Semiannual Report
December 31, 1995
Stein Roe
Tax-Exempt Bond Funds
Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund
Graphic: Stein Roe Logo
Stein Roe Mutual Funds
Building Wealth for Generations(sm)
Photographic image of man and woman hugging.
Contents
From the President............................................1
Tim Armour's thoughts on the markets and investing
Performance...................................................3
How the Stein Roe Tax-Exempt Bond Funds have done over time
Q&A
Municipal Money Market Fund...................................6
Intermediate Municipals Fund..................................9
Managed Municipals Fund......................................12
High-Yield Municipals Fund...................................14
Interviews with the portfolio managers and a
summary of major shifts in the Funds' investments
over the past six months
Investments..................................................18
A complete list of each Fund's investments with
market values
Financial Statements.........................................42
Balance sheets, statements of operations,
and changes in net assets
Notes to Financial Statements................................52
Financial Highlights.........................................58
Selected per-share data
General Information..........................................66
A guide to products and services
<PAGE>
From the President
To Our Shareholders
We are pleased to present this semiannual report for the Stein Roe Municipal
Bond Funds--Stein Roe Municipal Money Market Fund, Stein Roe Intermediate
Municipals Fund, Stein Roe Managed Municipals Fund and Stein Roe High-Yield
Municipals Fund.
What a Difference a Year Makes
At this time last year, investors had just suffered through one of the worst
bond markets in history. Today, however, the market presents a much brighter
picture. Fueled largely by falling interest rates, fixed income securities
roared back in 1995, helping to make 1994's losses a distant memory.
Indeed, fixed income funds had one of their best years on record.
At year end, the yield on the benchmark 30-year Treasury bond hit
6 percent--compared with more than 8 percent at this time last year. Adding
fuel to the market rally was the influx of Japanese money into the U.S.
taxable bond market. Starting last spring, Japanese investors--tired of poor
returns and rock-bottom interest rates--started sending their savings abroad,
moving their money into U.S. bonds that were paying as much as double what
Japanese investors would be receiving at home. The effect was magnified when
low borrowing rates on Japanese yen prompted large U.S. hedge funds to borrow
yen and buy U.S. dollars. According to the Wall Street Journal, this influx of
Japanese money may have helped long-term interest rates fall by as much as
half a percentage point in 1995.(1)
Falling rates helped municipal bonds appreciate in value, despite periods of
underperformance stemming from continued talk of tax reform. In fact, data
published by Lipper Analytical Services, Inc., shows that, in many cases,
municipal bond funds posted double-digit returns in 1995. And because they
have not appreciated at the same rate as taxable bonds, at current prices we
think municipals present a tempting alternative for bond investors.
A Tough Act to Follow?
While back-to-back boom years in the bond market are rare, there may still be
some steam left in the rally. Growing investor sentiment that the equity
market can't sustain its current level of growth, or a deficit-cutting budget
deal, for example, could pave the way for a bond market rally. Moreover, if
the yen/dollar exchange remains stable, Japanese investors will most likely
continue reaching for yield in the U.S. Treasury markets, contributing further
to bond market gains. Finally, many investors continue to wager that signs of
weak economic growth and a benign rate of inflation will spur the Federal
Reserve to cut rates again in 1996.
Photographic image of Tim Armour.
<PAGE>
We expect interest rates to trade around current levels--they may even reach
some lower levels in coming months. Still, as economic activity firms and the
prospect of additional rate cuts wanes, any potential lows in interest rates
may not be sustained. Furthermore, with the current budget impasse and tax
reform sure to be key issues of debate in coming months, municipal bond
investors can expect continued uncertainties in the market at least through
1996. You'll find a brief discussion of flat tax issues elsewhere in this
report, and I encourage you to call our account representatives with your
questions about tax reform and your investments.
The Basics
No one can predict what might happen to bond funds or the markets in the
future, but we believe investors are wise to understand the factors that move
the markets, not just to profit from them, but to gain the patience to ride
out short-term volatility in their investments. As always, no matter what
direction you think the economy is heading, it is important to remember the
basics. Think long term and re-evaluate your investment portfolio from time to
time to make sure it continues to match your goals, risk tolerance and time
horizon. And try to follow a regular investment plan. By investing a certain
amount of money each month or quarter, you can take advantage of dollar-cost
averaging. Of course, not everyone is in a position to follow a regular
investment plan. And it neither ensures a profit nor protects against a loss
in a declining market. This simple strategy, however, can help you turn market
volatility to your advantage.
Please call us at 800-338-2550 with your comments and suggestions. As always,
we look forward to serving your investment needs.
Sincerely,
/s/ Timothy K. Armour
President
January 29, 1996
(1) Steiner, Robert, "Cash Flow: Tired of Poor Returns, Many Japanese Send
Their Savings Abroad." Wall Street Journal, December 26, 1995.
<PAGE>
<TABLE>
Fund Performance
There are several ways to evaluate a fund's historical performance. You can
look at the cumulative return percentage, the average annual return
percentage, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus reinvestment
of any dividends (net investment income) and capital gains (the profits the
fund earns when it sells fixed income securities that have grown in value).
Average Annual Total Returns
Periods ended December 31, 1995
<CAPTION>
Past 1 Past 3 Past 5 Past 10
Year Years Years Years
<S> <C> <C> <C> <C>
Municipal Money Market Fund 3.34% 2.49% 2.75% 3.82%
Intermediate Municipals Fund 12.91 6.61 7.62 7.36
Lehman 10-Year Municipal Bond Index 17.17 7.96 8.97 9.22
Managed Municipals Fund 16.61 7.07 8.26 9.08
High-Yield Municipals Fund 17.70 7.71 7.65 8.85
Lehman Municipal Bond Index 17.46 7.74 8.82 9.24
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
<PAGE>
Investment Comparison
Comparison of change in value of a $10,000 investment for the years ended June
30.
Graph:
<CAPTION>
Year Ended Intermediate Lehman 10-Year
6/30 Municipals Fund Municipal Bond Index
<S> <C> <C>
10/31/85 10000 10000
6/30/86 10518 10875
1987 11201 11990
1988 11826 12818
1989 12636 14051
1990 13513 15050
1991 14619 16441
1992 16135 18302
1993 17899 20605
1994 18106 20808
1995 19300 22635
12/31/95 20388 24163
Comparison of change in value of a $10,000 investment for the years ended June
30.
Graph:
<CAPTION>
Year Ended Managed Lehman
6/30 Municipals Fund Municipal Bond Index
<S> <C> <C>
85 10000 10000
86 11081 10945
1987 11952 11890
1988 12842 12772
1989 14435 14226
1990 15337 15195
1991 16707 16564
1992 18698 18514
1993 20717 20728
1994 20657 20764
1995 22128 22595
12/31/95 23848 24204
These graphs compare the performance of Stein Roe's Funds to the Lehman
10-Year Municipal Bond Index and the Lehman Municipal Bond Index, each an
unmanaged group of fixed income securities that differs from the composition
of each Stein Roe Fund; they are not available for direct investment. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
<PAGE>
Investment Comparison
Comparison of change in value of a $10,000 investment for the years ended June
30.
Graph.
<CAPTION>
Year Ended High-Yield Lehman
6/30 Municipals Fund Municipal Bond Index
<S> <C> <C>
85 10000 10000
86 10892 10945
1987 11676 11890
1988 12679 12772
1989 14425 14226
1990 15527 15195
1991 16894 16564
1992 18409 18514
1993 19860 20728
1994 20048 20764
1995 21762 22595
12/31/95 23392 24204
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares.
<PAGE>
Q&A
An Interview with Veronica Wallace, Portfolio Manager of SR&F Municipal Money
Market Portfolio
Veronica Wallace joined the Fund in September 1995.
Fund Data
Investment Objective:
Seeks maximum current tax-free income consistent with safety of capital and
maintenance of liquidity by investing all assets in shares of SR&F Municipal
Money Market Portfolio, which has the same objective and restrictions as the
Fund.
Fund Inception:
March 15, 1983
Total Net Assets:
$132.7 million
Photographic image of Veronica Wallace.
Q: Shareholders approved a change to the Fund's management structure
in June.
A: Right. Effective September 28, the Fund's assets began to be pooled with
assets of another fund that had a substantially similar investment objective.
The resulting larger pool of assets--the Portfolio--is managed by Stein Roe.
What that means is that shareholders invest in the Fund, and the Fund invests
in the Portfolio. The potential benefit this structure has for you is economy
of scale. We can manage the larger pools of assets more cost-effectively.
Q: How did the Fund perform?
A: With a 1.63 percent return for the six months ended December 31, 1995,
Municipal Money Market Fund matched the 1.63 percent median return of its
Lipper tax-exempt money market fund peer group. The Fund's one-year return of
3.3 percent also matched the peer group median return of 3.3 percent.
As of December 31, 1995, the Fund reported a seven-day current tax-exempt
yield of 3.92 percent. For an investor in the 39.6 percent tax bracket, that's
a taxable-equivalent yield of 6.49 percent.
<PAGE>
Q: The Federal Reserve cut interest rates twice in the last six months. What
effect has this easing in monetary policy had on the Fund?
A: Money market fund yields track moves in short-term interest rates closely.
In this case, the market so strongly expected the Federal Reserve to begin
easing that this expectation was simply factored into money market rates,
meaning that rates began to fall even before the Federal Reserve made its
first cut in July. And because the Federal Reserve has traditionally followed
a first interest rate cut with a second cut, most agreed that the Federal
Reserve would ease again--it was a question of when. Those who felt that the
Federal Reserve would ease soon lengthened maturity in an effort to lock in
higher yields. We lengthened our maturity slightly, from 50 days on June 30 to
56 days on December 31, which benefited our performance relative to the peer
group.
Q: What other factors affected performance?
A: During the fourth quarter, the market's expectations of an imminent easing
move by the Federal Reserve caused the short-term yield curve first to flatten
and then, following greater demand for longer maturity securities, to invert.
In this environment, shorter-maturity securities were more attractive than
longer-maturity securities. As a result, the Fund's performance was boosted by
its holdings in seven-day variable rate demand notes (60.7 percent of the
portfolio on December 31).
Q: What role do you think money market funds will play if a stock market
correction occurs?
A: This year has been one of unprecedented flows into equity mutual funds,(1)
but money market funds also grew. Money market fund assets swelled more than
$133 billion in 1995 to total more than $771 billion,(2) their highest level
in 10 years and an increase of more than 18 percent over 1994. If equities
were to lose their luster, I think you'll see inflows into money market funds,
particularly institutional assets. A breakdown in the budget talks also could
help increase cash flows into money market funds, as investors seek a safer
haven for their investments.
(1) "Flood of Cash to Mutual Funds Helped to Fuel '95 Bull Market, Wall Street
Journal, January 26, 1996.
(2) Source: Strategic Insight.
Portfolio holdings as of December 31, 1995; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Taxable-equivalent yield is shown in
the 39.6 percent tax bracket, which applies to investors with incomes higher
than $256,500 per year. Tax-free income is exempt from federal taxes, but may
be subject to state and local taxes and federal alternative minimum tax. The
Advisor currently limits expenses to 0.70 percent of average net assets,
subject to termination upon 30 days' notice. Absent past limits, the seven-day
current tax-free and taxable-equivalent yields at December 31, 1995, would
have been 3.84 percent and 6.41 percent, respectively, and total return would
have been less. An investment in the Fund is neither insured nor guaranteed by
the U.S. government, and there is no assurance that the Fund will be able to
maintain its stable net asset value of $1 per share. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the median returns for the Fund's tax-exempt money market fund peer group for
the one-, five- and 10-year periods ended December 31, 1995, were 3.33
percent, 2.83 percent and 3.89 percent, respectively.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or a loss when you sell shares.
<PAGE>
</TABLE>
<TABLE>
Portfolio Highlights
Municipal Money Market Portfolio
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1995 December 31, 1995
<S> <C> <C>
General Obligation 2.4% 2.6%
Revenue:
Utility 25.2 20.5
Industrial 25.8 16.9
Other Revenue 12.4 16.4
Hospital 5.8 8.3
Steel/Metal -- 6.4
Housing 5.3 6.1
Waste Disposal 4.5 3.7
Education 6.5 2.6
Oil 8.8 2.0
Electric 1.0 1.0
Student Loan -- 1.0
Toll 1.3 --
Escrowed 1.0 --
Other -- 12.5
----- -----
Total 100% 100%
Maturity
Pie chart:
As of June 30, 1995 As of December 31, 1995
0-29 Days 65.6% 63.3%
30-59 Days 8.2% 12.1%
60-89 Days 11.6% 2.6%
90-179 Days 7.0% 2.6%
180-375 Days 7.6% 19.4%
</TABLE>
<PAGE>
Q&A
An Interview with Joanne Costopoulos, Portfolio Manager of Intermediate
Municipals Fund
Fund Data
Investment Objective:
Seeks high current yield exempt from federal income tax, consistent with
capital preservation, through investments primarily in the three highest
grades of intermediate-term municipal securities. The dollar-weighted average
maturity of the Fund's portfolio is between three and
ten years.
Fund Inception:
October 9, 1985
Total Net Assets:
$218.4 million
Photographic image of Joanne Costopoulos.
Q: How did the Fund perform?
A: For the six months ended December 31, 1995, Intermediate Municipals Fund's
5.63 percent return outperformed the 5.17 percent return of its Lipper
intermediate municipal fund peer group and lagged the 6.75 percent six-month
return of the Lehman Municipal 10-Year Index.
As of December 31, the Fund reported a 30-day standardized tax-exempt yield of
4.15 percent. That translates into a taxable-equivalent yield of 6.87 percent
for investors in the 39.6 percent tax bracket.
Q: What factors affected performance?
A: Declining or stabilizing interest rates and demand for intermediate
municipal bonds, coupled with lingering concern over the effect of tax reform
on longer-term issues, sparked a rally in the intermediate market. We
lengthened our average weighted maturity slightly during the fourth quarter
and this, coupled with the rally, helped us to outpace the peer group in the
last six months.
We lagged the Index primarily because the Fund customarily maintains a shorter
duration, shorter maturity and higher-quality portfolio than does the Index.
The Lehman Municipal 10-Year Index tends to have an average maturity of eight
to 12 years and a duration that averages roughly seven. In contrast, the
Fund's average maturity tends to be about eight years, and its duration tends
to center around six. To extend our maturity, and thus, our duration, would
require selling a great deal of our shorter-term paper and realizing a
significant amount of capital gains--a move that we currently believe would
not be in the best interests of our shareholders.
<PAGE>
Q: Where are you finding opportunities now?
A: Municipal bond issuance waxes and wanes throughout the year, so supply and
demand factors are especially key to performance. New issues of general
obligation bonds (GOs) were scarce during the fourth quarter of 1995, for
example, so they performed well. We're anticipating a lot more issuance in GOs
during the first quarter of 1996. If that's the case, we expect them to trade
a bit more cheaply and, as a result, we'll look to add to our holdings.
We also added to our holdings in utilities when we found issues with
attractive spreads and, in our opinion, a stable outlook.
Q: What is your outlook?
A: Concern about the proposed flat tax caused prices in the municipal bond
market to fall and sent many investors running earlier in the year. It's
difficult to say what effect a flat tax would have on the market, as both tax
law and flat tax proposals may change significantly in the next few years. We
believe a full-fledged flat tax is at least a couple of years down the road,
so it's probably a bit premature to abandon the municipal market altogether.
One thing is clear, however. Whatever version of the federal budget is finally
agreed upon, it will have a major impact on the market in general,
particularly on interest rates. In addition, the current budget impasse is
causing speculation about a federal default, which would have a profoundly
negative effect on the domestic and international bond markets. This, coupled
with current tax reform issues, is currently creating uncertainty in the
municipal bond market. As a result, we're inclined to maintain a neutral
position, at least in the first quarter, while searching for relative value
opportunities to enhance the Fund's total return.
Portfolio holdings as of December 31, 1995; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Taxable-equivalent yield is shown in
the 39.6 percent tax bracket, which applies to investors with incomes higher
than $256,500 per year. Tax-free income is exempt from federal taxes, but may
be subject to state and local taxes and federal alternative minimum tax.
Capital gains are subject to federal, state and local taxes. The Adviser
currently limits expenses to 0.70 percent of average net assets, subject to
termination upon 30 days' notice to the Fund. Absent past limits, the 30-day
standardized tax-free and taxable-equivalent yields at December 31, 1995,
would have been 4.00 percent and 6.62 percent, respectively, and total return
would have been less. The Lehman 10-Year Municipal Bond Index is an unmanaged
group of intermediate-term municipal bonds that differs from the composition
of the Fund; it is not available for direct investment. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the median returns for the Fund's intermediate municipal fund peer group for
the one-, five- and 10-year periods ended December 31, 1995, were 12.91
percent, 7.26 percent and 7.53 percent, respectively.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or a loss when you sell shares.
<PAGE>
<TABLE>
Fund Highlights
Intermediate Municipals Fund
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1995 December 31, 1995
<S> <C> <C>
General Obligation 30.9% 25.6%
Revenue
Water & Sewer 16.5 16.3
Electric 5.4 8.7
Toll 5.5 6.2
Hospital 5.9 6.4
Airport 6.3 3.4
Student Loan 4.5 2.9
Other Revenue 12.1 21.3
Escrowed 9.1 6.4
Lease/Miscellaneous 3.8 2.8
----- -----
Total 100% 100%
Maturity
Pie chart:
As of June 30, 1995 As of December 31, 1995
Less Than 1 Year 2.1% 1.8%
1-5 Years 15.8% 15.9%
5-10 Years 48.6% 49.0%
10-15 Years 20.8% 20.7%
Over 15 Years 12.7% 12.6%
Portfolio Quality
Pie chart:
As of June 30, 1995 As of December 31, 1995
A 18.7% 15.8%
AA 21.9% 18.2%
AAA 58.6% 60.9%
BBB 0.8% 5.1%
</TABLE>
<PAGE>
Q&A
An Interview with Jane McCart, Portfolio Manager of Managed Municipals Fund
and High-Yield Municipals Fund Managed Municipals Fund Q&A
Managed Municipals
Fund Data
Investment Objective:
Pursues high tax-free income consistent with capital preservation by investing
in a quality-conscious portfolio of long-term municipal securities.
Fund Inception:
February 23, 1977
Total Net Assets:
$639.2 million
Photographic image of Jane McCart.
Q: How did the Fund perform?
A: For the six months ended December 31, 1995, the Fund's 7.76 percent return
surpassed both the Lehman Municipal Bond Index return of 7.12 percent and the
Lipper general municipal debt fund peer group average of 7.13 percent. As of
December 31, the Fund reported a 30-day standardized tax-exempt yield of 4.70
percent. For investors in the 39.6 percent tax bracket, that's a
taxable-equivalent yield of 7.79 percent.
Q: What drove the Fund's performance?
A: A combination of factors -- the slowing economy, lower inflation,
anticipation of a budget resolution and a Fed easing move--brought rates down
during the period. Long-term bonds benefited as a result, and at December 31,
with a 69.8 percent weighting in bonds with a maturity of more than 15 years,
the Fund gained as well.
Q: You've often said that a bond's structure is one of the most important
factors in its performance. How have you structured the Fund to take advantage
of the current environment?
A: A few years ago, we saw that noncallable bonds offered an opportunity for
appreciation that we believed was unmatched in other structures. Unlike
callable bonds, these bonds cannot be called out of the market and their price
movement is not obstructed by call features. As a result, the prices of
noncallable bonds are not hindered from moving upward in a strong market. Over
the past two years we have gradually increased the Fund's weighting in
noncallable bonds, which, on December 31, represented 39 percent of total net
assets. We think that decision has paid off handsomely, as plunging rates made
noncallable bonds an especially powerful performer during the past six months.
<PAGE>
Q: Tax reform issues continue to dampen inflows and cause volatility in the
municipal bond market. What are a flat tax proposal's chances of success?
A: There are several different proposals on the table, but one of the key
issues in the debate is whether to keep tax deductions for certain items,
including the mortgage deduction. It's a difficult point, and may prove a
stumbling block for any agreement. So although hearings are now under way on
some of these proposals, we believe it is highly unlikely that any major
changes will be made to the tax system before 1997 at the earliest--and then
only if the Republicans capture the White House and retain control of the
Congress in the 1996 elections.
Q: How would a flat tax affect the municipal market?
A: It's difficult to say what effect a flat tax would have, as both tax law
and flat tax proposals may change significantly in the next few years. Is a
flat tax something investors need to worry about in the near term? We don't
think so. We believe a full-fledged flat tax is at least a couple of years
down the road, so it's probably premature to abandon the municipal market
altogether.
Investors, however, often act in anticipation of the potential for various
events (as opposed to the actual event), and we think this has created some
reluctance to buy tax-exempt municipals. So while municipal bond funds
benefited significantly from events this year--both Managed Municipals Fund
and High-Yield Municipals Fund posted double-digit one-year returns--
municipals did not appreciate at the same rate as taxables. At current prices,
we believe municipals are an attractive alternative to taxable bonds, and that
may spur some inflows from investors who believe the equity market won't be
able to sustain the riveting performance it turned in during 1995.
Portfolio holdings as of December 31, 1995; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Taxable-equivalent yield is shown in
the 39.6 percent tax bracket, which applies to investors with incomes higher
than $256,500 per year. Tax-free income is exempt from most federal taxes, but
may be subject to state and local taxes and federal alternative minimum tax.
Capital gains are subject to federal, state and local taxes. The Lehman
Municipal Bond Index is an unmanaged group of municipal bonds that differs
from the composition of the Fund; it is not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of
mutual fund performance, the median returns for the Fund's general municipal
debt peer fund group for the one-, five- and 10-year periods ended December
31, 1995, were 16.80 percent, 8.44 percent and 8.64 percent, respectively.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or a loss when you sell shares.
<PAGE>
Q&A Continued
High-Yield Municipals Fund Q&A
High-Yield Municipals
Fund Data
Investment Objective:
Seeks a high level of tax-free income consistent with capital preservation by
investing in longer-term municipal securities, principally of medium and lower
quality.
Fund Inception:
March 5, 1984
Total Net Assets:
$283.7 million
Q: You've marked your first full year managing High-Yield Municipals Fund. How
did it perform?
A: High-Yield Municipals Fund finished the six-month period with a 7.47
percent total return, outdistancing both the Lipper high-yield municipal debt
fund peer group return of 6.71 percent and the 7.12 percent return of the
Lehman General Municipal Bond Index.
On December 31, 1995, the Fund's 30-day standardized tax-exempt yield was 5.22
percent. That translates into a taxable-equivalent yield of 8.64 percent for
investors in the 39.6 percent tax bracket.
Q: What drove performance?
A: The Fund benefited from credit upgrades and price appreciation when some of
its holdings were pre-refunded, but the principal factor in our performance
was the Fund's weighting in high-yield bonds, which outperformed high-grade
bonds during the quarter. Currently, new issuance of high-yield paper is lower
than usual, which has contributed to the strong price appreciation of these
securities. In addition, the demand for higher-yielding securities is
heightened because of the prevalence of insured municipal bonds.
Q: Since bond insurance doesn't guarantee a bond's interest rate or market
price, can you explain how it affects high-yield securities?
A: Lower-quality investment grade issues--those that have underlying ratings
of A and BBB by Standard and Poor's or A and Baa by Moody's--are being insured
before they come to market. Insured bonds are issued at lower yields and
higher ratings. These bonds are replacing much of the A- and BBB-rated paper
in the marketplace. As a result, demand for yield has taken on extra urgency,
drawing investors who would typically avoid high-yield bonds into the
high-yield market.
<PAGE>
Q: You've made a conscious effort to boost the Fund's yield. Where are you
finding opportunities now?
A: We believe that, without taking undue risk, we can be more aggressive than
we have been in the past in seeking higher yields. We believe this is possible
with thorough credit research and, fortunately, we think that's one of Stein
Roe's strengths.
In the past year we've attempted to diversify the portfolio by adding a number
of high-yield issues to the portfolio--including toll roads, an aquarium and
several new issues in New York. New issue supply waxes and wanes throughout
the year, and existing New York issues tend to do relatively well when supply
is low. We've been pleased with the performance of these issues.
Q: Have the budget negotiations in Congress affected the portfolio?
A: We continually monitor the quality of our investments, and we trimmed our
health care position when we saw some potential weakness in a few of those
holdings in the fourth quarter. The Congressional budget talks, with their
proposed cuts in Medicare and Medicaid, would have a material effect on
hospitals. Some hospitals manage Medicare and Medicaid more effectively than
others, and we're being very careful to try to determine those holdings that
could be affected by cuts in these health plans.
Q: What are your expectations?
A: We expect long-term interest rates to stabilize or decline slightly in the
first and second quarter, with a pickup in the economy in the third quarter.
In addition to closely monitoring the economic cycle in the coming months, we
will continue to monitor our credits for signs of weakness. We think
volatility in the market will continue as we enter the campaign year and flat
tax issues become a core subject of debate.
Portfolio holdings as of December 31, 1995; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Taxable-equivalent yield is shown in
the 39.6 percent tax bracket, which applies to investors with incomes higher
than $256,500 per year. Tax-free income is exempt from federal taxes, but may
be subject to state and local taxes and federal alternative minimum tax.
Capital gains are subject to federal, state and local taxes. The Lehman
Municipal Bond Index is an unmanaged group of municipal bonds that differs
from the composition of the Fund; it is not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of
mutual fund performance, the median returns for the Fund's high-yield
municipal debt fund peer group for the one-, five- and 10-year periods ended
December 31, 1995, were 16.12 percent, 8.53 percent and 8.65 percent,
respectively.
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or a loss when you sell shares.
<PAGE>
<TABLE>
Fund Highlights
Managed Municipals Fund
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1995 December 31, 1995
<S> <C> <C>
General Obligation 18.3% 16.4%
Lease/Miscellaneous 14.5 14.8
Escrowed 13.2 12.2
Revenue:
Housing 12.0 11.5
Electric 8.6 9.8
Water & Sewer 8.3 8.2
Toll 6.8 6.6
Hospital 6.0 6.5
Airport 4.1 2.2
Other Revenue 8.2 11.8
----- -----
Total 100% 100%
Maturity
Pie chart:
As of June 30, 1995 As of December 31, 1995
Less Than 1 Year 6.0% 5.2%
1-5 Years 7.9% 7.7%
5-10 Years 3.7% 3.8%
10-15 Years 12.0% 13.4%
15-20 Years 26.0% 28.3%
20-25 Years 23.9% 22.2%
Over 25 Years 20.5% 19.4%
Portfolio Quality
Pie chart:
As of June 30, 1995 As of December 31, 1995
A 24.5% 23.5%
AA 33.9% 31.6%
AAA 38.8% 38.9%
BBB 2.8% 6.0%
</TABLE>
<PAGE>
<TABLE>
Fund Highlights
High-Yield Municipals Fund
Securities Type Breakdown
<CAPTION>
Portfolio Portfolio
June 30, 1995 December 31, 1995
<S> <C> <C>
Lease/Miscellaneous 22.4% 24.6%
Escrowed 10.0 11.2
General Obligation 5.9 5.7
Revenue:
Hospital 17.8 13.6
Housing 11.5 11.1
Electric 8.5 7.4
Toll 5.6 7.5
Water & Sewer 3.6 1.8
Airport 2.3 1.6
Student Loan -- 1.3
Other Revenue 12.4 14.2
----- -----
Total 100% 100%
Maturity
Pie chart:
As of June 30, 1995 As of December 31, 1995
Less Than 1 Year 3.7% 2.6%
1-5 Years 2.4% 6.3%
5-10 Years 9.5% 5.2%
10-15 Years 10.7% 8.8%
15-20 Years 10.9% 11.6%
20-25 Years 34.1% 34.6%
Over 25 Years 28.7% 30.9%
Portfolio Quality
Pie chart:
As of June 30, 1995 As of December 31, 1995
A 27.0% 26.8%
AA 12.7% 13.3%
AAA 18.2% 11.9%
BB 3.2% 3.0%
BBB 21.3% 27.7%
NR* 17.6% 17.3%
<FN>
*Nonrated
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Investments as of December 31, 1995
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (100.5%) Amount Value
<S> <C> <C>
Alabama (3.7%)
*Alabama I.D.A. Solid Waste Disposal Revenues (Pine City
Fiber Company L.O.C. Barclays Bank Plc) V.R.D.B. 5.250% $ 5,750 $ 5,750
Arizona (0.8%)
*Maricopa County I.D.A. Multi Family Housing Revenue Series D
(L.O.C. Bank One, Arizona) V.R.D.B. 5.300% 1,200 1,200
Arkansas (3.2%)
*Clark County Solid Waste Disposal Revenue (Reynolds Metals Co.
L.O.C. Trust Company Bank) V.R.D.B. 5.200% 5,000 5,000
California (3.1%)
Los Angeles Unified School District T.R.A.N.
4.500% 7/03/96 Series 95-96 2,750 2,761
San Diego T.A.N. Series A 4.750% 7/03/96 2,000 2,008
_______
4,769
Colorado (0.5%)
Colorado Health Facilities Authority Revenue (MBIA Insured)
V.R.D.B. 5.000% 400 400
*Colorado Student Obligation Bond Authority Student Loan
Revenue Series B (L.O.C. Student Loan Marketing Association)
V.R.D.B. 5.200% 400 400
_______
800
District of Columbia (2.0%)
District of Columbia Revenue Series 1985 (American University
L.O.C. National Westminister Bank) V.R.D.B. 5.200% 3,100 3,100
Florida (5.2%)
Putnam County Development Authority P.C.R. Series 1984 S
(Seminole Electric Cooperative, Inc. gtd. by National Rural
Utilities Cooperative Finance Corp.) V.R.D.B. 4.650% 4,100 4,100
St. Lucie County P.C.R. (Florida Power and Light)
3.750% Mandatory Put 2/14/96 2,000 2,000
3.500% Mandatory Put 3/07/96 2,000 2,000
_______
8,100
<PAGE>
Georgia (2.0%)
*Development Authority of Gwinnett County I.D.R. (Price
Companies Inc. L.O.C. NationsBank) V.R.D.B. 5.300% 3,000 3,000
Hapeville Development Authority I.D.R. (Hapeville Hotel Ltd.
L.O.C. Swiss Bank Corp.) V.R.D.B. 6.000% 100 100
_______
3,100
Illinois (6.8%)
*Illinois Development Finance Authority Revenue Refunding
V.R.D.B.
5.250% (Brookdale) (L.O.C. Landes Bank Hesson -
Thiurgen Giro) 1,000 1,000
5.200% (River Oaks) (L.O.C. Swiss Bank Corporation) 865 865
*Illinois Development Finance Authority Sewage Facilities
Revenue (Nutrasweet Co. Project gtd. by Monsanto Co.)
V.R.D.B. 5.300% 3,200 3,200
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
Continued Principal Market
Amount Value
<S> <C> <C>
Illinois (continued)
Illinois Health Facilities Authority Revenue
5.550% V.R.D.B. (Palos Community Hospital L.O.C.
ABN Amro) $ 300 $ 300
3.900% Optional Put 2/08/96 (University of Chicago Hospital) 3,500 3,500
5.600% V.R.D.B. (L.O.C. Bank One Indianapolis) 570 570
*Southwestern Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) 6.150% V.R.D.B. 1,000 1,000
_______
10,435
Indiana (8.5%)
Fort Wayne Hospital Authority Revenue (Parkview Memorial
Hospital L.O.C. Fuji Bank, Ltd.) V.R.D.B.
5.600% Series B 3,000 3,000
5.600% Series C 2,300 2,300
*Franklin Economic Development Revenue Refunding (L.O.C.
Federal Home Loan Bank, Indianapolis) V.R.D.B. 5.300% 2,965 2,965
Gary Environmental Improvement Revenue (U.S. Steel L.O.C.
Bank of Nova Scotia) V.R.D.B. 4.250% 500 500
*Halifax County Industrial Facilities (Westmoreland L.O.C. Credit
Suisse) V.R.D.B. 6.100% 300 300
*LaPorte County Economic Development Revenue (Woodland
Project L.O.C. Federal Home Loan Bank, Indianapolis)
V.R.D.B. 5.300% 2,000 2,000
Petersburg P.C.R. Refunding Revenue Series 1995 B (Indianapolis
Power & Light)(AMBAC Insured) V.R.D.B. 5.000% 2,000 2,000
_______
13,065
Iowa (1.3%)
Iowa School Corporations Warrant Certificates (Capital Guaranty
Insured) Series 1995-96 Series A 4.750% 6/28/96 2,000 2,009
Kentucky (2.8%)
*Covington I.D.R. Series 1991 (White Castle Distributing L.O.C.
Bank One, Columbus) V.R.D.B. 5.350% 4,255 4,255
Louisiana (1.7%)
*Lake Charles Harbor & Terminal District P.C.R. (Conoco Inc.
gtd by E.I. DuPont) V.R.D.B. 6.150% 700 700
Louisiana Recovery District Sales Tax Revenue (MBIA Insured)
7.625% 7/01/96 1,000 1,019
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B. 6.150% 900 900
_______
2,619
Maryland (1.9%)
*Ann Arundel County E.D.R. (Baltimore Gas and Electric
Company) 3.900% Mandatory Put 1/30/96 3,000 3,000
<PAGE>
Michigan (3.6%)
Detroit School District State School Aid Notes Series 1995
4.500% 5/01/96 2,500 2,505
Michigan Job Development Authority P.C.R. Series 1985 (Mazda
Motor Manufacturing USA Corp. L.O.C. Sumitomo Bank,
Ltd.) V.R.D.B. 5.250% 3,000 3,000
_______
5,505
Minnesota (1.0%)
*Minnesota Housing Finance Authority Single Family Mortgage
Series N 3.600% Mandatory Put 12/12/96 1,600 1,600
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
Continued Principal Market
Amount Value
<S> <C> <C>
Mississippi (0.6%)
Claiborne County (Southern Mississippi Electric gtd. by National
Rural Utilities Cooperative Finance Corp.) 3.700% Mandatory
Put 2/13/96 $ 1,000 $ 1,000
Missouri (2.9%)
*Jefferson County (GHF Holdings L.O.C. Bank One, Indianapolis)
V.R.D.B. 5.350% 4,410 4,410
New Hampshire (3.9%)
*New Hampshire I.D.R. (New England Power Co.) 4.050%
Mandatory Put 2/09/96 6,000 6,000
New Mexico (0.6%)
*Santa Fe Single Family Mortgage Revenue 4.000%
Mandatory Put 11/15/96 1,000 1,000
New York (2.0%)
New York City R.A.N. Series B 4.750% 6/28/96 3,000 3,012
North Carolina (0.6%)
North Carolina Educational Facilities Financing Revenue (Bowman
Grey School Medical Project L.O.C. Wachovia Bank)
V.R.D.B. 5.000% 1,000 1,000
Ohio (0.3%)
Ohio Environmental Improvement Revenue (L.O.C. Pittsburgh
National Bank) V.R.D.B. 4.000% 400 400
Oregon (1.0%)
Klamath Falls Electric Revenue Salt Caves Hydroelectricity Series D
4.400% Mandatory Put 5/01/96 1,500 1,500
Pennsylvania (3.3%)
Pennsylvania T.A.N. Series 1995-96 4.500% 6/28/96 3,0003,011
Philadelphia T.R.A.N. 4.500% 6/27/96 2,000 2,005
_______
5,016
<PAGE>
South Carolina (8.6%)
*South Carolina Economic Development Authority (Specialty
Equipment Companies L.O.C. Barclays Bank PLC)
V.R.D.B. 5.350% 3,000 3,000
South Carolina Local Education Agencies Pooled Tax and Revenue
Anticipation Note Program Series 1995 A 5.000% 8/14/96 5,000 5,015
York County P.C.R. (gtd. by National Rural Utilities Cooperative
Finance Corp.)
3.800% Optional Put 2/15/96 (Saluda River) 3,300 3,300
3.750% Optional Put 3/15/96 (North Carolina Electric Co.) 2,000 2,000
_______
13,315
Tennessee (3.7%)
Blount County Hospital Revenue Refunding Series 1996 A
(MBIA Insured) 3.900% 7/01/96 1,775 1,775
*McMinn County Industrial Development Board I.D.R. (L.O.C.
NBD Bank) V.R.D.B. 5.250% 4,000 4,000
_______
5,775
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
Continued Principal Market
Amount Value
<S> <C> <C>
Texas (11.1%)
Denton I.D.R. (Safety-Kleen Corp. L.O.C. Swiss Bank Corporation)
V.R.D.B. 5.050% $ 830 $ 830
*Harris County Industrial Development Corp. (Exxon Corp.)
V.R.D.B. 6.150% 500 500
*Harris County Industrial Development Corp. I.D.R. (Precision
General Project L.O.C. Morgan Guaranty) V.R.D.B. 5.350% 2,060 2,060
*North Texas Higher Education Authority Texas Student Loan
Revenue Refunding Series A (L.O.C. Student Loan Marketing
Association) V.R.D.B. 5.250% 1,100 1,100
*Robertson County Industrial Development Corp. I.D.R.
Series 1995 (L.O.C. Harris Bank) V.R.D.B. 5.200% 1,800 1,800
*San Antonio Airport Lease Special Project Revenue (Hedrick
Beechcraft, Inc gtd. by Raytheon Co.) Series 1992
V.R.D.B. 5.250% 3,900 3,900
Texas G.O. Veteran's Housing Assistance Program Funding
Series 1995 V.R.D.B. 5.050% 2,000 2,000
Texas T.R.A.N. 4.750% 8/30/96 5,000 5,026
________
17,216
Vermont (0.3%)
*Vermont I.D.R. (Rye Gate Project L.O.C. ABN Amro)
V.R.D.B. 5.100% 500 500
Washington (1.3%)
*Yakima County Public Corp I.D.R. (L.O.C. Bayerische Vereinsbank
AG) V.R.D.B. 5.350% 2,000 2,000
Wisconsin (12.2%)
*Carlton P.C.R. Series 1988 (Wisconsin Power and Light)
V.R.D.B. 5.150% 6,500 6,500
*Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 5.350% 3,825 3,825
*Holland I.D.R. (White Clover Daily Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 5.350% 3,085 3,085
*Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 5.350% 2,430 2,430
*Oak Creek I.D.R. Series 1995 (McAdams Graphics L.O.C. Bank
One, Milwaukee) V.R.D.B. 5.450% 2,000 2,000
Wisconsin Health Facilities Authority Revenue (Franciscan Health
L.O.C. Toronto Dominion Bank) V.R.D.B. 5.500% 1,000 1,000
________
18,840
<PAGE>
Total Municipal Securities (100.5%)
(Amortized Cost $155,291) 155,291
Other Assets, Less Liabilities (-0.5%) (708)
________
Total Net Assets (100.0%) $154,586
========
<FN>
* These securities are subject to Alternative Minimum Tax. At December 31,
1995 these securities represented 55.1 percent of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Intermediate Municipals Fund
Investments as of December 31, 1995
(Dollar Amounts In Thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (98.5%) Amount Value
<S> <C> <C>
Alabama (0.8%)
Alabama Special Care Facility Financing Authority Birmingham
Revenue (Daughters of Charity St. Vincent Hospital)
5.000% 11/01/05 $ 1,735 $ 1,729
Alaska (1.4%)
Kenai Peninsula Borough G.O. Refunding (AMBAC Insured)
8.300% 1/01/99 1,500 1,673
North Slope Borough G.O. 8.350% 6/30/98 1,200 1,311
_______
2,984
Arizona (6.8%)
Arizona Transportation Board Highway Revenue Subordinated
Series A 6.000% 7/01/00 1,000 1,076
Cochise County Unified School District No. 68 Series B
(FGIC Insured) 9.000% 7/01/01 1,115 1,366
Maricopa County Hospital Revenue (Samaritan Health Services)
(Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,436
Maricopa County Refunding G.O. Unlimited Tax (FGIC Insured)
6.250% 7/01/00 2,000 2,172
Phoenix Civic Improvement Wastewater System Lease Revenue
(Escrowed in U.S. Treasury Securities) (pre-refunded to 7/01/03)
6.000% 7/01/07 2,500 2,772
Pima County Refunding G.O. 6.300% 7/01/02 2,500 2,779
Pima County Unified School District No. 1 (Tucson Project)
(MBIA Insured) 8.000% 7/01/01 1,400 1,650
Tempe Unified High School District No. 213 Refunding and
Improvement (FGIC Insured) 7.00% 7/01/08 500 595
_______
14,846
Arkansas (1.3%)
Beaver Water District Benton & Washington Counties Water
Revenue Refunding (MBIA Insured) 6.000% 11/15/04 2,580 2,851
<PAGE>
California (5.6%)
*California Housing Finance Agency Revenue Home Mortgage
Series B-1 5.900% 2/01/04 990 1,041
Central Coast Water Authority Revenue (AMBAC Insured)
5.950% 10/01/03 2,000 2,196
East Bay Municipal Utility District Water System Revenue
(Escrowed in U.S. Treasury Securities) (AMBAC Insured)
7.000% 6/01/00 1,400 1,556
Los Angeles County Public Water Works Authority (Regional Parks
And Open Space Revenue) 5.800% 10/01/05 1,500 1,606
Los Angeles Department of Water & Power Electric Revenue
Crossover Refunding 9.000% 9/01/03 2,500 3,215
Oakland Unified School District G.O. Series A (FGIC Insured)
Zero Coupon (Effective Yield 6.250%) 8/01/16 1,700 504
Vallejo Revenue Series B (Water Improvement Project)
(FGIC Insured) 6.000% 11/01/01 2,030 2,207
_______
12,325
Colorado (0.2%)
Adams County School District No 12 Series A (MBIA Insured)
Zero Coupon (Effective Yield 5.850%) 12/15/12 1,300 512
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Delaware (0.6%)
Delaware Economic Development Authority Water Development
Revenue Refunding (General Waterworks Corp.-Wilmington
Suburban Water Corp.) 6.450% 12/01/07 $ 1,165 $ 1,306
Florida (2.6%)
Florida Division Board Finance Department of General Services
Revenue (Department of Natural Resources) (MBIA Insured)
6.000% 7/01/03 1,000 1,087
*Lee County Solid Waste System Revenue (MBIA Insured)
5.250% 10/1/10 3,000 2,971
Palm Beach County Airport System Revenue (MBIA Insured)
7.625% 10/01/04 1,410 1,663
_______
5,721
Georgia (5.4%)
Dekalb County Development Authority Revenue (Emory University
Project) Series A 5.375% 11/01/05 3,000 3,153
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
5.625% 1/01/01 1,000 1,064
Georgia G.O. Series C 7.700% 4/01/00 1,250 1,421
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding (AMBAC Insured)
6.050% 7/01/01 1,600 1,733
5.800% 7/01/02 1,000 1,075
Municipal Electric Authority of Georgia Special Obligation Fifth
Crossover Series (AMBAC Insured) 6.400% 1/01/13 3,000 3,399
_______
11,845
Hawaii (0.6%)
Honolulu (City & County) Refunding G.O. Series 1990 A
7.350% 7/01/06 1,000 1,217
Illinois (5.6%)
*Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/01/04 1,000 1,053
Chicago School Finance Authority Series A (MBIA Insured)
4.800% 6/01/04 2,040 2,031
Chicago Skyway Toll Bridge Revenue Refunding Series 1994
6.750% 1/01/17 1,500 1,573
Chicago Water Revenue Refunding (FGIC Insured) 6.500% 11/01/09 2,130 2,416
DuPage County Special Service Area No. 11 Refunding
6.750% 1/01/14 1,250 1,266
Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue Series 1992 A (McCormick Place Expansion Project)
5.900% 6/15/03 1,500 1,606
7.250% 6/15/05 1,750 2,058
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B. 6.150% 300 300
_______
12,303
<PAGE>
Indiana (4.4%)
Indiana Toll Road Commission Toll Road Revenue (Escrowed in
U.S. Treasury Securities) 9.000% 1/01/15 2,655 3,798
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A (United Airlines)
5.600% 11/01/99 1,125 1,173
6.500% 11/01/07 2,250 2,449
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Indiana (Continued)
Indianapolis Local Public Improvement Bond Bank Series 1992 D
6.500% 2/01/06 $ 2,100 $ 2,321
_______
9,741
Iowa (0.7%)
Iowa School Corporations Warrant Certificates 1995-96 Series A
(Capital Guaranty Insured) 4.750% 6/28/96 1,500 1,509
Kentucky (3.7%)
Kentucky Property & Buildings Refunding (MBIA Insured)
6.250% 9/01/07 2,755 3,081
Kentucky Turnpike Authority Economic Development Revenue
Refunding (Revitalization Projects)
5.800% 1/01/04 2,500 2,677
6.500% 7/01/07 (AMBAC Insured) 2,000 2,278
_______
8,036
Louisiana (2.2%)
Lafayette Public Power Authority Electric Revenue
9.000% 11/01/96 1,000 1,043
Louisiana Public Facilities Authority Student Loan Revenue
Series A-1 5.900% 9/01/99 2,000 2,079
Orleans Levee District Tax Revenue Receipts Series A (FSA Insured)
5.950% 11/01/04 1,635 1,719
_______
4,841
Maine (0.4%)
*Maine Educational Loan Authority Educational Loan Revenue
Supplemental Education Loan Series A-2 6.650% 12/01/02 725 789
Massachusetts (4.3%)
Massachusetts Bay Transportation Authority Mass Refunding
General Transportation System Series A 7.000% 3/01/07 2,250 2,632
Massachusetts Health and Educational Facilities Authority Revenue
7.250% 7/01/00 Series C (Daughters of Charity Carney
Hospital) 1,000 1,081
6.000% 7/01/09 Series D (Daughters of Charity Carney
Hospital) 1,000 1,047
6.250% 12/01/14 (Dana Farber Cancer Institution) 1,000 1,036
Massachusetts Water Resources Authority Refunding Series C
6.000% 12/01/11 3,410 3,713
_______
9,509
<PAGE>
Michigan (2.8%)
Hastings School District (FGIC Insured) 5.250% 5/01/08 1,030 1,044
Michigan Building Authority Revenue Refunding Series I
(AMBAC Insured) 6.000% 10/01/02 3,000 3,281
Michigan Hospital Finance Authority Revenue (Daughters of Charity
Providence Hospital) 6.500% 11/01/01 1,605 1,725
_______
6,050
Missouri (0.4%)
Missouri Regional Convention & Sports Complex Authority
6.600% 8/15/03 830 923
Nevada (1.3%)
*Clark County P.C.R. Series 1990 A (Southern California Edison Co.)
7.125% 6/01/09 1,500 1,632
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Nevada (Continued)
Las Vegas Valley Water District G.O. Limited Tax (AMBAC Insured)
(Escrowed in U.S. Treasury Securities) (pre-refunded to 8/01/00)
7.000% 8/01/08 $ 1,000 $ 1,130
_______
2,762
New Jersey (3.2%)
Bergen County Utility Authority Solid Waste System Revenue
Refunding Series A (FGIC Insured) 6.250% 6/15/06 2,000 2,202
New Jersey Health Care Facilities Finance Authority Revenue
6.100% 7/01/01 (Hackensack Medical Center) (FGIC Insured) 1,000 1,089
7.000% 7/01/03 (Christ Hospital Group) (Connie Lee Insured) 1,730 1,987
New Jersey Turnpike Authority Revenue Refunding Series A
(AMBAC Insured) 6.400% 1/01/02 1,500 1,656
_______
6,934
New Mexico (1.7%)
Gallup P.C.R. (Plains Electric Transmission & Generating
Cooperative Inc.) (MBIA Insured) 6.100% 8/15/02 2,000 2,174
Rio Rancho Water & Wastewater System Revenue Series A
(FSA Insured) 8.000% 5/15/03 1,350 1,634
_______
3,808
New York (5.3%)
New York City G.O. Series 1996 D 6.500% 2/15/05 4,000 4,228
New York Dormitory Authority Revenue (State University
Educational Facilities) Series A 6.500% 5/15/05 1,000 1,087
New York Environmental Facility Corp. P.C.R. State Water Series D
6.300% 5/15/05 3,000 3,409
New York Urban Development Corporation Revenue Series 4
5.250% 1/01/13 3,000 2,866
_______
11,590
North Carolina (2.4%)
North Carolina Eastern Municipal Power Refunding Series B
6.000% 1/01/05 3,000 3,104
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding
3.750% 1/01/96 500 500
5.900% 1/01/03 1,500 1,560
_______
5,164
<PAGE>
Ohio (2.4%)
Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,111
Hamilton County Sewer System Revenue Refunding and
Improvement Series A 6.300% 12/01/01 620 681
Loveland School District G.O. (MBIA Insured) 7.100% 12/01/09 3,000 3,480
_______
5,272
Oklahoma (0.5%)
Mackalester Oklahoma Public Works Authority Revenue Refunding
& Improvement (FSA Insured) 5.250% 12/01/14 1,230 1,207
Oregon (2.4%)
Oregon Department of Transportation Revenue (MBIA Insured)
5.700% 6/01/02 1,220 1,315
Portland Sewer System Revenue Refunding Series B (FGIC Insured)
5.400% 4/01/02 2,500 2,661
Tri-County Metropolitan Transportation District Revenue Series A
(AMBAC Insured) 6.750% 8/01/03 1,060 1,208
_______
5,184
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Pennsylvania (3.7%)
Dauphin County Hospital Authority Revenue Refunding Series B
(Hapsco Group Inc.) (MBIA Insured) 5.800% 7/01/02 $ 1,600 $ 1,711
Penn Hills Township Allegheny County G.O. Series 1995
(AMBAC Insured) 5.500% 12/01/04 2,510 2,658
Pennsylvania Higher Education Assistance Agency Student Loan
Revenue Refunding Series 1985 A (FGIC Insured)
6.800% 12/01/00 3,000 3,286
Schuykill County I.D.A. Resource Recovery Revenue (Westwood
Energy Properties Limited Partnership L.O.C. Fuji Bank, Ltd.)
V.R.D.B. 6.250% 500 500
_______
8,155
Puerto Rico (0.5%)
Puerto Rico Electric Power Authority Revenue Series X
6.000% 7/01/15 1,000 1,030
South Carolina (2.6%)
Piedmont Municipal Power Agency Electric Revenue (FGIC Insured)
6.125% 1/01/07 2,065 2,277
*South Carolina Ports Authority Revenue (AMBAC Insured)
6.200% 7/01/01 1,000 1,074
Sumter County Hospital Facilities Revenue Refunding (Tuomey
Regional Medical Center) (MBIA Insured) 6.625% 11/15/04 2,000 2,266
_______
5,617
Tennessee (1.5%)
Metropolitan Nashville & Davidson County Water & Sewer
Revenue (FGIC Insured) 6.500% 1/01/10 2,750 3,167
<PAGE>
Texas (12.8%)
Alief Independent School District G.O. (gtd. by Permanent School
Funding) 8.000% 2/15/99 1,305 1,451
Dallas Waterworks & Sewer System Revenue Refunding Series 1988
7.000% 4/01/98 2,000 2,126
Dallas-Fort Worth Regional Airport Joint Revenue Refunding
Series B 5.750% 11/01/99 1,000 1,056
Fort Bend Independent School District Unlimited Tax (gtd. by
Permanent School Funding) 7.500% 2/15/00 1,010 1,133
Fort Worth Limited Tax 8.350% 3/01/00 1,250 1,442
Houston Hotel Occupancy Tax Revenue Refunding (FSA Insured)
6.000% 7/01/06 2,095 2,265
Houston Water & Sewer System Revenue Refunding Jr. Lien Series C
(MBIA Insured) 5.900% 12/01/05 1,300 1,412
Houston Water Conveyance System Contract Certificates of
Participation (AMBAC Insured)
7.000% 12/15/03 Series C 1,000 1,153
6.125% 12/15/06 Series J 1,000 1,102
Northside Independent School District G.O. 9.400% 4/01/98 1,850 2,053
Plano Independent School District G.O. Unlimited Tax
(FGIC Insured) 8.625% 2/15/99 1,900 2,143
Round Rock Independent School District G.O. Unlimited Tax
School Building and Refunding Series 1991
8.625% 8/15/00 Series 1991 (MBIA Insured) 1,270 1,499
7.500% 8/01/02 Series 1995 A (PSF Insured) 1,200 1,417
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Texas (Continued)
San Antonio Water System Revenue Refunding (FGIC Insured)
6.000% 5/15/01 $ 3,000 $ 3,235
*Texas Veterans Land G.O. 7.625% 12/01/13 3,975 4,358
________
27,845
Utah (0.5%)
Utah Housing Finance Agency Single Family Mortgage Issue E
Series 1986 A
8.300% 7/01/00 435 451
8.400% 7/01/01 580 602
________
1,053
Virginia (1.4%)
*Virginia Housing Development Authority Commonwealth
Mortgages Series A
6.700% 7/01/05 Subseries A-1 1,280 1,396
6.200% 7/01/12 Subseries A-4 (MBIA Insured) 1,670 1,751
________
3,147
Washington (6.5%)
Clark County Public Utilities District No. 1 Generating System
Revenue (FGIC Insured) 6.000% 1/01/08 2,500 2,690
Snohomish County School District No. 2 Refunding G.O. (Everett)
(MBIA Insured)
7.250% 12/01/00 2,540 2,878
7.000% 12/01/01 2,230 2,539
7.000% 12/01/02 1,500 1,729
Washington Multiple Purpose G.O. Series C 6.500% 7/01/04 3,800 4,299
________
14,135
Total Municipal Securities (98.5%)
(Amortized Cost $202,802) 215,107
Other Assets, Less Liabilities (1.5%) 3,311
________
Total Net Assets (100.0%) $218,418
========
<FN>
* These securities are subject to Alternative Minimum Tax. At December 31,
1995 these securities represented 7.5 percent of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Managed Municipals Fund
Investments as of December 31, 1995
(Dollar Amounts In Thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (100.6%) Amount Value
<S> <C> <C>
Alabama (0.7%)
Alabama Special Care Facility Financing Authority Birmingham
Revenue (Daughters of Charity St. Vincent Hospital)
5.000% 11/01/25 $ 5,000 $ 4,602
Arizona (0.3%)
Phoenix G.O. Unlimited Tax Refunding Series 1995A 6.250 7/01/17 1,800 2,031
Arkansas (0.4%)
Arkansas Development Financing Authority Single Family
Mortgage Revenue Series A (FHA Insured) 8.125% 8/01/14 2,475 2,584
California (5.1%)
Burbank Wastewater Treatment Revenue Series A 5.500% 6/01/25 1,000 1,001
California Health Facilities Finance Authority Revenue
(Daughters of Charity) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/01/96) 9.250% 11/01/15 2,000 2,076
California Public Works Board Lease Revenue Series A (FSA Insured)
5.625 5/01/20 3,000 3,010
Central Contra Costa Sanitation District Revenue Wastewater
Facilities Improvement Project (MBIA Insured)
6.250% 9/01/13 2,025 2,191
6.250% 9/01/14 1,295 1,401
Foothill Eastern Transportation Corridor Agency Toll Road
Refunding Sr. Lien Series 1995A
Zero Coupon (Effective Yield 7.200%) 1/01/18 10,0002,511
6.000% 1/01/34 1,500 1,492
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/23 10,000 9,968
Northern California Power Agency Public Power Revenue Refunding
Series B-1 (Hydroelectric Project #1) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/98) 8.000% 7/01/24 2,000 2,185
Southern California Public Power Authority Revenue Refunding
Zero Coupon (Effective Yield 6.000%) 7/01/14 (FGIC Insured)
(Escrowed in U.S. Treasury Securities) 8,155 3,034
5.000% 7/01/17 Series A (Power Project) 2,500 2,334
5.500% 7/01/23 (Transmission Project) 1,490 1,463
_______
32,666
<PAGE>
Colorado (1.4%)
Colorado Housing Finance Authority Multifamily Mortgage Revenue
6.000% 10/01/09 1,490 1,492
6.000% 10/01/10 1,590 1,592
6.000% 10/01/11 1,715 1,716
6.000% 10/01/12 1,835 1,836
Municipal Subdistrict Northern Colorado Water Conservancy
District Revenue Series D 6.000% 12/01/15 2,500 2,529
_______
9,165
Delaware (0.8%)
Delaware Economic Development Authority Water Development
Revenue Refunding (General Waterworks Corp. - Wilmington
Suburban Water Corp.)
6.450% 12/01/07 Series 1992 B 1,160 1,300
*6.800% 12/01/23 Series 1992 A 3,500 3,736
_______
5,036
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Florida (1.8%)
Broward County Public Improvement Revenue Refunding G.O.
Series 1986
12.500% 1/01/03 $ 1,000 $ 1,471
12.500% 1/01/04 1,195 1,821
12.500% 1/01/05 2,000 3,140
Florida G.O. (Jacksonville Transportation Authority Project)
(Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,833
*Jacksonville Water and Sewer Development Revenue (Jacksonville
Suburban Utilities-General Waterworks Corp.) 6.750% 6/01/22 1,500 1,633
Martin County P.C.R. (Florida Power & Light Co.)
V.R.D.B. 5.000% 400 400
_______
11,298
Georgia (11.8%)
Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured)
6.500% 1/01/08 2,750 3,115
6.500% 1/01/10 2,000 2,273
*Cartersville Development Authority Revenue Water & Wasteworks
Facilities (Anheuser-Busch) 7.375% 5/01/09 9,000 10,871
Columbia County School District G.O. (MBIA Insured)
6.750% 4/01/09 1,900 2,210
7.000% 4/01/10 2,125 2,532
7.000% 4/01/11 2,370 2,831
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
6.375% 1/01/14 13,700 15,653
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding Series P (AMBAC Insured) 6.250% 7/01/20 4,000 4,585
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18 21,100 24,043
Paulding County Georgia School District (MBIA Insured)
6.000% 02/01/10 4,235 4,595
6.000% 02/01/13 2,360 2,574
_______
75,282
Idaho (0.3%)
*Idaho Housing Agency Single Family Mortgage Revenue
(FHA/VA Insured) 7.875% 7/01/24 1,945 2,054
<PAGE>
Illinois (9.2%)
Chicago Board of Education Refunding G.O. Lease Certificates
Series A (MBIA Insured) 6.000% 1/01/16 5,000 5,442
Chicago (City of) Gas Supply Revenue Series 1985 D (Peoples Gas
Light & Coke Company) 7.500% 3/01/15 4,500 5,053
Chicago (City of) Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/17 1,500 1,573
Illinois Development Finance Authority
**5.950% 1/01/09 (Catholic Charities Housing Development) 1,450 1,465
7.600% 9/01/13 P.C.R. (Central Illinois Public Service) 3,000 3,386
Illinois Housing Development Authority Series A (FHA Insured)
7.800% 12/01/12 905 939
8.000% 6/01/26 6,770 7,021
Illinois Sales Tax Revenue Refunding Series Q 6.000% 6/15/12 10,000 10,875
Illinois Toll Highway Authority Priority Revenue Series A
6.300% 1/01/11 7,500 8,317
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Illinois (Continued)
Metropolitan Fair & Exposition Authority Dedicated State Tax
Revenue (Escrowed in U.S. Treasury Securities) (pre-refunded to
6/01/96) 8.000% 6/01/10 $ 10,000 $ 10,371
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B.
6.150% 2,100 2,100
University of Illinois University Revenue Auxiliary Facilities
(MBIA Insured) Zero Coupon (Effective Yield 6.120%) 4/01/12 5,795 2,378
________
58,920
Indiana (5.8%)
*Hammond Sewer & Solid Waste Disposal Revenue
(American Maize Products Co.) 8.000% 12/01/24 5,000 5,643
*Indianapolis Airport Authority Revenue Special Facilities (United
Airlines) 6.500% 11/15/31 5,000 5,095
Indianapolis Local Public Improvement Series 1995 A (FSA Insured)
5.000% 1/01/17 11,415 10,628
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16 6,950 7,159
Michigan City P.C.R. (Northern Indiana Public Service Company)
5.700% 10/01/03 8,795 8,810
________
37,335
Iowa (0.2%)
*Iowa Finance Authority Single Family Mortgage Revenue Series B
(collateralized by Government & Federal National Mortgage
Association Securities) 7.450% 7/01/23 1,255 1,332
Kansas (0.6%)
Kansas City Industrial Revenue (PQ Corp) V.R.D.B. 6.000% 300 300
Kansas Department of Transportation Highway Revenue (Escrowed
in U.S. Treasury Securities) (pre-refunded to 3/01/02)
6.500% 3/01/12 3,000 3,365
________
3,665
<PAGE>
Kentucky (3.3%)
*Kentucky Housing Corp. Revenue Series C (FHA/VA Insured)
8.100% 1/01/22 2,585 2,774
Kentucky Turnpike Authority Economic Development Revenue
Refunding Series 1992 (Revitalization Project) (FGIC Insured)
Zero Coupon (Effective Yield 6.600%) 1/01/10 13,500 6,441
Kentucky Turnpike Authority Revenue (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,740
*Trimble County P.C.R. Series A (Louisville Gas & Electric Co.)
7.625% 11/01/20 6,670 7,559
7.625% 11/01/20 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/00) 1,330 1,533
________
21,047
Louisiana (2.7%)
*Lake Charles Harbor & Terminal District P.C.R. (E.I. DuPont gtd.
by Conoco Inc.) V.R.D.B. 6.150% 900 900
*De Soto Parish Environmental Improvement Revenue (International
Paper Co.) Series A 7.700% 11/01/18 3,250 3,752
East Baton Rouge Parish P.C.R. (Rhone-Poulenc) V.R.D.B. 5.900% 1,000 1,000
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Louisiana (Continued)
Louisiana Public Facility Authority Hospital Revenue (Hotel Dieu
Daughters of Charity Health System) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 2/01/96) 9.750% 2/01/15 $ 1,000 $ 1,024
New Orleans G.O. (AMBAC Insured)
Zero Coupon (Effective Yield 6.125%) 9/01/12 6,250 2,524
*Parish of St. Charles P.C.R. (Shell Oil Co.) V.R.D.B. 6.150% 3,700 3,700
Shreveport Water & Sewer Revenue Series 1994 A (FGIC Insured)
5.250% 12/01/12 2,005 1,993
5.250% 12/01/13 2,115 2,090
_______
16,983
Maine (1.2%)
*Maine Educational Loan Marketing Corporation Student Loan
Revenue Series 1994 B-1 6.500% 11/01/09 3,000 3,172
*Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19 2,520 2,661
7.550% 11/15/22 1,750 1,848
_______
7,681
Maryland (1.2%)
Washington Suburban Sanitary District
6.600% 6/01/06 2,795 3,082
6.625% 6/01/17 1,660 1,833
6.625% 6/01/19 2,320 2,562
_______
7,477
Massachusetts (8.7%)
Massachusetts Bay Transportation Authority Refunding
7.000% 3/01/14 Series 1994 A 3,150 3,757
6.200% 3/01/16 Series 1992 B 9,825 10,809
7.000% 3/01/19 Series 1994 A 2,500 3,015
Massachusetts College Building Authority Project Refunding Series A
7.500% 5/01/11 1,500 1,863
7.500% 5/01/14 3,500 4,392
Massachusetts Health & Educational Facilities Authority Revenue
6.250% 7/01/12 (Massachusetts General Hospital Project)
(AMBAC Insured) 5,750 6,419
6.250% 12/01/22 (Dana Farber Cancer Institute) 6,5006,704
5.250% 6/01/23 (Boston College) (MBIA Insured) 3,0402,963
6.750% 7/01/24 (Brigham & Women's Hospital)
(AMBAC Insured) 7,365 8,053
Massachusetts Water Resources Authority Refunding
5.500% 11/01/15 Series 1992 B 7,500 7,400
_______
55,375
<PAGE>
Michigan (2.2%)
Detroit Sewage Disposal Revenue (MBIA Insured) 5.000% 7/01/25 1,000 951
Michigan Hospital Finance Authority Providence Hospital Revenue
Refunding (Daughters of Charity Health Systems Inc.)
7.000% 11/01/21 3,000 3,262
Michigan Hospital Financing Authority Revenue Refunding Series A
(Henry Ford Health System) 5.250% 11/15/25 5,000 4,756
Novi Community School District (FGIC Insured) 5.300% 5/01/17 4,950 4,881
_______
13,850
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Minnesota (1.7%)
*Minneapolis St. Paul Housing Finance Board Single Family
Mortgage Revenue (collateralized by Government National
Mortgage Association Securities)
7.250% 8/01/21 $ 2,455 $ 2,645
7.300% 8/01/31 3,640 3,865
*Minnesota Housing Finance Agency Single Family Mortgage Series A
7.450% 7/01/22 3,990 4,291
_______
10,801
Mississippi (0.4%)
Biloxi Mortgage Revenue Refunding Series 1987 (Biloxi Regional
Medical Center) (Escrowed in U.S. Treasury Securities)
19.000% 8/15/98 2,000 2,728
Missouri (0.3%)
Little Blue Valley Sewer District Revenue Refunding (AMBAC
Insured) (Escrowed in U.S. Treasury Securities) (pre-refunded to
10/01/98) 9.000% 10/01/07 1,000 1,127
Missouri Housing Community Development Single Family
Mortgage Revenue 9.375% 4/01/16 100 109
Springfield School District Refunding G.O. Series B (FGIC Insured)
9.500% 3/01/07 600 839
_______
2,075
Nevada (0.7%)
*Nevada Housing Division Single Family Mortgage (FHA/VA Insured)
7.750% 4/01/22 4,050 4,236
New Jersey (0.9%)
New Jersey G.O. Series D 6.000% 2/15/11 5,150 5,610
New Mexico (0.4%)
Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13 1,000 1,038
Santa Fe Utilities Revenue Refunding (AMBAC Insured)
5.250% 6/01/17 1,250 1,237
_______
2,275
<PAGE>
New York (8.7%)
Empire State Development Corp. New York Urban Development
Corp. Project Revenue Refunding (Syracuse University
Technology) 5.500% 1/01/17 2,000 1,985
Erie County Water Authority Water Revenue Refunding Series 1992
(AMBAC Insured) Zero Coupon (Effective Yield 7.300%)
12/01/17 660 137
New York City G.O. Series A
8.750% 11/01/17 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/97) 1,000 1,099
5.750% 2/01/19 3,170 3,087
New York Dormitory Authority Lease Revenue State University
Dormitory Facilities (AMBAC Insured)
6.000% 7/01/09 2,000 2,175
6.000% 7/01/11 1,110 1,203
New York Environmental Facilities Corporation P.C.R. Water
Revolving Fund - New York City Municipal Water
5.750% 6/15/10 10,000 10,676
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
New York (Continued)
*New York I.D.A. Special Facility Revenue Series 1994 (Terminal
One Group, Associate L.P. Project) 6.000% 1/01/15 $ 8,340 $ 8,455
New York Medical Care Facilities Finance Agency Revenue Mental
Health Series A (FGIC Insured) 5.250% 08/15/23 3,0002,911
New York Urban Development Corp. State Facilities Revenue
Refunding
5.600% 4/01/15 2,600 2,618
5.700% 4/01/20 3,600 3,648
Triborough Bridge & Tunnel Authority General Purpose Revenue
6.625% 1/01/12 Series X 8,715 10,010
6.125% 1/01/21 Series Y 6,890 7,684
_______
55,688
North Carolina (1.2%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities) 4,315 5,167
6.500% 1/01/18 Series 1991 A 2,185 2,385
8.000% 1/01/21 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98) 240 263
_______
7,815
Ohio (0.7%)
Franklin County Hospital Revenue Refunding and Improvement
(Riverside Hospital) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/15/00) 7.600% 5/15/20 3,900 4,488
Oklahoma (0.3%)
*Tulsa County Home Finance Authority Mortgage Revenue Series
1991 B (collateralized by Government National Mortgage
Association Securities) 7.550% 5/01/23 1,825 1,945
Pennsylvania (2.7%)
Allegheny County Sanitation Authority Sewer Revenue
(FGIC Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,324
*Dauphin County I.D.A. Water Development Revenue (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24 2,400 2,793
Pennsylvania G.O. 6.250% 7/01/12 11,200 12,557
Schuykill County I.D.A. (Westwood Energy Properties Limited
Partnership L.O.C. Fuji Bank Ltd.) V.R.D.B. 6.250% 360 360
_______
17,034
<PAGE>
Puerto Rico (0.3%)
Puerto Rico Aqueduct & Sewer Authority Revenue Refunding
6.250% 7/01/12 2,000 2,179
Rhode Island (1.0%)
*Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/01/22 5,650 6,090
South Carolina (2.2%)
*Calhoun County Solid Waste Disposal Facilities Revenue
(Eastman Kodak Co.) (Escrowed in U.S. Treasury Securities)
6.750% 5/01/17 3,000 3,526
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
South Carolina (Continued)
*Richland County Solid Waste Disposal Facilities Revenue Series
1991 B (Union Camp Corp.) 7.125% 9/01/21 $ 5,000 $ 5,461
*South Carolina Housing Finance Agency Single Family Mortgage
Revenue Series C 7.750% 7/01/22 4,775 5,070
_______
14,057
South Dakota (2.8%)
Heartland Consumers Power District Electric Revenue Refunding
(FSA Insured) 6.000% 1/01/17 7,000 7,579
*South Dakota Student Loan Assistance Corp. Student Loan
Revenue Series B 7.450% 8/01/00 9,820 10,572
_______
18,151
Tennessee (1.6%)
*Tennessee Housing Development Agency (Homeownership Project)
7.300% 7/01/11 10,000 10,516
Texas (8.5%)
*Harris County Health Facilities Refunding (MBIA Insured)
5.500% 10/01/16 5,000 4,998
*Harris County Industrial Development Corp. (Exxon Corp.)
V.R.D.B. 6.150% 600 600
Houston Hotel Occupancy Tax Revenue Refunding (FSA Insured)
5.500% 7/01/15 4,000 4,017
Houston Water & Sewer Systems Revenue Refunding
Zero Coupon (Effective Yield 6.800%)
12/01/08 (AMBAC Insured) 4,000 2,044
Zero Coupon (Effective Yield 6.8125%)
12/01/09 (AMBAC Insured) 4,000 1,925
Zero Coupon (Effective Yield 6.850%)
12/01/10 (AMBAC Insured) 3,750 1,700
8.200% 12/01/15 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 12/01/96) 2,915 3,087
8.200% 12/01/16 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 12/01/96) 4,500 4,766
Sabine River Authority P.C.R. (Southwestern Electric Power
Company) Series 1986 8.200% 7/01/14 6,000 6,240
Texas G.O. Veteran's Welfare Fund 8.300% 12/01/16 (Escrowed in
U.S. Treasury Securities) (pre-refunded to 12/01/99) 15,275 17,480
Texas Municipal Power Agency Revenue Refunding
Zero Coupon (Effective Yield 6.900%) 9/01/08 (AMBAC Insured) 1,475 764
Zero Coupon (Effective Yield 6.050%) 9/01/13 (MBIA Insured) 14,000 5,362
*Travis County Housing Finance Agency Single Family Mortgage
(collateralized by Government National Mortgage Association
Securities) (FGIC Insured) 8.000% 9/01/10 1,350 1,434
_______
54,417
<PAGE>
Vermont (0.2%)
*Vermont Housing Finance Agency Single Family Mortgage
Revenue Series A 8.150% 5/01/25 1,095 1,172
Virginia (0.4%)
Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,813
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Washington (6.1%)
Clark County Public Utility District No. 1 Generating System
Revenue (FGIC Insured) 6.000% 1/01/08 $ 3,000 $ 3,228
*Port of Longview Industrial Development Corporation Solid Waste
Disposal Revenue (Weyerhaeuser Company) 6.875% 10/01/08 8,250 9,323
Washington G.O.
5.750% 9/01/10 Refunding Series R 3,000 3,185
6.000% 6/01/13 Series B 7,280 7,880
Washington Public Power Supply Systems Revenue Refunding
Zero Coupon (Effective Yield 6.700%) 7/01/05 Series 1991 B
(FGIC Insured) (Nuclear Project #3) 5,000 3,105
Zero Coupon (Effective Yield 6.950%)
7/01/08 Series B (Nuclear Project #3) 7,000 3,494
6.300% 7/01/12 Series 1992 A (Nuclear Project #2) 3,500 3,749
6.500% 7/01/18 Series 1991 C (Nuclear Project #3) 5,000 5,275
________
39,239
Wisconsin (1.4%)
Carlton P.C.R. Series 1991 (Wisconsin Power and Light)
V.R.D.B. 6.100% 500 500
Wisconsin G.O. Series G (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/01/99) 6.750% 5/01/11 5,000 5,435
Wisconsin Housing and Economic Development Authority
Revenue 7.750% 9/01/10 2,985 3,171
________
9,106
Wyoming (0.4%)
*Lincoln County P.C.R. (Exxon Corp.) V.R.D.B. 6.000% 1,500 1,500
Green River P.C.R. (Rhone-Poulenc Inc.) V.R.D.B. 5.900% 1,000 1,000
________
2,500
Total Municipal Securities (100.6%)
(Amortized Cost $589,037) 643,318
Other Assets, Less Liabilities (-0.6%) (4,121)
________
Total Net Assets (100.0%) $639,197
========
<FN>
* These securities are subject to Alternative Minimum Tax. At December 31,
1995 these securities represented 23.3 percent of net assets.
** This security is subject to contractual or legal restrictions on its
resale. At December 31, 1995, the value of this security represented 0.2
percent of net assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
High-Yield Municipals Fund
Investments as of December 31, 1995
(Dollar Amounts In Thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (98.9%) Amount Value
<S> <C> <C>
Arizona (1.0%)
Arizona Health Facilities Hospital System Revenue Refunding
(Phoenix Memorial Hospital) 8.125% 6/01/12 $ 2,500 $ 2,723
California (2.5%)
Foothill/Eastern Transportation Corridor Agency Toll Road Revenue
Sr. Lien Series 1995A 6.500% 1/01/32 2,000 2,045
Irvine Ranch Water District G.O. V.R.D.B. 6.100% 100 100
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/23 5,000 4,984
_______
7,129
Colorado (7.8%)
Adams County Single Family Mortgage Revenue Series B
(Escrowed in U.S. Treasury Securities)
11.250% 9/01/11 (pre-refunded to 9/01/09) 325 522
11.250% 9/01/11 (pre-refunded to 9/01/10) 360 586
11.250% 9/01/11 220 361
11.250% 9/01/12 1,440 2,389
Arapahoe County Capital Improvement Highway Revenue
7.000% 8/31/26 7,000 7,532
**Briargate Public Building Authority Landowner's Assessment
Lien Revenue
10.250% 12/15/00 Series 1985 A 546 338
9.500% 12/15/07 Series 1986 A 2,022 1,254
Colorado Health Facilities Authority Revenue
7.250% 4/01/11 (Birchwood Manor Apartments) (collateralized
by Government National Mortgage Association Securities) 720 761
8.500% 2/15/21 Series B (PSL Health Systems) (Escrowed in
U.S. Treasury Securities) (pre-refunded to 2/15/01) 3,250 3,906
*Denver City and County Airport Revenue Series D
7.750% 11/15/21 4,000 4,475
_______
22,124
<PAGE>
Florida (1.0%)
*Florida Housing Finance Agency Multi-Family
** Housing Revenue (Palm-Aire) 10.000% 1/01/20 2,835 1,701
Leesburg Capital Improvement Hospital Revenue Series 1991 A
(Leesburg Regional Medical Center) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/01) 7.375% 7/01/11 775 916
_______
2,617
Georgia (4.5%)
*Cartersville Development Authority Water and Wastewater
Facilities Revenue (Anheuser Busch) 7.375% 5/01/09 5,000 6,039
Municipal Electric Authority of Georgia Power Revenue
6.600% 1/01/18 6,065 6,911
_______
12,950
Idaho (1.3%)
*Idaho Housing Agency Single Family Mortgage Revenue
Series B (FHA Insured) 7.500% 7/01/24 3,580 3,794
<PAGE>
<CAPTION>
High-Yield Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Illinois (4.1%)
Chicago (City of) Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/07 $ 1,500 $ 1,572
***Illinois Development Finance Authority
(Catholic Charities Housing Development)
5.950% 1/01/09 1,400 1,414
Illinois Health Facilities Authority Revenue Refunding
8.125% 7/01/06 Series 1991 (United Medical Center) (Escrowed
in U.S. Treasury Securities) (pre-refunded to 7/01/01) 2,760 3,315
7.000% 2/15/22 Series 1992 (Edward Hospital Association) 685 738
Illinois Housing Development Authority Multi-Family Housing
Series C 7.400% 7/01/23 140 148
Regional Transportation Authority Series A (AMBAC Insured)
8.000% 6/01/17 1,500 2,004
*Southwestern Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) 6.150% V.R.D.B 2,400 2,400
_______
11,591
Indiana (14.3%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24 4,000 4,514
Indiana Health Facilities Financing Authority
Hospital Refunding
6.875% 8/01/17 (Riverview Hospital) Series 1993 1,500 1,552
7.000% 10/01/17 Series A (St. Anthony Medical Center) 1,000 1,074
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16 4,500 4,635
*Indianapolis Airport Authority Revenue Special Facilities
6.500% 11/15/31 (United Airlines) 7,000 7,133
7.100% 1/15/17 (Federal Express Corp.) 5,000 5,471
**Indianapolis Economic Development Revenue First Lien
9.375% 8/01/19 (The Home Place I Project) 1,457 801
9.500% 2/01/21 (The Home Place II Project) 780 429
Indianapolis Local Public Improvement Bond Bank Series 1991 C
6.700% 1/01/17 8,900 9,963
New Castle Economic Development Revenue (Raintree Square Project)
8.650% 4/01/17 Series 1988 A (FHA Insured) 2,860 3,249
**Zero Coupon 3/01/18 Series 1988 B 30,655 77
**Westfield Economic Development Revenue First Lien (Sanders
Glen Project) 9.375% 8/01/19 2,231 1,562
_______
40,460
<PAGE>
Iowa (1.5%)
Iowa Housing Finance Authority Single Family Housing Revenue
Zero Coupon (Effective Yield 10.262%) 9/01/16 42,745 4,251
Kansas (0.7%)
CSJ Health Systems of Wichita Revenue 7.000% 11/15/18 2,000 2,133
Louisiana (1.9%)
*De Soto Parish Environmental Improvement Revenue
(International Paper Co.) Series A 7.700% 11/01/18 2,500 2,886
Louisiana Public Facilities Authority Hospital Revenue (Women's
Hospital Foundation) 7.250% 10/01/22 2,300 2,428
_______
5,314
<PAGE>
<CAPTION>
High-Yield Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Massachusetts (4.0%)
Massachusetts Bay Transportation Authority Refunding Series B
6.200% 3/01/16 $ 5,825 $ 6,408
Massachusetts Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institute)
6.250% 12/01/22 4,000 4,125
*Massachusetts Housing Finance Agency Series A
9.000% 12/01/18 850 892
_______
11,425
Michigan (1.1%)
Michigan Strategic Funding P.C.R. (General Motors)
6.200% 9/01/20 3,000 3,119
Mississippi (3.8%)
Adams County Hospital Revenue (Jefferson Davis Memorial Hospital)
7.900% 10/01/08 750 830
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A 750 861
9.875% 12/01/14 Series C 1,000 1,158
7.300% 5/01/25 2,000 2,119
Lowndes County Solid Waste Disposal & P.C.R. Refunding
(Weyerhaeuser Company) 6.800% 4/01/22 4,995 5,839
_______
10,807
Missouri (1.1%)
*St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose
Arena) 7.875% 12/01/24 3,000 3,235
Montana (0.4%)
Montana Board of Housing Single Family Mortgage Revenue
(FHA/VA Insured)
7.300% 10/01/17 Series B-1 465 489
*7.500% 4/01/23 Series B-2 510 531
_______
1,020
Nevada (0.9%)
Humboldt County P.C.R. (Idaho Power Company)
8.300% 12/01/14 2,000 2,420
New Jersey (0.8%)
New Jersey Health Care Facilities Financing Authority Revenue
Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,241
<PAGE>
New York (4.6%)
Erie County Water Authority Revenue Refunding (AMBAC
Insured) Zero Coupon (Effective Yield 7.300%) 12/01/17 660 137
New York City G.O.
7.250% 8/15/07 Series 1996 B 1,000 1,127
5.750% 2/01/19 Series 1996 F 1,330 1,295
6.000% 2/15/25 Series 1996 D 1,525 1,513
New York City Municipal Water Finance Authority Water & Sewer
Revenue 5.500% 6/15/23 5,000 4,911
New York Urban Development Corp. Revenue Correctional Capital
Facilities Series 5 6.250% 1/01/20 1,750 1,802
Triborough Bridge & Tunnel Authority General Purpose Revenue
Series E 7.250% 1/01/10 2,000 2,306
_______
13,091
<PAGE>
<CAPTION>
High-Yield Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
North Carolina (2.0%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991A $ 1,680 $ 1,834
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities) 3,320 3,976
_______
5,810
Ohio (2.7%)
Greater Allen County Housing Development Corp. Revenue First
Lien (Steiner-McBride Apartments Project) 10.250% 9/01/03 1,385 1,404
*Ohio Water Development Facilities Authority P.C.R. (Cleveland
Electric Illuminating Company) Mandatory Put 11/01/97 9.750% 5,060 5,382
Oxford Hospital Facilities Revenue Series 1986 (McCullough-Hyde
Memorial Hospital) 8.000% 5/01/17 1,000 1,025
_______
7,811
Pennsylvania (12.0%)
Allentown Area Hospital Authority Revenue (Sacred Heart Hospital
of Allentown) 7.500% 7/01/06 3,460 3,765
Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo Edison
Company) 7.625% 5/01/20 2,400 2,558
*Dauphin County I.D.A. Revenue Series A (Dauphin Consolidated
Water Supply General Waterworks Corp.) 6.900% 6/01/24 2,700 3,142
Delaware County Hospital Authority Revenue Series A (Mercy
Catholic Medical Center) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/97) 7.375% 11/01/12 1,100 1,186
Montgomery County Higher Education & Health Authority
Hospital Revenue
8.750% 7/01/20 (Jeanes Health Systems) (Escrowed in U.S.
Treasury Securities) (Pre-refunded to 7/01/00) 3,200 3,822
6.875% 11/15/20 (Pottstown Memorial Medical Center) 1,000 1,031
*Pennsylvania Economic Development Financing Authority
Recycling Revenue (Ponderosa Fibres Project) Series 1995 A
9.250% 1/01/22 6,000 6,215
*Pennsylvania Economic Development Financing Authority
Resource Recovery Revenue Refunding (Northhampton)
6.750% 1/01/07 Series 1995 B 3,000 3,067
6.600% 1/01/19 Series A 2,000 1,988
Philadelphia Municipal Lease Revenue Refunding Series 1993 D
6.250% 7/15/13 2,500 2,560
Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in U.S.
Treasury Securities) 7.350% 9/01/04 4,140 4,805
_______
34,139
<PAGE>
Puerto Rico (2.0%)
Puerto Rico Highway & Transportation Authority Highway
Revenue Refunding
6.625% 7/01/12 Series V 2,000 2,156
6.625% 7/01/18 Series T 3,200 3,431
_______
5,587
South Carolina (0.8%)
*Calhoun County Solid Waste Disposal Facilities Revenue
(Eastman Kodak Co.) (Escrowed in U.S. Treasury Securities)
6.750% 5/01/17 2,000 2,351
<PAGE>
<CAPTION>
High-Yield Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
South Dakota (1.3%)
*South Dakota Student Loan Assistance Corp. Student Loan
Revenue Series B 7.450% 8/01/00 $ 3,320 $ 3,574
Tennessee (0.8%)
Knox County Health, Educational and Housing Facilities Revenue
(Baptist Health Systems of East Tennessee) 8.600% 4/15/16 2,005 2,137
Texas (7.5%)
*Alliance Airport Authority Special Facilities Revenue Series 1991
(American Airlines) 7.000% 12/01/11 4,000 4,440
*Bexar County Housing Financing Corp. Revenue Series B
(collateralized by Government National Mortgage Association
Securities) 9.250% 4/01/16 515 541
Harris County Housing Finance Corp. Single Family Housing
Revenue Series 1983
9.250% 3/15/96 210 211
9.625% 3/15/03 315 316
Montgomery County Health Facilities Development Corp. Hospital
Mortgage Revenue Refunding (Woodlands Medical Center)
8.850% 8/15/14 2,510 2,755
North Central Health Facilities Development Corporation Hospital
Revenue (Tri-City Health Center) 9.500% 5/01/21 8,300 7,885
Port Corpus Christi Industrial Development Corporation Revenue
Series A (Valero Energy Corp.) 10.250% 6/01/17 4,2804,717
*Texas Housing Agency Residential Mortgage Revenue Series D
8.400% 1/01/21 315 333
_______
21,198
<PAGE>
Utah (0.7%)
*Utah Housing Finance Agency Single Family Mortgage
7.750% 1/01/23 Series B-2 (FHA Insured) 735 778
7.550% 7/01/23 Series C-3 (FHA/VA Insured) 1,050 1,109
_______
1,887
Washington (8.4%)
Quincy Water and Sewer Revenue Series I (Escrowed in U.S. Treasury
Securities) (pre-refunded to 11/01/00) 9.250% 11/01/10 2,650 3,216
Washington G.O. Series B 6.400% 6/01/17 5,000 5,686
Washington Health Care Facilities Authority Revenue (Sacred
Heart Medical Center, Spokane) 6.875% 2/15/12 1,500 1,630
Washington Housing Finance Commission Single Family Mortgage
Revenue Series C (collateralized by Government and Federal
National Mortgage Association Securities)
Zero Coupon (Effective Yield 7.750%) 1/01/22 1,720 241
Zero Coupon (Effective Yield 7.750%) 7/01/22 1,905 256
Zero Coupon (Effective Yield 7.750%) 1/01/23 1,905 247
Zero Coupon (Effective Yield 7.750%) 7/01/23 1,910 238
Zero Coupon (Effective Yield 7.750%) 1/01/24 1,920 231
Zero Coupon (Effective Yield 7.750%) 7/01/24 1,910 221
Washington Public Power Supply Systems Revenue (Nuclear
Project #1) Series A 6.500% 7/01/15 5,250 5,552
Washington Public Power Supply Systems Revenue (Nuclear
Project #2)
Zero Coupon (Effective Yield 6.888%) 7/01/07 6,9453,706
6.300% 7/01/12 Series 1992 A 2,500 2,678
_______
23,902
<PAGE>
<CAPTION>
High-Yield Municipals Fund Continued
Principal Market
Amount Value
<S> <C> <C>
Wisconsin (1.1%)
*Wisconsin Housing and Economic Development
Authority Revenue 7.850% 3/01/24 $ 2,950 $ 3,139
Wyoming (2.3%)
Lincoln County P.C.R. (Exxon County) V.R.D.B.
5.900% 1,400 1,400
*6.000% 3,300 3,300
Wyoming Community Development Authority Single Family
Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17 1,730 1,847
________
6,547
Total Municipal Securities (98.9%)
(Amortized Cost $268,043) 280,526
Other Assets, Less Liabilities (1.1%) 3,201
________
Total Net Assets (100.0%) $283,727
========
<FN>
*These securities are subject to the Alternative Minimum Tax. At December 31,
1995 these securities represented 29.1 percent of net assets.
**Non-income producing securities.
***This security is subject to contractual or legal restrictions on its
resale. At December 31, 1995, the value of this security represented 0.5
percent of the assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Balance Sheets
December 31, 1995
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Municipals Municipals Municipals
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Assets
Investments, at market value $ -- $215,107 $643,318 $280,526
Investment in SR&F Municipal Money Market Portfolio,
at market value 130,061 -- -- --
Receivable for investments sold -- -- 5,011 --
Receivable for fund shares sold 3,403 -- 97 --
Accrued interest receivable -- 3,757 11,068 5,079
Cash and other assets 46 355 584 841
________ ________ ________ ________
Total Assets $133,510 $219,219 $660,078 $286,446
======== ======== ======== ========
Liabilities
Payable for investments purchased $ -- $ -- $ 18,281 $ --
Payable for fund shares repurchased 706 -- 554 --
Dividends payable 58 -- 1,547 --
Payable to investment adviser and transfer agent 23 98 337 159
Other liabilities 30 703 162 2,560
________ ________ ________ ________
Total Liabilities 817 801 20,881 2,719
________ ________ ________ ________
Capital
Paid-in capital 132,699 205,659 587,986 276,035
Net unrealized appreciation of investments -- 12,305 54,281 12,483
Accumulated net realized gains (losses) on investments (6) 454 (3,070) (4,791)
________ ________ ________ ________
Total Capital (Net Assets) 132,693 218,418 639,197 283,727
________ ________ ________ ________
Total Liabilities and Capital $133,510 $219,219 $660,078 $286,446
======== ======== ======== ========
Shares Outstanding (Unlimited Number Authorized) 132,624 18,970 69,316 24,030
======== ======== ======== ========
Net Asset Value (Capital) Per Share $ 1.00 $ 11.51 $ 9.22 $ 11.81
======== ======== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For The Six Months Ended
December 31, 1995
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Municipals Municipals Municipals
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest income $1,322 $ 5,937 $19,304 $ 9,363
Tax-exempt interest income allocated from
SR&F Municipal Money Market Portfolio 1,363 -- -- --
______ _______ _______ _______
Total investment income 2,685 5,937 19,304 9,363
Expenses
Management fees 255 613 1,635 774
Expenses allocated from SR&F Municipal Money Market Portfolio 102 -- -- --
Transfer agent fees 102 151 437 196
Printing and postage 27 20 47 31
Registration fees 16 15 12 15
Audit and legal fees 16 13 13 23
Accounting fees 14 15 20 15
Trustees' fees 7 7 12 9
Custodian fees 14 9 18 9
Other 26 34 67 150
______ _______ _______ _______
579 877 2,261 1,222
Reimbursement of expenses by investment adviser (103) (124) -- --
______ _______ _______ _______
Total Expenses 476 753 2,261 1,222
______ _______ _______ _______
Net Investment Income 2,209 5,184 17,043 8,141
______ _______ _______ _______
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments (4) 1,462 4,842 219
Net change in unrealized appreciation or depreciation
on investments -- 5,231 25,414 11,831
______ _______ _______ _______
Net Gains (Losses) on Investments (4) 6,693 30,256 12,050
______ _______ _______ _______
Net Increase in Net Assets Resulting from Operations $2,205 $11,877 $47,299 $20,191
====== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Municipal Money Intermediate
Market Fund Municipals Fund
Year Six Months Year Six Months
Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1995 1995 1995 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 4,655 $ 2,209 $ 10,858 $ 5,184
Net realized gains (losses) on investments -- (4) (935) 1,462
Net change in unrealized appreciation or depreciation
of investments -- -- 3,694 5,231
_________ ________ _________ ________
Net Increase in Net Assets Resulting from Operations 4,655 2,205 13,617 11,877
_________ ________ _________ ________
Distributions To Shareholders
Dividends from net investment income (4,655) (2,209) (10,858) (5,184)
_________ ________ _________ ________
Share Transactions
Subscriptions to fund shares 239,238 80,073 65,416 20,545
Investment income dividends reinvested 4,001 2,046 6,688 3,335
Redemptions of fund shares (262,355) (96,126) (100,427) (24,644)
_________ ________ _________ ________
Net Decrease from Share Transactions (19,116) (14,007) (28,323) (764)
_________ ________ _________ ________
Net Increase (Decrease) in Net Assets (19,116) (14,011) (25,564) 5,929
Total Net Assets
Beginning of Period 165,820 146,704 238,053 212,489
_________ ________ _________ ________
End of Period $ 146,704 $132,693 $ 212,489 $218,418
========= ======== ========= ========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 239,238 80,073 6,010 1,813
Investment income dividends reinvested 4,001 2,046 611 293
_________ ________ _________ ________
243,239 82,119 6,621 2,106
Redemptions of fund shares (262,355) (96,126) (9,229) (2,171)
_________ ________ _________ ________
Net decrease in fund shares (19,116) (14,007) (2,608) (65)
Shares outstanding at beginning of period 165,747 146,631 21,643 19,035
_________ ________ _________ ________
Shares outstanding at end of period 146,631 132,624 19,035 18,970
========= ======== ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Managed High-Yield
Municipals Fund Municipals Fund
Year Six Months Year Six Months
Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1995 1995 1995 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 37,935 $ 17,043 $ 17,185 $ 8,141
Net realized gains (losses) on investments (2,748) 4,842 (2,660) 219
Net change in unrealized appreciation or depreciation
of investments 7,348 25,414 7,892 11,831
_________ ________ _________ ________
Net Increase in Net Assets Resulting from Operations 42,535 47,299 22,417 20,191
_________ ________ _________ ________
Distributions To Shareholders
Dividends from net investment income (37,935) (17,043) (17,185) (8,141)
_________ ________ _________ ________
Share Transactions
Subscriptions to fund shares 79,659 13,666 61,571 15,478
Investment income dividends reinvested 21,933 10,120 9,681 4,918
Redemptions of fund shares (163,714) (44,575) (103,510) (29,874)
_________ _________ _________ ________
Net Decrease from Share Transactions (62,122) (20,789) (32,258) (9,478)
_________ ________ _________ ________
Net Increase (Decrease) in Net Assets (57,522) 9,467 (27,026) 2,572
Total Net Assets
Beginning of Period 687,252 629,730 308,181 281,155
_________ ________ _________ ________
End of Period $ 629,730 $639,197 $ 281,155 $283,727
========== ========= ========= ========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 9,297 1,525 5,657 1,348
Investment income dividends reinvested 2,544 1,131 879 427
__________ _________ __________ _________
11,841 2,656 6,536 1,775
Redemptions of fund shares (19,210) (4,993) (9,536) (2,600)
_________ ________ _________ ________
Net decrease in fund shares (7,369) (2,337) (3,000) (825)
Shares outstanding at beginning of period 79,022 71,653 27,855 24,855
_________ ________ _________ ________
Shares outstanding at end of period 71,653 69,316 24,855 24,030
========= ======== ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Balance Sheet
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Dec. 31,
1995
<S> <C>
Assets
Investments, at market value $155,291
Accrued interest receivable 1,115
________
Total Assets 156,406
========
Liabilities
Payable for investments purchased $ 1,781
Payable to investment adviser 32
Other liabilities 7
________
Total Liabilities 1,820
________
Net Assets applicable to investors' beneficial interests $154,586
========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Period
Ended
Dec. 31,
1995 (a)
<S> <C>
Investment Income
Tax-exempt interest income $1,607
______
Expenses
Management fees 100
Custodian fees 11
Audit and legal fees 10
Accounting fees 7
Trustees' fees 4
Other (13)
______
Total Expenses 119
______
Net Investment Income $1,488
======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Statement of Changes in Net Assets
(All Amounts In Thousands)
(Unaudited)
<CAPTION>
Period
Ended
Dec. 31,
1995 (a)
<S> <C>
Operations
Net investment income $ 1,488
________
Transactions in investors' beneficial interest
Contributions 183,424
Withdrawals (30,326)
________
Net Increase from Share Transactions 153,098
________
Net Increase in Net Assets 154,586
Total Net Assets
Beginning of Period --
________
End of Period $154,586
========
<FN>
See accompanying notes to financial statements.
(a) The Portfolio commenced operations September 28, 1995.
</TABLE>
<PAGE>
Notes To Financial Statements
Note 1. Significant Accounting Policies
The following are the significant accounting policies of Stein Roe Municipal
Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed
Municipals Fund, Stein Roe High-Yield Municipals Fund (the "Funds"), each a
series of Stein Roe Municipal Trust (a Massachusetts business trust) and, the
SR&F Municipal Money Market Portfolio (the "Portfolio"), a series of the SR&F
Base Trust (a Massachusetts business trust).
Security Valuations
All securities are valued as of December 29, 1995, the last business day of
the period. Municipal securities are valued at a fair value using a procedure
determined in good faith by the Board of Trustees, which has authorized the
use of bid valuations provided by a pricing service, except for the SR&F
Municipal Money Market Portfolio. Municipal securities of the SR&F Municipal
Money Market Portfolio are valued at amortized cost, which approximates market
value. This method involves valuing an instrument at cost on the purchase date
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument and does not take into account unrealized securities
gains or losses. In the event that a deviation of 0.50 of 1 percent or more
exists between the Fund's $1.00 per share net asset value, calculated at
amortized cost, and the net asset value calculated by reference to market
quotations, the Board of Trustees would consider what action, if any, should
be taken. Other securities and assets of the Funds are valued by a method that
the Board of Trustees believes represents a fair value.
Futures Contracts
The Funds may enter into futures contracts to either hedge against expected
declines in the market value of their portfolio securities or as a temporary
substitute for the purchase of individual bonds. Risks of entering into
futures contracts include the possibility that there may be an illiquid market
at the time the Fund seeks to close out a contract, and changes in the value
of the futures contract may not correlate with changes in the value of the
portfolio securities being hedged.
Upon entering into a futures contract, the Fund deposits cash or securities
with its custodian in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Fund equal to the
daily change in the contract value and are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires. None of the Funds entered into futures contracts during the
six months ended December 31, 1995.
<PAGE>
Federal Income Taxes
No provision is made for federal income taxes since the Funds and Portfolio
comply and intend to continue complying with the applicable provisions of the
Internal Revenue Service Code. Accordingly, no provisions for federal income
taxes is considered necessary.
The Funds intend to utilize provisions of the federal income tax laws that
allow them to carry a realized capital loss forward for eight years following
the year of the loss, and offset such losses against any future realized
gains.
At June 30, 1995, the Funds had capital loss carry forwards as follows:
<TABLE>
<CAPTION>
Year of
Fund Amount Expiration
<S> <C> <C>
Intermediate
Municipals $ 839 2003
Managed
Municipals 4,436 2003
High Yield
Municipals 1,715 2003
</TABLE>
Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly. All
dividends paid from net investment income by the Funds constitute tax-exempt
interest that is not taxable for federal income tax purposes; however, a
portion of the dividends paid may be includable in the alternative minimum tax
calculation. Capital gains distributions, if any, are distributed annually.
Distributions in excess of tax basis earnings are reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings
that result in temporary over-distributions are classified as distributions in
excess of net investment income or net realized gains, and any permanent
differences are reclassified to paid-in capital.
None of the Funds had distributions in excess of net investment income or net
realized gains for the six months ended December 31, 1995.
Other Information
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
Securities purchased on a when-issued or delayed delivery basis may be settled
a month or more after transaction date. These securities are subject to market
fluctuation during this period. When-issued or delayed delivery purchase
commitments of Managed Municipals Fund and High-Yield Municipals Fund as of
December 31, 1995, amounted to $18,281 and $1,242, respectively.
The Municipal Money Market Fund attempts to maintain its net asset value per
share at $1.00, which it believes will be possible under most conditions.
<PAGE>
Original issue discounts and premiums on municipal securities of Intermediate
Municipals Fund, Managed Municipals Fund, and High-Yield Municipals Fund are
amortized.
A maturity date is not shown for municipal securities bearing variable or
floating interest rates that are adjusted periodically to minimize
fluctuations in the value of such securities.
All amounts, except per-share amounts, are shown in thousands.
Note 2. Trustees' Fees and Transactions with Affiliates
The Intermediate Municipals Fund, Managed Municipals Fund, High Yield
Municipals Fund, and the SR&F Municipal Money Market Portfolio pay a monthly
management fee to Stein Roe & Farnham Incorporated (the "Adviser"), an
indirect subsidiary of Liberty Mutual Insurance Company, for its services as
investment adviser and manager. The management fee for the SR&F Municipal
Money Market Portfolio is computed at an annual rate of 0.25 of 1 percent of
average daily net assets; Intermediate Municipals Fund and High-Yield
Municipals Fund are computed at an annual rate of 0.60 of 1 percent of the
first $100 million of average daily net assets, 0.55 of 1 percent of the next
$100 million, and 0.50 of 1 percent thereafter. For Managed Municipals Fund,
the management fee is computed at an annual rate of 0.60 of 1 percent of the
first $100 million of average daily net assets, 0.55 of 1 percent of the next
$100 million, 0.50 of 1 percent of the next $800 million, and 0.45 of 1
percent thereafter.
The investment advisory agreements of the Funds provide that the Adviser will
reimburse each Fund to the extent that its annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which each
Fund's shares are offered for sale. In addition, the Adviser has agreed to
reimburse Municipal Money Market Fund and Intermediate Municipals Fund for
expenses in excess of 0.70 of 1 percent of average daily net assets. These
expense limitations expire on October 31, 1996, subject to earlier termination
by the Adviser on 30 days' notice.
The transfer agent fees of the Funds are paid to SteinRoe Services, Inc., an
indirect subsidiary of Liberty Mutual Insurance Company.
Pursuant to an agreement with the Funds and the Portfolio, the Adviser
provides certain accounting services. For the six months ended December 31,
1995, the Municipal Money Market Fund, Intermediate Municipals Fund, Managed
Municipals Fund, High-Yield Municipals Fund and the SR&F Municipal Money
Market Portfolio incurred charges of $14, $15, $20, $15 and $7, respectively.
<PAGE>
Certain officers and trustees of the Trusts are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Municipal
Money Market Fund, Intermediate Municipals Fund, Managed Municipals Fund,
High-Yield Municipals Fund, and SR&F Municipal Money Market Portfolio for the
six months ended December 31, 1995, was $7, $7, $12, $9, and $4, respectively.
No remuneration was paid to any other trustee or officer of the Trusts.
Note 3. Short-Term Debt
To facilitate portfolio liquidity, the Funds and Portfolio maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings for any of the Funds or Portfolio during six months ended
December 31, 1995.
<PAGE>
<TABLE>
Note 4. Investment Transactions
The aggregate cost of purchases and proceeds from sales or maturities of
securities (excluding short-term obligations for Intermediate Municipals Fund,
Managed Municipals Fund and High-Yield Municipals Fund) for the six months
ended December 31, 1995, were as follows:
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
SR&F Municipal Money Market Portfolio/Fund $ 75,667 $ 79,774
Intermediate Municipals Fund 57,161 52,570
Managed Municipals Fund 106,632 126,004
High-Yield Municipals Fund 47,171 53,831
At December 31, 1995, the cost of investments for financial reporting purposes
and for federal income tax purposes were equal. Unrealized appreciation and
depreciation of investments on a tax basis were as follows:
<CAPTION>
Net
Appreciation
Appreciation Depreciation (Depreciation)
<S> <C> <C> <C>
Intermediate Municipals Fund $12,316 $ 11 $12,305
Managed Municipals Fund 54,287 5 54,281
High-Yield Municipals Fund 21,841 9,358 12,483
Note 5. Portfolio Composition
The Funds and Portfolio invest in municipal securities including, but not
limited to, general obligation bonds, revenue bonds and escrowed bonds (which
are bonds that have been refinanced, the proceeds of which have been invested
in U.S. Government or agency obligations and set aside to pay off the original
issue at the first call date or maturity). See Fund Highlights for each Fund's
and the Portfolio's security type breakdown.
The Funds' and Portfolio's investments include certain municipal securities
that are insured by private insurers who guarantee the payment of principal
and interest in the event of default. At December 31, 1995, investments in
these securities for High-Yield Municipals Fund and Managed Municipals Fund
represented 6.5 and 0.2 percent of the portfolio, respectively.
</TABLE>
<PAGE>
The SR&F Municipal Money Market Portfolio's investments include certain
short-term securities that are backed by bank letters of credit used to
provide liquidity to the issuer and/or additional security in the event of
default by the issuer. At December 31, 1995, 47.3 percent of the portfolio was
backed by bank letters of credit.
See each Fund's or Portfolio's schedule of investments for additional
information on portfolio composition and Fund Highlights for portfolio quality
(unaudited).
Note 6. Organization of the SR&F Municipal Money Market Portfolio
The SR&F Municipal Money Market Portfolio (the "Portfolio") is a separate
series of the SR&F Base Trust, a Massachusetts common trust organized under an
Agreement and Declaration of Trust dated August 23, 1993. The Declaration of
Trust permits the Trustees to issue non-transferable interests in the
Portfolio. The Portfolio commenced operation on September 28, 1995. At
commencement, the Stein Roe Municipal Money Market Fund contributed $131,563
in securities and other assets and the Colonial Municipal Money Market Fund
contributed in securities and other assets $24,119, which represented
ownership of 84.5 percent and 15.5 percent, respectively.
The Portfolio allocates net asset value, income and expenses based on
respective percentage ownership of each investor on a daily basis. At December
31, 1995, Stein Roe Municipal Money Market Fund and Colonial Municipal Money
Market Fund owned 84.1 percent and 15.9 percent, respectively.
<PAGE>
<TABLE>
Financial Highlights
Municipal Money Market Fund
(Unaudited)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Years Ended Ended
December 31, June 30, Years Ended June 30,
1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
________ ________ ________ ________ ________ ________
Net investment income .041 .040 .021 .056 .054 .046
Distributions from net investment
income (.041) (.040) (.021) (.056) (.054) (.046)
________ ________ ________ ________ __________________
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.60% 0.69% 0.67%* 0.67% 0.67% 0.68%
Ratio of net investment income to average
net assets (b) 4.05% 4.08% 4.25%* 5.57% 5.40% 4.66%
Total return (b) 4.22% 4.11% 4.29%* 5.74% 5.52% 4.74%
Net assets, end of period (000s) $251,465 $306,971 $294,116 $254,261 $255,953 $237,403
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
________ ________ ________ ________ ________
Net investment income .032 .020 .019 .030 0.020
Distributions from net investment income (.032) (.020) (.019) (.030) (0.020)
________ ________ ________ ________ ________
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.70% 0.70% 0.70% 0.70% 0.70%*
Ratio of net investment income to average
net assets (b) 3.19% 1.96% 1.88% 2.96% 3.24%*
Total return (b) 3.25% 1.97% 1.90% 3.02% 1.63%**
Net assets, end of period (000s) $199,037 $195,887 $165,820 $146,704 $132,693
<FN>
*Annualized
**Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would have
been 0.70 and 0.78 percent for the years ended December 31, 1986 and June 30,
1995, and 0.85 for the six months ended December 31, 1995.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
(Unaudited)
Period
Ended
Dec. 31,
1995 (a)
---------
<S> <C>
Ratios to Average Net Assets
Ratio of net expenses to average net assets 0.30%*
Ratio of net investment income to average net assets 3.24%*
<FN>
*Annualized
(a) The Portfolio commenced operations September 28, 1995.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Intermediate Municipals Fund
(Unaudited)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Years Ended Ended
December 31, June 30, Years Ended June 30,
1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C <C>
Net Asset Value, Beginning of Period $ 10.14 $ 10.76 $ 10.37 $ 10.43 $ 10.50 $ 10.54
________ _______ _______ _______ _______ ________
Income From Investment Operations
Net investment income 58 .57 .29 .62 .63 .62
Net realized and unrealized gains (losses)
on investments .62 (.38) .06 .07 .07 .22
________ _______ _______ _______ _______ ________
Total from investment operations 1.20 .19 .35 .69 .70 .84
Distributions
Net investment income (.58) (.57) (.29) (.62) (.63) (.62)
Net realized gains -- (.01) -- -- (.03) (.03)
In excess of realized gains -- -- -- -- -- --
________ _______ _______ _______ _______ ________
Total distributions (.58) (.58) (.29) (.62) (.66) (.65)
________ _______ _______ _______ _______ ________
Net Asset Value, End of Period $ 10.76 $ 10.37 $ 10.43 $ 10.50 $ 10.54 $ 10.73
======== ======= ======= ======= ======= ========
Ratio of net expenses to average net assets (b) 0.80% 0.80% 0.80%* 0.80% 0.80% 0.80%
Ratio of net investment income to average net
assets (c) 5.45% 5.47% 5.66%* 5.96% 5.96% 5.79%
Portfolio turnover rate 10% 49% 22%** 83% 141% 96%
Total return (c) 12.09% 1.93% 3.45%** 6.85% 6.85% 8.18%
Net assets, end of period (000s) $104,750 $96,143 $97,308 $91,304 $98,918 $118,651
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.73 $ 11.06 $ 11.57 $ 11.00 $11.16
________ ________ ________ ________ ________
Income From Investment Operations
Net investment income .57 .54 .53 .53 .29
Net realized and unrealized gains (losses)
on investments .50 .63 (.39) .16 .35
________ ________ ________ ________ ________
Total from investment operations 1.07 1.17 .14 .69 .64
Distributions
Net investment income (.57) (.54) (.53) (.53) (.29)
Net realized gains (.17) (.12) (.17) -- --
In excess of realized gains -- -- (.01) -- --
________ ________ ________ ________ ________
Total distributions (.74) (.66) (.71) (.53) (.29)
________ ________ ________ ________ ________
Net Asset Value, End of Period $ 11.06 $ 11.57 $ 11.00 $ 11.16 $ 11.51
======== ======== ======= ======== ========
Ratio of net expenses to average net assets (b) 0.79% 0.72% 0.71% 0.74% 0.70%*
Ratio of net investment income to average net
assets (c) 5.23% 4.79% 4.63% 4.94% 4.82%*
Portfolio turnover rate 109% 96% 55% 67% 25%**
Total return (c) 10.31% 10.92% 1.16% 6.59% 5.63%**
Net assets, end of period (000s) $165,401 $245,441 $238,053 $212,489 $218,418
<FN>
* Annualized
** Not annualized
(a) The Fund commenced operations on October 9, 1985.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser in connection with the
expense limitation which expired October 31, 1993, this ratio would have been
0.94 and 0.83 percent for the years ended December 31, 1986 and December 31,
1987, 0.87 percent for the six months ended June 30, 1988, 0.82, 0.81 and 0.81
percent for the years ended June 30, 1989 through 1991, respectively. If there
had been no reimbursement of expenses by the investment adviser in connection
with the current expense limitation (effective May 1, 1995), this ratio would
have been 0.76 percent for the year ended June 30, 1995, and 0.81 percent for
the six months ended December 31, 1995.
(c) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Managed Municipals Fund
(Unaudited)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Years Ended Ended
December 31, June 30, Years Ended June 30,
1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C <C>
Net Asset Value, Beginning of Period $ 8.93 $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71
________ ________ ________ ________ ________ ________
Income From Investment Operations
Net investment income .67 .61 .30 .61 .59 .56
Net realized and unrealized gains (losses)
on investments 1.21 (.59) .11 .44 (.06) .19
________ ________ ________ ________ ________ ________
Total from investment operations 1.88 .02 .41 1.05 .53 .75
Distributions
Net investment income (.67) (.61) (.30) (.61) (.59) (.56)
Net realized gains (.92) (.13) -- (.03) (.25) (.05)
In excess of realized gains -- -- -- -- -- --
________ ________ ________ ________ ________ ________
Total distributions (1.59) (.74) (.30) (.64) (.84) (.61)
________ ________ ________ ________ ________ ________
Net Asset Value, End of Period $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85
======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.65% 0.65% 0.65%* 0.65% 0.66% 0.66%
Ratio of net investment income to average
net assets 7.04% 6.99% 7.03%* 7.00% 6.66% 6.39%
Portfolio turnover rate 92% 113% 28%** 102% 95% 203%
Total return 21.70% 0.39% 4.90%** 12.69% 6.15% 8.92%
Net assets, end of period (000s) $523,947 $458,170 $467,595 $514,898 $584,081 $655,930
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.85 $ 9.11 $ 9.38 $ 8.70 $ 8.79
________ ________ ________ ________ ________
Income From Investment Operations
Net investment income .55 .52 .50 .51 .26
Net realized and unrealized gains (losses)
on investments .46 .42 (.51) .09 .43
________ ________ ________ ________ ________
Total from investment operations 1.01 .94 (.01) .60 .69
Distributions
Net investment income (.55) (.52) (.50) (.51) (.26)
Net realized gains (.20) (.15) (.11) -- --
In excess of realized gains -- -- (.06) -- --
________ ________ ________ ________ ________
Total distributions (.75) (.67) (.67) (.51) (.26)
________ ________ ________ ________ ________
Net Asset Value, End of Period $ 9.11 $ 9.38 $ 8.70 $ 8.79 $ 9.22
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.64% 0.64% 0.65% 0.65% 0.72%*
Ratio of net investment income to average
net assets 6.17% 5.65% 5.45% 5.85% 5.46%*
Portfolio turnover rate 94% 63% 36% 33% 17%**
Total return 11.95% 10.79% (0.29%) 7.12% 7.76%**
Net assets, end of period (000s) $725,472 $776,694 $687,252 $629,730 $639,197
<FN>
* Annualized
** Not annualized
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
High-Yield Municipals Fund
(Unaudited)
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Years Ended Ended
December 31, June 30, Years Ended June 30,
1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C <C>
Net Asset Value, Beginning of Period $ 11.10 $ 12.06 $ 11.06 $ 11.37 $ 11.97 $ 11.78
________ ________ ________ ________ ________ ________
Income From Investment Operations
Net investment income .90 .87 .44 .88 .85 .82
Net realized and unrealized gains (losses)
on investments 1.11 (.89) .31 .63 .02 .17
________ ________ ________ ________ ________ ________
Total from investment operations 2.01 (.02) .75 1.51 .87 .99
Distributions
Net investment income (.90) (.87) (.44) (.88) (.85) (.82)
Net realized gains (.15) (.11) -- (.03) (.21) (.16)
In excess of realized gains -- -- -- -- -- --
________ ________ ________ ________ ________ ________
Total distributions (1.05) (.98) (.44) (.91) (1.06) (.98)
________ ________ ________ ________ ________ ________
Net Asset Value, End of Period $ 12.06 $ 11.06 $ 11.37 $ 11.97 $ 11.78 $ 11.79
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets 0.76% 0.73% 0.76%* 0.73% 0.71% 0.71%
Ratio of net investment income to average
net assets 7.77% 8.20% 7.87%* 7.54% 7.22% 7.00%
Portfolio turnover rate 34% 110% 53%** 208% 261% 195%
Total return 18.64% (0.16%) 6.89%** 13.79% 7.59% 8.79%
Net assets, end of period (000s) $225,883 $181,600 $201,274 $277,620 $310,582 $373,948
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.79 $ 11.83 $ 11.84 $ 11.06 $ 11.31
________ ________ ________ ________ ________
Income From Investment Operations
Net investment income .80 .71 .67 .66 .35
Net realized and unrealized gains (losses)
on investments .22 .18 (.54) .25 .50
________ ________ ________ ________ ________
Total from investment operations 1.02 .89 .13 .91 .85
Distributions
Net investment income (.80) (.71) (.67) (.66) (.35)
Net realized gains (.18) (.17) (.17) -- --
In excess of realized gains -- -- (.07) -- --
________ ________ ________ ________ ________
Total distributions (.98) (.88) (.91) (.66) (.35)
________ ________ ________ ________ ________
Net Asset Value, End of Period $ 11.83 $ 11.84 $ 11.06 $ 11.31 $ 11.81
======== ======== ======== ======== ========
Ratio of net expenses to average net assets 0.69% 0.73% 0.76% 0.86% 0.87%*
Ratio of net investment income to average
net assets 6.75% 6.04% 5.76% 5.98% 5.90%*
Portfolio turnover rate 88% 75% 36% 23% 17%**
Total return 9.01% 7.88% 0.95% 8.54% 7.47%**
Net assets, end of period (000s) $410,613 $359,103 $308,181 $281,155 $283,727
<FN>
* Annualized
** Not annualized
</TABLE>
<PAGE>
A Guide to Stein Roe Services
We encourage you to take advantage of our free shareholder services. If you
would like additional information about how to establish or use a Stein Roe
service, just call us at 800-338-2550.
Purchases
In addition to sending us a check or wire to purchase additional fund shares,
you can take advantage of these convenient automatic services:
* Automatic Investment Plan--Make regular investments ($50 minimum) in your
Stein Roe account directly from your bank checking account. You select
monthly, quarterly, semiannual or annual purchases.
* Special Investments--Purchase shares by telephone and pay for them by
electronic transfer from your bank checking account.
Exchanges
* Telephone Exchange--Call us to exchange $50 or more from your existing
account in one Stein Roe Fund to an identically registered existing account in
another Stein Roe Fund. You receive this service when you open a Stein Roe
Fund account, unless you elect not to.*
* Automatic Exchange--Stein Roe will regularly exchange shares from your
account in one Stein Roe Fund to your account in another. You select
twice-monthly, monthly, quarterly, semiannual or annual exchanges.
Redemptions
* Telephone Redemption by Check--Call to redeem $1,000 or more from your
account. A check will be sent to your registered address. You automatically
receive this service when you open a Stein Roe account, unless you elect not
to.
* Telephone Redemption by Wire--Redeem shares by phone from your account
($1,000 minimum) and wire the proceeds to your bank checking account. A small
fee for wiring proceeds will be deducted from the amount wired.
* Special Redemption Option--If you do not want to pre-schedule your
redemptions, you can redeem shares by telephone ($50 minimum/ $100,000
maximum) and have the proceeds sent directly to your bank checking account.
* Automatic Redemption Plan--Redeem either a fixed dollar or share amount, or
a fixed percentage of your account automatically on a schedule you establish.
You select monthly, quarterly, semiannual or annual withdrawals ($50 minimum/
$100,000 maximum), and the proceeds are sent either to your bank checking
account or to an address you specify.
* Money Market Fund Check Writing--Write checks for $50 or more on your Money
Market Fund account.
*Stein Roe reserves the right to discontinue or modify the exchange privilege,
and certain restrictions apply. Please refer to your prospectus for details.
<PAGE>
Distributions
Most investors like to reinvest their dividends and capital gains
distributions and put them back to work. If, however, you do not want them
reinvested, consider these alternatives:
* Dividend Purchase Option -- Use the distributions from one Stein Roe Fund
account ($25 minimum) to automatically purchase shares in your account with
another Stein Roe Fund.
* Automatic Dividend Deposit--Instead of receiving your dividends by check,
your distributions are deposited automatically into your bank checking
account.
Recordkeeping
* Summary of Investments--Consolidates quarterly transaction and investment
information for any or all of your household's Stein Roe accounts on one
easy-to-read statement. At year end, Stein Roe provides a complete summary of
all account activity for the year.
<PAGE>
To Contact Us. . .
By Phone 1 800 338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
Stein Roe Fund account, including Stein Roe IRAs. We're available seven days a
week, from 7 a.m. to 8 p.m. weekdays and from 8 a.m. to 5 p.m. Saturday and
Sunday (central time).
Stein Roe's Funds-on-Call(R)
24-Hour Service Line
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields, and
other information. In addition, if you have a Personal Identification Number
(PIN), you may place orders for the following transactions 24 hours a day:
* Exchange shares between your Stein Roe accounts;
* Purchase Fund shares by electronic transfer;
* Order additional account statements and Money Market Fund checks;
* Redeem shares by check, wire or electronic transfer.
Please contact an account representative if you would like to apply for a PIN.
Retirement Plan Accounts
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130.
By Mail
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 804058, Chicago, IL 60680. You also may visit our Internet site--
http://www.steinroe.com--to contact us by e-mail.
In Person
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current fund investments or
provide you information about any of the Stein Roe Funds and retirement plans.
Stop by weekdays between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
<PAGE>
Municipal Trust
Trustees
Timothy K. Armour
President, Mutual Fund Division and Director, Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A. T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling
Plumbing Group, Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Gordon R. Worley
Private investor
Officers
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President,
Secretary
N. Bruce Callow, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Thomas W. Butch, Vice President
Joanne T. Costopoulos, Vice President
Philip D. Hausken, Vice President
Stephen P. Lautz, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
M. Jane McCart, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Thomas P. Sorbo, Vice President
Veronica M. Wallace, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
Agents and Advisers
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
<PAGE>
Graphic: SteinRoe Logo
The Stein Roe Funds
Stein Roe Government Reserves Fund
Stein Roe Cash Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Total Return Fund
Stein Roe Growth & Income Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
P.O. Box 804058
Chicago, Illinois 60680
800-338-2550
In Chicago, visit our Investor Center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member, SIPC 2/96
TE12A
