STEIN ROE MUNICIPAL TRUST, N-30D, 1996-08-29

STEIN ROE MUNICIPAL TRUST
N-30D, 1996-08-29

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ANNUAL REPORT
JUNE 30, 1996

Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund

Photographic image of man and woman hugging.

Graphic: Stein Roe Logo
Stein Roe Mutual Funds

Building Wealth for Generations (SM)

<PAGE>

Contents

From the President................................................ 1
Tim Armour's thoughts on the markets and investing

Performance....................................................... 4
How the Stein Roe tax-exempt bond funds have done over time

Q&A
Municipal Money Market Fund....................................... 8
Intermediate Municipals Fund ..................................... 11
Managed Municipals Fund .......................................... 15
High-Yield Municipals Fund ....................................... 17
Interviews with the portfolio managers and a summary of major shifts in the
Funds' investments over the past 12 months

Investments....................................................... 24
A complete list of each Fund's investments with
market values

Financial Statements.............................................. 48
Balance sheets, statements of operations,
and changes in net assets

Notes to Financial Statements..................................... 58

Financial Highlights.............................................. 64
Selected per-share data

Report of Independent Auditors.................................... 72

General Information............................................... 74
A guide to products and services

<PAGE>
From the President

TO OUR SHAREHOLDERS
We are pleased to present this annual report for the Stein Roe tax-exempt 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.

CHANGING WINDS
After more than a year of monetary tightening that successfully slowed
economic growth and inhibited inflation, the Federal Reserve embarked on a new
interest rate strategy early in the Funds' fiscal year. Spurred by slowing
government spending, declining auto sales, and fewer housing starts, the
Federal Reserve began to trim the benchmark federal funds rate target,
reducing it from 6.00 percent to 5.75 percent in July 1995, then to 5.50
percent in December 1995, and finally to 5.25 percent in January 1996. The
bond market rallied.
But the celebration was shortlived. As Washington failed to reach a
balanced budget agreement and currency speculators played U.S. and Japanese
interest rates against each other, the bond market weakened. Bond investors
seemed willing to brush off these events, however, as two government shutdowns
delayed key economic reports and hinted at continued economic sluggishness and
further rate cuts. In early March, however, an astonishing payroll report put
the number of jobs created at the highest level since January 1995. This data
suggested far stronger economic growth than anyone had anticipated, which in
turn implied a possible spike in inflation -- the bane of bondholders. As a
result, many believed the Federal Reserve would have to raise short-term
interest rates to keep inflation under control. The bond markets plummeted. In
fact, the selloff was so sharp that it prompted comparisons to 1994, when a
sudden change in market sentiment regarding interest rates contributed to one
of the worst bear bond markets in history.

PHOTOGRAPHIC IMAGE OF TIM ARMOUR.

<PAGE>

GOOD NEWS
The bond market ended an otherwise dismal first half of 1996 on a positive
note, however. The yield on the benchmark 30-year Treasury bond, which had
reached a mid-June peak of 7.2 percent, eased by month's end, indicating the
bond market finally may have brushed off the rever berations of
stronger-than-expected economic reports -- at least for the time being. This
was particularly good news for bond investors since, before this turn around,
June figured to be the fifth consecutive losing month for bonds in terms of
total return. Previously, even in bear bond markets, stretches of four losing
months had invariably been followed by a rebound of at least one or two
months.
The fixed income markets remain volatile, however. And although the bond
market has, in effect, tightened monetary policy already, without the Federal
Reserve having to raise a hand -- or interest rates -- the possibility of a
rate hike remains. That's because the economy appears to be growing at a
fairly robust pace, with economic growth expected to top 3.5 percent for the
second quarter. At the same time, unemploy ment continues to hover at
near-record lows. But while recent economic reports increase the chance of a
rate hike, they in no way guarantee one. While we believe it's possible that
the Federal Reserve might raise interest rates a quarter to a half percentage
point at its next meeting, we think economic growth will slow later in the
year of its own accord, preventing the need for any further rate increases. So
while some volatility may continue in the near term, we believe the bond
market should stabilize by year-end 1996. In fact, we believe bonds represent
an attractive investment right now. Because stocks generally tend to be
considered riskier than bonds, the stock market's rate of return, as measured
by the S&P 500, is usually about 2.5 percentage points above the yield of the
10-year Treasury bond. Lately, however, the spread has closed to less than 1.5
points, which is narrower than at any time since the summer of 1987.
Historically, whenever the stock market has moved into this territory, it
usually has foreshadowed either a market correction or an extended period of
relatively flat performance. Consequently, we think bonds could be a safe
refuge in the months ahead.

THE BASICS
While past performance is no guarantee of future results, and no one can
predict what might happen to bond funds or the markets in the future, we
believe investors must understand the factors that move the markets, not just
to profit from them, but to gain the patience to ride out short-term
volatility in their investments. As always, no matter what direction you think
the economy is heading, it is important to remember the basics. Think long
term and re-evaluate your investment portfolio from time to time to make sure
it continues to match your goals, risk tolerance and time horizon. And try to
follow a regular investment plan. By investing a certain amount of money each
month or each 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 to 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,

Timothy K. Armour
President
July 25, 1996
<PAGE>
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).

<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
Periods ended June 30, 1996
<CAPTION>
PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
MUNICIPAL MONEY MARKET FUND 3.13% 2.68% 2.65% 3.73%
INTERMEDIATE MUNICIPALS FUND 5.47 4.38 6.83 6.81
Lehman 10-Year
Municipal Bond Index 6.39 5.33 7.93 8.27
Lehman 7-Year
Municipal Bond Index 5.54 4.99 7.28 --
MANAGED MUNICIPALS FUND 6.24 4.30 7.08 7.82
HIGH-YIELD MUNICIPALS FUND 6.83 5.40 6.61 7.87
Lehman Municipal Bond Index 6.64 5.14 7.78 8.21
<FN>
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. The Lehman 10-Year Municipal Bond Index, the Lehman 7-Year Municipal
Bond Index and the Lehman Municipal Bond Index are unmanaged groups of fixed
income securities that differ 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.
</FN>
</TABLE>
<PAGE>
Investment Comparison
COMPARISON of change in value of a $10,000 investment for the years ended June
30.

GRAPH:
YEAR ENDED INTERMEDIATE LEHMAN 10-YEAR MUNICIPAL
MUNICIPALS FUND BOND INDEX
1986 10000 10000
1987 10645 11025
1988 11242 11787
1989 12012 12920
1990 12835 13839
1991 13885 15118
1992 15317 16830
1993 16990 18948
1994 17187 19135
1995 18320 20814
1996 19320 22143

GRAPH:
YEAR ENDED MANAGED MUNICIPALS LEHMAN MUNICIPAL
FUND BOND INDEX
1986 10000 10000
1987 10766 10863
1988 11578 11668
1989 13047 12998
1990 13849 13883
1991 15084 15134
1992 16887 16915
1993 18709 18938
1994 18655 18970
1995 19983 20643
1996 21231 22014

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. 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 CONTINUED

GRAPH
YEAR ENDED HIGH YIELD LEHMAN MUNICIPAL
MUNICIPALS FUND BOND INDEX
1986 10000 10000
1987 10706 10863
1988 11633 11668
1989 13237 12998
1990 14242 13883
1991 15494 15134
1992 16890 16915
1993 18221 18938
1994 18394 18970
1995 19965 20643
1996 21332 22014

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. The Lehman Municipal Bond Index is an unmanaged group of fixed income
securities that differs from the composition of each Stein Roe fund; it is not
available for direct investment. Total return performance includes changes in
share price and reinvestment of income and capital gains distributions.

<PAGE>

Investment Comparison CONTINUED

MAKING THE MOST OF PERFORMANCE

The wide assortment of performance data available today can be a mixed
blessing. On one hand, a fund's performance results can be a valuable source
of information when considering an investment. On the other hand, even
seasoned investors may find the wide array of data and the different methods
of interpretation confusing.

That's why one of the most important pieces of advice we can give you is
to remember that a fund's past performance is just that -- past. While a
fund's past performance is not a guarantee of how it will perform in the
future, it can help you make rational decisions about the funds you currently
hold or about funds you might be considering. Owning bond funds helps to
provide diversification, and, as a result, can help to reduce a portfolio's
risks. And because bond funds have an income component, bond portfolio returns
tend to be less volatile than stock funds. Nonetheless, bond fund returns and
share prices will fluctuate as interest rates change. The price and total
return of a mutual fund will change daily and if you sell your shares during a
down turn in the market, you might lose money. But, if you can ride out the
market's ups and downs, your fund might achieve a gain.

No one can make your financial decisions better than you. We hope this
report helps you to better understand and evaluate your fund's performance,
and serves as a helpful aid in making intelligent, appropriate investment
decisions. If you have any questions, please call a Stein Roe account
representative at 800-338-2550.

<PAGE>

Q&A

AN INTERVIEW WITH VERONICA WALLACE,
PORTFOLIO MANAGER OF SR&F MUNICIPAL MONEY MARKET PORTFOLIO

PHOTOGRAPHIC IMAGE OF VERONICA WALLACE.

MUNICIPAL MONEY MARKET FUND DATA

INVESTMENT OBJECTIVE:
Seeks maximum current tax-free income consistent with safety of capital and
maintenance of liquidity by investing principally in a diversified
portfolio of short-term municipal securities.

FUND INCEPTION:
March 15, 1983

TOTAL NET ASSETS:
$120.4 million

Q: HOW DID THE FUND PERFORM?
A: With a 3.13 percent return for the year ended June 30, the Fund outpaced
the 3.10 percent median return of its Lipper tax-exempt money market fund peer
group. The Fund's seven-day current tax-exempt yield was 2.89 percent at June
30, 1996 -- that's a tax-equivalent yield of 4.76 percent.

Q: WHAT AFFECTED PERFORMANCE?
A: Our performance has been boosted in the last six months by a substantial
weighting in variable rate notes. As of June 30, these repre sented nearly 60
percent of the Fund's total net assets. Because their rates are free to move
with interest rates, variable rate notes tend to do well in the kind of rising
rate environment we've recently been experiencing.

Q: DURING THE FIRST SEVEN MONTHS OF THE FUND'S FISCAL YEAR, THE FEDERAL
RESERVE EASED RATES THREE TIMES -- IN JULY AND DECEMBER 1995 AND AGAIN IN
JANUARY 1996. NOW, SOME INVESTORS THINK CURRENT INFLATION DATA MERIT A
REVERSAL OF MONETARY POLICY. WHAT ARE THE MOST RECENT INDICATIONS?
A: Certainly strong employment numbers and other economic indicators have
raised questions among investors and contributed to choppiness in the markets
recently. And while inflation remains rela tively low, the market is convinced
that the Federal Reserve will tighten in the third quarter and it already has
factored about a half-point into current rates.
Yet the data have been too mixed to say with any degree of certainty that
inflation is on the rise. Our economists continue to believe that inflation
will remain subdued, that growth will slow to a more sustainable level by
December 1996, and that interest rates, while rising in the near term, most
likely will drift down again by year-end 1996.
Recent data seem to help confirm our view. The fears of an economic boom
that roiled the bond markets in June seem to have calmed for the time being.
Long-term Treasury bond yields, for example, have fallen recently.

<PAGE>

Q: HOW IS THIS AFFECTING YOUR STRATEGY FOR THE FUND?
A: Throughout the most recent quarter, stronger-than-expected economic reports
led us to believe the Federal Reserve might make a tightening move. As a
result, we maintained a neutral position, a move that we believed would allow
us to respond quickly to changes in interest rates. Accordingly, we allowed
attrition to take the Fund's average maturity as low as 40 days during the
quarter.
We did, however, take advantage of the annual note issuance -- which occurs
in the last two weeks of June -- to purchase notes. This raised the Fund's
average maturity to 53 days on June 30.

Q: LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR THE FUND?
A: Despite evidence that economic growth remained strong, the Federal Reserve
did not tighten rates at its July meeting. We think the Federal Reserve could
still make a tightening move this summer, however, and we've adopted a
wait-and-see attitude for the time being. We are keeping a majority of the
portfolio in weeklies and dailies -- with very little expo sure to securities
longer than 90 days. The Fund currently is in a short, but relatively neutral,
position. We think this will allow us to respond quickly to further interest
rate moves.

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.
Portfolio holdings as of June 30, 1996; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Tax-equivalent yield is shown in the
39.6 percent tax bracket, which applies to investors with incomes higher than
$263,750 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
Adviser 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 tax-equivalent yields at June 30, 1996, would have been
2.81 percent and 4.68 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 June 30, 1996, were 3.10 percent, 2.71 percent
and 3.81 percent, respectively.
<PAGE>
Portfolio Highlights
Municipal Money Market Portfolio
SECURITIES TYPE BREAKDOWN
<TABLE>
<CAPTION>
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
<S> <C> <C>
General Obligation 2.4% 7.9%
Revenue:
Industrial 25.8 17.6
Utility 25.2 16.3
Other Revenue 12.4 13.5
Housing 5.3 8.7
Steel/Metal -- 6.6
Hospital 5.8 5.6
Airport/Port -- 2.6
Student Loan -- 2.1
Waste Disposal 4.5 1.6
Oil 8.8 1.6
Education 6.5 --
Electric 1.0 --
Toll 1.3 --
Escrowed 1.0 0.7
Other -- 15.2
- ------------------------------------------------------------------------------
Total 100% 100%
</TABLE>

MATURITY
PIE CHART:
As of June 30, 1996 As of June 30, 1996
180-375 Days 7.6% 180-375 Days 10.4%
90-179 Days 7.0% 90-179 Days 5.4%%
60-89 Days 11.6% 60-89 Days 4.4%%
30-59 Days 8.2% 30-59 Days 12.7%%
0-29 Days 65.6% 0-29 Days 67.1%

<PAGE>
Q&A
AN INTERVIEW WITH JOANNE COSTOPOULOS,
PORTFOLIO MANAGER OF INTERMEDIATE MUNICIPALS FUND

Photographic image of Joanne Costopoulos.

INTERMEDIATE MUNICIPALS FUND DATA
INVESTMENT OBJECTIVE:
Seeks high current yield exempt from federal income tax, con sistent 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 10 years.

FUND INCEPTION:
October 9, 1985

TOTAL NET ASSETS:
$204.7 million

Q: HOW DID THE FUND PERFORM?
A: For the year ended June 30, 1996, we posted a total return of 5.47 percent,
which compares favorably to the 4.80 percent median return of our Lipper
intermediate municipal debt fund peer group. The Fund's 30-day standardized
yield at June 30, 1996, was 4.68 percent -- that's a tax-equivalent yield of
7.74 percent.
We lagged the 6.39 percent return of the Lehman 10-Year Municipal Bond
Index, primarily because the Fund seeks to main tain a higher-quality
portfolio, shorter maturity, and shorter duration than the Index. Because
Intermediate Municipals Fund's average maturity tends to center around eight
years, we think it may be useful to compare the Fund to an index that measures
performance for a similar maturity profile, such as the Lehman 7-Year
Municipal Bond Index. Intermediate Municipals' one-year performance more
nearly approximated the 5.54 percent return of the 7-Year Municipal Bond
Index.

Q: WHAT CAUSED THE FUND'S FAVORABLE PERFORMANCE THIS YEAR?
A: We've done well with our holdings of revenue bonds, particularly water and
sewer bonds. These are often called "essential purpose" revenue bonds --
meaning that people will always need water and sewer services, regardless of
how slowly the economy is growing. As a result, these bonds tend to offer a
chance for more relative stability in a bear bond market, such as we're now
experiencing.
The Fund also benefited from the structure of the individual securities it
held. We have been avoiding lower-coupon bonds in the intermediate part of the
curve since the inception of market discount legislation. In an environment of
rising interest rates, bonds that are trading at a discount to their face
value are subject to ordinary income tax and therefore trade on an after-tax
basis. A buyer of this type of structure would pay ordinary income tax, while
a seller would be giving up more since the bonds trade on an after-tax yield.
To help avoid passing on taxable income to our share holders, and to help
avoid the downside associated with this structure, we have been investing in
higher-coupon, or "premium" bonds.

<PAGE>

Q: WHAT OTHER FACTORS HAVE AFFECTED PERFORMANCE?
A: A number of events combined to roil the municipal bond markets throughout
the year, including tax reform discussions during the Republican primaries, a
breakdown in federal budget talks during the winter, and, more recently,
uncertainty about the direction of interest rates and reports of
stronger-than-expected economic growth. As a result, we've experienced a great
deal of volatility during the year.
I think we've done a good job of managing our duration in response to
changes in the yield curve. Weighted average adjusted duration is an
expression of a bond mutual fund's sensitivity to interest rates. If a bond
has a duration of five and interest rates fall by 1 percent, for example, the
bond's price should rise by approximately 5 percent. As a portfolio manager, I
lengthen or shorten the Fund's average duration based on where I think
interest rates are going. As of June 30, 1996, the Fund's duration was 5.9,
and it had been as high as 6.3 during the year.

Q: HOW ARE YOU POSITIONING THE FUND FOR THE CURRENT ENVIRONMENT?
A: The tax-exempt yield curve flattened recently; one-year to 10-year
maturities gave up 15 basis points, while longer maturities gave up only five
basis points. We've begun shifting assets from the 15-year range into the
10-year sector in an effort to help lower the portfolio's volatility without
sacrificing yield.
In addition, as city and state economies improve, we expect the general
obligation sector to outperform the revenue sector. In keeping with this view,
we recently shifted assets out of essential purpose revenue bonds into general
obligation bonds to take advantage of favorable price movements.

Q: WHAT ARE YOUR EXPECTATIONS?
A: We see an even chance of a Federal Reserve tightening move in the near
term. Still, as we've said, we think interest rates could peak in the near
term and may even begin declining by year end. As a result, we think the
Fund's slightly longer duration positions it well to take advantage of a
lower-rate environment over the longer term.

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.
Portfolio holdings as of June 30, 1996; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Tax-equivalent yield is shown in the
39.6 percent tax bracket, which applies to investors with incomes higher than
$263,750 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 tax-equivalent yields at June 30, 1996, would have been 4.53
percent and 7.59 percent, respectively, and total return would have been less.
The Lehman 10-Year Municipal Bond Index and the Lehman 7-Year Municipal Bond
Index are unmanaged groups of intermediate-term municipal bonds that differ
from the Fund; they are 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 June 30, 1996, were
4.80 percent, 6.43 percent and 6.83 percent, respectively.

<PAGE>

Fund Highlights
Intermediate Municipals Fund
SECURITIES TYPE BREAKDOWN
<TABLE>
<CAPTION>
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
<S> <C> <C>
General Obligation 30.9% 27.2%
Revenue:
Water & Sewer 16.5 13.6
Other Revenue 12.1 13.3
Electric 5.4 8.0
Hospital 5.9 6.6
Airport 6.3 5.6
Solid Waste -- 4.1
Toll 5.5 4.4
Student Loan 4.5 2.9
Escrowed 9.1 7.0
Pollution Control 3.8 7.3
- ------------------------------------------------------------------------------
Total 100% 100%

MATURITY

PIE CHART:
As of June 30, 1995 As of June 30, 1996
LESS THAN 1 YEAR (2.1%) LESS THAN 1 YEAR (5.8%)
1-5 YEARS (15.8%) 1-5 YEARS (13.2%)
5-10 YEARS (48.6%) 5-10 YEARS (50.0%)
10-15 YEARS (20.8%) 10-15 YEARS (17.6%)
OVER 15 YEARS (12.7%) OVER 15 YEARS (13.4%)

PORTFOLIO QUALITY
PIE CHART:
As of June 30, 1995 As of June 30, 1996
A (18.7%) A(16.2%)
AA (21.9%) AA (13.6%)
AAA (58.6%) AAA (63.9%)
BBB (0.8%) BBB (6.3%)
</TABLE>
<PAGE>

Q&A
AN INTERVIEW WITH JANE MCCART, PORTFOLIO MANAGER OF
MANAGED MUNICIPALS FUND AND HIGH-YIELD MUNICIPALS FUND

Photographic image of Jane McCart.

MANAGED MUNICIPALS FUND DATA

INVESTMENT OBJECTIVE:
Pursues high tax-free income consistent with capital preservation by
investing in a quality-conscious portfolio of long-term municipal
securities.

FUND INCEPTION:
February 23, 1977

TOTAL NET ASSETS:
$606.4 million

MANAGED MUNICIPALS FUND

Q: HOW DID THE FUND PERFORM?
A: With a 6.24 percent return for the year ended June 30, 1996, Managed
Municipals Fund outstripped the 5.66 percent return of the Lipper general
municipal debt fund peer group, but lagged the Lehman Municipal Bond Index
return of 6.64 percent.
As of June 30, the Fund's 30-day standardized yield was 5.24 percent --
that translates into a tax-equivalent yield of 8.68 percent.

Q: WHAT DROVE YOUR PERFORMANCE?
A: Performance against the peer group was boosted by our holdings of
noncallable bonds, which continued to perform solidly throughout the year.
More recently, we also benefited from our higher weightings in housing and
hospital issues, the strongest performers of the last few months.

Q: WHY ARE YOU CONTINUING TO FOCUS ON NONCALLABLE BONDS?
A: We've been emphasizing noncall able bonds for the last three years
since we determined that these bonds offered an opportunity for appreciation
unmatched in other structures. Unlike callable bonds, noncallable bonds cannot
be called out of the market, and their price movement is not obstructed by
call features. As a result, the price of a noncallable bond is not hindered
from moving upward in a strong market. Noncallable bonds have continued to
reward our investment.
Still, inflows into municipal funds currently are at record lows. Because
we prefer to hold on to our noncallable bonds -- which totaled 42 percent of
total net assets on June 30 -- our ability to take advantage of buying
opportunities has been limited. This, coupled with the fact that roughly 50
percent of bonds coming to the market are insured --and, as such, are issued
at lower yields and higher ratings -- has made capturing additional yield
in the portfolio more difficult in recent months.

<PAGE>

Q: IN AN ENVIRONMENT WHERE MORE THAN HALF OF THE ISSUES COMING TO MARKET ARE
INSURED, WHERE DO YOU FIND OPPORTUNITIES?
A: Insured bonds are dramatically reducing the opportunities for making credit
plays -- investing in a credit in the belief that it will be upgraded, for
example. We think it's still possible to capture yield by playing the yield
curve and, if you're willing, by taking extreme positions. An extreme position
might be over weighting in longer maturities, holding a great deal of cash, or
investing in lower-rated, or high-yield, credits. We've already seen a lot of
activity in lower-rated bonds. As the demand for yield takes on extra urgency,
investors who would typically avoid high-yield bonds have been increasingly
drawn into the high-yield market.

Q: HOW HAVE YOU CHANGED YOUR STRATEGY THIS YEAR?
A: In the last six months, we've become more concerned about the direction of
interest rates. As a result, we took a more defensive position in the
portfolio, shortening maturity modestly and varying our cash position from 4
percent to 6 percent during the most recent quarter.

Q: WHAT'S YOUR OUTLOOK?
A: While we continue to be concerned about growth, inflation and the
possibility of rising interest rates in the near term, mixed data are clouding
the economic picture. We expect to maintain a more defensive posture in the
near term. And while rising rates are dampening supply, where possible we'll
continue to take advantage of relative value oppor tunities as well as supply
imbalances. We'll be looking for pockets of supply, particularly in specialty
states such as New York, California and Connecticut.

<PAGE>

HIGH-YIELD MUNICIPALS FUND DATA

INVESTMENT OBJECTIVE:
Seeks a high level of tax-free income consistent with capital preservation
by investing in longer-term municipal securities, principally of medium and
lower quality.

FUND INCEPTION:
March 5, 1984

TOTAL NET ASSETS:
$283.0 million

HIGH-YIELD MUNICIPALS FUND

Q: HOW WAS THE FUND'S YEAR?
A: As of June 30, 1996, High-Yield Municipals Fund's one-year return was 6.83
percent, which outper formed both the Lehman Municipal Bond Index return of
6.64 percent and the 5.86 percent median return of the Fund's peer group, the
Lipper high-yield municipal debt fund category.
The Fund's 30-day standardized yield was 5.77 percent on June 30 --that's a
tax-equivalent yield of 9.56 percent.

Q: OVERALL, THE FUND'S PERFORMANCE AGAINST BOTH THE INDEX AND PEER GROUP WAS
STRONG. WHAT BOOSTED PER FORMANCE AND WHAT, IF ANYTHING, HELD YOU BACK?
A: During most of the fiscal year, high-yield bonds as a sector turned in a
strong performance. With its focus in high-yield bonds, the Fund benefited
accordingly. The lack of new-issue supply in high-yield bonds contributed to
the high-yield sector's performance, as demand outstripped supply.
Airlines have continued to post strong earnings, and our airline holdings
fared well accordingly. Our toll road holdings, which are new construction
projects, also registered strong performances as these projects have commenced
and are within budget.
An overweighting in high-coupon housing issues in the portfolio helped
cushion the Fund from a rising-rate environment -- the income and price
stability of these issues helped withstand the volatility we have seen in the
fixed income markets.
We saw some widening in credit spreads from our utility holdings as a
result of uncertainty following the deregulation of the utility sector.
Deregulation will affect both the municipal and public power sectors.
Finally, our paper holdings did well in the beginning of the fiscal year,
but lost some ground as paper prices have come down from their highs. While
paper companies are doing relatively well, the earnings performance we saw in
the beginning of the fiscal year has not been sustainable. We're watching
closely as the paper companies attempt to keep costs in line and institute
price increases.

<PAGE>

Q: SO WHERE ARE YOU FINDING OPPORTUNITIES NOW?
A: With a continuing trend toward consolidation among hospitals, and
increasing concerns about govern ment medical programs, we think our weaker
health care holdings could suffer some deterioration in credit quality. As a
result, we swapped these holdings for a continuing care facility -- an
opportunity we've been scouting for some time. That's because the baby boomers
started to turn 50 this year. As this enormous force in the market grows
increas ingly gray, we think demand for quality continuing care will grow,
too.

We also recently purchased a co-generation plant, which uses waste
products -- in this case, wood chips -- to make energy.

Q: WHAT ARE YOUR EXPECTATIONS FOR THE FUND?
A: With roughly 10 percent of total net assets held in bonds issued by
cyclicals, and some expectations of slower growth ahead, we're keeping a close
eye on credit quality. We'll monitor paper prices as well as hospital and
airline trends for signs of weakness.

Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality securities.

<PAGE>

Fund Highlights
Managed Municipals Fund
SECURITIES TYPE BREAKDOWN
<TABLE>
<CAPTION>
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
<S> <C> <C>
General Obligation 18.3% 18.0%
Pollution Control 14.5 16.2
Escrowed 13.2 9.0
Revenue:
Housing 12.0 11.9
Electric 8.6 10.1
Water & Sewer 8.3 6.3
Toll 6.8 7.5
Hospital 6.0 6.0
Airport 4.1 3.3
Student Loan 0.5 2.9
Other Revenue 7.7 8.8
- ------------------------------------------------------------------------------
Total 100% 100%
</TABLE>
MATURITY

PIE CHART:
As of June 30, 1995 As of June 30, 1996
OVER 25 YEARS 20.5% OVER 25 YEARS 19.0%
20-25 YEARS 23.9% 20-25 YEARS 17.4%
15-20 YEARS 26.0% 15-20 YEARS 30.2%
10-15 YEARS 12.0% 10-15 YEARS 17.5%
5-10 YEARS 3.7% 5-10 YEARS 4.0%
1-5 YEARS 7.9% 1-5 YEARS 8.0%
LESS THAN 1 YEAR 6.0% LESS THAN 1 YEAR 3.9%

PORTFOLIO QUALITY
PIE CHART:
As of June 30, 1995 As of June 30, 1996
A (24.5%) A (22.3%)
AA (33.9%) AA (33.3%)
AAA (38.8%) AAA (34.2%)
BBB AND BELOW (2.8%) BBB AND BELOW (10.2%)

<PAGE>
<TABLE>
Fund Highlights
High-Yield Municipals Fund
SECURITIES TYPE BREAKDOWN
<CAPTION>
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
<S> <C> <C>
Pollution Control 22.5% 25.1%
Escrowed 10.0 15.5
General Obligation 5.9 6.5
Revenue:
Housing 11.5 12.5
Other Revenue 12.3 12.2
Hospital 17.8 12.0
Toll 5.6 5.5
Electric 8.5 5.2
Airport 2.3 2.8
Student Loan -- 2.7
Water & Sewer 3.6 --
- ------------------------------------------------------------------------------
Total 100% 100%
</TABLE>

MATURITY
PIECHART:
As of June 30, 1995 As of June 30, 1996
OVER 25 YEARS 28.7% OVER 25 YEARS 27.8%
20-25 YEARS 34.1% 20-25 YEARS 28.0%
15-20 YEARS 10.9% 15-20 YEARS 15.4%
10-15 YEARS 10.7% 10-15 YEARS 10.2%
5-10 YEARS 9.5% 5-10 YEARS 8.4%
1-5 YEARS 2.4% 1-5 YEARS 7.5%
LESS THAN 1 YEAR 3.7% LESS THAN 1 YEAR 2.7%

PORTFOLIO QUALITY

As of June 30, 1995 As of June 30, 1996
A (27.0%) A (22.7%)
AA (12.7%) AA (11.7%)
AAA (18.2%) AAA (15.9%)
NR* (17.6%) NR* (20.4%)
BB (3.2%) BB (4.5%)
BBB (21.3%) BBB (24.8%)
<PAGE>

Shareholders Approve Four Proposals

At a special meeting on June 18, 1996, shareholders of Stein Roe Municipal
Money Market Fund, Intermediate Municipals Fund, Managed Municipals Fund and
High-Yield Municipals Fund voted to approve proposals relating to an election
of each Fund's Board of Trustees, modifications to certain investment policies
and new management and administrative agreements. The approved proposals
include:

(A) Expansion of Board of Trustees
Each Fund's Board was a) expanded from seven to nine members; nine members
were elected to each Board. This expansion will help Stein Roe to facilitate
the transition of responsibilities from retiring board members to new board
members over an 18-month period. Stein Roe Municipal Money Market Fund
shareholders also separately voted to b) authorize the Fund to cast votes for
the election of a Board of Trustees of SR&F Base Trust.

(B) Interfund Borrowing
(C) Interfund Lending

Cash management is an important part of the investment process for mutual
funds. An a) interfund lending/borrowing program--a program that allows mutual
funds to borrow cash from and lend cash to each other--gives the funds an
additional credit facility to meet emergency needs at terms that would be at
least as favorable as a third party transaction, such as a bank line of
credit. Stein Roe expects to engage in interfund borrowing only when we think
it would be more favorable to both funds than borrowing from a third party.
Stein Roe Municipal Money Market Fund shareholders also separately voted to b)
authorize the Fund to vote for approval of a similar amendment to the
fundamental restrictions of SR&F Municipal Money Market Portfolio.

(D) Administrative and Management Agreements
The Investment Advisory agreements for Stein Roe Intermediate Municipals Fund,
Managed Municipals Fund and High-Yield Municipals Fund are replaced by
separate a) Administrative and b) Portfolio Management Agreements. These new
agreements essentially carry forward, under two separate agreements, the
investment advisory and management services Stein Roe & Farnham already
provides to each Fund. Separate agreements will facilitate, at a future date,
the pooling of each Fund's assets with assets of other funds that have
identical investment objectives. The resulting larger pool of assets would be
managed by Stein Roe & Farnham.
<PAGE>
<TABLE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
MUNICIPAL MONEY MARKET FUND...138,164,836 83,759,642
A) a)Expansion of Board
of Trustees
Timothy K. Armour....... 82,705,524 1,054,118
Kenneth L. Block........ 82,826,712 932,930
William W. Boyd......... 82,923,554 836,088
Lindsay Cook............ 82,888,339 871,303
Douglas A. Hacker....... 82,891,743 867,899
Francis W. Morley....... 82,758,885 1,000,757
Charles R. Nelson....... 82,976,081 783,561
Thomas C. Theobald...... 82,743,748 1,015,894
Gordon R. Worley........ 82,483,356 1,276,286
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
b) Authorize Fund to cast for
SR&F Base Trust election 79,616,408 2,552,634 1,590,600
B) Interfund Borrowing
a) Amend Fund's Investments Restriction 77,553,263 4,782,812 1,423,567
b) Authorize Fund to vote for similar
amendment for SR&F Portfolio 77,739,244 4,029,147 1,991,251
C) Interfund Lending
a) Amend Fund's Investments Restriction 76,562,626 5,128,133 2,068,883
b) Authorize Fund to vote for similar
amendment for SR&F Portfolio 77,516,661 4,088,953 2,154,028
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
INTERMEDIATE MUNICIPALS ... 18,853,529 10,100,096
A) Expansion of Board of Trustees
Timothy K. Armour....... 9,997,888 102,208
Kenneth L. Block........ 9,967,325 132,771
William W. Boyd......... 9,988,012 112,084
Lindsay Cook............ 9,997,864 102,232
Douglas A. Hacker....... 9,949,037 151,059
Francis W. Morley....... 9,977,338 122,758
Charles R. Nelson....... 9,996,889 103,207
Thomas C. Theobald...... 9,975,912 124,184
Gordon R. Worley........ 9,891,249 208,847
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
B) Interfund Borrowing 9,164,953 477,282 457,861
C) Interfund Lending 9,171,856 462,568 465,672
D) Administrative and
Management Agreements
a) Administrative 9,217,967 388,033 494,096
b) Management 9,232,300 374,089 493,707
<PAGE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>

MANAGED MUNICIPALS ........ 68,444,782 42,766,169
A) a)Expansion of Board
of Trustees
Timothy K. Armour....... 41,426,999 1,339,170
Kenneth L. Block........ 41,403,026 1,363,143
William W. Boyd......... 41,486,458 1,279,711
Lindsay Cook............ 41,514,339 1,251,830
Douglas A. Hacker....... 41,373,648 1,392,521
Francis W. Morley....... 41,324,401 1,441,768
Charles R. Nelson....... 41,516,555 1,249,614
Thomas C. Theobald...... 41,284,738 1,481,431
Gordon R. Worley........ 41,305,605 1,460,564
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
B) Interfund Borrowing 36,846,035 3,415,186 2,504,948
C) Interfund Lending 36,713,580 3,541,112 2,511,477
D) Administrative and
Management Agreements
a) Administrative 37,532,387 2,461,822 2,771,960
b) Management 37,532,167 2,488,841 2,745,161
<CAPTION>
<PAGE>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
HIGH-YIELD MUNICIPALS .... 23,800,555 14,810,191
A) a)Expansion of Board
of Trustees
Timothy K. Armour....... 14,298,062 512,129
Kenneth L. Block........ 14,250,959 559,232
William W. Boyd......... 14,274,581 535,610
Lindsay Cook............ 14,292,487 517,704
Douglas A. Hacker....... 14,229,004 581,187
Francis W. Morley....... 14,227,431 582,760
Charles R. Nelson....... 14,295,916 514,275
Thomas C. Theobald...... 14,220,127 590,064
Gordon R. Worley........ 14,244,883 565,308
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
B) Interfund Borrowing 12,582,546 992,529 1,235,116
C) Interfund Lending 12,607,445 954,871 1,247,875
D) Administrative and
Management Agreements
a) Administrative 12,747,183 785,331 1,277,677
b) Management 12,753,802 774,721 1,281,668
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Investments as of June 30, 1996
(Dollar Amounts In Thousands)

<CAPTION>
Principal Market
MUNICIPAL SECURITIES (104.5%) Amount Value
<S> <C> <C>
ALABAMA (6.1%)
*Alabama I.D.A. Solid Waste Disposal Revenues (Pine City
Fiber Company L.O.C. Barclays Bank Plc) V.R.D.B. 3.500% $ 5,750 $5,750
*Cullman Industrial Development Board (National Bedding Co.
L.O.C. Bank of America) V.R.D.B. 3.650%........... 3,000 3,000
-------
8,750
ARIZONA (2.4%)
*Coconino P.C.R. (Tuscon Power L.O.C. Canadian Imperial Bank
of Commerce) V.R.D.B. 3.500%...................... 2,200 2,200
*Maricopa County I.D.A. Series D (L.O.C. Bank One, Arizona)
V.R.D.B. 3.500%................................... 1,200 1,200
-------
3,400
ARKANSAS (2.5%)
*Clark County Solid Waste Disposal Revenue (Reynolds Metals Co.
L.O.C. Trust Company Bank) V.R.D.B. 3.550%........ 3,000 3,000
Paragould Sales Tax Revenue (AMBAC Insured) 4.750% 7/01/97 550 553
-------
3,553
CALIFORNIA (10.1%)
*California Housing Financial Agency Revenue (Bayerland L.O.C.
First Trust, San Francisco) 3.500% Mandatory Put 2/01/97 1,500 1,500
California School Cash Reserve Program Authority Pool Series A
4.750% 7/02/97.................................... 2,000 2,017
California Statewide Community Development Authority
T.R.A.N. 4.750% 6/30/97........................... 1,000 1,007
Coast California Local Education Agencies Pooled T.R.A.N.
Series 1995A 5.000% 8/14/96....................... 5,000 5,003
Series 1996A 4.750% 6/30/97....................... 1,090 1,097
Los Angeles School District T.R.A.N.
4.500% 7/03/96 Series 95-96....................... 2,750 2,750
4.500% 6/30/97 Series 96-97....................... 1,000 1,007
-------
14,381
DISTRICT OF COLUMBIA (0.8%)
District of Columbia Revenue Series 1985 (American University
L.O.C. National Westminster Bank) V.R.D.B. 3.150%. 1,100 1,100

FLORIDA (3.5%)
*Collier County Housing Financial Authority (Saxon Manor Isles
L.O.C. PNC Bank of Kentucky) V.R.D.B. 3.400%...... 2,000 2,000
St. Lucie County P.C.R. (Florida Power & Light)
3.450% Mandatory Put 7/23/96...................... 2,000 2,000
3.600% Mandatory Put 11/08/96..................... 1,000 1,000
-------
5,000
GEORGIA (2.7%)
*Development Authority of Gwinnett County I.D.R. (Price
Companies Inc. L.O.C. NationsBank) V.R.D.B. 3.500% 3,000 3,000
Hapeville Development Revenue I.D.R. (Hapeville Hotel Ltd.
L.O.C. Deutsche Bank) V.R.D.B. 3.600%............. 900 900
-------
3,900
IDAHO (1.4%)
Idaho T.A.N. Series 1996 4.500% 6/30/97.............. 2,000 2,011
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
CONTINUED Principal Market
Amount Value
<S> <C> <C>
ILLINOIS (7.8%)
City of Chicago G.O.
3.650% Mandatory Put 10/31/96 (L.O.C. Morgan Guaranty) $ 1,000 $ 1,000
3.100% Mandatory Put 2/04/97 (L.O.C. Hessen Bank). 2,000 2,000
*Illinois Development Finance Authority Sewage Facilities Revenue
(Nutrasweet Co. Project gtd. by Monsanto Co.) V.R.D.B. 3.400% 3,200 3,200
Illinois Health Facilities Authority Revenue (University of Chicago
Hospital) 3.250% Optional Put 8/06/96 ............ 3,000 3,000
*Illinois Student Assistance Student Loan Revenue Series 1996 A
(L.O.C. Bank of America) V.R.D.B. 3.600%.......... 2,000 2,000
-------
11,200
INDIANA (5.2%)
Fort Wayne Hospital Authority Revenue (Parkview Memorial
Hospital L.O.C. Fuji Bank, Ltd.) V.R.D.B.
3.350% Series B................................. 1,000 1,000
3.350% Series C................................. 1,000 1,000
*Franklin Economic Development Revenue Refunding (L.O.C.
Federal Home Loan Bank, Indianapolis) V.R.D.B. 3.500% 2,965 2,965
Gary Environmental Improvement Revenue (U.S. Steel L.O.C.
Bank of Nova Scotia) V.R.D.B. 3.700%.............. 500 500
*LaPorte County Economic Development Revenue (Woodland Project
L.O.C. Federal Home Loan Bank, Indianapolis) V.R.D.B. 3.500% 2,000 2,000
-------
7,465
IOWA (0.7%)
Iowa School Corporations Warrant Certificates Series 1996-97 B
(Capital Guaranty Insured) 4.250% 1/30/97......... 1,000 1,005

KANSAS (0.1%)
Kansas City I.D.R. (PQ Corp L.O.C. Credit Suisse Bank)
V.R.D.B. 3.700%................................... 200 200

KENTUCKY (6.3%)
*Covington I.D.R. Series 1991 (White Castle Distributing L.O.C.
Bank One, Columbus) V.R.D.B. 3.550%............... 3,980 3,980
*Pulaski County Solid Waste Development (Eastern Kentucky
Power gtd. by National Rural Utilities Cooperative Finance
Corp.) 3.200% Optional Put 8/15/96................ 3,000 3,000
*Shelby County Industrial Building Revenue (Roll Form Corp.
L.O.C. Bank One of Kentucky) V.R.D.B. 3.550%...... 2,000 2,000
-------
8,980
LOUISIANA (2.2%)
Louisiana G.O. Series 1996 A (FGIC Insured) 3.550% 8/01/96 1,000 1,000
Louisiana Recovery District Sales Tax Revenue (MBIA Insured)
7.625% 7/01/96.................................... 1,000 1,000
*Parish of St. Charles P.C.R. Series 1991 (Shell Oil Co.)
V.R.D.B. 3.800%................................... 1,200 1,200
-------
3,200
MARYLAND (3.2%)
*Ann Arundel County E.D.R. (Baltimore Gas and Electric Company)
3.400% Mandatory Put 7/18/96...................... 3,000 3,000
3.700% Mandatory Put 9/10/96...................... 1,000 1,000
3.700% Mandatory Put 10/18/96..................... 500 500
-------
4,500
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
CONTINUED Principal Market
Amount Value
<S> <C> <C>
MICHIGAN (2.1%)
Michigan Job Development Authority P.C.R. Series 1985 (Mazda
Motor Manufacturing USA Corp. L.O.C. Sumitomo Bank,
Ltd.) V.R.D.B. 3.550%............................. $ 3,000 $3,000

MINNESOTA (1.1%)
*Minnesota Housing Finance Authority Single Family Mortgage
Series N 3.600% Mandatory Put 12/12/96............ 1,600 1,600

MISSOURI (3.8%)
*Jefferson County (GHF Holdings L.O.C. Bank One, Indianapolis)
V.R.D.B. 3.550%................................... 4,410 4,410
St. Louis T.R.A.N. 4.750% 6/30/97.................... 1,000 1,008
-------
5,418
NEW HAMPSHIRE (3.5%)
*New Hampshire I.D.R. (New England Power Co.)
3.350% Mandatory Put 8/07/96...................... 2,000 2,000
3.600% Mandatory Put 8/09/96...................... 3,000 3,000
-------
5,000
NEW JERSEY (1.4%)
Essex County T.A.N.S. (L.O.C. Chemical Bank) 4.000% 8/19/96 2,000 2,002

NEW MEXICO (0.7%)
*Santa Fe Single Family Mortgage Revenue 4.000%
Mandatory Put 11/15/96............................ 1,000 1,000

NORTH DAKOTA (0.7%)
*Mercer County Solid Waste Disposal Revenue Series 1993V
(gtd. by National Rural Utilities Cooperative Finance Corp.)
3.650% Optional Put 12/01/96...................... 1,000 1,000

OHIO (1.4%)
Cuyahoga Hospital Revenue (MBIA Insured) 6.500% 1/15/97 1,520 1,543
Ohio Environmental Improvement Revenue (U.S. Steel L.O.C.
Pittsburgh National Bank) V.R.D.B. 4.000%......... 400 400
-------
1,943
OREGON (0.1%)
*Port St. Helen P.C.R. Series 1990A (Portland General Electric Co.
L.O.C. Swiss Bank) V.R.D.B. 3.800%................ 200 200

PENNSYLVANIA (1.7%)
*Pennsylvania Housing Financial Authority Single Family Mortgage
Series 1991-31-A 6.300% 4/01/97................... 750 761
Schuykill County I.D.A. (Westwood Energy Properties Limited
Partnership L.O.C. Fuji Bank Ltd.) V.R.D.B. 3.850% 200 200
Westview Water Bonds (FGIC Insured) 3.600% 11/15/96.. 1,410 1,410
-------
2,371
SOUTH CAROLINA (2.5%)
Columbia Water and Sewer Revenue (MBIA Insured) (Escrowed in
U.S. Treasury Securities) (pre-refunded to 10/01/96) 7.375% 505 515
*South Carolina Economic Development Authority (Specialty
Equipment Companies L.O.C. Barclays Bank Plc)
V.R.D.B. 3.550%................................... 3,000 3,000
-------
3,515
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
CONTINUED Principal Market
Amount Value
<S> <C> <C>
TENNESSEE (4.0%)
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. 3.550%................. 4,000 4,000
--------
5,775
TEXAS (10.9%)
*Harris County Industrial Development Corp. I.D.R. (Precision
General Project L.O.C. Morgan Guaranty) V.R.D.B. 3.550% 2,060 2,060
Houston Independent School District Tax Notes 4.000% 7/15/96 1,355 1,355
*North Texas Higher Education Authority Texas Student Loan
Revenue Refunding Series A (L.O.C. Student Loan Marketing
Association) V.R.D.B. 3.400%...................... 1,100 1,100
*Port Corpus Christi Sewer and Water (Citgo Inc. L.O.C. Banque
Nationale de Paris) V.R.D.B. 3.800%............... 300 300
*Robertson County Industrial Development Corp. I.D.R.
Series 1995 (L.O.C. Harris Bank) V.R.D.B. 3.400%.. 1,900 1,900
*San Antonio Airport Lease Special Project Revenue Series 1992
(Hedrick Beechcraft, Inc gtd. by Raytheon Co.) V.R.D.B. 3.350% 3,900 3,900
Texas T.R.A.N. 4.750% 8/30/96........................ 5,000 5,007
--------
15,622
VERMONT (0.4%)
*Vermont I.D.R. (Rye Gate Project L.O.C. ABN AMRO)
V.R.D.B. 3.500%................................... 500 500

WASHINGTON (2.3%)
Washington G.O. (Escrowed in U.S. Treasury Securities)
(pre-refunded to 9/01/96) 7.600%.................. 500 503
*Yakima County Public Corp I.D.R. (L.O.C. Bayerische Vereinsbank
AG) V.R.D.B. 3.500%............................... 2,700 2,700
--------
3,203
WISCONSIN (12.4%)
*Carlton P.C.R. Series 1988 (Wisconsin Power and Light)
V.R.D.B. 3.650%................................... 6,500 6,500
*Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 3.550%........................ 3,825 3,825
*Holland I.D.R. (White Clover Daily Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 3.550%........................ 2,925 2,925
*Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 3.550%........................ 2,430 2,430
*Oak Creek I.D.R. Series 1995 (McAdams Graphics L.O.C.
Bank One, Milwaukee) V.R.D.B. 3.550%.............. 2,000 2,000
--------
17,680
WYOMING (0.6%)
*Lincoln County P.C.R. (Exxon Corp.) V.R.D.B. 3.700%. 800 800
Sublette County P.C.R. (Exxon Corp.) V.R.D.B. 3.550% 100 100
--------
900

TOTAL MUNICIPAL SECURITIES (104.5%)
(Amortized Cost $149,374)...................................... 149,374
OTHER ASSETS, LESS LIABILITIES (-4.5%)............................ (6,446)
--------
TOTAL NET ASSETS (100.0%)......................................... $142,928
========
<FN>
* These securities are subject to Alternative Minimum Tax. At June 30, 1996,
these securities represented 68.9 percent of net assets.

See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Intermediate Municipals Fund

Investments as of June 30, 1996
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
MUNICIPAL SECURITIES (101.2%) Amount Value
<S> <C> <C>
ALASKA (1.4%)
Kenai Peninsula Borough G.O. Refunding (AMBAC Insured)
8.300% 1/01/99.................................... $ 1,500 $ 1,635
North Slope Borough G.O. 8.350% 6/30/98.............. 1,200 1,285
-------
2,920
ARIZONA (7.7%)
Arizona Transportation Board Highway Revenue Subordinated
Series A 6.000% 7/01/00........................... 1,000 1,052
Arizona Wastewater Management Authority (AMBAC Insured)
5.700% 7/01/04.................................... 1,585 1,643
Cochise County Unified School District No. 68 Series B (FGIC
Insured) 9.000% 7/01/01........................... 1,115 1,324
Deer Valley Unified School District No. 097 G.O. (MBIA Insured)
6.250% 7/01/06.................................... 1,750 1,880
Maricopa County Hospital Revenue (Samaritan Health Services)
(Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,330
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 2,705
Pima County Refunding G.O. 6.300% 7/01/02............ 2,500 2,700
Pima County Unified School District No. 1 (Tucson Project)
(MBIA Insured) 8.000% 7/01/01..................... 1,400 1,603
Tempe Unified High School District No. 213 Refunding and
Improvement (FGIC Insured) 7.000% 7/01/08......... 500 575
-------
15,812
ARKANSAS (1.3%)
Beaver Water District Benton & Washington Counties Water
Revenue Refunding (MBIA Insured) 6.000% 11/15/04.. 2,580 2,748

CALIFORNIA (6.3%)
California Education Facility University of San Francisco (MBIA
Insured) 5.600% 10/01/10.......................... 1,000 1,008
*California Housing Finance Agency Revenue Home Mortgage
Series B-1 5.900% 2/01/04......................... 990 1,009
Central Coast Water Authority Revenue (AMBAC Insured)
5.950% 10/01/03................................... 2,000 2,123
East Bay Municipal Utility District Water System Revenue (Escrowed
in U.S. Treasury Securities) (AMBAC Insured) 7.000% 6/01/00 1,400 1,519
Los Angeles County Public Water Works Authority (Regional Parks
And Open Space Revenue) 5.800% 10/01/05........... 1,500 1,568
Los Angeles Department of Water & Power Electric Revenue
Crossover Refunding 9.000% 9/01/03................ 2,500 3,110
Oakland Unified School District G.O. Series A (FGIC Insured)
Zero Coupon (Effective Yield 6.250%) 8/01/16...... 1,700 496
Vallejo Revenue Series B (Water Improvement Project) (FGIC Insured)
(Escrowed in U.S. Treasury Securities) 6.000% 11/01/01 2,030 2,158
-------
12,991
COLORADO (0.2%)
Adams County School District No 12 Series A (MBIA Insured)
Zero Coupon (Effective Yield 5.850%) 12/15/12..... 1,300 499
<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 $ 1,259

FLORIDA (1.7%)
Florida Division Board Finance Department of General Services
Revenue (Department of Natural Resources) (MBIA Insured)
6.000% 7/01/03.................................... 1,000 1,064
*Martin County Sewer and Water Development (Florida Power
& Light Co.) V.R.D.B. 3.800%...................... 100 100
Palm Beach County Airport System Revenue (MBIA Insured)
7.625% 10/01/04................................... 1,410 1,614
*St. Lucie Sewer and Water Development (Florida Power & Light Co.)
V.R.D.B. 3.800%................................... 600 600
-------
3,378
GEORGIA (6.8%)
Atlanta Airport Facility Revenue Series 1996 (AMBAC Insured)
6.500% 1/01/07.................................... 5,000 5,451
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
5.625% 1/01/01.................................... 1,000 1,036
Georgia G.O. Series C 7.700% 4/01/00................. 1,250 1,385
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding (AMBAC Insured)
6.050% 7/01/01.................................. 1,600 1,693
5.800% 7/01/02.................................. 1,000 1,051
Municipal Electric Authority of Georgia Special Obligation Fifth
Crossover Series (AMBAC Insured) 6.400% 1/01/13... 3,000 3,232
-------
13,848
HAWAII (0.6%)
Honolulu (City & County) Refunding G.O. Series 1990 A
7.350% 7/01/06.................................... 1,000 1,164

ILLINOIS (6.2%)
Chicago Board of Education Refunding G.O. Series A (MBIA
Insured) 6.250% 12/01/12.......................... 2,100 2,205
*Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/01/04.................................... 1,000 1,022
Chicago Skyway Toll Bridge Revenue Refunding Series 1994
6.750% 1/01/17.................................... 1,500 1,524
Chicago Water Revenue Refunding (FGIC Insured) 6.500% 11/01/09 2,130 2,324
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 1,567
7.250% 6/15/05.................................. 2,250 2,557
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B. 3.800%........... 300 300
-------
12,765
INDIANA (4.6%)
Indiana Toll Road Commission Toll Road Revenue (Escrowed in
U.S. Treasury Securities) 9.000% 1/01/15.......... 2,655 3,608
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
INDIANA (CONTINUED)
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A (United Airlines)
5.600% 11/01/99................................. $ 1,125 $ 1,156
6.500% 11/01/07................................. 2,250 2,374
Indianapolis Local Public Improvement Bond Bank
Series 1992 D 6.500% 2/01/06...................... 2,100 2,241
-------
9,379
IOWA (1.1%)
Muscatine P.C.R. (Monsanto Co.) V.R.D.B. 3.200%...... 2,200 2,200

KENTUCKY (1.3%)
Kentucky Turnpike Authority Economic Development Revenue
Refunding (Revitalization Projects) 5.800% 1/01/04 2,500 2,603

LOUISIANA (2.5%)
East Baton Rouge Parish P.C.R. (Rhone Poulenc Inc. L.O.C. Banque
National of Paris) V.R.D.B. 3.700%................ 400 400
Lafayette Public Power Authority Electric Revenue 9.000% 11/01/96 1,000 1,015
*Lake Charles Harbor & Terminal District P.C.R. (Conoco Inc. gtd. by
E.I. DuPont) V.R.D.B.
3.600%............................................ 500 500
3.800%............................................ 400 400
Louisiana Public Facilities Authority Student Loan Revenue Series A-1
5.900% 9/01/99.................................... 2,000 2,069
*Parish of St. Charles (Shell Oil Co.) V.R.D.B.
3.800% Series 1991................................ 100 100
3.800% Series 1993................................ 700 700
-------
5,184
MAINE (0.4%)
*Maine Educational Loan Authority Educational Loan Revenue
Supplemental Education Loan Series A-2 6.650% 12/01/02 725 765

MASSACHUSETTS (6.1%)
Massachusetts Bay Transportation Authority Mass Refunding
General Transportation System Series A 7.000% 3/01/07 2,250 2,541
Massachusetts Health and Educational Facilities Authority Revenue
7.250% 7/01/00 Series C (Daughters of Charity Carney Hospital) 800 844
6.000% 7/01/09 Series D (Daughters of Charity Carney Hospital) 1,000 1,008
6.250% 12/01/14 (Dana Farber Cancer Institution).. 1,000 1,003
Massachusetts G.O. (MBIA Insured)
5.000% 1/01/06.................................... 3,650 3,597
Massachusetts Water Resources Authority Refunding Series C
6.000% 12/01/11................................... 3,410 3,544
-------
12,537
MICHIGAN (8.0%)
Greater Detroit Resource Authority Revenue (AMBAC Insured)
6.250% 12/13/05................................... 4,000 4,274
Michigan Building Authority Revenue Refunding Series I
(AMBAC Insured) 6.000% 10/01/02................... 3,000 3,173
Michigan Hospital Finance Authority Revenue (Daughters of Charity
Providence Hospital) 6.500% 11/01/01.............. 1,605 1,712
Michigan Municipal Bond Authority Revenue 5.625% 10/01/19 2,000 1,928
Michigan Underground Storage Tank Revenue (AMBAC Insured)
6.000% 5/01/05.................................... 5,000 5,277
-------
16,364
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
MISSISSIPPI (0.4%)
Jackson County P.C.R. (Chevron Corp.) V.R.D.B. 3.550% $ 800 $ 800

MISSOURI (0.5%)
Missouri Health and Educational Facility (Washington University)
V.R.D.B. 3.700% .................................. 200 200
Missouri Regional Convention & Sports Complex Authority
6.600% 8/15/03.................................... 830 899
-------
1,099
NEVADA (0.8%)
*Clark County P.C.R. Series 1990 A (Southern California Edison
Co.) 7.125% 6/01/09............................... 1,500 1,593

NEW JERSEY (2.5%)
Bergen County Utility Authority Solid Waste System Revenue
Refunding Series A (FGIC Insured) 6.250% 6/15/06.. 2,000 2,161
New Jersey Health Care Facilities Finance Authority Revenue
6.100% 7/01/01 (Hackensack Medical Center) (FGIC Insured) 1,000 1,063
7.000% 7/01/03 (Christ Hospital Group) (Connie Lee Insured) 1,730 1,922
-------
5,146
NEW MEXICO (1.8%)
Gallup P.C.R. (Plains Electric Transmission & Generating
Cooperative Inc.) (MBIA Insured) 6.100% 8/15/02... 2,000 2,116
Rio Rancho Water & Wastewater System Revenue Series A (FSA
Insured) 8.000% 5/15/03........................... 1,350 1,575
-------
3,691
NEW YORK (6.6%)
New York City G.O.
6.500% 2/15/05 Series 1996 D...................... 4,000 4,125
7.125% 8/15/11 Series C........................... 2,200 2,292
5.750% 2/01/14.................................... 3,000 2,789
New York Dormitory Authority Revenue (State University
Educational Facilities) Series A 6.500% 5/15/05... 1,000 1,060
New York Environmental Facility Corp. P.C.R. State Water Series D
6.300% 5/15/05.................................... 3,000 3,264
-------
13,530
NORTH CAROLINA (2.4%)
*Halifax County P.C.R. (Westmoreland-Hadson Partners L.O.C.
Credit Suisse Bank) V.R.D.B. 3.850%............... 300 300
North Carolina Eastern Municipal Power Refunding Series B
6.000% 1/01/05.................................... 3,000 3,030
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding (MBIA Insured) 5.900% 1/01/03... 1,500 1,573
-------
4,903
OHIO (2.2%)
Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,081
Loveland School District G.O. (MBIA Insured) 7.100% 12/01/09 3,000 3,383
-------
4,464
OREGON (2.9%)
Marion County Sewer and Electric Revenue (AMBAC Insured)
5.100% 10/01/02................................... 2,000 2,015
Oregon Department of Transportation Revenue (MBIA Insured)
5.700% 6/01/02.................................... 1,220 1,276
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
OREGON (CONTINUED)
Portland Sewer System Revenue Refunding Series B (FGIC Insured)
5.400% 4/01/02.................................... $ 2,500 $ 2,586
-------
5,877
PENNSYLVANIA (0.8%)
Dauphin County Hospital Authority Revenue Refunding Series B
(Hapsco Group Inc.) (MBIA Insured) 5.800% 7/01/02. 1,600 1,666

PUERTO RICO (0.5%)
Puerto Rico Electric Power Authority Revenue Series X
6.000% 7/01/15.................................... 1,000 1,007

SOUTH CAROLINA (3.9%)
Greenville Hospital Systems Revenue Series 1996 B 5.250% 5/01/17 2,500 2,272
Piedmont Municipal Power Agency Electric Revenue (FGIC Insured)
6.125% 1/01/07.................................... 2,350 2,502
*South Carolina Ports Authority Revenue (AMBAC Insured)
6.200% 7/01/01.................................... 1,000 1,058
Sumter County Hospital Facilities Revenue Refunding (Tuomey
Regional Medical Center) (MBIA Insured) 6.625% 11/15/04 2,000 2,213
-------
8,045

TENNESSEE (1.5%)
Metropolitan Nashville & Davidson County Water & Sewer Revenue
(FGIC Insured) 6.500% 1/01/10..................... 2,750 3,006

TEXAS (9.3%)
Alief Independent School District G.O. (gtd. by Permanent School
Fund) 8.000% 2/15/99.............................. 1,305 1,423
*Brazos River P.C.R. (Texas Utilities Co. L.O.C. Union Bank of
Switzerland) V.R.D.B. 3.850%...................... 500 500
Fort Bend Independent School District Unlimited Tax (gtd. by
Permanent School Fund) 7.500% 2/15/00............. 1,010 1,108
Fort Worth Limited Tax 8.350% 3/01/00................ 1,250 1,405
Houston Water Conveyance System Contract Certificates of
Participation Series J (AMBAC Insured) 6.125% 12/15/06 1,000 1,067
Northside Independent School District G.O. 9.400% 4/01/98 1,850 2,003
Plano Independent School District G.O. Unlimited Tax (FGIC
Insured) 8.625% 2/15/99........................... 1,900 2,094
*Port Corpus Christi Sewer and Water (Citgo Inc. L.O.C. Banque
National of Paris) V.R.D.B. 3.800%................ 300 300
Round Rock Independent School District G.O. Unlimited Tax
School Building and Refunding
8.625% 8/15/00 Series 1991 (MBIA Insured)....... 1,270 1,460
7.500% 8/01/02 Series 1995 A (PSF Insured)...... 1,200 1,370
San Antonio Water System Revenue Refunding (FGIC Insured)
6.000% 5/15/01.................................... 3,000 3,157
Texas Higher Education Student Loan Senior Lien 7.450% 10/01/06 3,035 3,100
-------
18,987
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
VIRGINIA (0.9%)
*Campbell Company (Hadson Power L.O.C. Barclays Bank)
V.R.D.B. 3.900%................................... $ 100 $ 100
Peninsula Ports Authority Series D (Dominion Terminal Project
L.O.C. Barclays Bank) V.R.D.B. 3.600%............. 500 500
*Virginia Housing Development Authority Commonwealth
Mortgages Series A Subseries A-1 6.700% 7/01/05... 1,280 1,332
-------
1,932
WASHINGTON (6.0%)
Snohomish County School District No. 2 Refunding G.O. (Everett)
(MBIA Insured)
7.250% 12/01/00................................. 2,540 2,809
7.000% 12/01/01................................. 2,230 2,471
7.000% 12/01/02................................. 1,500 1,680
Washington Multiple Purpose G.O. Series C 6.500% 7/01/04 3,800 4,157
Washington Public Power Supply Systems Revenue Refunding
(FGIC Insured) 7.000% 7/01/05..................... 1,000 1,072
--------
12,189
WYOMING (1.4%)
*Green River P.C.R. (Rhone Poulenc Inc. L.O.C. Banque National
of Paris) V.R.D.B.
3.700%............................................ 600 600
3.900%............................................ 200 200
Lincoln County P.C.R. (Exxon Corp.) V.R.D.B.
3.550% Series 1985................................ 100 100
*3.700% Series 1987 A............................. 800 800
*3.700% Series 1987 C............................. 1,200 1,200
--------
2,900
TOTAL MUNICIPAL SECURITIES (101.2%)
(Amortized Cost $200,636)...................................... 207,251
OTHER ASSETS, LESS LIABILITIES (-1.2%)............................ (2,525)
--------
TOTAL NET ASSETS (100.0%)......................................... $204,726
========
<FN>
* These securities are subject to Alternative Minimum Tax. At June 30, 1996,
these securities represented 6.6 percent of net assets.

See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Managed Municipals Fund
Investments as of June 30, 1996
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
MUNICIPAL SECURITIES (99.9%) Amount Value
<S> <C> <C>
ALABAMA (1.4%)
Alabama Special Care Facility Financing Authority Birmingham
Revenue (Daughters of Charity St. Vincent Hospital)
5.000% 11/01/25................................... $ 9,700 $ 8,309

ALASKA (0.6%)
*Alaska Student Loan Corporation Student Loan Revenue Series A
(AMBAC Insured) 6.200% 7/01/09................... 3,870 3,903

ARKANSAS (0.4%)
Arkansas Development Financing Authority Single Family Mortgage
Revenue Series A (FHA Insured) 8.125% 8/01/14..... 2,270 2,344

CALIFORNIA (4.4%)
California P.C.R. Refunding Series A (San Diego Gas & Electric Co.)
5.900% 6/01/14.................................... 3,000 3,018
Central Contra Costa Sanitation District Revenue Wastewater
Facilities Improvement Project (MBIA Insured)
6.250% 9/01/13.................................. 2,025 2,089
6.250% 9/01/14.................................. 1,295 1,337
Foothill Eastern Transportation Corridor Agency Toll Road Refunding
Sr. Lien Series 1995 A Zero Coupon (Effective Yield 7.200%)
1/01/18........................................... 10,000 2,348
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/15.................................... 4,000 3,779
6.125% 7/01/23.................................... 6,000 5,579
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 2,148
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 2,780
5.000% 7/01/17 Series A (Power Project)........... 2,500 2,179
5.500% 7/01/23 (Transmission Project)............. 1,490 1,371
-------
26,628
COLORADO (2.6%)
Araphoe County Capital Improvement Trust Fund Highway
Zero Coupon (Effective Yield 6.930%) 8/31/15...... 25,000 6,363
Colorado Housing Finance Authority Multifamily Mortgage Revenue
6.000% 10/01/09................................... 1,490 1,491
6.000% 10/01/10................................... 1,590 1,591
6.000% 10/01/11................................... 1,710 1,710
6.000% 10/01/12................................... 1,830 1,830
Municipal Subdistrict Northern Colorado Water Conservancy
District Revenue Series D 6.000% 12/01/15......... 2,500 2,503
-------
15,488
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 1,254
*6.800% 12/01/23 Series 1992 A.................. 3,500 3,612
-------
4,866
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
FLORIDA (1.9%)
Broward County Public Improvement Revenue Refunding G.O.
Series 1986
12.500% 1/01/03................................. $ 1,000 $ 1,410
12.500% 1/01/04................................. 1,195 1,743
12.500% 1/01/05................................. 2,000 3,003
Florida G.O. (Jacksonville Transportation Authority Project)
(Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,693
*Jacksonville Water and Sewer Development Revenue (Jacksonville
Suburban Utilities-General Waterworks Corp.) 6.750% 6/01/22 1,500 1,566
*Martin County Solid Waste Disposal Revenue (Florida Power &
Light Co.) V.R.D.B. 3.800%........................ 500 500
*St. Lucie Solid Waste Disposal Revenue (Florida Power & Light Co.)
V.R.D.B. 3.800%................................... 400 400
-------
11,315
GEORGIA (11.8%)
Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured)
6.500% 1/01/08.................................... 2,750 3,015
6.500% 1/01/10.................................... 2,000 2,186
*Cartersville Development Authority Revenue Water & Wasteworks
Facilities (Anheuser-Busch) 7.375% 5/01/09........ 9,000 10,416
Columbia County School District G.O. (MBIA Insured)
6.750% 4/01/09.................................... 1,900 2,137
7.000% 4/01/10.................................... 2,125 2,444
7.000% 4/01/11.................................... 2,370 2,730
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
6.375% 1/01/14.................................... 13,700 14,873
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding Series P (AMBAC Insured) 6.250% 7/01/20. 4,000 4,264
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18.................................... 21,100 22,538
Paulding County Georgia School District (MBIA Insured)
6.000% 2/01/10.................................... 4,235 4,446
6.000% 2/01/13.................................... 2,360 2,450
-------
71,499
HAWAII (1.1%)
*Hawaii Airports System Revenue Series II (MBIA Insured)
6.900% 7/1/12 .................................... 6,000 6,708

IDAHO (0.3%)
*Idaho Housing Agency Single Family Mortgage Revenue (FHA/VA
Insured) 7.875% 7/01/24........................... 1,790 1,851

ILLINOIS (8.4%)
Chicago Board of Education Refunding G.O. Lease Certificates
School Reform Series A (MBIA Insured)
6.250% 12/01/12................................. 2,500 2,625
6.000% 1/01/16.................................. 5,000 5,103
Chicago Gas Supply Revenue Series 1985 D (Peoples Gas
Light & Coke Company) 7.500% 3/01/15.............. 4,500 4,926
Chicago Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/17.................................... 1,500 1,524
Illinois Development Finance Authority
**5.950% 1/01/09 (Catholic Charities Housing Development) 1,450 1,379
7.600% 9/01/13 P.C.R. (Central Illinois Public Service) 3,000 3,288
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
ILLINOIS (CONTINUED)
Illinois Housing Development Authority Series A (FHA Insured)
7.800% 12/01/12................................... $ 905 $ 934
8.000% 6/01/26.................................... 6,770 7,002
Illinois Sales Tax Revenue Refunding Series Q 6.000% 6/15/12 10,000 10,307
Illinois Toll Highway Authority Priority Revenue Series A
6.300% 1/01/11.................................... 7,500 7,855
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B...................
3.800% Series 1992.............................. 600 600
3.800% Series 1995.............................. 5,100 5,100
-------
50,643
INDIANA (4.3%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 5,000 5,484
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16.................. 6,950 6,994
*Indianapolis Airport Authority Revenue Special Facilities
(United Airlines) 6.500% 11/15/31................. 5,000 4,885
Michigan City P.C.R. (Northern Indiana Public Service Company)
5.700% 10/01/03................................... 8,795 8,799
-------
26,162
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............ 1,185 1,230

KANSAS (0.5%)
Kansas Department of Transportation Highway Revenue (Escrowed
in U.S. Treasury Securities) (pre-refunded to 3/01/02)
6.500% 3/01/12.................................... 3,000 3,272

KENTUCKY (3.3%)
*Kentucky Housing Corp. Revenue Series C (FHA/VA Insured)
8.100% 1/01/22.................................... 2,385 2,518
Kentucky Turnpike Authority Economic Development Revenue
Refunding Series 1992 (Revitalization Project) (FGIC Insured)
Zero Coupon (Effective Yield 6.600%) 1/01/10...... 13,500 6,249
Kentucky Turnpike Authority Revenue (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,638
*Trimble County P.C.R. Series A (Louisville Gas & Electric Co.)
7.625% 11/01/20................................... 6,670 7,341
7.625% 11/01/20 (Escrowed in U.S.
Treasury Securities) (pre-refunded to 11/01/00). 1,330 1,491
-------
20,237
LOUISIANA (2.2%)
*De Soto Parish Environmental Improvement Revenue (International
Paper Co.) Series A 7.700% 11/01/18.............. 3,250 3,639
East Baton Rouge Parish P.C.R. (Rhone-Poulenc Inc. L.O.C.
Banque Nationale de Paris) V.R.D.B. 3.700%........ 300 300
*Lake Charles Harbor & Terminal District P.C.R. (Conoco, Inc. gtd.
by E.I. DuPont) V.R.D.B. 3.800%................... 1,600 1,600
New Orleans G.O. (AMBAC Insured) Zero Coupon (Effective Yield
6.125%) 9/01/12................................... 6,250 2,430
Orleans Parish School Board G.O. Refunding Series B (FGIC Insured)
5.200% 2/01/14.................................... 2,000 1,849
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
LOUISIANA (CONTINUED)
*St. Charles Parish P.C.R. (Shell Oil Co.) V.R.D.B.
3.800% Series 1992A............................... $ 300 $ 300
3.800% Series 1993................................ 3,100 3,100
-------
13,218
MAINE (1.2%)
*Maine Educational Loan Marketing Corporation Student Loan
Revenue Series 1994 B-1 6.500% 11/01/09........... 3,000 3,054
*Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19................................... 2,520 2,604
7.550% 11/15/22................................... 1,750 1,808
-------
7,466
MARYLAND (1.2%)
Washington Suburban Sanitary District
6.600% 6/01/16.................................... 2,795 2,977
6.625% 6/01/17.................................... 1,660 1,771
6.625% 6/01/19.................................... 2,320 2,475
-------
7,223
MASSACHUSETTS (7.1%)
Massachusetts Bay Transportation Authority Refunding
7.000% 3/01/14 Series 1994 A...................... 3,150 3,583
6.200% 3/01/16 Series 1992 B...................... 9,825 10,292
7.000% 3/01/19 Series 1994 A...................... 2,500 2,859
Massachusetts College Building Authority Project Refunding Series A
7.500% 5/01/11.................................... 1,500 1,796
7.500% 5/01/14.................................... 3,500 4,168
Massachusetts Health & Educational Facilities Authority Revenue
6.250% 7/01/12 (Massachusetts General Hospital Project)
(AMBAC Insured)................................. 5,750 6,102
6.250% 12/01/22 (Dana Farber Cancer Institute).... 6,500 6,494
6.750% 7/01/24 (Brigham & Women's Hospital)
(AMBAC Insured)................................. 7,365 7,792
-------
43,086
MICHIGAN (0.5%)
Michigan Hospital Finance Authority Providence Hospital Revenue
Refunding (Daughters of Charity Health Systems Inc.)
7.000% 11/01/21................................... 3,000 3,192

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.................................. 2,400 2,535
7.300% 8/01/31.................................. 3,560 3,696
*Minnesota Housing Finance Agency Single
Family Mortgage Series A 7.450% 7/01/22........... 3,990 4,214
-------
10,445
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 2,569

MISSOURI (0.8%)
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 1,103
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
MISSOURI (CONTINUED)
Missouri Health and Educational Facility (Washington University)
V.R.D.B. 3.700%................................... $ 2,600 $ 2,600
Missouri Housing Community Development Single Family Mortgage
Revenue 9.375% 4/01/16............................ 90 95
Springfield School District Refunding G.O. Series B (FGIC Insured)
9.500% 3/01/07.................................... 600 807
-------
4,605
NEVADA (0.7%)
*Nevada Housing Division Single Family Mortgage (FHA/VA
Insured) 7.750% 4/01/22........................... 4,050 4,216

NEW JERSEY (0.9%)
New Jersey G.O. Series D 6.000% 2/15/11.............. 5,150 5,436

NEW MEXICO (0.7%)
Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13... 1,000 1,036
Bernalillo County Gross Receipts Tax Revenue Series 1996 A
5.750% 4/01/21.................................... 3,460 3,393
-------
4,429
NEW YORK (11.1%)
Erie County Water Authority Water Revenue Refunding Series 1992
(AMBAC Insured) Zero Coupon (Effective Yield 7.300%)
12/01/17.......................................... 660 142
New York City G.O.
5.750% 2/01/14 Series G........................... 3,145 2,924
8.750% 11/01/17 Series A (Escrowed in U.S. Treasury Securities)
(pre-refunded to11/01/97) ...................... 1,000 1,076
6.000% 2/15/25 Series D........................... 12,980 12,124
New York Dormitory Authority Lease Revenue State University
Dormitory Facilities (AMBAC Insured)
6.000% 7/01/09.................................. 2,000 2,095
6.000% 7/01/11.................................. 1,110 1,156
New York Environmental Facilities Corporation P.C.R. Water
Revolving Fund - New York City Municipal Water
5.750% 6/15/10.................................... 10,000 10,187
*New York City I.D.A. Special Facility Revenue Series 1994
(Terminal One Group, Associate L.P. Project) 6.000% 1/01/15 8,340 8,156
New York Urban Development Corp. State Facilities Revenue Refunding
5.600% 4/01/15.................................... 2,600 2,444
5.700% 4/01/20.................................... 10,990 10,322
Triborough Bridge & Tunnel Authority General Purpose Revenue
6.625% 1/01/12 Series X........................... 8,715 9,640
6.125% 1/01/21 Series Y........................... 6,890 7,172
-------
67,438
NORTH CAROLINA (1.9%)
*Halifax County P.C.R. (Westmoreland-Hadson Partners L.O.C.
Credit Suisse Bank) V.R.D.B. 3.850%............... 300 300
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991 A (Escrowed in U.S.
Treasury Securities).......................... 4,315 4,734
6.500% 1/01/18 Series 1991 A.................... 2,185 2,252
8.000% 1/01/21 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98)..................... 240 258
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
NORTH CAROLINA (CONTINUED)
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding (AMBAC Insured) 6.000% 1/01/08.. $ 3,585 $ 3,766
-------
11,310
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 4,375

OKLAHOMA (0.3%)
*Tulsa County Home Finance Authority Mortgage Revenue
Series 1991 B (collateralized by Government National Mortgage
Association Securities) 7.550% 5/01/23............ 1,825 1,923

OREGON (0.1%)
Port St. Helens P.C.R. (Portland General Electric Co. L.O.C. Swiss
Bank) V.R.D.B. 3.800%............................. 600 600

PENNSYLVANIA (2.7%)
Allegheny County Sanitation Authority Sewer Revenue (FGIC
Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,310
*Dauphin County I.D.A. Water Development Revenue (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24.................................... 2,400 2,639
Pennsylvania G.O. 6.250% 7/01/12..................... 11,200 11,996
Schuykill County I.D.A. (Westwood Energy Properties Limited
Partnership L.O.C. Fuji Bank Ltd.) V.R.D.B. 3.850% 360 360
-------
16,305
RHODE ISLAND (1.0%)
*Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/01/22................................... 5,650 5,976

SOUTH CAROLINA (3.0%)
*Calhoun County Solid Waste Disposal Facilities Revenue (Eastman
Kodak Co.) (Escrowed in U.S. Treasury Securities)
6.750% 5/01/17.................................... 3,000 3,280
Greenville Hospital System Hospital Facilities Revenue Series B
5.250% 5/01/23.................................... 5,000 4,490
*Richland County Solid Waste Disposal Facilities Revenue
Series 1991 B (Union Camp Corp.) 7.125% 9/01/21... 5,000 5,346
*South Carolina Housing Finance Agency Single Family Mortgage
Revenue Series C 7.750% 7/01/22................... 4,775 4,979
-------
18,095
SOUTH DAKOTA (3.1%)
Heartland Consumers Power District Electric Revenue Refunding
(FSA Insured) 6.000% 1/01/17...................... 8,000 8,200
*South Dakota Student Loan Assistance Corp. Student Loan Revenue
Series B 7.450% 8/01/00........................... 9,820 10,365
-------
18,565
TENNESSEE (1.7%)
*Tennessee Housing Development Agency (Homeownership Project)
7.300% 7/01/11.................................... 10,000 10,289
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
TEXAS (7.0%)
Brazos River P.C.R. (Monsanto Co.) V.R.D.B. 3.200%... $ 1,400 $ 1,400
*Harris County Industrial Development Corp. P.C.R. (Exxon Corp.)
V.R.D.B. 3.800%................................... 100 100
Houston Water & Sewer Systems Revenue Refunding (AMBAC
Insured):
Zero Coupon (Effective Yield 6.800%) 12/01/08... 4,000 2,001
Zero Coupon (Effective Yield 6.8125%) 12/01/09.. 4,000 1,868
Zero Coupon (Effective Yield 6.850%) 12/01/10... 3,750 1,643
Sabine River Authority P.C.R. (Southwestern Electric Power
Company) Series 1986 8.200% 7/01/14............... 6,000 6,120
Southwestern Higher Education Authority (Southern Methodist
University) L.O.C. Morgan Guaranty V.R.D.B. 3.800% 400 400
Texas G.O. Veteran's Welfare Fund (Escrowed in U.S. Treasury
Securities) (pre-refunded to 12/01/99) 8.300% 12/01/16 15,275 17,065
Texas Municipal Power Agency Revenue Refunding
Zero Coupon (Effective Yield 6.900%) 9/01/08 (AMBAC Insured) 1,475 748
Zero Coupon (Effective Yield 6.050%) 9/01/13 (MBIA Insured) 14,000 5,127
Texas T.R.A.N. Series A 4.750% 8/30/96............... 4,575 4,584
*Travis County Housing Finance Agency Single Family Mortgage
(collateralized by Government National Mortgage Association
Securities) (FGIC Insured) 8.000% 9/01/10......... 1,350 1,414
-------
42,470
VERMONT (0.2%)
*Vermont Housing Finance Agency Single Family Mortgage
Revenue Series A 8.150% 5/01/25................... 1,095 1,152

VIRGINIA (0.5%)
*Campbell County I.D.A. (Hadson Power L.O.C. Barclays Bank)
V.R.D.B. 3.900%................................... 400 400
Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,709
-------
3,109
WASHINGTON (5.7%)
*Port of Longview Industrial Development Corporation Solid Waste
Disposal Revenue (Weyerhaeuser Company) 6.875% 10/01/08 8,250 9,036
Washington G.O.
5.750% 9/01/10 Refunding Series R................. 3,000 3,045
6.000% 6/01/13 Series B........................... 7,280 7,520
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 3,093
Zero Coupon (Effective Yield 6.950%) 7/01/08 Series B
(Nuclear Project #3)............................ 7,000 3,380
6.300% 7/01/12 Series 1992 A (Nuclear Project #2). 3,500 3,599
6.500% 7/01/18 Series 1991 C (Nuclear Project #3). 5,000 5,138
-------
34,811
WISCONSIN (1.4%)
Wisconsin G.O. Series G (Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/01/99) 6.750% 5/01/11.......... 5,000 5,346
Wisconsin Housing and Economic Development Authority Revenue
7.750% 9/01/10.................................... 2,985 3,144
-------
8,490
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
WYOMING (0.1%)
Green River P.C.R. (Rhone-Poulenc Inc. L.O.C. Banque National
of Paris)
V.R.D.B. 3.700%................................. $800 $ 800
TOTAL MUNICIPAL SECURITIES (99.9%)
(Amortized Cost $576,318)...................................... 606,048
OTHER ASSETS, LESS LIABILITIES (0.1%)............................. 311
--------
TOTAL NET ASSETS (100.0%)......................................... $606,359
========
<FN>
* These securities are subject to Alternative Minimum Tax. At June 30, 1996,
these securities represented 25.4 percent of net assets.
** This security is subject to contractual or legal restrictions on its
resale. At June 30, 1996, the value of this security represented 0.2 percent
of net assets.

See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
High-Yield Municipals Fund
Investments as of June 30, 1996
(Dollar Amounts In Thousands)
<CAPTION>
Principal Market
MUNICIPAL SECURITIES (97.9%) 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 $ 2,677

CALIFORNIA (2.4%)
Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue Sr. Lien Series 1995 A 6.500% 1/01/32..... 2,000 1,995
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/23.................................... 5,000 4,649
-------
6,644
COLORADO (7.6%)
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)....... 325 494
11.250% 9/01/11 (pre-refunded to 9/01/10)....... 360 554
11.250% 9/01/11................................. 220 341
11.250% 9/01/12................................. 1,440 2,254
Arapahoe County Capital Improvement Highway Revenue
7.000% 8/31/26.................................... 7,000 7,273
**Briargate Public Building Authority Landowner's Assessment
Lien Revenue
10.250% 12/15/00 Series 1985 A.................. 500 350
9.500% 12/15/07 Series 1986 A................... 1,781 1,246
Colorado Health Facilities Authority Revenue
7.250% 4/01/11 (Birchwood Manor Apartments) (collateralized
by Government National Mortgage Association Securities) 705 741
8.500% 2/15/21 Series B (PSL Health Systems) (Escrowed in
U.S. Treasury Securities) (pre-refunded to 2/15/01) 3,250 3,787
*Denver City and County Airport Revenue Series D
7.750% 11/15/21................................... 4,000 4,417
-------
21,457
FLORIDA (1.0%)
***Florida Housing Finance Agency Multi-Family
Housing Revenue (Palm-Aire) 10.000% 1/01/20....... 2,835 1,842
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% 7/01/11 775 887
*St. Lucie County Solid Waste Disposal Revenue (Florida Power &
Light Co.) V.R.D.B. 3.800%........................ 200 200
-------
2,929
GEORGIA (4.9%)
*Cartersville Development Authority Water and Wastewater Facilities
Revenue (Anheuser Busch) 7.375% 5/01/09........... 5,000 5,786
Hapeville Development Authority I.D.R. (Hapeville Hotel Ltd.
L.O.C. Deutsche Bank) V.R.D.B. 3.600%............. 1,600 1,600
Municipal Electric Authority of Georgia Power Revenue
6.600% 1/01/18.................................... 6,065 6,478
-------
13,864
IDAHO (1.2%)
*Idaho Housing Agency Single Family Mortgage Revenue Series B
(FHA Insured) 7.500% 7/01/24...................... 3,355 3,475
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
ILLINOIS (2.7%)
Chicago Skyway Toll Bridge Revenue Series 1994
6.750% 1/01/17.................................... $ 1,500 $ 1,524
***Illinois Development Finance Authority (Catholic Charities
Housing Development) 5.950% 1/01/09............... 1,400 1,331
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 7/01/03) 2,595 2,914
7.000% 2/15/22 Series 1992 (Edward Hospital Association) 685 714
Illinois Housing Development Authority Multi-Family Housing
Series C 7.400% 7/01/23........................... 140 145
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.)
3.800% V.R.D.B. Series 1991....................... 100 100
3.800% V.R.D.B. Series 1992....................... 700 700
3.800% V.R.D.B. Series 1995....................... 200 200
-------
7,628
INDIANA (13.0%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 4,000 4,387
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16.................. 4,500 4,529
*Indianapolis Airport Authority Revenue Special Facilities
7.100% 1/15/17 (Federal Express Corp.)............ 5,000 5,255
6.500% 11/15/31 (United Airlines)................. 7,000 6,840
**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
(Escrowed in U.S. Treasury Securities) 6.700% 1/01/17 8,900 9,800
**New Castle Economic Development Revenue (Raintree Square
Project)
8.650% 4/01/17 Series 1988 A (FHA Insured)........ 2,860 3,177
*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
-------
36,857
IOWA (1.3%)
Iowa Housing Finance Authority Single Family Housing Revenue
Zero Coupon (Effective Yield 10.264%) 9/01/16..... 36,870 3,803

KANSAS (0.7%)
CSJ Health Systems of Wichita Revenue 7.000% 11/15/18 2,000 2,064

LOUISIANA (3.0%)
*De Soto Parish Environmental Impact Revenue (International
Paper Co.) Series A 7.700% 11/01/18.............. 2,500 2,799
Lake Charles Harbor & Terminal District P.C.R. (Conoco Inc. gtd.
by E.I. DuPont) V.R.D.B.
3.600%.......................................... 100 100
3.800%.......................................... 1,200 1,200
Louisiana Public Facilities Authority Hospital Revenue (Women's
Hospital Foundation) 7.250% 10/01/22.............. 2,300 2,367
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
LOUISIANA (CONTINUED)
*St. Charles Parish P.C.R (Shell Oil Co.) V.R.D.B.
3.800% Series 1991................................ $ 1,100 $ 1,100
3.800% Series 1992 A.............................. 900 900
3.800% Series 1993................................ 100 100
-------
8,566
MASSACHUSETTS (3.9%)
Massachusetts Bay Transportation Authority Refunding Series B
6.200% 3/01/16.................................... 5,825 6,102
Massachusetts Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institution) 6.250% 12/01/22.. 4,000 3,996
*Massachusetts Housing Finance Agency Series A 9.000% 12/01/18 850 882
-------
10,980
MISSISSIPPI (3.6%)
Adams County Hospital Revenue (Jefferson Davis Memorial
Hospital) 7.900% 10/01/08......................... 750 809
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A.......................... 750 833
9.875% 12/01/14 Series C.......................... 1,000 1,119
7.300% 5/01/25.................................... 2,000 2,060
Lowndes County Solid Waste Disposal & P.C.R. Refunding
(Weyerhaeuser Company) 6.800% 4/01/22............. 4,995 5,476
-------
10,297
MISSOURI (1.1%)
*St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose
Arena) 7.875% 12/01/24............................ 3,000 3,192

MONTANA (0.4%)
Montana Board of Housing Single Family Mortgage Revenue
(FHA/VA Insured)
7.300% 10/01/17 Series B-1...................... 455 476
*7.500% 4/01/23 Series B-2...................... 500 523
-------
999
NEBRASKA (1.4%)
*Nebraska Higher Education Loan Program Junior Subordinated
Series A-6 6.450% 6/01/18......................... 4,000 3,994

NEVADA (0.8%)
Humboldt County P.C.R. (Idaho Power Company)
8.300% 12/01/14................................... 2,000 2,336

NEW JERSEY (2.5%)
New Jersey Economic Development Authority Revenue
(Winchester Gardens) 8.625% 11/01/25.............. 5,000 4,947
New Jersey Health Care Facilities Financing Authority Revenue
Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,238
-------
7,185
NEW YORK (4.3%)
Erie County Water Authority Revenue Refunding (AMBAC
Insured) Zero Coupon (Effective Yield 7.300%) 12/01/17 660 142
New York City G.O.
7.250% 8/15/07 Series 1996 B...................... 1,000 1,089
5.750% 2/01/14 Series 1996 F...................... 5,720 5,318
*New York City I.D.A. Special Facility Revenue Series 1994 (Terminal
One Group Association L.P. Project) 6.000% 1/1/15. 3,465 3,389
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
NEW YORK (CONTINUED)
Triborough Bridge & Tunnel Authority General Purpose
Revenue Series E 7.250% 1/01/10................... $ 2,000 $ 2,232
-------
12,170
NORTH CAROLINA (1.9%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991 A.................... 1,680 1,731
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities)................................... 3,320 3,643
-------
5,374
OHIO (2.7%)
*Greater Allen County Housing Development Corp. Revenue First
Lien (Steiner-McBride Apartments Project) 10.250% 9/01/03 1,385 1,399
*Ohio Water Development Facilities Authority P.C.R. (Cleveland
Electric Illuminating Company) Mandatory Put
11/01/97 9.750%................................... 5,060 5,267
Oxford Hospital Facilities Revenue Series 1986 (McCullough-Hyde
Memorial Hospital) 8.000% 5/01/17................. 1,000 1,023
-------
7,689
PENNSYLVANIA (12.1%)
Allentown Area Hospital Authority Revenue (Sacred Heart Hospital
of Allentown) 7.500% 7/01/06...................... 3,460 3,672
Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo Edison
Company) 7.625% 5/01/20........................... 4,900 4,874
*Dauphin County I.D.A. Revenue Series A (Dauphin Consolidated
Water Supply General Waterworks Corp.) 6.900% 6/01/24 2,700 2,969
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 1,169
Montgomery County Higher Education & Health Authority Hospital Revenue
(Jeanes Health Systems) (Escrowed in U.S.
Treasury Securities) (Pre-refunded to 7/01/00) 8.750% 7/01/20 3,200 3,707
*Pennsylvania Economic Development Financing Authority
Recycling Revenue Series 1995 A (Ponderosa Fibres Project)
9.250% 1/01/22.................................... 6,000 5,786
*Pennsylvania Economic Development Financing Authority
Resource Recovery Revenue Refunding (Northhampton)
Series 1995 B 6.750% 1/01/07.................... 3,000 2,975
Series A 6.600% 1/01/19......................... 2,000 1,877
Philadelphia Municipal Lease Revenue Refunding Series 1993 D
6.250% 7/15/13.................................... 2,500 2,465
Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in U.S.
Treasury Securities) 7.350% 9/01/04.............. 4,140 4,612
-------
34,106
PUERTO RICO (2.0%)
Puerto Rico Highway & Transportation Authority Highway
Revenue Refunding
6.625% 7/01/12 Series V......................... 2,000 2,120
6.625% 7/01/18 Series T (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/02)..................... 3,200 3,528
-------
5,648
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 2,187
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
SOUTH DAKOTA (1.2%)
*South Dakota Student Loan Assistance Corp.
Student Loan Revenue Series B 7.450% 8/01/00...... $ 3,320 $ 3,504

TENNESSEE (0.7%)
Knox County Health, Educational and Housing Facilities Revenue
(Baptist Health Systems of East Tennessee) 8.600% 4/15/16 2,005 2,100

TEXAS (8.4%)
*Alliance Airport Authority Special Facilities Revenue Series 1991
(American Airlines) 7.000% 12/01/11............... 4,000 4,304
*Bexar County Housing Financing Corp. Revenue Series B
(collateralized by Government National Mortgage Association
Securities) 9.250% 4/01/16........................ 515 535
Harris County Housing Finance Corp. Single Family Housing
Revenue Series 1983 9.625% 3/15/03................ 280 280
*Harris County Industrial Development Corporation P.C.R. (Exxon
Corp.) V.R.D.B. 3.800%............................ 400 400
Montgomery County Health Facilities Development Corp. Hospital
Mortgage Revenue Refunding (Woodlands Medical Center)
8.850% 8/15/14.................................... 2,510 2,692
North Central Health Facilities Development Corporation Hospital
Revenue (Tri-City Health Center) 9.500% 5/01/21... 8,300 7,221
*Port of Bay City Authority Revenue (Hoechst Celanese Corp.)
6.500% 5/01/26................................... 3,000 3,057
Port Corpus Christi Industrial Development Corporation Revenue
Series A (Valero Refining & Marketing) 10.250% 6/01/17 4,280 4,591
*Port of Corpus Christi I.D.C. Sewer and Solid Waste (Citgo Inc.
L.O.C. Banque Nationale de Paris) V.R.D.B. 3.800%. 300 300
*Texas Housing Agency Residential Mortgage Revenue Series D
8.400% 1/01/21.................................... 305 318
-------
23,698
UTAH (0.6%)
*Utah Housing Finance Agency Single Family Mortgage
7.750% 1/01/23 Series B-2 (FHA Insured)........... 605 637
7.550% 7/01/23 Series C-3 (FHA/VA Insured)........ 895 936
-------
1,573
VIRGINIA (2.4%)
*Pittsylvania County I.D.A. Revenue Series A (Multitrade of
Pittsylvania County L.P.)
7.450% 1/01/09.................................. 3,500 3,586
7.550% 1/01/19.................................. 3,100 3,180
-------
6,766
WASHINGTON (6.3%)
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 3,068
Washington G.O. Series B 6.400% 6/01/17.............. 5,000 5,399
Washington Health Care Facilities Authority Revenue (Sacred Heart
Medical Center, Spokane) 6.875% 2/15/12........... 1,500 1,581
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
<S> <C> <C>
WASHINGTON (CONTINUED)
*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 $ 257
Zero Coupon (Effective Yield 7.750%) 7/01/22.... 1,905 274
Zero Coupon (Effective Yield 7.750%) 1/01/23.... 1,905 264
Zero Coupon (Effective Yield 7.750%) 7/01/23.... 1,910 255
Zero Coupon (Effective Yield 7.750%) 1/01/24.... 1,920 247
Zero Coupon (Effective Yield 7.750%) 7/01/24.... 1,910 237
Washington Public Power Supply Systems Revenue (Nuclear
Project #2)
Zero Coupon (Effective Yield 6.888%) 7/01/07.... 6,945 3,602
6.300% 7/01/12 Series 1992 A.................... 2,500 2,571
--------
17,755
WISCONSIN (1.1%)
*Wisconsin Housing and Economic Development Authority
Revenue 7.850% 3/01/24............................ 2,950 3,076

WYOMING (0.9%)
*Green River (Rhone Poulenc Inc. L.O.C. Societe Generale)
V.R.D.B. 3.900%................................... 700 700
Wyoming Community Development Authority Single Family
Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17 1,730 1,809
--------
2,509
TOTAL MUNICIPAL SECURITIES (97.9%)
(Amortized Cost $274,221)...................................... 277,102
OTHER ASSETS, LESS LIABILITIES (2.1%)............................. 5,854
--------
TOTAL NET ASSETS (100.0%)......................................... $282,956
========
<FN>
* These securities are subject to the Alternative Minimum Tax. At June 30,
1996, these securities represented 34.9 percent of net assets.
** Non-income producing securities.
*** This security is subject to contractual or legal restrictions on its
resale. At June 30, 1996, the value of this security represented 0.5 percent
of net assets.

See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Balance Sheets
June 30, 1996
(Amounts In Thousands, except per-share amounts)
<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 ................................. $ -- $ 207,251 $ 606,048 $ 277,102
Investment in SR&F Municipal Money Market Portfolio,
at value ............................................ 121,462 -- -- --
Receivable for investments sold .............................. -- 1,246 2,250 690
Receivable for fund shares sold .............................. 358 55 121 14
Accrued interest receivable .................................. -- 3,760 11,887 5,591
Cash and other assets ........................................ 311 251 531 588
--------- --------- --------- ---------
Total Assets ........................................ $ 122,131 $ 212,563 $ 620,837 $ 283,985
========= ========= ========= =========
Liabilities
Payable for investments purchased ............................ $ -- $ 7,297 $ 12,998 $ --
Payable for fund shares redeemed ............................. 1,523 -- -- --
Dividends payable ............................................ 104 334 1,124 559
Payable to investment adviser and transfer agent ............. 41 116 330 161
Other liabilities ............................................ 31 90 26 309
--------- --------- --------- ---------
Total Liabilities ................................... 1,699 7,837 14,478 1,029
--------- --------- --------- ---------
Capital
Paid-in capital .............................................. 120,439 197,541 580,713 284,905
Net unrealized appreciation of investments ................... -- 6,615 29,730 2,881
Accumulated net realized gains (losses) on investments ....... (7) 570 (4,084) (4,830)
--------- --------- --------- ---------
Total Capital (Net Assets) .......................... 120,432 204,726 606,359 282,956
--------- --------- --------- ---------
Total Liabilities and Capital ....................... $ 122,131 $ 212,563 $ 620,837 $ 283,985
========= ========= ========= =========
Shares Outstanding (Unlimited Number Authorized) ............. 120,365 18,243 68,507 24,814
========= ========= ========= =========
Net Asset Value (Capital) Per Share .......................... $ 1.00 $ 11.22 $ 8.85 $ 11.40
========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For The Year Ended
June 30, 1996
(Amounts In Thousands)
<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 ................................................... $ 1,322 $ 11,825 $ 38,182 $ 18,755
Tax-exempt interest income allocated from SR&F Municipal
Money Market Portfolio ....................................... 3,759 -- -- --
-------- -------- -------- --------
Total Investment Income ...................................... 5,081 11,825 38,182 18,755
Expenses
Management fees ....................................................... 419 1,220 3,262 1,549
Expenses allocated from SR&F Municipal Money Market Portfolio ......... 298 -- -- --
Transfer agent fees ................................................... 200 300 871 391
Printing and postage .................................................. 61 39 117 72
SEC and state registration fees ....................................... 27 24 22 25
Legal and audit fees .................................................. 21 34 37 56
Accounting fees ....................................................... 27 29 40 31
Trustees fees ......................................................... 22 22 36 29
Custodian fees ........................................................ 10 -- 5 --
Other ................................................................. 43 57 93 213
-------- -------- -------- --------
1,128 1,725 4,483 2,366
Reimbursement of expenses by investment adviser ....................... (194) (227) -- --
-------- -------- -------- --------
Total Expenses ............................................... 934 1,498 4,483 2,366
-------- -------- -------- --------
Net Investment Income ........................................ 4,147 10,327 33,699 16,389
-------- -------- -------- --------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments ............................ (5) 1,659 3,828 180
Net change in unrealized appreciation or depreciation on investments .. -- (459) 864 2,229
-------- -------- -------- --------
Net Gains (Losses) on Investments ............................ (5) 1,200 4,692 2,409
-------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations .................. $ 4,142 $ 11,527 $ 38,391 $ 18,798
======== ======== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Years Ended June 30, 1995 and 1996
(Amounts In Thousands)
<CAPTION>
MUNICIPAL MONEY INTERMEDIATE
MARKET FUND MUNICIPALS FUND
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Operations
Net investment income ................................................... $ 4,655 $ 4,147 $ 10,858 $ 10,327
Net realized gains (losses) on investments .............................. -- (5) (935) 1,659
Net change in unrealized appreciation or depreciation of investments .... -- -- 3,694 (459)
--------- --------- --------- ---------
Net Increase in Net Assets Resulting from Operations ........... 4,655 4,142 13,617 11,527
--------- --------- --------- ---------
Distributions To Shareholders
Dividends from net investment income .................................... (4,655) (4,147) (10,858) (10,327)
--------- --------- --------- ---------
Share Transactions
Subscriptions to fund shares ............................................ 239,238 178,387 65,416 37,532
Investment income dividends reinvested .................................. 4,001 3,663 6,688 6,377
Redemptions of fund shares .............................................. (262,355) (208,317) (100,427) (52,872)
--------- --------- --------- ---------
Net Decrease from Share Transactions ........................... (19,116) (26,267) (28,323) (8,963)
--------- --------- --------- ---------
Net Decrease in Net Assets ..................................... (19,116) (26,272) (25,564) (7,763)
Total Net Assets
Beginning of Period ..................................................... 165,820 146,704 238,053 212,489
--------- --------- --------- ---------
End of Period ........................................................... $ 146,704 $ 120,432 $ 212,489 $ 204,726
========= ========= ========= =========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares ............................................ 239,238 178,387 6,010 3,308
Investment income dividends reinvested .................................. 4,001 3,663 611 562
--------- --------- --------- ---------
243,239 182,050 6,621 3,870
Redemptions of fund shares .............................................. (262,355) (208,317) (9,229) (4,662)
--------- --------- --------- ---------
Net decrease in fund shares ............................................. (19,116) (26,267) (2,608) (792)
Shares outstanding at beginning of period ............................... 165,748 146,632 21,643 19,035
--------- --------- --------- ---------
Shares outstanding at end of period ..................................... 146,632 120,365 19,035 18,243
========= ========= ========= =========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the Years Ended June 30, 1995 and 1996
(Amounts In Thousands)
<CAPTION>
MANAGED HIGH-YIELD
MUNICIPALS FUND MUNICIPALS FUND
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Operations
Net investment income ................................................. $ 37,935 $ 33,699 $ 17,185 $ 16,389
Net realized gains (losses) on investments ............................ (2,748) 3,828 (2,660) 180
Net change in unrealized appreciation or depreciation of investments .. 7,348 864 7,892 2,229
--------- --------- --------- ---------
Net Increase in Net Assets Resulting from Operations ......... 42,535 38,391 22,417 18,798
--------- --------- --------- ---------
Distributions To Shareholders
Dividends from net investment income .................................. (37,935) (33,699) (17,185) (16,389)
--------- --------- --------- ---------
Share Transactions
Subscriptions to fund shares .......................................... 79,659 43,018 61,571 48,888
Investment income dividends reinvested ................................ 21,933 18,841 9,681 9,372
Redemptions of fund shares ............................................ (163,714) (89,922) (103,510) (58,868)
--------- --------- --------- ---------
Net Decrease from Share Transactions ......................... (62,122) (28,063) (32,258) (608)
--------- --------- --------- ---------
Net Increase (Decrease) in Net Assets ........................ (57,522) (23,371) (27,026) 1,801
Total Net Assets
Beginning of Period ................................................... 687,252 629,730 308,181 281,155
--------- --------- --------- ---------
End of Period ......................................................... $ 629,730 $ 606,359 $ 281,155 $ 282,956
========= ========= ========= =========
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares .......................................... 9,297 4,798 5,657 4,256
Investment income dividends reinvested ................................ 2,544 2,106 879 814
--------- --------- --------- ---------
11,841 6,904 6,536 5,070
Redemptions of fund shares ............................................ (19,210) (10,050) (9,536) (5,111)
--------- --------- --------- ---------
Net increase (decrease) in fund shares ................................ (7,369) (3,146) (3,000) (41)
Shares outstanding at beginning of period ............................. 79,022 71,653 27,855 24,855
--------- --------- --------- ---------
Shares outstanding at end of period ................................... 71,653 68,507 24,855 24,814
========= ========= ========= =========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Balance Sheet
(Amounts In Thousands)
<CAPTION>
JUNE 30,
1996
<S> <C>
ASSETS
Investments, at value ................................................$149,374
Receivable for investments sold ...................................... 1,000
Accrued interest receivable .......................................... 1,283
Cash ................................................................. 9
--------
Total Assets ......................................................$151,666
========
LIABILITIES
Payable for investments purchased ....................................$ 8,702
Payable to investment adviser ........................................ --
Other liabilities .................................................... 36
--------
Total Liabilities ................................................. 8,738
--------
Net Assets applicable to investors' beneficial interests .............$142,928
========
<PAGE>
<CAPTION>
Statement of Operations
(Amounts In Thousands)
PERIOD
ENDED
JUNE 30,
1996 (A)
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income ...........................................$4,402
------
EXPENSES
Management fees ...................................................... 290
Audit and legal fees ................................................. 23
Accounting fees ...................................................... 21
Trustees' fees ....................................................... 6
Custodian fees ....................................................... 8
------
Total Expenses .................................................... 348
------
Net Investment Income ................................................$4,054
======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
Statement of Changes in Net Assets
(Amounts In Thousands)
<CAPTION>
PERIOD
ENDED
JUNE 30,
1996 (A)
<S> <C>
OPERATIONS
Net investment income ............................................... $ 4,054
---------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions ....................................................... 241,616
Withdrawals ......................................................... (102,742)
---------
Net Increase from transactions in investors' beneficial
interests ..................................................... 138,874
---------
Net Increase in Net Assets ....................................... 142,928
TOTAL NET ASSETS
Beginning of Period ................................................. --
---------
End of Period ....................................................... $ 142,928
=========
<FN>
(a) The Portfolio commenced operations September 28, 1995.

See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
Notes To Financial Statements

NOTE 1. 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 $24,119 in securities and other assets, 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 June 30,
1996, Stein Roe Municipal Money Market Fund and Colonial Municipal Money
Market Fund owned 85 percent and 15 percent, respectively.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of the Stein Roe
Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe
Managed Municipals Fund, and Stein Roe High-Yield Municipals Fund (the
"Funds"), each a series of the 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). The policies are in conformity with generally accepted accounting
principles. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
<PAGE>
SECURITY VALUATIONS
All securities are valued as of June 28, 1996, the last business day in 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 Portfolio.
Municipal securities of the Portfolio are valued at amortized cost, which
approxi mates market value. This method involves valuing an instrument at cost
on the purchase date and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument and does not take into
account unrealized securities gains or losses. In the event that a deviation
of 1/2 of 1 percent or more exists between the Stein Roe Municipal Money
Market Fund's $1.00 per share net asset value, calculated at amor tized 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 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 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 with its custodian
cash or securities in an amount sufficient to meet the initial margin
requirements. Subsequent payments are made or received by the Fund 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
year ended June 30, 1996.

FEDERAL INCOME TAXES
No provision is made for federal income taxes since each of the Funds elect to
be taxed as "regulated investment companies" and each make such distribu tions
to their shareholders as to be relieved of all federal income taxes under
provisions of current federal tax law. All dividends paid from net investment
income by the Funds constitute tax-exempt interest that is not taxable for
federal income tax purposes; however, a portion of the dividends paid
may be includable in the alternative minimum tax calculation.

<PAGE>

The Funds intend to utilize provisions of the federal income tax laws,
which allow them to carry a realized capital loss forward up to eight years
following the year of the loss, and offset such losses against any future
realized gains. At June 30, 1996, the Funds had capital loss carryforwards as
follows:
YEAR OF
FUND AMOUNT EXPIRATION
Managed
Municipals $2,457 2003-2004
High-Yield
Municipals 3,458 2003-2004

DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly.
Capital gain distributions, if any, are distributed annually. Distributions in
excess of tax basis earnings are reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings that result in temporary
overdistri butions are classified as distributions in excess of net investment
income or net realized gains, and any perma nent differences are reclassified
to paid-in capital. None of the Funds had distri butions in excess of net
investment income or net realized gains for the year ended June 30, 1996.

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 the transaction
date. These securities are subject to market fluctuation during this period.
None of the Funds had when-issued or delayed delivery purchase commitments as
of June 30, 1996. 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. Original issue discounts and premiums on municipal securities of
Intermediate Municipals Fund, Managed Municipals Fund and High-Yield
Municipals Fund are accreated or 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.
<PAGE>
NOTE 3. PORTFOLIO COMPOSITION
The Funds and the 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 the 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 June 30, 1996, investments in these securities for Intermediate
Municipals Fund and Managed Municipals Fund represented 51.0 and 19.5 percent
of the portfolio, respectively. 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 June 30, 1996, 53.1 percent
of the Portfolio was backed by bank letters of credit. See each Fund's or the
Portfolio's schedule of investments for additional information on portfolio
composition and Fund Highlights for each Fund's portfolio quality (unaudited).
Stein Roe Municipal Money Market Fund invests all of its investable assets in
the Portfolio.

NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds and the Portfolio pay a monthly management fee to Stein Roe &
Farnham Incorporated (the "Adviser"), an indirect, majority-owned subsidiary
of Liberty Mutual Insurance Company, for its services as investment adviser
and manager. Prior to the commencement of operations of the Portfolio
(September 28, 1995), the Municipal Money Market Fund paid a management fee to
the adviser of .50 of 1 percent of average daily net assets. Upon commencement
of the Portfolio operations, the investment advisory agreement was replaced
with separate management and adminstrative agreements in which the management
fee for the Portfolio is computed at an annual rate of .25 of 1 percent of
average daily net assets, and the administrative fee for the Fund is computed
at an annual rate of .25 of 1 percent of average daily net assets up to $500
million, .20 of 1 percent of average daily net assets for the next $500
million and .15 of 1 percent thereafter. The management fee for the
Inter-mediate Municipals Fund and High-Yield Municipals Fund are computed at
an annual rate of .60 of 1 percent of the first $100 million of average daily
net assets, .55 of 1 percent of the next $100 million, and .50 of 1 percent
thereafter. For Managed Municipals Fund, the management fee is computed at an
annual rate of .60 of 1 percent of the first $100 million of average daily net
assets, .55 of 1 percent of the next $100 million, .50 of 1 percent of the
next $800 million, and .45 of 1 percent thereafter.
<PAGE>
Effective July 1, 1996, as a result of shareholder vote, the Funds'
investment advisory agreements were replaced by separate administrative and
management agreements. The administrative fee for the Intermediate Municipals
Fund and High-Yield Municipals Fund will be .15 of 1 percent of the first $100
million of average daily net assets, .125 of 1 percent of the next $100
million, and .10 of 1 percent thereafter. The administrative fee for the
Managed Municipals Fund will be .15 of 1 percent of the first $100 million of
average daily net assets, .125 of 1 percent of the next $100 million, .10 of 1
percent of the next $800 million, and .075 of 1 percent thereafter. The
management fee for the Intermediate Municipals Fund and the High-Yield
Municipals Fund will be .45 of 1 percent of the first $100 million of average
daily net assets, .425 of 1 percent of the next $100 million, and .40 of 1
percent thereafter. The management fee for the Managed Municipals Fund will be
.45 of 1 percent of the first $100 million of average daily net assets, .425
of 1 percent of the next $100 million, .40 of 1 percent of the next $800
million, and .375 thereafter. There is no increase in the aggregate fees paid
to the Adviser due to these changes.
The investment advisory agreements of the Intermediate Municipals, Managed
Municipals and High-Yield Municipals Funds and the administration agreement
for the Municipal Money Market Fund provide that the Adviser will reimburse
each of the Funds to the extent that their annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which the
Funds' 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 .70 of 1 percent of average daily net assets. These
expense limitations expire October 31, 1997, subject to earlier termination by
the Adviser on 30 days' notice.
The transfer agent fees of the Funds are paid to SteinRoe Services, Inc.
(SSI), an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. Effective July 3, 1996, SSI entered into an agreement with Colonial
Investors Service Center, Inc., an indirect, majority-owned subsidiary of
Liberty Mutual Insurance Company to act as sub-transfer agent for the Funds.
The Adviser also provides certain accounting services. For the year ended
June 30, 1996, the Municipal Money Market Fund, Intermediate Municipals Fund,
Managed Municipals Fund, High-Yield Municipals Fund and the Portfolio incurred
charges of $27, $29, $40, $31 and $21, respectively, for these services.
Certain officers and trustees of the Trust are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for
Municipal Money Market Fund, Intermediate Municipals Fund, Managed Municipals
Fund, High-Yield Municipals, and the Portfolio for the year ended June 30,
1996, was $22, $22, $36, $29 and $6, respectively. No remuneration was paid to
any other trustee or officer of the Trust.
<PAGE>
NOTE 5. 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 the Portfolio during the year ended
June 30, 1996.

NOTE 6. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales or maturities of
securities, excluding short-term obligations, for the year ended June 30,
1996, were as follows:

FUND PURCHASES SALES
Intermediate Municipals Fund.............. $136,459 $141,707
Managed Municipals Fund................... 243,275 286,004
High-Yield Municipals Fund................ 90,464 91,597
At June 30, 1996, 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:

NET
APPRECIATION DEPRECIATION APPRECIATION
Intermediate Municipals Fund..... $ 6,855 $ 240 $ 6,615
Managed Municipals Fund.......... 31,509 1,779 29,730
High-Yield Municipals Fund....... 11,605 8,724 2,881
<PAGE>
<TABLE>
Financial Highlights
Municipal Money Market Fund

Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
SIX
MONTHS
YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
1986 1987 1988
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................................... $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
Net investment income ..................................................... .041 .040 .021
Distributions from net investment income .................................. (.041) (.040) (.021)
-------- -------- --------
Net Asset Value, End of Period ..................................................... $ 1.000 $ 1.000 $ 1.000
======== ======== ========
Ratio of net expenses to average net assets (a) .................................... 0.60% 0.69% 0.67%*
Ratio of net investment income to average net assets (b) ........................... 4.05% 4.08% 4.25%*
Total return (b) ................................................................... 4.22% 4.11% 4.29%*
Net assets, end of period (000s) ................................................... $251,465 $306,971 $294,116
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1989 1990 1991 1992
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Net investment income .............................................. .056 .054 .046 .032
Distributions from net investment income ........................... (.056) (.054) (.046) (.032)
-------- -------- -------- --------
Net Asset Value, End of Period .............................................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Ratio of net expenses to average net assets (a) ............................. 0.67% 0.67% 0.68% 0.70%
Ratio of net investment income to average net assets (b) .................... 5.57% 5.40% 4.66% 3.19%
Total return (b) ............................................................ 5.74% 5.52% 4.74% 3.25%
Net assets, end of period (000s) ............................................ $254,261 $255,953 $237,403 $199,037
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...................................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Net investment income ............................................ .020 .019 .030 0.031
Distributions from net investment income ......................... (.020) (.019) (.030) (0.031)
-------- -------- -------- --------
Net Asset Value, End of Period ............................................ $ 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%
Ratio of net investment income to average net assets (b) .................. 1.96% 1.88% 2.96% 3.09%
Total return (b) .......................................................... 1.97% 1.90% 3.02% 3.13%
Net assets, end of period (000s) .......................................... $195,887 $165,820 $146,704 $120,432
<FN>
*Annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been 0.72,
0.70, 0.78 and 0.84 percent for the years ended December 31, 1985 and 1986,
and June 30, 1995 and June 30, 1996, respectively.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
<CAPTION>
PERIOD
ENDED
JUNE 30,
1996 (a)
<S> <C>
Ratios to Average Net Assets
Ratio of net investment income to average net assets........ 3.50%*
Ratio of net expenses to average net assets................. 0.30%*
<FN>
*Annualized
(a) The Portfolio commenced operations on September 28, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Intermediate Municipals Fund

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,
1986 1987 1988
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ................................... $ 10.14 $ 10.76 $ 10.37
----------- ---------- ----------
Income From Investment Operations
Net investment income ......................................... 58 .57 .29
Net realized and unrealized gains (losses) on investments ..... .62 (.38) .06
----------- ---------- ----------
Total from investment operations ............................ 1.20 .19 .35
Distributions
Net investment income ......................................... (.58) (.57) (.29)
Net realized gains ............................................ -- (.01) --
In excess of realized gains ................................... -- -- --
----------- ---------- ----------
Total distributions ......................................... (.58) (.58) (.29)
----------- ---------- ----------
Net Asset Value, End of Period ......................................... $ 10.76 $ 10.37 $ 10.43
=========== ========== ==========
Ratio of net expenses to average net assets (a) ........................ 0.80% 0.80% 0.80%*
Ratio of net investment income to average net assets (b) ............... 5.45% 5.47% 5.66%*
Portfolio turnover rate ................................................ 10% 49% 22%**
Total return (b) ....................................................... 12.09% 1.93% 3.45%**
Net assets, end of period (000s) ....................................... $ 104,750 $ 96,143 $ 97,308
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1989 1990 1991 1992
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 10.43 $ 10.50 $ 10.54 $ 10.73
---------- ---------- ----------- -----------
Income From Investment Operations
Net investment income ..................................... .62 .63 .62 .57
Net realized and unrealized gains (losses) on investments . .07 .07 .22 .50
---------- ---------- ----------- -----------
Total from investment operations ........................ .69 .70 .84 1.07
Distributions
Net investment income ..................................... (.62) (.63) (.62) (.57)
Net realized gains ........................................ -- (.03) (.03) (.17)
In excess of realized gains ............................... -- -- -- --
---------- ---------- ----------- -----------
Total distributions ..................................... (.62) (.66) (.65) (.74)
---------- ---------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 10.50 $ 10.54 $ 10.73 $ 11.06
========== ========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.80% 0.80% 0.80% 0.79%
Ratio of net investment income to average net assets (b) ........... 5.96% 5.96% 5.79% 5.23%
Portfolio turnover rate ............................................ 83% 141% 96% 109%
Total return (b) ................................................... 6.85% 6.85% 8.18% 10.31%
Net assets, end of period (000s) ................................... $ 91,304 $ 98,918 $ 118,651 $ 165,401
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 11.06 $ 11.57 $ 11.00 $ 11.16
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income ..................................... .54 .53 .53 .55
Net realized and unrealized gains (losses) on investments . .63 (.39) .16 .06
----------- ----------- ----------- -----------
Total from investment operations ........................ 1.17 .14 .69 .61
Distributions
Net investment income ..................................... (.54) (.53) (.53) (.55)
Net realized gains ........................................ (.12) (.17) -- --
In excess of realized gains ............................... -- (.01) -- --
----------- ----------- ----------- -----------
Total distributions ..................................... (.66) (.71) (.53) (.55)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 11.57 $ 11.00 $ 11.16 $ 11.22
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.72% 0.71% 0.74% 0.70%
Ratio of net investment income to average net assets (b) ........... 4.79% 4.63% 4.94% 4.82%
Portfolio turnover rate ............................................ 96% 55% 67% 66%
Total return (b) ................................................... 10.92% 1.16% 6.59% 5.47%
Net assets, end of period (000s) ................................... $ 245,441 $ 238,053 $ 212,489 $ 204,726
<FN>
* Annualized
** Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement 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 1987, respectively,
0.87 percent for the six months ended June 30, 1988, 0.82, 0.81 and 0.81
percent for the years ended June 30, 1989 through 1991, respectively. For the
expense limitation effective May 1, 1995, this ratio would have been 0.76 and
0.81 percent for the years ended June 30, 1995 and 1996, respectively.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
Managed Municipals Fund

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,
1986 1987 1988
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................................. $ 8.93 $ 9.22 $ 8.50
----------- ----------- -----------
Income From Investment Operations
Net investment income ........................................ .67 .61 .30
Net realized and unrealized gains (losses) on investments .... 1.21 (.59) .11
----------- ----------- -----------
Total from investment operations ........................... 1.88 .02 .41
Distributions
Net investment income ........................................ (.67) (.61) (.30)
Net realized gains ........................................... (.92) (.13) --
In excess of realized gains .................................. -- -- --
----------- ----------- -----------
Total distributions ........................................ (1.59) (.74) (.30)
----------- ----------- -----------
Net Asset Value, End of Period ........................................ $ 9.22 $ 8.50 $ 8.61
=========== =========== ===========
Ratio of net expenses to average net assets (a) ....................... 0.65% 0.65% 0.65%*
Ratio of net investment income to average net assets (b) .............. 7.04% 6.99% 7.03%*
Portfolio turnover rate ............................................... 92% 113% 28%**
Total return .......................................................... 21.70% 0.39% 4.90%**
Net assets, end of period (000s) ...................................... $ 523,947 $ 458,170 $ 467,595
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1989 1990 1991 1992
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 8.61 $ 9.02 $ 8.71 $ 8.85
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income ..................................... .61 .59 .56 .55
Net realized and unrealized gains (losses) on investments . .44 (.06) .19 .46
----------- ----------- ----------- -----------
Total from investment operations ........................ 1.05 .53 .75 1.01
Distributions
Net investment income ..................................... (.61) (.59) (.56) (.55)
Net realized gains ........................................ (.03) (.25) (.05) (.20)
In excess of realized gains ............................... -- -- -- --
----------- ----------- ----------- -----------
Total distributions ..................................... (.64) (.84) (.61) (.75)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 9.02 $ 8.71 $ 8.85 $ 9.11
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.65% 0.66% 0.66% 0.64%
Ratio of net investment income to average net assets (b) ........... 7.00% 6.66% 6.39% 6.17%
Portfolio turnover rate ............................................ 102% 95% 203% 94%
Total return ....................................................... 12.69% 6.15% 8.92% 11.95%
Net assets, end of period (000s) ................................... $ 514,898 $ 584,081 $ 655,930 $ 725,472
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $ 9.11 $ 9.38 $ 8.70 $ 8.79
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income ..................................... .52 .50 .51 .48
Net realized and unrealized gains (losses) on investments . .42 (.51) .09 .06
----------- ----------- ----------- -----------
Total from investment operations ........................ .94 (.01) .60 .54
Distributions
Net investment income ..................................... (.52) (.50) (.51) (.48)
Net realized gains ........................................ (.15) (.11) -- --
In excess of realized gains ............................... -- (.06) -- --
----------- ----------- ----------- -----------
Total distributions ..................................... (.67) (.67) (.51) (.48)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 9.38 $ 8.70 $ 8.79 $ 8.85
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.64% 0.65% 0.65% 0.72%
Ratio of net investment income to average net assets (b) ........... 5.65% 5.45% 5.85% 5.41%
Portfolio turnover rate ............................................ 63% 36% 33% 40%
Total return ....................................................... 10.79% (0.29%) 7.12% 6.24%
Net assets, end of period (000s) ................................... $ 776,694 $ 687,252 $ 629,730 $ 606,359
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
High-Yield Municipals Fund

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,
1986 1987 1988
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ...................................... $ 11.10 $ 12.06 $ 11.06
----------- ----------- -----------
Income From Investment Operations
Net investment income ........................................... .90 .87 .44
Net realized and unrealized gains (losses) on investments ....... 1.11 (.89) .31
----------- ----------- -----------
Total from investment operations .............................. 2.01 (.02) .75
Distributions
Net investment income ........................................... (.90) (.87) (.44)
Net realized gains .............................................. (.15) (.11) --
In excess of realized gains ..................................... -- -- --
----------- ----------- -----------
Total distributions ........................................... (1.05) (.98) (.44)
----------- ----------- -----------
Net Asset Value, End of Period ............................................ $ 12.06 $ 11.06 $ 11.37
=========== =========== ===========
Ratio of net expenses to average net assets (a) ........................... 0.76% 0.73% 0.76%*
Ratio of net investment income to average net assets (b) .................. 7.77% 8.20% 7.87%*
Portfolio turnover rate ................................................... 34% 110% 53%**
Total return .............................................................. 18.64% (0.16%) 6.89%**
Net assets, end of period (000s) .......................................... $ 225,883 $ 181,600 $ 201,274
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1989 1990 1991 1992
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 11.37 $ 11.97 $ 11.78 $ 11.79
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income .................................... .88 .85 .82 .80
Net realized and unrealized gains (losses) on investments .63 .02 .17 .22
----------- ----------- ----------- -----------
Total from investment operations ....................... 1.51 .87 .99 1.02
Distributions
Net investment income .................................... (.88) (.85) (.82) (.80)
Net realized gains ....................................... (.03) (.21) (.16) (.18)
In excess of realized gains .............................. -- -- -- --
----------- ----------- ----------- -----------
Total distributions .................................... (.91) (1.06) (.98) (.98)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 11.97 $ 11.78 $ 11.79 $ 11.83
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.73% 0.71% 0.71% 0.69%
Ratio of net investment income to average net assets (b) ........... 7.54% 7.22% 7.00% 6.75%
Portfolio turnover rate ............................................ 208% 261% 195% 88%
Total return ....................................................... 13.79% 7.59% 8.79% 9.01%
Net assets, end of period (000s) ................................... $ 277,620 $ 310,582 $ 373,948 $ 410,613
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $ 11.83 $ 11.84 $ 11.06 $ 11.31
----------- ----------- ----------- -----------
Income From Investment Operations
Net investment income .................................... .71 .67 .66 .67
Net realized and unrealized gains (losses) on investments .18 (.54) .25 .09
----------- ----------- ----------- -----------
Total from investment operations ....................... .89 .13 .91 .76
Distributions
Net investment income .................................... (.71) (.67) (.66) (.67)
Net realized gains ....................................... (.17) (.17) -- --
In excess of realized gains .............................. -- (.07) -- --
----------- ----------- ----------- -----------
Total distributions .................................... (.88) (.91) (.66) (.67)
----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................................... $ 11.84 $ 11.06 $ 11.31 $ 11.40
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) .................... 0.73% 0.76% 0.86% 0.85%
Ratio of net investment income to average net assets (b) ........... 6.04% 5.76% 5.98% 5.86%
Portfolio turnover rate ............................................ 75% 36% 23% 34%
Total return ....................................................... 7.88% 0.95% 8.54% 6.83%
Net assets, end of period (000s) ................................... $ 359,103 $ 308,181 $ 281,155 $ 282,956
<FN>
* Annualized
** Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser in connection with the
expense limitation which expired December 31, 1986, this ratio would have been
0.81 percent for the year ended December 31, 1985.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</FN>
</TABLE>
<PAGE>
Report of Independent Auditors

To the Shareholders and Board of Trustees of the Stein Roe Municipal Trust
and SR&F Base Trust

Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
SR&F Municipal Money Market Portfolio

We have audited the accompanying balance sheets, including the schedules of
investments, of Stein Roe Municipal Money Market Fund, Stein Roe Intermediate
Municipals Fund, Stein Roe Managed Municipals Fund, Stein Roe High-Yield
Municipals Fund, and SR&F Municipal Money Market Portfolio as of June 30,
1996, and the related statements of operations for the period then ended and
changes in net assets for each of the two years in the period then ended
(except for SR&F Municipal Money Market Portfolio, as to which the period is
from September 28, 1995 to June 30, 1996), and the financial highlights for
the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Funds' and Portfolio's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals,
Stein Roe Managed Municipals, Stein Roe High-Yield Municipals, and SR&F
Municipal Money Market Portfolio at June 30, 1996, and the results of their
operations, the changes in their net assets, and their financial highlights
for the periods referred to above, in conformity with generally accepted
accounting principals.

Ernst & Young LLP

Chicago, Illinois
August 8, 1996
<PAGE>
Funds for Every Investment Objective

The Stein Roe family of 100 percent no-load mutual funds offers a variety of
funds so you can select the right fund, or combination of funds, to meet your
investment objec tives. Call us at 800-338-2550 for a prospectus and more
complete information on any of the funds, including management fees and
expenses. Please read the pro spectus carefully before you invest or send
money.

MONEY MARKET FUNDS
Money market funds seek to provide income while preserving principal and
maintaining liquidity. These funds offer free check writing.
o Government Reserves Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies and
instrumentalities.*
o Cash Reserves Fund -- Invests in high-quality, short-term money market
securities such as certificates of deposit, banker's acceptances and
commercial paper.*

BOND FUNDS
Bond funds seek high current income by investing pri marily in fixed income
securities.
o Limited Maturity Income Fund -- Invests primarily in U.S. government and
other high-quality debt securities. The dollar -weighted average
effective maturity will not exceed three years.
o Government Income Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies.*
o Intermediate Bond Fund-- Invests primarily in marketable debt securities
with an average life of three to 10 years.
o Income Fund -- Pursues a higher level of current income by investing
primarily in medium- and lower-quality bonds.

TAX-EXEMPT FUNDS
These funds help investors keep more of their earnings by investing in
instruments that earn income free from federal income tax. Income may be
subject to federal alternative minimum tax and state and local taxes; capital
gains are subject to state, local and federal taxes.
o Municipal Money Market Fund -- Seeks to provide the liquidity and
stability of a money market fund plus current tax-free income. Free
check writing available.*

*Money market mutual funds strive to maintain a $1 per share net asset value,
but there is no assurance that the fund will be able to maintain a stable net
asset value. The net asset value of a fund that invests in securities issued
or guaranteed by the U.S. government is not guaranteed.
<PAGE>
o Intermediate Municipals Fund -- Seeks high current yield through
investments primarily in the three highest grades of intermediate-term
municipal securities.
o Managed Municipals Fund -- Pursues high tax-free income by investing in a
quality-conscious portfolio of long-term municipal bonds.
o High-Yield Municipals Fund -- Seeks a higher level of tax-free income
from long-term municipal securities, primarily of medium or lower
quality.

GROWTH AND INCOME FUNDS
These funds seek to provide a conservative investment that is well positioned
for long-term growth and current income. Each fund's approach is designed to
limit the effects of market volatility.
o Balanced Fund +-- Seeks long-term growth of capital and current income
consistent with reasonable investment risk by investing in equities, debt
securities and cash equivalents.
o Growth & Income Fund -- Pursues income and long-term capital growth by
investing primarily in large, well-established companies.

GROWTH FUNDS
Growth funds offer long-term capital appreciation potential by investing
primarily in various types of stocks.
o Growth Stock Fund -- Pursues long-term capital appreciation from stocks
with strong growth potential.
o Special Fund -- Invests in securities believed to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, under followed or out-of-favor companies.
o Special Venture Fund -- Seeks capital appreciation through equity
securities of entre preneurially managed companies.
o Young Investor Fund -- Invests in securities of companies that affect the
lives of children or teenagers.
o Capital Opportunities Fund -- Takes a long-term approach to emerging
growth by selecting quality companies with the potential to generate high
levels of earnings growth over a three- to five-year period.
o International Fund -- Invests in a diversified portfolio of foreign
securities.

+Formerly Total Return Fund; name and investment objective change effective
April 17, 1996.
<PAGE>
To Contact Us. . .

BY PHONE 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
Stein Roe account, including Stein Roe 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 prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:

o Exchange shares between your Stein Roe accounts;
o Purchase shares by electronic transfer;
o Order additional account statements and money market
fund checks;
o Redeem shares by check, wire or electronic transfer.

RETIREMENT PLAN ACCOUNTS
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130.
For information on IRA plans, call us toll free at 800-338-2550.

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 --
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 infor mation 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.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer, United Airlines
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
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
Ann H. Benjamin, Vice President
Thomas W. Butch, Vice President
Philip J. Crosley, Vice President
Philip D. Hausken, Vice President
Michael T. Kennedy, Vice President
Steven P. Luetger, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Jane M. Naeseth, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Cynthia A. Prah, Vice President
Thomas P. Sorbo, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary

AGENTS AND ADVISERS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Ernst & Young LLP
Independent Auditors
<PAGE>
Logo: Stein Roe
Stein Roe Mutual Funds
Building Wealth for Generations (sm)

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 Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Young Investor Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund

P.O. Box 8900
Boston, Massachusetts 02205-8900
800-338-2550
In Chicago, visit our Fund Center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member SIPC. 7/96

TE11A