Annual Report
June 30, 1996
STEIN ROE MONEY MARKET FUNDS
Government Reserves Fund
Cash Reserves Fund
Photographic image of woman and girl holding hands.
Logo: Stein Roe Mutual Funds
Building Wealth for Generations (sm)
Contents
From the President....................................................... 1
Tim Armour's thoughts on the markets and investing
Q&A
Government Reserves Fund................................................. 3
Cash Reserves Fund....................................................... 6
Interviews with the portfolio manager and a summary of major
shifts in the Funds' investments over the past 12 months
Investments.............................................................. 11
A complete list of each Fund's investments with
market values
Financial Statements..................................................... 14
Balance sheets, statements of operations,
and changes in net assets
Notes to Financial Statements............................................ 17
Financial Highlights..................................................... 20
Selected per-share data
Report of Independent Auditors........................................... 22
General Information...................................................... 23
A guide to products and services
From the President
TO OUR SHAREHOLDERS
We're pleased to present this annual report for the Stein Roe money market
funds -- Stein Roe Government Reserves Fund and Stein Roe Cash Reserves Fund.
CHANGING WINDS
After more than a year of monetary tightening that successfully slowed
economic growth and inhibited inflation, the Federal Reserve embarked on a new
interest rate strategy during the Funds' fiscal year. Spurred by slowing
corporate and government spending, declining auto sales and housing activity,
and flatter holiday retail sales, the Federal Reserve began to trim the
benchmark federal funds rate target, reducing it from 6 percent to 5.75
percent in July 1995, then to 5.50 percent in December 1995, and finally to
5.25 percent in January 1996.
Because federal budget battles and two resulting government shutdowns
hinted at further sluggishness in the economy and delayed key economic
reports, investors entered 1996 with continued expectations of slow growth and
further rate cuts. Then, in March, an astonish ing payroll report put the
number of jobs created at the highest levels since January 1995. This data
suggested far stronger economic growth than anyone had anticipated, which in
turn indicated a possible spike in inflation. The bond markets plummeted.
Today, the markets remain volatile, as many on Wall Street believe the
Federal Reserve may make a tightening move at its next meeting to cool off
economic growth and pre-empt a possible wage-price spiral. Many believe that a
rate hike could send long-term rates even higher, however, hammering company
profits and sending the markets into a tailspin.
But while recent economic data increase the chance of a rate hike, it in no
way guarantees one. In fact, while there is a possibility that the Federal
Reserve may raise interest rates a quarter to a half percentage point at its
next meeting, we think slowing economic growth later in the year should
prevent any further increases. Additionally, despite solid job growth and
expected second-quarter GDP growth of more than 3.5 percent, inflation remains
subdued. So while some volatility may continue in the near term, the economy
may stabilize by year-end 1996.
Photographic image of Timothy K. Armour.
THE BASICS
While no one can predict what might happen to the markets in the future, we
believe investors should understand the factors that move the markets -- not
just to profit from them, but to gain the patience to ride out short-term
volatility in their investments. As always, no matter what direction you think
the economy is heading, we think it's important to remember the basics. Think
long term and re-evaluate your investment portfolio from time to time to make
sure it continues to match your goals, risk tolerance and time horizon.
Please call us at 800-338-2550 with your comments and suggestions. As
always, we look forward to serving your investment needs.
Sincerely,
Timothy K. Armour
President
July 18, 1996
Q&A
AN INTERVIEW WITH JANE NAESETH, PORTFOLIO MANAGER OF GOVERNMENT RESERVES
FUND AND CASH RESERVES FUND
FUND DATA
INVESTMENT OBJECTIVE:
Seeks maximum current income consistent with safety of capital and
maintenance of liquidity by investing in money market securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
in repurchase agreements for U.S. government securities.
FUND INCEPTION:
September 20, 1982
TOTAL NET ASSETS:
$66.9 million
Photographic image of Jane Naeseth.
GOVERNMENT RESERVES FUND
Q: HOW DID THE FUND PERFORM?
A: The Fund finished the fiscal year with a 5.01 percent total return,
matching the 5.01 percent median return for its U.S. government money market
fund peer group. As of June 30, 1996, the Fund's seven-day current yield was
4.50 percent.
Q: DURING THE FIRST SEVEN MONTHS OF THE FUND'S FISCAL YEAR, THE FEDERAL
RESERVE HAD EASED RATES THREE TIMES -- IN JULY AND DECEMBER 1995 AND AGAIN IN
JANUARY 1996. NOW, SOME INVESTORS THINK CURRENT INFLATION DATA MAY MERIT A
REVERSAL OF MONETARY POLICY. WHAT ARE THE MOST RECENT INDICATIONS?
A: Certainly strong employment numbers and other economic indicators have
raised questions among investors and contributed to choppiness in the markets
recently. And while inflation remains relatively low, the market is convinced
that the Federal Reserve will tighten in the third quarter and it already has
factored about a half-point into current rates.
Yet the data have simply been too mixed to say with any degree of certainty
that inflation is on the rise. Our economists continue to believe that
inflation will remain subdued, that growth will slow to a more sustainable
level by December 1996, and that interest rates, while rising in the near
term, most likely will drift down again by year-end 1996.
Recent data seem to help confirm our view. The fears of an economic boom
that roiled the bond markets in June seem to have calmed for the time being.
Long-term Treasury bond yields, for example, recently have fallen -- mainly a
result of unemployment claims, which, since mid-May, have been trending
upward.
Q: HOW IS THIS AFFECTING YOUR STRATEGY FOR THE FUND?
A: During the year we allowed attrition to shorten the Fund's maturity, which
dropped from 46 days on June 30, 1995, to 29 days on December 31. This
strategy was driven by the fact that the market had factored in a bigger
Federal Reserve easing move than we thought would actually happen, which
caused longer-dated securities to have a lower yield than shorter securities.
Investing into the market at current rates would have meant giving up more
yield than we thought was justified. Based on the most recent Federal Reserve
easing move, which was just a quarter of a point, so far we've been right.
We've extended maturity slightly as interest rates have bobbed up again and
the yield curve has resumed a more normal shape. At 56 days on June 30, 1996,
the Fund currently is in a relatively neutral position, which will allow us to
respond quickly to further interest rate moves.
Q: WHAT'S YOUR OUTLOOK FOR THE FUND?
A: While we expect to see a Federal Reserve tightening move sometime in the
third quarter, we think the Fund's shorter maturity positions it well for a
rising rate environment. If, by year end, interest rates are behaving as our
forecasts indicate, we'll probably move to lock in higher rates by extending
maturity slightly. In the near term, however, until the data is firmer, we'll
keep our wait-and-see attitude and maintain the Fund's shorter maturity
profile.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. The Fund's Adviser
currently limits expenses to 0.70 percent of average net assets, subject to
termination upon 30 days' notice. Absent past limits, the Fund's seven-day
current yield would have been 4.40 percent and its total return would have
been less. An investment in the Fund is neither insured nor guaranteed by the
U.S. government, and there is no assurance that the Fund will be able to
maintain its stable net asset value of $1 per share. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
the median total returns for the Fund's U.S. government money market fund peer
group for the one-, five, and 10-year periods ending June 30, 1996, were 5.01
percent, 3.92 percent and 5.39 percent, respectively.
Fund Highlights
Government Reserves Fund
SECURITIES TYPE BREAKDOWN
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
Federal Agency Discount Notes 43.7% 54.3%
Repurchase Agreements 46.6 23.1
Federal Agency Bonds 9.7 22.6
Total 100% 100%
MATURITY
PIE CHART:
AS OF JUNE 30, 1995
60-365 DAYS 9.7%
5-59 DAYS 34.1%
0-4 DAYS 56.2%
PIE CHART:
AS OF JUNE 30, 1996
60-365 DAYS 22.7%
5-59 DAYS 30.1%
0-4 DAYS 47.2%
Q&A
FUND DATA
INVESTMENT OBJECTIVE:
Seeks maximum current income consistent with capital preservation and
maintenance of liquidity by investing in high-quality money market
securities, such as U.S. Treasuries, commercial paper, banker's acceptances
and certificates of deposit.
FUND INCEPTION:
October 2, 1976
TOTAL NET ASSETS:
$476.8 million
CASH RESERVES FUND Q&A
Q: HOW DID THE FUND PERFORM?
A: The Fund finished the fiscal year with a 5.07 percent total return,
trailing the 5.09 percent median return for its money market peer group.
As of June 30, 1996, the Fund's seven-day current yield was 4.70 percent,
down from 5.31 percent a year ago. Much of that dip in yield occurred six
months ago, when the Federal Reserve made two rate cuts, one in December 1995
and another in January 1996. And while strong market expectations of an
imminent Federal Reserve tightening move have recently pushed rates a little
higher, the Fund's yield has stayed just shy of 5 percent. This was driven
primarily by technical factors, including unattractive overnight rates, which
rose at the end of June as investors raced to get into the market before the
July 1 Federal Reserve meeting. That created higher demand for paper. These
supply and demand factors were further magnified by the fact that issuers
generally refrain from issuing paper near quarter end.
Q: HAVE YOU MADE ANY CHANGES TO THE FUND'S MATURITY PROFILE?
A: Throughout the year we make strategic moves based on the shape of the yield
curve.(1) The Fund's weighted average maturity was 61 days when we began the
fiscal year on June 30, 1995. By the middle of the fiscal year, average
maturity had telescoped to just 35 days. That's because the yield curve had
inverted, meaning shorter-term yields exceeded longer-term yields. This often
happens when investors are uncertain which direction interest rates will go.
This was precisely the case in December and January, when mixed economic data
made it difficult to say with certainty whether the Federal Reserve would ease
rates. Buying longer securities at that point would have represented a bet
that the Federal Reserve would ease soon. Under circumstances like these,
longer- maturity securities start looking riskier, and longer-term yields fall
as investors come to the conclusion that they won't be paid for that risk.
We were able to extend maturity back out slightly as the yield curve
returned to normal. By June 30, 1996, the Fund's average maturity was at 48
days. That's a relatively neutral position for us -- while we can invest in
securities with maturities of up to one year in length, our average maturity
is never longer than 90 days.
Q: WITH STOCK MARKET VALUATIONS AT SEEMINGLY RECORD HIGHS, SOME PUNDITS THINK
AN EQUITY MARKET CORRECTION IS LONG OVERDUE. HOW WOULD THIS AFFECT THE FUND?
A: A sizable correction generally spurs inflows into both bond and money
market funds. But bond investors have long memories, and the 1994 bear market
in bonds may still haunt them. That's why some experts think inflows from
equities would most likely be directed into money market funds as investors
try to decide how to reposition their portfolios.
Rates remain low, but they've been trending upward recently, and many think
the Federal Reserve will push them a bit higher with a tightening move in the
third quarter. For a money market fund, like Cash Reserves, the best possible
time to gain assets is during a rising rate environment, such as we are now
experiencing -- reinvesting large sums of cash when rates are low would most
likely cause rates to drop even faster, hindering performance.
Q: LOOKING AHEAD, WHAT ARE YOUR PLANS FOR THE FUND?
A: We're expecting a Federal Reserve tightening move sometime in the third
quarter, and, accordingly, we plan to maintain the Fund's shorter maturity in
the near term.
(1) The Treasury yield curve does not represent any particular Stein Roe fund;
you can find it in the Wall Street Journal.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. An investment in the Fund is neither insured
nor guaranteed by the U.S. government, and there is no assurance that the Fund
will be able to maintain its stable net asset value of $1 per share. According
to Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance, the median total returns for the Fund's money market fund peer
group for the one-, five, and 10-year periods ending June 30, 1996, were 5.09
percent, 4.01 percent and 5.55 percent, respectively.
Fund Highlights
Cash Reserves Fund
SECURITIES TYPE BREAKDOWN
PORTFOLIO PORTFOLIO
JUNE 30, 1995 JUNE 30, 1996
Commercial Paper 71.3% 75.2%
Corporate Notes 18.0 12.7
Federal Agencies 2.9 5.3
Letter of Credit Commercial Paper 3.9 3.6
Yankee Certificates of Deposit 3.9 3.2
Total 100% 100%
MATURITY
PIE CHART:
As of June 30, 1995
360+ days 6.9%
150-359 days 8.7%
60-89 days 3.8%
30-59 days 13.2%
0-29 days 67.4%
PIE CHART:
As of June 30, 1996
360+ days 4.2%
90-359 days 5.3%
60-89 days 4.3%
30-59 days 8.6%
0-29 days 77.6%
Shareholders Approve Four Proposals
At a special meeting on June 18, 1996, shareholders of Stein Roe Government
Reserves Fund and Cash Reserves Fund voted to approve proposals relating to an
election of each Fund's Board of Trustees, modifications to certain investment
policies, and new management and administrative agreements. The approved
proposals include:
(A) Expansion of Board of Trustees
Each Fund's Board was expanded from seven to nine members; nine members were
elected to each Board. This expansion will help Stein Roe to facilitate the
transition of responsibilities from retiring board members to new board
members over an 18-month period.
(B) Interfund Borrowing
(C) Interfund Lending
Cash management is an important part of the investment process for mutual
funds. An interfund lending program -- a program that allows mutual funds to
borrow cash from and lend cash to each other -- gives the funds an additional
credit facility to meet emergency needs at terms that would be at least as
favorable as a third party transaction, such as a bank line of credit. Stein
Roe expects to engage in interfund borrowing only when we think it would be
more favorable to both funds than borrowing from a third party.
(D) Administrative and Management Agreements
Each Fund's Investment Advisory Agreement is replaced by separate a)
Administrative and b) Portfolio Management Agreements. These new agreements
essentially carry forward, under two separate agreements, the investment
advisory and management services Stein Roe & Farnham already provides to each
Fund. Separate agreements will facilitate, at a future date, the pooling of
each Fund's assets with assets of other funds that have identical investment
objectives. The resulting larger pool of assets would be managed by Stein Roe
& Farnham.
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
GOVERNMENT RESERVES FUND... 71,620,276 41,799,525
A) Expansion of Board of
Trustees
Timothy K. Armour...... 40,973,014 826,511
Kenneth L. Block....... 40,724,920 1,074,605
William W. Boyd........ 40,968,886 830,639
Lindsay Cook........... 40,973,406 826,119
Douglas A. Hacker...... 40,800,765 998,760
Francis W. Morley...... 40,680,074 1,119,451
Charles R. Nelson...... 40,973,127 826,398
Thomas C. Theobald..... 40,899,824 899,701
Gordon R. Worley....... 40,735,343 1,064,182
FOR AGAINST ABSTENTIONS
B) Interfund Borrowing 38,572,605 2,958,063 268,857
C) Interfund Lending 39,272,223 2,034,310 492,992
D) Administrative and
Management Agreements
a) Administrative 38,639,652 2,305,296 854,577
b) Management 38,627,025 2,288,501 884,449
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
CASH RESERVES FUND......... 490,523,088 273,934,563
A) Expansion of Board of
Trustees
Timothy K. Armour...... 267,954,779 5,979,784
Kenneth L. Block....... 268,166,427 5,768,136
William W. Boyd........ 268,229,902 5,704,661
Lindsay Cook........... 268,284,446 5,650,117
Douglas A. Hacker...... 267,486,661 6,447,902
Francis W. Morley...... 268,147,677 5,786,886
Charles R. Nelson...... 268,244,983 5,689,580
Thomas C. Theobald..... 267,521,964 6,412,599
Gordon R. Worley...... 267,915,356 6,019,207
FOR AGAINST ABSTENTIONS
B) Interfund Borrowing 247,904,886 18,613,768 7,415,909
C) Interfund Lending 249,176,039 17,136,174 7,622,350
D) Administrative and
Management Agreements
a) Administrative 255,071,708 9,889,236 8,973,619
b) Management 254,828,455 10,033,869 9,072,239
Government Reserves
INVESTMENTS AS OF JUNE 30, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
INTEREST MATURITY PRINCIPAL MARKET
RATE* DATE AMOUNT VALUE
U.S. GOVERNMENT AGENCY
OBLIGATIONS (76.1%)
Federal Home Loan Bank .................................... 5.430% 1/10/97 $10,000 $10,000
Federal Home Loan Bank .................................... 5.410 3/14/97 5,000 5,000
Federal Home Loan Mortgage
Corporation ............................................ 5.262 7/01/96 16,000 16,000
Federal Home Loan Mortgage
Corporation ............................................ 5.300 7/15/96 20,000 19,959
-------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Amortized Cost $50,959) ............................... 50,959
REPURCHASE AGREEMENTS (22.9%)
CIBC Wood Gundy Securities; 6/28/96
agreement collateralized by Federal
National Mortgage Association bond,
5.450% due 5/02/01
(Amortized Cost $15,300) ............................... 5.450 7/01/96 15,300 15,300
TOTAL INVESTMENTS (99.0%)
(Amortized Cost $66,259) ............................... 66,259
OTHER ASSETS, LESS LIABILITIES (1.0%) ..................... 669
-------
TOTAL NET ASSETS (100%) ................................... $66,928
=======
<FN>
* The interest rate is the effective rate at date of purchase.
See accompanying notes to financial statements.
</FN>
Cash Reserves
INVESTMENTS AS OF JUNE 30, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
INTEREST MATURITY PRINCIPAL MARKET
COMMERCIAL PAPER (78.0%) RATE RANGE* DATE RANGE AMOUNT VALUE
BUSINESS SERVICES (6.5%)
Orix America (L.O.C. Norianchukin
Bank) .............................. 5.577 7/29/96 $11,000 $10,952
ELECTRONICS (4.9%)
**General Signal Corp. ................ 5.406 7/19/96 13,800 13,763
General Signal Corp. .................. 5.451 7/22/96 9,600 9,570
-------
.................................. 23,333
FINANCIAL SERVICES (65.3%)
BANKING (8.8%)
Goldman Sachs Group, Ltd. .......... 5.653 7/01/96 20,000 20,000
**Pooled Accounts Receivable
Capital ............................ 5.423 7/19/96 15,064 15,024
Sumitomo Bank Capital
Markets Inc. (gtd. by
Sumitomo Bank Ltd.) 5.527 8/09/96 7,000 6,959
-------
.................................. 41,983
BROKERAGE SERVICES (5.0%)
Lehman Brothers Holdings Inc. ...... 5.445 7/01/96 24,000 24,000
BUSINESS CREDIT INSTITUTIONS (14.2%)
Finova Capital Corp. ............... 5.443 8/14/96 23,000 22,849
Sanwa Business Credit Corp. ........ 5.440 7/10/96 20,000 19,973
Sears Roebuck Acceptance Corp. ..... 5.419 7/18/96 20,000 19,949
Whirlpool Financial Corp. .......... 5.603 7/01/96 5,000 5,000
-------
.................................. 67,771
LENDING INSTITUTIONS (3.8%)
Oak Funding Corp. .................. 5.423-5.516 7/02/-7/15/96 18,000 17,987
MISCELLANEOUS FINANCIAL (33.5%)
**Diamond Asset Funding Corp. ...... 5.454 7/08/96 15,000 14,985
Enterprise Funding Corp. ........... 5.401 7/18/96 20,000 19,948
Hanson Finance Plc ................. 5.401 7/16/96 20,000 19,955
Heller Financial, Inc. ............. 5.449 7/17/96 24,000 23,942
Old Line Funding Corp. ............. 5.382 7/15/96 23,000 22,952
**Thames Asset Global
Securitization .................. 5.437 7/15/96 20,000 19,958
Tri-Lateral Capital USA Inc. ....... 5.502-5.519 7/19-7/22/96 22,899 22,828
Windmill Funding Corp. ............. 5.366 7/03/96 15,023 15,018
-------
.................................. 159,586
-------
TOTAL FINANCIAL SERVICES .............. 311,327
FOOD & BEVERAGES (4.2%)
Coca Cola Enterprises, Inc. ........... 5.417 7/16/96 20,000 19,955
PHOTOGRAPHY (1.3%)
**Seiko Corp. of America (L.O.C .......
Dai-Ichi Kangyo Bank Ltd.) ......... 5.531 7/17/96 6,000 5,986
-------
TOTAL COMMERCIAL PAPER
(Amortized cost $371,554) .......... 371,553
Cash Reserves CONTINUED
INTEREST MATURITY PRINCIPAL MARKET
RATE RANGE* DATE RANGE AMOUNT VALUE
VARIABLE RATE NOTES (12.6%)
BANKS (4.2%)
Sanwa Bank Ltd. ......................... 5.480% 8/12/96 $ 20,000 $ 20,000
FINANCIAL SERVICES (8.4%)
**American Honda Finance Corp.
(gtd. by Honda Motor Co. Inc.) ....... 5.299 3/14/97 20,000 20,000
Morgan Stanley Group Inc. ............... 5.500 Optional Put 20,000 20,000
7/15/96
--------
40,000
--------
TOTAL VARIABLE RATE NOTES
(Amortized cost $60,000) ............. 60,000
U.S. GOVERNMENT AGENCY
OBLIGATION (5.2%)
Federal Home Loan Bank
(Amortized cost $25,000) ............. 5.560 3/18/97 25,000 25,000
YANKEE CERTIFICATE OF DEPOSIT (3.1%)
FINANCIAL SERVICES
Sumitomo Bank, Ltd. ..................... 5.440 7/03/96 15,000 15,000
--------
TOTAL YANKEE CERTIFICATE OF DEPOSIT
(Amortized cost $15,000) ............. 15,000
TOTAL INVESTMENTS (98.9%)
(Amortized cost $471,553) ............ 471,553
OTHER ASSETS, LESS LIABILITIES (1.1%) ... 5,287
--------
TOTAL NET ASSETS (100.0%) ............... $476,840
========
<FN>
*The interest rate is the effective rate at the date of purchase except for
variable rate notes, for which the interest rate represents the current rate
as of the most recent reset date.
**Represents private placement securities exempt from registration by
Section 4(2) of the Securities Act of 1933. These securities generally are
issued to investors who agree that they are purchasing the securities for
investment and not with a view to public distribution. Any resale by the Fund
must be in an exempt transaction, normally to other institutional investors.
At June 30, 1996, the aggregate value of the Fund's private placement
securities was $89,716 which represented 18.8% of net assets. None of these
are deemed to be illiquid securities. Letter of credit backing of a note is
represented by L.O.C.
See accompanying notes to financial statements.
</FN>
Balance Sheets
June 30, 1996
(Amounts in Thousands, except Per-Share Amounts)
GOVERNMENT CASH
RESERVES RESERVES
ASSETS
Investments, at value (including $15,300 in repurchase
agreements for Government Reserves) ............... $ 66,259 $471,553
Accrued interest receivable .......................... 345 786
Cash and other assets ................................ 496 7,385
-------- --------
Total Assets ...................................... $ 67,100 $479,724
======== ========
LIABILITIES
Payable for fund shares redeemed ..................... $ -- $ 1,792
Dividends payable .................................... 84 625
Payable to investment adviser and transfer agent ..... 39 259
Other liabilities .................................... 49 208
-------- --------
Total Liabilities ................................. 172 2,884
-------- --------
CAPITAL
Paid-in capital ...................................... 66,968 476,704
Accumulated net realized gains (losses) on investments (40) 136
-------- --------
Total Capital (Net Assets) ........................ 66,928 476,840
-------- --------
Total Liabilities and Capital ..................... $ 67,100 $479,724
======== ========
Shares Outstanding (Unlimited Number Authorized) ..... 66,967 476,757
======== ========
Net Asset Value (Capital) Per Share .................. $ 1.00 $ 1.00
======== ========
See accompanying notes to financial statements.
Statements of Operations
For The Year Ended
June 30, 1996
(Amounts in Thousands)
GOVERNMENT CASH
RESERVES RESERVES
INVESTMENT INCOME
Interest Income .................................... $ 4,804 $28,020
EXPENSES
Management fees .................................... 425 2,432
Transfer agent fees ................................ 128 730
Printing and postage ............................... 18 207
Accounting fees .................................... 26 36
Legal and audit fees ............................... 32 32
Registration fees .................................. 24 27
Trustees' fees ..................................... 18 28
Other expenses ..................................... 28 291
------- -------
............................................... 699 3,783
Reimbursement of expenses by investment adviser .... (105) --
------- -------
Total Expenses .................................. 594 3,783
------- -------
Net Investment Income ........................... 4,210 24,237
NET REALIZED GAINS ON INVESTMENTS .................. 3 --
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,213 $24,237
======= =======
See accompanying notes to financial statements.
Statements of Changes in Net Assets
FOR THE YEARS ENDED JUNE 30, 1995 AND 1996
(AMOUNTS IN THOUSANDS)
GOVERNMENT RESERVES CASH RESERVES
1995 1996 1995 1996
OPERATIONS
Net investment income ...................................... $ 4,775 $ 4,210 $ 25,612 $ 24,237
Net realized gains (losses) on investments ................. (7) 3 (85) --
--------- --------- --------- ---------
Net Increase in Net Assets Resulting
from Operations ....................................... 4,768 4,213 25,527 24,237
--------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ....................... (4,775) (4,210) (25,612) (24,237)
--------- --------- --------- ---------
SHARE TRANSACTIONS
Subscriptions to fund shares ............................... 69,532 60,169 746,505 711,619
Investment income dividends reinvested ..................... 3,968 3,737 23,255 22,397
Redemptions of fund shares ................................. (85,663) (90,299) (826,225) (755,339)
--------- --------- --------- ---------
Net Decrease from Share Transactions .................... (12,163) (26,393) (56,465) (21,323)
--------- --------- --------- ---------
Net Decrease in Net Assets .............................. (12,170) (26,390) (56,550) (21,323)
TOTAL NET ASSETS
Beginning of year .......................................... 105,488 93,318 554,713 498,163
--------- --------- --------- ---------
End of year ................................................ $ 93,318 $ 66,928 $ 498,163 $ 476,840
========= ========= ========= =========
ANALYSES OF CHANGES IN SHARES
OF BENEFICIAL INTEREST
Subscriptions to fund shares ............................... 69,532 60,169 746,505 711,619
Investment income dividends reinvested ..................... 3,968 3,737 23,255 22,397
--------- --------- --------- ---------
73,500 63,906 769,760 734,016
Redemptions of fund shares ................................. (85,663) (90,299) (826,225) (755,339)
--------- --------- --------- ---------
Net decrease in fund shares ................................ (12,163) (26,393) (56,465) (21,323)
Shares outstanding at beginning of year .................... 105,523 93,360 554,545 498,080
--------- --------- --------- ---------
Shares outstanding at end of year .......................... 93,360 66,967 498,080 476,757
========= ========= ========= =========
See accompanying notes to financial statements.
Notes to the Financial Statements
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of Stein Roe Government
Reserves Fund and Stein Roe Cash Reserves Fund (the "Funds"), each a series of
Stein Roe Income Trust (a Massachusetts business trust).
INVESTMENT VALUATIONS
The Funds utilize the amortized cost method to value their investments, which
approximates market value. This technique involves valuing a security
initially at cost and thereafter assuming a constant amortization to maturity
of any discount or premium. In the event that a deviation of .50 of 1 percent
or more exists between a Fund's $1.00 per share net asset value, calculated at
amortized cost, and the net asset value calculated by reference to market
quotations, the Board of Trustees would consider what action, if any, should
be taken. Other assets of the Funds are valued by a method that the Board of
Trustees believes represents a fair value.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since the Funds elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all federal income taxes under provisions of
current federal tax law.
DISTRIBUTIONS TO SHAREHOLDERS
The Funds declare income dividends from net investment income daily and
pay these dividends monthly.
OTHER INFORMATION
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
The Funds attempt to maintain their net asset value per share at $1.00,
which they believe will be possible under most conditions.
The Funds require issuers of repurchase agreements to transfer the
securities underlying the agreements to the Funds' custodian at the time of
payment for the repurchase agreement. The Funds monitor the value of
securities underlying a repurchase agreement during the term of the agreement.
All amounts, except per-share amounts, are shown in thousands.
NOTE 2. PORTFOLIO COMPOSITION
Government Reserves invests in U.S. government securities maturing in
thirteen months or less from the date of purchase, and repurchase agreements
collateralized by U.S. government securities, regardless of the maturities of
such securities. U.S. government securities include securities issued or
guaranteed by the U.S. government and its agencies or instrumentalities.
Cash Reserves invests in U.S. dollar-denominated money market instruments
maturing in thirteen months or less from time of investment. Under normal
market conditions, the Fund will invest at least 25 percent of its total
assets in securities of issuers in the financial services industry (which
includes, but is not limited to, banks, personal credit and business credit
institutions, and other financial services institutions). At June 30, 1996,
81.0 percent of the Fund's total assets were invested in the financial
services industry. In addition, at June 30, 1996, 87.5 percent of the Fund's
investments were in instruments of entities located in the United States and
12.5 percent were in instruments of Japanese entities. Country determination
is based on either the location of the issuer or, in the case of those
instruments that are guaranteed by another entity, the location of the
guarantor.
See each Fund's schedule of investments for additional information on
portfolio composition.
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
The Funds pay a monthly management fee, computed and accrued daily, to the
Adviser, an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company, for its services as investment adviser and manager. Effective
November 1, 1995, the annualized fee for each fund is .50 of 1 percent of the
first $500 million of average daily net assets, .45 of 1 percent of the next
$500 million, and .40 of 1 percent over $1 billion. Prior to that date, the
annualized fee for Government Reserves was .50 of 1 percent of average daily
net assets. For Cash Reserves, the annualized fee was .50 of 1 percent of the
first $1 billion of average daily net assets, .475 of 1 percent on the next
$500 million, and .45 of 1 percent thereafter.
Effective July 1, 1996, as a result of shareholder vote, each Fund's
investment advisory agreement was replaced by separate administrative and
management agreements. The administrative fee for the Funds will be .25 of 1
percent of the first $500 million of average daily net assets, .20 of 1
percent of the next $500 million, and .15 of 1 percent over $1 billion. The
management fee will be .25 of one percent of average daily net assets. There
is no increase in the aggregate fee paid to the Adviser due to these changes.
The investment advisory agreements of the Funds provide that the Adviser
will reimburse each Fund to the extent that its annual expenses, excluding
certain expenses, exceed the applicable limits prescribed by any state in
which each Fund's shares are offered for sale.
In addition, the Adviser has agreed to reimburse Government Reserves to the
extent that its expenses exceed .70 of 1 percent of average daily net assets.
This expense limitation expires October 31, 1997, subject to earlier
termination by the Adviser on 30 days' notice.
The transfer agent fees of the Funds are paid to SteinRoe Services Inc.
(SSI), an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. Effective July 3, 1996, SSI entered into an agreement with Colonial
Investors Service Center, Inc., an indirect, majority-owned subsidiary of
Liberty Mutual Insurance Company, to act as a sub-transfer agent for the
Funds.
The Adviser also provides the Fund with certain Fund accounting services.
For the year ended June 30, 1996, Government Reserves and Cash Reserves
incurred fees of $26 and $36, respectively.
Certain officers and trustees of the Trust are also officers of the
Adviser. The compensation of trustees not affiliated with the Adviser for
Government Reserves and Cash Reserves for the year ended June 30, 1996, was
$18 and $28, respectively. No remuneration was paid to any other trustee or
officer of the Trust.
NOTE 4. INVESTMENT TRANSACTIONS
Cost of investments of the Funds was the same for financial reporting
purposes and federal income tax purposes.
FINANCIAL HIGHLIGHTS
GOVERNMENT RESERVES
Selected per-share data (for a share outstanding throughout each period),
ratios and supplemental data.
Years Ended June 30,
1987 1988 1989 1990
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- -----------
Net investment income 0.050 0.058 0.080 0.078
Distributions from net investment income (0.050) (0.058) (0.080) (0.078)
----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== ===========
Ratio of net expenses to average net assets (a) 1.03% 0.87% 0.70% 0.70%
Ratio of net investment income to average net assets (b) 4.97% 5.75% 8.02% 7.79%
Total return (b) 5.11% 5.90% 8.27% 8.05%
Net assets, end of year $ 34,799 $ 41,787 $ 50,185 $ 53,400
Years Ended June 30,
1991 1992 1993
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------
Net investment income 0.066 0.044 0.027
Distributions from net investment income (0.066) (0.044) (0.027)
------------ ------------ ------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000
============ ============ ============
Ratio of net expenses to average net assets (a) 0.70% 0.70% 0.70%
Ratio of net investment income to average net assets (b) 6.41% 4.27% 2.75%
Total return (b) 6.74% 4.45% 2.78%
Net assets, end of year $ 102,860 $ 132,982 $ 104,220
Years Ended June 30,
1994 1995 1996
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000
------------ ----------- -----------
Net investment income 0.027 0.047 0.050
Distributions from net investment income (0.027) (0.047) (0.050)
------------ ----------- -----------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000
============ =========== ===========
Ratio of net expenses to average net assets (a) 0.70% 0.70% 0.70%
Ratio of net investment income to average net assets (b) 2.71% 4.65% 4.94%
Total return (b) 2.74% 4.78% 5.01%
Net assets, end of year $ 105,488 $ 93,318 $ 66,928
<FN>
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would have
been 1.04, 0.93, 0.98, 0.83, 0.79, 0.76, 0.75, 0.75 and 0.82 percent for the
years ended June 30, 1988 through 1996, respectively.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</FN>
CASH RESERVES
Selected per-share data (for a share outstanding throughout each period), ratios and supplemental data.
Six
Months
Years Ended Ended
December 31, June 30,
1986 1987 1988
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------
Net investment income 0.061 0.060 0.032
Distributions from net investment income (0.061) (0.060) (0.032)
------------ ------------ ------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000
============ ============ ============
Ratio of expenses to average net assets 0.72% 0.72% 0.70%*
Ratio of net investment income to average net assets 6.05% 6.02% 6.36%*
Total return 6.25% 6.15% 6.43%*
Net assets, end of year $ 814,544 $ 962,901 $ 930,074
Years Ended June 30,
1989 1990 1991 1992
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
Net investment income 0.081 0.079 0.068 0.044
Distributions from net investment income (0.081) (0.079) (0.068) (0.044)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============
Ratio of expenses to average net assets 0.75% 0.76% 0.78% 0.78%
Ratio of net investment income to average net assets 8.13% 7.94% 6.81% 4.40%
Total return 8.41% 8.20% 6.98% 4.49%
Net assets, end of year $ 948,018 $ 949,803 $ 840,525 $ 711,087
Years Ended June 30,
1993 1994 1995 1996
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
Net investment income 0.028 0.028 0.048 0.050
Distributions from net investment income (0.028) (0.028) (0.048) (0.050)
------------ ------------ ------------ ------------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============
Ratio of expenses to average net assets 0.79% 0.79% 0.76% 0.78%
Ratio of net investment income to average net assets 2.81% 2.77% 4.83% 4.98%
Total return 2.83% 2.81% 4.96% 5.07%
Net assets, end of year $ 627,110 $ 554,713 $ 498,163 $ 476,840
* Annualized
Report of Independent Auditors
To the Shareholders and Board of Trustees of Stein Roe Income Trust
Stein Roe Government Reserves
Stein Roe Cash Reserves
We have audited the accompanying balance sheets, including the schedules of
investments, of Stein Roe Government Reserves and Stein Roe Cash Reserves as
of June 30, 1996, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1996, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
Stein Roe Government Reserves and Stein Roe Cash Reserves at June 30, 1996,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated thereon, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
July 26, 1996
Funds for Every Investment Objective
The Stein Roe family of 100 percent no-load mutual funds offers a variety of
funds so you can select the right fund, or combination of funds, to meet your
investment objec tives. Call us at 800-338-2550 for a prospectus and more
complete information on any of the funds, including management fees and
expenses. Please read the pro spectus carefully before you invest or send
money.
MONEY MARKET FUNDS
Money market funds seek to provide income while preserving principal and
maintaining liquidity. These funds offer free check writing.
o Government Reserves Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies and
instrumentalities.*
o Cash Reserves Fund -- Invests in high-quality, short-term money market
securities such as certificates of deposit, banker's acceptances and
commercial paper.*
BOND FUNDS
Bond funds seek high current income by investing pri marily in fixed income
securities.
o Limited Maturity Income Fund -- Invests primarily in U.S. government and
other high-quality debt securities. The dollar -weighted average
effective maturity will not exceed three years.
o Government Income Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies.*
o Intermediate Bond Fund-- Invests primarily in marketable debt securities
with an average life of three to 10 years.
o Income Fund -- Pursues a higher level of current income by investing
primarily in medium- and lower-quality bonds.
TAX-EXEMPT FUNDS
These funds help investors keep more of their earnings by investing in
instruments that earn income free from federal income tax. Income may be
subject to federal alternative minimum tax and state and local taxes; capital
gains are subject to state, local and federal taxes.
o Municipal Money Market Fund -- Seeks to provide the liquidity and
stability of a money market fund plus current tax-free income. Free
check writing available.*
*Money market mutual funds strive to maintain a $1 per share net asset value,
but there is no assurance that the fund will be able to maintain a stable net
asset value. The net asset value of a fund that invests in securities issued
or guaranteed by the U.S. government is not guaranteed.
o Intermediate Municipals Fund -- Seeks high current yield through
investments primarily in the three highest grades of intermediate-term
municipal securities.
o Managed Municipals Fund -- Pursues high tax-free income by investing in a
quality-conscious portfolio of long-term municipal bonds.
o High-Yield Municipals Fund -- Seeks a higher level of tax-free income
from long-term municipal securities, primarily of medium or lower
quality.
GROWTH AND INCOME FUNDS
These funds seek to provide a conservative investment that is well positioned
for long-term growth and current income. Each fund's approach is designed to
limit the effects of market volatility.
o Balanced Fund+ -- Seeks long-term growth of capital and current income
consistent with reasonable investment risk by investing in equities, debt
securities and cash equivalents.
o Growth & Income Fund -- Pursues income and long-term capital growth by
investing primarily in large, well-established companies.
GROWTH FUNDS
Growth funds offer long-term capital appreciation potential by investing
primarily in various types of stocks.
o Growth Stock Fund -- Pursues long-term capital appreciation from stocks
with strong growth potential.
o Special Fund -- Invests in securities believed to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, under followed or out-of-favor companies.
o Special Venture Fund -- Seeks capital appreciation through equity
securities of entre preneurially managed companies.
o Young Investor Fund -- Invests in securities of companies that affect the
lives of children or teenagers.
o Capital Opportunities Fund -- Takes a long-term approach to emerging
growth by selecting quality companies with the potential to generate high
levels of earnings growth over a three- to five-year period.
o International Fund -- Invests in a diversified portfolio of foreign
securities.
+Formerly Total Return Fund; name and investment objective changed effective
April 17, 1996.
BY PHONE 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
Stein Roe Fund account, including Stein Roe IRAs. We're available seven days a
week, from 7 a.m. to 8 p.m. weekdays and from 8 a.m. to 5 p.m. Saturday and
Sunday (central time).
STEIN ROE'S FUNDS-ON-CALL(R)24-HOUR SERVICE LINE
Using a touch-tone phone, call our toll-free number, day or night, for your
current account balance, the latest Stein Roe Fund prices and yields, and
other information. In addition, if you have a Personal Identification Number
(PIN), you may place orders for the following transactions 24 hours a day:
o Exchange shares between your Stein Roe accounts;
o Purchase Fund shares by electronic transfer;
o Order additional account statements and Money Market Fund checks;
o Redeem shares by check, wire or electronic transfer.
RETIREMENT PLAN ACCOUNTS
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130.
For information on IRA plans, call us toll free at 800-338-2550.
BY MAIL
If you prefer to contact us by mail, please address all correspondence
to: P.O. Box 8900, Boston, MA 02205-8900. You also may visit our Internet
web site -- www.steinroe.com -- to contact us by e-mail.
IN PERSON
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current Fund investments or
provide you infor mation about any of the Stein Roe Funds and retirement
plans. Stop by weekdays between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
Stein Roe Income Trust
TRUSTEES
Timothy K. Armour
President, Mutual Fund Division and Director, Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A.T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer, United Airlines
Francis W. Morley
Chairman, Employer Plan Administrators and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
Gordon R. Worley
Private investor
OFFICERS
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President, Secretary
N. Bruce Callow, Executive Vice President
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief Financial Officer
Ann H. Benjamin, Vice President
Thomas W. Butch, Vice President
Philip J. Crosley, Vice President
Philip D. Hausken, Vice President
Michael T. Kennedy, Vice President
Steven P. Luetger, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Jane M. Naeseth, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Cynthia A. Prah, Vice President
Thomas P. Sorbo, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
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
A Guide to Stein Roe Services
We encourage you to take advantage of our free shareholder services. If you
would like additional information about how to establish or use a Stein Roe
service, just call us at 800 338-2550.
PURCHASES
In addition to sending us a check or wire to purchase additional fund shares,
you can take advantage of these convenient automatic services:
o Automatic Investment Plan -- Make regular investments ($50 minimum) in
your SteinRoe account directly from your bank checking account. You
select monthly, quarterly, semiannual or annual purchases.
o Special Investments -- Purchase shares by telephone and pay for them by
electronic transfer from your bank checking account.
EXCHANGES
o Telephone Exchange -- Call us to exchange $50 or more from your existing
account in one Stein Roe fund to an identically registered existing
account in another Stein Roe fund. You receive this service when you open
a Stein Roe fund account, unless you elect not to.*
o Automatic Exchange -- Stein Roe will regularly exchange shares
from your account in one Stein Roe fund to your account in another. You
select twice-monthly, monthly, quarterly, semiannual or annual exchanges.
REDEMPTIONS
o Telephone Redemption by Check -- Call to redeem $1,000 or more from your
account. A check will be sent to your registered address. You
automatically receive this service when you open a Stein Roe account,
unless you elect not to.
o Telephone Redemption by Wire -- Redeem shares by phone from your account
($1,000 minimum) and wire the proceeds to your bank checking account. A
small fee for wiring proceeds will be deducted from the amount wired.
o Special Redemption Option -- If you do not want to pre-schedule your
redemptions, you can redeem shares by telephone ($50 minimum/ $100,000
maximum) and have the proceeds sent directly to your bank checking
account.
o Automatic Redemption Plan -- Redeem either a fixed dollar or
share amount, or a fixed percentage of your account automatically on a
schedule you establish. You select monthly, quarterly, semiannual or
annual withdrawals ($50 minimum/ $100,000 max imum), and the proceeds are
sent either to your bank checking account or to an address you specify.
o Money Market Fund Check
Writing -- Write checks for $50
or more on your money market fund account.
*Stein Roe reserves the right to discontinue or modify the exchange
privilege, and certain restrictions apply. Please refer to your prospectus
for details.
DISTRIBUTIONS
Most investors like to reinvest their dividends and capital gains
distributions and put them back to work. If, however, you do not want them
reinvested, consider these alternatives:
o Dividend Purchase Option -- Use the distributions from one Stein Roe fund
account ($25 minimum) to automatically purchase shares in your account
with another Stein Roe fund.
o Automatic Dividend Deposit -- Instead of receiving your dividends by
check, your distributions are deposited automatically into your bank
checking account.
RECORDKEEPING
o Summary of Investments -- Consolidates quarterly transaction and
investment infor mation for any or all of your household's Stein Roe
accounts on one easy-to-read statement. At year end, Stein Roe provides a
complete summary of all account activity for the year.
Logo: Stein Roe
Stein Roe Mutual Funds
Building Wealth for Generations (sm)
THE STEIN ROE FUNDS
Stein Roe Government Reserves Fund
Stein Roe Cash Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Young Investor Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
P.O. Box 8900
Boston, Massachusetts 02205-8900
800-338-2550
In Chicago, visit our Fund Center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member SIPC. 7/96
MM11A