STEIN ROE MUNICIPAL TRUST, N-30D, 1998-02-27

STEIN ROE MUNICIPAL TRUST
N-30D, 1998-02-27

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STEIN ROE MUTUAL FUNDS

SEMIANNUAL REPORT
DEC. 31, 1997

PHOTO OF: BRIDGE

STEIN ROE TAX-EXEMPT BOND FUNDS

TAX-EXEMPT FUNDS

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

LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(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

Interviews with the portfolio managers and a summary of
investment activity over the past six months
Municipal Money Market Portfolio............................... 6
Intermediate Municipals Fund .................................. 9
Managed Municipals Fund ....................................... 13
High-Yield Municipals Fund .................................... 15

Investments....................................................... 19

A complete list of investments with market values

Financial Statements.............................................. 46

Statements of assets and liabilities, statements of operations
and changes in net assets

Notes to Financial Statements..................................... 56

Financial Highlights.............................................. 62

Selected per-share data

General Information............................................... 72

Must be preceded or accompanied by a prospectus.

<PAGE>
From the President

TO OUR SHAREHOLDERS
We are pleased to present this semiannual report for Stein Roe's 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. In the following pages, we'll provide you with an overview of
economic events that occurred over the past six months and explain how we
positioned the funds to respond to those events.

A BOND INVESTOR'S EDEN
Thanks to ebbing inflation, a shrinking budget deficit and a Federal
Reserve willing to stand pat on interest rates, 1997 proved to be a near-perfect
environment for bonds. And bonds responded, posting near-record returns.
Nearly all types of bonds bene fited: corporate bonds, high yield bonds, even
emerging markets bonds turned in stellar performances by Dec. 31, 1997. The
benchmark 30-year bond rallied, its yield dropping to 5.92 percent on Dec. 31,
1997, its lowest level in more than four years. And, in the last six months,
Treasury bonds did the unthinkable -- they outperformed the Dow Jones Industrial
Average.*

ASIAN TURMOIL BOOSTS BONDS
The strong rally in Treasury bonds was driven in part by a financial crisis
in Asia that roiled stock markets worldwide. Excess debt, overcapacity and what
may have been unwise economic and fiscal policies sparked the devaluation of
several Southeast Asian currencies in July and August 1997. The resulting
currency crisis struck many Southeast Asian economies, then sparked a
surprisingly severe crash in Hong Kong. By the end of October, this sequence of
events had finally unnerved investors in the developed countries. The result:
sharp declines in all of the major markets, including the United States. Stocks
fell more than 550 points in one day of trading on Oct. 28, 1997.
The situation in Asia stabilized somewhat in December, with the International
Monetary Fund providing resources to South Korea, and several other governments
proposing plans to get their economies to a more healthy state.
The stock market's unrest took its toll, spurring what's known as a flight
to quality. Investors, in search of a relatively safer investment haven, and to
profit from a possible drop in interest rates, turned to bonds -- Treasuries in
particular -- in droves. And foreign investors, encouraged by the strong U.S.
dollar, swelled their ranks.

<PAGE>

A ROSY OUTLOOK
The last several years have proved to be a great golden era for the United
States. Unemployment rates are at historic lows. Inflation is tame at roughly 2
percent. The economy is growing steadily. Corporate profits are expanding.
Hourly wages are rising. And, for the first time in recent memory, Congress is
looking at a possible budget surplus in 1998.
Some economists speculate that the combination of technological advances,
global competition and productivity improvements will keep price pressures at a
minimum, and bonds popular, far into the future. The rapid reduction of the U.S.
budget deficit could mean good news for bonds, too. That's because smaller
deficits reduce the government's need to borrow and shrink the number of bond
issues it floats. A minimized supply could push prices upward.
So, while the path to recovery for many Southeast Asian nations will be
long and difficult -- and may cause some choppiness in the investment markets in
1998 -- we believe the disruptions there are unlikely to have a major impact on
our economy or the profits of U.S. corporations as a whole. What's more, we
anticipate any ill effects on other developed Western economies to be relatively
mild over the next several quarters. As a result, we look forward to a continued
strong U.S. economy, and a favorable environment for bond investors in 1998.

THE BASICS
No one can predict what might happen to the markets in the future. But no
matter what direction you think the economy is heading, it's important to
remember the basics. 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. Think long term and re-evaluate your investment
portfolio from time to time to make sure it continues to match your goals,
risk tolerance and time horizon.

Sincerely,

Timothy K. Armour
President
Jan. 29, 1998

* Treasury bonds, as measured by the Merrill Lynch Treasury Master Index
returned 6.83 percent for the six months ended Dec. 31, 1997. The Dow Jones
Industrial Average returned 3.99 percent for the same period.

<PAGE>
Fund Performance
- -------------------------------------------------------------------------------
There are several ways to evaluate a fund's historical performance. You can
look at the cumulative return percentage, the average annual return percentage
or the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any dividends
(net investment income) and capital gains (the profits the fund earns when it
sells fixed income securities that have grown in value).
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Periods ended Dec. 31, 1997
PAST 1 PAST 3 PAST 5 PAST 10
YEAR YEARS YEARS YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL MONEY MARKET FUND 3.12% 3.15% 2.72% 3.60%
INTERMEDIATE MUNICIPALS FUND 7.50 8.14 6.30 7.15
Lehman 10-Year Municipal Bond Index 9.24 10.19 7.52 8.43
Lehman 7-Year Municipal Bond Index 7.69 8.66 6.62 --
MANAGED MUNICIPALS FUND 9.31 9.78 6.85 8.27
HIGH-YIELD MUNICIPALS FUND 9.53 10.45 7.42 8.48
Lehman Municipal Bond Index 9.19 10.23 7.36 8.58
- -------------------------------------------------------------------------------
<FN>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The Lehman 10-Year Municipal Bond, 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 six-month period ended Dec. 31, 1997.

- -------------------------------------------------------------------------------
Intermediate Municipals Fund
LINE CHART:
INTERMEDIATE LEHMAN 10-YEAR
MUNICIPALS MUNICIPAL
FUND BOND INDEX
6/30/87 10000 10000
6/30/88 10561 10689
6/30/89 11284 11718
6/30/90 12057 12555
6/30/91 13043 13848
6/30/92 14388 15416
6/30/93 15959 17355
6/30/94 16144 17525
6/30/95 17208 19063
6/30/96 18149 20282
6/30/97 19432 21970
12/31/97 20357 23240

- -------------------------------------------------------------------------------
Managed Municipals Fund
LINE CHART:
MANAGED LEHMAN
MUNICIPALS MUNICIPAL
FUND BOND INDEX
6/30/87 10000 10000
6/30/88 10754 10741
6/30/89 12119 11962
6/30/90 12864 12778
6/30/91 14011 13929
6/30/92 15685 15572
6/30/93 17377 17431
6/30/94 17327 17461
6/30/95 18561 18999
6/30/96 19719 20260
6/30/97 21407 21937
12/31/97 22696 23212

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. 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.
<PAGE>
Investment Comparison
- -------------------------------------------------------------------------------
COMPARISON of change in value of a $10,000 investment for the years ended June
30 and the six-month period ended Dec. 31, 1997.
- -------------------------------------------------------------------------------
High-Yield Municipals Fund
LINE CHART:
HIGH-YIELD LEHMAN
MUNICIPALS MUNICIPAL BOND
FUND INDEX
6/30/87 10000 10000
6/30/88 10866 10741
6/30/89 12364 11962
6/30/90 13302 12778
6/30/91 14471 13929
6/30/92 15775 15572
6/30/93 17018 17431
6/30/94 17180 17461
6/30/95 18647 18999
6/30/96 19921 20260
6/30/97 21696 21937
12/31/97 22941 23212

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:
$130.3 million

PHOTO OF: VERONICA WALLACE

Q: HOW DID THE FUND PERFORM?

A: With a 1.58 percent return on Dec. 31, 1997, the Fund finished the reporting
period just ahead of the Lipper peer group median return of 1.56 percent.

Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE REPORTING PERIOD?

A: The markets were stable but investors were cautious, waiting to discern the
market reactions to an Asian currency crisis unlike any ever experienced before.
During this period, variable rate demand notes -- bonds that reset their rates
daily and weekly -- had attractive rates. Investors tend to remain neutral in
uncertain markets. This allows investors more flexibility to adjust to market
changes. Amid the speculation, low inflation and continued growth in the United
States remained constant.

Q: WHAT WAS YOUR STRATEGY?

A: We kept the portfolio structure unchanged for the past two quarters. We were
concerned about the possibility of a rate increase, so we did not want to make
any change to the portfolio's average maturity. The largest portion of the
portfolio's assets are invested in variable rate demand notes. We believe these
securities provide us the necessary flexibility to help manage our average
maturity and provide liquidity for the fund. Because we try to lock in higher
yields where possible, we also added to our holdings of securities with
maturities between 90 and 180 days. We made occasional purchases in commercial
paper and six-month notes when we thought they were attractive. We also managed
our maturities to avoid investing in a lower-rate environment typically caused
by an increase in demand in January.

<PAGE>

Q: WHILE YOU MADE FEW CHANGES IN THE PORTFOLIO, ITS AVERAGE MATURITY SHORTENED.
WHY?

A: The portfolio's average maturity dropped from 53.4 days on June 30, 1997, to
46.0 days on Dec. 31, 1997. We made efforts to maintain a neutral duration in
the portfolio. If we don't purchase securities with the intention of going out
longer on the yield curve, the portfolio's average maturity comes down
naturally. In addition, an increased flow of assets during the six-month period
diluted the portfolio's average maturity, causing it to go down slightly. We
sought to maintain the portfolio's average maturity at a level that we believed
would provide flexibility in an uncertain environment -- short enough to invest
in inexpensive bonds if the Federal Reserve raised rates, yet long enough to
help lock in current rates if the Federal Reserve lowered rates.

Q: WHAT DO YOU EXPECT FROM THE YEAR AHEAD?

A: We think the economy may continue on its stable growth track. If we begin to
see signs that rates are going to come down, we will purchase longer-maturity
securities to help lock in rates. Until signs are more concrete for a tightening
or easing of interest rates, we will try to maintain a neutral position and
continue to evaluate investment opportunities in the market.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. Portfolio
holdings are as of Dec. 31, 1997; portfolio data is 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
$271,050 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 June 30, 1997 would have
been 3.25 percent and 5.48 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 Dec. 31, 1997, were 3.09 percent, 2.72
percent and 3.66 percent, respectively.
<PAGE>
Portfolio Highlights
<TABLE>
<CAPTION>
Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
SECURITY TYPE BREAKDOWN
- -------------------------------------------------------------------------------
PORTFOLIO PORTFOLIO
JUNE 30, 1997 DEC. 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Pollution Control:
Industrial 17.0% 19.9%
Utility 8.7 9.1
Steel/Metal 8.7 8.1
Chemical 5.0 6.5
Food Industry 5.3 4.9
Other Pollution Control 4.8 3.2
Revenue:
Housing 12.0 11.4
Education 5.1 5.1
Student Loan 3.5 3.3
Hospital 5.6 3.1
Airport/Port -- 2.6
Tax 3.5 1.0
Waste Disposal 0.7 0.7
Utility 1.7 0.4
Other Revenue 11.3 12.1
General Obligation 5.0 8.6
Escrowed 2.1 --
- -------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------
</TABLE>
PIE CHARTS:
MATURITY
As of June 30, 1997
180-359 DAYS 12.0%
90-179 DAYS 4.7%
60-89 DAYS 5.5%
30-59 DAYS 4.4%
0-29 DAYS 73.4%

As of Dec. 31, 1997
180-359 DAYS 9.7%
90-179 DAYS 12.1%
60-89 DAYS 3.5%
30-59 DAYS 5.7%
0-29 DAYS 69.0%
<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:
Oct. 9, 1985

TOTAL NET ASSETS:
$201.7 million

PHOTO OF: JOANNE COSTOPOULOS

Q: HOW DID THE FUND PERFORM?

A: For the six months ended Dec. 31, 1997, Intermediate Municipals Fund's return
of 4.76 percent outpaced the 4.56 percent return of its Lipper peer group.
The Fund trailed the 5.77 percent return of the Lehman 10-year Municipal
Bond Index, primarily because the Fund held a shorter duration, shorter maturity
and higher quality portfolio than the index for the six-month period. The Lehman
10-year Municipal Bond Index tends to have a maturity of eight to 12 years and a
duration that averages roughly seven; the Fund's average maturity and duration
tend to center on 8.25 and 5.70 years, respectively. For this reason, we think
it may be useful to compare the Fund to an index that measures performance for a
similar maturity profile, such as the Lehman 7-Year Municipal Bond Index.
Intermediate Municipals Fund's six-month return compares more favorably with the
4.91 percent return of the Lehman 7-Year Municipal Bond Index.

Q: WHAT BENEFITED PERFORMANCE?

A: During the beginning of the fiscal year, investors were concerned that the
Federal Reserve would tighten interest rates. This did not happen, and as
interest rates continued their downward trend, the municipal market was deluged
with new issues. It also underperformed U.S. Treasuries. Interestingly, the Fund
was not affected to the same degree.

<PAGE>

Q: WHY DID YOU RESIST EXTENDING THE PORTFOLIO'S DURATION WHEN PRICES BEGAN TO
RISE?

A: We maintained a neutral duration in part as a defense against the economic
uncertainties we discussed earlier. In addition, because there has been limited
cash flowing into the portfolio, further extending duration would have forced us
to sell holdings that we acquired at substantially higher yields. This meant
taking more gains than we thought prudent -- the tax consequences of this move
would have offset any benefits. We also believe inflation could heat up in
coming months. This could cause bond prices to drop from current higher levels.

Q: WERE THERE ANY OTHER REASONS FOR THE LOW TRADING ACTIVITY IN THE PORTFOLIO?

A: We look for transactions that will help increase the yield achieved by the
portfolio. Narrowing credit spreads meant that yields dropped more on
lower-credit bonds.
The portfolio was positioned favorably. This allowed us to wait for more
attractive reinvestment opportunities rather than take on additional risk by
investing in lower-rated issues.

Q: THE CREDIT QUALITY OF THE PORTFOLIO APPEARS HIGHER THAN IT HAS BEEN IN THE
PAST. WAS THIS A STRATEGIC MOVE ON YOUR PART, OR A REACTION TO MARKET ACTIVITY?

A: The portfolio's credit quality in fact reached its highest level since the
Fund's inception on Oct. 9, 1985, with 71.7 percent of the Fund's total net
assets held in AAA-rated holdings on Dec. 31, 1997. This was driven by heavy
prerefunding in the municipal market and the high volume of insured issuance.
In addition, some of our holdings improved in credit quality during the
six-month period. For example, the rating of one of the portfolio's holdings --
New York Dormitory Authority Bonds -- was increased from BBB to A-. Although
this was less than 1 percent of the portfolio, it is an example of the trend in
the municipal market.

Q: WHAT'S YOUR OUTLOOK?

A: The municipal bond supply is dwindling. In coming quarters, demand will be
one of the municipal bond market's driving factors. If interest rates remain
unchanged -- as we expect they will -- we believe credit spreads will tighten
further. For these reasons, we believe municipal bonds will continue to perform
favorably throughout the earlier part of next year. We plan to take advantage of
tighter yield spreads in coming months and sell some of the portfolio's holdings
in sectors that we believe to be overvalued.

<PAGE>

<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
Intermediate Municipals Fund
- -------------------------------------------------------------------------------
SECURITY TYPE BREAKDOWN
PORTFOLIO PORTFOLIO
JUNE 30, 1997 DEC. 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
General Obligation 24.5% 24.7%
Revenue:
Water & Sewer 11.2 11.1
Hospital 7.8 8.7
Airport 5.9 5.9
Electric 5.8 5.9
Colleges, Universities 3.7 4.1
Toll 4.0 3.9
Student Loan 2.3 2.6
Solid Waste 2.3 2.3
Other Revenue 13.0 12.6
Escrowed 12.1 13.3
Pollution Control 6.8 4.9
- -------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------
</TABLE>
PIE CHART:
MATURITY
As of June 30, 1997 As of Dec. 31, 1997
Greater than 15 years 12.7% 12.8%
10 - 15 Years 19.3% 18.9%
5 - 10 Years 45.2% 41.9%
1 - 5 Years 19.9% 25.3%
Less than 1 Year 2.9% 1.1%

PORTFOLIO QUALITY
As of June 30, 1997 As of Dec. 31, 1997
AAA 70.8% 71.7%
AA 9.5% 8.9%
A 11.7% 11.9%
BBB and Below 8.0% 7.5%
<PAGE>
Q&A
- -------------------------------------------------------------------------------
AN INTERVIEW WITH JANE MCCART, PORTFOLIO MANAGER OF
MANAGED MUNICIPALS FUND AND HIGH-YIELD MUNICIPALS FUND
MANAGED MUNICIPALS FUND Q&A

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:
Feb. 23, 1977

TOTAL NET ASSETS:
$598.1 million

PHOTO OF : JANE MCCART

Q: HOW DID THE FUND PERFORM?

A: The Fund, which returned 6.02 percent for the six months ended Dec. 31, 1997,
topped both the Lipper peer group median return of 5.95 percent and the Lehman
Municipal Bond Index return of 5.81 percent.

Q: WHAT DROVE PERFORMANCE?

A: Approximately 40 percent of the portfolio's total net assets were held in
high-coupon noncallable municipal bonds throughout the six-month period -- this
substantially benefited our performance. As interest rates dropped, these issues
outperformed callable bonds. Call features tend to hinder a bond's performance
when interest rates are declining. That's because bonds become priced to their
shorter call dates rather than their maturity dates; this inhibits price
appreciation.

Q: CAN YOU TELL US ABOUT THE MUNICIPAL MARKET OF THE PAST SIX MONTHS?

A: We saw interest rates on 30-year AAA-rated munici- pal bonds drop by
almost one half of 1 percent. There was heavy demand for municipal bonds by
insurance companies, arbitrageurs and individuals as, on an after-tax basis,
municipals have been inexpensive compared to taxable bond alternatives. In
addition, bonds at times looked better than equities -- particularly to
investors who prefer relative safety in their search for return. A heavy new
issue calendar more than fulfilled the demand as lower interest rates spurred
municipalities both to issue new debt and to refund existing higher-rate debt.

Q: HOW DID YOU STRUCTURE THE PORTFOLIO?

A: Considering the relatively stable economic environment, holding steady
appeared to be our best strategy. We did purchase some specialty state issues,
and we funded withdrawals by selling issues for which yield spreads had
tightened. We also sold some short paper that was prerefunded and set to mature
in the next year or so. Finally, we disposed of some small holdings in the
hospital sector.

<PAGE>

Q: CAN YOU ELABORATE ON THOSE SPECIALTY STATE BUYS?

A: We purchased bonds issued by New York and Massachusetts. These are called
specialty states because residents of those states do not pay taxes on bonds
issued by the state, which causes their bonds to sell at lower yield levels than
other states. We buy specialty state issues when they are trading similarly to
low-tax state issues, and usually sell them when they revert back to their
normal levels.

Q: CAN YOU EXPLAIN THE EFFECTS OF MUNICIPAL INSURANCE FLOODING THE MARKET?

A: Currently more than 50 percent of new municipal issues are insured and the
number of insured issues continues to increase. This makes it challenging for us
to find relative value between sectors -- insured issues are perceived as lower
risk than noninsured issues, so they yield correspondingly less.

Q: PUNDITS PREDICT A SLOWER-GROWTH ECONOMY FOR 1998. HOW WILL THAT AFFECT THE
MUNICIPAL MARKET?

A: We believe a slower-growth economy and low inflation will have a positive
effect on the municipal market. Slower growth could spell lower corporate
earnings, possibly dampening returns on stocks. As a result, we believe
investors will focus more attention toward the fixed income markets.
With the trend toward lower interest rates, we'll continue to maintain our
noncallable positions. We also may shift some of our shorter holdings into
longer maturities in an effort to extend duration. We are currently experiencing
a high level of volatility resulting from the Asian crisis, so we are
temporarily deploying cash inflows into shorter, high-coupon issues until we see
a clearer direction from the market. We'll continue to focus on high-quality
securities -- their credit spreads, unlike those in the taxable markets, have
been narrowing for the past several quarters.

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:
$329.9 million

Q: HOW DID THE FUND PERFORM?

A: For the six months ended Dec. 31, 1997, Stein Roe High-Yield Municipals Fund
returned 5.74 percent, trailing both the Lipper peer group index return of 6.42
percent and the Lehman Brothers Municipal Bond Index return of 5.81 percent.

Q: WHAT AFFECTED PERFORMANCE?

A: A paper de-inking plant owned by the portfolio experienced start-up
difficulties, which negatively affected performance. We subsequently eliminated
the holding from the portfolio. We also sold a hospital holding that was losing
revenue as a result of heightened competition in that specific service area.
Finally, the high yield market saw a substantial number of prerefundings
during the last six months. When a bond is prerefunded, the price of the bond
usually moves up considerably. We did not experience the same number of
prerefundings as other funds in our peer group may have. Finally, several
high-coupon holdings were called, which reduced the portfolio's income.

Q: LOWER-GRADE INVESTMENTS DID WELL DURING THE PAST SIX MONTHS. HOW DID YOU
POSITION THE PORTFOLIO?

A: Lower-rated securities -- issues rated B and below -- typically carry the
highest yields in the market. We were cautious about adding a heavy weighting of
nonrated lower-quality issues to the portfolio -- we thought the yield potential
of such securities was not attractive enough to compensate for their added risk.
We invested primarily in BBB-rated securities, and to a lesser extent in some
BB-rated securities. As a result, we earned lower yields for the Fund than we'd
hoped. We have seen credit spreads widen in the taxable market and believe that,
with the possibility of slower growth in the economy, credit spreads in the
municipal market will eventually widen.

<PAGE>

Q: YOU ADDED TO YOUR HOLDINGS OF UTILITIES. WHY?

A: We believe certain utilities stand to benefit from deregulation in the near
future. We bought a gas-fired generation plant that supplies power to the
primary electricity supplier in New York City, as well as other investor-owned
utilities. We also added small positions to our hospital and airline holdings.
We remain positive about the outlook for our airline holdings -- the airlines
continue to post strong earnings.

Q: THE HIGH YIELD MARKET HAS ENJOYED STRONG INFLOWS OF CASH. HAVE MUNICIPALS
CAPTURED SOME OF THESE ASSETS?

A: The high yield market overall has become saturated with investors --
including other mutual funds -- looking to purchase higher-yielding investments.
The high yield municipal market has gained attention, but not as much as its
taxable counterpart. This is principally driven by the amount of municipal
insurance coverage in the marketplace. The presence of municipal insurance will
continue to compress credit spreads. Insurance companies are insuring about half
of all new municipal issues, and this ratio is increasing. Insured issues carry
higher credit ratings, and consequently lower yields, spurring investors to
consider even lower-rated bonds in search of attractive yields.

Q: WHAT DO YOU EXPECT FOR THE REMAINDER OF THE FUND'S FISCAL YEAR?

A: We are positive about the continued outlook for the high yield market. Going
forward, we will continue to be cautious about investing in lower-grade paper,
and we'll pay close attention to risk and reward in lower-tier investments. We
will closely follow the effects of the Asian situation, particularly its effects
on some of the sectors in which we invest.

<PAGE>

Fund Highlights
<TABLE>
<CAPTION>
Managed Municipals Fund
- -------------------------------------------------------------------------------
SECURITY TYPE BREAKDOWN

PORTFOLIO PORTFOLIO
JUNE 30, 1997 DEC. 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
General Obligation 17.1% 17.6%
Escrowed 11.9 15.7
Pollution Control 14.0 15.1
Revenue:
Housing 13.3 13.1
Electric 10.0 9.5
Toll 7.7 7.1
Water & Sewer 6.8 6.7
Airport 3.6 3.6
Student Loan 3.1 3.2
Hospital 5.4 2.3
Other Revenue 7.1 6.1
- -------------------------------------------------------------------------------
Total 100.0% 100.0%
</TABLE>
PIE CHARTS:
MATURITY
As of June 30, 1997 As of Dec. 31, 1997
Greater than 25 years 14.8% 10.1%
20 - 25 Years 17.4% 18.0%
15 - 20 Years 26.6% 20.8%
10 - 15 Years 22.6% 30.6%
5 - 10 Years 7.3% 6.4%
1 - 5 Years 8.5% 11.0%
Less than 1 Year 2.8% 3.1%

PORTFOLIO QUALITY
As of June 30, 1997 As of Dec. 31, 1997
AAA 36.9% 37.7%
AA 26.8% 32.3%
A 25.9% 21.1%
BBB and Below 10.4% 8.9%
<PAGE>
<TABLE>
<CAPTION>
Fund Highlights
High-Yield Municipals Fund
- -------------------------------------------------------------------------------
SECURITY TYPE BREAKDOWN
PORTFOLIO PORTFOLIO
JUNE 30, 1997 DEC. 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Pollution Control 22.5% 27.4%
Escrowed 17.8 19.6
Revenue:
Housing 12.2 12.5
Electric 7.2 7.1
Hospital 8.8 6.4
Student Loan 2.3 3.2
Airport 4.2 2.2
Toll 4.8 2.1
Other Revenue 11.8 11.2
General Obligation 8.4 8.3
- -------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------
</TABLE>
PIE CHARTS:
MATURITY
As of June 30, 1997 As of Dec. 31, 1997
Over 25 Years 24.6% 24.9%
20 - 25 Years 22.9% 19.2%
15 - 20 Years 19.3% 18.4%
10 - 15 Years 10.0% 11.7%
5 - 10 Years 9.3% 10.3%
1 - 5 Years 10.2% 12.7%
Less than 1 Year 3.7% 2.8%

PORTFOLIO QUALITY
As of June 30, 1997 As of Dec. 31, 1997
AAA 18.0% 20.4%
AA 9.0% 11.0%
A 22.3% 19.8%
BBB 22.2% 21.8%
BB/B 10.4% 11.8%
NR* 18.1% 15.2%

<PAGE>
<TABLE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Principal Market
MUNICIPAL SECURITIES (100.2%) Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
ARIZONA (0.8%)
*Maricopa County I.D.A. Multi-Family Housing Revenue
(Vista Ventana Apartments Project gtd. by Federal
National Mortgage Association) V.R.D.B. 4.200%.... $ 1,200 $ 1,200

ARKANSAS (3.6%)
*Clark County Solid Waste Disposal Revenue (Reynolds Metals Co.
Project L.O.C. SunTrust Company Bank) V.R.D.B. 3.950% 3,000 3,000
*Pulaski County Public Facilities Board Multi-family Revenue
(Chenel Park Apartments Project L.O.C. PNC Bank
Kentucky, Inc.) V.R.D.B. 3.900%................... 2,550 2,550
--------
5,550
CALIFORNIA (3.6%)
City of Orange I.D.A. I.D.R. Series A (Control Air Conditioning
Project L.O.C. California State Teachers Retirement Fund)
V.R.D.B. 3.850%................................... 1,000 1,000
California School Cash Reserve Program Authority Pool Series A
(AMBAC Insured) 4.750% 7/02/98.................... 1,000 1,004
California Statewide Community Development Authority T.R.A.N.
Series A (FSA Insured) 4.500% 6/30/98............. 2,000 2,007
Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 1,000 1,003
Los Angeles Unified School District G.O. T.R.A.N. 1997-98
4.500% 7/01/98.................................... 500 502
--------
5,516
COLORADO (3.3%)
Arapahoe County T.A.N. (Cherry Creek No. 5) 4.500% 6/30/98 1,000 1,003
*Denver Airport System Revenue (L.O.C. Bayerische Landesbank
Girozentrale) Series A
3.800% Mandatory Put 1/29/98.................... 1,000 1,000
3.800% Mandatory Put 2/26/98.................... 1,000 1,000
3.700% Mandatory Put 4/09/98.................... 1,000 1,000
Denver City and County Airport Revenue (L.O.C. Westdeutsche
Landesbank Girozentrale) Series B V.R.D.B. 4.100%. 1,000 1,000
--------
5,003
DELAWARE (1.3%)
*Delaware Economic Authority I.D.R. Series C (Star Enterprise)
(Delaware Clean Power Project L.O.C. Canadian Imperial
Bank) V.R.D.B. 3.950%............................. 2,000 2,000

DISTRICT OF COLUMBIA (2.0%)
District of Columbia Revenue (American University L.O.C.
National Westminster Bank) V.R.D.B. 4.200%....... 1,100 1,100
District of Columbia G.O. T.R.A.N. Series A (L.O.C. Morgan
Guaranty Trust, New York) V.R.D.B. 3.850% ........ 1,000 1,000
District of Columbia T.R.A.N. Series C (L.O.C. Union Bank of
Switzerland) 5.000% 9/30/98....................... 1,000 1,008
--------
3,108
FLORIDA (0.5%)
*Martin County Solid Waste Disposal Revenue (Florida Power &
Light Company Project) V.R.D.B. 5.100%........... 700 700
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA (1.8%)
*Gwinnett County Development Authority I.D.R. (Price Companies
Inc. Project L.O.C. NationsBank) V.R.D.B. 4.350%.. $ 2,800 $ 2,800

IDAHO (0.7%)
Idaho T.A.N. 4.625% 6/30/98.......................... 1,000 1,004

ILLINOIS (10.8%)
Chicago Economic Development Revenue (Crane Carton
Company Project L.O.C. Northern Trust) V.R.D.B. 4.300% 750 750
Chicago Revenue (De La Salle Institute Project L.O.C. Northern
Trust Chicago) V.R.D.B. 3.750%.................... 1,000 1,000
Chicago Tax Increment Refunding Allocation Series A (Stockyards
L.O.C. Northern Trust, Chicago) V.R.D.B. 3.750%... 1,500 1,500
Cook County School District No. 100 G.O. (Berwyn South,
FSA Insured) 8.200% 12/01/98..................... 375 389
Illinois Development Finance Authority (Rest Haven, Illinois
L.O.C. Federal Home Loan Bank and South Holland Trust
& Savings) V.R.D.B. 4.000%........................ 1,000 1,000
*Illinois Development Finance Authority Sewage Facilities Revenue
(Nutrasweet Co. Project gtd. by Monsanto Co.)
V.R.D.B. 3.950%................................... 4,100 4,100
*Illinois Development Finance Authority Solid Waste Disposal
Revenue (Waste Management Inc. Project gtd. by Chase
Manhattan Bank) V.R.D.B. 3.850%................... 2,000 2,000
Illinois Health Facility Authority Revenue (University of Chicago
Project) 3.750% Mandatory Put 5/27/98............. 1,000 1,000
*Illinois Student Assistance Student Loan Revenue Series 1996A
(L.O.C. Bank of America of Illinois) V.R.D.B. 3.750% 1,900 1,900
Northbrook Park District G.O. 5.800% 11/01/98....... 800 812
Quad Cities Regional Economic Development Authority Revenue
(Steel Warehouse L.O.C. Banc One, Indiana)
V.R.D.B. 4.250%................................... 2,000 2,000
--------
16,451
INDIANA (8.0%)
*Crawfordsville Economic Development Revenue (Pedcor
Investments Shady Knoll L.O.C. Federal Home Loan Bank)
V.R.D.B. 4.200%.................................. 1,575 1,575
Fort Wayne Hospital Authority Revenue (Parkview Memorial
Hospital L.O.C. Bank of America, Illinois) V.R.D.B. 3.650%
Series B........................................ 1,000 1,000
Series C........................................ 1,000 1,000
*Franklin Economic Development Revenue Refunding (Pedcor
Investments-Lakeview I Apartments L.O.C. Project Federal
Home Loan Bank, Indianapolis) V.R.D.B. 4.200%..... 2,885 2,885
Gary Environmental Improvement Revenue (U.S. Steel Corp.
Project L.O.C. Bank of Nova Scotia) V.R.D.B. 4.050% 500 500
Indiana Educational Facilities Authority Revenue Refunding
(University of Notre Dame) 3.800% 3/10/98........ 315 315
*Kokomo Economic Development Revenue (Village Community
Partners IV Project L.O.C. Federal Home Loan Bank)
V.R.D.B. 4.200%................................... 2,940 2,940
*LaPorte County Economic Development Revenue (Woodland
Project L.O.C. Federal Home Loan Bank) V.R.D.B. 4.200% 1,983 1,983
--------
12,198
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
IOWA (6.0%)
*Clinton I.D.R. (Sethness Products Project L.O.C. Northern Trust)
V.R.D.B. 4.250%................................... $ 3,400 $ 3,400
Iowa School Corporations Cash Anticipation Program Warrant
Certificates (FSA Insured)
Series 1996-97 B 4.250% 1/30/98................. 1,000 1,000
Series 1997-98 A 4.500% 6/26/98................. 3,000 3,010
Muscatine County P.C.R. (Monsanto Co. Project)
V.R.D.B. 3.800%................................... 1,800 1,800
--------
9,210
KANSAS (0.9%)
*Butler County Solid Waste Disposal Facilities Revenue Series A
(Texaco Refining & Marketing) V.R.D.B. 5.150%.... 300 300
Topeka G.O. Series B 4.250% 3/04/98.................. 1,000 1,001
--------
1,301
KENTUCKY (5.4%)
Clark County P.C.R. Series J-1 (Eastern Kentucky Power gtd. by
National Rural Utilities Cooperative Finance Corp.)
3.700% Optional Put 4/15/98...................... 1,000 1,000
*Covington I.D.R. Series 1991 (White Castle Distributing L.O.C.
Banc One, Columbus) V.R.D.B. 4.250%............... 3,890 3,890
Kentucky Economic Development Finance Authority Hospital
Facilities Revenue (Baptist Healthcare System L.O.C. Canadian
Imperial Bank) V.R.D.B. 3.650%................... 500 500
*Pulaski County Solid Waste Disposal Revenue Series B (East
Kentucky Power Corp., gtd. by National Rural Utilities
Cooperative Finance Corp.) 3.700% Optional Put 2/15/98 1,000 1,000
*Shelby County Industrial Building Revenue (Roll Forming Corp.
L.O.C. Banc One of Kentucky) V.R.D.B. 4.250%...... 1,865 1,865
-------
8,255
LOUISIANA (1.1%)
*Lake Charles Harbor & Terminal District P.C.R. Revenue
(Conoco Inc. Project gtd. by E.I. DuPont) V.R.D.B. 5.100% 700 700
City of Shreveport G.O. (MBIA Insured) 8.000% 6/01/98 685 696
St. Mary Parish Consolidated School District No. 1 (FSA Insured)
10.000% 3/01/98.................................. 345 348
-------
1,744
MARYLAND (1.0%)
*Anne Arundel Economic Development Revenue (Baltimore Gas and
Electric) 3.750% Mandatory Put 4/22/98............ 1,500 1,500

MICHIGAN (3.3%)
Detroit School District Aid Notes 4.500% 5/01/98..... 2,000 2,004
Detroit School District G.O. Series A (AMBAC Insured)
4.200% 5/01/98 .................................. 500 500
Michigan Building Authority (L.O.C. Canadian Imperial Bank)
3.750% 3/02/98.................................... 1,000 1,000
Michigan Job Authority (Michigan Sugar L.O.C. Trust Company
Bank) V.R.D.B. 4.200%............................. 1,600 1,600
-------
5,104
MISSOURI (3.7%)
Clay County G.O. (FSA Insured) 4.000% 3/1/98......... 1,645 1,645
*Jefferson County I.D.A. Revenue Series A (GHF Holdings LLC
Project L.O.C. Banc One, Indiana) V.R.D.B. 4.250%. 3,945 3,945
-------
5,590
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
NEW HAMPSHIRE (2.5%)
New Hampshire Business Finance Authority P.C.R. Series 1992 D
(Public Service Company Project L.O.C. Barclays Bank PLC)
V.R.D.B. 3.800%................................... $ 600 $ 600
*New Hampshire Business Finance Authority Resource Recovery
Revenue Series B (Wheelabrator Concord L.O.C. Wachovia
Bank) V.R.D.B. 3.750%............................. 1,200 1,200
*New Hampshire Industrial Development P.C.R. (New England
Power Co.)
3.800% Mandatory Put 2/19/98.................... 1,000 1,000
3.800% Mandatory Put 4/09/98.................... 1,000 1,000
--------
3,800
NORTH DAKOTA (0.6%)
*Mercer County Solid Waste Disposal Revenue Series 1993 U
(gtd. by National Rural Utilities Cooperative Finance Corp.)
3.800% Optional Put 6/01/98....................... 1,000 1,000

OHIO (0.7%)
Cuyahoga County Hospital Revenue (Metrohealth Systems)
(MBIA Insured) 5.000% 2/15/98.................... 510 511
Ohio Environmental Improvement Revenue (U.S. Steel Corp.
Project L.O.C. Pittsburgh National Bank) V.R.D.B. 4.000% 400 400
*Ohio Housing Finance Agency Mortgage Revenue Series A2
(L.O.C. Government National Mortgage Association)
4.050% 9/01/98................................... 160 160
--------
1,071
OREGON (0.3%)
Salem Water & Sewage Revenue (FGIC Insured) 4.000% 5/01/98 540 540

PENNSYLVANIA (3.4%)
*Pennsylvania Higher Education Assistance Agency Student Loan
Revenue Series A (L.O.C. Student Loan Marketing Association)
V.R.D.B. 3.850%................................... 2,000 2,000
Philadelphia G.O. T.R.A.N. Series A 4.500% 6/30/98... 1,000 1,002
Quakertown General Authority Revenue Series 1996A
(L.O.C. PNC Bank, N.A.) V.R.D.B. 3.750%........... 2,200 2,200
--------
5,202
SOUTH CAROLINA (3.7%)
Clemson University Revenue Series A (AMBAC Insured)
4.500% 5/01/98.................................... 1,395 1,398
Richland County Hospital Facilities Revenue Refunding Series B
(Baptist Hospital) (AMBAC Insured) 6.200% 8/01/98 250 253
*South Carolina Jobs Economic Development Authority Hospital
Facilities Revenue (Specialty Equipment Companies
L.O.C. Bank of America, Illinois) V.R.D.B. 4.250%. 3,000 3,000
Sumter County School District No. 2 G.O. 4.400% 4/01/98 1,000 1,002
--------
5,653

SOUTH DAKOTA (0.6%)
Yankton I.D.R. (Alumax Project L.O.C. Bank of America,
NT & SA) V.R.D.B. 4.100% ........................ 1,000 1,000

TENNESSEE (2.6%)
*McMinn County Industrial Development Board I.D.R. (Creative
Fabrication Corp. L.O.C. NBD Bank) V.R.D.B. 4.350% 3,510 3,510
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TENNESSEE (CONTINUED)
Metropolitan Government Nashville & Davidson County Health
& Educational Facilities Board Revenue Series 1993 (Richland
Place Inc. Project L.O.C. Societe Generale)
V.R.D.B. 3.750%.................................. $ 400 $ 400
--------
3,910
TEXAS (12.1%)
*Brazos River Authority P.C.R. Series 1995A (Texas Utilities
L.O.C. Morgan Guaranty Trust, New York) V.R.D.B. 5.100% 200 200
*Brazos River Harbor District P.C.R. (Brazoria County) (Dow
Chemical) 3.800% Mandatory Put 4/07/98............ 2,000 2,000
Dallas Equipment Acquisition Contractual G.O.
4.250% 2/15/98.................................... 1,500 1,501
Everman Independent School District Refunding G.O.
(gtd. by PSF) 4.550% 8/01/98...................... 1,000 1,004
Galena Park Independent School District Refunding G.O.
(gtd. by PSF) 4.500% 8/15/98..................... 100 100
*Gulf Coast Waste Disposal Authority (Amoco Oil Co. Project gtd.
by Amoco Corp.) V.R.D.B. 5.100%
Series 1994..................................... 1,000 1,000
Series 1996.................................... 300 300
Harlandale Independent School District Refunding (gtd. by
PSF) 4.000% 2/01/98.............................. 450 450
Harris County T.A.N. 4.250% 2/27/98.................. 1,000 1,001
*Harris County Industrial Development Corp. I.D.R. (Precision
General Inc. Project L.O.C. Morgan Guaranty Trust)
V.R.D.B. 4.250%................................... 2,060 2,060
Houston G.O. Refunding 8.000% 2/01/98............... 500 502
*North Texas Higher Education Authority Student Loan Revenue
Refunding Series A (L.O.C. Student Loan Marketing
Association) V.R.D.B. 3.750% ..................... 1,100 1,100
*Robertson County Industrial Development Corp. Series 1995
(Sanderson Farms Inc. Project L.O.C. Harris Trust and Savings
Bank) V.R.D.B. 3.900%............................. 1,900 1,900
San Angelo Independent School District G.O. (gtd. by PSF)
4.250% 2/15/98................................... 725 725
Texas T.R.A.N. Series 1997A 4.750% 8/31/98........... 2,000 2,011
Texas Department Housing and Community Affairs Multi-family
Revenue Refunding Series B (Remington Hill L.O.C. Trust
Company Bank) V.R.D.B. 3.750%..................... 2,100 2,100
Ysleta Independent School District Refunding G.O. (gtd. by PSF)
3.800% 8/15/98.................................... 550 550
--------
18,504
VIRGINIA (0.6%)
Bedford County I.D.A. I.D.R. Refunding (Nekoosa Packaging Project
L.O.C. Canadian Imperial Bank) V.R.D.B. 4.150% .. 1,000 1,000

WASHINGTON (2.8%)
*Washington Multi-family Housing Finance Commission Revenue
Series A (Hamilton Place Project L.O.C. U.S. Bank of
Washington) V.R.D.B. 4.350%....................... 1,140 1,140
*Yakima County Public Corp. I.D.R. (John I. Haas Inc. Project
L.O.C. Bayerische Vereinsbank AG) V.R.D.B. 4.300%. 3,150 3,150
--------
4,290
WEST VIRGINIA (0.7%)
West Virginia School Building Authority Capital Improvement
Revenue (MBIA Insured) 6.000% 7/01/98............. 1,000 1,011
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- -------------------------------------------------------------------------------
CONTINUED Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
WISCONSIN (11.2%)
*Carlton P.C.R. Series 1988 (Wisconsin Power & Light Co.)
V.R.D.B. 3.800%................................... $ 7,000 $ 7,000
*Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Banc One,
Wisconsin) V.R.D.B. 4.250%........................ 2,975 2,975
*Holland I.D.R. (White Clover Dairy Inc. Project L.O.C. Banc One,
Wisconsin) V.R.D.B. 4.250%........................ 2,435 2,435
*Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Banc One,
Wisconsin) V.R.D.B. 4.250%........................ 2,090 2,090
Janesville Wisconsin School District G.O. (FSA Insured)
6.500% 3/01/98.................................... 1,000 1,004
*Oak Creek I.D.R. Series 1995 (McAdams Graphics Inc. L.O.C.
Banc One, Wisconsin) V.R.D.B. 4.250%.............. 1,600 1,600
--------
17,104
WYOMING (0.6%)
Wyoming General Fund T.R.A.N. 4.250% 6/26/98......... 1,000 1,002
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES (100.2%)
(Amortized cost $153,321)...................................... 153,321
OTHER ASSETS, LESS LIABILITIES (-0.2%)............................ (355)
--------
TOTAL NET ASSETS (100.0%)......................................... $152,966
========
- -------------------------------------------------------------------------------
<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1997, these securities represented 59.5 percent of net assets.
</FN>

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Intermediate Municipals Fund
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Principal Market
MUNICIPAL SECURITIES (98.6%) Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
ALASKA (0.8%)
Kenai Peninsula Borough G.O. Refunding (AMBAC Insured)
8.300% 1/01/99.................................... $ 1,500 $ 1,562

ARIZONA (6.9%)
Arizona Transportation Board Highway Revenue Subordinated
Series A 6.000% 7/01/00........................... 1,000 1,049
Cochise County Unified School District No. 68 Series B (FGIC
Insured) 9.000% 7/01/01........................... 1,115 1,289
Maricopa County Hospital Revenue (Samaritan Health Services)
(Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,422
Maricopa County Unified High School District
6.250% 7/01/06 District No. 97 Deer Valley Series A
(MBIA Insured) ................................... 1,750 1,983
7.000% 7/01/08 District No. 213 Tempe (FGIC Insured) 500 607
Phoenix Civic Improvement Wastewater System Lease Revenue
(Escrowed in U.S. Treasury Securities)(prerefunded to 7/01/03)
6.000% 7/01/07.................................... 2,500 2,752
Pima County Refunding G.O. 6.300% 7/01/02............ 2,500 2,717
Scottsdale Industrial Development Authority Hospital Revenue
Refunding Series A (Scottsdale Memorial Hospitals) (AMBAC
Insured) 6.500% 9/01/04........................... 1,000 1,118
--------
13,937
ARKANSAS (1.4%)
Beaver Water District Benton & Washington Counties Water
Revenue Refunding (MBIA Insured) 6.000% 11/15/04.. 2,580 2,857

CALIFORNIA (7.7%)
California Education Facility University of San Francisco (MBIA
Insured) 5.600% 10/01/10.......................... 1,000 1,094
*California Housing Finance Agency Revenue Home Mortgage
Series B-1 5.900% 2/01/04......................... 960 1,015
California Statewide Communities Development Authority
(Cedars-Sinai Medical Center) 5.400% 11/01/15..... 2,400 2,411
Central Coast Water Authority Revenue (AMBAC Insured)
(Escrowed in U.S. Treasury Securities)(prerefunded to 10/01/02)
5.950% 10/01/03................................... 2,000 2,186
East Bay Municipal Utility District Water System Revenue (Escrowed
in U.S. Treasury Securities)(AMBAC Insured)
7.000% 6/01/00.................................... 1,400 1,497
La Quinta California Redevelopment Agency Tax Allocation
(MBIA Insured) 7.300% 9/01/09..................... 750 934
Los Angeles County Public Water Works Authority (Regional Parks
And Open Space Revenue)(Escrowed in State and Local
Government Securities)(prerefunded to 10/01/04)
5.800% 10/01/05................................... 1,500 1,653
Oakland Unified School District G.O. Series A (FGIC Insured)
Zero Coupon (Effective Yield 6.250%) 8/01/16...... 1,700 590
San Francisco City & County Refunding Series 1 (FGIC Insured)
5.000% 6/15/10.................................... 2,000 2,059
Vallejo Revenue Series B (Water Improvement Project)(FGIC Insured)
(Escrowed in U.S. Treasury Securities) 6.000% 11/01/01 2,030 2,172
--------
15,611
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COLORADO (0.3%)
Adams County School District No 12 Series A (MBIA Insured)
Zero Coupon (Effective Yield 5.850%) 12/15/12..... $ 1,300 $ 619

DELAWARE (0.7%)
Delaware Economic Development Authority Water Development
Revenue Refunding (General Waterworks Corp.-Wilmington
Suburban Water Corp.) 6.450% 12/01/07............. 1,165 1,342

FLORIDA (1.0%)
Seminole County School Board Series A(AMBAC Insured)
5.000% 7/1/15..................................... 2,000 1,988

GEORGIA (8.3%)
Atlanta Airport Facility Revenue Series 1996 (AMBAC Insured)
6.500% 1/01/07.................................... 5,000 5,762
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
5.625% 1/01/01.................................... 1,000 1,042
Georgia G.O.
7.700% 4/01/00 Series C........................... 1,250 1,351
6.250% 4/01/07 Series A........................... 2,000 2,287
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding (AMBAC Insured)
6.050% 7/01/01.................................. 1,600 1,700
5.800% 7/01/02.................................. 1,000 1,065
Municipal Electric Authority of Georgia Special Obligation Fifth
Crossover Series (AMBAC Insured) 6.400% 1/01/13... 3,000 3,512
--------
16,719
HAWAII (2.8%)
*Hawaii Department of Budget & Finance Special Purpose
Mortgage Revenue (Hawaiian Electric Co.)(MBIA Insured)
7.375% 12/01/20................................... 4,000 4,396
Honolulu (City & County) Refunding G.O. Series 1990 A
7.350% 7/01/06.................................... 1,000 1,206
--------
5,602
ILLINOIS (6.3%)
Chicago Board of Education (MBIA Insured) 6.250% 12/01/12 2,100 2,414
*Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/01/04.................................... 1,000 1,061
Chicago Skyway Toll Bridge Revenue Refunding Series 1994
(Escrowed in U.S. Treasury Securities)(prerefunded to 1/01/04)
6.750% 1/01/17.................................... 1,500 1,711
Chicago Water Revenue Refunding (FGIC Insured) 2,130 2,497
6.500% 11/01/09
DuPage County Special Service Area No. 11 Refunding
6.750% 1/01/14.................................... 1,180 1,350
Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue Series 1992 A (McCormick Place Expansion Project)
7.250% 6/15/05.................................... 2,750 3,234
*Southwestern Illinois University Revenues (Housing & Auxiliary
Facilities System)(MBIA Insured) Zero Coupon (Effective
Yield 5.650%) 4/1/15.............................. 1,175 484
--------
12,751
INDIANA (4.6%)
Indiana Toll Road Commission Toll Road Revenue (Escrowed in U.S.
Treasury Securities) 9.000% 1/01/15............... 2,240 3,164
<PAGE>
<CAPTION>
Intermediate Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
INDIANA (CONTINUED)
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A
5.600% 11/01/99................................. $ 1,125 $ 1,158
6.500% 11/01/07................................. 1,040 1,142
6.500% 11/01/07 (Escrowed in U.S. Treasury Securities)
(prerefunded to 11/01/02)..................... 1,210 1,347
Indianapolis Local Public Improvement Bond Bank Series 1992 D
6.500% 2/01/06.................................... 2,100 2,379
--------
9,190
IOWA (1.5%)
Iowa Finance Authority Health Care Facilities Revenue (Genesis
Medical Center) (MBIA Insured) 5.000% 7/1/06...... 2,920 3,037

KENTUCKY (1.3%)
Kentucky Turnpike Authority Economic Development Revenue
Refunding (Revitalization Projects) 5.800% 1/01/04 2,500 2,678

LOUISIANA (2.1%)
*Calcasieu Parish Industrial Development Board Environmental
Revenue (Citgo Petroleum Corp. Project L.O.C Banque
Nationale de Paris) V.R.D.B.5.150%................ 100 100
Louisiana Public Facilities Authority Student Loan Revenue Series A-1
5.900% 9/01/99.................................... 1,655 1,702
Orleans Levee District Series A (FSA Insured)
5.950% 11/01/07................................... 2,200 2,437
-------
4,239
MAINE (0.4%)
*Maine Educational Loan Authority Educational Loan Revenue
Supplemental Education Loan Series A-2 6.650% 12/01/02 650 697

MASSACHUSETTS (2.2%)
Massachusetts Bay Transportation Authority Mass Refunding
General Transportation System Series A 7.000% 3/01/07 2,250 2,669
Massachusetts Health and Educational Facilities Authority Revenue
(Daughters of Charity Carney Hospital)
+7.250% 7/01/00 Series C........................ 600 634
6.000% 7/01/09 Series D......................... 1,000 1,074
-------
4,377
MICHIGAN (4.4%)
Greater Detroit Resource Authority Revenue (AMBAC Insured)
6.250% 12/13/05................................... 2,000 2,242
Michigan Hospital Finance Authority Revenue (Daughters of Charity
Providence Hospital)(Escrowed in State and Local Government
Securities) 6.500% 11/01/01....................... 1,115 1,191
Michigan Underground Storage Tank Revenue (AMBAC Insured)
6.000% 5/01/05.................................... 5,000 5,519
-------
8,952
MISSOURI (0.5%)
Missouri Regional Convention & Sports Complex Authority
6.600% 8/15/03.................................... 830 921

NEVADA (0.8%)
*Clark County P.C.R. Series 1990 A (Southern California Edison Co.)
7.125% 6/01/09.................................... 1,500 1,621
<PAGE>
<CAPTION>
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- -------------------------------------------------------------------------------
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Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
NEW JERSEY (2.6%)
Bergen County Utility Authority Solid Waste System Revenue
Refunding Series A (FGIC Insured) 6.250% 6/15/06.. $ 2,000 $ 2,270
New Jersey Health Care Facilities Finance Authority Revenue
6.100% 7/01/01 (Hackensack Medical Center)
(FGIC Insured).................................... 1,000 1,066
7.000% 7/01/03 (Christ Hospital Group)
(Connie Lee Insured).............................. 1,730 1,958
--------
5,294
NEW MEXICO (2.5%)
Gallup P.C.R. (Plains Electric Transmission & Generating
Cooperative Inc.)(MBIA Insured) 6.100% 8/15/02.... 2,000 2,154
Santa Fe Gross Receipts Tax Revenue Series A (AMBAC Insured)
6.500% 6/01/06.................................... 2,555 2,933
--------
5,087
NEW YORK (11.2%)
New York City G.O.
5.700% 2/1/06 Series 1996 C....................... 1,000 1,057
6.125% 8/01/11 Series 1997 J...................... 5,000 5,401
7.125% 8/15/11 Series 1995 C...................... 1,560 1,694
6.000% 8/01/17 Series 1997 H...................... 2,000 2,109
New York City Water & Sewer System Revenue Series A
7.000% 6/15/09.................................... 2,115 2,323
New York Dormitory Authority Revenue Series A
6.500% 5/15/05 (State University Educational
Facilities)....................................... 1,000 1,125
5.625% 7/01/16 (City University System)(FGIC Insured) 5,000 5,431
New York Environmental Facility Corp. P.C.R. State
Water Series D 6.300% 5/15/05..................... 3,000 3,379
--------
22,519
NORTH CAROLINA (2.4%)
North Carolina Eastern Municipal Power System Revenue Series C
5.500% 1/01/07.................................... 3,100 3,228
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue Refunding (MBIA Insured) 5.900% 1/01/03... 1,500 1,611
--------
4,839
OHIO (2.2%)
Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,087
Loveland School District G.O. (MBIA Insured)
7.100% 12/01/09................................... 3,000 3,433
--------
4,520
OREGON (1.9%)
Oregon Department of Transportation Revenue (MBIA Insured)
5.700% 6/01/02.................................... 1,220 1,298
Portland Sewer System Revenue Refunding Series B (FGIC Insured)
5.400% 4/01/02.................................... 2,500 2,626
--------
3,924
PENNSYLVANIA (0.8%)
Dauphin County Hospital Authority Revenue Refunding Series B
(Hapsco Group Inc.)(MBIA Insured) 5.800% 7/01/02.. 1,600 1,698

SOUTH CAROLINA (3.0%)
Piedmont Municipal Power Agency Electric Revenue (FGIC Insured)
6.125% 1/01/07 ................................... 2,015 2,266
6.125% 1/01/07(Escrowed in U.S. Treasury Securities) 335 378
*South Carolina Ports Authority Revenue (AMBAC Insured)
6.200% 7/01/01.................................... 1,000 1,064
<PAGE>
<CAPTION>
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Amount Value
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<S> <C> <C>
SOUTH CAROLINA (CONTINUED)
Sumter County Hospital Facilities Revenue Refunding (Tuomey
Regional Medical Center)(MBIA Insured)
6.625% 11/15/04................................... $ 2,000 $ 2,276
--------
5,984
TENNESSEE (2.6%)
Knox County Health Educational & Housing Facilities Board
(Connie Lee Insured) 5.500% 4/15/11............... 2,000 2,112
Metropolitan Nashville & Davidson County Water & Sewer
Revenue (FGIC Insured) 6.500% 1/01/10............. 2,750 3,224
--------
5,336
TEXAS (11.9%)
Alief Independent School District G.O. (gtd. by Permanent School
Fund) 8.000% 2/15/99.............................. 1,305 1,362
*Brazos River Authority P.C.R. Series A (Texas Utilities Electric Co.
L.O.C. Morgan Guaranty Trust) V.R.D.B. 5.100% .... 100 100
Dallas-Fort Worth Regional Airport Revenue Series A (MBIA Insured)
5.500%11/01/04.................................... 2,400 2,571
Fort Bend Independent School District Unlimited Tax (gtd. by
Permanent School Fund) 7.500% 2/15/00............. 1,010 1,080
Fort Worth Limited Tax 8.350% 3/01/00................ 1,250 1,359
*Gulf Coast Waste Disposal Authority (Amoco Oil Co. Project
gtd. by Amoco Corp.) Series 1994 V.R.D.B. 5.100%.. 100 100
Houston Water Conveyance System Contract Certificates of
Participation Series J (AMBAC Insured) 6.125% 12/15/06 1,000 1,123
Northside Independent School District G.O. 9.400% 4/01/98 1,850 1,874
Plano Independent School District G.O. Unlimited Tax (FGIC
Insured)(Escrowed in U.S. Treasury Securities)
8.625% 2/15/99.................................... 1,900 1,996
Retama Development Corporation Special Facilities Revenue
(Retama Racetrack) (Escrowed in U.S. Treasury Securities)
8.750%12/15/10.................................... 2,885 3,981
Round Rock Independent School District G.O. Unlimited Tax
School Building and Refunding
8.625% 8/15/00 Series 1991 (MBIA Insured)....... 1,270 1,409
7.500% 8/01/02 Series 1995 A (gtd. by Permanent
School Fund).................................. 1,200 1,364
San Antonio Water System Revenue Refunding (FGIC Insured)
6.000% 5/15/01.................................... 2,875 3,039
*Texas Higher Education Student Loan Senior Lien
7.450% 10/01/06................................... 2,525 2,708
--------
24,066
UTAH (0.6%)
Intermountain Power Agency Power Supply Revenue Series B
(MBIA Insured) 6.000% 7/01/07..................... 1,000 1,117

VIRGINIA (0.7%)
*Virginia Housing Development Authority Commonwealth
Mortgage Series A Subseries A-1 6.700% 7/01/05.... 1,280 1,384

WASHINGTON (2.2%)
Snohomish County School District No. 2 Refunding G.O. (Everett
School District #2) (MBIA Insured)
7.250% 12/01/00................................. 2,540 2,763
7.000% 12/01/02................................. 1,500 1,688
--------
4,451
<PAGE>
<CAPTION>
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Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TOTAL MUNICIPAL SECURITIES (98.6%)
(Amortized cost $185,035)...................................... $198,919
OTHER ASSETS, LESS LIABILITIES (1.4%)............................. 2,785
--------
TOTAL NET ASSETS (100.0%)......................................... $201,704
========
- -------------------------------------------------------------------------------
<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1997, these securities represented 7.3 percent of net assets.

ARKANSAS (0.3%)
Arkansas Development Financing Authority Single Family Mortgage
Revenue Series A (FHA Insured) 8.125% 8/01/14..... 1,770 1,807

CALIFORNIA (4.8%)
California P.C.R. Refunding Series A (San Diego Gas & Electric Co.)
5.900% 6/01/14.................................... 3,000 3,324
Central Contra Costa Sanitation District Revenue Wastewater
Facilities Improvement Project (MBIA Insured)
6.250% 9/01/13.................................. 2,025 2,237
6.250% 9/01/14.................................. 1,295 1,431
Foothill Eastern Transportation Corridor Agency Toll Road
Refunding Senior Lien Series 1995 A Zero Coupon (Effective
Yield 7.200%) 1/01/18............................. 10,000 3,362
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/15.................................... 4,000 4,172
6.125% 7/01/23.................................... 6,000 6,240
Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 2,000 2,007
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 3,591
5.000% 7/01/17 Series A (Power Project)........... 2,500 2,445
--------
28,809
COLORADO (2.7%)
Arapahoe County Capital Improvement Trust Fund Highway Revenue
(Escrowed in U.S. Treasury Securities)(prerefunded to 8/31/05)
Zero Coupon (Effective Yield 6.930%) 8/31/15...... 25,000 8,646
Colorado General Fund Revenue T.R.A.N.
Series A 4.500% 6/26/98........................... 1,000 1,003
Colorado Housing Finance Authority Multifamily Mortgage Revenue
6.000% 10/01/09................................... 1,490 1,494
6.000% 10/01/10................................... 1,590 1,593
6.000% 10/01/11................................... 1,710 1,713
6.000% 10/01/12................................... 1,830 1,833
--------
16,282
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 1,337
*6.800% 12/01/23 Series 1992 A.................. 3,500 3,771
--------
5,108
FLORIDA (2.1%)
Broward County Public Improvement Revenue Refunding G.O.
(Series 1986)
12.500% 1/01/03................................. 1,000 1,364
12.500% 1/01/04................................. 1,195 1,705
12.500% 1/01/05................................. 2,000 2,969
<PAGE>
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Amount Value
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<S> <C> <C>
FLORIDA (CONTINUED)
Florida G.O. (Broward County) 9.875% 7/01/09 ........ $ 1,100 $ 1,582
Florida G.O. (Jacksonville Transportation Authority Project)
(Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,850
*Jacksonville Water and Sewer Development Revenue (Jacksonville
Suburban Utilities-General Waterworks Corp.)
6.750% 6/01/22.................................... 1,500 1,633
*Martin County Solid Waste Disposal Revenue (Florida Power & Light
Company Project) V.R.D.B. 5.100%.................. 600 600
--------
12,703
GEORGIA (12.6%)
Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured)
6.500% 1/01/08.................................... 2,750 3,204
6.500% 1/01/10.................................... 2,000 2,351
*Cartersville Development Authority Revenue Water & Wasteworks
Facilities (Anheuser-Busch) 7.375% 5/01/09........ 9,000 11,110
Columbia County School District G.O. (MBIA Insured)
6.750% 4/01/09.................................... 1,900 2,260
7.000% 4/01/10.................................... 2,125 2,582
7.000% 4/01/11.................................... 2,370 2,886
Fulton County Water & Sewer Revenue Refunding (FGIC Insured)
6.375% 1/01/14.................................... 13,700 16,123
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
Refunding Series P (AMBAC Insured) 6.250% 7/01/20. 4,000 4,690
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18.................................... 21,300 25,248
Paulding County School District (MBIA Insured)
6.000% 2/01/10.................................... 4,235 4,757
--------
75,211
HAWAII (1.2%)
*Hawaii Airports System Revenue Series II (MBIA Insured)
6.900% 7/01/12.................................... 6,000 7,116

IDAHO (0.3%)
*Idaho Housing Agency Single Family Mortgage Revenue (FHA/VA
Insured) 7.875% 7/01/24........................... 1,445 1,567

ILLINOIS (9.0%)
Chicago Board of Education Refunding G.O. Lease Certificates
School Reform Series A (MBIA Insured)
6.250% 12/01/12................................. 2,500 2,874
6.000% 1/01/16.................................. 5,000 5,589
Chicago Gas Supply Revenue Series 1985 D (Peoples Gas Light &
Coke Company) 7.500% 3/01/15...................... 4,500 4,865
Chicago Skyway Toll Bridge Revenue Series 1994 (Escrowed in U.S.
Treasury Securities)(prerefunded to 1/01/04)
6.750% 1/01/17.................................... 1,500 1,711
Illinois Development Finance Authority
+5.950% 1/01/09 (Catholic Charities Housing Development) 1,450 1,502
7.600% 9/01/13 P.C.R. (Central Illinois Public Service) 3,000 3,266
Illinois Housing Development Authority Series A (FHA Insured)
7.800% 12/01/12................................... 905 952
8.000% 6/01/26.................................... 6,770 7,128
Illinois Sales Tax Revenue Refunding Series Q
6.000% 6/15/12.................................... 10,000 11,205
Illinois Toll Highway Authority Priority Revenue Series A
6.300% 1/01/11.................................... 7,500 8,545
<PAGE>
<CAPTION>
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Principal Market
Amount Value
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<S> <C> <C>
ILLINOIS (CONTINUED)
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 $ 2,437
Zero Coupon (Effective Yield 6.020%) 12/15/12... 8,300 3,946
--------
54,020
INDIANA (4.5%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 5,000 5,876
Indiana Transportation Finance Authority Airport Facilities Revenue
Series A
6.250% 11/01/16 ................................ 1,475 1,573
6.250% 11/01/16 (Escrowed in U.S. Treasury Securities)
(prerefunded to 11/01/02)..................... 5,475 6,037
*Indianapolis Airport Authority Revenue Special Facilities (United
Airlines) 6.500% 11/15/31......................... 5,000 5,431
Michigan City P.C.R. (Northern Indiana Public Service Company)
5.700% 10/01/03................................... 8,060 8,087
--------
27,004
IOWA (0.2%)
*Iowa Finance Authority Single Family Mortgage Revenue Series B
(collateralized by Government & Federal National Mortgage
Association Securities) 7.450% 7/01/23............ 970 1,028
Muscatine County P.C.R. (Monsanto Co. Project)
V.R.D.B. 3.800%................................... 400 400
--------
1,428
KANSAS (0.5%)
Kansas Department of Transportation Highway Revenue (Escrowed
in U.S. Treasury Securities)(prerefunded to 3/01/02)
6.500% 3/01/12.................................... 3,000 3,305

KENTUCKY (2.5%)
*Kentucky Housing Corp. Revenue Series C (FHA/VA Insured)
8.100% 1/01/22.................................... 1,865 1,977
Kentucky Turnpike Authority Economic Development Revenue
Refunding Series 1992 (Revitalization Project)(FGIC Insured)
Zero Coupon (Effective Yield 6.600%) 1/01/10...... 7,500 4,218
*Trimble County P.C.R. Series A (Louisville Gas & Electric Co.)
7.625% 11/01/20................................... 6,670 7,363
7.625% 11/01/20 (Escrowed in U.S. Treasury Securities)
(prerefunded to 11/01/00)...................... 1,330 1,472
-------
15,030
LOUISIANA (1.1%)
*De Soto Parish Environmental Improvement Revenue
(International Paper Co.) Series A 7.700% 11/01/18 3,250 3,827
New Orleans G.O. (AMBAC Insured) Zero Coupon (Effective Yield
6.125%) 9/01/12................................... 6,250 3,015
*Parish of St. Charles P.C.R. (Shell Oil Norco Project)(Shell Oil
Company) V.R.D.B. 5.100%.......................... 1,000 1,000
-------
7,842
<PAGE>
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Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
MAINE (1.3%)
*Maine Educational Loan Marketing Corporation Student Loan
Revenue Subordinate Series 1994 B-1 6.500% 11/01/09 $ 3,000 $ 3,320
*Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19................................... 2,520 2,661
7.550% 11/15/22................................... 1,750 1,848
-------
7,829
MARYLAND (1.3%)
Washington Suburban Sanitation District Construction (Escrowed
in U.S. Treasury Securities)(prerefunded to 6/01/04)
6.600% 6/01/16.................................. 2,795 3,151
6.625% 6/01/17.................................. 1,660 1,874
6.625% 6/01/19.................................. 2,320 2,619
-------
7,644
MASSACHUSETTS (8.2%)
Massachusetts Bay Transportation Authority Refunding
7.000% 3/01/14 Series 1994 A...................... 3,150 3,870
6.200% 3/01/16 Series 1992 B...................... 9,825 11,272
7.000% 3/01/19 Series 1994 A...................... 2,500 3,145
Massachusetts College Building Authority Project Refunding Series A
7.500% 5/01/11.................................... 1,500 1,905
7.500% 5/01/14.................................... 3,500 4,500
Massachusetts Health & Educational Facilities Authority Revenue
6.250% 7/01/12 (Massachusetts General Hospital Project)
(AMBAC Insured)................................. 5,750 6,490
6.250% 12/01/22 (Dana Farber Cancer Institute).... 6,500 7,064
6.750% 7/01/24 (Brigham & Women's Hospital)(Escrowed in
U.S. Treasury Securities)(prerefunded to 7/01/01)
(MBIA Insured).................................. 7,365 8,121
Massachusetts Turnpike Authority Metropolitan Highway Systems
Revenue Series A Senior (MBIA Insured) 5.000% 1/01/37 3,000 2,901
-------
49,268
MICHIGAN (0.6%)
Michigan Hospital Finance Authority Providence Hospital Revenue
Refunding (Daughters of Charity Health Systems Inc.)
(Escrowed in U.S. Treasury Securities)(prerefunded to
11/01/01) 7.000% 11/01/21......................... 3,000 3,350
Monroe County Economic Development Corp. Series CC (Detroit
Edison L.O.C. Barclays Bank Plc) V.R.D.B. 5.050%.. 100 100
-------
3,450
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.................................. 2,235 2,394
7.300% 8/01/31.................................. 3,340 3,562
*Minnesota Housing Finance Agency Single Family Mortgage
Series A 7.450% 7/01/22........................... 3,860 4,114
-------
10,070
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 2,174
<PAGE>
<CAPTION>
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Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
MISSOURI (0.3%)
Little Blue Valley Sewer District Revenue Refunding (AMBAC
Insured)(Escrowed in U.S. Treasury Securities)(prerefunded to
10/01/98) 9.000% 10/01/07......................... $ 1,000 $ 1,038
Missouri Housing Community Development Single Family
Mortgage Revenue 9.375% 4/01/16................... 55 59
Springfield School District Refunding G.O. Series B (FGIC Insured)
9.500% 3/01/07.................................... 600 829
--------
1,926
MONTANA (0.1%)
Forsyth P.C.R. (Pacificorp Project L.O.C Rabobank Nederland)
V.R.D.B. 4.500%................................... 500 500

NEVADA (0.7%)
*Nevada Housing Division Single Family Mortgage (FHA/VA
Insured) 7.750% 4/01/22........................... 3,945 4,179

NEW JERSEY (1.0%)
New Jersey G.O. Series D 6.000% 2/15/11.............. 5,150 5,825

NEW MEXICO (0.2%)
Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13... 1,000 1,030

NEW YORK (9.6%)
Erie County Water Authority Water Revenue Refunding Series 1992
(AMBAC Insured) Zero Coupon (Effective Yield
7.300%) 12/01/17.................................. 660 158
New York City G.O.
5.750% 2/01/14 Series G........................... 3,145 3,258
6.000% 2/15/25 Series D........................... 12,980 13,499
*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 8,806
New York City Transitional Finance Authority Revenue Series A
5.000% 8/15/27.................................... 2,500 2,429
New York State Environmental Facilities Corporation P.C.R. Water
Revolving Fund--New York City Municipal Water
5.750% 6/15/10.................................... 10,000 11,088
Triborough Bridge & Tunnel Authority General Purpose Revenue
6.625% 1/01/12 Series X........................... 8,715 10,350
6.125% 1/01/21 Series Y........................... 6,890 7,996
--------
57,584
NORTH CAROLINA (2.0%)
North Carolina Eastern Municipal Power Agency Power Systems
Revenue
6.000% 1/01/06 Series B......................... 3,955 4,259
6.500% 1/01/18 Series 1991 A (Escrowed in U.S.
Treasury Securities).......................... 4,315 5,202
6.500% 1/01/18 Series 1991 A.................... 2,185 2,468
--------
11,929
OHIO (1.4%)
Columbus G.O. Revenue Bonds Series 1 V.R.D.B. 4.050%. 500 500
Franklin County Hospital Revenue Refunding and Improvement
(Riverside Hospital)(Escrowed in U.S. Treasury Securities)
(prerefunded to 5/15/00) 7.600% 5/15/20........... 3,900 4,281
<PAGE>
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Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
OHIO (CONTINUED)
*Ohio Housing Finance Agency Mortgage Revenue Residential
Series A-1 (Collateralized by Government National Mortgage
Association Securities) 6.050% 9/01/17............ $ 3,000 $ 3,178
--------
7,959
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 1,939

PENNSYLVANIA (3.5%)
Allegheny County Sanitation Authority Sewer Revenue (FGIC
Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,544
*Dauphin County I.D.A. Water Development Revenue (Dauphin
Consolidated Water Supply General Waterworks Corp.)
6.900% 6/01/24.................................... 2,400 2,959
Montgomery County I.D.A. Retirement Community Revenue
Series B (Adult Communities Total Services)
5.750% 11/15/17................................... 3,500 3,627
Pennsylvania G.O. 6.250% 7/01/12..................... 11,200 12,867
--------
20,997
RHODE ISLAND (1.0%)
*Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/01/22................................... 5,650 6,048

SOUTH CAROLINA (2.5%)
*Charleston County I.D.R. (Zeigler Coal Project)(L.O.C. Bank of
America NT & SA) V.R.D.B. 5.100%.................. 800 800
*Calhoun County Solid Waste Disposal Facilities Revenue
(Eastman Kodak Co.)(Escrowed in U.S. Treasury Securities)
6.750% 5/01/17.................................... 3,000 3,612
*Richland County Solid Waste Disposal Facilities Revenue Series
1991 B (Union Camp Corp.) 7.125% 9/01/21.......... 5,000 5,474
*South Carolina Housing Finance Agency Single Family Mortgage
Revenue Series C 7.750% 7/01/22................... 4,775 5,031
--------
14,917
SOUTH DAKOTA (2.9%)
Heartland Consumers Power District Electric Revenue Refunding
(FSA Insured) 6.000% 1/01/17...................... 8,000 9,048
*South Dakota Student Loan Assistance Corp. Student Loan Revenue
Series B 7.450% 8/01/00........................... 7,990 8,506
--------
17,554
TENNESSEE (1.8%)
*Tennessee Housing Development Agency (Homeownership Project)
7.300% 7/01/11.................................... 10,000 10,547

TEXAS (6.0%)
*Brazos Higher Education Authority Student Loan Revenue
Subordinate Series 1993 C-2 5.875% 6/01/04........ 2,785 2,853
*Gulf Coast Industrial Development Authority Marine Terminal
Revenue (Amoco Oil Co. Project gtd. by Amoco Corp.)
V.R.D.B. 5.100%................................... 600 600
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TEXAS (CONTINUED)
*Gulf Coast Waste Disposal Authority (Amoco Oil Co. Project
gtd. by Amoco Corp.) V.R.D.B. 5.100%
1993 Series..................................... $ 600 $ 600
1994 Series..................................... 500 500
1996 Series..................................... 400 400
1997 Series..................................... 1,400 1,400
Gulf Coast Waste Disposal Authority P.C.R. (Monsanto Co. Project)
V.R.D.B. 3.800%................................... 1,000 1,000
*Harris County Industrial Development Corp. P.C.R. (Exxon Project)
V.R.D.B. 5.050%................................... 1,200 1,200
Houston Water & Sewer Systems Revenue Refunding
(AMBAC Insured)
Zero Coupon (Effective Yield 6.800%) 12/01/08... 4,000 2,408
Zero Coupon (Effective Yield 6.8125%) 12/01/09.. 4,000 2,272
Zero Coupon (Effective Yield 6.850%) 12/01/10... 3,750 2,006
Texas G.O. Veteran's Welfare Fund (Escrowed in U.S. Treasury
Securities) (prerefunded to 12/01/99)
8.300% 12/01/16................................... 15,275 16,466
Texas Municipal Power Agency Revenue Refunding (AMBAC
Insured) Zero Coupon (Effective Yield 6.900%) 9/01/08 1,475 898
Texas T.R.A.N. Series 1997 4.750% 8/31/98............ 2,000 2,013
*Travis County Housing Finance Agency Single Family Mortgage
(collateralized by Government National Mortgage Association
Securities)(FGIC Insured) 8.000% 9/01/10.......... 1,120 1,191
--------
35,807
VERMONT (0.2%)
*Vermont Housing Finance Agency Single Family Mortgage
Revenue Series A 8.150% 5/01/25................... 1,095 1,144

VIRGINIA (0.4%)
Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,559

WASHINGTON (6.0%)
*Port of Longview Industrial Development Corporation Solid Waste
Disposal Revenue (Weyerhaeuser Company) 6.875% 10/01/08 8,750 10,248
Washington G.O. Series B & AT-7
6.000% 6/1/13..................................... 5,090 5,725
6.000% 6/1/13 (Escrowed in U.S. Treasury Securities) 2,190 2,473
Washington Public Power Supply Systems Revenue Refunding
Zero Coupon (Effective Yield 6.700%) 7/01/05 Series 1991 B
(Nuclear Project #3) (FGIC Insured)............. 5,000 3,567
Zero Coupon (Effective Yield 6.950%) 7/01/08 Series B
(Nuclear Project #3)............................ 7,000 4,205
6.300% 7/01/12 Series 1992 A (Nuclear Project #2). 3,500 3,957
6.500% 7/01/18 Series 1991 C (Nuclear Project #3)
(Escrowed in U.S. Treasury Securities)
(prerefunded to 7/01/01)........................ 5,000 5,456
--------
35,631
WISCONSIN (1.4%)
Wisconsin G.O. Series G (Escrowed in U.S. Treasury Securities)
(prerefunded to 5/01/99) 6.750% 5/01/11........... 5,000 5,222
Wisconsin Housing E.D.A. Revenue 7.750% 9/01/10...... 2,985 3,166
--------
8,388
<PAGE>
<CAPTION>
Managed Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
WYOMING (0.1%)
*Lincoln County P.C.R. Series C (Exxon Corp. Project)
V.R.D.B. 5.200%................................... $ 500 $ 500
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES (98.4%)
(Amortized cost $524,741)..................................... 588,819
OTHER ASSETS, LESS LIABILITIES (1.6%)............................. 9,320
--------
TOTAL NET ASSETS (100.0%)......................................... $598,139
========
- -------------------------------------------------------------------------------
<FN>
*These securities are subject to federal alternative minimum tax. At December
31, 1997, these securities represented 26.3 percent of net assets.

+This security is subject to contractual or legal restrictions on its
resale. At December 31, 1997, the value of this security represented 0.3 percent
of net assets.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
High-Yield Municipals Fund
- -------------------------------------------------------------------------------
Investments as of December 31, 1997
(Dollar Amounts In Thousands)
(Unaudited)
Principal Market
MUNICIPAL SECURITIES (98.3%) Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
ARIZONA (2.1%)
Arizona Health Facilities Hospital System Revenue Refunding
(Phoenix Memorial Hospital) 8.125% 6/01/12........ $ 2,500 $ 2,739
Pima County I.D.A. Industrial Revenue Series 1997 C
(Tuscon Electric Power Co. Project) 6.000% 9/01/29 4,000 4,081
--------
6,820
CALIFORNIA (4.3%)
Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue Sr. Lien Series 1995 A 6.500% 1/01/32..... 2,000 2,170
Long Beach Aquarium of the Pacific Revenue Series 1995 A
6.125% 7/01/23.................................... 5,750 5,980
Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 3,000 3,010
M-S-R Public Power Agency Revenue Series H (San Juan Project)
5.900% 7/01/20.................................... 3,000 3,018
--------
14,178
COLORADO (6.7%)
Adams County Single Family Mortgage Revenue Series B
(Escrowed in U.S. Treasury Securities)
11.250% 9/01/11 (prerefunded to 9/01/09)........ 325 508
11.250% 9/01/11 (prerefunded to 9/01/10)........ 360 571
11.250% 9/01/11................................. 220 355
11.250% 9/01/12................................. 1,440 2,357
Arapahoe County Capital Improvement Trust Fund Highway Revenue
(Escrowed in U.S. Treasury Securities)(prerefunded to 8/31/05)
7.000% 8/31/26.................................... 7,000 8,347
*+Briargate Public Building Authority Landowner's Assessment
Lien Revenue
10.250% 12/15/00 Series 1985 A.................. 267 226
9.500% 12/15/07 Series 1986 A................... 1,094 930
Colorado Health Facilities Authority Revenue
7.250% 4/01/11 (Birchwood Manor Apartments)(collateralized
by Government National Mortgage Association Securities) 665 699
8.500% 2/15/21 Series B (PSL Health Systems)(Escrowed in
U.S. Treasury Securities)(prerefunded to 2/15/01) 3,250 3,726
*Denver City and County Airport Revenue Series D
7.750% 11/15/21 (Escrowed in U.S. Treasury Securities)
(prerefunded to 11/15/01)....................... 830 945
7.750% 11/15/21................................... 3,170 3,566
--------
22,230
DISTRICT OF COLUMBIA (2.2%)
District of Columbia G.O. Series A 6.000% 6/01/26.... 7,000 7,294

FLORIDA (2.7%)
*+Florida Housing Finance Agency Multi-Family Housing Revenue
(Palm-Aire) 10.000% 1/01/20....................... 2,835 2,126
Leesburg Capital Improvement Hospital Revenue Series 1991 A
(Leesburg Regional Medical Center)(Escrowed in U.S. Treasury
Securities) (prerefunded to 7/01/01) 7.375% 7/01/11 775 886
*Martin County Solid Waste Disposal Revenue (Florida Power &
Light Company Project) V.R.D.B. 5.100%............ 100 100
Orange County Health Facilities Authority First Mortgage Revenue
(Orlando Lutheran Towers, Inc.) 8.625% 7/01/20.... 5,000 5,878
--------
8,990
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA (4.0%)
*Cartersville Development Authority Water & Wasteworks Facilities
Revenue (Anheuser-Busch) 7.375% 5/01/09........... $ 5,000 $ 6,172
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/01/18.................................... 6,065 7,189
--------
13,361
IDAHO (0.8%)
*Idaho Housing Agency Single Family Mortgage Revenue Series B
(FHA/VA Insured) 7.500% 7/01/24................... 2,600 2,761

ILLINOIS (2.1%)
Chicago Skyway Toll Bridge Revenue Series 1994 (Escrowed in
U.S. Treasury Securities) (prerefunded to 1/01/04)
6.750% 1/01/17.................................... 1,500 1,711
+Illinois Development Finance Authority (Catholic Charities
Housing Development) 5.950% 1/01/09............... 1,400 1,450
Illinois Health Facilities Authority Revenue Refunding
8.125% 7/01/06 Series 1991 (United Medical Center)
(Escrowed in U.S. Treasury Securities) (prerefunded
to 07/01/03).................................... 2,415 2,726
7.000% 2/15/22 Series 1992 (Edward Hospital Association)
(Escrowed in U.S. Treasury Securities)
(prerefunded to 2/15/02)........................ 685 766
Illinois Housing Development Authority Multi-Family Housing
Series C 7.400% 7/01/23........................... 140 148
Sauget Village P.C.R. (Monsanto Company Project)
V.R.D.B. 3.800% .................................. 200 200
--------
7,001
INDIANA (12.4%)
*Hammond Sewer & Solid Waste Disposal Revenue (American
Maize Products Co.) 8.000% 12/01/24............... 4,000 4,701
Indiana Development Finance Authority Exempt Facilities Refunding
Revenue Series 1997A (Inland Steel Company Project No. 15)
5.750% 10/01/11................................... 5,000 5,175
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A
6.250% 11/01/16................................. 950 1,013
6.250% 11/01/16 (Escrowed in U.S. Treasury Securities)
(prerefunded to 11/01/02)..................... 3,550 3,914
*Indianapolis Airport Authority Revenue Special Facilities
7.100% 1/15/17 (Federal Express Corp.)............ 5,000 5,630
6.500% 11/15/31 (United Airlines)................. 7,000 7,603
Indianapolis Local Public Improvement Bond Bank Series 1991 C
(Escrowed in U.S. Treasury Securities)(prerefunded to 1/01/02)
6.700% 1/01/17.................................... 8,900 9,842
New Castle Economic Development Revenue (Raintree
Square Project) 8.650% 4/01/17 Series 1988 A
(FHA Insured)..................................... 2,860 3,153
*+Zero Coupon 3/01/18 Series 1988 B............... 30,655 77
--------
41,108
IOWA (1.2%)
Iowa Housing Finance Authority Single Family Housing Revenue
Zero Coupon (Effective Yield 10.262%) 9/01/16..... 23,550 2,948
Muscatine County P.C.R. (Monsanto Company Project)
V.R.D.B. 3.800%................................... 900 900
--------
3,848
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
KANSAS (0.7%)
Wichita Revenue (CSJ Health System of Wichita Inc.)
7.000% 11/15/18................................... $ 2,000 $ 2,185

LOUISIANA (1.8%)
*De Soto Parish Environmental Impact Revenue (International Paper
Co.) Series A 7.700% 11/01/18..................... 2,500 2,944
Louisiana Public Facilities Authority Hospital Revenue (Women's
Hospital Foundation)(Escrowed in U.S. Treasury Securities)
(prerefunded to 10/01/02) 7.250% 10/01/22......... 2,300 2,620
*Parish of St. Charles P.C.R. (Shell Oil Norco Project)(Shell Oil
Company) V.R.D.B. 5.100%.......................... 300 300
-------
5,864
MASSACHUSETTS (2.9%)
Massachusetts Bay Transportation Authority Refunding Series B
6.200% 3/01/16.................................... 5,825 6,682
Massachusetts Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institute) 6.250% 12/01/22.... 2,000 2,174
*Massachusetts Housing Finance Agency Series A
9.000% 12/01/18................................... 850 867
-------
9,723
MISSISSIPPI (3.7%)
Adams County Hospital Revenue (Jefferson Davis Memorial Hospital)
(Escrowed in U.S. Treasury Securities)(prerefunded to 10/01/01)
7.900% 10/01/08................................... 750 861
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A.......................... 750 805
9.875% 12/01/14 Series C.......................... 1,000 1,077
7.300% 5/01/25.................................... 2,000 2,128
Lowndes County Solid Waste Disposal & P.C.R. Refunding
(Weyerhaeuser Company) 6.800% 4/01/22............. 5,995 7,309
-------
12,180
MISSOURI (1.6%)
Missouri Health & Educational Facilities Authority Revenue
(Lutheran Senior Services) 5.750% 2/01/17......... 2,000 2,064
*St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose Arena)
7.875% 12/01/24................................... 3,000 3,324
-------
5,388
MONTANA (0.3%)
Montana Board of Housing Single Family Mortgage Revenue
(FHA/VA Insured)
7.300% 10/01/17 Series B-1...................... 435 462
*7.500% 4/01/23 Series B-2...................... 485 515
-------
977
NEBRASKA (1.3%)
*Nebraska Higher Education Loan Program Junior Subordinated
Series A-6 6.450% 6/01/18......................... 4,000 4,400

NEVADA (2.3%)
Humboldt County P.C.R. (Idaho Power Company)
8.300% 12/01/14................................... 2,000 2,408
*Clark County Industrial Development Revenue Series A
(Nevada Power Co. Project) 5.900% 11/01/32........ 5,000 5,066
-------
7,474
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
NEW JERSEY (2.4%)
New Jersey Economic Development Authority Revenue
(Winchester Gardens) 8.625% 11/01/25.............. $ 5,000 $ 5,513
New Jersey Health Care Facilities Financing Authority Revenue
Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,404
-------
7,917
NEW MEXICO (2.9%)
*New Mexico Educational Assistance Foundation Student Loan
Revenue Series A2 6.650% 11/01/25................. 1,955 2,125
Farmington P.C.R. Series A (San Juan Project)
6.300% 12/01/16 1996 (Public Service Company of
New Mexico)....................................... 5,000 5,333
6.950% 10/01/20 1997 (Tucson Electric Power Company) 2,000 2,238
--------
9,696
NEW YORK (5.0%)
Erie County Water Authority Revenue Refunding (AMBAC Insured)
Zero Coupon (Effective Yield 7.300%) 12/01/17..... 660 158
New York City G.O.
7.250% 8/15/07 Series 1996 B...................... 1,000 1,180
5.750% 2/01/14 Series 1996 F...................... 5,720 5,925
*New York City I.D.A. Industrial Development Revenue
(Brooklyn Navy Yard Cogen Partners) 5.650% 10/01/28 3,000 3,010
*New York City I.D.A. Special Facility Revenue Series 1994
(Terminal One Group Association L.P. Project)
6.000% 01/01/15................................... 3,465 3,658
Triborough Bridge & Tunnel Authority General Purpose Revenue
Series E 7.250% 1/01/10........................... 2,000 2,406
--------
16,337
NORTH CAROLINA (2.9%)
North Carolina Eastern Municipal Power Agency Power
Systems Revenue
6.500% 1/01/18 Series 1991A..................... 1,680 1,898
6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury
Securities)................................... 3,320 4,002
6.000% 1/01/26 Series B......................... 3,500 3,760
--------
9,660
OHIO (1.1%)
*Greater Allen County Housing Development Corp. Revenue First
Lien (Steiner-McBride Apartments Project)
10.250% 9/01/03................................... 1,385 1,387
Montgomery County Ohio Health Care Facilities Revenue Refunding
Series B (Friendship Village) 6.250% 02/01/22..... 2,250 2,306
--------
3,693
OREGON (0.0%)
*Port St. Helens Pollution Control Revenue Series 1990A
(Portland General Electrical Co.) V.R.D.B.
5.050% 08/01/14................................... 100 100

PENNSYLVANIA (10.1%)
Allentown Area Hospital Authority Revenue (Sacred Heart Hospital
of Allentown) 7.500% 7/01/06...................... 3,460 3,795
Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo Edison
Company) 7.625% 5/01/20........................... 4,900 5,644
*Dauphin County I.D.A. Revenue Series A (Dauphin Consolidated
Water Supply General Waterworks Corp.) 6.900% 6/01/24 2,700 3,329
Montgomery County Higher Education & Health Authority
Hospital Revenue (Jeanes Health Systems)(Escrowed in U.S.
Treasury Securities)(prerefunded to 7/01/00)
8.750% 7/01/20.................................... 3,200 3,606
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (CONTINUED)
*Pennsylvania Economic Development Financing Authority Resource
Recovery Revenue Refunding (North Hampton)
6.750% 1/01/07 Series 1995 B.................... $ 3,000 $ 3,280
6.500% 1/01/13 Series A......................... 2,000 2,118
Philadelphia Hospitals & Higher Education Facilities Authority
Revenue (Temple University Hospital) 5.875% 11/15/23 4,000 4,133
Philadelphia Municipal Lease Revenue Refunding Series 1993 D
6.250% 7/15/13.................................... 2,500 2,667
Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in U.S.
Treasury Securities) 7.350% 9/01/04............... 4,105 4,712
--------
33,284
PUERTO RICO (1.8%)
Puerto Rico Highway & Transportation Authority Highway
Revenue Refunding
6.625% 7/01/12 Series V......................... 2,000 2,208
6.625% 7/01/18 Series T (Escrowed in U.S. Treasury Securities)
(prerefunded to 7/01/02)...................... 3,200 3,568
--------
5,776
SOUTH CAROLINA (0.1%)
Berkeley County Exempt Facilities Industrial Revenue (Amoco
Chemical Company Project L.O.C. Amoco Corp.)
V.R.D.B. 5.100% .................................. 200 200

SOUTH DAKOTA (0.9%)
*South Dakota Student Loan Assistance Corp. Student Loan Revenue
Series B 7.450% 8/01/00........................... 2,700 2,874

TENNESSEE (0.7%)
Knox County Health, Educational and Housing Facilities
Revenue (Baptist Health Systems of East Tennessee)
(Escrowed in U.S. Treasury Securities)
(prerefunded to 4/15/99) 8.600% 4/15/16........... 2,005 2,158

TEXAS (7.5%)
*Alliance Airport Authority Special Facilities Revenue Series 1991
(American Airlines) 7.000% 12/01/11............... 4,070 4,792
*Bexar County Housing Financing Corp. Revenue Series B
(collateralized by Government National Mortgage Association
Securities) 9.250% 4/01/16........................ 265 274
*Brazos Texas Higher Education Authority Incorporated Series C2
5.875% 06/01/04................................... 835 855
*Gulf Coast Waste Disposal Authority (Amoco Oil Co. Project
gtd. by Amoco Corp.) V.R.D.B. 5.100%
1993 Series..................................... 400 400
1995 Series..................................... 200 200
1997 Series..................................... 200 200
Gulf Coast Waste Disposal Authority P.C.R.
(Monsanto Co. Project) V.R.D.B. 3.800%............ 400 400
*Harris County Housing Finance Corp. Single Family Housing
Revenue Series 1983 9.625% 3/15/03................ 220 221
*Houston Airport System Special Facilities Revenue Series 1997 B
(Continental Airlines)
6.125% 7/15/17.................................. 4,000 4,152
6.125% 7/15/27.................................. 2,000 2,069
<PAGE>
<CAPTION>
High-Yield Municipals Fund CONTINUED
- -------------------------------------------------------------------------------
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TEXAS (CONTINUED)
Montgomery County Health Facilities Development Corp. Hospital
Mortgage Revenue Refunding (Woodlands Medical Center)
(Escrowed in U.S. Treasury Securities) (prerefunded to 8/15/99)
8.850% 8/15/14.................................... $ 2,400 $ 2,607
*Port Bay City Authority Revenue (Hoechst Celanese Corp.)
6.500% 5/01/26.................................... 3,000 3,324
*Texas Housing Agency Residential Mortgage Revenue Series D
8.400% 1/01/21.................................... 280 292
Texas T.R.A.N. Series 1997 4.750% 8/31/98............ 3,000 3,019
Tyler Health Facilities Development Corporation Series A
(Mother Francis Hospital) 5.625% 07/01/13......... 1,785 1,790
--------
24,595
UTAH (0.3%)
*Utah Housing Finance Agency Single Family Mortgage
7.750% 1/01/23 Series B-2 (FHA Insured)........... 360 383
7.550% 7/01/23 Series C-3 (FHA/VA Insured)........ 605 643
--------
1,026
VIRGINIA (2.2%)
*Pittsylvania County I.D.A. Revenue Series A
(Multitrade of Pittsylvania County L.P.)
7.450% 1/01/09.................................. 3,500 3,870
7.550% 1/01/19.................................. 3,100 3,427
--------
7,297
WASHINGTON (5.8%)
Quincy Water and Sewer Revenue Series I (Escrowed in U.S.
Treasury Securities)(prerefunded to 11/01/00)
9.250% 11/01/10................................... 2,475 2,775
Washington G.O. Series B 6.400% 6/01/17.............. 5,000 5,877
Washington Health Care Facilities Authority Revenue (Sacred Heart
Medical Center, Spokane) 6.875% 2/15/12........... 1,500 1,646
*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.... 1,685 293
Zero Coupon (Effective Yield 7.750%) 7/01/22.... 1,860 312
Zero Coupon (Effective Yield 7.750%) 1/01/23.... 1,860 300
Zero Coupon (Effective Yield 7.750%) 7/01/23.... 1,865 291
Zero Coupon (Effective Yield 7.750%) 1/01/24.... 1,875 282
Zero Coupon (Effective Yield 7.750%) 7/01/24.... 1,865 270
Washington Public Power Supply Systems Revenue (Nuclear Project #2)
Zero Coupon (Effective Yield 6.888%) 7/01/07...... 6,945 4,403
6.300% 7/01/12 Series 1992 A...................... 2,500 2,826
--------
19,275
WISCONSIN (1.0%)
*Wisconsin Housing and Economic Development Authority Revenue
7.850% 3/01/24.................................... 2,950 3,126

WYOMING (0.5%)
Wyoming Community Development Authority Single Family
Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17 1,445 1,537
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------
High-Yield Municipals Fund CONTINUED
Principal Market
Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C>
TOTAL MUNICIPAL SECURITIES (98.3%)
(Amortized cost $297,627)...................................... 324,333
OTHER ASSETS, LESS LIABILITIES (1.7%)............................. 5,555
--------
TOTAL NET ASSETS (100.0%)......................................... $329,888
========
- -------------------------------------------------------------------------------
<FN>
*These securities are subject to the federal alternative minimum tax. At
December 31, 1997, these securities represented 30.4 percent of net assets.

+This security is subject to contractual or legal restrictions on its resale. At
December 31, 1997 the value of this security represented 0.4 percent of net
assets.

*+Non-income producing securities.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities

December 31, 1997
(All amounts in thousands, except per-share amounts)
(Unaudited)
<CAPTION>
MUNICIPAL
MONEY INTERMEDIATE
MARKET MUNICIPALS
FUND FUND
<S> <C> <C>
ASSETS
Investments, at market value......................................... $ -- $198,919
Investment in SR&F Municipal Money Market Portfolio.................. 130,132 --
Cash................................................................. 75 146
Accrued interest receivable.......................................... -- 3,440
Receivable for investments sold...................................... -- 40
Receivable for fund shares sold...................................... 776 6
Other assets......................................................... 31 37
--------- ---------
Total Assets...................................................... 131,014 202,588
--------- ---------
LIABILITIES
Dividends payable.................................................... 104 638
Payable for fund shares redeemed..................................... 511 55
Payable to investment adviser and transfer agent..................... 16 111
Accrued expenses payable............................................. 43 80
--------- ---------
Total Liabilities ................................................ 674 884
--------- ---------
Net Assets........................................................ $130,340 $201,704
======== ========
CAPITAL
Paid-in capital ..................................................... $130,348 $187,850
Net unrealized appreciation on investments........................... -- 13,884
Accumulated net realized losses on investments....................... (8) (30)
--------- ---------
Total Capital (Net Assets)........................................ $130,340 $201,704
======== ========
Shares Outstanding (Unlimited Number Authorized)..................... 130,275 17,378
======== ========
Net Asset Value (Capital) Per Share.................................. $ 1.00 $ 11.61
======== ========
<PAGE>
<CAPTION>
Statements of Assets and Liabilities

December 31, 1997
(All amounts in thousands, except per-share amounts)
(Unaudited)
MANAGED HIGH-YIELD
MUNICIPALS MUNICIPALS
FUND FUND
<S> <C> <C>
ASSETS
Investments, at market value......................................... $588,819 $324,333
Investment in SR&F Municipal Money Market Portfolio.................. -- --
Cash................................................................. 533 273
Accrued interest receivable.......................................... 10,646 5,961
Receivable for investments sold...................................... 250 462
Receivable for fund shares sold...................................... 90 222
Other assets......................................................... 97 53
--------- ---------
Total Assets...................................................... 600,435 331,304
--------- ---------
LIABILITIES
Dividends payable.................................................... 1,609 965
Payable for fund shares redeemed..................................... 154 42
Payable to investment adviser and transfer agent..................... 361 205
Accrued expenses payable............................................. 172 204
--------- ---------
Total Liabilities ................................................ 2,296 1,416
--------- ---------
Net Assets........................................................ $598,139 $329,888
======== ========
CAPITAL
Paid-in capital ..................................................... $536,282 $316,107
Net unrealized appreciation on investments........................... 64,078 26,706
Accumulated net realized losses on investments....................... (2,221) (12,925)
--------- ---------
Total Capital (Net Assets)........................................ $598,139 $329,888
======== ========
Shares Outstanding (Unlimited Number Authorized)..................... 63,568 27,484
======== ========
Net Asset Value (Capital) Per Share.................................. $ 9.41 $ 12.00
======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations

For The Six Months Ended December 31, 1997
(All amounts in thousands)
(Unaudited)
<CAPTION>
MUNICIPAL
MONEY INTERMEDIATE
MARKET MUNICIPALS
FUND FUND
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest........................................................... $ -- $5,472
Tax-exempt interest allocated from SR&F Municipal Money Market Portfolio...... 2,377 --
------- -------
Total Investment Income.................................................... 2,377 5,472
EXPENSES
Management fees............................................................... -- 441
Expenses allocated from SR&F Municipal Money Market Portfolio................. 219 --
Administrative fees........................................................... 156 139
Transfer agent fees........................................................... 94 141
Printing and postage.......................................................... 21 19
SEC and state registration fees............................................... 16 17
Accounting fees............................................................... 13 14
Legal and audit fees.......................................................... 6 13
Trustees' fees................................................................ 7 11
Other......................................................................... 20 37
------- -------
Total Expenses............................................................. 552 832
Reimbursement of expenses by investment adviser............................... (115) (127)
------- -------
Net Expenses............................................................... 437 705
------- -------
Net Investment Income...................................................... 1,940 4,767
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) on investments.................................... -- 181
Net change in unrealized appreciation or depreciation on investments.......... -- 4,231
------- -------
Net Gains on Investments................................................... -- 4,412
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $1,940 $9,179
========= =========
<PAGE>
<CAPTION>
Statements of Operations

For The Six Months Ended December 31, 1997
(All amounts in thousands)
(Unaudited)
MANAGED HIGH-YIELD
MUNICIPALS MUNICIPALS
FUND FUND
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest........................................................... $17,617 $10,087
Tax-exempt interest allocated from SR&F Municipal Money Market Portfolio...... -- --
-------- --------
Total Investment Income.................................................... 17,617 10,087
EXPENSES
Management fees............................................................... 1,227 676
Expenses allocated from SR&F Municipal Money Market Portfolio................. -- --
Administrative fees........................................................... 335 197
Transfer agent fees........................................................... 416 224
Printing and postage.......................................................... 42 30
SEC and state registration fees............................................... 18 20
Accounting fees............................................................... 19 16
Legal and audit fees.......................................................... 13 23
Trustees' fees................................................................ 18 15
Other......................................................................... 65 7
-------- --------
Total Expenses............................................................. 2,153 1,208
Reimbursement of expenses by investment adviser............................... -- --
-------- --------
Net Expenses............................................................... 2,153 1,208
-------- --------
Net Investment Income...................................................... 15,464 8,879
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) on investments.................................... 775 (3,644)
Net change in unrealized appreciation or depreciation on investments.......... 18,215 12,510
-------- --------
Net Gains on Investments................................................... 18,990 8,866
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $34,454 $17,745
========== ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets

(All amounts in thousands)
(Unaudited)
<CAPTION>
MUNICIPAL MONEY
MARKET FUND
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1997 1997
<S> <C> <C>
OPERATIONS
Net investment income........................................................... $ 1,940 $ 3,585
Net realized gains (losses) on investments...................................... -- (2)
Net change in unrealized appreciation or depreciation on investments............ -- --
--------- ---------
Net Increase in Net Assets Resulting from Operations......................... 1,940 3,583
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............................................ (1,940) (3,585)
Dividends from net capital gains................................................ -- --
--------- ---------
Total Distributions to Shareholders.......................................... (1,940) (3,585)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares.................................................... 91,388 188,521
Investment income dividends reinvested.......................................... 1,590 2,798
Capital gains distributions reinvested.......................................... -- --
Redemptions of fund shares...................................................... (81,062) (193,325)
--------- ----------
Net Increase (Decrease) from Share Transactions.............................. 11,916 (2,006)
--------- ----------
Net Increase (Decrease) in Net Assets........................................ 11,916 (2,008)
TOTAL NET ASSETS
Beginning of Period............................................................. 118,424 120,432
--------- ---------
End of Period................................................................... $130,340 $118,424
========== ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares.................................................... 91,388 188,521
Investment income dividends reinvested.......................................... 1,590 2,798
Capital gains distributions reinvested.......................................... -- --
--------- ---------
92,978 191,319
Redemptions of fund shares (81,062) (193,325)
--------- ---------
Net increase (decrease) in fund shares.......................................... 11,916 (2,006)
Shares outstanding at beginning of period....................................... 118,359 120,365
--------- ---------
Shares outstanding at end of period............................................. 130,275 118,359
========== ==========
<PAGE>
<CAPTION>
Statements of Changes in Net Assets

(All amounts in thousands)
(Unaudited)

INTERMEDIATE
MUNICIPALS FUND
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1997 1997
<S> <C> <C>
OPERATIONS
Net investment income........................................................... $ 4,767 $ 9,690
Net realized gains (losses) on investments...................................... 181 913
Net change in unrealized appreciation or depreciation on investments............ 4,231 3,038
--------- ---------
Net Increase in Net Assets Resulting from Operations......................... 9,179 13,641
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............................................ (4,767) (9,690)
Dividends from net capital gains................................................ (545) (1,149)
--------- ---------
Total Distributions to Shareholders.......................................... (5,312) (10,839)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares.................................................... 14,526 30,850
Investment income dividends reinvested.......................................... 2,837 5,237
Capital gains distributions reinvested.......................................... 376 768
Redemptions of fund shares...................................................... (15,908) (48,377)
---------- ---------
Net Increase (Decrease) from Share Transactions.............................. 1,831 (11,522)
---------- ---------
Net Increase (Decrease) in Net Assets........................................ 5,698 (8,720)
TOTAL NET ASSETS
Beginning of Period............................................................. 196,006 204,726
--------- ---------
End of Period................................................................... $201,704 $196,006
========== ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares.................................................... 1,260 2,725
Investment income dividends reinvested.......................................... 246 463
Capital gains distributions reinvested.......................................... 32 67
--------- ---------
1,538 3,255
Redemptions of fund shares (1,380) (4,278)
--------- ---------
Net increase (decrease) in fund shares.......................................... 158 (1,023)
Shares outstanding at beginning of period....................................... 17,220 18,243
--------- ---------
Shares outstanding at end of period............................................. 17,378 17,220
========== ==========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets

(All amounts in thousands)
(Unaudited)
<CAPTION>
MANAGED
MUNICIPALS FUND
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1997 1997
<S> <C> <C>
OPERATIONS
Net investment income........................................................... $ 15,464 $ 31,920
Net realized gains (losses) on investments...................................... 775 1,088
Net change in unrealized appreciation or depreciation of investments............ 18,215 16,133
--------- ---------
Net Increase in Net Assets Resulting from Operations......................... 34,454 49,141
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............................................ (15,464) (31,920)
Dividends from net capital gains................................................ -- --
--------- ---------
Total Distributions to Shareholders.......................................... (15,464) (31,920)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares.................................................... 22,273 42,898
Investment income dividends reinvested.......................................... 8,579 16,555
Capital gains distributions reinvested.......................................... -- --
Redemptions of fund shares...................................................... (34,069) (100,667)
--------- ---------
Net Increase (Decrease) from Share Transactions.............................. (3,217) (41,214)
--------- ---------
Net Increase (Decrease) in Net Assets........................................ 15,773 (23,993)
TOTAL NET ASSETS
Beginning of Period............................................................. 582,366 606,359
--------- ---------
End of Period $598,139 $582,366
========== ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares.................................................... 2,403 4,770
Investment income dividends reinvested.......................................... 924 1,838
Capital gains distributions reinvested.......................................... -- --
--------- ---------
3,327 6,608
Redemptions of fund shares (3,675) (11,199)
--------- ---------
Net increase (decrease) in fund shares.......................................... (348) (4,591)
Shares outstanding at beginning of period....................................... 63,916 68,507
--------- ---------
Shares outstanding at end of period............................................. 63,568 63,916
========== ==========
<PAGE>
<CAPTION>
HIGH-YIELD
MUNICIPALS FUND
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1997 1997
--------------------------
<S> <C> <C>
OPERATIONS
Net investment income........................................................... $ 8,879 $ 18,292
Net realized gains (losses) on investments...................................... (3,644) (4,451)
Net change in unrealized appreciation or depreciation of investments............ 12,510 11,315
--------- ---------
Net Increase in Net Assets Resulting from Operations......................... 17,745 25,156
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income............................................ (8,879) (18,292)
Dividends from net capital gains................................................ -- --
--------- ---------
Total Distributions to Shareholders.......................................... (8,879) (18,292)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares.................................................... 39,229 58,262
Investment income dividends reinvested.......................................... 4,772 8,959
Capital gains distributions reinvested.......................................... -- --
Redemptions of fund shares...................................................... (29,049) (50,971)
--------- ---------
Net Increase (Decrease) from Share Transactions.............................. 14,952 16,250
--------- ---------
Net Increase (Decrease) in Net Assets........................................ 23,818 23,114
TOTAL NET ASSETS
Beginning of Period............................................................. 306,070 282,956
--------- ---------
End of Period $329,888 $306,070
========== ==========
ANALYSES OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to fund shares.................................................... 3,319 5,050
Investment income dividends reinvested.......................................... 402 776
Capital gains distributions reinvested.......................................... -- --
--------- ---------
3,721 5,826
Redemptions of fund shares (2,459) (4,418)
--------- ---------
Net increase (decrease) in fund shares.......................................... 1,262 1,408
Shares outstanding at beginning of period....................................... 26,222 24,814
--------- ---------
Shares outstanding at end of period............................................. 27,484 26,222
========== ==========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio

Balance Sheet
December 31, 1997
(All amounts in thousands)
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
Investments, at market value.................................... $153,321
Cash............................................................ 4
Receivable for investments sold................................. 2,000
Accrued interest receivable..................................... 1,116
---------
Total Assets................................................. 156,441
---------
LIABILITIES
Payable for investments purchased............................... 3,401
Payable to investment adviser................................... 36
Other liabilities............................................... 38
---------
Total Liabilities............................................ 3,475
---------
Net Assets applicable to investors' beneficial interest........ $152,966
=========
</TABLE>
<TABLE>
Statement of Operations
For the Six Months Ended December 31, 1997
(All Amounts in Thousands)
(Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income...................................... $2,771
-------

EXPENSES
Management fees................................................. 182
Accounting fees................................................. 14
Audit and legal fees............................................ 9
Trustees' fees.................................................. 7
Custodian fees.................................................. 3
Other........................................................... 39
-------
Total Expenses............................................... 254
-------
Net Investment Income........................................... $2,517
======

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio

Statements of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1997 1997
<S> <C> <C>
OPERATIONS
Net Investment Income........................... $ 2,517 $ 4,728
-------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions.................................... 49,721 118,114
Withdrawals...................................... (38,200) (126,842)
-------- --------
Net Increase (Decrease) from Transactions ....
in investors' beneficial interests.......... 11,521 (8,728)
-------- --------
Net Increase (Decrease) in Net Assets......... 14,038 (4,000)
TOTAL NET ASSETS
Beginning of Period.............................. 138,928 142,928
-------- --------
End of Period.................................... $152,966 $138,928
======== ========

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, 1997,
Stein Roe Municipal Money Market Fund and Colonial Municipal Money Market Fund
owned 85.1 percent and 14.9 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
the Portfolio. 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, 1997. 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 approximates market value. This method
involves valuing an instrument at cost on the purchase date and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument and does not take into account unrealized securities gains or
losses. In the event that a deviation of .50 of 1 percent or more exists between
Stein Roe Municipal Money Market Fund's $1.00 per share net asset value,
calculated at amortized cost, and the net asset value calculated by reference to
market quotations, its 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.
<PAGE>
FUTURES CONTRACTS
The Funds may enter into futures contracts to either hedge against expected
declines of their portfolio's securities or as a temporary substitute for the
purchase of individual bonds. Risks of entering into futures contracts include
the possibility that there may be an illiquid market at the time 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, 1997.

FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Funds elect to be
taxed as "regulated investment companies" and make distributions to their
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on respective percentages of ownership. 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, 1997, the Funds had capital loss carryforwards as
follows:
YEAR OF
FUND AMOUNT EXPIRATION
Managed
Municipals $1,660 2003-2004
High-Yield
Municipals $4,053 2003-2004
<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 distributions in excess of net investment
income or net realized gains for the six months ended December 31, 1997.

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, 1997. 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, 1997, investments in these securities for Intermediate
Municipals Fund, High-Yield Municipals Fund and Managed Municipals Fund
represented 56.7 percent, 3.0 percent and 23.7 percent of holdings,
respectively. The 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, 1997, 59.4 percent of the Portfolio was backed by bank letters of
credit. See each Fund's or the Portfolio's schedule of investments for
additional information on portfolio composition and Fund Highlights for each
Fund's portfolio quality (unaudited). Stein Roe Municipal Money Market Fund
invests all of its investable assets in the Portfolio.

NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds and the Portfolio pay 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 administrative fees to the Adviser. The administrative
fee for Intermediate Municipals Fund and High-Yield Municipals Fund 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 $100 million, .10 of 1
percent of the next $800 million and .075 of 1 percent thereafter.
<PAGE>
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, 1998,
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 subtransfer agent for the Funds.
The Adviser also provides fund accounting services. For the six months ended
December 31, 1997, Municipal Money Market Fund, Intermediate Municipals Fund,
Managed Municipals Fund, High-Yield Municipals Fund and the Portfolio incurred
charges of $13, $14, $19, $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, 1997,
was $7, $11, $18, $15 and $7, respectively. No remuneration 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, 1997.

<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, 1997, were as follows:
<TABLE>
<CAPTION>
FUND Purchases Sales
<S> <C> <C>
Intermediate Municipals Fund........................... $19,613 $14,049
Managed Municipals Fund................................ 19,336 31,920
High-Yield Municipals Fund............................. 31,811 24,182
</TABLE>
At December 31, 1997, the cost of investments for financial reporting purposes
and for federal income tax purposes were identical. Unrealized appreciation and
depreciation of investments on a tax basis were as follows:
<TABLE>
<CAPTION>
Net
Appreciation Depreciation Appreciation
<S> <C> <C> <C>
Intermediate Municipals Fund........... $14,652 $ 768 $13,884
Managed Municipals Fund................ 66,094 2,016 64,078
High-Yield Municipals Fund............. 28,876 2,170 26,706
</TABLE>

NOTE 7. SUBSEQUENT EVENT
On February 2, 1998, High-Yield Municipals Fund became a "feeder fund"--that is,
the Fund invested all of its assets in SR&F High-Yield Municipals Portfolio, a
"master fund" that has an investment objective identical to that of the Fund.
The master fund is a series of the SR&F Base Trust. Under the "master
fund/feeder fund" structure, a feeder fund and one or more other feeder funds
pool their assets in a master portfolio that has the identical investment
objective and substantially the same investment policies as the feeder funds.
The purpose of such an arrangement is to achieve greater operational
efficiencies and reduce costs. The assets of the master fund are managed by the
Adviser in the same manner as the assets of the feeder fund were managed before
conversion to the master fund/feeder fund structure.
<PAGE>
<TABLE>
Financial Highlights

Stein Roe Municipal Money Market Fund

<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- -------
Net investment income........................ .046 .032 .020 .019
Distributions from net investment income..... (.046) (.032) (.020) (.019)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= =======
Ratio of net expenses to average net assets (a). 0.68% 0.70% 0.70% 0.70%
Ratio of net investment income to average net assets (b) 4.66% 3.19% 1.96% 1.88%
Total return (b)................................ 4.74% 3.25% 1.97% 1.90%
Net assets, end of period (000's)............... $237,403 $199,037 $195,887 $165,820
<PAGE>
<CAPTION>
SIX
MONTHS
ENDED
DEC. 31,
YEARS ENDED JUNE 30, 1997
1995 1996 1997 (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- -------
Net investment income........................ .030 .031 .030 .016
Distributions from net investment income..... (.030) (.031) (.030) (.016)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= =======
Ratio of net expenses to average net assets (a). 0.70% 0.70% 0.70% 0.70%*
Ratio of net investment income to average net assets (b) 2.96% 3.09% 2.98% 3.11%*
Total return (b)................................ 3.02% 3.13% 3.04% 1.58%+
Net assets, end of period (000's)............... $146,704 $120,432 $118,424 $130,340
<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, 0.84 and 0.86 percent for
the years ended June 30, 1995 through June 30, 1997, respectively, and 0.88
percent for the six months ended December 31, 1997.
(b) Computed giving effect to the Adviser's expense limitation undertaking.
</FN>
</TABLE>
<TABLE>
SR&F Municipal Money Market Portfolio
<CAPTION>
SIX MONTHS
ENDED
PERIOD ENDED YEAR ENDED DEC. 31,
JUNE 30, JUNE 30, 1997
1996(A) 1997 (UNAUDITED)
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Ratio of net investment income to
average net assets..................... 3.50%* 3.36% 3.46%*
Ratio of net expenses to average net assets 0.30%* 0.32% 0.35%*

<FN>
* Annualized
(a) The Portfolio commenced operations on September 28, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED

Stein Roe Intermediate Municipals Fund

Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED
DEC. 31, JUNE 30,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.76 $ 10.37 $ 10.43 $ 10.50
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .57 .29 .62 .63
Net realized and unrealized gains (losses)
on investments............................. (.38) .06 .07 .07
------- ------- ------- -------
Total from investment operations........... .19 .35 .69 .70
DISTRIBUTIONS
Net investment income........................ (.57) (.29) (.62) (.63)
Net realized gains .......................... (.01) -- -- (.03)
In excess of realized gains ................. -- -- -- --
------- ------- ------- -------
Total distributions........................ (.58) (.29) (.62) (.66)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $10.37 $10.43 $10.50 $10.54
======= ====== ====== =======
Ratio of net expenses to average net assets (a). 0.80% 0.80%* 0.80% 0.80%
Ratio of net investment income to average
net assets (b)................................ 5.47% 5.66%* 5.96% 5.96%
Portfolio turnover rate......................... 49% 22%+ 83% 141%
Total return (b)................................ 1.93% 3.45%+ 6.85% 6.85%
Net assets, end of period (000's)............... $96,143 $97,308 $91,304 $98,918

<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.73 $ 11.06 $ 11.57
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .62 .57 .54 .53
Net realized and unrealized gains (losses)
on investments............................. .22 .50 .63 (.39)
------- ------- ------- -------
Total from investment operations........... .84 1.07 1.17 .14
DISTRIBUTIONS
Net investment income........................ (.62) (.57) (.54) (.53)
Net realized gains .......................... (.03) (.17) (.12) (.17)
In excess of realized gains ................. -- -- -- (.01)
------- ------- ------- -------
Total distributions........................ (.65) (.74) (.66) (.71)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 10.73 $ 11.06 $ 11.57 $ 11.00
======= ====== ====== =======
Ratio of net expenses to average net assets (a). 0.80% 0.79% 0.72% 0.71%
Ratio of net investment income to average net assets (b) 5.79% 5.23% 4.79% 4.63%
Portfolio turnover rate......................... 96% 109% 96% 55%
Total return (b)................................ 8.18% 10.31% 10.92% 1.16%
Net assets, end of period (000's)............... $118,651 $165,401 $245,441 $238,053
<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 0.83 percent for the year ended
December 31, 1987, 0.87 percent for the six months ended June 30, 1988, 0.82,
0.81 and 0.81 percent for the years ended June 30, 1989, through June 30,
1991, 0.76, 0.81 and 0.82 percent for the years ended June 30, 1995, through
June 30, 1997, and 0.82 percent for the six months ended December 31, 1997.
(b) Computed giving effect to the Adviser's expense limitation undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
DEC. 31,
YEARS ENDED JUNE 30, 1997
1995 1996 1997 (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.00 $ 11.16 $ 11.22 $ 11.38
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .53 .55 .55 .28
Net realized and unrealized gains (losses)
on investments............................. .16 .06 .22 .26
------- ------- ------- -------
Total from investment operations........... .69 .61 .77 .54
DISTRIBUTIONS
Net investment income........................ (.53) (.55) (.55) (.28)
Net realized gains .......................... -- -- (.06) (.03)
In excess of realized gains ................. -- -- -- --
------- ------- ------- -------
Total distributions........................ (.53) (.55) (.61) (.31)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 11.16 $ 11.22 $ 11.38 $ 11.61
======= ====== ====== =======
Ratio of net expenses to average net assets (a). 0.74% 0.70% 0.70% 0.70%*
Ratio of net investment income to average net assets (b) 4.94% 4.82% 4.84% 4.73%*
Portfolio turnover rate......................... 67% 66% 44% 15%*
Total return (b)................................ 6.59% 5.47% 7.07% 4.76%+
Net assets, end of period (000's)............... $212,489 $204,726 $196,006 $201,704
<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 0.83 percent for the year ended
December 31, 1987, 0.87 percent for the six months ended June 30, 1988, 0.82,
0.81 and 0.81 percent for the years ended June 30, 1989, through June 30,
1991, 0.76, 0.81 and 0.82 percent for the years ended June 30, 1995, through
June 30, 1997, and 0.82 percent for the six months ended December 31, 1997.
(b) Computed giving effect to the Adviser's expense limitation undertaking.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights CONTINUED

Stein Roe 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,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 9.22 $ 8.50 $ 8.61 $ 9.02
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .61 .30 .61 .59
Net realized and unrealized gains (losses)
on investments............................. (.59) .11 .44 (.06)
------- ------- ------- -------
Total from investment operations........... .02 .41 1.05 .53
DISTRIBUTIONS
Net investment income........................ (.61) (.30) (.61) (.59)
Net realized gains .......................... (.13) -- (.03) (.25)
In excess of realized gains ................. -- -- -- --
------- ------- ------- -------
Total distributions........................ (.74) (.30) (.64) (.84)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 8.50 $ 8.61 $ 9.02 $ 8.71
======= ====== ====== =======
Ratio of net expenses to average net assets..... 0.65% 0.65%* 0.65% 0.66%
Ratio of net investment income to average net assets 6.99% 7.03%* 7.00% 6.66%
Portfolio turnover rate ........................ 113% 28%+ 102% 95%
Total return ................................... 0.39% 4.90%+ 12.69% 6.15%
Net assets, end of period (000's)............... $458,170 $467,595 $514,898 $584,081

1991 1992 1993 1994
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 8.71 $ 8.85 $ 9.11 $ 9.38
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .56 .55 .52 .50
Net realized and unrealized gains (losses)
on investments............................. .19 .46 .42 (.51)
------- ------- ------- -------
Total from investment operations........... .75 1.01 .94 (.01)
DISTRIBUTIONS
Net investment income........................ (.56) (.55) (.52) (.50)
Net realized gains .......................... (.05) (.20) (.15) (.11)
In excess of realized gains ................. -- -- -- (.06)
------- ------- ------- -------
Total distributions........................ (.61) (.75) (.67) (.67)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 8.85 $ 9.11 $ 9.38 $ 8.70
======= ====== ====== =======
Ratio of net expenses to average net assets..... 0.66% 0.64% 0.64% 0.65%
Ratio of net investment income to average net assets 6.39% 6.17% 5.65% 5.45%
Portfolio turnover rate ........................ 203% 94% 63% 36%
Total return ................................... 8.92% 11.95% 10.79% (0.29%)
Net assets, end of period (000's)............... $655,930 $725,472 $776,694 $687,252
<PAGE>
<CAPTION>
SIX
MONTHS
ENDED
DEC. 31,
1997
1995 1996 1997 (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 8.70 $ 8.79 $ 8.85 $ 9.11
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .51 .48 .48 .25
Net realized and unrealized gains (losses)
on investments............................. .09 .06 .26 .30
------- ------- ------- -------
Total from investment operations........... .60 .54 .74 .55
DISTRIBUTIONS
Net investment income........................ (.51) (.48) (.48) (.25)
Net realized gains .......................... -- -- -- --
In excess of realized gains ................. (.06) -- -- --
------- ------- ------- -------
Total distributions........................ (.51) (.48) (.48) (.25)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................. $ 8.79 $ 8.85 $ 9.11 $ 9.41
======= ====== ====== =======
Ratio of net expenses to average net assets..... 0.65% 0.72% 0.73% 0.72%*
Ratio of net investment income to average net assets 5.85% 5.41% 5.31% 5.20%*
Portfolio turnover rate ........................ 33% 40% 16% 7%*
Total return ................................... 7.12% 6.24% 8.56% 6.02%+
Net assets, end of period (000's)............... $629,730 $606,359 $582,366 $598,139

</TABLE>
<TABLE>
Financial Highlights CONTINUED
Stein Roe High-Yield Municipals Fund

Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED
DEC. 31, JUNE 30,
1987 1988 1989 1990
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 12.06 $ 11.06 $ 11.37 $ 11.97
-------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .87 .44 .88 .85
Net realized and unrealized gains (losses)
on investments............................. (.89) .31 .63 .02
-------- -------- ------- --------
Total from investment operations........... (.02) .75 1.51 .87
DISTRIBUTIONS
Net investment income........................ (.87) (.44) (.88) (.85)
Net realized gains .......................... (.11) -- (.03) (.21)
In excess of realized gains ................. -- -- -- --
-------- -------- ------- --------
Total distributions........................ (.98) (.44) (.91) (1.06)
-------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 11.06 $ 11.37 $ 11.97 $ 11.78
======== ======== ======= ======
Ratio of net expenses to average net assets..... 0.73% 0.76%* 0.73% 0.71%
Ratio of net investment income to average
net assets.................................... 8.20% 7.87%* 7.54% 7.22%
Portfolio turnover rate ........................ 110% 53%+ 208% 261%
Total return ................................... (0.16%) 6.89%+ 13.79% 7.59%
Net assets, end of period (000s)................ $181,600 $201,274 $277,620 $310,582

YEARS ENDED JUNE 30,
1991 1992 1993 1994
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 11.78 $ 11.79 $ 11.83 $ 11.84
-------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .82 .80 .71 .67
Net realized and unrealized gains (losses)
on investments............................. .17 .22 .18 (.54)
-------- -------- -------- --------
Total from investment operations........... .99 1.02 .89 .13
DISTRIBUTIONS
Net investment income........................ (.82) (.80) (.71) (.67)
Net realized gains .......................... (.16) (.18) (.17) (.17)
In excess of realized gains ................. -- -- -- (.07)
-------- -------- -------- --------
Total distributions........................ (.98) (.98) (.88) (.91)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 11.79 $ 11.83 $ 11.84 $11.06
======== ======== ======= ======
Ratio of net expenses to average net assets..... 0.71% 0.69% 0.73% 0.76%
Ratio of net investment income to average net assets 7.00% 6.75% 6.04% 5.76%
Portfolio turnover rate ........................ 195% 88% 75% 36%
Total return ................................... 8.79% 9.01% 7.88% 0.95%
Net assets, end of period (000s)................ $373,948 $410,613 $359,103 $308,181

<PAGE>
<CAPTION>
SIX
MONTHS
ENDED
DEC. 31,
YEARS ENDED JUNE 30, 1997
1995 1996 1997 (UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 11.06 $ 11.31 $ 11.40 $ 11.67
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................ .66 .67 .72 .34
Net realized and unrealized gains (losses)
on investments............................. .25 .09 .27 .33
-------- -------- -------- --------
Total from investment operations........... .91 .76 .99 .67
DISTRIBUTIONS
Net investment income........................ (.66) (.67) (.72) (.34)
Net realized gains .......................... -- -- -- --
In excess of realized gains ................. -- -- -- --
-------- -------- -------- --------
Total distributions........................ (.66) (.67) (.72) (.34)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 11.31 $ 11.40 $ 11.67 $ 12.00
======== ======== ======= ======
Ratio of net expenses to average net assets..... 0.86% 0.85% 0.77% 0.76%*
Ratio of net investment income to average net assets 5.98% 5.86% 6.20% 5.56%*
Portfolio turnover rate ........................ 23% 34% 11% 16%*
Total return ................................... 8.54% 6.83% 8.91% 5.74%+
Net assets, end of period (000s)................ $281,155 $282,956 $306,070 $329,888
<FN>
* Annualized
+ Not annualized
</FN>
</TABLE>

<PAGE>
Funds for Every Investment Objective

The Stein Roe family of mutual funds offers a variety of funds so you can select
the right fund, or combina tion of funds, to meet your investment objectives.
Call us at 800-338-2550 for a prospectus and more complete information on any of
the funds, including management fees and expenses. Please read the prospectus
carefully before you invest or send money.

MONEY MARKET FUNDS
Money market funds seek to provide income while preserving principal and
maintaining liquidity. This fund offers free check writing.

o Cash Reserves Fund -- Invests in high-quality, short-term money market
securities such as certificates of deposit, banker's acceptances and
commercial paper.*

TAX-EXEMPT FUNDS
These funds help investors keep more of their earnings by investing in
instruments that earn income free from federal income tax. Income may be subject
to federal alternative minimum tax and state and local taxes; capital gains are
subject to state, local and federal taxes.

o Municipal Money Market Fund -- Seeks to provide the liquidity and stability
of a money market fund plus current tax-free income. Free check writing
available.*

o Intermediate Municipals Fund -- Seeks high current yield through
investments primarily in the three highest grades of intermediate-term
municipal securities.

o Managed Municipals Fund -- Pursues high tax-free income by investing in a
quality- conscious portfolio of long-term municipal bonds.

o High-Yield Municipals Fund -- Seeks a higher level of tax-free income from
long-term municipal securities, primarily of medium or lower quality.

BOND FUNDS
Bond funds seek high current income by investing primarily in fixed income
securities.

o Intermediate Bond Fund-- Invests primarily in marketable debt securities with
an average life of three to 10 years.

o Income Fund -- Pursues a higher level of current income by investing
primarily in medium- and lower-quality bonds.

*Money market mutual funds strive to maintain a $1 per share net asset value,
but there is no assurance that these funds will be able to maintain a stable net
asset value. The net asset value of a fund that invests in securities issued or
guaranteed by the U.S. government is not guaranteed.

o High Yield Fund -- Invests in high yield, high-risk, medium- and
lower-quality debt securities that may involve greater risk.

GROWTH AND INCOME FUNDS
These funds seek to provide a conservative investment that is well positioned
for long-term growth and current income. Each fund's approach is designed to
limit the effects of market volatility.

o Balanced Fund -- Seeks long-term growth of capital and current income
consistent with reasonable investment risk by investing in equities, debt
securities and cash equivalents.

o Growth & Income Fund -- Pursues income and long-term capital growth by
investing primarily in large, well-established companies.

GROWTH FUNDS
Growth funds offer long-term capital appreciation potential by investing
primarily in various types of stocks.

o Growth Stock Fund* -- Pursues long-term capital appreciation from stocks
with strong growth potential.

o Young Investor Fund -- Invests in securities of companies that affect the
lives of children or teenagers.

o Special Fund -- Invests in securities believed to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, under- followed or out-of-favor companies.

o Growth Opportunities Fund -- Invests in the common stocks of small,
mid-sized and large companies believed to have the potential to generate
and sustain earnings growth at an above-average rate.

o Special Venture Fund -- Seeks capital appreciation through equity securities
of entrepreneurially managed companies.

o Capital Opportunities Fund -- Takes a long-term approach to aggressive
growth by selecting quality companies with the potential to generate high
levels of earnings growth over a three- to five-year period.

o International Fund -- Invests in a diversified portfolio of foreign
securities.

o Emerging Markets Fund -- Seeks long-term capital opportunities through
emerging market investment opportunities.

*Closed to new investors in accordance with the terms set forth in
the prospectus.

<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 Traditional and Roth IRAs. We're available
seven days a week, from 7 a.m. to 8 p.m. weekdays and from 9 a.m. to 2 p.m.
Saturday and Sunday (Central time).

STEIN ROE'S FUNDS-ON-CALL
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, including the new Roth IRA, 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 with 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
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
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
William D. Andrews, Executive Vice President
Thomas W. Butch, Executive Vice President
Loren A. Hanson, 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
Veronica M. Wallace, Vice President
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President, Secretary
Janet B. Rysz, Assistant Secretary
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant 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 Public Accountants

<PAGE>

THE STEIN ROE MUTUAL FUNDS

Stein Roe Cash Reserves 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 Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe High Yield Fund
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Young Investor Fund
Stein Roe Growth Opportunities 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, MA 02205-8900
Financial Advisors call: 1-800-322-0593
Shareholders call: 1-800-338-2550
www.steinroe.com

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

Liberty Financial Investments, Inc., Distributor
Member SIPC

TE12A 2/98