STEIN ROE MUNICIPAL TRUST, N-30D, 1997-02-27

STEIN ROE MUNICIPAL TRUST
N-30D, 1997-02-27

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STEIN
ROE

TAX-EXEMPT BOND
FUNDS

MUNICIPAL MONEY MARKET FUND
INTERMEDIATE MUNICIPALS FUND
MANAGED MUNICIPALS FUND
HIGH-YIELD MUNICIPLAS FUND

SEMIANNUAL REPORT
DECEMBER 31, 1996

Stein Roe Mutual Funds
Building Wealth For Generations(sm)

<PAGE>

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

Fund Performance.................................................. 3
How the Stein Roe tax-exempt bond funds have done over time

Q&A
Municipal Money Market Fund....................................... 7
Intermediate Municipals Fund ..................................... 10
Managed Municipals Fund .......................................... 14
High-Yield Municipals Fund ....................................... 16
Interviews with the portfolio managers and a
summary of investment activity over the past six months

Investments....................................................... 20
A complete list of investments with market values

Financial Statements.............................................. 44
Balance sheets, statements of operations
and changes in net assets

Notes to Financial Statements..................................... 54

Financial Highlights.............................................. 60
Selected per-share data

General Information............................................... 68

Must be accompanied or preceded by a prospectus.

<PAGE>

From the President
- -----------------------------------------------------------------------------
To Our Shareholders

We are pleased to present this semiannual 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.

Mixed Signals

Once again, concern about the direction of interest rates was probably the
biggest influence on bond fund performance over the past six months. Despite
the fact that most of the rise in interest rates actually took place in the
first quarter of 1996 -- with long-term rates rising quite dramatically in
February and March -- investors were never able to overcome their uneasiness
about which direction interest rates were actually headed.

By late October, however, things were starting to look up for the bond
market. Following robust second-quarter GDP growth of 4.8 percent, the economy
suddenly looked weaker, prompting many to think the Federal Reserve's next
move actually might be a rate cut. At the same time, foreign investors --
particularly the Japanese -- were starting to buy Treasuries. There was even
renewed talk of a possible budget deal, which held out promise for lower
long-term interest rates.

Then, in early December, the good news dried up. First, Federal Reserve
Chairman Alan Greenspan's now infamous "irrational exuberance" comment left
many bond traders once again fearing a possible rate hike. Next, foreign
buyers started to cut back on their purchases of U.S. government securities,
crimping liquidity and depriving the market of a key source of demand.
Finally, year-end trading sent the bond markets reeling, as investors pushed a
glut of fixed income issues onto the market, while potential buyers --
figuring they had little to gain and a lot to lose by venturing into a shaky
market -- stood on the sidelines.

The Next Move For Interest Rates Is...

In the end, however, even the release of surprisingly upbeat news on housing,
consumer confidence and manu facturing wasn't enough to convince the Federal
Reserve to raise interest rates at its December 17 meeting -- its last of
1996. And although the economic signposts have pointed all over the place
since then, the general con sensus is that economic growth will slow in the

Photo of: Tim Armour, President

<PAGE>

coming months. This could help to ease inflation worries and resolve many of
the conflicts that have plagued bond investors over the past year.

Maybe This Year

Although it was difficult for bonds to garner any attention at all in a
year when stocks ruled Wall Street, we think things could change in 1997. In
fact, it appears that the scale may be starting to tilt in favor of bonds.

That's because we think revenue growth for some U.S. companies will likely
slow with the economy. At the same time, many companies will have to absorb
rising unit labor costs without raising prices. As a result, profit margins
could fall by as much as half a point. While it's unlikely that such a margin
squeeze would cause an outright decline in corporate profits, it could rein in
earnings growth and, thus, stock market returns. As a result, we think the
inflation-adjusted rate of return on many bonds looks fairly attractive.
What's more, if a number of companies were to report lower-than-expected
earnings, it could, in turn, cause increased stock market volatility or even a
market correction, making bond returns look even more competitive.

Another good reason to consider bond funds now: After the long bull run in
equities, many investors' portfolios seem to be out of whack, with a
disproportionate percentage in stock funds and precious little in bond funds.
In fact, the ICI reported that cash flow into bond funds equaled just 5
percent of the money invested in stock funds during 1996. That means this
could be a good time to realign your portfolio. So, whether your goal is
income, preservation of principal or strong and steady returns, we think bonds
could be important to ensuring a rational level of diver sification in your
investment portfolio.

The Basics

Although no one can predict what might happen to 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. As always, no matter what direction you think the economy is
heading, it's important to remember the basics. Think long term and re-evaluate
your investment portfolio to make sure it continues to match your goals,
risk tolerance and time horizon.

Please call us at 800-338-2550 with your comments and suggestions. As
always, we look forward to serving your investment needs.

Sincerely,

/s/ Timothy K. Armour

Timothy K. Armour
President
January 28, 1997

<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).

Average Annual Total Returns
Periods ended December 31, 1996

PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
-----------------------------------------

MUNICIPAL MONEY MARKET FUND 3.00% 2.87% 2.57% 3.70%

INTERMEDIATE MUNICIPALS FUND 4.19 4.37 6.32 6.58

Lehman 10-Year
Municipal Bond Index 4.54 5.27 7.46 7.82

Lehman 7-Year
Municipal Bond Index 4.36 5.02 6.69 --

MANAGED MUNICIPALS FUND 3.80 4.62 6.65 7.35

HIGH-YIELD MUNICIPALS FUND 4.51 5.68 6.59 7.48

Lehman Municipal Bond Index 4.43 5.17 7.28 7.80

<FN>
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. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. 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.
</FN>
</TABLE>
<PAGE>

Investment Comparison
- ------------------------------------------------------------------------------

COMPARISON of change in value of a $10,000 investment for the years ended June
30 and the period ended December 31, 1996.

Intermediate Lehman 10-Year Municipal
Municipals Fund Bond Index

6/30/86 10000 10000
1987 10645 11025
1988 11242 11787
1989 12012 12920
1990 12835 13893
1991 13885 15118
1992 15317 16830
1993 16990 18948
1994 17187 19135
1995 18320 20814
1996 19320 22143
12/31/96 20158 23228

Managed Lehman Municipal
Municipals Fund Bond Index

6/30/86 10000 10000
1987 10766 10863
1988 11576 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
12/31/96 22354 23093

<FN>
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. These
graphs compare the performance of the Stein Roe 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.
</FN>
</TABLE>
<PAGE>

Investment Comparison CONTINUED
- -------------------------------------------------------------------------------
COMPARISON of change in value of a $10,000 investment for the years ended June
30 and the period ended December 31, 1996.

High-Yield Lehman Municipal
Municipals Fund Bond Index

6/30/86 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 20332 22014
12/31/96 21377 23093

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, their returns tend to be less
volatile than stock funds' returns. Nonetheless, bond funds' 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 downturn in the market, you might lose money.
But, if you can ride out the market's ups and downs, your fund might
achieve a gain.

No one can make your financial decisions better than you. We hope
this 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

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:
$121.4 million

Q: How did the Fund perform?

A: With a 1.50 percent return for the six months ended December 31, 1996,
Municipal Money Market Fund outpaced the 1.46 percent median return of its
Lipper tax-exempt money market fund peer group. The Fund's seven-day current
tax-exempt yield was 3.36 percent -- that translates into a tax-equivalent
yield of 5.56 percent for investors in the 39.6 percent tax bracket.

Q: What factors affected performance?

A: As the second half of the year began, investors were convinced that the
Federal Reserve would raise interest rates in the third quarter. When it
became clear in late September that the Federal Reserve was going to hold
rates steady, the higher yields built into the market disappeared. Just prior
to the September meeting, yields on one-year notes were especially attractive,
so we added to our holdings. These purchases helped boost the Fund's
performance because yields remained in a narrow range through year end.

The Portfolio's heavier weighting of variable rate demand notes also had a
positive effect on performance. In typical year-end fashion, securities
dealers offered higher rates on short-term securities in order to reduce the
amount of inventory they carry into the new year. The Fund's seven-day current
yield on December 31 reflects these higher yields.

Photo of: Veronica Wallace

Q: There has been considerable uncertainty over the strength of the economy
and the Federal Reserve's next interest rate move. How is this affecting your
strategy for the Portfolio?

A: Under these circumstances we maintained a relatively neutral maturity
position. On June 30, average maturity was 53 days. Purchases of one-year
notes in July lifted average maturity to as high as 63 days at one point in

<PAGE>

the second half of the year. It had dropped to 54 days on December 31,
however, since attrition shortened our longer positions and we avoided
purchasing longer-maturity securities.

Put bonds that came due during the fourth quarter offered low reinvestment
rates. As a result, rather than reinvesting in them, we reallocated those
assets to other tax-exempt bonds having maturities of less than one year.

We also increased the Portfolio's already substantial weighting in variable
rate notes. As of December 31, these represented nearly 65.2 percent of total
net assets. Because yields on variable rate notes are free to move with
interest rates, these securities tend to offer the best relative value when
the interest rate outlook is unclear.

Q: What's your outlook for the Portfolio?

A: As long as the economy continues to send mixed signals, we will maintain a
"wait-and-see" attitude. If growth slows and inflation remains moderate, our
economists believe we may see a Federal Reserve easing in the months ahead.
Economic reports, however, are still too conflicting to reallocate assets in
anticipation of such a move. Therefore, we plan to maintain a neutral maturity
position that will help us respond quickly to changes in interest rates. We
plan to keep a majority of the Portfolio in daily and weekly variable rate
notes, while looking for opportunities to purchase longer-maturity securities
at attractive yields.

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 December 31, 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 for 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 to the Fund. Absent past limits,
the seven-day current tax-free and tax-equivalent yields at December 31, 1996,
would have been 3.21 percent and 5.41 percent, respectively, and total return
would have been less. An investment in the Fund is neither insured nor
guaranteed by the U.S. government, and there is no assurance that the Fund
will be able to maintain its stable net asset value of $1 per share. According
to Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance, the median returns for the Fund's tax-exempt money market fund
peer group for the one-, five- and 10-year periods ended December 31, 1996,
were 2.95 percent, 2.60 percent and 3.76 percent, respectively.

Portfolio Highlights
- -------------------------------------------------------------------------------
Municipal Money Market Portfolio

Security Type Breakdown

PORTFOLIO PORTFOLIO
JUNE 30, 1996 DECEMBER 31, 1996
-------------------------------------

General Obligation 7.9% 1.9%
Revenue:
Industrial 17.6 19.1
Utility 16.3 15.1
Other Revenue 13.5 18.3
Housing 8.7 9.5
Steel/Metal 6.6 6.9
Hospital 5.6 4.7
Airport/Port 2.6 2.8
Student Loan 2.1 2.2
Waste Disposal 1.6 0.7
Oil 1.6 2.2
Education -- 1.6
Electric -- 0.3
Escrowed 0.7 0.2
Other 15.2 14.5
--------------------------------------
Total 100.0% 100.0%
- ---------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

pie charts:
Maturity

As of June 30, 1996 As of December 31, 1996

0-29 Days 67.1% 66.2%
30-59 Days 12.7% 7.9%
60-89 Days 4.4% 2.4%
90-179 Days 5.4% 5.3%
180-375 Days 10.4% 18.2%

</TABLE>
<PAGE>

Q&A
- -------------------------------------------------------------------------------
An Interview with Joanne Costopoulos,
Portfolio Manager of Intermediate Municipals Fund

Fund Data

Investment Objective:

Seeks high current yield exempt from federal income tax, consistent with
capital preservation, through investments primarily in the three highest
grades of intermediate-term municipal securities. The dollar-weighted
average maturity of the Fund's portfolio is between three and 10 years.

Fund Inception:
October 9, 1985

Total Net Assets:
$201.7 million

Q: How did the Fund perform?

A: For the six-month period ended December 31, 1996, the Fund posted a total
return of 4.34 percent, outdistancing the 3.91 percent median return of its
Lipper intermediate municipal debt fund peer group. The Fund's 30-day
standardized yield at December 31, 1996, was 4.28 percent. That translates
into a tax-equivalent yield of 7.09 percent for investors in the 39.6 percent
tax bracket.

We trailed the 4.90 percent return of the Lehman 10-Year Municipal Bond
Index primarily because the Fund customarily maintains a shorter duration,
shorter maturity and higher-quality portfolio than the Index. The Lehman
10-Year Municipal Bond Index tends to have an average maturity of eight to 12
years and a duration that averages roughly seven. 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 perform
ance for a similar maturity profile, such as the Lehman 7-Year Municipal Bond
Index. Intermediate Municipals Fund's six-month performance compares more
favorably with the 4.28 percent return of the Lehman 7-Year Municipal
Bond Index.

Photo of: Joanne Costopoulos

Q: What factors affected the Fund's performance?

A: Lower interest rates and low cash flows muted activity in the intermediate
municipal market and the Fund. As a result, money from maturing bonds that
normally would be reinvested in the municipal market headed to the equity
market.

Throughout the year, issuers took advantage of lower interest rates to

<PAGE>

refinance older debt. In fact, several of the Fund's longer-maturity holdings
have been prerefunded to their first call dates. As a result, the Fund's
weighting of escrowed bonds increased from 6.4 percent of total net assets on
January 1 to 9.5 percent on December 31. We tend to hold onto these bonds
because once they are prerefunded they are escrowed in U.S. Treasuries,
insulating them from the credit risks associated with the issuer.
Consequently, the Fund's overall credit quality improves, average maturity
decreases and some price appreciation occurs.

Q: How has your strategy changed in the last six months?

A: Given uncertainty over the direction of interest rates, we made adjustments
designed to help lower the Fund's potential volatility. We improved credit
quality through relative value swaps and shortened duration to take on a more
neutral positioning.

Adjusting duration is one way we can manage the Fund's response to market
uncertainty. Keep in mind that weighted average adjusted duration is an
expression of a bond's sensitivity to interest rate changes. As a rule of
thumb, if a bond has a duration of five years and interest rates fall by 1
percent, the bond's price should rise by approximately 5 percent. We lengthen
or shorten the Fund's duration based on our outlook for the direction of
interest rates.

During the first half of the year we anticipated lower interest rates and,
at times, had a weighted adjusted duration as high as 6.3. On December 31,
however, it was at 5.8, reflecting a more neutral position.

Q: What are your expectations for the coming months?

A: We believe interest rates will remain stable or decrease somewhat in the
near term as inflationary pressures remain subdued and economic activity
slows. Given the high percentage of noncallable bonds we hold -- 79 percent of
total net assets on December 31 -- we think the Fund is positioned to perform
well in a lower interest rate environment. That's because noncallable bonds
help provide both call protection and appreciation potential as rates fall. We
think that municipal securities may outperform their taxable counterparts in
the first quarter of 1997 as supply becomes manageable and demand increases.

<PAGE>

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 December 31, 1996, would have been 4.13
percent and 6.94 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 composition of 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 December 31, 1996, were 3.72 percent, 5.98 percent and 6.59 percent,
respectively.

Fund Highlights
- ---------------------------------------------------------------------------------
Intermediate Municipals Fund

Security Type Breakdown

PORTFOLIO PORTFOLIO
JUNE 30, 1996 DECEMBER 31, 1996
-----------------------------------

General Obligation 27.2% 23.3%
Revenue:
Water & Sewer 13.6 10.9
Electric 8.0 7.1
Hospital 6.6 7.1
Airport 5.6 5.9
Taxes 2.0 5.0
Toll 4.4 3.9
Solid Waste 4.1 3.5
Colleges, Universities 1.1 3.5
Student Loan 2.9 2.9
Other Revenue 10.2 11.4
Escrowed 7.0 9.5
Pollution Control 7.3 6.0
-----------------------------------
Total 100.0% 100.0%
- ---------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

pie charts:
Maturity

As of June 30, 1996 As of December 31, 1996

Less than 1 Year 5.8% 1.9%
1-5 Years 13.2% 19.4%
5-10 Years 50.0% 46.0%
10-15 Years 17.6% 21.2%
Greater than 15 Years 13.4% 11.5%
- ---------------------------------------------------------------------------------------------

Portfolio Quality

As of June 30, 1996 As of December 31, 1996

AAA 63.9% 66.5%
AA 13.6% 9.4%
A 16.2% 14.5%
BBB 6.3% 9.6%

</TABLE>
<PAGE>

Q&A
- -------------------------------------------------------------------------------
An Interview with Jane McCart, Portfolio Manager of
Managed Municipals Fund and High-Yield Municipals Fund

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:
$614.7 million

- ---------------------------
Managed Municipals Fund Q&A

Q: How did the Fund perform?

A: With a 5.29 percent return for the six months ended December 31, 1996,
Managed Municipals Fund surpassed both the 4.74 percent return of the Lipper
general municipal debt fund peer group, and the 4.90 percent return of the
Lehman Municipal Bond Index.

As of December 31, the Fund's 30-day standardized yield was 4.87 percent --
that translates into a tax-equivalent yield of 8.06 percent for an investor in
the 39.6 percent tax bracket.

Q: What drove the Fund's performance?

A: The Fund benefited once again from our holdings of noncallable bonds as
investor demand for this structure remained strong. As the name implies,
noncallable bonds cannot be called out of the market. Because their price
movement is not obstructed by call features, it means they can offer increased
appreciation potential in a strong market. We've been emphasizing a
noncallable theme for several years and we plan to continue adding to our
holdings when we see opportunities.

Photo of: Jane McCart

Q: What has been your strategy during the last six months?

A: With flows into the municipal markets remaining at low levels, we continued
to focus on relative value trades to take advantage of tightening yield
spreads between securities of different credit quality. We found several
opportunities for additional yield potential without taking undue risk. For
example, we restructured some of our holdings by swapping bonds that were
becoming current coupon bonds for discount bonds. We believe that discount
bonds may perform well in 1997. That's because they trade at a discount to

<PAGE>

face value, which means they tend to offer quicker appreciation potential than
other bonds if interest rates fall.

Q: Where are you finding investment opportunities now?

A: We believe promising opportunities exist in the electric utility industry,
which is being deregulated. Electric utilities have experienced some credit
quality deterioration because several states haven't handled deregulation as
well as others. While the industry may be slightly out of favor, we believe
careful credit analysis can reward disciplined investors.

We believe a similar story is emerging in the health care industry. After
several years of mergers and acquisitions, it now appears we've seen the bulk
of the consolidation. Having seen some credit improve-ment, we're cautiously
upbeat about the industry's prospects.

Q: What's your outlook?

A: With more modest returns expected from the stock market, we think investor
sentiment may begin shifting somewhat to the municipal market. We believe the
Fund is well positioned for a slowing economy and a possible Federal Reserve
interest rate reduction. Should this happen, the high percentage of
noncallable issues held by the Fund -- approximately 42 percent of total net
assets on December 31 -- helps provide both call protection and appreciation
potential. We plan to extend shorter noncallable positions as opportunities
arise.

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 December 31, 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 for the
39.6 percent tax bracket, which applies to investors with incomes higher than
$263,750 per year. Tax-free income is exempt from most federal taxes, but may
be subject to state and local taxes and federal alternative minimum tax.
Capital gains are subject to federal, state and local taxes. The Lehman
Municipal Bond Index is an unmanaged group of municipal bonds that differs
from the composition of the Fund; it is not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of
mutual fund performance, the median returns for the Fund's general municipal
debt fund peer group for the one-, five- and 10-year periods ended December
31, 1996, were 3.43 percent, 6.83 percent and 7.22 percent, respectively.

<PAGE>

Q&A
- -------------------------------------------------------------------------------
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:
$296.2 million

- ------------------------------
High-Yield Municipals Fund Q&A

Q: How did the Fund perform?

A: As of December 31, 1996, the Fund's return was 5.14 percent, outperforming
both the 4.90 percent return of the Lehman Municipal Bond Index and the 4.68
percent median return of its Lipper high-yield municipal debt fund peer group.

The Fund's 30-day standardized yield was 5.43 percent on December 31. That
translates into a tax-equivalent yield of 8.99 percent for an investor in the
39.6 percent tax bracket.

Q: What factors drove the Fund's performance?

A: While the overall municipal market was sluggish, strong investor demand for
a limited supply of new high yield issues -- particularly in the fourth
quarter of 1996 -- enhanced the high yield sector's performance. With our
emphasis on high yield bonds, the Fund benefited accordingly. In addition,
many issuers took advantage of lower interest rates in 1996 to refinance
existing debt. The Fund benefited when the prerefunding of several of our
holdings boosted their values.

Q: After avoiding the health care industry for some time, you added to your
holdings over the last six months. What's changed?

A: When proposals for health care reform began circulating a few years ago, we
knew we would have to monitor the industry closely. Continued Congressional
debate over cuts in Medicare and Medicaid added pressures that contributed to
deterioration in the credit quality of health care issues over the last two to
three years. All the while, the industry was going through consolidation. This
made for a very volatile investment environment.

We believe that we've seen the bulk of the consolidation, but the winds of
change are still blowing. While we found several promising opportunities in

<PAGE>

hospitals that have adapted well to consolidation, we maintain a cautious
outlook for the industry.

An evolving theme within the health care industry is continuing care
facilities, which we think is an interesting, high-growth sector. We believe
the graying of baby boomers, who started turning 50 in 1996, will fuel demand
for quality continuing care in the future. Our continuing care holdings have
performed well and we plan to add to them as attractive issues become
available.

Q: Are you pursuing any other purchase themes?

A: Despite the turmoil being caused by deregulation, we believe additional
opportunities exist in the electric utility industry. The key to uncovering
these opportunities is thorough credit research, which is one of Stein Roe's
strengths. We added a holding that our analysts believe has the wherewithal to
weather deregulation in good condition.

Q: What is your outlook for the Fund?

A: Credit analysis continues to be our primary focus. We'll look to identify
new issues with the potential to outperform over the long term. We think the
health care industry -- particularly hospitals and continuing care facilities
- -- and electric utilities may present these opportunities. While we maintain a
cautious outlook, we intend to participate in issues that we believe are
attractive on a risk/reward basis.

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 December 31, 1996; portfolio data subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Taxable-equivalent yield is shown for
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 Lehman
Municipal Bond Index is an unmanaged group of municipal bonds that differs
from the composition of the Fund; it is not available for direct investment.
According to Lipper Analytical Services, Inc., an independent monitor of
mutual fund performance, the median returns for the Fund's high-yield
municipal debt fund peer group for the one-, five- and 10-year periods ended
December 31, 1996, were 4.17 percent, 6.84 percent and 7.17 percent,
respectively.

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

Fund Highlights
- ---------------------------------------------------------------------------------
Managed Municipals Fund

Security Type Breakdown

PORTFOLIO PORTFOLIO
JUNE 30, 1996 DECEMBER 31, 1996
-----------------------------------

General Obligation 18.0% 18.2%
Pollution Control 16.2 13.1
Escrowed 9.0 9.4
Revenue:
Housing 11.9 12.3
Electric 10.1 9.4
Water & Sewer 6.3 8.4
Toll 7.5 7.8
Hospital 6.0 6.6
Airport 3.3 3.4
Student Loan 2.9 2.5
Other Revenue 8.8 8.9
------------------------------------
Total 100.0% 100.0%
- ---------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

pie charts:
Maturity

As of June 30, 1996 As of December 31, 1996

Less than 1 Year 3.9% 2.2%
1-5 Years 8.0% 7.4%
5-10 Years 4.0% 4.3%
10-15 Years 17.5% 18.6%
15-20 Years 30.2% 29.4%
20-25 Years 17.4% 19.2%
Greater than 25 Years 19.0% 18.9%
- ------------------------------------------------------------------------------------------

Portfolio Quality

As of June 30, 1996 As of December 31, 1996

AAA 34.2% 34.5%
AA 33.3% 30.1%
A 22.3% 24.3%
BBB and Below 10.2% 11.1%

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Fund Highlights
- ---------------------------------------------------------------------------------
High-Yield Municipals Fund

Security Type Breakdown

PORTFOLIO PORTFOLIO
JUNE 30, 1996 DECEMBER 31, 1996
-----------------------------------

Pollution Control 25.1% 25.5%
Escrowed 15.5 15.7
General Obligation 6.5 6.3
Revenue:
Hospital 12.0 12.5
Housing 12.5 11.3
Electric 5.2 5.2
Toll 5.5 4.9
Airport 2.8 2.7
Student Loan 2.7 2.4
Other Revenue 12.2 13.5
------------------------------------
Total 100.0% 100.0%
- ---------------------------------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

pie charts:
Maturity

As of June 30, 1996 As of December 31, 1996

Less than 5 Years 10.3% 11.4%
5-10 Years 8.5% 9.9%
10-15 Years 10.2% 10.0%
15-20 Years 15.4% 17.3%
20-25 Years 28.0% 24.7%
Greater than 25 Years 27.6% 26.7%

- ---------------------------------------------------------------------------------

Portfolio Quality

As of June 30, 1996 As of December 31, 1996

AAA 15.9% 17.2%
AA 11.7% 10.5%
A 22.7% 21.1%
BBB 24.8% 25.4%
BB 4.5% 6.1%
Not Rated 20.4% 19.7%

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------------------------
Investments as of December 31, 1996
(Dollar Amounts In Thousands)
(Unaudited)

Principal Market
MUNICIPAL SECURITIES (102.2%) Amount Value
- --------------------------------------------------------------------------------------------------

ALABAMA (4.1%)
*Alabama I.D.A. Solid Waste Disposal Revenues (Pine City Fiber
Company L.O.C. Barclays Bank Plc) V.R.D.B. 4.300%. $ 5,750 $ 5,750

ARIZONA (2.4%)
*Coconino P.C.R. (Tucson Power L.O.C. Canadian Imperial Bank
of Commerce) V.R.D.B. 4.300%...................... 2,200 2,200
*Maricopa County I.D.A. Series D (Vista Ventana Apartments
Project gtd. by Federal National Mortgage Association Securities)
V.R.D.B. 4.350%................................... 1,200 1,200
--------
3,400

ARKANSAS (4.5%)
*Clark County Solid Waste Disposal Revenue (Reynolds Metals Co.
L.O.C. Sun Trust Company Bank) V.R.D.B. 4.200%.... 3,000 3,000
Paragould Sales Tax Revenue (AMBAC Insured) 4.750% 7/01/97 550 552
*Pulaski County Public Facilities Board (Chenel Park Apartments
Project L.O.C. PNC Bank, Kentucky) V.R.D.B. 4.350% 2,750 2,750
--------
6,302

CALIFORNIA (7.8%)
California School Cash Reserve Program Authority Pool Series A
4.750% 7/02/97.................................... 2,000 2,009
California State R.A.N. Series A 4.500% 6/30/97...... 5,825 5,842
California Statewide Community Development Authority T.R.A.N.
4.750% 6/30/97.................................... 1,000 1,003
Los Angeles School District Series 96-97 T.R.A.N. 4.500% 6/30/97 1,000 1,003
South Coast California Local Education Agencies Pooled T.R.A.N.
Series 1996A 4.750% 6/30/97....................... 1,090 1,093
--------
10,950

COLORADO (0.7%)
Arapahoe County School District No. 5 T.A.N. (Cherry Creek)
4.500% 6/30/97.................................... 1,000 1,003

DISTRICT OF COLUMBIA (0.8%)
District of Columbia Revenue Series 1985 (American University
L.O.C. National Westminster Bank) V.R.D.B. 4.150%. 1,100 1,100

FLORIDA (2.1%)
*Collier County Housing Financial Authority (Saxon Manor Isles
L.O.C. PNC Bank of Kentucky) V.R.D.B. 4.000%...... 2,000 2,000
St. Lucie County P.C.R. (Florida Power & Light Co.) 3.450%
Mandatory Put 3/06/97............................. 1,000 1,000
--------
3,000

GEORGIA (2.1%)
*Development Authority of Gwinnett County I.D.R. (Price
Companies Inc. L.O.C. NationsBank) V.R.D.B. 4.300% 3,000 3,000

IDAHO (1.4%)
Idaho T.A.N. Series 1996 4.500% 6/30/97.............. 2,000 2,006

SR&F Municipal Money Market Portfolio
- ----------------------------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------

ILLINOIS (8.8%)
City of Chicago G.O. (L.O.C. LandesBank Hessen) 3.100%
Mandatory Put 2/04/97............................. $ 2,000 $ 2,000
*Illinois Development Finance Authority (River Oaks Project
L.O.C. Credit Suisse) V.R.D.B 4.100%.............. 1,000 1,000
*Illinois Development Finance Authority Sewage Facilities Revenue
(Nutrasweet Co. Project gtd. by Monsanto Co.)
V.R.D.B. 4.400%................................... 4,100 4,100
Illinois Health Facilities Authority Revenue (University of Chicago)
3.750% Mandatory Put 1/30/97...................... 3,000 3,000
Illinois Sales Tax Revenue Series C (Escrowed in U.S. Treasury
Securities)(pre-refunded to 6/15/97) 6.875%....... 215 222
*Illinois Student Assistance Student Loan Revenue Series 1996A
(L.O.C. Bank of America) V.R.D.B. 4.300%.......... 2,000 2,000
*Southwestern Illinois Development Authority (Wood River Project)
(Shell Oil Co.) V.R.B.D. 5.050%................... 100 100
-------
12,422

INDIANA (5.3%)
Fort Wayne Hospital Authority Revenue (Parkview Memorial
Hospital L.O.C. Bank of America, Chicago)
4.150% Series B................................. 1,000 1,000
4.150% Series C................................. 1,000 1,000
*Franklin Economic Development Revenue Refunding (L.O.C.
Federal Home Loan Bank, Indianapolis) V.R.D.B. 4.250% 2,927 2,927
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. 4.250%................................... 2,000 2,000
-------
7,427

IOWA (1.6%)
Iowa School Corporations Warrant Certificates Series 1996-97 B
(FSA Insured) 4.250% 1/30/97...................... 1,000 1,001
Iowa Higher Education Loan Authority Revenue Refunding Series 1996
(Private College Facilities)(MBIA Insured) 4.250% 8/01/97 600 602
Muscatine County Iowa P.C.R. (Monsanto Co. Project)
V.R.D.B. 4.200%................................... 600 600
-------
2,203

KENTUCKY (5.0%)
*Covington I.D.R. Series 1991 (White Castle Distributing L.O.C.
Bank One, Columbus) V.R.D.B. 4.300%............... 3,980 3,980
*Pulaski County Solid Waste Disposal Revenue (East Kentucky Power
gtd. by National Rural Utilities Cooperative Finance Corp.)
3.700% Optional Put 2/15/97....................... 1,000 1,000
*Shelby County Industrial Building Revenue (Roll Forming Corp.
L.O.C. Bank One of Kentucky) V.R.D.B. 4.300%...... 2,000 2,000
-------
6,980

LOUISIANA (1.9%)
*Lake Charles Harbor & Terminal District P.C.R. (Conoco Inc.
gtd. by E.I. Dupont) V.R.D.B. 5.100%.............. 2,600 2,600
*St. Charles Parish P.C.R. Series 1991 (Shell Oil Co.)
V.R.D.B. 5.050%................................... 100 100
-------
2,700

SR&F Municipal Money Market Portfolio
- --------------------------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- --------------------------------------------------------------------------------------------------

MARYLAND (3.3%)
*Ann Arundel County E.D.R. (Baltimore Gas and Electric Company)
3.450% Mandatory Put 2/14/97...................... $ 1,100 $ 1,100
3.650% Mandatory Put 2/27/97...................... 1,000 1,000
3.450% Mandatory Put 3/20/97...................... 1,500 1,500
3.500% Mandatory Put 3/27/97...................... 1,000 1,000
-------
4,600

MASSACHUSETTS (0.2%)
Massachusetts Industrial Finance Agency Revenue Series A
(Babson College)(MBIA Insured) 3.750% 10/01/97.... 250 250

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. 4.250%............................. 3,000 3,000

MINNESOTA (0.7%)
*Minnesota Housing Finance Authority Single Family Mortgage
Series J 3.650% Mandatory Put 12/11/97............ 1,000 1,000

MISSISSIPPI (0.2%)
Mississippi State University Educational Building Corporation
Revenue (MBIA Insured) 3.700% 8/01/97............. 350 350

MISSOURI (3.7%)
*Jefferson County I.D.A. Revenue Series A (GHF Holdings L.O.C.
Bank One, Indianapolis) V.R.D.B. 4.300%........... 4,185 4,185
St. Louis T.R.A.N. 4.750% 6/30/97.................... 1,000 1,004
-------
5,189

NEW HAMPSHIRE (4.6%)
*New Hampshire Industrial Development P.C.R. (New England
Power Co.)
3.750% Mandatory Put 2/25/97.................... 1,450 1,450
3.600% Mandatory Put 4/01/97.................... 1,500 1,500
3.600% Mandatory Put 4/10/97.................... 1,500 1,500
3.600% Mandatory Put 5/09/97.................... 2,000 2,000
-------
6,450

NORTH DAKOTA (0.7%)
*Mercer County Solid Waste Disposal Series 1993 U (gtd. by
National Rural Utilities Cooperative Finance Corp.) 3.550%
Optional Put 6/01/97.............................. 1,000 1,000

OHIO (1.5%)
Columbus G.O. Series 1995 V.R.D.B. 4.000%............ 200 200
Cuyahoga County Hospital Revenue (University Hospital Health)
(MBIA Insured) 6.500% 1/15/97..................... 1,520 1,522
Ohio Environmental Improvement Revenue (U.S. Steel L.O.C.
Pittsburgh National Bank, PA) V.R.D.B. 3.850%..... 400 400
--------
2,122

OKLAHOMA (1.1%)
Lawton Water Authority Sales Tax & Utility System Revenue
(AMBAC Insured) 5.375% 7/01/97.................... 1,585 1,598

OREGON (0.3%)
Eugene Electric Utilities Revenue (FSA Insured)
4.000% 8/01/97.................................... 420 421

SR&F Municipal Money Market Portfolio

- ----------------------------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------

PENNSYLVANIA (3.1%)
*Pennsylvania Housing Finance Authority Single Family Mortgage
Series 1991-31-A 6.300% 4/01/97................... $ 750 $ 754
Philadelphia Redevelopment Authority Notes Series 96 (Southwark
Plaza Project)(FGIC Insured) 3.850% 12/30/97...... 1,500 1,500
Quakertown General Authority Revenue Series A (L.O.C. PNC
Bank, New York) V.R.D.B. 3.150%................... 2,200 2,200
--------
4,454

SOUTH CAROLINA (2.7%)
Columbia Waterworks and Sewer System Revenue
6.000% 2/01/97.................................... 825 826
*South Carolina Jobs Economic Development Authority Hospital
Facilities Revenue (Specialty Equipment Companies L.O.C.
Barclays Bank, New York) V.R.D.B. 4.300%.......... 3,000 3,000
--------
3,826

TENNESSEE (2.8%)
*McMinn County Industrial Development Board I.D.R.
(Creative Fabrication Corp. L.O.C. NBD Bank)
V.R.D.B. 4.400%................................... 4,000 4,000

TEXAS (10.2%)
*Harris County Industrial Development Corp. I.D.R. (Precision
General Project L.O.C. Morgan Guaranty) V.R.D.B. 4.300% 2,060 2,060
*North Texas Higher Education Authority Texas Student Loan
Revenue Refunding Series A (L.O.C. Student Loan Marketing
Association) V.R.D.B. 4.250%...................... 1,100 1,100
*Port Corpus Christi Industrial Development Corp. Sewer & Solid
Waste (Citgo Petroleum Corp. Project Inc. L.O.C. Banque
National de Paris) V.R.D.B. 5.100%................ 300 300
*Robertson County Industrial Development Corp. Series 1995
(Sanderson Farms Inc. Project L.O.C. Harris Trust and
Savings Bank) V.R.D.B. 4.300%..................... 1,900 1,900
*San Antonio Airport Lease Special Project Revenue (Hedrick
Beechcraft, Inc gtd. by Raytheon Co.) V.R.D.B. 4.300% 4,000 4,000
Texas State T.R.A.N. Series 1996 4.750% 8/29/97...... 5,000 5,025
--------
14,385

VERMONT (1.8%)
*Vermont I.D.A. Revenue (RyeGate Project L.O.C. ABN AMRO
Bank N.V.) V.R.D.B. 4.150%........................ 2,500 2,500

WASHINGTON (2.2%)
*Yakima County Public Corp. I.D.R. (John I. Haas Inc. Project
L.O.C. Bayerische Vereinsbank AG) V.R.D.B. 4.400%. 3,150 3,150

WISCONSIN (12.5%)
*Carlton P.C.R. Series 1988 (Wisconsin Power & Light Co.)
V.R.D.B. 4.250%................................... 6,500 6,500
*Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.300%........................ 3,400 3,400
*Holland I.D.R. (White Clover Daily Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.300%........................ 2,760 2,760
*Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Bank One,
Milwaukee) V.R.D.B. 4.300%........................ 2,260 2,260
*Oak Creek I.D.R. Series 1995 (McAdams Graphics Inc. L.O.C.
Bank One, Milwaukee) V.R.D.B. 4.300%.............. 1,800 1,800
Slinger School District (FSA Insured) 6.400% 4/01/97. 560 563

SR&F Municipal Money Market Portfolio

WISCONSIN (CONTINUED)
Wisconsin State Health Facility Authority Revenue (Franciscan
Health Care L.O.C. Toronto Dominion Bank)
V.R.D.B. 4.100%................................... $ 300 $ 300
--------
17,583
- ----------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES (102.2%)
(Amortized cost $144,121)...................................... 144,121
OTHER ASSETS, LESS LIABILITIES (-2.2%)............................ (3,089)
--------
TOTAL NET ASSETS (100.0%)......................................... $141,032
========
- ----------------------------------------------------------------------------------------------------

<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1996, these securities represented 69.8 percent of net assets.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Intermediate Municipals Fund
- ---------------------------------------------------------------------------------------------------
Investments as of December 31, 1996
(Dollar Amounts In Thousands)
(Unaudited)

Principal Market
MUNICIPAL SECURITIES (98.7%) Amount Value
- ----------------------------------------------------------------------------------------------------

ALASKA (1.4%)
Kenai Peninsula Borough G.O. Refunding (AMBAC Insured)
8.300% 1/01/99.................................... $ 1,500 $ 1,617
North Slope Borough G.O. 8.350% 6/30/98.............. 1,200 1,268
-------
2,885

ARIZONA (6.3%)
Arizona Transportation Board Highway Revenue Subordinated
Series A 6.000% 7/01/00........................... 1,000 1,052
Cochise County Unified School District No. 68 Series B (FGIC
Insured) 9.000% 7/01/01........................... 1,115 1,319
Maricopa County Hospital Revenue (Samaritan Health Services)
(Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,381
Maricopa County Unified High School District
6.250% 7/01/06 District No. 97 Deer Valley Series A
(MBIA Insured).................................... 1,750 1,931
7.000% 7/01/08 District No. 213 Tempe............. 500 583
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 2,732
Pima County Refunding G.O. 6.300% 7/01/02............ 2,500 2,722
-------
12,720

ARKANSAS (1.4%)
Beaver Water District Benton & Washington Counties Water
Revenue Refunding (MBIA Insured) 6.000% 11/15/04.. 2,580 2,800

CALIFORNIA (7.9%)
California Education Facility University of San Francisco (MBIA
Insured) 5.600% 10/01/10.......................... 1,000 1,037
*California Housing Finance Agency Revenue Home Mortgage

Series B-1 5.900% 2/01/04......................... 985 1,013
California Statewide Communities Development Authority
(Cedars-Sinai Medical Center) 5.400% 11/01/15..... 2,000 1,858
Central Coast Water Authority Revenue (AMBAC Insured)
(Escrowed in U.S. Treasury Securities)(pre-refunded to 10/01/02)
5.950% 10/01/03................................... 2,000 2,181
East Bay Municipal Utility District Water System Revenue (Escrowed

in U.S. Treasury Securities)(AMBAC Insured) 7.000% 6/01/00 1,400 1,523
La Quinta California Redevelopment Agency Tax Allocation
(MBIA Insured) 7.300% 9/01/09..................... 750 901
Los Angeles County Public Water Works Authority (Regional Parks
And Open Space Revenue) 5.800% 10/01/05........... 1,500 1,594
Los Angeles Department of Water & Power Electric Revenue
Crossover Refunding 9.000% 9/01/03................ 2,500 3,116
Oakland Unified School District G.O. Series A (FGIC Insured)
Zero Coupon (Effective Yield 6.250%) 8/01/16...... 1,700 524
Vallejo Revenue Series B (Water Improvement Project)(FGIC Insured)
(Escrowed in U.S. Treasury Securities) 6.000% 11/01/01 2,030 2,179
-------
15,926

COLORADO (0.3%)
Adams County School District No 12 Series A (MBIA Insured)
Zero Coupon (Effective Yield 5.850%) 12/15/12..... 1,300 533

Intermediate Municipals Fund CONTINUED
- ----------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------

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 $ 1,289

FLORIDA (2.1%)
Florida Division Board Finance Department of General Services
Revenue (Department of Natural Resources)(MBIA Insured)
6.000% 7/01/03.................................... 1,000 1,074
*Jacksonville Excise Taxes Revenue Series B (FGIC Insured)
5.700% 10/1/09.................................... 1,500 1,513
Palm Beach County Airport System Revenue (MBIA Insured)
7.625% 10/01/04................................... 1,410 1,618
-------
4,205

GEORGIA (7.0%)
Atlanta Airport Facility Revenue Series 1996 (AMBAC Insured)
6.500% 1/1/07..................................... 5,000 5,615
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
5.625% 1/01/01.................................... 1,000 1,043
Georgia G.O. Series C 7.700% 4/01/00................. 1,250 1,381
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding (AMBAC Insured)
6.050% 7/01/01.................................. 1,600 1,704
5.800% 7/01/02.................................. 1,000 1,061
Municipal Electric Authority of Georgia Special Obligation Fifth
Crossover Series (AMBAC Insured) 6.400% 1/01/13... 3,000 3,328
-------
14,132

HAWAII (2.8%)
*Hawaii Department of Budget & Finance Special Purpose
Mortgage Revenue (Hawaiian Electric Co.)(MBIA Insured)
7.375% 12/01/20................................... 4,000 4,388
Honolulu (City & County) Refunding G.O. Series 1990 A
7.350% 7/01/06.................................... 1,000 1,188
-------
5,576

ILLINOIS (6.9%)
Chicago Board of Education (MBIA Insured) 6.250% 12/01/12 2,100 2,279
*Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/01/04.................................... 1,000 1,040
Chicago Skyway Toll Bridge Revenue Refunding Series 1994
(Escrowed in U.S. Treasury Securities)(pre-refunded to 1/01/04)
6.750% 1/01/17.................................... 1,500 1,684
Chicago Water Revenue Refunding (FGIC Insured) 6.500% 11/01/09 2,130 2,386
DuPage County Special Service Area No. 11 Refunding
6.750% 1/01/14.................................... 1,220 1,300
Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue Series 1992 A (McCormick Place Expansion Project)

5.900% 6/15/03.................................. 1,500 1,581
7.250% 6/15/05.................................. 2,750 3,153
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil Co.) V.R.D.B. 5.050%........... 500 500
-------
13,923

INDIANA (4.8%)
Indiana Toll Road Commission Toll Road Revenue (Escrowed in U.S.
Treasury Securities) 9.000% 1/01/15............... 2,740 3,727

INDIANA (CONTINUED)
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A (United Airlines)
5.600% 11/01/99................................. $ 1,125 $ 1,159
6.500% 11/01/07................................. 2,250 2,441
Indianapolis Local Public Improvement Bond Bank Series 1992 D
6.500% 2/01/06.................................... 2,100 2,333
-------
9,660

KENTUCKY (1.3%)
Kentucky Turnpike Authority Economic Development Revenue
Refunding (Revitalization Projects) 5.800% 1/01/04 2,500 2,633

LOUISIANA (2.3%)
*Calcasieu Parish Industrial Development Board (Citgo Petroleum
Corp.) V.R.D.B. 5.100%............................ 300 300
Louisiana Public Facilities Authority Student Loan Revenue Series A-1
5.900% 9/01/99.................................... 2,000 2,068
Orleans Levee District Series A 5.950% 11/01/07...... 2,200 2,351
-------
4,719

MAINE (0.4%)
*Maine Educational Loan Authority Educational Loan Revenue
Supplemental Education Loan Series A-2 6.650% 12/01/02 680 726

MASSACHUSETTS (2.2%)
*Massachusetts Bay Transportation Authority Mass Refunding
General Transportation System Series A 7.000% 3/01/07 2,250 2,599
Massachusetts Health and Educational Facilities Authority Revenue
(Daughters of Charity Carney Hospital)
7.250% 7/01/00 Series C......................... 800 847
6.000% 7/01/09 Series D......................... 1,000 1,031
-------
4,477

MICHIGAN (7.2%)
Greater Detroit Resource Authority Revenue (AMBAC Insured)
6.250% 12/13/05................................... 4,000 4,382
Michigan Building Authority Revenue Refunding Series I (AMBAC
Insured) 6.000% 10/01/02.......................... 3,000 3,213
Michigan Hospital Finance Authority Revenue (Daughters of Charity
Providence Hospital) 6.500% 11/01/01.............. 1,380 1,484
Michigan Underground Storage Tank Revenue (AMBAC Insured)
6.000% 5/01/05.................................... 5,000 5,401
-------
14,480

MISSOURI (0.4%)
issouri Regional Convention & Sports Complex Authority
6.600% 8/15/03.................................... 830 906

NEVADA (0.8%)
*Clark County P.C.R. Series 1990 A (Southern California Edison Co.)
7.125% 6/01/09.................................... 1,500 1,615

NEW JERSEY (2.6%)
Bergen County Utility Authority Solid Waste System Revenue
Refunding Series A (FGIC Insured) 6.250% 6/15/06.. 2,000 2,200
New Jersey Health Care Facilities Finance Authority Revenue
6.100% 7/01/01 (Hackensack Medical Center) (FGIC Insured) 1,000 1,069
7.000% 7/01/03 (Christ Hospital Group)(Connie Lee Insured) 1,730 1,940
-------
5,209

NEW MEXICO (2.5%)
Gallup P.C.R. (Plains Electric Transmission & Generating
Cooperative Inc.)(MBIA Insured) 6.100% 8/15/02.... $ 2,000 $ 2,152
Santa Fe Gross Receipts Tax Revenue Series A (AMBAC Insured)
6.500% 6/01/06.................................... 2,555 2,855
-------
5,007

NEW YORK (9.3%)
New York City G.O.
6.500% 2/15/05 Series 1996 D...................... 3,500 3,731
5.700% 2/01/06 Series 1996 C...................... 1,000 1,007
7.125% 8/15/11 Series 1995 C...................... 2,200 2,333
New York City Water & Sewer System Revenue Series A
7.000% 6/15/09.................................... 2,115 2,335
New York Dormitory Authority Revenue Series A
6.500% 5/15/05 (State University Educational Facilities) 1,000 1,075
5.625% 7/01/16 (City University System)........... 5,000 4,869
New York Environmental Facility Corp. P.C.R. State Water Series D
6.300% 5/15/05.................................... 3,000 3,321
-------
18,671

NORTH CAROLINA (2.3%)
North Carolina Eastern Municipal Power Refunding Series B
6.000% 1/01/05.................................... 3,000 3,088
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding (MBIA Insured) 5.900% 1/01/03... 1,500 1,580
-------
4,668

OHIO (2.8%)
Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,088
Loveland School District G.O. (MBIA Insured) 7.100% 12/01/09 3,000 3,419
Mahoning County (MBIA Insured) 6.600% 12/01/06....... 1,000 1,100
-------
5,607

OREGON (1.9%)
Oregon Department of Transportation Revenue (MBIA Insured)
5.700% 6/01/02.................................... 1,220 1,288
Portland Sewer System Revenue Refunding Series B (FGIC Insured)
5.400% 4/01/02.................................... 2,500 2,611
-------
3,899

PENNSYLVANIA (0.9%)
Dauphin County Hospital Authority Revenue Refunding Series B
(Hapsco Group Inc.)(MBIA Insured) 5.800% 7/01/02.. 1,600 1,692
Schuylkill County I.D.A. (Westwood Energy Properties L.P. L.O.C.
Fuji Bank Ltd.) V.R.D.B. 5.100%................... 100 100
-------
1,792

SOUTH CAROLINA (3.3%)
Piedmont Municipal Power Agency Electric Revenue
6.000% 1/01/07 Series B (MBIA Insured)............ 835 887
6.125% 1/01/07 (FGIC Insured)..................... 2,350 2,526
*South Carolina Ports Authority Revenue (AMBAC Insured)
6.200% 7/01/01.................................... 1,000 1,063
Sumter County Hospital Facilities Revenue Refunding (Tuomey

Regional Medical Center)(MBIA Insured) 6.625% 11/15/04 2,000 2,240
-------
6,716

TENNESSEE (2.5%)
Knox County Health Educational & Housing Facilities Board
(Connie Lee Insured) 5.500% 4/15/11.............. $ 2,000 $ 1,974
Metropolitan Nashville & Davidson County Water & Sewer
Revenue (FGIC Insured) 6.500% 1/01/10............. 2,750 3,084
--------
5,058

TEXAS (10.4%)
Alief Independent School District G.O. (gtd. by Permanent School
Fund) 8.000% 2/15/99.............................. 1,305 1,405
Fort Bend Independent School District Unlimited Tax (gtd. by
Permanent School Fund) 7.500% 2/15/00............. 1,010 1,104
Fort Worth Limited Tax 8.350% 3/01/00................ 1,250 1,397
*Gulf Coast I.D.A. Marine Terminal Revenue (Amoco Oil)
V.R.D.B. 5.050%................................... 200 200
*Gulf Coast Waste Disposal Authority P.C.R. (Amoco Oil)
V.R.D.B. 5.050%................................... 900 900
Harris County I.D.R. (Exxon Capital Ventures) V.R.D.B. 5.000% 300 300
Houston Water Conveyance System Contract Certificates of
Participation Series J (AMBAC Insured) 6.125% 12/15/06 1,000 1,086
Northside Independent School District G.O. 9.400% 4/01/98 1,850 1,966
Plano Independent School District G.O. Unlimited Tax (FGIC
Insured) 8.625% 2/15/99........................... 1,900 2,068
*Port Corpus Christi Sewer and Water (Citgo Petroleum Corp. L.O.C.
Banque National of Paris) V.R.D.B. 5.100%......... 500 500
Round Rock Independent School District G.O. Unlimited Tax
School Building and Refunding
8.625% 8/15/00 Series 1991 (MBIA Insured)....... 1,270 1,451
7.500% 8/01/02 Series 1995 A (gtd. by Permanent School Fund) 1,200 1,375
San Antonio Water System Revenue Refunding (FGIC Insured)
6.000% 5/15/01.................................... 3,000 3,178
Texas Higher Education Student Loan Senior Lien
7.450% 10/01/06................................... 2,870 3,039
Texas T.R.A.N. 4.750% 8/29/97........................ 1,000 1,009
--------
20,978

VIRGINIA (0.7%)
*Virginia Housing Development Authority Commonwealth
Mortgage Series A Subseries A-1 6.700% 7/01/05.... 1,280 1,345

WASHINGTON (3.4%)
Snohomish County School District No. 2 Refunding G.O. (Everett)
(MBIA Insured)
7.250% 12/01/00................................. 2,540 2,806
7.000% 12/01/01................................. 2,230 2,477
7.000% 12/01/02................................. 1,500 1,688
--------
6,971
- --------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES (98.7%)
(Amortized cost $189,514)...................................... 199,126
OTHER ASSETS, LESS LIABILITIES (1.3%)............................. 2,584
--------
TOTAL NET ASSETS (100.0%)......................................... $201,710
========
- --------------------------------------------------------------------------------------------------

<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1996, these securities represented 8.8 percent of net assets.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Managed Municipals Fund
- ---------------------------------------------------------------------------------------------------
Investments as of December 31, 1996
(Dollar Amounts In Thousands)
(Unaudited)

Principal Market
MUNICIPAL SECURITIES (98.4%) Amount Value
- ---------------------------------------------------------------------------------------------------

ALABAMA (0.7%)
Alabama Special Care Facility Financing Authority Birmingham
Revenue (Daughters of Charity St. Vincent Hospital)
5.000% 11/01/25................................... $ 4,770 $ 4,275

ALASKA (1.1%)
*Alaska Student Loan Corporation Revenue Series A (AMBAC
Insured) 6.200% 7/01/09........................... 3,870 3,975
North Slope Borough Capital Appreciation Series A (MBIA Insured)
Zero Coupon (Effective Yield 5.750%) 6/30/06...... 5,000 3,033
-------
7,008

ARKANSAS (0.3%)
Arkansas Development Financing Authority Single Family Mortgage
Revenue Series A (FHA Insured) 8.125% 8/01/14..... 2,080 2,144

CALIFORNIA (4.5%)
California P.C.R. Refunding Series A (San Diego Gas & Electric Co.)
5.900% 6/01/14.................................... 3,000 3,143
California State R.A.N. 1996-7 Series A
4.500% 6/30/97.................................... 1,000 1,005
Central Contra Costa Sanitation District Revenue Wastewater
Facilities Improvement Project (MBIA Insured)
6.250% 9/01/13.................................. 2,025 2,157
6.250% 9/01/14.................................. 1,295 1,379
Foothill Eastern Transportation Corridor Agency Toll Road
Refunding Senior Lien Series 1995 A Zero Coupon (Effective
Yield 7.200%) 1/01/18............................. 10,000 2,714
Long Beach Aquarium of the Pacific Revenue Series 1995 A

6.125% 7/01/15.................................... 4,000 3,923
6.125% 7/01/23.................................... 6,000 5,820
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 2,119
Southern California Public Power Authority Revenue Refunding
Zero Coupon (Effective Yield 6.000%) 7/01/14 (FGIC Insured)
(Escrowed in U.S. Treasury Securities)............ 8,155 3,073
5.000% 7/01/17 Series A (Power Project)........... 2,500 2,253
-------
27,586

COLORADO (2.6%)
Araphoe County Capital Improvement Trust Fund Highway
Revenue Zero Coupon (Effective Yield 6.930%) 8/31/15 25,000 7,141
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 1,711
6.000% 10/01/12................................... 1,830 1,831
Municipal Subdistrict Northern Colorado Water Conservancy
District Revenue Series D 6.000% 12/01/15......... 2,500 2,506
-------
16,271

Managed Municipals Fund CONTINUED
- ----------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------

DELAWARE (0.8%)
Delaware E.D.A. Water Development Revenue Refunding
(General Waterworks Corp.--Wilmington Suburban Water Corp.)
6.450% 12/01/07 Series 1992 B................... $ 1,160 $ 1,284
*6.800% 12/01/23 Series 1992 A.................. 3,500 3,675
-------
4,959

FLORIDA (1.7%)
Broward County Public Improvement Revenue Refunding G.O.
Series 1986 12.500% 1/01/03....................... 1,000 1,404
12.500% 1/01/04................................... 1,195 1,738
12.500% 1/01/05................................... 2,000 3,000
Florida G.O. (Jacksonville Transportation Authority Project)
(Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,715
*Jacksonville Water and Sewer Development Revenue (Jacksonville
Suburban Utilities-General Waterworks Corp.) 6.750% 6/01/22 1,500 1,593
*St. Lucie County Solid Waste Disposal Revenue (Florida Power and
Light Co.) V.R.D.B. 5.000%........................ 100 100
-------
10,550

GEORGIA (12.0%)
Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured)
6.500% 1/01/08.................................... 2,750 3,089
6.500% 1/01/10.................................... 2,000 2,239
*Cartersville Development Authority Revenue
Water & Wasteworks Facilities (Anheuser-Busch)
7.375% 5/01/09.................................... 9,000 10,614
Columbia County School District G.O. (MBIA Insured)
6.750% 4/01/09.................................... 1,900 2,178
7.000% 4/01/10.................................... 2,125 2,482
7.000% 4/01/11.................................... 2,370 2,776
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
6.375% 1/01/14.................................... 13,700 15,188
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding Series P (AMBAC Insured) 6.250% 7/01/20. 4,000 4,427
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18.................................... 21,100 23,631
Paulding County School District (MBIA Insured)
6.000% 2/01/10.................................... 4,235 4,543
6.000% 2/01/13.................................... 2,360 2,526
-------
73,693

HAWAII (1.1%)
*Hawaii Airports System Revenue Series II (MBIA Insured)
6.900% 7/01/12.................................... 6,000 6,895

IDAHO (0.3%)
*Idaho Housing Agency Single Family Mortgage Revenue (FHA/VA
Insured) 7.875% 7/01/24........................... 1,635 1,701

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 2,713
6.000% 1/01/16.................................. 5,000 5,268
Chicago Gas Supply Revenue Series 1985 D (Peoples Gas Light &
Coke Company) 7.500% 3/01/15...................... 4,500 4,884
Chicago Skyway Toll Bridge Revenue Series 1994 (Escrowed in U.S.
Treasury Securities)(pre-refunded to 1/01/04) 6.750% 1/01/17 1,500 1,684

ILLINOIS (CONTINUED)
Illinois Development Finance Authority
**5.950% 1/01/09 (Catholic Charities Housing Development) $ 1,450 $ 1,418
7.600% 9/01/13 P.C.R. (Central Illinois Public Service) 3,000 3,289
Illinois Housing Development Authority Series A (FHA Insured)
7.800% 12/01/12................................... 905 939
8.000% 6/01/26.................................... 6,770 7,042
Illinois Sales Tax Revenue Refunding Series Q 6.000% 6/15/12 10,000 10,565
Illinois Toll Highway Authority Priority Revenue Series A
6.300% 1/01/11.................................... 7,500 8,186
Metropolitan Pier and Exposition Authority Dedicated Tax Revenue
Series A (McCormick Place Project)(MBIA Insured)
Zero Coupon (Effective Yield 6.020%) 6/15/12.... 5,000 2,090
Zero Coupon (Effective Yield 6.020%) 12/15/12... 8,300 3,373
-------
51,451

INDIANA (4.8%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 5,000 5,584
Indiana Transportation Finance Authority
5.750% 6/01/12 (Highway Revenue Series A) (AMBAC Insured) 3,000 3,102
6.250% 11/01/16 (Airport Facilities Lease Revenue Series A) 6,950 7,421
*Indianapolis Airport Authority Revenue Special Facilities (United
AirLines) 6.500% 11/15/31......................... 5,000 5,072
Michigan City P.C.R. (Northern Indiana Public Service Company)
5.700% 10/01/03................................... 8,480 8,491
-------
29,670

IOWA (0.4%)
*Iowa Finance Authority Single Family Mortgage Revenue Series B
(collateralized by Government & Federal National Mortgage
Association Securities) 7.450% 7/01/23............ 1,100 1,149
Muscatine County P.C.R. (Monsanto Company Project)
V.R.D.B. 4.200%................................... 1,300 1,300
-------
2,449

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 3,299

KENTUCKY (2.8%)
*Kentucky Housing Corp. Revenue Series C (FHA/VA Insured)
8.100% 1/01/22.................................... 2,125 2,246
Kentucky Turnpike Authority Economic Development Revenue
Refunding Series 1992 (Revitalization Project)(FGIC Insured)
Zero Coupon (Effective Yield 6.600%) 1/01/10...... 7,500 3,703
Kentucky Turnpike Authority Revenue (Escrowed in U.S. Treasury
Securities)(pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,536
*Trimble County P.C.R. Series A (Louisville Gas & Electric Co.)
7.625% 11/01/20................................... 6,670 7,367
7.625% 11/01/20 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/00)...................... 1,330 1,494
-------
17,346

LOUISIANA (1.1%)
*Calcasieu Parish Environmental Industrial Development Board
Revenue (Citgo Petroleum Corp. L.O.C. Banque Nationale
de Paris) V.R.D.B. 5.100%......................... 400 400

LOUISIANA (CONTINUED)
*De Soto Parish Environmental Improvement Revenue

(International Paper Co.) Series A 7.700% 11/01/18 $ 3,250 $ 3,696
New Orleans G.O. (AMBAC Insured) Zero Coupon (Effective Yield
6.125%) 9/01/12................................... 6,250 2,585
-------
6,681

MAINE (1.2%)
*Maine Educational Loan Marketing Corporation Student Loan
Revenue Series 1994 B-1 6.500% 11/01/09........... 3,000 3,101
*Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19................................... 2,520 2,621
7.550% 11/15/22................................... 1,750 1,820
-------
7,542

MARYLAND (1.2%)
Washington Suburban Sanitation District Construction
6.600% 6/01/16.................................... 2,795 3,044
6.625% 6/01/17.................................... 1,660 1,810
6.625% 6/01/19.................................... 2,320 2,530
-------
7,384

MASSACHUSETTS (7.2%)
Massachusetts Bay Transportation Authority Refunding
7.000% 3/01/14 Series 1994 A...................... 3,150 3,713
6.200% 3/01/16 Series 1992 B...................... 9,825 10,706
7.000% 3/01/19 Series 1994 A...................... 2,500 2,981
Massachusetts College Building Authority Project Refunding Series A
7.500% 5/01/11.................................... 1,500 1,841
7.500% 5/01/14.................................... 3,500 4,329
Massachusetts Health & Educational Facilities Authority Revenue
6.250% 7/01/12 (Massachusetts General Hospital Project)
(AMBAC Insured)................................... 5,750 6,276
6.250% 12/01/22 (Dana Farber Cancer Institute).... 6,500 6,685
6.750% 7/01/24 (Brigham & Women's Hospital)(MBIA Insured) 7,365 7,952
-------
44,483

MICHIGAN (1.3%)
Detroit Sewage Disposal Revenue 5.000% 11/01/95
(MBIA Insured).................................... 5,000 4,556
Michigan Hospital Finance Authority Providence Hospital Revenue
Refunding (Daughters of Charity Health Systems Inc.)

7.000% 11/01/21................................... 3,000 3,244
-------
7,800

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.................................. 2,345 2,488
7.300% 8/01/31.................................. 3,490 3,647
*Minnesota Housing Finance Agency Single Family Mortgage
Series A 7.450% 7/01/22........................... 3,990 4,226
-------
10,361

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 2,436

MISSOURI (0.3%)
Little Blue Valley Sewer District Revenue Refunding (AMBAC
Insured)(Escrowed in U.S. Treasury Securities)(pre-refunded to
10/01/98) 9.000% 10/01/07......................... $ 1,000 $ 1,083
Missouri Housing Community Development Single Family
Mortgage Revenue 9.375% 4/01/16................... 75 80
Springfield School District Refunding G.O. Series B (FGIC Insured)
9.500% 3/01/07.................................... 600 812
-------
1,975

NEVADA (0.7%)
*Nevada Housing Division Single Family Mortgage (FHA/VA
Insured) 7.750% 4/01/22........................... 4,050 4,241

NEW JERSEY (0.9%)
New Jersey G.O. Series D 6.000% 2/15/11.............. 5,150 5,550

NEW MEXICO (0.2%)
Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13... 1,000 1,032

NEW YORK (12.0%)
Erie County Water Authority Water Revenue Refunding Series 1992
(AMBAC Insured) Zero Coupon (Effective Yield
7.300%) 12/01/17.................................. 660 149
New York City G.O.
5.750% 2/01/14 Series G........................... 3,145 3,006
8.750% 11/01/17 Series A (Escrowed in U.S. Treasury
Securities)(pre-refunded to11/01/97)............ 1,000 1,056
6.000% 2/15/25 Series D........................... 12,980 12,619
New York State Environmental Facilities Corporation P.C.R. Water
Revolving Fund--New York City Municipal Water
5.750% 6/15/10.................................... 10,000 10,472
*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 8,329
New York City Municipal Water Finance Authority Water and Sewer
Systems Revenue Series A 5.500% 6/15/24........... 7,175 6,863
New York State Urban Development Corp. State Facilities
Revenue Refunding
5.600% 4/01/15.................................. 2,600 2,550
5.700% 4/01/20.................................. 10,990 10,767
Triborough Bridge & Tunnel Authority
6.625% 1/01/12 General Purpose Revenue Series X... 8,715 9,956
6.125% 1/01/21 General Purpose Revenue Series Y... 6,890 7,470
V.R.D.B. 4.000% (FGIC Insured).................... 400 400
-------
73,637

NORTH CAROLINA (1.9%)
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 4,913
6.500% 1/01/18 Series 1991 A.................... 2,185 2,328
8.000% 1/01/21 (Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98)..................... 240 255
North Carolina Municipal Power Agency No.1 Catatwba Electric
Revenue Refunding (AMBAC Insured) 6.000% 1/01/08.. 3,585 3,852
-------
11,348

NORTH DAKOTA (0.3%)
Fargo Health System Revenue Series A (Meritcare Obligated Group)
(MBIA Insured) 5.375% 6/01/27..................... $ 2,000 $ 1,901

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 4,372

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 1,929

PENNSYLVANIA (3.3%)
Allegheny County Sanitation Authority Sewer Revenue (FGIC
Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,401
*Dauphin County I.D.A. Water Development Revenue (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24.................................... 2,400 2,776
Montgomery County I.D.A. Retirement Community Revenue
Series B (Adult Communities Total Services) 5.750% 11/15/17 3,500 3,388
Pennsylvania G.O. 6.250% 7/01/12..................... 11,200 12,362
Schuykill County I.D.A. (Westwood Energy Properties L.P. L.O.C.
Fuji Bank Ltd.) V.R.D.B. 5.100%................... 100 100
-------
20,027

RHODE ISLAND (1.0%)
*Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/01/22................................... 5,650 5,994

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 3,431
Greenville Hospital System Hospital Facilities Revenue Series B
5.250% 5/01/23.................................... 5,000 4,618
*Richland County Solid Waste Disposal Facilities Revenue Series
1991 B (Union Camp Corp.) 7.125% 9/01/21.......... 5,000 5,394
*South Carolina Housing Finance Agency Single Family Mortgage
Revenue Series C 7.750% 7/01/22................... 4,775 5,002
-------
18,445

SOUTH DAKOTA (2.7%)
Heartland Consumers Power District Electric Revenue Refunding
(FSA Insured) 6.000% 1/01/17...................... 8,000 8,451
*South Dakota Student Loan Assistance Corp Student Loan Revenue
Series B 7.450% 8/01/00........................... 7,990 8,302
-------
16,753

TENNESSEE (2.5%)
Knox County Health, Educational and Housing Facilities Board
Revenue (Baptist Health Systems of East Tennessee
Obligated Group)(Connie Lee Insured) 5.500% 4/15/17 5,000 4,839
*Tennessee Housing Development Agency (Homeownership Project)
7.300% 7/01/11.................................... 10,000 10,361
-------
15,200

TEXAS (5.2%)
Houston Water & Sewer Systems Revenue Refunding
(AMBAC Insured)
Zero Coupon (Effective Yield 6.800%) 12/01/08... $ 4,000 $ 2,129
Zero Coupon (Effective Yield 6.8125%) 12/01/09.. 4,000 1,994
Zero Coupon (Effective Yield 6.850%) 12/01/10... 3,750 1,747
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 16,925
Texas Municipal Power Agency Revenue Refunding (AMBAC
Insured) Zero Coupon (Effective Yield 6.900%) 9/01/08 1,475 795
Texas T.R.A.N. Series 1996 Series 4.750% 8/29/97..... 6,200 6,254
*Travis County Housing Finance Agency Single Family Mortgage
(collateralized by Government National Mortgage Association
Securities)(FGIC Insured) 8.000% 9/01/10.......... 1,190 1,254
--------
31,098

VERMONT (0.2%)
*Vermont Housing Finance Agency Single Family Mortgage
Revenue Series A 8.150% 5/01/25................... 1,095 1,155

VIRGINIA (0.4%)
Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,673

WASHINGTON (5.3%)
*Port of Longview Industrial Development Corporation Solid Waste
Disposal Revenue (Weyerhaeuser Company) 6.875% 10/01/08 8,250 9,261
Washington G.O. Series B 6.000% 6/01/13.............. 7,280 7,774
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 3,201
Zero Coupon (Effective Yield 6.950%) 7/01/08 Series B
(Nuclear Project #3)............................ 7,000 3,650
6.300% 7/01/12 Series 1992 A (Nuclear Project #2). 3,500 3,740
6.500% 7/01/18 Series 1991 C (Nuclear Project #3). 5,000 5,230
--------
32,856

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 5,324
Wisconsin Housing E.D.A. Revenue 7.750% 9/01/10...... 2,985 3,151
--------
8,475
- ----------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES (98.4%)
(Amortized cost $561,471)...................................... 604,645
OTHER ASSETS, LESS LIABILITIES (1.6%)............................. 10,100
--------
TOTAL NET ASSETS (100.0%)......................................... $614,745
========
- ----------------------------------------------------------------------------------------------------

<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1996, these securities represented 22.9 percent of net assets. **This
security is subject to contractual or legal restrictions on its resale. At
December 31, 1996, the value of this security represented 0.2 percent of net
assets.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

High-Yield Municipals Fund
- ---------------------------------------------------------------------------------------------------
Investments as of December 31, 1996
(Dollar Amounts In Thousands)
(Unaudited)

Principal Market
MUNICIPAL SECURITIES (98.4%) Amount Value
- ----------------------------------------------------------------------------------------------------

ARIZONA (0.9%)
Arizona Health Facilities Hospital System Revenue Refunding
(Phoenix Memorial Hospital) 8.125% 6/01/12........ $ 2,500 $ 2,713

CALIFORNIA (2.3%)
Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue Sr. Lien Series 1995 A 6.500% 1/01/32..... 2,000 2,086
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/23.................................... 5,000 4,850
-------
6,936

COLORADO (7.5%)
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)....... 325 503
11.250% 9/01/11 (pre-refunded to 9/01/10)....... 360 564
11.250% 9/01/11................................. 220 349
11.250% 9/01/12................................. 1,440 2,310
Arapahoe County Capital Improvement Trust Fund Highway
Revenue 7.000% 8/31/26............................ 7,000 7,710
***Briargate Public Building Authority Landowner's Assessment
Lien Revenue
10.250% 12/15/00 Series 1985 A.................. 474 379
9.500% 12/15/07 Series 1986 A................... 1,747 1,398
Colorado Health Facilities Authority Revenue
7.250% 4/01/11 (Birchwood Manor Apartments)(collateralized

by Government National Mortgage Association Securities) 690 725
8.500% 2/15/21 Series B (PSL Health Systems)(Escrowed in
U.S. Treasury Securities)(pre-refunded to 2/15/01) 3,250 3,780
*Denver City and County Airport Revenue Series D
7.750% 11/15/21................................... 4,000 4,439
-------
22,157

FLORIDA (2.8%)
***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% 7/01/11 775 890
Orange County Health Facilities Authority First Mortgage Revenue
(Orlando Lutheran Towers, Inc.) 8.625% 7/01/20.... 5,000 5,227
*St. Lucie County Solid Waste Disposal Revenue (Florida Light and
Power Company) V.R.D.B. 5.00%..................... 200 200
-------
8,159

GEORGIA (4.3%)
*Cartersville Development Authority Water and Wastewater Facilities
Revenue (Anheuser Busch) 7.375% 5/01/09........... 5,000 5,897
Municipal Electric Authority of Georgia Power Revenue
6.600% 1/01/18.................................... 6,065 6,792
-------
12,689

IDAHO (1.1%)
*Idaho Housing Agency Single Family Mortgage Revenue Series B
(FHA Insured) 7.500% 7/01/24...................... 3,110 3,244

High-Yield Municipals Fund CONTINUED
- ----------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------------

ILLINOIS (2.4%)

Chicago (Skyway Toll Bridge Revenue (Escrowed in U.S. Treasury
Securities)(pre-refunded to 1/01/04) Series 1994
6.750% 1/01/17.................................... $ 1,500 $ 1,684
**Illinois Development Finance Authority (Catholic Charities
Housing Development) 5.950% 1/01/09............... 1,400 1,369
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 07/01/03).................................... 2,595 2,895
7.000% 2/15/22 Series 1992 (Edward Hospital Association) 685 726
Illinois Housing Development Authority Multi-Family Housing
Series C 7.400% 7/01/23........................... 140 146
*Southwestern Illinois Development Authority Solid Waste Disposal
Revenue (Shell Oil-Wood River Project)
5.050% V.R.D.B. Series 1991..................... 100 100
5.050% V.R.D.B. Series 1992..................... 100 100
*Southwestern Illinois Development Authority (Shell Oil Co.)
(Wood River Project) 5.050% V.R.D.B. Series 1995.. 100 100
-------
7,120

INDIANA (11.8%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 4,000 4,467
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A 6.250% 11/01/16.................. 4,500 4,805
*Indianapolis Airport Authority Revenue Special Facilities
7.100% 1/15/17 (Federal Express Corp.)............ 5,000 5,406
6.500% 11/15/31 (United Airlines)................. 7,000 7,102
Indianapolis Local Public Improvement Bond Bank Series 1991 C
(Escrowed in U.S. Treasury Securities) 6.700% 1/01/17 8,900 9,866
New Castle Economic Development Revenue (Raintree
Square Project)
8.650% 4/01/17 Series 1988 A (FHA Insured)........ 2,860 3,168
***Zero Coupon 3/01/18 Series 1988 B.............. 30,655 77
-------
34,891

IOWA (1.5%)
Iowa Housing Finance Authority Single Family Housing Revenue
Zero Coupon (Effective Yield 10.262%) 9/01/16..... 33,870 3,778
Muscatine County P.C.R. (Monsanto Company Project)
V.R.D.B. 4.200%................................... 700 700
-------
4,478

KANSAS (0.9%)
CSJ Health Systems of Wichita Revenue 7.000% 11/15/18 2,000 2,122
Kansas City Industrial Revenue (PQ Corporation L.O.C. Credit
Suisse Bank) V.R.D.B. 5.050%...................... 400 400
-------
2,522

LOUISIANA (1.9%)
*De Soto Parish Environmental Impact Revenue (International Paper
Co.) Series A 7.700% 11/01/18..................... 2,500 2,843
Louisiana Public Facilities Authority Hospital Revenue (Women's
Hospital Foundation) 7.250% 10/01/22.............. 2,300 2,456
*St. Charles Parish P.C.R. Series 1993 (Shell Oil Co.) (Norco Project)
V.R.D.B. 5.050%................................... 200 200
-------
5,499

MASSACHUSETTS (3.1%)
Massachusetts Bay Transportation Authority Refunding Series B
6.200% 3/01/16.................................... $ 5,825 $ 6,347
Massachusetts Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institution) 6.250% 12/01/22.. 2,000 2,057
*Massachusetts Housing Finance Agency Series A 9.000% 12/01/18 850 878
-------
9,282

MISSISSIPPI (4.0%)
Adams County Hospital Revenue (Jefferson Davis Memorial Hospital)
(Escrowed in U.S. Treasury Securities)(pre-refunded to 10/01/01)
7.900% 10/01/08................................... 750 868
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A.......................... 750 826
9.875% 12/01/14 Series C.......................... 1,000 1,107
7.300% 5/01/25.................................... 2,000 2,098
Lowndes County Solid Waste Disposal & P.C.R. Refunding
(Weyerhaeuser Company) 6.800% 4/01/22............. 5,995 6,847
-------
11,746

MISSOURI (1.1%)
*St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose Arena)
7.875% 12/01/24................................... 3,000 3,222

MONTANA (0.3%)
Montana Board of Housing Single Family Mortgage Revenue
(FHA/VA Insured)
7.300% 10/01/17 Series B-1...................... 450 473
*7.500% 4/01/23 Series B-2...................... 495 520
-------
993

NEBRASKA (1.4%)
*Nebraska Higher Education Loan Program Junior Subordinated
Series A-6 6.450% 6/01/18......................... 4,000 4,156

NEVADA (0.8%)
Humboldt County P.C.R. (Idaho Power Company)
8.300% 12/01/14................................... 2,000 2,362

NEW JERSEY (2.5%)
New Jersey Economic Development Authority Revenue
(Winchester Gardens) 8.625% 11/01/25.............. 5,000 5,130
New Jersey Health Care Facilities Financing Authority Revenue
Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,304
-------
7,434

NEW MEXICO (1.7%)
Farmington P.C.R. Series A (Public Service Company of New
Mexico)(San Juan Project) 6.300% 12/01/16......... 5,000 5,016

NEW YORK (4.2%)
Erie County Water Authority Revenue Refunding (AMBAC Insured)
Zero Coupon (Effective Yield 7.300%) 12/01/17..... 660 149
New York City G.O.
7.250% 8/15/07 Series 1996 B...................... 1,000 1,127
5.750% 2/01/14 Series 1996 F...................... 5,720 5,467
*New York City I.D.A. Special Facility Revenue Series 1994
(Terminal One Group Association L.P. Project) 6.000% 1/01/15 3,465 3,461

NEW YORK (CONTINUED)
Triborough Bridge & Tunnel Authority General Purpose Revenue
Series E 7.250% 1/01/10........................... $ 2,000 $ 2,263
-------
12,467

NORTH CAROLINA (1.9%)
North Carolina Eastern Municipal Power Agency Power Systems
Revenue
6.500% 1/01/18 Series 1991A..................... 1,680 1,790
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities)................................... 3,320 3,780
-------
5,570

OHIO (2.2%)
*Greater Allen County Housing Development Corp. Revenue First
Lien (Steiner-McBride Apartments Project) 10.250% 9/01/03 1,385 1,395
*Ohio Water Development Facilities Authority P.C.R. (Cleveland
Electric Illuminating Company) Mandatory Put
11/01/97 9.750%................................... 5,060 5,215
-------
6,610

OREGON (0.6%)
Port Morrow Revenue Series A (Portland General Electric Company
L.O.C. Industrial Bank of Japan, Ltd.) V.R.D.B. 5.000% 200 200
*Port St. Helens Company P.C.R. Series A (Portland General Electric
Company Project L.O.C. Swiss Bank) V.R.D.B. 5.000% 1,700 1,700
-------
1,900

PENNSYLVANIA (13.6%)
Allentown Area Hospital Authority Revenue (Sacred Heart Hospital
of Allentown) 7.500% 7/01/06...................... 3,460 3,703
Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo Edison
Company) 7.625% 5/01/20........................... 4,900 5,288
*Dauphin County I.D.A. Revenue Series A (Dauphin Consolidated
Water Supply General Waterworks Corp.) 6.900% 6/01/24 2,700 3,123
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 1,155
Delaware County Authority Revenue Health Facilities (Mercy Health
Corp of Southeastern Pennsylvania Project) 6.000% 12/15/26 4,000 3,908
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 3,695
Montgomery County I.D.A. Retirement Community Revenue
Refunding Series A (Adult Communities Total Services)
5.875% 11/15/22................................... 1,250 1,214
*Pennsylvania Economic Development Financing Authority Recycling
Revenue Series 1995 A (Ponderosa Fibres Project)
9.250% 1/01/22.................................... 6,000 5,438
*Pennsylvania Economic Development Financing Authority Resource
Recovery Revenue Refunding (Northhampton)
6.750% 1/01/07 Series 1995 B.................... 3,000 3,071
6.600% 1/01/19 Series A......................... 2,000 1,974
Philadelphia Municipal Lease Revenue Refunding Series 1993 D
6.250% 7/15/13.................................... 2,500 2,533
Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in U.S.
Treasury Securities) 7.350% 9/01/04............... 4,125 4,687
Schuylkill County I.D.A. (Westwood Energy Properties L.P. L.O.C.
Fuji Bank Ltd.) V.R.D.B. 5.100%................... 400 400
-------
40,189

PUERTO RICO (1.9%)
Puerto Rico Highway & Transportation Authority Highway
Revenue Refunding
6.625% 7/01/12 Series V......................... $ 2,000 $ 2,151
6.625% 7/01/18 Series T (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/02)..................... 3,200 3,573
-------
5,724

SOUTH DAKOTA (0.9%)
*South Dakota Student Loan Assistance Corp. Student Loan Revenue
Series B 7.450% 8/01/00........................... 2,700 2,806

TENNESSEE (1.0%)
Knox County Health, Educational and Housing Facilities Revenue (Baptist Health
Systems of East Tennessee)(Escrowed in U.S.
Treasury Securities)(pre-refunded to 4/15/99) 8.600% 4/15/16 2,005 2,228
Metropolitan Government Nashville & Davidson County Health &
Educational Facilities Board Revenue (Richland Place Inc. Project
L.O.C. Societe Generale) V.R.D.B. 4.150%.......... 700 700
-------
2,928

TEXAS (9.1%)
*Alliance Airport Authority Special Facilities Revenue Series 1991
(American Airlines) 7.000% 12/01/11............... 4,000 4,443
*Bexar County Housing Financing Corp. Revenue Series B
(collateralized by Government National Mortgage Association
Securities) 9.250% 4/01/16........................ 420 436
*Gulf Coast Waste Disposal Authority Refunding (Amoco Oil Co.
Project) V.R.D.B. 5.050%
Series 1994..................................... 300 300
Series 1995..................................... 100 100
Series 1996..................................... 200 200
Harris County Housing Finance Corp. Single Family Housing
Revenue Series 1983 9.625% 3/15/03................ 260 260
Montgomery County Health Facilities Development Corp. Hospital
Mortgage Revenue Refunding (Woodlands Medical Center)
8.850% 8/15/14.................................... 2,460 2,639
North Central Health Facilities Development Corporation Hospital
Revenue (Tri-City Health Center) 9.500% 5/01/21... 8,300 6,225
*Port Bay City Authority Revenue (Hoechst Celanese Corp.)
6.500% 5/01/26.................................... 3,000 3,144
Port Corpus Christi Industrial Development Corporation Revenue
Series A (Valero Refining & Marketing) 10.250% 6/01/17 4,280 4,505
*Port Corpus Christi Industrial Development Corporation Sewer and
Solid Waste (Citgo Petroleum Corporation Project L.O.C. Banque
National de Paris) V.R.D.B. 5.100%................ 300 300
*San Antonio Airport Lease Revenue (Hedrick Beechcraft Project)
(Raytheon Company) V.R.D.B. 4.300%................ 100 100
*Texas Housing Agency Residential Mortgage Revenue Series D
8.400% 1/01/21.................................... 305 318
Texas State T.R.A.N. 4.750% 8/29/97 1996 Series...... 4,000 4,035
-------
27,005

UTAH (0.5%)
*Utah Housing Finance Agency Single Family Mortgage
7.750% 1/01/23 Series B-2 (FHA Insured)........... 530 560
7.550% 7/01/23 Series C-3 (FHA/VA Insured)........ 780 821
-------
1,381

VIRGINIA (2.4%)
*Pittsylvania County I.D.A. Revenue Series A
(Multitrade of Pittsylvania County L.P.)
7.450% 1/01/09.................................. $ 3,500 $ 3,657
7.550% 1/01/19.................................. 3,100 3,238
Peninsula Ports Authority Coal Terminal Revenue Refunding Series D
(Dominion Terminal Project L.O.C. Barclays Bank N.Y.)
V.R.D.B. 4.950%................................... 200 200
--------
7,095

WASHINGTON (6.2%)
Quincy Water and Sewer Revenue Series I (Escrowed in U.S.
Treasury Securities)(pre-refunded to 11/01/00)
9.250% 11/01/10................................... 2,565 2,925
Washington G.O. Series B 6.400% 6/01/17.............. 5,000 5,561
Washington Health Care Facilities Authority Revenue (Sacred Heart
Medical Center, Spokane) 6.875% 2/15/12........... 1,500 1,619
*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.... 1,720 273
Zero Coupon (Effective Yield 7.750%) 7/01/22.... 1,905 292
Zero Coupon (Effective Yield 7.750%) 1/01/23.... 1,905 281
Zero Coupon (Effective Yield 7.750%) 7/01/23.... 1,910 272
Zero Coupon (Effective Yield 7.750%) 1/01/24.... 1,920 263
Zero Coupon (Effective Yield 7.750%) 7/01/24.... 1,910 252
Washington Public Power Supply Systems Revenue (Nuclear Project #2)
Zero Coupon (Effective Yield 6.888%) 7/01/07...... 6,945 3,871
6.300% 7/01/12 Series 1992 A...................... 2,500 2,671
--------
18,280

WISCONSIN (1.0%)
*Wisconsin Housing and Economic Development Authority Revenue
7.850% 3/01/24.................................... 2,950 3,094

WYOMING (0.6%)
Wyoming Community Development Authority Single Family
Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17 1,730 1,819
- ---------------------------------------------------------------------------------------------------

TOTAL MUNICIPAL SECURITIES (98.4%)
(Amortized cost $279,415)...................................... 291,487
OTHER ASSETS, LESS LIABILITIES (1.6%)............................. 4,687
--------
TOTAL NET ASSETS (100.0%)......................................... $296,174
========
- ---------------------------------------------------------------------------------------------------

<FN>
*These securities are subject to the federal alternative minimum tax. At
December 31, 1996, these securities represented 31.5 percent of net assets.
**This security is subject to contractual or legal restrictions on its resale.
At December 31, 1996, the value of this security represented 0.5 percent of
net assets.
***Non-income producing securities.
</FN>

See accompanying notes to financial statements.

</TABLE>
<PAGE>

This page intentionally left blank.

Balance Sheets
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1996
(All Amounts in Thousands, except Per-Share Amounts)
(Unaudited)

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

Assets

Investments, at market value $ -- $199,126 $604,645 $291,487
Investment in SR&F Municipal Money Market Portfolio, at value 120,571 -- -- --
Receivable for investments sold -- 30 370 435
Receivable for fund shares sold 1,730 16 212 111
Accrued interest receivable -- 3,552 11,345 5,700
Cash and other assets 59 171 604 294
--------- --------- --------- ---------
Total Assets $122,360 $202,895 $617,176 $298,027
======== ======== ======== ========
Liabilities

Payable for fund shares redeemed $ 812 $ 99 $ 237 $ 99
Dividends payable 85 594 1,811 1,317
Payable to investment adviser and transfer agent 18 103 329 181
Other liabilities 20 389 54 256
--------- --------- --------- ---------
Total Liabilities 935 1,185 2,431 1,853
--------- --------- --------- ---------
Capital

Paid-in capital 121,432 192,079 574,625 292,890
Net unrealized appreciation of investments -- 9,612 43,174 12,072
Accumulated net realized gains (losses) on investments (7) 19 (3,054) (8,788)
--------- --------- --------- ---------
Total Capital (Net Assets) 121,425 201,710 614,745 296,174
--------- --------- --------- ---------
Total Liabilities and Capital $122,360 $202,895 $617,176 $298,027
======== ======== ======== ========
Shares Outstanding (Unlimited Number Authorized) 121,358 17,760 67,815 25,507
======== ======== ======== ========
Net Asset Value (Capital) Per Share $ 1.00 $ 11.36 $ 9.07 $ 11.61
======== ======== ======== ========

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Statements of Operations
- -----------------------------------------------------------------------------------------------------------------------------------
For The Six Months Ended
December 31, 1996
(All Amounts In Thousands)
(Unaudited)

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

Investment Income

Tax-exempt interest $ -- $5,625 $18,508 $10,290
Tax-exempt interest income allocated from SR&F
Municipal Money Market Portfolio 2,192 -- -- --
------- ------- -------- --------
Total Investment Income 2,192 5,625 18,508 10,290

Expenses

Management fees -- 447 1,268 621
Expenses allocated from SR&F Municipal Money Market Portfolio 187 -- -- --
Administrative fees 151 139 342 182
Transfer agent fees 91 143 430 204
Printing and postage 31 21 60 36
Legal and audit fees 9 12 11 32
Accounting fees 13 14 20 16
Trustees' fees 10 12 18 15
Custodian fees 6 10 23 8
Other 36 46 4 4
------- ------- -------- --------
534 844 2,176 1,118
Reimbursement of expenses by investment adviser (110) (129) -- --
------- ------- -------- --------
Total Expenses 424 715 2,176 1,118
------- ------- -------- --------
Net Investment Income 1,768 4,910 16,332 9,172
------- ------- -------- --------
Realized and Unrealized Gains (Losses) on Investments

Net realized gains (losses) on investments -- 599 1,030 (3,958)
Net change in unrealized appreciation or depreciation on investments -- 2,996 13,444 9,191
------- ------- -------- --------
Net Gains on Investments -- 3,595 14,474 5,233
------- ------- -------- --------
Net Increase in Net Assets Resulting from Operations $1,768 $8,505 $30,806 $14,405
======= ======= ======== ========

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
(All Amounts In Thousands)
(Unaudited)
Municipal Money Intermediate
Market Fund Municipals Fund

Year Six Months Year Six Months
Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1996 1996 1996 1996
---------------------------- -----------------------------

Operations

Net investment income $ 4,147 $ 1,768 $ 10,327 $ 4,910
Net realized gains (losses) on investments (5) -- 1,659 599
Net change in unrealized appreciation or depreciation of investments -- -- (459) 2,996
---------- ---------- ---------- ---------
Net Increase in Net Assets Resulting from Operations 4,142 1,768 11,527 8,505
---------- --------- ---------- ---------
Distributions To Shareholders

Dividends from net investment income (4,147) (1,768) (10,327) (4,910)
Dividends from net capital gains -- -- -- (1,147)
---------- ---------- ---------- ---------
Total Distributions to Shareholders (4,147) (1,768) (10,327) (6,057)
---------- --------- ---------- ---------
Share Transactions

Subscriptions to fund shares 178,387 83,163 37,532 15,215
Investment income dividends reinvested 3,663 1,472 6,377 2,770
Capital gains distributions reinvested -- -- -- 768
Redemptions of fund shares (208,317) (83,642) (52,872) (24,217)
---------- ---------- ---------- ---------
Net Increase (Decrease) from Share Transactions (26,267) 993 (8,963) (5,464)
---------- ---------- ---------- ---------
Net Increase (Decrease) in Net Assets (26,272) 993 (7,763) (3,016)

Total Net Assets
Beginning of Period 146,704 120,432 212,489 204,726
---------- ---------- ---------- ---------
End of Period $120,432 $121,425 $204,726 $201,710
=========== ============= ============ ==========
Analyses of Changes in Shares of Beneficial Interest

Subscriptions to fund shares 178,387 83,163 3,308 1,345
Investment income dividends reinvested 3,663 1,472 562 244
Capital gains distributions reinvested -- -- -- 68
---------- ---------- ---------- ---------
182,050 84,635 3,870 1,657
Redemptions of fund shares (208,317) (83,642) (4,662) (2,140)
---------- ---------- ---------- ---------
Net increase (decrease) in fund shares (26,267) 993 (792) (483)
Shares outstanding at beginning of period 146,632 120,365 19,035 18,243
---------- ---------- ---------- ---------
Shares outstanding at end of period 120,365 121,358 18,243 17,760
========== ========== ========== =========

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
(All Amounts In Thousands)
(Unaudited)

Managed High-Yield
Municipals Fund Municipals Fund

Year Six Months Year Six Months
Ended Ended Ended Ended
June 30, Dec. 31, June 30, Dec. 31,
1996 1996 1996 1996
------------------------------- -------------------------

Operations

Net investment income $ 33,699 $ 16,332 $ 16,389 $ 9,172
Net realized gains (losses) on investments 3,828 1,030 180 (3,958)
Net change in unrealized appreciation or depreciation of investments 864 13,444 2,229 9,191
---------- ---------- ---------- ---------
Net Increase in Net Assets Resulting from Operations 38,391 30,806 18,798 14,405
---------- --------- ---------- ---------
Distributions To Shareholders
Dividends from net investment income (33,699) (16,332) (16,389) (9,172)
---------- --------- ---------- ---------
Share Transactions

Subscriptions to fund shares 43,018 25,053 48,888 23,550
Investment income dividends reinvested 18,841 8,913 9,372 4,709
Redemptions of fund shares (89,922) (40,054) (58,868) (20,274)
---------- ---------- ---------- ---------
Net Increase (Decrease) from Share Transactions (28,063) (6,088) (608) 7,985
---------- ---------- ---------- ---------
Net Increase (Decrease) in Net Assets (23,371) 8,386 1,801 13,218

Total Net Assets
Beginning of Period 629,730 606,359 281,155 282,956
---------- ---------- ---------- ---------
End of Period $606,359 $614,745 $282,956 $296,174
========== ========== ========== =========
Analyses of Changes in Shares of Beneficial Interest

Subscriptions to fund shares 4,798 2,787 4,256 2,049
Investment income dividends reinvested 2,106 993 814 409
---------- ---------- ---------- ---------
6,904 3,780 5,070 2,458
Redemptions of fund shares (10,050) (4,472) (5,111) (1,765)
---------- ---------- ---------- ---------
Net increase (decrease) in fund shares (3,146) (692) (41) 693
Shares outstanding at beginning of period 71,653 68,507 24,855 24,814
---------- ---------- ---------- ---------
Shares outstanding at end of period 68,507 67,815 24,814 25,507
========== ========== ========== =========

See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
Balance Sheet
(All Amounts In Thousands)
(Unaudited)

DEC. 31,
1996
----------

<S> <C>

ASSETS

Investments, at market value.................................... $144,121
Accrued interest receivable..................................... 997
---------
Total Assets................................................. $145,118
=========
LIABILITIES

Payable for investments purchased............................... $ 4,051
Payable to investment adviser................................... 33
Other liabilities............................................... 2
---------
Total Liabilities............................................ 4,086
---------
Net Assets applicable to investors' beneficial interest......... $141,032
=========
See accompanying notes to financial statements.

</TABLE>
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------
Statement of Operations
(All Amounts In Thousands)
(Unaudited)

SIX MONTHS
ENDED
DEC. 31,
1996
----------

<S> <C>

INVESTMENT INCOME

Tax-exempt interest income...................................... $2,561
-------

EXPENSES

Management fees................................................. 177
Audit and legal fees............................................ 5
Accounting fees................................................. 14
Trustees' fees.................................................. 8
Custodian fees.................................................. 7
Other........................................................... 8
-------
Total Expenses............................................... 219
-------
Net Investment Income........................................... $2,342
======
See accompanying notes to financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
(All Amounts In Thousands)
(Unaudited)

ERIOD SIX MONTHS
ENDED ENDED
JUNE 30, DEC. 31,
(A) 1996
-----------------------------------

OPERATIONS

Net investment income............................ $ 4,054 $ 2,342
-------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS

Contributions.................................... 241,616 59,224
Withdrawals...................................... (102,742) (63,462)
--------- --------
Net Increase (Decrease) from Share Transactions 138,874 (4,238)
--------- --------
Net Increase (Decrease) in Net Assets......... 142,928 (1,896)

TOTAL NET ASSETS

Beginning of Period.............................. -- $142,928
-------- ----------
End of Period.................................... $142,928 $141,032
======== ==========

<FN>
(a) The portfolio commenced operations September 28, 1995.
</FN>

See accompanying notes to financial statements.

</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 allocates net asset value, income and expenses based
on respective percentage ownership of each investor on a daily basis. At
December 31, 1996, Stein Roe Municipal Money Market Fund and Colonial
Municipal Money Market Fund owned 85.5 percent and 14.5 percent, respectively.

Note 2. Significant Accounting Policies

The following are the significant accounting policies of Stein Roe Municipal
Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed
Municipals Fund and Stein Roe High-Yield Municipals Fund (the "Funds"), each a
series of the Stein Roe Municipal Trust (a Massachusetts business trust), and
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.

Security Valuations

All securities are valued as of December 31, 1996. 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

<PAGE>

gains or losses. In the event that a deviation of .50 of 1 percent or more
exists between 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 substi tute
for the purchase of individual bonds. Risks of entering into futures contracts
include the possibility that there may be an illiquid market at the time a
fund seeks to close out a contract, and changes in the value of the futures
contract may not correlate with changes in the value of the portfolio
securities being hedged.

Upon entering into a futures contract, a 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 a fund equal to the
daily change in the contract value and are recorded as unrealized gains or
losses. A fund recognizes a realized gain or loss when the contract is closed
or expires. None of the Funds entered into futures contracts during the period
ended December 31, 1996.

Federal Income Taxes

No provision is made for federal income taxes since 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.

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

</TABLE>
<PAGE>

Distributions to Shareholders

Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Distributions
in excess of tax basis earnings are reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings that result in temporary
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 six months ended December 31,
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 December 31, 1996. 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 accreted 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.

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 breakdowns. 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 December 31, 1996, invest ments in these securities for

<PAGE>

Intermediate Municipals Fund, High-Yield Municipals Fund and Managed
Municipals Fund repre sented 50.0 percent, 3.7 percent and 23.4 percent of
holdings, respectively. SR&F Municipal Money Market Portfolio's investments
include certain short-term securities that are backed by bank letters of
credit used to provide liquidity to the issuer and/or additional security in
the event of default by the issuer. At December 31, 1996, 51.0 percent of the
Portfolio was backed by bank letters of credit. See each Fund's or the
Portfolio's schedule of investments for addi tional 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 monthly management fees, computed and accrued
daily, 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. The management fee for SR&F
Municipal Money Market 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
Intermediate Municipals Fund and High-Yield Municipals Fund is .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 Managed Municipals Fund is .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 of 1 percent
thereafter.

The Funds pay monthly adminis tra tive fees to the Adviser. Intermediate
Municipals Fund and High-Yield Municipals Fund administrative fee is .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 Managed Municipals Fund is .15 of 1 percent of the
first $100 million of average daily net assets, .125 of 1 percent of the next

<PAGE>

$100 million, .10 of 1 percent of the next $800 million and .075 of 1 percent
thereafter.

The administrative agreements of Municipal Money Market Fund Intermediate
Municipals Fund, Managed Municipals Fund, and High-Yield Municipals 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. SSI has 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 six months
ended December 31, 1996, Municipal Money Market Fund, Intermediate Municipals
Fund, Managed Municipals Fund, High-Yield Municipals Fund and the Portfolio
incurred charges of $13, $14, $20, $16 and $14, 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 Fund and the Portfolio for the six months ended
December 31, 1996, was $10, $12, $18, $15 and $8, respectively. No remunera
tion was paid to any other trustee or officer of the Trust.

Note 5. Short-Term Debt

To facilitate portfolio liquidity, the Funds and the 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 six months ended December 31, 1996.

<PAGE>

Note 6. Investment Transactions
The aggregate cost of purchases and proceeds from sales or maturities of
securities, excluding short-term obligations, for the six months ended
December 31, 1996, were as follows:

FUND Purchases Sales
--------- ---------

Intermediate Municipals Fund........................... $52,623 $56,002
Managed Municipals Fund................................ 55,576 61,245
High-Yield Municipals Fund............................. 22,048 15,549

</TABLE>

At December 31, 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........... $ 9,615 $ 3 $ 9,612
Managed Municipals Fund................ 43,362 188 43,174
High-Yield Municipals Fund............. 18,488 5,786 12,702

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Municipal Money Market Fund
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.

Six
Year Months
Ended Ended
Dec, 31, June 30, Years Ended June 30,
1987 1988 1989 1990 1991 1992
--------- --------- --------- --------- --------- ---------

Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- --------- ---------
Net investment income .040 .021 .056 .054 .046 .032
Distributions from net investment income (.040) (.021) (.056) (.054) (.046) (.032)
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ========= ========= =========
Ratio of net expenses to average net assets (a) 0.69% 0.67%* 0.67% 0.67% 0.68% 0.70%
Ratio of net investment income to average net assets (b) 4.08% 4.25%* 5.57% 5.40% 4.66% 3.19%
Total return (b) 4.11% 4.29%* 5.74% 5.52% 4.74% 3.25%
Net assets, end of period (000s) $306,971 $294,116 $254,261 $255,953 $237,403 $199,037

Six
Months
Ended
Years Ended June 30, Dec. 31,
1993 1994 1995 1996 1996
--------- --------- --------- --------- ---------

Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------- --------- --------- --------- ---------
Net investment income .020 .019 .030 .031 .016
Distributions from net investment income (.020) (.019) (.030) (.031) (.016)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ========= =========
Ratio of net expenses to average net assets (a) 0.70% 0.70% 0.70% 0.70% 0.70%*
Ratio of net investment income to average net assets (b) 1.96% 1.88% 2.96% 3.09% 2.92%*
Total return (b) 1.97% 1.90% 3.02% 3.13% 1.50%**
Net assets, end of period (000s) $195,887 $165,820 $146,704 $120,432 $121,425

<FN>
* Annualized
** Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser, this ratio would have been 0.78 percent and 0.84
percent for the years ended June 30, 1995, and June 30, 1996, and 0.88 percent
for the six months ended December 31, 1996.
(b) Computed giving effect to Adviser's expense limitation undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SR&F Municipal Money Market Portfolio

Period Six Months
Ended Ended
June 30, Dec. 31,
1996 (a) 1996
------- ---------

Ratios to Average Net Assets

Ratio of net investment income to average net assets 3.50%* 3.31%*
Ratio of net expenses to average net assets 0.30%* 0.31%*

<FN>
* Annualized
(a) The portfolio commenced operations on September 28, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Financial Highlights Continued
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Municipals Fund

Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.

Six
Year Months
Ended Ended
Dec. 31, June 30, Years Ended June 30,
1987 1988 1989 1990 1991 1992
-------- ------- ------- ------- ------- --------

Net Asset Value, Beginning of Period $ 10.76 $ 10.37 $ 10.43 $ 10.50 $ 10.54 $ 10.73
------- ------- ------- ------- -------- --------
Income From Investment Operations

Net investment income .57 .29 .62 .63 .62 .57
Net realized and unrealized gains (losses) on investments (.38) .06 .07 .07 .22 .50
------- ------- ------- ------- -------- --------
Total from investment operations .19 .35 .69 .70 .84 1.07

Distributions

Net investment income (.57) (.29) (.62) (.63) (.62) (.57)
Net realized gains (.01) -- -- (.03) (.03) (.17)
In excess of realized gains -- -- -- -- -- --
------- ------- ------- ------- -------- --------
Total distributions (.58) (.29) (.62) (.66) (.65) (.74)
------- ------- ------- ------- -------- --------
Net Asset Value, End of Period $ 10.37 $ 10.43 $ 10.50 $ 10.54 $ 10.73 $ 11.06
======= ======= ======= ======= ======== ========
Ratio of net expenses to average net assets (a) 0.80% 0.80%* 0.80% 0.80% 0.80% 0.79%
Ratio of net investment income to average net assets (b) 5.47% 5.66%* 5.96% 5.96% 5.79% 5.23%
Portfolio turnover rate 49% 22%** 83% 141% 96% 109%
Total return (b) 1.93% 3.45%** 6.85% 6.85% 8.18% 10.31%
Net assets, end of period (000s) $96,143 $97,308 $91,304 $98,918 $118,651 $165,401

Six
Ended
Years Ended June 30, Dec. 31,
1993 1994 1995 1996 1996
--------- --------- --------- --------- ---------

Net Asset Value, Beginning of Period $ 11.06 $ 11.57 $ 11.00 $ 11.16 $ 11.22
-------- -------- -------- -------- --------
Income From Investment Operations

Net investment income .54 .53 .53 .55 .29
Net realized and unrealized gains (losses) on investments .63 (.39) .16 .06 .20
-------- -------- -------- -------- --------
Total from investment operations 1.17 .14 .69 .61 .49

Distributions

Net investment income (.54) (.53) (.53) (.55) (.29)
Net realized gains (.12) (.17) -- -- (.06)
In excess of realized gains -- (.01) -- -- --
-------- -------- -------- -------- --------
Total distributions (.66) (.71) (.53) (.55) (0.35)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.57 $ 11.00 $ 11.16 $ 11.22 $ 11.36
======== ======== ======== ======== ========
Ratio of net expenses to average net assets (a) 0.72% 0.71% 0.74% 0.70% 0.70%*
Ratio of net investment income to average net assets (b) 4.79% 4.63% 4.94% 4.82% 4.81%*
Portfolio turnover rate 96% 55% 67% 66% 25%**
Total return (b) 10.92% 1.16% 6.59% 5.47% 4.34%**
Net assets, end of period (000s) $245,441 $238,053 $212,489 $204,726 $201,710

<FN>
* Annualized
** Not annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser in connection with the expense limitation that
expired October 31, 1993, this ratio would have been: 0.94 percent and 0.83
percent for the years ended December 31, 1986, and December 31, 1987,
respectively; 0.87 percent for the six months ended June 30, 1988; and 0.82
percent, 0.81 percent 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 percent and 0.81 percent for the years ended
June 30, 1995, and June 30, 1996, and 0.83 percent for the six months ended
December 31, 1996.
(b) Computed giving effect to Adviser's expense limitation undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Financial Highlights Continued
- -----------------------------------------------------------------------------------------------------------------------------------
Managed Municipals Fund

Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.

Six
Year Months
Ended Ended
Dec. 31, June 30, Years Ended June 30,
1987 1988 1989 1990 1991 1992
-------- -------- -------- -------- -------- --------

Net Asset Value, Beginning of Period $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85
-------- -------- -------- -------- -------- --------
Income From Investment Operations

Net investment income .61 .30 .61 .59 .56 .55
Net realized and unrealized gains (losses) on investments (.59) .11 .44 (.06) .19 .46
-------- -------- -------- -------- -------- --------
Total from investment operations .02 .41 1.05 .53 .75 1.01

Distributions

Net investment income (.61) (.30) (.61) (.59) (.56) (.55)
Net realized gains (.13) -- (.03) (.25) (.05) (.20)
In excess of realized gains -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions (.74) (.30) (.64) (.84) (.61) (.75)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85 $ 9.11
========== ========= ========= ======== ======== ========
Ratio of net expenses to average net assets 0.65% 0.65%* 0.65% 0.66% 0.66% 0.64%
Ratio of net investment income to average net assets 6.99% 7.03%* 7.00% 6.66% 6.39% 6.17%
Portfolio turnover rate 113% 28%** 102% 95% 203% 94%
Total return 0.39% 4.90%** 12.69% 6.15% 8.92% 11.95%
Net assets, end of period (000s) $458,170 $467,595 $514,898 $584,081 $655,930 $725,472

Six
Months
Ended
Years Ended June 30, Dec. 31,
1993 1994 1995 1996 1996
--------- --------- --------- --------- ---------

Net Asset Value, Beginning of Period $ 9.11 $ 9.38 $ 8.70 $ 8.79 $ 8.85
-------- -------- -------- -------- --------
Income From Investment Operations

Net investment income .52 .50 .51 .48 .25
Net realized and unrealized gains (losses) on investments .42 (.51) .09 .06 .22
-------- -------- -------- -------- --------
Total from investment operations .94 (.01) .60 .54 .47
Distributions

Net investment income (.52) (.50) (.51) (.48) (.25)
Net realized gains (.15) (.11) -- -- --
In excess of realized gains -- (.06) -- -- --
-------- -------- -------- -------- --------
Total distributions (.67) (.67) (.51) (.48) (.25)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 9.38 $ 8.70 $ 8.79 $ 8.85 $ 9.07
======== ======== ======== ======== ========
Ratio of net expenses to average net assets 0.64% 0.65% 0.65% 0.72% 0.71%*
Ratio of net investment income to average net assets 5.65% 5.45% 5.85% 5.41% 5.32%*
Portfolio turnover rate 63% 36% 33% 40% 9%**
Total return 10.79% (0.29%) 7.12% 6.24% 5.29%**
Net assets, end of period (000s) $776,694 $687,252 $629,730 $606,359 $614,745

<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Financial Highlights Continued

High-Yield Municipals Fund

Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.

Six
Year Months
Ended Ended
Dec. 31, June 30, Years Ended June 30,
1987 1988 1989 1990 1991 1992
-------- -------- -------- -------- -------- --------

Net Asset Value, Beginning of Period $ 12.06 $ 11.06 $ 11.37 $ 11.97 $ 11.78 $ 11.79
-------- -------- -------- -------- -------- --------
Income From Investment Operations

Net investment income .87 .44 .88 .85 .82 .80
Net realized and unrealized gains (losses)
on investments (.89) .31 .63 .02 .17 .22
-------- -------- -------- -------- -------- --------
Total from investment operations (.02) .75 1.51 .87 .99 1.02
Distributions

Net investment income (.87) (.44) (.88) (.85) (.82) (.80)
Net realized gains (.11) -- (.03) (.21) (.16) (.18)
In excess of realized gains -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions (.98) (.44) (.91) (1.06) (.98) (.98)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.06 $ 11.37 $ 11.97 $ 11.78 $ 11.79 $ 11.83
======== ========= ========= ========= ========= ==========
Ratio of net expenses to average net assets 0.73% 0.76%* 0.73% 0.71% 0.71% 0.69%
Ratio of net investment income to average net assets 8.20% 7.87%* 7.54% 7.22% 7.00% 6.75%
Portfolio turnover rate 110% 53%** 208% 261% 195% 88%
Total return (0.16%) 6.89%** 13.79% 7.59% 8.79% 9.01%
Net assets, end of period (000s) $181,600 $201,274 $277,620 $310,582 $373,948 $410,613

Six
Months
Ended
Years Ended June 30, Dec. 31,
1993 1994 1995 1996 1996
-------- --------- --------- --------- ---------

Net Asset Value, Beginning of Period $ 11.83 $ 11.84 $ 11.06 $ 11.31 $ 11.40
-------- -------- -------- -------- --------
Income From Investment Operations

Net investment income .71 .67 .66 .67 .38
Net realized and unrealized gains (losses) on investments .18 (.54) .25 .09 .21
-------- -------- -------- -------- --------
Total from investment operations .89 .13 .91 .76 .59
Distributions

Net investment income (.71) (.67) (.66) (.67) (.38)
Net realized gains (.17) (.17) -- -- --
In excess of realized gains -- (.07) -- -- --
-------- -------- -------- -------- --------
Total distributions (.88) (.91) (.66) (.67) (.38)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 11.84 $ 11.06 $ 11.31 $ 11.40 $ 11.61
======== ======== ======== ======== ========
Ratio of net expenses to average net assets 0.73% 0.76% 0.86% 0.85% 0.77%*
Ratio of net investment income to average net assets 6.04% 5.76% 5.98% 5.86% 6.32%*
Portfolio turnover rate 75% 36% 23% 34% 6%**
Total return 7.88% 0.95% 8.54% 6.83% 5.14%**
Net assets, end of period (000s) $359,103 $308,181 $281,155 $282,956 $296,174

<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
<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 or E-Mail

If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900.

To contact us by e-mail, send correspondence directly to
[email protected] or visit us at www.steinroe.com on the Internet.

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 Stein Roe 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
Janet Langford Kelly
Senior Vice President, Secretary and General Counsel, Sara Lee Corporation
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

Officers

Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President, Secretary
Thomas W. Butch, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief Financial Officer
Joanne T. Costopoulos, Vice President
Philip J. Crosley, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
M. Jane McCart, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Cynthia A. Prah, Vice President
Thomas P. Sorbo, Vice President
Veronica M. Wallace, Vice President
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President
Janet B. Rysz, Assistant Secretary
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer

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

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THE STEIN ROE MUTUAL FUNDS

Stein Roe Government Reserves Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe High Yield 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
Stein Roe Emerging Markets Fund

Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-8900
Financial Advisors call: 1-800-322-0593
Shareholders call: 1-800-338-2550
http://www.steinroe.com

In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor.

Liberty Securities Corporation, Distributor
Member SIPC

TE12A