1933 Act Registration No. 333-19181
1940 Act File No. 811-07997
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
STEIN ROE TRUST
Registrant
One South Wacker Drive, Chicago, Illinois 60606
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
& Secretary Three First National Plaza
Stein Roe Trust Suite 3300
One South Wacker Drive 70 W. Madison Street
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
Registrant has previously elected to register under the Securities
Act of 1933 an indefinite number of its shares of beneficial
interest, without par value, of the series of shares designated
Stein Roe Institutional Client High Yield Fund.
This Registration Statement has also been signed by SR&F Base Trust.
<PAGE>
STEIN ROE TRUST
CROSS REFERENCE SHEET
ITEM
NO. CAPTION
- ----- -------
PART A (PROSPECTUS)
1 Front cover
2 Fee Table; Summary
3 (a) Inapplicable
(b) Inapplicable
(c) Investment Return
(d) Inapplicable
4 Organization and Description of Shares; The Fund;
Investment Policies; Investment Restrictions; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser, Fees and
Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see statement of
additional information: General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) For More Information
(f) Distributions and Income Taxes
(g) Distributions and Income Taxes
(h) Special Considerations Regarding Master Fund/Feeder Fund
Structure
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares; Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inappicable
8 (a) How to Redeem Shares
(b) How to Purchase Shares
(c) How to Redeem Shares
(d) How to Redeem Shares
9 Inapplicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Distributor
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Portfolio Transactions
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares
(b) Purchases and Redemptions; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22 Investment Performance
23 Balance Sheet
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE> 1
STEIN ROE INSTITUTIONAL CLIENT HIGH YIELD FUND
Institutional Client High Yield Fund seeks total return by
investing for a high level of current income and capital growth.
Institutional Client High Yield Fund seeks to achieve its
objective by investing all of its net investable assets in SR&F
High Yield Portfolio, a portfolio of SR&F Base Trust that has the
same investment objective and substantially the same investment
policies as Institutional Client High Yield Fund. High Yield
Portfolio invests primarily in high-yield, high-risk medium- and
lower-quality debt securities. LOWER-QUALITY SECURITIES, COMMONLY
KNOWN AS "JUNK BONDS," ARE SUBJECT TO A GREATER RISK WITH REGARD
TO PAYMENT OF INTEREST AND RETURN OF PRINCIPAL THAN HIGHER-RATED
BONDS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS ASSOCIATED
WITH JUNK BONDS BEFORE INVESTING. (SEE INVESTMENT POLICIES, RISKS
AND INVESTMENT CONSIDERATIONS, SPECIAL CONSIDERATIONS REGARDING
MASTER FUND/FEEDER FUND STRUCTURE, AND APPENDIX.)
Institutional Client High Yield Fund is a "no-load" fund. There
are no sales or redemption charges, and the Fund has no 12b-1
plan. Institutional Client High Yield Fund is a series of the
Stein Roe Trust and High Yield Portfolio is a series of SR&F Base
Trust. Each Trust is a diversified open-end management investment
company.
Shares of Institutional Client High Yield Fund are intended
primarily for investors who are (or through purchase of Fund
shares become) clients of the Institutional Asset Management
Division of Stein Roe & Farnham Incorporated.
This prospectus contains information you should know before
investing in Institutional Client High Yield Fund. Please read it
carefully and retain it for future reference.
A Statement of Additional Information dated February 14, 1997,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information may be obtained without charge
by writing to Stein Roe Funds, Suite 3200, One South Wacker Drive,
Chicago, Illinois 60606, or by calling 800-322-1130.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February 14, 1997.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary...................................2
Fee Table ................................3
The Fund..................................4
Investment Policies.......................5
Portfolio Investments and Strategies......7
Investment Restrictions .................11
Risks and Investment Considerations .....12
How to Purchase Shares...................13
How to Redeem Shares ....................13
Net Asset Value .........................13
Distributions and Income Taxes...........14
Investment Return........................15
Management ..............................16
Organization and Description of Shares...17
Special Considerations Regarding the
Master Fund/Feeder Fund Structure......18
For More Information ....................20
Appendix.................................21
SUMMARY
Stein Roe Institutional Client High Yield Fund ("Institutional
Client High Yield Fund") is a series of Stein Roe Trust, an open-
end diversified management investment company organized as a
Massachusetts business trust. Institutional Client High Yield
Fund offers investors the advantage of a "no-load" fund, with
Stein Roe & Farnham Incorporated and its affiliates providing
customized services as investment adviser, administrator, transfer
agent, and distributor. (See The Fund and Organization and
Description of Shares.) This prospectus is not a solicitation in
any jurisdiction in which shares of Institutional Client High
Yield Fund are not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. Institutional Client High
Yield Fund invests all of its net investable assets in SR&F High
Yield Portfolio ("High Yield Portfolio"). High Yield Portfolio
invests in a diversified portfolio of securities in accordance
with the identical investment objective and substantially the same
investment policies as those of Institutional Client High Yield
Fund. High Yield Portfolio seeks total return by investing for a
high level of current income and capital growth. High Yield
Portfolio invests primarily in high-yield, high-risk medium- and
lower-quality debt securities. Medium-quality debt securities,
although considered investment grade, may have some speculative
characteristics. Lower-quality debt securities are obligations of
issuers that are considered predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal
according to the terms of the obligation and, therefore, carry
greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk
bonds."
For a more detailed discussion of the investment objectives and
policies, please see Investment Policies and Portfolio Investments
and Strategies. There is, of course, no assurance that
Institutional Client High Yield Fund and High Yield Portfolio will
achieve their common investment objective.
INVESTMENT RISKS. The risks inherent in Institutional Client High
Yield Fund depend primarily upon the term and quality of the
obligations in the investment portfolio of High Yield Portfolio,
as well as on market conditions. Interest rate fluctuations will
affect the Fund's net asset value and, therefore, the total return
from an investment in Institutional Client High Yield Fund.
Interest rate fluctuations will affect income on variable rate
securities and on securities purchased as other portfolio
securities mature. Since yields on debt securities available for
purchase vary over time, no specific yield on shares of
Institutional Client High Yield Fund can be assured.
Institutional Client High Yield Fund is designed for investors who
can accept the heightened level of risk and principal fluctuation
inherent in a portfolio that invests at least 65% of its assets in
medium- and lower-quality debt securities. High Yield Portfolio
may invest in foreign securities, which may entail a greater
degree of risk than investing in securities of domestic issuers.
Please see Investment Restrictions and Risks and Investment
Considerations for further information.
PURCHASES AND REDEMPTIONS. For information on purchasing (buying)
and redeeming (selling) shares, see How to Purchase Shares and How
to Redeem Shares.
DISTRIBUTIONS. Dividends are declared each business day and are
paid monthly. Dividends will be reinvested in additional shares
of Institutional Client High Yield Fund unless you elect to have
distributions paid in cash. (See Distributions and Income Taxes.)
MANAGEMENT AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") is investment adviser to High Yield Portfolio. In
addition, it provides administrative services to Institutional
Client High Yield Fund and High Yield Portfolio. For a
description of the Adviser and its fees, see Management.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases......................None
Sales Load Imposed on Reinvested Dividend............None
Deferred Sales Load..................................None
Redemption Fees......................................None
Exchange Fees........................................None
ANNUAL FUND OPERATING EXPENSES (after fee
waiver; as a percentage of average net assets)
Management and Administrative Fees (after fee
waiver)...........................................0.50%
12b-1 Fees...........................................None
Other Expenses.(after fee waiver)....................0.00%
-----
Total Fund Operating Expenses (after fee waiver)....0.50%
=====
EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; and (2) redemption at the end of
each time period:
1 year 3 years
------ -------
$5 $16
The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in Institutional Client High Yield Fund.
Because Institutional Client High Yield Fund has no operating
history, the information in the table is based upon an estimate of
expenses, assuming net assets of $50 million. The figures assume
that the percentage amounts listed under Annual Fund Operating
Expenses remain the same during each of the periods and that all
income dividends and capital gain distributions are reinvested in
additional Fund shares.
From time to time, the Adviser may voluntarily waive a portion of
its fees payable by Institutional Client High Yield Fund and the
Fund's pro rata share of the fees and expenses payable by High
Yield Portfolio. The Adviser has agreed to voluntarily waive such
fees to the extent the ordinary operating expenses of
Institutional Client High Yield Fund exceed 0.50% of its annual
average net assets. This commitment will be reviewed by the
Adviser on January 31, 2000, at which time the commitment could be
continued or terminated. In addition, the commitment is subject
to earlier review and possible termination by the Adviser on 30
days' notice to the Fund. Absent such expense undertaking, the
estimated Management and Administrative Fees, Other Expenses and
Total Fund Operating Expenses would be 0.65%, 0.35% and 1.00%,
respectively. Any such fee waiver will lower Institutional Client
High Yield Fund's overall expense ratio and increase its overall
return to investors. (Also see Management--Fees and Expenses.)
Institutional Client High Yield Fund pays the Adviser an
administrative fee based on its average daily net assets and High
Yield Portfolio pays the Adviser a management fee based on its
average daily net assets. The Fee Table summarizes the expenses
of both Institutional Client High Yield Fund and High Yield
Portfolio. Fees and expenses are described under Management.
Institutional Client High Yield Fund bears its proportionate share
of Portfolio expenses. The Trustees of Stein Roe Trust have
considered whether the annual operating expenses of Institutional
Client High Yield Fund, including its proportionate share of the
expenses of High Yield Portfolio, would be more or less than if
Institutional Client High Yield Fund invested directly in the
securities held by High Yield Portfolio, and concluded that
Institutional Client High Yield Fund's expenses would not be
materially greater in such case.
The figures in the Example are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown in the
Example and Fee Table is useful in reviewing Institutional Client
High Yield Fund's expenses and in providing a basis for comparison
with other mutual funds, it should not be used for comparison with
other investments using different assumptions or time periods.
THE FUND
STEIN ROE INSTITUTIONAL CLIENT HIGH YIELD FUND ("Institutional
Client High Yield Fund") is a no-load, diversified "mutual fund."
Institutional Client High Yield Fund does not impose commissions
or charges when shares are purchased or redeemed. Institutional
Client High Yield Fund is a series of Stein Roe Trust, an open-end
management investment company, which is authorized to issue shares
of beneficial interest in separate series.
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to High Yield Portfolio and
administrative services to Institutional Client High Yield Fund
and High Yield Portfolio.
Rather than invest in securities directly, Institutional Client
High Yield Fund seeks to achieve its investment objective by using
the "master fund/feeder fund" structure. Under that structure,
Institutional Client High Yield Fund and other investment
companies with the same investment objective invest their assets
in another investment company having the same investment objective
and substantially the same investment policies as Institutional
Client High Yield Fund. The purpose of such an arrangement is to
achieve greater operational efficiencies and reduce costs.
Institutional Client High Yield Fund invests all of its net
investable assets in SR&F High Yield Portfolio ("High Yield
Portfolio"), which is a series of SR&F Base Trust ("Base Trust").
(See Special Considerations Regarding Master Fund/Feeder Fund
Structure.)
INVESTMENT POLICIES
Institutional Client High Yield Fund and High Yield Portfolio each
seek total return by investing for a high level of current income
and capital growth. Further information on portfolio investments
and strategies may be found under Portfolio Investments and
Strategies in this prospectus and in the Statement of Additional
Information. Institutional Client High Yield Fund seeks to
achieve its objective by investing all of its assets in High Yield
Portfolio. The investment policies of High Yield Portfolio are
substantially identical to those of Institutional Client High
Yield Fund.
High Yield Portfolio invests principally in high-yield, high-risk
medium- and lower-quality debt securities. The medium- and lower-
quality debt securities in which High Yield Portfolio will invest
normally offer a current yield or yield to maturity that is
significantly higher than the yield from securities rated in the
three highest categories assigned by rating services such as
Standard & Poor's Corporation ("S&P") and by Moody's Investors
Service, Inc. ("Moody's").
Under normal circumstances, at least 65% of High Yield Portfolio's
assets will be invested in high-yield, high-risk medium- and
lower-quality debt securities rated lower than Baa by Moody's or
lower than BBB by S&P, or equivalent ratings as determined by
other rating agencies, or unrated securities that the Adviser
determines to be of comparable quality. Medium-quality debt
securities, although considered investment grade, have some
speculative characteristics. Lower-quality debt securities are
obligations of issuers that are considered predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the
possibility of issuer default and bankruptcy, and are commonly
referred to as "junk bonds." Some issuers of debt securities
choose not to have their securities rated by a rating service, and
High Yield Portfolio may invest in unrated securities that the
Adviser has researched thoroughly and believes are suitable for
investment. High Yield Portfolio may invest in debt obligations
that are in default, but such obligations are not expected to
exceed 10% of High Yield Portfolio's assets.
High Yield Portfolio may invest up to 35% of its total assets in
other securities including, but not limited to, pay-in-kind bonds,
securities issued in private placements, bank loans, zero coupon
bonds, foreign securities, convertible securities, futures, and
options. High Yield Portfolio may also invest in higher-quality
debt securities. Under normal market conditions, however, High
Yield Portfolio is unlikely to emphasize higher-quality debt
securities since generally they offer lower yields than medium-
and lower-quality debt securities with similar maturities. High
Yield Portfolio may also invest in common stocks and securities
that are convertible into common stocks, such as warrants.
Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer
default or bankruptcy. High Yield Portfolio seeks to reduce
investment risk through diversification, credit analysis, and
evaluation of developments in both the economy and financial
markets.
An economic downturn could severely disrupt the high-yield market
and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. In
addition, lower-quality bonds are less sensitive to interest rate
changes than higher-quality instruments (see Risks and Investment
Considerations) and generally are more sensitive to adverse
economic changes or individual corporate developments. During a
period of adverse economic changes, including a period of rising
interest rates, issuers of such bonds may experience difficulty in
servicing their principal and interest payment obligations.
Achievement of the investment objective will be more dependent on
the Adviser's credit analysis than would be the case if High Yield
Portfolio were investing in higher-quality debt securities. Since
the ratings of rating services (which evaluate the safety of
principal and interest payments, not market risks) are used only
as preliminary indicators of investment quality, the Adviser
employs its own credit research and analysis, from which it has
developed a proprietary credit rating system based upon
comparative credit analyses of issuers within the same industry.
These analyses may take into consideration such quantitative
factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity
ratio and debt servicing capabilities, and such qualitative
factors as an assessment of management, industry characteristics,
accounting methodology, and foreign business exposure.
Lower-quality debt securities are obligations of issuers that are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation and, therefore, carry greater investment
risk, including the possibility of issuer default and bankruptcy,
and are commonly referred to as "junk bonds." The lowest rating
assigned by Moody's is for bonds that can be regarded as having
extremely poor prospects of ever attaining any real investment
standing.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the market
for them is less broad. The market for unrated debt securities is
even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase
significantly, and High Yield Portfolio may have greater
difficulty selling its portfolio securities. (See Net Asset
Value.) The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions.
PORTFOLIO INVESTMENTS AND STRATEGIES
FOREIGN SECURITIES. High Yield Portfolio may invest in foreign
securities, but will not invest in a foreign security if, as a
result of such investment, more than 25% of its total assets would
be invested in foreign securities. For purposes of this
restriction, foreign debt securities do not include securities
represented by American Depositary Receipts ("ADRs"), foreign debt
securities denominated in U.S. dollars, or securities guaranteed
by a U.S. person such as a corporation domiciled in the United
States that is a parent or affiliate of the issuer of the
securities being guaranteed. High Yield Portfolio may invest in
sponsored or unsponsored ADRs. In addition to, or in lieu of,
such direct investment, High Yield Portfolio may construct a
synthetic foreign position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b)
concurrently entering into a forward contract to deliver a
corresponding amount of that currency in exchange for a different
currency on a future date and at a specified rate of exchange.
Because of the availability of a variety of highly liquid U.S.
dollar debt instruments, a synthetic foreign position utilizing
such U.S. dollar instruments may offer greater liquidity than
direct investment in foreign currency debt instruments. In
connection with the purchase of foreign securities, High Yield
Portfolio may contract to purchase an amount of foreign currency
sufficient to pay the purchase price of the securities at the
settlement date. (See Risks and Investment Considerations.)
DERIVATIVES. Consistent with its objective, High Yield Portfolio
may invest in a broad array of financial instruments and
securities, including conventional exchange-traded and non-
exchange traded options, futures contracts, futures options,
securities collateralized by underlying pools of mortgages or
other receivables, and other instruments, the value of which is
"derived" from the performance of an underlying asset or a
"benchmark" such as a security index, an interest rate, or a
currency ("Derivatives"). High Yield Portfolio does not expect to
invest more than 5% of its net assets in any type of Derivative
except: options, futures contracts, and futures options.
Derivatives are most often used to manage investment risk or to
create an investment position indirectly because they are more
efficient or less costly than direct investment. They also may be
used in an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives. For additional
information on Derivatives, please refer to the Statement of
Additional Information.
MORTGAGE AND OTHER ASSET-BACKED DEBT SECURITIES. High Yield
Portfolio may invest in securities secured by mortgages or other
assets such as automobile or home improvement loans and credit
card receivables. These instruments may be issued or guaranteed
by the U.S. Government or by its agencies or instrumentalities or
by private entities such as commercial, mortgage and investment
banks and financial companies or financial subsidiaries of
industrial companies.
Securities issued by GNMA represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the
Farmers Home Administration, or guaranteed by the Veterans
Administration. Securities issued by FNMA and FHLMC, U.S.
Government-sponsored corporations, also represent an interest in a
pool of mortgages.
The timely payment of principal and interest on GNMA securities is
guaranteed by GNMA and backed by the full faith and credit of the
U.S. Treasury. FNMA guarantees full and timely payment of
interest and principal on FNMA securities. FHLMC guarantees
timely payment of interest and ultimate collection of principal on
FHLMC securities. FNMA and FHLMC securities are not backed by the
full faith and credit of the U.S. Treasury.
Mortgage-backed debt securities, such as those issued by GNMA,
FNMA, and FHLMC, are of the "modified pass-through type," which
means the interest and principal payments on mortgages in the pool
are "passed through" to investors. During periods of declining
interest rates, there is increased likelihood that mortgages will
be prepaid, with a resulting loss of the full-term benefit of any
premium paid by High Yield Portfolio on purchase of such
securities; in addition, the proceeds of prepayment would likely
be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest in
underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs"), which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities and are usually issued in multiple classes, each
of which has different payment rights, pre-payment risks, and
yield characteristics. Mortgage-backed securities involve the
risk of pre-payment of the underlying mortgages at a faster or
slower rate than the established schedule. Pre-payments generally
increase with falling interest rates and decrease with rising
rates, but they also are influenced by economic, social, and
market factors. If mortgages are pre-paid during periods of
declining interest rates, there would be a resulting loss of the
full-term benefit of any premium paid by High Yield Portfolio on
purchase of the CMO, and the proceeds of pre-payment would likely
be invested at lower interest rates. High Yield Portfolio tends
to invest in CMOs of classes known as planned amortization classes
("PACs") which have pre-payment protection features tending to
make them less susceptible to price volatility.
Non-mortgage asset-backed securities usually have less pre-payment
risk than mortgage-backed securities, but have the risk that the
collateral will not be available to support payments on the
underlying loans which finance payments on the securities
themselves. Therefore, greater emphasis is placed on the credit
quality of the security issuer and the guarantor, if any.
Asset-backed securities tend to experience greater price
volatility than straight debt securities.
FLOATING RATE INSTRUMENTS. High Yield Portfolio may also invest
in floating rate instruments which provide for periodic
adjustments in coupon interest rates that are automatically reset
based on changes in amount and direction of specified market
interest rates. In addition, the adjusted duration of some of
these instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%. High
Yield Portfolio does not intend to invest more than 5% of its net
assets in floating rate instruments.
FUTURES AND OPTIONS. High Yield Portfolio may purchase and write
both call options and put options on securities, indexes and
foreign currencies, and enter into interest rate, index and
foreign currency futures contracts. High Yield Portfolio may also
write options on such futures contracts and purchase other types
of forward or investment contracts linked to individual
securities, indexes or other benchmarks, consistent with its
investment objective, in order to provide additional revenue, or
to hedge against changes in security prices, interest rates, or
currency fluctuations. High Yield Portfolio may write a call or
put option only if the option is covered. As the writer of a
covered call option, High Yield Portfolio foregoes, during the
option's life, the opportunity to profit from increases in market
value of the security covering the call option above the sum of
the premium and the exercise price of the call. There can be no
assurance that a liquid market will exist when High Yield
Portfolio seeks to close out a position. Because of low margin
deposits required, the use of futures contracts involves a high
degree of leverage, and may result in losses in excess of the
amount of the margin deposit.
LENDING OF PORTFOLIO SECURITIES. Subject to certain restrictions,
High Yield Portfolio may lend portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current
basis in an amount at least equal to the market value of the
securities loaned by High Yield Portfolio. High Yield Portfolio
would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned, and would
also receive an additional return that may be in the form of a
fixed fee or a percentage of the collateral. High Yield Portfolio
would have the right to call the loan and obtain the securities
loaned at any time on notice of not more than five business days.
In the event of bankruptcy or other default of the borrower, High
Yield Portfolio could experience both delays in liquidating the
loan collateral or recovering the loaned securities and losses
including (a) possible decline in the value of the collateral or
in the value of the securities loaned during the period while the
Portfolio seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
High Yield Portfolio's assets may include securities purchased on
a when-issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. High Yield Portfolio makes
such commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if
the Adviser deems it advisable for investment reasons. Securities
purchased in this manner involve a risk of loss if the value of
the security purchased declines before the settlement date.
When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that High Yield
Portfolio will sell securities with a commitment to purchase
similar, but not identical, securities at a future date.
Generally, the securities are repurchased at a price lower than
the sales price. Dollar roll transactions involve the risk of
restrictions on the Portfolio's ability to repurchase the security
if the counterparty becomes insolvent; an adverse change in the
price of the security during the period of the roll or that the
value of the security repurchased will be less than the security
sold; and transaction costs exceeding the return earned by High
Yield Portfolio on the sales proceeds of the dollar roll.
High Yield Portfolio may also invest in securities purchased on a
standby commitment basis, which is a delayed-delivery agreement in
which High Yield Portfolio binds itself to accept delivery of a
security at the option of the other party to the agreement.
PIK AND ZERO COUPON BONDS. High Yield Portfolio may invest up to
20% of its total assets in zero coupon bonds and bonds the
interest on which is payable in kind ("PIK bonds"). A zero coupon
bond is a bond that does not pay interest for its entire life. A
PIK bond pays interest in the form of additional securities. The
market prices of both zero coupon and PIK bonds are affected to a
greater extent by changes in prevailing levels of interest rates
and thereby tend to be more volatile in price than securities that
pay interest periodically and in cash. In addition, because High
Yield Portfolio accrues income with respect to these securities
prior to the receipt of such interest in cash, it may have to
dispose of portfolio securities under disadvantageous
circumstances in order to obtain cash needed to pay income
dividends in amounts necessary to avoid unfavorable tax
consequences.
SHORT SALES AGAINST THE BOX. The Fund may sell short securities
it owns or has the right to acquire without further consideration,
a technique called selling short "against the box." Short sales
against the box may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such securities should be wholly or partly
offset by a corresponding gain in the short position. However,
any potential gains in such securities should be wholly or
partially offset by a corresponding loss in the short position.
Short sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, the Adviser does not
want to sell the security. For a more complete explanation,
please refer to the Statement of Additional Information.
PORTFOLIO TURNOVER. In attempting to attain its objective, High
Yield Portfolio may sell portfolio securities without regard to
the period of time they have been held. Further, the Adviser may
purchase and sell securities for the investment portfolio with a
view to maximizing current return, even if portfolio changes would
cause the realization of capital gains. Although the average
stated maturity of High Yield Portfolio will be from five to ten
years, the Adviser may adjust the average effective maturity of
High Yield Portfolio's portfolio from time to time, depending on
its assessment of the relative yields available on securities of
different maturities and its expectations of future changes in
interest rates. As a result, the turnover rate of High Yield
Portfolio may vary from year to year. The turnover rate for High
Yield Portfolio may exceed 100%, but is not expected to exceed
200% under normal market conditions. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains (which may be taxable) or losses.
(See Distributions and Income Taxes.)
INVESTMENT RESTRICTIONS
Neither Institutional Client High Yield Fund nor High Yield
Portfolio may invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements /1/ for such securities; or (2) 25% or more of its
total assets would be invested in the securities of a group of
issuers in the same industry, except that this restriction does
not apply to U.S. Government Securities. Notwithstanding these
limitations, Institutional Client High Yield Fund, but not High
Yield Portfolio, may invest all of its assets in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund.
- ------------
/1/ A repurchase agreement involves a sale of securities to High
Yield Portfolio with the concurrent agreement of the seller (bank
or securities dealer) to repurchase the securities at the same
price plus an amount equal to an agreed-upon interest rate within
a specified time. In the event of a bankruptcy or other default
of a seller of a repurchase agreement, the Portfolio could
experience both delays in liquidating the underlying securities
and losses. The Portfolio may not invest more than 10% of its net
assets in repurchase agreements maturing in more than seven days
and other illiquid securities.
- ------------
Neither Institutional Client High Yield Fund nor High Yield
Portfolio may make loans except that it may (1) purchase money
market instruments and enter into repurchase agreements; (2)
acquire publicly-distributed or privately-placed debt securities;
(3) lend its portfolio securities under certain conditions; and
(4) participate in an interfund lending program with other Stein
Roe Funds and Portfolios. Neither may borrow money, except for
non-leveraging, temporary, or emergency purposes or in connection
with participation in the interfund lending program. Neither the
aggregate borrowings (including reverse repurchase agreements) nor
the aggregate loans at any one time may exceed 33 1/3% of the
value of total assets. Additional securities may not be purchased
when borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
The policies set forth in the first two paragraphs under
Investment Restrictions (but not the footnote) are fundamental
policies of Institutional Client High Yield Fund and High Yield
Portfolio./2/ The Statement of Additional Information contains
all of the investment restrictions.
- ----------------
/2/ A fundamental policy may be changed only with the approval of
a "majority of the outstanding voting securities" as defined in
the Investment Company Act.
- ---------------
RISKS AND INVESTMENT CONSIDERATIONS
The risks inherent in Institutional Client High Yield Fund depend
primarily upon the term and quality of the obligations in High
Yield Portfolio's investment portfolio, as well as on market
conditions. Although High Yield Portfolio seeks to reduce risk by
investing in a diversified portfolio, this does not eliminate all
risk. Institutional Client High Yield Fund is designed for
investors who can accept the heightened level of risk and
principal fluctuation which might result from a portfolio that
invests at least 65% of its assets in medium- and lower-quality
debt securities.
The market value of securities in the investment portfolio tends
to vary inversely with the level of interest rates. As a result,
interest rate fluctuations may affect net asset value. (Because
yields on debt securities available for purchase by High Yield
Portfolio vary over time, no specific yield on shares of
Institutional Client High Yield Fund can be assured.) In
addition, if the bonds in the investment portfolio contain call,
prepayment or redemption provisions, during a period of declining
interest rates, these securities are likely to be redeemed, and
High Yield Portfolio may have to replace the security with a lower
yielding security, resulting in a decreased return for investors.
Investments in foreign securities, including ADRs, represent both
risks and opportunities not typically associated with investments
in domestic issuers. Risks of foreign investing include currency
risk, less complete financial information on issuers, different
accounting, auditing and financial reporting standards, different
settlement practices, less market liquidity, more market
volatility, less well-developed and regulated markets, and greater
political instability. In addition, various restrictions by
foreign governments on investments by non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
High Yield Portfolio may enter into foreign currency forward
contracts and use options and futures contracts, as described
elsewhere in this prospectus, to limit or reduce foreign currency
risk.
There can be no assurance that Institutional Client High Yield
Fund or High Yield Portfolio will achieve its objective, nor can
High Yield Portfolio assure that payments of interest and
principal on portfolio securities will be made when due. If,
after purchase by High Yield Portfolio, the rating of a portfolio
security is lost or reduced, High Yield Portfolio would not be
required to sell the security, but the Adviser would consider such
a change in deciding whether High Yield Portfolio should retain
the security in its investment portfolio.
The investment objective of Institutional Client High Yield Fund
and High Yield Portfolio is not fundamental and may be changed by
the respective Board of Trustees without a vote of shareholders.
HOW TO PURCHASE SHARES
Shares of Institutional Client High Yield Fund are intended
primarily for investors who are (or through purchase of Fund
shares become) clients of Stein Roe's Institutional Asset
Management Division. Shares may also be available to other
investors if, in the judgment of the Adviser, the sale of shares
to such investors would not adversely affect the Fund or its
shareholders. The initial purchase minimum is $1,000,000 and the
minimum subsequent investment is $100,000. For more information
on how to purchase Fund shares, please call Stein Roe Retirement
Services at 800-322-1130. Stein Roe Trust reserves the right to
waive or lower its investment minimums for any reason.
CONDITIONS OF PURCHASE. Each purchase order for Institutional
Client High Yield Fund must be accepted by an authorized officer
of Stein Roe Trust or its authorized agent and is not binding
until accepted and entered on the books of Institutional Client
High Yield Fund. Once your purchase order has been accepted, you
may not cancel or revoke it; you may, however, redeem the shares.
Stein Roe Trust reserves the right not to accept any purchase
order that it determines not to be in the best interests of Stein
Roe Trust or of Institutional Client High Yield Fund's
shareholders.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Institutional
Client High Yield Fund's shares is made at its net asset value
(see Net Asset Value) next determined after receipt of an order in
good form, including receipt of payment by Institutional Client
High Yield Fund.
HOW TO REDEEM SHARES
Shares of Institutional Client High Yield Fund may be redeemed any
day the New York Stock Exchange ("NYSE") is open at the net asset
value next calculated after a redemption order is received and
accepted by Stein Roe Trust.
Redemption instructions may not be cancelled or revoked once they
have been received and accepted by Stein Roe Trust. Stein Roe
Trust cannot accept a redemption request that specifies a
particular date or price for redemption or any special conditions.
Because the redemption price you receive depends upon
Institutional Client High Yield Fund's net asset value per share
at the time of redemption, it may be more or less than the price
you originally paid for the shares and may result in a realized
capital gain or loss. Stein Roe Trust will generally mail payment
for shares redeemed within seven days after proper instructions
are received.
Stein Roe Trust reserves the right to redeem shares in any account
and send the proceeds to the owner if the shares in the account do
not have a value of at least $1,000,000. A shareholder would be
notified that his account is below the minimum and would be
allowed 30 days to increase the account before the redemption is
processed.
NET ASSET VALUE
The purchase and redemption price of Institutional Client High
Yield Fund's shares is its net asset value per share.
Institutional Client High Yield Fund determines the net asset
value of its shares as of the close of trading on the NYSE
(currently 3:00 p.m., central time) by dividing the difference
between the values of its assets and liabilities by the number of
shares outstanding. High Yield Portfolio allocates net asset
value, income, and expenses to Institutional Client High Yield
Fund and any other of its feeder funds in proportion to their
respective interests in High Yield Portfolio.
Net asset value will not be determined on days when the NYSE is
closed unless, in the judgment of the Board of Trustees, the net
asset value of Institutional Client High Yield Fund should be
determined on any such day, in which case the determination will
be made at 3:00 p.m., central time.
Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Long-term
straight-debt securities for which market quotations are not
readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. Short-term debt securities with
remaining maturities of 60 days or less are valued at their
amortized cost, which does not take into account unrealized gains
or losses. The Board believes that the amortized cost represents
a fair value for such securities. Short-term debt securities with
remaining maturities of more than 60 days for which market
quotations are not readily available are valued by use of a matrix
prepared by the Adviser based on quotations for comparable
securities. Other assets and securities held by High Yield
Portfolio for which these valuation methods do not produce a fair
value are valued by a method that the Board believes will
determine a fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared each business day,
paid monthly, and confirmed at least quarterly. Institutional
Client High Yield Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the twelve-month period ended
October 31 in that year. Institutional Client High Yield Fund
intends to distribute any undistributed net investment income and
net realized capital gains in the following year.
All income dividends and capital gain distributions will be
reinvested in additional shares unless you elect to have
distributions paid in cash. Reinvestment normally occurs on the
payable date. Stein Roe Trust reserves the right to reinvest the
proceeds and future distributions in additional shares of
Institutional Client High Yield Fund if checks mailed to you for
distributions are returned as undeliverable or are not presented
for payment within six months.
INCOME TAXES. Your distributions will be taxable to you, under
income tax law, whether received in cash or reinvested in
additional shares. For federal income tax purposes, any
distribution that is paid in January but was declared in the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to federal income tax at ordinary rates on
income dividends and distributions of net short-term capital gain.
Distributions of net long-term capital gain will be taxable to you
as long-term capital gain regardless of the length of time you
have held your shares.
You will be advised annually as to the source of distributions.
If you are not subject to tax on your income, you will not be
required to pay tax on these amounts.
If you realize a loss on the sale or exchange of Fund shares held
for six months or less, your short-term loss is recharacterized as
long-term to the extent of any long-term capital gain
distributions you have received with respect to those shares.
For federal income tax purposes, Institutional Client High Yield
Fund is treated as a separate taxable entity distinct from any
other series of the Stein Roe Trust. High Yield Portfolio intends
to qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal Revenue
Code, so that it will be relieved of federal income tax on that
part of its net investment income and net capital gain that is
distributed to shareholders.
This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.
INVESTMENT RETURN
The total return from an investment in Institutional Client High
Yield Fund is measured by the distributions received (assuming
reinvestment) plus or minus the change in the net asset value per
share for a given period. A total return percentage may be
calculated by dividing the value of a share at the end of the
period (including reinvestment of distributions) by the value of
the share at the beginning of the period and subtracting one. For
a given period, an average annual total return may be calculated
by finding the average annual compounded rate that would equate a
hypothetical $1,000 investment to the ending redeemable value.
The yield of Institutional Client High Yield Fund is calculated by
dividing its net investment income per share (a hypothetical
figure as defined in the SEC rules) during a 30-day period by the
net asset value per share on the last day of the period. The
yield formula provides for semiannual compounding, which assumes
that net investment income is earned and reinvested at a constant
rate and annualized at the end of a six-month period.
Comparison of Institutional Client High Yield Fund's yield or
total return with those of alternative investments should consider
differences between Institutional Client High Yield Fund and the
alternative investments, the periods and methods used in
calculation of the return being compared, and the impact of taxes
on alternative investments. Yield figures are not based on actual
dividends paid. Past performance is not necessarily indicative of
future results. To obtain current yield or total return
information, you may call 800-322-1130.
MANAGEMENT
TRUSTEES AND INVESTMENT ADVISER. The Board of Trustees of the
Stein Roe Trust has overall management responsibility for Stein
Roe Trust and Institutional Client High Yield Fund; the Board of
Base Trust has overall management responsibility for High Yield
Portfolio. See Management in the Statement of Additional
Information for the names of and other information about the
trustees and officers. Since Stein Roe Trust and Base Trust have
the same trustees, the trustees have adopted conflict of interest
procedures to monitor and address potential conflicts between the
interests of Institutional Client High Yield Fund and High Yield
Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolio of High Yield Portfolio and the business
affairs of Institutional Client High Yield Fund, High Yield
Portfolio, Stein Roe Trust, and Base Trust, subject to the
direction of the respective Board. The Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940.
The Adviser was organized in 1986 to succeed to the business of
Stein Roe & Farnham, a partnership that had advised and managed
mutual funds since 1949. The Adviser is a wholly owned subsidiary
of Liberty Financial Companies, Inc. ("Liberty Financial"), which
in turn is a majority owned indirect subsidiary of Liberty Mutual
Insurance Company.
PORTFOLIO MANAGERS. Ann H. Benjamin has been portfolio manager of
High Yield Portfolio since its inception in 1996. She is a senior
vice president of the Adviser and has been associated with the
Adviser since 1989. She has also been portfolio manager of Stein
Roe Income Fund since 1990. Ms. Benjamin has 12 years' experience
in the analysis and investment of medium- and lower-quality debt
securities. She received her B.B.A. from Chatham College in 1980
and her M.A. from Carnegie Mellon University in 1985. Ms.
Benjamin managed $344 million in mutual fund net assets for the
Adviser as of December 31, 1996, serves as High-Yield Credit
Research Manager for the Adviser, and is a member of the Adviser's
Fixed Income Credit Review Committee.
Stephen F. Lockman has been associate portfolio manager of High
Yield Portfolio since its inception in 1996. Mr. Lockman is a
senior vice president of the Adviser and has been employed by the
Adviser since January 1994. A chartered financial analyst, Mr.
Lockman received a B.S. degree from the University of Illinois in
1983 and an M.B.A. from DePaul University in 1986.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Institutional Client High Yield Fund,
computed and accrued daily, at an annual rate of .150% of the
first $500 million of average net assets and .125% thereafter; and
a monthly management fee from High Yield Portfolio, computed and
accrued daily, at an annual rate of .500% of the first $500
million of average net assets and .475% thereafter. However, as
noted above under Fee Table, the Adviser may voluntarily waive a
portion of its fees.
The Adviser provides office space and executive and other
personnel to Stein Roe Trust and Base Trust and bears any sales or
promotional expenses. All expenses of Institutional Client High
Yield Fund (other than those paid by the Adviser), including, but
not limited to, printing and postage charges, securities
registration fees, custodian and transfer agency fees, legal and
auditing fees, compensation of trustees not affiliated with the
Adviser and expenses incidental to its organization, are paid out
of the assets of Institutional Client High Yield Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Institutional
Client High Yield Fund and High Yield Portfolio including
computation of net asset value and calculation of net income and
capital gains and losses on disposition of assets.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and futures
contracts. In doing so, the Adviser seeks to obtain the best
combination of price and execution, which involves a number of
judgmental factors.
TRANSFER AGENT. SteinRoe Services Inc. ("SSI"), One South Wacker
Drive, Chicago, Illinois 60606, a wholly owned subsidiary of
Liberty Financial, is the agent of Stein Roe Trust for the
transfer of shares, disbursement of dividends, and maintenance of
shareholder accounting records.
DISTRIBUTOR. The shares of Institutional Client High Yield Fund
are offered for sale through Liberty Securities Corporation
("Distributor") without any sales commissions or charges to
Institutional Client High Yield Fund or to its shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Financial. The business address of the Distributor is 600
Atlantic Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to SteinRoe Services Inc. at P.O. Box 8900, Boston,
Massachusetts 02205. All distribution and promotional expenses
are paid by the Adviser, including payments to the Distributor for
sales of Fund shares.
CUSTODIAN. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Institutional Client High Yield Fund. Foreign securities are
maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network or foreign
depositories used by such members. (See Custodian in the
Statement of Additional Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
Stein Roe Trust is a Massachusetts business trust organized under
an Agreement and Declaration of Trust ("Declaration of Trust")
dated July 31, 1996, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either Stein Roe
Trust's shareholders or its trustees. Stein Roe Trust may issue
an unlimited number of shares, in one or more series as the Board
may authorize. Currently, Institutional Client High Yield Fund is
the only series authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Stein Roe Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of Stein Roe
Trust. The Declaration of Trust provides that persons extending
credit to, contracting with, or having any claim against, Stein
Roe Trust or any particular series shall look only to the assets
of Stein Roe Trust or of the respective series for payment under
such credit, contract or claim, and that the shareholders,
trustees and officers of Stein Roe Trust shall have no personal
liability therefor. The Declaration of Trust requires that notice
of such disclaimer of liability be given in each contract,
instrument or undertaking executed or made on behalf of Stein Roe
Trust. The Declaration of Trust provides for indemnification of
any shareholder against any loss and expense arising from personal
liability solely by reason of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is believed to be remote, because
it would be limited to circumstances in which the disclaimer was
inoperative and Stein Roe Trust was unable to meet its
obligations.
The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of Stein Roe
Trust is also believed to be remote, because it would be limited
to claims to which the disclaimer did not apply and to
circumstances in which the other Fund was unable to meet its
obligations.
SPECIAL CONSIDERATIONS REGARDING THE
MASTER FUND/FEEDER FUND STRUCTURE
Institutional Client High Yield Fund, an open-end management
investment company, seeks to achieve its objective by investing
all of its assets in shares of another mutual fund having an
investment objective identical to that of Institutional Client
High Yield Fund. The initial shareholder of Institutional Client
High Yield Fund approved this policy of permitting Institutional
Client High Yield Fund to act as a feeder fund by investing in
High Yield Portfolio. Please refer to the Investment Policies,
Portfolio Investments and Strategies, and Investment Restrictions
for a description of the investment objectives, policies, and
restrictions of Institutional Client High Yield Fund and High
Yield Portfolio. The management and expenses of both
Institutional Client High Yield Fund and High Yield Portfolio are
described under Fee Table and Management. Institutional Client
High Yield Fund bears its proportionate share of Portfolio
expenses.
The Adviser has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
SR&F High Yield Portfolio is a separate series of SR&F Base Trust
("Base Trust"), a Massachusetts common law trust organized under
an Agreement and Declaration of Trust ("Declaration of Trust")
dated August 23, 1993. The Declaration of Trust of Base Trust
provides that Institutional Client High Yield Fund and other
investors in High Yield Portfolio will each be liable for all
obligations of High Yield Portfolio that are not satisfied by High
Yield Portfolio. However, the risk of Institutional Client High
Yield Fund incurring financial loss on account of such liability
is limited to circumstances in which both inadequate insurance
existed and High Yield Portfolio itself were unable to meet its
obligations. Accordingly, the Trustees of Stein Roe Trust believe
that neither Institutional Client High Yield Fund nor its
shareholders will be adversely affected by reason of Institutional
Client High Yield Fund's investing in High Yield Portfolio.
The Declaration of Trust of Base Trust provides that High Yield
Portfolio will terminate 120 days after the withdrawal of
Institutional Client High Yield Fund or any other investor in High
Yield Portfolio, unless the remaining investors vote to agree to
continue the business of High Yield Portfolio. The Trustees of
Stein Roe Trust may vote Institutional Client High Yield Fund's
interests in High Yield Portfolio for such continuation without
approval of Institutional Client High Yield Fund's shareholders.
The common investment objective of Institutional Client High Yield
Fund and High Yield Portfolio is non-fundamental and may be
changed without shareholder approval, subject, however, to at
least 30 days' advance written notice to Institutional Client High
Yield Fund's shareholders.
The fundamental policies of Institutional Client High Yield Fund
and the corresponding fundamental policies of the Portfolio can be
changed only with shareholder approval.
If Institutional Client High Yield Fund, as a Portfolio investor,
is requested to vote on a proposed change in fundamental policy of
High Yield Portfolio or any other matter pertaining to High Yield
Portfolio (other than continuation of the business of High Yield
Portfolio after withdrawal of another investor), Institutional
Client High Yield Fund will solicit proxies from its shareholders
and vote its interest in High Yield Portfolio for and against such
matters proportionately to the instructions to vote for and
against such matters received from Fund shareholders.
Institutional Client High Yield Fund will vote shares for which it
receives no voting instructions in the same proportion as the
shares for which it receives voting instructions. If there are
other investors in High Yield Portfolio, there can be no assurance
that any matter receiving a majority of votes cast by Fund
shareholders will receive a majority of votes cast by all High
Yield Portfolio investors. If other investors hold a majority
interest in High Yield Portfolio, they could have voting control
over High Yield Portfolio.
In the event that High Yield Portfolio's fundamental policies were
changed so as to be inconsistent with those of Institutional
Client High Yield Fund, the Board of Trustees of Stein Roe Trust
would consider what action might be taken, including changes to
Institutional Client High Yield Fund's fundamental policies,
withdrawal of Institutional Client High Yield Fund's assets from
High Yield Portfolio and investment of such assets in another
pooled investment entity, or the retention of another investment
adviser. Any of these actions would require the approval of
Institutional Client High Yield Fund's shareholders.
Institutional Client High Yield Fund's inability to find a
substitute master fund or comparable investment management could
have a significant impact upon its shareholders' investments. Any
withdrawal of Institutional Client High Yield Fund's assets could
result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) to Institutional Client High Yield
Fund. Should such a distribution occur, Institutional Client High
Yield Fund would incur brokerage fees or other transaction costs
in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio
of investments for Institutional Client High Yield Fund and could
affect the liquidity of Institutional Client High Yield Fund.
Each investor in High Yield Portfolio, including Institutional
Client High Yield Fund, may add to or reduce its investment in
High Yield Portfolio on each day the NYSE is open for business.
The investor's percentage of the aggregate interests in High Yield
Portfolio will be computed as the percentage equal to the fraction
(i) the numerator of which is the beginning of the day value of
such investor's investment in High Yield Portfolio on such day
plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in High Yield
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of High
Yield Portfolio on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate
investments in High Yield Portfolio by all investors in High Yield
Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in High Yield
Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in High Yield Portfolio, but
members of the general public may not invest directly in High
Yield Portfolio. Other investors in High Yield Portfolio are not
required to sell their shares at the same public offering price as
Institutional Client High Yield Fund, could incur different
administrative fees and expenses than Institutional Client High
Yield Fund, and their shares might be sold with a sales
commission. Therefore, Fund shareholders might have different
investment returns than shareholders in another investment company
that invests exclusively in High Yield Portfolio. Investment by
such other investors in High Yield Portfolio would provide funds
for the purchase of additional portfolio securities and would tend
to reduce the Portfolio's operating expenses as a percentage of
its net assets. Conversely, large-scale redemptions by any such
other investors in High Yield Portfolio could result in untimely
liquidations of High Yield Portfolio's security holdings, loss of
investment flexibility, and increases in the operating expenses of
High Yield Portfolio as a percentage of its net assets. As a
result, High Yield Portfolio's security holdings may become less
diverse, resulting in increased risk.
Currently two other investment companies invest in High Yield
Portfolio: Stein Roe High Yield Fund, a series of Stein Roe
Income Trust; and Stein Roe Institutional High Yield Fund, a
series of Stein Roe Institutional Trust. Information regarding
any investment company that may invest in High Yield Portfolio in
the future may be obtained by writing to SR&F Base Trust, Suite
3200, One South Wacker Drive, Chicago, Illinois 60606 or by
calling 800-338-2550. The Adviser may provide administrative or
other services to one or more of such investors.
FOR MORE INFORMATION
Contact Stein Roe Retirement Services at 800-322-1130 for more
information about this Fund.
APPENDIX--RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as
to the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer. Consequently,
the Adviser believes that the quality of debt securities in which
High Yield Portfolio invests should be continuously reviewed and
that individual analysts give different weightings to the various
factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of ratings
used by Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P").
CORPORATE BOND RATINGS
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest
is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES: The ratings from AA to CCC may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within
the major rating categories. Foreign debt is rated on the same
basis as domestic debt measuring the creditworthiness of the
issuer; ratings of foreign debt do not take into account currency
exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or
currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will
exhibit no volatility or variability in total return.
COMMERCIAL PAPER RATINGS
RATINGS BY MOODY'S
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of
rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its commercial paper
obligations are supported by the credit of another entity or
entities, Moody's, in assigning ratings to such issuers, evaluates
the financial strength of the indicated affiliated corporations,
commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating
assessment.
RATINGS BY S&P
A brief description of the applicable rating symbols and their
meaning follows:
A. Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is very strong. Those issues determined
to possess overwhelming safety characteristics will be denoted
with a plus (+) sign designation.
______________________
<PAGE>
Statement of Additional Information Dated February 14, 1997
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
This Statement of Additional Information is not a prospectus
but provides additional information that should be read in
conjunction with the Prospectus dated February 14, 1997 and any
supplements thereto. The Prospectus may be obtained at no charge
by telephoning Stein Roe Retirement Services at 800-322-1130.
TABLE OF CONTENTS
Page
General Information and History..........................2
Investment Policies......................................3
Portfolio Investments and Strategies.....................5
Investment Restrictions.................................21
Additional Investment Considerations....................23
Purchases and Redemptions...............................24
Management..............................................25
Principal Shareholders..................................29
Investment Advisory Services............................29
Distributor.............................................30
Transfer Agent..........................................31
Custodian...............................................31
Independent Auditors....................................32
Portfolio Transactions..................................32
Additional Income Tax Considerations....................33
Investment Performance..................................34
Balance Sheet...........................................39
<PAGE>
GENERAL INFORMATION AND HISTORY
Stein Roe Institutional Client High Yield Fund
("Institutional Client High Yield Fund") is a series of the Stein
Roe Trust. Institutional Client High Yield Fund invests all of
its net investable assets in shares of SR&F High Yield Portfolio
("High Yield Portfolio"), which is a series of shares of SR&F Base
Trust ("Base Trust").
Currently Institutional Client High Yield Fund is the only
series of Stein Roe Trust authorized and outstanding. Each share
of a series, without par value, is entitled to participate pro
rata in any dividends and other distributions declared by the
Board on shares of that series, and all shares of a series have
equal rights in the event of liquidation of that series. Each
whole share (or fractional share) outstanding on the record date
established in accordance with the By-Laws shall be entitled to a
number of votes on any matter on which it is entitled to vote
equal to the net asset value of the share (or fractional share) in
United States dollars determined at the close of business on the
record date (for example, a share having a net asset value of
$10.50 would be entitled to 10.5 votes). As a business trust,
Stein Roe Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes
such as electing or removing trustees, changing fundamental
policies, or approving an investment advisory contract. If
requested to do so by the holders of at least 10% of Roe Trust's
outstanding shares, Stein Roe Trust will call a special meeting
for the purpose of voting upon the question of removal of a
trustee or trustees and will assist in the communications with
other shareholders as required by Section 16(c) of the Investment
Company Act of 1940. All shares of Stein Roe Trust are voted
together in the election of trustees. On any other matter
submitted to a vote of shareholders, shares are voted by
individual series and not in the aggregate, except that shares are
voted in the aggregate when required by the Investment Company Act
of 1940 or other applicable law. When the Board of Trustees
determines that the matter affects only the interests of one or
more series, shareholders of the unaffected series are not
entitled to vote on such matters.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative and accounting and recordkeeping services to
Institutional Client High Yield Fund and High Yield Portfolio and
provides investment advisory services to High Yield Portfolio.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
Rather than invest in securities directly, Institutional
Client High Yield Fund seeks to achieve its objective by pooling
its assets with assets of other investment companies and/or
institutional investors for investment in another mutual fund
having the same investment objective and substantially the same
investment policies and restrictions. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. For more information, please refer to the
Prospectus under the caption Special Considerations Regarding the
Master Fund/Feeder Fund Structure.
INVESTMENT POLICIES
The following information supplements the discussion of the
investment objective and policies of Institutional Client High
Yield Fund and High Yield Portfolio described in the Prospectus.
In pursuing its objective, High Yield Portfolio will invest as
described below and may employ the investment techniques described
in the Prospectus and in this Statement of Additional Information
under Portfolio Investments and Strategies. The investment
objective is a non-fundamental policy and may be changed by the
Board of Trustees without the approval of a "majority of the
outstanding voting securities" /1/ of Institutional Client High
Yield Fund or High Yield Portfolio.
- -------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding shares
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- -------------
Institutional Client High Yield Fund seeks to achieve its
objective by investing all of its assets in High Yield Portfolio.
The investment policies of Institutional Client High Yield Fund
and High Yield Portfolio are substantially identical. High Yield
Portfolio seeks total return by investing for a high level of
current income and capital growth.
High Yield Portfolio invests principally in high-yield, high-
risk medium- and lower-quality debt securities. The medium- and
lower-quality debt securities in which High Yield Portfolio will
invest normally offer a current yield or yield to maturity that is
significantly higher than the yield from securities rated in the
three highest categories assigned by rating services such as
Standard & Poor's Corporation ("S&P") and by Moody's Investors
Service, Inc. ("Moody's").
Under normal circumstances, at least 65% of High Yield
Portfolio's assets will be invested in high-yield, high-risk
medium- and lower-quality debt securities rated lower than Baa by
Moody's or lower than BBB by S&P, or equivalent ratings as
determined by other rating agencies, or unrated securities that
the Adviser determines to be of comparable quality. Medium-
quality debt securities, although considered investment grade,
have some speculative characteristics. Lower-quality debt
securities are obligations of issuers that are considered
predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal according to the terms of the
obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy, and
are commonly referred to as "junk bonds." Some issuers of debt
securities choose not to have their securities rated by a rating
service, and High Yield Portfolio may invest in unrated securities
that the Adviser has researched thoroughly and believes are
suitable for investment. High Yield Portfolio may invest in debt
obligations that are in default, but such obligations are not
expected to exceed 10% of High Yield Portfolio's assets.
High Yield Portfolio may invest up to 35% of its total assets
in other securities including, but not limited to, pay-in-kind
bonds, securities issued in private placements, bank loans, zero
coupon bonds, foreign securities, convertible securities, futures,
and options. High Yield Portfolio may also invest in higher-
quality debt securities. Under normal market conditions, however,
High Yield Portfolio is unlikely to emphasize higher-quality debt
securities since generally they offer lower yields than medium-
and lower-quality debt securities with similar maturities. High
Yield Portfolio may also invest in common stocks and securities
that are convertible into common stocks, such as warrants.
Investment in medium- or lower-quality debt securities
involves greater investment risk, including the possibility of
issuer default or bankruptcy. High Yield Portfolio seeks to
reduce investment risk through diversification, credit analysis,
and evaluation of developments in both the economy and financial
markets.
An economic downturn could severely disrupt the high-yield
market and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. In
addition, lower-quality bonds are less sensitive to interest rate
changes than higher-quality instruments (see Risks and Investment
Considerations) and generally are more sensitive to adverse
economic changes or individual corporate developments. During a
period of adverse economic changes, including a period of rising
interest rates, issuers of such bonds may experience difficulty in
servicing their principal and interest payment obligations.
Achievement of the investment objective will be more dependent on
the Adviser's credit analysis than would be the case if High Yield
Portfolio were investing in higher-quality debt securities. Since
the ratings of rating services (which evaluate the safety of
principal and interest payments, not market risks) are used only
as preliminary indicators of investment quality, the Adviser
employs its own credit research and analysis, from which it has
developed a proprietary credit rating system based upon
comparative credit analyses of issuers within the same industry.
These analyses may take into consideration such quantitative
factors as an issuer's present and potential liquidity,
profitability, internal capability to generate funds, debt/equity
ratio and debt servicing capabilities, and such qualitative
factors as an assessment of management, industry characteristics,
accounting methodology, and foreign business exposure.
Lower-quality debt securities are obligations of issuers that
are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal according to
the terms of the obligation and, therefore, carry greater
investment risk, including the possibility of issuer default and
bankruptcy, and are commonly referred to as "junk bonds." The
lowest rating assigned by Moody's is for bonds that can be
regarded as having extremely poor prospects of ever attaining any
real investment standing.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the market
for them is less broad. The market for unrated debt securities is
even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase
significantly, and High Yield Portfolio may have greater
difficulty selling its portfolio securities. The market value of
these securities and their liquidity may be affected by adverse
publicity and investor perceptions.
PORTFOLIO INVESTMENTS AND STRATEGIES
DERIVATIVES
Consistent with its objective, High Yield Portfolio may
invest in a broad array of financial instruments and securities,
including conventional exchange-traded and non-exchange traded
options, futures contracts, futures options, securities
collateralized by underlying pools of mortgages or other
receivables, and other instruments the value of which is "derived"
from the performance of an underlying asset or a "benchmark" such
as a security index, an interest rate, or a currency
("Derivatives").
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because it is more
efficient or less costly than direct investment that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's
ability to correctly predict changes in the levels and directions
of movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives.
High Yield Portfolio does not intend to invest more than 5%
of its assets in any type of Derivative except for options,
futures contracts, and futures options.
MORTGAGE AND OTHER ASSET-BACKED SECURITIES
High Yield Portfolio may invest in securities secured by
mortgages or other assets such as automobile or home improvement
loans and credit card receivables. These instruments may be
issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities or by private entities such as commercial,
mortgage and investment banks and financial companies or financial
subsidiaries of industrial companies.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, pre-payment risks and yield
characteristics. Mortgage-backed securities involve the risk of
pre-payment on the underlying mortgages at a faster or slower rate
than the established schedule. Pre-payments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social and market factors.
If mortgages are pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by High Yield Portfolio on purchase of the CMO,
and the proceeds of pre-payment would likely be invested at lower
interest rates. High Yield Portfolio intends to invest in CMOs of
classes known as planned amortization classes ("PACs") which have
pre-payment protection features tending to make them less
susceptible to price volatility.
Non-mortgage asset-backed securities usually have less pre-
payment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans which finance payments on the securities
themselves. Therefore, greater emphasis is placed on the credit
quality of the security issuer and the guarantor, if any.
FLOATING RATE INSTRUMENTS
High Yield Portfolio may also invest in floating rate
instruments which provide for periodic adjustments in coupon
interest rates that are automatically reset based on changes in
amount and direction of specified market interest rates. In
addition, the adjusted duration of some of these instruments may
be materially shorter than their stated maturities. To the extent
such instruments are subject to lifetime or periodic interest rate
caps or floors, such instruments may experience greater price
volatility than debt instruments without such features. Adjusted
duration is an inverse relationship between market price and
interest rates and refers to the approximate percentage change in
price for a 100 basis point change in yield. For example, if
interest rates decrease by 100 basis points, a market price of a
security with an adjusted duration of 2 would increase by
approximately 2%. High Yield Portfolio does not intend to invest
more than 5% of its net assets in floating rate instruments.
LENDING OF PORTFOLIO SECURITIES
Subject to restriction (7) under Investment Restrictions,
High Yield Portfolio may lend its portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current
basis in an amount at least equal to the market value of the
securities loaned by High Yield Portfolio. High Yield Portfolio
would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned, and would
also receive an additional return that may be in the form of a
fixed fee or a percentage of the collateral. High Yield Portfolio
would have the right to call the loan and obtain the securities
loaned at any time on notice of not more than five business days.
In the event of bankruptcy or other default of the borrower, High
Yield Portfolio could experience both delays in liquidating the
loan collateral or recovering the loaned securities and losses
including (a) possible decline in the value of the collateral or
in the value of the securities loaned during the period while High
Yield Portfolio seeks to enforce its rights thereto, (b) possible
subnormal levels of income and lack of access to income during
this period, and (c) expenses of enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE
AGREEMENTS; STANDBY COMMITMENTS
High Yield Portfolio may purchase instruments on a when-
issued or delayed-delivery basis. Although payment terms are
established at the time High Yield Portfolio enters into the
commitment, the instruments may be delivered and paid for some
time after the date of purchase, when their value may have changed
and the yields available in the market may be greater. High Yield
Portfolio will make such commitments only with the intention of
actually acquiring the instruments, but may sell them before
settlement date if it is deemed advisable for investment reasons.
Securities purchased in this manner involve risk of loss if the
value of the security purchased declines before settlement date.
High Yield Portfolio may purchase securities on a when-issued
or delayed-delivery basis, as described in the Prospectus. High
Yield Portfolio makes such commitments only with the intention of
actually acquiring the securities, but may sell the securities
before settlement date if the Adviser deems it advisable for
investment reasons. Securities purchased on a when-issued or
delayed-delivery basis are sometimes done on a "dollar roll"
basis. Dollar roll transactions consist of the sale by High Yield
Portfolio of securities with a commitment to purchase similar but
not identical securities, generally at a lower price at a future
date. A dollar roll may be renewed after cash settlement and
initially may involve only a firm commitment agreement by High
Yield Portfolio to buy a security. A dollar roll transaction
involves the following risks: if the broker-dealer to whom High
Yield Portfolio sells the security becomes insolvent, High Yield
Portfolio's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over
the term of the dollar roll; the security which High Yield
Portfolio is required to repurchase may be worth less than a
security which High Yield Portfolio originally held; and the
return earned by High Yield Portfolio with the proceeds of a
dollar roll may not exceed transaction costs.
High Yield Portfolio may enter into reverse repurchase
agreements with banks and securities dealers. A reverse
repurchase agreement is a repurchase agreement in which High Yield
Portfolio is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed-upon time
and price. Use of a reverse repurchase agreement may be
preferable to a regular sale and later repurchase of securities
because it avoids certain market risks and transaction costs.
At the time High Yield Portfolio enters into a binding
obligation to purchase securities on a when-issued basis or enters
into a reverse repurchase agreement, liquid assets (cash, U.S.
Government or other "high grade" debt obligations) of High Yield
Portfolio having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books
of High Yield Portfolio and held by the custodian throughout the
period of the obligation. The use of these investment strategies,
as well as borrowing under a line of credit as described below,
may increase net asset value fluctuation.
Standby commitment agreements create an additional risk for
High Yield Portfolio because the other party to the standby
agreement generally will not be obligated to deliver the security,
but High Yield Portfolio will be obligated to accept it if
delivered. Depending on market conditions, High Yield Portfolio
may receive a commitment fee for assuming this obligation. If
prevailing market interest rates increase during the period
between the date of the agreement and the settlement date, the
other party can be expected to deliver the security and, in
effect, pass any decline in value to High Yield Portfolio. If the
value of the security increases after the agreement is made,
however, the other party is unlikely to deliver the security. In
other words, a decrease in the value of the securities to be
purchased under the terms of a standby commitment agreement will
likely result in the delivery of the security, and, therefore,
such decrease will be reflected in High Yield Portfolio's net
asset value. However, any increase in the value of the securities
to be purchased will likely result in the non-delivery of the
security and, therefore, such increase will not affect the net
asset value unless and until High Yield Portfolio actually obtains
the security.
SHORT SALES AGAINST THE BOX
High Yield Portfolio may sell securities short against the
box; that is, enter into short sales of securities that it
currently owns or has the right to acquire through the conversion
or exchange of other securities that it owns at no additional
cost. High Yield Portfolio may make short sales of securities
only if at all times when a short position is open High Yield
Portfolio owns at least an equal amount of such securities or
securities convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short,
at no additional cost.
In a short sale against the box, High Yield Portfolio does
not deliver from its portfolio the securities sold. Instead,
High Yield Portfolio borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the
broker-dealer delivers such securities, on behalf of High Yield
Portfolio, to the purchaser of such securities. High Yield
Portfolio is required to pay to the broker-dealer the amount of
any dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold
short, High Yield Portfolio must deposit and continuously maintain
in a separate account with High Yield Portfolio's custodian an
equivalent amount of the securities sold short or securities
convertible into or exchangeable for such securities at no
additional cost. High Yield Portfolio is said to have a short
position in the securities sold until it delivers to the broker-
dealer the securities sold. High Yield Portfolio may close out a
short position by purchasing on the open market and delivering to
the broker-dealer an equal amount of the securities sold short,
rather than by delivering portfolio securities.
Short sales may protect High Yield Portfolio against the risk
of losses in the value of its portfolio securities because any
unrealized losses with respect to such portfolio securities should
be wholly or partially offset by a corresponding gain in the short
position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding
loss in the short position. The extent to which such gains or
losses are offset will depend upon the amount of securities sold
short relative to the amount High Yield Portfolio owns, either
directly or indirectly, and, in the case where High Yield
Portfolio owns convertible securities, changes in the conversion
premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time High Yield Portfolio replaces the borrowed
security, High Yield Portfolio will incur a loss and if the price
declines during this period, High Yield Portfolio will realize a
short-term capital gain. Any realized short-term capital gain
will be decreased, and any incurred loss increased, by the amount
of transaction costs and any premium, dividend or interest which
High Yield Portfolio may have to pay in connection with such short
sale. Certain provisions of the Internal Revenue Code may limit
the degree to which High Yield Portfolio is able to enter into
short sales. There is no limitation on the amount of High Yield
Portfolio's assets that, in the aggregate, may be deposited as
collateral for the obligation to replace securities borrowed to
effect short sales and allocated to segregated accounts in
connection with short sales. High Yield Portfolio currently
expects that no more than 5% of its total assets would be involved
in short sales against the box.
LINE OF CREDIT
Subject to restriction (8) under Investment Restrictions,
High Yield Portfolio may establish and maintain a line of credit
with a major bank in order to permit borrowing on a temporary
basis to meet share redemption requests in circumstances in which
temporary borrowing may be preferable to liquidation of portfolio
securities.
INTERFUND BORROWING AND LENDING PROGRAM
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, Institutional Client High Yield Fund has
received permission to lend money to, and borrow money from, other
mutual funds advised by the Adviser. Institutional Client High
Yield Fund will borrow through the program when borrowing is
necessary and appropriate and the costs are equal to or lower than
the costs of bank loans.
PIK AND ZERO COUPON BONDS
High Yield Portfolio may invest up to 20% of its assets in
zero coupon bonds and bonds the interest on which is payable in
kind ("PIK bonds"). A zero coupon bond is a bond that does not
pay interest for its entire life. A PIK bond pays interest in the
form of additional securities. The market prices of both zero
coupon and PIK bonds are affected to a greater extent by changes
in prevailing levels of interest rates and thereby tend to be more
volatile in price than securities that pay interest periodically
and in cash. In addition, because High Yield Portfolio accrues
income with respect to these securities prior to the receipt of
such interest in cash, it may have to dispose of portfolio
securities under disadvantageous circumstances in order to obtain
cash needed to pay income dividends in amounts necessary to avoid
unfavorable tax consequences.
RATED SECURITIES
For a description of the ratings applied by rating services
to debt securities, please refer to the Appendix. The rated debt
securities described under Investment Policies above for High
Yield Portfolio include securities given a rating conditionally by
Moody's or provisionally by S&P. If the rating of a security held
by High Yield Portfolio is withdrawn or reduced, High Yield
Portfolio is not required to sell the security, but the Adviser
will consider such fact in determining whether High Yield
Portfolio should continue to hold the security. To the extent
that the ratings accorded by Moody's or S&P for debt securities
may change as a result of changes in such organizations, or
changes in their rating systems, High Yield Portfolio will attempt
to use comparable ratings as standards for its investments in debt
securities in accordance with its investment policies.
FOREIGN SECURITIES
High Yield Portfolio may invest up to 25% of total assets
(taken at market value at the time of investment) in securities of
foreign issuers that are not publicly traded in the United States
("foreign securities"). For purposes of these limits, foreign
securities do not include securities represented by American
Depositary Receipts ("ADRs"), securities denominated in U.S.
dollars, or securities guaranteed by U.S. persons. Investment in
foreign securities may involve a greater degree of risk (including
risks relating to exchange fluctuations, tax provisions, or
expropriation of assets) than does investment in securities of
domestic issuers.
High Yield Portfolio may invest in both "sponsored" and
"unsponsored" ADRs. In a sponsored ADR, the issuer typically pays
some or all of the expenses of the depositary and agrees to
provide its regular shareholder communications to ADR holders. An
unsponsored ADR is created independently of the issuer of the
underlying security. The ADR holders generally pay the expenses
of the depositary and do not have an undertaking from the issuer
of the underlying security to furnish shareholder communications.
High Yield Portfolio does not expects to invest as much as 5% of
its total assets in unsponsored ADRs.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, High Yield
Portfolio's investment performance is affected by the strength or
weakness of the U.S. dollar against these currencies. For
example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the
investment portfolio will rise even though the price of the stock
remains unchanged. Conversely, if the dollar rises in value
relative to the yen, the dollar value of the yen-denominated stock
will fall. (See discussion of transaction hedging and portfolio
hedging under Currency Exchange Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions in which are generally denominated in foreign
currencies, and utilization of forward foreign currency exchange
contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements.
Although High Yield Portfolio will try to invest in companies
and governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
High Yield Portfolio's foreign currency exchange transactions
are limited to transaction and portfolio hedging involving either
specific transactions or portfolio positions, except to the extent
described below under Synthetic Foreign Positions. Transaction
hedging is the purchase or sale of forward contracts with respect
to specific receivables or payables of High Yield Portfolio
arising in connection with the purchase and sale of its portfolio
securities. Portfolio hedging is the use of forward contracts
with respect to portfolio security positions denominated or quoted
in a particular foreign currency. Portfolio hedging allows High
Yield Portfolio to limit or reduce its exposure in a foreign
currency by entering into a forward contract to sell such foreign
currency (or another foreign currency that acts as a proxy for
that currency) at a future date for a price payable in U.S.
dollars so that the value of the foreign-denominated portfolio
securities can be approximately matched by a foreign-denominated
liability. High Yield Portfolio may not engage in portfolio
hedging with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio
denominated or quoted in that particular currency, except that
High Yield Portfolio may hedge all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy
currency where such currencies or currency act as an effective
proxy for other currencies. In such a case, High Yield Portfolio
may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency held in High Yield
Portfolio. High Yield Portfolio may not engage in "speculative"
currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, High Yield Portfolio may either sell the portfolio
security related to such contract and make delivery of the
currency, or it may retain the security and either acquire the
currency on the spot market or terminate its contractual
obligation to deliver the currency by purchasing an offsetting
contract with the same currency trader obligating it to purchase
on the same maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for High Yield
Portfolio to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the
security is less than the amount of currency High Yield Portfolio
is obligated to deliver and if a decision is made to sell the
security and make delivery of the currency. Conversely, it may be
necessary to sell on the spot market some of the currency received
upon the sale of the portfolio security if its market value
exceeds the amount of currency High Yield Portfolio is obligated
to deliver.
If High Yield Portfolio retains the portfolio security and
engages in an offsetting transaction, High Yield Portfolio will
incur a gain or a loss to the extent that there has been movement
in forward contract prices. If High Yield Portfolio engages in an
offsetting transaction, it may subsequently enter into a new
forward contract to sell the currency. Should forward prices
decline during the period between High Yield Portfolio's entering
into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the
currency, High Yield Portfolio will realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to purchase. Should forward prices
increase, High Yield Portfolio will suffer a loss to the extent
the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell. A default on the
contract would deprive High Yield Portfolio of unrealized profits
or force High Yield Portfolio to cover its commitments for
purchase or sale of currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for High Yield Portfolio to hedge against a devaluation
that is so generally anticipated that High Yield Portfolio is not
able to contract to sell the currency at a price above the
devaluation level it anticipates. The cost to High Yield
Portfolio of engaging in currency exchange transactions varies
with such factors as the currency involved, the length of the
contract period, and prevailing market conditions. Since currency
exchange transactions are usually conducted on a principal basis,
no fees or commissions are involved.
Synthetic Foreign Positions. High Yield Portfolio may invest
in debt instruments denominated in foreign currencies. In
addition to, or in lieu of, such direct investment, High Yield
Portfolio may construct a synthetic foreign position by (a)
purchasing a debt instrument denominated in one currency,
generally U.S. dollars, and (b) concurrently entering into a
forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and
at a specified rate of exchange. Because of the availability of a
variety of highly liquid U.S. dollar debt instruments, a synthetic
foreign position utilizing such U.S. dollar instruments may offer
greater liquidity than direct investment in foreign currency debt
instruments. The results of a direct investment in a foreign
currency and a concurrent construction of a synthetic position in
such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be
similar, but would not be identical because the components of the
alternative investments would not be identical.
High Yield Portfolio may also construct a synthetic foreign
position by entering into a swap arrangement. A swap is a
contractual agreement between two parties to exchange cash flows--
at the time of the swap agreement and again at maturity, and, with
some swaps, at various intervals through the period of the
agreement. The use of swaps to construct a synthetic foreign
position would generally entail the swap of interest rates and
currencies. A currency swap is a contractual arrangement between
two parties to exchange principal amounts in different currencies
at a predetermined foreign exchange rate. An interest rate swap
is a contractual agreement between two parties to exchange
interest payments on identical principal amounts. An interest
rate swap may be between a floating and a fixed rate instrument, a
domestic and a foreign instrument, or any other type of cash flow
exchange. A currency swap generally has the same risk
characteristics as a forward currency contract, and all types of
swaps have counter-party risk. Depending on the facts and
circumstances, swaps may be considered illiquid. Illiquid
securities usually have greater investment risk and are subject to
greater price volatility. The net amount of the excess, if any,
of High Yield Portfolio's obligations over which it is entitled to
receive with respect to an interest rate or currency swap will be
accrued daily and liquid assets (cash, U.S. Government securities,
or other "high grade" debt obligations) of High Yield Portfolio
having a value at least equal to such accrued excess will be
segregated on the books of High Yield Portfolio and held by the
Custodian for the duration of the swap.
High Yield Portfolio may also construct a synthetic foreign
position by purchasing an instrument whose return is tied to the
return of the desired foreign position. An investment in these
"principal exchange rate linked securities" (often called PERLS)
can produce a similar return to a direct investment in a foreign
security.
RULE 144A SECURITIES
High Yield Portfolio may purchase securities that have been
privately placed but that are eligible for purchase and sale under
Rule 144A under the 1933 Act. That Rule permits certain qualified
institutional buyers, such as High Yield Portfolio, to trade in
privately placed securities that have not been registered for sale
under the 1933 Act. The Adviser, under the supervision of the
Board of Trustees, will consider whether securities purchased
under Rule 144A are illiquid and thus subject to High Yield
Portfolio's restriction of investing no more than 10% of its net
assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making
this determination, the Adviser will consider the trading markets
for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, the Adviser could
consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make
a market, and (4) nature of the security and of marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The liquidity
of Rule 144A securities would be monitored and, if as a result of
changed conditions, it is determined that a Rule 144A security is
no longer liquid, High Yield Portfolio's holdings of illiquid
securities would be reviewed to determine what, if any, steps are
required to assure that High Yield Portfolio does not invest more
than 10% of its assets in illiquid securities. Investing in Rule
144A securities could have the effect of increasing the amount of
High Yield Portfolio's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such
securities. High Yield Portfolio does not expect to invest as
much as 5% of its total assets in Rule 144A securities that have
not been deemed to be liquid by the Adviser.
PORTFOLIO TURNOVER
The turnover rate for High Yield Portfolio in the future may
vary greatly from year to year, and when portfolio changes are
deemed appropriate due to market or other conditions, such
turnover rate may be greater than might otherwise be anticipated.
A high rate of portfolio turnover may result in increased
transaction expenses and the realization of capital gains or
losses. Distributions of any net realized gains are subject to
federal income tax. (See Risks and Investment Considerations and
Distributions and Income Taxes in the Prospectus, and Additional
Income Tax Considerations in this Statement of Additional
Information.)
OPTIONS ON SECURITIES AND INDEXES
High Yield Portfolio may purchase and may sell both put
options and call options on debt or other securities or indexes in
standardized contracts traded on national securities exchanges,
boards of trade, or similar entities, or quoted on Nasdaq, and
agreements, sometimes called cash puts, that may accompany the
purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option. The writer of an option on an individual
security has the obligation upon exercise of the option to deliver
the underlying security upon payment of the exercise price or to
pay the exercise price upon delivery of the underlying security.
Upon exercise, the writer of an option on an index is obligated to
pay the difference between the cash value of the index and the
exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect specified facets
of a particular financial or securities market, a specific group
of financial instruments or securities, or certain economic
indicators.)
High Yield Portfolio will write call options and put options
only if they are "covered." In the case of a call option on a
security, the option is "covered" if High Yield Portfolio owns the
security underlying the call or has an absolute and immediate
right to acquire that security without additional cash
consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount are held in a segregated
account by its custodian) upon conversion or exchange of other
securities held in its portfolio.
If an option written by High Yield Portfolio expires, High
Yield Portfolio realizes a capital gain equal to the premium
received at the time the option was written. If an option
purchased by High Yield Portfolio expires, High Yield Portfolio
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when High Yield Portfolio desires.
High Yield Portfolio will realize a capital gain from a
closing purchase transaction if the cost of the closing option is
less than the premium received from writing the option, or, if it
is more, High Yield Portfolio will realize a capital loss. If the
premium received from a closing sale transaction is more than the
premium paid to purchase the option, High Yield Portfolio will
realize a capital gain or, if it is less, High Yield Portfolio
will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand,
interest rates, the current market price of the underlying
security or index in relation to the exercise price of the option,
the volatility of the underlying security or index, and the time
remaining until the expiration date.
A put or call option purchased by High Yield Portfolio is an
asset of High Yield Portfolio, valued initially at the premium
paid for the option. The premium received for an option written
by High Yield Portfolio is recorded as a deferred credit. The
value of an option purchased or written is marked-to-market daily
and is valued at the closing price on the exchange on which it is
traded or, if not traded on an exchange or no closing price is
available, at the mean between the last bid and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options on
securities and on indexes. For example, there are significant
differences between the securities markets and options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when High Yield Portfolio seeks to close out an option position.
If High Yield Portfolio were unable to close out an option that it
had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and
become worthless. If High Yield Portfolio were unable to close
out a covered call option that it had written on a security, it
would not be able to sell the underlying security until the option
expired. As the writer of a covered call option, High Yield
Portfolio foregoes, during the option's life, the opportunity to
profit from increases in the market value of the security covering
the call option above the sum of the premium and the exercise
price of the call.
If trading were suspended in an option purchased by High
Yield Portfolio, High Yield Portfolio would not be able to close
out the option. If restrictions on exercise were imposed, High
Yield Portfolio might be unable to exercise an option it has
purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
High Yield Portfolio may use interest rate futures contracts
and index futures contracts. An interest rate or index futures
contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument or
the cash value of an index /2/ at a specified price and time. A
public market exists in futures contracts covering a number of
indexes as well as the following financial instruments: U.S.
Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-
month U.S. Treasury bills; 90-day commercial paper; bank
certificates of deposit; Eurodollar certificates of deposit; and
foreign currencies. It is expected that other futures contracts
will be developed and traded.
- -----------
/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
- ----------
High Yield Portfolio may purchase and write call and put
futures options. Futures options possess many of the same
characteristics as options on securities and indexes (discussed
above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise of a
call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. High Yield
Portfolio might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of
security prices, anticipated changes in interest rates or currency
fluctuations that might adversely affect either the value of High
Yield Portfolio's securities or the price of the securities that
High Yield Portfolio intends to purchase. Although other
techniques could be used to reduce High Yield Portfolio's exposure
to security price, interest rate and currency fluctuations, High
Yield Portfolio may be able to achieve its exposure more
effectively and perhaps at a lower cost by using futures contracts
and futures options.
High Yield Portfolio will only enter into futures contracts
and futures options that are standardized and traded on an
exchange, board of trade, or similar entity, or quoted on an
automated quotation system.
The success of any futures transaction depends on the Adviser
correctly predicting changes in the level and direction of
security prices, interest rates, currency exchange rates and other
factors. Should those predictions be incorrect, High Yield
Portfolio's return might have been better had the transaction not
been attempted; however, in the absence of the ability to use
futures contracts, the Adviser might have taken portfolio actions
in anticipation of the same market movements with similar
investment results but, presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made by High
Yield Portfolio, High Yield Portfolio is required to deposit with
its custodian (or broker, if legally permitted) a specified amount
of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required
for a futures contract is set by the exchange on which the
contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance
bond or good faith deposit on the futures contract that is
returned to High Yield Portfolio upon termination of the contract,
assuming all contractual obligations have been satisfied. High
Yield Portfolio expects to earn interest income on its initial
margin deposits. A futures contract held by High Yield Portfolio
is valued daily at the official settlement price of the exchange
on which it is traded. Each day High Yield Portfolio pays or
receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by High
Yield Portfolio does not represent a borrowing or loan by High
Yield Portfolio but is instead settlement between High Yield
Portfolio and the broker of the amount one would owe the other if
the futures contract had expired at the close of the previous
trading day. In computing daily net asset value, High Yield
Portfolio will mark-to-market its open futures positions.
High Yield Portfolio is also required to deposit and maintain
margin with respect to put and call options on futures contracts
written by it. Such margin deposits will vary depending on the
nature of the underlying futures contract (and the related initial
margin requirements), the current market value of the option, and
other futures positions held by High Yield Portfolio.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, High Yield Portfolio realizes a
capital gain, or if it is more, High Yield Portfolio realizes a
capital loss. Conversely, if an offsetting sale price is more
than the original purchase price, High Yield Portfolio realizes a
capital gain, or if it is less, High Yield Portfolio realizes a
capital loss. The transaction costs must also be included in
these calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options as hedging techniques. A purchase
or sale of a futures contract may result in losses in excess of
the amount invested in the futures contract. In trying to
increase or reduce market exposure, there can be no guarantee that
there will be a correlation between price movements in the futures
contract and in the portfolio exposure sought. In addition, there
are significant differences between the securities and futures
markets that could result in an imperfect correlation between the
markets, causing a given transaction not to achieve its
objectives. The degree of imperfection of correlation depends on
circumstances such as: variations in speculative market demand for
futures, futures options and debt securities, including technical
influences in futures trading and futures options and differences
between the financial instruments and the instruments underlying
the standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of issuers.
A decision as to whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at
a time when High Yield Portfolio seeks to close out a futures or a
futures option position. High Yield Portfolio would be exposed to
possible loss on the position during the interval of inability to
close and would continue to be required to meet margin
requirements until the position is closed. In addition, many of
the contracts discussed above are relatively new instruments
without a significant trading history. As a result, there can be
no assurance that an active secondary market will develop or
continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
High Yield Portfolio may also use those investment vehicles,
provided the Board of Trustees determines that their use is
consistent with High Yield Portfolio's investment objective.
High Yield Portfolio will not enter into a futures contract
or purchase an option thereon if, immediately thereafter, the
initial margin deposits for futures contracts held by High Yield
Portfolio plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-
the-money," /3/ would exceed 5% of High Yield Portfolio's total
assets.
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/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- -----------
When purchasing a futures contract or writing a put on a
futures contract, High Yield Portfolio must maintain with its
custodian (or broker, if legally permitted) cash or cash
equivalents (including any margin) equal to the market value of
such contract. When writing a call option on a futures contract,
High Yield Portfolio similarly will maintain with its custodian
cash or cash equivalents (including any margin) equal to the
amount by which such option is in-the-money until the option
expires or is closed out by High Yield Portfolio.
High Yield Portfolio may not maintain open short positions in
futures contracts, call options written on futures contracts or
call options written on indexes if, in the aggregate, the market
value of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent High Yield Portfolio
has written call options on specific securities in its portfolio,
the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," High Yield Portfolio will use commodity futures or
commodity options contracts solely for bona fide hedging purposes
within the meaning and intent of Regulation 1.3(z), or, with
respect to positions in commodity futures and commodity options
contracts that do not come within the meaning and intent of
1.3(z), the aggregate initial margin and premiums required to
establish such positions will not exceed 5% of the fair market
value of the assets of High Yield Portfolio, after taking into
account unrealized profits and unrealized losses on any such
contracts it has entered into [in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount (as
defined in Section 190.01(x) of the Commission Regulations) may be
excluded in computing such 5%].
TAXATION OF OPTIONS AND FUTURES
If High Yield Portfolio exercises a call or put option that
it holds, the premium paid for the option is added to the cost
basis of the security purchased (call) or deducted from the
proceeds of the security sold (put). For cash settlement options
and futures options exercised by High Yield Portfolio, the
difference between the cash received at exercise and the premium
paid is a capital gain or loss.
If a call or put option written by High Yield Portfolio is
exercised, the premium is included in the proceeds of the sale of
the underlying security (call) or reduces the cost basis of the
security purchased (put). For cash settlement options and futures
options written by High Yield Portfolio, the difference between
the cash paid at exercise and the premium received is a capital
gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by High Yield
Portfolio was in-the-money at the time it was written and the
security covering the option was held for more than the long-term
holding period prior to the writing of the option, any loss
realized as a result of a closing purchase transaction will be
long-term. The holding period of the securities covering an in-
the-money option will not include the period of time the option is
outstanding.
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If High
Yield Portfolio delivers securities under a futures contract, High
Yield Portfolio also realizes a capital gain or loss on those
securities.
For federal income tax purposes, High Yield Portfolio
generally is required to recognize as income for each taxable year
its net unrealized gains and losses as of the end of the year on
options, futures and futures options positions ("year-end mark-to-
market"). Generally, any gain or loss recognized with respect to
such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held by High
Yield Portfolio: (1) will affect the holding period of the hedged
securities; and (2) may cause unrealized gain or loss on such
securities to be recognized upon entry into the hedge.
In order for High Yield Portfolio to continue to qualify for
federal income tax treatment as a regulated investment company, at
least 90% of its gross income for a taxable year must be derived
from qualifying income; i.e., dividends, interest, income derived
from loans of securities, and gains from the sale of securities or
foreign currencies or other income (including but not limited to
gains from options, futures, and forward contracts). In addition,
gains realized on the sale or other disposition of securities held
for less than three months must be limited to less than 30% of
High Yield Portfolio's annual gross income. Any net gain realized
from futures (or futures options) contracts will be considered
gain from the sale of securities and therefore be qualifying
income for purposes of the 90% requirement. In order to avoid
realizing excessive gains on securities held less than three
months, High Yield Portfolio may be required to defer the closing
out of certain positions beyond the time when it would otherwise
be advantageous to do so.
Institutional Client High Yield Fund distributes to
shareholders annually any net capital gains that have been
recognized for federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions. Such
distributions are combined with distributions of capital gains
realized on the other investments and shareholders are advised of
the nature of the payments.
INVESTMENT RESTRICTIONS
Institutional Client High Yield Fund and High Yield Portfolio
operate under the following investment restrictions.
Institutional Client High Yield Fund and High Yield Portfolio may
not:
(1) invest in a security if, as a result of such investment,
more than 25% of its total assets (taken at market value at the
time of such investment) would be invested in the securities of
issuers in any particular industry, except that this restriction
does not apply to U.S. Government Securities, and [Institutional
Client High Yield Fund only] except that all or substantially all
of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
(2) invest in a security if, with respect to 75% of its
assets, as a result of such investment, more than 5% of its total
assets (taken at market value at the time of such investment)
would be invested in the securities of any one issuer, except that
this restriction does not apply to U.S. Government Securities or
repurchase agreements for such securities and [Institutional
Client High Yield Fund only] except that all or substantially all
of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
(3) invest in a security if, as a result of such investment,
it would hold more than 10% (taken at the time of such investment)
of the outstanding voting securities of any one issuer,
[Institutional Client High Yield Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate, or
interests therein);
(5) purchase or sell commodities or commodities contracts or
oil, gas or mineral programs, except that it may enter into (i)
futures and options on futures and (ii) forward contracts;
(6) purchase securities on margin, except for use of short-
term credit necessary for clearance of purchases and sales of
portfolio securities, but it may make margin deposits in
connection with transactions in options, futures, and options on
futures;
(7) make loans, although it may (a) lend portfolio
securities and participate in an interfund lending program with
other Stein Roe Funds and Portfolios provided that no such loan
may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of its total assets (taken at market
value at the time of such loans); (b) purchase money market
instruments and enter into repurchase agreements; and (c) acquire
publicly-distributed or privately-placed debt securities;
(8) borrow except that it may (a) borrow for non-leveraging,
temporary or emergency purposes, (b) engage in reverse repurchase
agreements and make other borrowings, provided that the
combination of (a) and (b) shall not exceed 33 1/3% of the value
of its total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law, and (c) enter into futures and options
transactions; it may borrow from banks, other Stein Roe Funds and
Portfolios, and other persons to the extent permitted by
applicable law;
(9) act as an underwriter of securities, except insofar as
it may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933 on disposition of securities acquired
subject to legal or contractual restrictions on resale,
[Institutional Client High Yield Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or
(10) issue any senior security except to the extent
permitted under the Investment Company Act of 1940.
The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the outstanding
voting securities" of the Fund or High Yield Portfolio, as
previously defined herein. The policy on the scope of
transactions involving lending of portfolio securities to broker-
dealers and banks (as set forth herein under Portfolio Investments
and Strategies) is also a fundamental policy.
Institutional Client High Yield Fund and High Yield Portfolio
are also subject to the following restrictions and policies that
may be changed by the Board of Trustees. None of the following
restrictions shall prevent it from investing all or substantially
all of its assets in another investment company having the same
investment objective and substantially similar investment policies
as the Fund. Unless otherwise indicated, Institutional Client
High Yield Fund and High Yield Portfolio may not:
(A) invest for the purpose of exercising control or
management;
(B) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of its total assets (valued at time of purchase) in
the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to
be made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets; /4/
- ---------------
/4/ Stein Roe Funds have been informed that the staff of the
Securities and Exchange Commission takes the position that the
issuers of certain CMOs and certain other collateralized assets
are investment companies and that subsidiaries of foreign banks
may be investment companies for purposes of Section 12(d)(1) of
the Investment Company Act of 1940, which limits the ability of
one investment company to invest in another investment company.
Accordingly, High Yield Portfolio intends to operate within the
applicable limitations under Section 12(d)(1)(A) of that Act.
- ---------------
(C) purchase portfolio securities from, or sell portfolio
securities to, any of the officers and directors or trustees of
the Trust or of its investment adviser;
(D) purchase shares of other open-end investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
(E) invest more than 5% of its net assets (valued at time of
investment) in warrants, nor more than 2% of its net assets in
warrants which are not listed on the New York or American Stock
Exchange;
(F) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(G) write an option on a security unless the option is
issued by the Options Clearing Corporation, an exchange, or
similar entity;
(H) buy or sell an option on a security, a futures
contract, or an option on a futures contract unless the option,
the futures contract, or the option on the futures contract is
offered through the facilities of a national securities
association or listed on a national exchange or similar entity;
(I) invest in limited partnerships in real estate unless
they are readily marketable;
(J) sell securities short unless (i) it owns or has the
right to obtain securities equivalent in kind and amount to those
sold short at no added cost or (ii) the securities sold are "when
issued" or "when distributed" securities which it expects to
receive in a recapitalization, reorganization, or other exchange
for securities it contemporaneously owns or has the right to
obtain and provided that transactions in options, futures, and
options on futures are not treated as short sales;
(K) invest more than 15% of its total assets (taken at
market value at the time of a particular investment) in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933;
(L) invest more than 10% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities /5/, including repurchase agreements maturing in more
than seven days.
- ------------------
/5/ In the judgment of the Adviser, Private Placement Notes,
which are issued pursuant to Section 4(2) of the Securities Act of
1933, generally are readily marketable even though they are
subject to certain legal restrictions on resale. As such, they
are not treated as being subject to the limitation on illiquid
securities.
- -----------------
ADDITIONAL INVESTMENT CONSIDERATIONS
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
build wealth for generations, it has been guided by three primary
objectives which it believes are the foundation of a successful
investment program. These objectives are preservation of capital,
limited volatility through managed risk, and consistent above-
average returns, as appropriate for the particular client or
managed account.
Because every investor's needs are different, Stein Roe
mutual funds are designed to accommodate different investment
objectives, risk tolerance levels, and time horizons. In
selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
In addition, the Adviser believes that investment in a high
yield fund provides an opportunity to diversify an investment
portfolio because the economic factors that affect the performance
of high-yield, high-risk debt securities differ from those that
affect the performance of high-quality debt securities or equity
securities.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
and Net Asset Value, and that information is incorporated herein
by reference.
Institutional Client High Yield Fund's net asset value is
determined on days on which the New York Stock Exchange (the
"NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in
February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays
falls on a Saturday or Sunday, the NYSE will be closed on the
preceding Friday or the following Monday, respectively. Net asset
value will not be determined on days when the NYSE is closed
unless, in the judgment of the Board of Trustees, net asset value
of Institutional Client High Yield Fund should be determined on
any such day, in which case the determination will be made at 3:00
p.m., central time.
Stein Roe Trust reserves the right to suspend or postpone
redemptions of shares of its series during any period when: (a)
trading on the NYSE is restricted, as determined by the Securities
and Exchange Commission, or the NYSE is closed for other than
customary weekend and holiday closings; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c)
an emergency, as determined by the Securities and Exchange
Commission, exists, making disposal of portfolio securities or
valuation of net assets of a series not reasonably practicable.
Stein Roe Trust intends to pay all redemptions in cash and is
obligated to redeem shares of its series solely in cash up to the
lesser of $250,000 or one percent of the net assets of
Institutional Client High Yield Fund during any 90-day period for
any one shareholder. However, redemptions in excess of such limit
may be paid wholly or partly by a distribution in kind of
securities. If redemptions were made in kind, the redeeming
shareholders might incur transaction costs in selling the
securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, Stein Roe Trust reserves the right to redeem shares in
any account for their then-current value (which will be promptly
paid to the investor) if at any time the shares in the account do
not have a value of at least $1,000,000. An investor will be
notified that the value of his account is less than the minimum
and allowed at least 30 days to bring the value of the account up
to at least $1,000,000 before the redemption is processed. The
Agreement and Declaration of Trust also authorizes Stein Roe Trust
to redeem shares under certain other circumstances as may be
specified by the Board of Trustees.
MANAGEMENT
The following table sets forth certain information with
respect to trustees and officers of Stein Roe Trust:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME AGE INSTITUTIONAL TRUST DURING PAST FIVE YEARS
<C> <S> <S> <S>
Gary A. Anetsberger 41 Senior Vice-President Chief Financial Officer of the
(4) Mutual Funds division of Stein
Roe & Farnham Incorporated
(the "Adviser"); senior vice
president of the Adviser since
April, 1996; vice president
of the Adviser prior thereto
Timothy K. Armour 48 President; Trustee President of the Mutual Funds
(1)(2)(4) division of the Adviser and
director of the Adviser since
June, 1992; senior vice president
and director of marketing of
Citibank Illinois prior thereto
Jilaine Hummel Bauer 41 Executive Vice-President; General counsel and secretary of
(4) Secretary the Adviser since November 1995;
senior vice president of the
Adviser since April, 1992; vice
president of the Adviser prior
thereto
Ann H. Benjamin 38 Vice-President Senior vice president of the
Adviser since July, 1994; vice
president of the Adviser from
January, 1992 to July, 1994;
associate of the Adviser prior
thereto
Kenneth L. Block 76 Trustee Chairman Emeritus of A. T. Kearney,
(3)(4) Inc. (international management
consultants)
William W. Boyd 70 Trustee Chairman and director of Sterling
(3)(4) Plumbing Group, Inc. (manufacturer
of plumbing products) since 1992;
chairman, president, and chief
executive officer of Sterling
Plumbing Group, Inc. prior thereto
Thomas W. Butch 39 Executive Vice-President Senior vice president of the
Adviser since September, 1994;
first vice president, corporate
communications, of Mellon Bank
Corporation prior thereto
Lindsay Cook(1)(4) 44 Trustee Senior vice president of Liberty
Financial Companies, Inc. (the
indirect parent of the Adviser)
Philip J. Crosley 50 Vice-President Senior Vice President of the
Adviser since February, 1996;
Vice President, Institutional
Sales-Advisor Sales, Invesco
Funds Group prior thereto
Douglas A. Hacker 41 Trustee Senior vice president and chief
(3)(4) financial officer, United
Airlines, since July, 1994;
senior vice president - Finance,
United Airlines, February, 1993
to July, 1994; vice president,
American Airlines prior thereto
Janet Langford Kelly 39 Trustee Senior vice president, secretary
(3)(4) and general counsel, Sara Lee
Corporation (branded, packaged,
consumer-products manufacturer),
since 1995; partner, Sidley &
Austin (law firm), 1991 through 1994
Michael T. Kennedy 34 Vice-President Senior vice president of the
Adviser since October, 1994;
vice president of the Adviser
from January, 1992 to October,
1994; associate of the Adviser
prior thereto
Lynn C. Maddox 55 Vice-President Senior vice president of the Adviser
Anne E. Marcel 38 Vice-President Vice president of the Adviser
since April, 1996; manager,
Mutual Fund Sales & Services
of the Adviser since October,
1994; supervisor of the Counselor
Department of the Adviser from
October, 1992 to October, 1994;
vice president of Selected
Financial Services prior thereto
Francis W. Morley 76 Trustee Chairman of Employer Plan
(2)(3)(4) Administrators and Consultants
Co. (designer, administrator,
and communicator of employee
benefit plans)
Jane M. Naeseth 46 Vice-President Senior vice president of the
Adviser since January, 1991; vice
president of the Adviser prior thereto
Charles R. Nelson 54 Trustee Van Voorhis Professor of Political
(3) (4) Economy of the University of Washington
Nicolette D. Parrish 47 Vice-President; Senior compliance administrator and
(4) Assistant Secretary assistant secretary of the Adviser
since November 1995; senior legal
assistant for the Adviser prior thereto
Cynthia A. Prah (4) 34 Vice-President Manager of Shareholder
Transaction Processing for
the Adviser
Sharon R. Robertson 35 Controller Accounting manager for the Adviser's
(4) Mutual Funds division
Janet B. Rysz (4) 41 Assistant Secretary Senior compliance administrator
and assistant secretary of the
Adviser
Thomas P. Sorbo 35 Vice-President Senior vice president of the
Adviser since January, 1994;
vice president of the Adviser
from September, 1992 to December,
1993; associate of Travelers
Insurance Company prior thereto
Thomas C. Theobald 59 Trustee Managing director, William Blair
(3) (4) Capital Partners (private equity
fund) since 1994; chief executive
officer and chairman of the Board
of Directors of Continental Bank
Corporation prior thereto
Heidi J. Walter (4) 29 Vice-President Legal counsel for the Adviser
since March, 1995; associate with
Beeler Schad & Diamond, P,C.
prior thereto
Stacy H. Winick (4) 32 Vice-President Senior legal counsel for the Adviser since October,
1996; associate of Bell, Boyd & Lloyd (law firm), June,
1993 to September, 1996; associate of Debevoise &
Plimpton prior thereto
Hans P. Ziegler (4) 56 Executive Vice-President Chief executive officer of the
Adviser since May, 1994;
president of the Investment
Counsel division of the Adviser
from July, 1993 to June, 1994;
president and chief executive
officer, Pitcairn Financial
Management Group prior thereto
Margaret O. Zwick 30 Treasurer Compliance manager for the Adviser's
(4) Mutual Funds division since
August 1995; compliance
accountant, January 1995 to
July 1995; section manager,
January 1994 to January 1995;
supervisor prior thereto
</TABLE>
______________________
(1) Trustee who is an "interested person" of Stein Roe Trust and
of the Adviser, as defined in the Investment Company Act of
1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
(4) This person holds the corresponding officer or trustee
position with the Base Trust.
Certain of the trustees and officers of Stein Roe Trust and
of Base Trust are trustees or officers of other investment
companies managed by the Adviser. Mr. Armour, Ms. Bauer, Mr.
Cook, and Ms. Walter are also vice presidents of Institutional
Client High Yield Fund's distributor, Liberty Securities
Corporation. The address of Mr. Block is 11 Woodley Road,
Winnetka, Illinois 60093; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Hacker is P.O. Box 66100,
Chicago, IL 60666; that of Ms. Kelly is Three First National
Plaza, Chicago, Illinois 60602; that of Mr. Morley is 20 North
Wacker Drive, Suite 2275, Chicago, Illinois 60606; that of Mr.
Nelson is Department of Economics, University of Washington,
Seattle, Washington 98195; that of Mr. Theobald is Suite 3300, 222
West Adams Street, Chicago, IL 60606; and that of the officers is
One South Wacker Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from Stein Roe Trust. In compensation
for their services to Stein Roe Trust, trustees who are not
"interested persons" of Stein Roe Trust or the Adviser are paid an
annual retainer of $8,000 (divided equally among the series of
Stein Roe Trust) plus an attendance fee from each series for each
meeting of the Board or standing committee thereof attended at
which business for the series is conducted. The attendance fees
(other than for a Nominating Committee meeting) are based on each
series' net assets as of the preceding December 31. For a series
with net assets of less than $50 million, the fee is $50 per
meeting; with $51 to $250 million, the fee is $200 per meeting;
with $251 million to $500 million, $350; with $501 million to $750
million, $500; with $751 million to $1 billion, $650; and with
over $1 billion in net assets, $800. For Institutional Client
High Yield Fund and any other series of Stein Roe Trust
participating in the master fund/feeder fund structure, the
trustees' attendance fee is paid solely by the master portfolio.
Each non-interested trustee also receives $500 from Stein Roe
Trust for attending each meeting of the Nominating Committee.
Stein Roe Trust has no retirement or pension plan. The following
table sets forth compensation paid to the trustees by the Stein
Roe Fund complex:
Estimated Compensation Total Compensation from
from Institutional Trust the Stein Roe Fund
for Fiscal Year Ending Complex for the year
Name of Trustee June 30, 1997* ended June 30, 1996**
- --------------- ------------------------ -----------------------
Timothy K. Armour -0- -0-
Lindsay Cook -0- -0-
Douglas A. Hacker -0- -0-
Janet Langford Kelly $4,000 -0-
Thomas C. Theobald 4,000 -0-
Kenneth L. Block 4,000 $82,417
William W. Boyd 4,000 86,317
Francis W. Morley 4,000 82,017
Charles R. Nelson 4,000 86,317
Gordon R. Worley -0- 82,817
_______________
* Assuming less than $50 million in net assets and no
nominating committee meeting held during the period.
** During this period, the Stein Roe Fund Complex consisted
of six series of Stein Roe Income Trust, four series of
Stein Roe Municipal Trust, eight series of Stein Roe
Investment Trust, and one series of Base Trust. Messrs.
Hacker and Theobald were elected trustees of those Trusts
on June 18, 1996, and, therefore, did not receive any
compensation for the year ended June 30, 1996. Mr. Worley
retired as a trustee on December 31, 1996; and Ms. Kelly
became a trustee on January 1, 1997.
PRINCIPAL SHAREHOLDERS
As of the date of this Statement of Additional Information,
Institutional Client High Yield Fund had only one shareholder,
Stein Roe & Farnham Incorporated, which held 10,000 shares.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides administrative
services to Institutional Client High Yield Fund and High Yield
Portfolio and portfolio management services to High Yield
Portfolio. The Adviser is a wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), Institutional Client High Yield Funds'
transfer agent, which is a wholly owned subsidiary of Liberty
Financial Companies, Inc. ("Liberty Financial"), which is a
majority owned subsidiary of LFC Holdings, Inc., which is a wholly
owned subsidiary of Liberty Mutual Equity Corporation, which is a
wholly owned subsidiary of Liberty Mutual Insurance Company.
Liberty Mutual Insurance Company is a mutual insurance company,
principally in the property/casualty insurance field, organized
under the laws of Massachusetts in 1912.
The directors of the Adviser are Kenneth R. Leibler, Harold
W. Cogger, C. Allen Merritt, Jr., Timothy K. Armour, and Hans P.
Ziegler. Mr. Leibler is President and Chief Executive Officer of
Liberty Financial; Mr. Cogger is Executive Vice President of
Liberty Financial; Mr. Merritt is Senior Vice President and
Treasurer of Liberty Financial; Mr. Armour is President of the
Adviser's Mutual Funds division; and Mr. Ziegler is Chief
Executive Officer of the Adviser. The business address of Messrs.
Leibler, Cogger, and Merritt is Federal Reserve Plaza, Boston,
Massachusetts 02210; and that of Messrs. Armour, and Ziegler is
One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of December 31, 1996, the Adviser
managed over $26.7 billion in assets: over $8 billion in equities
and over $18.7 billion in fixed income securities (including $1.6
billion in municipal securities). The $26.7 billion in managed
assets included over $7.5 billion held by open-end mutual funds
managed by the Adviser (approximately 16% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 227,000 shareholders. The $7.5 billion in
mutual fund assets included over $743 million in over 47,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 6,500 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At December 31, 1996, the Adviser
employed 19 research analysts and 55 account managers. The
average investment-related experience of these individuals was 22
years.
Please refer to the description of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under Management and Fee
Table in the Prospectus, which is incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to Institutional Client High Yield Fund and bears any
sales or promotional expenses. Institutional Client High Yield
Fund pays all expenses other than those paid by the Adviser,
including but not limited to printing and postage charges and
securities registration and custodian fees and expenses incidental
to its organization.
Institutional Client High Yield Fund's administrative
agreement provides that the Adviser shall reimburse the Fund to
the extent that its total annual expenses (including fees paid to
the Adviser, but excluding taxes, interest, brokers' commissions
and other normal charges incident to the purchase and sale of
portfolio securities, and expenses of litigation to the extent
permitted under applicable state law) exceed the applicable limits
prescribed by any state in which shares of Institutional Client
High Yield Fund are being offered for sale to the public; however,
such reimbursement for any fiscal year will not exceed the amount
of the fees paid by Institutional Client High Yield Fund under
that agreement for such year. In addition, in the interest of
further limiting Institutional Client High Yield Fund's expenses,
the Adviser may voluntarily waive its management fee and/or absorb
certain its expenses, as described in the Prospectus under Fee
Table. Any such reimbursements will enhance the yield of the
Fund.
High Yield Portfolio's management agreement provides that
neither the Adviser nor any of its directors, officers,
stockholders (or partners of stockholders), agents, or employees
shall have any liability to Base Trust or any shareholder of High
Yield Portfolio for any error of judgment, mistake of law or any
loss arising out of any investment, or for any other act or
omission in the performance by the Adviser of its duties under the
agreement, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the Adviser's part
in the performance of its duties or from reckless disregard by the
Adviser of the Adviser's obligations and duties under that
agreement.
Any expenses that are attributable solely to the
organization, operation, or business of Institutional Client High
Yield Fund shall be paid solely out of that Fund's assets. Any
expenses incurred by Stein Roe Trust that are not solely
attributable to a particular Fund are apportioned in such manner
as the Adviser determines is fair and appropriate, unless
otherwise specified by the Board of Trustees.
DISTRIBUTOR
Shares of Institutional Client High Yield Fund are
distributed by Liberty Securities Corporation ("LSC"), under a
Distribution Agreement as described under Management in the
Prospectus, which is incorporated herein by reference. The
Distribution Agreement continues in effect from year to year,
provided such continuance is approved annually (i) by a majority
of the trustees or by a majority of the outstanding voting
securities of Stein Roe Trust, and (ii) by a majority of the
trustees who are not parties to the Agreement or interested
persons of any such party. Stein Roe Trust has agreed to pay all
expenses in connection with registration of its shares with the
Securities and Exchange Commission and auditing and filing fees in
connection with registration of its shares under the various state
blue sky laws and assumes the cost of preparation of prospectuses
and other expenses.
As agent, LSC offers shares of Institutional Client High
Yield Fund to investors in states where the shares are qualified
for sale, at net asset value, without sales commissions or other
sales load to the investor. No sales commission or "12b-1"
payment is paid by Institutional Client High Yield Fund. LSC
offers Institutional Client High Yield Fund's shares only on a
best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for Stein Roe
Trust, as described under Management in the Prospectus. For
performing these services, SSI receives from Institutional Client
High Yield Fund a fee based on an annual rate of [.05] of 1% of
average daily net assets of Institutional Client High Yield Fund.
The Board of Trustees believes the charges by SSI are comparable
to those of other companies performing similar services. (See
Investment Advisory Services.)
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Stein Roe Trust and Base Trust. It is responsible for holding all
securities and cash, receiving and paying for securities
purchased, delivering against payment securities sold, receiving
and collecting income from investments, making all payments
covering expenses, and performing other administrative duties, all
as directed by authorized persons. The custodian does not
exercise any supervisory function in such matters as purchase and
sale of portfolio securities, payment of dividends, or payment of
expenses.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S.
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network, and foreign
depositories ("foreign sub-custodians"). Each of the domestic and
foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with
regulations under the Investment Company Act of 1940.
Each Board of Trustees reviews, at least annually, whether it
is in the best interest of Institutional Client High Yield Fund,
High Yield Portfolio, and their shareholders to maintain assets in
each custodial institution. However, with respect to foreign sub-
custodians, there can be no assurance that it, and the value of
its shares, will not be adversely affected by acts of foreign
governments, financial or operational difficulties of the foreign
sub-custodians, difficulties and costs of obtaining jurisdiction
over, or enforcing judgments against, the foreign sub-custodians,
or application of foreign law to the foreign sub-custodial
arrangements. Accordingly, an investor should recognize that the
non-investment risks involved in holding assets abroad are greater
than those associated with investing in the United States.
Institutional Client High Yield Fund and High Yield Portfolio
may invest in obligations of the custodian and may purchase or
sell securities from or to the custodian.
INDEPENDENT AUDITORS
The independent auditors for Stein Roe Trust and High Yield
Portfolio are Ernst & Young LLP, 233 South Wacker Drive, Chicago,
Illinois 60606. The independent auditors audit and report on the
annual financial statements, review certain regulatory reports and
the federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the applicable Trust.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures contracts for High
Yield Portfolio. Purchases and sales of portfolio securities are
ordinarily transacted with the issuer or with a primary market
maker acting as principal or agent for the securities on a net
basis, with no brokerage commission being paid by High Yield
Portfolio. Transactions placed through dealers reflect the spread
between the bid and asked prices. Occasionally, High Yield
Portfolio may make purchases of underwritten issues at prices that
include underwriting discounts or selling concessions.
The Adviser's overriding objective in effecting portfolio
transactions is to seek to obtain the best combination of price
and execution. The best net price, giving effect to transaction
charges, if any, and other costs, normally is an important factor
in this decision, but a number of other judgmental factors may
also enter into the decision. These include: the Adviser's
knowledge of current transaction costs; the nature of the security
being traded; the size of the transaction; the desired timing of
the trade; the activity existing and expected in the market for
the particular security; confidentiality; the execution, clearance
and settlement capabilities of the broker or dealer selected and
others that are considered; the Adviser's knowledge of the
financial stability of the broker or dealer selected and such
other brokers or dealers; and the Adviser's knowledge of actual or
apparent operational problems of any broker or dealer.
Recognizing the value of these factors, High Yield Portfolio may
incur a transaction charge in excess of that which another broker
or dealer may have charged for effecting the same transaction.
Evaluations of the reasonableness of the costs of portfolio
transactions, based on the foregoing factors, are made on an
ongoing basis by the Adviser's staff and reports are made annually
to the Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for High Yield
Portfolio, the Adviser often selects a broker or dealer that has
furnished it with research products or services such as research
reports, subscriptions to financial publications and research
compilations, compilations of securities prices, earnings,
dividends and similar data, and computer databases, quotation
equipment and services, research-oriented computer software and
services, and services of economic and other consultants.
Selection of brokers or dealers is not made pursuant to an
agreement or understanding with any of the brokers or dealers;
however, the Adviser uses an internal allocation procedure to
identify those brokers or dealers who provide it with research
products or services and the amount of research products or
services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate,
including High Yield Portfolio, to such brokers or dealers to
ensure the continued receipt of research products or services the
Adviser feels are useful. In certain instances, the Adviser
receives from brokers and dealers products or services which are
used both as investment research and for administrative,
marketing, or other non-research purposes. In such instances, the
Adviser makes a good faith effort to determine the relative
proportions of such products or services which may be considered
as investment research. The portion of the costs of such products
or services attributable to research usage may be defrayed by the
Adviser (without prior agreement or understanding, as noted above)
through brokerage commissions generated by transactions of clients
(including High Yield Portfolio), while the portion of the costs
attributable to non-research usage of such products or services is
paid by the Adviser in cash. No person acting on behalf of High
Yield Portfolio is authorized, in recognition of the value of
research products or services, to pay a price in excess of that
which another broker or dealer might have charged for effecting
the same transaction. The Adviser may also receive research in
connection with selling concessions and designations in fixed
price offerings in which High Yield Portfolio participates.
Research products or services furnished by brokers and dealers
through whom transactions are effected may be used in servicing
any or all of the clients of the Adviser and not all such research
products or services are used in connection with the management of
High Yield Portfolio.
The Board has reviewed the legal developments pertaining to
and the practicability of attempting to recapture underwriting
discounts or selling concessions when portfolio securities are
purchased in underwritten offerings. The Board has been advised
by counsel that recapture by a mutual fund currently is not
permitted under the Rules of Fair Practice of the National
Association of Securities Dealers ("NASD").
ADDITIONAL INCOME TAX CONSIDERATIONS
Institutional Client High Yield Fund and High Yield Portfolio
intend to comply with the special provisions of the Internal
Revenue Code that relieve it of federal income tax to the extent
of its net investment income and capital gains currently
distributed to shareholders.
Because capital gain distributions reduce net asset value, if
a shareholder purchases shares shortly before a record date, he
will, in effect, receive a return of a portion of his investment
in such distribution. The distribution would nonetheless be
taxable to him, even if the net asset value of shares were reduced
below his cost. However, for federal income tax purposes the
shareholder's original cost would continue as his tax basis.
Institutional Client High Yield Fund expects that none of its
dividends will qualify for the deduction for dividends received by
corporate shareholders.
INVESTMENT PERFORMANCE
Institutional Client High Yield Fund may quote yield figures
from time to time. "Yield" is computed by dividing the net
investment income per share earned during a 30-day period (using
the average number of shares entitled to receive dividends) by the
net asset value per share on the last day of the period. The
Yield formula provides for semiannual compounding which assumes
that net investment income is earned and reinvested at a constant
rate and annualized at the end of a six-month period. For a given
period, an "Average Annual Total Return" may be computed by
finding the average annual compounded rate that would equate a
hypothetical initial amount invested of $1,000 to the ending
redeemable value.
6
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1) -1].
Where: a = dividends and interest earned during the period
. (For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which
net asset value is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of Institutional Client
High Yield Fund for the period.
_____________________
Institutional Client High Yield Fund may quote total return
figures from time to time. A "Total Return" on a per share basis
is the amount of dividends received per share plus or minus the
change in the net asset value per share for a period. A "Total
Return Percentage" may be calculated by dividing the value of a
share at the end of a period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of Institutional Client High Yield Fund
is a result of conditions in the securities markets, portfolio
management, and operating expenses. Although investment
performance information is useful in reviewing Institutional
Client High Yield Fund's performance and in providing some basis
for comparison with other investment alternatives, it should not
be used for comparison with other investments using different
reinvestment assumptions or time periods.
In advertising and sales literature, Institutional Client
High Yield Fund may compare its yield and performance with that of
other mutual funds, indexes or averages of other mutual funds,
indexes of related financial assets or data, and other competing
investment and deposit products available from or through other
financial institutions. The composition of these indexes or
averages differs from that of Institutional Client High Yield.
Comparison of Institutional Client High Yield Fund to an
alternative investment should be made with consideration of
differences in features and expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which Stein Roe
Trust believes to be generally accurate. Institutional Client
High Yield Fund may also note its mention in newspapers,
magazines, or other media from time to time. However, Stein Roe
Trust assumes no responsibility for the accuracy of such data.
Newspapers and magazines that might mention Institutional Client
High Yield Fund include, but are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Associated Press
Barron's
Bloomberg
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Decoder
Gourmet
Individual Investor
Investment Adviser
Investment Dealers' Digest
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
Institutional Client High Yield Fund may compare its
performance to the Consumer Price Index (All Urban), a widely-
recognized measure of inflation.
The performance of Institutional Client High Yield Fund may
be compared to the following as indicated below:
CS First Boston High Yield Index
ICD High Yield Index
Lehman High Yield Bond Index
Lehman High Yield Corporate Bond Index
Merrill Lynch High-Yield Master Index
Morningstar Corporate Bond (General) Average
Salomon Brothers Extended High Yield Market Index
Salomon Brothers High Yield Market Index
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. Institutional Client
High Yield Fund may also use comparative performance as computed
in a ranking by these services or category averages and rankings
provided by another independent service. Should these services
reclassify Institutional Client High Yield Fund to a different
category or develop (and place it into) a new category, it may
compare its performance or rank against other funds in the newly-
assigned category (or the average of such category) as published
by the service.
In advertising and sales literature, Institutional Client
High Yield Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function
of its monthly returns less the 3-month T-bill return) from its
load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five
star, the next 22.5% labeled four star, the next 35% labeled three
star, the next 22.5% labeled two star, and the bottom 10% one
star. A high rating reflects either above-average returns or
below-average risk, or both.
Of course, past performance is not indicative of future
results.
____________________
To illustrate the historical returns on various types of
financial assets, Institutional Client High Yield Fund may use
historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson
constructs (or obtains) very long-term (since 1926) total return
data (including, for example, total return indexes, total return
percentages, average annual total returns and standard deviations
of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
____________________
Institutional Client High Yield Fund may also use
hypothetical returns to be used as an example in a mix of asset
allocation strategies. One such example is reflected in the chart
below, which shows the effect of tax deferral on a hypothetical
investment. This chart assumes that an investor invested $2,000 a
year on January 1, for any specified period, in both a Tax-
Deferred Investment and a Taxable Investment, that both
investments earn either 6%, 8% or 10% compounded annually, and
that the investor withdrew the entire amount at the end of the
period. (A tax rate of 39.6% is applied annually to the Taxable
Investment and on the withdrawal of earnings on the Tax-Deferred
Investment.)
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 150,484 82,067 97,780 117,014
20 62,943 75,543 91,947 59,362 68,109 78,351
15 41,684 47,304 54,099 40,358 44,675 49,514
10 24,797 26,820 29,098 24,453 26,165 28,006
5 11,178 11,613 12,072 11,141 11,546 11,965
1 2,072 2,096 2,121 2,072 2,096 2,121
Average Life Calculations. From time to time, Institutional
Client High Yield Fund may quote an average life figure for its
portfolio. Average life is the weighted average period over which
the Adviser expects the principal to be paid, and differs from
stated maturity in that it estimates the effect of expected
principal prepayments and call provisions. With respect to GNMA
securities and other mortgage-backed securities, average life is
likely to be substantially less than the stated maturity of the
mortgages in the underlying pools. With respect to obligations
with call provisions, average life is typically the next call date
on which the obligation reasonably may be expected to be called.
Securities without prepayment or call provisions generally have an
average life equal to their stated maturity.
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
BALANCE SHEET
Stein Roe Institutional Client High Yield Fund
Statement of Net Assets
February 6, 1997
Assets:
Cash $100,000
Unamortized organization costs 45,000
--------
Total Assets 145,000
========
Liabilities:
Payable to the Adviser for
organization costs incurred 45,000
Capital
Paid in Capital (net assets) 100,000
--------
Total Liabilities and Capital $145,000
========
Shares Outstanding (Unlimited number
authorized) 10,000
========
Net Asset Value (Capital) Per Share $ 10.00
========
NOTES TO STATEMENT OF NET ASSETS
Note 1. Organization:
Stein Roe Institutional Client High Yield Fund (the "Fund")
is a separate series of the Stein Roe Trust (the
"Trust"), an open-end diversified management investment
company organized as a Massachusetts business trust. The
Fund will invest all of its net investable assets in SR&F
High Yield Portfolio (the "Portfolio"), a separate series of
the SR&F Base Trust. The Fund is inactive except for matters
relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940,
and the sale of 10,000 shares of the Fund for $100,000 to
Stein Roe & Farnham Incorporated (the "Adviser"), an indirect
wholly owned subsidiary of Liberty Financial Companies, Inc.
Organization costs will be amortized on a straight-line basis
against income over various periods of up to sixty months
from the commencement of public offering by the Fund,
depending on the nature of the individual costs.
Note 2. Transactions with Affiliates:
The Adviser receives a management fee from the Portfolio
computed and accrued daily, at an annual rate of 0.500% of
the first $500 million of daily net assets and 0.475%
thereafter. The Adviser will also receive an administrative
fee from the Fund, computed and accrued daily, at an annual
rate of 0.150% of the first $500 million of daily net assets
and 0.125% thereafter.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees
Stein Roe Trust
We have audited the accompanying statement of net assets of Stein
Roe Institutional High Yield Fund, a series of Stein Roe Trust, as
of February 6, 1997. This statement of net assets is the
responsibility of the Fund's management. Our responsibility is
to express an opinion on this statement of net assets based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of net assets is free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of
net assets. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement
of net assets provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to
above presents fairly, in all material respects, the financial
position of Stein Roe Institutional Client High Yield Fund at
February 6, 1997, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 7, 1997
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. Financial statements included in Part A of this
Registration Statement: None.
2. Financial statements included in Part B of this Registration
Statement:
(a) Balance sheet as of February 6, 1997
(b) Report of independent auditors.
(b) Exhibits:
1. Agreement and Declaration of Trust.
2. By-Laws of Registrant.
3. None.
4. None.
5. None.
6. Underwriting agreement.
7. None.
8. Custodian contract.
9. (a) Transfer agency agreement.
(b) Administrative agreement.
(c) Accounting and bookkeeping agreement.
10. Opinion and consent of Bell, Boyd & Lloyd.
11. Consent of Ernst & Young LLP.
12. None.
13. Subscription agreement.
14. None.
15. None.
16. Inapplicable.
17. Inapplicable.
18. Inapplicable.
_____________
* To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlling, controlled by, or under common control with other
persons within the meaning of this Item. See "Investment Advisory
Services," "Management," and "Transfer Agent" in the Statement of
Additional Information, each of which is incorporated herein by
reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
Title of Series as of February 7, 1997
--------------- -----------------------
Stein Roe Institutional Client
High Yield Fund 1
ITEM 27. INDEMNIFICATION.
Article VIII of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including persons who serve or
have served at Registrant's request as directors, officers, or
trustees of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act")
provides that neither the Agreement and Declaration of Trust nor
the By-Laws of Registrant, nor any other instrument pursuant to
which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section 17(h) of the 1940 Act, Article VIII shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article VIII does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable to the Registrant or its shareholders
by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office, indemnification is permitted under Article VIII if (a)
approved as in the best interest of the Registrant, after notice
that it involves such indemnification, by at least a majority of
the Trustees who are disinterested persons are not "interested
persons" as defined in Section 2(a)(19) of the 1940 Act
("disinterested trustees"), upon determination, based upon a review
of readily available facts (but not a full trial-type inquiry) that
such Covered Person is not liable to the Registrant or its
shareholders by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office or (b) there has been
obtained a opinion in writing of independent legal counsel, based
upon a review of readily available facts (but not a full trial-type
inquiry) to the effect that such indemnification would not protect
such Covered Person against any liability to the Trust to which
such Covered Person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; and
(iii) Registrant will not advance expenses, including counsel
fees(but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), incurred by a Covered Person
unless Registrant receives an undertaking by or on behalf of the
Covered Person to repay the advance if it is ultimately determined
that indemnification of such expenses is not authorized by Article
VII and (a) the Covered Person provides security for his
undertaking, or (b) Registrant is insured against losses arising by
reason of such Covered Person's failure to fulfill his undertaking,
or (c) a majority of the disinterested trustees of Registrant or an
independent legal counsel as expressed in a written opinion,
determine, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that
the Covered Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article VIII does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article VIII as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction to have been liable to the
Trust or its shareholders by reason of wilful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Article VIII also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser, and persons
affiliated with them are insured against certain expenses in
connection with the defense of actions, suits, or proceedings, and
certain liabilities that might be imposed as a result of such
actions, suits, or proceedings. Registrant will not pay any
portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of wilful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Registrant, its trustees, officers, employees and representatives
and each person, if any, who controls the Registrant within the
meaning of Section 15 of the Securities Act of 1933 are
indemnified by the distributor of Registrant's shares (the
"distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of wilful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly-owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary of
LFC Holdings, Inc., which in turn is a subsidiary of Liberty Mutual
Equity Corporation, which in turn is a subsidiary of Liberty Mutual
Insurance Company. The Adviser acts as investment adviser to
individuals, trustees, pension and profit-sharing plans, charitable
organizations, and other investors. In addition to Registrant, it
also acts as investment adviser to other investment companies
having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
Stein Roe Investment Trust, Stein Roe Municipal Trust, SR&F Base
Trust, Stein Roe Income Trust, Stein Roe Institutional Trust, Stein
Roe Advisor Trust, SteinRoe Variable Investment Trust and LFC Utilities
Trust, investment companies managed by the Adviser. (The listed
entities are located at One South Wacker Drive, Chicago, Illinois
60606, except for SteinRoe Variable Investment Trust, which is
located at Federal Reserve Plaza, Boston, MA 02210 and LFC Utilities
Trust, which is located at One Financial Center, Boston, MA 02111.)
A list of such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Hans P. Ziegler Director, President, Vice Chairman
Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Secy.
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President
Michael T. Kennedy Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Philip J. Crosley 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
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Thomas W. Butch Executive Vice-President Vice-President
Joanne T. Costopoulos Vice-President
Philip J. Crosley Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INSTITUTIONAL TRUST and STEIN ROE TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Philip J. Crosley 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
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Securities
Corporation, is a wholly owned subsidiary of Liberty Investment
Services, Inc., a wholly owned subsidiary of Liberty Financial
Services, Inc. which, in turn, is a wholly owned subsidiary of
Liberty Financial Companies, Inc. Liberty Financial Companies,
Inc. is a public corporation whose majority shareholder is LFC
Holdings, Inc., a wholly owned subsidiary of Liberty Mutual Equity
Corporation. Liberty Mutual Equity Corporation is a wholly owned
subsidiary of Liberty Mutual Insurance Company.
Liberty Securities Corporation is principal underwriter for the
following investment companies:
Stein Roe Income Trust
Stein Roe Municipal Trust
Stein Roe Investment Trust
Stein Roe Insitutional Trust
Stein Roe Advisor Trust
Stein Roe Trust
Set forth below is information concerning the directors and
officers of Liberty Securities Corporation:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------------------ -------------------- ---------------
Porter P. Morgan Chairman of the Board; Director None
Frank L. Tarantino President; Chief Operating
Officer; Director None
Robert L. Spadafora Executive Vice President -
Sales and Marketing None
John T. Treece, Jr. Senior Vice President - Operations None
John W. Reading Senior Vice President and
Assistant Secretary None
Valerie A. Arendell Senior Vice President - Sales None
Gerald H. Stanney, Vice President and Compliance
Jr. Officer (Boston) None
Jilaine Hummel Bauer Vice President and Compliance Exec. V-P &
Officer (Chicago) Secretary
Bruce F. Ripepi Vice President, General Counsel None
and Assistant Secretary
Timothy K. Armour Vice President President,
Trustee
Lindsay Cook Vice President Trustee
Ralph E. Nixon Vice President None
Joyce B. Riegel Vice President None
Heidi J. Walter Vice President V-P
Glenn E. Williams Assistant Vice President None
Philip J. Iudice Treasurer None
John A. Benning Secretary None
John A. Davenport Assistant Secretary None
Marjorie M. Pluskota Assistant Secretary None
C. Allen Merritt, Jr. Assistant Treasurer; Assistant
Secretary; Director None
The principal business address of Mr. Armour,Ms. Bauer, Ms.
Pluskota, Ms. Riegel and Ms. Walter is One South Wacker Drive,
Chicago, IL 60606; that of Mr. Williams is Two Righter Parkway,
Wilmington, DE 19803; and that of the other officers is 600
Atlantic Avenue, Boston, MA 02210-2214.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Jilaine Hummel Bauer
Executive Vice-President and Secretary
Stein Roe Trust
One South Wacker Drive, Suite 3500
Chicago, Illinois 60606
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to file a post-effective amendment
using financial statements, which need not be certified, within
four to six months from the effective date of this Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused
this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois on the 10th day of February, 1997.
STEIN ROE TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
TIMOTHY K. ARMOUR President and Trustee February 10, 1997
Timothy K. Armour
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President February 10, 1997
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller February 10, 1997
Sharon R. Robertson
Principal Accounting Officer
KENNETH L. BLOCK Trustee February 10, 1997
Kenneth L. Block
WILLIAM W. BOYD Trustee February 10, 1997
William W. Boyd
LINDSAY COOK Trustee February 10, 1997
Lindsay Cook
___________________ Trustee __________________
Douglas A. Hacker
JANET LANGFORD KELLY Trustee February 10, 1997
Janet Langford Kelly
FRANCIS W. MORLEY Trustee February 10, 1997
Francis W. Morley
CHARLES R. NELSON Trustee February 10, 1997
Charles R. Nelson
THOMAS C. THEOBALD Trustee February 10, 1997
Thomas C. Theobald
*This Registration Statement has also been signed by the above persons
in their capacities as trustees and officers of SR&F Base Trust
STEIN ROE TRUST
INDEX TO EXHIBITS FILED WITH THIS REGISTRATION STATEMENT
Exhibit
Number Description
- ------- -------------
1 Agreement and Declaration of Trust
2 By-Laws of Registrant
6 Underwriting agreement
8 Custodian contract
9(a) Transfer agency agreement
9(b) Administrative agreement
9(c) Accounting and bookkeeping agreement
10 Opinion and consent of Bell, Boyd & Lloyd
11 Consent of Ernst & Young LLP
13 Subscription agreement
EXHIBIT 1
STEIN ROE TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the duly elected
and qualified Trustees of Stein Roe Trust, a voluntary
association with transferable shares organized under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement
and Declaration of Trust dated July 31, 1996 (the
"Declaration of Trust"), do hereby amend the Declaration of
Trust as follows and hereby consent to such amendment:
Article VI, Section II of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 2. Any holder of Shares of the Trust may by
presentation of a written request, together with his or
her certificates, if any, for such Shares, in proper
form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the
Trust, redeem his or her Shares for the net asset value
thereof determined and computed in accordance with the
provisions of this Section 2 and the provisions of
Section 7 of this Article VI.
Upon receipt by the Trust or its transfer agent of
such written request for redemption of Shares, such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such Shares are tendered in proper order for transfer to
the Trust or determined as of such other time fixed by
the Trustees as may be permitted or required by the 1940
Act, provided that no such tender shall be required in
the case of Shares for which a certificate or
certificates have not been issued, and in such case such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such request has been received or determined at such
other time fixed by the Trustees as may be permitted or
required by the 1940 Act.
The amount payable by the Trust upon redemption shall
be reduced by such redemption fee, if any, as the
Trustees may authorize.
The obligation of the Trust to redeem its Shares of
each series or class as set forth above in this Section
2 shall be subject to the conditions that during any
time of emergency, as hereinafter defined, such
obligation may be suspended by the Trust by or under
authority of the Trustees for such period of periods
during such time of emergency as shall be determined by
or under authority of the Trustees. If there is such a
suspension, any Shareholder may withdraw any demand for
redemption and any tender of Shares which has been
received by the Trust during any such period and any
tender of Shares, the applicable net asset value of
which would but for such suspension be calculated as of
a time during such period. Upon such withdrawal, the
Trust shall return to the Shareholder the certificates
therefor, if any. For the purposes of any such
suspension, "time of emergency" shall mean, either with
respect to all Shares of any series of Shares, any
period during which:
a. the New York Stock Exchange is closed other than for
customary weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust
shall have determined, in compliance with any
applicable rules and regulations of the Securities
and Exchange Commission, either that trading on the
New York Stock Exchange is restricted, or that an
emergency exists as a result of which (i) disposal
by the Trust of securities owned by it is not
reasonably practicable or (ii) it is not reasonably
practicable for the Trust fairly to determine the
current value of its net assets; or
c. the suspension or postponement of such obligations
is permitted by order of the Securities and Exchange
Commission.
The Trust may also purchase, repurchase or redeem
Shares in accordance with such other methods, upon such
other terms and subject to such other conditions as the
Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to
purchase or repurchase is made.
This instrument may be executed in several counterparts,
each of which shall be deemed to be an original, but all
taken together shall be one instrument.
Dated: December 13, 1996
TIMOTHY K. ARMOUR DOUGLAS A. HACKER
Timothy K. Armour Douglas A. Hacker
KENNETH L. BLOCK FRANCIS W. MORLEY
Kenneth L. Block Francis W. Morley
WILLIAM W. BOYD CHARLES R. NELSON
William W. Boyd Charles R. Nelson
LINDSAY COOK THOMAS C. THEOBALD
Lindsay Cook Thomas C. Theobald
GORDON R. WORLEY
Gordan R. Worley
<PAGE> 1
STEIN ROE TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 31st day of July, 1996 by the Trustees
hereunder, and by the holders of shares of beneficial
interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the
business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts
business trust in accordance with the provisions hereinafter
set forth.
NOW, THEREFORE, the Trustees hereby declare that they
will hold all cash, securities and other assets, which they
may from time to time acquire in any manner as Trustees
hereunder, IN TRUST to manage and dispose of the same upon
the following terms and conditions for the pro rata benefit
of the holders from time to time of Shares in this Trust as
hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Name
Section 1. This Trust shall be known as "Stein Roe
Trust", and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from
time to time determine.
<PAGE> 2
Definitions
Section 2. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business
trust established by this Agreement and Declaration of Trust,
as amended from time to time;
(b) "Trustees" refers to the Trustee or Trustees of the
Trust named herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than one
series of Shares is authorized by the Trustees, the equal
proportionate units into which each series of Shares shall be
divided from time to time or, if more than one class of
Shares of any series is authorized by the Trustees, the equal
proportionate units into which each class of such series of
Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Affiliated Person," "Assignment,"
"Commission," "Interested Person," "Principal Underwriter"
and "Majority Shareholder Vote" (the 67% or 50% requirement
of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) shall have the meanings given
them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to
time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time.
ARTICLE II
PURPOSE
The purpose of the Trust is to engage in the business of
a management investment company and to provide investors a
managed investment primarily in securities, commodities and
debt instruments.
<PAGE> 3
ARTICLE III
SHARES
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in
one or more series as the Trustees may, without Shareholder
approval, authorize. The Trustees may, without Shareholder
approval, divide the Shares of any series into two or more
classes, Shares of each such class having such preferences or
special or relative rights or privileges (including
conversion rights, if any) as the Trustees may determine and
as are not inconsistent with any provision of this
Declaration of Trust. Each series shall be preferred over
all other series in respect of the assets allocated to that
series. The beneficial interest in each series shall at all
times be divided into Shares, without par value, each of
which shall, except as the Trustees may otherwise authorize
in the case of any series that is divided into two or more
classes, represent an equal proportionate interest in the
series with each other Share of the same series, none having
priority or preference over another. The number of Shares
authorized shall be unlimited, and the Shares so authorized
may be represented in part by fractional shares. The
Trustees may from time to time divide or combine the Shares
of any series or class into a greater or lesser number
without thereby changing the proportionate beneficial
interests in the series or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on
the books of the Trust or its transfer or similar agent. No
certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates,
the transfer of Shares and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar
agent of the Trust, as the case may be, shall be conclusive
as to who are the Shareholders of each series and class and
as to the number of Shares of each series and class held from
time to time by each Shareholder.
Investments in the Trust; Assets of the Series
Section 3. The Trustees may accept investments in the
Trust from such persons and on such terms and, subject to any
requirements of law, for such consideration, which may
consist of cash or tangible or intangible property or a
combination thereof, as they from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of each series, together with all income,
earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived
<PAGE> 4
from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received by the Trust for
all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Trust
and are herein referred to as "assets of" such series.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or
other right to receive, purchase or subscribe for any
additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal
property giving only the rights provided in this instrument.
Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of
a Shareholder during the continuance of the Trust shall not
operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the
Trust, shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to
call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
Derivative Claims
Section 6. No Shareholder shall have the right to bring
or maintain any court action, proceeding or claim on behalf
of this Trust or any series without first making demand on
the Trustees requesting the Trustees to bring or maintain
such action, proceeding or claim. Such demand shall be
excused only when the plaintiff makes a specific showing that
irreparable injury to the Trust or series would otherwise
result. Such demand shall be mailed to the Secretary of the
Trust at the Trust's principal office and shall set forth in
reasonable detail the nature of the proposed court action,
proceeding or claim and the essential facts relied upon by
the Shareholder to support the allegations made in the
demand. The Trustees shall consider such demand within 45
days of its receipt by the Trust. In their sole discretion,
the Trustees may submit the matter to a vote of Shareholders
of the Trust or series, as appropriate. Any decision by the
Trustees to bring, maintain or settle (or not to bring,
maintain or settle) such court action, proceeding or claim,
or to submit the matter to a vote of Shareholders shall be
made by the Trustees in their business judgment and shall be
binding upon the Shareholders.
<PAGE> 5
ARTICLE IV
THE TRUSTEES
Election; Removal
Section 1. The number of Trustees shall be fixed by the
Trustees, except that, subsequent to any sale of Shares
pursuant to a public offering, there shall be not less than
three Trustees. Any vacancies occurring in the Board of
Trustees may be filled by the Trustees if, immediately after
filling any such vacancy, at least two-thirds of the Trustees
then holding office shall have been elected to such office by
the Shareholders. In the event that at any time less than a
majority of the Trustees then holding office were elected to
such office by the Shareholders, the Trustees shall call a
meeting of Shareholders for the purpose of electing Trustees.
Each Trustee elected by the Shareholders or by the Trustees
shall serve until the next meeting of Shareholders called for
the purpose of electing Trustees and until the election and
qualification of his or her successor, or until he or she
sooner dies, resigns or is removed. The initial Trustees,
each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or
her successor is elected and qualified, or until he or she
sooner dies, resigns or is removed, shall be Antonio
DeSpirito, III and such other persons as the Trustee or
Trustees then in office shall, prior to any sale of Shares
pursuant to a public offering, appoint. By vote of a
majority of the Trustees then in office, the Trustees may
remove a Trustee with or without cause. At any meeting
called for the purpose, a Trustee may be removed, with or
without cause, by vote of the holders of two-thirds of the
outstanding Shares.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one
of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
Section 3. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be
managed by the Trustees, and they shall have all powers
necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt By-
Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and
may amend and repeal them to the extent that such By-Laws do
not reserve that right to the Shareholders; they may fill
vacancies in their number, including vacancies resulting from
increases in their number, and may elect and remove such
officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number,
and terminate, any one or more committees consisting of two
or more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of
the power and authority of the Trustees as the Trustees may
determine;
<PAGE> 6
they may appoint an advisory board, the members of which
shall not be Trustees and need not be Shareholders; they may
employ one or more custodians of the assets of the Trust and
may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems
for the central handling of securities, retain a transfer
agent or a Shareholder services agent, or both, provide for
the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various
matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest in securities, options,
futures contracts, options on futures contracts and other
property, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the
assets of the Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and
discretion with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities or other assets;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of
the Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3,
to allocate assets, liabilities and expenses of the Trust to
a particular series of Shares or to apportion the same among
two or more series, provided that any liabilities or expenses
incurred by a particular series of Shares shall be payable
solely out of the assets of that series; and to the extent
necessary or appropriate to give effect to the preferences
and special or relative rights and privileges of any classes
of Shares, to allocate assets, liabilities, income and
expenses of a series to a particular class of Shares of that
series or to apportion the same among two or more classes of
Shares of that series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security of which is or was held in the
<PAGE> 7
Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay
calls or subscriptions with respect to any security held in
the Trust;
(h) To join with other security holders in acting
through a committee, depositary, voting trustee or otherwise,
and in that connection to deposit any security with, or
transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust on any matter in
controversy, including but not limited to claims for taxes;
(j) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(k) To borrow funds, securities or other assets;
(1) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all of such
obligations or obligations incurred pursuant to subparagraph
(k) hereof;
(m) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters or
independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted
by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal
underwriter or independent contractor, including any action
taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(n) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and
<PAGE> 8
provisions, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by
any present or future law or custom in regard to investments
by Trustees. Except as otherwise provided herein or from
time to time in the By-Laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within
or without Massachusetts, including any meeting held by means
of a conference telephone or other communications equipment
by means of which all persons participating in the meeting
can hear each other at the same time, and participation by
such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in
office.
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust,
or partly out of principal and partly out of income, as they
deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
investment adviser or manager, principal underwriter,
auditor, counsel, custodian, transfer agent, Shareholder
services agent and such other agents or independent
contractors, and such other expenses and charges, as the
Trustees may deem necessary or proper to incur, provided,
however, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a
particular series of Shares, as determined by the Trustees,
shall be payable solely out of the assets of that series.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of
Shares and of the Trust shall at all times be considered as
vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder
Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or
management services with Stein Roe & Farnham Incorporated, or
any other partnership, corporation, trust, association or
other organization (the "Adviser"), every such contract to
comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from
time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the
Trust shall be held uninvested, and to make changes
<PAGE> 9
in the Trust's investments. The Trustees may also, at any
time and from time to time, contract with the Adviser or any
other corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set
forth in the By-Laws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter or
distributor or agent of or for any corporation, trust,
association or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract may have been or may hereafter be made,
or that any organization, or any parent or affiliate thereof,
is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract or
principal underwriter's or distributor's contract, or
transfer, Shareholder services or other agency contract may
have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract with one or more other corporations,
trusts, associations or other organizations, or has other
business or interests
shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Voting Powers
Section 1. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article
IV, Section 1, (ii) with respect to any Adviser as provided
in Article IV, Section 6, (iii) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in
Article IX, Section 7, and (v) with respect to such
additional matters relating to the Trust as may be required
by law, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Securities and Exchange
Commission (or
<PAGE> 10
any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share (or
fractional share) outstanding on the record date established
in accordance with the By-Laws shall be entitled to a number
of votes on any matter on which it is entitled to vote equal
to the net asset value of the share (or fractional share) in
United States dollars determined at the close of business on
the record date (for example, a share having a net asset
value of $10.50 would be entitled to 10.5 votes).
Notwithstanding any other provision of this Declaration of
Trust, on any matter submitted to a vote of Shareholders, all
Shares of the Trust then entitled to vote shall be voted in
the aggregate as a single class without regard to series or
class except: (1) when required by the 1940 Act or when the
Trustees shall have determined that the matter affects one or
more series or classes materially differently, Shares shall
be voted by individual series or class; and (2) when the
Trustees have determined that the matter affects only the
interests of one or more series or classes, then only
Shareholders of such series or classes shall be entitled to
vote thereon. There shall be no cumulative voting in the
election of Trustees.
Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on
the challenger. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably
designed to verify that such instructions have been
authorized by such shareholder shall constitute execution of
such proxy by or on behalf of such shareholder in writing.
At all meetings of Shareholders, unless inspectors of
election have been appointed, all questions relating to the
qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the
chairman of the meeting. Unless otherwise specified in the
proxy, the proxy shall apply to all Shares of each series of
the Trust owned by the Shareholder.
Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by
law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Voting Power and Meetings
Section 2. Meetings of Shareholders of the Trust or of
any series or class may be called by the Trustees or such
other person or persons as may be specified in the By-Laws
and held from time to time for the purpose of taking action
upon any matter requiring the vote or the authority of the
Shareholders of the Trust or any series or class as herein
provided or upon any other matter deemed by the Trustees to
be necessary or desirable. Meetings of Shareholders of the
Trust or of any series or class shall be called by the
Trustees or such other person or persons as may be specified
in the By-Laws upon written application. The
<PAGE> 11
Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. Shares representing thirty percent of the
votes entitled to vote shall be a quorum for the transaction
of business at a Shareholders' meeting, except that where any
provision of law or of this Declaration of Trust permits or
requires that holders of any series or class shall vote as a
series or class, then Shares representing thirty percent of
the votes of that series or class entitled to vote shall be
necessary to constitute a quorum for the transaction of
business by that series or class. Any lesser number,
however, shall be sufficient for adjournments. Any adjourned
session or sessions may be held within a reasonable time
after the date set for the original meeting without the
necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the
By-Laws, Shares representing a majority of the votes voted
shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of this
Declaration of Trust permits or requires that the holders of
any series or class shall vote as a series or class, then
Shares representing a majority of the votes of that series or
class voted on the matter (or a plurality with respect to the
election of a Trustee) shall decide that matter insofar as
that series or class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion
thereof as shall be required by any express provision of this
Declaration of Trust or the By-Laws) consent to the action in
writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The ByLaws may include further provisions
for Shareholders' votes and meetings and related matters.
<PAGE> 12
ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
AND DETERMINATION OF NET ASSET VALUE
Distributions
Section 1. The Trustees may, but need not, each year
distribute to the Shareholders of each series or class such
income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses
and liabilities (including such reserves as the Trustees may
establish) determined in accordance with good accounting
practices. The Trustees shall have full discretion to
determine which items shall be treated as income and which
items as capital and their determination shall be binding
upon the Shareholders. Distributions of each year's income
of each series, if any be made, may be made in one or more
payments, which shall be in Shares, in cash or otherwise and
on a date or dates and as of a record date or dates
determined by the Trustees. At any time and from time to
time in their discretion, the Trustees may distribute to the
Shareholders of any one or more series or classes as of a
record date or dates determined by the Trustees, in Shares,
in cash or otherwise, all or part of any gains realized on
the sale or disposition of property of the series or
otherwise, or all or part of any other principal of the Trust
attributable to the series. In the case of any series not
divided into two or more classes of Shares, each distribution
pursuant to this Section 1 shall be made ratably according to
the number of Shares of the series held by the several
Shareholders on the applicable record date thereof, provided
that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made,
after such time or times as the Trustees may determine. In
the case of any series divided into two or more classes, each
distribution pursuant to this Section 1 may be made in whole
or in such parts as the Trustees may determine to the
Shareholders of any one or more classes, and the distribution
to the Shareholders of any class shall be made ratably
according to the number of Shares of the class (but need not
be made ratably according to the number of Shares of the
series, considered without regard to class) held by the
several Shareholders on the record date thereof, provided
that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made,
after such time or times as the Trustees may determine. Any
such distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with Section
7 of this Article VI.
Redemptions and Repurchases
Section 2. Any holder of Shares of the Trust may by
presentation of a written request, together with his or her
certificates, if any, for such Shares, in proper form for
transfer, at the office of the Trust or at a principal office
of a transfer agent appointed by the Trust, redeem his or her
Shares for the net asset value thereof determined and
computed in accordance with the provisions of this Section 2
and the provisions of Section 7 of this Article VI.
<PAGE> 13
Upon receipt by the Trust or its transfer agent of such
written request for redemption of Shares, such Shares shall
be redeemed at the net asset value per share of the
appropriate series next determined after such Shares are
tendered in proper order for transfer to the Trust or
determined as of such other time fixed by the Trustees as may
be permitted or required by the 1940 Act, provided that no
such tender shall be required in the case of Shares for which
a certificate or certificates have not been issued, and in
such case such Shares shall be redeemed at the net asset
value per share of the appropriate series next determined
after such request has been received or determined at such
other time fixed by the Trustees as may be permitted or
required by the 1940 Act.
The obligation of the Trust to redeem its Shares of each
series or class as set forth above in this Section 2 shall be
subject to the conditions that during any time of emergency,
as hereinafter defined, such obligation may be suspended by
the Trust by or under authority of the Trustees for such
period or periods during such time of emergency as shall be
determined by or under authority of the Trustees. If there
is such a suspension, any Shareholder may withdraw any demand
for redemption and any tender of Shares which has been
received by the Trust during any such period and any tender
of Shares, the applicable net asset value of which would but
for such suspension be calculated as of a time during such
period. Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any. For the
purposes of any such suspension, "time of emergency" shall
mean, either with respect to all Shares or any series of
Shares, any period during which:
a. the New York Stock Exchange is closed other than for
customary weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust
shall have determined, in compliance with any applicable
rules and regulations of the Securities and Exchange
Commission, either that trading on the New York Stock
Exchange is restricted, or that an emergency exists as a
result of which (i) disposal by the Trust of securities owned
by it is not reasonably practicable or (ii) it is not
reasonably practicable for the Trust fairly to determine the
current value of its net assets; or
c. the suspension or postponement of such obligations
is permitted by order of the Securities and Exchange
Commission.
The Trust may also purchase, repurchase or redeem Shares
in accordance with such other methods, upon such other terms
and subject to such other conditions as the Trustees may from
time to time authorize at a price not exceeding the net asset
value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
<PAGE> 14
Payment in Kind
Section 3. Subject to any generally applicable
limitation imposed by the Trustees, any payment on redemption
of Shares may, if authorized by the Trustees, be made wholly
or partly in kind, instead of in cash. Such payment in kind
shall be made by distributing securities or other property
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed
(but not necessarily involving a portion of each of the
series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of
which payment is made.
Redemptions at the Option of the Trust
Section 4. The Trust shall have the right at its option
and at any time to redeem Shares of any Shareholder at the
net asset value thereof as determined in accordance with
Section 7 of Article VI of this Declaration of Trust: (i) if
at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees; or (ii)
to the extent that such Shareholder owns Shares of a
particular series of Shares equal to or in excess of a
percentage of the outstanding Shares of that series
(determined without regard to class) determined from time to
time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a
percentage equal to or in excess of such percentage of the
aggregate number of outstanding Shares of the Trust or the
aggregate net asset value of the Trust determined from time
to time by the Trustees.
Dividends, Distributions, Redemptions and Repurchases
Section 5. No dividend or distribution (including,
without limitation, any distribution paid upon termination of
the Trust or of any series) with respect to, nor any
redemption or repurchase of, the Shares of any series (or of
any class) shall be effected by the Trust other than from the
assets of such series (or of the series of which such class
is a part).
Additional Provisions Relating to Redemptions and
Repurchases
Section 6. The completion of redemption of Shares shall
constitute a full discharge of the Trust and the Trustees
with respect to such shares, and the Trustees may require
that any certificate or certificates issued by the Trust to
evidence the ownership of such Shares shall be surrendered to
the Trustees for cancellation or notation.
<PAGE> 15
Determination of Net Asset Value
Section 7. The term "net asset value" of the Shares of
each series or class shall mean: (i) the value of all the
assets of such series or class; (ii) less the total
liabilities of such series or class; (iii) divided by the
number of Shares of such series or class outstanding, in each
case at the time of each determination. The "number of
Shares of such series or class outstanding" for the purposes
of such computation shall be exclusive of any Shares of such
series or class to be redeemed and not then redeemed as to
which the redemption price has been determined, but shall
include Shares of such series or class presented for
repurchase and not then repurchased and Shares of such series
or class to be redeemed and not then redeemed as to which the
redemption price has not been determined and Shares of such
series or class the sale of which has been confirmed. Any
fractions involved in the computation of net asset value per
share shall be adjusted to the nearer cent unless the
Trustees shall determine to adjust such fractions to a
fraction of a cent.
The Trustees, or any officer or officers or agent of
this Trust designated for the purpose by the Trustees, shall
determine the net asset value of the Shares of each series or
class, and the Trustees shall fix the times as of which the
net asset value of the Shares of each series or class shall
be determined and shall fix the periods during which any such
net asset value shall be effective as to sales, redemptions
and repurchases of, and other transactions in, the Shares of
such series or class, except as such times and periods for
any such transaction may be fixed by other provisions of this
Declaration of Trust or by the By-Laws.
In valuing the portfolio investments of any series or
class for determination of net asset value per share of such
series or class:
(a) Each security for which market quotations are
readily available shall be valued at current market value
determined by methods specified by the Board of Trustees;
(b) Each other security, including any security within
(a) for which the specified price does not appear to
represent a dependable quotation for such security as of the
time of valuation, shall be valued at a fair value as
determined in good faith by the Trustees;
(c) Any cash on hand shall be valued at the face amount
thereof;
(d) Any cash on deposit, accounts receivable, and cash
dividends and interest declared or accrued and not yet
received, any prepaid expenses, and any other current asset
shall be valued at the face amount thereof, unless the
Trustees shall determine that any such item is not worth its
face amount, in which case such asset shall be valued at a
fair value determined in good faith by the Trustees; and
<PAGE> 16
(e) Any other asset shall be valued at a fair value
determined in good faith by the Trustees.
Notwithstanding the foregoing, short-term debt obligations,
commercial paper and repurchase agreements may be, but need
not be, valued on the basis of quoted yields for securities
of comparable maturity, quality and type, or on the basis of
amortized cost.
Liabilities of any series or class for accounts payable
for investments purchased and for Shares tendered for
redemption and not then redeemed as to which the redemption
price has been determined shall be stated at the amounts
payable therefor. In determining the net asset value of any
series or class, the person or persons making such
determination on behalf of the Trust may include in
liabilities such reserves, estimated accrued expenses and
contingencies as such person or persons may in its, his or
their best judgment deem fair and reasonable under the
circumstances. Any income dividends and gains distributions
payable by the Trust shall be deducted as of such time or
times on the record date therefor as the Trustees shall
determine.
The manner of determining the net assets of any series
or class or of determining the net asset value of the Shares
of any series or class may from time to time be altered as
necessary or desirable in the judgment of the Trustees to
conform to any other method prescribed or permitted by any
applicable law or regulation.
Determinations under this Section 7 made in good faith
and in accordance with the provisions of the 1940 Act shall
be binding on all parties concerned.
ARTICLE VII
COMPENSATION AND LIMITATION
OF LIABILITY OF TRUSTEES
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the
amount of their compensation. Nothing herein shall in any
way prevent the employment of any Trustee for advisory,
management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any
officer, agent, employee, adviser or principal underwriter of
the Trust, nor shall any Trustee be responsible for the act
or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to
which he or she would
<PAGE> 17
otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate,
Share or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees
or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or
with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally
liable thereon.
ARTICLE VIII
INDEMNIFICATION
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action,
suit or other proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom,
before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as
a party or otherwise or with which such person may be or may
have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person, except
that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Expenses, including counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be
paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (a) such
Covered Person shall provide security for his undertaking,
(b) the Trust shall be insured against losses arising by
reason of such Covered Person's failure to fulfill his
undertaking or (c) a majority of the Trustees who are
disinterested persons and who are not Interested Persons
(provided that a majority of such Trustees then in office act
on the matter), or independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (but not a full
<PAGE> 18
trial-type inquiry), that there is reason to believe such
Covered Person ultimately will be entitled to
indemnification.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or
otherwise) without an adjudication in a decision on the
merits by a court, or by any other body before which the
proceeding was brought, that such Covered Person is liable to
the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office, indemnification shall be provided if
(a) approved as in the best interest of the Trust, after
notice that it involves such indemnification, by at least a
majority of the Trustees who are disinterested persons and
are not Interested Persons (provided that a majority of such
Trustees then in office act on the matter), upon a
determination, based upon a review of readily available facts
(but not a full trial-type inquiry) that such Covered Person
is not liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a
review of readily available facts (but not a full-trial type
inquiry) to the effect that such indemnification would not
protect such Covered Person against any liability to the
Trust to which such Covered Person would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct
of his office.
Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Indemnification Not Exclusive; Definitions
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which
any such Covered Person may be entitled. As used in this
Article VIII, the term "Covered Person" shall include such
person's heirs, executors and administrators, and a
"disinterested person" is a person against whom none of the
actions, suits or other proceedings in question or another
action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in
this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase
and maintain liability insurance on behalf of such persons.
<PAGE> 19
Shareholders
Section 4. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by
reason of his or her being or having been a Shareholder and
not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal
representatives or, in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability, but only out of
the assets of the particular series of Shares of which he or
she is or was a Shareholder.
ARTICLE IX
MISCELLANEOUS
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular
series of Shares shall look only to the assets of the Trust
or the assets of that particular series of Shares for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers
or officer shall give notice that this Declaration of Trust
is on file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or
Trustee or as officers or officer and not individually and
that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable for his or her own
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts
<PAGE> 20
with respect to the meaning and operation of this Declaration
of Trust, and shall be under no liability for any act or
omission in accordance with such advice or for failing to
follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred
to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of Shareholders holding
at least two-thirds of the Shares of each series entitled to
vote or by the Trustees by written notice to the
Shareholders. Any series of Shares may be terminated at any
time by vote of Shareholders holding at least two-thirds of
the votes represented by the outstanding Shares of such
series entitled to vote or by the Trustees by written notice
to the Shareholders of such series.
Upon termination of the Trust or of any one or more
series of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees,
the Trust shall in accordance with such procedures as the
Trustees consider appropriate reduce the remaining assets to
distributable form in cash or shares or other securities, or
any combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according to the
number of Shares of such series held by the several
Shareholders of such series on the date of termination,
except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of
any classes of Shares of that series, provided that any
distribution to the Shareholders of a particular class of
Shares shall be made to such Shareholders pro rata in
proportion to the number of Shares of such class held by each
of them.
Filing of Copies, References, Headings
Section 5. The original or a copy of this instrument
and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City
of Boston, as well as any other governmental office where
such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments
have been made and as to any matters in connection with the
Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy
<PAGE> 21
certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all
expressions such as "herein," "hereof" and "hereunder," shall
be deemed to refer to this instrument as amended or affected
by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction or
effect of this instrument. This instrument may be executed
in any number of counterparts, each of which shall be deemed
an original.
Applicable Law
Section 6. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the
type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a
trust.
Amendments
Section 7. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of
the then Trustees when authorized so to do by a vote of the
holders of a majority of the votes represented by outstanding
Shares entitled to vote, except that an amendment which shall
affect the holders of one or more series or classes of Shares
but not the holders of all outstanding series and classes
shall be authorized by vote of holders of a majority of the
votes represented by outstanding Shares entitled to vote of
each series and class affected and no vote of Shareholders of
a series or class not affected shall be required. Amendments
having the purpose of changing the name of the Trust or of
supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by
Shareholder vote.
<PAGE> 22
IN WITNESS WHEREOF the undersigned has hereunto set his hand
in the City of Boston, Massachusetts for himself and his
assigns, as of this 31st day of July, 1996.
ANTONIO DE SPIRITO, III
Antonio DeSpirito, III
One International Place
Boston, MA 02110
THE COMMONWEALTH OF MASSACHUSETTS
Boston ss. July 31, 1996
Then personally appeared the above-named Trustee and
acknowledged the foregoing instrument to be his free act and
deed, before me,
DIANE ROTONDI
Notary Public
My commission expires: 9/23/99
(Notary's Seal)
The address of the Trust is One South Wacker Drive, Chicago,
Illinois 60606
The Resident Agent is CT Corporation, 2 Oliver Street,
Boston, MA 02109.
EXHIBIT 2
STEIN ROE TRUST
BY-LAWS
<PAGE>
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL.............................1
Section 1.01. Agreement and Declaration of Trust........1
Section 1.02. Principal Office..........................1
Section 1.03. Seal......................................1
ARTICLE II. BOARD OF TRUSTEES...............................1
Section 2.01. Number and Term of Office.................1
Section 2.02. Power to Declare Dividends................1
Section 2.03. Annual and Regular Meetings...............2
Section 2.04. Special Meetings..........................3
Section 2.05. Notice....................................3
Section 2.06. Waiver of Notice..........................3
Section 2.07. Quorum and Voting.........................3
Section 2.08. Action Without a Meeting..................3
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES.......3
Section 3.01. How Constituted...........................3
Section 3.02. Powers of the Executive Committee.........4
Section 3.03. Other Committees of the Board of Trustees.4
Section 3.04. Proceedings, Quorum and Manner of Acting..4
Section 3.05. Other Committees..........................4
Section 3.06. Action Without a Meeting..................4
Section 3.07. Waiver of Notice..........................4
ARTICLE IV. OFFICERS........................................5
Section 4.01. General...................................5
Section 4.02. Election, Term of Office and
Qualifications.........................5
Section 4.03. Resignation...............................5
Section 4.04. Removal...................................5
Section 4.05. Vacancies and Newly Created Offices.......5
Section 4.06. Chairman of the Board.....................6
Section 4.07. President.................................6
Section 4.08. Executive Vice-Presidents and Vice-
Presidents.............................6
Section 4.09. Senior Vice-President.....................6
Section 4.10. Treasurer and Assistant Treasurers........6
Section 4.11. Secretary and Assistant Secretaries.......7
Section 4.12. Controller and Assistant Controllers......7
Section 4.13. Subordinate Officers......................7
Section 4.14. Remuneration..............................7
Section 4.15. Surety Bonds..............................7
ARTICLE V. CUSTODY OF SECURITIES............................8
Section 5.01. Employment of a Custodian.................8
Section 5.02. Provisions of Custodian Contract..........8
Section 5.03. Action upon Termination of Custodian
Contract................................9
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS SECURITY
HOLDER........................................9
Section 6.01. General...................................9
Section 6.02. Checks, Notes, Drafts, Etc................9
Section 6.03. Rights as Security Holder................10
ARTICLE VII. SHARES OF BENEFICIAL INTEREST.................10
Section 7.01. Certificates.............................10
Section 7.02. Uncertificated Shares....................10
Section 7.03. Transfers of Shares......................10
Section 7.04. Registered Shareholders..................11
Section 7.05. Transfer Agents and Registrars...........11
Section 7.06. Fixing of Record Date....................11
Section 7.07. Lost, Stolen, or Destroyed Certificates..11
Section 7.08. Resumption of Issuance of Certificates/
Cancellation of Certificates............12
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT......................12
Section 8.01. Fiscal Year..............................12
Section 8.02. Accountants..............................12
ARTICLE IX. AMENDMENTS.....................................12
Section 9.01. General..................................12
Section 9.02. By Shareholders Only.....................12
ARTICLE X. MISCELLANEOUS...................................13
Section 10.01. Restrictions and Limitations............13
<PAGE> 1
STEIN ROE TRUST
BY-LAWS
(By-Laws Adopted by Board of Trustees on July 31, 1996
as amended and restated on February 5, 1997)
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST, LOCATION OF
OFFICES AND SEAL
Section 1.01. Agreement and Declaration of Trust.
These By-Laws shall be subject to the Agreement and
Declaration of Trust as now in effect or hereinafter amended
("Declaration of Trust") of Stein Roe Trust, a Massachusetts
business trust established by the Declaration of Trust (the
"Trust").
Section 1.02. Principal Office. A principal office of
the Trust shall be located in Boston, Massachusetts. The
Trust may also maintain a principal office in the City of
Chicago, State of Illinois. The Trust may, in addition,
establish and maintain such other offices and places of
business as the Board of Trustees may from time to time
determine.
Section 1.03. Seal. The seal of the Trust shall be
circular in form and shall bear the name of the Trust, the
word "Massachusetts," and the year of its organization. The
form of the seal shall be subject to alteration by the Board
of Trustees and the seal may be used by causing it or a
facsimile to be impressed or affixed or printed or otherwise
reproduced. Any officer or Trustee of the Trust shall have
authority to affix the seal of the Trust to any document
requiring the same. Unless otherwise required by the Board
of Trustees, the seal shall not be necessary to be placed on,
and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by
or on behalf of the Trust.
ARTICLE II. BOARD OF TRUSTEES
Section 2.01. Number and Term of Office. The Board of
Trustees shall initially consist of the initial sole Trustee,
which number may be increased or subsequently decreased by a
resolution of a majority of the entire Board of Trustees,
provided that the number of Trustees shall not be less than
one nor more than twenty-one, except that subsequent to any
sale of Shares pursuant to a public offering, there shall not
be less than three Trustees. Each Trustee (whenever
selected) shall hold office until the next meeting of
shareholders called for the purposes of electing Trustees and
until his successor is elected and qualified or until his
earlier death, resignation, or removal. Each Trustee shall
retire on December 31 of the year during which the Trustee
becomes age 72, provided, however, that any Trustee age 70 or
older on February 3, 1993, shall retire on December 31 of the
year during which the Trustee becomes age 77.
Section 2.02. Power to Declare Dividends.
(a) The Board of Trustees, from time to time as it may
deem advisable, may declare and pay dividends to the
shareholders of any series of the Trust in cash or other
property of that series, out of any source available to that
series for
<PAGE>
dividends, according to the respective rights and interests
of shareholders of that series and in accordance with the
applicable provisions of the Declaration of Trust.
(b) The Board of Trustees may prescribe from time to
time that dividends declared on shares of a series may be
payable at the election of any of the shareholders of that
series (exercisable before the declaration of the dividend),
either in cash or in shares of that series; provided that the
net asset value of the shares received by a shareholder
electing to receive dividends in shares (determined as of
such time as the Board of Trustees shall have prescribed in
accordance with the Declaration of Trust) shall not exceed
the full amount of cash to which the shareholder would be
entitled if he elected to receive cash.
(c) The Board of Trustees shall cause any dividend
payment to shareholders of a series to be accompanied by a
written statement if wholly or partly from any source other
than:
(i) such series' accumulated undistributed net income
[determined in accordance with generally accepted
accounting principles and the rules and
regulations then in effect of the Securities and
Exchange Commission or any other governmental
body having similar jurisdiction over the Trust
(the "SEC")] and not including profits or losses
realized upon the sale of securities or other
properties of the series; or
(ii) the series' net income so determined for the
current or preceding fiscal year.
Such statement shall adequately disclose the source or
sources of such payment and the basis of calculation and
shall be in such form as the SEC may prescribe.
Section 2.03. Annual and Regular Meetings. Annual and
regular meetings of the Board of Trustees may be held without
call or notice and at such places at such times as the Board
of Trustees may from time to time determine provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. Members of
the Board of Trustees or any committee designated thereby may
participate in a meeting of such Board or committee by means
of a conference telephone or other communications equipment,
by means of which all persons participating in the meeting
can hear each other at the same time. Participation by such
means shall constitute presence in person at a meeting;
provided, however, that the Board of Trustees shall not enter
into, renew, or perform any contract or agreement, written or
oral, whereby a person undertakes regularly to serve or act
as investment adviser with respect to any series of the Trust
unless the terms of such contract or agreement and any
renewal thereof have been approved by the vote of a majority
of Trustees who are not parties to such contract or agreement
or interested persons of any such party, which votes shall be
cast at a meeting called for the purpose of voting on such
approval at which such persons are physically present.
<PAGE>
Section 2.04. Special Meetings. Special meetings of
the Board of Trustees shall be held whenever called and at
such place and time determined by the President, Executive
Vice-President or Secretary (or, in the absence or disability
of the President, Executive Vice-President and Secretary, by
any Vice-President), or a majority of the Trustees then in
office, at the time and place specified in the respective
notices or waivers of notice of such meetings.
Section 2.05. Notice. If notice of a meeting of the
Board of Trustees is required or desired to be given, notice
stating the time and place shall be mailed to each Trustee at
his residence or regular place of business at least five days
before the day on which the meeting is to be held or caused
to be delivered to him personally or to be transmitted to him
by telephone, telegraph, cable, or wireless at least one day
before the meeting.
Section 2.06. Waiver of Notice. No notice required or
desired to be given of any meeting need be given to any
Trustee who attends such meeting in person or to any Trustee
who waives notice of such meeting in writing (which waiver
shall be filed with records of such meeting), whether before
or after the time of the meeting.
Section 2.07. Quorum and Voting. At all meetings of
the Board of Trustees, the presence of one-third of the
number of Trustees then in office shall constitute a quorum
for the transaction of business; provided, however, a quorum
shall not be less than the lesser of two Trustees or 100% of
all Trustees then in office. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting
without further notice, from time to time, until a quorum
shall be present. The action of a majority of the Trustees
present at a meeting at which a quorum is present shall be
the action of the Board of Trustees, unless the concurrence
of a greater proportion is required for such action by law,
by the Declaration of Trust, or by these By- Laws.
Section 2.08. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board
of Trustees may be taken without a meeting, if written
consents thereto are signed by a majority of the members of
the Board, unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees.
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. By resolution adopted
by the Board of Trustees, the Board may designate one or more
committees, including an Executive Committee, each of which
shall consist of at least two Trustees. Each member of a
committee shall be a Trustee and shall hold office during the
pleasure of the Board.
<PAGE>
Section 3.02. Powers of the Executive Committee.
Unless otherwise provided by resolution of the Board of
Trustees, the Executive Committee shall have and may exercise
all powers of the Board of Trustees in the management of the
business and affairs of the Trust that may lawfully be
exercised by an executive committee, except the power to
recommend to shareholders any matter requiring shareholder
approval, amend the Declaration of Trust or By-Laws, or
approve any merger or share exchange that does not require
shareholder approval.
Section 3.03. Other Committees of the Board of
Trustees. To the extent provided by resolution of the Board,
other committees of the Board shall have and may exercise any
of the powers that may lawfully be granted to the Executive
Committee.
Section 3.04. Proceedings, Quorum and Manner of Acting.
In the absence of appropriate resolution of the Board of
Trustees, each committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting as it
shall deem proper and desirable, provided that the quorum
shall not be less than two Trustees except that, in the case
of a committee (other than the Executive Committee)
consisting of two Trustees, one Trustee shall constitute a
quorum unless the Board by resolution specifies that a quorum
for that committee shall consist of two Trustees. In the
absence of any member of any such committee, the members
thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of
Trustees to act in the place of such absent member.
Section 3.05. Other Committees. The Board of Trustees
may appoint other committees, each consisting of one or more
persons, who need not be Trustees. Each such committee shall
have such powers and perform such duties as may be assigned
to it from time to time by the Board of Trustees, but shall
not exercise any power which may lawfully be exercised only
by the Board of Trustees or a committee thereof.
Section 3.06. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of any
committee may be taken without a meeting, if written consents
thereto are signed by a majority of the members of the
committee unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees or
of the committee.
Section 3.07. Waiver of Notice. Whenever any notice of
the time, place or purpose of any meeting of any committee is
required to be given under the provisions of any applicable
law or under the provisions of the Declaration of Trust or
these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the
records of the meeting, whether before or after the holding
of such meeting, or actual attendance at the meeting in
person, shall be deemed equivalent to the giving of such
notice to such persons.
<PAGE>
ARTICLE IV. OFFICERS
Section 4.01. General. The officers of the Trust shall
be a President, a Secretary, a Senior Vice-President, a
Treasurer and a Controller, and may include one or more
Executive Vice-Presidents, Vice-Presidents, Assistant
Secretaries, Assistant Treasurers or Assistant Controllers
and such other officers as may be appointed in accordance
with the provisions of Section 4.13 hereof. The Board of
Trustees may elect, but shall not be required to elect, a
Chairman of the Board.
Section 4.02. Election, Term of Office and
Qualifications. The officers of the Trust (except those
appointed pursuant to Section 4.13 hereof) shall be chosen by
the Board of Trustees at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting
and thereafter annually. If any officers are not chosen at
any annual meeting, such officers may be chosen at any
subsequent regular or special meeting of the Board. Except
as provided in Sections 4.03, 4.04 and 4.05 hereof, each
officer chosen by the Board of Trustees shall hold office
until the next annual meeting of the Board of Trustees and
until his successor shall have been chosen and qualified or
until his earlier death. Any person may hold one or more
offices of the Trust except the offices of President and
Vice-President, but no officer shall execute, acknowledge, or
verify an instrument in more than one capacity, if such
instrument is required by law, by the Declaration of Trust,
or by these By-Laws to be executed, acknowledged or verified
by two or more officers. The Chairman of the Board, if any,
shall be chosen from among the Trustees of the Trust and may
hold such office only so long as he continues to be a
Trustee. No other officer need be a Trustee.
Section 4.03. Resignation. Any officer may resign his
office at any time by delivering a written resignation to the
Board of Trustees, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 4.04. Removal. Any officer may be removed from
office, whenever in the Board's judgment the best interest of
the Trust will be served thereby, by the vote of a majority
of the Board of Trustees given at any regular or special
meeting. In addition, any officer or agent appointed in
accordance with the provisions of Section 4.13 hereof may be
removed, either with or without cause, by any officer upon
whom such power of removal shall have been conferred by the
Board of Trustees.
Section 4.05. Vacancies and Newly Created Offices. If
any vacancy shall occur in any office by reason of death,
resignation, removal, disqualification, or other cause, or if
any new office shall be created, such vacancy or newly
created office may be filled by the Board of Trustees at any
regular or special meeting or, in the case of any office
created pursuant to Section 4.13 hereof, by any officer upon
whom such power shall have been conferred by the Board of
Trustees. An officer chosen by the Board of Trustees to fill
a vacancy or a newly created office shall serve until the
next annual meeting of the Board of Trustees and until his
<PAGE>
successor shall have been chosen and qualified or until his
earlier death, resignation or removal.
Section 4.06. Chairman of the Board. In the absence or
disability of the President, the Chairman of the Board, if
there be such an officer, shall preside at all shareholders'
meetings and at all meetings of the Board of Trustees. He
shall have such other powers and perform such other duties as
may be assigned to him from time to time by the Board of
Trustees.
Section 4.07. President. The President shall be the
chief executive officer and shall preside at all
shareholders' meetings and at all meetings of the Board of
Trustees. Subject to the supervision of the Board of
Trustees, he shall have the general charge of the business,
affairs and property of the Trust and general supervision
over its other officers, employees and agents.
Section 4.08. Executive Vice-Presidents and Vice-
Presidents. The Board of Trustees may from time to time
elect one or more Executive Vice-Presidents and one or more
Vice-Presidents, who shall have such powers and perform such
duties as from time to time may be assigned to them by the
Board of Trustees or the President. At the request of the
President, the Executive Vice-President, and if no Executive
Vice-President is present or able, the Vice-President may
perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. If there are two or more
Executive Vice-Presidents or Vice-Presidents, the earliest
elected to the more senior office present and able shall
perform the duties of the President in his absence or
disability.
Section 4.09. Senior Vice-President. The Senior Vice-
President shall be the principal financial officer of the
Trust and shall have general charge of the finances and books
of account of the Trust. Except as otherwise provided by the
Board of Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the
Custodian of its duties with respect thereto. He shall
render to the Board of Trustees, whenever directed by the
Board, an account of the financial condition of the Trust and
of all his transactions as Senior Vice-President; and as soon
as possible after the close of each fiscal year he shall make
and submit to the Board of Trustees a like report for such
fiscal year. He shall perform all the acts incidental to the
office of Senior Vice-President, subject to the control of
the Board of Trustees. At the request of any Executive Vice-
President, or if no Executive Vice-President is present or
able, the Senior Vice-President may perform all of the duties
of the Executive Vice-President (except to the extent that
such duties have otherwise been delegated by or pursuant to
these By-Laws) and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the Executive
Vice-President.
Section 4.10. Treasurer and Assistant Treasurers. The
Treasurer and any Assistant Treasurer may perform such duties
of the Senior Vice-President as the Senior Vice-President or
the Board of Trustees may assign, and, in the absence of
<PAGE>
the Senior Vice-President, may perform all the duties of the
Senior Vice-President.
Section 4.11. Secretary and Assistant Secretaries. The
Secretary shall attend to the giving and serving of all
notices of the Trust and shall record all proceedings of the
meetings of the shareholders, Trustees, the Executive
Committee and other committees, in a book to be kept for that
purpose. He shall keep in safe custody the seal of the
Trust, and shall have charge of the records of the Trust,
including the share books and such other books and papers as
the Board of Trustees may direct and such books, reports,
certificates and other documents required by law to be kept,
all of which shall, at all reasonable times, be open to
inspection by any Trustee. He shall perform all the acts
incidental to the office of Secretary, subject to the control
of the Board of Trustees.
Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Trustees may
assign, and, in the absence of the Secretary, he may perform
all the duties of the Secretary.
Section 4.12. Controller and Assistant Controllers.
The Controller shall be the chief accounting officer of the
Trust. He shall direct the preparation and maintenance, on a
current basis, of such accounting books, records and reports
as may be necessary to permit the directors, officers and
executives of the Trust or as may be required by law. He
shall perform all the acts incidental to the office of
Controller, subject to the control of the Board of Trustees,
the Executive Vice-President or the Senior Vice-President.
Any Assistant Controller may perform such duties of the
Controller as the Controller or the Board of Trustees may
assign, of the Controller.
Section 4.13. Subordinate Officers. The Board of
Trustees from time to time may appoint such other officers or
agents as it may deem advisable, each of whom shall have such
title, hold office for such period, have such authority and
perform such duties as the Board of Trustees may determine.
The Board of Trustees from time to time may delegate to one
or more officers or agents the power to appoint any such
subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 4.14. Remuneration. The salaries, if any, or
other compensation of the officers of the Trust shall be
fixed from time to time by resolution of the Board of
Trustees, except that the Board of Trustees may by resolution
delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate
officers or agents appointed in accordance with the
provisions of Section 4.13 hereof.
Section 4.15. Surety Bonds. The Board of Trustees may
require any officer or agent of the Trust to execute a bond
to the Trust [including, without limitation, any bond
required by the Investment Company Act of 1940, or any rule
or regulation thereunder, all as now in effect or as
hereafter amended or added (the
<PAGE>
"1940 Act") and the rules and regulations of the SEC] in such
sum and with such surety or sureties as the Board of Trustees
may determine, conditioned upon the faithful performance of
his duties to the Trust, including responsibility for
negligence and for the accounting of any of the Trust's
property, funds, or securities that may come into his hands.
ARTICLE V. CUSTODY OF SECURITIES
Section 5.01. Employment of a Custodian. The Trust
shall place and at all times maintain in the custody of a
Custodian (including any sub-custodian for the Custodian) all
securities owned by the Trust and cash representing the
proceeds from sales of securities owned by the Trust and of
capital stock or other units of beneficial interest issued to
the Trust, payments of principal upon securities owned by the
Trust, or capital distribution in respect to capital stock or
other units of beneficial interest owned by the Trust,
pursuant to a written contract with such Custodian. The
Custodian shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided
profits (as shown in its last published report).
Section 5.02. Provisions of Custodian Contract. The
Custodian contract shall be upon such terms and conditions
and may provide for such compensation as the Board of
Trustees deems necessary or appropriate, provided such
contract shall further provide that the Custodian shall
deliver securities owned by the Trust only upon sale of such
securities for the account of the Trust and receipt of
payment therefor by the Custodian or when such securities may
be called, redeemed, retired, or otherwise become payable.
Such limitations shall not prevent:
(a) the delivery of securities for examination to the
broker selling the same in accord with the "street delivery"
custom whereby such securities are delivered to such broker
in exchange for a delivery receipt exchanged on the same day
for an uncertified check of such broker to be presented on
the same day for certification;
(b) the delivery of securities of an issuer in exchange
for or for conversion into other securities alone or cash and
other securities, pursuant to any plan of merger,
consolidation, reorganization, recapitalization, or
readjustment of the securities of such issuer;
(c) the conversion by the Custodian of securities owned
by the Trust, pursuant to the provisions of such securities,
into other securities;
(d) the surrender by the Custodian of warrants, rights,
or similar securities owned by the Trust in the exercise of
such warrants, rights, or similar securities, or the
surrender of interim receipts or temporary securities for
definitive securities;
<PAGE>
(e) the delivery of securities as collateral on
borrowing effected by the Trust; or
(f) the delivery of securities owned by the Trust as a
redemption in kind of securities issued by the Trust.
The Custodian shall deliver funds of the Trust for the
purchase of securities for the portfolio of the Trust only
upon the delivery of such securities to the Custodian, but
such limitation shall not prevent the release of funds by the
Custodian for redemption of shares issued by the Trust, for
payment of interest, dividend disbursements, taxes or
management fees, for payments in connection with the
conversion, exchange or surrender of securities owned by the
Trust as set forth in subparagraphs (b), (c) and (d) above or
for operating expenses of the Trust.
The term "security" shall be broadly construed and shall
include, without limitation, the various types of securities
set forth in Section 3(a)(10) of the Securities Exchange Act
of 1934.
Section 5.03. Action upon Termination of Custodian
Contract. The contract of employment of the Custodian may be
terminated by either party on 60 days' written notice to the
other party. Upon termination of the Custodian contract,
resignation of the Custodian, or inability of the Custodian
to continue to serve, the Board of Trustees shall use its
best efforts to obtain a successor custodian. If a successor
custodian is found, the Trust shall require the retiring
Custodian to deliver the cash and securities owned by the
Trust directly to the successor custodian. In the event that
no successor custodian which has the required qualifications
and is willing to serve can be found, the Board of Trustees
shall call a special meeting of the shareholders to submit to
the shareholders, before delivery of the cash and securities
owned by the Trust to other than a successor custodian, the
question of whether the Trust shall function without a
custodian or shall be liquidated.
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS
SECURITY HOLDER
Section 6.01. General. All deeds, documents,
transfers, contracts, agreements and other instruments
requiring execution by the Trust shall be signed by the
President, the Executive Vice-President, the Senior Vice-
President, the Controller, the Secretary, or the Treasurer,
or as the Board of Trustees may otherwise, from time to time,
authorize. Any such authorization may be general or confined
to specific instances.
Section 6.02. Checks, Notes, Drafts, Etc. Except as
otherwise authorized by the Board of Trustees, all checks and
drafts for the payment of money shall be signed in the name
of the Trust by the Custodian, and all requisitions or orders
for the payment of money by the Custodian or for the issue of
checks and drafts therefor, all promissory notes, all
assignments of shares or securities standing in
<PAGE>
the name of the Trust and all requisitions or orders for the
assignment of shares or securities standing in the name of
the Custodian or its nominee, or for the execution of powers
to transfer the same, shall be signed in the name of the
Trust by not less than two of its officers. Promissory
notes, checks, or drafts payable to the Trust may be endorsed
only to the order of the Custodian or its agent.
Section 6.03. Rights as Security Holder. Unless
otherwise ordered by the Board of Trustees, any officer shall
have full power and authority on behalf of the Trust to (1)
exercise (or waive) any and all rights, powers and privileges
incident to the ownership of any securities or other
obligations which may be owned by the Trust; and (2) attend
and to act and to vote, or in the name of the Trust to
execute proxies to vote, at any meeting of security holders
of any company in which the Trust may hold securities. At
any such meeting, any officer shall possess and may exercise
(in person or by proxy) any and all rights, powers and
privileges incident to the ownership of such securities.
ARTICLE VII. SHARES OF BENEFICIAL INTEREST
Section 7.01. Certificates. The Trust shall not issue
share certificates unless the Trustees so authorize. In the
event that certificates are issued, each certificate will be
valid if signed by the President or a Vice-President and
countersigned by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and sealed with the
seal. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other
form of seal. In case any officer who has signed any
certificate ceases to be an officer of the Trust before the
certificate was issued, the certificate nevertheless has the
same effect as if the officer had not ceased to be such
officer as of the date of its issue.
Section 7.02. Uncertificated Shares. The Trust's share
ledger shall be deemed to represent and certify the number of
full and/or fractional shares of a series owned of record by
a shareholder in those instances where a certificate for such
shares has not been issued.
Section 7.03. Transfers of Shares. Shares of any
series of the Trust shall be transferable on the books of the
Trust at the request of the record holder thereof in person
or by a duly authorized attorney, upon presentation to the
Trust or its transfer agent of a duly executed assignment or
authority to transfer, or proper evidence of succession, and,
if the shares are represented by a certificate, a duly
endorsed certificate or certificates of shares surrendered
for cancellation, and with such proof of the authenticity of
the signatures as the Trust or its transfer agent may
reasonably require, provided, whether or not such shares are
represented by any certificate or certificates of shares,
that:
(a) the Trust has no duty to inquire into adverse claims
or has discharged any such duty;
(b) any applicable law relating to the collection of
taxes has been complied with; and
<PAGE>
(c) the transfer is in fact rightful or is to a bona
fide purchaser.
The transfer shall be recorded on the books of the Trust
and the old certificates, if any, shall be cancelled.
Section 7.04. Registered Shareholders. The Trust shall
be entitled to treat the holder of record of shares of each
series as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Commonwealth of
Massachusetts.
Section 7.05. Transfer Agents and Registrars. The
Board of Trustees may, from time to time, appoint or remove
transfer agents and/or registrars of transfers of shares of
the Trust, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment
being made, all certificates representing shares thereafter
issued shall be countersigned by one of such transfer agents
or by one of such registrars of transfers or by both and
shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
Section 7.06. Fixing of Record Date. The Board of
Trustees may fix in advance a date as a record date for the
determination of the shareholders of any series entitled to
notice of or to vote at any meeting of such shareholders or
any adjournment thereof, or to express consent to Trust
action in writing without a meeting, or to receive payment of
any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change,
conversion, or exchange of shares of such series, or for the
purpose of any other lawful action, provided that such record
date shall not be a date more than 60 days, and, in the case
of a meeting of shareholders, not less than 10 days, prior to
the date on which the particular action requiring such
determination of shareholders of such series is to be taken.
In such case only such shareholders as shall be shareholders
of record of such series on the record date so fixed shall be
entitled to such notice of, and to vote at, such meeting or
adjournment, or to give such consent, or to receive payment
of such dividend or other distribution, or to receive such
allotment of rights, or to exercise such rights, or to take
such other action, as the case may be, notwithstanding any
transfer or redemption of any shares of such series on the
books of the Trust after any such record date. If no record
date has been fixed for the determination of shareholders,
the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day on which notice
of the meeting is mailed, which shall not be more than 60
days before the meeting, or, if notice is waived by all
shareholders entitled thereto, at the close of business on
the tenth day before the day on which the meeting is held.
Section 7.07. Lost, Stolen, or Destroyed Certificates.
Before transferring on the books of the Trust shares
represented by a certificate that is alleged to have been
lost, stolen, or destroyed, the Board of Trustees or any
officer authorized by the Board may, in its or his
discretion, require the owner of the lost, stolen, or
destroyed certificate (or his legal representative) to give
the Trust a bond or other indemnity, in such form and in such
amount as of the Board or any such officer may direct and
with such surety or sureties as may be satisfactory to the
Board or any such officer, sufficient to indemnify the Trust
against any claim that may be made against it on account of
the alleged loss, theft, or destruction of any such
certificate.
Section 7.08. Resumption of Issuance of
Certificates/Cancellation of Certificates. The Trustees may
at any time resume the issuance of share certificates. The
Trustees may, by written notice to each shareholder, require
the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not
affect the ownership of shares in the Trust.
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT
Section 8.01. Fiscal Year. The fiscal year of each
series of shares of the Trust shall be established by the
Board of Trustees.
Section 8.02. Accountants. For each series of the
shares of the Trust, the Trust shall employ an independent
public accountant or firm of independent public accountants
as the Accountant for such series to examine and certify or
issue its report on the financial statements of that series
of the Trust. Each Accountant's certificates and reports
shall be addressed both to the Board of Trustees and to the
shareholders of the applicable series.
ARTICLE IX. AMENDMENTS
Section 9.01. General. Except as provided in Section
9.02 hereof, all By-Laws of the Trust, whether adopted by the
Board of Trustees or the shareholders, shall be subject to
amendment, alteration, or repeal, and new By-Laws may be
made, by the affirmative vote of either:
(a) the holders of record of a majority of the votes
represented by outstanding shares of the Trust entitled to
vote at any meeting, the notice or waiver of notice of which
shall have specified or summarized the proposed amendment,
alteration, repeal, or new By-Law; or
(b) a majority of the Trustees, at any regular or
special meeting.
Section 9.02. By Shareholders Only.
(a) No amendment of any section of these By-Laws shall
be made except by the shareholders of the Trust, if the By-
Laws provide that such section may not be amended, altered or
repealed except by the shareholders.
<PAGE>
(b) From and after the issue of any shares of the Trust
to the public, no amendment of this Article IX or Article X
shall be made except by the shareholders of the Trust.
ARTICLE X. MISCELLANEOUS
Section 10.01. Restrictions and Limitations.
(a) Except as hereinafter provided, no officer or
Trustee of the Trust, no officer, director, or stockholder
(or partner of a stockholder) of the investment adviser of
the Trust (as that term is defined in the 1940 Act) or of any
underwriter of the Trust, and no investment adviser or
underwriter of the Trust shall take long or short positions
in the securities issued by the Trust. The foregoing
provision shall not prevent the purchase from the Trust of
shares of any series issued by the Trust by any person at the
price available to shareholders of the Trust generally at the
time of such purchase, or as described in the current
Prospectus of the Trust, or prior to commencement of the
public offering of shares of the Trust, at the net asset
value of such shares.
(b) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust or to any officer, director,
or stockholder (or partner of a stockholder) of, or person
financially interested in, the investment adviser or any
underwriter of the Trust, or to the investment adviser of the
Trust or to any underwriter of the Trust.
(c) The Trust shall not restrict the transferability or
negotiability of the shares of the Trust, except in
conformity with the statements with respect thereto contained
in the Trust's Registration Statement, and not in
contravention of such rules and regulations as the SEC may
prescribe.
(d) The Trust shall not permit any officer or Trustee of
the Trust, or any officer, director, or stockholder (or
partner of a stockholder) of the investment adviser or any
underwriter of the Trust to deal for or on behalf of the
Trust with himself as principal or agent, or with any
partnership, association, or trust in which he has a
financial interest; provided that the foregoing provisions
shall not prevent (1) officers and Trustees of the Trust from
buying, holding, redeeming, or selling shares in the Trust,
or from being officers, directors, or stockholders (or
partners of a stockholder) of or otherwise financially
interested in the investment adviser or any underwriter of
the Trust; (2) purchases or sales of securities or other
property by the Trust from or to an affiliated person or to
the investment adviser or any underwriter of the Trust, if
such transactions are not prohibited by the 1940 Act or have
been exempted by SEC order from the prohibitions of the 1940
Act; (3) purchases of investments for the portfolio of the
Trust through a securities dealer who is, or one or more of
whose partners, stockholders, officers, or directors is, an
officer or Trustee of the Trust, if such transactions are
handled in the capacity of broker only and commissions
charged do not exceed customary brokerage charges for such
services; (4) employment of legal counsel, registrar,
transfer agent, dividend disbursing agent, or custodian who
is, or has a partner,
<PAGE>
stockholder, officer, or director who is, an officer or
Trustee of the Trust, if only customary fees are charged for
services to the Trust; (5) sharing statistical, research,
legal and management expenses and office hire and expenses
with any other investment company in which an officer or
Trustee of the Trust is an officer, trustee, or director or
otherwise financially interested.
END OF BY-LAWS
EXHIBIT 6
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE TRUST
AND LIBERTY SECURITIES CORPORATION
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 14th day of February, 1997 by and between Stein Roe
Trust, a business trust organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter called the
"Fund"), and Liberty Securities Corporation, a corporation
organized and existing under the laws of the State of
Delaware (hereinafter call the "Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the Investment
Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and, the laws of each state (including the
District of Columbia and Puerto Rico) in which it engages in
business to the extent such law requires, and is a member of
the National Association of Securities Dealers ("NASD") (such
registrations and membership are referred to collectively as
the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its transfer,
shareholder recordkeeping, dividend disbursing and redemption
agents, if any; all expenses of notices, proxy solicitation
material and reports to shareholders; all expenses of
preparation and printing of annual or more frequent revisions
of the Fund's Prospectus and Statement of Additional
Information and of supplying copies thereof to shareholders;
all expenses of registering and maintaining the registration
of the Fund under ICA-40 and of the Fund's Shares under the
Securities Act of 1933, as amended ("SA-33"); all expenses of
qualifying and maintaining qualification of such Fund and of
the Fund's Shares for sale under securities laws of various
states or other jurisdictions and of registration and
qualification of the Fund under all laws applicable to the
Fund or its business activities;
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, shall pay all expenses incurred in the
sale and promotion of the Fund;
NOW, THEREFORE, in consideration of the premises and the
mutual promises hereinafter set forth, the parties hereto
agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in Sections
2(a)(29) of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form
of agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as
may from time to time be indicated in the Fund's
Prospectus, Distributor is authorized to solicit, as
agent on behalf of the Fund, unconditional orders
for purchases of the Fund's Shares authorized for
issuance and registered under SA-33, provided that:
(1) Distributor shall act solely as a disclosed
agent on behalf of and for the account of the
Fund;
(2) The Fund or its transfer agent shall receive
directly from investors all payments for the
purchase of the Fund's Shares and also shall pay
directly to shareholders amounts due to them for
the redemption or repurchase of all the Fund's
Shares with Distributor having no rights or
duties to accept such payment or to effect such
redemptions or repurchases;
(3) Distributor shall confirm all orders received
for purchase of the Fund's Shares which
confirmation shall clearly state (i) that
Distributor is acting as agent of the Fund in
the transaction (ii) that all certificates for
redemption, remittances, and registration
instructions should be sent directly to the
Fund, and (iii) the Fund's mailing address;
(4) Distributor shall have no liability for payment
for purchases of the Fund's Shares it sells as
agent; and
(5) Each order to purchase Shares of the Fund
received by Distributor shall be subject to
acceptance by an officer of the Fund in Chicago
and entry of the order on the Fund's records or
shareholder accounts and is not binding until so
accepted and entered.
The purchase price to the public of the Fund's
Shares shall be the public offering price as defined
in Paragraph 6 hereof.
(b) In consideration of the rights granted to the
Distributor under this Agreement, Distributor will
use its best efforts (but only in states in which
Distributor may lawfully do so) to solicit from
investors unconditional orders to purchase Shares of
the Fund. The Fund shall make available to the
Distributor without cost to the Distributor such
number of copies of the Fund's currently effective
Prospectus and Statement of Additional Information
and copies of all information, financial statements
and other papers which the Distributor may
reasonably request for use in connection with the
distribution of Shares.
3.A. Selling Agreements. Distributor is authorized, as
agent on behalf of each Fund, to enter into agreements with
other broker-dealers providing for the solicitation of
unconditional orders for purchases of Fund's Shares
authorized for issuance and registered under SA-33. All such
agreements shall be either in the form of agreement attached
hereto or in such other form as may be approved by the
officers of the Fund ("Selling Agreement"). All
solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
5. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares that
are duly authorized and registered and available for sale by
the Fund, including redeemed or repurchased Shares if and to
the extent that they may be legally sold and if, but only if,
the Fund authorizes the Distributor to sell them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders to
purchase Shares of the Fund at the public offering price.
The public offering price for each accepted subscription for
the Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription.
The net asset value per share shall be determined in the
manner provided in the Fund's Agreement and Declaration of
Trust as now in effect or as they may be amended, and as
reflected in the Fund's then current Prospectus and Statement
of Additional Information.
7. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, no further orders for
Shares shall be accepted by the Fund except such
unconditional orders placed with the Fund and accepted by it
before the suspension. In addition, the Fund reserves the
right to suspend sales of Shares if, in the judgement of the
Board of the Fund, it is in the best interest of the Fund to
do so, such suspension to continue for such period as may be
determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to
purchase Shares shall be accepted by the Fund while such
suspension remains in effect unless otherwise directed by its
Board.
8. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any
representations in connection with the sale of Shares other
than the information and representations contained in the
Fund's registration statement filed with the SEC under SA-33
and/or ICA-40, covering Shares, as such registration
statement or the Fund's prospectus may be amended or
supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on
behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is
authorized to act as principal underwriter (as such term is
defined in ICA-40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register either (i) an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, or (ii) a definite
number of Shares as the Fund shall deem advisable pursuant to
Rule 24e-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the Fund,
and to maintain such qualification; provided, however, that
nothing herein shall be deemed to prevent the Fund from
registering its shares without approval of the Distributor in
any state it deems appropriate.
10. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform in
all respects with applicable federal and state laws and the
rules and regulations of the NASD. Distributor will use its
best efforts to maintain its Registrations in good standing
during the term of this Agreement and will promptly notify
the Fund and Stein Roe & Farnham Incorporated in the event of
the suspension or termination of any of the Registrations.
11. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
12. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the meaning
of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to which
the Fund or such of the members of its Board and of its
officers, employees, representatives, or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise, arising out of the
acquisition of any Shares of the Fund by any person which (i)
may be based upon any wrongful act by Distributor or any of
Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement
of Additional Information, shareholder report or other
information covering Shares of the Fund filed or made public
by the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon information furnished to
the Fund by Distributor in writing. In no case (i) is
Distributor's indemnity in favor of the Fund, or any person
indemnified, to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund or
such person would otherwise be subject by reason of willful
misfeasance, bad faith, or negligence in the performance of
its or his duties or by reason of its or his reckless
disregard of its or his obligations and duties under this
Agreement or (ii) is Distributor to be liable under its
indemnity agreement contained in this paragraph with respect
to any claim made against the Fund or any person indemnified
unless the Fund or such person, as the case may be, shall
have notified Distributor in writing of the claim within a
reasonable time after the summons, or other first written
notification, giving information of the nature of the claim
served upon the Fund or upon such person (or after the Fund
or such person shall have received notice of such service on
any designated agent). However, failure to notify
Distributor of any such claim shall not relieve Distributor
from any liability which Distributor may have to the Fund or
any person against whom such action is brought otherwise than
on account of Distributor's indemnity agreement contained in
this Paragraph.
Distributor shall be entitled to participate, at its own
expense, in the defense, or, if Distributor so elects, to
assume the defense of any suit brought to enforce any such
claim but, if Distributor elects to assume the defense, such
defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain such
legal counsel, persons indemnified who are defendants in the
suit shall bear the fees and expenses of any additional legal
counsel retained by them. If Distributor does not elect to
assume the defense of any such suit, Distributor will
reimburse persons indemnified who are defendants in such suit
for the reasonable fees of any legal counsel retained by them
in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33 against
any and all losses, liabilities, damages, claims or expenses
(including the damage, claim or expense and reasonable legal
counsel fees incurred in connection therewith) to which
Distributor or such of its directors, officers, employees,
representatives or controlling person or persons may become
subject under SA-33, under any other statute, at common law,
or otherwise arising out of the acquisition of any Shares by
any person which (i) may be based upon any wrongful act by
the Fund or any of the members of the Fund's Board, or the
Fund's officers, employees or representatives other than
Distributor, or (ii) may be based upon any untrue statement
or alleged untrue statement of a material fact contained in a
registration statement, Prospectus, Statement of Additional
Information, shareholder report or other information covering
Shares filed or made public by the Fund or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading unless such statement or omission was made in
reliance upon information furnished by Distributor to the
Fund. In no case (i) is the Fund's indemnity in favor of the
Distributor or any person indemnified to be deemed to protect
the Distributor or such indemnified person against any
liability to which Distributor or such indemnified person
would otherwise be subject by reason of willful misfeasance,
bad faith, or negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its
or his obligations and duties under this Agreement, or (ii)
is the Fund to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made
against Distributor or any person indemnified unless
Distributor, or such person, as the case may be, shall have
notified the Fund in writing of the claim within a reasonable
time after the summons, or other first written notification,
giving information of the nature of the claim served upon
Distributor or upon such person (or after Distributor or such
person shall have received notice of such service on any
designated agent). However, failure to notify a Fund of any
such claim shall not relieve the Fund from any liability
which the Fund may have to Distributor or any person against
whom such action is brought otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but, if
the Fund elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants in
the suit. In the event that the Fund elects to assume the
defense of any such suit and retain such legal counsel, the
persons indemnified who are defendants in the suit shall bear
the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the persons
indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by
them in such litigation.
13. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement shall
become effective upon its execution ("Effective Date") and
unless terminated as provided herein, shall remain in effect
through June 30, 1997, and from year to year thereafter, but
only so long as such continuance is specifically approved at
least annually (a) by a vote of majority of the members of
the Board of the Fund who are not interested persons of the
Distributor or of the Fund, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by
the vote of either the Board of the Fund or a majority of the
outstanding shares of the Fund. This Agreement may be
terminated by and between an individual Fund and Distributor
at any time, without the payment of any penalty (a) on 60
days' written notice, by the Board of the Fund or by a vote
of a majority of the outstanding Shares of the Fund, or by
Distributor, or (b) immediately, on written notice by the
Board of the Fund, in the event of termination or suspension
of any of the Registrations. This Agreement will
automatically terminate in the event of its assignment. In
interpreting the provisions of this Paragraph 13, the
definitions contained in Section 2(a) of ICA-40 (particularly
the definitions of "interested person", "assignment", and
"majority of the outstanding shares") shall be applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best interests
of the Fund that any amendment of this Agreement be made in
order to comply with the recommendations or requirements of
the SEC or any other governmental authority or to obtain any
advantage under state or Federal tax laws and notifies
Distributor of the form of such amendment, and the reasons
therefor, and if Distributor should decline to assent to such
amendment, the Fund may terminate this Agreement forthwith.
If Distributor should at any time request that a change be
made in the Fund's Agreement and Declaration of Trust or By-
Laws or in its methods of doing business, in order to comply
with any requirements of Federal law or regulations of the
SEC, or of a national securities association of which
Distributor is or may be a member, relating to the sale of
Shares, and the Fund should not make such necessary changes
within a reasonable time, Distributor may terminate this
Agreement forthwith.
15. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other party
at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: 600 Atlantic Avenue
Boston, Massachusetts 02210
Attn: Secretary
If to Stein Roe & Farnham
Incorporated: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY SECURITIES CORPORATION
By:_____________________________
ATTEST:
________________________
Secretary
STEIN ROE TRUST
By:______________________________
Timothy K. Armour
President
ATTEST:
__________________________
Nicolette D. Parrish
Assistant Secretary
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By:____________________________________
Hans P. Ziegler, Chief Executive Officer
ATTEST:
_____________________________________
Nicolette D. Parrish, Assistant Secretary
<PAGE>
EXHIBIT A TO DISTRIBUTION AGREEMENT
BETWEEN THE STEIN ROE TRUST AND
LIBERTY SECURITIES CORPORATION
The series of the Trust covered by this agreement are:
Name of Series Effective Date
- -------------------------------------- -----------------
Stein Roe Institutional Client High
Yield Fund February 14, 1997
Dated: February 14, 1997
<PAGE>
Date _____________
LIBERTY SECURITIES CORPORATION
STEIN ROE ____ FUND
SELLING AGREEMENT
Dear Sirs:
As the principal underwriter of Stein Roe ____ Fund (the
"Fund"), a series of Stein Roe Trust (the "Trust"), a
Massachusetts business trust registered under the Investment
Company Act of 1940 as an open-end investment company, we
invite you as agent for your customer to participate in the
distribution of shares of beneficial interest in the Fund
("Shares"), subject to the following terms and conditions:
1. We hereby grant to you the right to make Shares
available to, and to solicit orders to purchase Shares by,
the public, subject to applicable federal and state law, the
Agreement and Declaration of Trust and By-laws of the Trust,
and the current Prospectus and Statement of Additional
Information relating to the Fund attached hereto (the
"Prospectus"). You will forward to us or to the Trust's
transfer agent, as we may direct from time to time, all
orders for the purchase of Shares obtained by you, subject to
such terms and conditions as to the form of payment, minimum
initial and subsequent purchase and otherwise, and in
accordance with such procedures and directions, as we may
specify from time to time. All orders are subject to
acceptance by an authorized officer of the Trust in Chicago
and the Trust reserves the right in its sole discretion to
reject any order. Share purchases are not binding on the
Trust until accepted and entered on the books of the Fund.
No Share purchase shall be effective until payment is
received by the Trust in the form of Federal funds. If a
Share purchase by check is cancelled because the check does
not clear, you will be responsible for any loss to the Fund
or to us resulting therefrom.
2. The public offering price of the Shares shall be the
net asset value per share of the outstanding Shares
determined in accordance with the then current Prospectus.
No sales charge shall apply.
3. As used in this Agreement, the term "Registration
Statement" with regard to the Fund shall mean the
Registration Statement most recently filed by the Trust with
the Securities and Exchange Commission and effective under
the Securities Act of 1933, as such Registration Statement is
amended by any amendments thereto at the time in effect, and
the terms "prospectus" and "statement of additional
information" with regard to the Fund shall mean the form of
prospectus and statement of additional information relating
to the Fund as attached hereto filed by the Trust as part of
the Registration Statement, as such form of prospectus and
statement of additional information may be amended or
supplemented from time to time.
4. You hereby represent that you are and will remain
during the term of this Agreement duly registered as a
broker-dealer under the Securities Exchange Act of 1934 and
under the securities laws of each state where your activities
require such registration, and that you are and will remain
during the term of this Agreement a member in good standing
of the National Association of Securities Dealers, Inc.
("NASD"). In the conduct of your activities hereunder, you
will abide by all applicable rules and regulations of the
NASD, including, without limitation, Rule 26 of the Rules of
Fair Practice of the NASD as in effect form time to time, and
all applicable federal and state securities laws, including
without limitation, the prospectus delivery requirements of
the Securities Act of 1933.
5. This Agreement is subject to the right of the Trust
at any time to withdraw all offerings of the Shares by
written notice to us at our principal office. You
acknowledge that the Trust will not issue certificates
representing Shares.
6. Your obligations under this Agreement are not to be
deemed exclusive, and you shall be free to render similar
services to others so long as your services hereunder are not
impaired thereby.
7. You will sell Shares only to residents of states or
other jurisdictions where we have notified you that the
Shares have been registered or qualified for sale to the
public or are exempt from such qualification or registration.
Neither we nor the Trust will have any obligation to register
or qualify the Shares in any particular jurisdiction. We
shall not be liable or responsible for the issue, form
validity, enforceability or value of the Shares or for any
matter in connection therewith, except lack of good faith on
our part, and no obligation not expressly assumed by us in
this Agreement shall be implied therefrom. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any person acquiring any
Shares to waive compliance with any provision of the
Securities Act of 1933, or to relieve the parties hereto from
any liability arising thereunder.
8. You are not authorized to make any representations
concerning the Fund, the Trust or the Shares except those
contained in the then current prospectus and statement of
additional information relating to the Fund, or printed
information issued by the Trust or by us as information
supplemental to such prospectus and statement of additional
information. We will supply you with a reasonable number of
copies of the then current prospectus and statement of
additional information of the Fund, and reasonable quantities
of any supplemental sales literature, sales bulletins, and
additional information as may be issued by us or the Trust.
You will not use any advertising or sales material relating
to the Fund other than materials supplied by the Trust or us,
unless such other material is approved in writing by us in
advance of such use.
9. You will not have any authority to act as agent for
the Trust, for us or for any other dealer. All transactions
between you and us contemplated by this Agreement shall be as
agents.
10. Either party to this Agreement may terminate this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it is
either delivered personally to the other party, is mailed
postpaid or delivered by telecopier to the other party at its
address listed below. This Agreement may be amended by us at
any time, and your placing of an order after the effective
date of any such amendment shall constitute your acceptance
thereof.
Liberty Securities Corporation Dealer
600 Atlantic Avenue ________________
Boston, Massachusetts 02210 ________________
Attention: ________________ ________________
Telecopier: _______________
with copy to:
Stein Roe Trust
One South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
Telecopier: ________
11. This Agreement constitutes the entire agreement
between you and us relating to the subject matter hereof and
supersedes all prior or written agreements between us. This
Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and shall be binding upon
both parties hereto when signed by us and accepted by you in
the space provided below.
Very truly yours,
LIBERTY SECURITIES CORPORATION
BY: ____________________
The undersigned hereby accepts your invitation to
participate in the distribution of Shares and agrees to each
of the terms and conditions set forth in this letter.
___________________________
Dealer
Date: ____________________ By: _______________________
(Signature of Officer)
Pay Office of Dealer:
__________________________ ___________________________
Street Address (Print Name of Officer)
__________________________
City/State/Zip
__________________________
Telephone Number
EXHIBIT 8
CUSTODIAN CONTRACT
Between
STEIN ROE TRUST
and
STATE STREET BANK AND TRUST COMPANY
Global/Series/Trust
21E593
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It......................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United
States .................................................2
2.1 Holding Securities.................................2
2.2 Delivery of Securities.............................2
2.3 Registration of Securities.........................4
2.4 Bank Accounts......................................4
2.5 Availability of Federal Funds......................5
2.6 Collection of Income...............................5
2.7 Payment of Fund Monies.............................5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...............................6
2.9 Appointment of Agents..............................7
2.10 Deposit of Fund Assets in U.S. Securities
System.............................................7
2.11 Fund Assets Held in the Custodian's Direct
Paper System.......................................8
2.12 Segregated Account.................................9
2.13 Ownership Certificates for Tax Purposes............9
2.14 Proxies...........................................10
2.15 Communications Relating to Portfolio Securities...10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States.............10
3.1 Appointment of Foreign Sub-Custodians.............10
3.2 Assets to be Held.................................10
3.3 Foreign Securities Systems........................11
3.4 Holding Securities................................11
3.5 Agreements with Foreign Banking Institutions......11
3.6 Access of Independent Accountants of the Fund.....11
3.7 Reports by Custodian..............................11
3.8 Transactions in Foreign Custody Account...........12
3.9 Liability of Foreign Sub-Custodians...............12
3.10 Liability of Custodian............................12
3.11 Reimbursement for Advances........................12
3.12 Monitoring Responsibilities.......................13
3.13 Branches of U.S. Banks............................13
3.14 Tax Law...........................................14
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund..................................14
5. Proper Instructions....................................14
6. Actions Permitted Without Express Authority............15
7. Evidence of Authority..................................15
8 . Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net
Income.................................................15
9. Records................................................16
10. Opinion of Fund's Independent Accountants..............16
11. Reports to Fund by Independent Public Accountants......16
12. Compensation of Custodian..............................16
13. Responsibility of Custodian............................17
14. Effective Period, Termination and Amendment............18
15. Successor Custodian....................................19
16. Interpretive and Additional Provisions.................19
17. Additional Funds.......................................20
18. Massachusetts Law to Apply.............................20
19. Prior Contracts........................................20
20. Reproduction of Documents..............................20
21. Shareholder Communications Election....................20
<PAGE>
CUSTODIAN CONTRACT
This Contract between Stein Roe Trust, a business trust
organized and existing under the laws of The Commonwealth of
Massachusetts, having its principal place of business at One
South Wacker Drive, Chicago, Illinois 60606 hereinafter
called the "Fund", and State Street Bank and Trust Company,
a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in
one series, Stein Roe Institutional Client High Yield Fund
(such series together with all other series subsequently
established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto
agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of the assets of the Portfolios of the Fund, including
securities which the Fund, on behalf of the applicable
Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities")
pursuant to the provisions of the Declaration of Trust. The
Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital
distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares
of beneficial interest of the Fund representing interests in
the Portfolios, ("Shares") as may be issued or sold from time
to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more
sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees
of the Fund on behalf of the applicable Portfolio(s), and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian. The Custodian
may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Portfolio
all non-cash property, to be held by it in the United
States including all domestic securities owned by such
Portfolio, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency
which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury
(each, a U.S. Securities System") and (b) commercial
paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by
the Custodian or in a U.S. Securities System account of
the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions
of Section 2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.9 or into the name or nominee name of
any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on behalf
of the Portfolio, which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the book-
entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf
of the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the currently
effective prospectus and statement of additional
information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from
the Fund on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary
or an Assistant Secretary, specifying the securities
of the Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name
of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall
be assigned exclusively to the Portfolio, unless the
Fund has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment adviser
as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name
or nominee name of any sub-custodian appointed pursuant
to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of
relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of each Portfolio of the Fund, subject only
to draft or order by the Custodian acting pursuant to
the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio
in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for a Portfolio may
be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees
of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund on behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to
time by the Fund and the Custodian in the amount of
checks received in payment for Shares of such Portfolio
which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held
by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due each Portfolio on securities loaned pursuant
to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other
than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for
the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases
only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.11; (d) in the
case of repurchase agreements entered into between
the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase
by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the
Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit
account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from
the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund
on behalf of the Portfolio, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in
advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund
on behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems.
The Custodian may deposit and/or maintain securities
owned by a Portfolio in a clearing agency registered
with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934,
which acts as a securities depository, or in the book-
entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and
regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in
a U.S. Securities System provided that such
securities are represented in an account ("Account")
of the Custodian in the U.S. Securities System which
shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
U.S. Securities System shall identify by book-entry
those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the U.S. Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the
account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian
on the U.S. Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the U.S.
Securities System;
5) The Custodian shall have received from the Fund on
behalf of the Portfolio the initial or annual
certificate, as the case may be, required by Article
14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss
or damage to the Portfolio resulting from use of the
U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or
from failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the U.S. Securities System; at the election
of the Fund, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other
person which the Custodian may have as a consequence
of any such loss or damage if and to the extent that
the Portfolio has not been made whole for any such
loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Fund on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in
the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an
entry on the records of the Custodian to reflect such
payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or
from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next
business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each
day's transaction in the U.S. Securities System for
the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of
the Portfolio with any report on its system of
internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt
of Proper Instructions from the Fund on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Portfolio or commodity
futures contracts or options thereon purchased or sold
by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities.
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund for each Portfolio
all written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly
to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian
is to take such action.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to employ as sub-
custodians for the Portfolio's securities and other
assets maintained outside the United States the foreign
banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-
custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Trustees,
the Custodian and the Fund may agree to amend Schedule
A hereto from time to time to designate additional
foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of
Proper Instructions, the Fund may instruct the
Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign
securities", as defined in paragraph (c)(1) of Rule 17f-
5 under the Investment Company Act of 1940, and (b) cash
and cash equivalents in such amounts as the Custodian
or the Fund may determine to be reasonably necessary to
effect the Portfolio's foreign securities transactions.
The Custodian shall identify on its books as belonging
to the Fund, the foreign securities of the Fund held
by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund,
assets of the Portfolios shall be maintained in a
clearing agency which acts as a securities depository or
in a book-entry system for the central handling of
securities located outside the United States (each a
"Foreign Securities System") only through arrangements
implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof (Foreign
Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities
Systems"). Where possible, such arrangements shall
include entry into agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities
and other non-cash property for all of its customers,
including the Fund, with a Foreign Sub-custodian in a
single account that is identified as belonging to the
Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with
respect to securities and other non-cash property of the
Fund which are maintained in such account shall
identify by book-entry those securities and other non-
cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be
held separately from any assets of the foreign sub-
custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
provide that: (a) the assets of each Portfolio will not
be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio
will be freely transferable without the payment of money
or value other than for custody or administration; (c)
adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d)
officers of or auditors employed by, or other
representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Fund, will be given access
to the books and records of the foreign banking
institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolios
held by the foreign sub-custodian will be subject only
to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of
the Fund to be afforded access to the books and records
of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate
to the performance of such foreign banking institution
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of
entities having possession of the Portfolio(s)
securities and other assets and advices or notifications
of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for
the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as
otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract
shall apply, mutatis mutandis to the foreign securities
of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities
received for the account of each applicable Portfolio
and delivery of securities maintained for the account of
each applicable Portfolio may be effected in accordance
with the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against
any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence
of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not been
made whole for any such loss, damage, cost, expense,
liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect
to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
for the benefit of a Portfolio including the purchase or
sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except
such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall
furnish annually to the Fund, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
in connection with the initial approval of this
Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition
of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set
forth in this Contract, the provisions hereof shall not
apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification
set forth in Section 26(a) of said Act. The appointment
of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the
United Kingdom shall be maintained in an interest
bearing account established for the Fund with the
Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street
London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed
on the Fund or the Custodian as custodian of the Fund
by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of
the obligations imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence,
including responsibility for withholding and other
taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund
under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of
Shares of the Fund
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Fund and deposit
into the account of the appropriate Portfolio such payments
as are received for Shares of that Portfolio issued or sold
from time to time by the Fund. The Custodian will provide
timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and
any applicable votes of the Board of Trustees of the Fund
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund
and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialled by one or more person or
persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a
specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board
of Trustees of the Trust accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices
provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with
Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor expenses
of handling securities or other similar items
relating to its duties under this Contract, provided
that all such payments shall be accounted for to the
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the
Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote
of the Board of Trustees of the Trust as conclusive evidence
(a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as
in full force and effect until receipt by the Custodian of
written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board
of Trustees of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per share of the
outstanding shares of each Portfolio or, if directed in
writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus
related to such Portfolio and shall advise the Fund and the
Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components.
The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or
times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relating to its activities
and obligations under this Contract in such manner as will
meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund on behalf of each applicable Portfolio may from time to
time request, to obtain from year to year favorable opinions
from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of
the Fund's Form N-1A, and Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect to
any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each
of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on
the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund on behalf of
each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and
to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying
out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence
or willful misconduct or the negligence or willful misconduct
of a sub-custodian or agent, the Custodian shall be without
liability to the Fund for any loss, liability, claim or
expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian
or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of
currency controls or restrictions, the interruption,
suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions,
work stoppages, natural disasters or other similar events or
acts; (ii) errors by the Fund or the Investment Advisor in
their instructions to the Custodian provided such
instructions have been in accordance with this Contract;
(iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-
custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body
in charge of registering or transferring securities in the
name of the Custodian, the Fund, the Custodian's sub-
custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and
rights and other accretions or benefits; (vi) delays or
inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or
future law or regulation or order of the United States of
America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this
Contract.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities,
which action involves the payment of money or which action
may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund being liable for the
payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) or in the
event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of
the Fund shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect,
special or consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however
that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by
such Portfolio, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under
Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has approved the initial use of the
Direct Paper System by such Portfolio; provided further,
however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust,
and further provided, that the Fund on behalf of one or more
of the Portfolios may at any time by action of its Board of
Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination
and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more
of the Portfolios shall be appointed by the Board of Trustees
of the Fund, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities of
each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities
System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees of the Fund, deliver
at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board
of Trustees shall have been delivered to the Custodian on or
before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments
held by the Custodian relative thereto and all other property
held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor
custodian all of the securities of each such Portfolio held
in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other
properties remain in the possession of the Custodian after
the date of termination hereof owing to failure of the Fund
to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains
possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties
and obligations of the Custodian shall remain in full force
and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios,
may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may
in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and
shall be annexed hereto, provided that no such interpretive
or additional provisions shall contravene any applicable
federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more
series of Shares in addition to the Stein Roe Institutional
Client High Yield Fund with respect to which it desires to
have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio
hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of
each of the Portfolios and the Custodian relating to the
custody of the Fund's assets.
20. Reproduction of Documents
This Contract and all schedules, exhibits, attachments
and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree
that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
21. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of
that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide
the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below,
the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all
securities owned by the Fund or any Funds or accounts
established by the Fund. For the Fund's protection, the
Rule prohibits the requesting company from using the Fund's
name and address for any purpose other than corporate
communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [X] The Custodian is not authorized to release the
Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed as of the day of February, 1997.
ATTEST STEIN ROE TRUST
NICOLETTE D. PARRISH By GARY A. ANETSBERGER
Assistant Secretary Senior Vice-President
ATTEST STATE STREET BANK AND TRUST COMPANY
By CHARLES WHITTEWOOD, JR.
_____________________ Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of Stein Roe Trust for use as sub-custodians for the
Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
GARY A. ANETSBERGER
Trust's Authorized Officer
Date_________
EXHIBIT 9(a)
AGENCY AGREEMENT
This agreement is made this 14th day of February, 1997, by
and between STEIN ROE TRUST (the "Trust"), a Massachusetts
business trust, and STEINROE SERVICES INC. (hereinafter
referred to as "SSI"), a Massachusetts corporation.
WITNESSETH:
1. APPOINTMENT. The Trust hereby appoints SSI,
effective as of the date hereof, as its agent in connection
with the issue, redemption, and transfer of shares of
beneficial interest of the Trust, including shares of each
respective series of the Trust (hereinafter called the
"Shares"), and to process investment income and capital gain
distributions with respect to such Shares, to perform certain
duties in connection with the Trust's withdrawal and other
plans, to mail proxy and other materials to the Trust's
shareholders upon the terms and conditions set forth herein,
and to perform such other and further duties as are agreed
upon between the parties from time to time.
2. ACKNOWLEDGMENT. SSI acknowledges that it has
received from the Trust the following documents:
A. A certified copy of the Agreement and Declaration
of Trust and any amendments thereto;
B. A certified copy of the By-Laws of Trust;
C. A certified copy of the resolution of its Board
of Trustees authorizing this Agreement;
D. Specimens of all forms of Share certificates as
approved by its Board of Trustees with a
statement of its Secretary certifying such
approval;
E. Samples of all account application forms and
other documents relating to shareholders
accounts, including terms of its Systematic
Withdrawal Plan;
F. Certified copies of any resolutions of the Board
of Trustees authorizing the issue of authorized
but unissued Shares;
G. An opinion of counsel for the Trust with respect
to the validity of the Shares, the status of
repurchased Shares and the number of Shares with
respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the
signatures of the officers of the Trust who are
authorized to sign Share certificates, to sign
checks and to sign written instructions to SSI.
3. ADDITIONAL DOCUMENTATION. The Trust will also
furnish SSI from time to time with the following documents:
A. Certified copies of each amendment to its
Agreement and Declaration of Trust and By-Laws;
B. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereto with respect to its Shares;
C. Certified copies of each resolution of the Board
of Trustees authorizing officers to give
instructions to SSI;
D. Specimens of all new Share certificates
accompanied by certified copies of Board of
Trustees resolutions approving such forms;
E. Forms and terms with respect to new plans that
may be instituted and such other certificates,
documents or opinions that SSI may from time to
time, in its discretion, deem necessary or
appropriate in the proper performance of its
duties.
4. AUTHORIZED SHARES. The Trust certifies to SSI that,
as of the date of this Agreement, it may issue unlimited
number of Shares of the same class in one or more series as
the Board of Trustees may authorize. The series authorized as
of the date of this Agreement are listed in Schedule B.
5. REGISTRATION OF SHARES. SSI shall record issuances
of Shares based on the information provided by the Trust. SSI
shall have no obligation to a Trust, when countersigning and
issuing Shares, whether evidenced by certificates or in
uncertificated form, to take cognizance of any law relating to
the issuance and sale of Shares, except as specifically agreed
in writing between SSI and the Trusts, and shall have no such
obligation to any shareholder except as specifically provided
in Sections 8-205, 8-208 and 8-406 of the Uniform Commercial
Code. Based on data provided by the Trust of Shares
registered or qualified for sale in various states, SSI will
advise the Trusts when any sale of Shares to a resident of a
state would result in total sales in that state in excess of
the amount registered or qualified in that state.
6. SHARE CERTIFICATES. The Trust shall supply SSI with
a sufficient supply of serially pre-numbered blank Share
certificates, which shall contain the appropriate series
designation, if applicable. Such blank certificates shall be
properly prepared and signed by authorized officers of Trust
manually or, if authorized by Trust, by facsimile and shall
bear the seal of Trust or a facsimile thereof.
Notwithstanding the death, resignation, or removal of any
officer authorized to sign certificates, SSI may continue to
countersign certificates which bear the manual or facsimile
signature of such officer as directed by Trust.
7. CHECKS. The Trust shall supply SSI with a sufficient
supply of serially pre-numbered blank checks for the dividend
bank accounts and for the principal bank accounts of Trust.
SSI shall prepare and sign by facsimile signature plates,
bearing the facsimiles of the signatures of authorized
signatories, dividend account checks for payment of ordinary
income dividends and capital gain distributions and principal
account checks for payment of redemptions of Shares, including
those in connection with the Trusts' Withdrawal Plans, refunds
on subscriptions and other capital payments on Shares, in
accordance with this Agreement. SSI shall hold signature
facsimile plates for this purpose and shall exercise
reasonable care in their transportation, storage or use. SSI
may deliver such signature facsimile plates to an agent or
contractor to perform the services described herein, but shall
not be relieved of its duties hereunder by any such delivery.
8. RECORDKEEPING. SSI shall maintain records showing
for each shareholder's account in the appropriate series of
the Trust, the following information and such other
information as may be mutually agreed to from time to time by
the Trusts and SSI:
A. To the extent such information is provided by
shareholders: name(s), address, alphabetical sort
key, client number, tax identification number,
account number, the existence of any special
service or transaction privilege offered by the
Trust and applicable to the shareholder's account
including but not limited to the telephone
exchange privilege, and other similar
information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year
regarding the account of the shareholder,
including transactions to date, date of each
transaction, price per share, amount and type of
each purchase and redemption, transfers, amount
of accrued dividends, the amount and date of all
distributions paid, price per share, and amount
of all distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for
the calendar year as required under applicable
Federal and state laws, rules and regulations;
G. The certificate number and date of issuance of
each Share certificate outstanding, if any,
representing a shareholder's Shares in each
account, the number of Shares so represented, and
any stop legend on each certificate;
H. Information with respect to gross proceeds of all
sales transactions as required under applicable
Federal income tax laws, rules and regulations;
and
I. Such other information as may be agreed upon by
the Trusts and SSI from time to time.
SSI shall maintain for any account that is closed
("Closed Account") the aforesaid records through the June of
the calendar year following the year in which the account is
closed or such other period as may be mutually agreed to from
time to time by such Trust and SSI.
9.. PURCHASES. Upon receipt of a request for purchase of
Shares containing data required by a Trust for processing of a
purchase transaction, SSI will:
A. Compute the number of Shares of the appropriate
series of the Trust to which the purchaser is
entitled and the dollar value of the transaction
according to the price of such Shares as provided
by the Trust for purchases made at that time and
date;
B. In the case of a new shareholder, establish an
account for the shareholder, including the
information specified in Section 8 hereof; in the
case of an Exchange as described in Section 12
below by telephone or telegraph, the account
shall have exactly the same registration as that
of the account of the other series of the Trust
or any other series of another Trust from which
the Exchange was made;
C. Transmit to the shareholder by mail or
electronically a confirmation of the purchase, as
directed by the Trust, in such format as agreed
to by SSI and the Trusts, including all
information called for thereby, and, in the case
of a purchase for a new account, shall also
furnish the shareholder a current Prospectus of
the applicable series;
D. If applicable, prepare a refund check in the
amount of any overpayment of the subscription
price and deliver it to the Trust for signing;
and
E. If a certificate is requested by the shareholder,
prepare, countersign, issue and mail, not earlier
than 30 days after the date of purchase, to the
shareholder at his address of record a Share
certificate for such full Shares purchased.
10. REDEMPTIONS. Instructions to redeem Shares of any
series of a Trust, including instructions for an Exchange as
described in Section 12 below, may be furnished in written
form, or by other means, including but not limited to
telephonic or electronic transmission or by writing a special
form of check, as may be mutually agreed to from time to time
by the Trust and SSI. Upon receipt by SSI of instructions to
redeem which are in "good order," as defined in the Prospectus
of the applicable series and satisfactory to SSI, SSI will:
A. Compute the amount due for the Shares and the
total number of all the Shares redeemed in
accordance with the price per Share as provided
by the Trust for redemptions of such Shares at
that time and date, and transmit to the
shareholder by mail or electronically a
confirmation of the redemption, as directed by
the Trust, in such format as agreed to by SSI and
the Trust, including all information called for
thereby;
B. Confirmations of redemptions that result in the
payment of accrued dividends shall indicate the
amount of such payment and any amounts withheld;
C. In the case of a redemption in written form other
than by Exchange, SSI shall transmit to the
shareholder by check or, as may be mutually
agreed to by the Trust and SSI and requested by
the shareholder, electronic means, an amount
equal to the redemption price and any payment of
accrued dividends occasioned by the redemption,
net of any amounts withheld under applicable
Federal and state laws, rules and regulations on
or before the seventh calendar day following the
date on which instructions to redeem in "good
order" as defined in the Prospectus of the
applicable series, which instructions are
satisfactory to SSI as received by SSI. In the
case of an Exchange, SSI shall use the proceeds
of the redemption, net of any amounts withheld
under applicable Federal and state laws, rules
and regulations, to purchase Shares of any other
series of the Trust or any other series of
another Trust selected by the person requesting
the Exchange;
D. In the case of Exchanges by telephone or
telegraph, redemptions by telephone or electronic
transmission and redemptions by writing a special
form of check, SSI shall deliver to the Trust, on
the business day following the effective date of
such transaction, a listing of such transaction
data in a format agreed to by the Trusts and SSI
from time to time;
E. If any Share certificate or instruction to redeem
tendered to SSI is not satisfactory to SSI, it
shall promptly notify the Trust of such fact
together with the reason therefor;
F. SSI shall cancel promptly Share certificates
received in proper form for redemption and issue,
countersign and mail new Share certificates for
the Shares represented by certificates so
cancelled which are not redeemed;
G. SSI shall advise the Trust and refuse to process
any redemption by electronic transmission or
Exchange by telephone or telegraph or redemptions
by writing a special form of check, if such
transaction would result in the redemption of
Shares represented by outstanding certificates,
unless otherwise instructed by an officer of the
Trust.
11. ADMINISTRATION OF WITHDRAWAL PLANS. A redemption
made pursuant to a Withdrawal Plan offered by the Trusts shall
be effected by SSI at the net asset value per Share of the
appropriate series of the Trust on the twentieth day or the
next business day of the month in which the recipient is
scheduled to receive the withdrawal payment. SSI shall
prepare and mail to the recipient on or before the seventh
calendar day after the date of redemption a check in the
amount of each required payment, net of any amounts withheld
under applicable Federal and state laws, rules and
regulations, and also furnish the shareholder a confirmation
of the redemption as described in Section 10 above.
12. EXCHANGES. Upon receipt by SSI of a request to
exchange Shares of a series of a Trust held in a shareholder's
account for those of any other series of the Trust or any
other series of another Trust or vice versa in written form,
by telephone or telegraph or by other electronic means,
containing data required by the Trust for processing such a
transaction, SSI will:
A. If the request is by telephone, telegraph or
other electronic means, verify that the
shareholder has furnished both the series of a
Trust from and to which the Exchange is to be
made authorization, in a form acceptable to such
Trust, to accept Exchange instructions for his
account by such means.
B. Process a redemption of the Shares of the series
of the Trust to be redeemed in connection with
the Exchange and apply the proceeds thereof, net
of any amounts withheld under applicable Federal
and state laws, rules and regulations, to
purchase shares of any other series of the Trust
or any other series of another Trust being
acquired in accordance with the respective
Trust's redemption and purchase policies and
Sections 9 and 10 of this Agreement.
Any redemption and purchase pursuant to an Exchange shall
be effected as of the time and prices applicable to an order
for redemption or purchase received at the time the request
for Exchange is received.
13. TRANSFER OF SHARES. Upon receipt by SSI of a
request for a transfer of Shares of any series of a Trust, and
receipt of a Share certificate for transfer or an order for
the transfer of Shares in the case of an uncertificated
account, in either case with such endorsements, instruments of
assignment or evidence of succession as may be required by SSI
and accompanied by payment of such transfer taxes, if any, as
may be applicable, and satisfaction of any other conditions
for registration of transfers contained in the Trust's By-
Laws, Prospectuses, and Statements of Additional Information,
SSI will verify the balance of Shares of such series of the
Trust in the account; record the transfer of ownership of such
Shares in its Share certificate and shareholder records for
such series; cancel Share certificates for Shares surrendered
for transfer; establish an account pursuant to Section 8 for
the transferee if a new shareholder; prepare, countersign and
mail new Share certificates for a like number of Shares in the
case of a certificated account; and transmit to the
shareholder by mail or electronically confirmation of the
transfer for each account affected, in a format agreed to by
SSI and the Trust, including all information called for
thereby. SSI shall be responsible for determining that
certificates, orders for transfer, and supporting documents,
if any, are in proper legal form for the transfer of Shares.
14. CHANGES IN SHAREHOLDER RECORDS. Changes in items of
information specified in Section 8 not relating to change in
ownership of Shares will be made by SSI upon receipt of a
request for such change in a format agreed to by SSI and the
Trusts. In the case of any change that SSI and the Trusts
agree requires confirmation, a confirmation of such change in
a format agreed to by SSI and the Trusts shall be transmitted
to the shareholder by mail or electronically.
15. REFUSAL TO REDEEM OR TRANSFER. SSI reserves the
right to refuse to redeem or transfer Shares until reasonably
satisfied that the endorsement on the Share certificates or
written request presented is valid and genuine, and for such
purpose may require where reasonably necessary or appropriate
a guarantee of signature. SSI also reserves the right to
refuse to redeem or transfer Shares until satisfied that the
requested transfer or redemption is legally authorized, and it
shall incur no liability for the refusal in good faith to make
transfers or redemptions which it, in its judgment, deems
improper or unauthorized. Notwithstanding the foregoing, SSI
shall redeem or transfer Shares even though not satisfied as
to the endorsement or legal authority if it is first
indemnified to its reasonable satisfaction against all
expenses and liabilities to which it might, in its judgment,
be subjected by such action.
16. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. The Trust
will promptly inform SSI of the declaration of any dividend or
other distribution with respect to Shares of any series of the
Trust, including the amount of distribution, the amount of
withholding under applicable Federal and state laws, rules and
regulations, if any, dividend number, if any, record date, ex-
dividend date, payable date and price at which dividends or
other distributions are to be reinvested.
In the case of any series of a Trust for which dividends
shall be declared daily and paid monthly or quarterly, SSI
will credit the dividend payable to each shareholder thereof
to a dividend account of the shareholder and will provide the
Trust on each business day with reports of the total amount of
dividends credited and such other data as are agreed upon by
the Trust and SSI. Promptly after the payable date for the
Trust, SSI will provide the Trust with reports showing the
accounts which have been paid a dividend or other
distribution, the amount received by each account, the amount
withheld as required under applicable Federal and state laws,
rules and regulations, if any, the amount of the dividend or
distribution paid in cash or reinvested in Shares, and the
total amount of cash and Shares required for payment of the
dividend or other distribution.
In the case of each other series of the Trust, SSI will
provide the Trust promptly following the record date therefor
with reports of the total amount of dividends payable with
respect thereto and such other data as are agreed to by the
Trusts and SSI. Promptly after the payable date therefor, SSI
will provide the Trust with reports showing the accounts which
are to be paid a dividend or other distribution, the amount to
be received by each account, the amount to be withheld as
required under applicable Federal and state laws, rules and
regulations, if any, whether such dividend or distribution is
to be paid in cash or reinvested in Shares, and the total
amount of cash and Shares required for the payment of such
dividend or distribution.
At times agreed to by the Trusts and SSI, SSI will
transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and
confirmation thereof. Where distributions are reinvested, the
price and date of reinvestment will be those supplied by the
Trusts. Confirmations will be prepared by SSI in a format
agreed to by SSI and the Trusts.
17. WITHHOLDING. Under applicable Federal and state
laws, rules and regulations requiring withholding from
dividends and other distributions and payments to
shareholders, SSI shall be responsible for determining the
amount to be withheld and the Trusts shall forward that amount
to SSI, which will deposit said amount with, and report said
amount to, the proper governmental agency as required
thereunder. Liability for any amounts withheld, whether or
not actually withheld, and for any penalties which may be
imposed upon the payor for failure to withhold, report, or
deposit the proper amount, and for any interest due on said
amount, shall be borne by the Trusts and SSI as provided in
Section 35 hereof.
Upon receipt of a certificate from a shareholder
pertaining to withholding (including exemptions therefrom)
containing such information as required by a Trust of the
shareholder under applicable Federal and state laws, rules and
regulations, SSI shall promptly process the certificate, which
shall become effective as soon as reasonably possible after
receipt by SSI, but no later than may be required by
applicable Federal and state laws, rules and regulations.
At the time a shareholder account is established with a
Trust, the Trust shall be responsible for (i) soliciting the
shareholder's tax identification number in the manner and form
required under applicable Federal and state laws, rules and
regulations; (ii) identifying and rejecting an obviously
incorrect number (as defined under applicable Federal and
state laws, rules and regulations) and (iii) furnishing to SSI
the number and any related information provided by or on
behalf of the shareholder. SSI shall be responsible for any
subsequent communications to the shareholder that may be
required in this regard.
In the case of withholding an amount in excess of the
proper amount from a payment made by or on behalf of a Trust
to a shareholder except as otherwise provided by applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately adjust the
shareholder's account, as well as succeeding deposits;
provided, however, that when an adjustment would result in an
adjustment across calendar years, SSI shall not be required to
make such adjustment.
In the case of (i) a failure to withhold the proper
amount from a dividend or other distribution or payment made
by or on behalf of any series of a Trust to a shareholder or
(ii) any penalties attributable to (a) a failure to withhold
the proper amount or (b) the shareholder's failure to provide
the Trust or SSI with correct information requested in order
to comply with withholding requirements under applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately cause the redemption
of Shares from the shareholder's account with such series
having a value not exceeding the sum of such deficit amount
and applicable penalties and apply the proceeds to reimburse
whomever has borne the expense resulting from the
shareholder's failure. If the value of the Shares in the
shareholder's account with the series is less than the sum of
the deficit amount and applicable penalties, SSI may cause the
redemption of Shares having a value not exceeding such
difference from any account, including a joint account, of the
shareholder with any other series of the Trust or any other
series of another Trust, subject to the consent of the other
Trust, and apply the proceeds to reimburse whoever has borne
the expense resulting from the shareholder's failure.
18. MAILINGS. SSI shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. SSI shall mail financial reports furnished by each series
of a Trust to shareholders as requested and will mail the
current Prospectus for each series of the Trust to
shareholders of such series once each year;
B. SSI shall mail to shareholders of each series of a Trust
proxy material for each duly scheduled meeting of shareholders
of that series;
C. SSI shall include in any of the above mailings such other
enclosures as are compatible for mailing purposes as
reasonably requested by the Trusts;
D. SSI shall make such other mailings upon such terms and
conditions and for such fees as are agreed to by SSI and the
Trust from time to time.
The Trusts shall deliver all material required to be
furnished to SSI for any scheduled mailing sufficiently in
advance of the date for such mailing, so that SSI may effect
the scheduled mailing.
19. TAX INFORMATION RETURNS AND REPORTS. SSI will
prepare and file with the appropriate governmental agencies,
such information, returns and reports as are required to be so
filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other
distributions and payments under applicable Federal and state
laws, rules and regulations, and (iii) gross proceeds of sales
transactions as required and as the Trusts shall direct SSI.
Further, SSI shall prepare and deliver to the Trusts reports
showing amounts withheld from dividends and other
distributions and payments made for each series of the Trusts.
20. INFORMATION TO BE FURNISHED TO SHAREHOLDERS. SSI
will prepare and transmit to each shareholder of the Trust
annually in such format as is reasonably requested by the
Trust, and as agreed to by SSI, information returns and
reports for reporting dividends and other distribution and
payments, amounts withheld, if any, and gross proceeds of
sales transactions as required under applicable Federal and
state laws, rules and regulations.
21. STOP ORDERS. Upon receipt of a request from a Trust
or a shareholder that a "stop" should be placed on the
shareholder's account, SSI will maintain a record of such
"stop" and notify the Trust if any transaction request is
received from a shareholder which would reduce the number of
Shares in an account on which a "stop" has been placed. SSI
will inform the Trusts of any information SSI receives
relating to a "stop." SSI shall also maintain for the Trusts
the record of share certificates on which a "stop" has been
placed, it being understood that a certificate "stop" does not
mean a "stop" on the shareholder's entire account to which a
certificate may relate.
22. SHARE SPLITS AND SHARE DIVIDENDS. If a Trust elects
to declare a Share dividend or split for any series, the
services and fees with respect thereto will be negotiated by
the Trust and SSI.
23. REPLACEMENT OF SHARE CERTIFICATES. SSI may issue a
new Share certificate in place of a Share certificate
represented as not having been received or as having been
lost, stolen, seized or destroyed, upon receiving instructions
from a Trust and indemnity satisfactory to SSI, and may issue
a new Share certificate in exchange for, and upon surrender
of, an identifiable mutilated Share certificate. Such
instructions from the Trust shall be in such form as has been
approved by its Board of Trustees and shall be in accordance
with the provisions of its By-Laws governing such matters.
24. UNCLAIMED AND UNDELIVERED SHARE CERTIFICATES. Where
a Share certificate is in the possession of SSI for any
reason, and has not been claimed by the record holder or
cannot be delivered to the record holder, SSI shall cancel
said certificate and reflect as uncertificated Shares on the
shareholder's account record the Shares represented by said
cancelled certificate.
25. REPORTS AND FILES. SSI shall maintain the files and
furnish the statistical and other information listed on
Schedule C. However, SSI reserves the right to delete, change
or add to the files maintained and information provided so
long as such deletions, additions or changes do not impair the
receipt of services described elsewhere in this Agreement.
SSI shall also use its best efforts to obtain such additional
statistical and other information as the Trusts may reasonably
request within the capabilities of SSI, for such additional
consideration as may be agreed to by SSI and the Trusts.
26. EXAMINATION OF DAILY TRANSACTIONS. The Trusts will
examine reports reflecting each day's transactions and other
data delivered to it for the accuracy of the transactions
reflected therein and failure to reflect transactions that
should have been reflected therein. If SSI has not received
from a Trust, within five (5) business days after delivery of
such reports to the Trust, written notice, which may be in the
form of an appropriate transaction instruction submitted by
the Trust for the purpose of correcting the error or omission,
as to any errors or omissions which a reasonable inspection
and normal audit and control procedure would reveal, then all
transactions reflected in such reports shall be deemed to be
correct and accepted by the Trust, and SSI shall have no
further responsibility for the omission from or correction,
deletion, or inclusion of any transaction reflected or which
should have been reflected therein, or any liability to the
Trust or any third person on account of such error or
omission.
27. DISPOSITION OF BOOKS, RECORDS, AND CANCELLED SHARE
CERTIFICATES. SSI will periodically send to the Trust all
books, documents, and records of the Trust no longer needed
for current purposes and Share certificates which have been
cancelled in transfer or in redemption; such books, documents,
records, and Share certificates shall be safely stored by the
Trusts for future reference for such period as is required and
by any means permitted by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other
relevant statutes. SSI shall have no liability for loss or
destruction of said books, documents, records, or Share
certificates after they are returned to the Trusts.
28. INSPECTION OF SHARE BOOKS. In case of any request
or demand for inspection of the books of a Trust reflecting
ownership of the Shares therein ("Share books"), SSI will make
a reasonable effort to notify the Trust and to secure
instructions as to permitting or refusing such inspection.
SSI reserves the right, however, to exhibit the Share books to
any person in case it is advised by its counsel that it may be
held liable for the failure to exhibit the Share books to such
person.
29. FEES. The Trust shall pay to SSI for its services
hereunder fees computed as set forth in Schedule A hereto.
30. OUT-OF-POCKET EXPENSES. The Trust shall reimburse
SSI for any and all out-of-pocket expenses and charges in
performing services under this Agreement (other than charges
for normal data processing services and related software,
equipment and facilities) including, but not limited to,
mailing service, postage, printing of shareholder statements,
the cost of any and all forms of the Trust and other materials
used by SSI in communicating with shareholders of the Trust,
the cost of any equipment or service used for communicating
with the Trust's custodian bank or other agent of the Trust,
and all costs of telephone communication with or on behalf of
shareholders allocated in a manner mutually acceptable to the
Trust and SSI.
31. INSTRUCTIONS, OPINION OF COUNSEL, AND SIGNATURES.
At any time SSI may apply to a duly authorized agent of a
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice
or opinion of such counsel. SSI shall be protected in acting
upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by SSI to be genuine and to have been signed by the
proper person or persons and shall not be held to have notice
of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
32. TRUSTS' LEGAL RESPONSIBILITY. The Trust assumes
full responsibility for the preparation, contents, and
distribution of each Prospectus and Statement of Additional
Information of the Trust, and for complying with all
applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and
any laws, rules, and regulations of government authorities
having jurisdiction over the Trust except that SSI shall be
responsible for all laws, rules and regulations of government
authorities having jurisdiction over transfer agents and their
activities. SSI assumes full responsibility for complying
with due diligence requirements of payors of reportable
dividends and of brokers under the Internal Revenue Code with
respect to shareholder accounts.
33. REGISTRATION OF SSI AS TRANSFER AGENT. SSI
represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of
the Securities Exchange Act of 1934 and will notify the Trusts
promptly if such registration is revoked or if any proceeding
is commenced before the Securities and Exchange Commission
which may lead to such revocation.
34. CONFIDENTIALITY OF RECORDS. SSI agrees not to
disclose any information received from the Trusts to any other
customer of SSI or to any other person except SSI's employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SSI shall return to the Trusts all records in the
possession and control of SSI related to the Trusts'
activities, other than SSI's own business records, it being
also understood that any programs and systems used by SSI to
provide the services rendered hereunder will not be given to
the Trusts.
Notwithstanding the foregoing, it is understood and
agreed that SSI may maintain with the Trusts' records
information and data to be utilized by SSI in providing
services to entities serving as trustees and/or custodians of
prototype Tax-Qualified Retirement Plans, IRA Plans, plans for
employees of public schools or tax-exempt organizations, or
other plans which invest in the Shares. In the event that
this Agreement is terminated, SSI may transfer and retain from
the records maintained for the Trusts such information and
data relating to participants in such aforementioned plans as
may be required for SSI to continue providing its services to
such trustees and/or custodians.
35. LIABILITY AND INDEMNIFICATION. SSI shall not be
liable to the Trusts for any action taken or thing done by it
or its agents or contractors on behalf of a Trust in carrying
out the terms and provisions of this Agreement if done in good
faith and without negligence or misconduct on the part of SSI,
its agents or contractors.
The Trust shall indemnify and hold SSI, and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses,
including reasonable expenses for counsel, incurred by it in
connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
contractors in the performance of its duties hereunder to the
Trusts, or as a result of acting upon any instruction believed
by it to have been executed by a duly authorized agent of a
Trust or as a result of acting upon information provided by a
Trust in form and under policies agreed to by SSI and the
Trusts provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular series or group of series of Shares, such
indemnification shall be only out of the assets of that series
or group of series; (ii) this indemnification shall not apply
to actions or omissions constituting negligence or misconduct
of SSI or its agents or contractors, including but not limited
to willful misfeasance, bad faith, or gross negligence in the
performance of their duties, or reckless disregard of their
obligations and duties under this Agreement; and (iii) SSI
shall give a Trust prompt notice and reasonable opportunity to
defend against any such claim or action in its own name or in
the name of SSI.
SSI shall indemnify and hold harmless the Trust from and
against any and all claims, demands, expenses and liabilities
which the Trust may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of SSI or
its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of the Trust or its
other agents or contractors and (ii) the Trust shall give SSI
prompt notice and reasonable opportunity to defend against any
such claim or action in its own name or in the name of the
Trust.
36. INSURANCE. SSI represents that it has available to
it the insurance coverage set forth on Schedule D hereto, and
agrees to notify the Trusts in advance of any proposed
deletion or reduction in said insurance.
37. FURTHER ASSURANCES. Each party agrees to perform
such further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
38. DUAL INTERESTS. It is understood that some person
or persons may be trustees, directors, officers, or
shareholders of both the Trusts and SSI, and that the
existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder except as
otherwise provided by specific provision of applicable law.
39. AMENDMENT AND TERMINATION. This Agreement may be
modified or amended from time to time by mutual agreement
between the parties hereto and may be terminated by at least
one hundred eighty (180) days' written notice given by one
party to the other. Upon termination hereof, the Trust shall
pay to SSI such compensation as may be due as of the date of
such termination and shall reimburse SSI for its costs,
expenses, and disbursements payable under this Agreement to
such date. In the event that in connection with termination a
successor to any of the duties or responsibilities of SSI
hereunder is designated by the Trust by written notice to SSI,
it shall promptly upon such termination and at the expense of
the Trust, transfer to such successor a certified list of
shareholders of each series of the Trust (with name, address,
and tax identification number), a record of the account of
each shareholder and status thereof, and all other relevant
books, records, and data established or maintained by SSI
under this Agreement and shall cooperate in the transfer of
such duties and responsibilities, including provision, at the
expense of the Trust, for assistance from SSI personnel in the
establishment of books, records, and other data by such
successor.
40. ASSIGNMENT.
A. Except as provided below, neither this Agreement nor
any rights or obligations hereunder may be assigned by
either party without the written consent of the
other party.
B. This Agreement shall inure to the benefit of and
be binding upon the parties and their respective
permitted successors and assigns.
C. SSI may subcontract for the performance of any of
its duties or obligations under this Agreement with
any person if such subcontract is approved by the
Board of Trustees of a Trust provided, however,
that SSI shall be as fully responsible to the
Trust for the acts and omissions of any
subcontractor as it is for its own acts and
omissions.
41. NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trusts is One South Wacker Drive, Chicago,
Illinois 60606, Attention: Secretary, and that of SSI for this
purpose is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
42. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of a Trust hereunder shall be binding only upon the
assets of that Trust (or the applicable series thereof), as
provided in its Agreement and Declaration of Trust, and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of the Trust or upon any other Trust. Neither the
authorization of any action by the Trustees or the
shareholders of a Trust, nor the execution of this Agreement
on behalf of the Trust shall impose any liability upon any
Trustee or any shareholder. Nothing in this Agreement shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement.
43. REFERENCES AND HEADINGS. In this Agreement and in
any such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
STEIN ROE TRUST
ATTEST: By: ____________________________
Tomothy K. Armour, President
____________________________
Nicolette D. Parrish, Assistant Secretary
STEINROE SERVICES INC.
ATTEST: By: __________________________
Hans P. Ziegler
President
____________________________
Nicolette D. Parrish, Assistant Secretary
<PAGE>
Schedule A
Agency Agreement
Fees pursuant to Section 29 of the Agency Agreement shall
be calculated in accordance with the following schedule. For
each series, the fee shall accrue on each calendar day and
shall be payable monthly on the first business day of the next
succeeding calendar month.
The daily fee accrual shall be computed by multiplying
the fraction of one divided by the number of days in the
calendar year by the applicable annual fee and multiplying
this product by the net assets of the series, determined in
the manner established by the Board of Trustees of the
applicable Trust, as of the close of business on the last
preceding business day on which the series' net asset value
was determined.
Series Annual Fee
- ---------------------------- ----------------------------------
Stein Roe Institutional Client
High Yield Fund .050% of average daily net assets
Dated: February 14, 1997
<PAGE>
Schedule B
Agency Agreement
The Series of the Trust covered by this agreement are as follows:
Name of Series Effective Date
- ---------------------------------------- ------------------
Stein Roe Institutional Client High
Yield Fund February 14, 1997
Dated: February 14, 1997
<PAGE>
SCHEDULE C
SYSTEM DESCRIPTION
TRANSACTION PROCESSING LOG - PROCESSING SPAN IN DAYS
EXPEDITED REDEMPTION FILE - BATCH MAINTENANCE JOURNAL
DAILY CRT OPERATOR STATISTICS
DAILY BATCH MONITORING REPORT
ONLINE NEW ACCOUNT REPORT
DETAIL DAILY "AS OF" REPORT - BY ACCOUNTABILITY
SPECIAL HANDLING - DAILY CONFIRMATIONS
BANK ACCOUNT OUTSTANDING BALANCE VERIFICATION
MISCELLANEOUS FEE JOURNAL
BATCH ENTRY SUMMARY REPORT
ACCOUNT CLOSEOUT ADJUSTMENTS - SUMMARY REPORT
REDEMPTION CHECK REGISTER
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
DST INC. - DDPS DAILY CASH RECAP REPORT
DAILY UPDATE (MU100) ERROR LISTING
EXCHANGE DISTRIBUTION SUMMARY REPORT
BATCH TRANSMISSION ERRORS - TRANSACTION ID: DFUNP
DAILY CHECK RECONCILIATION UPDATE REGISTER UCHECK
UPDATES
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
WIRE INSTRUCTION REPORT FOR DIRECT REDEMPTIONS
TRANSFER RECORD DAILY DVND INCREASE JOURNAL
RECORD DATE JOURNAL
DAILY RECAP & SHARE CONTROL SHEET - SHARE AMOUNT
EXCHANGE CLOSE-OUT AUTOMATIC REINVESTMENT REPORT BY
EXCHANGE (FROM) FUND
DETAIL DAILY "AS OF" REPORT - BY REASON CODE
SHAREOWNER CHECK-CONFIRM RECONCILIATION
DAILY/FREE DAILY BALANCE LISTING - ALPHA CODE SEQUENCE
CONSOLIDATED ERROR REPORTING
DAILY CONFIRMED UNPAID PURCHASE JOURNAL - NO LOAD
REQUESTS FOR DUPLICATE CONFIRMS
CALCULATED DAILY DIVIDEND RATE
EXTERNAL CHECK/INVESTMENT ISSUANCE REPORT
IN-HOUSE CHECK ISSUANCE REPORT
AUTOMATED CLEARING HOUSE REDEMPTION TRANSACTIONS
STEINROE FUNDS
ACH PURCHASE TRANSACTIONS REPORT
ACH MONTHLY REDEMPTION/PURCHASE - TRANSACTION REPORT
STEIN ROE & FARNHAM TRANSFER RECORD FOR DIRECT PAYMENTS
REDEMPTION CHECK REGISTER
DAILY DIVIDEND ACCRUAL CLOSEOUTS COMBINED WITH CLOSEOUT
REDEMPTION WIRES
DAILY DIVIDEND ACCRUAL CLOSEOUTS UNMATCHED CLOSEOUT
ACCRUAL ERROR REPORT
AVERAGE COST ACCOUNT CALCULATION EXCEPTION REPORT FOR
DAILY AVERAGE COST FORMS REQUEST
NEW FOREIGN ACCOUNT REPORT
BATCH BALANCE LISTING
TRANSACTION TRACER REPORT
BATCH BALANCE LISTING - ACCOUNT DETAIL
TIMER - SWITCH UPDATE VERIFICATION
REDEMPTION & ADDRESS CHANGE PROCESSED SAME DAY WARNING
REPORT
AUTOMATE CLEARING HOUSE PRENOTE TRANSACTIONS
STEINROE FUNDS
EXRED WARNING REPORT
EXCHANGE WARNING REPORT UNLIKE TAX ID NUMBERS
INVESTOR TRANSFER TRANSACTIONS LISTING INVESTOR
DISTRIBUTOR CODE: STR
DETAIL DAILY "AS OF" REPORT BY TRANSACTION CODE
DAILY "AS OF" REPORT
DAILY FUND SHARE BALANCE ERROR LIST
DAILY BATCH BALANCE
DAILY SHAREOWNER MAINTENANCE ERROR LISTING
EXPEDITED REDEMPTION FILE STATUS JOURNAL
NEW ACCOUNT VERIFICATION QUALITY REPORT
SYSTEMATIC EXCHANGE DAILY MAINTENANCE ACTIVITY
ADDITIONAL MAIL MAINTENANCE JOURNAL
BATCH TRANSMISSION ERRORS TRANSACTION ID: ATRANS
DEALER FILE MAINTENANCE REPORT
CHECK-WRITING REDEMPTION REPORT
ASSET ALLOCATION - REALLOCATION
NEW ACCOUNT REPORT
SCHEDULE D
<TABLE>
SCHEDULE OF INSURANCE
STEIN ROE & FARNHAM INCORPORATED
ONE SOUTH WACKER DRIVE
CHICAGO, IL 60606-4685
<CAPTION>
CARRIER POLICY NO. TERM COVERAGE EXPOSURE/RATE LIMITS PREMIUM
- --------- ------------ -------- --------- ---------------------------- -------------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal (96)7626-89 01/01/95 Workers' FL-8810 $213,000 .71 Workers' Compensation: Statutory $61,612
Insurance. -79 -96 Compensation NY-8810 $660,000 .57
Co sation Experience Mod. .97 Employers Liability:
Premium Disc. 10.1% Bodily Injury by Accident:
$100,000 each accident
IL-8810 $18,900,000 .42
IL-8742 $ 710,000 .92 Bodily Injury by Disease:
Experience Mod. .97 $500,000 policy limit
IL Schedule Credit 25%
Premium Discount 10.1% Bodily Injury by Disease:
$100,000 each employee
Flat Coverage Monopolistic
Fund States 50. x 6
Expense Constant 160
- ------------------------------------------------------------------------------------------------------------------------------------
Federal 681-26-32 01/01/95 Financial Blanket Personal $2,000,000 General Aggregate
$21,686.92
Insurance -96 Package Property Limit $11,070,000 (other than Products Completed
Co. Policy Operations)
Two Scheduled Locations: $1,000,000 Products Completed
Puerto Rico $30,300 Operations Aggregate Limit
1510 Skokie Blvd. $600,000
$1,000,000 Personal & Advertising
Library Values: $80,000 Injury Limit
Fine Arts: $399,387 $1,000,000 Each Occurrence Limit
Inland Marine - Valuable $10,000 Medical Expense Limit
Papers
General Liability based on $100,000 Personal Property Damage
square feet to Rented Premises Limit
- ---------------------------------------------------------------------------------------------------------------------------------
Vigilant 7312-72-46 01/01/95 Foreign Liability & N.O. Auto $1,765 General Liability: $3,100
Insurance -96 Package Policy Workers' Compensation 1,335 $1,000,000 Commercial Liability
Co. for Bodily Injury or Property
General Damage Liability per occurrence
Liability $50 Per Person, per trip- & Personal Injury or Advertising
Flat. Based on: Injury caused by an offense
Automobile Total Employees - 20 $1,000,000 Annual Aggregate -
Liability-DIC/ No. of Trips 49 Products/Completed Operations
Excess Auto Total No. of Days 104
$250,000 Fire Legal Liability
Foreign Volun- $10,000 Medical Expense Per person
ary Workers'
Compensation $30,000 Medical Expense per accident
Automobile Liability - DIC/Excess Auto
$1,000,000 Bodily Injury per person
$1,000,000 Bodily Injury per occurrence
$1,000,000 Property damage per occurrence
$10,000 Medial Expense per person
$30,000 Medical Per Accident
Foreign Voluntary Workers'
Compensation - Statutory
$100,000 Employers Liability Limit
$20,000 Repatriation Expense for
any one Employee
- -----------------------------------------------------------------------------------------------------------------------------------
St. Paul IM01200804 01/01/95 Electronic Data/Media Flat $400 for Computer Equipment $4,132,731 $6,987
Insurance -96 Data $500,000 limit
Co. Processing
Business Interruption -
1,000,000 limit Valuable Papers & Records 600,000
Contingent Business Interrup-
tion: 1,000,000 - Kansas City Business Interruption 1,000,000
100,000 - Downers Grove
Deductible Contingent Business
Computer Equipment, Data and Interruption 1,100,000
Media and Extra Expense
Combined $1,000
Special Breakdown Deductible Extra Expense 500,000
$5,000
Transit
Computer Equipment $50,000
Data & Media $50,000
Valuable Papers $5,000
- ------------------------------------------------------------------------------------------------------------------------------------
Gulf GA5743948P 02/15/96 Excess Mutual $15,000,000 excess of $5,000,000 $540,935
Insurance -96 Fund D&O/E&O excess of underlying deductible
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Federal 81391969-A 02/15/95 Investment Limits of Liability $25,000,000 $211,312
Insurance -96 Company Assets Extended Forgery 10,000,000
Co. Protection Bond Threats to Persons 5,000,000
Uncollectible items of Deposit 500,000
Audit Expense 100,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 9(b)
ADMINISTRATIVE AGREEMENT
BETWEEN
STEIN ROE TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEIN ROE TRUST, a Massachusetts business trust
registered under the Securities Act of 1933 ("1933 Act") and
the Investment Company Act of 1940 ("1940 Act") (the
"Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation, of Chicago, Illinois ("Administrator"),
to furnish certain administrative services with respect to
the Trust and the series of the Trust listed in Schedule A
hereto, as such schedule may be amended from time to time
(each such series hereinafter referred to as "Fund").
The Trust and Administrator hereby agree that:
1. ADMINISTRATIVE SERVICES. Subject to the terms of
this Agreement and the supervision and control of the Trust's
Board of Trustees ("Trustees"), Administrator shall provide
the following services with respect to the Trust:
(a) Preparation and maintenance of the Trust's registration
statement with the Securities and Exchange Commission
("SEC");
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Fund
("Prospectus");
(c) Preparation, filing with appropriate regulatory
authorities, and dissemination of various reports for the
Fund, including but not limited to semiannual reports to
shareholders under Section 30(d) of the 1940 Act, annual
and semiannual reports on Form N-SAR, and notices
pursuant to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including
the collection of all information required for
preparation of proxy statements, the preparation and
filing with appropriate regulatory agencies of such proxy
statements, the supervision of solicitation of
shareholders and shareholder nominees in connection
therewith, tabulation (or supervision of the tabulation)
of votes, response to all inquiries regarding such
meetings from shareholders, the public and the media, and
preparation and retention of all minutes and all other
records required to be kept in connection with such
meetings;
(e) Maintenance and retention of all Trust charter documents
and the filing of all documents required to maintain the
Trust's status as a Massachusetts business trust and as a
registered open-end investment company;
(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board of Trustees and
committees thereof and preparation and retention of all
minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax
required to be paid in connection therewith;
(h) Calculation of all Trust and Fund expenses and
arrangement for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of
each Fund;
(j) Determination, after consultation with the officers of
the Trust, of the jurisdictions in which shares of
beneficial interest of each Fund ("Shares") shall be
registered or qualified for sale, or may be sold pursuant
to an exemption from such registration or qualification,
and preparation and maintenance of the registration or
qualification of the Shares for sale under the securities
laws of each such jurisdiction;
(k) Provision of the services of persons who may be appointed
as officers of the Trust by the Board of Trustees (it is
agreed that some person or persons may be officers of
both the Trust and the Administrator, and that the
existence of any such dual interest shall not affect the
validity of this Agreement except as otherwise provided
by specific provision of applicable law);
(l) Preparation and, subject to approval of the Trust's Chief
Financial Officer, dissemination of the Trust's and each
Fund's quarterly financial information to the Board of
Trustees and preparation of such other reports relating
to the business and affairs of the Trust and each Fund as
the officers and Board of Trustees may from time to time
reasonably request;
(m) Administration of the Trust's Code of Ethics and periodic
reporting to the Board of Trustees of Trustee and officer
compliance therewith;
(n) Provision of internal legal, accounting, compliance,
audit, and risk management services and periodic
reporting to the Board of Trustees with respect to such
services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to,
custody, tax, transfer agency, disaster recovery, audit,
and legal services;
(p) Negotiation and arrangement for insurance desired or
required of the Trust and administering all claims
thereunder;
(q) Response to all inquiries by regulatory agencies, the
press, and the general public concerning the business and
affairs of the Trust, including the oversight of all
periodic inspections of the operations of the Trust and
its agents by regulatory authorities and responses to
subpoenas and tax levies;
(r) Handling and resolution of any complaints registered with
the Trust by shareholders, regulatory authorities, and
the general public;
(s) Monitoring legal, tax, regulatory, and industry
developments related to the business affairs of the Trust
and communicating such developments to the officers and
Board of Trustees as they may reasonably request or as
the Administrator believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of Trustees
of the Trust of modifications to such policies to
facilitate the protection of shareholders or market
competitiveness of the Trust and Fund and to the extent
necessary to comply with new legal or regulatory
requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio
information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in
connection with the litigation or settlement of such
claims.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Administrator
under this Agreement, Administrator may, to the extent it
deems appropriate, and subject to compliance with the
requirements of applicable laws and regulations and upon
receipt of approval of the Trustees, make use of (i) its
affiliated companies and their directors, trustees, officers,
and employees and (ii) subcontractors selected by
Administrator, provided that Administrator shall supervise
and remain fully responsible for the services of all such
third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by
Administrator or such parties.
3. INSTRUCTIONS, OPINIONS OF COUNSEL, AND SIGNATURES.
At any time Administrator may apply to a duly authorized
agent of Trust for instructions regarding the Trust, and may
consult counsel for the Trust or its own counsel, in respect
of any matter arising in connection with this Agreement, and
it shall not be liable for any action taken or omitted by it
in good faith in accordance with such instructions or with
the advice or opinion of such counsel. Administrator shall
be protected in acting upon any such instruction, advice, or
opinion and upon any other paper or document delivered by the
Trust or such counsel believed by Administrator to be genuine
and to have been signed by the proper person or persons and
shall not be held to have notice of any change of authority
of any officer or agent of the Trust, until receipt of
written notice thereof from the Trust.
4. EXPENSES BORNE BY TRUST. Except to the extent
expressly assumed by Administrator herein or under a separate
agreement between the Trust and Administrator and except to
the extent required by law to be paid by Administrator, the
Trust shall pay all costs and expenses incidental to its
organization, operations and business. Without limitation,
such costs and expenses shall include but not be limited to:
(a) All charges of depositories, custodians and other
agencies for the safekeeping and servicing of its cash,
securities, and other property;
(b) All charges for equipment or services used for obtaining
price quotations or for communication between
Administrator or the Trust and the custodian, transfer
agent or any other agent selected by the Trust;
(c) All charges for investment advisory, portfolio
management, and accounting services provided to the Trust
by the Administrator, or any other provider of such
services;
(d) All charges for services of the Trust's independent
auditors and for services to the Trust by legal counsel;
(e) All compensation of Trustees, other than those affiliated
with Administrator, all expenses incurred in connection
with their services to the Trust, and all expenses of
meetings of the Trustees or committees thereof;
(f) All expenses incidental to holding meetings of
shareholders, including printing and of supplying each
record-date shareholder with notice and proxy
solicitation material, and all other proxy solicitation
expenses;
(g) All expenses of printing of annual or more frequent
revisions of the Trust's prospectus(es) and of supplying
each then-existing shareholder with a copy of a revised
prospectus;
(h) All expenses related to preparing and transmitting
certificates representing the Trust's shares;
(i) All expenses of bond and insurance coverage required by
law or deemed advisable by the Board of Trustees;
(j) All brokers' commissions and other normal charges
incident to the purchase, sale, or lending of Fund
securities;
(k) All taxes and governmental fees payable to Federal, state
or other governmental agencies, domestic or foreign,
including all stamp or other transfer taxes;
(l) All expenses of registering and maintaining the
registration of the Trust under the 1940 Act and, to the
extent no exemption is available, expenses of registering
the Trust's shares under the 1933 Act, of qualifying and
maintaining qualification of the Trust and of the Trust's
shares for sale under securities laws of various states
or other jurisdictions and of registration and
qualification of the Trust under all other laws
applicable to the Trust or its business activities;
(m) All interest on indebtedness, if any, incurred by the
Trust or a Fund; and
(n) All fees, dues and other expenses incurred by the Trust
in connection with membership of the Trust in any trade
association or other investment company organization.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by the Trust that are attributable solely to the
organization, operation or business of a Fund shall be paid
solely out of Fund assets. Any expense borne by the Trust
which is not solely attributable to a Fund, nor solely to any
other series of shares of the Trust, shall be apportioned in
such manner as Administrator determines is fair and
appropriate, or as otherwise specified by the Board of
Trustees.
6. EXPENSES BORNE BY ADMINISTRATOR. Administrator at
its own expense shall furnish all executive and other
personnel, office space, and office facilities required to
render the services set forth in this Agreement. However,
Administrator shall not be required to pay or provide any
credit for services provided by the Trust's custodian or
other agents without additional cost to the Trust.
In the event that Administrator pays or assumes any
expenses of the Trust or a Fund not required to be paid or
assumed by Administrator under this Agreement, Administrator
shall not be obligated hereby to pay or assume the same or
similar expense in the future; provided that nothing
contained herein shall be deemed to relieve Administrator of
any obligation to the Trust or a Fund under any separate
agreement or arrangement between the parties.
7. ADMINISTRATION FEE. For the services rendered,
facilities provided, and charges assumed and paid by
Administrator hereunder, the Trust shall pay to Administrator
out of the assets of each Fund fees at the annual rate for
such Fund as set forth in Schedule B to this Agreement. For
each Fund, the administrative fee shall accrue on each
calendar day, and shall be payable monthly on the first
business day of the next succeeding calendar month. The
daily fee accrual shall be computed by multiplying the
fraction of one divided by the number of days in the calendar
year by the applicable annual rate of fee, and multiplying
this product by the net assets of the Fund, determined in the
manner established by the Board of Trustees, as of the close
of business on the last preceding business day on which the
Fund's net asset value was determined.
8. STATE EXPENSE LIMITATION. If for any fiscal year of
a Fund, its aggregate operating expenses ("Aggregate
Operating Expenses") exceed the applicable percentage expense
limit imposed under the securities law and regulations of any
state in which Shares of the Fund are qualified for sale (the
"State Expense Limit"), the Administrator shall pay such Fund
the amount of such excess. For purposes of this State
Expense Limit, Aggregate Operating Expenses shall (a) include
(i) any fees or expense reimbursements payable to
Administrator pursuant to this Agreement and (ii) to the
extent the Fund invests all or a portion of its assets in
another investment company registered under the 1940 Act, the
pro rata portion of that company's operating expenses
allocated to the Fund, and (iii) any compensation payable to
Administrator pursuant to any separate agreement relating to
the Fund's investment operations and portfolio management,
but (b) exclude any interest, taxes, brokerage commissions,
and other normal charges incident to the purchase, sale or
loan of securities, commodity interests or other investments
held by the Fund, litigation and indemnification expense, and
other extraordinary expenses not incurred in the ordinary
course of business. Except as otherwise agreed to by the
parties or unless otherwise required by the law or regulation
of any state, any reimbursement by Administrator to a Fund
under this section shall not exceed the administrative fee
payable to Administrator by the Fund under this Agreement.
Any payment to a Fund by Administrator hereunder shall
be made monthly, by annualizing the Aggregate Operating
Expenses for each month as of the last day of the month. An
adjustment for payments made during any fiscal year of the
Fund shall be made on or before the last day of the first
month following such fiscal year of the Fund if the Annual
Operating Expenses for such fiscal year (i) do not exceed the
State Expense Limitation or (ii) for such fiscal year there
is no applicable State Expense Limit.
9. NON-EXCLUSIVITY. The services of Administrator to
the Trust hereunder are not to be deemed exclusive and
Administrator shall be free to render similar services to
others.
10. STANDARD OF CARE. Neither Administrator, nor any
of its directors, officers or stockholders, agents or
employees shall be liable to the Trust, any Fund, or its
shareholders for any action taken or thing done by it or its
subcontractors or agents on behalf of the Trust or the Fund
in carrying out the terms and provisions of this Agreement if
done in good faith and without negligence or misconduct on
the part of Administrator, its subcontractors, or agents.
11. INDEMNIFICATION. The Trust shall indemnify and
hold Administrator and its controlling persons, if any,
harmless from any and all claims, actions, suits, losses,
costs, damages, and expenses, including reasonable expenses
for counsel, incurred by it in connection with its acceptance
of this Agreement, in connection with any action or omission
by it or its agents or subcontractors in the performance of
its duties hereunder to the Trust, or as a result of acting
upon any instruction believed by it to have been executed by
a duly authorized agent of the Trust or as a result of acting
upon information provided by the Trust in form and under
policies agreed to by Administrator and the Trust, provided
that: (i) to the extent such claims, actions, suits, losses,
costs, damages, or expenses relate solely to a particular
Fund or group of Funds, such indemnification shall be only
out of the assets of that Fund or group of Funds; (ii) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of Administrator or its
agents or subcontractors, including but not limited to
willful misfeasance, bad faith, or gross negligence in the
performance of their duties, or reckless disregard of their
obligations and duties under this Agreement; and (iii)
Administrator shall give the Trust prompt notice and
reasonable opportunity to defend against any such claim or
action in its own name or in the name of Administrator.
Administrator shall indemnify and hold harmless the
Trust from and against any and all claims, demands, expenses
and liabilities which such Trust may sustain or incur arising
out of, or incurred because of, the negligence or misconduct
of Administrator or its agents or subcontractors, provided
that such Trust shall give Administrator prompt notice and
reasonable opportunity to defend against any such claim or
action in its own name or in the name of such Trust.
12. EFFECTIVE DATE, AMENDMENT, AND TERMINATION. This
Agreement shall become effective as to any Fund as of the
effective date for that Fund specified in Schedule A hereto
and, unless terminated as hereinafter provided, shall remain
in effect with respect to such Fund thereafter from year to
year so long as such continuance is specifically approved
with respect to that Fund at least annually by a majority of
the Trustees who are not interested persons of Trust or
Administrator.
As to any Trust or Fund of that Trust, this Agreement
may be modified or amended from time to time by mutual
agreement between the Administrator and the Trust and may be
terminated by Administrator or Trust by at least sixty (60)
days' written notice given by the terminating party to the
other party. Upon termination as to any Fund, the Trust
shall pay to Administrator such compensation as may be due
under this Agreement as of the date of such termination and
shall reimburse Administrator for its costs, expenses, and
disbursements payable under this Agreement to such date. In
the event that, in connection with a termination, a successor
to any of the duties or responsibilities of Administrator
hereunder is designated by the Trust by written notice to
Administrator, upon such termination Administrator shall
promptly, and at the expense of the Trust or Fund with
respect to which this Agreement is terminated, transfer to
such successor all relevant books, records, and data
established or maintained by Administrator under this
Agreement and shall cooperate in the transfer of such duties
and responsibilities, including provision, at the expense of
such Fund, for assistance from Administrator personnel in the
establishment of books, records, and other data by such
successor.
13. ASSIGNMENT. Any interest of Administrator under
this Agreement shall not be assigned either voluntarily or
involuntarily, by operation of law or otherwise, without the
prior written consent of Trust.
14. BOOKS AND RECORDS. Administrator shall maintain,
or oversee the maintenance by such other persons as may from
time to time be approved by the Board of Trustees to
maintain, the books, documents, records, and data required to
be kept by the Trust under the 1940 Act, the laws of the
Commonwealth of Massachusetts or such other authorities
having jurisdiction over the Trust or the Fund or as may
otherwise be required for the proper operation of the
business and affairs of the Trust or the Fund (other than
those required to be maintained by any investment adviser
retained by the Trust on behalf of a Fund in accordance with
Section 15 of the 1940 Act).
Administrator will periodically send to the Trust all
books, documents, records, and data of the Trust and each of
its Funds listed in Schedule A that are no longer needed for
current purposes or required to be retained as set forth
herein. Administrator shall have no liability for loss or
destruction of said books, documents, records, or data after
they are returned to such Trust.
Administrator agrees that all such books, documents,
records, and data which it maintains shall be maintained in
accordance with Rule 31a-3 of the 1940 Act and that any such
items maintained by it shall be the property of the Trust.
Administrator further agrees to surrender promptly to the
Trust any such items it maintains upon request, provided that
the Administrator shall be permitted to retain a copy of all
such items. Administrator agrees to preserve all such items
maintained under Rule 31a-1 for the period prescribed under
Rule 31a-2 of the 1940 Act.
Trust shall furnish or otherwise make available to
Administrator such copies of the financial statements, proxy
statements, reports, and other information relating to the
business and affairs of each Fund of the Trust as
Administrator may, at any time or from time to time,
reasonably require in order to discharge its obligations
under this Agreement.
15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of Trust. Neither the authorization of any
action by the Trustees or shareholders of Trust nor the
execution of this Agreement on behalf of Trust shall impose
any liability upon any Trustee or any shareholder.
16. USE OF ADMINISTRATOR'S NAME. The Trust may use its
name and the names of its Funds listed in Schedule A or any
other name derived from the name "Stein Roe & Farnham" only
for so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of Administrator as it relates to the services
it has agreed to furnish under this Agreement. At such time
as this Agreement or any extension, renewal or amendment
hereof, or such other similar agreement shall no longer be in
effect, Trust will cease to use any name derived from the
name "Stein Roe & Farnham" or otherwise connected with
Administrator, or with any organization which shall have
succeeded to Administrator's business herein described.
17. REFERENCES AND HEADINGS. In this Agreement and in
any such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder" shall
be deemed to refer to this Agreement as amended or affected
by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
Dated: February 14, 1997
STEIN ROE TRUST
ATTEST: By: ____________________________
Timothy K. Armour
President
____________________________
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED.
ATTEST: By: ____________________________
Hans P. Ziegler
Chief Executive Officer
____________________________
Nicolette D. Parrish,
Assistant Secretary
<PAGE>
STEIN ROE TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement
are as follows:
Name of Series Effective Date
- -------------------------------------- -----------------
Stein Roe Institutional Client High
Yield Fund February 14, 1997
Dated: February 14, 1997
<PAGE>
STEIN ROE TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated with respect to each Fund in accordance with the
following schedule applicable to average daily net assets of
the Fund:
Fund Administrative Fee Schedule
- --------------------------- --------------------------------
Stein Roe Institutional
Client High Yield Fund 0.15% of the first $500 million,
0.125% thereafter
Dated: February 14, 1997
EXHIBIT 9(c)
ACCOUNTING AND BOOKKEEPING AGREEMENT
This Agreement is made this 14th day of February. 1997,
by and between STEIN ROE TRUST, a Massachusetts business trust,
(hereinafter referred to as the "Trust") and STEIN ROE &
FARNHAM INCORPORATED ("Stein Roe"), a Delaware corporation.
1. Appointment. The Trust hereby appoints Stein Roe to act
as its agent to perform the services described herein with
respect to each series of shares of the Trust (the "Series")
identified in and beginning on the date specified on Appendix
I to this Agreement, as may be amended from time to time.
Stein Roe hereby accepts appointment as the Trust's agent and
agrees to perform the services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, Stein Roe
shall value all securities and other assets of the
Series, and compute the net asset value per share of
such Series, at such times and dates and in the
manner and by such methodology as is specified in the
then currently effective prospectus and statement of
additional information for such Series, and pursuant
to such other written procedures or instructions
furnished to Stein Roe by the Trust. To the extent
procedures or instructions used to value securities
or other assets of a Series under this Agreement are
at any time inconsistent with any applicable law or
regulation, the Trust shall provide Stein Roe with
written instructions for valuing such securities or
assets in a manner which the Trust represents to be
consistent with applicable law and regulation.
(b) Net Income. Stein Roe shall calculate with such
frequency as the Trust shall direct, the net income
of each Series of the Trust for dividend purposes and
on a per share basis. Such calculation shall be at
such times and dates and in such manner as the Trust
shall instruct Stein Roe in writing. For purposes of
such calculation, Stein Roe shall not be responsible
for determining whether any dividend or interest
accruable to the Trust is or will be actually paid,
but will accrue such dividend and interest unless
otherwise instructed by the Trust.
(c) Capital Gains and Losses. Stein Roe shall calculate
gains or losses of each Series of the Trust from the
sale or other disposition of assets of that Series as
the Trust shall direct.
(d) Yields. At the request of the Trust, Stein Roe shall
compute yields for each Series of the Trust for such
periods and using such formula as shall be instructed
by the Trust.
(e) Communication of Information. Stein Roe shall
provide the Trust, the Trust's transfer agent and
such other parties as directed by the Trust with the
net asset value per share, the net income per share
and yields for each Series of the Trust at such time
and in such manner and format and with such frequency
as the parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish Stein Roe with any and all instructions,
explanations, information, specifications and
documentation deemed necessary by Stein Roe in the
performance of its duties hereunder, including,
without limitation, the amounts and/or written
formula for calculating the amounts, and times of
accrual of liabilities and expenses of each Series of
the Trust. The Trust shall also at any time and from
time to time furnish Stein Roe with bid, offer and/or
market values of securities owned by the Trust if the
same are not available to Stein Roe from a pricing or
similar service designated by the Trust for use by
Stein Roe to value securities or other assets. Stein
Roe shall at no time be required to commence or
maintain any utilization of, or subscriptions to, any
such service which shall be the sole responsibility
and expense of the Trust.
3. Recordkeeping.
(a) Stein Roe shall, as agent for the Trust, maintain and
keep current and preserve the general ledger and
other accounts, books, and financial records of the
Trust relating to activities and obligations under
this Agreement in accordance with the applicable
provisions of Section 31(a) of the General Rules and
Regulations under the Investment Company Act of 1940,
as amended (the "Rules").
(b) All records maintained and preserved by Stein Roe
pursuant to this Agreement which the Trust is
required to maintain and preserve in accordance with
the Rules shall be and remain the property of the
Trust and shall be surrendered to the Trust promptly
upon request in the form in which such records have
been maintained and preserved.
(c) Stein Roe shall make available on its premises during
regular business hours all records of a Trust for
reasonable audit, use and inspection by the Trust,
its agents and any regulatory agency having authority
over the Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized
agent of the Trust for instructions regarding the
Trust, and may consult counsel for such Trust or its
own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be
liable for any action taken or omitted by it in good
faith in accordance with such instructions or with
the advice or opinion of such counsel. Stein Roe
shall be protected in acting upon any such
instruction, advice, or opinion and upon any other
paper or document delivered by the Trust or such
counsel believed by Stein Roe to be genuine and to
have been signed by the proper person or persons and
shall not be held to have notice of any change of
authority of any officer or agent of the Trust, until
receipt of written notice thereof from such Trust.
(b) Stein Roe may receive and accept a certified copy of
a vote of the Board of Trustees of the Trust as
conclusive evidence of (i) the authority of any
person to act in accordance with such vote or (ii)
any determination or any action by the Board of
Trustees pursuant to its Agreement and Declaration of
Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt
by Stein Roe of written notice to the contrary.
5. Compensation. The Trust shall reimburse Stein Roe from
the assets of the respective applicable Series of the Trust,
for any and all out-of-pocket expenses and charges in
performing services under this Agreement and such
compensation as is provided in Appendix II to this Agreement,
as amended from time to time. Stein Roe shall invoice the
Trust as soon as practicable after the end of each calendar
month, with allocation among the respective Series and full
detail, and the Trust shall promptly pay Stein Roe the
invoiced amount.
6. Confidentiality of Records. Stein Roe agrees not to
disclose any information received from the Trust to any other
client of Stein Roe or to any other person except its
employees and agents, and shall use its best efforts to
maintain such information as confidential. Upon termination
of this Agreement, Stein Roe shall return to the Trust all
records in the possession and control of Stein Roe related to
such Trust's activities, other than Stein Roe's own business
records, it being also understood and agreed that any
programs and systems used by Stein Roe to provide the
services rendered hereunder will not be given to any Trust.
7. Liability and Indemnification.
(a) Stein Roe shall not be liable to any Trust for any
action taken or thing done by it or its employees or
agents on behalf of the Trust in carrying out the
terms and provisions of this Agreement if done in
good faith and without negligence or misconduct on
the part of Stein Roe, its employees or agents.
(b) The Trust shall indemnify and hold Stein Roe, and its
controlling persons, if any, harmless from any and
all claims, actions, suits, losses, costs, damages,
and expenses, including reasonable expenses for
counsel, incurred by it in connection with its
acceptance of this Agreement, in connection with any
action or omission by it or its employees or agents
in the performance of its duties hereunder to the
Trust, or as a result of acting upon instructions
believed by it to have been executed by a duly
authorized agent of the Trust or as a result of
acting upon information provided by the Trust in form
and under policies agreed to by Stein Roe and the
Trust, provided that: (i) to the extent such claims,
actions, suits, losses, costs, damages, or expenses
relate solely to one or more Series, such
indemnification shall be only out of the assets of
that Series or group of Series; (ii) this
indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of Stein Roe or its employees or agents,
including but not limited to willful misfeasance, bad
faith, or gross negligence in the performance of
their duties, or reckless disregard of their
obligations and duties under this Agreement; and
(iii) Stein Roe shall give the Trust prompt notice
and reasonable opportunity to defend against any such
claim or action in its own name or in the name of
Stein Roe.
(c) Stein Roe shall indemnify and hold harmless the Trust
from and against any and all claims, demands,
expenses and liabilities which such Trust may sustain
or incur arising out of, or incurred because of, the
negligence or misconduct of Stein Roe or its agents
or contractors, or the breach by Stein Roe of its
obligations under this Agreement, provided that: (i)
this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of such Trust or its other agents or
contractors and (ii) such Trust shall give Stein Roe
prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or
in the name of such Trust.
8. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some
person or persons may be trustees, officers, or shareholders
of both the Trusts and Stein Roe, and that the existence of
any such dual interest shall not affect the validity hereof
or of any transactions hereunder except as otherwise provided
by specific provision of applicable law.
10. Amendment and Termination. This Agreement may be
modified or amended from time to time, or terminated, by
mutual agreement between the parties hereto and may be
terminated by at least one hundred eighty (180) days' written
notice given by one party to the other. Upon termination
hereof, the Trust shall pay to Stein Roe such compensation as
may be due from it as of the date of such termination, and
shall reimburse Stein Roe for its costs, expenses, and
disbursements payable under this Agreement to such date. In
the event that, in connection with termination, a successor
to any of the duties or responsibilities of Stein Roe
hereunder is designated by a Trust by written notice to Stein
Roe, Stein Roe shall promptly upon such termination and at
the expense of such Trust, deliver to such successor all
relevant books, records, and data established or maintained
by Stein Roe under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including
provision, at the expense of such Trust, for assistance from
Stein Roe personnel in the establishment of books, records,
and other data by such successor.
11. Assignment. Any interest of Stein Roe under this
Agreement shall not be assigned or transferred either
voluntarily or involuntarily, by operation of law or
otherwise, without prior written notice to the Trust.
12. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trust and Stein Roe is One South Wacker
Drive, Chicago, Illinois 60606, Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any
obligation of the Trust hereunder shall be binding only upon
the assets of that Trust (or the applicable Series thereof),
as provided in the Agreement and Declaration of Trust of that
Trust, and shall not be binding upon any Trustee, officer,
employee, agent or shareholder of the Trust or upon any other
Trust. Neither the authorization of any action by the
Trustees or the shareholders of the Trust, nor the execution
of this Agreement on behalf of the Trust shall impose any
liability upon any Trustee or any shareholder. Nothing in
this Agreement shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
willful misfeasance, bad faith or gross negligence in the
performance of his duties, or reckless disregard of his
obligations and duties under this Agreement. In connection
with the discharge and satisfaction of any claim made by
Stein Roe against the Trust involving more than one Series,
the Trust shall have the exclusive right to determine the
appropriate allocations of liability for any such claim
between or among the Series.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder,"
shall be deemed to refer to this Agreement as amended or
affected by any such amendments. Headings are placed herein
for convenience of reference only and shall not be taken as
part hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
STEIN ROE TRUST
ATTEST: By: ____________________________
Timothy K. Armour
President
____________________________
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED.
ATTEST: By: ____________________________
Timothy K. Armour
President, Mutual Funds Division
____________________________
Nicolette D. Parrish,
Assistant Secretary
<PAGE>
STEIN ROE TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX I
The series of Stein Roe Trust currently subject to this
Agreement are as follows:
Series Effective Date
- -------------------------------------- -----------------
Stein Roe Institutional Client High
Yield Fund February 14, 1997
Dated: February 14, 1997
<PAGE>
STEIN ROE TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX II
For the services provided under the Accounting &
Bookkeeping Agreement (the "Agreement"), the Trust shall pay
Stein Roe an annual fee with respect to each series,
calculated and paid monthly, equal to $25,000 plus .0025
percent per annum of the average daily net assets of the
series in excess of $50 million. Such fee shall be paid
within thirty days after receipt of monthly invoice.
<PAGE>
EXHIBIT 10
BELL, BOYD & LLOYD
THREE FIRST NATIONAL PLAZA
70 WEST MADISON STREET, SUITE 3300
CHICAGO, ILLINOIS 60602-4207
312 372-1121
FAX 312 372-2098
February 4, 1997
Stein Roe Trust
One South Wacker Drive, #3500
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
STEIN ROE TRUST
We have acted as counsel for Stein Roe Trust (the
"Trust") in connection with the registration under the
Securities Act of 1933 (the "Act") of an indefinite number of
shares of beneficial interest (the "Shares") of the series of
the Trust designated Stein Roe Institutional Client High
Yield Fund (the "Fund") in registration statement no. 333-
19181 on form N-1A (the "Registration Statement").
In this connection we have examined originals, or copies
certified or otherwise identified to our satisfaction, of
such documents, corporate and other records, certificates and
other papers as we deemed it necessary to examine for the
purpose of this opinion, including the agreement and
declaration of trust (the "Trust Agreement") and by-laws (the
"By-laws") of the Trust, actions of the board of trustees of
the Trust authorizing the issuance of shares of the Fund and
the Registration Statement.
We assume that, upon the sale of Shares, the Trust will
receive the authorized consideration therefor, which will at
least equal the net asset vale of the Shares.
Based on such examination, we are of the opinion that
upon the issuance and delivery of the Shares of the Fund
after the Registration Statement has been declared effective
and in accordance with the Trust Agreement and the actions of
the board of trustees authorizing the issuance of the Shares,
and the receipt by the Trust of the authorized consideration
therefor, the Shares so issued will be validly issued, fully
paid and nonassessable (although shareholders of the Fund may
be subject to liability under certain circumstances as
described in the statement of additional information of the
Trust included as Part B of the Registration Statement under
the caption "Declaration of Trust").
In rendering the foregoing opinion, we have relied upon
the opinion of Ropes & Gray expressed in their letter to us
dated January 30, 1997.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not
admit that we are in the category of persons whose consent is
required under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our report dated
February 7, 1997 with respect to Stein Roe Institutional
Client High Yield Fund in the Registration Statement (Form
N-1A) of Stein Roe Trust and related Prospectus and Statement
of Additional Information of Stein Roe Institutional Client
High Yield Fund filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933
(Registration No. 333-19181) and in this Amendment No. 1 to
the Registration Statement under the Investment Company Act
of 1940 (Registration No. 811-07997).
ERNST & YOUNG LLP
Chicago, Illinois
February 7, 1997
EXHIBIT 13
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
Subscription Agreement and Investment Letter
1. Share Subscription. The undersigned agrees to purchase
from Stein Roe Trust (the "Trust"), a Massachusetts business
trust, the number of shares of beneficial interest in the Trust
of the series designated Stein Roe Institutional Client High
Yield Fund (the "Shares") set forth below, on the terms and
conditions set forth herein, and hereby tenders the amount of
the price required to purchase these Shares at a price of $10.00
per Share.
The undersigned understands that the Trust has filed a
post-effective amendment to its registration statement with the
Securities and Exchange Commission (No. 333-19181) on Form N-1A
to register the Shares, which contains the Preliminary
Prospectus describing the Trust and the Shares. By its
execution hereof, the undersigned hereby acknowledges receipt of
a copy of the Preliminary Prospectus.
The undersigned recognizes that the Trust has not commenced
the public offering of the Shares. Accordingly, a number of
features of the Trust, with respect to the Shares described in
the Preliminary Prospectus including, without limitation, the
declaration and payment of dividends and redemption of the
Shares upon request of shareholders, are not, in fact, in
existence at the present time and will not be instituted until
the Trust's post-effective amendment to its registration
statement, as amended, under the Securities Act of 1933, is made
effective.
2. Representations and Warranties. The undersigned hereby
represents and warrants as follows:
(a) It is aware that no federal or state agency has made any
findings or determination as to the fairness for investment
in, nor any recommendation nor endorsement of, the Shares;
(b) It has such knowledge and experience of financial and
business matters as will enable it to utilize the
information made available to it in connection with the
offering of the Shares, to evaluate the merits and risks of
the prospective investment, and to make an informed
investment decision;
(c) It recognizes that the issuance of the Shares has only
recently been authorized and, further, that investment in
the Shares involves certain risks, and it has taken full
cognizance of and understands all of the risks related to
the purchase of the Shares, and it acknowledges that it has
suitable financial resources and anticipated income to bear
the economic risk of such an investment;
(d) It is purchasing the Shares for its own account, for
investment, and not with any intention of distribution or
resale of the Shares, either in whole or in part;
(e) It will not sell the Shares purchased by it without
registration of the Shares under the Securities Act of 1933
or exemption therefrom;
(f) It has been furnished with, and has carefully read, this
Agreement and the Preliminary Prospectus and such material
documents relating to the Shares as it has requested and as
have been provided to it by the Trust;
(g) It has also had the opportunity to ask questions of, and
receive answers from, the Trust concerning the Shares and
the terms of the offering. The undersigned certifies under
penalties of perjury that the number shown on this form is
its correct tax identification number and that it is not
subject to backup withholding as a result of a failure to
report all interest and dividend income to the Internal
Revenue Service.
3. Shareholder Liability. The undersigned recognizes that,
under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, it
is aware that the Agreement and Declaration of Trust of the
Trust disclaims liability of the shareholders, trustees, and
officers of the Trust for acts or obligations of the Trust,
which acts and obligations are binding only on the assets and
property of the Trust (or the applicable series thereof), and
requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. It is also aware that the Agreement
and Declaration of Trust provides for indemnification out of the
property of the Trust (or the applicable series thereof), for
all losses and expenses of any shareholder held personally
liable for the obligations of the Trust (or the applicable
series thereof).
4. Rejection of Subscription. The undersigned recognizes
that the Trust reserves the unrestricted right to reject or
limit any subscription and to close the offer at any time.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on February 6, 1997.
Number of Shares: 10,000 Shares.
Subscription price: $10.00 per Share.
STEIN ROE & FARNHAM INCORPORATED
By:_________________________________
Hans P. Ziegler,
Chief Executive Officer
36-3447638
(Tax Identification Number)
