Stein Roe Mutual Funds
Semiannual Report
Dec. 31, 1998
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)
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Contents
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From the President................................................ 1
Tom Butch's thoughts on the markets and investing
Fund Performance.................................................. 3
How the Stein Roe tax-exempt bond funds have done over time
Questions & Answers
Interviews with the portfolio managers and a summary of
investment activity over the past six months
Municipal Money Market Fund.................................... 6
Intermediate Municipals Fund ................................. 10
Managed Municipals Fund ....................................... 13
High-Yield Municipals Fund ................................... 17
Portfolios of Investments......................................... 20
A complete list of investments with market values
Financial Statements.............................................. 46
Statements of assets and liabilities, operations
and changes in net assets
Notes to Financial Statements..................................... 56
Financial Highlights.............................................. 61
Selected per-share data
<PAGE>
From the President
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Photo of: Thomas W. Butch
To Our Shareholders
The second half of calendar year 1998 was a challenging but rewarding time for
tax-exempt securities. Since my last report to you, municipal bonds have
provided solid total returns with relatively modest levels of price volatility.
I am pleased to say that each of the four Stein Roe tax-exempt bond funds
provided positive results and outperformed the average of their peers for the
six months ended Dec. 31, 1998, as shown on page 3.
On the pages that follow, each Fund's portfolio manager presents an overview
of events since June that affected the tax-exempt bond market. We explain how we
have positioned Stein Roe Municipal Money Market Fund, Stein Roe Intermediate
Municipals Fund, Stein Roe Managed Municipals Fund, and Stein Roe High-Yield
Municipals Fund for the balance of fiscal 1999.
Shorter-Term Bonds Led the Way
High-quality municipal bonds with maturities of less than five years offered the
highest total return potential among tax-exempt securities between June and
December 1998. As bond prices rose, average yields on highly rated municipal
bonds fell between 10 and 60 basis points (0.10% and 0.60%).
This past autumn the Federal Reserve Board reduced its target for short-term
interest rates by 0.75% to 4.75% to maintain domestic econ omic growth in the
wake of global economic weakness. This sharp easing of short-term rates led to
further declines in long-term interest rates. Thirty-year U.S. Treasury bond
yields reached a near 40-year low of 4.71% on October 5 and ended calendar year
1998 at 5.09%.
Since mid-October, investor demand for U.S. government and municipal debt has
eased. Led by bright earnings prospects for technology stocks, the U.S. equity
market recovered from a brief but biting 19.5% summer correction. A widening of
yields between high quality and higher risk securities also sparked renewed
interest in lower-grade corporate debt and, to a lesser degree, municipal bonds.
A Positive Economic and Political Climate
We believe the current environment is quite favorable for municipal bond
investors, especially when viewed against taxable fixed-income alternatives.
Continued domestic growth has helped many states maintain high credit ratings
and helped the federal government post budget surpluses. Consumer inflation is
negligible. Tax-equivalent yields on longer term municipal bonds averaged more
than 95% of comparable maturity U.S. Treasury bonds as of December 31, a level
we haven't seen in a decade.
Supply May Ease
In calendar 1998, our nation's municipalities issued more than $284 billion in
new tax-exempt bonds, the second largest volume on record, according to The Bond
Buyer, a municipal bond trade publication. Many of these issuers refinanced old
debt, thereby allowing many states to substantially reduce debt service
expenditures in the years ahead.
We expect that new municipal bond supply will ease in 1999, in part because
the Internal Revenue Service imposes limits on how often municipalities can
refinance their debt. This is potentially good news for municipal bond investors
because if demand for tax-exempt securities remains steady or rises, bond prices
should hold up well.
Three Reasons to Look At Municipal Bond Funds
Historically, municipal bond yields have averaged between 80% and 85% of U.S.
Treasuries, making the current environment, with yields nearly as high as
Treasuries, unusually attractive, in our view. When you compare the income
potential of a municipal bond with the income potential of a taxable investment
after taxes, you'll see it can be quite attractive. For example, as of Dec. 31,
1998, a 30-year U.S. Treasury bond yielded 5.09% before taxes, and 3.07% after
taxes for an investor in the 39.6% federal tax bracket. By comparison, the
average A rated municipal bond yielded 5.07% as of Dec. 31, 1998.*
Since America's economy appears healthy, we believe a no-load municipal bond
fund currently offers investors three distinct advantages:
o Most of the income potential of comparable maturity and quality taxable bond
funds at a potentially significant tax advantage;
o A diversification opportunity for investors whose asset mix and risk profile
may have substantially shifted in recent years; and
o Reduced federal income tax liability (for most taxpayers).*
We urge you to review the role your municipal bond fund or funds are playing
in your portfolio and, as appropriate, consider increasing your financial com
mitment to this time-tested asset class.
On behalf of Stein Roe, I want to personally thank you for your continued
confidence in our organization, which this year marks its 50th anniversary of
serving mutual fund investors.
Sincerely,
Thomas W. Butch
President
Jan. 8, 1999
*Income may be subject to state or local taxes and federal alternative minimum
tax. Capital gains are subject to federal, state and local taxes.
Unlike Treasuries, municipal bonds vary in quality and are not guaranteed by
the U.S. government.
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Fund Performance
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<TABLE>
Cumulative Six-Month and Average Annual Total Returns
Periods Ended Dec. 31, 1998
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Stein Roe Municipal Money
Market Fund 1.43% 2.95% 2.94% 3.41%
U.S. Consumer Price Index (Inflation) 0.85 1.80 2.70 3.20
Lipper Tax-Exempt Money Market
Fund Average 1.41 2.92 2.91 3.08
Number of Funds in Peer Group 134 134 106 71
Stein Roe Intermediate Municipals Fund 3.40% 5.46% 5.20% 7.08%
Lehman Brothers 10-Year Municipal
Bond Index 4.10 6.76 6.35 8.33
Lehman Brothers 7-Year Municipal
Bond Index 3.82 6.23 5.79 --
Lipper Intermediate Municipal
Debt Fund Average 3.23 5.34 5.17 6.88
Number of Funds in Peer Group 151 149 85 27
Stein Roe Managed Municipals Fund 3.21% 5.50% 5.72% 7.73%
Lehman Brothers Municipal Bond Index 3.69 6.48 6.22 8.22
Lipper Municipal Debt Fund Average 3.00 5.33 5.43 7.68
Number of Funds in Peer Group 260 245 141 74
Stein Roe High-Yield Municipals Fund 2.76% 5.28% 6.36% 7.65%
Lehman Brothers Municipal Bond Index 3.69 6.48 6.22 8.22
Lipper High Yield Municipal Debt
Fund Average 2.36 5.25 5.98 7.58
Number of Funds in Peer Group 56 52 28 16
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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.
An expense limitation of 0.70% is currently in effect for Municipal Money Market
Fund and Intermediate Municipals Fund. Returns would have been lower without the
limitation. Total return includes changes in share price and reinvestment of
income and capital gains distributions, if any. Tax-free income is exempt from
federal taxes but may be subject to state and local taxes and federal
alternative minimum tax. Each index shown above is an unmanaged group of
fixed-income securities that differs from the composition of each Stein Roe
fund; the indices are not available for direct investment. The Consumer Price
Index is the U.S. government's measure of inflation for urban consumers.
Sources: Lipper, Inc. and Bloomberg Business News.
</TABLE>
<PAGE>
Total Return Comparisons
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Comparison of change in value of a $10,000 investment for the years ended
Dec. 31.
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Intermediate Municipals Fund
Line Chart:
Intermediate Municipals Lehman Brothers 10-Year
Fund Municipal Bond Index
12/31/88 10000 10000
12/31/89 10812 11068
12/31/90 11625 11880
12/31/91 12865 13320
12/31/92 13846 14508
12/31/93 13234 16361
12/31/94 14860 15580
12/31/95 16779 18254
12/31/96 17481 19084
12/31/97 18793 20846
12/31/98 19818 22255
Comparison of change in value of a $10,000 investment for the years ended
Dec. 31.
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Managed Municipals Fund and High-Yield Municipals Fund
Line Chart:
Managed Municpals High-Yield Lehman Brothers
Fund Municipals Fund Municipal Bond Index
12/31/88 10000 10000 10000
12/31/89 11060 11141 11079
12/31/90 11834 11996 11886
12/31/91 13240 13176 13329
12/31/92 14338 13881 14504
12/31/93 15951 15358 16286
12/31/94 15066 14737 15444
12/31/95 17561 17345 18140
12/31/96 18228 18128 18943
12/31/97 19923 19855 20685
12/31/98 21061 20899 22025
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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. An expense limitation of 0.70% is currently in
effect for Intermediate Municipals Fund. Returns would have been lower without
the limitation. These charts 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. Each illustration assumes a $10,000 investment on Dec. 31, 1988.
<PAGE>
Income Comparisons
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Managed Municipals Fund
Annual Income from a $100,000 Investment for years ended Dec. 31, 1979 through
Dec. 31, 1998
Bar Chart:
Managed Muncipals Fund
Total Income = $336,788
12/79 5930
12/80 7072
12/81 8783
12/82 9805
12/83 10019
12/84 8268
12/85 12568
12/86 16159
12/87 15839
12/88 15791
12/89 18702
12/90 19705
12/91 20279
12/92 21398
12/93 21769
12/94 23119
12/95 24120
12/96 24802
12/97 26046
12/98 27133
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Intermediate Municipals Fund and High-Yield Municipals Fund
Annual Income from a $100,000 Investment for years ended Dec. 31, 1989 through
Dec. 31, 1998
Bar Chart:
High-Yield Municipals Fund
Total Income = $92,372
Intermediate Municipals Fund
Total Income = $73,552
High-Yield Intermediate
Municipals Fund Municipals Fund
12/89 7701 6191
12/90 8267 6651
12/91 8593 6652
12/92 8602 6642
12/93 8528 6798
12/94 8727 7065
12/95 9517 7732
12/96 10672 8193
12/97 10932 8604
12/98 10832 8855
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.
Performance includes changes in share price and reinvestment of income and
capital gains distributions. The above illustrations assume a $100,000
investment on Dec. 31, 1988 and continuous reinvestment of dividends and capital
gains and show the amount of income dividends for each 12-month period ended
December 31.
<PAGE>
Questions & Answers
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An Interview with Veronica Wallace, Portfolio Manager of Stein Roe Municipal
Money Market Fund and SR&F Municipal Money Market Portfolio
Photo of: Veronica Wallace
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:
$122.5 million
Q: Interest rates have declined sharply since June. How has the Fund performed
in this environment?
A: Despite the Federal Reserve Board's 75 basis point (0.75%) cut in short-term
interest rates beginning in September, SR&F Municipal Money Market Portfolio has
maintained its income-generating potential. We anticipated the Fed's easing of
credit this past autumn and kept average maturity well above most of the Fund's
peers throughout the first half of fiscal 1999. As of Dec. 31, 1998, average
maturity stood at 55 days, some 25% higher than the average tax-exempt money
market fund, according to Lipper, Inc. This has helped maximize the Fund's
seven-day current tax-exempt yield, currently 3.13%. In fact, the Fund's
seven-day current yield as of December 31 was 13 basis points (0.13%) higher
than it was on June 30, when the Fund's average maturity was 68 days.
Q: What specific portfolio actions did you take to try to maximize income and
retain liquidity?
A: We invested more than two-thirds of net assets in variable-rate demand notes.
Rates on these securities have historically outperformed six-month notes. We
have been focusing on municipal securities issued in states such as Illinois and
Wisconsin, where lower investor demand required issuers to offer higher yields.
Also, the Fund reduced its positioning in put bonds because of unattractive
rates. At the beginning of the fourth quarter of 1998, we added tax-exempt bonds
with six-to-10 month maturities at what we considered very attractive yields,
and this helped us lengthen the Fund's average maturity.
Q: What level of income potential did tax-exempt money market securities offer
between June and December compared to taxable securities of similar maturity?
A: The range fluctuated from day to day. However, high quality municipal
money-market notes generally offered between 63% and 68% of the yield of
comparable maturity U.S. Treasury bills. We considered this relatively expensive
by historical standards. Investors had a brief buying opportunity in early
October during a period of increased stock and bond market volatility. At that
point, tax-exempt money market-eligible bonds yielded as much as 73% of
Treasuries. We used this period to increase the Fund's income potential while
paying careful attention to safety of capital.
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Municipal Money Market Fund's Yield History vs. Inflation 1995-1998
Bar Chart:
Municipal Money Market U.S. Consumer Price
Fund's 7-Day Current Yield Index (Inflation)
Jan-95 3.12 2.8
3.37 2.9
3.69 2.9
3.71 3.1
3.48 3.2
Jun-95 3.58 3
3.5 2.8
3.17 2.6
3.5 2.5
3.28 2.8
3.25 2.8
Dec-95 3.92 2.5
2.84 2.7
2.88 2.7
2.88 2.8
3.27 2.9
3.04 2.9
Jun-96 2.98 2.8
2.89 3
2.94 2.9
3.16 3
3 3
2.94 3.3
Dec-96 3.36 3.3
2.89 3
2.85 3
2.88 2.8
3.74 2.5
3.28 2.2
Jun-97 3.43 2.3
3.1 2.2
2.88 2.2
3.35 2.2
3.1 2.1
3.28 1.8
Dec-97 3.25 1.7
2.93 1.6
2.83 1.4
3.07 1.4
3.53 1.4
3.18 1.7
Jun-98 3 1.7
2.97 1.7
2.99 1.6
3.24 1.5
2.73 1.5
2.8 1.5
Dec-98 3.13 1.6
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Past performance does not guarantee future results. The Fund's yield fluctuates
and is not guaranteed.
Source: Bloomberg Business News. The U.S. Consumer Price Index is the
government's measure of retail inflation.
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Municipal Money Market Fund's income advantage over inflation
has grown during the past three years.
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<PAGE>
Q: How has the Fund's income potential stood up against inflation?
A: Even though interest rates and inflation have fallen since 1995, the Fund's
seven-day current yield has remained relatively steady as shown on page 7.
However, the Fund's income advantage over inflation has grown during the past
three years. Back in January 1995, the Fund's seven-day yield was only 32 basis
points (0.32%) more than the year-over-year increase in consumer prices. As of
December 31, 1998, Municipal Money Market Fund's seven-day yield was 153 basis
points (1.53%) more than the prevailing inflation rate. So in our view, the
Fund's potential to preserve the purchasing power of a short-term investment has
increased.
Q: What do you see happening with interest rates and inflation for the balance
of fiscal 1999, and how might this affect the Fund?
A: Maintaining the Fund's income potential is likely to be challenging in the
coming months, as rates for newly issued one-year municipal notes have fallen
below 3%. Short-term interest rates are approaching the record lows they set in
1993. U.S. inflation was at its lowest level in 12 years in 1998 and, in our
view, is likely to stay low given low prices for many commodities and weakness
in export-oriented manufacturing.
Past performance is no guarantee of future results. Yield varies daily and is
not guaranteed. An investment in the Fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corp. (FDIC) or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. The Adviser
currently limits expenses to 0.70% of average net assets, subject to termination
upon 30 days' notice to the Fund. Absent past limits, the seven-day current
yield at Dec. 31, 1998, would have been 3.02% and total return would have been
less. Tax-free income is exempt from federal taxes but may be subject to state
and local taxes and federal alternative minimum tax. Current yield is net of all
fees and expenses and represents annualization of dividends declared and payable
to shareholders for the last seven days of investment. See page 3 for a
comparison of the Fund's performance with that of its Lipper peer group average.
Portfolio composition is disclosed for SR&F Municipal Money Market Portfolio.
Portfolio holdings are as of 12/31/98 and are subject to change.
<PAGE>
Portfolio Highlights
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SR&F Municipal Money Market Portfolio
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Security Type Breakdown
PORTFOLIO PORTFOLIO
DEC. 31, 1998 JUNE 30, 1998
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Corporate-Backed:
Industrial 20.3% 23.0%
Food Industry 7.8 5.0
Steel/Metal 6.3 8.9
Chemical 6.3 4.7
Utility 4.5 7.6
Other Corporate-Backed 1.7 1.2
Revenue:
Housing 14.1 14.2
Education 5.5 4.6
Electric 4.3 3.3
Tax 3.2 1.1
Hospital 2.3 2.1
Water & Sewer 1.3 1.5
Student Loan 0.7 1.4
Other Revenue 8.2 11.2
Airport -- 0.7
General Obligation 11.6 9.5
Escrowed 1.9 --
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Total 100.0% 100.0%
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Maturity
As of Dec. 31, 1998 As of June 30, 1998
Pie Charts:
Greater than 299 Days 4.0% 11.0%
180-299 Days 10.3% 7.3%
90-179 Days 10.2% 6.5%
30-89 Days 4.4% 3.7%
0-29 Days 71.1% 71.5%
<PAGE>
Questions & Answers
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An Interview with Joanne Costopoulos, Portfolio Manager of Intermediate
Municipals Fund
Photo of: Joanne Costopoulos
Fund Data
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Investment Objective:
Seeks high current yield exempt from federal income tax, consistent with
capital preservation, through investment 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:
$200.5 million
Q: How did the Fund perform between June 1998 and December 1998?
A: Intermediate Municipals Fund performed well, outpacing the average of its
peers as shown on page 3. For the six-month period ended Dec. 31, 1998, the Fund
posted a 3.40% total return. For calendar 1998, Intermediate Municipals Fund's
total return of 5.46% also outpaced the average of its peers as shown on page 3.
As of Dec. 31, 1998, the Fund's 30-day SEC yield was 3.58%, which is a
tax-equivalent yield of 5.93%.
Q: What supported the Fund's strong results?
A: Nearly 80% of the Fund's holdings were in non-callable bonds. As short-term
interest rates were reduced three times during the period, the value of
non-callable bonds -- which cannot be called and replaced with lower-yielding
securities when interest rates decrease -increased, supporting the Fund's
performance.
Q: What trends affected the market?
A: Fueled by a drop in borrowing rates, new issuance of municipal bonds reached
$284 billion in calendar 1998 -- a 27% increase from the previous year and
nearly as strong as 1993's record year. While this gave the Fund ample
opportunity to select new bonds, the huge increase in supply put a damper on
bond prices. Municipal bonds have underperformed Treasury bonds of comparable
maturity since June. Yields on high-quality tax-exempt securities reached their
highest level relative to Treasuries since 1986.
The current income and tax advantages of municipal bonds, coupled with an
easing of demand for Treasuries this past autumn as the stock market recovered,
bodes well for calendar year 1999, in our view. High-quality municipal bonds are
currently cheaper than they were last summer. We think that as more investors
begin to see the federal tax consequences of rising wage and investment income,
municipal bonds will be viewed as a compelling alternative to Treasuries.
Despite new tax breaks for some this decade, Americans overall now pay a higher
percentage of their investment and wage earnings in taxes than at any point in
history, according to the non-partisan Tax Foundation.
Q: Where have you been finding the best values lately?
A: Bonds in the 10- to 15-year maturity range have been offering better returns
than bonds in any other range.
Q: Have you focused on any specific sectors since June 1998?
A: We favored sectors based on the return on investment potential they offered.
Credit spreads (the difference in yield between lower rated and higher rated
securities) have historically narrowed in lower interest rate environments. When
interest rates fell, we were able to find value in some lower-rated securities,
which we believe will enhance the total return of the portfolio. This action
resulted in a slight increase of the Fund's holdings rated BBB and lower.
Q: What do you expect going forward?
A: Going forward, we expect supply to taper off from its 1998 pace. If economic
growth slows, as expected in 1999, investors may be looking for less risky
investments, and we believe municipal bonds are a good place for them to look.
And, bonds in the intermediate sector provide much of the income and less of the
risk of longer-term bonds. Also, because tax-exempt securities continue to trade
cheaply compared to Treasuries, we believe this easing of supply should allow
for tax-exempt securities to outperform.
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 includes changes in share price and reinvestment of income and
capital gains distributions, if any. The Adviser currently limits expenses to
0.70% of average net assets, subject to termination upon 30 days' notice to the
Fund. Absent past limits, the 30-day SEC and tax equivalent yields at Dec. 31,
1998 would have been 3.48% and 5.76%, respectively, and total return would have
been less. Tax-free income is exempt from federal taxes but may be subject to
state and local taxes and federal alternative minimum tax. Tax-equivalent yield
shown on page 10 is for an investor in the 39.6% federal tax bracket. See page 3
for a comparison of the Fund's performance with that of its Lipper peer group
average. Portfolio holdings are as of 12/31/98 and are subject to change.
<PAGE>
Fund Highlights
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Intermediate Municipals Fund
Security Type Breakdown
PORTFOLIO PORTFOLIO
DEC. 31, 1998 JUNE 30, 1998
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General Obligation 22.0% 20.0%
Escrowed 14.4 13.8
Revenue:
Water & Sewer 9.8 12.0
Electric 8.1 6.0
Hospital 7.8 10.0
Airport 6.5 7.2
Education 4.7 5.3
Tax 4.3 3.6
Toll 3.9 4.0
Student Loan 2.3 2.5
Waste Disposal 2.3 2.3
Other Revenue 10.1 8.2
Corporate-Backed 3.8 5.1
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Total 100.0% 100.0%
================================================================================
Maturity
Pie Charts:
As of Dec. 31, 1998 As of June 30, 1998
Greater than 15 Years 15.6% 14.1%
10-15 Years 26.7% 26.6%
5-10 Years 39.2% 40.4%
0-5 Years 18.5% 18.9%
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Portfolio Quality
Pie Charts:
As of Dec. 31, 1998 As of June 30, 1998
AAA 73.2% 71.7%
AA 10.1% 10.3%
A 11.7% 14.4%
BBB and Below 5.0% 3.6%
<PAGE>
Questions & Answers
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An Interview with Brian Hartford and Bill Loring, Portfolio Managers of Managed
Municipals Fund
Fund Data
Investment Objective:
Pursues high tax-free income consistent with capital preservation by
investing in a quality-conscious portfolio of long-term municipal securities.
Fund Inception:
Feb. 23, 1977
Total Net Assets:
$579.5 million
Brian Hartford and William Loring were named portfolio managers of Managed
Municipals Fund effective Nov. 1, 1998.
Q: How did the Fund perform for the first half of fiscal 1999?
A: Managed Municipals Fund provided strong results. The Fund outpaced the
average returns of a peer group of municipal bond funds (See page 3). For the
six-month period ended Dec. 31, 1998, the Fund posted a 3.21% total return. As
of Dec. 31, 1998, the Fund's 30-day SEC yield was 4.17%, which is a
tax-equivalent yield of 6.90%.
Q: What contributed to the Fund's performance?
A: Municipal bond refinancing activity was brisk between June and December. Many
communities across America took advantage of falling interest rates to reduce
their long-term obligations. This negatively affected returns from bonds with
limited call protection. The Fund benefited from a significant position in
non-callable bonds. As interest rates declined this past autumn, the value of
these holdings increased. About 60% of the portfolio's holdings during the
period offered call protection. We also maintained a longer-than-average
adjusted duration which provided the Fund with increased income and total return
potential as bond prices rose.
To help preserve principal, we had a higher-than-average position in bonds of
the highest quality available - those rated AAA. This was a mild negative for
the Fund's performance, because during the period, prices of lower-quality bonds
rose more rapidly.
Q: What factors do you consider in your security selection?
A: We take a balanced risk approach to security selection. We believe one thing
that sets us apart from other fund managers is that we look at every facet of
portfolio management from a risk point of view. We try to assess the risk of
each decision involved in selecting a security -- sector risk, credit ratings
and scenarios in which a particular investment may add to or detract from
performance. We then purchase bonds that we believe will add the most to the
portfolio in the market environment we expect for coming months.
We employ various strategies based on bond market movements and economic
conditions. We attempt to invest in ways that take advantage of favorable market
conditions. In our opinion, this broad strategy has the potential to provide
consistent, above-average performance.
Q: Where do you strive to maintain the portfolio's average maturity?
A: The average maturity we want to maintain for the portfolio will change
depending on our economic outlook and how we believe economic change may affect
interest rates; credit sectors; differences in income potential between and
within quality sectors; the maturities offered on new issues; and the shape of
the yield curve. At Dec. 31, 1998, the Fund's weighted average maturity was 15.4
years, reflecting our outlook for slower, but stable economic growth, low
interest rates and an environment that favors intermediate-term bonds.
Q: What types of bonds have your criteria led you to lately?
A: We've found the greatest return potential in certain parts of the
higher-yield portion of the market lately. The spread -- or difference in yields
- -- in most quality levels in the municipals market has been extremely narrow.
We've generally limited purchases of bonds with the lowest credit ratings
because the yields offered by such bonds have not been high enough to warrant
taking on additional credit risk in the portfolio. Still, we found a few
securities we believe were undervalued and may have the potential to be upgraded
in quality. This positioning resulted in a slight increase in the percentage of
the Fund invested in bonds rated BBB and below.
Q: Have you made any significant adjustments to the portfolio during the period?
A: We have been assessing the value of some of the portfolio's shorter-call
holdings as well as holdings subject to alternative minimum tax (AMT). In a
declining interest rate environment, it is more valuable to own securities with
a longer call protection. Also, to minimize tax consequences for shareholders,
it is important to limit holdings that are subject to alternative minimum tax.
We've reduced the portfolio's position in pre-refunded bonds and housing
bonds to 24.2% of total net assets. Sometimes these are not the most
advantageous holdings in a low interest rate environment. For example,
homeowners are more inclined to refinance their mortgages when interest rates
are lower and that can make housing bonds less attractive.
We've also increased our position in bonds with longer maturities because
they may become more valuable in the low interest rate environment we
anticipate. Longer maturity bonds have the potential to fall more rapidly in
value when interest rates rise. However, with inflation currently at a 12-year
low, we believe the added income and price appreciation potential of longer-term
bonds more than offsets the risk that rates will reverse course.
Q: Do you expect supply to be strong in 1999?
A: Supply is likely to be well over $200 billion, but we doubt it will be as
strong as the $284 billion in new issuance brought to the market in 1998.
Q: You said that economic growth is expected to slow. Does this make you fear
credit risks going into next year?
A: Yes, if economic growth slows in 1999, corporate balance sheets may be less
robust. But we expect growth to be slow, so there should not be any great
surprises. Overall, the credit quality of most states' bonds remains excellent.
Most states are expected to post budget surpluses in 1999.
During the economic expansion over the past four years, rating services
upgraded the quality ratings of many municipal bond issues. If economic growth
slows as we expect, we believe there will be a reduction in the number of
securities given higher ratings. The most at-risk securities appear to be
cyclical industrial development bonds.
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 includes changes in share price and reinvestment of income and
capital gains distributions, if any. Tax-free income is exempt from federal
taxes but may be subject to state and local taxes and federal alternative
minimum tax. Tax equivalent yield shown on page 13 is for an investor in the
39.6% federal tax bracket. See page 3 for a comparison of the Fund's performance
with that of its Lipper peer group average. Portfolio holdings are as of
12/31/98 and are subject to change.
<PAGE>
Fund Highlights
- --------------------------------------------------------------------------------
Managed Municipals Fund
Portfolio Composition
PORTFOLIO
DEC. 31, 1998
- --------------------------------------------------------------------------------
Top 5 Sectors
Refunded 14.0%
State General Obligation 13.2
Local General Obligation 8.6
Joint Power Utility 7.5
Single Family Homes 7.2
Top 5 States
Georgia 13.6%
New York 10.8
Massachusetts 8.9
Illinois 8.1
Washington 5.3
- --------------------------------------------------------------------------------
Maturity
Pie Charts:
As of Dec. 31, 1998 As of June 30, 1998
Greater than 25 Years 10.5% 10.3%
20-25 Years 14.5% 12.2%
15-20 Years 24.6% 23.8%
10-15 Years 31.3% 34.0%
5-10 Years 9.3% 7.2%
Less than 5 Years 9.8% 12.5%
Portfolio Quality
As of Dec. 31, 1998 As of June 30, 1998
AAA 37.4%% 36.7%
AA 30.3% 32.0%
A 26.0% 25.8%
BBB and Below 6.3% 5.5%
<PAGE>
Questions & Answers
- --------------------------------------------------------------------------------
An Interview with Maureen Newman Portfolio Manager of Stein Roe High-Yield
Municipals Fund and SR&F High-Yield Municipals Portfolio
Photo of: Maureen Newman
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:
$329.5 million
Maureen Newman was named portfolio manager of High Yield Municipals Fund
effective Nov. 1, 1998.
Q: How did the Fund perform for the first half of fiscal 1999?
A: High-Yield Municipals Fund provided strong results, outpacing the average
returns of a peer group of municipal bond funds (See page 3). As of Dec. 31,
1998, the Fund's 30-day SEC yield was 4.28% -- that's a tax-equivalent yield of
7.09%.
Weak corporate earnings reports last summer caused riskier, lower-quality
municipal bonds backed by less-stable corporations to underperform. We hold a
high-quality composition, and that helped the Fund perform better than the
average fund in its category between June and December.
To help preserve principal, the Fund maintained a shorter-than-average
maturity. When the high yield municipal bond market rallied this past autumn,
this positioning did not allow the Fund's net asset value to rise as much as
comparable funds.
During the last six months, high yield bond issuance increased firmly. This
tremendous amount of new supply presented us with the opportunity to buy
attractive bonds with high income potential at discount prices.
Q: How did you adjust the portfolio's composition?
A: We used a barbell strategy to manage credit risk. We increased the
portfolio's weighting in bonds with credit quality ratings of BB and lower
between June and December. This reflected our efforts to take advantage of the
opportunities available in lower-quality bonds.
Q: What strategies do you use for security selection?
A: We use a relative value approach. Our analysts focus on the fundamentals of
the individual credit, including management, financials and market factors, in
order to discern issuers that are likely to be stable or improving. We evaluate
the pricing of the security to determine whether there are favorable income
and/or capital appreciation opportunities. We actively manage our holdings to
provide long term value to our shareholders.
Due to the uncertainty in the outlook for cyclical industries, we are
currently focusing our purchases in industries that are less dependent on
economic activity, such as education and nursing homes. One example is our
holding of 5.65% Latin School of Chicago bonds (0.5% of total net assets). We
bought these BBB-rated bonds at par and they have performed better than other
bonds in their rating category. This private school is enjoying strong
enrollment and community support. It appears to have effective management and
strong fund-raising capabilities.
Q: What have you added to the portfolio?
A: We purchased bonds of Walker Methodist, a senior living/nursing home group in
Minneapolis, MN (0.4% of total net assets). The bonds of this large,
well-established group were offered at an attractive price due to concerns about
historical results. More recently, management has focused its attention on its
core business, which we believe will result in improved operating performance.
Q: What's your outlook for the balance of fiscal 1999?
A: If corporate earnings are weak in 1999, we believe this may affect bond
prices in the high yield market. Industrial development bonds could be most
affected by this as their issuers are traditionally sensitive to economic
weakness. We expect that non-cyclical areas such as housing, schools and nursing
homes will continue to provide value, so that's where we plan to focus new
purchases.
With yields at their highest level relative to Treasuries since the
mid-1980s, we believe municipal bonds are likely to remain an attractive
alternative to taxable fixed-income securities for investors in high
tax brackets.
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 includes changes in share price and reinvestment of income and capital
gains distributions, if any. Tax-free income is exempt from federal taxes but
may be subject to state and local taxes and federal alternative minimum tax.
Tax-equivalent yield shown on page 17 is for an investor in the 39.6% federal
tax bracket. Portfolio holdings are as of 12/31/98 and are subject to change.
Holdings disclosed as a percentage of SR&F High-Yield Municipals Portfolio. See
page 3 for a comparison of the Fund's performance with that if its Lipper peer
group average. Investing in high-yield bonds involves greater credit risks than
investing in higher quality bonds.
<PAGE>
Fund Highlights
- --------------------------------------------------------------------------------
SR&F High-Yield Municipals Portfolio
Portfolio Composition
PORTFOLIO
DEC. 31, 1998
- --------------------------------------------------------------------------------
Top 5 Sectors
Refunded 17.8%
Investor-Owned Utility 8.8
Air Transportation 8.8
Hospital 6.9
Life Care 6.6
Top 5 States
Indiana 12.5%
Pennsylvania 10.1
Texas 6.9
Colorado 6.5
Ohio 4.9
- --------------------------------------------------------------------------------
Maturity
As of Dec. 31, 1998 As of June 30, 1998
Pie Charts:
Greater than 25 Years 26.8% 24.4%
20-25 Years 18.6% 15.2%
15-20 Years 18.9% 21.3%
10-15 Years 12.8% 12.1%
5-10 Years 8.6% 9.7%
Less than 5 Years 14.3% 17.3%
- --------------------------------------------------------------------------------
Portfolio Quality
Pie Charts:
As of Dec. 31, 1998 As of June 30, 1998
AAA 18.2% 20.7%
AA 9.2% 10.5%
A 21.4% 19.9%
BBB 19.5% 21.6%
BB 10.4% 7.9%
B and Below/Not Rated 21.3% 19.4%
<PAGE>
<TABLE>
SR&F Municipal Money Market Portfolio
- --------------------------------------------------------------------------------
Portfolio of Investments at December 31, 1998
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Amortized
Municipal Securities (101.9%) Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alaska (0.2%)
Anchorage Alaska Water Revenue (FSA Insured) 4.500% 8/1/99 ................................... $ 235 $ 236
Alabama (0.4%)
University of Alabama Revenue Series A (General Fee-Huntsville,
MBIA Insured, prerefunded to 11/1/99, escrowed in
U.S. Treasury securities) 7.000% 11/1/09 .................................................. 500 527
Arkansas (2.2%)
Clark County Solid Waste Disposal Revenue (Reynolds Metals Project,
LOC SunTrust Bank) VRDB 4.050% (a) ........................................................ 3,000 3,000
California (1.7%)
Los Angeles County GO TRAN Series 98-99A 4.500% 6/30/99 ...................................... 1,000 1,003
Orange County IDR Series A (Control Air Conditioning Project,
LOC California State Teachers Retirement) VRDB 4.000% (a) ................................. 1,400 1,400
------
2,403
Colorado (3.5%)
Colorado Health Facilities Authority Revenue (AMC Cancer Research
Center, LOC U.S. Bank NA) 3.750% 1/15/28
(Mandatory Put 1/15/99) ................................................................... 1,000 1,000
Colorado Springs IDR (Catalano Family LLP Project, LOC Bank One
Colorado) VRDB 4.150% (a) ................................................................. 1,200 1,200
Lowry Economic Redevelopment Authority Colorado Revenue Series B
(LOC Canadian Imperial Bank) VRDB 4.000% .................................................. 1,000 1,000
SBC Metropolitan District Colorado (LOC U.S. Bank NA)
3.350% 12/1/17 (Mandatory Put 12/1/99) .................................................... 1,555 1,555
------
4,755
Delaware (2.2%)
Delaware State Economic Development Authority IDR Series C (Star
Enterprise, Delaware Clean Power Project, LOC Canadian
Imperial Bank) VRDB 4.110% (a) ............................................................ 3,000 3,000
Georgia (1.9%)
Gwinnett County Development Authority IDR (Price Companies Project,
LOC NationsBank of Georgia) VRDB 4.200% (a) ............................................... 2,600 2,600
Illinois (14.9%)
ABN AMRO Munitops Certificates Trust Series 1998-14 (Cook County
GO Refunding Bond, ABN AMRO Liquidity Provider)
VRDB 4.200% (c) ........................................................................... 1,000 1,000
Chicago Economic Development Revenue (Crane Carton Project,
LOC Northern Trust) VRDB 4.200% ........................................................... 750 750
Chicago Revenue (De La Salle Institute Project, LOC Northern Trust)
VRDB 4.000% ............................................................................... 900 900
Chicago Tax Increment Allocation (Stockyards, LOC Northern Trust)
Series A VRDB 4.000% ...................................................................... 1,500 1,500
Cook County School District No. 99 Cicero GO
(FSA Insured) 3.400% 6/1/99 ............................................................... 1,225 1,226
Glendale Heights IDR (Judy LLC/York Corrugated, LOC Harris Trust
and Savings Bank) VRDB 4.200% (a) ......................................................... 1,000 1,000
Homewood Flossmoor Park District GO (FSA Insured) 4.200% 12/1/99 ............................. 135 136
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Amortized
Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois (Continued)
Illinois Development Finance Authority Revenue
(Nutrasweet Project, gtd. by Monsanto) VRDB 4.300% (a) ...................................... $ 4,300 $ 4,300
(American Osteopathic Association, LOC Harris Trust
& Savings Bank) VRDB 4.050% ............................................................... 700 700
(Wheaton Academy Project, LOC Northern Trust) VRDB 4.050% ................................... 1,000 1,000
Illinois Health Facility Authority Revenue (University of Chicago
Hospital Project) 2.950% 8/1/15 (Mandatory Put 5/3/99) ...................................... 1,000 1,000
Illinois Student Assistance Commission Student Loan Revenue (LOC
Bank of America Illinois) Series 96A VRDB 4.050% (a) ........................................ 1,000 1,000
Montgomery & Bond Counties Community Unit School District
Number 3 (FSA Insured) 3.400% 11/1/99 ....................................................... 395 395
Morton IDR Series A (Morton Welding Project, LOC Bank One
Illinois NA Chicago) VRDB 4.250% (a) ........................................................ 940 940
Quad Cities Regional Economic Development Authority Revenue
(Steel Warehouse, LOC Bank One Indiana) VRDB 4.150% (a) ..................................... 4,200 4,200
Sauget PCR (Monsanto Project) VRDB 4.150% ...................................................... 300 300
-------
20,347
Indiana (9.5%)
Allen County Economic Development Revenue (Golden Years
Homestead Project, LOC Norwest Bank Minnesota) VRDB 4.000% .................................. 1,655 1,655
Crawfordsville Economic Development Revenue (Pedcor Investments,
Shady Knoll Project, LOC FHLB) VRDB 4.100% (a) .............................................. 1,567 1,567
Franklin Economic Development Revenue (Pedcor Investments,
Lakeview Apartments, LOC FHLB) VRDB 4.100% (a) .............................................. 2,839 2,839
Gary Environmental Improvement Revenue (U.S. Steel
Project, LOC Bank of Nova Scotia) VRDB 3.500% ............................................... 500 500
Indiana Municipal Power Agency Power Supply System Revenue
Series B (MBIA Insured) 4.850% 1/1/99 ....................................................... 500 500
Kokomo Economic Development Revenue (Village Community
Partners IV Project, LOC FHLB) VRDB 4.100% (a) .............................................. 2,940 2,940
La Porte County Economic Development Revenue (Pedcor Investments,
Woodland Project, LOC FHLB) VRDB 4.100% (a) ................................................. 1,965 1,965
Plymouth Economic Development Revenue Series A (Hillcrest Apartments
Project, LOC LaSalle National Bank) VRDB 4.250% (a) ......................................... 1,000 1,000
-------
12,966
Iowa (6.7%)
Clinton IDR (Sethness Products Project, LOC Northern Trust)
VRDB 4.150% (a) ............................................................................. 4,000 4,000
Iowa Higher Education Loan Authority Revenue (Saint Ambrose University,
LOC Norwest Bank Minnesota) VRDB 4.100% ..................................................... 500 500
Iowa State Schools Cash Anticipation Program Warrant
Certificates (FSA Insured)
Series 97-98B 4.250% 1/28/99 .............................................................. 1,000 1,000
Series 98-99A 4.500% 6/25/99 .............................................................. 2,000 2,007
Muscatine County PCR (Monsanto Project)
VRDB 4.150% ................................................................................. 1,500 1,500
Ottumwa Revenue (Ottumwa Regional Health Center, LOC Norwest
Bank Minnesota) VRDB 4.050% ................................................................. 200 200
-------
9,207
Kansas (0.6%)
Olathe IDR (Garmin International Project, LOC NationsBank)
VRDB 4.200% (a) ............................................................................. 800 800
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Amortized
Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kentucky (3.9%)
Covington Industrial Building Revenue (White Castle Distributing,
LOC Bank One Columbus) Series 1991 VRDB 4.150% (a) .......................................... $3,560 $3,560
Shelby County Industrial Building Revenue (Roll Forming,
LOC Bank One Kentucky) VRDB 4.150% (a) ...................................................... 1,730 1,730
------
5,290
Louisiana (1.0%)
Calcasieu Parish Industrial Development Board Environmental Revenue
(Citgo Petroleum Project, LOC Banque Nationale Paris)
VRDB 5.250% (a) ............................................................................. 200 200
Lake Charles Harbor & Term District Port Facilities Revenue
(E.I. Dupont de Nemours) VRDB 5.100% ........................................................ 300 300
Saint Charles Parish PCR (Shell Oil Company Norco Project)
VRDB 5.200% (a) ............................................................................. 500 500
Terrebonne Parish Hospital Service District No. 1 (General Medical
Center Project, AMBAC Insured) 4.000% 4/1/99 ................................................ 320 320
------
1,320
Massachusetts (0.6%)
Massachusetts State Turnpike Authority Bond Anticipation
Notes Series A 5.000% 6/1/99 (escrowed in U.S. Treasury securities) ......................... 785 789
Maryland (1.2%)
Anne Arundel County Economic Development Revenue (Baltimore Gas
and Electric Project) 2.950% 12/1/18 (Mandatory Put 4/5/99) (a) ............................. 1,000 1,000
Maryland State Community Development Administration Department
of Housing and Community Development Single Family Program
Sixth Series 4.450% 4/1/99 (a) .............................................................. 655 656
------
1,656
Michigan (2.5%)
ABN AMRO Munitops Certificates Trusts Series 1998-13 (Michigan
Trunk Line Revenue, ABN AMRO Liquidity Provider)
VRDB 4.170% (c) ............................................................................. 2,000 2,000
Detroit City School District GO 4.500% 7/1/99 .................................................. 1,000 1,004
Highland Park School District GO (FSA Insured) 3.900% 5/1/99 ................................... 185 185
Lowell Michigan Area Schools GO 6.750% 5/1/99 .................................................. 225 227
------
3,416
Minnesota (2.2%)
Maple Grove Multifamily Housing Revenue (Eagle Ridge Apartments,
LOC Norwest Bank Minnesota) VRDB 3.950% ..................................................... 3,000 3,000
Missouri (4.4%)
Jefferson County Industrial Development Authority IDR (GHF
Holdings Project, LOC Bank One Indiana) VRDB 4.150% (a) ..................................... 3,700 3,700
Kansas City Industrial Development Authority IDR (Lanter Project,
LOC Harris Trust & Savings Bank) VRDB 4.200% ................................................ 600 600
Missouri State Health & Educational Facilities Authority Revenue
(Washington University) Series C VRDB 5.000% ................................................ 600 600
Saint Charles County Industrial Development Authority PCR
(Monsanto Project) VRDB 4.100% .............................................................. 100 100
St. Louis General Fund Revenue TRAN 4.500% 6/30/99 ............................................. 1,000 1,004
------
6,004
Montana (0.7%)
Montana State Board of Investment Revenue Series 1991
VRDB 3.600% 3/1/01 (Optional Put 3/1/99) .................................................... 1,000 1,000
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Amortized
Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Hampshire (0.9%)
New Hampshire State Business Finance Authority Resource Recovery
Revenue (Wheelabrator Concord, LOC Wachovia Bank)
Series B VRDB 4.050% (a) .................................................................. $1,200 $1,200
New Jersey (0.7%)
Middlesex School District GO (FSA Insured) 4.750% 4/15/99 .................................... 250 250
Pitman School District GO (FGIC Insured) 4.800% 4/1/99 ....................................... 325 326
South Brunswick Township GO 4.400% 8/1/99 .................................................... 395 396
------
972
New Mexico (0.8%)
Albuquerque Educational Facilities Revenue (Menaul School Project,
LOC Norwest Bank Minnesota) VRDB 4.100% ................................................... 300 300
Rio Rancho Public School District Number 94 GO Series B
(FSA Insured) 6.100% 8/1/99 ............................................................... 835 846
------
1,146
New York (2.2%)
Batavia School District GO (FSA Insured) 4.350% 6/15/99 ...................................... 1,639 1,643
Nassau County GO Series S (AMBAC Insured) 5.000% 3/1/99 ...................................... 715 716
Oceanside Unified Free School District GO (FGIC Insured)
7.000% 6/15/99 ........................................................................... 650 659
------
3,018
North Carolina (0.5%)
New Hanover County Industrial Facilities (Gang-Nail Systems Project,
LOC Harris Trust & Savings Bank) VRDB 4.050% .............................................. 700 700
Ohio (2.3%)
Hancock County Multi-Family Revenue (Pedcor Investments, Crystal
Glen Apartments Project, LOC FHLB) VRDB 4.200% (a) ........................................ 750 750
Ohio Environmental Improvement Revenue (U.S. Steel Project,
LOC Pittsburgh National Bank) VRDB 3.500% ................................................. 400 400
Ohio Housing Finance Agency Mortgage Revenue Series A-2
(gtd. by Trinity Funding GIC) 3.800% 3/1/99 (a) ........................................... 1,500 1,500
Ohio State Building Authority Series C (prerefunded to 10/1/99,
escrowed in U.S. Treasury securities) 7.350% 10/1/04 ...................................... 500 532
------
3,182
Oklahoma (0.4%)
Tulsa County Independent School District No. 9 Union
Board of Education GO 5.350% 5/1/99 ....................................................... 500 527
Pennsylvania (3.0%)
Pennsylvania State GO Second Series A (MBIA Insured) 6.000% 11/1/99 .......................... 200 204
Pennsylvania State Higher Educational Facilities Authority College &
University Revenue (Bryn Mawr College, FGIC Insured, prerefunded
to 12/1/99, escrowed in U.S. Treasury securities) 6.750% 12/1/01 .......................... 750 788
Philadelphia TRAN Series 98-99A 4.250% 6/30/99 ............................................... 1,000 1,002
Quakertown General Authority Revenue Series 96A
(LOC PNC Bank) VRDB 4.050% ................................................................ 2,058 2,058
------
4,052
South Carolina (1.5%)
South Carolina Jobs Economic Development Authority IDR
(Specialty Equipment Companies, LOC Bank of America, Illinois)
VRDB 4.150% (a) ........................................................................... 2,045 2,045
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Amortized
Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tennessee (2.6%)
Knoxville Waste Water System Revenue 4.375% 4/1/99 ........................................... $ 610 $ 610
McMinn County Industrial Development Board IDR (Creative
Fabrication, LOC NBD Bank) VRDB 4.250% (a) ................................................ 1,096 1,096
Montgomery County Public Building Authority Pooled Financing
Government Obligation Revenue (LOC NationsBank)
VRDB 4.050% ............................................................................... 1,900 1,900
------
3,606
Texas (6.5%)
Arlington GO 6.500% 8/15/99 .................................................................. 660 673
Austin Certificates of Obligation 7.000% 9/1/99 .............................................. 620 634
Bexar Metropolitan Water District Waterworks Revenue
(MBIA Insured) 4.350% 5/1/99 .............................................................. 300 300
Brazos River Authority PCR (Texas Utilities Electric Co.)
VRDB 5.200% (a) ........................................................................... 500 500
Brazos Industrial Development Corporation Marine Term Revenue
(Monsanto Project) VRDB 4.150% ............................................................ 400 400
Carrollton GO 6.250% 8/15/99 ................................................................. 335 340
Gulf Coast Industrial Development Authority Solid Waste Disposal
Revenue (Citgo Petroleum Project, LOC NationsBank of Texas)
VRDB 5.250% (a) ........................................................................... 300 300
Gulf Coast Waste Disposal Authority PCR (Monsanto Project)
VRDB 4.150% ............................................................................... 200 200
Haltom City GO (AMBAC Insured) 6.500% 2/1/99 ................................................. 300 300
Haltom City Waterworks and Sewer Revenue (FSA Insured)
6.500% 2/1/99 ............................................................................. 100 100
Harris County Industrial Development Corporation IDR
(Precision General Project, LOC Morgan Guaranty Trust)
VRDB 4.150% (a) ........................................................................... 2,060 2,060
Harris County Revenue (MBIA Insured) 5.100% 8/15/99 (a) ...................................... 235 236
Pasadena Independent School District GO (gtd. by PSF)
4.500% 2/15/99 ............................................................................ 435 435
Richardson Independent School District GO 5.500% 2/15/99 ..................................... 740 741
Robertson County Industrial Development Corporation (Sanderson Farms
Project, LOC Harris Trust & Savings Bank) VRDB 4.250% (a) ................................. 100 100
Tarrant County Hospital District GO 5.000% 8/15/99 ........................................... 500 504
Texas State Veterans Housing Assistance Program Fund II Series A
4.150% 6/1/99 (a) ......................................................................... 580 581
University of Texas Revenue Series B 5.000% 8/15/99 .......................................... 500 504
------
8,908
Utah (0.2%)
Provo City School District GO 3.400% 6/15/99 ................................................. 105 105
Utah Municipal Power System Revenue (Hunter Project, AMBAC Insured)
4.200% 7/1/99 ............................................................................. 250 250
------
355
Vermont (0.7%)
Vermont Educational & Health Buildings Financing Agency Revenue
(Middlebury College Project) Series A 3.750% 5/1/28
(Optional Put 5/1/99) ..................................................................... 910 910
Washington (7.3%)
Washington State Housing Finance Commission Multi-Family Housing
Revenue (Hamilton Place Senior Living Project, LOC U.S. Bank
of Washington) Series A VRDB 4.000% (a) ................................................... 1,140 1,140
<PAGE>
<CAPTION>
SR&F Municipal Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Amortized
Amount Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Washington (Continued)
Washington State Public Power Supply System Revenue
Series A (Nuclear Project Number 1) 7.250% 7/1/99 .................................... $ 1,500 $ 1,528
Series C (Nuclear Project Number 2) 7.200% 7/1/99 .................................... 3,650 3,710
Yakima County Public Corporation IDR (John I. Haas Project,
LOC Bayerische Vereinsbank) VRDB 4.150% (a) .......................................... 3,550 3,550
---------
9,928
Wisconsin (12.0%)
Carlton PCR (Wisconsin Power & Light Project)
VRDB 4.200% (a) ...................................................................... 4,000 4,000
Chase IDR (Belgioioso Cheese Project, LOC Bank One Wisconsin)
VRDB 4.150% (a) ...................................................................... 1,000 1,000
Fond Du Lac IDR (Brenner Tank, LOC Bank One
Wisconsin) VRDB 4.150% (a) ........................................................... 2,355 2,355
Fox Lake Redevelopment Authority IDR (Karavan Trailers Project,
LOC Bank One Wisconsin) VRDB 4.150% (a) .............................................. 1,600 1,600
Hamilton School District GO 4.000% 4/1/99 ............................................... 415 415
Holland IDR (White Clover Dairy Project, LOC Bank One
Wisconsin) VRDB 4.150% (a) ........................................................... 2,275 2,275
Kenosha IDR (Monarch Plastics Project, LOC Bank One
Wisconsin) VRDB 4.150% (a) ........................................................... 1,920 1,920
Kettle Moraine School District GO (AMBAC Insured) 3.500% 3/15/99 ........................ 375 375
Mukwonago School District Bond Anticipation Notes 3.750% 11/1/99 ........................ 1,000 1,005
Oshkosh Area School District GO Bond Anticipation
Notes 3.330% 12/15/99 ................................................................ 1,000 1,001
Wisconsin State Clean Water Revenue Series 1 4.200% 6/1/99 .............................. 500 500
---------
16,446
---------
Total Municipal Securities (b) .......................................................... 139,311
Other Assets, Less Liabilities (-1.9%) .................................................. (2,595)
---------
Total Net Assets (100.0%) ............................................................... $ 136,716
=========
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a)Security is subject to federal alternative minimum tax. At December 31, 1998,
the aggregate amortized cost of these securities represented 56.5 percent of
total net assets.
(b)At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical.
(c)Represents private placement securities issued under Rule 144A, which are
exempt from the registration requirements of the Securities Act of 1933.
These securities generally are issued to qualified institutional buyers, such
as the Portfolio, and any resale by the Portfolio must be in an exempt
transaction, normally to other qualified institutional investors. At December
31, 1998, the aggregate amortized cost of the Portfolio's private placement
securities was $3,000 which represented 2.2 percent of net assets.
Variable rate demand bonds (VRDB) are securities whose yields are periodically
reset at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit from a major bank.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Intermediate Municipals Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at December 31, 1998
(Dollar amounts in thousands)
(Unaudited)
Principal Market
Municipal Securities (99.5%) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska (1.7%)
Alaska Industrial Development & Export Authority Revenue
(Cominco Limited, MBIA Insured) Series A 5.500% 4/1/04 (a)................................ $ 1,000 $ 1,066
(Snettisham Hydro-Electric, AMBAC Insured) 4.850% 1/1/09 (a) .............................. 280 287
Anchorage GO (MBIA Insured) 5.000% 7/1/14 .................................................... 2,000 2,059
-------
3,412
Arizona (6.9%)
Arizona State Transportation Board Highway Revenue Series A
6.000% 7/1/00 ............................................................................. 1,000 1,036
Cochise County Unified School District No. 68 Sierra Vista GO
Series B (FGIC Insured) 9.000% 7/1/01 ..................................................... 1,115 1,255
Maricopa County Hospital Revenue (Samaritan Health Services,
escrowed in U.S. Treasury securities) 7.625% 1/1/08 ....................................... 2,050 2,425
Maricopa County Unified School District No. 97 Deer Valley GO
Series A (MBIA Insured) 6.250% 7/1/06 ..................................................... 1,750 1,989
Phoenix Civic Improvement Corporation
Wastewater System Lease (escrowed in U.S. Treasury securities,
prerefunded to 7/1/03) 6.000% 7/1/07 ...................................................... 2,500 2,762
Pima County GO 6.300% 7/1/02 ................................................................. 2,500 2,705
Tempe GO Series A 5.500% 7/1/08 .............................................................. 1,000 1,105
Tempe Unified High School District No. 213 GO (FGIC Insured)
7.000% 7/1/08 ............................................................................ 500 606
------
13,883
Arkansas (1.4%)
Beaver Water District Benton & Washington Counties Water Revenue
(MBIA Insured) 6.000% 11/15/04 ............................................................ 2,580 2,871
California (5.2%)
California Educational Facilities Authority Revenue (University of
San Francisco, MBIA Insured) 5.600% 10/1/10 ............................................... 1,000 1,120
California Housing Finance Agency Revenue Home Mortgage
Series B-1 5.900% 2/1/04 (a) .............................................................. 910 956
Central Coast Water Authority Revenue (AMBAC Insured,
escrowed in state and local government securities,
prerefunded to 10/1/02) 5.950% 10/1/03 .................................................... 2,000 2,194
East Bay Municipal Utility District Water System Revenue
(AMBAC Insured, escrowed in U.S. Treasury securities)
7.000% 6/1/00 ............................................................................ 1,400 1,470
La Quinta California Redevelopment Agency Tax Allocation
(MBIA Insured) 7.300% 9/1/09 .............................................................. 750 949
Los Angeles County Public Works Financing Authority Revenue
(escrowed in U.S. Treasury securities, prerefunded to 10/1/04)
5.800% 10/1/05 ............................................................................ 1,500 1,669
Vallejo Revenue Water Improvement Project Series B
(FGIC Insured, escrowed in U.S. Treasury securities)
6.000% 11/1/01 ............................................................................ 2,030 2,165
------
10,523
Colorado (0.3%)
Adams County School District No. 12 Series A (MBIA Insured)
Zero Coupon (Effective Yield 6.100%) 12/15/12 ............................................. 1,300 672
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware (0.7%)
Delaware Economic Development Authority Revenue
(General Waterworks Corporation) 6.450% 12/1/07 ............................................. $ 1,165 $ 1,342
District of Columbia (1.1%)
District of Columbia Revenue (Howard University, MBIA Insured)
5.500% 10/1/13 .............................................................................. 2,000 2,182
Florida (3.7%)
Miami-Dade County School Board Certificates of Participation
Series C (FSA Insured) 5.000% 8/1/17 ........................................................ 1,000 1,004
Stoneybrook Community Development District Capital Improvement
Revenue Series B 5.700% 5/1/08 .............................................................. 3,285 3,281
Tallahassee Energy System Revenue Series A 5.250% 10/1/14 ...................................... 2,980 3,202
-------
7,487
Georgia (7.7%)
Atlanta Airport Facilities Revenue (AMBAC Insured)
6.500% 1/1/07 ............................................................................... 5,000 5,782
Fulton County Water & Sewer Revenue (FGIC Insured)
5.625% 1/1/01 ............................................................................... 1,000 1,038
Georgia GO Series A 6.250% 4/1/07 .............................................................. 2,000 2,307
Georgia Municipal Electric Authority Power Revenue Series Y
(AMBAC Insured) 6.400% 1/1/13 ............................................................... 3,000 3,532
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
(AMBAC Insured)
Series M 6.050% 7/1/01 .................................................................... 1,600 1,690
Series P 5.800% 7/1/02 .................................................................... 1,000 1,066
-------
15,415
Hawaii (0.6%)
Honolulu City & County GO Series A 7.350% 7/1/06 ............................................... 1,000 1,200
Illinois (8.9%)
Chicago Board of Education GO (MBIA Insured)
6.250% 12/1/12 .............................................................................. 2,100 2,457
Chicago Midway Airport Revenue Series A (MBIA Insured)
5.700% 1/1/04 (a) ........................................................................... 1,000 1,069
Chicago Skyway Toll Bridge Revenue (escrowed in U.S. Treasury
securities, prerefunded to 1/1/04) 6.750% 1/1/17 ............................................ 1,500 1,710
Chicago Water Revenue (FGIC Insured) 6.500% 11/1/09 ............................................ 2,155 2,558
DuPage County Special Service Area No. 11 6.750% 1/1/14 ........................................ 1,135 1,300
Illinois Development Finance Authority Revenue Series A
(Provena Health, MBIA Insured) 5.250% 5/15/18 ............................................... 3,865 3,933
Illinois Health Facilities Authority Revenue
(Rush Presbyterian, MBIA Insured) 5.000% 11/15/18 ........................................... 1,100 1,082
Metropolitan Pier & Exposition Authority Dedicated State Tax
Revenue (McCormick Place Expansion Project)
Series 1992A (escrowed in U.S. Treasury securities) 7.250% 6/15/05 ....................... 385 455
Series 1992A 7.250% 6/15/05 ............................................................... 2,365 2,780
Southern Illinois University Revenue (MBIA Insured)
Zero Coupon (Effective Yield 5.649%) 4/1/15 ................................................. 1,175 522
-------
17,866
Indiana (4.1%)
Indiana State Toll Road Commission Toll Road Revenue
(escrowed in U.S. Treasury securities) 9.000% 1/1/15 ........................................ 2,240 3,260
<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
6.500% 11/1/07 (escrowed in U.S. Treasury securities,
prerefunded to 11/1/02) ............................................................... $1,040 $1,134
6.500% 11/1/07 .......................................................................... 1,210 1,348
Indianapolis Local Public Improvement Bond Bank Series D
6.500% 2/1/06 ............................................................................. 2,100 2,404
------
8,146
Iowa (0.1%)
Muscatine County PCR (Monsanto Project) VRDB 4.150% .......................................... 100 100
Kentucky (1.3%)
Kentucky State Turnpike Authority Economic Development
Road Revenue 5.800% 1/1/04 ................................................................ 2,500 2,698
Louisiana (2.6%)
Louisiana Public Facilities Authority Student Loan Revenue
Series A-1 5.900% 9/1/99 .................................................................. 1,655 1,676
New Orleans GO (FGIC Insured) 5.500% 12/01/14 ................................................ 1,000 1,085
Orleans Levee District Series A (FSA Insured) 5.950% 11/1/07 ................................. 2,200 2,449
------
5,210
Maine (0.3%)
Maine Educational Loan Authority Educational Loan Revenue
Series A-2 6.650% 12/1/02 (a) ............................................................. 580 613
Massachusetts (2.1%)
Massachusetts Bay Transportation Authority Series A 7.000% 3/1/07 ............................ 2,250 2,694
Massachusetts State Health and Educational Facilities Authority
Revenue (Daughters of Charity )
Series C 7.250% 7/1/00 .................................................................. 400 416
Series D 6.000% 7/1/09 .................................................................. 1,000 1,095
------
4,205
Michigan (4.3%)
Greater Detroit Resource Recovery Authority Revenue Series A
(AMBAC Insured) 6.250% 12/13/05 ........................................................... 2,000 2,259
Michigan State Hospital Finance Authority Revenue (Daughters of
Charity, escrowed in state and local government securities)
6.500% 11/1/01 ............................................................................ 850 885
Michigan State Underground Storage Tank Financial Assurance
Authority (AMBAC Insured) Series I 6.000% 5/1/05 .......................................... 5,000 5,541
------
8,685
Missouri (0.5%)
Missouri State Regional Convention & Sports Complex Authority
Series A 6.600% 8/15/03 ................................................................... 830 917
Nevada (0.8%)
Clark County PCR (Southern California Edison) Series A
7.125% 6/1/09 (a) ......................................................................... 1,500 1,608
New Jersey (2.6%)
Bergen County Utility Authority (FGIC Insured) Series A
6.250% 6/15/06 ............................................................................ 2,000 2,271
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Jersey (Continued)
New Jersey Health Care Facilities Financing Authority Revenue
(Hackensack Medical Center, FGIC Insured, escrowed in
U.S. Treasury securities) 6.100% 7/1/01 ................................................. $ 1,000 $ 1,059
(Christ Hospital Group, Connie Lee Insured) 7.000% 7/1/03 ................................. 1,730 1,951
-------
5,281
New Mexico (2.5%)
Gallup PCR (Plains Electric Generation & Transmission
Cooperative, MBIA Insured) 6.100% 8/15/02 ................................................. 2,000 2,145
Santa Fe Gross Receipts Tax Revenue (AMBAC Insured) Series A
6.500% 6/1/06 ............................................................................. 2,555 2,937
-------
5,082
New York (11.2%)
New York City GO
Series 1995C (escrowed in U.S. Treasury securities,
prerefunded to 8/15/01) 7.125% 8/15/11 .................................................. 610 662
Series 1996C 5.700% 2/1/06 ................................................................ 1,000 1,084
Series 1997J 6.125% 8/1/11 ................................................................ 5,000 5,619
Series 1997H 6.000% 8/1/17 ................................................................ 2,000 2,188
New York State Dormitory Authority Revenue
(State University Educational Facilities) Series A 6.500% 5/15/05 ......................... 1,000 1,129
(City University System, FGIC Insured) Series A 5.625% 7/1/16 ............................. 5,000 5,510
New York State Environmental Facilities Corporation PCR
(State Revolving Fund) Series 1994D 6.300% 5/15/05 ........................................ 3,000 3,405
Port Authority New York & New Jersey Special Obligation Revenue
(JFK International Air Terminal, MBIA Insured)
6.000% 12/1/05 (a) ........................................................................ 2,500 2,789
-------
22,386
North Carolina (2.4%)
North Carolina Eastern Municipal Power Agency Revenue Series C
5.500% 1/1/07 ............................................................................. 3,100 3,266
North Carolina Municipal Power Agency No. 1 Catawba Electric
Revenue (MBIA Insured) 5.900% 1/1/03 ...................................................... 1,500 1,606
-------
4,872
Ohio (2.2%)
Columbus GO (escrowed in U.S. Treasury securities,
prerefunded to 9/15/01) 6.750% 9/15/04 .................................................... 1,000 1,080
Loveland School District GO (MBIA Insured) 7.100% 12/1/09 .................................... 3,000 3,385
-------
4,465
Oregon (2.0%)
Oregon State Department of Transportation Revenue (MBIA Insured)
5.700% 6/1/02 ............................................................................. 1,220 1,295
Portland Sewer System Revenue Series B (FGIC Insured)
5.400% 4/1/02 ............................................................................. 2,500 2,625
-------
3,920
Pennsylvania (0.8%)
Dauphin County General Authority Hospital Revenue
(Hapsco Group, MBIA Insured) Series B 5.800% 7/1/02 ....................................... 1,600 1,697
South Carolina (3.0%)
Piedmont Municipal Power Agency Electric Revenue (FGIC Insured)
6.125% 1/1/07 (escrowed in U.S. Treasury securities) ...................................... 335 381
6.125% 1/1/07 ............................................................................. 2,015 2,281
South Carolina State Ports Authority Revenue (AMBAC Insured)
6.200% 7/1/01 (a) ......................................................................... 1,000 1,055
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
South Carolina (Continued)
Sumter County Hospital Facilities Revenue (Tuomey Regional
Medical Center, MBIA Insured) 6.625% 11/15/04 ............................................. $ 2,000 $ 2,275
-------
5,992
Tennessee (2.7%)
Knox County Health Educational & Housing Facilities Board
Health Facilities Revenue (Baptist Health Systems,
Connie Lee Insured) 5.500% 4/15/11 ........................................................ 2,000 2,140
Metropolitan Nashville & Davidson County Water & Sewer Revenue
(FGIC Insured) 6.500% 1/1/10 .............................................................. 2,750 3,261
-------
5,401
Texas (10.4%)
Alliance Airport Authority Special Facilities Revenue
(Federal Express Project) 6.375% 4/1/21 (a) ............................................... 2,000 2,150
Austin Certificates of Obligation 4.750% 9/1/18 .............................................. 1,125 1,093
Brazos Harbor Industrial Development Corporation Marine Term Revenue
(Monsanto Project) VRDB 4.150% ............................................................ 1,100 1,100
Fort Bend Independent School District GO
(gtd. by PSF) 7.500% 2/15/00 .............................................................. 1,010 1,053
Fort Worth GO 8.350% 3/1/00 .................................................................. 1,250 1,319
Gulf Coast Waste Disposal Authority PCR
(Amoco Project) VRDB 5.200% (a) ........................................................... 100 100
(Monsanto Project) VRDB 4.150% ............................................................ 100 100
Houston Water Conveyance System Participation Certificates
Series J (AMBAC Insured) 6.125% 12/15/06 .................................................. 1,000 1,133
Retama Development Corporation Special Facilities Revenue
(escrowed in U.S. Treasury securities) 8.750% 12/15/10 .................................... 2,885 4,037
Round Rock Independent School District GO
Series 1991 8.625% 8/15/00 (MBIA Insured) ................................................. 1,270 1,371
Series 1995 7.500% 8/1/02 (gtd. by PSF) ................................................... 1,200 1,346
San Antonio Water Revenue (FGIC Insured)
6.000% 5/15/01(escrowed in U.S. Treasury securities) ...................................... 415 437
6.000% 5/15/01 ............................................................................ 2,460 2,585
Tarrant County Housing Finance Corporation Revenue
(escrowed in U.S. Treasury securities, MBIA Insured)
Zero Coupon (Effective Yield 5.000%) 9/15/16 .............................................. 1,730 706
Texas State Higher Education Revenue Student Loan Senior Lien
7.450% 10/1/06 (a) ........................................................................ 2,120 2,242
-------
20,772
Utah (0.6%)
Intermountain Power Agency Power Supply Revenue
(MBIA Insured) Series B 6.000% 7/1/07 ..................................................... 1,000 1,132
Virginia (0.5%)
Danville Industrial Development Authority Hospital Revenue
(Danville Regional Medical Center, AMBAC Insured)
5.250% 10/1/13 ............................................................................ 1,000 1,061
Washington (3.8%)
Central Puget Sound Regulatory Transit Authority
(FGIC Insured) 5.250% 2/1/17 .............................................................. 2,000 2,093
Chelan County Public Utility District No. 1 Revenue
Series B 5.000% 7/1/33 (a) ............................................................... 900 905
<PAGE>
<CAPTION>
Intermediate Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Washington (Continued)
Snohomish County School District No. 2 Everett GO (MBIA Insured)
7.250% 12/1/00 ........................................................................ $ 2,540 $ 2,711
7.000% 12/1/02 ........................................................................ 1,500 1,669
--------
7,378
Wisconsin (0.5%)
Racine GO Promissory Notes Series B 3.700% 12/1/99 ....................................... 1,000 1,003
--------
====================================================================================================================================
Total Municipal Securities
(Cost $185,135) (b) ................................................................... 199,477
Other Assets, Less Liabilities (0.5%) .................................................... 1,055
--------
Total Net Assets (100.0%) ................................................................ $200,532
========
====================================================================================================================================
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a)Security is subject to federal alternative minimum tax. At December 31, 1998,
the market value of these securities represented 7.4% of total net assets.
(b)At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$14,342, consisting of gross unrealized appreciation of $14,378 and gross
unrealized depreciation of $36.
Variable rate demand bonds (VRDB) are securities whose yields are periodically
reset at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit from a major bank.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Managed Municipals Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at December 31, 1998
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (99,7%) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alaska (0.7%)
Alaska Student Loan Corporation Revenue
(AMBAC Insured) 6.200% 7/1/09 (a).......................................................... $ 3,870 $ 4,175
California (5.2%)
California Pollution Control Financing Authority PCR
(San Diego Gas & Electric) Series A
5.900% 6/1/14 ............................................................................. 3,000 3,379
Central Contra Costa Sanitation District Revenue (MBIA Insured)
6.250% 9/1/13 ............................................................................. 2,025 2,281
6.250% 9/1/14 ............................................................................. 1,295 1,455
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue Series 1995A
Zero Coupon (Yield to Maturity 7.200%) 1/1/18 ............................................. 10,000 3,675
Irvine Improvement Bond Act 1915
Assessment District No 97-16 (LOC Societe Generale)
VRDB 5.100% ............................................................................. 456 456
Assessment District No 94-13 (LOC Canadian Imperial Bank)
VRDB 5.100% ............................................................................. 700 700
Assessment District No 97-17 (LOC Bayerische Vereinsbank)
VRDB 5.100% ............................................................................. 200 200
Long Beach Aquarium of the Pacific Revenue Series A
6.125% 7/1/15 ............................................................................. 4,000 4,250
6.125% 7/1/23 ............................................................................. 6,000 6,352
Los Angeles County GO TRAN Series 98-99A 4.500% 6/30/99 ...................................... 1,000 1,007
Southern California Public Power Authority Revenue
Zero Coupon (Yield to Maturity 6.000%) 7/1/14
(escrowed in U.S. Treasury securities, FGIC Insured) .................................... 8,155 3,894
5.000% 7/1/17 ............................................................................. 2,500 2,491
------
30,140
Colorado (2.7%)
Arapahoe County Capital Improvement Trust Fund Highway Revenue
(escrowed in U.S. Treasury securities, prerefunded to 8/31/05)
Zero Coupon (Yield to Maturity 6.930%) 8/31/15 ............................................ 25,000 9,219
Colorado Housing Finance Authority Multi-Family Mortgage Revenue
6.000% 10/1/09 ............................................................................ 1,490 1,496
6.000% 10/1/10 ............................................................................ 1,590 1,597
6.000% 10/1/11 ............................................................................ 1,710 1,717
6.000% 10/1/12 ............................................................................ 1,830 1,838
------
15,867
Delaware (0.9%)
Delaware Economic Development Authority Revenue
(General Waterworks Corporation)
6.450% 12/1/07 Series B ................................................................. 1,160 1,337
6.800% 12/1/23 Series A (a) ............................................................. 3,500 3,754
------
5,091
District of Columbia (1.1%)
District of Columbia GO (MBIA Insured) Series B
6.000% 6/1/15 ............................................................................. 3,000 3,364
6.000% 6/1/16 ............................................................................. 2,500 2,816
------
6,180
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Florida (2.7%)
Broward County GO
12.500% 1/1/03 .......................................................................... $ 1,000 $ 1,312
12.500% 1/1/04 .......................................................................... 1,195 1,652
12.500% 1/1/05 .......................................................................... 2,000 2,885
Florida GO (Broward County) 9.875% 7/1/09 .................................................. 1,100 1,592
Florida GO (Jacksonville Transportation Authority,
escrowed in U.S. Treasury securities) 9.200% 1/1/15 ..................................... 2,000 2,902
Jacksonville Water and Sewer Development Revenue
(General Waterworks Corporation) 6.750% 6/1/22 (a) ...................................... 1,500 1,618
Orange County Housing Finance Authority Multi-Family
Revenue Series K (Palms at Brentwood) 6.500% 12/1/34 .................................... 2,000 1,997
Pinellas County Health Facilities Authority Revenue
VRDB 4.700% ............................................................................. 1,600 1,600
-------
15,558
Georgia (13.6%)
Atlanta Airport Facilities Revenue Series A (AMBAC Insured)
6.500% 1/1/10 ........................................................................... 2,000 2,365
Atlanta Water & Sewer Revenue 6.000% 1/1/11 ................................................ 4,410 5,006
Cartersville Development Authority (Anheuser-Busch)
7.375% 5/1/09 (a) ....................................................................... 9,000 10,969
Columbia County School District GO (MBIA Insured)
6.750% 4/1/09 ........................................................................... 1,900 2,278
7.000% 4/1/10 ........................................................................... 2,125 2,614
7.000% 4/1/11 ........................................................................... 2,370 2,933
Fulton County Water & Sewer Revenue (FGIC Insured)
(escrowed in U.S. Treasury Securities) 6.375% 1/1/14 .................................... 13,270 15,642
6.375% 1/1/14 ........................................................................... 430 503
Georgia State GO 5.250% 10/1/10 ............................................................ 1,910 2,089
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue
(AMBAC Insured) Series P 6.250% 7/1/20 .................................................. 4,000 4,730
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/1/18 ........................................................................... 21,300 24,921
Paulding County School District GO (MBIA Insured)
6.000% 2/1/10 ........................................................................... 4,235 4,828
-------
78,878
Hawaii (1.2%)
Hawaii Airports System Revenue Second Series (MBIA Insured)
6.900% 7/1/12 (a) ....................................................................... 6,000 7,207
Idaho (0.3%)
Idaho Health Facilities Authority Revenue (St. Lukes
Regional Medical Center) VRDB 5.100% .................................................... 200 200
Idaho Housing Agency Single-Family Mortgage Revenue
7.875% 7/1/24 (a) ....................................................................... 1,235 1,311
-------
1,511
Illinois (8.1%)
Chicago Board of Education GO (MBIA Insured)
6.250% 12/1/12 .......................................................................... 2,500 2,925
6.000% 1/1/16 ........................................................................... 5,000 5,625
Chicago Skyway Toll Bridge Revenue
(escrowed in U.S. Treasury securities, prerefunded to 1/1/04)
6.750% 1/1/17 ........................................................................... 1,500 1,710
Illinois Development Finance Authority (Catholic Charities)
5.950% 1/1/09 ........................................................................... 1,450 1,515
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Illinois (Continued)
Illinois Educational Facilities Authority Revenue
VRDB 3.950% ............................................................................... $ 100 $ 100
Illinois Health Facilities Authority Revenue (Healthcorp Affiliates)
VRDB 5.100% ............................................................................... 300 300
Illinois Housing Development Authority Series A
7.800% 12/1/12 ............................................................................ 905 942
8.000% 6/1/26 ............................................................................. 6,770 7,049
Illinois Sales Tax Revenue Series Q 6.000% 6/15/12 ........................................... 10,000 11,400
Illinois State Toll Highway Authority Priority Revenue Series A
6.300% 1/1/11 ............................................................................. 7,500 8,559
Metropolitan Pier and Exposition Authority Dedicated State
Tax Revenue Series A (MBIA Insured)
Zero Coupon (Yield to Maturity 6.020%) 6/15/12 .......................................... 5,000 2,631
Zero Coupon (Yield to Maturity 6.020%) 12/15/12 ......................................... 8,300 4,264
-------
47,020
Indiana (4.8%)
Hammond Sewer & Solid Waste Disposal Revenue
(American Maize Products gtd. by Eridania Beghin-Say)
8.000% 12/1/24 (a) ........................................................................ 5,000 5,850
Indiana Health Facility Finance Authority Revenue
(Metro Health/Indiana Project) 6.400% 12/1/33 ............................................. 1,400 1,390
Indiana Transportation Finance Authority Airport Facilities Lease
Revenue Series A
6.250% 11/1/16 (escrowed in U.S. Treasury securities,
prerefunded to 11/1/02) ............................................................... 5,475 6,050
6.250% 11/1/16 .......................................................................... 1,475 1,575
Indianapolis Airport Authority Revenue Special Facilities
(United Airlines) 6.500% 11/15/31 (a) ..................................................... 5,000 5,350
Michigan City PCR (Northern Indiana Public Service Company)
5.700% 10/1/03 ............................................................................ 7,635 7,663
-------
27,878
Iowa (0.3%)
Iowa Finance Authority Single-Family Mortgage Revenue
(collateralized by GNMA securities) Series B 7.450% 7/1/23 (a) ............................ 915 970
Iowa State Schools Cash Anticipation Program Warrant Certificates
(FSA Insured) Series 98-99A 4.500% 6/25/99 ................................................ 1,000 1,007
-------
1,977
Kansas (0.6%)
Kansas State Department of Transportation Highway Revenue
(escrowed in U.S. Treasury securities, prerefunded to 3/1/02)
6.500% 3/1/12 ............................................................................. 3,000 3,296
Kentucky (2.3%)
Kentucky Housing Corporation Housing Revenue
Series C 8.100% 1/1/22 (a) ................................................................ 1,585 1,653
Kentucky Turnpike Authority Economic Development
Road Revenue (FGIC Insured)
Zero Coupon (Yield to Maturity 6.600%) 1/1/10 ............................................. 7,500 4,594
Trimble County PCR (Louisville Gas & Electric) Series A
7.625% 11/1/20 (a) ........................................................................ 6,670 7,195
-------
13,442
Louisiana (1.2%)
De Soto Parish Environmental Improvement Revenue
(International Paper) Series A 7.700% 11/1/18 (a) ......................................... 3,250 3,746
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Louisiana (Continued)
New Orleans GO (AMBAC Insured)
Zero Coupon (Yield to Maturity 6.125%) 9/1/12 ........................................... $ 6,250 $ 3,250
-------
6,996
Maine (1.3%)
Maine Educational Loan Marketing Corporation Student Loan
Revenue Subordinate Series B-1 6.500% 11/1/09 (a) ....................................... 3,000 3,195
Maine Housing Authority Mortgage Revenue Series D-5
7.550% 11/15/19 (a) ..................................................................... 2,520 2,633
7.550% 11/15/22 (a) ..................................................................... 1,750 1,829
-------
7,657
Maryland (1.3%)
Washington Suburban Sanitation District
(escrowed in U.S. Treasury securities, prerefunded to 6/1/04)
6.600% 6/1/16 ......................................................................... 2,795 3,158
6.625% 6/1/17 ......................................................................... 1,660 1,878
6.625% 6/1/19 ......................................................................... 2,320 2,625
-------
7,661
Massachusetts (8.9%)
Massachusetts Bay Transportation Authority
Series 1994A 7.000% 3/1/14 .............................................................. 3,150 3,934
Series 1992B 6.200% 3/1/16 .............................................................. 9,825 11,323
Series 1994A 7.000% 3/1/19 .............................................................. 2,500 3,128
Massachusetts Health & Educational Facilities Authority Revenue
(Brigham & Womens' Hospital, MBIA Insured, escrowed
in U.S. Treasury securities, prerefunded to 7/1/01)
6.750% 7/1/24 ......................................................................... 7,365 8,046
(Massachusetts General Hospital, AMBAC Insured)
6.250% 7/1/12 ......................................................................... 5,750 6,691
(Dana Farber Cancer Institute) 6.250% 12/1/22 ........................................... 6,500 7,069
Massachusetts State College Building Authority Series A
7.500% 5/1/11 ........................................................................... 1,500 1,926
7.500% 5/1/14 ........................................................................... 3,500 4,524
Massachusetts State Port Authority Revenue Series A
5.750% 7/1/12 ........................................................................... 2,000 2,235
Massachusetts Turnpike Authority Metropolitan Highway System
Revenue Series A (MBIA Insured) 5.000% 1/1/37 ........................................... 3,000 2,917
-------
51,793
Michigan (0.3%)
Farmington Hills Hospital Finance Authority (Bostford General
Hospital, MBIA Insured) Series B VRDB 5.100% ............................................ 300 300
Michigan Strategic Fund Limited Obligation Revenue (Imperial Holly)
Series B 6.400% 11/1/25 ................................................................. 700 702
Series C 6.550% 11/1/25 (a) ............................................................. 800 802
-------
1,804
Minnesota (1.7%)
Minneapolis Revenue (Walker Methodist Senior Services)
Series A 5.875% 11/15/18 ................................................................ 450 450
Minneapolis/St. Paul Housing Finance Board Revenue
Single-Family Mortgage (collateralized by GNMA securities)
7.250% 8/1/21 (a) ..................................................................... 2,015 2,133
7.300% 8/1/31 (a) ..................................................................... 3,000 3,157
Minnesota State Housing Finance Agency Single-Family Mortgage
Series A 7.450% 7/1/22 (a) .............................................................. 3,780 3,988
-------
9,728
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Missouri (0.2%)
Missouri State Housing Development Commission Single-Family
Mortgage Revenue 9.375% 4/1/16 ............................................................ $ 35 $ 37
Springfield School District No. 12 GO Series B (FGIC Insured)
9.500% 3/1/07 ............................................................................. 600 820
-------
857
Nevada (1.0%)
Clark County GO (FGIC Insured) Series B 4.500% 12/1/17 ....................................... 2,675 2,501
Nevada Housing Division Single-Family Program Series A-2
7.750% 4/1/22 (a) ......................................................................... 3,330 3,484
-------
5,985
New Jersey (1.2%)
New Jersey Economic Development Authority
(Glimcher Properties Project) 6.000% 11/1/28 (a) .......................................... 850 853
New Jersey GO Series D 6.000% 2/15/11 ........................................................ 5,150 5,955
-------
6,808
New Mexico (0.3%)
Albuquerque IDR (Motorola) 10.000% 6/1/13 .................................................... 1,000 1,025
Farmington PCR (Arizona Public Service Company, LOC
Barclays Bank) Series B VRDB 5.100% ....................................................... 500 500
-------
1,525
New York (10.8%)
New York City GO
Series B (FGIC Insured) VRDB 5.000% ....................................................... 2,300 2,300
Series D 6.000% 2/15/25 (escrowed in U.S.Treasury securities,
prerefunded to 2/15/05) ................................................................. 12,980 13,968
Series G 5.750% 2/1/14 .................................................................... 3,145 3,361
Series F 5.000% 8/1/23 .................................................................... 2,150 2,094
New York City Industrial Development Authority Special
Facility Revenue (Terminal One Group Association)
6.000% 1/1/15 (a) ......................................................................... 8,340 8,934
New York City Municipal Water Finance Authority Water & Sewer
Revenue Series A (FGIC Insured) VRDB 5.200% ............................................... 200 200
New York State Environmental Facilities Corporation PCR
Water Revolving Fund 5.750% 6/15/10 ....................................................... 10,000 11,237
Suffolk County Industrial Development Agency IDR
(Nissequogue Cogen Partners) 5.500% 1/1/23 (a) ............................................ 500 500
Triborough Bridge & Tunnel Authority Revenue
Series X 6.625% 1/1/12 .................................................................... 9,915 11,836
Series Y 6.125% 1/1/21 .................................................................... 6,890 7,958
-------
62,388
North Carolina (1.3%)
North Carolina Eastern Municipal Power Agency Revenue
Series 1991A
6.500% 1/1/18 (escrowed in U.S. Treasury securities) .................................... 4,315 5,173
6.500% 1/1/18 ........................................................................... 2,185 2,504
-------
7,677
Ohio (1.8%)
Franklin County Hospital Revenue
Series B (Riverside Hospital, escrowed in U.S. Treasury securities,
prerefunded to 5/15/00) 7.600% 5/15/20 .................................................. 3,900 4,192
Series A (Doctors OhioHealth Corp.) 5.600% 12/1/28 ........................................ 3,000 2,929
Ohio Housing Finance Agency Mortgage Revenue
Series A-1 (collateralized by GNMA) 6.050% 9/1/17 (a) ..................................... 2,995 3,164
-------
10,285
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oklahoma (0.3%)
Tulsa County Home Finance Authority Mortgage Revenue
(collateralized by GNMA securities) Series 1991 B7.550% 5/1/23 (a) ........................ $ 1,825 $ 1,912
Oregon (0.2%)
Clackamas County School District No. 12 GO (FGIC Insured)
5.250% 6/1/11 ............................................................................. 1,000 1,062
Pennsylvania (4.1%)
Allegheny County Sanitation Authority Sewer Revenue Series A
(FGIC Insured) Zero Coupon (Yield to Maturity 6.800%) 6/1/07 .............................. 2,370 1,659
Dauphin County Industrial Development Authority Water
Development Revenue (General Waterworks Corporation)
6.900% 6/1/24 (a) ......................................................................... 3,400 4,220
Montgomery County Industrial Development Authority Retirement
Community Revenue (Adult Communities Total Services)
Series B 5.750% 11/15/17 .................................................................. 3,500 3,627
Pennsylvania State GO 6.250% 7/1/12 .......................................................... 11,200 13,090
Philadelphia School District GO Series A (MBIA Insured)
4.500% 4/1/18 ............................................................................. 1,385 1,293
-------
23,889
Puerto Rico (0.2%)
Puerto Rico Commonwealth GO 4.750% 7/1/23 .................................................... 1,400 1,332
Rhode Island (1.0%)
Rhode Island Housing & Mortgage Finance Corporation
7.550% 10/1/22 (a) ........................................................................ 5,650 5,961
South Carolina (2.4%)
Calhoun County Solid Waste Disposal Facilities Revenue (Eastman
Kodak, escrowed in U.S. Treasury securities) 6.750% 5/1/17 (a) ........................... 3,000 3,641
Richland County Solid Waste Disposal Facilities Revenue
(Union Camp) Series B 7.125% 9/1/21 (a) ................................................... 5,000 5,394
South Carolina Housing Finance & Development Authority
Series C 7.750% 7/1/22 (a) ................................................................ 4,775 4,966
-------
14,001
South Dakota (3.0%)
Heartland Consumers Power District Electric Revenue
(FSA Insured) 6.000% 1/1/17 ............................................................... 8,000 9,050
South Dakota Student Loan Corporation Revenue Series B
(escrowed in U.S. Treasury securities) 7.450% 8/1/00 (a) .................................. 7,990 8,459
-------
17,509
Tennessee (2.0%)
Tennessee Housing Development Agency 7.300% 7/1/11 (a) ....................................... 10,000 10,550
Texas (4.5%)
Brazos Higher Education Authority Subordinate Series C-2
5.875% 6/1/04 (a) ......................................................................... 2,785 2,837
Harris County Certificates of Obligation 4.500% 10/1/19 ...................................... 1,630 1,522
Houston Water & Sewer System Revenue (AMBAC Insured)
Zero Coupon (Yield to Maturity 6.800%) 12/1/08 ............................................ 4,000 2,610
Zero Coupon (Yield to Maturity 6.813%) 12/1/09 ............................................ 4,000 2,475
Zero Coupon (Yield to Maturity 6.850%) 12/1/10 ............................................ 3,750 2,194
<PAGE>
<CAPTION>
Managed Municipals Fund Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Texas (Continued)
Richardson Hospital Authority (Baylor/Richardson)
5.625% 12/1/28 ........................................................................ $ 500 $ 492
San Antonio Electric & Gas Series A 4.500% 2/1/21 ........................................ 1,500 1,399
Texas GO (escrowed in U.S. Treasury securities,
prerefunded to 12/1/99) 8.300% 12/1/16 ................................................ 10,275 10,728
Texas Municipal Power Agency Revenue (AMBAC Insured)
Zero Coupon (Yield to Maturity 6.900%) 9/1/08 ......................................... 1,475 974
Travis County Housing Finance Corporation Mortgage Revenue
(collateralized by GNMA, FGIC Insured) 8.000% 9/1/10 (a) .............................. 895 940
--------
26,171
Vermont (0.2%)
Vermont Housing Finance Agency Single-Family Mortgage Series 1
8.150% 5/1/25 (a) ..................................................................... 1,095 1,107
Virginia (0.4%)
Virginia Beach GO 12.750% 7/15/01 ........................................................ 2,000 2,438
Washington (5.3%)
Port of Longview Industrial Development Corporation Solid Waste
Disposal Revenue (Weyerhaeuser Company)
6.875% 10/1/08 (a) .................................................................... 8,750 10,106
Washington GO Series B & AT-7
6.000% 6/1/13 (escrowed in U.S. Treasury securities) .................................. 2,190 2,521
6.000% 6/1/13 ......................................................................... 5,090 5,834
Washington Public Power Supply System Nuclear Project No. 2
Series 1992A 6.300% 7/1/12 ............................................................ 3,500 4,056
Washington Public Power Supply System Nuclear Project No. 3
Series 1989B Zero Coupon (Yield to Maturity 6.950%) 7/1/05 ............................ 5,000 3,831
Series 1989B Zero Coupon (Yield to Maturity 6.700%) 7/1/08
(FGIC Insured) ...................................................................... 7,000 4,585
--------
30,933
Wisconsin (0.3%)
Wisconsin Housing & Economic Development Authority
Series D 7.750% 9/1/10 ................................................................ 1,360 1,392
--------
====================================================================================================================================
Total Municipal Securities
(Cost $514,021) (b) ................................................................... $577,641
Other Assets, Less Liabilities (0.3%) .................................................... 1,806
--------
Total Net Assets (100.0%) ................................................................ $579,447
========
====================================================================================================================================
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a)Security is subject to federal alternative minimum tax. At December 31, 1998,
the market value of these securities represented 25.6% of total net assets.
(b)At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$63,620, consisting of gross unrealized appreciation of $63,744 and gross
unrealized depreciation of $124.
Variable rate demand bonds (VRDB) are securities whose yields are periodically
reset at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit from a major bank.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Investments at December 31, 1998
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (98.9%) Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona (2.3%)
Arizona Health Facilities Authority Hospital System Revenue
(Phoenix Memorial Hospital) 8.125% 6/1/12.................................................. $ 2,500 $ 2,675
Pima County Industrial Development Authority IDR
(Tucson Electric Power Company)
Series B 6.000% 9/1/29 .................................................................. 1,000 998
Series C 6.000% 9/1/29 .................................................................. 4,000 3,990
------
7,663
California (2.9%)
California Health Facilities Financing Authority Revenue
(Sutter Health) Series A VRDB 5.100% ...................................................... 1,200 1,200
Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue Series 1995A 6.500% 1/1/32 ........................................................ 2,000 2,240
Long Beach Aquarium of the Pacific Revenue Series A
6.125% 7/1/23 ............................................................................. 5,750 6,088
------
9,528
Colorado (6.5%)
Adams County Single-Family Mortgage Revenue Series B
(escrowed in U.S. Treasury securities)
11.250% 9/1/11 (prerefunded to 9/1/09) .................................................. 325 509
11.250% 9/1/11 (prerefunded to 9/1/10) .................................................. 360 574
11.250% 9/1/11 .......................................................................... 220 358
11.250% 9/1/12 .......................................................................... 1,440 2,383
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 8,356
Briargate Public Building Authority Landowner Assessment Lien
Series 1985A 10.250% 12/15/00 (b) ......................................................... 220 187
Series 1986A 9.500% 12/15/07 (b) .......................................................... 807 686
Colorado Health Facilities Authority Revenue
(Birchwood Manor Apartments, collateralized by GNMA securities
Series A 7.250% 4/1/11 .................................................................. 645 672
(PSL Health Systems, escrowed in U.S. Treasury securities,
prerefunded to 2/15/01) Series B 8.500% 2/15/21 ......................................... 3,250 3,628
Denver City and County Airport Revenue Series D
7.750% 11/15/21 (escrowed in U.S. Treasury securities,
prerefunded to 11/15/01) (a) ............................................................ 830 933
7.750% 11/15/21 (a) ....................................................................... 3,170 3,491
------
21,777
Connecticut (0.9%)
Connecticut State Development Authority PCR
(Connecticut Light & Power) 5.850% 9/1/28 ................................................. 2,900 2,911
District of Columbia (2.2%)
District of Columbia GO Series A 6.000% 6/01/26 .............................................. 7,000 7,350
Florida (3.3%)
Florida Housing Finance Agency Multi-Family Housing Revenue
(Palm-Aire) 10.000% 1/1/20 (a) (b) ........................................................ 2,731 2,348
Leesburg Hospital Revenue (Leesburg Regional Medical Center,
escrowed in U.S. Treasury securities, prerefunded to 7/1/02)
Series A 7.375% 7/1/11 .................................................................... 775 880
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Florida (Continued)
Orange County Health Facilities Authority
(Orlando Lutheran Towers) 8.625% 7/1/20 ................................................... $ 5,000 $ 5,856
Orlando Special Assessment Revenue Series A
(Conroy Road Interchange Project)
5.500% 5/1/10 ........................................................................... 200 199
5.800% 5/1/26 ........................................................................... 500 499
Stoneybrook Community Development District Capital
Improvement Revenue
Series B 5.700% 5/1/08 .................................................................. 760 759
Series A 6.100% 5/1/19 .................................................................. 330 330
-------
10,871
Georgia (3.5%)
Cartersville Development Authority (Anheuser-Busch)
7.375% 5/1/09 (a) ......................................................................... 3,000 3,656
Municipal Electric Authority of Georgia Power Revenue Series V
6.600% 1/1/18 ............................................................................. 6,065 7,096
Rockdale County Development Authority Solid Waste Disposal Revenue
(Visy Paper) 7.500% 1/1/26 (a) ............................................................ 1,000 1,065
-------
11,817
Idaho (0.6%)
Idaho Housing Agency Single-Family Mortgage Series B
7.500% 7/1/24 (a) ......................................................................... 2,060 2,163
Illinois (2.5%)
Chicago Skyway Toll Bridge Revenue
(escrowed in U.S. Treasury securities, prerefunded to 1/1/04)
6.750% 1/1/17 ............................................................................. 1,500 1,710
Illinois Development Finance Authority
(Catholic Charities) 5.950% 1/1/09 ........................................................ 1,400 1,463
(Latin School of Chicago) 5.650% 8/1/28 ................................................... 1,725 1,716
Illinois Health Facilities Authority Revenue
(United Medical Center, escrowed in U.S. Treasury securities,
prerefunded to 7/1/03) 8.125% 7/1/06 .................................................... 2,225 2,500
(Edward Hospital Association, escrowed in U.S. Treasury securities,
prerefunded to 2/15/02) 7.000% 2/15/22 .................................................. 685 760
Illinois Housing Development Authority Multi-Family Housing
Series C 7.400% 7/1/23 .................................................................... 140 146
-------
8,295
Indiana (12.5%)
Hammond Sewer & Solid Waste Disposal Revenue
(American Maize Products, gtd. by Eridania Beghin-Say)
8.000% 12/1/24 (a) ........................................................................ 4,000 4,680
Indiana Health Facility Financing Authority Revenue
(Metro Health/Indiana Project) 6.400% 12/1/33 ............................................. 1,500 1,489
Indiana State Development Finance Authority Revenue
(Inland Steel Company) 5.750% 10/1/11 ..................................................... 5,000 4,737
Indiana Transportation Finance Authority Airport Facilities
Lease Revenue Series A
6.250% 11/1/16 (escrowed in U.S. Treasury securities,
prerefunded to 11/1/02) ............................................................... 3,550 3,923
6.250% 11/1/16 .......................................................................... 950 1,014
Indianapolis Airport Authority Revenue Special Facilities
(Federal Express) 7.100% 1/15/17 (a) ...................................................... 5,000 5,556
(United Airlines) 6.500% 11/15/31 (a) ..................................................... 7,000 7,490
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Indiana (Continued)
Indianapolis Local Public Improvement Bond Bank Series C
(escrowed in U.S. Treasury securities, prerefunded to 1/1/02)
6.700% 1/1/17 ............................................................................. $ 8,900 $ 9,790
New Castle Economic Development Revenue
8.650% 4/1/17 (escrowed in U.S. Treasury securities,
prerefunded to 4/1/99) .................................................................. 2,860 3,039
Zero Coupon (Yield to Maturity 10.855%) 3/1/18 (b) ........................................ 30,655 77
-------
41,795
Iowa (0.7%)
Iowa Housing Finance Authority (AMBAC Insured)
Zero Coupon (Yield to Maturity 10.262%) 9/1/16 ............................................ 15,620 2,187
Kansas (0.6%)
Wichita Revenue (CSJ Health System) 7.000% 11/15/18 .......................................... 2,000 2,158
Louisiana (2.2%)
De Soto Parish Environmental Improvement Revenue
(International Paper) Series A 7.700% 11/1/18 (a) ......................................... 2,500 2,881
Louisiana Public Facilities Authority Hospital Revenue
(Women's Hospital Foundation, escrowed in U.S. Treasury
securities, prerefunded to 10/1/02) 7.250% 10/1/22 ...................................... 2,300 2,611
(Progressive Healthcare Providers) 6.375% 10/1/28 ......................................... 2,000 1,952
-------
7,444
Massachusetts (2.7%)
Massachusetts Bay Transportation Authority Series 92B
6.200% 3/1/16 ............................................................................. 5,825 6,713
Massachusetts State Health & Educational Facilities Authority Revenue
(Dana Farber Cancer Institute) 6.250% 12/1/22 ............................................. 2,000 2,175
-------
8,888
Michigan (0.5%)
Michigan Strategic Fund Limited Obligation Revenue
(Imperial Holly) Series C 6.550% 11/1/25 (a) .............................................. 1,500 1,504
Minnesota (0.4%)
Minneapolis Revenue (Walker Methodist Senior Services)
Series C 6.000% 11/15/28 .................................................................. 1,300 1,298
Mississippi (3.4%)
Adams County Hospital Revenue (Jefferson Davis Memorial Hospital,
escrowed in U.S. Treasury securities, prerefunded to 10/1/01)
7.900% 10/1/08 ............................................................................ 750 846
Claiborne County PCR (System Energy Resources)
9.500% 12/1/13 ............................................................................ 600 626
7.300% 5/1/25 ............................................................................. 2,000 2,100
Lowndes County Solid Waste Disposal PCR
(Weyerhaeuser Company) 6.800% 4/1/22 ...................................................... 5,995 7,329
Perry County PCR (Leaf River Forest Project, LOC Wachovia Bank)
VRDB 5.100% ............................................................................... 400 400
-------
11,301
Missouri (1.6%)
Missouri Health & Educational Facilities Authority Health
Facilities Revenue (Lutheran Senior Services)
5.750% 2/1/17 ............................................................................. 2,000 2,077
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Missouri (Continued)
St. Louis Industrial Development Authority IDR (Kiel Center)
7.875% 12/1/24 (a) ...................................................................... $ 3,000 $ 3,285
-------
5,362
Montana (0.3%)
Montana State Board of Housing Single-Family Mortgage
Series B-1 7.300% 10/1/17 ............................................................... 375 393
Series B-2 7.500% 4/1/23 (a) ............................................................ 415 435
-------
828
Nebraska (1.3%)
Nebraska Higher Education Loan Program Series A-6
Junior Subordinated (MBIA Insured) 6.450% 6/1/18 (a) .................................... 4,000 4,300
Nevada (1.6%)
Clark County IDR (Nevada Power Company)
Series A 5.900% 11/1/32 (a) ............................................................. 3,000 3,030
Humboldt County PCR (Idaho Power Company) 8.300% 12/1/14 ................................... 2,000 2,372
-------
5,402
New Jersey (3.6%)
New Jersey Economic Development Authority Revenue Series A
(Winchester Gardens Project, Marcus L. Ward Home)
8.625% 11/1/25 ........................................................................ 5,000 5,756
(Kapkowski Road Landfill, NJ Metromall Urban Renewal)
6.375% 4/1/31 ......................................................................... 6,000 6,188
-------
11,944
New Mexico (2.9%)
Farmington PCR
(Public Service Company of New Mexico) 6.300% 12/1/16 ................................... 5,000 5,294
(Tucson Electric Power Company) 6.950% 10/1/20 .......................................... 2,000 2,232
(Arizona Public Service Company, LOC Barclays Bank)
VRDB 5.100% ........................................................................... 200 200
New Mexico Educational Assistance Foundation Student Loan
Revenue Subordinated Series A-2 6.650% 11/1/25 (a) ...................................... 1,955 2,099
-------
9,825
New York (4.3%)
New York City GO
Series B (FGIC Insured) VRDB 5.100% ..................................................... 300 300
Series B 7.250% 8/15/07 ................................................................. 1,000 1,200
Series G 5.750% 2/1/14 .................................................................. 5,720 6,113
New York City Industrial Development Authority Special
Facility Revenue (Terminal One Group Association)
6.000% 1/1/15 (a) ....................................................................... 3,465 3,712
New York City Municipal Water Finance Authority Water & Sewer
Systems Revenue Series A VRDB 5.200% .................................................... 800 800
Triborough Bridge & Tunnel Authority Revenue Series E
7.250% 1/1/10 ........................................................................... 2,000 2,353
-------
14,478
North Carolina (2.9%)
North Carolina Eastern Municipal Power Agency Revenue
Series A 6.500% 1/1/18 (escrowed in U.S. Treasury securities) ........................... 3,320 3,980
Series A 6.500% 1/1/18 .................................................................. 1,680 1,926
Series B 6.000% 1/1/26 .................................................................. 3,500 3,819
-------
9,725
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ohio (4.9%)
Franklin County Hospital Revenue
(Doctors OhioHealth Corporation) 5.600% 12/1/28 ......................................... $ 2,650 $ 2,587
Greater Allen County Housing Development Corporation Revenue
(Steiner-McBride Apartments) 10.250% 9/1/03 ............................................. 1,385 1,388
Montgomery County Health Care Facilities Revenue
(Friendship Village of Dayton) Series B 6.250% 2/1/22 ................................... 5,250 5,322
Ohio State Water Development Authority Solid Waste
Disposal Revenue (Bay Shore Power Company) Series A
5.875% 9/1/20 (a) ....................................................................... 7,000 7,053
-------
16,350
Pennsylvania (10.1%)
Allentown Area Hospital Authority Revenue (Sacred Heart
Hospital) 7.500% 7/1/06 ................................................................. 3,460 3,754
Beaver County Industrial Development Authority PCR
(Toledo Edison Company) 7.625% 5/1/20 ................................................... 4,900 5,580
Dauphin County Industrial Development Authority Water
Development Revenue (General Waterworks Corporation)
Series A 6.900% 6/1/24 (a) .............................................................. 3,200 3,972
Montgomery County Higher Education & Health Authority
Hospital Revenue (Jeanes Health Systems, escrowed in U.S.
Treasury securities, prerefunded to 7/1/00) 8.750% 7/1/20 ............................... 3,200 3,504
Pennsylvania Economic Development Financing Authority
Resource Recovery Revenue (Northampton Generating)
Series B 6.750% 1/1/07 (a) ............................................................ 3,000 3,263
Series A 6.500% 1/1/13 (a) ............................................................ 2,000 2,120
Philadelphia Hospitals & Higher Education Facilities Authority
Revenue (Temple University Hospital) 5.875% 11/15/23 .................................... 4,000 4,145
Philadelphia Municipal Authority Revenue Lease Series 1993D
6.250% 7/15/13 .......................................................................... 2,500 2,669
Philadelphia Water & Sewer Revenue Tenth Series
(escrowed in U.S. Treasury securities)
7.350% 9/1/04 (d) ....................................................................... 4,085 4,626
-------
33,633
Puerto Rico (1.7%)
Puerto Rico Highway & Transportation Authority
Series T 6.625% 7/1/18 (escrowed in U.S. Treasury securities,
prerefunded to 7/1/02) ................................................................ 3,200 3,552
Series V 6.625% 7/1/12 .................................................................. 2,000 2,185
-------
5,737
South Dakota (0.9%)
South Dakota Student Loan Assistance Corporation Series C
(escrowed in U.S. Treasury securities) 7.450% 8/1/00 (a) ................................ 2,700 2,859
Tennessee (0.4%)
Metropolitan Government of Nashville & Davidson Counties Health
and Educational Facilities Board Revenue (The Blakeford
at Green Hills) 5.650% 7/1/24 ........................................................... 1,500 1,474
Texas (6.9%)
Abilene Health Facilities Development Corporation Retirement
Facilities Revenue (Sears Methodist Retirement)
Series A 5.900% 11/15/25 ................................................................ 2,100 2,082
Alliance Airport Authority Special Facilities Revenue
(American Airlines) 7.000% 12/1/11 (a) .................................................. 4,070 4,808
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Texas (Continued)
Brazos Higher Education Authority Subordinated Series C-2
5.875% 6/1/04 (a) ......................................................................... $ 835 $ 851
Harris County Housing Finance Corporation Single-Family
Mortgage Revenue 9.625% 3/15/03 ........................................................... 171 172
Houston Airport System Revenue (Continental Airlines)
6.125% 7/15/17 (a) ........................................................................ 4,000 4,165
6.125% 7/15/27 (a) ........................................................................ 2,000 2,075
Port of Bay City Authority Matagorda County Revenue
(Hoechst Celanese Corporation) 6.500% 5/1/26 (a) .......................................... 3,000 3,300
Richardson Hospital Authority (Baylor/Richardson) 5.625% 12/1/28 ............................. 900 887
Texas City IDR (Atlantic Richfield Company)
7.375% 10/1/20 ............................................................................ 2,000 2,610
Texas Housing Agency Residential Development Revenue
Series D 8.400% 1/1/21 (a) ................................................................ 255 264
Tyler Health Facilities Development Corporation
(Mother Francis Hospital) Series A 5.625% 7/1/13 .......................................... 1,785 1,796
-------
23,010
Utah (0.2%)
Utah Housing Finance Agency Single-Family Mortgage
Series B-2 7.750% 1/1/23 (a) .............................................................. 160 167
Series C-3 7.550% 7/1/23 (a) .............................................................. 355 372
-------
539
Virginia (2.2%)
Pittsylvania County Industrial Development Authority Revenue
(Multitrade of Pittsylvania County L.P.) Series A
7.450% 1/1/09 (a) ....................................................................... 3,500 3,846
7.550% 1/1/19 (a) ....................................................................... 3,100 3,402
-------
7,248
Washington (4.1%)
Quincy Water and Sewer Revenue Series I (escrowed in
U.S. Treasury securities, prerefunded to 11/1/00)
9.250% 11/1/10 ............................................................................ 2,375 2,580
Washington State Health Care Facilities Authority Revenue
(Sacred Heart Medical Center) 6.875% 2/15/12 .............................................. 1,500 1,626
Washington State Housing Finance Commission Single-Family
Mortgage Revenue Series C (collateralized by GNMA/FNMA securities)
Zero Coupon (Yield to Maturity 7.750%) 1/1/22 (a) ....................................... 1,455 271
Zero Coupon (Yield to Maturity 7.750%) 7/1/22 (a) ....................................... 1,605 287
Zero Coupon (Yield to Maturity 7.750%) 1/1/23 (a) ....................................... 1,605 277
Zero Coupon (Yield to Maturity 7.750%) 7/1/23 (a) ....................................... 1,610 268
Zero Coupon (Yield to Maturity 7.750%) 1/1/24 (a) ....................................... 1,615 258
Zero Coupon (Yield to Maturity 7.750%) 7/1/24 (a) ....................................... 1,605 249
Washington State Public Power Supply System
Nuclear Project No. 2 Revenue Series A
Zero Coupon (Yield to Maturity 6.888%) 7/1/07 ........................................... 6,945 4,792
6.300% 7/1/12 ........................................................................... 2,500 2,897
-------
13,505
Wisconsin (1.2%)
Wisconsin State Health & Educational Facilities Authority Revenue
(Attic Angel Community) 5.750% 11/15/27 ................................................... 1,250 1,222
(Clement Manor) 5.750% 8/15/24 ............................................................ 3,000 2,906
-------
4,128
<PAGE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Continued Principal Market
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wyoming (0.1%)
Wyoming Community Development Authority Single-Family
Mortgage Series A 7.375% 6/1/17 ................................................... $ 180 $ 189
--------
====================================================================================================================================
Total Municipal Securities
(Cost $304,861) (c) ............................................................... $329,486
Other Assets, Less Liabilities (1.1%) ................................................ 3,621
--------
Total Net Assets (100.0%) ............................................................ $333,107
========
Notes to Portfolio of Investments
====================================================================================================================================
(a)Security is subject to the federal alternative minimum tax. At December 31,
1998, the market value of these securities represented 29.0% of total net
assets.
(b)Issuer is in default of certain debt covenants. Income is not being accrued.
(c)At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$24,625, consisting of gross unrealized appreciation of $27,983 and gross
unrealized depreciation of $3,358.
(d)Security was pledged to cover margin requirements for open future contracts.
The following contracts were open at December 31, 1998:
Number of Contract Unrealized
Type Position Contracts Value Expiration Gain
---------- -------- ---------- -------- -------- ---------
U.S. T-Bond Long 85 $10,861 3/99 $103
Variable rate demand bonds (VRDB) are securities whose yields are periodically
reset at levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and normally
incorporate an irrevocable letter of credit or line of credit from a major bank.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998
(All amounts in thousands, except per-share data)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Municipals Municipals Municipals
Fund Fund Fund Fund
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Investment in Portfolio, at value ............................................... $ 122,442 $ -- $ -- $ 330,655
Investments, at market value (cost $185,135 and $514,021, respectively) ........ -- 199,477 577,641 --
Accrued interest receivable ..................................................... -- 3,231 10,066 --
Receivable for investments sold ................................................. -- 3,020 -- --
Receivable for fund shares sold ................................................. 777 52 37 66
Cash ............................................................................ 75 54 -- 25
Other assets .................................................................... 31 40 88 55
--------- --------- --------- ---------
Total assets ................................................................. 123,325 205,874 587,832 330,801
--------- --------- --------- ---------
Liabilities
Payable for investments purchased ............................................... -- 4,303 6,333 --
Dividends payable ............................................................... 80 771 1,484 921
Payable for fund shares redeemed ................................................ 686 74 59 187
Payable to investment adviser and transfer agent ................................ 35 122 332 76
Other liabilities ............................................................... 33 72 177 134
--------- --------- --------- ---------
Total liabilities ............................................................ 834 5,342 8,385 1,318
--------- --------- --------- ---------
Net assets ................................................................... $ 122,491 $ 200,532 $ 579,447 $ 329,483
========= ========= ========= =========
Analysis of Net Assets
Paid-in capital ................................................................. $ 122,502 $ 186,155 $ 515,830 $ 316,551
Net unrealized appreciation on investments ...................................... -- 14,342 63,620 24,719
Accumulated net realized gains (losses) on investments .......................... (11) 35 (3) (11,787)
--------- --------- --------- ---------
Net assets ................................................................... $ 122,491 $ 200,532 $ 579,447 $ 329,483
========= ========= ========= =========
Shares outstanding (unlimited number authorized) ................................ 122,429 17,227 61,391 27,509
========= ========= ========= =========
Net asset value per share ....................................................... $ 1.00 $ 11.64 $ 9.44 $ 11.98
========= ========= ========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended December 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Municipals Municipals Municipals
Fund Fund Fund Fund
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest allocated from Portfolio ................................ $ 2,097 $ -- $ -- $ 10,329
Tax-exempt interest ......................................................... -- 5,279 16,783 --
-------- -------- -------- --------
Total investment income .................................................. 2,097 5,279 16,783 10,329
-------- -------- -------- --------
Expenses
Management fees ............................................................. -- 441 1,214 --
Expenses allocated from Portfolio ........................................... 181 -- -- 774
Transfer agent fees ......................................................... 90 141 412 240
Administrative fees ......................................................... 149 138 332 209
Printing and postage ........................................................ 12 13 35 24
Accounting fees ............................................................. 13 14 19 16
Audit and legal fees ........................................................ 11 13 14 5
SEC and state registration fees ............................................. 12 14 15 19
Trustees' fees .............................................................. 3 6 7 1
Other ....................................................................... 12 23 74 28
-------- -------- -------- --------
Total expenses ........................................................... 483 803 2,122 1,316
Reimbursement of expenses by investment adviser ............................. (71) (98) -- --
-------- -------- -------- --------
Net expenses ............................................................. 412 705 2,122 1,316
-------- -------- -------- --------
Net investment income .................................................... 1,685 4,574 14,661 9,013
-------- -------- -------- --------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments allocated from Portfolio ......... (3) -- -- 1,344
Net realized gains on investments ........................................... -- 418 1,520 --
Net change in unrealized appreciation or depreciation on investments ........ -- 1,606 2,035 (1,364)
-------- -------- -------- --------
Net gains (losses) on investments ........................................ (3) 2,024 3,555 (20)
-------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations ........................ $ 1,682 $ 6,598 $ 18,216 $ 8,993
======== ======== ======== ========
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended December 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
Municipal Money Intermediate
Market Fund Municipals Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
1998 1998 1998 1998
----------------------- ------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income ...................................................... $ 1,685 $ 3,771 $ 4,574 $ 9,378
Net realized gains (losses) on investments ................................. (3) -- 418 753
Net change in unrealized appreciation or depreciation on investments ....... -- -- 1,606 3,083
--------- --------- --------- ---------
Net increase in net assets resulting from operations .................... 1,682 3,771 6,598 13,214
--------- --------- --------- ---------
Distributions to Shareholders
Distributions from net investment income ................................... (1,685) (3,771) (4,574) (9,378)
Distributions from net capital gains ....................................... -- -- (925) (545)
--------- --------- --------- ---------
Total distributions to shareholders ..................................... (1,685) (3,771) (5,499) (9,923)
--------- --------- --------- ---------
Share Transactions
Subscriptions to fund shares ............................................... 81,459 177,051 22,187 31,594
Value of distributions reinvested .......................................... 1,374 2,975 3,280 5,718
Redemptions of fund shares ................................................. (75,618) (183,171) (21,685) (40,958)
--------- --------- --------- ---------
Net increase (decrease) from share transactions ......................... 7,215 (3,145) 3,782 (3,646)
--------- --------- --------- ---------
Net increase (decrease) in net assets ................................... 7,212 (3,145) 4,881 (355)
Total Net Assets
Beginning of period ........................................................ 115,279 118,424 195,651 196,006
--------- --------- --------- ---------
End of period .............................................................. $ 122,491 $ 115,279 $ 200,532 $ 195,651
========= ========= ========= =========
Analysis of Changes in Shares of Beneficial Interest
Subscriptions to fund shares ............................................... 81,459 177,051 1,898 2,733
Issued in reinvestment of distributions .................................... 1,374 2,975 281 494
Redemptions of fund shares ................................................. (75,618) (183,171) (1,857) (3,542)
--------- --------- --------- ---------
Net increase (decrease) in fund shares .................................. 7,215 (3,145) 322 (315)
Shares outstanding at beginning of period .................................. 115,214 118,359 16,905 17,220
--------- --------- --------- ---------
Shares outstanding at end of period ........................................ 122,429 115,214 17,227 16,905
========= ========= ========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
For The Six Months Ended December 31, 1998
(All amounts in thousands)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Managed High-Yield
Municipals Fund Municipals Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
1998 1998 1998 1998
----------------------- ------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income ...................................................... $ 14,661 $ 30,361 $ 9,013 $ 17,880
Net realized gains (losses) on investments ................................. 1,520 1,473 1,344 (3,850)
Net change in unrealized appreciation or depreciation on investments ....... 2,035 15,722 (1,364) 11,887
--------- --------- --------- ---------
Net increase in net assets resulting from operations .................... 18,216 47,556 8,993 25,917
--------- --------- --------- ---------
Distributions to Shareholders
Distributions from net investment income ................................... (14,661) (30,361) (9,013) (17,880)
Distributions from net capital gains ....................................... -- -- -- --
--------- --------- --------- ---------
Total distributions to shareholders ..................................... (14,661) (30,361) (9,013) (17,880)
--------- --------- --------- ---------
Share Transactions
Subscriptions to fund shares ............................................... 22,405 42,525 35,388 75,509
Value of distributions reinvested .......................................... 8,166 16,076 4,966 9,200
Redemptions of fund shares ................................................. (37,817) (75,024) (52,631) (57,036)
--------- --------- --------- ---------
Net increase (decrease) from share transactions ......................... (7,246) (16,423) (12,277) 27,673
--------- --------- --------- ---------
Net increase (decrease) in net assets ................................... (3,691) 772 (12,297) 35,710
Total Net Assets
Beginning of period ........................................................ 583,138 582,366 341,780 306,070
--------- --------- --------- ---------
End of period .............................................................. $ 579,447 $ 583,138 $ 329,483 $ 341,780
========= ========= ========= =========
Analysis of Changes in Shares of Beneficial Interest
Subscriptions to fund shares ............................................... 2,371 4,557 2,942 6,341
Issued in reinvestment of distributions .................................... 865 1,721 414 771
Redemptions of fund shares ................................................. (4,003) (8,036) (4,389) (4,792)
--------- --------- --------- ---------
Net increase (decrease) in fund shares .................................. (767) (1,758) (1,033) 2,320
Shares outstanding at beginning of period .................................. 62,158 63,916 28,542 26,222
--------- --------- --------- ---------
Shares outstanding at end of period ........................................ 61,391 62,158 27,509 28,542
========= ========= ========= =========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
SR&F SR&F
Municipal High-Yield
Money Market Municipals
Portfolio Portfolio
---------- ----------
<S> <C> <C>
Assets
Investments, at value (cost $139,311 and $304,861, respectively) ..... $139,311 $329,486
Accrued interest receivable .......................................... 977 6,132
Receivable for investments sold ...................................... 5,687 785
Cash ................................................................. 11 343
-------- --------
Total assets ...................................................... 145,986 336,746
-------- --------
Liabilities
Payable for investments purchased .................................... 9,195 3,528
Payable to investment adviser ........................................ 31 102
Other liabilities .................................................... 44 9
-------- --------
Total liabilities ................................................. 9,270 3,639
-------- --------
Net assets applicable to investors' beneficial interest ........... $136,716 $333,107
======== ========
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended December 31, 1998
(All amounts in thousands)
(Unaudited)
<CAPTION>
SR&F SR&F
Municipal High-Yield
Money Market Municipals
Portfolio Portfolio
---------- ----------
<S> <C> <C>
Investment Income
Tax-exempt interest ................................................... $ 2,380 $ 10,388
-------- --------
Expenses
Management fees ....................................................... 170 730
Accounting fees ....................................................... 14 16
Audit and legal fees .................................................. 9 23
Trustees' fees ........................................................ 4 6
Other ................................................................. 9 3
-------- --------
Total expenses ..................................................... 206 778
-------- --------
Net investment income .............................................. 2,174 9,610
-------- --------
Realized and Unrealized Losses on Investments
Net realized gains (losses) on investments ............................ (3) 1,334
Net change in unrealized appreciation or depreciation on investments .. -- (1,355)
-------- --------
Net losses on investments .......................................... (3) (21)
-------- --------
Net Increase in Net Assets Resulting from Operations .................. $ 2,171 $ 9,589
======== ========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(All amounts in thousands)
(Unaudited)
<CAPTION>
SR&F Municipal SR&F High-Yield
Money Market Portfolio Municipals Portfolio
Six Months Period Six Months Period
Ended Ended Ended Ended
Dec. 31, June 30, Dec. 31, June 30,
1998 1998 1998 1998 (a)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operations
Net investment income .......................................... $ 2,174 $ 4,891 $ 9,610 $ 7,847
Net realized gains (losses) on investments ..................... (3) -- 1,334 (214)
Net change in unrealized appreciation or
depreciation on investments ................................. -- -- (1,355) (1,762)
--------- --------- --------- ---------
Net increase in net assets resulting
from operations ........................................... 2,171 4,891 9,589 5,871
--------- --------- --------- ---------
Transactions in Investors' Beneficial Interests
Contributions .................................................. 37,533 80,237 21,587 349,343
Withdrawals .................................................... (35,006) (92,038) (41,235) (12,048)
--------- --------- --------- ---------
Net increase (decrease) from transactions
in investors' beneficial interests ........................ 2,527 (11,801) (19,648) 337,295
--------- --------- --------- ---------
Net increase (decrease) in net assets ....................... 4,698 (6,910) (10,059) 343,166
Total Net Assets
Beginning of period ............................................ 132,018 138,928 343,166 --
--------- --------- --------- ---------
End of period .................................................. $ 136,716 $ 132,018 $ 333,107 $ 343,166
========= ========= ========= =========
(a) From commencement of operations on February 2, 1998.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(All amounts, except per-share amounts, in thousands)
Note 1. Organization
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") are series of Stein Roe Municipal Trust (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust.
Municipal Money Market Fund and High-Yield Municipals Fund invest substantially
all of their assets in SR&F Municipal Money Market Portfolio and SR&F High-Yield
Municipals Portfolio (the "Portfolios"), respectively.
The Portfolios are series of SR&F Base Trust, a Massachusetts common law
trust organized under an Agreement and Declaration of Trust dated August 23,
1993. SR&F High-Yield Municipals Portfolio commenced operations on February 2,
1998. At commencement, High-Yield Municipals Fund contributed $335,711 in
securities and other assets to SR&F High-Yield Municipals Portfolio in exchange
for beneficial ownership of the Portfolio. At February 4, 1998, Stein Roe
Advisor High-Yield Municipals Fund contributed cash of $100 to the Portfolio.
The Portfolios allocate income, expenses, realized and unrealized gains and
losses to each investor on a daily basis, based on their respective percentage
of ownership. At December 31, 1998, Stein Roe Municipal Money Market Fund and
Colonial Municipal Money Market Fund owned 89.6% and 10.4%, respectively, of
SR&F Municipal Money Market Portfolio; and Stein Roe High-Yield Municipals Fund
and Stein Roe Advisor High-Yield Municipals Fund owned 99.3% and 0.7%,
respectively, of SR&F High-Yield Municipals Portfolio.
Note 2. Significant Accounting Policies
The following summarizes the significant accounting policies of the Funds and
Portfolios. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Interest income,
including discount accretion and premium amortization, is recorded daily on the
accrual basis. Realized gains or losses from investment transactions are
reported on an identified cost basis.
Securities purchased on a when-issued or delayed delivery basis may be
settled a month or more after the transaction date. The values of such
securities are subject to market fluctuations during this period. At December
31, 1998, investments in these securities for Intermediate Municipals Fund,
Managed Municipals Fund, and SR&F High-Yield Municipals Portfolio represented
2.1%, 1.1%, and 1.0% of net assets, respectively.
Security Valuations
All securities are valued as of December 31, 1998. 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 SR&F Municipal Money Market Portfolio. The Portfolio
utilizes the amortized cost method to value its investments. This technique
approximates market value and involves valuing a security initially at cost and,
thereafter, assuming a constant amortization to maturity of any discount or
premium. In the event that a deviation of .50% 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 at fair value as determined in
good faith by or under the direction of the Board of Trustees.
Municipal Money Market Fund attempts to maintain a per-share net asset value
of $1.00, which management believes will be possible under most conditions.
Futures Contracts
During the six months ended December 31, 1998, SR&F High-Yield Municipals
Portfolio entered into U.S. Treasury security futures contracts to either hedge
against expected declines in the value of its securities or as a temporary
substitute for the purchase of individual bonds. Risks of entering into futures
contracts include the possibility that there may be an illiquid market at the
time the Fund or Portfolio seeks to close out a contract, and changes in the
value of the futures contract may not correlate with changes in the value of the
portfolio securities being hedged.
Upon entering into a futures contract, the Fund or Portfolio deposits with
its custodian cash or securities in an amount sufficient to meet the initial
margin requirements. Subsequent payments are made or received by the Fund or
Portfolio equal to the daily change in the contract value and are recorded as
unrealized gains or losses. The Fund or Portfolio recognizes a realized gain or
loss when the contract is closed or expires. See SR&F High-Yield Municipals
Portfolio's portfolio of investments for a summary of open futures contracts at
December 31, 1998. No other Funds or Portfolios entered into any futures
contracts during the period.
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 Portfolios are treated as partnerships for
federal income tax purposes and all of their income is allocated to their 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 subject to alternative minimum tax.
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, 1998, High-Yield Municipals Fund had a capital loss carryforward of
$12,069 which expires between 2003 and 2006.
Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly.
Capital gains distributions, if any, are distributed annually. Dividends are
determined in accordance with income tax principles, which may treat certain
transactions differently than generally accepted accounting principles.
Distributions in excess of tax-basis earnings are reported in the financial
statements as a return of capital. Permanent differences in the recognition or
classification of income between the financial statements and tax earnings are
reclassified to paid-in capital.
Note 3. Portfolio Composition
The Funds and Portfolios invest in municipal securities including, but not
limited to, general obligation bonds, revenue bonds and escrowed bonds (i.e.,
bonds that have been refinanced, the proceeds of which have been invested in
U.S. government obligations that are set aside to pay off the original issue at
the first call date or maturity).
The Funds and Portfolios hold investments that are insured by private
insurers who guarantee the payment of principal and interest in the event of
default. At December 31, 1998, investments in these securities for Intermediate
Municipals Fund, Managed Municipals Fund and SR&F High-Yield Municipals
Portfolio represented 55.5%, 23.5% and 2.0% of holdings, respectively. SR&F
Municipal Money Market Portfolio invests in 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. At December 31, 1998, 61.6%
of the Portfolio was backed by bank letters of credit. See the Portfolio of
Investments for each Fund or Portfolio for additional information regarding
portfolio composition.
Note 4. Trustees' Fees and Transactions with Affiliates
The Funds and Portfolios pay monthly management and administrative fees,
computed and accrued daily, to Stein Roe & Farnham Incorporated (the "Adviser"),
an indirect, wholly-owned subsidiary of Liberty Financial Companies, Inc.
("Liberty"), for its services as investment adviser and manager. The annual
rates, as a percentage of average daily net assets, are as follows:
<TABLE>
<CAPTION>
Management Fee Administrative Fee
<S> <C> <C>
Municipal Money Market Fund N/A .250% up to $500 million,
.200% of the next $500 million,
.150% thereafter
SR&F Municipal Money .250% N/A
Market Portfolio
Intermediate Municipals Fund .450% up to $100 million, .150% up to $100 million,
.425% of the next $100 million, .125% of the next $100 million,
.400% thereafter .100% thereafter
Managed Municipals Fund .450% up to $100 million, .150% up to $100 million,
.425% of the next $100 million, .125% of the next $100 million,
.400% of the next $800 million, .100% of the next $800 million,
.375% thereafter .075% thereafter
High-Yield Municipal Fund N/A .150% up to $100 million,
.125% of the next $100 million,
.100% thereafter
SR&F High-Yield Municipals .450% up to $100 million, N/A
Portfolio .425% of the next $100 million,
.400% thereafter
</TABLE>
The Adviser also provides fund accounting services to the Funds and
Portfolios.
The Adviser has agreed to reimburse Municipal Money Market Fund and
Intermediate Municipals Fund for annual expenses in excess of .70% of average
daily net assets. This commitment expires on October 31, 1999, subject to
earlier termination by the Adviser on 30 days notice.
Transfer agent fees are paid to SteinRoe Services, Inc. (SSI), a direct,
wholly-owned subsidiary of Liberty. SSI has entered into an agreement with
Liberty Funds Services, Inc., an indirect, wholly-owned subsidiary of Liberty,
to act as subtransfer agent for the Funds.
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, SR&F Municipal Money Market Portfolio, and SR&F High-Yield
Municipals Portfolio for the six months ended December 31, 1998, was $3, $6, $7,
$1, $4 and $6, 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 Portfolios maintain borrowing
arrangements under which they can borrow against portfolio securities. There
were no borrowings by any of the Funds or Portfolios during the six months ended
December 31, 1998.
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, 1998, were as follows:
Purchases Sales
--------- ---------
Intermediate Municipals Fund........................... $49,834 $43,291
Managed Municipals Fund................................ 28,597 42,311
SR&F High-Yield Municipals Portfolio................... 33,622 26,564
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
Municipal Money Market Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<TABLE>
<CAPTION>
Six Months
Ended
Dec. 31,
1998 Years Ended June 30,
(Unaudited) 1998 1997 1996 1995
----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Net investment income ................................ .014 .031 .030 .031 .030
Distributions from net
investment income ................................. (.014) (.031) (.030) (.031) (.030)
------ ------ ------ ------ ------
Net Asset Value, End of Period .......................... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Ratio of net expenses to average net assets (a) ......... 0.69%(c) 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income to average
net assets (b) ....................................... 2.82%(c) 3.06% 2.98% 3.09% 2.96%
Total return (b) ........................................ 1.43% 3.10% 3.04% 3.13% 3.02%
Net assets, end of period (000's) ...................... $122,491 $115,279 $118,424 $120,432 $146,704
<CAPTION>
SR&F Municipal Money Market Portfolio
Six Months
Ended Period
Dec. 31, Year Ended Ended
1998 June 30, June 30, June 30,
(Unaudited) 1998 1997 1996 (d)
----------- --------- -------- --------
<S> <C> <C> <C> <C>
Selected Ratios
Ratio of net expenses to average net assets .................. 0.30%(c) 0.34% 0.32% 0.30%(c)
Ratio of net investment income to average
net assets ................................................ 3.20%(c) 3.41% 3.36% 3.50%(c)
(a)If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this ratio would have been 0.81% for the six months ended
December 31, 1998, and 0.86%, 0.86%, 0.84% and 0.78% for the years ended June
30, 1998, 1997, 1996 and 1995, respectively.
(b)Computed giving effect to Adviser's expense limitation undertaking.
(c)Annualized
(d)From commmencement of operations on September 28, 1995.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
- --------------------------------------------------------------------------------
Intermediate Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
Six Months
Ended
Dec. 31,
1998 Years Ended June 30,
(Unaudited) 1998 1997 1996 1995
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................................... $11.57 $11.38 $11.22 $11.16 $11.00
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income ................................................. .27 .54 .55 .55 .53
Net realized and unrealized gains
on investments ..................................................... .12 .22 .22 .06 .16
------ ------ ------ ------ ------
Total from investment operations ................................... .39 .76 .77 .61 .69
------ ------ ------ ------ ------
Distributions
Net investment income ................................................. (.27) (.54) (.55) (.55) (.53)
Net realized gains .................................................... (.05) (.03) (.06) -- --
------ ------ ------ ------ ------
Total distributions ................................................ (.32) (.57) (.61) (.55) (.53)
------ ------ ------ ------ ------
Net Asset Value, End of Period ........................................... $11.64 $11.57 $11.38 $11.22 $11.16
====== ====== ====== ====== ======
Ratio of net expenses to average net assets (a) .......................... 0.70%(c) 0.70% 0.70% 0.70% 0.74%
Ratio of net investment income to average
net assets (b) ........................................................ 4.54%(c) 4.70% 4.84% 4.82% 4.94%
Portfolio turnover rate .................................................. 22 29% 44% 66% 67%
Total return (b) ......................................................... 3.40% 6.84% 7.07% 5.47% 6.59%
Net assets, end of period (000's) ....................................... $200,532 $195,651 $196,006 $204,726 $212,489
(a)If the Fund had paid all of its expenses and there had been no reimbursement
by the Adviser, this ratio would have been 0.80% for the six months ended
December 31, 1998, and 0.81%, 0.82%, 0.81% and 0.76% for the years ended June
30, 1998, 1997, 1996 and 1995, respectively.
(b)Computed giving effect to Adviser's expense limitation undertaking.
(c)Annualized
</TABLE>
<PAGE>
<TABLE>
Managed Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
Six Months
Ended
Dec. 31,
1998 Years Ended June 30,
(Unaudited) 1998 1997 1996 1995
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $9.38 $ 9.11 $ 8.85 $ 8.79 $ 8.70
----- ------ ------ ------ ------
Income From Investment Operations
Net investment income ................................. .24 .48 .48 .48 .51
Net realized and unrealized gains
on investments ..................................... .06 .27 .26 .06 .09
----- ------ ------ ------ ------
Total from investment operations ................... .30 .75 .74 .54 .60
----- ------ ------ ------ ------
Distributions
Net investment income ................................. (.24) (.48) (.48) (.48) (.51)
Net realized gains .................................... -- -- -- -- --
----- ------ ------ ------ ------
Total distributions ................................ (.24) (.48) (.48) (.48) (.51)
----- ------ ------ ------ ------
Net Asset Value, End of Period ........................... $9.44 $ 9.38 $ 9.11 $ 8.85 $ 8.79
======
Ratio of net expenses to average net assets .............. 0.72%(a) 0.72% 0.73% 0.72% 0.65%
Ratio of net investment income to average
net assets ............................................ 4.99%(a) 5.14% 5.31% 5.41% 5.85%
Portfolio turnover rate .................................. 5% 12% 16% 40% 33%
Total return ............................................. 3.21% 8.37% 8.56% 6.24% 7.12%
Net assets, end of period (000's) ........................ $579,447 $583,138 $582,366 $606,359 $629,730
(a)Annualized
</TABLE>
<PAGE>
<TABLE>
Financial Highlights Continued
- --------------------------------------------------------------------------------
High-Yield Municipals Fund
Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
Six Months
Ended
Dec. 31,
1998 Years Ended June 30,
(Unaudited) 1998 1997 1996 1995
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $11.97 $11.67 $11.40 $11.31 $11.06
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income ............................. .32 .65 .72 .67 .66
Net realized and unrealized gains
on investments ................................. .01 .30 .27 .09 .25
------ ------ ------ ------ ------
Total from investment operations ............... .33 .95 .99 .76 .91
------ ------ ------ ------ ------
Distributions
Net investment income ............................. (.32) (.65) (.72) (.67) (.66)
Net realized gains ................................ -- -- -- -- --
------ ------ ------ ------ ------
Total distributions ............................ (.32) (.65) (.72) (.67) (.66)
------ ------ ------ ------ ------
Net Asset Value, End of Period ....................... $11.98 $11.97 $11.67 $11.40 $11.31
====== ====== ====== ====== ======
Ratio of net expenses to average net assets .......... 0.77%(a) 0.75% 0.77% 0.85% 0.86%
Ratio of net investment income to average
net assets ........................................ 5.25%(a) 5.48% 6.20% 5.86% 5.98%
Portfolio turnover rate .............................. N/A 8%(b) 11% 34% 23%
Total return ......................................... 2.76% 8.32% 8.91% 6.83% 8.54%
Net assets, end of period (000's) ................... $329,483 $341,780 $306,070 $282,956 $281,155
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SR&F High-Yield Municipals Portfolio
Six Months
Ended Period
Dec. 31, Ended
1998 June 30,
(Unaudited) 1998 (c)
---------- ---------
<S> <C> <C>
Selected Ratios
Ratio of net expenses to average net assets............ 0.45%(a) 0.47%(a)
Ratio of net investment income to average net assets... 5.56%(a) 5.72%(a)
Portfolio turnover rate................................ 8% 3%
(a)Annualized
(b)Prior to commencement of operations of the Portfolio.
(c)From commencement of operations on February 2, 1998.
</TABLE>
<PAGE>
Municipal Trust
- --------------------------------------------------------------------------------
Trustees
John A. Bacon, Jr.
Private Investor
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
Thomas W. Butch, President
William D. Andrews, Executive Vice President
Loren A. Hansen, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Kevin M. Carome, Vice President,
Assistant Secretary
Kevin Connaughton, Vice President
Timothy Jacoby, Vice President
Joanne T. Costopoulos, Vice President
Brian M. Hartford, Vice President
Gail Knudsen, Vice President
William C. Loring, Vice President
Lynn C. Maddox, Vice President
Maureen Newman, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Veronica M. Wallace, Vice President
Heidi J. Walter, Vice President, Secretary
Sharon R. Robertson, Controller
Janet B. Rysz, Assistant Secretary
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 Auditors
<PAGE>
- --------------------------------------------------------------------------------
The Stein Roe Mutual Funds
Fixed Income Funds
Cash Reserves Fund
Municipal Money Market Fund
Intermediate Municipals Fund
Managed Municipals Fund
High-Yield Municipals Fund
Intermediate Bond Fund
Income Fund
High Yield Fund
Equity Funds
Balanced Fund
Growth & Income Fund
Growth Stock Fund
Young Investor Fund
Growth Opportunities Fund
Special Fund
Large Company Focus Fund
Special Venture Fund
Capital Opportunities Fund
International Fund
Small Company Growth Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 800-322-0593
Shareholders call: 800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One SouthWacker Drive, 32nd Floor.
Liberty Funds Distributor, Inc.
TE12A 2/99
