STEIN ROE MUTUAL FUNDS
SEMIANNUAL REPORT
DEC. 31, 1997
Photo of: abacus
STEIN ROE MONEY MARKET FUND
CASH RESERVES FUND
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(SM)
<PAGE>
Contents
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From the President................................................ 1
Tim Armour's thoughts on the markets and investing
Q&A
Interview with the portfolio manager and
a summary of investment activity
Cash Reserves Fund............................................. 3
Investments....................................................... 7
A complete list of investments with market values
Financial Statements.............................................. 9
Statement of assets and liabilities, statement of
operations and changes in net assets
Notes to Financial Statements..................................... 12
Financial Highlights.............................................. 14
Selected per-share data
General Information............................................... 16
A guide to products and services
Must be preceded or accompanied by a prospectus.
<PAGE>
From the President
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TO OUR SHAREHOLDERS
We are pleased to present this annual report for Stein Roe Cash Reserves Fund.
In the following pages, we'll provide you with an overview of economic events
that occurred over the past six months and explain how we positioned the Fund to
respond to these events.
MONEY MARKET FUNDS KEEP THEIR FOOTING IN ROCKY TERRAIN
Since June, money market rates have sailed on steady waters as interest rates
remained unchanged. Early in the reporting period, investors feared a rate
increase based on what appeared to be overly strong economic growth. A currency
crisis, however, struck Thailand and spread to neighboring markets. The
resulting currency crisis affected many Southeast Asian economies and then
sparked a surprisingly severe crash in Hong Kong. By October 1997, this sequence
of events had finally unnerved investors in the developed countries. The result:
sharp declines in all of the major markets.
The shakeup in foreign markets amplified a seasonal pattern of rising money
market yields. At year end, yields typically rise as lenders try to entice
buyers who generally would prefer to buy at the start of the new year. As a
result of the global market turmoil, foreign issuers and even domestic issuers
with foreign exposure were forced to offer even greater yields to attract
investors. Consequently, the portfolio's seven-day yield closed at 5.28 percent
on Dec. 31, 1997, compared with 4.86 percent on June 30th.
The situation in Asia has stabilized somewhat, with the International
Monetary Fund providing resources to South Korea, and several other governments
proposing plans to get their economies to a more healthy state.
In our opinion, interest rates will likely remain unchanged -- especially now
that the markets have calmed down. We may see yields on money market funds
decline slightly, however, as year-end lending pressure will soon go away.
Nonetheless, we think concern about an inflated and/or uncertain stock market
could help maintain and even increase the level of assets flowing into money
market funds, particularly as investors seek a relatively safe haven for their
investment dollars.
A LAND OF PLENTY
The last several years have proved to be a great golden era for the United
States. Unemployment rates are at historic lows. Inflation is tame at roughly 2
percent. The economy is growing steadily. Corporate profits are expanding.
Hourly wages are rising. And, for the first time in recent memory, Congress is
looking at a possible budget surplus in 1998. As a result, we look forward to a
continued strong U.S. economy, and a favorable market environment in 1998.
THE BASICS
Although no one can predict what might happen to the markets in the future, we
believe investors must understand the factors that move the markets -- not just
to profit from them, but to gain the patience to ride out short-term
volatility. As always, no matter what direction you think the economy is
heading, it's important to remember the basics. Think long term and re-evaluate
your investment portfolio from time to time to make sure it continues to match
your goals, risk tolerance and time horizon.
Sincerely,
/s/ Timothy K. Armour
Timothy K. Armour
President
Jan. 29, 199
Photo of: Tim Armour
<PAGE>
Q&A
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AN INTERVIEW WITH JANE NAESETH, PORTFOLIO MANAGER OF STEIN ROE
CASH RESERVES FUND
FUND DATA
INVESTMENT OBJECTIVE:
Seeks maximum current income consistent with capital preservation and
maintenance of liquidity by investing in high-quality money market
securities, such as U.S. Treasuries, commercial paper, banker's acceptances
and certificates of deposit.
FUND INCEPTION:
Oct. 2, 1976
TOTAL NET ASSETS:
$508.8 million
photo of : Jane Naeseth
Photo of: Jane Naeseth.
Q: HOW DID THE FUND PERFORM?
A: Cash Reserves Fund's return of 2.53 percent for the six-month period ending
Dec. 31, 1997, outpaced the 2.47 percent return of the Lipper peer group median,
but trailed the 2.57 percent return of the 90-day Treasury Bill Index.
Q: WHAT DO YOU LOOK FOR WHEN YOU'RE SHOPPING FOR AN INVESTMENT?
A: I'm strictly a "best relative value" investor. I don't trade with any
specific maturity range in mind. Rather, I look across the spectrum of
securities that are available in the money market to find what I think are the
best buys. Depending on the yield curve, interest rate horizon and other
factors, that could be any mixture of short-term, highly liquid securities:
Treasury bills, issued by the U.S. government; short-term notes, issued by
agencies of the government; letters of credit and certificates of deposit,
issued by large banks; or commercial paper, issued by large corporations. I've
been running this Fund since 1980, so that experience definitely helps.
Q: WHAT HAPPENED DURING THE PERIOD?
A: Stable interest rates allowed us to monitor the market with confidence.
Negative global activity added lending pressure near the end of the calendar
year. Otherwise, the markets were quiet until the end of the year, when
international market volatility and normal year-end lending pressures boosted
rates on the seven-day yield to 5.92 percent from 4.86 percent in June. Because
of the hyperactive global activity we experienced recently (a result of the
meltdown in Asian markets last fall), foreign issuers and even domestic issuers
with foreign exposure were forced to offer greater yield payment to attract
investors.
<PAGE>
Q: WHAT HISTORICALLY HAPPENS AT YEAR END?
A: A boost in rates at year end is typically a result of year-end financing
pressures. Borrowing pressure in December drives rates up for January
maturities. This pressure usually subsides in January.
Q: HOW DID YOU STRUCTURE THE PORTFOLIO TO TAKE ADVANTAGE OF INFLATED
YEAR-END RATES?
A: The Fund's maturity profile is typically shorter at the end of each calendar
year, but it can vary depending on when we think the year-end pressures will let
up. Currently, some investors seem to think that there is a chance for a Federal
Reserve easing move in 1998. We're trying to maintain a short and defensive
structure, which should allow us to respond quickly to any changes in the
market's attitude in coming months.
Q: YOU HAVE TYPICALLY INVESTED IN MONEY MARKET SECURITIES ISSUED BY FOREIGN
BANKS. HAS THE TURMOIL IN JAPAN AND OTHER ASIAN ECONOMIES AFFECTED THE
PORTFOLIO?
A: International money market securities became attractive early in the fiscal
year as lenders had to offer inflated yields to attract purchasers. We added
attractive international holdings at that time, increasing our exposure to 15
percent of the port folio's total net assets by the end of the first quarter. As
the international currency crisis gained momentum, we trimmed our international
exposure, particularly cutting back any exposure to Japan.
Q: GOING FORWARD, WHAT WILL BE YOUR STRATEGY WHEN INVESTING IN CREDITS BACKED BY
FOREIGN ISSUERS?
A: We continue to invest only in international credits rated highly enough to
meet our standards -- we invest only in the highest-grade bonds. For example,
we still own commercial paper guaranteed by the Bank of Tokyo/Mitsubishi Bank
Ltd. (4.3 percent of total net assets) because its global strength allows it to
be less affected by its domestic environment. We're keeping our foreign
maturities short to stay defensive against market turns.
Q: WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
A: In our opinion, interest rates likely will remain unchanged -- especially
now that the markets have calmed down. Based on this belief we plan to keep the
Fund in the short- to medium-term maturity range unless we find attractive
longer-term purchases.
<PAGE>
Q: DISCUSS YOUR STRATEGY FOR 1998.
A: We will continue to look for opportunities to add yield to the portfolio. If
interest rates remain neutral, we will attempt to add yield potential by using
attractive floaters -- corporate notes with coupons that adjust quarterly with
market rates. If economic growth slows enough to make a cut in rates likely, we
will shift from floaters to fixed-rate paper that will help us to lock in
attractive rates.
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 investment in the Fund is neither insured
nor guaranteed by the U.S. government, and there is no assurance that the Fund
will be able to maintain its stable net asset value of $1 per share. According
to Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance, the median total returns for the Fund's money market fund peer
group for the one-, five-, and 10-year periods ended Dec. 31, 1997, were 5.00
percent, 4.33 percent and 5.42 percent, respectively.
<PAGE>
Fund Highlights
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Cash Reserves Fund
SECURITIES TYPE BREAKDOWN
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PORTFOLIO PORTFOLIO
JUNE 30, 1996 JUNE 30, 1997
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Commercial Paper 75.2% 79.2%
Letter of Credit Commercial Paper 3.6 10.0
Corporate Notes 12.7 8.2
Federal Agencies 5.3 2.6
Yankee Certificates of Deposit 3.2 --
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Total 100.0% 100.0%
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PIE CHART:
MATURITY
As of June 30, 1996
360+ days 4.2%
90-359 days 5.3%
60-89 days 4.3%
30-59 days 8.6%
15-29 days 46.4%
5-14 days 18.0%
0-4 days 13.2%
As of June 30, 1997
360+ days 0%
90-359 days 0%
60-89 days 11.7%
30-59 days 15.8%
15-29 days 38.5%
5-14 days 33.6%
0-4 days 0.4%
<PAGE>
<TABLE>
Cash Reserves Fund
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INVESTMENTS AS OF DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
(Unaudited)
<CAPTION>
INTEREST MATURITY PRINCIPAL AMORTIZED
RATE RANGE* DATE RANGE AMOUNT COST
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (89.2%)
AUTOMOTIVE (4.2%)
+Eaton Corp. .................. 5.783-5.974% 1/09-2/04/98 $21,453 $21,363
CHEMICALS (1.2%)
+Monsanto Company.............. 6.079 1/16/98 6,000 5,985
CONSULTING SERVICES (4.6%)
CSC Enterprises (gtd. by Computer
Sciences Co.)............... 5.857 3/13/98 24,000 23,727
ELECTRONICS (1.0%)
+General Signal Corp........... 6.068 1/06/98 5,000 4,996
FINANCIAL SERVICES (54.2%)
BUSINESS CREDIT INSTITUTIONS (10.6%)
Finova Capital Corp. ....... 5.898 1/21/98 24,000 23,922
General Motors Acceptance Corp. 6.022 1/21/98 8,000 7,973
Mitsubishi Motor Credit Corp.
(gtd. by BOT/Mitsubishi
Bank Ltd.)............... 6.359 2/09/98 22,000 21,850
-------
53,745
MISCELLANEOUS FINANCIAL (43.6%)
+Asset Securitization Corp. 5.938 1/26/98 20,000 19,918
Associates Corp. of North America 6.753 1/02/98 2,000 2,000
Countrywide Home Loans (gtd. by
Countrywide Credit
Industries) 6.257-6.071 1/05-1/09/98 25,000 24,976
+Eiger Capital.............. 5.942 1/28/98 18,636 18,553
+Enterprise Funding Corp. .. 5.937 1/09/98 19,000 18,975
+Mitsubishi Elec. Finance... 5.955 2/18/98 24,000 23,812
+Old Line Funding Corp. .... 5.941-5.948 1/16-1/21/98 25,000 24,926
+Pooled Assets Receivable Capital 6.155 1/20/98 10,000 9,968
+Receivables Capital Corp... 5.939 1/15/98 25,000 24,942
+Thames Asset Global
Securitization........... 5.880 1/20/98 20,000 19,939
+Tri-Lateral Capital USA Inc. 7.058 1/15/98 10,000 9,973
+Windmill Funding Corp...... 5.845 1/07/98 24,000 23,977
-------
221,959
-------
TOTAL FINANCIAL SERVICES............................................ 275,704
FOOD & BEVERAGE (8.8%)
+Coca-Cola Enterprises......... 5.987 1/22/98 25,000 24,913
Joseph Seagram & Sons.......... 5.862 1/12/98 20,000 19,964
-------
44,877
HEALTH CARE (4.7%)
+American Home Products........ 5.789 3/13/98 24,000 23,730
HOTELS (3.3%)
Accor SA (gtd. Banque
Nationale de Paris)......... 5.911-5.822 1/21-3/04/98 17,000 16,865
<PAGE>
<CAPTION>
Cash Reserves Fund CONTINUED
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INTEREST MATURITY PRINCIPAL AMORTIZED
RATE RANGE* DATE RANGE AMOUNT COST
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PETROLEUM (2.0%)
+Exxon Imperial............... 6.026% 1/06/98 $10,000 $ 9,992
RETAIL (1.9%)
Dillard Investment Co. ........ 6.122 1/13/98 9,813 9,792
UTILITIES (3.3%)
New England Power Corp. ....... 6.514 1/07/98 5,000 4,994
TMI-1 Fuel (gtd. Union Bank
of Switzerland)............. 6.617 1/07/98 12,000 11,987
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16,981
-------
TOTAL COMMERCIAL PAPER.............................................. 454,012
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VARIABLE RATE NOTES (8.3%)
FINANCIAL SERVICES
+American Honda Finance Corp.
(gtd. by Honda Motor Co. Inc.) 5.768 4/06/98 22,000 21,999
Morgan Stanley Group Inc. ..... 6.000 11/16/98 20,000 20,000
-------
TOTAL VARIABLE RATE NOTES........................................... 41,999
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U.S. GOVERNMENT OBLIGATIONS (2.6%)
Federal Home Loan Bank
Callable Note............... 5.750-5.958 1/09/98 8,000 8,000
Student Loan Mortgage Association 5.753 1/08/98 5,000 5,000
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TOTAL U.S. GOVERNMENT OBLIGATIONS................................... 13,000
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TOTAL INVESTMENTS (100.1%).......................................... 509,011
OTHER ASSETS, LESS LIABILITIES (-0.1%).............................. (259)
-------
TOTAL NET ASSETS (100.0%).......................................... $508,752
========
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<FN>
*The interest rate is the effective rate at the date of purchase except for
variable rate notes, for which the interest rate represents the current rate as
of the most recent reset date.
+Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities generally are issued to
investors who agree that they are purchasing the securities for investment and
not with a view to public distribution. Any resale by the Fund must be in an
exempt transaction, normally to other institutional investors. At December 31,
1997, the aggregate value of the Fund's private placement securities was
$307,961, which represented 60.5% of net assets. None of these are deemed to be
illiquid securities.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statement of Assets and Liabilities
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December 31, 1997
(All Amounts in Thousands Except Per-Share Amounts)
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
Investments, at value............................................. $509,011
Cash ............................................................. 732
Receivable for fund shares sold................................... 2,822
Accrued interest receivable....................................... 1,198
Other assets...................................................... 94
---------
Total Assets................................................... 513,857
---------
LIABILITIES
Payable for fund shares redeemed.................................. 4,065
Dividends payable................................................. 419
Payable to investment adviser and transfer agent.................. 303
Accrued expenses payable.......................................... 318
---------
Total Liabilities.............................................. 5,105
---------
Net Assets..................................................... $508,752
=========
CAPITAL
Paid-in capital................................................... $508,616
Accumulated net realized gains on investments .................... 136
---------
Total Capital (Net Assets)..................................... $508,752
=========
Shares Outstanding (Unlimited Number Authorized).................. 508,669
=========
Net Asset Value (Capital) Per Share.............................. $ 1.00
=========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
- --------------------------------------------------------------------------------
For The Six Months Ended
December 31, 1997
(All Amounts in Thousands)
(Unaudited)
<CAPTION>
<S> <C>
INTEREST INCOME.................................................. $13,920
EXPENSES
Management fees.................................................. 607
Administrative fees.............................................. 606
Transfer agent fees.............................................. 364
Printing and postage............................................. 100
SEC and state registration fees.................................. 36
Accounting fees.................................................. 18
Legal and audit fees............................................. 13
Trustees' fees................................................... 13
Other............................................................ 81
-------
Total Expenses................................................ 1,838
-------
Net Investment Income......................................... 12,082
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $12,082
=======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(ALL AMOUNTS IN THOUSANDS)
(Unaudited)
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1997
<S> <C> <C>
OPERATIONS
Net investment income...................................... $ 12,082 $ 23,115
---------- ----------
Net Increase in Net Assets Resulting from Operations.... 12,082 23,115
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... (12,082) (23,115)
---------- ----------
SHARE TRANSACTIONS
Subscriptions to fund shares............................... 434,609 846,211
Investment income dividends reinvested..................... 10,914 19,881
Redemptions of fund shares................................. (389,129) (890,574)
---------- ----------
Net Increase (Decrease) from Share Transactions......... 56,394 (24,482)
---------- ----------
Net Increase (Decrease) in Net Assets................... 56,394 (24,482)
TOTAL NET ASSETS
Beginning of Period........................................ 452,358 476,840
---------- ----------
End of Period.............................................. $ 508,752 $ 452,358
========== ==========
ANALYSES OF CHANGES IN SHARES OF
BENEFICIAL INTEREST
Subscriptions to fund shares .............................. 434,609 846,211
Investment income dividends reinvested..................... 10,914 19,881
---------- ----------
445,523 866,092
Redemptions of fund shares................................. (389,129) (890,574)
---------- ----------
Net increase (decrease) in fund shares..................... 56,394 (24,482)
Shares outstanding at beginning of period.................. 452,275 476,757
---------- ----------
Shares outstanding at end of period........................ 508,669 452,275
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of Stein Roe Cash Reserves
Fund (the "Fund"), a series of the Stein Roe Income Trust (a Massachusetts
business trust).
INVESTMENT VALUATIONS
The Fund utilizes the amortized cost method to value its investments, which
approximates market value. This technique 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 of 1 percent or more
exists between the Fund's $1.00 per-share net asset value, calculated at
amortized cost, and the net asset value calculated by reference to market
quotations, the Board of Trustees would consider what action, if any, should be
taken. Other assets of the Fund are valued by a method that the Board of
Trustees believes represents a fair value.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since the Fund elects to be
taxed as a "regulated investment company" and makes such distri butions to its
shareholders as to be relieved of all federal income taxes under provisions of
current federal tax law.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares income dividends from net investment income daily and
pays these dividends monthly.
OTHER INFORMATION
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
The Fund attempts to maintain its net asset value per share at $1.00, which
it believes will be possible under most conditions.
The Fund requires issuers of repurchase agreements to transfer the
securities underlying the agreements to the Fund's custodian at the time of
payment for the repurchase agreement.
All amounts, except per-share amounts, are shown in thousands.
<PAGE>
NOTE 2. PORTFOLIO COMPOSITION
Cash Reserves Fund invests in U.S. dollar-denominated money market instruments
maturing in 13 months or less from the time of investment. Under normal market
conditions, the Fund will invest at least 25 percent of its total assets in
securities of issuers in the financial services industry (which includes, but is
not limited to, banks, personal credit and business institutions, and other
financial services institutions). At December 31, 1997, 62.4 percent of the
Fund's total assets were invested in the financial services industry. In
addition, at December 31, 1997, 71.1 percent of the Fund's investments were in
instruments of entities located in the United States, 15.3 percent were in
instruments of Japanese entities and 6.1 percent were in instruments of Swiss
entities. Country determination is based on either the location of the issuer
or, in the case of those instruments that are guaranteed by another entity,
the location of the guarantor.
See the Fund's schedule of investments for additional information on
portfolio composition.
NOTE 3. TRUSTEE'S FEES AND TRANSACTIONS WITH AFFILIATES
The Fund pays monthly management and administrative fees to Stein Roe & Farnham,
an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for
its services as investment adviser and manager. The administrative fee is .25 of
1 percent of the first $500 million of average daily net assets, .20 of 1
percent of the next $500 million, and .15 of 1 percent over $1 billion. The
management fee is .25 of 1 percent of average daily net assets.
The administrative agreement of the Fund provides that the Adviser will
reimburse the Fund to the extent that its annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state in which the
Fund's shares are offered for sale.
The transfer agent fees of the Fund are paid to SteinRoe Services Inc. (SSI),
an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI
entered into an agreement with Colonial Investors Service Center, Inc., an
indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to act
as subtransfer agent for the Fund.
The Adviser also provides the Fund with fund accounting services. For the six
months ended December 31, 1997, the Fund incurred fees of $18.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for the Fund for
the six months ended December 31, 1997, was $13. No remuneration was paid to any
other trustee or officer of the Trust.
NOTE 4. INVESTMENT TRANSACTIONS
Cost of investments of the Fund was the same for financial reporting purposes
and federal income tax purposes.
<PAGE>
<TABLE>
Financial Highlights
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Selected per-share data (for a share outstanding throughout each period), ratios
and supplemental data.
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED YEAR ENDED
DEC. 31, JUNE 30, JUNE 30,
1987 1988 1989 1990
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Net investment income............... 0.060 0.032 0.081 0.079
-------- -------- -------- --------
Distributions from net investment income (0.060) (0.032) (0.081) (0.079)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Ratio of expenses to average net assets 0.72% 0.70%* 0.75% 0.76%
Ratio of net investment income to average
net assets.......................... 6.02% 6.36%* 8.13% 7.94%
Total return........................... 6.15% 6.43%* 8.41% 8.20%
Net assets, end of period.............. $962,901 $930,074 $948,018 $949,803
<PAGE>
<CAPTION>
YEARS ENDED JUNE 30,
1991 1992 1993 1994
-------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Net investment income............... 0.068 0.044 0.028 0.028
-------- -------- -------- --------
Distributions from net investment income (0.068) (0.044) (0.028) (0.028)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Ratio of expenses to average net assets 0.78% 0.78% 0.79% 0.79%
Ratio of net investment income to average
net assets.......................... 6.81% 4.40% 2.81% 2.77%
Total return........................... 6.98% 4.49% 2.83% 2.81%
Net assets, end of period.............. $840,525 $711,087 $627,110 $554,713
<PAGE>
<CAPTION>
SIX
MONTHS
ENDED
DEC. 31,
1997
1995 1996 1997(UNAUDITED)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Net investment income............... 0.048 0.050 0.048 0.025
-------- -------- -------- --------
Distributions from net investment income (0.048) (0.050) (0.048) (0.025)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Ratio of expenses to average net assets 0.76% 0.78% 0.77% 0.76%*
Ratio of net investment income to average
net assets.......................... 4.83% 4.98% 4.80% 4.97%*
Total return........................... 4.96% 5.07% 4.92% 2.53%+
Net assets, end of period.............. $498,163 $476,840 $452,358 $508,752
<FN>
* Annualized
+ Not Annualized
</FN>
</TABLE>
<PAGE>
To Contact Us. . .
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BY PHONE 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions about
your current account, or to provide you with information about opening a Stein
Roe account, including Stein Roe Traditional and Roth IRAs. We're available
seven days a week, from 7 a.m. to 8 p.m. weekdays and from 9 a.m. to 2 p.m.
Saturday and Sunday (central time).
STEIN ROE'S FUNDS-ON-CALL
24-HOUR SERVICE LINE
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe prices and yields, and other
information. In addition, if you have a Personal Identification Number (PIN),
you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase shares by electronic transfer;
o Order additional account statements and money market fund checks;
o Redeem shares by check, wire or electronic transfer.
RETIREMENT PLAN ACCOUNTS
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130.
For information on IRA plans, including the new Roth IRA, call us toll free at
800-338-2550.
BY MAIL OR E-MAIL
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900.
To contact us by e-mail, send correspondence directly to
[email protected] or visit us at www.steinroe.com on the Internet.
IN PERSON
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current Stein Roe investments or
provide you infor mation about any of the Stein Roe funds and retirement plans.
Stop by weekdays between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
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Income Trust
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TRUSTEES
Timothy K. Armour
President, Mutual Fund Division and
Director, Stein Roe & Farnham Incorporated
William W. Boyd
Chairman and Director, Sterling Plumbing
Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial
Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer, United Airlines
Janet Langford Kelly
Senior Vice President, Secretary and General Counsel, Sara Lee Corporation
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
OFFICERS
Timothy K. Armour, President
William D. Andrews, Executive Vice President
Thomas W. Butch, Executive Vice President
Loren A. Hanson, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President,
Chief Financial Officer
Philip J. Crosley, Vice President
Michael T. Kennedy, Vice President
Stephen F. Lockman, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Jane M. Naeseth, Vice President
Nicolette D. Parrish, Vice President,
Assistant Secretary
Heidi J. Walter, Vice President
Stacy H. Winick, Vice President, Secretary
Janet B. Rysz, Assistant Secretary
Sharon R. Robertson, Controller
Scott E. Volk, Treasurer
Margaret O. Zwick, Assistant Treasurer
AGENTS AND ADVISERS
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Ernst & Young LLP
Independent Public Accountants
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THE STEIN ROE MUTUAL FUNDS
Stein Roe Cash Reserves Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe High Yield Fund
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Young Investor Fund
Stein Roe Growth Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
Stein Roe Emerging Markets Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Financial Advisors call: 1-800-322-0593
Shareholders call: 1-800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor.
Liberty Financial Investments, Inc., Distributor
Member SIPC
MM12A 2/98
