S.
Government or agency obligations and set aside to pay off the original issue
at the first call date or maturity). See Fund Highlights for each Fund's
security type breakdown.
The Funds' investments include certain municipal securities that are insured
by private insurers who guarantee the payment of principal and interest in the
event of default. At June 30, 1995, investments in these securities for
Intermediate Municipals and Managed Municipals represented 44.6 and 22.9
percent of the portfolio, respectively.
Municipal Money Market Fund's investments include 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 by the
issuer. At June 30, 1995, 44.3 percent of the portfolio was backed by bank
letters of credit.
See each Fund's schedule of investments for additional information on
portfolio composition and Fund Highlights for each Fund's portfolio quality
(unaudited).
<PAGE>
<TABLE>
Financial Highlights Continued
Municipal Money Market Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months Years
Ended Ended
Years Ended Dec. 31, June 30, June 30,
1985 1986 1987 1988 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Net investment income .047 .041 .040 .021 .056
Distributions from net investment income (.047) (.041) (.040) (.021) (.056)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.60% 0.60% 0.69% 0.67%* 0.67%
Ratio of net investment income to average
net assets (b) 4.74% 4.05% 4.08% 4.25%* 5.57%
Total return (b) 4.82% 4.22% 4.11% 4.29%* 5.74%
Net assets, end of period (000s) $152,277 $251,465 $306,971 $294,116 $254,261
<PAGE>
<CAPTION>
Years Ended June 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Net investment income .054 .046 .032 .020 .019 .030
Distributions from net investment income (.054) (.046) (.032) (.020) (.019) (.030)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.67% 0.68% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income to average
net assets (b) 5.40% 4.66% 3.19% 1.96% 1.88% 2.96%
Total return (b) 5.52% 4.74% 3.25% 1.97% 1.90% 3.02%
Net assets, end of period (000s) $255,953 $237,403 $199,037 $195,887 $165,820 $146,704
<FN>
*Annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would have
been 0.72, 0.70 and 0.78 percent for the years ended December 31, 1985 and
1986, and June 30, 1995, respectively.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Intermediate Municipals
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Period Months Years
Ended Years Ended Ended Ended
Dec. 31, December 31, June 30, June 30,
1985(a) 1986 1987 1988 1989
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.14 $ 10.76 $ 10.37 $ 10.43
------- -------- ------- ------- -------
Income From Investment Operations
Net investment income .12 .58 .57 .29 .62
Net realized and unrealized gains (losses)
on investments .14 .62 (.38) .06 .07
------- -------- ------- ------- -------
Total from investment operations .26 1.20 .19 .35 .69
Distributions
Net investment income (.12) (.58) (.57) (.29) (.62)
Net realized gains -- -- (.01) -- --
In excess of realized gains -- -- -- -- --
------- -------- ------- ------- -------
Total distributions (.12) (.58) (.58) (.29) (.62)
------- -------- ------- ------- -------
Net Asset Value, End of Period $ 10.14 $ 10.76 $ 10.37 $ 10.43 $ 10.50
======= ======== ======= ======= =======
Ratio of net expenses to average net assets (b) 0.80%* 0.80% 0.80% 0.80%* 0.80%
Ratio of net investment income to average
net assets (c) 5.82%* 5.45% 5.47% 5.66%* 5.96%
Portfolio turnover rate 0% 10% 49% 22%** 83%
Total return (c) 2.61%** 12.09% 1.93% 3.45%** 6.85%
Net assets, end of period (000s) $22,973 $104,750 $96,143 $97,308 $91,304
<PAGE>
<CAPTION>
Years Ended June 30,
1990 1991 1992 1993 1994 1995
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.50 $ 10.54 $ 10.73 $ 11.06 $ 11.57 $ 11.00
------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .63 .62 .57 .54 .53 .53
Net realized and unrealized gains (losses)
on investments .07 .22 .50 .63 (.39) .16
------- -------- -------- -------- -------- --------
Total from investment operations .70 .84 1.07 1.17 .14 .69
Distributions
Net investment income (.63) (.62) (.57) (.54) (.53) (.53)
Net realized gains (.03) (.03) (.17) (.12) (.17) --
In excess of realized gains -- -- -- -- (.01) --
------- -------- -------- -------- -------- --------
Total distributions (.66) (.65) (.74) (.66) (.71) (.53)
------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 10.54 $ 10.73 $ 11.06 $ 11.57 $ 11.00 $ 11.16
======= ======== ======== ======== ======== ========
Ratio of net expenses to average
net assets (b) 0.80% 0.80% 0.79% 0.72% 0.71% 0.74%
Ratio of net investment income to average
net assets (c) 5.96% 5.79% 5.23% 4.79% 4.63% 4.94%
Portfolio turnover rate 141% 96% 109% 96% 55% 67%
Total return (c) 6.85% 8.18% 10.31% 10.92% 1.16% 6.59%
Net assets, end of period (000s) $98,918 $118,651 $165,401 $245,441 $238,053 $212,489
<FN>
* Annualized
** Not annualized
(a) The Fund commenced operations on October 9, 1985.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser in connection with the
expense limitation which expired October 31, 1993, this ratio would have been
2.38 percent for the period ended December 31, 1985, 0.94 and 0.83 percent for
the years ended December 31, 1986 and 1987, respectively, 0.87 percent for the
six months ended June 30, 1988, 0.82, 0.81 and 0.81 percent for the years
ended June 30, 1989 through 1991, respectively, and 0.76 percent for the year
ended June 30, 1995.
(c) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Managed Municipals
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months Years
Ended Ended
Years Ended December 31, June 30, June 30,
1985 1986 1987 1988 1989
<S> <C> <C> <C> <C> <C>
-------- -------- -------- -------- --------
Net Asset Value, Beginning of Period $ 7.89 $ 8.93 $ 9.22 $ 8.50 $ 8.61
-------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .68 .67 .61 .30 .61
Net realized and unrealized gains (losses)
on investments 1.07 1.21 (.59) .11 .44
-------- -------- -------- -------- --------
Total from investment operations 1.75 1.88 .02 .41 1.05
Distributions
Net investment income (.68) (.67) (.61) (.30) (.61)
Net realized gains (.03) (.92) (.13) -- (.03)
In excess of realized gains -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions (.71) (1.59) (.74) (.30) (.64)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 8.93 $ 9.22 $ 8.50 $ 8.61 $ 9.02
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.65% 0.65% 0.65% 0.65%* 0.65%
Ratio of net investment income to average
net assets 8.11% 7.04% 6.99% 7.03%* 7.00%
Portfolio turnover rate 113% 92% 113% 28%** 102%
Total return 23.00% 21.70% 0.39% 4.90%** 12.69%
Net assets, end of period (000s) $357,360 $523,947 $458,170 $467,595 $514,898
<PAGE>
<CAPTION>
Years Ended June 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.02 $ 8.71 $ 8.85 $ 9.11 $ 9.38 $ 8.70
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .59 .56 .55 .52 .50 .51
Net realized and unrealized gains (losses)
on investments (.06) .19 .46 .42 (.51) .09
-------- -------- -------- -------- -------- --------
Total from investment operations .53 .75 1.01 .94 (.01) .60
Distributions
Net investment income (.59) (.56) (.55) (.52) (.50) (.51)
Net realized gains (.25) (.05) (.20) (.15) (.11) --
In excess of realized gains -- -- -- -- (.06) --
-------- -------- -------- -------- -------- --------
Total distributions (.84) (.61) (.75) (.67) (.67) (.51)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 8.71 $ 8.85 $ 9.11 $ 9.38 $ 8.70 $ 8.79
======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.66% 0.66% 0.64% 0.64% 0.65% 0.65%
Ratio of net investment income to average net assets 6.66% 6.39% 6.17% 5.65% 5.45% 5.85%
Portfolio turnover rate 95% 203% 94% 63% 36% 33%
Total return 6.15% 8.92% 11.95% 10.79% (0.29%) 7.12%
Net assets, end of period (000s) $584,081 $655,930 $725,472 $776,694 $687,252 $629,730
<FN>
* Annualized
** Not annualized
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
High-Yield Municipals
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months Years
Ended Ended
Years Ended December 31, June 30, June 30,
1985 1986 1987 1988 1989
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.02 $ 11.10 $ 12.06 $ 11.06 $ 11.37
------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .94 .90 .87 .44 .88
Net realized and unrealized gains (losses)
on investments 1.08 1.11 (.89) .31 .63
------- -------- -------- -------- --------
Total from investment operations 2.02 2.01 (.02) .75 1.51
Distributions
Net investment income (.94) (.90) (.87) (.44) (.88)
Net realized gains -- (.15) (.11) -- (.03)
In excess of realized gains -- -- -- -- --
------- -------- -------- -------- --------
Total distributions (.94) (1.05) (.98) (.44) (.91)
------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.10 $ 12.06 $ 11.06 $ 11.37 $ 11.97
======= ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.80% 0.76% 0.73% 0.76%* 0.73%
Ratio of net investment income to average
net assets (b) 8.89% 7.77% 8.20% 7.87%* 7.54%
Portfolio turnover rate 46% 34% 110% 53%** 208%
Total return 20.96% 18.64% (0.16%) 6.89%** 13.79%
Net assets, end of period (000s) $99,796 $225,883 $181,600 $201,274 $277,620
<PAGE>
<CAPTION>
Years Ended June 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.97 $ 11.78 $ 11.79 $ 11.83 $ 11.84 $ 11.06
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income .85 .82 .80 .71 .67 .66
Net realized and unrealized gains (losses)
on investments .02 .17 .22 .18 (.54) .25
-------- -------- -------- -------- -------- --------
Total from investment operations .87 .99 1.02 .89 .13 .91
Distributions
Net investment income (.85) (.82) (.80) (.71) (.67) (.66)
Net realized gains (.21) (.16) (.18) (.17) (.17) --
In excess of realized gains -- -- -- -- (.07) --
-------- -------- -------- -------- -------- --------
Total distributions (1.06) (.98) (.98) (.88) (.91) (.66)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.78 $ 11.79 $ 11.83 $ 11.84 $ 11.06 $ 11.31
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.71% 0.71% 0.69% 0.73% 0.76% 0.86%
Ratio of net investment income to average
net assets (b) 7.22% 7.00% 6.75% 6.04% 5.76% 5.98%
Portfolio turnover rate 261% 195% 88% 75% 36% 23%
Total return 7.59% 8.79% 9.01% 7.88% 0.95% 8.54%
Net assets, end of period (000s) $310,582 $373,948 $410,613 $359,103 $308,181 $281,155
<FN>
* Annualized
** Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser in connection with the
expense limitation which expired December 31, 1986, this ratio would have
been 0.81 percent for the year ended December 31, 1985.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees of SteinRoe Municipal Trust
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
We have audited the accompanying balance sheets, including the schedules of
investments, of SteinRoe Municipal Money Market Fund, SteinRoe Intermediate
Municipals, SteinRoe Managed Municipals, and SteinRoe High-Yield Municipals,
as of June 30, 1995, and the related statements of operations for the year
then ended and changes in net assets for each of the two years in the period
then ended, and the financial highlights of SteinRoe Municipal Money Market
Fund and SteinRoe High-Yield Municipals since inception, and the financial
highlights of SteinRoe Intermediate Municipals and SteinRoe Managed Municipals
for the periods subsequent to December 31, 1987. These financial statements
and financial highlights are the responsibility of the Funds' 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 generally accepted auditing
standards. 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. Our procedures included confirmation of securities
owned as of June 30, 1995, by correspondence with the custodian and brokers.
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 positions of
SteinRoe Municipal Money Market Fund, SteinRoe Intermediate Municipals,
SteinRoe Managed Municipals, and SteinRoe High-Yield Municipals at June 30,
1995, and the results of their operations, the changes in their net assets,
and their financial highlights for the periods referred to above, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
August 14, 1995
<PAGE>
A Guide to SteinRoe Services
We encourage you to take advantage of our free shareholder services. If you
would like additional information about how to establish or use a SteinRoe
service, just call us at 1 800 338-2550.
Purchases
In addition to sending us a check or wire to purchase additional fund shares,
you can take advantage of these convenient automatic services:
* Automatic Investment Plan -- Make regular investments ($50 minimum) in your
SteinRoe account directly from your bank checking account. You select monthly,
quarterly, semiannual or annual purchases.
* Special Investments -- Purchase shares by telephone and pay for them by
electronic transfer from your bank checking account.
Exchanges
* Telephone Exchange -- Call us to exchange $1,000 or more from your account
in one SteinRoe Fund to an identically registered account in another SteinRoe
Fund. You receive this service when you open a SteinRoe Fund account, unless
you elect not to.*
* Automatic Exchange -- SteinRoe will regularly exchange shares from your
account in one SteinRoe Fund to your account in another. You select
twice-monthly, monthly, quarterly, semiannual or annual exchanges.
Redemptions
* Telephone Redemption by Check -- Call to redeem $1,000 or more from your
account. A check will be sent to your registered address. You automatically
receive this service when you open a SteinRoe account, unless you elect not
to.
* Telephone Redemption by Wire -- Redeem shares by phone from your Money
Market Fund account ($1,000 minimum) and wire the proceeds to your bank
checking account. A small fee for wiring proceeds will be deducted from
the amount wired.
* Special Redemption Option -- If you do not want to pre-schedule your
redemptions, you can redeem shares by telephone ($50 minimum/ $100,000
maximum) and have the proceeds sent directly to your bank checking account.
* Automatic Redemption Plan -- Redeem either a fixed dollar or share amount,
or a fixed percentage of your account automatically on a schedule you
establish. You select monthly, quarterly, semiannual or annual withdrawals
($50 minimum/ $100,000 maximum), and the proceeds are sent either to your bank
checking account or to an address you specify.
* Money Market Fund Check Writing -- Write checks for $50 or more on your
Money Market Fund account.
<PAGE>
Distributions
Most investors like to reinvest their dividends and capital gains
distributions and put them back to work. If, however, you do not want them
reinvested, consider these alternatives:
* Dividend Purchase Option -- Use the distributions from one SteinRoe Fund
account ($25 minimum) to automatically purchase shares in your account with
another SteinRoe Fund.
* Automatic Dividend Deposit -- Instead of receiving your dividends by check,
your distributions are deposited automatically into your bank checking
account.
Recordkeeping
* Summary of Investments -- Consolidates quarterly transaction and
investment information for any or all of your household's SteinRoe accounts on
one easy-to-read statement. At year end, SteinRoe provides a complete summary
of all account activity for the year.
*SteinRoe reserves the right to discontinue or modify the exchange privilege,
and certain restrictions apply. Please refer to your prospectus for details.
Funds for Every Investment Objective
The SteinRoe family of 100 percent no-load mutual funds offers a variety of
funds so you can select the right fund, or combination of funds, to meet your
investment objectives. Call us at 1 800 338-2550 for a prospectus and more
complete information on any of the funds, including management fees and
expenses. Please read the prospectus carefully before you invest or send
money.
Money Market Funds
Money market funds seek to provide income while preserving principal and
maintaining liquidity. These funds offer free check writing.
* Government Reserves -- Invests primarily in securities issued or guaranteed
by the U.S. government and its agencies and instrumentalities.*
* Cash Reserves -- Invests in high-quality, short-term money market
securities such as certificates of deposit, banker's acceptances and
commercial paper.*
<PAGE>
Bond Funds
Bond funds seek high current income by investing primarily in fixed income
securities.
* Limited Maturity Income Fund -- Invests primarily in U.S. government and
other high-quality debt securities. The dollar-weighted average effective
maturity will not exceed three years.
* Government Income Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies.*
* Intermediate Bond Fund -- Invests primarily in marketable debt securities
with an average life of three to ten years.
* Income Fund -- Pursues a higher level of current income by investing
primarily in medium- and lower-quality bonds.
<PAGE>
Tax-Exempt Funds
These funds help investors keep more of their earnings by investing in
instruments that earn income free from federal income tax. Income may be
subject to federal alternative minimum tax and state and local taxes; capital
gains are subject to state, local and federal taxes.
* Municipal Money Market Fund -- Seeks to provide the liquidity and stability
of a money market fund plus current tax-free income. Free check writing
available.*
* Intermediate Municipals -- Seeks high current yield through investments
primarily in the three highest grades of intermediate-term municipal
securities.
* Managed Municipals -- Pursues high tax-free income by investing in a
quality-conscious portfolio of long-term municipal bonds.
* High-Yield Municipals -- Seeks a higher level of tax-free income from
long-term municipal securities, primarily of medium or lower quality.
Growth and Income Funds
These funds seek to provide a conservative investment that is well positioned
for long-term growth and current income. Each fund's approach is designed to
limit the effects of market volatility.
* Total Return Fund -- Strives for maximum total return consistent with
reasonable investment risk by investing in stocks, bonds and convertible
securities.
* Prime Equities -- Pursues long-term capital growth by investing primarily
in large, well-established companies.
<PAGE>
Growth Funds
Growth funds offer long-term capital appreciation potential by investing
primarily in various types of stocks.
* Growth Stock Fund -- Pursues long-term capital appreciation from stocks
with strong growth potential.
* Special Fund -- Invests in securities believed to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, underfollowed or out-of-favor companies.
* Special Venture Fund -- Seeks capital appreciation through equity
securities of entrepreneurially managed companies.
* Young Investor Fund -- Invests in securities of companies that affect the
lives of children or teenagers.
* Capital Opportunities Fund -- Takes a long-term approach to emerging growth
by selecting quality companies with the potential to generate high levels of
earnings growth over a three- to five-year period.
* International Fund -- Invests in a diversified portfolio of foreign
securities.
*Money market mutual funds strive to maintain a $1 per share net asset value,
but there is no assurance that the fund will be able to maintain a stable net
asset value. The net asset value of a fund that invests in securities issued
or guaranteed by the U.S. government is not guaranteed.
<PAGE>
To Contact Us. . .
By Phone 1 800 338-2550
You can discuss your investment questions with a SteinRoe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
SteinRoe Fund account, including SteinRoe IRAs. We're available seven days a
week, from 7 a.m. to 8 p.m. weekdays and from 8 a.m. to 5 p.m. Saturday and
Sunday (central time).
SteinRoe's Funds-on-Call(R)
24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest SteinRoe Fund prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
* Exchange shares between your SteinRoe accounts;
* Purchase Fund shares by electronic transfer;
* Order additional account statements and Money Market Fund checks;
* Redeem shares by check, wire or electronic transfer.
Please contact an account representative if you would like to apply for a PIN.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
1 800 322-1130.
By Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 804058, Chicago, IL 60680.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current fund investments or
provide you information about any of the SteinRoe Funds and retirement plans.
Stop by weekdays between
8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
<PAGE>
Municipal Trust
Trustees
Timothy K. Armour
President of Mutual Fund Division and Director of Stein Roe & Farnham
Incorporated
Kenneth L. Block
Chairman Emeritus, A. T. Kearney, Inc.
William W. Boyd
Chairman and Director of Sterling
Plumbing Group, Inc.
Lindsay Cook
Senior Vice President of Liberty Financial Companies, Inc.
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Gordon R. Worley
Private investor
<PAGE>
Officers
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President,
Secretary
N. Bruce Callow, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Thomas W. Butch, Vice President
Joanne T. Costopoulos, Vice President
Philip D. Hausken, Vice President
Stephen P. Lautz, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
M. Jane McCart, Vice President
Jill K. Netzel, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Thomas P. Sorbo, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
Agents and Advisers
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
<PAGE>
Graphic SteinRoe Logo
The SteinRoe Funds
SteinRoe Government Reserves
SteinRoe Cash Reserves
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Young Investor Fund
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe International Fund
P.O. Box 804058
Chicago, Illinois 60680
1 800 338-2550
In Chicago, visit our Investor Center
at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member, SIPC
8/95
20040
