<PAGE>
File No. 2-99356
Rule No. 497(e)
STEINROE MUNICIPAL TRUST
STEINROE HIGH-YIELD MUNICIPALS
ARIZONA AND TEXAS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 1, 1994
______________________
High-Yield Municipals invests principally in long-term medium- or
lower-quality securities. Lower-quality securities are generally
considered to be obligations that are rated below Baa by Moody's or
below BBB by S&P and unrated obligations. Such high-yield, high-risk
obligations are commonly referred to as "junk bonds." If the Fund were
to invest a significant portion of its assets in such obligations, the
Fund could be considered speculative and, therefore, might not be
suitable for all investors. As of the date of this supplement,
however, less than 35% of the Fund's total assets are invested in such
obligations, but no assurance can be given that the Fund will continue
to do so.
The Date of this Supplement is June 22, 1995
AZ/TX
<PAGE>
STEINROE MUNICIPAL TRUST
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
Supplement to Prospectus Dated November 1, 1994
____________________________
On April 19, 1995, the Board of Trustees of SteinRoe Municipal Trust
voted to convert the Municipal Money Market Fund into the Master
Fund/Feeder Fund structure. (See the discussion of the Master
Fund/Feeder Fund Option under Risks and Investment Considerations in
the Prospectus.) It is anticipated that on or about August 1, 1995,
all of the assets of the Municipal Money Market Fund will be invested
in the SR&F Municipal Money Market Portfolio, a series of the SR&F Base
Trust (the "Conversion"). The Municipal Money Market Portfolio and the
Municipal Money Market Fund have identical investment objectives and
policies.
Under the current investment advisory agreement, Stein Roe & Farnham
Incorporated (the "Adviser") furnishes both portfolio management
services and administrative services to the Fund. Upon the Conversion,
however, the current agreement would terminate. It would be replaced
by two separate new agreements approved by the Board at a meeting on
April 19, 1995, subject to approval by the Fund's shareholders at a
special meeting scheduled for June 27, 1995. If approved by
shareholders, the proposed new agreements would become effective upon
the date of the Conversion.
One of the proposed new agreements would be a management agreement
between the Adviser and the SR&F Base Trust providing for portfolio
management services to the Municipal Money Market Portfolio. The other
proposed new agreement would be an administrative agreement between the
Adviser and the Municipal Trust providing for administrative services
to the Municipal Money Market Fund.
Total fees payable by the Fund under the proposed schedule are no
greater than under the current schedule. In addition, the Adviser's
current undertaking to reimburse the Fund for expenses on an annualized
basis in excess of 0.70 of 1% of average net assets would remain in
effect. The current and proposed fee schedules are stated below at
annual rates as a percentage of average daily net assets:
Proposed Fee Schedule
Current Fee Schedule (dollar amounts in millions)
- -------------------- -------------------------------------------
Management and Management Administrative Total
Administrative Fee Fee Fee Fees
- ------------------- ---------- -------------- ---------------
.50% .25% .25% up to $500, .50% up to $500,
.20% next $500, .45% next $500,
.15% thereafter .40% thereafter
* * *
From time to time, the Adviser may voluntarily waive its management fee
and/or absorb certain Fund expenses. Beginning May 1, 1995, the
Adviser has agreed to voluntarily waive its management fee and absorb
the expenses of Intermediate Municipals to the extent that such fees
and expenses on an annualized basis exceed 0.70 of 1% of average net
assets through October 31, 1995, subject to earlier termination by the
Adviser on 30 days' notice.
* * *
Effective May 1, 1995, there is a change in the services provided by
the Funds' transfer agent and a change in the fees payable to the
transfer agent. These changes are expected to change annual operating
expenses as shown in the Fee Table on page 4 of the Prospectus as
follows:
Annual Fund Operating Expenses
(as a percentage of average
net assets) Managed High-Yield
Municipals Municipals
---------- -----------
Management Fees 0.52% 0.54%
12b-1 Fees None None
Other Expenses 0.20% 0.27%
Total Fund Operating Expenses 0.72% 0.81%
The corresponding figures for Intermediate Municipals and Municipal
Money Market Fund are not expected to change as a result of the changes
in the transfer agency agreement. In addition, the expenses payable on
a $1,000 investment in the hypothetical example following the Fee Table
would be changed as follows:
1 year 3 years 5 years 10 years
----- ------- ------- --------
Managed Municipals $7 $23 $40 $ 89
High-Yield Municipals 8 26 45 100
The Date of this Supplement is April 19, 1995
<PAGE>
STEINROE MUNICIPAL TRUST
Supplement to Prospectus Dated November 1, 1994
______________________
Effective February 1, 1995, M. Jane McCart has assumed portfolio
management responsibility for High-Yield Municipals from James S.
Grabovac. Ms. McCart also manages Managed Municipals. Both Funds
invest primarily in long-term Municipal Securities. Please refer to
pages 25-26 of this prospectus for further information on Ms. McCart.
In addition, Joanne T. Costopoulos, who is the portfolio manager of
Intermediate Municipals, has been named associate portfolio manager for
Municipal Money Market Fund, High-Yield Municipals, and Managed
Municipals.
The Date of this Supplement is February 1, 1995
<PAGE> 1
___________________________
MUNICIPAL MONEY
MARKET FUND
The Fund seeks maximum current income exempt from Federal income tax.
It attempts to maintain relative stability of principal and liquidity
by investing principally in a diversified portfolio of short-term
Municipal Securities.
______________________________
INTERMEDIATE
MUNICIPALS
The Fund seeks a high current yield exempt from Federal income tax,
consistent with the preservation of capital. It invests primarily in a
diversified portfolio of intermediate-term Municipal Securities.
___________________________
MANAGED
MUNICIPALS
The Fund seeks a high level of current income exempt from Federal
income tax, consistent with the preservation of capital. It invests
primarily in a diversified portfolio of long-term Municipal Securities.
___________________________
HIGH-YIELD
MUNICIPALS
The Fund seeks a high current yield exempt from Federal income tax. It
invests principally in a diversified portfolio of long-term medium- or
lower-quality Municipal Securities, which may involve greater risk.
(See How the Funds Invest--High-Yield Municipals.)
Each Fund is a "no-load" fund. There are no sales or redemption
charges, and the Funds have no 12b-1 plans. The Funds are series of
the STEINROE MUNICIPAL TRUST.
Municipal Money is a money market fund, and attempts to maintain its
net asset value at $1.00 per share. SHARES OF THE FUND ARE NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This prospectus contains information you should know before investing
in the Funds. Please read it carefully and retain it for future
reference.
A Statement of Additional Information dated November 1, 1994,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any supplements
thereto) is incorporated herein by reference. The Statement of
Additional Information and the most recent financial statements may be
obtained without charge by writing to the Secretary at the address
shown on the back cover or by calling 1-800-338-2550.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November 1, 1994.
<PAGE>2
___________________________
TABLE OF CONTENTS
Page
Summary.................................2
Fee Table ........................ .....4
Financial Highlights ...................5
The Funds ..............................9
How the Funds Invest....................9
Municipal Money......................9
Intermediate Municipals .............10
Managed Municipals ..................11
High-Yield Municipals................11
Portfolio Investments and Strategies....12
Restrictions on the Funds' Investments..14
Risks and Investment Considerations ....14
How to Purchase Shares .................16
By Check ............................16
By Wire .............................16
By Electronic Transfer ..............16
By Exchange .........................17
Purchase Price and Effective Date....17
Conditions of Purchase ..............17
Purchases Through Third Parties......17
How to Redeem Shares....................18
By Written Request ..................18
By Exchange .........................18
Special Redemption Privileges .......18
General Redemption Policies .........20
Shareholder Services ...................21
Net Asset Value ........................22
Distributions and Income Taxes..........23
Investment Return ......................24
Management of the Funds ................25
Organization and Description of Shares..27
Certificate of Authorization ...........28
_________________________
SUMMARY
SteinRoe Municipal Money Market Fund ("Municipal Money"), SteinRoe
Intermediate Municipals ("Intermediate Municipals"), SteinRoe Managed
Municipals ("Managed Municipals"), and SteinRoe High-Yield Municipals
("High-Yield Municipals") are series of the SteinRoe Municipal Trust,
an open-end diversified management investment company organized as a
Massachusetts business trust. Each Fund is a "no-load" fund. There
are no sales or redemption charges. (See The Funds and Organization
and Description of Shares.)
INVESTMENT OBJECTIVES AND POLICIES.
Each Fund seeks a high level of current income that is exempt from
Federal income tax by investing in various types of Municipal
Securities. (See Portfolio Investments and Strategies.)
MUNICIPAL MONEY seeks current income exempt from Federal income tax by
investing principally in "short-term" Municipal Securities. In
pursuing that objective, the Fund attempts to maintain relative
stability of principal and liquidity. Although there can be no
assurance that it will always be able to do so, the Fund follows
procedures that are intended to afford a reasonable expectation that
its price per share will be stabilized at $1.00. The Fund will invest
primarily in Municipal Securities rated within the top two grades
assigned by Moody's or S&P, except for certain types of issues which
must carry the highest rating. The Fund may also invest in unrated
securities that, in the opinion of the Board of Trustees, are at least
equal in quality to the foregoing ratings.
INTERMEDIATE MUNICIPALS seeks a high current yield exempt from Federal
income tax, consistent with the preservation of capital, by investing
primarily in "intermediate-term" Municipal Securities. At least 75%
<PAGE> 3
of the Fund's investments in Municipal Securities will be (i) rated at
the time of purchase within the three highest ratings by Moody's or S&P
(except that if the Fund relies on ratings by S&P for municipal notes,
such notes must be within the two highest ratings), (ii) if unrated, of
comparable quality as determined by the Adviser, or (iii) backed by the
full faith and credit or guarantee of the U.S. Government.
MANAGED MUNICIPALS seeks a high level of current income that is exempt
from Federal income tax, consistent with the preservation of capital,
by investing primarily in long-term Municipal Securities. At least 75%
of the Fund's investments in Municipal Securities will be (i) rated at
the time of purchase within the three highest ratings assigned by
Moody's or S&P (except that if the Fund relies on ratings by S&P for
municipal notes, such notes must be within the two highest ratings for
such securities), or (ii) backed by the full faith and credit or
guarantee of the U.S. Government.
HIGH-YIELD MUNICIPALS seeks a high current yield exempt from Federal
income tax by investing principally in long-term, medium- or lower-
quality Municipal Securities. Medium-quality Municipal Securities are
obligations of issuers that the Adviser believes possess adequate, but
not outstanding, capacities to service the obligations. Lower-quality
Municipal Securities are obligations of issuers that are considered
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal according to the terms of the obligation
and, therefore, carry greater investment risk, including the
possibility of issuer default and bankruptcy, and are commonly referred
to as "junk bonds." The Adviser attributes to medium- and lower-
quality obligations the same general characteristics as do rating
services. Because many issuers of medium- and lower-quality Municipal
Securities choose not to have their obligations rated by a rating
agency, many of the obligations in the Fund's portfolio may be unrated.
The market for unrated securities is usually less broad than for rated
obligations, which could adversely affect their marketability.
Each Fund may invest in Municipal Securities the interest on which is
subject to the alternative minimum tax. For a more detailed discussion
of each Fund's investment objective and policies, please see How the
Funds Invest. There is, of course, no assurance that the Funds will
achieve their investment objectives.
INVESTMENT RISKS.
The risks inherent in each Fund depend primarily upon the maturity and
quality of the obligations in the Fund's portfolio, as well as on
market conditions. Municipal Money is designed for investors who seek
little or no fluctuation in portfolio value. Intermediate Municipals
is appropriate for investors who seek more tax-exempt income than is
usually available from tax-exempt money funds and who can accept some
fluctuation in portfolio value. Managed Municipals is appropriate for
investors who seek higher tax-exempt income than normally provided by
shorter-term tax-exempt securities and who can accept the greater
portfolio fluctuation associated with long-term Municipal Securities.
High-Yield Municipals is designed for investors who seek a high level
of tax-exempt income and who can accept still greater fluctuation in
portfolio value and other risks, such as increased credit risk,
associated with medium- or lower-quality long-term Municipal
Securities. See Risks and Investment Considerations for further
information.
PURCHASES.
The minimum initial investment for each Fund is $2,500, and additional
investments must be at least $100 (only $50 for purchases by electronic
transfer). Shares may be purchased by check, by bank wire, by
electronic transfer, or by exchange from another SteinRoe Fund. For
more detailed information, see How to Purchase Shares.
<PAGE> 4
REDEMPTIONS.
For information on redeeming Fund shares, including the special
redemption privileges, see How to Redeem Shares.
DISTRIBUTIONS.
Dividends are declared each business day and are paid monthly.
Dividends will be reinvested into your Fund account unless you elect to
have them paid in cash, deposited by electronic transfer into your bank
checking account, or invested into another SteinRoe Fund account. (See
Distributions and Income Taxes and Shareholder Services.)
ADVISER AND FEES.
Stein Roe & Farnham Incorporated (the "Adviser") is investment adviser
to the Funds. For a description of the Adviser and the advisory fees
paid by the Funds, see Management of the Funds.
If you have any additional questions about the Funds, please feel free
to discuss them with a relationship manager by calling 1-800-338-2550.
_________________________
FEE TABLE
<TABLE>
<CAPTION>
Municipal High-
Money Intermediate Managed Yield
Fund Municipals Municipals Municipals
-------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None None
Sales Load Imposed on Reinvested
Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None* None None None
Exchange Fees None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management and Administrative
Fees ... .50% .56% .52% .54%
12b-1 Fees None None None None
Other Expenses . .20% .15% .13% .22%
---- ---- ---- ----
Total Fund Operating Expenses .70% .71% .65% .76%
---- ---- ---- ----
---- ---- ---- ----
<FN>
____________________
*There is a $3.50 charge for wiring redemption proceeds to your bank.
</TABLE>
EXAMPLES. You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Municipal Money Fund $7 $22 $39 $87
Intermediate Municipals 7 23 40 88
Managed Municipals 7 21 36 81
High-Yield Municipals 8 24 42 94
The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as
an investor in a Fund. The information in the table is based upon
actual
<PAGE> 5
expenses incurred in the last fiscal year. (Also see Management of the
Funds--Fees and Expenses.) The Adviser has undertaken to reimburse
Municipal Money for its expenses in excess of .7 of 1% of average net
assets through October 31, 1995, subject to earlier termination by the
Adviser on 30 days' notice. There was no reimbursement to Municipal
Money during the last fiscal year because its actual expenses were less
than the amount of the expense limitation.
For purposes of the Examples above, the figures assume that the
percentage amounts listed for the respective Funds under Annual Fund
Operating Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, if any, the Funds' respective net assets remain at the
same levels as in the most recently completed fiscal year.
The figures in the Examples are not necessarily indicative of past or
future expenses, and actual expenses may be greater or less than those
shown. Although information such as that shown above is useful in
reviewing the Funds' expenses and in providing a basis for comparison
with other mutual funds, it should not be used for comparison with
other investments using different assumptions or time periods.
_________________________
FINANCIAL HIGHLIGHTS
The tables below reflect the results of operations of the Funds on a
per-share basis for the periods shown. The tables for Municipal Money
and High-Yield Municipals and information for the periods beginning
after December 31, 1987 for Managed Municipals and Intermediate
Municipals have been audited by Ernst & Young LLP, independent
auditors. All of the auditors' reports related to information for
these periods were unqualified. These tables should be read in
conjunction with the respective Fund's financial statements and notes
thereto. The Funds' annual report, which may be obtained from the
Trust upon request without charge, contains additional performance
information.
<PAGE> 6
MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ------- ---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income .054 .047 .041 .040 .021 .056 .054 .046 .032 .020 .019
Distributions from
net investment income (.054) (.047) (.041) (.040) (.021) (.056) (.054) (.046) (.032) (.020) (.019)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of expenses
to average net
assets (b) 0.60% 0.60% 0.60% 0.69% *0.67% 0.67% 0.67% 0.68% 0.70% 0.70% 0.70%
Ratio of net
investment income to
average net assets
(c) 5.45% 4.74% 4.05% 4.08% *4.25% 5.57% 5.40% 4.66% 3.19% 1.96% 1.88%
Total return 5.59% 4.82% 4.22% 4.11% *4.29% 5.74% 5.52% 4.74% 3.25% 1.97% 1.90%
Net assets, end of
period (000 omitted) $145,291 $152,277 $251,465 $306,971 $294,116 $254,261 $255,953 $237,403 $199,037 $195,887 $165,820
</TABLE>
<PAGE> 10
INTERMEDIATE MUNICIPALS
<TABLE>
<CAPTION>
Six
Period Months
Ended Years Ended Ended
Dec. 31, December 31, June 30, Years Ended June 30,
1985 (a) 1986 1987 1988 1989 1990 1991 1992 1993 1994
------- ---- ---- ------- ---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $10.00 $10.14 $10.76 $10.37 $10.43 $10.50 $10.54 $10.73 $11.06 $11.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
Investment Operations
Net investment income .12 .58 .57 .29 .62 .63 .62 .57 .54 .53
Net realized and
unrealized gains
(losses) on
investments .14 .62 (.38) .06 .07 .07 .22 .50 .63 (.39)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .26 1.20 .19 .35 .69 .70 .84 1.07 1.17 .14
Distributions
Net investment income (.12) (.58) (.57) (.29) (.62) (.63) (.62) (.57) (.54) (.53)
Net realized capital
gains -- -- (.01) -- -- (.03) (.03) (.17) (.12) (.17)
In excess of realized
gains -- -- -- -- -- -- -- -- -- (.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.12) (.58) (.58) (.29) (.62) (.66) (.65) (.74) (.66) (.71)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD $10.14 $10.76 $10.37 $10.43 $10.50 $10.54 $10.73 $11.06 $11.57 $11.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net expenses
to average net
assets (b) *0.80% 0.80% 0.80% *0.80% 0.80% 0.80% 0.80% 0.79% 0.72% 0.71%
Ratio of net
investment income to
average net assets
(c) *5.82% 5.45% 5.47% *5.66% 5.96% 5.96% 5.79% 5.23% 4.79% 4.63%
Portfolio turnover
rate 0% 10% 49% **22% 83% 141% 96% 109% 96% 55%
Total return **2.61% 12.09% 1.93% **3.45% 6.85% 6.85% 8.18% 10.31% 10.92% 1.16%
Net assets, end of
period (000 omitted) $22,973 $104,750 $96,143 $97,308 $91,304 $98,918 $118,651 $165,401 $245,441 $238,053
</TABLE>
<PAGE> 11
MANAGED MUNICIPALS
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 7.71 $ 7.89 $ 8.93 $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85 $ 9.11 $ 9.38
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
Investment Operations
Net investment income .67 .68 .67 .61 .30 .61 .59 .56 .55 .52 .50
Net realized and
unrealized gains
(losses) on
investments .18 1.07 1.21 (.59) .11 .44 (.06) .19 .46 .42 (.51)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .85 1.75 1.88 .02 .41 1.05 .53 .75 1.01 .94 (.01)
Distributions
Net investment income (.67) (.68) (.67) (.61) (.30) (.61) (.59) (.56) (.55) (.52) (.50)
Net realized capital
gains -- (.03) (.92) (.13) -- (.03) (.25) (.05) (.20) (.15) (.11)
In excess of realized
gains -- -- -- -- -- -- -- -- -- -- (.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.67) (.71) (1.59) (.74) (.30) (.64) (.84) (.61) (.75) (.67) (.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 7.89 $ 8.93 $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85 $ 9.11 $ 9.38 $ 8.70
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of expenses to
average net assets 0.64% 0.65% 0.65% 0.65% *0.65% 0.65% 0.66% 0.66% 0.64% 0.64% 0.65%
Ratio of net
investment income
to average net
assets 8.74% 8.11% 7.04% 6.99% *7.03% 7.00% 6.66% 6.39% 6.17% 5.65% 5.45%
Portfolio turnover
rate 190% 113% 92% 113% **28% 102% 95% 203% 94% 63% 36%
Total return 11.63% 23.00% 21.70% 0.39% **4.90% 12.69% 6.15% 8.92% 11.95% 10.79% (0.29%)
Net assets, end
of period
(000 omitted) $242,693 $357,360 $523,947 458,170 $467,595 $514,898 $584,081 $655,930 $725,472 $776,694 $687,252
</TABLE>
<PAGE> 12
HIGH-YIELD MUNICIPALS
<TABLE>
<CAPTION> Six
Period Months
Ended Years Ended Ended
Dec. 31, December 31, June 30, Years Ended June 30,
1984(a) 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------- ---- ---- ---- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.02 $11.10 $12.06 $11.06 $11.37 $11.97 $11.78 $11.79 $11.83 $11.84
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income .73 .94 .90 .87 .44 .88 .85 .82 .80 .71 .67
Net realized and
unrealized gains
(losses) on
investments .02 1.08 1.11 (.89) .31 .63 .02 .17 .22 .18 (.54)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .75 2.02 2.01 (.02) .75 1.51 .87 .99 1.02 .89 .13
Distributions
Net investment income (.73) (.94) (.90) (.87) (.44) (.88) (.85) (.82) (.80) (.71) (.67)
Net realized capital
gains -- -- (.15) (.11) -- (.03) (.21) (.16) (.18) (.17) (.17)
In excess of realized
gains -- -- -- -- -- -- -- -- -- -- (.07)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.73) (.94) (1.05) (.98) (.44) (.91) (1.06) (.98) (.98) (.88) (.91)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $10.02 $11.10 $12.06 $11.06 $11.37 $11.97 $11.78 $11.79 $11.83 $11.84 $11.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net expenses
to average net
assets (b) *0.80% 0.80% 0.76% 0.73% *0.76% 0.73% 0.71% 0.71% 0.69% 0.73% 0.76%
Ratio of net investment
income to average
net assets (c) *9.60% 8.89% 7.77% 8.20% *7.87% 7.54% 7.22% 7.00% 6.75% 6.04% 5.76%
Portfolio turnover
rate **68% 46% 34% 110% **53% 208% 261% 195% 88% 75% 36%
Total return **7.97% 20.96% 18.64% (0.16%) **6.89% 13.79% 7.59% 8.79% 9.01% 7.88% 0.95%
Net assets,
end of period
(000 omitted) $32,780 $99,796 $225,883 181,600 $201,274 $277,620 $310,582 $373,948 $410,613 $359,103 $308,181
<FN>
*Annualized.
**Not annualized.
(a) The Funds commenced operations on the following dates:
Intermediate Municipals, October 9, 1985 and High-Yield Municipals,
March 5, 1984.
(b) If the Funds had paid all of their expenses and there had been no
reimbursement of expenses by the Adviser, these ratios would have
been: for Municipal Money, 0.70%, 0.72%, and 0.70% for the years
ended December 31, 1984, 1985 and 1986, respectively; for
Intermediate Municipals, 2.38% for the period ended December 31,
1985, 0.94% and 0.83% for the years ended December 31, 1986 and
1987, respectively, 0.87% for the six months ended June 30, 1988,
and 0.82%,
<PAGE> 9
0.81%, and 0.81% for the years ended June 30, 1989 through 1991,
respectively; and for High-Yield Municipals, 1.43% for the period
ended December 31, 1984 and 0.81% for the year ended December 31,
1985.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
_________________________
THE FUNDS
The mutual funds offered by this prospectus are STEINROE MUNICIPAL
MONEY MARKET FUND ("Municipal Money"), STEINROE INTERMEDIATE MUNICIPALS
("Intermediate Municipals"), STEINROE MANAGED MUNICIPALS ("Managed
Municipals"), and STEINROE HIGH-YIELD MUNICIPALS ("High-Yield
Municipals") (collectively, the "Funds"). Each of the Funds is a no-
load, diversified "mutual fund." Mutual funds sell their own shares to
investors and invest the proceeds in a portfolio of securities. A
mutual fund allows you to pool your money with that of other investors
in order to obtain professional investment management. Mutual funds
generally make it possible for you to obtain greater diversification of
your investments and simplify your recordkeeping. The Funds do not
impose commissions or charges when shares are purchased or redeemed.
The Funds are series of the SteinRoe Municipal Trust (the "Trust"), an
open-end management investment company, which is authorized to issue
shares of beneficial interest in separate series. Each series
represents interests in a separate portfolio of securities and other
assets, with its own investment objectives and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides investment
advisory, administrative, and accounting and recordkeeping services to
the Funds. The Adviser also manages several other no-load mutual funds
with different investment objectives, including international funds,
equity funds, taxable bond funds, and money market funds. To obtain
prospectuses and other information on any of those mutual funds, please
call 1-800-338-2550.
_________________________
HOW THE FUNDS INVEST
Each Fund seeks a high level of current income that is exempt from
Federal income tax by investing in Municipal Securities (described
under Portfolio Investments and Strategies below), consistent with
specified maturity and quality standards that differ among the Funds.
Each Fund will invest as described below and also may employ the
investment techniques described elsewhere in this prospectus.
MUNICIPAL MONEY.
This Fund seeks maximum current income exempt from Federal income tax
by investing principally in a diversified portfolio of "short-term"
Municipal Securities. In pursuing that objective, the Fund attempts to
maintain relative stability of principal and liquidity. Generally,
"short-term" securities are those with remaining maturities of no more
than thirteen months. Although there can be no assurance that it will
always be able to do so, the Fund follows procedures that the Board of
Trustees believes are reasonably designed to stabilize its price per
share at $1.00. These procedures and the definition of "short-term"
are described in detail in the Statement of Additional Information.
<PAGE> 10
It is a fundamental policy /1/ that normally at least 80% of the
Fund's investments will produce income that is exempt from Federal
income tax, except for periods that the Adviser believes require a
defensive position /2/ for the protection of shareholders.
The Fund may invest in Municipal Securities that, at the time of
purchase, are rated within the two highest ratings assigned by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), except that if the Fund relies on ratings by Moody's for
municipal commercial paper or ratings by S&P for short-term municipal
notes, such securities must carry the highest rating assigned by the
respective rating service. /3/ The Fund may also invest in unrated
securities that, in the opinion of the Board of Trustees, are at least
equal in quality to the foregoing ratings. The Fund also may invest in
[i] securities backed by the full faith and credit of the U.S.
Government or [ii] securities as to which payment of principal and
interest is collateralized by an escrow of securities issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities ["U.S. Government Securities"]. The policies
described in the preceding three sentences (except for the portions in
brackets) are fundamental policies. In accordance with SEC Rule 2a-7
under the Investment Company Act, each security in which the Fund
invests will be U.S. dollar denominated and (i) rated (or be issued by
an issuer that is rated with respect to its short-term debt) within the
two highest rating categories for short-term debt by at least two
nationally recognized statistical rating organizations ("NRSRO") or, if
rated by only one NRSRO, rated within the two highest rating categories
by that NRSRO, or, if unrated, determined by or under the direction of
the Board of Trustees to be of comparable quality, and (ii) determined
by or under the direction of the Board of Trustees to present minimal
credit risks.
INTERMEDIATE MUNICIPALS.
This Fund seeks a high current yield exempt from Federal income tax,
consistent with the preservation of capital, by investing primarily in
a diversified portfolio of "intermediate-term" Municipal Securities.
Normally, at least 65% of the Fund's assets will be invested in
Municipal Securities with a maturity of ten years or less (including
Municipal Securities with longer maturities, but under which the holder
is entitled to receive, upon demand at a stated time within ten years,
the entire principal and accrued interest). In addition, the Fund's
portfolio is expected to have a dollar-weighted average maturity of
between three and ten years.
It is a fundamental policy that normally at least 80% of the Fund's
investments will produce income that is exempt from Federal income tax,
except during periods that the Adviser believes require a temporary
defensive position for the protection of shareholders.
At least 75% of the Fund's investments in Municipal Securities will be
(i) rated at the time of purchase within the three highest ratings by
Moody's or S&P (except that if the Fund relies on ratings by S&P for
municipal notes, such notes must be within the two highest ratings),
(ii) if unrated, of comparable quality as determined by the Adviser, or
(iii) backed by the U.S. Government or by an agency or instrumentality
- -----------------------
/1/ A fundamental policy of a Fund may be changed only with the
approval of a "majority of the outstanding voting securities" of the
Fund as defined in the Investment Company Act of 1940.
/2/ A defensive position is one that temporarily reduces a Fund's
exposure to anticipated adverse market changes.
/3/ For a description of Moody's and S&P ratings, see the Appendix to
the Statement of Additional Information. All references to ratings
apply to any ratings adopted in the future by a rating service that are
determined by the Board of Trustees to be equivalent to current
ratings.
<PAGE> 11
of the U.S. Government or by U.S. Government Securities. The Fund may
also invest up to 25% of its assets in other Municipal Securities
without any minimum credit quality requirement, including those for
which a limited market may exist, which normally involve greater risk
of loss of principal or income and higher yield.
MANAGED MUNICIPALS.
This Fund seeks a high level of current income that is exempt from
Federal income tax, consistent with the preservation of capital, by
investing in a diversified portfolio of Municipal Securities. The Fund
invests primarily in long-term Municipal Securities (generally maturing
in more than ten years) but may also invest in shorter-term securities
as a temporary defensive move.
It is a fundamental policy that the Fund's assets will be invested so
that at least 80% of its income will be exempt from Federal income tax,
except during periods in which the Adviser believes a temporary
defensive position is advisable.
At least 75% of the Fund's investments in Municipal Securities will be
(i) rated at the time of purchase within the three highest ratings
assigned by Moody's or S&P (except that if the Fund relies on ratings
by S&P for municipal notes, such notes must be within the two highest
ratings for such securities) or (ii) backed by the U.S. Government, by
an agency or instrumentality of the U.S. Government or by U.S.
Government Securities. The Fund may also invest up to 25% of its
assets in other Municipal Securities without any minimum credit quality
requirement, including those for which a limited market may exist,
which normally involve greater risk of loss of principal or income and
higher yield.
HIGH-YIELD MUNICIPALS.
This Fund seeks a high current yield exempt from Federal income tax by
investing primarily in a diversified portfolio of Municipal Securities.
The Fund invests principally in long-term (generally maturing in more
than ten years) medium- or lower-quality Municipal Securities bearing a
high rate of interest income; possible capital appreciation is of
secondary importance.
It is a fundamental policy that normally the Fund's assets will be
invested so that at least 80% of its gross income will be derived from
securities the interest on which is exempt from Federal income tax in
the opinion of counsel for the issuers of such securities, except
during periods in which the Adviser believes a temporary defensive
position is advisable.
Medium-quality Municipal Securities are obligations of issuers that the
Adviser believes possess adequate, but not outstanding, capacities to
service the obligations. Lower-quality Municipal Securities are
obligations of issuers that are considered predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk bonds."
The lowest rating assigned by Moody's is for bonds that can be regarded
as having extremely poor prospects of ever attaining any real
investment standing. The Adviser attributes to medium- and lower-
quality obligations the same general characteristics as do rating
services. Because many issuers of medium- and lower-quality Municipal
Securities choose not to have their obligations rated by a rating
agency, many of the obligations in the Fund's portfolio may be unrated.
<PAGE> 12
Investment in medium- or lower-quality debt securities involves greater
investment risk, including the possibility of issuer default or
bankruptcy. An economic downturn could severely disrupt this market
and adversely affect the value of outstanding bonds and the ability of
the issuers to repay principal and interest. During a period of
adverse economic changes, including a period of rising interest rates,
issuers of such bonds may experience difficulty in servicing their
principal and interest payment obligations.
Medium- and lower-quality debt securities tend to be less marketable
than higher-quality debt securities because the market for them is less
broad. The market for unrated debt securities is even narrower.
During periods of thin trading in these markets, the spread between bid
and asked prices is likely to increase significantly, and the Fund may
have greater difficulty selling its portfolio securities.
Although the Fund invests principally in medium- or lower-quality
Municipal Securities, it may invest in Municipal Securities of higher
quality when the Adviser believes it is appropriate to do so.
For the fiscal year ended June 30, 1994, the Fund's portfolio was
invested, on average, as follows: high-quality short-term instruments,
2.72%; AAA, 9.34%; AA, 19.54%; A, 33.20%; BBB, 18.08%; BB, 3.40%; CC,
0.36%; and unrated, 13.36%. The ratings are based on a dollar-weighted
average, computed monthly, and reflect the higher of S&P or Moody's
ratings. The ratings do not necessarily reflect the current or future
composition of the Fund's portfolio.
_________________________
PORTFOLIO INVESTMENTS
AND STRATEGIES
MUNICIPAL SECURITIES.
Municipal Securities are debt obligations issued by or on behalf of the
governments of states, territories or possessions of the United States,
the District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is generally exempt from the
regular Federal income tax. Except with respect to Municipal Money and
subject to each Fund's investment policies described above, each Fund
may invest in Municipal Securities rated with any credit rating below
investment grade. Medium- and lower-quality Municipal Securities
involve greater investment risk, as discussed above under How the Funds
Invest--High-Yield Municipals.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. "General obligation" bonds are
secured by the issuer's pledge of its faith, credit, and taxing power
for the payment of principal and interest. "Revenue" bonds are usually
payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special
excise tax or other specific revenue source. Industrial development
bonds are usually revenue bonds, the credit quality of which is
normally directly related to the credit standing of the industrial user
involved. Municipal Securities may bear either fixed or variable rates
of interest. Variable rate securities bear rates of interest that are
adjusted periodically according to formulae intended to minimize
fluctuation in values of the instruments.
Within the principal classifications of Municipal Securities, there are
various types of instruments, including municipal bonds, municipal
notes, municipal leases, custodial receipts, and participation
certificates. Municipal notes include tax, revenue, and bond
anticipation notes of short maturity, generally less than
<PAGE> 13
three years, which are issued to obtain temporary funds for various
public purposes. Municipal lease securities, and participation
certificates therein, evidence certain types of interests in lease or
installment purchases contract obligations of a municipal authority or
other entity. Custodial receipts represent ownership in future
interest or principal payments (or both) on certain Municipal
Securities and are underwritten by securities dealers or banks. Some
Municipal Securities may not be backed by the faith, credit, and taxing
power of the issuer and may involve "non-appropriation" clauses which
provide that the municipal authority is not obligated to make lease or
other contractual payments, unless specific annual appropriations are
made by the municipality. Each Fund may invest more than 5% of its net
assets in municipal bonds and notes, but does not expect to invest more
than 5% of its net assets in the other Municipal Securities described
in this paragraph.
The Funds may also purchase Municipal Securities that are insured as to
the timely payment of interest and principal. Such insured Municipal
Securities may already be insured when purchased by a Fund or the Fund
may purchase insurance in order to turn an uninsured Municipal Security
into an insured Municipal Security.
Some Municipal Securities are backed by (i) the full faith and credit
of the U.S. Government, (ii) agencies or instrumentalities of the U.S.
Government, or (iii) U.S. Government Securities.
Except with respect to Municipal Securities with a demand feature
acquired by Municipal Money (see the definition of "short-term" in the
Statement of Additional Information), if, after purchase by a Fund, an
issue of Municipal Securities ceases to meet the required rating
standards, if any, the Fund is not required to sell such security, but
the Adviser would consider such an event in deciding whether the Fund
should retain the security in its portfolio. In the case of Municipal
Securities with a demand feature acquired by Municipal Money, if the
quality of such a security falls below the minimum level applicable at
the time of acquisition, the Fund must dispose of the security, unless
the Board of Trustees determines that it is in the best interests of
the Fund and its shareholders to retain the security.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
Each Fund's assets may include securities purchased on a when-issued or
delayed-delivery basis. Although the payment and interest terms of
these securities are established at the time the purchaser enters into
the commitment, the securities may be delivered and paid for a month or
more after the date of purchase, when their value may have changed.
The Funds make such commitments only with the intention of actually
acquiring the securities, but may sell the securities before settlement
date if it is deemed advisable for investment reasons. Securities
purchased in this manner involve a risk of loss if the value of the
security purchased declines before settlement date.
STANDBY COMMITMENTS.
To facilitate portfolio liquidity, each Fund may obtain standby
commitments when it purchases Municipal Securities. A standby
commitment gives the holder the right to sell the underlying security
to the seller at an agreed-upon price on certain dates or within a
specified period.
PARTICIPATION INTERESTS.
Each Fund may also purchase participation interests or certificates of
participation in all or part of specific holdings of Municipal
Securities, including municipal lease obligations. Some participation
interests,
<PAGE> 14
certificates of participation, and municipal lease obligations are
illiquid and, as such, will be subject to the Funds' 15% limit on
investments in illiquid securities.
FUTURES AND OPTIONS.
Each of Intermediate Municipals, Managed Municipals, and High Yield
Municipals may purchase and write both call options and put options on
securities and on indexes, and enter into interest rate and index
futures contracts and options on such futures contracts in order to
provide additional revenue, or to hedge against changes in security
prices or interest rates. Each Fund may write a call or put option
only if the option is covered. As the writer of a covered call option,
the Fund foregoes, during the option's life, the opportunity to profit
from increases in market value of the security covering the call option
above the sum of the premium and the exercise price of the call.
Because of low margin deposits required, the use of futures contracts
involves a high degree of leverage, and may result in losses in excess
of the amount of the margin deposit. Since there can be no assurance
that a liquid market will exist when the Fund seeks to close out a
position, these risks may become magnified.
_________________________
RESTRICTIONS ON THE
FUNDS' INVESTMENTS
No Fund will: (i) with respect to 75% of its total assets, invest more
than 5% of its total assets in the securities of any one issuer (except
for obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities; guarantees or letters of credit of a
single guarantor may exceed this limit; see the Statement of Additional
Information); or (ii) invest more than 25% of its total assets in
securities of non-governmental issuers whose principal business
activities are in the same industry. Notwithstanding these
limitations, each Fund may invest all or substantially all of its
assets in another registered investment company having the same
investment objective and substantially similar investment policies as
the Fund. No Fund may borrow money or pledge or mortgage its assets
except as a temporary measure for extraordinary or emergency purposes,
and then the aggregate borrowings at any one time (including any
reverse repurchase agreements) may not exceed 33 1/3% of its assets (at
market value). No Fund may purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets. (See, however, Risks and
Investment Considerations.) The restrictions described in this section
are fundamental policies of the Funds. All of the investment
restrictions are set forth in the Statement of Additional Information.
_________________________
RISKS AND INVESTMENT
CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Although each Fund seeks to
reduce risk by investing in a diversified portfolio, this does not
eliminate all risk. The risks inherent in each Fund depend primarily
upon the maturity and quality of the obligations in that Fund's
portfolio, as well as on market conditions. A decline in prevailing
levels of interest rates generally increases the value of securities in
a Fund's portfolio, while an increase in rates usually reduces the
value of those securities.
<PAGE> 15
Generally, high-quality short-term obligations offer lower yields and
less fluctuation in value than long-term low-quality obligations.
Consequently, Municipal Money is designed for investors who seek little
or no fluctuation in portfolio value. Intermediate Municipals is
appropriate for investors who seek more tax-exempt income than is
usually available from tax-exempt money funds and who can accept some
fluctuation in portfolio value. Managed Municipals is appropriate for
investors who seek higher tax-exempt income than normally provided by
shorter-term tax-exempt securities and who can accept the greater
portfolio fluctuation associated with long-term Municipal Securities.
High-Yield Municipals is designed for investors who seek a high level
of tax-exempt income and who can accept still greater fluctuation in
portfolio value and other risks, such as increased credit risk,
associated with medium- and lower-quality long-term Municipal
Securities.
Although the Funds currently limit their investments in Municipal
Securities to those the interest on which is exempt from the regular
Federal income tax, each Fund may invest up to 100% of its total assets
in Municipal Securities the interest on which is subject to the Federal
alternative minimum tax. (See Distributions and Income Taxes.)
Each Fund's objective is not fundamental and may be changed by the
Board of Trustees without a vote of shareholders. If there is a change
in a Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-
current financial position and needs. There can be no assurance that a
Fund will achieve its objective, nor can a Fund assure that payments of
interest and principal on portfolio obligations will be made when due.
In seeking to attain its objective, a Fund may sell securities without
regard to the period of time they have been held. As a result, the
turnover rate may vary from year to year. A high rate of portfolio
turnover may result in increased transaction costs and the realization
of capital gains or losses.
Each Fund may invest 25% or more of its assets in Municipal Securities
that are related in such a way that an economic, business, or political
development affecting one such security could also affect the other
securities. For example, Municipal Securities the interest upon which
is paid from revenues of similar-type projects, such as hospitals,
utilities, or housing, would be so related. Each Fund may invest 25%
or more of its assets in industrial development bonds (subject to the
concentration restrictions described in this prospectus under
Restrictions on the Funds' Investments and in the Statement of
Additional Information). Assets of a Fund that are not invested in
Municipal Securities may be held in cash or invested in short-term
taxable investments. /4/
MASTER FUND/FEEDER FUND OPTION.
Rather than invest in Municipal Securities directly, each Fund may in
the future seek to achieve its investment objective by pooling its
assets with assets of other mutual funds managed by the Adviser for
investment in another investment company having the same investment
objective and substantially the same investment policies and
restrictions as the Fund. The purpose of such an arrangement is to
achieve greater operational efficiencies and reduce costs. It is
expected that any such investment company would be managed by the
Adviser in substantially the same manner as the Fund. Shareholders of
a Fund will be given at least 30 days' prior notice of any such
investment, although they will not be entitled to vote
- --------------
/4/ The policy expressed in this sentence is a fundamental policy of
Municipal Money and Managed Municipals.
<PAGE> 16
on the action. Such investment would be made only if the Trustees
determine it to be in the best interests of the Fund and its
shareholders.
_________________________
HOW TO PURCHASE SHARES
You may purchase shares of any of the Funds by check, by wire, by
electronic transfer, or by exchange from your account with another
SteinRoe Fund. The initial purchase minimum per Fund account is
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act ("UGMA")
accounts is $1,000; and the minimum for accounts established under an
automatic investment plan (i.e., Regular Investments, Dividend Purchase
Option, or the Automatic Exchange Plan) is $1,000 for regular accounts
and $500 for UGMA accounts. Subsequent purchases must be at least
$100, or at least $50 if you purchase by electronic transfer. (See
Shareholder Services.)
BY CHECK.
To make an initial purchase of shares of a Fund, please complete and
sign the Application and mail it to P.O. Box 804058, Chicago, Illinois
60680, together with a check made payable to SteinRoe Funds.
You may make subsequent investments by submitting a check along with
either the stub from your Fund account confirmation statement or a note
indicating the amount of the purchase, your account number, and the
name in which your account is registered. Each individual check
submitted for purchase must be at least $100, and the Trust generally
will not accept cash, drafts, third party checks, or checks drawn on
banks outside of the United States. Should an order to purchase shares
of a Fund be cancelled because your check does not clear, you will be
responsible for any resulting loss incurred by that Fund.
BY WIRE.
You may also pay for shares by instructing your bank to wire Federal
funds (monies of member banks within the Federal Reserve System) to the
Funds' custodian bank. Your bank may charge you a fee for sending the
wire. If you are opening a new account by wire transfer, you must
first telephone the Trust to request an account number and furnish your
social security or other tax identification number. Neither the Funds
nor the Trust will be responsible for the consequences of delays,
including delays in the banking or Federal Reserve wire systems. Your
bank must include the full name(s) in which your account is registered
and your Fund account number, and should address its wire as follows:
State Street Bank and Trust Company
Boston, Massachusetts
Attention: Custody
Fund No. ____; SteinRoe __________
Account of (exact name(s) in registration)
Shareholder Account No. ___________
Fund Numbers:
7101--Managed Municipals
7110--Municipal Money
7113--High-Yield Municipals
7114--Intermediate Municipals
BY ELECTRONIC TRANSFER.
You may also make subsequent investments by an electronic transfer of
funds from your bank checking account. Electronic transfer allows you
to make purchases at your request ("Special Investments") by calling 1-
800-338-2550 or at pre-scheduled intervals ("Regular Investments").
(See Shareholder Services.) Electronic transfer purchases are subject
to a $50 minimum and a $100,000 maximum. You may not open
<PAGE> 17
a new account through electronic transfer. Should an order to purchase
shares of a Fund be cancelled because your electronic transfer does not
clear, you will be responsible for any resulting loss incurred by that
Fund.
BY EXCHANGE.
You may purchase shares by exchange of shares from another SteinRoe
Fund account either by phone (if the Telephone Exchange Privilege has
been established on the account from which the exchange is being made),
by mail, in person, or automatically at regular intervals (if you have
elected Automatic Exchanges). Restrictions apply; please review the
information under How to Redeem Shares--By Exchange.
PURCHASE PRICE AND EFFECTIVE DATE.
Each purchase of a Fund's shares is made at that Fund's net asset value
(see Net Asset Value) next determined after receipt of payment as
follows:
A purchase by check or wire transfer is made at the net asset value
next determined after receipt by the Fund of the check or wire transfer
of funds in payment of the purchase.
A purchase by electronic transfer is made at the net asset value next
determined after the Fund receives the electronic transfer from your
bank. A Special Electronic Transfer Investment order received by
telephone on a business day before 2:00 p.m., Chicago time, is
effective on the next business day. Shares begin earning dividends on
the day following the day on which they are purchased.
CONDITIONS OF PURCHASE.
Each purchase order for a Fund must be accepted by an authorized
officer of the Trust in Chicago and is not binding until accepted and
entered on the books of that Fund. Once your purchase order has been
accepted, you may not cancel or revoke it; however, you may redeem the
shares. The Trust reserves the right not to accept any purchase order
that it determines not to be in the best interest of the Trust or of a
Fund's shareholders. The Trust also reserves the right to waive or
lower its investment minimums for any reason. The Trust does not issue
certificates for shares.
PURCHASES THROUGH THIRD PARTIES.
You may purchase (or redeem) shares through investment dealers, banks,
or other financial institutions. These institutions may charge for
their services or place limitations on the extent to which you may use
the services offered by the Trust. There are no charges or limitations
imposed by the Trust (other than those described in this prospectus) if
shares are purchased (or redeemed) directly from the Trust.
Some financial institutions which maintain nominee accounts with the
Fund for their clients who are Fund shareholders charge an annual fee
of up to 0.25% of the average net assets held in such accounts for
accounting, servicing, and distribution services they provide with
respect to the underlying Fund shares. The Fund may pay a portion of
those fees not to exceed the fees and expenses the Fund would pay to
its transfer agent if the shares held in nominee name were registered
on the Fund's books in the individual names of the owners of such
shares. The balance of such fees are paid by the Adviser.
<PAGE> 18
_________________________
HOW TO REDEEM SHARES
BY WRITTEN REQUEST.
You may redeem all or a portion of your shares of a Fund by submitting
a written request in "good order" to the Trust at P.O. Box 804058,
Chicago, Illinois 60680. A redemption request will be considered to
have been received in good order if the following conditions are
satisfied:
(1) the request must be in writing, indicate the number of shares or
dollar amount to be redeemed, and identify the shareholder's account
number;
(2) the request must be signed by the shareholder(s) exactly as the
shares are registered;
(3) the request must be accompanied by any certificates for the shares,
either properly endorsed for transfer, or accompanied by a stock
assignment properly endorsed exactly as the shares are registered;
(4) the signatures on either the written redemption request or the
certificates (or the accompanying stock power) must be guaranteed (a
signature guarantee is not a notarization, but is a widely accepted
way to protect you and the Funds by verifying your signature);
(5) corporations and associations must submit with each request a
completed Certificate of Authorization included in this prospectus
(or a form of resolution acceptable to the Trust); and
(6) other supporting legal documents may be required from
organizations, executors, administrators, trustees, or others acting
on accounts not registered in their names.
BY EXCHANGE.
You may redeem all or any portion of your Fund shares and use the
proceeds to purchase shares of any other SteinRoe Fund offered for sale
in your state if your signed, properly completed Application is on
file. AN EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR
FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS.
Before exercising the Exchange Privilege, you should obtain the
prospectus for the SteinRoe Fund in which you wish to invest and read
it carefully. The registration of the account to which you are making
an exchange must be exactly the same as that of the Fund account from
which the exchange is made and the amount you exchange must meet any
applicable minimum investment of the SteinRoe Fund being purchased.
Unless you have elected to receive your dividends in cash, on an
exchange of all shares, any accrued unpaid dividends will be invested
in the SteinRoe Fund to which you exchange on the next business day.
An exchange may be made by following the redemption procedure described
above under By Written Request and indicating the SteinRoe Fund to be
purchased, except that a signature guarantee normally is not required.
(See also the discussion below of the Telephone Exchange Privilege and
Automatic Exchanges.)
SPECIAL REDEMPTION PRIVILEGES.
The Telephone Exchange Privilege and the Telephone Redemption by Check
Privilege will be established automatically for you when you open your
account unless you decline these Privileges on your Application. Other
Privileges must be specifically elected. If you do not want the
Telephone Exchange and Redemption Privileges, check the box(es) under
the section "Telephone Redemption Options" when
<PAGE> 19
completing your Application. In addition, a signature guarantee may be
required to establish a Privilege after you open your account. If you
establish both the Telephone Redemption by Wire Privilege and the
Electronic Transfer Privilege, the bank account that you designate for
both Privileges must be the same.
You may not use any of the Special Redemption Privileges if you hold
certificates for any of your Fund shares. (See also General Redemption
Policies.)
Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $1,000 or more from your account by
calling 1-800-338-2550 or by sending a telegram; new accounts opened by
exchange are subject to the $2,500 initial purchase minimum.
GENERALLY, YOU WILL BE LIMITED TO FOUR TELEPHONE EXCHANGE ROUND-TRIPS
PER YEAR AND THE FUNDS MAY REFUSE REQUESTS FOR TELEPHONE EXCHANGES IN
EXCESS OF FOUR ROUND-TRIPS (A ROUND-TRIP BEING THE EXCHANGE OUT OF A
FUND INTO ANOTHER STEINROE FUND, AND THEN BACK TO THAT FUND). Also,
the Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange. (See General Redemption Policies.)
The Trust reserves the right at any time without prior notice to
suspend or terminate the use of the Telephone Exchange Privilege by any
person or class of persons. The Trust believes that use of the
Telephone Exchange Privilege by investors utilizing market-timing
strategies adversely affects the Funds. THEREFORE, THE TRUST GENERALLY
WILL NOT HONOR REQUESTS FOR TELEPHONE EXCHANGES BY SHAREHOLDERS
IDENTIFIED BY THE TRUST AS "MARKET-TIMERS." Moreover, the Trust
reserves the right at any time without prior notice to suspend, limit,
modify, or terminate the Telephone Exchange Privilege in its entirety.
Because such a step would be taken only if the Board of Trustees
believes it would be in the best interests of the Funds, the Trust
expects that it would provide shareholders with prior written notice of
any such action unless it appears that the resulting delay in the
suspension, limitation, modification, or termination of the Telephone
Exchange Privilege would adversely affect the Funds. IF THE TRUST WERE
TO SUSPEND, LIMIT, MODIFY, OR TERMINATE THE TELEPHONE EXCHANGE
PRIVILEGE, A SHAREHOLDER EXPECTING TO MAKE A TELEPHONE EXCHANGE MIGHT
FIND THAT AN EXCHANGE COULD NOT BE PROCESSED OR THAT THERE MIGHT BE A
DELAY IN THE IMPLEMENTATION OF THE EXCHANGE. (See How to Redeem
Shares--By Exchange.) During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by telephone.
Automatic Exchanges. You may use the Automatic Exchange Privilege to
automatically redeem a fixed amount from your Fund account for
investment in another SteinRoe Fund account on a regular basis.
Telephone Redemption by Check Privilege. You may use the Telephone
Redemption by Check Privilege to redeem an amount of $1,000 or more
from your account by calling 1-800-338-2550. The proceeds will be sent
by check to your registered address.
Telephone Redemption by Wire Privilege (Municipal Money accounts only).
You may use this Privilege to redeem an amount of $1,000 or more from
your account by calling 1-800-338-2550. The proceeds will be
transmitted by wire to your account at a commercial bank previously
designated by you that is a member of the Federal Reserve System. The
fee for wiring proceeds (currently $3.50 per transaction) will be
deducted from the amount wired.
Check-Writing Privilege (Municipal Money accounts only). You may also
redeem shares by writing special checks in the amounts of $50 or more.
Your checks are drawn against a special checking account
<PAGE> 20
maintained with the custodian, and you will be subject to the
custodian's procedures and rules relating to its checking accounts and
to this Privilege.
Electronic Transfer Privilege. You may redeem shares by calling 1-800-
338-2550 and requesting an electronic transfer ("Special Redemption")
of the proceeds to a checking account previously designated by you at a
bank that is a member of the Automated Clearing House or at scheduled
intervals ("Automatic Redemptions"--see Shareholder Services).
Electronic transfers are subject to a $50 minimum and a $100,000
maximum. A Special Redemption request received by telephone after 2:00
p.m., Chicago time, is deemed received on the next business day.
GENERAL REDEMPTION POLICIES.
You may not cancel or revoke your redemption order once instructions
have been received and accepted. The Trust cannot accept a redemption
request that specifies a particular date or price for redemption or any
special conditions. Please telephone the Trust if you have any
questions about requirements for a redemption before submitting your
request. The Trust reserves the right to require a properly completed
Application before making payment for shares redeemed.
The price at which your redemption order will be executed is the net
asset value next determined after proper redemption instructions are
received. (See Net Asset Value.) Because the redemption price you
receive depends upon that Fund's net asset value per share at the time
of redemption, it may be more or less than the price you originally
paid for the shares and may result in a realized capital gain or loss.
The Trust will generally mail payment for shares redeemed within seven
days after proper instructions are received. However, Municipal Money
normally intends to pay proceeds of a written redemption within two
business days and proceeds of a Telephone Redemption paid by wire on
the next business day. The Trust will not be responsible for the
consequences of delays, including delays in the mail, banking, or
Federal Reserve wire systems. If you attempt to redeem shares within
15 days after they have been purchased by check or electronic transfer,
the Trust may delay payment of the redemption proceeds to you until it
can verify that payment for the purchase of those shares has been (or
will be) collected. To reduce such delays, the Trust recommends that
your purchase be made by Federal funds wire through your bank.
The Trust reserves the right at any time without prior notice to
suspend, limit, modify, or terminate any Privilege or its use in any
manner by any person or class.
Neither the Trust, its transfer agent, nor their respective officers,
trustees, directors, employees, or agents will be responsible for the
authenticity of instructions provided under the Privileges, nor for any
loss, liability, cost or expense for acting upon instructions furnished
thereunder if they reasonably believe that such instructions are
genuine. The Funds employ procedures reasonably designed to confirm
that instructions communicated by telephone under any Special
Redemption Privilege or the Special Electronic Transfer Redemption
Privilege are genuine. Use of any Special Redemption Privilege or the
Special Electronic Transfer Redemption Privilege authorizes the Funds
and their transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests the shareholder to review the transactions and inform the Fund
immediately if there is a problem. If a Fund does not follow
<PAGE> 21
reasonable procedures for protecting shareholders against loss on
telephone transactions, it may be liable for any losses due to
unauthorized or fraudulent instructions.
Generally, you may not use the Exchange Privilege or any Special
Redemption Privilege to redeem shares purchased by check (other than
certified or cashiers' checks) or electronic transfer until 15 days
after their date of purchase.
The Trust reserves the right to redeem shares in any account and send
the proceeds to the owner if the shares in the account do not have a
value of at least $1,000.
Shares in any account you maintain with a Fund or any of the other
SteinRoe Funds may be redeemed to the extent necessary to reimburse any
SteinRoe Fund for any loss it sustains that is caused by you (such as
losses from uncollected checks and electronic transfers or any SteinRoe
Fund liability under the Internal Revenue Code provisions on backup
withholding).
_________________________
SHAREHOLDER SERVICES
REPORTING TO SHAREHOLDERS.
You will receive a confirmation statement reflecting each of your
purchases and redemptions of shares of a Fund, as well as periodic
statements detailing distributions made by that Fund. Shares purchased
by reinvestment of dividends, by cross-reinvestment of dividends from
another Fund, or pursuant to an automatic investment plan will be
confirmed to you quarterly. In addition, the Trust will send you
semiannual and annual reports showing Fund portfolio holdings and will
provide you annually with tax information.
FUNDS-ON-CALL [REGISTERED TRADEMARK] 24-HOUR INFORMATION SERVICE.
To access the SteinRoe Funds-on-Call [registered trademark] automated
telephone service, just call 1-800-338-2550 on any touch-tone telephone
and follow the recorded instructions. Funds-on-Call [registered
trademark] provides yields, prices, latest dividends, account balances,
last transaction, and other information 24 hours a day, seven days a
week.
FUNDS-ON-CALL [REGISTERED TRADEMARK] AUTOMATED TELEPHONE TRANSACTIONS.
If you have established the Funds-on-Call [registered trademark]
transaction privilege (Funds-on-Call [registered trademark] Application
will be required), you may initiate Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by Check 24
hours a day, seven days a week by calling 1-800-338-2550 on a touch-
tone telephone. These transactions are subject to the terms and
conditions of the individual privileges. (See How to Purchase Shares
and How to Redeem Shares.)
STEINROE COUNSELOR [SERVICE MARK] PROGRAM.
The Adviser offers a SteinRoe Counselor [service mark] and a SteinRoe
Counselor Preferred [service mark] program. The programs are designed
to provide investment guidance in helping investors to select a
portfolio of SteinRoe Mutual Funds. The SteinRoe Counselor Preferred
[service mark] program, which automatically adjusts client portfolios,
has a fee of up to 1% of assets.
RECORDKEEPING AND ADMINISTRATION SERVICES.
If you oversee or administer investments for a group of investors, we
offer a variety of services.
<PAGE> 22
SPECIAL SERVICES.
The following special services are available to shareholders. Please
call 1-800-338-2550 or write the Trust for additional information and
forms.
Dividend Purchase Option--to diversify your Fund investments by having
distributions from one Fund account automatically invested in another
SteinRoe Fund account. Before establishing this option, you should
obtain and read carefully the prospectus of the SteinRoe Fund into
which you wish to have your distributions invested. The account from
which distributions are made must be of sufficient size that each
distribution will usually be at least $25. The account into which
distributions are to be invested may be opened with an initial
investment of only $1,000.
Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into your
bank checking account.
Telephone Redemption by Check Privilege and Telephone Exchange
Privilege--established automatically when you open your account unless
you decline them on your Application ($1,000 minimum). (See How to
Redeem Shares--Special Redemption Privileges.)
Telephone Redemption by Wire Privilege--to redeem shares from your
account by phone and have the proceeds transmitted by wire to your
checking account ($1,000 minimum). (This Privilege is available only
for Municipal Money accounts.)
Check-Writing Privilege--to redeem shares by writing special checks
against your Fund account ($50 minimum per check). (This Privilege is
available only for Municipal Money accounts.)
Special Redemption Option (electronic transfer)--to redeem shares at
any time and have the proceeds deposited directly to your bank checking
account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--to purchase Fund shares at
regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--to purchase Fund shares by
telephone and pay for them by electronic transfer of funds from your
checking account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan--to automatically redeem a fixed dollar amount
from your Fund account and invest it in another SteinRoe Fund account
on a regular basis ($50 minimum; $100,000 maximum).
Automatic Redemptions (electronic transfer)--to have a fixed dollar
amount redeemed and sent at regular intervals directly to your bank
checking account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.
_________________________
NET ASSET VALUE
The purchase and redemption price of each Fund's shares is its net
asset value per share. The net asset value of a share of each Fund is
determined as of the close of trading on the New York Stock Exchange
<PAGE> 23
(currently 3:00 p.m., Chicago time) by dividing the difference between
the values of the Fund's assets and liabilities by the number of shares
outstanding. Net asset value will not be determined on days when the
Exchange is closed unless, in the judgment of the Board of Trustees,
the net asset value of a Fund should be determined on any such day, in
which case the determination will be made at 3:00 p.m., Chicago time.
Securities in each Fund's portfolio, except for Municipal Money, are
valued based on valuations provided by a pricing service. These
valuations are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair value, it
values the obligation by a method that the Board believes will
determine a fair value. The Board may approve the use of another
pricing service and any pricing service used may employ electronic data
processing techniques, including a so-called "matrix" system, to
determine valuations. Other assets and securities are valued by a
method that the Board believes will determine a fair value.
The valuation of Municipal Money's portfolio securities is based on
their amortized cost, which does not take into account unrealized gains
or losses, in an attempt to maintain its net asset value at $1.00 per
share. The extent of any deviation between the Fund's net asset value
based upon market quotations or equivalents and $1.00 per share based
on amortized cost will be examined by the Board of Trustees. If such
deviation were to exceed 1/2 of 1%, the Board would consider what
action, if any, should be taken, including selling portfolio
instruments, increasing, reducing or suspending distributions, or
redeeming shares in kind. Other assets and securities of the Fund for
which this valuation method does not produce a fair value are valued at
a fair value determined by the Board.
_________________________
DISTRIBUTIONS AND
INCOME TAXES
DISTRIBUTIONS.
Income dividends are declared each business day, and are paid monthly
and confirmed at least quarterly. For Federal income tax purposes, any
distribution that is paid in January but was declared in the prior
calendar year is deemed paid in the prior calendar year. Each Fund
intends to distribute by the end of each calendar year at least 98% of
any net capital gains realized from the sale of securities during the
twelve-month period ended October 31 in that year. The Funds intend to
distribute any undistributed net realized capital gains in the
following year.
All of your income dividends and capital gain distributions will be
reinvested in additional shares unless you elect to have distributions
either (1) paid by check, (2) deposited by electronic transfer into
your bank checking account, (3) applied to purchase shares in your
account with another SteinRoe Fund, or (4) applied to purchase shares
in a SteinRoe Fund account of another person. (See Shareholder
Services.) Reinvestment normally occurs on the payable date. The
Trust reserves the right to reinvest the proceeds and future
distributions in additional Fund shares if checks mailed to you for
distributions are returned as undeliverable or are not presented for
payment within six months.
INCOME TAXES.
All of the Funds currently limit their investments in Municipal
Securities to those the interest on which they believe is exempt from
the regular Federal income tax ("exempt-interest dividends"). Each
Fund may invest up to 100% of its total assets in Municipal Securities
the interest on which is subject to the
<PAGE> 24
alternative minimum tax. In addition, if a Fund should ever invest in
securities the interest on which is not exempt, dividends paid by the
Fund from such interest would be subject to Federal income tax at
ordinary rates.
The portion of the dividends you receive representing net short-term
capital gain is taxable to you as ordinary income. Distributions of
net long-term capital gain are taxable to you as long-term capital gain
regardless of the length of time you have held your Fund shares.
Promptly after the end of each calendar year, you will receive a
statement of the Federal income tax status of all dividends and capital
gain distributions paid during the year. The portion of your dividends
and distributions that are taxable will be taxable to you whether
received in cash or reinvested in additional shares.
If you are receiving social security benefits, tax-exempt income,
including exempt-interest dividends received from the Funds, will be
added to your taxable income in determining whether a portion of your
benefits will be subject to Federal income tax. Interest on borrowings
you incur to purchase or carry shares of a Fund is not deductible for
Federal income tax purposes. You may be subject to state and local
taxes on distributions from the Funds, including those distributions
that are exempt from Federal income tax.
For Federal income tax purposes, each Fund is treated as a separate
taxable entity distinct from the other series of the Trust.
This section is not intended to be a full discussion of income tax laws
and their effect on shareholders. You may wish to consult your own tax
advisor.
BACKUP WITHHOLDING.
If (a) you fail to (i) furnish your properly certified social security
or other tax identification number or (ii) certify that your tax
identification number is correct or that you are not subject to backup
withholding due to the underreporting of certain income, or (b) the
Internal Revenue Service informs the Trust that your tax identification
number is incorrect, the Trust may be required to withhold Federal
income tax ("backup withholding") from certain payments (including
redemption proceeds) to you. These certifications are contained in the
Application that you should complete and return when you open an
account. The Funds must promptly pay to the IRS all amounts withheld.
Therefore, it is usually not possible for a Fund to reimburse you for
amounts withheld. However, you may claim the amount withheld as a
credit on your Federal income tax return.
_________________________
INVESTMENT RETURN
The total return from an investment in a Fund is measured by the
distributions received (assuming reinvestment) plus or minus the change
in the net asset value per share for a given period. A total return
percentage may be calculated by dividing the value of a share at the
end of the period (including reinvestment of distributions) by the
value of the share at the beginning of the period and subtracting one.
For a given period, an average annual total return may be calculated by
finding the average annual compounded rate that would equate a
hypothetical $1,000 investment to the ending redeemable value.
<PAGE> 25
Because Municipal Money strives to maintain a $1.00 per share value,
its return is usually quoted either as a current seven-day yield,
calculated by totaling the dividends on a Fund share for the previous
seven days and restating that yield as an annual rate, or as an
effective yield, calculated by adjusting the current yield to assume
daily compounding. Municipal Money's current and effective yields for
the seven-day period ended September 30, 1994, were 2.84% and 2.89%,
respectively. To obtain current yield information, you may call 1-800-
338-2550 or write to the address shown on the back cover.
The value of the three other Funds will fluctuate. Therefore, the
current yield of each of these Funds is calculated by dividing its net
investment income per share (a hypothetical figure as defined in the
SEC rules) during a 30-day period by the net asset value per share on
the last day of the period. The yield formula provides for semiannual
compounding, which assumes that net investment income is earned and
reinvested at a constant rate and annualized at the end of a six-month
period.
Comparison of a Fund's yield or total return with those of alternative
investments should consider differences between that Fund and the
alternative investments, the periods and methods used in the
calculation of the return being compared, and the impact of taxes on
alternative investments. Except for Municipal Money, yield figures are
not based on actual dividends paid. Past performance is not
necessarily indicative of future results.
_________________________
MANAGEMENT OF THE FUNDS
TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and each Fund. See the Statement of
Additional Information for the names of and other information about the
trustees and officers. The Funds' Adviser, Stein Roe & Farnham
Incorporated, One South Wacker Drive, Chicago, Illinois 60606, is
responsible for managing each Fund's investment portfolio and the
business affairs of the Funds and the Trust, subject to the direction
of the Board. The Adviser is registered as an investment adviser under
the Investment Advisers Act.
The Adviser was organized in 1986 to succeed to the business of Stein
Roe & Farnham, a partnership that had advised and managed mutual funds
since 1949. The Adviser is a wholly-owned indirect subsidiary of
Liberty Mutual Insurance Company ("Liberty Mutual").
In approving the use of a single combined prospectus, the Board
considered the possibility that one Fund might be liable for
misstatements in the prospectus regarding information concerning
another Fund.
PORTFOLIO MANAGERS.
Jill K. Netzel has been portfolio manager of Municipal Money since
August 1994. A vice-president of the Trust, she has been associated
with the Adviser since 1989 and was previously employed by Continental
Bank, Smith Barney Harris Upham, and Shearson. Ms. Netzel received her
B.S. degree from the University of South Dakota in 1981.
M. Jane McCart has been portfolio manager of Managed Municipals since
August 1991. Prior to that time, she had been portfolio manager of
Municipal Money since its inception in 1983 and of Intermediate
<PAGE> 26
Municipals since its inception in 1985. Ms. McCart is a vice-president
of the Trust and a senior vice president of the Adviser, and has been
associated with the Adviser since 1983. From 1973 to 1983, she was
with the National Bank of Detroit. She received her B.S.B.A. degree
from Lawrence Technological University in 1973 and, as of June 30,
1994, was responsible for managing $995 million in mutual fund assets.
Ms. McCart is assisted in managing the Fund by James S. Grabovac.
Joanne T. Costopoulos has been portfolio manager of Intermediate
Municipals since August 1991 and is a vice-president of the Trust and
of the Adviser. Responsible for managing $413 million in mutual fund
assets as of June 30, 1994, she joined the Adviser in 1982. In her
previous position as a head trader in the fixed-income area, she traded
tax-exempt securities for both institutional and individual investment
portfolios. She received her B.A. in business administration from
Elmhurst College in 1985. Ms. Costopoulos is assisted in managing the
Fund by Ms. McCart.
James S. Grabovac has been portfolio manager of High-Yield Municipals
since August 1991. Mr. Grabovac is a vice-president of the Trust and
the Adviser and has been associated with the Adviser since 1989, when
he was appointed to serve as a portfolio manager in the Adviser's
Insurance Asset Management Group. From 1982 to 1985, he served as a
municipal bond underwriter at Continental Bank in Chicago, and from
1985 to 1987, he traded municipal and corporate bonds and futures for
Chicago Corporation. From 1987 to 1988 he returned to Continental Bank
to trade futures and options. Mr. Grabovac received his B.A. degree in
economics from Lawrence University in 1980 and his M.B.A. from the
University of Michigan in 1982. He was responsible for managing $308
million in mutual fund assets as of June 30, 1994. Ms. McCart assists
Mr. Grabovac in managing High-Yield Municipals.
FEES AND EXPENSES.
In return for its services, the Adviser receives a monthly fee from
each Fund, computed and accrued daily, based on that Fund's average net
assets. The annualized fee for Municipal Money is .5 of 1% of average
net assets; that of Intermediate Municipals and High-Yield Municipals
is .6 of 1% of the first $100 million, .55 of 1% of the next $100
million, and .5 of 1% thereafter; and that of Managed Municipals is .6
of 1% of the first $100 million, .55 of 1% of the next $100 million, .5
of 1% of the next $800 million, and .45 of 1% thereafter. The Adviser
has undertaken to reimburse Municipal Money to the extent that the
Fund's annual expenses may exceed .7 of 1% of its average net assets.
Any such reimbursement will enhance the yield of the Fund. The expense
limitation expires October 31, 1995, subject to earlier termination by
the Adviser on 30 days' notice. For the period ended June 30, 1994,
the annualized advisory fees for Intermediate Municipals, Managed
Municipals and High-Yield Municipals were .56%, .52%, and .54% of
average net assets, respectively.
Under a separate agreement with the Trust, the Adviser provides certain
accounting and bookkeeping services to the Funds, including computation
of each Fund's net asset value and calculation of its net income and
capital gains and losses on disposition of Fund assets.
PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of portfolio
securities for each Fund. In doing so, the Adviser seeks to obtain the
best combination of price and execution, which involves a number of
judgmental factors.
<PAGE> 27
TRANSFER AGENT.
SteinRoe Services Inc., One South Wacker Drive, Chicago, Illinois
60606, a wholly-owned indirect subsidiary of Liberty Mutual, is the
agent of the Trust for the transfer of shares, disbursement of
dividends, and maintenance of shareholder accounting records.
DISTRIBUTOR.
The shares of each Fund are offered for sale through Liberty Securities
Corporation ("Distributor") without any sales commissions or charges to
the Funds or to their shareholders. The Distributor is a wholly-owned
indirect subsidiary of Liberty Mutual. The business address of the
Distributor is 600 Atlantic Avenue, Boston, Massachusetts 02210;
however, all Fund correspondence (including purchase and redemption
orders) should be mailed to the Trust at P.O. Box 804058, Chicago,
Illinois 60680. All distribution and promotional expenses are paid by
the Adviser, including payments to the Distributor for sales of Fund
shares.
_________________________
ORGANIZATION AND
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
October 6, 1987, which provides that each shareholder shall be deemed
to have agreed to be bound by the terms thereof. The Declaration of
Trust may be amended by a vote of either the Trust's shareholders or
its trustees. The Trust may issue an unlimited number of shares, in
one or more series as the Board may authorize. Currently, four series
are authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts business trust
such as the Trust could, in some circumstances, be held personally
liable for unsatisfied obligations of the trust. The Declaration of
Trust provides that persons extending credit to, contracting with, or
having any claim against, the Trust or any particular Fund shall look
only to the assets of the Trust or of the respective Fund for payment
under such credit, contract or claim, and that the shareholders,
trustees and officers of the Trust shall have no personal liability
therefor. The Declaration of Trust requires that notice of such
disclaimer of liability be given in each contract, instrument or
undertaking executed or made on behalf of the Trust. The Declaration
of Trust provides for indemnification of any shareholder against any
loss and expense arising from personal liability solely by reason of
being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to circumstances in
which the disclaimer was inoperative and the Trust was unable to meet
its obligations.
The risk of a particular Fund incurring financial loss on account of
unsatisfied liability of another Fund of the Trust is also believed to
be remote, because it would be limited to claims to which the
disclaimer did not apply and to circumstances in which the other Fund
was unable to meet its obligations.
<PAGE> 28
CERTIFICATE OF AUTHORIZATION (FOR USE BY CORPORATIONS AND ASSOCIATIONS
ONLY)
A corporation or association must complete this Certificate and submit
it with the Fund Application, each written redemption, transfer or
exchange request, and each request to terminate or change any of the
Privileges or special service elections.
If the entity submitting the Certificate is an association, the word
"association" shall be deemed to appear each place the word
"corporation" appears. If the officer signing this Certificate is
named as an authorized person, another officer must countersign the
Certificate. If there is no other officer, the person signing the
Certificate must have his signature guaranteed. If you are not sure
whether you are required to complete this Certificate, call the office
of the SteinRoe Funds, 1-800-338-2550 toll-free.
The undersigned hereby certifies that he is the duly elected Secretary
of __________________________________________________
(the "Corporation") and that the following individual(s):
(name of Corporation/Association)
Authorized Persons
______________________ _______________________________
Name Title
______________________ _______________________________
Name Title
______________________ _______________________________
Name Title
is (are) duly authorized by resolution or otherwise to act on behalf of
the Corporation in connection with the Corporation's ownership of
shares of any mutual fund managed by Stein Roe & Farnham Incorporated
(individually, the "Fund" and collectively, the "Funds") including,
without limitation, furnishing any such Fund and its transfer agent
with instructions to transfer or redeem shares of that Fund payable to
any person or in any manner, or to redeem shares of that Fund and apply
the proceeds of such redemption to purchase shares of another Fund (an
"exchange"), and to execute any necessary forms in connection
therewith.
Unless a lesser number is specified, all of the Authorized Persons must
sign written instructions. Number of signatures required: ________.
If the undersigned is the only person authorized to act on behalf of
the Corporation, the undersigned certifies that he is the sole
shareholder, director, and officer of the Corporation and that the
Corporation's Charter and Bylaws provide that he is the only person
authorized to so act.
Unless expressly declined on the Application (or other form acceptable
to the Funds), the undersigned further certifies that the Corporation
has authorized by resolution or otherwise the establishment of the
Telephone Exchange and Telephone Redemption by Check Privileges for the
Corporation's account with any Fund offering any such Privilege. If
elected on the Application (or other form acceptable to the Funds), the
undersigned also certifies that the Corporation has similarly
authorized establishment of the Electronic Transfer, Telephone
Redemption by Wire, and Check-Writing Privileges for the Corporation's
account with any Fund offering said Privileges. The undersigned has
further authorized each Fund and its transfer agent to honor any
written, telephonic, or telegraphic instructions furnished pursuant to
any such Privilege by any person believed by the Fund or its transfer
agent or their agents, officers, directors, trustees, or employees to
be authorized to act on behalf of the Corporation and agrees that
neither the Fund nor its transfer agent, their agents, officers,
directors, trustees, or employees will be liable for any loss,
liability, cost, or expense for acting upon any such instructions.
These authorizations shall continue in effect until five business days
after the Fund and its transfer agent receive written notice from the
Corporation of any change.
IN WITNESS WHEREOF, I have hereunto subscribed my name as Secretary and
affixed the seal of this Corporation this ____ day of
___________________, 19___.
Corporate
Seal
Here
_____________________
Secretary
______________________
Signature Guarantee*
*Only required if the person signing the Certificate is the only person
named as "Authorized Person."
<PAGE> 29
[STEINROE MUTUAL FUNDS 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 Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe Special Venture Fund
___________________
Tax-Exempt Funds
Prospectus
November 1, 1994
_____________________________
Municipal Money Market Fund
Intermediate Municipals
Managed Municipals
High-Yield Municipals
P.O. Box 804058
Chicago, Illinois 60680
1-800-338-2550
In Chicago, visit our Fund Center
at 300 West Adams Street (through 12/2/94)
or One South Wacker Drive (after 12/5/94)
Liberty Securities Corporation, Distributor
03008
