-----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, VnbodTfm6tspiL5VvU1Zbga+K/kKtWVQuMojfODg5UXSHn0fk5eXAmaHq/w7ZSqF quIV8+Y7UY1snaZql78wHw== 0000891804-99-000398.txt : 19990302 0000891804-99-000398.hdr.sgml : 19990302 ACCESSION NUMBER: 0000891804-99-000398 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990301 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: 99553585 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 Semiannual Report Dec. 31, 1998 Photo of: bridge Stein Roe Tax-Exempt Bond Funds Tax-Exempt Funds Municipal Money Market Fund Intermediate Municipals Fund Managed Municipals Fund High-Yield Municipals Fund LOGO: STEIN ROE MUTUAL FUNDS SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(SM) Contents - -------------------------------------------------------------------------------- From the President................................................ 1 Tom Butch's thoughts on the markets and investing Fund Performance.................................................. 3 How the Stein Roe tax-exempt bond funds have done over time Questions & Answers Interviews with the portfolio managers and a summary of investment activity over the past six months Municipal Money Market Fund.................................... 6 Intermediate Municipals Fund ................................. 10 Managed Municipals Fund ....................................... 13 High-Yield Municipals Fund ................................... 17 Portfolios of Investments......................................... 20 A complete list of investments with market values Financial Statements.............................................. 46 Statements of assets and liabilities, operations and changes in net assets Notes to Financial Statements..................................... 56 Financial Highlights.............................................. 61 Selected per-share data From the President - -------------------------------------------------------------------------------- Photo of: Thomas W. Butch To Our Shareholders The second half of calendar year 1998 was a challenging but rewarding time for tax-exempt securities. Since my last report to you, municipal bonds have provided solid total returns with relatively modest levels of price volatility. I am pleased to say that each of the four Stein Roe tax-exempt bond funds provided positive results and outperformed the average of their peers for the six months ended Dec. 31, 1998, as shown on page 3. On the pages that follow, each Fund's portfolio manager presents an overview of events since June that affected the tax-exempt bond market. We explain how we have positioned Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund, and Stein Roe High-Yield Municipals Fund for the balance of fiscal 1999. Shorter-Term Bonds Led the Way High-quality municipal bonds with maturities of less than five years offered the highest total return potential among tax-exempt securities between June and December 1998. As bond prices rose, average yields on highly rated municipal bonds fell between 10 and 60 basis points (0.10% and 0.60%). This past autumn the Federal Reserve Board reduced its target for short-term interest rates by 0.75% to 4.75% to maintain domestic econ omic growth in the wake of global economic weakness. This sharp easing of short-term rates led to further declines in long-term interest rates. Thirty-year U.S. Treasury bond yields reached a near 40-year low of 4.71% on October 5 and ended calendar year 1998 at 5.09%. Since mid-October, investor demand for U.S. government and municipal debt has eased. Led by bright earnings prospects for technology stocks, the U.S. equity market recovered from a brief but biting 19.5% summer correction. A widening of yields between high quality and higher risk securities also sparked renewed interest in lower-grade corporate debt and, to a lesser degree, municipal bonds. A Positive Economic and Political Climate We believe the current environment is quite favorable for municipal bond investors, especially when viewed against taxable fixed-income alternatives. Continued domestic growth has helped many states maintain high credit ratings and helped the federal government post budget surpluses. Consumer inflation is negligible. Tax-equivalent yields on longer term municipal bonds averaged more than 95% of comparable maturity U.S. Treasury bonds as of December 31, a level we haven't seen in a decade. Supply May Ease In calendar 1998, our nation's municipalities issued more than $284 billion in new tax-exempt bonds, the second largest volume on record, according to The Bond Buyer, a municipal bond trade publication. Many of these issuers refinanced old debt, thereby allowing many states to substantially reduce debt service expenditures in the years ahead. We expect that new municipal bond supply will ease in 1999, in part because the Internal Revenue Service imposes limits on how often municipalities can refinance their debt. This is potentially good news for municipal bond investors because if demand for tax-exempt securities remains steady or rises, bond prices should hold up well. Three Reasons to Look At Municipal Bond Funds Historically, municipal bond yields have averaged between 80% and 85% of U.S. Treasuries, making the current environment, with yields nearly as high as Treasuries, unusually attractive, in our view. When you compare the income potential of a municipal bond with the income potential of a taxable investment after taxes, you'll see it can be quite attractive. For example, as of Dec. 31, 1998, a 30-year U.S. Treasury bond yielded 5.09% before taxes, and 3.07% after taxes for an investor in the 39.6% federal tax bracket. By comparison, the average A rated municipal bond yielded 5.07% as of Dec. 31, 1998.* Since America's economy appears healthy, we believe a no-load municipal bond fund currently offers investors three distinct advantages: o Most of the income potential of comparable maturity and quality taxable bond funds at a potentially significant tax advantage; o A diversification opportunity for investors whose asset mix and risk profile may have substantially shifted in recent years; and o Reduced federal income tax liability (for most taxpayers).* We urge you to review the role your municipal bond fund or funds are playing in your portfolio and, as appropriate, consider increasing your financial com mitment to this time-tested asset class. On behalf of Stein Roe, I want to personally thank you for your continued confidence in our organization, which this year marks its 50th anniversary of serving mutual fund investors. Sincerely, Thomas W. Butch President Jan. 8, 1999 *Income may be subject to state or local taxes and federal alternative minimum tax. Capital gains are subject to federal, state and local taxes. Unlike Treasuries, municipal bonds vary in quality and are not guaranteed by the U.S. government. Fund Performance - -------------------------------------------------------------------------------- Cumulative Six-Month and Average Annual Total Returns Periods Ended Dec. 31, 1998
6 MONTHS 1 YEAR 5 YEARS 10 YEARS - -------------------------------------------------------------------------------- Stein Roe Municipal Money Market Fund 1.43% 2.95% 2.94% 3.41% U.S. Consumer Price Index (Inflation) 0.85 1.80 2.70 3.20 Lipper Tax-Exempt Money Market Fund Average 1.41 2.92 2.91 3.08 Number of Funds in Peer Group 134 134 106 71 Stein Roe Intermediate Municipals Fund 3.40% 5.46% 5.20% 7.08% Lehman Brothers 10-Year Municipal Bond Index 4.10 6.76 6.35 8.33 Lehman Brothers 7-Year Municipal Bond Index 3.82 6.23 5.79 -- Lipper Intermediate Municipal Debt Fund Average 3.23 5.34 5.17 6.88 Number of Funds in Peer Group 151 149 85 27 Stein Roe Managed Municipals Fund 3.21% 5.50% 5.72% 7.73% Lehman Brothers Municipal Bond Index 3.69 6.48 6.22 8.22 Lipper Municipal Debt Fund Average 3.00 5.33 5.43 7.68 Number of Funds in Peer Group 260 245 141 74 Stein Roe High-Yield Municipals Fund 2.76% 5.28% 6.36% 7.65% Lehman Brothers Municipal Bond Index 3.69 6.48 6.22 8.22 Lipper High Yield Municipal Debt Fund Average 2.36 5.25 5.98 7.58 Number of Funds in Peer Group 56 52 28 16 - -------------------------------------------------------------------------------- Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. An expense limitation of 0.70% is currently in effect for Municipal Money Market Fund and Intermediate Municipals Fund. Returns would have been lower without the limitation. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Tax-free income is exempt from federal taxes but may be subject to state and local taxes and federal alternative minimum tax. Each index shown above is an unmanaged group of fixed-income securities that differs from the composition of each Stein Roe fund; the indices are not available for direct investment. The Consumer Price Index is the U.S. government's measure of inflation for urban consumers. Sources: Lipper, Inc. and Bloomberg Business News.
Total Return Comparisons - -------------------------------------------------------------------------------- Comparison of change in value of a $10,000 investment for the years ended Dec. 31. - -------------------------------------------------------------------------------- Intermediate Municipals Fund Line Chart: Intermediate Municipals Lehman Brothers 10-Year Fund Municipal Bond Index 12/31/88 10000 10000 12/31/89 10812 11068 12/31/90 11625 11880 12/31/91 12865 13320 12/31/92 13846 14508 12/31/93 13234 16361 12/31/94 14860 15580 12/31/95 16779 18254 12/31/96 17481 19084 12/31/97 18793 20846 12/31/98 19818 22255 Comparison of change in value of a $10,000 investment for the years ended Dec. 31. - -------------------------------------------------------------------------------- Managed Municipals Fund and High-Yield Municipals Fund Line Chart: Managed Municpals High-Yield Lehman Brothers Fund Municipals Fund Municipal Bond Index 12/31/88 10000 10000 10000 12/31/89 11060 11141 11079 12/31/90 11834 11996 11886 12/31/91 13240 13176 13329 12/31/92 14338 13881 14504 12/31/93 15951 15358 16286 12/31/94 15066 14737 15444 12/31/95 17561 17345 18140 12/31/96 18228 18128 18943 12/31/97 19923 19855 20685 12/31/98 21061 20899 22025 - -------------------------------------------------------------------------------- Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. Total return performance includes changes in share price and reinvestment of income and capital gains distributions. An expense limitation of 0.70% is currently in effect for Intermediate Municipals Fund. Returns would have been lower without the limitation. These charts compare the performance of the Stein Roe funds to the Lehman 10-Year Municipal Bond Index and the Lehman Municipal Bond Index, each an unmanaged group of fixed-income securities that differs from the composition of each Stein Roe fund; they are not available for direct investment. Each illustration assumes a $10,000 investment on Dec. 31, 1988. Income Comparisons - -------------------------------------------------------------------------------- Managed Municipals Fund Annual Income from a $100,000 Investment for years ended Dec. 31, 1979 through Dec. 31, 1998 Bar Chart: Managed Muncipals Fund Total Income = $336,788 12/79 5930 12/80 7072 12/81 8783 12/82 9805 12/83 10019 12/84 8268 12/85 12568 12/86 16159 12/87 15839 12/88 15791 12/89 18702 12/90 19705 12/91 20279 12/92 21398 12/93 21769 12/94 23119 12/95 24120 12/96 24802 12/97 26046 12/98 27133 - -------------------------------------------------------------------------------- Intermediate Municipals Fund and High-Yield Municipals Fund Annual Income from a $100,000 Investment for years ended Dec. 31, 1989 through Dec. 31, 1998 Bar Chart: High-Yield Municipals Fund Total Income = $92,372 Intermediate Municipals Fund Total Income = $73,552 High-Yield Intermediate Municipals Fund Municipals Fund 12/89 7701 6191 12/90 8267 6651 12/91 8593 6652 12/92 8602 6642 12/93 8528 6798 12/94 8727 7065 12/95 9517 7732 12/96 10672 8193 12/97 10932 8604 12/98 10832 8855 Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. Performance includes changes in share price and reinvestment of income and capital gains distributions. The above illustrations assume a $100,000 investment on Dec. 31, 1988 and continuous reinvestment of dividends and capital gains and show the amount of income dividends for each 12-month period ended December 31. Questions & Answers - -------------------------------------------------------------------------------- An Interview with Veronica Wallace, Portfolio Manager of Stein Roe Municipal Money Market Fund and SR&F Municipal Money Market Portfolio Photo of: Veronica Wallace Fund Data Investment Objective: Seeks maximum current tax-free income consistent with safety of capital and maintenance of liquidity by investing principally in a diversified portfolio of short-term municipal securities. Fund Inception: March 15, 1983 Total Net Assets: $122.5 million Q: Interest rates have declined sharply since June. How has the Fund performed in this environment? A: Despite the Federal Reserve Board's 75 basis point (0.75%) cut in short-term interest rates beginning in September, SR&F Municipal Money Market Portfolio has maintained its income-generating potential. We anticipated the Fed's easing of credit this past autumn and kept average maturity well above most of the Fund's peers throughout the first half of fiscal 1999. As of Dec. 31, 1998, average maturity stood at 55 days, some 25% higher than the average tax-exempt money market fund, according to Lipper, Inc. This has helped maximize the Fund's seven-day current tax-exempt yield, currently 3.13%. In fact, the Fund's seven-day current yield as of December 31 was 13 basis points (0.13%) higher than it was on June 30, when the Fund's average maturity was 68 days. Q: What specific portfolio actions did you take to try to maximize income and retain liquidity? A: We invested more than two-thirds of net assets in variable-rate demand notes. Rates on these securities have historically outperformed six-month notes. We have been focusing on municipal securities issued in states such as Illinois and Wisconsin, where lower investor demand required issuers to offer higher yields. Also, the Fund reduced its positioning in put bonds because of unattractive rates. At the beginning of the fourth quarter of 1998, we added tax-exempt bonds with six-to-10 month maturities at what we considered very attractive yields, and this helped us lengthen the Fund's average maturity. Q: What level of income potential did tax-exempt money market securities offer between June and December compared to taxable securities of similar maturity? A: The range fluctuated from day to day. However, high quality municipal money-market notes generally offered between 63% and 68% of the yield of comparable maturity U.S. Treasury bills. We considered this relatively expensive by historical standards. Investors had a brief buying opportunity in early October during a period of increased stock and bond market volatility. At that point, tax-exempt money market-eligible bonds yielded as much as 73% of Treasuries. We used this period to increase the Fund's income potential while paying careful attention to safety of capital. - -------------------------------------------------------------------------------- Municipal Money Market Fund's Yield History vs. Inflation 1995-1998 Bar Chart: Municipal Money Market U.S. Consumer Price Fund's 7-Day Current Yield Index (Inflation) Jan-95 3.12 2.8 3.37 2.9 3.69 2.9 3.71 3.1 3.48 3.2 Jun-95 3.58 3 3.5 2.8 3.17 2.6 3.5 2.5 3.28 2.8 3.25 2.8 Dec-95 3.92 2.5 2.84 2.7 2.88 2.7 2.88 2.8 3.27 2.9 3.04 2.9 Jun-96 2.98 2.8 2.89 3 2.94 2.9 3.16 3 3 3 2.94 3.3 Dec-96 3.36 3.3 2.89 3 2.85 3 2.88 2.8 3.74 2.5 3.28 2.2 Jun-97 3.43 2.3 3.1 2.2 2.88 2.2 3.35 2.2 3.1 2.1 3.28 1.8 Dec-97 3.25 1.7 2.93 1.6 2.83 1.4 3.07 1.4 3.53 1.4 3.18 1.7 Jun-98 3 1.7 2.97 1.7 2.99 1.6 3.24 1.5 2.73 1.5 2.8 1.5 Dec-98 3.13 1.6 - -------------------------------------------------------------------------------- Past performance does not guarantee future results. The Fund's yield fluctuates and is not guaranteed. Source: Bloomberg Business News. The U.S. Consumer Price Index is the government's measure of retail inflation. - -------------------------------------------------------------------------------- Municipal Money Market Fund's income advantage over inflation has grown during the past three years. - -------------------------------------------------------------------------------- Q: How has the Fund's income potential stood up against inflation? A: Even though interest rates and inflation have fallen since 1995, the Fund's seven-day current yield has remained relatively steady as shown on page 7. However, the Fund's income advantage over inflation has grown during the past three years. Back in January 1995, the Fund's seven-day yield was only 32 basis points (0.32%) more than the year-over-year increase in consumer prices. As of December 31, 1998, Municipal Money Market Fund's seven-day yield was 153 basis points (1.53%) more than the prevailing inflation rate. So in our view, the Fund's potential to preserve the purchasing power of a short-term investment has increased. Q: What do you see happening with interest rates and inflation for the balance of fiscal 1999, and how might this affect the Fund? A: Maintaining the Fund's income potential is likely to be challenging in the coming months, as rates for newly issued one-year municipal notes have fallen below 3%. Short-term interest rates are approaching the record lows they set in 1993. U.S. inflation was at its lowest level in 12 years in 1998 and, in our view, is likely to stay low given low prices for many commodities and weakness in export-oriented manufacturing. Past performance is no guarantee of future results. Yield varies daily and is not guaranteed. An investment in the Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corp. (FDIC) or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The Adviser currently limits expenses to 0.70% of average net assets, subject to termination upon 30 days' notice to the Fund. Absent past limits, the seven-day current yield at Dec. 31, 1998, would have been 3.02% and total return would have been less. Tax-free income is exempt from federal taxes but may be subject to state and local taxes and federal alternative minimum tax. Current yield is net of all fees and expenses and represents annualization of dividends declared and payable to shareholders for the last seven days of investment. See page 3 for a comparison of the Fund's performance with that of its Lipper peer group average. Portfolio composition is disclosed for SR&F Municipal Money Market Portfolio. Portfolio holdings are as of 12/31/98 and are subject to change. Portfolio Highlights - -------------------------------------------------------------------------------- SR&F Municipal Money Market Portfolio - -------------------------------------------------------------------------------- Security Type Breakdown PORTFOLIO PORTFOLIO DEC. 31, 1998 JUNE 30, 1998 - -------------------------------------------------------------------------------- Corporate-Backed: Industrial 20.3% 23.0% Food Industry 7.8 5.0 Steel/Metal 6.3 8.9 Chemical 6.3 4.7 Utility 4.5 7.6 Other Corporate-Backed 1.7 1.2 Revenue: Housing 14.1 14.2 Education 5.5 4.6 Electric 4.3 3.3 Tax 3.2 1.1 Hospital 2.3 2.1 Water & Sewer 1.3 1.5 Student Loan 0.7 1.4 Other Revenue 8.2 11.2 Airport -- 0.7 General Obligation 11.6 9.5 Escrowed 1.9 -- - -------------------------------------------------------------------------------- Total 100.0% 100.0% - -------------------------------------------------------------------------------- Maturity As of Dec. 31, 1998 As of June 30, 1998 Pie Charts: Greater than 299 Days 4.0% 11.0% 180-299 Days 10.3% 7.3% 90-179 Days 10.2% 6.5% 30-89 Days 4.4% 3.7% 0-29 Days 71.1% 71.5% Questions & Answers - -------------------------------------------------------------------------------- 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 investment primarily in the three highest grades of intermediate-term municipal securities. The dollar-weighted average maturity of the Fund's portfolio is between three and 10 years. Fund Inception: Oct. 9, 1985 Total Net Assets: $200.5 million Q: How did the Fund perform between June 1998 and December 1998? A: Intermediate Municipals Fund performed well, outpacing the average of its peers as shown on page 3. For the six-month period ended Dec. 31, 1998, the Fund posted a 3.40% total return. For calendar 1998, Intermediate Municipals Fund's total return of 5.46% also outpaced the average of its peers as shown on page 3. As of Dec. 31, 1998, the Fund's 30-day SEC yield was 3.58%, which is a tax-equivalent yield of 5.93%. Q: What supported the Fund's strong results? A: Nearly 80% of the Fund's holdings were in non-callable bonds. As short-term interest rates were reduced three times during the period, the value of non-callable bonds -- which cannot be called and replaced with lower-yielding securities when interest rates decrease -increased, supporting the Fund's performance. Q: What trends affected the market? A: Fueled by a drop in borrowing rates, new issuance of municipal bonds reached $284 billion in calendar 1998 -- a 27% increase from the previous year and nearly as strong as 1993's record year. While this gave the Fund ample opportunity to select new bonds, the huge increase in supply put a damper on bond prices. Municipal bonds have underperformed Treasury bonds of comparable maturity since June. Yields on high-quality tax-exempt securities reached their highest level relative to Treasuries since 1986. The current income and tax advantages of municipal bonds, coupled with an easing of demand for Treasuries this past autumn as the stock market recovered, bodes well for calendar year 1999, in our view. High-quality municipal bonds are currently cheaper than they were last summer. We think that as more investors begin to see the federal tax consequences of rising wage and investment income, municipal bonds will be viewed as a compelling alternative to Treasuries. Despite new tax breaks for some this decade, Americans overall now pay a higher percentage of their investment and wage earnings in taxes than at any point in history, according to the non-partisan Tax Foundation. Q: Where have you been finding the best values lately? A: Bonds in the 10- to 15-year maturity range have been offering better returns than bonds in any other range. Q: Have you focused on any specific sectors since June 1998? A: We favored sectors based on the return on investment potential they offered. Credit spreads (the difference in yield between lower rated and higher rated securities) have historically narrowed in lower interest rate environments. When interest rates fell, we were able to find value in some lower-rated securities, which we believe will enhance the total return of the portfolio. This action resulted in a slight increase of the Fund's holdings rated BBB and lower. Q: What do you expect going forward? A: Going forward, we expect supply to taper off from its 1998 pace. If economic growth slows, as expected in 1999, investors may be looking for less risky investments, and we believe municipal bonds are a good place for them to look. And, bonds in the intermediate sector provide much of the income and less of the risk of longer-term bonds. Also, because tax-exempt securities continue to trade cheaply compared to Treasuries, we believe this easing of supply should allow for tax-exempt securities to outperform. Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. The Adviser currently limits expenses to 0.70% of average net assets, subject to termination upon 30 days' notice to the Fund. Absent past limits, the 30-day SEC and tax equivalent yields at Dec. 31, 1998 would have been 3.48% and 5.76%, respectively, and total return would have been less. Tax-free income is exempt from federal taxes but may be subject to state and local taxes and federal alternative minimum tax. Tax-equivalent yield shown on page 10 is for an investor in the 39.6% federal tax bracket. See page 3 for a comparison of the Fund's performance with that of its Lipper peer group average. Portfolio holdings are as of 12/31/98 and are subject to change. Fund Highlights - -------------------------------------------------------------------------------- Intermediate Municipals Fund Security Type Breakdown PORTFOLIO PORTFOLIO DEC. 31, 1998 JUNE 30, 1998 - -------------------------------------------------------------------------------- General Obligation 22.0% 20.0% Escrowed 14.4 13.8 Revenue: Water & Sewer 9.8 12.0 Electric 8.1 6.0 Hospital 7.8 10.0 Airport 6.5 7.2 Education 4.7 5.3 Tax 4.3 3.6 Toll 3.9 4.0 Student Loan 2.3 2.5 Waste Disposal 2.3 2.3 Other Revenue 10.1 8.2 Corporate-Backed 3.8 5.1 - -------------------------------------------------------------------------------- Total 100.0% 100.0% ================================================================================ Maturity Pie Charts: As of Dec. 31, 1998 As of June 30, 1998 Greater than 15 Years 15.6% 14.1% 10-15 Years 26.7% 26.6% 5-10 Years 39.2% 40.4% 0-5 Years 18.5% 18.9% - -------------------------------------------------------------------------------- Portfolio Quality Pie Charts: As of Dec. 31, 1998 As of June 30, 1998 AAA 73.2% 71.7% AA 10.1% 10.3% A 11.7% 14.4% BBB and Below 5.0% 3.6% Questions & Answers - -------------------------------------------------------------------------------- An Interview with Brian Hartford and Bill Loring, Portfolio Managers of Managed Municipals Fund Fund Data Investment Objective: Pursues high tax-free income consistent with capital preservation by investing in a quality-conscious portfolio of long-term municipal securities. Fund Inception: Feb. 23, 1977 Total Net Assets: $579.5 million Brian Hartford and William Loring were named portfolio managers of Managed Municipals Fund effective Nov. 1, 1998. Q: How did the Fund perform for the first half of fiscal 1999? A: Managed Municipals Fund provided strong results. The Fund outpaced the average returns of a peer group of municipal bond funds (See page 3). For the six-month period ended Dec. 31, 1998, the Fund posted a 3.21% total return. As of Dec. 31, 1998, the Fund's 30-day SEC yield was 4.17%, which is a tax-equivalent yield of 6.90%. Q: What contributed to the Fund's performance? A: Municipal bond refinancing activity was brisk between June and December. Many communities across America took advantage of falling interest rates to reduce their long-term obligations. This negatively affected returns from bonds with limited call protection. The Fund benefited from a significant position in non-callable bonds. As interest rates declined this past autumn, the value of these holdings increased. About 60% of the portfolio's holdings during the period offered call protection. We also maintained a longer-than-average adjusted duration which provided the Fund with increased income and total return potential as bond prices rose. To help preserve principal, we had a higher-than-average position in bonds of the highest quality available - those rated AAA. This was a mild negative for the Fund's performance, because during the period, prices of lower-quality bonds rose more rapidly. Q: What factors do you consider in your security selection? A: We take a balanced risk approach to security selection. We believe one thing that sets us apart from other fund managers is that we look at every facet of portfolio management from a risk point of view. We try to assess the risk of each decision involved in selecting a security -- sector risk, credit ratings and scenarios in which a particular investment may add to or detract from performance. We then purchase bonds that we believe will add the most to the portfolio in the market environment we expect for coming months. We employ various strategies based on bond market movements and economic conditions. We attempt to invest in ways that take advantage of favorable market conditions. In our opinion, this broad strategy has the potential to provide consistent, above-average performance. Q: Where do you strive to maintain the portfolio's average maturity? A: The average maturity we want to maintain for the portfolio will change depending on our economic outlook and how we believe economic change may affect interest rates; credit sectors; differences in income potential between and within quality sectors; the maturities offered on new issues; and the shape of the yield curve. At Dec. 31, 1998, the Fund's weighted average maturity was 15.4 years, reflecting our outlook for slower, but stable economic growth, low interest rates and an environment that favors intermediate-term bonds. Q: What types of bonds have your criteria led you to lately? A: We've found the greatest return potential in certain parts of the higher-yield portion of the market lately. The spread -- or difference in yields - -- in most quality levels in the municipals market has been extremely narrow. We've generally limited purchases of bonds with the lowest credit ratings because the yields offered by such bonds have not been high enough to warrant taking on additional credit risk in the portfolio. Still, we found a few securities we believe were undervalued and may have the potential to be upgraded in quality. This positioning resulted in a slight increase in the percentage of the Fund invested in bonds rated BBB and below. Q: Have you made any significant adjustments to the portfolio during the period? A: We have been assessing the value of some of the portfolio's shorter-call holdings as well as holdings subject to alternative minimum tax (AMT). In a declining interest rate environment, it is more valuable to own securities with a longer call protection. Also, to minimize tax consequences for shareholders, it is important to limit holdings that are subject to alternative minimum tax. We've reduced the portfolio's position in pre-refunded bonds and housing bonds to 24.2% of total net assets. Sometimes these are not the most advantageous holdings in a low interest rate environment. For example, homeowners are more inclined to refinance their mortgages when interest rates are lower and that can make housing bonds less attractive. We've also increased our position in bonds with longer maturities because they may become more valuable in the low interest rate environment we anticipate. Longer maturity bonds have the potential to fall more rapidly in value when interest rates rise. However, with inflation currently at a 12-year low, we believe the added income and price appreciation potential of longer-term bonds more than offsets the risk that rates will reverse course. Q: Do you expect supply to be strong in 1999? A: Supply is likely to be well over $200 billion, but we doubt it will be as strong as the $284 billion in new issuance brought to the market in 1998. Q: You said that economic growth is expected to slow. Does this make you fear credit risks going into next year? A: Yes, if economic growth slows in 1999, corporate balance sheets may be less robust. But we expect growth to be slow, so there should not be any great surprises. Overall, the credit quality of most states' bonds remains excellent. Most states are expected to post budget surpluses in 1999. During the economic expansion over the past four years, rating services upgraded the quality ratings of many municipal bond issues. If economic growth slows as we expect, we believe there will be a reduction in the number of securities given higher ratings. The most at-risk securities appear to be cyclical industrial development bonds. Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Tax-free income is exempt from federal taxes but may be subject to state and local taxes and federal alternative minimum tax. Tax equivalent yield shown on page 13 is for an investor in the 39.6% federal tax bracket. See page 3 for a comparison of the Fund's performance with that of its Lipper peer group average. Portfolio holdings are as of 12/31/98 and are subject to change. Fund Highlights - -------------------------------------------------------------------------------- Managed Municipals Fund Portfolio Composition PORTFOLIO DEC. 31, 1998 - -------------------------------------------------------------------------------- Top 5 Sectors Refunded 14.0% State General Obligation 13.2 Local General Obligation 8.6 Joint Power Utility 7.5 Single Family Homes 7.2 Top 5 States Georgia 13.6% New York 10.8 Massachusetts 8.9 Illinois 8.1 Washington 5.3 - -------------------------------------------------------------------------------- Maturity Pie Charts: As of Dec. 31, 1998 As of June 30, 1998 Greater than 25 Years 10.5% 10.3% 20-25 Years 14.5% 12.2% 15-20 Years 24.6% 23.8% 10-15 Years 31.3% 34.0% 5-10 Years 9.3% 7.2% Less than 5 Years 9.8% 12.5% Portfolio Quality As of Dec. 31, 1998 As of June 30, 1998 AAA 37.4%% 36.7% AA 30.3% 32.0% A 26.0% 25.8% BBB and Below 6.3% 5.5% Questions & Answers - -------------------------------------------------------------------------------- An Interview with Maureen Newman Portfolio Manager of Stein Roe High-Yield Municipals Fund and SR&F High-Yield Municipals Portfolio Photo of: Maureen Newman Fund Data Investment Objective: Seeks a high level of tax-free income consistent with capital preservation by investing in longer-term municipal securities, principally of medium and lower quality. Fund Inception: March 5, 1984 Total Net Assets: $329.5 million Maureen Newman was named portfolio manager of High Yield Municipals Fund effective Nov. 1, 1998. Q: How did the Fund perform for the first half of fiscal 1999? A: High-Yield Municipals Fund provided strong results, outpacing the average returns of a peer group of municipal bond funds (See page 3). As of Dec. 31, 1998, the Fund's 30-day SEC yield was 4.28% -- that's a tax-equivalent yield of 7.09%. Weak corporate earnings reports last summer caused riskier, lower-quality municipal bonds backed by less-stable corporations to underperform. We hold a high-quality composition, and that helped the Fund perform better than the average fund in its category between June and December. To help preserve principal, the Fund maintained a shorter-than-average maturity. When the high yield municipal bond market rallied this past autumn, this positioning did not allow the Fund's net asset value to rise as much as comparable funds. During the last six months, high yield bond issuance increased firmly. This tremendous amount of new supply presented us with the opportunity to buy attractive bonds with high income potential at discount prices. Q: How did you adjust the portfolio's composition? A: We used a barbell strategy to manage credit risk. We increased the portfolio's weighting in bonds with credit quality ratings of BB and lower between June and December. This reflected our efforts to take advantage of the opportunities available in lower-quality bonds. Q: What strategies do you use for security selection? A: We use a relative value approach. Our analysts focus on the fundamentals of the individual credit, including management, financials and market factors, in order to discern issuers that are likely to be stable or improving. We evaluate the pricing of the security to determine whether there are favorable income and/or capital appreciation opportunities. We actively manage our holdings to provide long term value to our shareholders. Due to the uncertainty in the outlook for cyclical industries, we are currently focusing our purchases in industries that are less dependent on economic activity, such as education and nursing homes. One example is our holding of 5.65% Latin School of Chicago bonds (0.5% of total net assets). We bought these BBB-rated bonds at par and they have performed better than other bonds in their rating category. This private school is enjoying strong enrollment and community support. It appears to have effective management and strong fund-raising capabilities. Q: What have you added to the portfolio? A: We purchased bonds of Walker Methodist, a senior living/nursing home group in Minneapolis, MN (0.4% of total net assets). The bonds of this large, well-established group were offered at an attractive price due to concerns about historical results. More recently, management has focused its attention on its core business, which we believe will result in improved operating performance. Q: What's your outlook for the balance of fiscal 1999? A: If corporate earnings are weak in 1999, we believe this may affect bond prices in the high yield market. Industrial development bonds could be most affected by this as their issuers are traditionally sensitive to economic weakness. We expect that non-cyclical areas such as housing, schools and nursing homes will continue to provide value, so that's where we plan to focus new purchases. With yields at their highest level relative to Treasuries since the mid-1980s, we believe municipal bonds are likely to remain an attractive alternative to taxable fixed-income securities for investors in high tax brackets. Past performance is no guarantee of future results. Share price and investment return will vary, so you may have a gain or loss when you sell shares. Total return includes changes in share price and reinvestment of income and capital gains distributions, if any. Tax-free income is exempt from federal taxes but may be subject to state and local taxes and federal alternative minimum tax. Tax-equivalent yield shown on page 17 is for an investor in the 39.6% federal tax bracket. Portfolio holdings are as of 12/31/98 and are subject to change. Holdings disclosed as a percentage of SR&F High-Yield Municipals Portfolio. See page 3 for a comparison of the Fund's performance with that if its Lipper peer group average. Investing in high-yield bonds involves greater credit risks than investing in higher quality bonds. Fund Highlights - -------------------------------------------------------------------------------- SR&F High-Yield Municipals Portfolio Portfolio Composition PORTFOLIO DEC. 31, 1998 - -------------------------------------------------------------------------------- Top 5 Sectors Refunded 17.8% Investor-Owned Utility 8.8 Air Transportation 8.8 Hospital 6.9 Life Care 6.6 Top 5 States Indiana 12.5% Pennsylvania 10.1 Texas 6.9 Colorado 6.5 Ohio 4.9 - -------------------------------------------------------------------------------- Maturity As of Dec. 31, 1998 As of June 30, 1998 Pie Charts: Greater than 25 Years 26.8% 24.4% 20-25 Years 18.6% 15.2% 15-20 Years 18.9% 21.3% 10-15 Years 12.8% 12.1% 5-10 Years 8.6% 9.7% Less than 5 Years 14.3% 17.3% - -------------------------------------------------------------------------------- Portfolio Quality Pie Charts: As of Dec. 31, 1998 As of June 30, 1998 AAA 18.2% 20.7% AA 9.2% 10.5% A 21.4% 19.9% BBB 19.5% 21.6% BB 10.4% 7.9% B and Below/Not Rated 21.3% 19.4% SR&F Municipal Money Market Portfolio - -------------------------------------------------------------------------------- Portfolio of Investments at December 31, 1998 (Dollar amounts in thousands) (Unaudited)
Principal Amortized Municipal Securities (101.9%) Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ Alaska (0.2%) Anchorage Alaska Water Revenue (FSA Insured) 4.500% 8/1/99 ................................... $ 235 $ 236 Alabama (0.4%) University of Alabama Revenue Series A (General Fee-Huntsville, MBIA Insured, prerefunded to 11/1/99, escrowed in U.S. Treasury securities) 7.000% 11/1/09 .................................................. 500 527 Arkansas (2.2%) Clark County Solid Waste Disposal Revenue (Reynolds Metals Project, LOC SunTrust Bank) VRDB 4.050% (a) ........................................................ 3,000 3,000 California (1.7%) Los Angeles County GO TRAN Series 98-99A 4.500% 6/30/99 ...................................... 1,000 1,003 Orange County IDR Series A (Control Air Conditioning Project, LOC California State Teachers Retirement) VRDB 4.000% (a) ................................. 1,400 1,400 ------ 2,403 Colorado (3.5%) Colorado Health Facilities Authority Revenue (AMC Cancer Research Center, LOC U.S. Bank NA) 3.750% 1/15/28 (Mandatory Put 1/15/99) ................................................................... 1,000 1,000 Colorado Springs IDR (Catalano Family LLP Project, LOC Bank One Colorado) VRDB 4.150% (a) ................................................................. 1,200 1,200 Lowry Economic Redevelopment Authority Colorado Revenue Series B (LOC Canadian Imperial Bank) VRDB 4.000% .................................................. 1,000 1,000 SBC Metropolitan District Colorado (LOC U.S. Bank NA) 3.350% 12/1/17 (Mandatory Put 12/1/99) .................................................... 1,555 1,555 ------ 4,755 Delaware (2.2%) Delaware State Economic Development Authority IDR Series C (Star Enterprise, Delaware Clean Power Project, LOC Canadian Imperial Bank) VRDB 4.110% (a) ............................................................ 3,000 3,000 Georgia (1.9%) Gwinnett County Development Authority IDR (Price Companies Project, LOC NationsBank of Georgia) VRDB 4.200% (a) ............................................... 2,600 2,600 Illinois (14.9%) ABN AMRO Munitops Certificates Trust Series 1998-14 (Cook County GO Refunding Bond, ABN AMRO Liquidity Provider) VRDB 4.200% (c) ........................................................................... 1,000 1,000 Chicago Economic Development Revenue (Crane Carton Project, LOC Northern Trust) VRDB 4.200% ........................................................... 750 750 Chicago Revenue (De La Salle Institute Project, LOC Northern Trust) VRDB 4.000% ............................................................................... 900 900 Chicago Tax Increment Allocation (Stockyards, LOC Northern Trust) Series A VRDB 4.000% ...................................................................... 1,500 1,500 Cook County School District No. 99 Cicero GO (FSA Insured) 3.400% 6/1/99 ............................................................... 1,225 1,226 Glendale Heights IDR (Judy LLC/York Corrugated, LOC Harris Trust and Savings Bank) VRDB 4.200% (a) ......................................................... 1,000 1,000 Homewood Flossmoor Park District GO (FSA Insured) 4.200% 12/1/99 ............................. 135 136 SR&F Municipal Money Market Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Amortized Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ Illinois (Continued) Illinois Development Finance Authority Revenue (Nutrasweet Project, gtd. by Monsanto) VRDB 4.300% (a) ...................................... $ 4,300 $ 4,300 (American Osteopathic Association, LOC Harris Trust & Savings Bank) VRDB 4.050% ............................................................... 700 700 (Wheaton Academy Project, LOC Northern Trust) VRDB 4.050% ................................... 1,000 1,000 Illinois Health Facility Authority Revenue (University of Chicago Hospital Project) 2.950% 8/1/15 (Mandatory Put 5/3/99) ...................................... 1,000 1,000 Illinois Student Assistance Commission Student Loan Revenue (LOC Bank of America Illinois) Series 96A VRDB 4.050% (a) ........................................ 1,000 1,000 Montgomery & Bond Counties Community Unit School District Number 3 (FSA Insured) 3.400% 11/1/99 ....................................................... 395 395 Morton IDR Series A (Morton Welding Project, LOC Bank One Illinois NA Chicago) VRDB 4.250% (a) ........................................................ 940 940 Quad Cities Regional Economic Development Authority Revenue (Steel Warehouse, LOC Bank One Indiana) VRDB 4.150% (a) ..................................... 4,200 4,200 Sauget PCR (Monsanto Project) VRDB 4.150% ...................................................... 300 300 ------- 20,347 Indiana (9.5%) Allen County Economic Development Revenue (Golden Years Homestead Project, LOC Norwest Bank Minnesota) VRDB 4.000% .................................. 1,655 1,655 Crawfordsville Economic Development Revenue (Pedcor Investments, Shady Knoll Project, LOC FHLB) VRDB 4.100% (a) .............................................. 1,567 1,567 Franklin Economic Development Revenue (Pedcor Investments, Lakeview Apartments, LOC FHLB) VRDB 4.100% (a) .............................................. 2,839 2,839 Gary Environmental Improvement Revenue (U.S. Steel Project, LOC Bank of Nova Scotia) VRDB 3.500% ............................................... 500 500 Indiana Municipal Power Agency Power Supply System Revenue Series B (MBIA Insured) 4.850% 1/1/99 ....................................................... 500 500 Kokomo Economic Development Revenue (Village Community Partners IV Project, LOC FHLB) VRDB 4.100% (a) .............................................. 2,940 2,940 La Porte County Economic Development Revenue (Pedcor Investments, Woodland Project, LOC FHLB) VRDB 4.100% (a) ................................................. 1,965 1,965 Plymouth Economic Development Revenue Series A (Hillcrest Apartments Project, LOC LaSalle National Bank) VRDB 4.250% (a) ......................................... 1,000 1,000 ------- 12,966 Iowa (6.7%) Clinton IDR (Sethness Products Project, LOC Northern Trust) VRDB 4.150% (a) ............................................................................. 4,000 4,000 Iowa Higher Education Loan Authority Revenue (Saint Ambrose University, LOC Norwest Bank Minnesota) VRDB 4.100% ..................................................... 500 500 Iowa State Schools Cash Anticipation Program Warrant Certificates (FSA Insured) Series 97-98B 4.250% 1/28/99 .............................................................. 1,000 1,000 Series 98-99A 4.500% 6/25/99 .............................................................. 2,000 2,007 Muscatine County PCR (Monsanto Project) VRDB 4.150% ................................................................................. 1,500 1,500 Ottumwa Revenue (Ottumwa Regional Health Center, LOC Norwest Bank Minnesota) VRDB 4.050% ................................................................. 200 200 ------- 9,207 Kansas (0.6%) Olathe IDR (Garmin International Project, LOC NationsBank) VRDB 4.200% (a) ............................................................................. 800 800 SR&F Municipal Money Market Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Amortized Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ Kentucky (3.9%) Covington Industrial Building Revenue (White Castle Distributing, LOC Bank One Columbus) Series 1991 VRDB 4.150% (a) .......................................... $3,560 $3,560 Shelby County Industrial Building Revenue (Roll Forming, LOC Bank One Kentucky) VRDB 4.150% (a) ...................................................... 1,730 1,730 ------ 5,290 Louisiana (1.0%) Calcasieu Parish Industrial Development Board Environmental Revenue (Citgo Petroleum Project, LOC Banque Nationale Paris) VRDB 5.250% (a) ............................................................................. 200 200 Lake Charles Harbor & Term District Port Facilities Revenue (E.I. Dupont de Nemours) VRDB 5.100% ........................................................ 300 300 Saint Charles Parish PCR (Shell Oil Company Norco Project) VRDB 5.200% (a) ............................................................................. 500 500 Terrebonne Parish Hospital Service District No. 1 (General Medical Center Project, AMBAC Insured) 4.000% 4/1/99 ................................................ 320 320 ------ 1,320 Massachusetts (0.6%) Massachusetts State Turnpike Authority Bond Anticipation Notes Series A 5.000% 6/1/99 (escrowed in U.S. Treasury securities) ......................... 785 789 Maryland (1.2%) Anne Arundel County Economic Development Revenue (Baltimore Gas and Electric Project) 2.950% 12/1/18 (Mandatory Put 4/5/99) (a) ............................. 1,000 1,000 Maryland State Community Development Administration Department of Housing and Community Development Single Family Program Sixth Series 4.450% 4/1/99 (a) .............................................................. 655 656 ------ 1,656 Michigan (2.5%) ABN AMRO Munitops Certificates Trusts Series 1998-13 (Michigan Trunk Line Revenue, ABN AMRO Liquidity Provider) VRDB 4.170% (c) ............................................................................. 2,000 2,000 Detroit City School District GO 4.500% 7/1/99 .................................................. 1,000 1,004 Highland Park School District GO (FSA Insured) 3.900% 5/1/99 ................................... 185 185 Lowell Michigan Area Schools GO 6.750% 5/1/99 .................................................. 225 227 ------ 3,416 Minnesota (2.2%) Maple Grove Multifamily Housing Revenue (Eagle Ridge Apartments, LOC Norwest Bank Minnesota) VRDB 3.950% ..................................................... 3,000 3,000 Missouri (4.4%) Jefferson County Industrial Development Authority IDR (GHF Holdings Project, LOC Bank One Indiana) VRDB 4.150% (a) ..................................... 3,700 3,700 Kansas City Industrial Development Authority IDR (Lanter Project, LOC Harris Trust & Savings Bank) VRDB 4.200% ................................................ 600 600 Missouri State Health & Educational Facilities Authority Revenue (Washington University) Series C VRDB 5.000% ................................................ 600 600 Saint Charles County Industrial Development Authority PCR (Monsanto Project) VRDB 4.100% .............................................................. 100 100 St. Louis General Fund Revenue TRAN 4.500% 6/30/99 ............................................. 1,000 1,004 ------ 6,004 Montana (0.7%) Montana State Board of Investment Revenue Series 1991 VRDB 3.600% 3/1/01 (Optional Put 3/1/99) .................................................... 1,000 1,000 SR&F Municipal Money Market Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Amortized Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ New Hampshire (0.9%) New Hampshire State Business Finance Authority Resource Recovery Revenue (Wheelabrator Concord, LOC Wachovia Bank) Series B VRDB 4.050% (a) .................................................................. $1,200 $1,200 New Jersey (0.7%) Middlesex School District GO (FSA Insured) 4.750% 4/15/99 .................................... 250 250 Pitman School District GO (FGIC Insured) 4.800% 4/1/99 ....................................... 325 326 South Brunswick Township GO 4.400% 8/1/99 .................................................... 395 396 ------ 972 New Mexico (0.8%) Albuquerque Educational Facilities Revenue (Menaul School Project, LOC Norwest Bank Minnesota) VRDB 4.100% ................................................... 300 300 Rio Rancho Public School District Number 94 GO Series B (FSA Insured) 6.100% 8/1/99 ............................................................... 835 846 ------ 1,146 New York (2.2%) Batavia School District GO (FSA Insured) 4.350% 6/15/99 ...................................... 1,639 1,643 Nassau County GO Series S (AMBAC Insured) 5.000% 3/1/99 ...................................... 715 716 Oceanside Unified Free School District GO (FGIC Insured) 7.000% 6/15/99 ........................................................................... 650 659 ------ 3,018 North Carolina (0.5%) New Hanover County Industrial Facilities (Gang-Nail Systems Project, LOC Harris Trust & Savings Bank) VRDB 4.050% .............................................. 700 700 Ohio (2.3%) Hancock County Multi-Family Revenue (Pedcor Investments, Crystal Glen Apartments Project, LOC FHLB) VRDB 4.200% (a) ........................................ 750 750 Ohio Environmental Improvement Revenue (U.S. Steel Project, LOC Pittsburgh National Bank) VRDB 3.500% ................................................. 400 400 Ohio Housing Finance Agency Mortgage Revenue Series A-2 (gtd. by Trinity Funding GIC) 3.800% 3/1/99 (a) ........................................... 1,500 1,500 Ohio State Building Authority Series C (prerefunded to 10/1/99, escrowed in U.S. Treasury securities) 7.350% 10/1/04 ...................................... 500 532 ------ 3,182 Oklahoma (0.4%) Tulsa County Independent School District No. 9 Union Board of Education GO 5.350% 5/1/99 ....................................................... 500 527 Pennsylvania (3.0%) Pennsylvania State GO Second Series A (MBIA Insured) 6.000% 11/1/99 .......................... 200 204 Pennsylvania State Higher Educational Facilities Authority College & University Revenue (Bryn Mawr College, FGIC Insured, prerefunded to 12/1/99, escrowed in U.S. Treasury securities) 6.750% 12/1/01 .......................... 750 788 Philadelphia TRAN Series 98-99A 4.250% 6/30/99 ............................................... 1,000 1,002 Quakertown General Authority Revenue Series 96A (LOC PNC Bank) VRDB 4.050% ................................................................ 2,058 2,058 ------ 4,052 South Carolina (1.5%) South Carolina Jobs Economic Development Authority IDR (Specialty Equipment Companies, LOC Bank of America, Illinois) VRDB 4.150% (a) ........................................................................... 2,045 2,045 SR&F Municipal Money Market Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Amortized Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ Tennessee (2.6%) Knoxville Waste Water System Revenue 4.375% 4/1/99 ........................................... $ 610 $ 610 McMinn County Industrial Development Board IDR (Creative Fabrication, LOC NBD Bank) VRDB 4.250% (a) ................................................ 1,096 1,096 Montgomery County Public Building Authority Pooled Financing Government Obligation Revenue (LOC NationsBank) VRDB 4.050% ............................................................................... 1,900 1,900 ------ 3,606 Texas (6.5%) Arlington GO 6.500% 8/15/99 .................................................................. 660 673 Austin Certificates of Obligation 7.000% 9/1/99 .............................................. 620 634 Bexar Metropolitan Water District Waterworks Revenue (MBIA Insured) 4.350% 5/1/99 .............................................................. 300 300 Brazos River Authority PCR (Texas Utilities Electric Co.) VRDB 5.200% (a) ........................................................................... 500 500 Brazos Industrial Development Corporation Marine Term Revenue (Monsanto Project) VRDB 4.150% ............................................................ 400 400 Carrollton GO 6.250% 8/15/99 ................................................................. 335 340 Gulf Coast Industrial Development Authority Solid Waste Disposal Revenue (Citgo Petroleum Project, LOC NationsBank of Texas) VRDB 5.250% (a) ........................................................................... 300 300 Gulf Coast Waste Disposal Authority PCR (Monsanto Project) VRDB 4.150% ............................................................................... 200 200 Haltom City GO (AMBAC Insured) 6.500% 2/1/99 ................................................. 300 300 Haltom City Waterworks and Sewer Revenue (FSA Insured) 6.500% 2/1/99 ............................................................................. 100 100 Harris County Industrial Development Corporation IDR (Precision General Project, LOC Morgan Guaranty Trust) VRDB 4.150% (a) ........................................................................... 2,060 2,060 Harris County Revenue (MBIA Insured) 5.100% 8/15/99 (a) ...................................... 235 236 Pasadena Independent School District GO (gtd. by PSF) 4.500% 2/15/99 ............................................................................ 435 435 Richardson Independent School District GO 5.500% 2/15/99 ..................................... 740 741 Robertson County Industrial Development Corporation (Sanderson Farms Project, LOC Harris Trust & Savings Bank) VRDB 4.250% (a) ................................. 100 100 Tarrant County Hospital District GO 5.000% 8/15/99 ........................................... 500 504 Texas State Veterans Housing Assistance Program Fund II Series A 4.150% 6/1/99 (a) ......................................................................... 580 581 University of Texas Revenue Series B 5.000% 8/15/99 .......................................... 500 504 ------ 8,908 Utah (0.2%) Provo City School District GO 3.400% 6/15/99 ................................................. 105 105 Utah Municipal Power System Revenue (Hunter Project, AMBAC Insured) 4.200% 7/1/99 ............................................................................. 250 250 ------ 355 Vermont (0.7%) Vermont Educational & Health Buildings Financing Agency Revenue (Middlebury College Project) Series A 3.750% 5/1/28 (Optional Put 5/1/99) ..................................................................... 910 910 Washington (7.3%) Washington State Housing Finance Commission Multi-Family Housing Revenue (Hamilton Place Senior Living Project, LOC U.S. Bank of Washington) Series A VRDB 4.000% (a) ................................................... 1,140 1,140 SR&F Municipal Money Market Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Amortized Amount Cost - ------------------------------------------------------------------------------------------------------------------------------------ Washington (Continued) Washington State Public Power Supply System Revenue Series A (Nuclear Project Number 1) 7.250% 7/1/99 .................................... $ 1,500 $ 1,528 Series C (Nuclear Project Number 2) 7.200% 7/1/99 .................................... 3,650 3,710 Yakima County Public Corporation IDR (John I. Haas Project, LOC Bayerische Vereinsbank) VRDB 4.150% (a) .......................................... 3,550 3,550 --------- 9,928 Wisconsin (12.0%) Carlton PCR (Wisconsin Power & Light Project) VRDB 4.200% (a) ...................................................................... 4,000 4,000 Chase IDR (Belgioioso Cheese Project, LOC Bank One Wisconsin) VRDB 4.150% (a) ...................................................................... 1,000 1,000 Fond Du Lac IDR (Brenner Tank, LOC Bank One Wisconsin) VRDB 4.150% (a) ........................................................... 2,355 2,355 Fox Lake Redevelopment Authority IDR (Karavan Trailers Project, LOC Bank One Wisconsin) VRDB 4.150% (a) .............................................. 1,600 1,600 Hamilton School District GO 4.000% 4/1/99 ............................................... 415 415 Holland IDR (White Clover Dairy Project, LOC Bank One Wisconsin) VRDB 4.150% (a) ........................................................... 2,275 2,275 Kenosha IDR (Monarch Plastics Project, LOC Bank One Wisconsin) VRDB 4.150% (a) ........................................................... 1,920 1,920 Kettle Moraine School District GO (AMBAC Insured) 3.500% 3/15/99 ........................ 375 375 Mukwonago School District Bond Anticipation Notes 3.750% 11/1/99 ........................ 1,000 1,005 Oshkosh Area School District GO Bond Anticipation Notes 3.330% 12/15/99 ................................................................ 1,000 1,001 Wisconsin State Clean Water Revenue Series 1 4.200% 6/1/99 .............................. 500 500 --------- 16,446 --------- Total Municipal Securities (b) .......................................................... 139,311 Other Assets, Less Liabilities (-1.9%) .................................................. (2,595) --------- Total Net Assets (100.0%) ............................................................... $ 136,716 ========= Notes to Portfolio of Investments - -------------------------------------------------------------------------------- (a)Security is subject to federal alternative minimum tax. At December 31, 1998, the aggregate amortized cost of these securities represented 56.5 percent of total net assets. (b)At December 31, 1998, the cost of investments for financial reporting and federal income tax purposes was identical. (c)Represents private placement securities issued under Rule 144A, which are exempt from the registration requirements of the Securities Act of 1933. These securities generally are issued to qualified institutional buyers, such as the Portfolio, and any resale by the Portfolio must be in an exempt transaction, normally to other qualified institutional investors. At December 31, 1998, the aggregate amortized cost of the Portfolio's private placement securities was $3,000 which represented 2.2 percent of net assets. Variable rate demand bonds (VRDB) are securities whose yields are periodically reset at levels that are generally comparable to tax-exempt commercial paper. These securities are payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit from a major bank. See accompanying Notes to Financial Statements.
Intermediate Municipals Fund - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio of Investments at December 31, 1998 (Dollar amounts in thousands) (Unaudited) Principal Market Municipal Securities (99.5%) Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Alaska (1.7%) Alaska Industrial Development & Export Authority Revenue (Cominco Limited, MBIA Insured) Series A 5.500% 4/1/04 (a)................................ $ 1,000 $ 1,066 (Snettisham Hydro-Electric, AMBAC Insured) 4.850% 1/1/09 (a) .............................. 280 287 Anchorage GO (MBIA Insured) 5.000% 7/1/14 .................................................... 2,000 2,059 ------- 3,412 Arizona (6.9%) Arizona State Transportation Board Highway Revenue Series A 6.000% 7/1/00 ............................................................................. 1,000 1,036 Cochise County Unified School District No. 68 Sierra Vista GO Series B (FGIC Insured) 9.000% 7/1/01 ..................................................... 1,115 1,255 Maricopa County Hospital Revenue (Samaritan Health Services, escrowed in U.S. Treasury securities) 7.625% 1/1/08 ....................................... 2,050 2,425 Maricopa County Unified School District No. 97 Deer Valley GO Series A (MBIA Insured) 6.250% 7/1/06 ..................................................... 1,750 1,989 Phoenix Civic Improvement Corporation Wastewater System Lease (escrowed in U.S. Treasury securities, prerefunded to 7/1/03) 6.000% 7/1/07 ...................................................... 2,500 2,762 Pima County GO 6.300% 7/1/02 ................................................................. 2,500 2,705 Tempe GO Series A 5.500% 7/1/08 .............................................................. 1,000 1,105 Tempe Unified High School District No. 213 GO (FGIC Insured) 7.000% 7/1/08 ............................................................................ 500 606 ------ 13,883 Arkansas (1.4%) Beaver Water District Benton & Washington Counties Water Revenue (MBIA Insured) 6.000% 11/15/04 ............................................................ 2,580 2,871 California (5.2%) California Educational Facilities Authority Revenue (University of San Francisco, MBIA Insured) 5.600% 10/1/10 ............................................... 1,000 1,120 California Housing Finance Agency Revenue Home Mortgage Series B-1 5.900% 2/1/04 (a) .............................................................. 910 956 Central Coast Water Authority Revenue (AMBAC Insured, escrowed in state and local government securities, prerefunded to 10/1/02) 5.950% 10/1/03 .................................................... 2,000 2,194 East Bay Municipal Utility District Water System Revenue (AMBAC Insured, escrowed in U.S. Treasury securities) 7.000% 6/1/00 ............................................................................ 1,400 1,470 La Quinta California Redevelopment Agency Tax Allocation (MBIA Insured) 7.300% 9/1/09 .............................................................. 750 949 Los Angeles County Public Works Financing Authority Revenue (escrowed in U.S. Treasury securities, prerefunded to 10/1/04) 5.800% 10/1/05 ............................................................................ 1,500 1,669 Vallejo Revenue Water Improvement Project Series B (FGIC Insured, escrowed in U.S. Treasury securities) 6.000% 11/1/01 ............................................................................ 2,030 2,165 ------ 10,523 Colorado (0.3%) Adams County School District No. 12 Series A (MBIA Insured) Zero Coupon (Effective Yield 6.100%) 12/15/12 ............................................. 1,300 672
Intermediate Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Delaware (0.7%) Delaware Economic Development Authority Revenue (General Waterworks Corporation) 6.450% 12/1/07 ............................................. $ 1,165 $ 1,342 District of Columbia (1.1%) District of Columbia Revenue (Howard University, MBIA Insured) 5.500% 10/1/13 .............................................................................. 2,000 2,182 Florida (3.7%) Miami-Dade County School Board Certificates of Participation Series C (FSA Insured) 5.000% 8/1/17 ........................................................ 1,000 1,004 Stoneybrook Community Development District Capital Improvement Revenue Series B 5.700% 5/1/08 .............................................................. 3,285 3,281 Tallahassee Energy System Revenue Series A 5.250% 10/1/14 ...................................... 2,980 3,202 ------- 7,487 Georgia (7.7%) Atlanta Airport Facilities Revenue (AMBAC Insured) 6.500% 1/1/07 ............................................................................... 5,000 5,782 Fulton County Water & Sewer Revenue (FGIC Insured) 5.625% 1/1/01 ............................................................................... 1,000 1,038 Georgia GO Series A 6.250% 4/1/07 .............................................................. 2,000 2,307 Georgia Municipal Electric Authority Power Revenue Series Y (AMBAC Insured) 6.400% 1/1/13 ............................................................... 3,000 3,532 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue (AMBAC Insured) Series M 6.050% 7/1/01 .................................................................... 1,600 1,690 Series P 5.800% 7/1/02 .................................................................... 1,000 1,066 ------- 15,415 Hawaii (0.6%) Honolulu City & County GO Series A 7.350% 7/1/06 ............................................... 1,000 1,200 Illinois (8.9%) Chicago Board of Education GO (MBIA Insured) 6.250% 12/1/12 .............................................................................. 2,100 2,457 Chicago Midway Airport Revenue Series A (MBIA Insured) 5.700% 1/1/04 (a) ........................................................................... 1,000 1,069 Chicago Skyway Toll Bridge Revenue (escrowed in U.S. Treasury securities, prerefunded to 1/1/04) 6.750% 1/1/17 ............................................ 1,500 1,710 Chicago Water Revenue (FGIC Insured) 6.500% 11/1/09 ............................................ 2,155 2,558 DuPage County Special Service Area No. 11 6.750% 1/1/14 ........................................ 1,135 1,300 Illinois Development Finance Authority Revenue Series A (Provena Health, MBIA Insured) 5.250% 5/15/18 ............................................... 3,865 3,933 Illinois Health Facilities Authority Revenue (Rush Presbyterian, MBIA Insured) 5.000% 11/15/18 ........................................... 1,100 1,082 Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue (McCormick Place Expansion Project) Series 1992A (escrowed in U.S. Treasury securities) 7.250% 6/15/05 ....................... 385 455 Series 1992A 7.250% 6/15/05 ............................................................... 2,365 2,780 Southern Illinois University Revenue (MBIA Insured) Zero Coupon (Effective Yield 5.649%) 4/1/15 ................................................. 1,175 522 ------- 17,866 Indiana (4.1%) Indiana State Toll Road Commission Toll Road Revenue (escrowed in U.S. Treasury securities) 9.000% 1/1/15 ........................................ 2,240 3,260 Intermediate Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Indiana (Continued) Indiana Transportation Finance Authority Airport Facilities Lease Revenue Series A 6.500% 11/1/07 (escrowed in U.S. Treasury securities, prerefunded to 11/1/02) ............................................................... $1,040 $1,134 6.500% 11/1/07 .......................................................................... 1,210 1,348 Indianapolis Local Public Improvement Bond Bank Series D 6.500% 2/1/06 ............................................................................. 2,100 2,404 ------ 8,146 Iowa (0.1%) Muscatine County PCR (Monsanto Project) VRDB 4.150% .......................................... 100 100 Kentucky (1.3%) Kentucky State Turnpike Authority Economic Development Road Revenue 5.800% 1/1/04 ................................................................ 2,500 2,698 Louisiana (2.6%) Louisiana Public Facilities Authority Student Loan Revenue Series A-1 5.900% 9/1/99 .................................................................. 1,655 1,676 New Orleans GO (FGIC Insured) 5.500% 12/01/14 ................................................ 1,000 1,085 Orleans Levee District Series A (FSA Insured) 5.950% 11/1/07 ................................. 2,200 2,449 ------ 5,210 Maine (0.3%) Maine Educational Loan Authority Educational Loan Revenue Series A-2 6.650% 12/1/02 (a) ............................................................. 580 613 Massachusetts (2.1%) Massachusetts Bay Transportation Authority Series A 7.000% 3/1/07 ............................ 2,250 2,694 Massachusetts State Health and Educational Facilities Authority Revenue (Daughters of Charity ) Series C 7.250% 7/1/00 .................................................................. 400 416 Series D 6.000% 7/1/09 .................................................................. 1,000 1,095 ------ 4,205 Michigan (4.3%) Greater Detroit Resource Recovery Authority Revenue Series A (AMBAC Insured) 6.250% 12/13/05 ........................................................... 2,000 2,259 Michigan State Hospital Finance Authority Revenue (Daughters of Charity, escrowed in state and local government securities) 6.500% 11/1/01 ............................................................................ 850 885 Michigan State Underground Storage Tank Financial Assurance Authority (AMBAC Insured) Series I 6.000% 5/1/05 .......................................... 5,000 5,541 ------ 8,685 Missouri (0.5%) Missouri State Regional Convention & Sports Complex Authority Series A 6.600% 8/15/03 ................................................................... 830 917 Nevada (0.8%) Clark County PCR (Southern California Edison) Series A 7.125% 6/1/09 (a) ......................................................................... 1,500 1,608 New Jersey (2.6%) Bergen County Utility Authority (FGIC Insured) Series A 6.250% 6/15/06 ............................................................................ 2,000 2,271 Intermediate Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ New Jersey (Continued) New Jersey Health Care Facilities Financing Authority Revenue (Hackensack Medical Center, FGIC Insured, escrowed in U.S. Treasury securities) 6.100% 7/1/01 ................................................. $ 1,000 $ 1,059 (Christ Hospital Group, Connie Lee Insured) 7.000% 7/1/03 ................................. 1,730 1,951 ------- 5,281 New Mexico (2.5%) Gallup PCR (Plains Electric Generation & Transmission Cooperative, MBIA Insured) 6.100% 8/15/02 ................................................. 2,000 2,145 Santa Fe Gross Receipts Tax Revenue (AMBAC Insured) Series A 6.500% 6/1/06 ............................................................................. 2,555 2,937 ------- 5,082 New York (11.2%) New York City GO Series 1995C (escrowed in U.S. Treasury securities, prerefunded to 8/15/01) 7.125% 8/15/11 .................................................. 610 662 Series 1996C 5.700% 2/1/06 ................................................................ 1,000 1,084 Series 1997J 6.125% 8/1/11 ................................................................ 5,000 5,619 Series 1997H 6.000% 8/1/17 ................................................................ 2,000 2,188 New York State Dormitory Authority Revenue (State University Educational Facilities) Series A 6.500% 5/15/05 ......................... 1,000 1,129 (City University System, FGIC Insured) Series A 5.625% 7/1/16 ............................. 5,000 5,510 New York State Environmental Facilities Corporation PCR (State Revolving Fund) Series 1994D 6.300% 5/15/05 ........................................ 3,000 3,405 Port Authority New York & New Jersey Special Obligation Revenue (JFK International Air Terminal, MBIA Insured) 6.000% 12/1/05 (a) ........................................................................ 2,500 2,789 ------- 22,386 North Carolina (2.4%) North Carolina Eastern Municipal Power Agency Revenue Series C 5.500% 1/1/07 ............................................................................. 3,100 3,266 North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue (MBIA Insured) 5.900% 1/1/03 ...................................................... 1,500 1,606 ------- 4,872 Ohio (2.2%) Columbus GO (escrowed in U.S. Treasury securities, prerefunded to 9/15/01) 6.750% 9/15/04 .................................................... 1,000 1,080 Loveland School District GO (MBIA Insured) 7.100% 12/1/09 .................................... 3,000 3,385 ------- 4,465 Oregon (2.0%) Oregon State Department of Transportation Revenue (MBIA Insured) 5.700% 6/1/02 ............................................................................. 1,220 1,295 Portland Sewer System Revenue Series B (FGIC Insured) 5.400% 4/1/02 ............................................................................. 2,500 2,625 ------- 3,920 Pennsylvania (0.8%) Dauphin County General Authority Hospital Revenue (Hapsco Group, MBIA Insured) Series B 5.800% 7/1/02 ....................................... 1,600 1,697 South Carolina (3.0%) Piedmont Municipal Power Agency Electric Revenue (FGIC Insured) 6.125% 1/1/07 (escrowed in U.S. Treasury securities) ...................................... 335 381 6.125% 1/1/07 ............................................................................. 2,015 2,281 South Carolina State Ports Authority Revenue (AMBAC Insured) 6.200% 7/1/01 (a) ......................................................................... 1,000 1,055 Intermediate Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ South Carolina (Continued) Sumter County Hospital Facilities Revenue (Tuomey Regional Medical Center, MBIA Insured) 6.625% 11/15/04 ............................................. $ 2,000 $ 2,275 ------- 5,992 Tennessee (2.7%) Knox County Health Educational & Housing Facilities Board Health Facilities Revenue (Baptist Health Systems, Connie Lee Insured) 5.500% 4/15/11 ........................................................ 2,000 2,140 Metropolitan Nashville & Davidson County Water & Sewer Revenue (FGIC Insured) 6.500% 1/1/10 .............................................................. 2,750 3,261 ------- 5,401 Texas (10.4%) Alliance Airport Authority Special Facilities Revenue (Federal Express Project) 6.375% 4/1/21 (a) ............................................... 2,000 2,150 Austin Certificates of Obligation 4.750% 9/1/18 .............................................. 1,125 1,093 Brazos Harbor Industrial Development Corporation Marine Term Revenue (Monsanto Project) VRDB 4.150% ............................................................ 1,100 1,100 Fort Bend Independent School District GO (gtd. by PSF) 7.500% 2/15/00 .............................................................. 1,010 1,053 Fort Worth GO 8.350% 3/1/00 .................................................................. 1,250 1,319 Gulf Coast Waste Disposal Authority PCR (Amoco Project) VRDB 5.200% (a) ........................................................... 100 100 (Monsanto Project) VRDB 4.150% ............................................................ 100 100 Houston Water Conveyance System Participation Certificates Series J (AMBAC Insured) 6.125% 12/15/06 .................................................. 1,000 1,133 Retama Development Corporation Special Facilities Revenue (escrowed in U.S. Treasury securities) 8.750% 12/15/10 .................................... 2,885 4,037 Round Rock Independent School District GO Series 1991 8.625% 8/15/00 (MBIA Insured) ................................................. 1,270 1,371 Series 1995 7.500% 8/1/02 (gtd. by PSF) ................................................... 1,200 1,346 San Antonio Water Revenue (FGIC Insured) 6.000% 5/15/01(escrowed in U.S. Treasury securities) ...................................... 415 437 6.000% 5/15/01 ............................................................................ 2,460 2,585 Tarrant County Housing Finance Corporation Revenue (escrowed in U.S. Treasury securities, MBIA Insured) Zero Coupon (Effective Yield 5.000%) 9/15/16 .............................................. 1,730 706 Texas State Higher Education Revenue Student Loan Senior Lien 7.450% 10/1/06 (a) ........................................................................ 2,120 2,242 ------- 20,772 Utah (0.6%) Intermountain Power Agency Power Supply Revenue (MBIA Insured) Series B 6.000% 7/1/07 ..................................................... 1,000 1,132 Virginia (0.5%) Danville Industrial Development Authority Hospital Revenue (Danville Regional Medical Center, AMBAC Insured) 5.250% 10/1/13 ............................................................................ 1,000 1,061 Washington (3.8%) Central Puget Sound Regulatory Transit Authority (FGIC Insured) 5.250% 2/1/17 .............................................................. 2,000 2,093 Chelan County Public Utility District No. 1 Revenue Series B 5.000% 7/1/33 (a) ............................................................... 900 905 Intermediate Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Washington (Continued) Snohomish County School District No. 2 Everett GO (MBIA Insured) 7.250% 12/1/00 ........................................................................ $ 2,540 $ 2,711 7.000% 12/1/02 ........................................................................ 1,500 1,669 -------- 7,378 Wisconsin (0.5%) Racine GO Promissory Notes Series B 3.700% 12/1/99 ....................................... 1,000 1,003 -------- ==================================================================================================================================== Total Municipal Securities (Cost $185,135) (b) ................................................................... 199,477 Other Assets, Less Liabilities (0.5%) .................................................... 1,055 -------- Total Net Assets (100.0%) ................................................................ $200,532 ======== ==================================================================================================================================== Notes to Portfolio of Investments - -------------------------------------------------------------------------------- (a)Security is subject to federal alternative minimum tax. At December 31, 1998, the market value of these securities represented 7.4% of total net assets. (b)At December 31, 1998, the cost of investments for financial reporting and federal income tax purposes was identical. Net unrealized appreciation was $14,342, consisting of gross unrealized appreciation of $14,378 and gross unrealized depreciation of $36. Variable rate demand bonds (VRDB) are securities whose yields are periodically reset at levels that are generally comparable to tax-exempt commercial paper. These securities are payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit from a major bank. See accompanying Notes to Financial Statements.
Managed Municipals Fund - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio of Investments at December 31, 1998 (Dollar amounts in thousands) (Unaudited)
Principal Market Municipal Securities (99,7%) Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Alaska (0.7%) Alaska Student Loan Corporation Revenue (AMBAC Insured) 6.200% 7/1/09 (a).......................................................... $ 3,870 $ 4,175 California (5.2%) California Pollution Control Financing Authority PCR (San Diego Gas & Electric) Series A 5.900% 6/1/14 ............................................................................. 3,000 3,379 Central Contra Costa Sanitation District Revenue (MBIA Insured) 6.250% 9/1/13 ............................................................................. 2,025 2,281 6.250% 9/1/14 ............................................................................. 1,295 1,455 Foothill/Eastern Transportation Corridor Agency Toll Road Revenue Series 1995A Zero Coupon (Yield to Maturity 7.200%) 1/1/18 ............................................. 10,000 3,675 Irvine Improvement Bond Act 1915 Assessment District No 97-16 (LOC Societe Generale) VRDB 5.100% ............................................................................. 456 456 Assessment District No 94-13 (LOC Canadian Imperial Bank) VRDB 5.100% ............................................................................. 700 700 Assessment District No 97-17 (LOC Bayerische Vereinsbank) VRDB 5.100% ............................................................................. 200 200 Long Beach Aquarium of the Pacific Revenue Series A 6.125% 7/1/15 ............................................................................. 4,000 4,250 6.125% 7/1/23 ............................................................................. 6,000 6,352 Los Angeles County GO TRAN Series 98-99A 4.500% 6/30/99 ...................................... 1,000 1,007 Southern California Public Power Authority Revenue Zero Coupon (Yield to Maturity 6.000%) 7/1/14 (escrowed in U.S. Treasury securities, FGIC Insured) .................................... 8,155 3,894 5.000% 7/1/17 ............................................................................. 2,500 2,491 ------ 30,140 Colorado (2.7%) Arapahoe County Capital Improvement Trust Fund Highway Revenue (escrowed in U.S. Treasury securities, prerefunded to 8/31/05) Zero Coupon (Yield to Maturity 6.930%) 8/31/15 ............................................ 25,000 9,219 Colorado Housing Finance Authority Multi-Family Mortgage Revenue 6.000% 10/1/09 ............................................................................ 1,490 1,496 6.000% 10/1/10 ............................................................................ 1,590 1,597 6.000% 10/1/11 ............................................................................ 1,710 1,717 6.000% 10/1/12 ............................................................................ 1,830 1,838 ------ 15,867 Delaware (0.9%) Delaware Economic Development Authority Revenue (General Waterworks Corporation) 6.450% 12/1/07 Series B ................................................................. 1,160 1,337 6.800% 12/1/23 Series A (a) ............................................................. 3,500 3,754 ------ 5,091 District of Columbia (1.1%) District of Columbia GO (MBIA Insured) Series B 6.000% 6/1/15 ............................................................................. 3,000 3,364 6.000% 6/1/16 ............................................................................. 2,500 2,816 ------ 6,180 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Florida (2.7%) Broward County GO 12.500% 1/1/03 .......................................................................... $ 1,000 $ 1,312 12.500% 1/1/04 .......................................................................... 1,195 1,652 12.500% 1/1/05 .......................................................................... 2,000 2,885 Florida GO (Broward County) 9.875% 7/1/09 .................................................. 1,100 1,592 Florida GO (Jacksonville Transportation Authority, escrowed in U.S. Treasury securities) 9.200% 1/1/15 ..................................... 2,000 2,902 Jacksonville Water and Sewer Development Revenue (General Waterworks Corporation) 6.750% 6/1/22 (a) ...................................... 1,500 1,618 Orange County Housing Finance Authority Multi-Family Revenue Series K (Palms at Brentwood) 6.500% 12/1/34 .................................... 2,000 1,997 Pinellas County Health Facilities Authority Revenue VRDB 4.700% ............................................................................. 1,600 1,600 ------- 15,558 Georgia (13.6%) Atlanta Airport Facilities Revenue Series A (AMBAC Insured) 6.500% 1/1/10 ........................................................................... 2,000 2,365 Atlanta Water & Sewer Revenue 6.000% 1/1/11 ................................................ 4,410 5,006 Cartersville Development Authority (Anheuser-Busch) 7.375% 5/1/09 (a) ....................................................................... 9,000 10,969 Columbia County School District GO (MBIA Insured) 6.750% 4/1/09 ........................................................................... 1,900 2,278 7.000% 4/1/10 ........................................................................... 2,125 2,614 7.000% 4/1/11 ........................................................................... 2,370 2,933 Fulton County Water & Sewer Revenue (FGIC Insured) (escrowed in U.S. Treasury Securities) 6.375% 1/1/14 .................................... 13,270 15,642 6.375% 1/1/14 ........................................................................... 430 503 Georgia State GO 5.250% 10/1/10 ............................................................ 1,910 2,089 Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue (AMBAC Insured) Series P 6.250% 7/1/20 .................................................. 4,000 4,730 Municipal Electric Authority of Georgia Power Revenue Series V 6.600% 1/1/18 ........................................................................... 21,300 24,921 Paulding County School District GO (MBIA Insured) 6.000% 2/1/10 ........................................................................... 4,235 4,828 ------- 78,878 Hawaii (1.2%) Hawaii Airports System Revenue Second Series (MBIA Insured) 6.900% 7/1/12 (a) ....................................................................... 6,000 7,207 Idaho (0.3%) Idaho Health Facilities Authority Revenue (St. Lukes Regional Medical Center) VRDB 5.100% .................................................... 200 200 Idaho Housing Agency Single-Family Mortgage Revenue 7.875% 7/1/24 (a) ....................................................................... 1,235 1,311 ------- 1,511 Illinois (8.1%) Chicago Board of Education GO (MBIA Insured) 6.250% 12/1/12 .......................................................................... 2,500 2,925 6.000% 1/1/16 ........................................................................... 5,000 5,625 Chicago Skyway Toll Bridge Revenue (escrowed in U.S. Treasury securities, prerefunded to 1/1/04) 6.750% 1/1/17 ........................................................................... 1,500 1,710 Illinois Development Finance Authority (Catholic Charities) 5.950% 1/1/09 ........................................................................... 1,450 1,515 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Illinois (Continued) Illinois Educational Facilities Authority Revenue VRDB 3.950% ............................................................................... $ 100 $ 100 Illinois Health Facilities Authority Revenue (Healthcorp Affiliates) VRDB 5.100% ............................................................................... 300 300 Illinois Housing Development Authority Series A 7.800% 12/1/12 ............................................................................ 905 942 8.000% 6/1/26 ............................................................................. 6,770 7,049 Illinois Sales Tax Revenue Series Q 6.000% 6/15/12 ........................................... 10,000 11,400 Illinois State Toll Highway Authority Priority Revenue Series A 6.300% 1/1/11 ............................................................................. 7,500 8,559 Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue Series A (MBIA Insured) Zero Coupon (Yield to Maturity 6.020%) 6/15/12 .......................................... 5,000 2,631 Zero Coupon (Yield to Maturity 6.020%) 12/15/12 ......................................... 8,300 4,264 ------- 47,020 Indiana (4.8%) Hammond Sewer & Solid Waste Disposal Revenue (American Maize Products gtd. by Eridania Beghin-Say) 8.000% 12/1/24 (a) ........................................................................ 5,000 5,850 Indiana Health Facility Finance Authority Revenue (Metro Health/Indiana Project) 6.400% 12/1/33 ............................................. 1,400 1,390 Indiana Transportation Finance Authority Airport Facilities Lease Revenue Series A 6.250% 11/1/16 (escrowed in U.S. Treasury securities, prerefunded to 11/1/02) ............................................................... 5,475 6,050 6.250% 11/1/16 .......................................................................... 1,475 1,575 Indianapolis Airport Authority Revenue Special Facilities (United Airlines) 6.500% 11/15/31 (a) ..................................................... 5,000 5,350 Michigan City PCR (Northern Indiana Public Service Company) 5.700% 10/1/03 ............................................................................ 7,635 7,663 ------- 27,878 Iowa (0.3%) Iowa Finance Authority Single-Family Mortgage Revenue (collateralized by GNMA securities) Series B 7.450% 7/1/23 (a) ............................ 915 970 Iowa State Schools Cash Anticipation Program Warrant Certificates (FSA Insured) Series 98-99A 4.500% 6/25/99 ................................................ 1,000 1,007 ------- 1,977 Kansas (0.6%) Kansas State Department of Transportation Highway Revenue (escrowed in U.S. Treasury securities, prerefunded to 3/1/02) 6.500% 3/1/12 ............................................................................. 3,000 3,296 Kentucky (2.3%) Kentucky Housing Corporation Housing Revenue Series C 8.100% 1/1/22 (a) ................................................................ 1,585 1,653 Kentucky Turnpike Authority Economic Development Road Revenue (FGIC Insured) Zero Coupon (Yield to Maturity 6.600%) 1/1/10 ............................................. 7,500 4,594 Trimble County PCR (Louisville Gas & Electric) Series A 7.625% 11/1/20 (a) ........................................................................ 6,670 7,195 ------- 13,442 Louisiana (1.2%) De Soto Parish Environmental Improvement Revenue (International Paper) Series A 7.700% 11/1/18 (a) ......................................... 3,250 3,746 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Louisiana (Continued) New Orleans GO (AMBAC Insured) Zero Coupon (Yield to Maturity 6.125%) 9/1/12 ........................................... $ 6,250 $ 3,250 ------- 6,996 Maine (1.3%) Maine Educational Loan Marketing Corporation Student Loan Revenue Subordinate Series B-1 6.500% 11/1/09 (a) ....................................... 3,000 3,195 Maine Housing Authority Mortgage Revenue Series D-5 7.550% 11/15/19 (a) ..................................................................... 2,520 2,633 7.550% 11/15/22 (a) ..................................................................... 1,750 1,829 ------- 7,657 Maryland (1.3%) Washington Suburban Sanitation District (escrowed in U.S. Treasury securities, prerefunded to 6/1/04) 6.600% 6/1/16 ......................................................................... 2,795 3,158 6.625% 6/1/17 ......................................................................... 1,660 1,878 6.625% 6/1/19 ......................................................................... 2,320 2,625 ------- 7,661 Massachusetts (8.9%) Massachusetts Bay Transportation Authority Series 1994A 7.000% 3/1/14 .............................................................. 3,150 3,934 Series 1992B 6.200% 3/1/16 .............................................................. 9,825 11,323 Series 1994A 7.000% 3/1/19 .............................................................. 2,500 3,128 Massachusetts Health & Educational Facilities Authority Revenue (Brigham & Womens' Hospital, MBIA Insured, escrowed in U.S. Treasury securities, prerefunded to 7/1/01) 6.750% 7/1/24 ......................................................................... 7,365 8,046 (Massachusetts General Hospital, AMBAC Insured) 6.250% 7/1/12 ......................................................................... 5,750 6,691 (Dana Farber Cancer Institute) 6.250% 12/1/22 ........................................... 6,500 7,069 Massachusetts State College Building Authority Series A 7.500% 5/1/11 ........................................................................... 1,500 1,926 7.500% 5/1/14 ........................................................................... 3,500 4,524 Massachusetts State Port Authority Revenue Series A 5.750% 7/1/12 ........................................................................... 2,000 2,235 Massachusetts Turnpike Authority Metropolitan Highway System Revenue Series A (MBIA Insured) 5.000% 1/1/37 ........................................... 3,000 2,917 ------- 51,793 Michigan (0.3%) Farmington Hills Hospital Finance Authority (Bostford General Hospital, MBIA Insured) Series B VRDB 5.100% ............................................ 300 300 Michigan Strategic Fund Limited Obligation Revenue (Imperial Holly) Series B 6.400% 11/1/25 ................................................................. 700 702 Series C 6.550% 11/1/25 (a) ............................................................. 800 802 ------- 1,804 Minnesota (1.7%) Minneapolis Revenue (Walker Methodist Senior Services) Series A 5.875% 11/15/18 ................................................................ 450 450 Minneapolis/St. Paul Housing Finance Board Revenue Single-Family Mortgage (collateralized by GNMA securities) 7.250% 8/1/21 (a) ..................................................................... 2,015 2,133 7.300% 8/1/31 (a) ..................................................................... 3,000 3,157 Minnesota State Housing Finance Agency Single-Family Mortgage Series A 7.450% 7/1/22 (a) .............................................................. 3,780 3,988 ------- 9,728 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Missouri (0.2%) Missouri State Housing Development Commission Single-Family Mortgage Revenue 9.375% 4/1/16 ............................................................ $ 35 $ 37 Springfield School District No. 12 GO Series B (FGIC Insured) 9.500% 3/1/07 ............................................................................. 600 820 ------- 857 Nevada (1.0%) Clark County GO (FGIC Insured) Series B 4.500% 12/1/17 ....................................... 2,675 2,501 Nevada Housing Division Single-Family Program Series A-2 7.750% 4/1/22 (a) ......................................................................... 3,330 3,484 ------- 5,985 New Jersey (1.2%) New Jersey Economic Development Authority (Glimcher Properties Project) 6.000% 11/1/28 (a) .......................................... 850 853 New Jersey GO Series D 6.000% 2/15/11 ........................................................ 5,150 5,955 ------- 6,808 New Mexico (0.3%) Albuquerque IDR (Motorola) 10.000% 6/1/13 .................................................... 1,000 1,025 Farmington PCR (Arizona Public Service Company, LOC Barclays Bank) Series B VRDB 5.100% ....................................................... 500 500 ------- 1,525 New York (10.8%) New York City GO Series B (FGIC Insured) VRDB 5.000% ....................................................... 2,300 2,300 Series D 6.000% 2/15/25 (escrowed in U.S.Treasury securities, prerefunded to 2/15/05) ................................................................. 12,980 13,968 Series G 5.750% 2/1/14 .................................................................... 3,145 3,361 Series F 5.000% 8/1/23 .................................................................... 2,150 2,094 New York City Industrial Development Authority Special Facility Revenue (Terminal One Group Association) 6.000% 1/1/15 (a) ......................................................................... 8,340 8,934 New York City Municipal Water Finance Authority Water & Sewer Revenue Series A (FGIC Insured) VRDB 5.200% ............................................... 200 200 New York State Environmental Facilities Corporation PCR Water Revolving Fund 5.750% 6/15/10 ....................................................... 10,000 11,237 Suffolk County Industrial Development Agency IDR (Nissequogue Cogen Partners) 5.500% 1/1/23 (a) ............................................ 500 500 Triborough Bridge & Tunnel Authority Revenue Series X 6.625% 1/1/12 .................................................................... 9,915 11,836 Series Y 6.125% 1/1/21 .................................................................... 6,890 7,958 ------- 62,388 North Carolina (1.3%) North Carolina Eastern Municipal Power Agency Revenue Series 1991A 6.500% 1/1/18 (escrowed in U.S. Treasury securities) .................................... 4,315 5,173 6.500% 1/1/18 ........................................................................... 2,185 2,504 ------- 7,677 Ohio (1.8%) Franklin County Hospital Revenue Series B (Riverside Hospital, escrowed in U.S. Treasury securities, prerefunded to 5/15/00) 7.600% 5/15/20 .................................................. 3,900 4,192 Series A (Doctors OhioHealth Corp.) 5.600% 12/1/28 ........................................ 3,000 2,929 Ohio Housing Finance Agency Mortgage Revenue Series A-1 (collateralized by GNMA) 6.050% 9/1/17 (a) ..................................... 2,995 3,164 ------- 10,285 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Oklahoma (0.3%) Tulsa County Home Finance Authority Mortgage Revenue (collateralized by GNMA securities) Series 1991 B7.550% 5/1/23 (a) ........................ $ 1,825 $ 1,912 Oregon (0.2%) Clackamas County School District No. 12 GO (FGIC Insured) 5.250% 6/1/11 ............................................................................. 1,000 1,062 Pennsylvania (4.1%) Allegheny County Sanitation Authority Sewer Revenue Series A (FGIC Insured) Zero Coupon (Yield to Maturity 6.800%) 6/1/07 .............................. 2,370 1,659 Dauphin County Industrial Development Authority Water Development Revenue (General Waterworks Corporation) 6.900% 6/1/24 (a) ......................................................................... 3,400 4,220 Montgomery County Industrial Development Authority Retirement Community Revenue (Adult Communities Total Services) Series B 5.750% 11/15/17 .................................................................. 3,500 3,627 Pennsylvania State GO 6.250% 7/1/12 .......................................................... 11,200 13,090 Philadelphia School District GO Series A (MBIA Insured) 4.500% 4/1/18 ............................................................................. 1,385 1,293 ------- 23,889 Puerto Rico (0.2%) Puerto Rico Commonwealth GO 4.750% 7/1/23 .................................................... 1,400 1,332 Rhode Island (1.0%) Rhode Island Housing & Mortgage Finance Corporation 7.550% 10/1/22 (a) ........................................................................ 5,650 5,961 South Carolina (2.4%) Calhoun County Solid Waste Disposal Facilities Revenue (Eastman Kodak, escrowed in U.S. Treasury securities) 6.750% 5/1/17 (a) ........................... 3,000 3,641 Richland County Solid Waste Disposal Facilities Revenue (Union Camp) Series B 7.125% 9/1/21 (a) ................................................... 5,000 5,394 South Carolina Housing Finance & Development Authority Series C 7.750% 7/1/22 (a) ................................................................ 4,775 4,966 ------- 14,001 South Dakota (3.0%) Heartland Consumers Power District Electric Revenue (FSA Insured) 6.000% 1/1/17 ............................................................... 8,000 9,050 South Dakota Student Loan Corporation Revenue Series B (escrowed in U.S. Treasury securities) 7.450% 8/1/00 (a) .................................. 7,990 8,459 ------- 17,509 Tennessee (2.0%) Tennessee Housing Development Agency 7.300% 7/1/11 (a) ....................................... 10,000 10,550 Texas (4.5%) Brazos Higher Education Authority Subordinate Series C-2 5.875% 6/1/04 (a) ......................................................................... 2,785 2,837 Harris County Certificates of Obligation 4.500% 10/1/19 ...................................... 1,630 1,522 Houston Water & Sewer System Revenue (AMBAC Insured) Zero Coupon (Yield to Maturity 6.800%) 12/1/08 ............................................ 4,000 2,610 Zero Coupon (Yield to Maturity 6.813%) 12/1/09 ............................................ 4,000 2,475 Zero Coupon (Yield to Maturity 6.850%) 12/1/10 ............................................ 3,750 2,194 Managed Municipals Fund Continued - ------------------------------------------------------------------------------------------------------------------------------------ Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Texas (Continued) Richardson Hospital Authority (Baylor/Richardson) 5.625% 12/1/28 ........................................................................ $ 500 $ 492 San Antonio Electric & Gas Series A 4.500% 2/1/21 ........................................ 1,500 1,399 Texas GO (escrowed in U.S. Treasury securities, prerefunded to 12/1/99) 8.300% 12/1/16 ................................................ 10,275 10,728 Texas Municipal Power Agency Revenue (AMBAC Insured) Zero Coupon (Yield to Maturity 6.900%) 9/1/08 ......................................... 1,475 974 Travis County Housing Finance Corporation Mortgage Revenue (collateralized by GNMA, FGIC Insured) 8.000% 9/1/10 (a) .............................. 895 940 -------- 26,171 Vermont (0.2%) Vermont Housing Finance Agency Single-Family Mortgage Series 1 8.150% 5/1/25 (a) ..................................................................... 1,095 1,107 Virginia (0.4%) Virginia Beach GO 12.750% 7/15/01 ........................................................ 2,000 2,438 Washington (5.3%) Port of Longview Industrial Development Corporation Solid Waste Disposal Revenue (Weyerhaeuser Company) 6.875% 10/1/08 (a) .................................................................... 8,750 10,106 Washington GO Series B & AT-7 6.000% 6/1/13 (escrowed in U.S. Treasury securities) .................................. 2,190 2,521 6.000% 6/1/13 ......................................................................... 5,090 5,834 Washington Public Power Supply System Nuclear Project No. 2 Series 1992A 6.300% 7/1/12 ............................................................ 3,500 4,056 Washington Public Power Supply System Nuclear Project No. 3 Series 1989B Zero Coupon (Yield to Maturity 6.950%) 7/1/05 ............................ 5,000 3,831 Series 1989B Zero Coupon (Yield to Maturity 6.700%) 7/1/08 (FGIC Insured) ...................................................................... 7,000 4,585 -------- 30,933 Wisconsin (0.3%) Wisconsin Housing & Economic Development Authority Series D 7.750% 9/1/10 ................................................................ 1,360 1,392 -------- ==================================================================================================================================== Total Municipal Securities (Cost $514,021) (b) ................................................................... $577,641 Other Assets, Less Liabilities (0.3%) .................................................... 1,806 -------- Total Net Assets (100.0%) ................................................................ $579,447 ======== ==================================================================================================================================== Notes to Portfolio of Investments - -------------------------------------------------------------------------------- (a)Security is subject to federal alternative minimum tax. At December 31, 1998, the market value of these securities represented 25.6% of total net assets. (b)At December 31, 1998, the cost of investments for financial reporting and federal income tax purposes was identical. Net unrealized appreciation was $63,620, consisting of gross unrealized appreciation of $63,744 and gross unrealized depreciation of $124. Variable rate demand bonds (VRDB) are securities whose yields are periodically reset at levels that are generally comparable to tax-exempt commercial paper. These securities are payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit from a major bank. See accompanying Notes to Financial Statements.
SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio of Investments at December 31, 1998 (Dollar amounts in thousands) (Unaudited)
Principal Market Municipal Securities (98.9%) Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Arizona (2.3%) Arizona Health Facilities Authority Hospital System Revenue (Phoenix Memorial Hospital) 8.125% 6/1/12.................................................. $ 2,500 $ 2,675 Pima County Industrial Development Authority IDR (Tucson Electric Power Company) Series B 6.000% 9/1/29 .................................................................. 1,000 998 Series C 6.000% 9/1/29 .................................................................. 4,000 3,990 ------ 7,663 California (2.9%) California Health Facilities Financing Authority Revenue (Sutter Health) Series A VRDB 5.100% ...................................................... 1,200 1,200 Foothill/Eastern Transportation Corridor Agency Toll Road Revenue Series 1995A 6.500% 1/1/32 ........................................................ 2,000 2,240 Long Beach Aquarium of the Pacific Revenue Series A 6.125% 7/1/23 ............................................................................. 5,750 6,088 ------ 9,528 Colorado (6.5%) Adams County Single-Family Mortgage Revenue Series B (escrowed in U.S. Treasury securities) 11.250% 9/1/11 (prerefunded to 9/1/09) .................................................. 325 509 11.250% 9/1/11 (prerefunded to 9/1/10) .................................................. 360 574 11.250% 9/1/11 .......................................................................... 220 358 11.250% 9/1/12 .......................................................................... 1,440 2,383 Arapahoe County Capital Improvement Trust Fund Highway Revenue (escrowed in U.S. Treasury securities, prerefunded to 8/31/05) 7.000% 8/31/26 ............................................................................ 7,000 8,356 Briargate Public Building Authority Landowner Assessment Lien Series 1985A 10.250% 12/15/00 (b) ......................................................... 220 187 Series 1986A 9.500% 12/15/07 (b) .......................................................... 807 686 Colorado Health Facilities Authority Revenue (Birchwood Manor Apartments, collateralized by GNMA securities Series A 7.250% 4/1/11 .................................................................. 645 672 (PSL Health Systems, escrowed in U.S. Treasury securities, prerefunded to 2/15/01) Series B 8.500% 2/15/21 ......................................... 3,250 3,628 Denver City and County Airport Revenue Series D 7.750% 11/15/21 (escrowed in U.S. Treasury securities, prerefunded to 11/15/01) (a) ............................................................ 830 933 7.750% 11/15/21 (a) ....................................................................... 3,170 3,491 ------ 21,777 Connecticut (0.9%) Connecticut State Development Authority PCR (Connecticut Light & Power) 5.850% 9/1/28 ................................................. 2,900 2,911 District of Columbia (2.2%) District of Columbia GO Series A 6.000% 6/01/26 .............................................. 7,000 7,350 Florida (3.3%) Florida Housing Finance Agency Multi-Family Housing Revenue (Palm-Aire) 10.000% 1/1/20 (a) (b) ........................................................ 2,731 2,348 Leesburg Hospital Revenue (Leesburg Regional Medical Center, escrowed in U.S. Treasury securities, prerefunded to 7/1/02) Series A 7.375% 7/1/11 .................................................................... 775 880 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Florida (Continued) Orange County Health Facilities Authority (Orlando Lutheran Towers) 8.625% 7/1/20 ................................................... $ 5,000 $ 5,856 Orlando Special Assessment Revenue Series A (Conroy Road Interchange Project) 5.500% 5/1/10 ........................................................................... 200 199 5.800% 5/1/26 ........................................................................... 500 499 Stoneybrook Community Development District Capital Improvement Revenue Series B 5.700% 5/1/08 .................................................................. 760 759 Series A 6.100% 5/1/19 .................................................................. 330 330 ------- 10,871 Georgia (3.5%) Cartersville Development Authority (Anheuser-Busch) 7.375% 5/1/09 (a) ......................................................................... 3,000 3,656 Municipal Electric Authority of Georgia Power Revenue Series V 6.600% 1/1/18 ............................................................................. 6,065 7,096 Rockdale County Development Authority Solid Waste Disposal Revenue (Visy Paper) 7.500% 1/1/26 (a) ............................................................ 1,000 1,065 ------- 11,817 Idaho (0.6%) Idaho Housing Agency Single-Family Mortgage Series B 7.500% 7/1/24 (a) ......................................................................... 2,060 2,163 Illinois (2.5%) Chicago Skyway Toll Bridge Revenue (escrowed in U.S. Treasury securities, prerefunded to 1/1/04) 6.750% 1/1/17 ............................................................................. 1,500 1,710 Illinois Development Finance Authority (Catholic Charities) 5.950% 1/1/09 ........................................................ 1,400 1,463 (Latin School of Chicago) 5.650% 8/1/28 ................................................... 1,725 1,716 Illinois Health Facilities Authority Revenue (United Medical Center, escrowed in U.S. Treasury securities, prerefunded to 7/1/03) 8.125% 7/1/06 .................................................... 2,225 2,500 (Edward Hospital Association, escrowed in U.S. Treasury securities, prerefunded to 2/15/02) 7.000% 2/15/22 .................................................. 685 760 Illinois Housing Development Authority Multi-Family Housing Series C 7.400% 7/1/23 .................................................................... 140 146 ------- 8,295 Indiana (12.5%) Hammond Sewer & Solid Waste Disposal Revenue (American Maize Products, gtd. by Eridania Beghin-Say) 8.000% 12/1/24 (a) ........................................................................ 4,000 4,680 Indiana Health Facility Financing Authority Revenue (Metro Health/Indiana Project) 6.400% 12/1/33 ............................................. 1,500 1,489 Indiana State Development Finance Authority Revenue (Inland Steel Company) 5.750% 10/1/11 ..................................................... 5,000 4,737 Indiana Transportation Finance Authority Airport Facilities Lease Revenue Series A 6.250% 11/1/16 (escrowed in U.S. Treasury securities, prerefunded to 11/1/02) ............................................................... 3,550 3,923 6.250% 11/1/16 .......................................................................... 950 1,014 Indianapolis Airport Authority Revenue Special Facilities (Federal Express) 7.100% 1/15/17 (a) ...................................................... 5,000 5,556 (United Airlines) 6.500% 11/15/31 (a) ..................................................... 7,000 7,490 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Indiana (Continued) Indianapolis Local Public Improvement Bond Bank Series C (escrowed in U.S. Treasury securities, prerefunded to 1/1/02) 6.700% 1/1/17 ............................................................................. $ 8,900 $ 9,790 New Castle Economic Development Revenue 8.650% 4/1/17 (escrowed in U.S. Treasury securities, prerefunded to 4/1/99) .................................................................. 2,860 3,039 Zero Coupon (Yield to Maturity 10.855%) 3/1/18 (b) ........................................ 30,655 77 ------- 41,795 Iowa (0.7%) Iowa Housing Finance Authority (AMBAC Insured) Zero Coupon (Yield to Maturity 10.262%) 9/1/16 ............................................ 15,620 2,187 Kansas (0.6%) Wichita Revenue (CSJ Health System) 7.000% 11/15/18 .......................................... 2,000 2,158 Louisiana (2.2%) De Soto Parish Environmental Improvement Revenue (International Paper) Series A 7.700% 11/1/18 (a) ......................................... 2,500 2,881 Louisiana Public Facilities Authority Hospital Revenue (Women's Hospital Foundation, escrowed in U.S. Treasury securities, prerefunded to 10/1/02) 7.250% 10/1/22 ...................................... 2,300 2,611 (Progressive Healthcare Providers) 6.375% 10/1/28 ......................................... 2,000 1,952 ------- 7,444 Massachusetts (2.7%) Massachusetts Bay Transportation Authority Series 92B 6.200% 3/1/16 ............................................................................. 5,825 6,713 Massachusetts State Health & Educational Facilities Authority Revenue (Dana Farber Cancer Institute) 6.250% 12/1/22 ............................................. 2,000 2,175 ------- 8,888 Michigan (0.5%) Michigan Strategic Fund Limited Obligation Revenue (Imperial Holly) Series C 6.550% 11/1/25 (a) .............................................. 1,500 1,504 Minnesota (0.4%) Minneapolis Revenue (Walker Methodist Senior Services) Series C 6.000% 11/15/28 .................................................................. 1,300 1,298 Mississippi (3.4%) Adams County Hospital Revenue (Jefferson Davis Memorial Hospital, escrowed in U.S. Treasury securities, prerefunded to 10/1/01) 7.900% 10/1/08 ............................................................................ 750 846 Claiborne County PCR (System Energy Resources) 9.500% 12/1/13 ............................................................................ 600 626 7.300% 5/1/25 ............................................................................. 2,000 2,100 Lowndes County Solid Waste Disposal PCR (Weyerhaeuser Company) 6.800% 4/1/22 ...................................................... 5,995 7,329 Perry County PCR (Leaf River Forest Project, LOC Wachovia Bank) VRDB 5.100% ............................................................................... 400 400 ------- 11,301 Missouri (1.6%) Missouri Health & Educational Facilities Authority Health Facilities Revenue (Lutheran Senior Services) 5.750% 2/1/17 ............................................................................. 2,000 2,077 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Missouri (Continued) St. Louis Industrial Development Authority IDR (Kiel Center) 7.875% 12/1/24 (a) ...................................................................... $ 3,000 $ 3,285 ------- 5,362 Montana (0.3%) Montana State Board of Housing Single-Family Mortgage Series B-1 7.300% 10/1/17 ............................................................... 375 393 Series B-2 7.500% 4/1/23 (a) ............................................................ 415 435 ------- 828 Nebraska (1.3%) Nebraska Higher Education Loan Program Series A-6 Junior Subordinated (MBIA Insured) 6.450% 6/1/18 (a) .................................... 4,000 4,300 Nevada (1.6%) Clark County IDR (Nevada Power Company) Series A 5.900% 11/1/32 (a) ............................................................. 3,000 3,030 Humboldt County PCR (Idaho Power Company) 8.300% 12/1/14 ................................... 2,000 2,372 ------- 5,402 New Jersey (3.6%) New Jersey Economic Development Authority Revenue Series A (Winchester Gardens Project, Marcus L. Ward Home) 8.625% 11/1/25 ........................................................................ 5,000 5,756 (Kapkowski Road Landfill, NJ Metromall Urban Renewal) 6.375% 4/1/31 ......................................................................... 6,000 6,188 ------- 11,944 New Mexico (2.9%) Farmington PCR (Public Service Company of New Mexico) 6.300% 12/1/16 ................................... 5,000 5,294 (Tucson Electric Power Company) 6.950% 10/1/20 .......................................... 2,000 2,232 (Arizona Public Service Company, LOC Barclays Bank) VRDB 5.100% ........................................................................... 200 200 New Mexico Educational Assistance Foundation Student Loan Revenue Subordinated Series A-2 6.650% 11/1/25 (a) ...................................... 1,955 2,099 ------- 9,825 New York (4.3%) New York City GO Series B (FGIC Insured) VRDB 5.100% ..................................................... 300 300 Series B 7.250% 8/15/07 ................................................................. 1,000 1,200 Series G 5.750% 2/1/14 .................................................................. 5,720 6,113 New York City Industrial Development Authority Special Facility Revenue (Terminal One Group Association) 6.000% 1/1/15 (a) ....................................................................... 3,465 3,712 New York City Municipal Water Finance Authority Water & Sewer Systems Revenue Series A VRDB 5.200% .................................................... 800 800 Triborough Bridge & Tunnel Authority Revenue Series E 7.250% 1/1/10 ........................................................................... 2,000 2,353 ------- 14,478 North Carolina (2.9%) North Carolina Eastern Municipal Power Agency Revenue Series A 6.500% 1/1/18 (escrowed in U.S. Treasury securities) ........................... 3,320 3,980 Series A 6.500% 1/1/18 .................................................................. 1,680 1,926 Series B 6.000% 1/1/26 .................................................................. 3,500 3,819 ------- 9,725 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Ohio (4.9%) Franklin County Hospital Revenue (Doctors OhioHealth Corporation) 5.600% 12/1/28 ......................................... $ 2,650 $ 2,587 Greater Allen County Housing Development Corporation Revenue (Steiner-McBride Apartments) 10.250% 9/1/03 ............................................. 1,385 1,388 Montgomery County Health Care Facilities Revenue (Friendship Village of Dayton) Series B 6.250% 2/1/22 ................................... 5,250 5,322 Ohio State Water Development Authority Solid Waste Disposal Revenue (Bay Shore Power Company) Series A 5.875% 9/1/20 (a) ....................................................................... 7,000 7,053 ------- 16,350 Pennsylvania (10.1%) Allentown Area Hospital Authority Revenue (Sacred Heart Hospital) 7.500% 7/1/06 ................................................................. 3,460 3,754 Beaver County Industrial Development Authority PCR (Toledo Edison Company) 7.625% 5/1/20 ................................................... 4,900 5,580 Dauphin County Industrial Development Authority Water Development Revenue (General Waterworks Corporation) Series A 6.900% 6/1/24 (a) .............................................................. 3,200 3,972 Montgomery County Higher Education & Health Authority Hospital Revenue (Jeanes Health Systems, escrowed in U.S. Treasury securities, prerefunded to 7/1/00) 8.750% 7/1/20 ............................... 3,200 3,504 Pennsylvania Economic Development Financing Authority Resource Recovery Revenue (Northampton Generating) Series B 6.750% 1/1/07 (a) ............................................................ 3,000 3,263 Series A 6.500% 1/1/13 (a) ............................................................ 2,000 2,120 Philadelphia Hospitals & Higher Education Facilities Authority Revenue (Temple University Hospital) 5.875% 11/15/23 .................................... 4,000 4,145 Philadelphia Municipal Authority Revenue Lease Series 1993D 6.250% 7/15/13 .......................................................................... 2,500 2,669 Philadelphia Water & Sewer Revenue Tenth Series (escrowed in U.S. Treasury securities) 7.350% 9/1/04 (d) ....................................................................... 4,085 4,626 ------- 33,633 Puerto Rico (1.7%) Puerto Rico Highway & Transportation Authority Series T 6.625% 7/1/18 (escrowed in U.S. Treasury securities, prerefunded to 7/1/02) ................................................................ 3,200 3,552 Series V 6.625% 7/1/12 .................................................................. 2,000 2,185 ------- 5,737 South Dakota (0.9%) South Dakota Student Loan Assistance Corporation Series C (escrowed in U.S. Treasury securities) 7.450% 8/1/00 (a) ................................ 2,700 2,859 Tennessee (0.4%) Metropolitan Government of Nashville & Davidson Counties Health and Educational Facilities Board Revenue (The Blakeford at Green Hills) 5.650% 7/1/24 ........................................................... 1,500 1,474 Texas (6.9%) Abilene Health Facilities Development Corporation Retirement Facilities Revenue (Sears Methodist Retirement) Series A 5.900% 11/15/25 ................................................................ 2,100 2,082 Alliance Airport Authority Special Facilities Revenue (American Airlines) 7.000% 12/1/11 (a) .................................................. 4,070 4,808 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Texas (Continued) Brazos Higher Education Authority Subordinated Series C-2 5.875% 6/1/04 (a) ......................................................................... $ 835 $ 851 Harris County Housing Finance Corporation Single-Family Mortgage Revenue 9.625% 3/15/03 ........................................................... 171 172 Houston Airport System Revenue (Continental Airlines) 6.125% 7/15/17 (a) ........................................................................ 4,000 4,165 6.125% 7/15/27 (a) ........................................................................ 2,000 2,075 Port of Bay City Authority Matagorda County Revenue (Hoechst Celanese Corporation) 6.500% 5/1/26 (a) .......................................... 3,000 3,300 Richardson Hospital Authority (Baylor/Richardson) 5.625% 12/1/28 ............................. 900 887 Texas City IDR (Atlantic Richfield Company) 7.375% 10/1/20 ............................................................................ 2,000 2,610 Texas Housing Agency Residential Development Revenue Series D 8.400% 1/1/21 (a) ................................................................ 255 264 Tyler Health Facilities Development Corporation (Mother Francis Hospital) Series A 5.625% 7/1/13 .......................................... 1,785 1,796 ------- 23,010 Utah (0.2%) Utah Housing Finance Agency Single-Family Mortgage Series B-2 7.750% 1/1/23 (a) .............................................................. 160 167 Series C-3 7.550% 7/1/23 (a) .............................................................. 355 372 ------- 539 Virginia (2.2%) Pittsylvania County Industrial Development Authority Revenue (Multitrade of Pittsylvania County L.P.) Series A 7.450% 1/1/09 (a) ....................................................................... 3,500 3,846 7.550% 1/1/19 (a) ....................................................................... 3,100 3,402 ------- 7,248 Washington (4.1%) Quincy Water and Sewer Revenue Series I (escrowed in U.S. Treasury securities, prerefunded to 11/1/00) 9.250% 11/1/10 ............................................................................ 2,375 2,580 Washington State Health Care Facilities Authority Revenue (Sacred Heart Medical Center) 6.875% 2/15/12 .............................................. 1,500 1,626 Washington State Housing Finance Commission Single-Family Mortgage Revenue Series C (collateralized by GNMA/FNMA securities) Zero Coupon (Yield to Maturity 7.750%) 1/1/22 (a) ....................................... 1,455 271 Zero Coupon (Yield to Maturity 7.750%) 7/1/22 (a) ....................................... 1,605 287 Zero Coupon (Yield to Maturity 7.750%) 1/1/23 (a) ....................................... 1,605 277 Zero Coupon (Yield to Maturity 7.750%) 7/1/23 (a) ....................................... 1,610 268 Zero Coupon (Yield to Maturity 7.750%) 1/1/24 (a) ....................................... 1,615 258 Zero Coupon (Yield to Maturity 7.750%) 7/1/24 (a) ....................................... 1,605 249 Washington State Public Power Supply System Nuclear Project No. 2 Revenue Series A Zero Coupon (Yield to Maturity 6.888%) 7/1/07 ........................................... 6,945 4,792 6.300% 7/1/12 ........................................................................... 2,500 2,897 ------- 13,505 Wisconsin (1.2%) Wisconsin State Health & Educational Facilities Authority Revenue (Attic Angel Community) 5.750% 11/15/27 ................................................... 1,250 1,222 (Clement Manor) 5.750% 8/15/24 ............................................................ 3,000 2,906 ------- 4,128 SR&F High-Yield Municipals Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Continued Principal Market Amount Value - ------------------------------------------------------------------------------------------------------------------------------------ Wyoming (0.1%) Wyoming Community Development Authority Single-Family Mortgage Series A 7.375% 6/1/17 ................................................... $ 180 $ 189 -------- ==================================================================================================================================== Total Municipal Securities (Cost $304,861) (c) ............................................................... $329,486 Other Assets, Less Liabilities (1.1%) ................................................ 3,621 -------- Total Net Assets (100.0%) ............................................................ $333,107 ======== Notes to Portfolio of Investments ==================================================================================================================================== (a)Security is subject to the federal alternative minimum tax. At December 31, 1998, the market value of these securities represented 29.0% of total net assets. (b)Issuer is in default of certain debt covenants. Income is not being accrued. (c)At December 31, 1998, the cost of investments for financial reporting and federal income tax purposes was identical. Net unrealized appreciation was $24,625, consisting of gross unrealized appreciation of $27,983 and gross unrealized depreciation of $3,358. (d)Security was pledged to cover margin requirements for open future contracts. The following contracts were open at December 31, 1998: Number of Contract Unrealized Type Position Contracts Value Expiration Gain ---------- -------- ---------- -------- -------- --------- U.S. T-Bond Long 85 $10,861 3/99 $103 Variable rate demand bonds (VRDB) are securities whose yields are periodically reset at levels that are generally comparable to tax-exempt commercial paper. These securities are payable on demand within seven calendar days and normally incorporate an irrevocable letter of credit or line of credit from a major bank. See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities - ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1998 (All amounts in thousands, except per-share data) (Unaudited)
Municipal Money Intermediate Managed High-Yield Market Municipals Municipals Municipals Fund Fund Fund Fund ----------- ----------- ----------- ----------- Assets Investment in Portfolio, at value ............................................... $ 122,442 $ -- $ -- $ 330,655 Investments, at market value (cost $185,135 and $514,021, respectively) ........ -- 199,477 577,641 -- Accrued interest receivable ..................................................... -- 3,231 10,066 -- Receivable for investments sold ................................................. -- 3,020 -- -- Receivable for fund shares sold ................................................. 777 52 37 66 Cash ............................................................................ 75 54 -- 25 Other assets .................................................................... 31 40 88 55 --------- --------- --------- --------- Total assets ................................................................. 123,325 205,874 587,832 330,801 --------- --------- --------- --------- Liabilities Payable for investments purchased ............................................... -- 4,303 6,333 -- Dividends payable ............................................................... 80 771 1,484 921 Payable for fund shares redeemed ................................................ 686 74 59 187 Payable to investment adviser and transfer agent ................................ 35 122 332 76 Other liabilities ............................................................... 33 72 177 134 --------- --------- --------- --------- Total liabilities ............................................................ 834 5,342 8,385 1,318 --------- --------- --------- --------- Net assets ................................................................... $ 122,491 $ 200,532 $ 579,447 $ 329,483 ========= ========= ========= ========= Analysis of Net Assets Paid-in capital ................................................................. $ 122,502 $ 186,155 $ 515,830 $ 316,551 Net unrealized appreciation on investments ...................................... -- 14,342 63,620 24,719 Accumulated net realized gains (losses) on investments .......................... (11) 35 (3) (11,787) --------- --------- --------- --------- Net assets ................................................................... $ 122,491 $ 200,532 $ 579,447 $ 329,483 ========= ========= ========= ========= Shares outstanding (unlimited number authorized) ................................ 122,429 17,227 61,391 27,509 ========= ========= ========= ========= Net asset value per share ....................................................... $ 1.00 $ 11.64 $ 9.44 $ 11.98 ========= ========= ========= ========= See accompanying Notes to Financial Statements.
Statements of Operations - ------------------------------------------------------------------------------------------------------------------------------------ For the Six Months Ended December 31, 1998 (All amounts in thousands) (Unaudited)
Municipal Money Intermediate Managed High-Yield Market Municipals Municipals Municipals Fund Fund Fund Fund ----------- ----------- ----------- ----------- Investment Income Tax-exempt interest allocated from Portfolio ................................ $ 2,097 $ -- $ -- $ 10,329 Tax-exempt interest ......................................................... -- 5,279 16,783 -- -------- -------- -------- -------- Total investment income .................................................. 2,097 5,279 16,783 10,329 -------- -------- -------- -------- Expenses Management fees ............................................................. -- 441 1,214 -- Expenses allocated from Portfolio ........................................... 181 -- -- 774 Transfer agent fees ......................................................... 90 141 412 240 Administrative fees ......................................................... 149 138 332 209 Printing and postage ........................................................ 12 13 35 24 Accounting fees ............................................................. 13 14 19 16 Audit and legal fees ........................................................ 11 13 14 5 SEC and state registration fees ............................................. 12 14 15 19 Trustees' fees .............................................................. 3 6 7 1 Other ....................................................................... 12 23 74 28 -------- -------- -------- -------- Total expenses ........................................................... 483 803 2,122 1,316 Reimbursement of expenses by investment adviser ............................. (71) (98) -- -- -------- -------- -------- -------- Net expenses ............................................................. 412 705 2,122 1,316 -------- -------- -------- -------- Net investment income .................................................... 1,685 4,574 14,661 9,013 -------- -------- -------- -------- Realized and Unrealized Gains (Losses) on Investments Net realized gains (losses) on investments allocated from Portfolio ......... (3) -- -- 1,344 Net realized gains on investments ........................................... -- 418 1,520 -- Net change in unrealized appreciation or depreciation on investments ........ -- 1,606 2,035 (1,364) -------- -------- -------- -------- Net gains (losses) on investments ........................................ (3) 2,024 3,555 (20) -------- -------- -------- -------- Net Increase in Net Assets Resulting from Operations ........................ $ 1,682 $ 6,598 $ 18,216 $ 8,993 ======== ======== ======== ======== See accompanying Notes to Financial Statements
Statements of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ For the Six Months Ended December 31, 1998 (All amounts in thousands) (Unaudited)
Municipal Money Intermediate Market Fund Municipals Fund Six Months Year Six Months Year Ended Ended Ended Ended Dec. 31, June 30, Dec. 31, June 30, 1998 1998 1998 1998 ----------------------- ------------------------ Operations Net investment income ...................................................... $ 1,685 $ 3,771 $ 4,574 $ 9,378 Net realized gains (losses) on investments ................................. (3) -- 418 753 Net change in unrealized appreciation or depreciation on investments ....... -- -- 1,606 3,083 --------- --------- --------- --------- Net increase in net assets resulting from operations .................... 1,682 3,771 6,598 13,214 --------- --------- --------- --------- Distributions to Shareholders Distributions from net investment income ................................... (1,685) (3,771) (4,574) (9,378) Distributions from net capital gains ....................................... -- -- (925) (545) --------- --------- --------- --------- Total distributions to shareholders ..................................... (1,685) (3,771) (5,499) (9,923) --------- --------- --------- --------- Share Transactions Subscriptions to fund shares ............................................... 81,459 177,051 22,187 31,594 Value of distributions reinvested .......................................... 1,374 2,975 3,280 5,718 Redemptions of fund shares ................................................. (75,618) (183,171) (21,685) (40,958) --------- --------- --------- --------- Net increase (decrease) from share transactions ......................... 7,215 (3,145) 3,782 (3,646) --------- --------- --------- --------- Net increase (decrease) in net assets ................................... 7,212 (3,145) 4,881 (355) Total Net Assets Beginning of period ........................................................ 115,279 118,424 195,651 196,006 --------- --------- --------- --------- End of period .............................................................. $ 122,491 $ 115,279 $ 200,532 $ 195,651 ========= ========= ========= ========= Analysis of Changes in Shares of Beneficial Interest Subscriptions to fund shares ............................................... 81,459 177,051 1,898 2,733 Issued in reinvestment of distributions .................................... 1,374 2,975 281 494 Redemptions of fund shares ................................................. (75,618) (183,171) (1,857) (3,542) --------- --------- --------- --------- Net increase (decrease) in fund shares .................................. 7,215 (3,145) 322 (315) Shares outstanding at beginning of period .................................. 115,214 118,359 16,905 17,220 --------- --------- --------- --------- Shares outstanding at end of period ........................................ 122,429 115,214 17,227 16,905 ========= ========= ========= ========= See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ For The Six Months Ended December 31, 1998 (All amounts in thousands) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------
Managed High-Yield Municipals Fund Municipals Fund Six Months Year Six Months Year Ended Ended Ended Ended Dec. 31, June 30, Dec. 31, June 30, 1998 1998 1998 1998 ----------------------- ------------------------ Operations Net investment income ...................................................... $ 14,661 $ 30,361 $ 9,013 $ 17,880 Net realized gains (losses) on investments ................................. 1,520 1,473 1,344 (3,850) Net change in unrealized appreciation or depreciation on investments ....... 2,035 15,722 (1,364) 11,887 --------- --------- --------- --------- Net increase in net assets resulting from operations .................... 18,216 47,556 8,993 25,917 --------- --------- --------- --------- Distributions to Shareholders Distributions from net investment income ................................... (14,661) (30,361) (9,013) (17,880) Distributions from net capital gains ....................................... -- -- -- -- --------- --------- --------- --------- Total distributions to shareholders ..................................... (14,661) (30,361) (9,013) (17,880) --------- --------- --------- --------- Share Transactions Subscriptions to fund shares ............................................... 22,405 42,525 35,388 75,509 Value of distributions reinvested .......................................... 8,166 16,076 4,966 9,200 Redemptions of fund shares ................................................. (37,817) (75,024) (52,631) (57,036) --------- --------- --------- --------- Net increase (decrease) from share transactions ......................... (7,246) (16,423) (12,277) 27,673 --------- --------- --------- --------- Net increase (decrease) in net assets ................................... (3,691) 772 (12,297) 35,710 Total Net Assets Beginning of period ........................................................ 583,138 582,366 341,780 306,070 --------- --------- --------- --------- End of period .............................................................. $ 579,447 $ 583,138 $ 329,483 $ 341,780 ========= ========= ========= ========= Analysis of Changes in Shares of Beneficial Interest Subscriptions to fund shares ............................................... 2,371 4,557 2,942 6,341 Issued in reinvestment of distributions .................................... 865 1,721 414 771 Redemptions of fund shares ................................................. (4,003) (8,036) (4,389) (4,792) --------- --------- --------- --------- Net increase (decrease) in fund shares .................................. (767) (1,758) (1,033) 2,320 Shares outstanding at beginning of period .................................. 62,158 63,916 28,542 26,222 --------- --------- --------- --------- Shares outstanding at end of period ........................................ 61,391 62,158 27,509 28,542 ========= ========= ========= ========= See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities - -------------------------------------------------------------------------------- December 31, 1998 (All amounts in thousands) (Unaudited)
SR&F SR&F Municipal High-Yield Money Market Municipals Portfolio Portfolio ---------- ---------- Assets Investments, at value (cost $139,311 and $304,861, respectively) ..... $139,311 $329,486 Accrued interest receivable .......................................... 977 6,132 Receivable for investments sold ...................................... 5,687 785 Cash ................................................................. 11 343 -------- -------- Total assets ...................................................... 145,986 336,746 -------- -------- Liabilities Payable for investments purchased .................................... 9,195 3,528 Payable to investment adviser ........................................ 31 102 Other liabilities .................................................... 44 9 -------- -------- Total liabilities ................................................. 9,270 3,639 -------- -------- Net assets applicable to investors' beneficial interest ........... $136,716 $333,107 ======== ========
Statements of Operations - -------------------------------------------------------------------------------- For the Six Months Ended December 31, 1998 (All amounts in thousands) (Unaudited)
SR&F SR&F Municipal High-Yield Money Market Municipals Portfolio Portfolio ---------- ---------- Investment Income Tax-exempt interest ................................................... $ 2,380 $ 10,388 -------- -------- Expenses Management fees ....................................................... 170 730 Accounting fees ....................................................... 14 16 Audit and legal fees .................................................. 9 23 Trustees' fees ........................................................ 4 6 Other ................................................................. 9 3 -------- -------- Total expenses ..................................................... 206 778 -------- -------- Net investment income .............................................. 2,174 9,610 -------- -------- Realized and Unrealized Losses on Investments Net realized gains (losses) on investments ............................ (3) 1,334 Net change in unrealized appreciation or depreciation on investments .. -- (1,355) -------- -------- Net losses on investments .......................................... (3) (21) -------- -------- Net Increase in Net Assets Resulting from Operations .................. $ 2,171 $ 9,589 ======== ======== See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets - -------------------------------------------------------------------------------- (All amounts in thousands) (Unaudited)
SR&F Municipal SR&F High-Yield Money Market Portfolio Municipals Portfolio Six Months Period Six Months Period Ended Ended Ended Ended Dec. 31, June 30, Dec. 31, June 30, 1998 1998 1998 1998 (a) --------- --------- --------- --------- Operations Net investment income .......................................... $ 2,174 $ 4,891 $ 9,610 $ 7,847 Net realized gains (losses) on investments ..................... (3) -- 1,334 (214) Net change in unrealized appreciation or depreciation on investments ................................. -- -- (1,355) (1,762) --------- --------- --------- --------- Net increase in net assets resulting from operations ........................................... 2,171 4,891 9,589 5,871 --------- --------- --------- --------- Transactions in Investors' Beneficial Interests Contributions .................................................. 37,533 80,237 21,587 349,343 Withdrawals .................................................... (35,006) (92,038) (41,235) (12,048) --------- --------- --------- --------- Net increase (decrease) from transactions in investors' beneficial interests ........................ 2,527 (11,801) (19,648) 337,295 --------- --------- --------- --------- Net increase (decrease) in net assets ....................... 4,698 (6,910) (10,059) 343,166 Total Net Assets Beginning of period ............................................ 132,018 138,928 343,166 -- --------- --------- --------- --------- End of period .................................................. $ 136,716 $ 132,018 $ 333,107 $ 343,166 ========= ========= ========= ========= (a) From commencement of operations on February 2, 1998. See accompanying Notes to Financial Statements.
Notes to Financial Statements - -------------------------------------------------------------------------------- (All amounts, except per-share amounts, in thousands) Note 1. Organization Stein Roe Municipal Money Market Fund, Stein Roe Intermediate Municipals Fund, Stein Roe Managed Municipals Fund and Stein Roe High-Yield Municipals Fund (the "Funds") are series of Stein Roe Municipal Trust (the "Trust"), an open-end management investment company organized as a Massachusetts business trust. Municipal Money Market Fund and High-Yield Municipals Fund invest substantially all of their assets in SR&F Municipal Money Market Portfolio and SR&F High-Yield Municipals Portfolio (the "Portfolios"), respectively. The Portfolios are series of SR&F Base Trust, a Massachusetts common law trust organized under an Agreement and Declaration of Trust dated August 23, 1993. SR&F High-Yield Municipals Portfolio commenced operations on February 2, 1998. At commencement, High-Yield Municipals Fund contributed $335,711 in securities and other assets to SR&F High-Yield Municipals Portfolio in exchange for beneficial ownership of the Portfolio. At February 4, 1998, Stein Roe Advisor High-Yield Municipals Fund contributed cash of $100 to the Portfolio. The Portfolios allocate income, expenses, realized and unrealized gains and losses to each investor on a daily basis, based on their respective percentage of ownership. At December 31, 1998, Stein Roe Municipal Money Market Fund and Colonial Municipal Money Market Fund owned 89.6% and 10.4%, respectively, of SR&F Municipal Money Market Portfolio; and Stein Roe High-Yield Municipals Fund and Stein Roe Advisor High-Yield Municipals Fund owned 99.3% and 0.7%, respectively, of SR&F High-Yield Municipals Portfolio. Note 2. Significant Accounting Policies The following summarizes the significant accounting policies of the Funds and Portfolios. These policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Investment Transactions and Investment Income Investment transactions are accounted for on trade date. Interest income, including discount accretion and premium amortization, is recorded daily on the accrual basis. Realized gains or losses from investment transactions are reported on an identified cost basis. Securities purchased on a when-issued or delayed delivery basis may be settled a month or more after the transaction date. The values of such securities are subject to market fluctuations during this period. At December 31, 1998, investments in these securities for Intermediate Municipals Fund, Managed Municipals Fund, and SR&F High-Yield Municipals Portfolio represented 2.1%, 1.1%, and 1.0% of net assets, respectively. Security Valuations All securities are valued as of December 31, 1998. Municipal securities are valued at a fair value using a procedure determined in good faith by the Board of Trustees, which has authorized the use of bid valuations provided by a pricing service, except for SR&F Municipal Money Market Portfolio. The Portfolio utilizes the amortized cost method to value its investments. This technique approximates market value and involves valuing a security initially at cost and, thereafter, assuming a constant amortization to maturity of any discount or premium. In the event that a deviation of .50% or more exists between Stein Roe Municipal Money Market Fund's $1.00 per share net asset value, calculated at amortized cost, and the net asset value calculated by reference to market quotations, its Board of Trustees would consider what action, if any, should be taken. Other securities and assets are valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Municipal Money Market Fund attempts to maintain a per-share net asset value of $1.00, which management believes will be possible under most conditions. Futures Contracts During the six months ended December 31, 1998, SR&F High-Yield Municipals Portfolio entered into U.S. Treasury security futures contracts to either hedge against expected declines in the value of its securities or as a temporary substitute for the purchase of individual bonds. Risks of entering into futures contracts include the possibility that there may be an illiquid market at the time the Fund or Portfolio seeks to close out a contract, and changes in the value of the futures contract may not correlate with changes in the value of the portfolio securities being hedged. Upon entering into a futures contract, the Fund or Portfolio deposits with its custodian cash or securities in an amount sufficient to meet the initial margin requirements. Subsequent payments are made or received by the Fund or Portfolio equal to the daily change in the contract value and are recorded as unrealized gains or losses. The Fund or Portfolio recognizes a realized gain or loss when the contract is closed or expires. See SR&F High-Yield Municipals Portfolio's portfolio of investments for a summary of open futures contracts at December 31, 1998. No other Funds or Portfolios entered into any futures contracts during the period. Federal Income Taxes No provision is made for federal income taxes since (a) the Funds elect to be taxed as "regulated investment companies" and make distributions to their shareholders to be relieved of all federal income taxes under provisions of current federal tax law; and (b) the Portfolios are treated as partnerships for federal income tax purposes and all of their income is allocated to their owners based on respective percentages of ownership. All dividends paid from net investment income by the Funds constitute tax-exempt interest that is not taxable for federal income tax purposes; however, a portion of the dividends paid may be subject to alternative minimum tax. The Funds intend to utilize provisions of the federal income tax laws, which allow them to carry a realized capital loss forward up to eight years following the year of the loss, and offset such losses against any future realized gains. At June 30, 1998, High-Yield Municipals Fund had a capital loss carryforward of $12,069 which expires between 2003 and 2006. Distributions to Shareholders Dividends from net investment income are declared daily and paid monthly. Capital gains distributions, if any, are distributed annually. Dividends are determined in accordance with income tax principles, which may treat certain transactions differently than generally accepted accounting principles. Distributions in excess of tax-basis earnings are reported in the financial statements as a return of capital. Permanent differences in the recognition or classification of income between the financial statements and tax earnings are reclassified to paid-in capital. Note 3. Portfolio Composition The Funds and Portfolios invest in municipal securities including, but not limited to, general obligation bonds, revenue bonds and escrowed bonds (i.e., bonds that have been refinanced, the proceeds of which have been invested in U.S. government obligations that are set aside to pay off the original issue at the first call date or maturity). The Funds and Portfolios hold investments that are insured by private insurers who guarantee the payment of principal and interest in the event of default. At December 31, 1998, investments in these securities for Intermediate Municipals Fund, Managed Municipals Fund and SR&F High-Yield Municipals Portfolio represented 55.5%, 23.5% and 2.0% of holdings, respectively. SR&F Municipal Money Market Portfolio invests in certain short-term securities that are backed by bank letters of credit used to provide liquidity to the issuer and/or additional security in the event of default. At December 31, 1998, 61.6% of the Portfolio was backed by bank letters of credit. See the Portfolio of Investments for each Fund or Portfolio for additional information regarding portfolio composition. Note 4. Trustees' Fees and Transactions with Affiliates The Funds and Portfolios pay monthly management and administrative fees, computed and accrued daily, to Stein Roe & Farnham Incorporated (the "Adviser"), an indirect, wholly-owned subsidiary of Liberty Financial Companies, Inc. ("Liberty"), for its services as investment adviser and manager. The annual rates, as a percentage of average daily net assets, are as follows:
Management Fee Administrative Fee Municipal Money Market Fund N/A .250% up to $500 million, .200% of the next $500 million, .150% thereafter SR&F Municipal Money .250% N/A Market Portfolio Intermediate Municipals Fund .450% up to $100 million, .150% up to $100 million, .425% of the next $100 million, .125% of the next $100 million, .400% thereafter .100% thereafter Managed Municipals Fund .450% up to $100 million, .150% up to $100 million, .425% of the next $100 million, .125% of the next $100 million, .400% of the next $800 million, .100% of the next $800 million, .375% thereafter .075% thereafter High-Yield Municipal Fund N/A .150% up to $100 million, .125% of the next $100 million, .100% thereafter SR&F High-Yield Municipals .450% up to $100 million, N/A Portfolio .425% of the next $100 million, .400% thereafter
The Adviser also provides fund accounting services to the Funds and Portfolios. The Adviser has agreed to reimburse Municipal Money Market Fund and Intermediate Municipals Fund for annual expenses in excess of .70% of average daily net assets. This commitment expires on October 31, 1999, subject to earlier termination by the Adviser on 30 days notice. Transfer agent fees are paid to SteinRoe Services, Inc. (SSI), a direct, wholly-owned subsidiary of Liberty. SSI has entered into an agreement with Liberty Funds Services, Inc., an indirect, wholly-owned subsidiary of Liberty, to act as subtransfer agent for the Funds. Certain officers and trustees of the Trust are also officers of the Adviser. The compensation of trustees not affiliated with the Adviser for Municipal Money Market Fund, Intermediate Municipals Fund, Managed Municipals Fund, High-Yield Municipals Fund, SR&F Municipal Money Market Portfolio, and SR&F High-Yield Municipals Portfolio for the six months ended December 31, 1998, was $3, $6, $7, $1, $4 and $6, respectively. No remuneration was paid to any other trustee or officer of the Trust. Note 5. Short-Term Debt To facilitate portfolio liquidity, the Funds and Portfolios maintain borrowing arrangements under which they can borrow against portfolio securities. There were no borrowings by any of the Funds or Portfolios during the six months ended December 31, 1998. Note 6. Investment Transactions The aggregate cost of purchases and proceeds from sales or maturities of securities, excluding short-term obligations, for the six months ended December 31, 1998, were as follows: Purchases Sales --------- --------- Intermediate Municipals Fund........................... $49,834 $43,291 Managed Municipals Fund................................ 28,597 42,311 SR&F High-Yield Municipals Portfolio................... 33,622 26,564 Financial Highlights - -------------------------------------------------------------------------------- Municipal Money Market Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Months Ended Dec. 31, 1998 Years Ended June 30, (Unaudited) 1998 1997 1996 1995 ----------- ------ ------ ------ ------ Net Asset Value, Beginning of Period .................... $1.000 $1.000 $1.000 $1.000 $1.000 ------ ------ ------ ------ ------ Net investment income ................................ .014 .031 .030 .031 .030 Distributions from net investment income ................................. (.014) (.031) (.030) (.031) (.030) ------ ------ ------ ------ ------ Net Asset Value, End of Period .......................... $1.000 $1.000 $1.000 $1.000 $1.000 ====== ====== ====== ====== ====== Ratio of net expenses to average net assets (a) ......... 0.69%(c) 0.70% 0.70% 0.70% 0.70% Ratio of net investment income to average net assets (b) ....................................... 2.82%(c) 3.06% 2.98% 3.09% 2.96% Total return (b) ........................................ 1.43% 3.10% 3.04% 3.13% 3.02% Net assets, end of period (000's) ...................... $122,491 $115,279 $118,424 $120,432 $146,704 SR&F Municipal Money Market Portfolio Six Months Ended Period Dec. 31, Year Ended Ended 1998 June 30, June 30, June 30, (Unaudited) 1998 1997 1996 (d) ----------- --------- -------- -------- Selected Ratios Ratio of net expenses to average net assets .................. 0.30%(c) 0.34% 0.32% 0.30%(c) Ratio of net investment income to average net assets ................................................ 3.20%(c) 3.41% 3.36% 3.50%(c) (a)If the Fund had paid all of its expenses and there had been no reimbursement by the Adviser, this ratio would have been 0.81% for the six months ended December 31, 1998, and 0.86%, 0.86%, 0.84% and 0.78% for the years ended June 30, 1998, 1997, 1996 and 1995, respectively. (b)Computed giving effect to Adviser's expense limitation undertaking. (c)Annualized (d)From commmencement of operations on September 28, 1995.
Financial Highlights Continued - -------------------------------------------------------------------------------- Intermediate Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Months Ended Dec. 31, 1998 Years Ended June 30, (Unaudited) 1998 1997 1996 1995 ----------- -------- -------- -------- -------- Net Asset Value, Beginning of Period ..................................... $11.57 $11.38 $11.22 $11.16 $11.00 ------ ------ ------ ------ ------ Income From Investment Operations Net investment income ................................................. .27 .54 .55 .55 .53 Net realized and unrealized gains on investments ..................................................... .12 .22 .22 .06 .16 ------ ------ ------ ------ ------ Total from investment operations ................................... .39 .76 .77 .61 .69 ------ ------ ------ ------ ------ Distributions Net investment income ................................................. (.27) (.54) (.55) (.55) (.53) Net realized gains .................................................... (.05) (.03) (.06) -- -- ------ ------ ------ ------ ------ Total distributions ................................................ (.32) (.57) (.61) (.55) (.53) ------ ------ ------ ------ ------ Net Asset Value, End of Period ........................................... $11.64 $11.57 $11.38 $11.22 $11.16 ====== ====== ====== ====== ====== Ratio of net expenses to average net assets (a) .......................... 0.70%(c) 0.70% 0.70% 0.70% 0.74% Ratio of net investment income to average net assets (b) ........................................................ 4.54%(c) 4.70% 4.84% 4.82% 4.94% Portfolio turnover rate .................................................. 22 29% 44% 66% 67% Total return (b) ......................................................... 3.40% 6.84% 7.07% 5.47% 6.59% Net assets, end of period (000's) ....................................... $200,532 $195,651 $196,006 $204,726 $212,489 (a)If the Fund had paid all of its expenses and there had been no reimbursement by the Adviser, this ratio would have been 0.80% for the six months ended December 31, 1998, and 0.81%, 0.82%, 0.81% and 0.76% for the years ended June 30, 1998, 1997, 1996 and 1995, respectively. (b)Computed giving effect to Adviser's expense limitation undertaking. (c)Annualized
Managed Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Months Ended Dec. 31, 1998 Years Ended June 30, (Unaudited) 1998 1997 1996 1995 ----------- -------- -------- -------- -------- Net Asset Value, Beginning of Period ..................... $9.38 $ 9.11 $ 8.85 $ 8.79 $ 8.70 ----- ------ ------ ------ ------ Income From Investment Operations Net investment income ................................. .24 .48 .48 .48 .51 Net realized and unrealized gains on investments ..................................... .06 .27 .26 .06 .09 ----- ------ ------ ------ ------ Total from investment operations ................... .30 .75 .74 .54 .60 ----- ------ ------ ------ ------ Distributions Net investment income ................................. (.24) (.48) (.48) (.48) (.51) Net realized gains .................................... -- -- -- -- -- ----- ------ ------ ------ ------ Total distributions ................................ (.24) (.48) (.48) (.48) (.51) ----- ------ ------ ------ ------ Net Asset Value, End of Period ........................... $9.44 $ 9.38 $ 9.11 $ 8.85 $ 8.79 ====== Ratio of net expenses to average net assets .............. 0.72%(a) 0.72% 0.73% 0.72% 0.65% Ratio of net investment income to average net assets ............................................ 4.99%(a) 5.14% 5.31% 5.41% 5.85% Portfolio turnover rate .................................. 5% 12% 16% 40% 33% Total return ............................................. 3.21% 8.37% 8.56% 6.24% 7.12% Net assets, end of period (000's) ........................ $579,447 $583,138 $582,366 $606,359 $629,730 (a)Annualized
Financial Highlights Continued - -------------------------------------------------------------------------------- High-Yield Municipals Fund Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six Months Ended Dec. 31, 1998 Years Ended June 30, (Unaudited) 1998 1997 1996 1995 ----------- -------- -------- -------- -------- Net Asset Value, Beginning of Period ................. $11.97 $11.67 $11.40 $11.31 $11.06 ------ ------ ------ ------ ------ Income From Investment Operations Net investment income ............................. .32 .65 .72 .67 .66 Net realized and unrealized gains on investments ................................. .01 .30 .27 .09 .25 ------ ------ ------ ------ ------ Total from investment operations ............... .33 .95 .99 .76 .91 ------ ------ ------ ------ ------ Distributions Net investment income ............................. (.32) (.65) (.72) (.67) (.66) Net realized gains ................................ -- -- -- -- -- ------ ------ ------ ------ ------ Total distributions ............................ (.32) (.65) (.72) (.67) (.66) ------ ------ ------ ------ ------ Net Asset Value, End of Period ....................... $11.98 $11.97 $11.67 $11.40 $11.31 ====== ====== ====== ====== ====== Ratio of net expenses to average net assets .......... 0.77%(a) 0.75% 0.77% 0.85% 0.86% Ratio of net investment income to average net assets ........................................ 5.25%(a) 5.48% 6.20% 5.86% 5.98% Portfolio turnover rate .............................. N/A 8%(b) 11% 34% 23% Total return ......................................... 2.76% 8.32% 8.91% 6.83% 8.54% Net assets, end of period (000's) ................... $329,483 $341,780 $306,070 $282,956 $281,155
SR&F High-Yield Municipals Portfolio Six Months Ended Period Dec. 31, Ended 1998 June 30, (Unaudited) 1998 (c) ---------- --------- Selected Ratios Ratio of net expenses to average net assets............ 0.45%(a) 0.47%(a) Ratio of net investment income to average net assets... 5.56%(a) 5.72%(a) Portfolio turnover rate................................ 8% 3% (a)Annualized (b)Prior to commencement of operations of the Portfolio. (c)From commencement of operations on February 2, 1998.
Municipal Trust - -------------------------------------------------------------------------------- Trustees John A. Bacon, Jr. Private Investor William W. Boyd Chairman and Director, Sterling Plumbing Group Inc. Lindsay Cook Senior Vice President, Liberty Financial Companies, Inc. Douglas A. Hacker Senior Vice President and Chief Financial Officer, United Airlines Janet Langford Kelly Senior Vice President, Secretary and General Counsel, Sara Lee Corporation Charles R. Nelson Van Voorhis Professor of Political Economy, University of Washington Thomas C. Theobald Managing Partner, William Blair Capital Partners Officers Thomas W. Butch, President William D. Andrews, Executive Vice President Loren A. Hansen, Executive Vice President Hans P. Ziegler, Executive Vice President Gary A. Anetsberger, Senior Vice President, Chief Financial Officer Kevin M. Carome, Vice President, Assistant Secretary Kevin Connaughton, Vice President Timothy Jacoby, Vice President Joanne T. Costopoulos, Vice President Brian M. Hartford, Vice President Gail Knudsen, Vice President William C. Loring, Vice President Lynn C. Maddox, Vice President Maureen Newman, Vice President Nicolette D. Parrish, Vice President, Assistant Secretary Veronica M. Wallace, Vice President Heidi J. Walter, Vice President, Secretary Sharon R. Robertson, Controller Janet B. Rysz, Assistant Secretary Scott E. Volk, Treasurer Margaret O. Zwick, Assistant Treasurer Agents and Advisers Stein Roe & Farnham Incorporated Investment Adviser State Street Bank and Trust Company Custodian SteinRoe Services Inc. Transfer Agent Bell, Boyd & Lloyd Legal Counsel to the Trust Ernst & Young LLP Independent Auditors - -------------------------------------------------------------------------------- The Stein Roe Mutual Funds Fixed Income Funds Cash Reserves Fund Municipal Money Market Fund Intermediate Municipals Fund Managed Municipals Fund High-Yield Municipals Fund Intermediate Bond Fund Income Fund High Yield Fund Equity Funds Balanced Fund Growth & Income Fund Growth Stock Fund Young Investor Fund Growth Opportunities Fund Special Fund Large Company Focus Fund Special Venture Fund Capital Opportunities Fund International Fund Small Company Growth Fund Stein Roe Mutual Funds P.O. Box 8900 Boston, MA 02205-8900 Financial Advisors call: 800-322-0593 Shareholders call: 800-338-2550 www.steinroe.com In Chicago, visit our Fund Center at One SouthWacker Drive, 32nd Floor. Liberty Funds Distributor, Inc. TE12A 2/99 -----END PRIVACY-ENHANCED MESSAGE-----