-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MlAovVHXsOs6BB6bAd1AYr0yBKuGHpgvhgoM9suTaOIzshooDWP00we2jVaoAtWo cDAW/9ypxROyqpdooRw0dg== 0000891804-97-000295.txt : 19970912 0000891804-97-000295.hdr.sgml : 19970911 ACCESSION NUMBER: 0000891804-97-000295 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970828 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEIN ROE MUNICIPAL TRUST CENTRAL INDEX KEY: 0000773757 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04367 FILM NUMBER: 97671293 BUSINESS ADDRESS: STREET 1: ONE SOUTH WACKER DRIVE STREET 2: 11TH FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123687836 MAIL ADDRESS: STREET 1: ONE SOUTH WACKER DR STREET 2: 11TH FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: STEINROE MUNICIPAL TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STEINROE INTERMEDIATE MUNICIPALS INC DATE OF NAME CHANGE: 19880114 N-30D 1 STEIN ROE MUNICIPAL TRUST Stein Roe Mutual Funds ANNUAL REPORT JUNE 30, 1997 Photo of: Various Bonds Stein Roe Fixed Income Funds TAX-EXEMPT BOND FUNDS MUNICIPAL MONEY MARKET FUND INTERMEDIATE MUNICIPALS FUND MANAGED MUNICIPALS FUND HIGH-YIELD MUNICIPALS FUND LOGO: STEIN ROE MUTUAL FUNDS BUILDING WEALTH FOR GENERATIONS (SM) Contents From the President................................................ 1 Tim Armour's thoughts on the markets and investing Fund Performance.................................................. 3 How the Stein Roe tax-exempt bond funds have done over time Q&A Municipal Money Market Fund....................................... 6 Intermediate Municipals Fund ..................................... 10 Managed Municipals Fund .......................................... 14 High-Yield Municipals Fund ....................................... 17 Interviews with the portfolio managers and a summary of investment activity Investments....................................................... 21 A complete list of investments with market values Financial Statements.............................................. 46 Balance sheets, statements of operations and changes in net assets Notes to Financial Statements..................................... 56 Financial Highlights.............................................. 62 Selected per-share data Report of Independent Auditors ................................... 70 General Information............................................... 72 Must be preceded or accompanied by a prospectus. From the President Photo of: Tim Armour To Our Shareholders We are pleased to present this annual report for the Stein Roe tax-exempt bond funds -- Municipal Money Market Fund, Intermediate Municipals Fund, Managed Municipals Fund and High-Yield Municipals Fund. In the following pages, we'll provide you with an overview of the economic events that occurred over the past year and explain how we positioned the funds to respond to these events. Will the Real Economic Numbers Please Stand Up? The past 12 months were an eventful period for the U.S. bond market, as investors reacted nervously to the release of each economic report -- particularly the monthly employment report, which investors tend to use as a gauge of U.S. economic strength. Despite some lingering concerns, however, it finally seemed as if things were starting to look up for the bond market by October of 1996. In early December, however, the good news dried up. First, comments voiced by ranking Federal Reserve officials left many bond traders once again fearing a possible rate hike. Next, foreign buyers started to cut back on their purchases of U.S. government securities, crimping liquidity and depriving the market of a key source of demand. Finally, year-end trading sent the bond markets reeling, as investors pushed a glut of fixed income issues onto the market, while potential buyers -- figuring they had little to gain and a lot to lose by venturing into a shaky market -- stood on the sidelines. In the end, however, economic reports showed no discernible increase in inflation and only a modest uptick in job growth, suggesting there was little, if any, need for a rate hike. Federal Reserve Chairman Alan Greenspan echoed this belief when he told the Senate Budget Committee that he saw few signs of the "inflationary tensions" that had hampered past economic expansions. It appeared that Greenspan's comments were enough to calm bond investors' fears. In fact, many started to believe that economic growth would slow in 1997, helping to resolve many of the conflicts that had plagued them in 1996. Yet as the new year unfolded, that notion was quickly dispelled. A wide range of indicators -- stronger-than-anticipated growth in durable goods orders and personal income, a surprisingly resilient housing market and a 10-year high in consumer confidence levels -- suggested the economy was actually gaining momentum. Despite this strong economic growth, inflation remained relatively tame as lower health care and benefits costs helped keep overall labor costs in check and a stronger dollar helped make imported goods less expensive for U.S. consumers. Nonetheless, many believed the overwhelming evidence of more robust economic growth would force the Federal Reserve to raise interest rates in an effort to preempt higher inflation going forward. As a result, few were surprised when, in late March, the Federal Reserve raised the federal funds rate - -- the rate large commercial banks charge one another for overnight loans -- from 5.25 percent to 5.50 percent. Although most reports now suggest that inflation is under control, we think there may be some continued pressure on interest rates going forward. We do not, however, expect rates to move sharply higher. That's because the "real" federal funds rate -- the federal funds rate minus the rate of inflation -- is already at a level that would typically discourage economic growth. So while we think it's possible the Federal Reserve may raise interest rates again, we think the economy will slow enough to quell any remaining inflationary pressures. Consequently, we believe a strong case can be made for bonds. First, we expect continued low inflation, accompanied by a potentially significant decline in long-term interest rates. In addition, declining budget deficits, both here and abroad, also could help create an extremely bullish backdrop for bonds. And finally, as long as the Federal Reserve remains vigilant against the ghost of inflation past, we think this backdrop will become even more powerful. 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 reevaluate your investment portfolio to make sure it continues to match your goals, risk tolerance and time horizon. Please call us at 800-338-2550 with your comments and suggestions. As always, we look forward to serving your investment needs. Sincerely, Timothy K. Armour President July 30, 1997 Fund Performance There are several ways to evaluate a fund's historical performance. You can look at the cumulative return percentage, the average annual return percentage or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (net investment income) and capital gains (the profits the fund earns when it sells fixed income securities that have grown in value). Average Annual Total Returns Periods ended June 30, 1997
PAST 1 PAST 3 PAST 5 PAST 10 YEAR YEARS YEARS YEARS Municipal Money Market Fund 3.04% 3.07% 2.61% 3.65% Intermediate Municipals Fund 7.07 6.38 6.20 6.87 Lehman 10-Year Municipal Bond Index 8.34 7.83 7.35 8.08 Lehman 7-Year Municipal Bond Index 7.03 6.92 6.51 -- Managed Municipals Fund 8.56 7.30 6.42 7.91 High-Yield Municipals Fund 8.91 8.09 6.58 8.06 Lehman Municipal Bond Index 8.25 7.90 7.10 8.17
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. The Lehman 10-Year Municipal Bond Index, the Lehman 7-Year Municipal Bond Index and the Lehman Municipal Bond Index are unmanaged groups of fixed income securities that differ from the composition of each Stein Roe fund; they are not available for direct investment. Investment Comparison Comparison of change in value of a $10,000 investment. Intermediate Municipals Fund LINE CHART: YEAR ENDED INTERMEDIATE MUNICIPALS FUND LEHMAN 10-YEAR MUNICIPAL BOND INDEX 6/30/87 10000 10000 6/30/88 10561 10691 6/30/89 11284 11719 6/30/90 12057 12552 6/30/91 13043 13712 6/30/92 14888 15265 6/30/93 15959 17186 6/30/94 16144 17356 6/30/95 17208 18879 6/30/96 18149 20084 6/30/97 19432 21759 Managed Municipals Fund LINE CHART: YEAR ENDED MANAGED MUNICIPALS FUND LEHMAN MUNICIPAL BOND INDEX 6/30/87 10000 10000 6/30/88 10754 10742 6/30/89 12119 11965 6/30/90 12864 12780 6/30/91 14011 13932 6/30/92 15685 15272 6/30/93 17877 17434 6/30/94 17827 17464 6/30/95 18561 19004 6/30/96 19719 20266 6/30/97 21407 21939 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. These graphs compare the performance of the 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 the funds; they are not available for direct investment. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Investment Comparison Comparison of change in value of a $10,000 investment. High-Yield Municipals Fund LINE CHART: YEAR ENDED HIGH-YIELD MUNICIPALS FUND LEHMAN MUNICIPAL BOND INDEX 6/30/87 10000 10000 6/30/88 10866 10742 6/30/89 12364 11965 6/30/90 13302 12780 6/30/91 14471 13932 6/30/92 15775 15272 6/30/93 17017 17434 6/30/94 17180 17464 6/30/95 18647 19004 6/30/96 19921 20266 6/30/97 21696 21939 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. This graph compares the performance of the fund to the Lehman Municipal Bond Index, an unmanaged group of fixed income securities that differs from the composition of the Fund; it is not available for direct investment. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Q&A An Interview with Veronica Wallace, Portfolio Manager of 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: $118.4 million Q: For the year ended June 30, 1997, how did the Fund perform? A: With a 3.04 percent one-year return, Municipal Money Market Fund finished the year slightly ahead of its Lipper tax-exempt money market fund peer group, which posted a return of 2.99 percent. The Fund's seven-day current tax-exempt yield was 3.43 percent on June 30, 1997, which is a tax-equivalent yield of 5.67 percent for an investor in the 39.6 percent tax bracket. Q: What drove performance? A: Our heavy weighting in variable rate demand notes (VRDNs) -- 70 percent of total net assets on June 30, 1997 -- has contributed strongly to performance during the year. Variable rate demand notes are a very short-term investment option for money market funds. They are termed "variable rate" because their rates -- which are reset either daily or weekly -- are free to move with current interest rates. In a rising rate environment, VRDNs will tend to offer higher yields; when rates are falling, their yields typically will be depressed. Q: What made variable rate demand notes so attractive in the current environment? A: In April, tax-related redemptions forced dealers to offer higher yields on VRDNs in order to move their inventories. Although rates on VRDNs typically dip after this tax-related pressure eases, it was different this year as rates on VRDNs remained attractive right through the end of the Fund's fiscal year, which is almost unheard of unless it's year end or tax season. We think there are a number of factors that are responsible for this. First, the stock market continued to attract assets that normally would be directed to money funds. What's more, there also seemed to be an increased supply of not only VRDNs but also derivatives. Finally, the number of corporate investors using short-term tax-exempt securities to handle their cash management needs dropped dramatically over the past year. Because these investors help support the short-term municipal market when tax-free money funds experience seasonal cash outflows, the loss of even a few corporate investors can drastically change the environment of the market. Together, these three elements contributed to reduced demand for VRDNs, which helped keep yields on these securities higher than normal. Q: Money market funds are extremely sensitive to changes in interest rates. How has the Fund responded to the interest rate environment of the past year? A: Any movement in short-term rates will have a roughly corresponding effect on a money market fund's seven-day yield. With the consistently strong economic reports we've seen all year long, money market investors have been in almost continual expectation of a tightening move by the Federal Open-Market Committee (FOMC) -- the committee that sets interest rate policy for the Federal Reserve. When investors expect an interest rate hike, actual rates usually will rise during the period just before an FOMC meeting. If the FOMC chooses not to make a move, rates will generally fall back to their previous levels. That's exactly what happened between August 1996 and March of this year, when the FOMC finally raised the federal funds rate by one-quarter point. As a result, our strategy during much of the past year was to maintain a short to neutral position. On June 30, 1996, the Fund's average maturity was at 53 days. By March 31, 1997, it had fallen to 38 days. By June 30, 1997, the Fund had returned to a more neutral maturity level of 53 days. Q: Where are you finding opportunities now? A: Despite minor fluctuations, rates have remained in a fairly tight trading range for much of the year. As a result, we added some one-year notes, which helped boost performance in the first two quarters of the Fund's fiscal year. More recently, in April and May we found pockets of opportunity in tax-exempt bonds with maturities of less than one year, and we added several to the portfolio. In June, we selectively participated in the annual issuance of one-year notes. Q: What are your expectations for coming months? A: While some institutional investors already are speculating about whether the FOMC will raise interest rates at its August meeting, we think there is just too much volatility in the market to make such a call. As a result, we'll try to maintain a more neutral maturity profile so that we're positioned to respond regardless of what happens to interest rates. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Portfolio holdings as of June 30, 1997; portfolio data subject to change. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Tax-equivalent yield is shown for the 39.6 percent tax bracket, which applies to investors with incomes higher than $271,050 per year. Tax-free income is exempt from federal taxes, but may be subject to state and local taxes and federal alternative minimum tax. The Adviser currently limits expenses to 0.70 percent of average net assets, subject to termination upon 30 days' notice to the Fund. Absent past limits, the seven-day current tax-free and tax-equivalent yields at June 30, 1997, would have been 3.28 percent and 5.43 percent, respectively, and total return would have been less. An investment in the Fund is neither insured nor guaranteed by the U.S. government, and there is no assurance that the Fund will be able to maintain its stable net asset value of $1 per share. According to Lipper Analytical Services, Inc., an independent monitor of mutual fund performance, the median returns for the Fund's tax-exempt money market fund peer group for the one-, five- and 10-year periods ended June 30, 1997, were 2.99 percent, 2.63 percent and 3.71 percent, respectively. Portfolio Highlights Municipal Money Market Portfolio Securities Type Breakdown PORTFOLIO PORTFOLIO JUNE 30, 1996 JUNE 30, 1997 General Obligation 7.9% 5.0% Revenue: Industrial 17.6 17.0 Housing 8.7 12.0 Other Revenue 13.5 11.4 Utility 16.3 8.7 Steel/Metal 6.6 8.7 Hospital 5.6 5.6 Education -- 5.1 Chemical -- 5.0 Student Loan 2.1 3.5 Waste Disposal 1.6 2.1 Airport/Port 2.6 -- Oil 1.6 -- Escrowed 0.7 2.1 Other 15.2 13.8 - ------------------------------------------------------------------------ Total 100.0% 100.0% PIE CHART: Maturity As of June 30, 1996 As of June 30, 1997 180-375 Days 10.4% 12.0% 90-179 Days 5.4% 4.7% 60-89 Days 4.4% 5.5% 30-59 Days 12.7% 4.4% 0-29 Days 67.1% 73.4% Q&A An Interview with Joanne Costopoulos, Portfolio Manager of Intermediate Municipals Fund Photo of: Joanne Costopoulos Fund Data Investment Objective: Seeks high current yield exempt from federal income tax, consistent with capital preservation, through investments primarily in the three highest grades of intermediate-term municipal securities. The dollar-weighted average maturity of the Fund's portfolio is between three and 10 years. Fund Inception: October 9, 1985 Total Net Assets: $196.0 million Q: How did the Fund perform? A: For the fiscal year ended June 30, 1997, Stein Roe Intermediate Municipals Fund's return was 7.07 percent, handily outpacing the 6.50 percent return of both the Lipper intermediate municipal debt fund peer group and placing in the peer group's top quartile (31 of 134 funds). The Fund's 30-day standardized yield was 4.23 percent on June 30, 1997. That translates into a tax-equivalent yield of 7.00 percent for an investor in the 39.6 percent tax bracket. The Fund trailed the 8.34 percent return of the Lehman 10-year Municipal Bond Index, primarily because the Fund customarily maintains a shorter duration, shorter maturity and higher-quality portfolio than the Index. The Lehman 10-Year Municipal Bond Index tends to have a maturity of eight to 12 years and a duration that averages roughly seven. Because the Fund's average maturity tends to center around eight years, we think it may be useful to compare the Fund to an index that measures performance for a similar maturity profile, such as the Lehman 7-Year Municipal Bond Index. Intermediate Municipals Fund's one-year return compares more favorably with the 7.03 percent return of the Lehman 7-Year Municipal Bond Index. Q: What drove performance? A: Taking advantage of the relatively stable interest rate environment during the year, many issuers refinanced older debt. In fact, a number of our longer-maturity holdings have been prerefunded to their first call dates. As a high-quality fund, we like to hold on to these bonds because, once they are prerefunded, they are escrowed in U.S. Treasuries, which helps insulate them from any credit risks associated with the issuer. Consequently, the Fund's overall credit quality improves, average maturity decreases and some price appreciation occurs. At roughly 80 percent of the portfolio, our holdings of noncallable bonds also have done well. Unlike callable bonds, noncallable bonds cannot be retired at the option of the issuer. For example, a longer-term bond that can be called within a few years typically has the volatility of a short-term bond when interest rates are down, and it has the volatility of a long-term bond when interest rates are high. As an investor, however, you would want the reverse to occur. But if you own a noncallable bond, its price typically is not negatively affected in a lower interest rate environment. In other words, if you have two similar bonds, but one has a five-year call feature and the second one is noncallable, the noncallable bond generally will appreciate more in a lower-rate environment, but both bonds typically will have almost the same downside in a rising-rate environment. Q: What's the environment for municipal bonds now? A: The market has been plagued by narrow credit spreads and a squeeze in the number of new issues coming to market. As a result, it has been a challenge to find attractive investment opportunities. You can reach for yield by buying issues of lower credit quality, but that hasn't made sense to us because these issues don't pay enough to compensate for the added risks they present. In addition, we've avoided making a number of trades in the Fund to minimize gains that would result in greater tax consequences for our investors. Q: In the current market, demand for yield has taken on extra urgency. What effect has this had on the Fund? A: Lower-rated issues offer higher yield potential, and investors who would normally avoid these lower-rated issues are showing an increasing amount of interest in them. That increased demand worked to our advantage when our holdings of credits at the lower end of the investment-grade scale appreciated. Q: What are your expectations for the coming months? A: If issuers take advantage of lower interest rates to refund old debt, supply in the municipal market may increase. This could cause municipal securities to trail their taxable counterparts in the near term. Because we currently hold roughly 70 percent of the Fund's assets in AAA-rated securities, however, we think we are positioned to take advantage of any widening in yield spreads. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Portfolio holdings as of June 30, 1997; portfolio data subject to change. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Tax-equivalent yield is shown for the 39.6 percent tax bracket, which applies to investors with incomes higher than $271,050 per year. Tax-free income is exempt from federal taxes, but may be subject to state and local taxes and federal alternative minimum tax. Capital gains are subject to federal, state and local taxes. The Adviser currently limits expenses to 0.70 percent of average net assets, subject to termination upon 30 days' notice to the Fund. Absent past limits, the 30-day standardized tax-free and tax-equivalent yields at June 30, 1997, would have been 4.08 percent and 6.75 percent, respectively, and total return would have been less. The Lehman 10-Year Municipal Bond Index and the Lehman 7-Year Municipal Bond Index are unmanaged groups of intermediate-term municipal bonds that differ from the composition of the Fund; they are not available for direct investment. According to Lipper Analytical Services, Inc., an independent monitor of mutual fund performance, the median returns for the Fund's intermediate municipal fund peer group for the one-, five- and 10-year periods ended June 30, 1997, were 6.50 percent, 5.86 percent and 6.83 percent, respectively. Fund Highlights Intermediate Municipals Fund Securities Type Breakdown PORTFOLIO PORTFOLIO JUNE 30, 1996 JUNE 30, 1997 General Obligation 27.2% 24.5% Revenue: Other Revenue 13.3 13.0 Water & Sewer 13.6 11.2 Hospital 6.6 7.8 Airport 5.6 5.9 Electric 8.0 5.8 Toll 4.4 4.0 Colleges, Universities -- 3.7 Student Loan 2.9 2.9 Solid Waste 4.1 2.3 Escrowed 7.0 12.1 Pollution Control 7.3 6.8 - ----------------------------------------------------------------- Total 100% 100% PIE CHART: Maturity As of June 30, 1996 As of June 30, 1997 Greater than 15 Years 17.6% 19.3% 10-15 Years 13.4% 12.7% 5-10 Years 5.8% 2.9% 1-5 Years 13.2% 19.9% Less than 1 Year 50.0% 45.2% PIE CHART: Portfolio Quality As of June 30, 1996 As of June 30, 1997 AAA (63.9%) AAA (70.8%) BBB and Below (6.3%) BBB and Below (8.0%) A (16.2%) A (11.7%) AA (13.6%) AA (9.5%) Q&A An Interview with Jane McCart, Portfolio Manager of Managed Municipals Fund and High-Yield Municipals Fund Photo of: Jane McCart Fund Data Investment Objective: Pursues high tax-free income consistent with capital preservation by investing in a quality-conscious portfolio of long-term municipal securities. Fund Inception: February 23, 1977 Total Net Assets: $582.4 million Managed Municipals Fund Q&A Q: How has the Fund performed? A: With an 8.56 percent return for the fiscal year ended June 30, 1997, Stein Roe Managed Municipals Fund outpaced both the 7.85 percent return of the Lipper general municipal debt peer group and the 8.25 percent return of the Lipper Municipal Bond Index. As of June 30, 1997, the Fund's 30-day standardized yield was 4.73 percent -- for an investor in the 39.6 percent tax bracket, that translates into a tax-equivalent yield of 7.83 percent. Q: What drove performance during the year? A: Our noncallable holdings have been a major factor in the Fund's performance. The price movement of noncallables is not obstructed by call features and, as a result, they offer increased appreciation potential in a strong market. Our credits rated A or below also did well during the year as credit spreads continued to tighten. Q: Throughout much of the Fund's fiscal year, investors speculated that the Federal Reserve might raise interest rates. Given this environment, what was your strategy? A: We were cautious and, as a result, we concentrated on maintaining the Fund's liquidity. Then, when the Federal Reserve finally raised the federal funds rate in late March, we increased our cash position substantially -- to nearly 7 percent of total net assets by early in the second quarter of 1997. We temporarily redeployed most of that cash to student loan and housing obligations - -- more defensive issues -- midway through the second quarter because we believed these securities offered both income potential and low price volatility. We've also kept the Fund's duration shorter than it has been in the recent past. Our weighted average adjusted duration was 7.46 on June 30, 1997, compared to 8.20 on June 30, 1996. Duration, which measures the Fund's sensitivity to changes in interest rates, represents the approximate percentage change in share price for a 100-basis-point change in market interest rates. Simply put, the shorter a fund's duration, the less impact an interest rate move tends to have on its performance. Q: Tight credit spreads and narrow trading ranges have plagued the municipal markets since mid-1995. How has this affected your strategy? A: There's been little opportunity for trading, and conditions have been further hampered by the equity market's riveting performance, which has dramatically slowed cash inflows into the municipal markets. As a result, we've continued to focus on relative value trades in order to take advantage of any tightening in yield spreads between securities of different credit quality. During the first six months of the Fund's fiscal year, for instance, we swapped out of current coupon bonds and into discount bonds, since we believed discount bonds would perform well in the sort of environment we were experiencing. That's because they trade at a discount to face value, which means they tend to offer better appreciation potential than other bonds when interest rates fall. In the second half of the Fund's fiscal year, however, we believed the Federal Reserve might raise interest rates so we began trimming these issues in anticipation of a possible tightening move. Where possible, we also have focused on noncallable bonds. As of June 30, 1997, roughly 40 percent of the Fund was held in these issues. While that's a big bet, in our opinion, it has been the right bet, since they give us the potential to benefit when rates go down and provide us with protection when rates go up. In an uncertain market, these characteristics look especially attractive. Finally, we're watching the electric utility market closely. As a result of deregulation, we expect to find some values there. Q: While there have been pockets of new issuance in the past year, supply hasn't been plentiful. Why? A: One reason could be the fact that the federal government is increasingly shifting responsibilities to the states. At first glance, it might seem like this trend would spur states to increase the number of new issues they issue. In reality, however, that hasn't been the case. That's because special projects -- such as schools, roads, prisons or hospitals -- require voter approval, and, in many instances, voters have been turning them down. Basically, voters appear to be sending a message to their state governments -- they want their taxes minimized. Nonetheless, as roads across the country fall into disrepair and the children of the baby boomers reach school age, we think voters will start to recognize the need for new projects, and, as a result, we think there eventually will be an increase in new municipal issues. Another reason supply has been low is that legislation has put a damper on supply, as it has limited the types of projects that qualify for municipal funding. Q: What's your outlook? A: We believe the moves we made during the quarter, and the fact that we plan to continue to hold a high percentage of noncallable issues, positions the Fund well for slower economic growth and a less restrictive Federal Reserve monetary policy. We're cautious about the low levels of rates being offered and the lack of cash flow into the market. While we intend to maintain our cash allocation at current levels, we may increase it if we see any inflationary pressure. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Portfolio holdings as of June 30, 1997; portfolio data subject to change. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Tax-equivalent yield is shown for the 39.6 percent tax bracket, which applies to investors with incomes higher than $271,050 per year. Tax-free income is exempt from most federal taxes, but may be subject to state and local taxes and federal alternative minimum tax. Capital gains are subject to federal, state and local taxes. The Lehman Municipal Bond Index is an unmanaged group of municipal bonds that differs from the composition of the Fund; it is not available for direct investment. According to Lipper Analytical Services, Inc., an independent monitor of mutual fund performance, the median returns for the Fund's general municipal debt fund peer group for the one-, five- and 10-year periods ended June 30, 1997, were 7.85 percent, 6.50 percent and 7.82 percent, respectively. Q&A Fund Data Investment Objective: Seeks a high level of tax-free income consistent with capital preservation by investing in longer-term municipal securities, principally of medium and lower quality. Fund Inception: March 5, 1984 Total Net Assets: $306.1 million High-Yield Municipals Fund Q&A Q: How did the Fund perform? A: For the fiscal year ended June 30, 1997, High-Yield Municipals Fund's return was 8.91 percent, topping the 8.31 percent return of both the Lipper high yield municipal debt fund peer group and the 8.25 percent return of the Lehman Municipal Bond Index. The Fund's 30-day standardized yield was 5.10 percent on June 30. That translates into a tax-equivalent yield of 8.45 percent for an investor in the 39.6 percent tax bracket. Q: Overall, the Fund's performance against both the peer group and Index was strong. What drove performance? A: Early in the year, strong demand for high yield holdings helped drive the high yield sector's performance and, with our emphasis on high yield bonds, the Fund benefited accordingly. Our airline holdings continue to do well, thanks to a strong economy, increased passenger traffic -- especially in business travel -- and good cost control. Solid demand means airlines are enjoying higher fares. We're bullish on this sector, as we believe many carriers are stronger today than they have been in the past. Our optimism recently was rewarded when one of our airline holdings was upgraded. Finally, the health care sector also helped drive performance, with solid returns posted by some of our continuing care and hospital holdings. Q: It's been a quiet year in the muni cipal market. Where are you finding attractive investment opportunities? A: Credit spreads continue to be tight, with yields on longer bonds unattractive. In addition, issuance in general was light. As a result, we didn't have a lot of opportunities to change the portfolio's structure during the year. Nonetheless, we remain interested in the electric utility industry. As a result, we added some electric utility holdings during the past year. Deregulation has caused some turmoil in this industry, but by carefully searching for companies that either are successfully emerging from difficult times or utilities that we believe are well positioned for deregulation, we think we have uncovered some good opportunities. Finally, we purchased a District of Columbia general obligation issue (2.3 percent of total net assets) because our analysts believe it is a good candidate for upgrade. Q: You have focused on the airline, health care and paper industries for some time. Are these sectors still interesting to you? A: Yes. We've continued to add to our holdings of airline- and health care-related securities. We're more cautious about the U.S. paper industry, however, since growing competition from overseas has caused paper prices to fall. As a result, we continued to look for attractive paper company securities, but we concentrated on locating higher-quality issues. Q: What are your expectations for the coming months? A: We think municipal insurance will continue to keep spreads tight, forcing investors to look for yield in lower-rated issues. As a result, we think it could be more difficult to find attractive investment opportunities. Nonetheless, in spite of this anticipated squeeze in supply, we don't plan on purchasing nonrated debt unless we think the potential yield justifies taking on additional risks. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Portfolio holdings as of June 30, 1997; portfolio data subject to change. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. Taxable-equivalent yield is shown for the 39.6 percent tax bracket, which applies to investors with incomes higher than $271,050 per year. Tax-free income is exempt from federal taxes, but may be subject to state and local taxes and federal alternative minimum tax. Capital gains are subject to federal, state and local taxes. The Lehman Municipal Bond Index is an unmanaged group of municipal bonds that differs from the composition of the Fund; it is not available for direct investment. According to Lipper Analytical Services, Inc., an independent monitor of mutual fund performance, the median returns for the Fund's high-yield municipal debt fund peer group for the one-, five- and 10-year periods ended June 30, 1997, were 8.31 percent, 6.54 percent and 8.00 percent, respectively. Investing in high yield bonds involves greater credit and other risks not associated with investing in higher-quality securities. Fund Highlights Managed Municipals Fund Securities Type Breakdown PORTFOLIO PORTFOLIO JUNE 30, 1996 JUNE 30, 1997 General Obligation 18.0% 17.1% Pollution Control 16.2 14.0 Escrowed 9.0 11.9 Revenue: Housing 11.9 13.3 Electric 10.1 10.0 Toll 7.5 7.7 Other Revenue 8.8 7.1 Water & Sewer 6.3 6.8 Hospital 6.0 5.4 Airport 3.3 3.6 Student Loan 2.9 3.1 - ---------------------------------------------------------- Total 100% 100% PIE CHART: Maturity As of June 30, 1996 As of June 30, 1997 Greater than 25 Years 19.0% 14.8% 20-25 Years 17.4% 17.4% 15-20 Years 30.2% 26.6% 10-15 Years 17.5% 22.6% 5-10 Years 4.0% 7.3% 1-5 Years 8.0% 8.5% Less than 1 Year 3.9% 2.8% PIECHART: Portfolio Quality As of June 30, 1996 As of June 30, 1997 AAA (34.2%) AAA (36.9%) AA (33.3%) AA (26.8%) A (22.3%) A (25.9%) BBB and Below (10.2%) BBB and Below (10.4%) Fund Highlights High-Yield Municipals Fund Securities Type Breakdown PORTFOLIO PORTFOLIO JUNE 30, 1996 JUNE 30, 1997 Pollution Control 25.1% 22.5% Escrowed 15.5 17.8 General Obligation 6.5 8.4 Revenue: Housing 12.5 12.2 Other Revenue 12.2 11.8 Hospital 12.0 8.8 Electric 5.2 7.2 Toll 5.5 4.8 Airport 2.8 4.2 Student Loan 2.7 2.3 - ------------------------------------------------------------ Total 100% 100% PIE CHART: Maturity As of June 30, 1996 As of June 30, 1997 Over 25 Years 27.8% 24.6% 20-25 Years 28.0% 22.9% 15-20 Years 15.4% 19.3% 10-15 Years 10.2% 10.0% 5-10 Years 8.4% 9.3% 1-5 Years 7.5% 10.2% Less than 1 Year 2.7% 3.7% Portfolio Quality As of June 30, 1996 As of June 30, 1997 AAA (15.9%) AAA (18.0%) AA (11.7%) AA (9.0%) A (22.7%) A (22.3%) BBB (24.8%) BBB (22.2%) BB/B (4.5%) BB/B (10.4%) NR* (20.4%) NR* (18.1%) * Not Rated SR&F Municipal Money Market Portfolio Investments as of June 30, 1997 (Dollar Amounts In Thousands)
Principal Market MUNICIPAL SECURITIES (103.8%) Amount Value ARIZONA (0.9%) *Maricopa County I.D.A. Multi-Family Housing Revenue (Vista Ventana Apartments Project gtd. by Federal National Mortgage Association) V.R.D.B. 4.250%............. $ 1,200 $ 1,200 ARKANSAS (4.7%) *Arkansas Development Finance Authority Revenue Refunding Series C (ADFA Guaranty Project) (AMBAC Insured) 3.950% 12/01/97................................... 185 185 *Clark County Solid Waste Disposal Revenue (Reynolds Metals Co. Project L.O.C. SunTrust Company Bank) V.R.D.B. 4.200%................................... 3,000 3,000 Paragould Sales Tax Revenue (AMBAC Insured) 4.750% 7/01/97.................................... 550 550 *Pulaski County Public Facilities Board (Chenel Park Apartments Project L.O.C. PNC Bank, Kentucky) V.R.D.B. 4.350%................................... 2,750 2,750 -------- 6,485 CALIFORNIA (5.4%) California School Cash Reserve Program Authority Pool Series A (MBIA Insured) 4.750% 7/02/97..................... 2,000 2,000 (AMBAC Insured) 4.750% 7/02/98.................... 1,000 1,009 California Statewide Community Development Authority T.R.A.N. Series A (FSA Insured) 4.500% 6/30/98............. 2,000 2,013 City of Orange I.D.A. I.D.R. Series A (Control Air Conditioning Project L.O.C. California State Teachers Retirement Fund) V.R.D.B. 4.350%................................... 1,000 1,000 Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 1,000 1,006 Los Angeles Unified School District G.O. T.R.A.N. 1997-98 4.500% 7/01/98.................................... 500 503 ------ 7,531 COLORADO (0.5%) Arvada Urban Renewal Authority Revenue Refunding Series A (Arvada City Center) (MBIA Insured) 3.650% 9/01/97 705 705 DELAWARE (0.7%) Delaware G.O. Revenue Refunding Series A 5.600% 8/15/97 1,000 1,002 DISTRICT OF COLUMBIA (0.8%) District of Columbia Revenue (American University L.O.C. National Westminster Bank) V.R.D.B. 4.200%........ 1,100 1,100 FLORIDA (2.2%) *Collier County Housing Financial Authority (Saxon Manor Isles Project L.O.C. PNC Bank, Kentucky) V.R.D.B. 4.400% 2,600 2,600 Port of St. Lucie Special Assessment Revenue (Assessment District No. 1-Phase II) (MBIA Insured) 3.600% 10/01/97.... 500 500 -------- 3,100 GEORGIA (2.0%) *Gwinnett County Development Authority I.D.R. (Price Companies Inc. Project L.O.C. NationsBank of Georgia) V.R.D.B. 4.200%................................... 2,800 2,800 HAWAII (0.5%) Hawaii Highway Revenue 3.850% 7/01/97................ 750 750 SR&F Municipal Money Market Portfolio CONTINUED Principal Market Amount Value IDAHO (0.7%) Idaho T.A.N. 4.625% 6/30/98.......................... $ 1,000 $ 1,007 ILLINOIS (8.1%) Chicago Revenue (De La Salle Institute Project L.O.C. Northern Trust, Chicago) V.R.D.B. 4.250%................... 1,000 1,000 Chicago Tax Increment Refunding Allocation Series A (Stockyards L.O.C. Northern Trust, Chicago) V.R.D.B. 4.250%... 1,500 1,500 Illinois Development Finance Authority (Rest Haven, Illinois L.O.C. Federal Home Loan Bank and South Holland Trust & Savings) V.R.D.B. 4.150%................................... 1,000 1,000 *Illinois Development Finance Authority Sewage Facilities Revenue (Nutrasweet Co. Project gtd. by Monsanto Co.) V.R.D.B. 4.400%............................................ 4,100 4,100 Illinois Health Facility Authority Revenue (University of Chicago Project) 3.550% Mandatory Put 7/02/97............. 1,500 1,500 *Illinois Student Assistance Student Loan Revenue Series 1996 A (L.O.C. Bank of America of Illinois) V.R.D.B. 4.200% 1,900 1,900 *Southwestern Illinois Development Authority Solid Waste Disposal Revenue (Wood River Project) (Shell Oil Co.) V.R.D.B. 4.250%................................... 200 200 -------- 11,200 INDIANA (6.5%) *Crawfordsville Economic Development Revenue (Pedcor Investments Shady Knoll L.O.C. Federal Home Loan Bank) V.R.D.B. 4.250%................................... 1,575 1,575 Fort Wayne Hospital Authority Revenue (Parkview Memorial Hospital L.O.C. Bank of America, Illinois) V.R.D.B. 4.150% Series B........................................ 1,000 1,000 Series C........................................ 1,000 1,000 *Franklin Economic Development Revenue Refunding (Pedcor Investments-Lakeview I Apartments Project Federal Home Loan Bank, Indianapolis) V.R.D.B. 4.250%.......... 2,927 2,927 Gary Environmental Improvement Revenue (U.S. Steel Corp. Project L.O.C. Bank of Nova Scotia) V.R.D.B. 4.100% 500 500 *LaPorte County Economic Development Revenue (Woodland Project L.O.C. Federal Home Loan Bank) V.R.D.B. 4.250% 2,000 2,000 -------- 9,002 IOWA (5.4%) *Clinton I.D.R. (Sethness Products Project) V.R.D.B. 4.350% 2,500 2,500 Iowa Higher Education Loan Authority Revenue Refunding Series 1996 (Private College Facilities) (MBIA Insured) 4.250% 8/01/97.................................... 600 600 Iowa School Corporations Cash Anticipation Program Warrant Certificates (FSA Insured) Series 1996-97 B 4.250% 1/30/98................. 1,000 1,004 Series 1997-98 A 4.500% 6/26/98................. 3,000 3,020 Muscatine County P.C.R. (Monsanto Co. Project) V.R.D.B. 4.250%................................... 400 400 -------- 7,524 KENTUCKY (5.9%) Clark County P.C.R. Series J-1 (Eastern Kentucky Power gtd. by National Rural Utilities Cooperative Finance Corp.) 3.750% Optional Put 10/15/97...................... 1,010 1,010 *Covington I.D.R. Series 1991 (White Castle Distributing L.O.C. Bank One, Columbus) V.R.D.B. 4.300%............... 3,685 3,685 SR&F Municipal Money Market Portfolio CONTINUED Principal Market Amount Value KENTUCKY (CONTINUED) Kentucky Economic Development Finance Authority Hospital Facilities Revenue (Baptist Healthcare System L.O.C. Canadian Imperial Bank) V.R.D.B. 4.100%.................... $ 500 $ 500 *Pulaski County Solid Waste Disposal Revenue Series B (East Kentucky Power Corp. gtd. by National Rural Utilities Cooperative Finance Corp.) 3.550% Optional Put 8/15/97 1,100 1,100 *Shelby County Industrial Building Revenue (Roll Forming Corp. L.O.C. Bank One of Kentucky) V.R.D.B. 4.300%...... 1,865 1,865 ------- 8,160 LOUISIANA (1.0%) Lake Charles Harbor & Terminal District Port Facilities Revenue (Conoco Inc. gtd. by E.I. Dupont) V.R.D.B. 4.100%. 400 400 City of Shreveport G.O. (MBIA Insured) 8.000% 6/01/98 685 709 St. Mary Parish Consolidated School District No. 1 (FSA Insured) 10.000% 3/01/98................................... 345 358 ------- 1,467 MASSACHUSETTS (0.9%) Massachusetts Industrial Finance Agency Revenue Series A (Babson College)(MBIA Insured) 3.750% 10/01/97.... 250 250 Massachusetts Water Reserve Authority (Morgan Guaranty) 3.750% 9/30/97.................................... 1,000 1,000 ------- 1,250 MICHIGAN (3.6%) Detroit City School District Aid Notes 4.500% 5/01/98 2,000 2,010 Michigan Job Development Authority P.C.R. Series 1985 (Mazda Motor Manufacturing USA Corp. L.O.C. Sumitomo Bank, Ltd.) V.R.D.B. 4.375%................................... 3,000 3,000 ------- 5,010 MINNESOTA (0.7%) *Minnesota Housing Finance Authority Single Family Mortgage Series J 3.650% Mandatory Put 12/11/97............ 1,000 1,000 MISSISSIPPI (0.3%) Mississippi State University Educational Building Corporation Revenue (MBIA Insured) 3.700% 8/01/97............. 350 350 MISSOURI (4.2%) Clay County G.O. (FSA Insured) 4.000% 3/1/98......... 1,645 1,645 *Jefferson County I.D.A. Revenue Series A (GHF Holdings LLC Project L.O.C. Bank One, Indianapolis) V.R.D.B. 4.300% 4,185 4,185 ------- 5,830 NEBRASKA (0.3%) Omaha G.O. 6.700% 12/01/97........................... 350 354 NEW HAMPSHIRE (4.0%) New Hampshire Business Finance Authority P.C.R. Series 1992 D (Public Service Company Project L.O.C. Barclays Bank PLC) V.R.D.B. 4.300%................................... 600 600 New Hampshire Capital Improvement Boards Series B 5.450% 11/01/97................................... 500 503 SR&F Municipal Money Market Portfolio CONTINUED Principal Market Amount Value NEW HAMPSHIRE (CONTINUED) *New Hampshire Industrial Development P.C.R. (New England Power Co.) 3.650% Mandatory Put 7/10/97.................... $ 1,500 $ 1,500 3.850% Mandatory Put 7/10/97.................... 450 450 3.850% Mandatory Put 8/22/97.................... 1,500 1,500 3.850% Mandatory Put 9/25/97.................... 1,000 1,000 -------- 5,553 NEW YORK (1.0%) New York Medical Care Facilities Finance Agency Revenue (Escrowed in U.S. Treasury Securities) (pre-refunded to 8/15/97) 8.875%................................... 1,350 1,385 NORTH DAKOTA (0.7%) *Mercer County Solid Waste Disposal Revenue Series 1993 U (gtd. by National Rural Utilities Cooperative Finance Corp.) 3.800% Optional Put 12/01/97...................... 1,000 1,000 OHIO (0.7%) Cuyahoga County Hospital Revenue (Metrohealth Systems) (MBIA Insured) 5.000% 2/15/98..................... 510 514 Ohio Environmental Improvement Revenue (U.S. Steel Corp. Project L.O.C. Pittsburgh National Bank) V.R.D.B. 3.900% 400 400 -------- 914 OKLAHOMA (1.1%) Lawton Water Authority Sales Tax & Utility System Revenue (AMBAC Insured) 5.375% 7/01/97.................... 1,585 1,585 OREGON (0.7%) Eugene Electric Utilities Revenue (FSA Insured) 4.000% 8/01/97.................................... 420 420 Salem Water & Sewage Revenue (FGIC Insured) 4.000% 5/01/98 540 540 -------- 960 PENNSYLVANIA (4.1%) *Pennsylvania Higher Education Assistance Agency Student Loan Revenue Series A (L.O.C. Student Loan Marketing Association) V.R.D.B. 4.250%................................... 2,000 2,000 Philadelphia Redevelopment Authority Notes Series 1996 (Southwark Plaza Project) (FGIC Insured) 3.850% 12/30/97..... 1,500 1,500 Quakertown General Authority Revenue Series 1996A (L.O.C. PNC Bank, N.A.) V.R.D.B. 4.250%....................... 2,200 2,200 -------- 5,700 SOUTH CAROLINA (2.2%) *South Carolina Jobs Economic Development Authority Hospital Facilities Revenue (Specialty Equipment Companies L.O.C. Bank of America, Illinois) V.R.D.B. 4.300%........ 3,000 3,000 SOUTH DAKOTA (0.7%) Yankton I.D.R. (Alumax Project L.O.C. Bank of America, NT & SA) V.R.D.B. 4.100%.......................... 1,000 1,000 TENNESSEE (3.6%) *McMinn County Industrial Development Board I.D.R. (Creative Fabrication Corp. L.O.C. NBD Bank) V.R.D.B. 4.200% 3,700 3,700 SR&F Municipal Money Market Portfolio CONTINUED Principal Market Amount Value TENNESSEE (CONTINUED) Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue Series 1993 (Richland Place Inc. Project L.O.C. Societe Generale) V.R.D.B. 4.200% $ 1,300 $ 1,300 -------- 5,000 TEXAS (9.1%) *Gulf Coast Waste Disposal Authority (Amoco Oil Co. Project gtd. by Amoco Corp.) V.R.D.B. 4.300% Series 1994..................................... 700 700 Series 1996..................................... 200 200 Harlandale Independent School District Refunding (gtd. by PSF) 4.000% 2/01/98.................................... 450 450 *Harris County Industrial Development Corp. I.D.R. (Precision General Inc. Project L.O.C. Morgan Guaranty Trust) V.R.D.B. 4.300%................................... 2,060 2,060 *North Texas Higher Education Authority Student Loan Revenue Refunding Series A (L.O.C. Student Loan Marketing Association) V.R.D.B. 4.250%................................... 1,100 1,100 *Robertson County Industrial Development Corp. Series 1995 (Sanderson Farms Inc. Project L.O.C. Harris Trust and Savings Bank) V.R.D.B. 4.350%............................. 1,900 1,900 Texas State T.R.A.N. Series 1996 4.750% 8/29/97...... 5,000 5,006 Tyler G.O. (Escrowed in U.S. Treasury Securities) 8.500% 9/01/97.................................... 1,200 1,209 -------- 12,625 VERMONT (2.9%) *Vermont I.D.A. Revenue (RyeGate Wood Energy Co. Project L.O.C. ABN AMRO Bank, N.V.) V.R.D.B. 4.300%.............. 4,000 4,000 VIRGINIA (0.7%) Bedford County I.D.A. I.D.R. Refunding (Nekoosa Packaging Project L.O.C. Canadian Imperial Bank) V.R.D.B. 4.200%.... 1,000 1,000 WASHINGTON (3.1%) *Washington Multi-family Housing Finance Commission Revenue Series A (Hamilton Place Project L.O.C. U.S. Bank of Washington) V.R.D.B. 4.300%....................... 1,140 1,140 *Yakima County Public Corp. I.D.R. (John I. Haas Inc. Project L.O.C. Bayerische Vereinsbank AG) V.R.D.B. 4.400%. 3,150 3,150 -------- 4,290 WISCONSIN (13.9%) *Carlton P.C.R. Series 1988 (Wisconsin Power & Light Co.) V.R.D.B. 4.300%................................... 6,500 6,500 *Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C. Bank One, Milwaukee) V.R.D.B. 4.300%........................ 3,400 3,400 *Holland I.D.R. (White Clover Dairy Inc. Project L.O.C. Bank One, Milwaukee) V.R.D.B. 4.300%........................ 2,600 2,600 *Kenosha I.D.R. (Monarch Plastics Inc. L.O.C. Bank One, Milwaukee) V.R.D.B. 4.300%........................ 2,260 2,260 Milwaukee County G.O. Series A (AMBAC Insured) 5.000% 10/01/97................................... 500 502 *Oak Creek I.D.R. Series 1995 (McAdams Graphics Inc. L.O.C. Bank One, Milwaukee) V.R.D.B. 4.300%.............. 1,800 1,800 SR&F Municipal Money Market Portfolio CONTINUED Principal Market Amount Value WISCONSIN (CONTINUED) Wisconsin State Health Facility Authority Revenue Series A-2 (Franciscan Health Care L.O.C. Toronto Dominion Bank) V.R.D.B. 4.150%................................... $ 1,700 $ 1,700 Wisconsin State Health & Educational Facilities Authority Revenue Series A (United Health Group, Inc.) (AMBAC Insured) 4.000% 12/15/97................................... 550 550 -------- 19,312 - ------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (103.8%) (Amortized cost $144,151)..................................... 144,151 OTHER ASSETS, LESS LIABILITIES (-3.8%)............................ (5,223) -------- TOTAL NET ASSETS (100.0%)......................................... $138,928 ======== - ------------------------------------------------------------------------------- * These securities are subject to federal alternative minimum tax. At June 30, 1997, these securities represented 60.8 percent of net assets. See accompanying notes to financial statements.
Intermediate Municipals Fund Investments as of June 30, 1997 (Dollar Amounts In Thousands)
Principal Market MUNICIPAL SECURITIES (98.9%) Amount Value ALASKA (1.4%) Kenai Peninsula Borough G.O. Refunding (AMBAC Insured) 8.300% 1/01/99.................................... $ 1,500 $ 1,589 North Slope Borough G.O. 8.350% 6/30/98.............. 1,200 1,248 -------- 2,837 ARIZONA (7.0%) Arizona Transportation Board Highway Revenue Subordinated Series A 6.000% 7/01/00........................... 1,000 1,045 Cochise County Unified School District No. 68 Series B (FGIC Insured) 9.000% 7/01/01........................... 1,115 1,303 Maricopa County Hospital Revenue (Samaritan Health Services) (Escrowed in U.S. Treasury Securities) 7.625% 1/01/08 2,050 2,384 Maricopa County Unified High School District 6.250% 7/01/06 District No. 97 Deer Valley Series A (MBIA Insured).................................. 1,750 1,937 7.000% 7/01/08 District No. 213 Tempe (FGIC insured) 500 585 Phoenix Civic Improvement Wastewater System Lease Revenue (Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/03) 6.000% 7/01/07.................................... 2,500 2,725 Pima County Refunding G.O. 6.300% 7/01/02............ 2,500 2,692 Scottsdale Industrial Development Authority Hospital Revenue Refunding Series A (Scottsdale Memorial Hospitals)(AMBAC Insured) 6.500% 9/01/04........................... 1,000 1,104 -------- 13,775 ARKANSAS (1.4%) Beaver Water District Benton & Washington Counties Water Revenue Refunding (MBIA Insured) 6.000% 11/15/04.. 2,580 2,795 CALIFORNIA (7.1%) California Education Facility University of San Francisco (MBIA Insured) 5.600% 10/01/10.......................... 1,000 1,048 *California Housing Finance Agency Revenue Home Mortgage Series B-1 5.900% 2/01/04......................... 960 993 California Statewide Communities Development Authority (Cedars-Sinai Medical Center) 5.400% 11/01/15..... 2,000 1,892 Central Coast Water Authority Revenue (AMBAC Insured) (Escrowed in U.S. Treasury Securities)(pre-refunded to 10/01/02) 5.950% 10/01/03................................... 2,000 2,175 East Bay Municipal Utility District Water System Revenue (Escrowed in U.S. Treasury Securities)(AMBAC Insured) 7.000% 6/01/00.................................... 1,400 1,506 La Quinta California Redevelopment Agency Tax Allocation (MBIA Insured) 7.300% 9/01/09..................... 750 902 Los Angeles County Public Water Works Authority (Regional Parks And Open Space Revenue) 5.800% 10/01/05........... 1,500 1,600 Los Angeles County Tax & Revenue Anticipation Note Series A 4.500% 6/30/98........................... 1,000 1,006 Oakland Unified School District G.O. Series A (FGIC Insured) Zero Coupon (Effective Yield 6.250%) 8/01/16...... 1,700 546 Vallejo Revenue Series B (Water Improvement Project)(FGIC Insured) (Escrowed in U.S. Treasury Securities) 6.000% 11/01/01 2,030 2,168 -------- 13,836 Intermediate Municipals Fund CONTINUED Principal Market Amount Value COLORADO (0.3%) Adams County School District No 12 Series A (MBIA Insured) Zero Coupon (Effective Yield 5.850%) 12/15/12..... $ 1,300 $ 569 DELAWARE (0.7%) Delaware Economic Development Authority Water Development Revenue Refunding (General Waterworks Corp.-Wilmington Suburban Water Corp.) 6.450% 12/01/07............. 1,165 1,295 GEORGIA (8.3%) Atlanta Airport Facility Revenue Series 1996 (AMBAC Insured) 6.500% 1/01/07.................................... 5,000 5,603 Fulton County Water & Sewer Revenue Refunding (FGIC Insured) 5.625% 1/01/01.................................... 1,000 1,038 Georgia G.O. Series C 7.700% 4/01/00 7.700% 4/01/00 Series C........................... 1,250 1,358 6.250% 4/01/07 Series A........................... 2,000 2,226 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue Refunding (AMBAC Insured) 6.050% 7/01/01.................................. 1,600 1,690 5.800% 7/01/02.................................. 1,000 1,055 Municipal Electric Authority of Georgia Special Obligation Fifth Crossover Series (AMBAC Insured) 6.400% 1/01/13... 3,000 3,345 -------- 16,315 HAWAII (2.8%) *Hawaii Department of Budget & Finance Special Purpose Mortgage Revenue (Hawaiian Electric Co.)(MBIA Insured) 7.375% 12/01/20................................... 4,000 4,357 Honolulu (City & County) Refunding G.O. Series 1990 A 7.350% 7/01/06.................................... 1,000 1,178 -------- 5,535 ILLINOIS (6.7%) Chicago Board of Education (MBIA Insured) 6.250% 12/01/12 2,100 2,303 *Chicago Midway Airport Revenue Series A (MBIA Insured) 5.700% 1/01/04.................................... 1,000 1,039 Chicago Skyway Toll Bridge Revenue Refunding Series 1994 (Escrowed in U.S. Treasury Securities)(pre-refunded to 1/01/04) 6.750% 1/01/17.................................... 1,500 1,687 Chicago Water Revenue Refunding (FGIC Insured) 6.500% 11/01/09................................... 2,130 2,383 DuPage County Special Service Area No. 11 Refunding 6.750% 1/01/14.................................... 1,220 1,315 Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue Series 1992 A (McCormick Place Expansion Project) 7.250% 6/15/05................................... 2,750 3,160 *Southwestern Illinois Development Authority Solid Waste Disposal Revenue (Shell Oil Co.) V.R.D.B. 4.250%........... 1,300 1,300 -------- 13,187 INDIANA (4.6%) Indiana Toll Road Commission Toll Road Revenue (Escrowed in U.S. Treasury Securities) 9.000% 1/01/15............... 2,240 3,108 Indiana Transportation Finance Authority Airport Facilities Lease Revenue Series A 5.600% 11/01/99................................. 1,125 1,155 6.500% 11/01/07................................. 1,040 1,127 6.500% 11/01/07 (Escrowed in U.S. Treasury Securities) 1,210 1,339 Intermediate Municipals Fund CONTINUED Principal Market Amount Value INDIANA (CONTINUED) Indianapolis Local Public Improvement Bond Bank Series 1992 D 6.500% 2/01/06.................................... $ 2,100 $ 2,321 -------- 9,050 KENTUCKY (1.3%) Kentucky Turnpike Authority Economic Development Revenue Refunding (Revitalization Projects) 5.800% 1/01/04 2,500 2,629 LOUISIANA (2.5%) *Calcasieu Parish Industrial Development Board (Citgo Petroleum Corp.) V.R.D.B. 4.300%............................ 100 100 Louisiana Public Facilities Authority Student Loan Revenue Series A-1 5.900% 9/01/99................. 2,000 2,053 Orleans Levee District Series A (FSA Insured) 5.950% 11/01/07................................... 2,200 2,346 * St. Charles Parish P.C.R. (Shell Oil Co.) V.R.D.B 4.250% Series A........................... 100 100 V.R.D.B 4.250% Norco Project...................... 300 300 ------- 4,899 MAINE (0.4%) *Maine Educational Loan Authority Educational Loan Revenue Supplemental Education Loan Series A-2 6.650% 12/01/02 680 726 MASSACHUSETTS (2.2%) Massachusetts Bay Transportation Authority Mass Refunding General Transportation System Series A 7.000% 3/01/07 2,250 2,603 Massachusetts Health and Educational Facilities Authority Revenue (Daughters of Charity Carney Hospital) 7.250% 7/01/00 Series C......................... 600 632 6.000% 7/01/09 Series D......................... 1,000 1,037 ------- 4,272 MICHIGAN (4.6%) Greater Detroit Resource Authority Revenue (AMBAC Insured) 6.250% 12/13/05................................... 2,000 2,184 Michigan Hospital Finance Authority Revenue (Daughters of Charity Providence Hospital) 6.500% 11/01/01.............. 1,380 1,480 Michigan Underground Storage Tank Revenue (AMBAC Insured) 6.000% 5/01/05.................................... 5,000 5,384 ------- 9,048 MISSOURI (0.5%) Missouri Regional Convention & Sports Complex Authority 6.600% 8/15/03.................................... 830 904 NEVADA (0.8%) *Clark County P.C.R. Series 1990 A (Southern California Edison Co.) 7.125% 6/01/09.................................... 1,500 1,609 NEW JERSEY (2.6%) Bergen County Utility Authority Solid Waste System Revenue Refunding Series A (FGIC Insured) 6.250% 6/15/06.. 2,000 2,205 New Jersey Health Care Facilities Finance Authority Revenue 6.100% 7/01/01 (Hackensack Medical Center) (FGIC Insured).......................................... 1,000 1,058 7.000% 7/01/03 (Christ Hospital Group)(Connie Lee Insured)...................................... 1,730 1,930 ------- 5,193 Intermediate Municipals Fund CONTINUED Principal Market Amount Value NEW MEXICO (2.5%) Gallup P.C.R. (Plains Electric Transmission & Generating Cooperative Inc.)(MBIA Insured) 6.100% 8/15/02.... $ 2,000 $ 2,137 Santa Fe Gross Receipts Tax Revenue Series A (AMBAC Insured) 6.500% 6/01/06.................................... 2,555 2,846 -------- 4,983 NEW YORK (11.1%) New York City G.O. 5.700% 2/1/06 Series 1996 C....................... 1,000 1,026 6.125% 8/01/11 Series 1997 J...................... 5,000 5,191 7.125% 8/15/11 Series 1995 C...................... 1,560 1,679 6.000% 8/01/17 Series 1997 H...................... 2,000 2,018 New York City Water & Sewer System Revenue Series A 7.000% 6/15/09.................................... 2,115 2,306 New York Dormitory Authority Revenue Series A 6.500% 5/15/05 (State University Educational Facilities) 1,000 1,087 5.625% 7/01/16 (City University System)........... 5,000 5,132 New York Environmental Facility Corp. P.C.R. State Water Series D 6.300% 5/15/05.................................... 3,000 3,296 -------- 21,735 NORTH CAROLINA (2.4%) North Carolina Eastern Municipal Power Refunding Series B 6.000% 1/01/05.................................... 3,000 3,106 North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue Refunding (MBIA Insured) 5.900% 1/01/03... 1,500 1,588 -------- 4,694 OHIO (2.3%) Columbus G.O. Sewer Improvement No. 26 6.750% 9/15/04 1,000 1,081 Loveland School District G.O. (MBIA Insured) 7.100% 12/01/09................................... 3,000 3,396 -------- 4,477 OREGON (2.0%) Oregon Department of Transportation Revenue (MBIA Insured) 5.700% 6/01/02.................................... 1,220 1,284 Portland Sewer System Revenue Refunding Series B (FGIC Insured) 5.400% 4/01/02.................................... 2,500 2,595 ------- 3,879 PENNSYLVANIA (0.9%) Dauphin County Hospital Authority Revenue Refunding Series B (Hapsco Group Inc.)(MBIA Insured) 5.800% 7/01/02.. 1,600 1,685 SOUTH CAROLINA (4.0%) *Berkeley County Facility Industrial Revenue (Amoco Chemical Co. Project) V.R.D.B. 4.300%.......................... 1,900 1,900 Piedmont Municipal Power Agency Electric Revenue (FGIC Insured) 6.125% 1/01/07.................................... 2,350 2,556 *South Carolina Ports Authority Revenue (AMBAC Insured) 6.200% 7/01/01.................................... 1,000 1,058 Sumter County Hospital Facilities Revenue Refunding (Tuomey Regional Medical Center)(MBIA Insured) 6.625% 11/15/04 2,000 2,232 -------- 7,746 TENNESSEE (2.6%) Knox County Health Educational & Housing Facilities Board (Connie Lee Insured) 5.500% 4/15/11............... 2,000 2,001 Intermediate Municipals Fund CONTINUED Principal Market Amount Value TENNESSEE (CONTINUED) Metropolitan Nashville & Davidson County Water & Sewer Revenue (FGIC Insured) 6.500% 1/01/10............. $ 2,750 $ 3,094 -------- 5,095 TEXAS (12.3%) Alief Independent School District G.O. (gtd. by Permanent School Fund) 8.000% 2/15/99.............................. 1,305 1,384 Dallas-Fort Worth Regional Airport Revenue Series A (MBIA Insured) 5.500% 11/01/04................................... 2,400 2,504 Fort Bend Independent School District Unlimited Tax (gtd. by Permanent School Fund) 7.500% 2/15/00............. 1,010 1,088 Fort Worth Limited Tax 8.350% 3/01/00................ 1,250 1,371 Houston Water Conveyance System Contract Certificates of Participation Series J (AMBAC Insured) 6.125% 12/15/06 1,000 1,086 Northside Independent School District G.O. 9.400% 4/01/98 1,850 1,923 Plano Independent School District G.O. Unlimited Tax (FGIC Insured) 8.625% 2/15/99........................... 1,900 2,031 Retama Development Corporation Special Facilities Revenue (Retama Racetrack)(Escrowed in U.S. Treasury Securities) 8.750% 12/15/10................................... 2,885 3,857 Round Rock Independent School District G.O. Unlimited Tax School Building and Refunding 8.625% 8/15/00 Series 1991 (MBIA Insured)....... 1,270 1,425 7.500% 8/01/02 Series 1995 A (gtd. by Permanent School Fund).................................. 1,200 1,360 San Antonio Water System Revenue Refunding (FGIC Insured) 6.000% 5/15/01.................................... 3,000 3,155 Texas Higher Education Student Loan Senior Lien 7.450% 10/01/06................................... 2,695 2,853 -------- 24,037 UTAH (0.5%) Intermountain Power Agency Power Supply Revenue Series B (MBIA Insured) 6.000% 7/01/07........................... 1,000 1,081 VIRGINIA (0.7%) *Virginia Housing Development Authority Commonwealth Mortgage Series A Subseries A-1 6.700% 7/01/05.... 1,280 1,353 WASHINGTON (2.3%) Snohomish County School District No. 2 Refunding G.O. (Everett School District #2) (MBIA Insured) 7.250% 12/01/00................................. 2,540 2,770 7.000% 12/01/02................................. 1,500 1,679 -------- 4,449 WYOMING (0.1%) Lincoln County Wyoming P.C.R. (Exxon Project) V.R.D.B 4.000%.................................... 100 100 Intermediate Municipals Fund CONTINUED Principal Market Amount Value TOTAL MUNICIPAL SECURITIES (98.9%) (Amortized cost $184,135)..................................... $193,788 OTHER ASSETS, LESS LIABILITIES (1.1%)............................. 2,218 -------- TOTAL NET ASSETS (100.0%)......................................... $196,006 ======== - ------------------------------------------------------------------------------- * These securities are subject to federal alternative minimum tax. At June 30, 1997, these securities represented 7.6 percent of net assets. See accompanying notes to financial statements.
Managed Municipals Fund Investments as of June 30, 1997 (Dollar Amounts In Thousands)
Principal Market MUNICIPAL SECURITIES (99.6%) Amount Value ALASKA (0.7%) *Alaska Student Loan Corporation Revenue Series A (AMBAC Insured) 6.200% 7/01/09........................... $ 3,870 $ 4,008 ARKANSAS (0.3%) Arkansas Development Financing Authority Single Family Mortgage Revenue Series A (FHA Insured) 8.125% 8/01/14.................................... 1,895 1,946 CALIFORNIA (5.0%) California P.C.R. Refunding Series A (San Diego Gas & Electric Co.) 5.900% 6/01/14.................... 3,000 3,161 Central Contra Costa Sanitation District Revenue Wastewater Facilities Improvement Project (MBIA Insured) 6.250% 9/01/13.................................. 2,025 2,168 6.250% 9/01/14.................................. 1,295 1,382 Foothill Eastern Transportation Corridor Agency Toll Road Refunding Senior Lien Series 1995 A Zero Coupon (Effective Yield 7.200%) 1/01/18............................. 10,000 2,866 Long Beach Aquarium of the Pacific Revenue Series 1995 A 6.125% 7/01/15.................................... 4,000 4,014 6.125% 7/01/23.................................... 6,000 5,999 Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 2,000 2,012 Northern California Power Agency Public Power Revenue Refunding Series B-1 (Hydroelectric Project #1)(Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/98) 8.000% 7/01/24.................................... 2,000 2,083 Southern California Public Power Authority Revenue Refunding Zero Coupon (Effective Yield 6.000%) 7/01/14 (FGIC Insured) (Escrowed in U.S. Treasury Securities)............ 8,155 3,222 5.000% 7/01/17 Series A (Power Project)........... 2,500 2,295 -------- 29,202 COLORADO (3.1%) Araphoe County Capital Improvement Trust Fund Highway Revenue Zero Coupon (Effective Yield 6.930%) 8/31/15 25,000 7,787 Colorado General Fund Revenue T.R.A.N. Series A 4.500% 6/26/98.................................... 1,000 1,006 Colorado Housing Finance Authority Multifamily Mortgage Revenue 6.000% 10/01/09................................... 1,490 1,492 6.000% 10/01/10................................... 1,590 1,592 6.000% 10/01/11................................... 1,710 1,712 6.000% 10/01/12................................... 1,830 1,831 Municipal Subdistrict Northern Colorado Water Conservancy District Revenue Series D 6.000% 12/01/15......... 2,500 2,506 -------- 17,926 CONNECTICUT (0.3%) Connecticut Health and Educational Facilities Authority Revenue Series E (St. Mary's Hospital Corp.) 5.500% 7/01/20.................................... 1,500 1,451 Managed Municipals Fund CONTINUED Principal Market Amount Value DELAWARE (0.9%) Delaware E.D.A. Water Development Revenue Refunding (General Waterworks Corp.--Wilmington Suburban Water Corp.) 6.450% 12/01/07 Series 1992 B................... $ 1,160 $ 1,290 *6.800% 12/01/23 Series 1992 A.................. 3,500 3,688 -------- 4,978 FLORIDA (1.8%) Broward County Public Improvement Revenue Refunding G.O. 12.500% 1/01/03 Series 1986....................... 1,000 1,374 12.500% 1/01/04................................... 1,195 1,703 12.500% 1/01/05................................... 2,000 2,952 Florida G.O. (Jacksonville Transportation Authority Project) (Escrowed in U.S. Treasury Securities) 9.200% 1/01/15 2,000 2,764 *Jacksonville Water and Sewer Development Revenue (Jacksonville Suburban Utilities-General Waterworks Corp.) 6.750% 6/01/22............................. 1,500 1,595 -------- 10,388 GEORGIA (12.3%) Atlanta Airport Facility Revenue Series 1994 A (AMBAC Insured) 6.500% 1/01/08.................................... 2,750 3,095 6.500% 1/01/10.................................... 2,000 2,246 *Cartersville Development Authority Revenue Water & Wasteworks Facilities (Anheuser-Busch) 7.375% 5/01/09........ 9,000 10,675 Columbia County School District G.O. (MBIA Insured) 6.750% 4/01/09.................................... 1,900 2,190 7.000% 4/01/10.................................... 2,125 2,497 7.000% 4/01/11.................................... 2,370 2,795 Fulton County Water & Sewer Revenue Refunding (FGIC Insured) 6.375% 1/01/14.................................... 13,700 15,305 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue Refunding Series P (AMBAC Insured) 6.250% 7/01/20. 4,000 4,378 Municipal Electric Authority of Georgia Power Revenue Series V 6.600% 1/01/18.................................... 21,300 23,934 Paulding County School District (MBIA Insured) 6.000% 2/01/10.................................... 4,235 4,580 -------- 71,695 HAWAII (1.2%) *Hawaii Airports System Revenue Series II (MBIA Insured) 6.900% 7/01/12.................................... 6,000 6,876 IDAHO (0.3%) *Idaho Housing Agency Single Family Mortgage Revenue (FHA/VA Insured) 7.875% 7/01/24........................... 1,525 1,647 ILLINOIS (8.9%) Chicago Board of Education Refunding G.O. Lease Certificates School Reform Series A (MBIA Insured) 6.250% 12/01/12................................. 2,500 2,742 6.000% 1/01/16.................................. 5,000 5,306 Chicago Gas Supply Revenue Series 1985 D (Peoples Gas Light & Coke Company) 7.500% 3/01/15...................... 4,500 4,852 Chicago Skyway Toll Bridge Revenue Series 1994 (Escrowed in U.S. Treasury Securities) (pre-refunded to 1/01/04) 6.750% 1/01/17.......... 1,500 1,687 Illinois Development Finance Authority **5.950% 1/01/09 (Catholic Charities Housing Development)...................................... 1,450 1,436 7.600% 9/01/13 P.C.R. (Central Illinois Public Service).......................................... 3,000 3,262 Managed Municipals Fund CONTINUED Principal Market Amount Value ILLINOIS (CONTINUED) Illinois Housing Development Authority Series A (FHA Insured) 7.800% 12/01/12................................... $ 905 $ 942 8.000% 6/01/26.................................... 6,770 7,062 Illinois Sales Tax Revenue Refunding Series Q 6.000% 6/15/12.................................... 10,000 10,704 Illinois Toll Highway Authority Priority Revenue Series A 6.300% 1/01/11.................................... 7,500 8,238 Metropolitan Pier and Exposition Authority Dedicated Tax Revenue Series A (McCormick Place Project)(MBIA Insured) Zero Coupon (Effective Yield 6.020%) 6/15/12.... 5,000 2,180 Zero Coupon (Effective Yield 6.020%) 12/15/12... 8,300 3,520 -------- 51,931 INDIANA (4.6%) *Hammond Sewer & Solid Waste Disposal Revenue (American Maize Products Co.) 8.000% 12/01/24............... 5,000 5,714 Indiana Transportation Finance Authority Airport Facilities Revenue Series A 6.250% 11/01/16................................. 1,475 1,543 6.250% 11/01/16 (Escrowed in U.S. Treasury Securities) (Pre-refunded to 11/01/02).................... 5,475 5,994 *Indianapolis Airport Authority Revenue Special Facilities (United Airlines) 6.500% 11/15/31................. 5,000 5,134 Michigan City P.C.R. (Northern Indiana Public Service Company) 5.700% 10/01/03................................... 8,480 8,493 -------- 26,878 IOWA (0.4%) *Iowa Finance Authority Single Family Mortgage Revenue Series B (collateralized by Government & Federal National Mortgage Association Securities) 7.450% 7/01/23............ 1,050 1,100 Muscatine County P.C.R. (Monsanto Co. Project) V.R.D.B. 4.250%................................... 1,200 1,200 -------- 2,300 KANSAS (0.6%) Kansas Department of Transportation Highway Revenue (Escrowed in U.S. Treasury Securities)(pre-refunded to 3/01/02) 6.500% 3/01/12.................................... 3,000 3,284 KENTUCKY (2.9%) *Kentucky Housing Corp. Revenue Series C (FHA/VA Insured) 8.100% 1/01/22.................................... 2,030 2,144 Kentucky Turnpike Authority Economic Development Revenue Refunding Series 1992 (Revitalization Project)(FGIC Insured) Zero Coupon (Effective Yield 6.600%) 1/01/10...... 7,500 3,840 Kentucky Turnpike Authority Revenue (Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,425 *Trimble County P.C.R. Series A (Louisville Gas & Electric Co.) 7.625% 11/01/20................................... 6,670 7,320 7.625% 11/01/20 (Escrowed in U.S. Treasury Securities) (pre-refunded to 11/01/00)..................... 1,330 1,475 ------- 17,204 LOUISIANA (1.1%) *De Soto Parish Environmental Improvement Revenue (International Paper Co.) Series A 7.700% 11/01/18 3,250 3,722 New Orleans G.O. (AMBAC Insured) Zero Coupon (Effective Yield 6.125%) 9/01/12................................... 6,250 2,738 ------- 6,460 Managed Municipals Fund CONTINUED Principal Market Amount Value MAINE (1.3%) *Maine Educational Loan Marketing Corporation Student Loan Revenue Subordinate Series 1994 B-1 6.500% 11/01/09 $ 3,000 $ 3,190 *Maine Housing Authority Mortgage Revenue Series D-5 7.550% 11/15/19................................... 2,520 2,630 7.550% 11/15/22................................... 1,750 1,826 ------- 7,646 MARYLAND (1.3%) Washington Suburban Sanitation District Construction (Escrowed in U.S. Treasury Securities)(Pre-refunded to 6/01/04) 6.600% 6/01/16.................................. 2,795 3,103 6.625% 6/01/17.................................. 1,660 1,846 6.625% 6/01/19.................................. 2,320 2,579 ------- 7,528 MASSACHUSETTS (7.7%) Massachusetts Bay Transportation Authority Refunding 7.000% 3/01/14 Series 1994 A...................... 3,150 3,722 6.200% 3/01/16 Series 1992 B...................... 9,825 10,815 7.000% 3/01/19 Series 1994 A...................... 2,500 2,993 Massachusetts College Building Authority Project Refunding Series A 7.500% 5/01/11.................................... 1,500 1,839 7.500% 5/01/14.................................... 3,500 4,332 Massachusetts Health & Educational Facilities Authority Revenue 6.250% 7/01/12 (Massachusetts General Hospital Project)(AMBAC Insured)................ 5,750 6,379 6.250% 12/01/22 (Dana Farber Cancer Institute).... 6,500 6,738 6.750% 7/01/24 (Brigham & Women's Hospital) (MBIA Insured).................................... 7,365 7,942 ------- 44,760 MICHIGAN (0.6%) Michigan Hospital Finance Authority Providence Hospital Revenue Refunding (Daughters of Charity Health Systems Inc.) 7.000% 11/01/21................................... 3,000 3,242 MINNESOTA (1.7%) *Minneapolis St. Paul Housing Finance Board Single Family Mortgage Revenue (collateralized by Government National Mortgage Association Securities) 7.250% 8/01/21.................................. 2,280 2,414 7.300% 8/01/31.................................. 3,400 3,590 *Minnesota Housing Finance Agency Single Family Mortgage Series A 7.450% 7/01/22........................... 3,980 4,215 ------- 10,219 MISSISSIPPI (0.4%) Biloxi Mortgage Revenue Refunding Series 1987 (Biloxi Regional Medical Center)(Escrowed in U.S. Treasury Securities) 19.000% 8/15/98................................... 2,000 2,307 MISSOURI (0.3%) Little Blue Valley Sewer District Revenue Refunding (AMBAC Insured)(Escrowed in U.S. Treasury Securities)(pre-refunded to 10/01/98) 9.000% 10/01/07......................... 1,000 1,060 Missouri Housing Community Development Single Family Mortgage Revenue 9.375% 4/01/16................... 70 76 Managed Municipals Fund CONTINUED Principal Market Amount Value MISSOURI (CONTINUED) Springfield School District Refunding G.O. Series B (FGIC Insured) 9.500% 3/01/07..................... $ 600 $ 811 -------- 1,947 NEVADA (0.7%) *Nevada Housing Division Single Family Mortgage (FHA/VA Insured) 7.750% 4/01/22........................... 4,040 4,243 NEW JERSEY (1.0%) New Jersey G.O. Series D 6.000% 2/15/11.............. 5,150 5,594 NEW MEXICO (0.2%) Albuquerque I.D.R. (Motorola Inc.) 10.000% 6/01/13... 1,000 1,033 NEW YORK (9.7%) Erie County Water Authority Water Revenue Refunding Series 1992 (AMBAC Insured) Zero Coupon (Effective Yield 7.300%) 12/01/17.................................. 660 153 New York City G.O. 5.750% 2/01/14 Series G........................... 3,145 3,118 6.000% 2/15/25 Series D........................... 12,980 13,076 *New York City I.D.A. Special Facility Revenue Series 1994 (Terminal One Group, Associate L.P. Project) 6.000% 1/01/15........................... 8,340 8,423 New York State Dormitory Authority Revenue (Rochester Institute of Technology)(MBIA Insured) 5.250% 7/01/22.................................... 1,250 1,196 New York State Environmental Facilities Corporation P.C.R. Water Revolving Fund-New York City Municipal Water 5.750% 6/15/10.................... 10,000 10,578 New York State Urban Development Corp. State Facilities Revenue Refunding 5.600% 04/01/15................. 2,600 2,579 Triborough Bridge & Tunnel Authority General Purpose Revenue 6.625% 1/01/12 Series X........................... 8,715 9,900 6.125% 1/01/21 Series Y........................... 6,890 7,484 -------- 56,507 NORTH CAROLINA (2.0%) North Carolina Eastern Municipal Power Agency Power Systems Revenue 6.000% 1/01/06 Series B......................... 3,955 4,110 6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury Securities).......................... 4,315 4,923 6.500% 1/01/18 Series 1991 A.................... 2,185 2,351 8.000% 1/01/21 (Escrowed in U.S. Treasury Securities) (pre-refunded to 1/01/98)..................... 240 250 -------- 11,634 OHIO (1.4%) Columbus G.O. Revenue Bonds Series 1 V.R.D.B. 4.100%. 1,000 1,000 Franklin County Hospital Revenue Refunding and Improvement (Riverside Hospital)(Escrowed in U.S. Treasury Securities) (pre-refunded to 5/15/00) 7.600% 5/15/20.......... 3,900 4,311 *Ohio Housing Finance Agency Mortgage Revenue Residential Series A-1 (Collateralized by Government National Mortgage Association Securities) 6.050% 9/01/17............ 3,000 3,054 -------- 8,365 Managed Municipals Fund CONTINUED Principal Market Amount Value OKLAHOMA (0.3%) *Tulsa County Home Finance Authority Mortgage Revenue Series 1991 B (collateralized by Government National Mortgage Association Securities) 7.550% 5/01/23............ $ 1,825 $ 1,928 PENNSYLVANIA (3.4%) Allegheny County Sanitation Authority Sewer Revenue (FGIC Insured) Zero Coupon (Effective Yield 6.800%) 6/01/07 2,370 1,434 *Dauphin County I.D.A. Water Development Revenue (Dauphin Consolidated Water Supply General Waterworks Corp.) 6.900% 6/01/24.................................... 2,400 2,809 Montgomery County I.D.A. Retirement Community Revenue Series B (Adult Communities Total Services) 5.750% 11/15/17................................... 3,500 3,470 Pennsylvania G.O. 6.250% 7/01/12..................... 11,200 12,351 -------- 20,064 RHODE ISLAND (1.0%) *Rhode Island Housing & Mortgage Finance Corporation 7.550% 10/01/22................................... 5,650 6,000 SOUTH CAROLINA (2.7%) Berkeley County Exempt Facility Industrial Revenue (Amoco Chemical Co. Project) V.R.D.B. 4.300%............. 1,800 1,800 *Calhoun County Solid Waste Disposal Facilities Revenue (Eastman Kodak Co.)(Escrowed in U.S. Treasury Securities) 6.750% 5/01/17.................................... 3,000 3,437 *Richland County Solid Waste Disposal Facilities Revenue Series 1991 B (Union Camp Corp.) 7.125% 9/01/21.......... 5,000 5,401 *South Carolina Housing Finance Agency Single Family Mortgage Revenue Series C 7.750% 7/01/22................... 4,775 5,005 -------- 15,643 SOUTH DAKOTA (2.9%) Heartland Consumers Power District Electric Revenue Refunding (FSA Insured) 6.000% 1/01/17...................... 8,000 8,534 *South Dakota Student Loan Assistance Corp Student Loan Revenue Series B 7.450% 8/01/00........................... 7,990 8,277 -------- 16,811 TENNESSEE (2.1%) Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue Series 1993 (Richland Place Inc.)(LOC. Societe Generale) V.R.D.B. 4.200%................................... 2,100 2,100 *Tennessee Housing Development Agency (Homeownership Project) 7.300% 7/01/11.................................... 10,000 10,402 -------- 12,502 TEXAS (5.8%) *Brazos Higher Education Authority Student Loan Revenue Subordinate Series 1993 C-2 5.875% 6/01/04........ 2,500 2,566 Brazos River Authority Pollution Control Revenue Series A (Texas Utilities Electric Co.)(L.O.C. Morgan Guaranty Trust) V.R.D.B. 4.250%................... 300 300 Houston Water & Sewer Systems Revenue Refunding (AMBAC Insured) Zero Coupon (Effective Yield 6.800%) 12/01/08... 4,000 2,212 Zero Coupon (Effective Yield 6.8125%) 12/01/09.. 4,000 2,075 Zero Coupon (Effective Yield 6.850%) 12/01/10... 3,750 1,821 Managed Municipals Fund CONTINUED Principal Market Amount Value TEXAS (CONTINUED) Texas G.O. Veteran's Welfare Fund (Escrowed in U.S. Treasury Securities) (pre-refunded to 12/01/99) 8.300% 12/01/16......................... $15,275 $16,674 Texas Municipal Power Agency Revenue Refunding (AMBAC Insured) Zero Coupon (Effective Yield 6.900%) 9/01/08 1,475 826 Texas T.R.A.N. Series 1996 Series 4.750% 8/29/97..... 6,200 6,208 *Travis County Housing Finance Agency Single Family Mortgage (collateralized by Government National Mortgage Association Securities)(FGIC Insured) 8.000% 9/01/10.......... 1,120 1,183 -------- 33,865 UTAH (0.7%) Utah County Hospital Revenue (IHC Health Services, Inc.) (MBIA Insured) 5.250% 8/15/21..................... 4,000 3,760 VERMONT (0.2%) *Vermont Housing Finance Agency Single Family Mortgage Revenue Series A 8.150% 5/01/25................... 1,095 1,129 VIRGINIA (0.5%) Virginia Beach G.O. Refunding Series B 12.750% 7/15/01 2,000 2,600 WASHINGTON (5.8%) *Port of Longview Industrial Development Corporation Solid Waste Disposal Revenue (Weyerhaeuser Company) 6.875% 10/01/08.......................... 8,750 9,871 Washington G.O. Series B 6.000% 6/01/13.............. 7,280 7,863 Washington Public Power Supply Systems Revenue Refunding Zero Coupon (Effective Yield 6.700%) 7/01/05 Series 1991 B (Nuclear Project #3) (FGIC Insured)............. 5,000 3,344 Zero Coupon (Effective Yield 6.950%) 7/01/08 Series B (Nuclear Project #3)............................ 7,000 3,830 6.300% 7/01/12 Series 1992 A (Nuclear Project #2). 3,500 3,760 6.500% 7/01/18 Series 1991 C (Nuclear Project #3). 5,000 5,246 -------- 33,914 WISCONSIN (1.5%) Wisconsin G.O. Series G (Escrowed in U.S. Treasury Securities) (pre-refunded to 5/01/99) 6.750% 5/01/11.......... 5,000 5,272 Wisconsin Housing E.D.A. Revenue 7.750% 9/01/10...... 2,985 3,150 -------- 8,422 - ------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (99.6%) (Amortized cost $533,974)..................................... 579,837 OTHER ASSETS, LESS LIABILITIES (0.4%)............................. 2,529 -------- TOTAL NET ASSETS (100.0%)......................................... $582,366 ======== - ------------------------------------------------------------------------------- * These securities are subject to federal alternative minimum tax. At June 30, 1997, these securities represented 25.2 percent of net assets. ** This security is subject to contractual or legal restrictions on its resale. At June 30, 1997, the value of this security represented 0.2 percent of net assets (aggregate cost $1,450). See accompanying notes to financial statements.
High-Yield Municipals Fund Investments as of June 30, 1997 (Dollar Amounts In Thousands)
Principal Market MUNICIPAL SECURITIES (99.8%) Amount Value ARIZONA (0.9%) Arizona Health Facilities Hospital System Revenue Refunding (Phoenix Memorial Hospital) 8.125% 6/01/12........ $ 2,500 $2,723 CALIFORNIA (4.0%) Foothill/Eastern Transportation Corridor Agency Toll Road Revenue Sr. Lien Series 1995 A 6.500% 1/01/32..... 2,000 2,095 Long Beach Aquarium of the Pacific Revenue Series 1995 A 6.125% 7/01/23.................................... 5,000 4,999 Los Angeles County G.O. T.R.A.N. Series A 4.500% 6/30/98 2,000 2,012 M-S-R Public Power Agency Revenue Series H (San Juan Project) 5.900% 7/01/20.................................... 3,000 3,002 -------- 12,108 COLORADO (7.2%) Adams County Single Family Mortgage Revenue Series B (Escrowed in U.S. Treasury Securities) 11.250% 9/01/11 (pre-refunded to 9/01/09)....... 325 503 11.250% 9/01/11 (pre-refunded to 9/01/10)....... 360 562 11.250% 9/01/11................................. 220 348 11.250% 9/01/12................................. 1,440 2,309 Arapahoe County Capital Improvement Trust Fund Highway Revenue 7.000% 8/31/26............................ 7,000 7,960 ***Briargate Public Building Authority Landowner's Assessment Lien Revenue 10.250% 12/15/00 Series 1985 A.................. 416 354 9.500% 12/15/07 Series 1986 A................... 1,146 974 Colorado Health Facilities Authority Revenue 7.250% 4/01/11 (Birchwood Manor Apartments) (collateralized by Government National Mortgage Association Securities).......................... 680 713 8.500% 2/15/21 Series B (PSL Health Systems)(Escrowed in U.S. Treasury Securities)(pre-refunded to 2/15/01) 3,250 3,739 *Denver City and County Airport Revenue Series D 7.750% 11/15/21................................... 4,000 4,464 -------- 21,926 DISTRICT OF COLUMBIA (2.3%) District of Columbia G.O. Series A 6.000% 6/01/26.... 7,000 6,944 FLORIDA (2.7%) ***Florida Housing Finance Agency Multi-Family Housing Revenue (Palm-Aire) 10.000% 1/01/20....................... 2,835 1,984 Leesburg Capital Improvement Hospital Revenue Series 1991 A (Leesburg Regional Medical Center)(Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/01) 7.375% 7/01/11 775 884 Orange County Health Facilities Authority First Mortgage Revenue (Orlando Lutheran Towers, Inc.) 8.625% 7/01/20.... 5,000 5,390 *St. Lucie County Solid Waste Disposal Revenue (Florida Light and Power Company) V.R.D.B. 4.250%.................... 200 200 -------- 8,458 High-Yield Municipals Fund CONTINUED Principal Market Amount Value GEORGIA (4.2%) *Cartersville Development Authority Water and Wastewater Facilities Revenue (Anheuser Busch) 7.375% 5/01/09.................................... $ 5,000 $ 5,930 Municipal Electric Authority of Georgia Power Revenue 6.600% 1/01/18.................................... 6,065 6,815 -------- 12,745 IDAHO (1.0%) *Idaho Housing Agency Single Family Mortgage Revenue Series B (FHA Insured) 7.500% 7/01/24...................... 2,860 2,996 ILLINOIS (2.2%) Chicago Skyway Toll Bridge Revenue Series 1994 (Escrowed in U.S. Treasury Securities) (pre-refunded to 1/01/04) 6.750% 1/01/17.................................... 1,500 1,687 **Illinois Development Finance Authority (Catholic Charities Housing Development) 5.950% 1/01/09............... 1,400 1,387 Illinois Health Facilities Authority Revenue Refunding 8.125% 7/01/06 Series 1991 (United Medical Center) (Escrowed in U.S. Treasury Securities)(pre-refunded to 07/01/03).................................... 2,415 2,703 7.000% 2/15/22 Series 1992 (Edward Hospital Association) 685 727 Illinois Housing Development Authority Multi-Family Housing Series C 7.400% 7/01/23........................... 140 147 *Southwestern Illinois Development Authority Solid Waste Disposal Revenue Series 1991 (Shell Oil-Wood River Project) V.R.D.B. 4.250%................................... 100 100 -------- 6,751 INDIANA (11.5%) *Hammond Sewer & Solid Waste Disposal Revenue (American Maize Products Co.) 8.000% 12/01/24............... 4,000 4,571 Indiana Transportation Finance Authority Airport Facilities Lease Revenue Series A 6.250% 11/01/16................................. 950 994 6.250% 11/01/16 (Escrowed in U.S. Treasury Securities) (pre-refunded to 11/01/02).................... 3,550 3,886 *Indianapolis Airport Authority Revenue Special Facilities 7.100% 1/15/17 (Federal Express Corp.)............ 5,000 5,480 6.500% 11/15/31 (United Airlines)................. 7,000 7,187 Indianapolis Local Public Improvement Bond Bank Series 1991 C (Escrowed in U.S. Treasury Securities)(pre-refunded to 1/01/02) 6.700% 1/01/17.................................... 8,900 9,811 New Castle Economic Development Revenue (Raintree Square Project) 8.650% 4/01/17 Series 1988 A (FHA Insured)........ 2,860 3,138 ***Zero Coupon 3/01/18 Series 1988 B.............. 30,655 77 -------- 35,144 IOWA (1.0%) Iowa Housing Finance Authority Single Family Housing Revenue Zero Coupon (Effective Yield 10.262%) 9/01/16..... 26,250 3,094 KANSAS (0.7%) Wichita Revenue (CSJ Health System of Wichita Inc.) 7.000% 11/15/18................................... 2,000 2,125 High-Yield Municipals Fund CONTINUED Principal Market Amount Value LOUISIANA (1.8%) *De Soto Parish Environmental Impact Revenue (International Paper Co.) Series A 7.700% 11/01/18................................... $ 2,500 $ 2,863 Louisiana Public Facilities Authority Hospital Revenue (Women's Hospital Foundation) 7.250% 10/01/22................................... 2,300 2,610 ------- 5,473 MASSACHUSETTS (3.0%) Massachusetts Bay Transportation Authority Refunding Series B 6.200% 3/01/16.................................... 5,825 6,412 Massachusetts Health & Educational Facilities Authority Revenue (Dana Farber Cancer Institution) 6.250% 12/01/22.. 2,000 2,073 *Massachusetts Housing Finance Agency Series A 9.000% 12/01/18................................... 850 872 ------- 9,357 MISSISSIPPI (3.8%) Adams County Hospital Revenue (Jefferson Davis Memorial Hospital) (Escrowed in U.S. Treasury Securities)(pre-refunded to 10/01/01) 7.900% 10/01/08................................... 750 863 Claiborne County P.C.R. (Systems Energy) 9.500% 12/01/13 Series A.......................... 750 813 9.875% 12/01/14 Series C.......................... 1,000 1,089 7.300% 5/01/25.................................... 2,000 2,112 Lowndes County Solid Waste Disposal & P.C.R. Refunding (Weyerhaeuser Company) 6.800% 4/01/22............. 5,995 6,926 ------- 11,803 MISSOURI (1.7%) Missouri Health & Educational Facilities Authority Revenue (Lutheran Senior Services) 5.750% 2/01/17......... 2,000 1,963 *St. Louis I.D.A. Revenue Refunding (Kiel Center Multipurpose Arena) 7.875% 12/01/24................................... 3,000 3,227 ------- 5,190 MONTANA (0.3%) Montana Board of Housing Single Family Mortgage Revenue (FHA/VA Insured) 7.300% 10/01/17 Series B-1...................... 445 469 *7.500% 4/01/23 Series B-2...................... 495 521 ------- 990 NEBRASKA (1.4%) *Nebraska Higher Education Loan Program Junior Subordinated Series A-6 6.450% 6/01/18......................... 4,000 4,140 NEVADA (0.8%) Humboldt County P.C.R. (Idaho Power Company) 8.300% 12/01/14................................... 2,000 2,357 NEW JERSEY (2.5%) New Jersey Economic Development Authority Revenue (Winchester Gardens) 8.625% 11/01/25.............. 5,000 5,228 New Jersey Health Care Facilities Financing Authority Revenue Refunding (Raritan Bay Medical Center) 7.250% 7/01/27 2,200 2,316 ------- 7,544 High-Yield Municipals Fund CONTINUED Principal Market Amount Value NEW MEXICO (2.3%) Farmington P.C.R. Series A (San Juan Project) 6.300% 12/01/16 1996 (Public Service Company of New Mexico)....................................... $ 5,000 $ 5,093 6.950% 10/01/20 1997 (Tucson Electric Power Company) 2,000 2,082 -------- 7,175 NEW YORK (4.2%) Erie County Water Authority Revenue Refunding (AMBAC Insured) Zero Coupon (Effective Yield 7.300%) 12/01/17..... 660 153 New York City G.O. 7.250% 8/15/07 Series 1996 B...................... 1,000 1,146 5.750% 2/01/14 Series 1996 F...................... 5,720 5,670 *New York City I.D.A. Special Facility Revenue Series 1994 (Terminal One Group Association L.P. Project) 6.000% 1/01/15.................................... 3,465 3,500 Triborough Bridge & Tunnel Authority General Purpose Revenue Series E 7.250% 1/01/10........................... 2,000 2,295 -------- 12,764 NORTH CAROLINA (3.0%) North Carolina Eastern Municipal Power Agency Power Systems Revenue 6.500% 1/01/18 Series 1991A..................... 1,680 1,807 6.500% 1/01/18 Series 1991 A (Escrowed in U.S. Treasury Securities)................................... 3,320 3,788 6.000% 1/01/26 Series B......................... 3,500 3,544 -------- 9,139 OHIO (2.1%) *Greater Allen County Housing Development Corp. Revenue First Lien (Steiner-McBride Apartments Project) 10.250% 9/01/03.......................... 1,385 1,387 *Ohio Water Development Facilities Authority P.C.R. (Cleveland Electric Illuminating Company) Mandatory Put 11/01/97 9.750%..................... 5,060 5,124 -------- 6,511 PENNSYLVANIA (12.8%) Allentown Area Hospital Authority Revenue (Sacred Heart Hospital of Allentown) 7.500% 7/01/06....... 3,460 3,735 Beaver County I.D.A. P.C.R. Revenue Refunding (Toledo Edison Company) 7.625% 5/01/20............ 4,900 5,366 *Dauphin County I.D.A. Revenue Series A (Dauphin Consolidated Water Supply General Waterworks Corp.) 6.900% 6/01/24 2,700 3,160 Delaware County Hospital Authority Revenue Series A (Mercy Catholic Medical Center)(Escrowed in U.S. Treasury Securities)(pre-refunded to 11/01/97) 7.375% 11/01/12................................... 1,100 1,134 Montgomery County Higher Education & Health Authority Hospital Revenue (Jeanes Health Systems)(Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/00) 8.750% 7/01/20........................... 3,200 3,637 Montgomery County I.D.A. Retirement Community Revenue Refunding Series A (Adult Communities Total Services) 5.875% 11/15/22................................... 1,250 1,241 *Pennsylvania Economic Development Financing Authority Recycling Revenue Series 1995 A (Ponderosa Fibres Project) 9.250% 1/01/22.................................... 6,000 4,500 *Pennsylvania Economic Development Financing Authority Resource Recovery Revenue Refunding (Northhampton) 6.750% 1/01/07 Series 1995 B.................... 3,000 3,095 6.500% 1/01/13 Series A......................... 2,000 1,999 High-Yield Municipals Fund CONTINUED Principal Market Amount Value PENNSYLVANIA (CONTINUED) Philadelphia Hospitals & Higher Education Facilities Authority Revenue (Temple University Hospital) 5.875% 11/15/23................................... $ 4,000 $ 3,945 Philadelphia Municipal Lease Revenue Refunding Series 1993 D 6.250% 7/15/13.................................... 2,500 2,552 Philadelphia Water & Sewer Revenue Tenth Series (Escrowed in U.S. Treasury Securities) 7.350% 9/01/04.................................... 4,125 4,678 Schuylkill County I.D.A.(Westwood Energy Properties L.P. L.O.C. Fuji Bank Ltd.) V.R.D.B. 4.250%....... 200 200 -------- 39,242 PUERTO RICO (1.9%) Puerto Rico Highway & Transportation Authority Highway Revenue Refunding 6.625% 7/01/12 Series V......................... 2,000 2,152 6.625% 7/01/18 Series T (Escrowed in U.S. Treasury Securities)(pre-refunded to 7/01/02)..... 3,200 3,553 -------- 5,705 SOUTH DAKOTA (0.9%) *South Dakota Student Loan Assistance Corp. Student Loan Revenue Series B 7.450% 8/01/00.............. 2,700 2,797 TENNESSEE (0.7%) Knox County Health, Educational and Housing Facilities Revenue (Baptist Health Systems of East Tennessee) (Escrowed in U.S. Treasury Securities)(pre-refunded to 4/15/99) 8.600% 4/15/16........................ 2,005 2,195 TEXAS (8.6%) *Alliance Airport Authority Special Facilities Revenue Series 1991 (American Airlines) 7.000% 12/01/11................................... 4,000 4,505 *Bexar County Housing Financing Corp. Revenue Series B (collateralized by Government National Mortgage Association Securities) 9.250% 4/01/16........................ 365 377 Harris County Housing Finance Corp. Single Family Housing Revenue Series 1983 9.625% 3/15/03................ 240 240 *Houston Airport System Special Facilities Revenue Series 1997 B (Continental Airlines) 6.125% 7/15/17.................................. 3,000 2,991 6.125% 7/15/27.................................. 2,000 1,980 Montgomery County Health Facilities Development Corp. Hospital Mortgage Revenue Refunding (Woodlands Medical Center)(Escrowed in U.S. Treasury Securities)(pre-refunded to 8/15/99) 8.850% 8/15/14.................................... 2,460 2,704 North Central Health Facilities Development Corporation Hospital Revenue (Tri-City Health Center) 9.500% 5/01/21............................ 7,430 5,574 *Port Bay City Authority Revenue (Hoechst Celanese Corp.) 6.500% 5/01/26.................................... 3,000 3,200 *Port Corpus Christi Industrial Development Corporation Sewer and Solid Waste (Citgo Petroleum Corporation Project L.O.C. Banque National de Paris) V.R.D.B. 4.300%................................... 300 300 Southwest Higher Education Authority (Southern Methodist University L.O.C. Morgan Guaranty Trust) V.R.D.B. 4.100%............................ 300 300 *Texas Housing Agency Residential Mortgage Revenue Series D 8.400% 1/01/21........................... 290 302 Texas T.R.A.N. Series 1996 4.750% 8/29/97............ 4,000 4,005 -------- 26,478 High-Yield Municipals Fund CONTINUED Principal Market Amount Value UTAH (0.4%) *Utah Housing Finance Agency Single Family Mortgage 7.750% 1/01/23 Series B-2 (FHA Insured)........... $ 445 $ 470 7.550% 7/01/23 Series C-3 (FHA/VA Insured)........ 705 744 -------- 1,214 VIRGINIA (2.3%) *Pittsylvania County I.D.A. Revenue Series A (Multitrade of Pittsylvania County L.P.) 7.450% 1/01/09.................................. 3,500 3,696 7.550% 1/01/19.................................. 3,100 3,273 -------- 6,969 WASHINGTON (6.0%) Quincy Water and Sewer Revenue Series I (Escrowed in U.S. Treasury Securities)(pre-refunded to 11/01/00) 9.250% 11/01/10................................... 2,565 2,898 Washington G.O. Series B 6.400% 6/01/17.............. 5,000 5,605 Washington Health Care Facilities Authority Revenue (Sacred Heart Medical Center, Spokane) 6.875% 2/15/12................................... 1,500 1,619 *Washington Housing Finance Commission Single Family Mortgage Revenue Series C (collateralized by Government and Federal National Mortgage Association Securities) Zero Coupon (Effective Yield 7.750%) 1/01/22.... 1,700 280 Zero Coupon (Effective Yield 7.750%) 7/01/22.... 1,880 298 Zero Coupon (Effective Yield 7.750%) 1/01/23.... 1,880 288 Zero Coupon (Effective Yield 7.750%) 7/01/23.... 1,885 278 Zero Coupon (Effective Yield 7.750%) 1/01/24.... 1,895 269 Zero Coupon (Effective Yield 7.750%) 7/01/24.... 1,885 258 Washington Public Power Supply Systems Revenue (Nuclear Project #2) Zero Coupon (Effective Yield 6.888%) 7/01/07...... 6,945 4,053 6.300% 7/01/12 Series 1992 A...................... 2,500 2,686 -------- 18,532 WISCONSIN (1.0%) *Wisconsin Housing and Economic Development Authority Revenue 7.850% 3/01/24.................. 2,950 3,101 WYOMING (0.6%) Wyoming Community Development Authority Single Family Mortgage Revenue Series A (FHA Insured) 7.375% 6/01/17.................................... 1,730 1,824 - ------------------------------------------------------------------------------- TOTAL MUNICIPAL SECURITIES (99.8%) (Amortized cost $291,318)...................................... 305,514 OTHER ASSETS, LESS LIABILITIES (0.2%)............................. 556 -------- TOTAL NET ASSETS (100.0%)......................................... $306,070 ======== - ------------------------------------------------------------------------------- * These securities are subject to the federal alternative minimum tax. At June 30, 1997, these securities represented 30.9 percent of net assets. ** This security is subject to contractual or legal restrictions on its resale. At June 30, 1997, the value of this security represented 0.5 percent of net assets aggregate cost $1,400. *** Non-income producing securities. See accompanying notes to financial statements.
Balance Sheets June 30, 1997 (All amounts in thousands, except per-share data)
Municipal Money Intermediate Managed High-Yield Market Municipals Municipals Municipals Fund Fund Fund Fund Assets Investments, at market value ......................... $ -- $ 193,788 $ 579,837 $ 305,514 Investment in SR&F Municipal Money Market Portfolio, at value .................. 119,150 -- -- -- Receivable for investments sold ...................... -- 200 255 621 Receivable for fund shares sold ...................... 300 72 158 417 Accrued interest receivable .......................... -- 3,294 10,921 6,086 Cash and other assets ................................ 96 192 649 645 --------- --------- --------- --------- Total Assets ................................ $ 119,546 $ 197,546 $ 591,820 $ 313,283 ========= ========= ========= ========= Liabilities Payable for investments purchased .................... $ -- $ 1,006 $ 8,020 $ 5,976 Payable for fund shares redeemed ..................... 944 87 -- 327 Dividends payable .................................... 111 263 839 494 Payable to investment adviser and transfer agent ..... 35 107 302 182 Other liabilities .................................... 32 77 293 234 --------- --------- --------- --------- Total Liabilities ........................... 1,122 1,540 9,454 7,213 --------- --------- --------- --------- Capital Paid-in capital ...................................... 118,432 186,019 539,499 301,155 Net unrealized appreciation of investments ........... -- 9,653 45,863 14,196 Accumulated net realized gains (losses) on investments (8) 334 (2,996) (9,281) --------- --------- --------- --------- Total Capital (Net Assets) .................. 118,424 196,006 582,366 306,070 --------- --------- --------- --------- Total Liabilities and Capital ............... $ 119,546 $ 197,546 $ 591,820 $ 313,283 ========= ========= ========= ========= Shares Outstanding (Unlimited Number Authorized) ..... 118,359 17,220 63,916 26,222 ========= ========= ========= ========= Net Asset Value (Capital) Per Share .................. $ 1.00 $ 11.38 $ 9.11 $ 11.67 ========= ========= ========= ========= See accompanying notes to financial statements.
Statements of Operations For the Year Ended June 30, 1997 (All amounts in thousands)
Municipal Money Intermediate Managed High-Yield Market Municipals Municipals Municipals Fund Fund Fund Fund Investment Income Tax-exempt interest ..................................... -- $ 11,091 $ 36,314 $ 20,548 Tax-exempt interest income allocated from SR&F Municipal Money Market Portfolio .......... $ 4,426 -- -- -- -------- -------- -------- -------- Total Investment Income ........................ 4,426 11,091 36,314 20,548 -------- -------- -------- -------- Expenses Management fees ......................................... -- 876 2,482 1,255 Expenses allocated from SR&F Municipal Money Market Portfolio .......... 388 -- -- -- Administrative fees ..................................... 300 274 674 369 Transfer agent fees ..................................... 180 280 842 413 Printing and postage .................................... 45 38 83 59 SEC and state registration fees ......................... 25 24 25 26 Legal and audit fees .................................... 16 22 22 63 Accounting fees ......................................... 27 29 39 31 Trustees' fees .......................................... 17 24 39 32 Other ................................................... 38 74 188 8 -------- -------- -------- -------- 1,036 1,641 4,394 2,256 Reimbursement of expenses by investment adviser ......... (195) (240) -- -- -------- -------- -------- -------- Total Net Expenses ............................. 841 1,401 4,394 2,256 -------- -------- -------- -------- Net Investment Income .......................... 3,585 9,690 31,920 18,292 -------- -------- -------- -------- Realized and Unrealized Gains (Losses) on Investments Net realized gains (losses) on investments .............. (2) 913 1,088 (4,451) Net change in unrealized appreciation or depreciation of investments .................... -- 3,038 16,133 11,315 -------- -------- -------- -------- Net Gains (Losses) on Investments .............. (2) 3,951 17,221 6,864 -------- -------- -------- -------- Net Increase in Net Assets Resulting from Operations .... $ 3,583 $ 13,641 $ 49,141 $ 25,156 ======== ======== ======== ======== See accompanying notes to financial statements.
Statements of Changes in Net Assets For The Years Ended June 30, 1996, and 1997 (All amounts in thousands)
Municipal Money Intermediate Market Fund Municipals Fund 1996 1997 1996 1997 Operations Net investment income .......................................... $ 4,147 $ 3,585 $ 10,327 $ 9,690 Net realized gains (losses) on investments ..................... (5) (2) 1,659 913 Net change in unrealized appreciation or depreciation of investments ........................................ -- -- (459) 3,038 --------- --------- --------- --------- Net Increase in Net Assets Resulting from Operations .................................... 4,142 3,583 11,527 13,641 --------- --------- --------- --------- Distributions To Shareholders Dividends from net investment income ........................... (4,147) (3,585) (10,327) (9,690) Dividends from net capital gains ............................... -- -- -- (1,149) --------- --------- --------- --------- Total Distributions to Shareholders ................... (4,147) (3,585) (10,327) (10,839) --------- --------- --------- --------- Share Transactions Subscriptions to fund shares ................................... 178,387 188,521 37,532 30,850 Investment income dividends reinvested ......................... 3,663 2,798 6,377 5,237 Capital gains distributions reinvested ......................... -- -- -- 768 Redemptions of fund shares ..................................... (208,317) (193,325) (52,872) (48,377) --------- --------- --------- --------- Net Decrease from Share Transactions .................. (26,267) (2,006) (8,963) (11,522) --------- --------- --------- --------- Net Decrease in Net Assets ............................ (26,272) (2,008) (7,763) (8,720) Total Net Assets Beginning of Period ............................................ 146,704 120,432 212,489 204,726 --------- --------- --------- --------- End of Period .................................................. $ 120,432 $ 118,424 $ 204,726 $ 196,006 ========= ========= ========= ========= Analyses of Changes in Shares of Beneficial Interest Subscriptions to fund shares ................................... 178,387 188,521 3,308 2,725 Investment income dividends reinvested ......................... 3,663 2,798 562 463 Capital gains distributions reinvested ......................... -- -- -- 67 --------- --------- --------- --------- 182,050 191,319 3,870 3,255 Redemptions of fund shares ..................................... (208,317) (193,325) (4,662) (4,278) --------- --------- --------- --------- Net decrease in fund shares .................................... (26,267) (2,006) (792) (1,023) Shares outstanding at beginning of period ...................... 146,632 120,365 19,035 18,243 --------- --------- --------- --------- Shares outstanding at end of period ............................ 120,365 118,359 18,243 17,220 ========= ========= ========= ========= See accompanying notes to financial statements.
Statements of Changes in Net Assets For The Years Ended June 30, 1996, and 1997 (All amounts in thousands)
Managed High-Yield Municipals Fund Municipals Fund 1996 1997 1996 1997 Operations Net investment income .......................................... $ 33,699 $ 31,920 $ 16,389 $ 18,292 Net realized gains (losses) on investments ..................... 3,828 1,088 180 (4,451) Net change in unrealized appreciation or depreciation of investments ........................................ 864 16,133 2,229 11,315 --------- --------- --------- --------- Net Increase in Net Assets Resulting from Operations .................................... 38,391 49,141 18,798 25,156 --------- --------- --------- --------- Distributions To Shareholders Dividends from net investment income ........................... (33,699) (31,920) (16,389) (18,292) --------- --------- --------- --------- Share Transactions Subscriptions to fund shares ................................... 43,018 42,898 48,888 58,262 Investment income dividends reinvested ......................... 18,841 16,555 9,372 8,959 Redemptions of fund shares ..................................... (89,922) (100,667) (58,868) (50,971) --------- --------- --------- --------- Net Increase (Decrease) from Share Transactions ................................. (28,063) (41,214) (608) 16,250 --------- --------- --------- --------- Net Increase (Decrease) in Net Assets ................. (23,371) (23,993) 1,801 23,114 Total Net Assets Beginning of Period ............................................ 629,730 606,359 281,155 282,956 --------- --------- --------- --------- End of Period .................................................. $ 606,359 $ 582,366 $ 282,956 $ 306,070 ========= ========= ========= ========= Analyses of Changes in Shares of Beneficial Interest Subscriptions to fund shares ................................... 4,798 4,770 4,256 5,050 Investment income dividends reinvested ......................... 2,106 1,838 814 776 --------- --------- --------- --------- 6,904 6,608 5,070 5,826 Redemptions of fund shares ..................................... (10,050) (11,199) (5,111) (4,418) --------- --------- --------- --------- Net Increase (Decrease) in fund shares ......................... (3,146) (4,591) (41) 1,408 Shares outstanding at beginning of period ...................... 71,653 68,507 24,855 24,814 --------- --------- --------- --------- Shares outstanding at end of period ............................ 68,507 63,916 24,814 26,222 ========= ========= ========= ========= See accompanying notes to financial statements.
SR&F Municipal Money Market Portfolio
Balance Sheet June 30, 1997 (All Amounts In Thousands) ASSETS Investments, at market value .................................. $144,151 Receivable for investments sold ............................... 3,009 Accrued interest receivable ................................... 1,068 Cash .......................................................... 22 -------- Total Assets ............................................... 148,250 -------- LIABILITIES Payable for investments purchased ............................. 9,274 Payable to investment adviser ................................. 31 Other liabilities ............................................. 17 -------- Total Liabilities .......................................... 9,322 -------- Net Assets applicable to investors' beneficial interests ...... $138,928 ========
Statement of Operations For The Year Ended June 30, 1997 (All Amounts In Thousands) INVESTMENT INCOME Tax-exempt interest income .................................... $5,182 ------ EXPENSES Management fees ............................................... 352 Accounting fees ............................................... 27 Trustees' fees ................................................ 16 Audit and legal fees .......................................... 14 Custodian fees ................................................ 13 Other ......................................................... 32 ------ Total Expenses ............................................. 454 ------ Net Investment Income ......................................... $4,728 ====== See accompanying notes to financial statements.
SR&F Municipal Money Market Portfolio
Statement of Changes in Net Assets (All Amounts In Thousands) PERIOD YEAR ENDED ENDED JUNE 30, JUNE 30, 1996 (A) 1997 OPERATIONS Net investment income .............................. $ 4,054 $ 4,728 --------- --------- Transactions in Investors' Beneficial Interests Contributions ...................................... 241,616 118,114 Withdrawals ........................................ (102,742) (126,842) --------- --------- Net Increase (Decrease) from transactions in investors' beneficial interests ............... 138,874 (8,728) --------- --------- Net Increase (Decrease) in Net Assets ........... 142,928 (4,000) TOTAL NET ASSETS Beginning of Period ................................ -- 142,928 --------- End of Period ...................................... $ 142,928 $ 138,928 ========= ========= (a) The portfolio commenced operations September 28, 1995. See accompanying notes to financial statements.
Notes to Financial Statements Note 1. Organization of the SR&F Municipal Money Market Portfolio The SR&F Municipal Money Market Portfolio (the "Portfolio") is a separate series of the SR&F Base Trust, a Massachusetts common trust organized under an Agreement and Declaration of Trust dated August 23, 1993. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The Portfolio allocates net asset value, income and expenses based on respective percentage ownership of each investor on a daily basis. At June 30, 1997, Stein Roe Municipal Money Market Fund and Colonial Municipal Money Market Fund owned 85.8 percent and 14.2 percent, respectively. Note 2. Significant Accounting Policies The following are the significant accounting policies of Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and Stein Roe High-Yield Municipals Fund (the "Funds"), each a series of the Stein Roe Municipal Trust (a Massachusetts business trust), and the Portfolio. The policies are in conformity with generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Security Valuations All securities are valued as of June 30, 1997. Municipal securities are valued at a fair value using a procedure determined in good faith by the Board of Trustees, which has authorized the use of bid valuations provided by a pricing service, except for the Portfolio. Municipal securities of the Portfolio are valued at amortized cost, which approxi mates market value. This method involves valuing an instrument at cost on the purchase date and, thereafter, assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument and does not take into account unrealized securities gains or losses. In the event that a deviation of .50 of 1 percent or more exists between Stein Roe Municipal Money Market Fund's $1.00 per share net asset value, calculated at amor tized cost, and the net asset value calculated by reference to market quotations, its Board of Trustees would consider what action, if any, should be taken. Other securities and assets are valued by a method that the Board of Trustees believes represents a fair value. Futures Contracts The Funds may enter into futures contracts to either hedge against expected declines of their portfolio securities or as a temporary substi tute for the purchase of individual bonds. Risks of entering into futures contracts include the possibility that there may be an illiquid market at the time a fund seeks to close out a contract, and changes in the value of the futures contract may not correlate with changes in the value of the portfolio securities being hedged. Upon entering into a futures contract, a fund deposits with its custodian cash or securities in an amount sufficient to meet the initial margin requirements. Subsequent payments are made or received by a fund equal to the daily change in the contract value and are recorded as unrealized gains or losses. A fund recognizes a realized gain or loss when the contract is closed or expires. None of the Funds entered into futures contracts during the year ended June 30, 1997. Federal Income Taxes No provision is made for federal income taxes since (a) the Funds elect to be taxed as "regulated investment companies" and make distribu tions to their shareholders to be relieved of all federal income taxes under provisions of current federal tax law and (b) the Portfolio is treated as a partnership for federal income tax purposes and all of its income is allocated to its owners based on respective percentages of ownership. All dividends paid from net investment income by the Funds constitute tax-exempt interest that is not taxable for federal income tax purposes; however, a portion of the dividends paid may be includable in the alternative minimum tax calculation. The Funds intend to utilize provisions of the federal income tax laws, which allow them to carry a realized capital loss forward up to eight years following the year of the loss, and offset such losses against any future realized gains. At June 30, 1997, the Funds had capital loss carryforwards as follows:
YEAR OF FUND AMOUNT EXPIRATION Managed Municipals $1,660 2003-2004 High-Yield Municipals $4,053 2003-2004
Distributions to Fund Shareholders Dividends from net investment income are declared daily and paid monthly. Capital gains distributions, if any, are distributed annually. Distributions in excess of tax basis earnings are reported in the financial statements as a return of capital. Differences in the recognition or classification of income between the financial statements and tax earnings that result in temporary overdistri butions are classified as distributions in excess of net investment income or net realized gains, and any perma nent differences are reclassified to paid-in capital. None of the Funds had distri butions in excess of net investment income or net realized gains for the year ended June 30, 1997. Other Information Realized gains or losses from sales of securities are determined on the specific identified cost basis. Securities purchased on a when-issued or delayed delivery basis may be settled a month or more after the transaction date. These securities are subject to market fluctuation during this period. None of the Funds had when-issued or delayed delivery purchase commitments as of June 30, 1997. Municipal Money Market Fund attempts to maintain its net asset value per share at $1.00, which it believes will be possible under most conditions. Original issue discounts and premiums on municipal securities of Intermediate Municipals Fund, Managed Municipals Fund and High-Yield Municipals Fund are accreted or amortized. A maturity date is not shown for municipal securities bearing variable or floating interest rates that are adjusted periodically to minimize fluctuations in the value of such securities. All amounts, except per-share amounts, are shown in thousands. Note 3. Portfolio Composition The Funds and the Portfolio invest in municipal securities including, but not limited to, general obligation bonds, revenue bonds and escrowed bonds (which are bonds that have been refinanced, the proceeds of which have been invested in U.S. government or agency obligations and set aside to pay off the original issue at the first call date or maturity). See Fund Highlights for each Fund's and the Portfolio's security type breakdowns. The Funds' and the Portfolio's investments include certain municipal securities that are insured by private insurers who guarantee the payment of principal and interest in the event of default. At June 30, 1997, invest ments in these securities for Intermediate Municipals Fund, High-Yield Municipals Fund and Managed Municipals Fund repre sented 50.8 percent, 3.4 percent and 23.8 percent of holdings, respectively. SR&F Municipal Money Market Portfolio's investments include certain short-term securities that are backed by letters of credit used to provide liquidity to the issuer and/or additional security in the event of default by the issuer. At June 30, 1997, 53.6 percent of the Portfolio was backed by bank letters of credit. See each Fund's or the Portfolio's schedule of investments for addi tional information on portfolio composition and Fund Highlights for each Fund's portfolio quality (unaudited). Stein Roe Municipal Money Market Fund invests all of its investable assets in the Portfolio. Note 4. Trustees' Fees and Transactions with Affiliates The Funds and the Portfolio pay monthly management fees, computed and accrued daily, to Stein Roe & Farnham Incorporated (the "Adviser"), an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, for its services as investment adviser and manager. The management fee for SR&F Municipal Money Market Portfolio is computed at an annual rate of .25 of 1 percent of average daily net assets, and the administrative fee for the Fund is computed at an annual rate of .25 of 1 percent of average daily net assets up to $500 million, .20 of 1 percent of average daily net assets for the next $500 million and .15 of 1 percent thereafter. The management fee for Intermediate Municipals Fund and High-Yield Municipals Fund is .45 of 1 percent of the first $100 million of average daily net assets, .425 of 1 percent of the next $100 million and .40 of 1 percent thereafter. The management fee for Managed Municipals Fund is .45 of 1 percent of the first $100 million of average daily net assets, .425 of 1 percent of the next $100 million, .40 of 1 percent of the next $800 million and .375 of 1 percent thereafter. The Funds pay monthly adminis tra tive fees to the Adviser. Intermediate Municipals Fund and High-Yield Municipals Fund administrative fee is .15 of 1 percent of the first $100 million of average daily net assets, .125 of 1 percent of the next $100 million and .10 of 1 percent thereafter. The administrative fee for Managed Municipals Fund is .15 of 1 percent of the first $100 million of average daily net assets, .125 of 1 percent of the next $100 million, .10 of 1 percent of the next $800 million and .075 of 1 percent thereafter. The administrative agreements of Municipal Money Market Fund Intermediate Municipals Fund, Managed Municipals Fund, and High-Yield Municipals Fund provide that the Adviser will reimburse each of the Funds to the extent that their annual expenses, excluding certain expenses, exceed the applicable limits prescribed by any state in which the Funds' shares are offered for sale. In addition, the Adviser has agreed to reimburse Municipal Money Market Fund and Intermediate Municipals Fund for expenses in excess of .70 of 1 percent of average daily net assets. These expense limitations expire October 31, 1997, subject to earlier termination by the Adviser on 30 days' notice. The transfer agent fees of the Funds are paid to SteinRoe Services, Inc. (SSI), an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company. SSI has entered into an agreement with Colonial Investors Service Center, Inc., an indirect, majority-owned subsidiary of Liberty Mutual Insurance Company, to act as sub-transfer agent for the Funds. The Adviser also provides fund accounting services. Certain officers and trustees of the Trusts are also officers of the Adviser. Compensation is paid to trustees not affiliated with the Adviser. No remunera tion was paid to any other trustee or officer of the Trusts. Note 5. Short-Term Debt To facilitate portfolio liquidity, the Funds and the Portfolio maintain borrowing arrangements under which they can borrow against portfolio securities. There were no borrowings for any of the Funds or the Portfolio during the year ended June 30, 1997. Note 6. Investment Transactions The aggregate cost of purchases and proceeds from sales or maturities of securities, excluding short-term obligations, for the year ended June 30, 1997, were as follows:
FUND Purchases Sales --------- --------- Intermediate Municipals Fund........................... $84,725 $ 94,054 Managed Municipals Fund................................ 90,470 127,617 High-Yield Municipals Fund............................. 53,379 31,972
At June 30, 1997, the cost of investments for financial reporting purposes and for federal income tax purposes were equal. Unrealized appreciation and depreciation of investments on a tax basis were as follows:
Net Appreciation Depreciation Appreciation Intermediate Municipals Fund........... $ 9,653 $ -- $ 9,653 Managed Municipals Fund................ 45,950 87 45,863 High-Yield Municipals Fund............. 20,746 6,550 14,196
Financial Highlights Municipal Money Market Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Year Months Ended Ended Dec. 31, June 30, Years Ended June 30, 1987 1988 1989 1990 Net Asset Value, Beginning of Period ......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 ------------ ------------ ------------ ------------ Net investment income ........................ .040 .021 .056 .054 Distributions from net investment income ..... (.040) (.021) (.056) (.054) ------------ ------------ ------------ ------------ Net Asset Value, End of Period ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 ============ ============ ============ ============ Ratio of net expenses to average net assets (a) ....... 0.69% 0.67%* 0.67% 0.67% Ratio of net investment income to average net assets (b) ...................................... 4.08% 4.25%* 5.57% 5.40% Total return (b) ...................................... 4.11% 2.13%** 5.74% 5.52% Net assets, end of period (000s) ...................... $ 306,971 $ 294,116 $ 254,261 $ 255,953 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 ........................ .046 .032 .020 .019 Distributions from net investment income ..... (.046) (.032) (.020) (.019) ------------ ------------ ------------ ------------ Net Asset Value, End of Period ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 ============ ============ ============ ============ Ratio of net expenses to average net assets (a) ....... 0.68% 0.70% 0.70% 0.70% Ratio of net investment income to average net assets (b) ..................................... 4.66% 3.19% 1.96% 1.88% Total return (b) ...................................... 4.74% 3.25% 1.97% 1.90% Net assets, end of period (000s) ...................... $ 237,403 $ 199,037 $ 195,887 $ 165,820 Years Ended June 30, 1995 1996 1997 Net Asset Value, Beginning of Period .........$ 1.000 $ 1.000 $ 1.000 ------------ ------------ ------------ Net investment income ........................ .030 .031 .030 Distributions from net investment income ..... (.030) (.031) (.030) ------------ ------------ ------------ Net Asset Value, End of Period ........................$ 1.000 $ 1.000 $ 1.000 ============ ============ ============ Ratio of net expenses to average net assets (a) ....... 0.70% 0.70% 0.70% Ratio of net investment income to average net assets (b) ..................................... 2.96% 3.09% 2.98% Total return (b) ...................................... 3.02% 3.13% 3.04% Net assets, end of period (000s) ......................$ 146,704 $ 120,432 $ 118,424 * Annualized ** Not annualized (a) If the Fund had paid all of its expenses and there had been no reimbursement by the Adviser, this ratio would have been 0.78, 0.84 and 0.86 percent for the years ended June 30, 1995 through June 30, 1997, respectively. (b) Computed giving effect to the Adviser's expense limitation undertaking.
SR&F Municipal Money Market Portfolio
PERIOD YEAR ENDED ENDED JUNE 30, JUNE 30, 1996 (A) 1997 Ratios to average net assets Ratio of net investment income to average net assets 3.50%* 3.36% Ratio of net expenses to average net assets.... 0.30%* 0.32% * Annualized (a) The portfolio commenced operations on September 28, 1995.
Financial Highlights Continued Intermediate Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Year Months Ended Ended Dec. 31, June 30, Years Ended June 30, 1987 1988 1989 1990 Net Asset Value, Beginning of Period ..................... $ 10.76 $ 10.37 $ 10.43 $ 10.50 ---------- ---------- ---------- ---------- Income From Investment Operations Net investment income ........................... .57 .29 .62 .63 Net realized and unrealized gains (losses) on investments .............................. (.38) .06 .07 .07 ---------- ---------- ---------- ---------- Total from investment operations .............. .19 .35 .69 .70 Distributions Net investment income ........................... (.57) (.29) (.62) (.63) Net realized gains .............................. (.01) -- -- (.03) In excess of realized gains ..................... -- -- -- -- ---------- ---------- ---------- ---------- Total distributions ........................... (.58) (.29) (.62) (.66) ---------- ---------- ---------- ---------- Net Asset Value, End of Period ........................... $ 10.37 $ 10.43 $ 10.50 $ 10.54 ========== ========== ========== ========== Ratio of net expenses to average net assets (a) .......... 0.80% 0.80%* 0.80% 0.80% Ratio of net investment income to average net assets (b) .......................... 5.47% 5.66%* 5.96% 5.96% Portfolio turnover rate .................................. 49% 22%** 83% 141% Total return (b) ......................................... 1.93% 3.45%** 6.85% 6.85% Net assets, end of period (000s) ......................... $ 96,143 $ 97,308 $ 91,304 $ 98,918 Years Ended June 30, 1991 1992 1993 1994 Net Asset Value, Beginning of Period ....................... $ 10.54 $ 10.73 $ 11.06 $ 11.57 ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income ............................. .62 .57 .54 .53 Net realized and unrealized gains (losses) on investments ................................ .22 .50 .63 (.39) ----------- ----------- ----------- ----------- Total from investment operations ................ .84 1.07 1.17 .14 Distributions Net investment income ............................. (.62) (.57) (.54) (.53) Net realized gains ................................ (.03) (.17) (.12) (.17) In excess of realized gains ....................... -- -- -- (.01) ----------- ----------- ----------- ----------- Total distributions ............................. (.65) (.74) (.66) (.71) ----------- ----------- ----------- ----------- Net Asset Value, End of Period ............................. $ 10.73 $ 11.06 $ 11.57 $ 11.00 =========== =========== =========== =========== Ratio of net expenses to average net assets (a) ............ 0.80% 0.79% 0.72% 0.71% Ratio of net investment income to average net assets (b) ............................ 5.79% 5.23% 4.79% 4.63% Portfolio turnover rate .................................... 96% 109% 96% 55% Total return (b) ........................................... 8.18% 10.31% 10.92% 1.16% Net assets, end of period (000s) ........................... $ 118,651 $ 165,401 $ 245,441 $ 238,053 Years Ended June 30, 1995 1996 1997 Net Asset Value, Beginning of Period ....................... $ 11.00 $ 11.16 $ 11.22 ----------- ----------- ----------- Income From Investment Operations Net investment income ............................. .53 .55 .55 Net realized and unrealized gains (losses) on investments ................................ .16 .06 .22 ----------- ----------- ----------- Total from investment operations ................ .69 .61 .77 Distributions Net investment income ............................. (.53) (.55) (.55) Net realized gains ................................ -- -- (.06) In excess of realized gains ....................... -- -- -- ----------- ----------- ----------- Total distributions ............................. (.53) (.55) (0.61) ----------- ----------- ----------- Net Asset Value, End of Period ............................. $ 11.16 $ 11.22 $ 11.38 =========== =========== =========== Ratio of net expenses to average net assets (a) ............ 0.74% 0.70% 0.70% Ratio of net investment income to average net assets (b) ............................ 4.94% 4.82% 4.84% Portfolio turnover rate .................................... 67% 66% 44% Total return (b) ........................................... 6.59% 5.47% 7.07% Net assets, end of period (000s) ........................... $ 212,489 $ 204,726 $ 196,006 * Annualized ** Not annualized (a) If the Fund had paid all of its expenses and there had been no reimbursement by the Adviser in connection with the expense limitation which expired October 31, 1993, this ratio would have been 0.83 percent for the year ended December 31, 1987, 0.87 percent for the six months ended June 30, 1988, 0.82, 0.81 and 0.81 percent for the years ended June 30, 1989, through June 30, 1991, and 0.76, 0.81 and 0.82 percent for the years ended June 30, 1995, through June 30, 1997. (b) Computed giving effect to the Adviser's expense limitation undertaking.
Financial Highlights Continued Managed Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Year Months Ended Ended Dec. 31, June 30, Years Ended June 30, 1987 1988 1989 1990 Net Asset Value, Beginning of Period ........................ $ 9.22 $ 8.50 $ 8.61 $ 9.02 ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income .............................. .61 .30 .61 .59 Net realized and unrealized gains (losses) on investments .................................. (.59) .11 .44 (.06) ----------- ----------- ----------- ----------- Total from investment operations ................. .02 .41 1.05 .53 Distributions Net investment income .............................. (.61) (.30) (.61) (.59) Net realized gains ................................. (.13) -- (.03) (.25) In excess of realized gains ........................ -- -- -- -- ----------- ----------- ----------- ----------- Total distributions .............................. (.74) (.30) (.64) (.84) ----------- ----------- ----------- ----------- Net Asset Value, End of Period .............................. $ 8.50 $ 8.61 $ 9.02 $ 8.71 =========== =========== =========== =========== Ratio of net expenses to average net assets ................. 0.65% 0.65%* 0.65% 0.66% Ratio of net investment income to average net assets ........ 6.99% 7.03%* 7.00% 6.66% Portfolio turnover rate ..................................... 113% 28%** 102% 95% Total return ................................................ 0.39% 4.90%** 12.69% 6.15% Net assets, end of period (000s) ............................ $ 458,170 $ 467,595 $ 514,898 $ 584,081 Years Ended June 30, 1991 1992 1993 1994 Net Asset Value, Beginning of Period .................... $ 8.71 $ 8.85 $ 9.11 $ 9.38 ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income .......................... .56 .55 .52 .50 Net realized and unrealized gains (losses) on investments .............................. .19 .46 .42 (.51) ----------- ----------- ----------- ----------- Total from investment operations ............. .75 1.01 .94 (.01) Distributions Net investment income .......................... (.56) (.55) (.52) (.50) Net realized gains ............................. (.05) (.20) (.15) (.11) In excess of realized gains .................... -- -- -- (.06) ----------- ----------- ----------- ----------- Total distributions .......................... (.61) (.75) (.67) (.67) ----------- ----------- ----------- ----------- Net Asset Value, End of Period .......................... $ 8.85 $ 9.11 $ 9.38 $ 8.70 =========== =========== =========== =========== Ratio of net expenses to average net assets ............. 0.66% 0.64% 0.64% 0.65% Ratio of net investment income to average net assets .... 6.39% 6.17% 5.65% 5.45% Portfolio turnover rate ................................. 203% 94% 63% 36% Total return ............................................ 8.92% 11.95% 10.79% (0.29%) Net assets, end of period (000s) ........................ $ 655,930 $ 725,472 $ 776,694 $ 687,252 Years Ended June 30, 1995 1996 1997 Net Asset Value, Beginning of Period .................... $ 8.70 $ 8.79 $ 8.85 ----------- ----------- ----------- Income From Investment Operations Net investment income .......................... .51 .48 .48 Net realized and unrealized gains (losses) on investments .............................. .09 .06 .26 ----------- ----------- ----------- Total from investment operations ............. .60 .54 .74 Distributions Net investment income .......................... (.51) (.48) (.48) Net realized gains ............................. -- -- -- In excess of realized gains .................... -- -- -- ----------- ----------- ----------- Total distributions .......................... (.51) (.48) (.48) ----------- ----------- ----------- Net Asset Value, End of Period .......................... $ 8.79 $ 8.85 $ 9.11 =========== =========== =========== Ratio of net expenses to average net assets ............. 0.65% 0.72% 0.73% Ratio of net investment income to average net assets .... 5.85% 5.41% 5.31% Portfolio turnover rate ................................. 33% 40% 16% Total return ............................................ 7.12% 6.24% 8.56% Net assets, end of period (000s) ........................ $ 629,730 $ 606,359 $ 582,366 * Annualized ** Not annualized
Financial Highlights Continued High-Yield Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Year Months Ended Ended Dec. 31, June 30, Years Ended June 30, 1987 1988 1989 1990 Net Asset Value, Beginning of Period ......................... $ 12.06 $ 11.06 $ 11.37 $ 11.97 ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income ............................... .87 .44 .88 .85 Net realized and unrealized gains (losses) on investments ................................... (.89) .31 .63 .02 ----------- ----------- ----------- ----------- Total from investment operations .................. (.02) .75 1.51 .87 Distributions Net investment income ............................... (.87) (.44) (.88) (.85) Net realized gains .................................. (.11) -- (.03) (.21) In excess of realized gains ......................... -- -- -- -- ----------- ----------- ----------- ----------- Total distributions ............................... (.98) (.44) (.91) (1.06) ----------- ----------- ----------- ----------- Net Asset Value, End of Period ............................... $ 11.06 $ 11.37 $ 11.97 $ 11.78 =========== =========== =========== =========== Ratio of net expenses to average net assets .................. 0.73% 0.76%* 0.73% 0.71% Ratio of net investment income to average net assets ......... 8.20% 7.87%* 7.54% 7.22% Portfolio turnover rate ...................................... 110% 53%** 208% 261% Total return ................................................. (0.16%) 6.89%** 13.79% 7.59% Net assets, end of period (000s) ............................. $ 181,600 $ 201,274 $ 277,620 $ 310,582 Years Ended June 30, 1991 1992 1993 1994 Net Asset Value, Beginning of Period ....................... $ 11.78 $ 11.79 $ 11.83 $ 11.84 ----------- ----------- ----------- ----------- Income From Investment Operations Net investment income ............................. .82 .80 .71 .67 Net realized and unrealized gains (losses) on investments ................................. .17 .22 .18 (.54) ----------- ----------- ----------- ----------- Total from investment operations ................ .99 1.02 .89 .13 Distributions Net investment income ............................. (.82) (.80) (.71) (.67) Net realized gains ................................ (.16) (.18) (.17) (.17) In excess of realized gains ....................... -- -- -- (.07) ----------- ----------- ----------- ----------- Total distributions ............................. (.98) (.98) (.88) (.91) ----------- ----------- ----------- ----------- Net Asset Value, End of Period ............................. $ 11.79 $ 11.83 $ 11.84 $ 11.06 =========== =========== =========== =========== Ratio of net expenses to average net assets ................ 0.71% 0.69% 0.73% 0.76% Ratio of net investment income to average net assets ....... 7.00% 6.75% 6.04% 5.76% Portfolio turnover rate .................................... 195% 88% 75% 36% Total return ............................................... 8.79% 9.01% 7.88% 0.95% Net assets, end of period (000s) ........................... $ 373,948 $ 410,613 $ 359,103 $ 308,181 Years Ended June 30, 1995 1996 1997 Net Asset Value, Beginning of Period ....................... $ 11.06 $ 11.31 $ 11.40 ----------- ----------- ----------- Income From Investment Operations Net investment income ............................. .66 .67 .72 Net realized and unrealized gains (losses) on investments ................................. .25 .09 .27 ----------- ----------- ----------- Total from investment operations ................ .91 .76 .99 Distributions Net investment income ............................. (.66) (.67) (.72) Net realized gains ................................ -- -- -- In excess of realized gains ....................... -- -- -- ----------- ----------- ----------- Total distributions ............................. (.66) (.67) (.72) ----------- ----------- ----------- Net Asset Value, End of Period ............................. $ 11.31 $ 11.40 $ 11.67 =========== =========== =========== Ratio of net expenses to average net assets ................ 0.86% 0.85% 0.77% Ratio of net investment income to average net assets ....... 5.98% 5.86% 6.20% Portfolio turnover rate .................................... 23% 34% 11% Total return ............................................... 8.54% 6.83% 8.91% Net assets, end of period (000s) ........................... $ 281,155 $ 282,956 $ 306,070 * Annualized ** Not annualized
Report of Independent Auditors To the Shareholders and Board of Trustees of the Stein Roe Municipal Trust and SR&F Base Trust Stein Roe Municipal Money Market Fund Stein Roe Intermediate Municipals Fund Stein Roe Managed Municipals Fund Stein Roe High-Yield Municipals Fund SR&F Municipal Money Market Portfolio We have audited the accompanying balance sheets, including the schedules of investments, of Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund, Stein Roe High-Yield Municipals Fund, and SR&F Municipal Money Market Portfolio as of June 30, 1997, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended (except for SR&F Municipal Money Market Portfolio, which is for the year then ended and the period from September 28, 1995, to June 30, 1996), and the financial highlights for each of the fiscal periods since 1987. These financial statements and financial highlights are the responsibility of the Funds' and Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund, Stein Roe High-Yield Municipals Fund, and SR&F Municipal Money Market Portfolio at June 30, 1997, and the results of their operations, the changes in their net assets, and their financial highlights for the periods referred to above, in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois August 12, 1997 A Guide to Stein Roe Services We encourage you to take advantage of our free shareholder services. If you would like additional information about how to establish or use a Stein Roe service, just call us at 800-338-2550. Purchases In addition to sending us a check or wire to purchase additional fund shares, you can take advantage of these convenient automatic services: o Automatic Investment Plan -- Make regular investments ($50 minimum) in your Stein Roe account directly from your bank checking account. You select monthly, quarterly, semiannual or annual purchases. o Special Investments -- Purchase shares by telephone and pay for them by electronic transfer from your bank checking account. Exchanges o Telephone Exchange -- Call us to exchange $50 or more from your existing account in one Stein Roe fund to an identically registered existing account in another Stein Roe fund. You receive this service when you open a Stein Roe fund account, unless you elect not to.* o Automatic Exchange -- Stein Roe will regularly exchange shares from your account in one Stein Roe fund to your account in another. You select twice-monthly, monthly, quarterly, semiannual or annual exchanges. Redemptions o Telephone Redemption by Check -- Call to redeem $1,000 or more from your account. A check will be sent to your registered address. You automatically receive this service when you open a Stein Roe account, unless you elect not to. o Telephone Redemption by Wire -- Redeem shares by phone from your account ($1,000 minimum) and wire the proceeds to your bank checking account. A small fee for wiring proceeds will be deducted from the amount wired. o Special Redemption Option-- If you do not want to pre-schedule your redemptions, you can redeem shares by telephone ($50 minimum/ $100,000 maximum) and have the proceeds sent directly to your bank checking account. o Automatic Redemption Plan -- Redeem either a fixed dollar or share amount, or a fixed percentage of your account automatically on a schedule you establish. You select monthly, quarterly, semiannual or annual withdrawals ($50 minimum/ $100,000 maximum), and the proceeds are sent either to your bank checking account or to an address you specify. o Money Market Fund Check Writing -- Write checks for $50 or more on your money market fund account. * Stein Roe reserves the right to discontinue or modify the exchange privilege, and certain restrictions apply. Please refer to your prospectus for details. Distributions Most investors like to reinvest their dividends and capital gains distributions and put them back to work. If, however, you do not want them reinvested, consider these alternatives: o Dividend Purchase Option -- Use the distributions from one Stein Roe fund account ($25 minimum) to automatically purchase shares in your account with another Stein Roe fund. o Automatic Dividend Deposit -- Instead of receiving your dividends by check, your distributions are deposited automatically into your bank checking account. Recordkeeping o Summary of Investments -- Consolidates quarterly transaction and investment information for any or all of your household's Stein Roe accounts on one easy-to-read statement. At year end, Stein Roe provides a complete summary of all account activity for the year. Funds for Every Investment Objective The Stein Roe family of mutual funds offers a variety of funds so you can select the right fund, or combina tion of funds, to meet your investment objectives. Call us at 800-338-2550 for a prospectus and more complete information on any of the funds, including management fees and expenses. Please read the prospectus carefully before you invest or send money. Money Market Funds Money market funds seek to provide income while preserving principal and maintaining liquidity. These funds offer free check writing. o Government Reserves Fund -- Invests primarily in securities issued or guaranteed by the U.S. government and its agencies and instrumentalities.* o Cash Reserves Fund -- Invests in high-quality, short-term money market securities such as certificates of deposit, banker's acceptances and commercial paper.* Tax-Exempt Funds These funds help investors keep more of their earnings by investing in instruments that earn income free from federal income tax. Income may be subject to federal alternative minimum tax and state and local taxes; capital gains are subject to state, local and federal taxes. o Municipal Money Market Fund -- Seeks to provide the liquidity and stability of a money market fund plus current tax-free income. Free check writing available.* o Intermediate Municipals Fund -- Seeks high current yield through investments primarily in the three highest grades of intermediate-term municipal securities. o Managed Municipals Fund -- Pursues high tax-free income by investing in a quality- conscious portfolio of long-term municipal bonds. o High-Yield Municipals Fund -- Seeks a higher level of tax-free income from long-term municipal securities, primarily of medium or lower quality. Bond Funds Bond funds seek high current income by investing primarily in fixed income securities. o Government Income Fund -- Invests primarily in securities issued or guaranteed by the U.S. government and its agencies.* o Intermediate Bond Fund-- Invests primarily in marketable debt securities with an average life of three to 10 years. *Money market mutual funds strive to maintain a $1 per share net asset value, but there is no assurance that these funds will be able to maintain a stable net asset value. The net asset value of a fund that invests in securities issued or guaranteed by the U.S. government is not guaranteed. o Income Fund -- Pursues a higher level of current income by investing primarily in medium- and lower-quality bonds. o High Yield Fund -- Invests in high yield, high-risk, medium- and lower-quality debt securities that may involve greater risk. Growth and Income Funds These funds seek to provide a conservative investment that is well positioned for long-term growth and current income. Each fund's approach is designed to limit the effects of market volatility. o Balanced Fund -- Seeks long-term growth of capital and current income consistent with reasonable investment risk by investing in equities, debt securities and cash equivalents. o Growth & Income Fund -- Pursues income and long-term capital growth by investing primarily in large, well-established companies. Growth Funds Growth funds offer long-term capital appreciation potential by investing primarily in various types of stocks. o Growth Stock Fund -- Pursues long-term capital appreciation from stocks with strong growth potential. o Young Investor Fund -- Invests in securities of companies that affect the lives of children or teenagers. o Special Fund -- Invests in securities believed to have limited downside risk relative to their potential for above-average growth, including securities of undervalued, under- followed or out-of-favor companies. o Growth Opportunities Fund -- Invests in the common stocks of small, mid-sized and large companies believed to have the potential to generate and sustain earnings growth at an above-average rate. o Special Venture Fund -- Seeks capital appreciation through equity securities of entrepreneurially managed companies. o Capital Opportunities Fund -- Takes a long-term approach to aggressive growth by selecting quality companies with the potential to generate high levels of earnings growth over a three- to five-year period. o International Fund -- Invests in a diversified portfolio of foreign securities. o Emerging Markets Fund -- Seeks long-term capital opportunities through emerging market investment opportunities. To Contact Us. . . By Phone 800-338-2550 You can discuss your investment questions with a Stein Roe account representative by calling us toll free. We'll be happy to answer questions about your current account, or to provide you with information about opening a Stein Roe account, including Stein Roe IRAs. We're available seven days a week, from 7 a.m. to 8 p.m. weekdays and from 9 a.m. to 2 p.m. Saturday and Sunday (Central time). Stein Roe's Funds-on-Call(R) 24-Hour Service Line Using a touch-tone phone, call our toll-free number, day or night, for your current account balance, the latest Stein Roe Fund 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 fund shares by electronic transfer; o Order additional account statements and money market fund checks; o Redeem shares by check, wire or electronic transfer. Retirement Plan Accounts Call us for information about how we can assist you with your defined contribution plan, including 401(k) plans. You can reach us toll free at 800-322-1130. For information on IRA plans, call us toll free at 800-338-2550. By Mail or E-Mail If you prefer to contact us by mail, please address all correspondence to: P.O. Box 8900, Boston, MA 02205-8900. To contact us by e-mail, send correspondence directly to: comments @steinroe.com 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 Fund investments or provide you with information about any of the Stein Roe Funds and retirement plans. Stop by weekdays between 8 a.m. and 5:15 p.m. Must be preceded or accompanied by a prospectus. Stein Roe Municipal Trust Trustees Timothy K. Armour President, Mutual Fund Division and Director, Stein Roe & Farnham Incorporated Kenneth L. Block Chairman Emeritus, A.T. Kearney, Inc. William W. Boyd Chairman and Director, Sterling Plumbing Group Inc. Lindsay Cook Senior Vice President, Liberty Financial Companies, Inc. Douglas A. Hacker. Senior Vice President and Chief Financial Officer, United Airlines Janet Langford Kelly Senior Vice President, Secretary and General Counsel, Sara Lee Corporation Francis W. Morley Chairman, Employer Plan Administrators and Consultants Co. Charles R. Nelson Van Voorhis Professor of Political Economy, University of Washington Thomas C. Theobald Managing Director, William Blair Capital Partners Officers Timothy K. Armour, President Jilaine H. Bauer, Executive Vice President, Secretary Thomas W. Butch, Executive Vice President Hans P. Ziegler, Executive Vice President Gary A. Anetsberger, Senior Vice President, Chief Financial Officer Joanne Costopoulos, Vice President Philip J. Crosley, Vice President Lynn C. Maddox, Vice President Anne E. Marcel, Vice President M. Jane McCart, Vice President Nicolette D. Parrish, Vice President, Assistant Secretary Cynthia A. Prah, Vice President Thomas P. Sorbo, Vice President Veronica Wallace, Vice President Heidi J. Walter, Vice President Stacy H. Winick, Vice President Sharon R. Robertson, Controller Margaret O. Zwick, Assistant Treasurer Janet B. Rysz, Assistant Secretary Agents and Advisers Stein Roe & Farnham Incorporated Investment Advisor 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 THE STEIN ROE MUTUAL FUNDS Stein Roe Government Reserves Fund Stein Roe Cash Reserves Fund Stein Roe Government Income Fund Stein Roe Intermediate Bond Fund Stein Roe Income Fund Stein Roe High Yield Fund Stein Roe Municipal Money Market Fund Stein Roe Intermediate Municipals Fund Stein Roe Managed Municipals Fund Stein Roe High-Yield Municipals Fund Stein Roe Balanced Fund Stein Roe Growth & Income Fund Stein Roe Growth Stock Fund Stein Roe Young Investor Fund Stein Roe Special Fund Stein Roe Growth Opportunities Fund Stein Roe Special Venture Fund Stein Roe Capital Opportunities Fund Stein Roe International Fund Stein Roe Emerging Markets Fund Stein Roe Mutual Funds P.O. Box 8900 Boston, Massachusetts 02205-8900 1-800-338-2550 http://www.steinroe.com In Chicago, visit our Fund Center at One South Wacker Drive, 32nd Floor Liberty Securities Corporation, Distributor Member SIPC TE11A 8/97 -----END PRIVACY-ENHANCED MESSAGE-----