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]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
STEIN ROE TRUST
(Exact Name of Registrant as Specified in Charter)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-338-2550
Heidi J. Walter Cameron S. Avery
Vice-President and Secretary Bell, Boyd & Lloyd
Stein Roe Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602
(Name and Address of Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on November 1, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
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
INSTITUTIONAL CLIENT FUNDS
Prospectus
Nov. 1, 1999
STEIN ROE INSTITUTIONAL CLIENT HIGH YIELD FUND
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is
committing a crime.
<PAGE>
3 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
7 Financial Highlights
8 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Dividends and Distributions
11 Other Investments and Risks
Mortgage-Backed Securities and Asset-Backed Securities
When-Issued Securities and Forward Commitments
Zero Coupon Securities
PIK Bonds
Illiquid Investments
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
13 The Fund's Management
Investment Adviser
Portfolio Manager
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
THE FUND
INVESTMENT GOAL Stein Roe Institutional Client High Yield Fund
seeks total return by investing for a high level of current income
and capital growth.
PRINCIPAL INVESTMENT STRATEGY Institutional Client High Yield
Fund invests all of its assets in SR&F High Yield Portfolio as
part of a master fund/feeder fund structure. The Portfolio
invests primarily in high-yield, high-risk debt securities. These
securities are rated at the time of purchase:
* below BBB by Standard & Poor's,
* below Baa by Moody's Investors Service, Inc.,
* a comparable rating by another nationally recognized rating
agency, or
* unrated securities that Stein Roe believes to be of comparable
quality.
In determining whether to purchase a security for the Portfolio or
sell a security held by the Portfolio, the portfolio manager looks
at both the relative value of a security in comparison to its
industry peers and the relative value in comparison to other
securities in the same rating category. The portfolio manager may
sell a security if there is a negative trend in the security's
value and may purchase a security if there is a positive trend.
The portfolio manager may be required to sell portfolio
investments to fund redemptions. The Portfolio may invest in
securities of any maturity.
PRINCIPAL INVESTMENT RISKS The primary risks of investing in the
Fund are described below. There are many circumstances (including
others not described here) that could cause you to lose money by
investing in the Fund or that could cause the Fund's total return
or yield to decrease.
The price of the Fund's shares-its net asset value per share
(NAV)-will fluctuate daily in response to changes in the market
value of the bonds it owns.
Market risk is the risk that the price of a security held by the
Portfolio will fall due to changing market, economic, or political
conditions, or due to the financial condition of the issuer of the
security. Market risk includes interest rate risk. Interest rate
risk is the risk of change in the price of a bond when interest
rates change. In general, if interest rates rise, bond prices
fall; and if interest rates fall, bond prices rise. Changes in
the values of bonds usually will not affect the amount of income
the Fund receives from them but will affect the value of the
Fund's shares. Interest rate risk is generally greater for bonds
having longer maturities.
Because the Portfolio may invest in debt securities issued by
private entities, including corporate bonds and privately issued
mortgage-backed and asset-backed securities, the Fund is subject
to issuer risk. Issuer risk is the possibility that changes in
the financial condition of the issuer of a security, changes in
general economic conditions, or changes in economic conditions
that affect the issuer may impact the issuer's ability to make
timely payments of interest or principal. This could result in
decreases in the price of the security.
High-yield, high-risk debt securities are sometimes referred to as
"junk bonds." High-yield, high-risk debt securities involve
greater risk of loss due to issuer risk and are less liquid,
especially during periods of economic uncertainty or change, than
higher-quality debt securities.
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 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.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
WHO SHOULD INVEST IN THE FUND?
You may want to invest in Institutional Client High Yield Fund if
you:
* want the high return potential associated with investing in
lower-rated bonds and can tolerate the high level of risk
associated with such securities
* are a long-term investor looking to diversify your investment
portfolio with high-yield, high-risk fixed-income securities
Institutional Client High Yield Fund is not appropriate for
investors who:
* are saving for a short-term investment
* want a relatively low-risk fixed-income investment
* want to avoid volatility or possible losses
* are not interested in generating taxable current income
FUND PERFORMANCE The following charts show the Fund's
performance through Dec. 31, 1998. The returns include the
reinvestment of dividends and distributions. As with all mutual
funds, past performance is no guarantee of future results.
YEAR-BY-YEAR TOTAL RETURNS
Year-by-year calendar returns show the Fund's volatility over a
period of time. This chart illustrates performance differences
for each calendar year and provides an indication of the risks of
investing in the Fund.
YEAR-BY-YEAR TOTAL RETURNS
10%
5%
0% 4.92%
- -5%
1998
[ ] Institutional Client High Yield Fund
The Fund's year to date total return through Sept. 30, 1999, was
___%.
Best quarter: 2nd quarter 1997, +6.55%
Worst quarter: 3rd quarter 1998, -6.07%
AVERAGE ANNUAL TOTAL RETURNS
Average annual total returns measure the Fund's performance over
time. We compare the Fund's returns with returns for the Merrill
Lynch High Yield Master II Index. We show returns for calendar
years to be consistent with the way other mutual funds report
performance in their prospectuses. This allows you to accurately
compare similar mutual fund investments and provides an indication
of the risks of investing in the Fund.
AVERAGE ANNUAL TOTAL RETURNS
Periods ending Dec. 31, 1998
1 yr Since Inception
(Feb. 28, 1997)
----------------------------
Institutional Client High Yield Fund 4.92% 9.77%
Merrill Lynch High Yield Master II
Index* 3.66% 7.62%
*The Merrill Lynch High Yield Master II Index is an unmanaged
group of securities that differs from the Fund's composition; it
is not available for direct investment.
YOUR EXPENSES This table shows fees and expenses you may pay if
you buy and hold shares of the Fund. You do not pay any sales
charge when you purchase or sell your shares. However, you pay
various other indirect expenses because the Fund or the Portfolio
pays fees and other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.65%
Distribution (12b-1) fees None
Other expenses 0.32%
Total annual fund operating expenses (c) 0.97%
Expense reimbursement 0.47%
Net expenses 0.50%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio. Fund
expenses include management fees and administrative costs such
as furnishing the Fund with offices and providing tax and
compliance services.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
(c) Stein Roe will reimburse the Fund if its annual ordinary
operating expenses exceed .50% of average daily net assets.
This commitment expires on Jan. 31, 2000. After
reimbursement, management fees will be 0.18%. A reimbursement
lowers the expense ratio and increases overall return to
investors.
EXPENSE EXAMPLE
This example compares the cost of investing in the Fund to the
cost of investing in a similar mutual fund. It uses the same
hypothetical assumptions that other funds use in their
prospectuses:
* $10,000 initial investment
* 5% total return each year
* the Fund's operating expenses remain constant as a percent of
net assets
* redemption at the end of each time period
Your actual costs may be higher or lower because in reality fund
returns and operating expenses change. Expenses based on these
assumptions are:
EXPENSE EXAMPLE
1 yr 3 yrs 5 yrs 10 yrs
-----------------------------
Institutional Client High Yield Fund $51 $160 $280 $628
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table explains the Fund's financial
performance. We show information for the period of the Fund's
operations. The Fund's fiscal year runs from July 1 to June 30.
The total returns in the table represent the return that investors
earned assuming that they reinvested all dividends and
distributions. Certain information in the table reflects the
financial results for a single Fund share. Ernst & Young LLP,
independent auditors, audits this information and issues a report
that appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
338-2550.
Institutional Client High Yield Fund
PER SHARE DATA
For Period Ending
Years ending June 30,
1999 1998 1997(d)
-----------------------------
Net asset value, beginning of period $ 10.65 $ 10.21 $ 10.00
Income from investment operations
Net investment income 0.87 0.88 0.33
Net gains on securities (both
realized and unrealized) (0.49) 0.58 0.21
Total income from investment
operations 0.38 1.46 0.54
Less distributions
Dividends (from net investment
income) (0.87) (0.88) (0.33)
Distributions (from capital gains) (0.31) (0.14) -
Total distributions (1.18) (1.02) (0.33)
Net asset value, end of period $ 9.85 $ 10.65 $ 10.21
Total return (a) 4.20% 14.88% 5.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $55,395 $35,157 $24,674
Ratio of net expenses to average
net assets (b) 0.50% 0.50% 0.50%(c)
Ratio of net investment income to
average net assets (a) 8.72% 8.31% 8.76%(c)
(a) Computed with the effect of Stein Roe's expense reimbursement.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been 0.97% for the year ended June 30, 1999, 1.28% for the
year ended June 30, 1998, and 2.59% for the period ended June
30, 1997.
(c) From commencement of operations on February 14, 1997.
(d) These percentages are for periods of less than one year. They
have been converted to an annual basis making it easier to
compare to complete years.
<PAGE>
YOUR ACCOUNT
PURCHASING SHARES You may purchase Fund shares without a sales
charge. Your purchases are made at the NAV next determined after
the Fund receives your check, wire transfer or electronic
transfer. The initial purchase minimum is $250,000 and the
minimum subsequent investment is $10,000. The Trust reserves the
right to waive or lower its investment minimums. Third-party
checks will not be accepted. All checks must be made payable in
U.S. dollars and drawn on U.S. banks. For more information on how
to purchase Fund shares, please call Stein Roe Retirement Services
at 800-322-1130.
An order to purchase Fund shares is not binding unless and until
an authorized officer, agent or designee of the Fund accepts it.
Once we accept your purchase order, you may not cancel or revoke
it; however, you may redeem your shares. The Fund may reject any
purchase order if it determines that the order is not in the best
interests of the Fund and its investors. The Fund may waive or
lower its investment minimums for any reason.
TRANSACTIONS THROUGH THIRD PARTIES
If you purchase or sell Fund shares through certain broker-
dealers, banks or other intermediaries, they may charge a fee for
their services. They may also place limits on your ability to use
services the Fund offers. There are no charges or limitations if
you purchase or sell shares directly from the Fund, except those
fees described in this prospectus.
If an intermediary is an agent or designee of the Fund, orders are
processed at the net asset value next calculated after the
intermediary receives the order. The intermediary must segregate
any orders it receives after the close of regular trading on the
NYSE and transmit those orders separately for execution at the net
asset value next determined.
DETERMINING SHARE PRICE (NAV) The Fund's share price is its NAV
next determined. NAV is the difference between the values of the
Fund's assets and liabilities divided by the number of shares
outstanding. We determine NAV at the close of regular trading on
the New York Stock Exchange (NYSE)-normally 3 p.m. Central time.
If you place an order after that time, you receive the share price
determined on the next business day.
Securities for which market quotations are readily available at
the time of valuation are valued on that basis. We value long-
term straight-debt securities for which market quotations are not
readily available at fair value. Pricing services provide the
Fund with the value of the securities. 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 Stein Roe based on quotations for comparable
securities. When the price of a security is not available,
including days when we determine that the sale or bid price of the
security does not reflect that security's market value, we value
the security at a fair value determined in good faith under
procedures established by the Board of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE. The
Portfolio's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
SELLING SHARES You may sell your shares any day the Fund is open
for business.
Once we receive and accept your order to sell shares, you may not
cancel or revoke it. We cannot accept an order to sell that
specifies a particular date or price or any other special
conditions.
The Fund redeems shares at the NAV next determined after an order
has been accepted. We mail proceeds within seven days after the
sale.
If the amount you redeem is large enough to affect the Fund's
operation, the Fund may pay the redemption "in kind." This is
payment in portfolio securities rather than cash. If this occurs,
you may incur transaction costs when you sell the securities.
If your account value falls below $250,000, the Fund may redeem
your shares and send the proceeds to the registered address. You
will receive notice 30 days before this happens.
DIVIDENDS AND DISTRIBUTIONS Income dividends are declared each
business day, paid monthly, and confirmed at least quarterly. The
Fund distributes, at least once a year, virtually all of its net
realized capital gains.
A dividend from net investment income represents the income the
Fund earns from dividends and interest paid on its investments,
after payment of the Fund's expenses.
A capital gain is the increase in value of a security that the
Portfolio holds. The gain is "unrealized" until the security is
sold. Each realized capital gain is either short term or long
term depending on whether the Portfolio held the security for one
year or less or more than one year, regardless of how long you
have held your Fund shares.
When the Fund makes a distribution of income or capital gains, the
distribution is automatically invested in additional shares of the
Fund unless you elect to have distributions paid by check.
If you elect to receive distributions by check and a distribution
check is returned to the Fund as undeliverable, or if you do not
present a distribution check for payment within six months, we
will change the distribution option on your account and reinvest
the proceeds of the check in additional shares of the Fund. You
will not receive any interest on amounts represented by uncashed
distribution or redemption checks.
TAX CONSEQUENCES
You are subject to federal income tax on both dividends and
capital gains distributions whether you elect to receive them in
cash or reinvest them in additional Fund shares. If the Fund
declares a distribution in December, but does not pay it until
after December 31, you will be taxed as if the distribution were
paid in December. Stein Roe will process your distributions and
send you a statement for tax purposes each year showing the source
of distributions for the preceding year.
TRANSACTION TAX STATUS
- ----------------------------------------------------------------
Income dividend Ordinary income
Short-term capital gain distribution Ordinary income
Long-term capital gain distribution Capital gain
Sale of shares owned one year or less Gain is ordinary income;
loss is subject to special
rules
Sale of shares owned more than one year Capital gain or loss
In addition to the dividends and capital gains distributions made
by the Fund, you may realize a capital gain or loss when selling
and exchanging Fund shares. Such transactions may be subject to
federal income tax.
This tax information provides only a general overview. It does
not apply if you invest in a tax-deferred retirement account such
as an IRA. Please consult your own tax advisor about the tax
consequences of an investment in the Fund.
<PAGE>
OTHER INVESTMENTS AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Fund also may invest in
other securities and use other investment techniques. The Fund
may elect not to buy any of these other securities or use any of
these other investment techniques. The Fund may not always
achieve its investment goal.
This section describes certain of those other securities and
techniques, and certain risks associated with them. The Statement
of Additional Information (SAI) contains additional information
about the Fund's securities and investment techniques (including
other securities and techniques) and the risks associated with
them. The SAI also contains the Fund's fundamental and non-
fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
and its non-fundamental investment policies without shareholder
approval.
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES The
Portfolio may invest in mortgage-backed securities which are
securities that represent ownership interests in large,
diversified pools of mortgage loans. Sponsors pool together
mortgages of similar rates and terms and offer them as a security
to investors.
Most mortgage securities are pooled together and structured as
pass-throughs. Monthly payments of principal and interest from
the underlying mortgage loans backing the pool are collected by a
service and "passed through" regularly to the investor. Pass-
throughs can have a fixed or an adjustable rate. The majority of
pass-through securities are issued by three agencies: Ginnie Mae,
Fannie Mae, and Freddie Mac.
Commercial mortgage-backed securities are secured by loans to
commercial properties such as office buildings, multi-family
apartment buildings and shopping centers. These loans usually
contain prepayment penalties that provide protection from
refinancing in a declining interest rate environment.
Real estate mortgage investment conduits (REMICs) are multiclass
securities that qualify for special tax treatment under the
Internal Revenue Code. REMICs invest in certain mortgages that
are secured principally by interests in real property such as
single family homes.
Asset-backed securities are securities backed by various types of
loans such as credit card, auto and home-equity loans. The
Portfolio generally invests in "mortgage-related" asset-backed
securities, which are backed by residential first and second lien
home equity, home improvement and manufactured housing loans.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS When-issued
securities and forward commitments are securities that are
purchased prior to the date they are actually issued or delivered.
These securities involve the risk that they may fall in value by
the time they are actually issued or that the other party may fail
to honor the contract terms.
ZERO COUPON SECURITIES The Portfolio may invest in zero coupon
securities. These securities do not pay interest in cash on a
current basis, but instead accrue over the life of the bond. As a
result, these securities are issued at a deep discount. The value
of these securities may fluctuate more than similar securities
that pay interest periodically. Although these securities pay no
interest to holders prior to maturity, interest on these
securities is reported as income to the Fund and distributed to
its shareholders.
PIK BONDS The Portfolio may invest in payable-in-kind bonds (PIK
bonds) which are bonds that pay interest in the form of additional
securities. These bonds are subject to greater price volatility
than bonds that pay cash interest on a current basis.
ILLIQUID INVESTMENTS The Portfolio may invest up to 15% of its
net assets in illiquid investments. An illiquid investment is a
security or other position that cannot be disposed of quickly in
the normal course of business. For example, some securities are
not registered under U.S. securities laws and cannot be sold to
the U.S. public because of SEC regulations (these are known as
"restricted securities"). Under procedures adopted by the Fund's
Trustees, certain restricted securities may be deemed liquid and
will not be counted toward this 15% limit.
PORTFOLIO TURNOVER There are no limits on turnover. Turnover
may vary significantly from year to year. Stein Roe does not
expect it to exceed 100% under normal conditions. Portfolio
turnover typically produces capital gains or losses resulting in
tax consequences for Fund investors. It also increases
transaction expenses, which reduce the Fund's return.
TEMPORARY DEFENSIVE POSITIONS When Stein Roe believes that a
temporary defensive position is necessary, the Portfolio may
invest, without limit, in high-quality debt securities or hold
assets in cash and cash equivalents. Stein Roe is not required to
take a temporary defensive position, and market conditions may
prevent such an action. A Fund may not achieve its investment
objective if it takes a defensive position.
INTERFUND LENDING PROGRAM The Fund and Portfolio may lend money
to and borrow money from other funds advised by Stein Roe. They
will do so when Stein Roe believes such lending or borrowing is
necessary and appropriate. Borrowing costs will be the same as or
lower than the costs of a bank loan.
<PAGE>
THE FUND'S MANAGEMENT
INVESTMENT ADVISER Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, IL 60606, manages the day-to-day operations
of the Fund and Portfolio. Stein Roe (and its predecessor) has
advised and managed mutual funds since 1949. For the fiscal year
ended June 30, 1999, the Fund paid to Stein Roe aggregate fees of
0.65% of average net assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit that includes
several separate legal entities known as Liberty Funds Group
(LFG). LFG includes certain affiliates of Stein Roe, including
Colonial Management Associates, Inc. (Colonial). The LFG business
unit is managed by a single management team. Colonial and other
LFG entities also share personnel, facilities, and systems with
Stein Roe that may be used in providing administrative or
operational services to the Funds. Colonial is a registered
investment adviser. Stein Roe also has a wealth management
business that is not part of LFG and is managed by a different
team. Stein Roe and the other entities that make up LFG are
subsidiaries of Liberty Financial Companies, Inc.
PORTFOLIO MANAGER
Stephen F. Lockman has been manager of High Yield Portfolio since
1997 and of SR&F Income Portfolio since its inception in 1998. He
was portfolio manager of Income Fund from 1997, associate manager
of Income Fund from 1995 to 1997, and associate manager of High
Yield Portfolio from 1996 to 1997. Mr. Lockman was a senior
research analyst for Stein Roe's fixed income department from 1994
to 1997. He served as portfolio manager for the Illinois State
Board of Investment from 1987 to 1994. A chartered financial
analyst, Mr. Lockman earned a bachelor's degree from the
University of Illinois and a master's degree from DePaul
University. As of June 30, 1999, Mr. Lockman managed $88 million
in mutual fund net assets.
MASTER/FEEDER FUND STRUCTURE Unlike mutual funds that directly
acquire and manage their own portfolios of securities, the Fund is
a "feeder" fund in a "master/feeder" structure. This means that
the Fund invests its assets in a larger "master" portfolio of
securities (the Portfolio) that has an investment objective and
policies substantially identical to those of the Fund. The
investment performance of the Fund depends upon the investment
performance of the Portfolio. If the investment policies of the
Fund and the Portfolio became inconsistent, the Board of Trustees
of the Fund can decide what actions to take. Actions the Board of
Trustees may recommend include withdrawal of the Fund's assets
from the Portfolio. For more information on the master/feeder
fund structure, see the SAI.
YEAR 2000 READINESS Like other investment companies, financial
and business organizations and individuals around the world, the
Fund could be adversely affected if the computer systems used by
Stein Roe, other service providers and the issuers in which the
Fund invests do not properly process and calculate date-related
information and data from and after Jan. 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's service
providers are taking steps that they believe are reasonably
designed to address the Year 2000 problem, including communicating
with vendors who furnish services, software and systems to the
Fund to provide that date-related information and data can be
properly processed after Jan. 1, 2000. Many Fund service
providers and vendors, including the Fund's service providers, are
in the process of making Year 2000 modifications to their software
and systems and believe that such modifications will be completed
on a timely basis prior to Jan. 1, 2000. In addition, Year 2000
readiness is one of the factors considered by Stein Roe in its
ongoing assessment of issuers in which the Fund invests, to the
extent that information is readily available. However, no
assurances can be given that the Fund will not be adversely
affected by these matters.
<PAGE>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. These reports
discuss the market conditions and investment strategies that
affected the Fund's performance over the past six months and year.
You may wish to read the Fund's SAI for more information. The SAI
is incorporated into this prospectus by reference, which means
that it is considered to be part of this prospectus and you are
deemed to have been told of its contents.
To obtain free copies of the Fund's semiannual and annual reports
or the SAI or to request other information about the Fund, write
or call:
Stein Roe Mutual Funds
One South Wacker Drive
Suite 3200
Chicago, IL 60606
800-338-2550
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington,
DC, by calling 800-SEC-0330, or by sending your request and the
appropriate fee to the SEC's public reference section, Washington,
DC 20549-6009.
Liberty Funds Distributor, Inc.
Investment Company Act file number of Stein Roe Trust: 811-07997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED NOV. 1, 1999
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
Suite 3200, One South Wacker Drive, Chicago, IL 60606
This Statement of Additional Information (SAI) is not a
prospectus but provides additional information that should be read
in conjunction with the Fund's Prospectus dated Nov. 1, 1999 and
any supplements thereto. Financial statements, which are
contained in the Fund's Annual Report, are incorporated by
reference into this SAI. The Prospectus and Annual Report 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.........................3
Investment Restrictions.....................................19
Additional Investment Considerations........................21
Purchases and Redemptions...................................22
Management..................................................24
Financial Statements........................................27
Principal Shareholders......................................27
Investment Advisory and Other Services......................28
Distributor.................................................29
Transfer Agent..............................................30
Custodian...................................................30
Independent Auditors........................................31
Portfolio Transactions......................................31
Additional Income Tax Considerations........................36
Investment Performance......................................36
Master Fund/Feeder Fund: Structure and Risk Factors.........40
Appendix-Ratings............................................42
<PAGE>
..............GENERAL INFORMATION AND HISTORY
Stein Roe Institutional Client High Yield Fund (the "Fund")
is a series of Stein Roe Trust (the "Trust").
The 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 the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. The Fund is the only series of the Trust authorized
and outstanding.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as the Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers 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
the 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 the 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 the
Trust also is 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 series was unable to meet its
obligations.
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, the 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
its outstanding shares, the 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 if the Trust were subject to Section 16(c) of the
Investment Company Act of 1940. All shares of all series of the
Trust are voted together in the election of trustees. On any
other matter submitted to a vote of shareholders, shares are voted
in the aggregate and not by individual series, except that shares
are voted by individual series when required by the Investment
Company Act of 1940 or other applicable law, or when the Board of
Trustees determines that the matter affects only the interests of
one or more series, in which case shareholders of the unaffected
series are not entitled to vote on such matters.
Special Considerations Regarding Master Fund/Feeder Fund Structure
Rather than invest in securities directly, the Fund seeks to
achieve its objective by pooling its assets with those of other
investment companies for investment in another mutual fund having
the same investment objective and substantially the same
investment policies. The purpose of such an arrangement is to
achieve greater operational efficiencies and reduce costs. The
Fund invests all of its net investable assets in SR&F High Yield
Portfolio (the "Portfolio"), which is a series of SR&F Base Trust.
For more information, please refer to Master Fund/Feeder Fund:
Structure and Risk Factors.
Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services to the
Fund and the Portfolio and provides investment advisory services
to the Portfolio.
INVESTMENT POLICIES
The Trust and SR&F Base Trust are open-end management
investment companies. The Fund and the Portfolio are diversified,
as that term is defined in the Investment Company Act of 1940.
The investment objective and policies are described in the
Prospectus under The Fund. In pursuing its objective, the
Portfolio may also employ the investment techniques described
under Portfolio Investments and Strategies in this SAI. The
investment objective is a nonfundamental policy and may be changed
by the Board of Trustees without the approval of a "majority of
the outstanding voting securities."/1/
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/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.
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PORTFOLIO INVESTMENTS AND STRATEGIES
Derivatives
Consistent with its objective, the 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 using them 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 Stein Roe'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.
The 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
The 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, prepayment risks and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments 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 prepaid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by the Portfolio on purchase of the CMO, and the
proceeds of prepayment would likely be invested at lower interest
rates. The Portfolio intends to invest in CMOs of classes known
as planned amortization classes ("PACs") which have prepayment
protection features tending to make them less susceptible to price
volatility.
Non-mortgage asset-backed securities usually have less
prepayment 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.
REMICs
The Portfolio may invest in real estate mortgage investment
conduits ("REMICs"). REMICs, which were authorized under the Tax
Reform Act of 1986, are private entities formed for the purpose of
holding a fixed pool of mortgages secured by an interest in real
property. REMICs are similar to CMOs in that they issue multiple
classes of securities. A REMIC is a CMO that qualifies for
special tax treatment under the Internal Revenue Code and invests
in certain mortgages principally secured by interests in real
property. Investors may purchase beneficial interests in REMICs,
which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by FNMA or FHLMC represent beneficial ownership interests
in a REMIC trust consisting principally of mortgage loans or FNMA-
, FHLMC- or GNMA-guaranteed mortgage pass-through certificates.
For FHLMC REMIC Certificates, FHLMC guarantees the timely payment
of interest and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage
participation certificates. FNMA REMIC Certificates are issued
and guaranteed as to timely distribution and principal and
interest by FNMA.
Floating Rate Instruments
The 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%. The 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, the
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 the Portfolio. The 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. the 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, the 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 it 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.
Repurchase Agreements
The Portfolio may invest in repurchase agreements, provided
that it will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to the
Portfolio in which the seller agrees to repurchase the securities
at a higher price, which includes an amount representing interest
on the purchase price, within a specified time. In the event of
bankruptcy of the seller, the Portfolio could experience both
losses and delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements; Standby Commitments
The Portfolio may purchase instruments on a when-issued or
delayed-delivery basis. Although payment terms are established at
the time the 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. The 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.
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 the 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 the Portfolio to buy a
security. A dollar roll transaction involves the following risks:
if the broker-dealer to whom the Portfolio sells the security
becomes insolvent, the 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 the Portfolio is required to repurchase may be worth less
than a security which it originally held; and the return earned by
the Portfolio with the proceeds of a dollar roll may not exceed
transaction costs.
The Portfolio may enter into reverse repurchase agreements
with banks and securities dealers. A reverse repurchase agreement
is a repurchase agreement in which the 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 the 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 the 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 the 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
the Portfolio because the other party to the standby agreement
generally will not be obligated to deliver the security, but the
Portfolio will be obligated to accept it if delivered. Depending
on market conditions, the 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 the
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 the 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 the Portfolio actually obtains the
security.
Short Sales Against the Box
The 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. The
Portfolio may make short sales of securities only if at all times
when a short position is open it 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, the Portfolio does not
deliver from its portfolio the securities sold. Instead, the
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 the Portfolio, to the
purchaser of such securities. The 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, the Portfolio must
deposit and continuously maintain in a separate account with its
custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities at
no additional cost. The Portfolio is said to have a short
position in the securities sold until it delivers to the broker-
dealer the securities sold. The 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 the 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 the Portfolio owns, either directly
or indirectly, and, in the case where the 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 the Portfolio replaces the borrowed security,
the Portfolio will incur a loss and if the price declines during
this period, the 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 the Portfolio may have to
pay in connection with such short sale. Certain provisions of the
Internal Revenue Code may limit the degree to which the Portfolio
is able to enter into short sales. There is no limitation on the
amount of the 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. The 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, the
Fund and the 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, the Fund and the Portfolio may lend money to
and borrow money from other mutual funds advised by Stein Roe.
They 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
The 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 the 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 to the
Prospectus. The rated debt securities described under Investment
Policies include securities given a rating conditionally by
Moody's or provisionally by S&P. If the rating of a security is
withdrawn or reduced, the Portfolio is not required to sell the
security, but Stein Roe will consider such fact in determining
whether to 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, the Portfolio will attempt to use comparable
ratings as standards for its investments in debt securities in
accordance with its investment policies.
Foreign Securities
The 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.
The 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.
The 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, 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 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 the 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.
The 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 the 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 the 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. The 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 the 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, the
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
the Portfolio. The Portfolio may not engage in "speculative"
currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, the 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 the
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 it 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 the Portfolio is obligated to deliver.
If the Portfolio retains the portfolio security and engages
in an offsetting transaction, it will incur a gain or a loss to
the extent that there has been movement in forward contract
prices. If the 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
the 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, the 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, the 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 the Portfolio of unrealized profits or
force the 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 the Portfolio to hedge against a devaluation that is
so generally anticipated that the Portfolio is not able to
contract to sell the currency at a price above the devaluation
level it anticipates. The cost to the 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. The Portfolio may invest in
debt instruments denominated in foreign currencies. In addition
to, or in lieu of, such direct investment, the 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.
The 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 the 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
the Portfolio having a value at least equal to such accrued excess
will be segregated on the books of the Portfolio and held by the
custodian for the duration of the swap.
The 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
The 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 the Portfolio, to trade in privately
placed securities that have not been registered for sale under the
1933 Act. Stein Roe, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Portfolio's restriction
of investing no more than 15% 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, Stein Roe will consider the trading markets for the
specific security, taking into account the unregistered nature of
a Rule 144A security. In addition, Stein Roe 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, the Portfolio's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to
assure that the Portfolio does not invest more than 15% of its
assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of assets invested
in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. The 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 Stein Roe.
Portfolio Turnover
The turnover rate for the 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.
Options on Securities and Indexes
The 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.)
The 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 the 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 the Portfolio expires, it realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Portfolio expires, it
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 the Portfolio desires.
The 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, the 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, the Portfolio will realize a capital
gain or, if it is less, it 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 the Portfolio is an asset
of the Portfolio, valued initially at the premium paid for the
option. The premium received for an option written by the
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 the Portfolio seeks to close out an option position. If the
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 the 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, the 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 the
Portfolio, it would not be able to close out the option. If
restrictions on exercise were imposed, the Portfolio might be
unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
The 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.
- -------------------
The 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. The 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 its securities or
the price of the securities that it intends to purchase. Although
other techniques could be used to reduce exposure to security
price, interest rate and currency fluctuations, the Portfolio may
be able to achieve its exposure more effectively and perhaps at a
lower cost by using futures contracts and futures options.
The 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 accurate
predictions of changes in the level and direction of security
prices, interest rates, currency exchange rates and other factors.
Should those predictions be incorrect, the return might have been
better had the transaction not been attempted; however, in the
absence of the ability to use futures contracts, Stein Roe 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, the
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 the Portfolio upon termination of the
contract, assuming all contractual obligations have been
satisfied. The Portfolio expects to earn interest income on its
initial margin deposits. A futures contract held by the Portfolio
is valued daily at the official settlement price of the exchange
on which it is traded. Each day the 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 the Portfolio
does not represent a borrowing or loan by the Portfolio but is
instead settlement between the 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, the Portfolio will mark-to-market its open futures
positions.
The 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 the 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, the Portfolio realizes a
capital gain, or if it is more, it realizes a capital loss.
Conversely, if an offsetting sale price is more than the original
purchase price, the Portfolio realizes a capital gain, or if it is
less, it 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 the Portfolio seeks to close out a futures or a
futures option position. The 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,
the Portfolio may also use those investment vehicles, provided the
Board of Trustees determines that their use is consistent with the
investment objective.
The Portfolio will not enter into a futures contract or
purchase an option thereon if, immediately thereafter, the initial
margin deposits for futures contracts held plus premiums paid for
open futures option positions, less the amount by which any such
positions are "in-the-money,"/3/ would exceed 5% of its 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.
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When purchasing a futures contract or writing a put on a
futures contract, the 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, the 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 the Portfolio.
The 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 the 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," the 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 the 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 the 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 the 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 the 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 the 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 the 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 the
Portfolio delivers securities under a futures contract, it also
realizes a capital gain or loss on those securities.
For federal income tax purposes, the 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 the 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 to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of 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). 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.
The 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.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio operate under the following
investment restrictions. The Fund and the 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 [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 [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, [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 nonleveraging,
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, [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," 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.
The Fund and the 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 the
Fund 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, the Fund and the 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, the 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) invest in limited partnerships in real estate unless they
are readily marketable;
(I) 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;
(J) 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;
(K) invest more than 15% 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.
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/5/ In the judgment of Stein Roe, 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
Stein Roe seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
take sensible risks and make intelligent investments, 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, Stein Roe 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
The initial purchase minimum is $250,000 and the minimum
subsequent investment is $10,000. For more information on how to
purchase Fund shares, please call Stein Roe Retirement Services at
800-322-1130. The Trust reserves the right to waive or lower its
investment minimums for any reason.
You may purchase (or redeem) shares through certain broker-
dealers, banks, or other intermediaries ("Intermediaries").
Intermediaries may charge for their services or place limitations
on the extent to which you may use the services offered by the
Trust. It is the responsibility of any such Intermediary to
establish procedures insuring the prompt transmission to the Trust
of any such purchase order. An Intermediary, who accepts orders
that are processed at the net asset value next determined after
receipt of the order by the Intermediary, accepts such orders as
authorized agent or designee of the Fund. The Intermediary is
required to segregate any orders received on a business day after
the close of regular session trading on the New York Stock
Exchange and transmit those orders separately for execution at the
net asset value next determined after that business day.
Some Intermediaries that maintain nominee accounts with the
Fund for their clients for whom they hold Fund shares charge an
annual fee of up to 0.35% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. Stein Roe and
the Fund's transfer agent share in the expense of these fees, and
Stein Roe pays all sales and promotional expenses.
Each purchase order for the Fund must be accepted by an
authorized officer of the Trust or its authorized agent and is not
binding until accepted and entered on the books of the Fund. Once
your purchase order has been accepted, you may not cancel or
revoke it; you may, however, redeem the shares. The Trust
reserves the right not to accept any purchase order that it
determines not to be in the best interests of the Trust or of the
Fund's shareholders. Each purchase of the Fund's shares is made
at its net asset value next determined after receipt of an order
in good form, including receipt of payment by the Fund.
Fund shares 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 the Trust.
Redemption instructions may not be cancelled or revoked once they
have been received and accepted by the Trust. The 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 the 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. The Trust will generally mail
payment for shares redeemed within seven days after proper
instructions are received.
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 January, 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 should be
determined on any such day, in which case the determination will
be made at 3:00 p.m., Central time.
The 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.
The 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 the 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, the 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 $250,000. 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
$250,000 before the redemption is processed. The Agreement and
Declaration of Trust also authorizes the Trust to redeem shares
under certain other circumstances as may be specified by the Board
of Trustees.
MANAGEMENT
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Fund. The following table
sets forth certain information with respect to trustees and
officers of the Trust:
<TABLE>
<CAPTION>
Position(s) held Principal occupation(s)
Name, Age with the Trust during past five years
- ------------------ ------------------------ ---------------------------
<S> <C> <C>
William D. Andrews, 51 Executive Vice-President Executive vice president of Stein Roe
Gary A. Anetsberger, 43(4) Senior Vice-President; Chief financial officer and chief administrative
Treasurer officer of the Mutual Funds division of Stein Roe;
senior vice president of Stein Roe since April 1996;
vice president of Stein Roe prior thereto
John A. Bacon Jr., 72 Trustee Private investor
(3) (4)
William W. Boyd, 72 Trustee Chairman and director of Sterling Plumbing
(2) (3) (4) (manufacturer of plumbing products)
Thomas W. Butch, 42 (4) President President of the Mutual Funds division and director of
Stein Roe since March 1998;
senior vice president of
Stein Roe prior thereto
Kevin M. Carome, 43 (4) Executive Vice-President; Senior vice president, legal, Liberty Funds Group LLC
Assistant Secretary (an affiliate of Stein Roe) since Jan. 1999; general
counsel and secretary of Stein Roe since Jan. 1998;
associate general counsel and vice president of
Liberty Financial Companies, Inc. (the indirect parent
of Stein Roe) through Jan. 1999
J. Kevin Connaughton,35(4) Vice-President Vice president of Colonial Management Associates, Inc.
("CMA") , since February 1998; senior tax manager,
Coopers & Lybrand, LLP from April 1996 to January
1998; vice president, 440 Financial Group/First Data
Investor Services Group prior thereto
Lindsay Cook, 47 (1)(2)(4) Trustee Executive vice president of Liberty Financial
Companies, Inc. since March 1997; senior vice
president prior thereto
Douglas A. Hacker, 44 Trustee Senior vice president and chief financial officer of
(3) (4) UAL, Inc. (airline)
Loren A. Hansen, 51 (4) Executive Vice-President Chief investment officer/equity of Colonial Management
Associates, Inc. since 1997; executive vice president
of Stein Roe since Dec. 1995; vice president of The
Northern Trust (bank) prior thereto
Timothy J. Jacoby, 47 (4) Vice-President Fund treasurer for Liberty Funds Group LLC since Sept.
1996 and chief financial officer since Aug. 1997;
senior vice president of Fidelity Investments prior
thereto
Janet Langford Kelly, 41 Trustee Senior vice president, secretary and general counsel
(3) (4) of Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner, Sidley &
Austin (law firm) prior thereto
Michael T. Kennedy, 37 (4) Vice-President Senior vice president of Stein Roe
Gail D. Knudsen, 37 (4) Vice-President Vice president and assistant controller of CMA
Stephen F. Lockman, 38 (4) Vice-President Senior vice president, portfolio manager, and credit
analyst of Stein Roe
Lynn C. Maddox, 58 Vice-President Senior vice president of Stein Roe
Jane M. Naeseth, 49 Vice-President Senior vice president of Stein Roe
Charles R. Nelson, 57 Trustee Van Voorhis Professor of Political Economy of the
(3)(4) University of Washington
Nicolette D. Parrish, 49 Vice-President; Senior legal assistant and assistant secretary of
(4) Assistant Secretary Stein Roe
Janet B. Rysz, 44 (4) Assistant Secretary Senior legal assistant and assistant secretary of
Stein Roe
Thomas C. Theobald, 62 Trustee Managing director, William Blair Capital Partners
(3) (4) (private equity fund)
Sharlene A. Thomas, 37 (4) Vice-President Assistant vice president of mutual fund sales &
service of Stein Roe since Feb. 1999; manager of
mutual fund sales & services of Stein Roe from March
1997 to Feb. 1999; account executive with Stein Roe's
Counselor department prior thereto
Heidi J. Walter, 32 (4) Vice-President; Secretary Vice president of Stein Roe since March 1998; senior
legal counsel for Stein Roe since Feb. 1998; legal
counsel for Stein Roe from March 1995 to Jan. 1998;
associate with Beeler Schad & Diamond, PC (law firm)
prior thereto
<FN>
____________________
(1) Trustee who is an "interested person" of the Trust and of
Stein Roe, 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 SR&F Base Trust.
</TABLE>
Certain of the trustees and officers of the Trust and SR&F
Base Trust are trustees or officers of other investment companies
managed by Stein Roe. Mr. Anetsberger, Mr. Butch, and Ms. Walter
are also officers of Liberty Funds Distributor, Inc., the Funds'
distributor. The address of Mr. Bacon is 4N640 Honey Hill Road,
Box 296, Wayne, IL 60184; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, IL 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, IL 60602; that of Mr. Nelson is Department of
Economics, University of Washington, Seattle, WA 98195; that of
Mr. Theobald is Suite 1300, 222 West Adams Street, Chicago, IL
60606; that of Ms. Knudsen, Mr. Connaughton, and Mr. Jacoby is One
Financial Center, Boston, MA 02111; and that of the officers is
One South Wacker Drive, Chicago, IL 60606.
Officers and trustees affiliated with Stein Roe serve without
any compensation from the Trust. In compensation for their
services to the Trust, trustees who are not "interested persons"
of the Trust or Stein Roe are paid an annual retainer plus an
attendance fee for each meeting of the Board or standing committee
thereof attended. The Trust has no retirement or pension plan.
The following table sets forth compensation paid during the fiscal
year ended June 30, 1999 to each of the trustees:
Compensation from the
Stein Roe Fund Complex*
-----------------------
Aggregate Compensation Total Average
Name of Trustee from the Trust Compensation Per Series
- ------------------- -------------------- ------------ ----------
Thomas W. Butch** -0- -0- -0-
Lindsay Cook -0- -0- -0-
John A. Bacon Jr.** $1,550 $101,150 $2,199
William W. Boyd 1,400 102,300 2,224
Douglas A. Hacker 1,300 87,700 1,907
Janet Langford Kelly 1,300 97,200 2,113
Charles R. Nelson 1,400 102,100 2,220
Thomas C. Theobald 1,300 97,200 2,113
_______________
*At June 30, 1999, the Stein Roe Fund Complex consisted of one
series of the Trust, four series of Stein Roe Income Trust, four
series of Stein Roe Municipal Trust, 12 series of Stein Roe
Investment Trust, five series of Liberty-Stein Roe Advisor
Trust, five series of SteinRoe Variable Investment Trust, 12
portfolios of SR&F Base Trust, Stein Roe Floating Rate Income
Fund, Stein Roe Institutional Floating Rate Income Fund, and
Stein Roe Floating Rate Limited Liability Company.
**Mr. Butch served as a trustee until Nov. 3, 1998 and Mr. Bacon
was elected a trustee effective Nov. 3, 1998
FINANCIAL STATEMENTS
Please refer to the June 30, 1999 Financial Statements
(statements of assets and liabilities and schedule of investments
as of June 30, 1999 and the statement of operations, changes in
net assets, and notes thereto) and the report of independent
auditors contained in the Fund's June 30, 1999 Annual Report. The
Financial Statements and the report of independent auditors (but
no other material from the Annual Report) are incorporated herein
by reference. The Annual Report may be obtained at no charge by
telephoning 800-338-2550.
PRINCIPAL SHAREHOLDERS
As of July 30, 1999, the only persons known by the Trust to
own of record or "beneficially" 5% or more of outstanding shares
of the Fund within the definition of that term as contained in
Rule 13d-3 under the Securities Exchange Act of 1934 were as
follows:
Approximate % of
Outstanding
Name and Address Shares Held
Covenant Benevolent Institution
5145 North California
Chicago, IL 60625 31.8%
Fireman's Annuity & Benefit Fund of Chicago
1 North Franklin Street, Suite 2550
Chicago, IL 60606 41.8%
John W. Anderson Foundation
402 Wall Street
Valparaiso, IN 46383 9.2%
National City Bank, Trustee
Akron General Medical Center
Defined Benefit Pension Trust
P.O. Box 94984
Cleveland, OH 44101 6.5%
GFS Holding, Inc.
333 Fiftieth Street, SW
P.O. Box 1787
Grand Rapids, MI 49501 8.5%
As of July 30, 1999, 5,650,857 shares, or approximately 99.9%
of outstanding shares, were held by clients of Stein Roe in their
client accounts. Stein Roe may have discretionary authority over
such shares and, accordingly, they could be deemed to be owned
"beneficially" by Stein Roe under Rule 13d-3. However, Stein Roe
disclaims actual beneficial ownership of such shares. No shares
were held by trustees and officers of the Trust.
INVESTMENT ADVISORY AND OTHER SERVICES
Stein Roe & Farnham Incorporated provides administrative
services to the Fund and the Portfolio and portfolio management
services to the Portfolio. Stein Roe is a wholly owned subsidiary
of SteinRoe Services Inc. ("SSI"), the Fund's transfer agent,
which is a wholly owned subsidiary of Liberty Financial Companies,
Inc. ("Liberty Financial"), which is a majority owned subsidiary
of Liberty Corporate Holdings, Inc., which is a wholly 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 Stein Roe are Kenneth R. Leibler, C. Allen
Merritt, Jr., and Thomas W. Butch. Mr. Leibler is President and
Chief Executive Officer of Liberty Financial; Mr. Merritt is Chief
Operating Officer of Liberty Financial; and Mr. Butch is President
of Stein Roe's Mutual Funds division. The business address of
Messrs. Leibler and Merritt is Federal Reserve Plaza, Boston, MA
02210; and that of Mr. Butch is One South Wacker Drive, Chicago,
IL 60606.
Stein Roe and its predecessor have been providing investment
advisory services since 1932. Stein Roe acts as investment
adviser to wealthy individuals, trustees, pension and profit
sharing plans, charitable organizations, and other institutional
investors. As of June 30, 1999, Stein Roe managed over $22.2
billion in assets: over $6.3 billion in equities and over $15.9
billion in fixed income securities (including $1 billion in
municipal securities). The $22.2 billion in managed assets
included over $9.2 billion held by mutual funds managed by Stein
Roe (approximately 15% of the mutual fund assets were held by
clients of Stein Roe). These mutual funds were owned by over
282,000 shareholders. The $9.2 billion in mutual fund assets
included over $679 million in over 42,000 IRA accounts. In
managing those assets, Stein Roe utilizes a proprietary computer-
based information system that maintains and regularly updates
information for approximately 7,500 companies. Stein Roe also
monitors over 1,400 issues via a proprietary credit analysis
system. At June 30, 1999, Stein Roe employed 18 research analysts
and 54 account managers. The average investment-related
experience of these individuals was 17 years.
In return for its services, Stein Roe is entitled to receive
a monthly administrative fee from the Fund and a monthly
management fee from the Portfolio. The table below shows the
annual rates of such fees as a percentage of average net assets
(shown in millions), gross fees paid for the three most recent
fiscal years, and any expense reimbursements by Stein Roe:
<TABLE>
<CAPTION>
Current Rates
(as a % of Year Ended Year Ended Period Ended
Fund Type average net assets) 6/30/99 6/30/98 6/30/97
- ---------- ------------------ --------------------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Fund Administrative fee .150% up to $500 million,
.125% thereafter $ 67,734 $ 46,114 $ 6,454
Reimbursement Expenses exceeding .50% 211,888 240,886 90,036
Portfolio Management fee .500% up to $500 million,
.475% thereafter 419,766 307,472 52,997
</TABLE>
Stein Roe provides office space and executive and other
personnel to the Fund and bears any sales or promotional expenses.
The Fund pays all expenses other than those paid by Stein Roe,
including but not limited to printing and postage charges,
securities registration and custodian fees, and expenses
incidental to its organization.
The Fund's administrative agreement provides that Stein Roe
shall reimburse the Fund to the extent that its total annual
expenses (including fees paid to Stein Roe, 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 the 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 the Fund under that agreement for
such year. In addition, in the interest of further limiting the
Fund's expenses, Stein Roe may waive its fees and/or absorb
certain its expenses. Any such reimbursements will enhance the
yield of the Fund.
The Portfolio's management agreement provides that neither
Stein Roe nor any of its directors, officers, stockholders (or
partners of stockholders), agents, or employees shall have any
liability to SR&F Base Trust or any shareholder 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
Stein Roe of its duties under the agreement, except for liability
resulting from willful misfeasance, bad faith or gross negligence
on Stein Roe's part in the performance of its duties or from
reckless disregard by Stein Roe of its obligations and duties
under that agreement.
Any expenses that are attributable solely to the
organization, operation, or business of a series of the Trust are
paid solely out of the assets of that series. Any expenses
incurred by the Trust that are not solely attributable to a
particular series are apportioned in such manner as Stein Roe
determines is fair and appropriate, unless otherwise specified by
the Board of Trustees.
Bookkeeping and Accounting Agreement
Pursuant to a separate agreement with the Trust, Stein Roe
receives a fee for performing certain bookkeeping and accounting
services. For these services, Stein Roe receives an annual fee of
$25,000 per series plus .0025 of 1% of average net assets over $50
million. During the fiscal years ended June 30, 1999, 1998 and
1997, Stein Roe received aggregate fees of $25,000, $24,999 and
$9,524, respectively, for services performed under this agreement.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Funds
Distributor, Inc. ("Distributor"), One Financial Center, Boston,
MA 02111, under a Distribution Agreement. The Distributor is a
subsidiary of Colonial Management Associates, Inc., which is an
indirect subsidiary of Liberty Financial.
The Distribution Agreement continues in effect from year to
year, provided such continuance is approved annually (1) by a
majority of the trustees or by a majority of the outstanding
voting securities of the Trust, and (2) by a majority of the
trustees who are not parties to the Agreement or interested
persons of any such party. The 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, the Distributor offers Fund shares 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 the
Fund. The distributor offers shares only on a best-efforts basis.
TRANSFER AGENT
SteinRoe Services Inc. ("SSI"), One South Wacker Drive,
Chicago, IL 60606, is the agent of the Trust for the transfer of
shares, disbursement of dividends, and maintenance of shareholder
accounting records. For performing these services, SSI receives
from the Fund a fee based on an annual rate of .05 of 1% of its
average daily net assets. The Board of Trustees believes the
charges by SSI are comparable to those of other companies
performing similar services. (See Investment Advisory and Other
Services.) Under a separate agreement, SSI provides certain
investor accounting services to the Portfolio.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 02101, is the custodian for the Trust
and SR&F 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 Bank 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 interests of the Fund, the 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.
The Fund and the Portfolio may invest in obligations of the
Bank and may purchase or sell securities from or to the Bank.
INDEPENDENT AUDITORS
The independent auditors for the Trust and the Portfolio are
Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116. 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
Stein Roe places the orders for the purchase and sale of
portfolio securities and options and futures contracts for its
clients, including private clients and mutual fund clients
("Clients"). 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 a Portfolio.
Transactions placed through dealers reflect the spread between the
bid and asked prices. Occasionally, a Portfolio may make
purchases of underwritten issues at prices that include
underwriting discounts or selling concessions.
Stein Roe's overriding objective in selecting brokers and
dealers to effect portfolio transactions is to seek the best
combination of net price and execution. The best net price,
giving effect to brokerage commissions, if any, is an important
factor in this decision; however, a number of other judgmental
factors may also enter into the decision. These factors include
Stein Roe's knowledge of negotiated commission rates currently
available and other current transaction costs; the nature of the
security being purchased or sold; the size of the transaction; the
desired timing of the transaction; 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
considered; Stein Roe's knowledge of the financial condition of
the broker or dealer selected and such other brokers and dealers;
and Stein Roe's knowledge of actual or apparent operation problems
of any broker or dealer.
Recognizing the value of these factors, Stein Roe may cause a
Client to pay a brokerage commission in excess of that which
another broker may have charged for effecting the same
transaction. Stein Roe has established internal policies for the
guidance of its trading personnel, specifying minimum and maximum
commissions to be paid for various types and sizes of transactions
and effected for Clients in those cases where Stein Roe has
discretion to select the broker or dealer by which the transaction
is to be executed. Stein Roe has discretion for all trades of the
Portfolios. Transactions which vary from the guidelines are
subject to periodic supervisory review. These guidelines are
reviewed and periodically adjusted, and the general level of
brokerage commissions paid is periodically reviewed by Stein Roe.
Evaluations of the reasonableness of brokerage commissions, based
on the factors described in the preceding paragraph, are made by
Stein Roe's trading personnel while effecting portfolio
transactions. The general level of brokerage commissions paid is
reviewed by Stein Roe, and reports are made annually to the Board
of Trustees.
Stein Roe maintains and periodically updates a list of
approved brokers and dealers which, in Stein Roe's judgment, are
generally capable of providing best price and execution and are
financially stable. Stein Roe's traders are directed to use only
brokers and dealers on the approved list, except in the case of
Client designations of brokers or dealers to effect transactions
for such Clients' accounts. Stein Roe generally posts certain
Client information on the "Alert" broker database system as a
means of facilitating the trade affirmation and settlement
process.
It is Stein Roe's practice, when feasible, to aggregate for
execution as a single transaction orders for the purchase or sale
of a particular security for the accounts of several Clients, in
order to seek a lower commission or more advantageous net price.
The benefit, if any, obtained as a result of such aggregation
generally is allocated pro rata among the accounts of Clients
which participated in the aggregated transaction. In some
instances, this may involve the use of an "average price"
execution wherein a broker or dealer to which the aggregated order
has been given will execute the order in several separate
transactions during the course of a day at differing prices and,
in such case, each Client participating in the aggregated order
will pay or receive the same price and commission, which will be
an average of the prices and commissions for the several separate
transactions executed by the broker or dealer.
Stein Roe sometimes makes use of an indirect electronic
access to the New York Stock Exchange's "SuperDOT" automated
execution system, provided through a NYSE member floor broker, W&D
Securities, Inc., a subsidiary of Jeffries & Co., Inc.,
particularly for the efficient execution of smaller orders in NYSE
listed equities. Stein Roe sometimes uses similar arrangements
through Billings & Co., Inc. and Driscoll & Co., Inc., floor
broker members of the Chicago Stock Exchange, for transactions to
be executed on that exchange. In using these arrangements, Stein
Roe must instruct the floor broker to refer the executed
transaction to another brokerage firm for clearance and
settlement, as the floor brokers do not deal with the public.
Transactions of this type sometimes are referred to as "step-in"
or "step-out" transactions. The brokerage firm to which the
executed transaction is referred may include, in the case of
transactions effected through W&D Securities, brokerage firms
which provide Stein Roe investment research or related services.
Stein Roe places certain trades for the Portfolios through
its affiliate AlphaTrade, Inc. ("ATI"). ATI is a wholly owned
subsidiary of Colonial Management Associates, Inc. ATI is a fully
disclosed introducing broker that limits its activities to
electronic execution of transactions in listed equity securities.
The Portfolios pay ATI a commission for these transactions. The
Funds and the Portfolios have adopted procedures consistent with
Investment Company Act Rule 17e-1 governing such transactions.
Certain of Stein Roe's officers also serve as officers, directors
and/or employees of ATI.
Consistent with the Rules of Fair Practice of National
Securities Dealers, Inc. and subject to seeking best executing and
such other policies as the trustees of the Funds may determine,
Stein Roe may consider sales of shares of each of the Funds as a
factor in the selection of broker-dealers to execute such mutual
fund securities transactions.
Investment Research Products and Services Furnished by Brokers and
Dealers
Stein Roe engages in the long-standing practice in the money
management industry of acquiring research and brokerage products
and services ("research products") from broker-dealer firms in
return directing trades for Client accounts to those firms. In
effect, Stein Roe is using the commission dollars generated from
these Client accounts to pay for these research products. The
money management industry uses the term "soft dollars" to refer to
this industry practice. Stein Roe may engage in soft dollar
transactions on trades for those Client accounts for which Stein
Roe has the discretion to select the brokers-dealer.
The ability to direct brokerage for a Client account belongs
to the Client and not to Stein Roe. When a Client grants Stein
Roe the discretion to select broker-dealers for Client trades,
Stein Roe has a duty to seek the best combination of net price and
execution. Stein Roe faces a potential conflict of interest with
this duty when it uses Client trades to obtain soft dollar
products. This conflict exists because Stein Roe is able to use
the soft dollar products in managing its Client accounts without
paying cash ("hard dollars") for the product. This reduces Stein
Roe's expenses.
Moreover, under a provision of the federal securities laws
applicable to soft dollars, Stein Roe is not required to use the
soft dollar product in managing those accounts that generate the
trade. Thus, the Client accounts that generate the brokerage
commission used to acquire the soft dollar product may not benefit
directly from that product. In effect, those accounts are cross
subsidizing Stein Roe's management of the other accounts that do
benefit directly from the product. This practice is explicitly
sanctioned by a provision of the Securities Exchange Act of 1934,
which creates a "safe harbor" for soft dollar transactions
conducted in a specified manner. Although it is inherently
difficult, if not impossible, to document, Stein Roe believes that
over time most, if not all, Clients benefit from soft dollar
products such that cross subsidizations even out.
Stein Roe attempts to reduce or eliminate this conflict by
directing Client trades for soft dollar products only if Stein Roe
concludes that the broker-dealer supplying the product is capable
of providing a combination of the best net price and execution on
the trade. As noted above, the best net price, while significant,
is one of a number of judgmental factors Stein Roe considers in
determining whether a particular broker is capable of providing
the best net price and execution. Stein Roe may cause a Client
account to pay a brokerage commission in a soft dollar trade in
excess of that which another broker-dealer might have charged for
the same transaction.
Stein Roe acquires two types of soft dollar research
products: (i) proprietary research created by the broker-dealer
firm executing the trade and (ii) other products created by third
parties that are supplied to Stein Roe through the broker-dealer
firm executing the trade.
Proprietary research consists primarily of traditional
research reports, recommendations and similar materials produced
by the in house research staffs of broker-dealer firms. This
research includes evaluations and recommendations of specific
companies or industry groups, as well as analyses of general
economic and market conditions and trends, market data, contacts
and other related information and assistance. Stein Roe's
research analysts periodically rate the quality of proprietary
research produced by various broker-dealer firms. Based on these
evaluations, Stein Roe develops target levels of commission
dollars on a firm-by-firm basis. Stein Roe attempts to direct
trades to each firm to meet these targets.
Stein Roe also uses soft dollars to acquire products created
by third parties that are supplied to Stein Roe through broker-
dealers executing the trade (or other broker-dealers who "step in"
to a transaction and receive a portion of the brokerage commission
for the trade). These products include the following:
* Database Services-comprehensive databases containing current
and/or historical information on companies and industries.
Examples include historical securities prices, earnings
estimates, and SEC filings. These services may include software
tools that allow the user to search the database or to prepare
value-added analyses related to the investment process (such as
forecasts and models used in the portfolio management process).
* Quotation/Trading/News Systems-products that provide real time
market data information, such as pricing of individual
securities and information on current trading, as well as a
variety of news services.
* Economic Data/Forecasting Tools-various macro economic
forecasting tools, such as economic data and economic and
political forecasts for various countries or regions.
* Quantitative/Technical Analysis-software tools that assist in
quantitative and technical analysis of investment data.
* Fundamental Industry Analysis-industry-specific fundamental
investment research.
* Fixed Income Security Analysis-data and analytical tools that
pertain specifically to fixed income securities. These tools
assist in creating financial models, such as cash flow
projections and interest rate sensitivity analyses, that are
relevant to fixed income securities.
* Other Specialized Tools-other specialized products, such as
specialized economic consulting analyses and attendance at
investment oriented conferences.
Many third-party products include computer software or on-
line data feeds. Certain products also include computer hardware
necessary to use the product.
Certain of these third party services may be available
directly from the vendor on a hard dollar basis. Others are
available only through broker-dealer firms for soft dollars.
Stein Roe evaluates each product to determine a cash ("hard
dollars") value of the product to Stein Roe. Stein Roe then on a
product-by-product basis targets commission dollars in an amount
equal to a specified multiple of the hard dollar value to the
broker-dealer that supplies the product to Stein Roe. In general,
these multiples range from 1.25 to 1.85 times the hard dollar
value. Stein Roe attempts to direct trades to each firm to meet
these targets. (For example, if the multiple is 1.5:1.0, assuming
a hard dollar value of $10,000, Stein Roe will target to the
broker-dealer providing the product trades generating $15,000 in
total commissions.)
The targets that Stein Roe establishes for both proprietary
and for third party research products typically will reflect
discussions that Stein Roe has with the broker-dealer providing
the product regarding the level of commissions it expects to
receive for the product. However, these targets are not binding
commitments, and Stein Roe does not agree to direct a minimum
amount of commissions to any broker-dealer for soft dollar
products. In setting these targets, Stein Roe makes a
determination that the value of the product is reasonably
commensurate with the cost of acquiring it. These targets are
established on a calendar year basis. Stein Roe will receive the
product whether or not commissions directed to the applicable
broker-dealer are less than, equal to or in excess of the target.
Stein Roe generally will carry over target shortages and excesses
to the next year's target. Stein Roe believes that this practice
reduces the conflicts of interest associated with soft dollar
transactions, since Stein Roe can meet the non-binding
expectations of broker-dealers providing soft dollar products over
flexible time periods. In the case of third party products, the
third party is paid by the broker-dealer and not by Stein Roe.
Stein Roe may enter into a contract with the third party vendor to
use the product. (For example, if the product includes software,
Stein Roe will enter into a license to use the software from the
vendor.)
In certain cases, Stein Roe uses soft dollars to obtain
products that have both research and non-research purposes.
Examples of non-research uses are administrative and marketing
functions. These are referred to as "mixed use" products. As of
the date of this SAI, Stein Roe acquires two mixed use products.
These are (i) a fixed income security data service and (ii) a
mutual fund performance ranking service. In each case, Stein Roe
makes a good faith evaluation of the research and non-research
uses of these services. These evaluations are based upon the time
spent by Firm personnel for research and non-research uses. Stein
Roe pays the provider in cash ("hard dollars") for the non-
research portion of its use of these products.
Stein Roe may use research obtained from soft dollar trades
in the management of any of its discretionary accounts. Thus,
consistent with industry practice, Stein Roe does not require that
the Client account that generates the trade receive any benefit
from the soft dollar product obtained through the trade. As noted
above, this may result in cross subsidization of soft dollar
products among Client accounts. As noted therein, this practice
is explicitly sanctioned by a provision of the Securities Exchange
Act of 1934, which creates a "safe harbor" for soft dollar
transactions conducted in a specified manner.
In certain cases, Stein Roe will direct a trade to one
broker-dealer with the instruction that it execute the trade and
pay over a portion of the commission from the trade to another
broker-dealer who provides Stein Roe with a soft dollar research
product. The broker-dealer executing the trade "steps out" of a
portion of the commission in favor of the other broker-dealer
providing the soft dollar product. Stein Roe may engage in step
out transactions in order to direct soft dollar commissions to a
broker-dealer which provides research but may not be able to
provide best execution. Brokers who receive step out commissions
typically are brokers providing a third party soft dollar product
that is not available on a hard dollars basis. Stein Roe has not
engaged in step out transactions as a manner of compensating
broker-dealers that sell shares of investment companies managed by
Stein Roe.
For the last three fiscal years, the Portfolio paid no
brokerage commissions on futures transactions or any other
transactions.
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 the Association of the National
Association of Securities Dealers ("NASD").
The Trust has arranged for its custodian to act as a
soliciting dealer to accept any fees available to the custodian as
a soliciting dealer in connection with any tender offer for
portfolio securities. The custodian will credit any such fees
received against its custodial fees.
During the last fiscal year, the Portfolio held securities
issued by one its regular broker-dealers or the parent of such
broker-dealer that derives more than 15% of gross revenue from
securities-related activities. Such holdings were as follows at
June 30, 1999:
Broker-Dealer Value of Securities Held
(in thousands)
ADDITIONAL INCOME TAX CONSIDERATIONS
The Fund intends to qualify under Subchapter M of the
Internal Revenue Code and to comply with the special provisions of
the Internal Revenue Code that relieve it of federal income tax to
the extent of 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.
The Fund expects that none of its dividends will qualify for
the deduction for dividends received by corporate shareholders.
INVESTMENT PERFORMANCE
The 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.
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 the Fund for the
period.
For example, the Yield of the Fund for the 30-day period ended
June 30, 1999 was 9.55%.
--------------
The 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. 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.
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).
For example, for a $1,000 investment in the Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at June 30, 1999 were:
Total Return Average Annual
Total Return Percentage Total Return
1 year $1,042 4.20% 4.20%
Life of Fund*
______________
*Since commencement of operations on Feb. 14, 1997.
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 the Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing the 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.
The Fund may note its mention in newspapers, magazines, or
other media from time to time. However, the Fund assumes no
responsibility for the accuracy of such data. Newspapers and
magazines that might mention the 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
In advertising and sales literature, the 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
the. Comparison of the 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
the Fund believes to be generally accurate.
The Fund may compare its performance to the Consumer Price
Index (All Urban), a widely-recognized measure of inflation.
The performance of the Fund may be compared to the following
benchmarks:
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 Morningstar averages are unweighted averages of total
return performance of mutual funds as classified, calculated, and
published by this independent service that monitors the
performance of mutual funds. The Fund may also use comparative
performance as computed in a ranking by this service or category
averages and rankings provided by another independent service.
Should this service reclassify the 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, the 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, the 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
---------------
The 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 Jan. 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
<TABLE>
<CAPTION>
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
Average Life Calculations. From time to time, the Fund may
quote an average life figure for its portfolio. Average life is
the weighted average period over which Stein Roe 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.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
The Fund (which is a series of the Trust, an open-end
management investment company) seeks to achieve its objective by
investing all of its assets in another mutual fund having an
investment objective identical to that of the Fund. The
shareholders of the Fund approved this policy of permitting the
Fund to act as a feeder fund by investing in the Portfolio.
Please refer to Investment Policies, Portfolio Investments and
Strategies, and Investment Restrictions for a description of the
investment objectives, policies, and restrictions of the Fund and
the Portfolio. The management fees and expenses of the Fund and
the Portfolio are described under Investment Advisory and Other
Services. The Fund bears its proportionate share of the expenses
of the Portfolio.
Stein Roe has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
The 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
Aug. 23, 1993. The Declaration of Trust of Base Trust provides
that the Fund and other investors in the Portfolio will be liable
for all obligations of the Portfolio that are not satisfied by the
Portfolio. However, the risk of the Fund incurring financial loss
on account of such liability is limited to circumstances in which
liability was inadequately insured and the Portfolio was unable to
meet its obligations. Accordingly, the trustees of the Trust
believe that neither the Fund nor its shareholders will be
adversely affected by reason of the Fund's investing in the
Portfolio.
The Declaration of Trust of Base Trust provides that the
Portfolio will terminate 120 days after the withdrawal of the Fund
or any other investor in the Portfolio, unless the remaining
investors vote to agree to continue the business of the Portfolio.
The trustees of the Trust may vote the Fund's interests in the
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objectives of the Funds and the
Portfolios are nonfundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to the Fund's shareholders.
The fundamental policies of the Fund and the corresponding
fundamental policies of the master Portfolio can be changed only
with shareholder approval. If the Fund, as the Portfolio
investor, is requested to vote on a change in the fundamental
policy of the Portfolio or any other matter pertaining to the
Portfolio (other than continuation of the business of the
Portfolio after withdrawal of another investor), the Fund will
solicit proxies from its shareholders and vote its interest in the
Portfolio for and against such matters proportionately to the
instructions to vote for and against such matters received from
Fund shareholders. The Fund will vote shares for which it
receives no voting instructions in the same proportion as the
shares for which it receives voting instructions. 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
investors in the Portfolio. If other investors hold a majority
interest in the Portfolio, they could have voting control over the
Portfolio.
In the event that the Portfolio's fundamental policies were
changed so as to be inconsistent with those of the Fund, the Board
of Trustees of the Trust would consider what action might be
taken, including changes to the Fund's fundamental policies,
withdrawal of the Fund's assets from the Portfolio and investment
of such assets in another pooled investment entity, or the
retention of an investment adviser to invest those assets directly
in the Portfolio of securities. The 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 the Fund's assets could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution)
to the Fund. Should such a distribution occur, the 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 the Fund
and could affect the liquidity of the Fund.
Each investor in the Portfolio, including the Fund, may add
to or reduce its investment in the Portfolio on each day the NYSE
is open for business. The investor's percentage of the aggregate
interests in the 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 the 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 the
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of the
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 the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio as of the close
of business.
Base Trust may permit other investment companies and/or
other institutional investors to invest in the Portfolio, but
members of the general public may not invest directly in the
Portfolio. Other investors in the Portfolio are not required to
sell their shares at the same public offering price as the Fund,
might incur different administrative fees and expenses than the
Fund, and might charge a sales commission. Therefore, Fund
shareholders might have different investment returns than
shareholders in another investment company that invests
exclusively in the Portfolio. Investment by such other investors
in the Portfolio would provide funds for the purchase of
additional portfolio securities and would tend to reduce the
operating expenses as a percentage of the Portfolio's net assets.
Conversely, large-scale redemptions by any such other investors in
the Portfolio could result in untimely liquidations of the
Portfolio's security holdings, loss of investment flexibility, and
increases in the operating expenses of the Portfolio as a
percentage of its net assets. As a result, the Portfolio's
security holdings may become less diverse, resulting in increased
risk.
Information regarding other investors in the Portfolio may
be obtained by writing to SR&F Base Trust at Suite 3200, One South
Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550.
Stein Roe may provide administrative or other services to one or
more of such investors.
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, Stein Roe believes that the quality of debt
securities 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 ("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>
PART C. OTHER INFORMATION
ITEM 24. EXHIBITS.
[Note: As used herein, the terms "Pre-Effective
Amendment" and "PEA" refer, respectively, to a pre-
effective amendment and a post-effective amendment to the
Registration Statement of the Registrant on Form N-1A
under the Securities Act of 1933, No. 333-19181.]
(a) Agreement and Declaration of Trust dated 7/31/96 as amended
through 12/13/96.
(b) By-Laws of Registrant as adopted on 7/31/96 and restated on
2/5/97 as amended through 2/5/98.
(c) None.
(d) Management Agreement between SR&F Base Trust and Stein
Roe & Farnham Incorporated dated 8/15/95, as amended
through 6/28/99.
(e) Underwriting agreement between Registrant and Liberty Funds
Distributor, Inc. (formerly named Liberty Financial
Investments, Inc.) dated 1/1/98 as amended through 8/4/99.
(f) None.
(g) Custodian contract between Registrant and State Street Bank
and Trust Company dated 2/13/97. (Exhibit 8 to PEA #1.)*
(h)(1) Administrative agreement between Registrant and Stein
Roe & Farnham Incorporated dated 2/14/97. (Exhibit 9(b) to
PEA #1.)*
(2) Accounting and bookkeeping agreement between Registrant
and Stein Roe & Farnham Incorporated dated 8/3/99.
(3) Transfer agency agreement between Registrant and Stein-
Roe Services Inc. dated 2/14/97. (Exhibit 9(a) to PEA #1.)*
(4) Sub-transfer agent agreement between Registrant and
Liberty Funds Services, Inc. (formerly named Colonial
Investors Service Center, Inc.) as amended through 3/31/99.
(i) Opinion and consent of Bell, Boyd & Lloyd. (Exhibit 10 to
Pre-Effective Amendment.)*
(j) Consent of Ernst & Young LLP.
(k) None.
(l) Subscription agreement. (Exhibit 13 to Pre-Effective
Amendment.)*
(m) None.
(n) None.
_____________
* Incorporated by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
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
and Other Services," "Management," and "Transfer Agent" in the
Statement of Additional Information, each of which is incorporated
herein by reference.
ITEM 25. INDEMNIFICATION.
Article VIII of the Agreement and Declaration of Trust of
Registrant (Exhibit a), 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
willful 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
willful 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 willful 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 willful 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 willful 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 willful
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 willful 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 willful 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 willful 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 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 the
distribution agreement.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Stein Roe & Farnham Incorporated ("Stein Roe"), the investment
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 Liberty Corporation Holdings, Inc., which is a wholly 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. Stein Roe 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
Stein Roe, 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
and Other Services."
Certain directors and officers of Stein Roe also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI, of Colonial Management
Associates, Inc. (which is a subsidiary of Liberty Financial
Companies, Inc.), and of the Registrant and other investment
companies managed by SteinRoe. (The listed entities are located
at One South Wacker Drive, Chicago, Illinois 60606, except for
Colonial Management Associates, Inc., which is located at One
Financial Center, Boston, MA 02111, and SteinRoe Variable
Investment Trust and Liberty Variable Investment Trust, which
are located at Federal Reserve Plaza, Boston, MA 02210.) 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
Thomas W. Butch President; Director; Chmn. Vice President
Kevin M. Carome Assistant Clerk
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
Karl J. Maurer Comptroller
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
COLONIAL MANAGEMENT ASSOCIATES, INC.
Ophelia L. Barsketis Senior Vice President
Kevin M. Carome Senior Vice President
William M. Garrison Vice President
Loren A. Hansen Senior Vice President
Clare M. Hounsell Vice President
James P. Haynie Senior Vice President
Timothy J. Jacoby Senior Vice President
Deborah A. Jansen Senior Vice President
North T. Jersild Vice President
Yvonne T. Shields Vice President
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Executive V-P;
Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Jane M. Naeseth Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. VP;
VP; Trustee
Kevin M. Carome Executive VP; Asst. Secy. VP
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. VP; VP;
Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
William M. Garrison Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Heidi J. Walter Vice-President; Secretary
LIBERTY-STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. VP;
VP; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. VP;
VP; Trustee
Kevin M. Carome Executive VP; Asst. Secy. VP
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive Vice-President
Brian M. Hartford Vice-President
William C. Loring Vice-President
Lynn C. Maddox Vice-President
Maureen G. Newman Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President
Kevin M. Carome Executive VP; Asst. Secy. VP
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy VP
Jane M. Naeseth Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST, STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President; Trustee or Manager
Kevin M. Carome Executive VP; Asst. Secy. VP
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
LIBERTY VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Kevin M. Carome Vice President
ITEM 27. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Funds Distributor,
Inc., a subsidiary of Colonial Management Associates, Inc.,
acts as underwriter to Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty
Funds Trust V, Liberty Funds Trust VI, Liberty Funds Trust VII,
Liberty Funds Trust IX, Stein Roe Investment Trust, Stein Roe
Income Trust, Stein Roe Municipal Trust, Liberty-Stein Roe
Advisor Trust, Stein Roe Institutional Trust, Stein Roe Trust,
Stein Roe Floating Rate Income Fund, Stein Roe Institutional
Floating Rate Income Fund, and SteinRoe Variable Investment
Trust. The table below lists the directors and officers of
Liberty Funds Distributor, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- -------------
Anderson, Judith Vice President None
Anetsberger, Gary A. Senior Vice President Senior V-P;
Treasurer
Babbitt, Debra VP & Compliance Officer None
Ballou, Rick Senior Vice President None
Bartlett, John Managing Director None
Blakeslee, James Senior Vice President None
Blumenfeld, Alex Vice President None
Bozek, James Senior Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Butch, Thomas W. Senior Vice President President
Campbell, Patrick Vice President None
Chrzanowski, Daniel Vice President None
Clapp, Elizabeth A. Managing Director None
Conlin, Nancy L. Director; Clerk None
Davey, Cynthia Sr. Vice President None
Desilets, Marian H. Vice President None
Devaney, James Senior Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Dupree, Robert Vice President None
Emerson, Kim P. Senior Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Managing Director None
Fifield, Robert Vice President None
Gariepy, Tom Vice President None
Gauger, Richard Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director; Chairman of Board None
Goldberg, Matthew Senior Vice President None
Gupta, Neeti Vice President None
Geunard, Brian Vice President None
Harrington, Tom Sr. Vice President None
Harris, Carla L. Vice President None
Hodgkins, Joseph Sr. Vice President None
Hussey, Robert Senior Vice President None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia Vice President None
Jones, Jonathan Vice President None
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
Martin, John Senior Vice President None
Martin, Peter Vice President None
McCombs, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Senior Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morse, Jonathan Vice President None
Nickodemus, Paul Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Place, Jeffrey Managing Director None
Powell, Douglas Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Raftery-Arpino, Linda Senior Vice President None
Ratto, Gregory Vice President None
Reed, Christopher B. Senior Vice President None
Riegel, Joyce B. Vice President None
Robb, Douglas Vice President None
Sandberg, Travis Vice President None
Santosuosso, Louise Senior Vice President None
Schulman, David Senior Vice President None
Shea, Terence Vice President None
Sideropoulos, Lou Vice President None
Sinatra, Peter Vice President None
Smith, Darren Vice President None
Soester, Trisha Vice President None
Studer, Eric Vice President None
Sweeney, Maureen Vice President None
Tambone, James Chief Executive Officer None
Tasiopoulos, Lou President None
VanEtten, Keith H. Senior Vice President None
Walter, Heidi J. Vice President V-P & Secy.
Wess, Valerie Senior Vice President None
Young, Deborah Vice President None
- ---------
* The address of Ms. Harris, Ms. Riegel, Ms. Walter, and Messrs.
Anetsberger and Butch is One South Wacker Drive, Chicago, IL
60606. The address of each other director and officer is One
Financial Center, Boston, MA 02111.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at One
South Wacker Drive, Chicago, Illinois 60606. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant
to Rule 31a-3 at the main office of Registrant's transfer agent or
custodian.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
<PAGE>
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 20th day of August, 1999.
STEIN ROE TRUST
By THOMAS W. BUTCH
Thomas W. Butch
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
THOMAS W. BUTCH President August 20, 1999
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice- August 20, 1999
Gary A. Anetsberger President; Treasurer
Principal Financial Officer
PATRICIA J. JUDGE Controller August 20, 1999
Patricia J. Judge
Principal Accounting Officer
WILLIAM W. BOYD Trustee August 20, 1999
William W. Boyd
LINDSAY COOK Trustee August 20, 1999
Lindsay Cook
DOUGLAS A. HACKER Trustee August 20, 1999
Douglas A. Hacker
JANET LANGFORD KELLY Trustee August 20, 1999
Janet Langford Kelly
CHARLES R. NELSON Trustee August 20, 1999
Charles R. Nelson
THOMAS C. THEOBALD Trustee August 20, 1999
Thomas C. Theobald
*Each person signing this amendment is signing in his or her
indicated capacity with the Registrant and also in the same
capacity with SR&F Base Trust.
<PAGE>
STEIN ROE TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- -------------
(a) Declaration of Trust
(b) By-Laws
(d) Management Agreement
(e) Underwriting Agreement
(h)(2) Accounting and Bookkeeping Agreement
(4) Sub-Transfer Agency Agreement
(j) Consent of Ernst & Young LLP
<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.
<PAGE>
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
Gordon R. Worley
<PAGE>
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
<PAGE>
CERTIFICATE
I, Nicolette D. Parrish, hereby certify that I am the
duly elected and acting Assistant Secretary of Stein Roe
Trust (the "Trust") and that the following is a true and
correct copy of a certain resolution duly adopted by
the Board of Trustees of the Trust at a meeting held in
accordance with the By-Laws on February 4, 1998, and that
such resolution is still in full force and effect:
RESOLVED, that Section 2.01 of the By-Laws is
amended and restated as follows:
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. 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 74.
The initial Trustee shall be the person designated in
the Declaration of Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seals of said Trust this 5th day of February, 1998.
NICOLETTE D. PARRISH
Assistant Secretary
(SEAL)
<PAGE>
MANAGEMENT AGREEMENT
BETWEEN
SR&F BASE TRUST AND
STEIN ROE & FARNHAM INCORPORATED
SR&F BASE TRUST, a Massachusetts common law trust
registered under the Investment Company Act of 1940 ("1940 Act")
as an open-end diversified management investment company
("Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation registered under the Investment Advisers
Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and portfolio
management services with respect to the portion of its assets
represented by the shares of beneficial interest issued in each
series listed in Schedule A hereto, as such schedule may be
amended from time to time (each such series hereinafter referred
to as "Portfolio"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage
the investment operations of Trust and each Portfolio, subject
to the terms of this Agreement and to the supervision and
control of Trust's Board of Trustees ("Trustees"). Manager
agrees to perform, or arrange for the performance of, the
following services with respect to each Portfolio:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and commodities
markets, and individual securities, commodities and indices
as it may deem necessary or useful in discharging its
responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in
a manner consistent with and subject to (i) Trust's agreement
and declaration of trust and by-laws; (ii) the Portfolio's
investment objectives, policies, and restrictions as set
forth in written documents furnished by the Trust to Manager;
(iii) all securities, commodities, and tax laws and
regulations applicable to the Portfolio and Trust; and (iv)
any other written limits or directions furnished by the
Trustees to Manager;
(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the
Portfolio, and to implement those decisions, including the
selection of entities with or through which such purchases,
sales or loans are to be effected;
(d) to use reasonable efforts to manage the Portfolio so that it
will qualify as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as
amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Portfolio action, and
any other rights pertaining to Trust or the Portfolio shall
be exercised;
(f) to make available to Trust promptly upon request all of the
Portfolio's records and ledgers and any reports or
information reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the
Trustees, with respect to execution of transactions for Trust on
behalf of a Portfolio, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents
selected by Manager. In connection with the selection of all
such parties for the placement of all such orders, Manager shall
attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor,
purchase and sell Portfolio securities from and to brokers and
dealers who provide Manager with statistical, research and other
information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such
broker or dealer a commission or spread in excess of that which
might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of
the services so provided.
Trust hereby authorizes any entity or person associated
with Manager that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a
Portfolio to the extent permitted by and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder. Trust hereby consents to the retention by
such entity or person of compensation for such transactions in
accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for Trust or one or more
Portfolios in order to obtain best execution or lower brokerage
commissions. In such event, Manager shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair
and consistent with its fiduciary obligations to Trust, the
Portfolios, and Manager's other customers.
Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall,
unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. Administrative Services. Manager shall supervise the
business and affairs of Trust and each Portfolio and shall
provide such services and facilities as may be required for
effective administration of Trust and Portfolios as are not
provided by employees or other agents engaged by Trust; provided
that Manager shall not have any obligation to provide under this
Agreement any such services which are the subject of a separate
agreement or arrangement between Trust and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. Use of Affiliated Companies and Subcontractors. In
connection with the services to be provided by Manager under
this Agreement, Manager may, to the extent it deems appropriate,
and subject to compliance with the requirements of applicable
laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager 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
Manager or such parties.
4. Expenses Borne by Trust. Except to the extent
expressly assumed by Manager herein or under a separate
agreement between Trust and Manager and except to the extent
required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the
organization, operations or business of the Trust. 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 Manager or
Trust and the custodian, transfer agent or any other agent
selected by Trust;
(c) all charges for administrative and accounting services
provided to Trust by Manager, or any other provider of such
services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their
services to Trust, and all expenses of meetings of the
Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each then-
existing Unitholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust 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 portfolio 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 Trust under the 1940 Act and, to the extent no exemption
is available, expenses of registering Trust's shares under
the 1933 Act, of qualifying and maintaining qualification of
Trust and of Trust's shares for sale under securities laws of
various states or other jurisdictions and of registration and
qualification of Trust under all other laws applicable to
Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Portfolio; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association
or other investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses
borne by Trust that are attributable solely to the organization,
operation or business of a Portfolio shall be paid solely out of
Portfolio assets. Any expense borne by Trust which is not
solely attributable to a Portfolio, nor solely to any other
series of shares of Trust, shall be apportioned in such manner
as Manager determines is fair and appropriate, or as otherwise
specified by the Board of Trustees.
6. Expenses Borne by Manager. Manager at its own expense
shall furnish all executive and other personnel, office space,
and office facilities required to render the investment
management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing,
maintaining, and servicing the accounts of Unitholders in each
Portfolio listed in Exhibit A. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian or other agents without additional cost to
Trust.
In the event that Manager pays or assumes any expenses of
Trust or a Portfolio not required to be paid or assumed by
Manager under this Agreement, Manager 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 Manager of any obligation to Trust or a Portfolio
under any separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder,
Trust shall pay to Manager out of the assets of each Portfolio
fees at the annual rate for such Portfolio as set forth in
Schedule B to this Agreement. For each Portfolio, the
management 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 Portfolio,
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 Portfolio's net asset value was determined.
8. Retention of Sub-Adviser. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at
Manager's own cost and expense for the purpose of furnishing one
or more of the services described in Section 1 hereof with
respect to Trust or one or more Portfolios. Retention of a sub-
adviser shall in no way reduce the responsibilities or
obligations of Manager under this Agreement, and Manager shall
be responsible to Trust and its Portfolios for all acts or
omissions of any sub-adviser in connection with the performance
of Manager's duties hereunder.
9. Non-Exclusivity. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be
free to render similar services to others.
10. Standard of Care. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to Trust or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties
under this Agreement, except for loss or liability resulting
from willful misfeasance, bad faith or gross negligence on
Manager's part or from reckless disregard by Manager of its
obligations and duties under this Agreement.
11. Amendment. This Agreement may not be amended as to
Trust or any Portfolio without the affirmative votes (a) of a
majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of
Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) of a "majority of the
outstanding shares" of Trust or, with respect to an amendment
affecting an individual Portfolio, a "majority of the
outstanding shares" of that Portfolio. The terms "interested
persons" and "vote of a majority of the outstanding shares"
shall be construed in accordance with their respective
definitions in the 1940 Act and, with respect to the latter
term, in accordance with Rule 18f-2 under the 1940 Act.
12. Effective Date and Termination. This Agreement shall
become effective as to any Portfolio as of the effective date
for that Portfolio specified in Schedule A hereto. This
Agreement may be terminated at any time, without payment of any
penalty, as to any Portfolio by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that
Portfolio, upon at least sixty (60) days' written notice to
Manager. This Agreement may be terminated by Manager at any
time upon at least sixty (60) days' written notice to Trust.
This Agreement shall terminate automatically in the event of its
"assignment" (as defined in the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect
with respect to any Portfolio until the end of the initial term
applicable to that Portfolio specified in Schedule A and
thereafter from year to year only so long as such continuance is
specifically approved with respect to that Portfolio at least
annually (a) by a majority of those Trustees who are not
interested persons of Trust or of Manager, voting in person at a
meeting called for the purpose of voting on such approval, and
(b) by either the Board of Trustees of Trust or by a "vote of a
majority of the outstanding shares" of the Portfolio.
13. Ownership of Records; Interparty Reporting. All
records required to be maintained and preserved by Trust
pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any
other records the parties mutually agree shall be maintained by
Manager on behalf of Trust are the property of Trust and shall
be surrendered by Manager promptly on request by Trust; provided
that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager
such copies of the financial statements, proxy statements,
reports, and other information relating to the business and
affairs of each Unitholder in a Portfolio as Manager may, at any
time or from time to time, reasonably require in order to
discharge its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each
Portfolio statistical data and other information in such form
and at such intervals as Trust may reasonably request.
14. Non-Liability of Trustees and Unitholders. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Portfolio thereof) and shall
not be binding upon any Trustee, officer, employee, agent or
Unitholder of Trust. Neither the authorization of any action by
the Trustees or Unitholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Unitholder.
15. Use of Manager's Name. Trust may use the name "SR&F
Base Trust" and the Portfolio names 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 Manager as investment adviser. 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 Manager, or with any
organization which shall have succeeded to Manager's business as
investment adviser.
16. 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: August 15, 1995
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR, President
Attest:
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
Attest:
KEITH J. RUDOLF
Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Portfolios of SR&F Base Trust currently subject to this
Agreement are as follows:
Effective End of
Date Initial Term
----------- ------------
SR&F Municipal Money Market Portfolio 9/28/95 6/30/97
SR&F High Yield Portfolio 11/01/96 6/30/98
SR&F Growth & Income Portfolio 02/03/97 6/30/98
SR&F International Portfolio 02/03/97 6/30/98
SR&F Growth Investor Portfolio 02/03/97 6/30/98
SR&F Balanced Portfolio 02/03/97 6/30/98
SR&F Growth Stock Portfolio 02/03/97 6/30/98
SR&F Disciplined Stock Portfolio 02/03/97 6/30/98
SR&F Intermediate Bond Portfolio 02/02/98 6/30/99
SR&F Income Portfolio 02/02/98 6/30/99
SR&F High-Yield Municipals Portfolio 02/02/98 6/30/99
SR&F Cash Reserves Portfolio 03/02/98 6/30/99
Dated: June 28, 1999
SR&F BASE TRUST
By: THOMAS W. BUTCH
Thomas W. Butch
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
President, Mutual Funds Division
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of the SR&F Base Trust
Management Agreement shall be calculated in accordance with the
following schedule(s):
SR&F MUNICIPAL MONEY MARKET PORTFOLIO
0.250% of average net assets
SR&F INTERMEDIATE BOND PORTFOLIO
0.35% of average net assets
SR&F HIGH YIELD PORTFOLIO
0.500% on first $500 million,
0.475% thereafter
SR&F HIGH-YIELD MUNICIPALS PORTFOLIO
0.450% up to $100 million,
0.425% next $100 million,
0.400% thereafter
SR&F INCOME PORTFOLIO
0.50% up to $100 million,
0.475% thereafter
SR&F CASH RESERVES PORTFOLIO
0.250% up to $500 million,
0.225% thereafter
SR&F INTERNATIONAL PORTFOLIO
0.85% of average net assets
SR&F DISCIPLINED STOCK PORTFOLIO
0.75% up to $500 million,
0.70% next $500 million,
0.65% next $500 million,
0.60% thereafter
SR&F BALANCED PORTFOLIO
0.55% up to $500 million,
0.50% next $500 million,
0.45% thereafter
SR&F GROWTH & INCOME PORTFOLIO,
SR&F GROWTH INVESTOR PORTFOLIO, AND
SR&F GROWTH STOCK PORTFOLIO
0.60% up to $500 million,
0.55% next $500 million,
0.50% thereafter
Dated: June 28, 1999
SR&F BASE TRUST
By: THOMAS W. BUTCH
Thomas W. Butch
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
President, Mutual Funds Division
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
AND LIBERTY FINANCIAL INVESTMENTS, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of the 1st
day of January 1998 by and between Stein Roe Income Trust, Stein
Roe Investment Trust, Stein Roe Municipal Trust, Stein Roe Trust
and Stein Roe Institutional Trust, each a business trust organized
and existing under the laws of the Commonwealth of Massachusetts
(hereinafter collectively referred to as the "Fund"), and Liberty
Financial Investments, Inc., 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) In all cases except for orders transmitted through the
FundSERV/NSCC system, 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) The Distributor shall receive directly from financial
intermediaries which trade through the FundSERV/NSCC
system all payments for the purchase of the Fund's
Shares and shall also cause to be paid directly to such
intermediaries amounts due to them for the redemption
or repurchase of all the Fund's Shares. The
Distributor shall be acting as the Fund's agent in
accepting payment for the orders and not be acting in a
principal capacity.
(4) 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;
(5) 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, 1998, 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.
A copy of the Declaration of Trust and of each amendment thereto
has been 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.
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: One Financial Center
Boston, Massachusetts 02111
Attn: Secretary
If to Stein Roe & Farnham
Incorporated: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY FINANCIAL INVESTMENTS, INC.
By: TIMOTHY K. ARMOUR
ATTEST:
MARJORIE M. PLUSKOTA
Assistant Clerk
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: HANS P. ZIEGLER
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>
Revised Exhibit A to Underwriting Agreement
Between Stein Roe Investment Trust, Stein Roe Income
Trust, Stein Roe Municipal Trust, Stein Roe Trust and
Stein Roe Institutional Trust and
Liberty Funds Distributor Inc. (f/k/a Liberty
Financial Investments, Inc.)
STEIN ROE INSTITUTIONAL TRUST
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
Dated: August 4,1999
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: ________________________________
Thomas W. Butch
President
Attest:
_______________________
Nicolette D. Parrish
Assistant Secretary
LIBERTY FUNDS DISTRIBUTOR, INC.
By: _________________________________
Name:
Title:
Attest:
_____________________________
Name:
Title:
<PAGE>
Date _____________
LIBERTY FINANCIAL INVESTMENTS, INC.
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 Financial Investments, Inc. Dealer
One Financial Center ________________
Boston, Massachusetts 02211 ________________
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 FINANCIAL INVESTMENTS, INC.
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
<PAGE>
AMENDMENT TO UNDERWRITING AGREEMENT
This Amendment dated as of August 4,1999, amends the
underwriting agreement dated January 1, 1998, as amended (the
"Agreement"), by and between Stein Roe Income Trust, Stein Roe
Investment Trust, Stein Roe Municipal Trust, Stein Roe Trust and
Stein Roe Institutional Trust, each a business trust organized and
existing under the laws of the Commonwealth of Massachusetts
(hereinafter collectively referred to as the "Fund"), and Liberty
Funds Distributor, Inc.(formerly known as Liberty Financial
Investments, Inc.), a corporation organized and existing under the
laws of the State of Delaware (hereinafter call the
"Distributor").
The Agreement is hereby amended to remove Stein Roe Income
Trust, Stein Roe Investment Trust, and Stein Roe Municipal Trust
as parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date first
written above.
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: THOMAS W. BUTCH
ATTEST: Thomas W. Butch, President
NICOLETTE D. PARRISH
Assistant Secretary
LIBERTY FUNDS DISTRIBUTOR, INC.
By: _________________________________
Name:
Title:
Attest:
_____________________________
Name:
Title:
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
Thomas W. Butch
President, Mutual Funds Division
ATTEST: NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
STEIN ROE FUNDS
AMENDED AND RESTATED
ACCOUNTING AND BOOKKEEPING AGREEMENT
This Agreement is made this 3rd day of August, 1999 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. Use of Affiliated Companies and Subcontractors. In connection
with the services to be provided by Stein Roe under this
Agreement, Stein Roe 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 Stein
Roe, provided that Stein Roe 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 Stein Roe or such parties.
13. 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.
14. 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.
15. 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.
16. 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: THOMAS W. BUTCH
NICOLETTE D. PARRISH Thomas W. Butch,
Nicolette D. Parrish President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
NICOLETTE D. PARRISH Thomas W. Butch,
Nicolette D. Parrish President, Mutual Funds
Division
<PAGE>
STEIN ROE TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX I
The series of the Trust currently subject to this Agreement are as
follows:
Series Effective Date
Stein Roe Institutional Client High Yield Fund August 3, 1999
Dated: August 3, 1999
<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>
SUB-TRANSFER AGENT AGREEMENT
Agreement dated as of July 3, 1996, between SteinRoe
Services Inc. ("SSI"), a Massachusetts corporation, for
itself and on behalf SteinRoe Municipal Trust, SteinRoe
Income Trust and SteinRoe Investment Trust, each a
Massachusetts business trust (all referred to herein as the
"Trust") comprised of the series of portfolios listed in
Schedule A (as the same may from time to time be amended to
add or to delete one or more series, all referred to herein
as the "Fund"), and Colonial Investors Service Center, Inc.
("CISC"), a Massachusetts corporation.
WHEREAS, the Trust has appointed SSI as Transfer Agent,
Registrar and Dividend Disbursing Agent for the Fund, a
registered investment company, pursuant to Restated Agency
Agreement dated August 1, 1995 ("Transfer Agent Agreement");
WHEREAS, SSI is a registered transfer agent duly
authorized to appoint CISC as its agent for purposes of
performing certain transfer agency, registration and dividend
disbursement services in respect of the Trust;
WHEREAS, CISC desires to accept such appointment and to
perform such services upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Stein Roe & Farnham, Inc. ("SRF") is the
investment adviser to the Fund and Liberty Securities
Corporation is the principal underwriter of its shares.
NOW THEREFORE, in consideration of the mutual promises
and covenants set forth herein, the parties hereto agree as
follows:
1. Appointment. SSI hereby appoints CISC to act as its
agent in respect of the purchase, redemption and transfer of
Fund shares and dividend disbursing services in connection
with such shares other than with respect to Fund shares (a)
held under Stein Roe Counselor [service mark] for which SSI
shall perform such services and (b) held in omnibus accounts
with respect to which such services are performed by third
party financial institutions as described in the Fund's
Prospectus from time to time. CISC accepts such appointments
and will perform the duties and functions described herein in
the manner hereinafter set forth. In respect of its duties
and obligations pursuant to this Agreement, CISC will act as
agent of SSI and not as agent of the Trust nor the Fund.
CISC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations
hereunder in accordance with the practice of transfer agents
of investment companies registered with the Securities and
Exchange Commission and in compliance with all laws
applicable to mutual fund transfer agents and the Fund.
<PAGE> 2
CISC agrees that it shall perform usual and ordinary
services as transfer agent, registrar and dividend disbursing
agent, which are necessary and appropriate for investment
companies registered with the Securities and Exchange
Commission, except as otherwise specifically excluded herein,
including but not limited to: receiving and processing
payments for purchases of Fund shares, opening shareholder
accounts, receiving and processing requests for liquidation
of Fund shares , transferring and canceling stock
certificates, maintaining all shareholder accounts, preparing
annual shareholder meetings lists, corresponding with
shareholders regarding transaction rejections, providing
order room services to brokers, withholding taxes on
accounts, disbursing income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department
Form 1099 for shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable
transactions in shareholder accounts, recording reinvestment
of dividends and distributions in Fund shares, and causing
liquidation of shares and disbursements to be made to
withdrawal plan holders. The services to be performed by
CISC under this Agreement may be set forth in a procedures
manual and other documents as mutually agreed to by CISC and
SSI. Specifically excluded from the services to be provided
by CISC are the following: mailing proxy materials,
receiving and tabulating proxies, mailing shareholder reports
and prospectuses, account research, shareholder
correspondence and telephone services regarding general
inquiries, information requests and all other matters except
transaction rejections, all of which SRS agrees to continue
to perform directly on behalf of the Trust and the Fund.
2. Fees and Charges. SSI will pay CISC for the services
provided hereunder in accordance with and in the manner set
forth in Schedule B to this Agreement.
3. Representations and Warranties of CISC. CISC
represents and warrants to SSI that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
by this Agreement and it is in compliance and shall
continue during the term of this Agreement to be in
compliance with all such applicable laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement; and
<PAGE> 3
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission, it is duly
registered as a transfer agent as provided in Section
17Ac of the Securities and Exchange Act of 1934, and
it will remain so registered and will comply with all
state and federal laws and regulations relating to
transfer agents throughout the term of this
Agreement.
4. Representations and Warranties of SSI. SSI
represents and warrants to CISC that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
State of Illinois;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
in this Agreement and in the Transfer Agent Agreement
and it is in compliance and shall continue during the
term of this Agreement to be in compliance with the
Transfer Agent Agreement and all such applicable
laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement and the Transfer Agent Agreement; and
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission; it is duly
registered as a Transfer Agent as provided in Section
17Ac of the Securities Exchange Act of 1934; and it
will remain so registered and comply with all state
and federal laws and regulations relating to transfer
agents throughout the term of this Agreement.
5. Representations and Warranties of the Trust. The
Trust represents and warrants to CISC that:
(a) It is a business trust duly organized and existing
and in good standing under the laws of the State of
Massachusetts;
(b) The Fund is an open-end diversified management
investment company registered under the Investment
Company Act of 1940;
<PAGE> 4
(c) Registration statements under the Securities Act of
1933 and applicable state laws are currently
effective and will remain effective at all times with
respect to all shares of the Fund being offered for
sale;
(d) The Trust is empowered under applicable laws and
regulations and by its Agreement and Declaration of
Trust and By-Laws to enter into and perform this
Agreement; and
(e) All requisite proceedings and actions have been
taken to authorize it to enter into and perform this
Agreement.
6. Copies of Documents. SSI promptly from time to time
will furnish CISC with copies of the following Trust and Fund
documents and all amendments or supplements thereto: the
Agreement and Declaration of Trust ; the By-Laws; and the
Registration Statement under Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended,
together with any other information reasonably requested by
CISC. The Prospectus and Statement of Additional Information
contained in such Registration Statement, as from time to
time amended and supplemented, are herein collectively
referred to as the "Fund's Prospectus."
On or before the date of effectiveness of this
Agreement, or as soon thereafter as is reasonably
practicable, and from time-to-time thereafter, SSI will
furnish CISC with certified copies of the resolutions of the
Trustees of the Trust authorizing this Agreement and
designating authorized persons to give instructions to CISC;
if applicable, a specimen of the certificate for shares of
the Fund in the form approved by the Trustees of the Trust,
with a certificate of the Secretary of the Trust as to such
approval; and certificates as to any change in any officer,
director, or authorized person of the SSI and the Trust.
7. Share Certificates. The Fund has resolved that all
of the Fund's shares shall hereafter be issued in
uncertificated form. Thus, CISC shall not be responsible for
the issuance of certificates representing shares in the Fund.
However, CISC shall maintain a record of each certificate
previously issued and outstanding, the number of shares
represented thereby, and the holder of record of such shares.
8. Lost or Destroyed Certificates. In case of the
alleged loss or destruction of any share certificate, no new
certificate shall be issued in lieu thereof, unless there
shall first be furnished to CISC an affidavit of loss or non-
receipt by the holder of shares with respect to which a
certificate has been lost or destroyed, supported by an
appropriate bond paid for by the shareholder which is
satisfactory to CISC and issued by a surety company
satisfactory to CISC. CISC shall place and maintain stop
transfer instructions on all lost certificates as to which it
receives notice.
9. Receipt of Funds for Investment. CISC will maintain
one or more accounts with The First National Bank of Boston
("Bank"),in the name of SSI into which
<PAGE> 5
it will deposit funds payable to CISC or SSI as agent for, or
otherwise identified as being for the account of, the Trust
or the Fund.
10. Shareholder Accounts. Upon receipt of any funds
referred to in paragraph 9, CISC will compute the number of
shares purchased by the shareholder according to the net
asset value of Fund shares determined in accordance with
applicable federal laws and regulations and as described in
the Prospectus of the Fund and:
(a) In the case of a new shareholder, open and maintain
an open account for such shareholder in the name or
names set forth in the subscription application form;
(b) Send to the shareholder a confirmation indicating the
amount of full and fractional shares purchased (in
the case of fractional shares, rounded to three
decimal places) and the price per share;
(c) In the case of a request to establish a plan or
program being offered by the Fund's Prospectus, open
and maintain such plan or program for the shareholder
in accordance with the terms thereof; and
(d) Perform such other services and initiate and maintain
such other books and records as are customarily
undertaken by transfer agents in maintaining
shareholder accounts for registered investment
company investors;
all subject to requirements set forth in the Fund's
Prospectus with respect to rejection of orders.
For closed accounts, CISC will maintain account records
through June of the calendar year following the year in which
the account is closed, or such other period of time as CISC
and SSI shall mutually agree in writing from time to time.
11. Unpaid Checks; Accounts Assigned for Collection.
If any check or other order for payment of money on the
account of any shareholder or new investor is returned unpaid
for any reason, CISC will:
(a) Give prompt notification to SRS of such non-payment
by facsimile sent prior to 9 a.m. E.S.T.; and
(b) Upon SSI's written instruction, received by facsimile
delivery not later than 11 a.m. E.S.T., authorize
payment of such order notwithstanding insufficient
shareholder account funds, on the condition that SSI
shall indemnify CISC and payor bank in respect of
such payment.
12. Dividends and Distributions. SSI will promptly
notify CISC of the declaration of any dividend or
distribution with respect to Fund shares, the amount of
<PAGE> 6
such dividend or distribution, the date each such dividend or
distribution shall be paid, and the record date for
determination of shareholders entitled to receive such
dividend or distribution. As dividend disbursing agent, CISC
will, on or before the payment date of any such dividend or
distribution, notify the Trust's custodian of the estimated
amount of cash required to pay such dividend or distribution,
and the Trust agrees that on or before the mailing date of
such dividend or distribution it will instruct its custodian
to make available to CISC sufficient funds in the dividend
and distribution account maintained by CISC with the Bank.
As dividend disbursing agent, CISC will prepare and
distribute to shareholders any funds to which they are
entitled by reason of any dividend or distribution and, in
the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, CISC
will make appropriate credits to their accounts and cause to
be prepared and mailed to shareholders confirmation
statements and, of such additional shares. CISC will maintain
all records necessary to reflect the crediting of dividends
and distributions which are reinvested in shares of the Fund.
13. Redemptions. CISC will receive and process for
redemption in accordance with the Fund's Prospectus, share
certificates and requests for redemption of shares as
follows:
(a) If such certificate or request complies with
standards for redemption, CISC will, in accordance
with the Fund's current Prospectus, pay to the
shareholder from funds deposited by the Fund from
time to time in the redemption account maintained by
CISC with the Bank, the appropriate redemption price
as set forth in the Fund's Prospectus; and
(b) If such certificate or request does not comply with
the standards for redemption, CISC will promptly
notify the shareholder and shall effect the
redemption at the price in effect at the time of
receipt of documents complying with the standard.
14. Transfer and Exchanges. CISC will review and
process transfers of shares of the Fund and to the extent, if
any, permitted in the Prospectus of the Fund, exchanges
between series of the Trust received by CISC. If shares to
be transferred are represented by outstanding certificates,
CISC will, upon surrender to it of the certificates in proper
form for transfer, credit the same to the transferee on its
books. If shares are to be exchanged for shares of another
Fund, CISC will process such exchange in the same manner as a
redemption and sale of shares, in accordance with the Fund's
Prospectus may in its.
15. Plans. CISC will process such plans or programs
for investing in shares, and such systematic withdrawal
plans, as are provided for in the Fund's Prospectus.
16. Tax Returns and Reports. CISC will prepare and
file tax returns and reports with the Internal Revenue
Service and any other federal, state or local governmental
agency which may require such filings, including state
abandoned
<PAGE> 7
property laws, and conduct appropriate communications
relating thereto, and, if required, mail to shareholders such
forms for reporting dividends and distributions paid by the
Fund as are required by applicable laws, rules and
regulations, and CISC will withhold such sums as are required
to be withheld under applicable Federal and state income tax
laws, rules and regulations. CISC will periodically provide
SSI with reports showing dividends and distributions paid and
any amounts withheld. CISC will also make reasonable attempt
to obtain such tax withholding information from shareholders
as is required to be obtained on behalf of the Trust under
applicable federal or state laws.
17. Record Keeping. CISC will maintain records, which
at all times will be the property of the Trust and available
for inspection by SSI, showing for each shareholder's account
the following information and such other information as CISC
and SSI shall mutually agree in writing from time to time:
(a) Name, address, and United States taxpayer
identification or Social Security number, if provided
(or amounts withheld with respect to dividends and
distributions on shares if a taxpayer identification
or Social Security number is not provided);
(b) Number of shares held for which certificates have not
been issued and for which certificates have been
issued;
(c) Historical information regarding the account of each
shareholder, including dividends and distributions
paid, if any, gross proceeds of sales transactions,
and the date and price for transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account of which SSI has notified CISI;
(e) Information with respect to withholdings of taxes as
required under applicable Federal and state laws and
regulations;
(f) Any capital gain or dividend reinvestment order and
plan application relating to the current maintenance
of a shareholder's account; and
(g) Any instructions as to record addresses and any
correspondence or instructions relating to the
current maintenance of a shareholder's account.
SSI hereby agrees that CISC shall have no liability or
obligation with respect to the accuracy or completeness of
shareholder account information received by CISC on or about
the Operational Date.
<PAGE> 8
By mutual agreement of CISC and SSI, CISC shall
administer a program whereby reasonable attempt is made to
identify current address information from shareholders whose
mail from the Trust is returned.
CISC shall maintain at its expense those records
necessary to carry out its duties under this Agreement. In
addition, CISC shall maintain at its expense for periods
prescribed by law all records which the Fund or CISC is
required to keep and maintain pursuant to any applicable
statute, rule or regulation, including without limitation
Rule 31(a)-1 under the Investment Company Act of 1940,
relating to the maintenance of records in connection with the
services to be provided hereunder. Upon mutual agreement of
CISC and SSI, CISC shall also maintain other records
requested from time to time by SSI, at SSI's expense.
At the end of the period in which records must be
retained by law, such records and documents will either be
provided to the Trust or destroyed in accordance with prior
written authorization from the Trust.
18. Retirement Plan Services. CISC shall provide sub-
accounting services for retirement plan shareholders
representing group relationships with special recordkeeping
needs.
19. Other Information Furnished. CISC will furnish to
SSI such other information, including shareholder lists and
statistical information as may be agreed upon from time to
time between CISC and SSI. CISC shall notify SSI and the
Trust of any request or demand to inspect the share records
of the Fund, and will not permit or refuse such inspection
until receipt of written instructions from the Trust as to
such permission or refusal unless required by law.
CISC shall provide to the Trust any results of studies
and evaluations of systems of internal accounting controls
performed for the purpose of meeting the requirements of
Regulation 240.17Ad-13(a) of the Securities Exchange Act of
1934.
20. Shareholder Inquiries. CISC will not respond to
written correspondence from fund shareholders or others
relating to the Fund other than those regarding transaction
rejections and clarification of transaction instructions, but
shall forward all such correspondence to SSI.
21. Communications to Shareholders and Meetings. CISC
will determine all shareholders entitled to receive, and will
cause to be addressed and mailed, all communications by the
Fund to its shareholders, including quarterly and annual
reports, proxy material for meetings, and periodic
communications. CISC will cause to be received, examined and
tabulated return proxy cards for meetings of shareholders and
certify the vote to the Trust Fund.
22. Other Services by CISC. CISC shall provide SSI,
with the following additional services:
<PAGE> 9
(a) All CTRAN, CIMAGE, Price Waterhouse Blue Sky 2, and
Pegashares functionality and enhancements (on a
remote basis) as they now exist and as they are
developed and made available to CISC clients;
(b) Initial programs and report enhancements to the CTRAN
System which are necessary to accommodate the Fund as
a no-load fund group;
(c) Development, systems training, technical support,
implementation, and maintenance of special programs
and systems to enhance overall shareholder servicing
capability;
(d) Product and system training for personnel of
institutional servicing agents.
23. Insurance. CISC will not reduce or allow to lapse
any of its insurance coverages from time to time in effect,
including but not limited to errors and omissions, fidelity
bond and electronic data processing coverage, without the
prior written consent of SSI. Attached as Schedule D to this
Agreement is a list of the insurance coverage which CISC has
in effect as of the date of execution of this Agreement and,
if different, will have in effect on the Operational Date.
24. Duty of Care and Indemnification. CISC will at all
times use reasonable care, due diligence and act in good
faith in performing its duties hereunder. CISC will not be
liable or responsible for delays or errors by reason of
circumstances beyond its control, including without
limitation acts of civil or military authority, national or
state emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or
power supply.
CISC may rely on certifications of those individuals
designated as authorized persons to give instructions to CISC
as to proceedings or facts in connection with any action
taken by the shareholders of the Fund or Trustees of the
Trust, and upon instructions not inconsistent with this
Agreement from individuals who have been so authorized. Upon
receiving authorization from an individual designated as an
authorized person to give instructions to CISC, CISC may
apply to counsel for the Trust, or counsel for SSI or the
Fund's investment adviser, at the Fund's expense, for advice.
With respect to any action reasonably taken on the basis of
such certifications or instructions or in accordance with the
advice of counsel of the Trust, or counsel for SSI or the
Fund's investment adviser, the Fund will indemnify and hold
harmless CSC from any and all losses, claims, damages,
liabilities and expenses (including reasonable counsel fees
and expenses).
SSI will indemnify CISC against and hold CISC harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect of any claim, demand, action or suit not resulting
from CISC's bad faith, negligence, lack of due diligence or
willful misconduct and arising out of, or in connection with
its duties under this Agreement.
<PAGE> 10
CISC shall indemnify SSI against and hold SSI harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit resulting from
CISC's bad faith, negligence, lack of due diligence or
willful misconduct, and arising out of, or in connection
with, its duties under this Agreement. For purposes of this
Sub-Transfer Agent Agreement, "lack of due diligence" shall
mean the processing by CISC of a Fund share transaction in
accordance with a practice that is not substantially in
compliance with (1) a transaction processing practice of SSI
approved by Fund Trustees, (2) insurance coverages, or (3)
generally accepted industry practices of mutual fund agents.
CISC shall also be indemnified and held harmless by SSI
against any loss, claim, damage, liability and expenses
(including reasonable counsel fees and expenses) by reason of
any act done by it in good faith with due diligence and in
reasonable reliance upon any instrument or certificate for
shares reasonably believed by it (a) to be genuine and (b) to
be signed, countersigned or executed by any person or persons
authorized to sign, countersign, or execute such instrument
or certificate.
In addition, SSI will indemnify and hold CISC harmless
against any loss, claim, damage, liability and expense
(including reasonable counsel fees and expenses) in respect
of any claim, demand, action or suit as a result of the
negligence of the Fund, Trust SRF or SSI, or as a result of
CISC's acting upon any instructions reasonably believed by
CISC to have been executed or orally communicated by a duly
authorized officer or employee of the Fund, Trust SRF or SSI,
or as a result of acting in reliance upon written or oral
advice reasonably believed by CISC to have been given by
counsel for the Fund, Trust SRF or SSI.
In any case in which a party to this Agreement may be
asked to indemnify or hold harmless the other party hereto,
the party seeking indemnification shall advise the other
party of all pertinent facts concerning the situation giving
rise to the claim or potential claim for indemnification, and
each party shall use reasonable care to identify and notify
the other promptly concerning any situation which presents or
appears likely to present a claim for indemnification.
Prior to admitting to or agreeing to settle any claim subject
to this Section, each party shall give the other reasonable
opportunity to defend against said claim in either party's
name.
25. Employees. CISC and SSI are separately
responsible for the employment, control and conduct of their
respective agents and employees and for injury to such agents
or employees or to others caused by such agents or employees.
CISC and SSI severally assume full responsibility for their
respective agents and employees under applicable statues and
agree to pay all employer taxes thereunder. The conduct of
their respective agents and employees shall be included in
any reference to the conduct of CISC or SSI for all purposes
hereunder.
26. Termination and Amendment. This Agreement shall
continue in effect for eighteen (18) months from the
Operational Date, and will automatically be
<PAGE> 11
renewed for successive one year terms thereafter. After
eighteen (18) months from the Operational Date the Agreement
may be terminated at any time by not less than one hundred
eighty (180) days written notice. Upon termination hereof,
SSI shall pay CISC such compensation as may be due to CISC as
of the date of such termination for services rendered and
expenses incurred, as described in Schedule B. This
Agreement may be modified or amended from time to time by
mutual agreement between SSI and CISC.
27. Successors. In the event that in connection with
termination of this Agreement a successor to any of CISC's
duties or responsibilities hereunder is designated by SSI by
written notice to CISC, CISC shall promptly at the expense of
SSI, transfer to such successor, or if no successor is
designated, transfer to the Trust, a certificate list of the
shareholders of the Fund (with name, address and taxpayer
identification or Social Security number), a historical
record of the account of each shareholder and the status
thereof, all other relevant books, records, correspondence
and other data established or maintained by CISC under this
Agreement in machine readable form and will cooperate in the
transfer of such duties and responsibilities, and in the
establishment of books, records and other data by such
successor. CISC shall be entitled to reimbursement of its
reasonable out-of-pocket expenses in respect of assistance
provided in accordance with the preceding sentence.
28. Miscellaneous. This Agreement shall be construed
in accordance with and governed by the laws of The
Commonwealth of Massachusetts.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit
any of the provisions of this Agreement 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 taken together
shall constitute one and the same instrument.
CISC shall keep confidential all records and information
provided to CISC by the Trust, SSI, SRF, and prior, present
or prospective shareholders of the Fund, except, after notice
to SSI , to the extent disclosures are required by this
Agreement, by the Fund's registration statement, or by a
reasonable request or a valid subpoena or warrant issued by a
court, state or federal agency or other governmental
authority.
Neither CISC nor SSI may use each other's name in any
written material without written consent of such other party,
provided , however, that such consent shall not unreasonably
withheld. CISC and SSI hereby consent to all uses of their
respective names which refer in accurate terms to appointment
and duties under this Agreement or which are required by any
governmental or regulatory authority including required
filings. SSI, SRF, the Trust and the Fund consent to use of
their respective names and logos by CISC for shareholder
correspondence and statements
This Agreement shall be binding upon and shall inure to
the benefit of SSI and CISC and their respective successors
and assigns. Neither SSI nor CISC shall assign this
<PAGE> 12
Agreement nor its rights and obligations under this Agreement
without the express written consent of the other party.
This Agreement may be amended only in writing by mutual
agreement of the parties.
Any notice and other instrument in writing authorized or
required by this Agreement t be given to SSI or CISC shall
sufficiently be given if addressed to that party and mailed
or delivered to it as its office set for the below or at such
other place as it may from time to time designate in writing.
SSI, the Trust and the Fund:
SteinRoe Services Inc.
One South Wacker Drive
Suite 3300
Chicago, Illinois 60606
Attn: Jilaine Hummel Bauer, Esq.
CISC:
Colonial Investors Service Center, Inc.
One Financial Center
Boston, Massachusetts 02111
Attn: Mary McKenzie; with a separate copy to
Attn: Nancy L. Conlin, Esq., Legal Department
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and sealed as of the date first
above written.
STEINROE SERVICES INC.
By: TIMOTHY K. ARMOUR
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: D.S. SCOON
Name: Davey S. Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
By: TIMOTHY K. ARMOUR
Name: Timothy K. Armour
Title: President
<PAGE>
SCHEDULE A
Stein Roe Mutual Funds (the "Fund"), consists of the
following series of portfolios:
Stein Roe Investment Trust
- --------------------------
Stein Roe Growth & Income Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Income Trust
- ----------------------
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Municipal Trust
- -------------------------
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Stein Roe Managed Municipals Fund
<PAGE>
SCHEDULE B
This Schedule B is attached to and is part of a certain
Sub-Transfer Agent Agreement ("Agreement") dated July 3, 1996
between SteinRoe Services Inc. ("SSI") and Colonial Investors
Center, Inc. ("CISC").
A. SSI will pay CISC for services rendered under the
Agreement and in accordance with a negotiated allocation of
revenues and reimbursement of costs as follows:
1. As of the Operational Date, CISC and SSI shall agree upon
a fixed monthly per account fee to be paid under the
Agreement, which shall be in an amount equal to 1/12 (a) the
estimated total, determined on an annualized basis, of (1)
all incremental costs incurred by CISC in connection with the
sub-transfer agency relationship, plus (2) 1/2 the net
economic benefit derived by Liberty Financial Companies, the
parent company of both CISC and SSI, as a result of the sub-
transfer agency relationship, (b) divided by the number of
shareholder accounts to be serviced by CISC pursuant to the
Agreement as of the Operational Date.
2. For the first eighteen (18) months of the Agreement, SSI
shall pay CISC, monthly in arrears, commencing with the first
day of August, 1996, and on the first day of each month
thereafter, the greater of (a) the product of the fixed per
account fee determined as provided in paragraph 1. above
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month, and (b) 1/12 the annualized estimated total costs and
benefit determined pursuant to (a) of paragraph 1. above.
All estimates under this paragraph shall be determined no
later than September 30, 1996. The annual fee for the first
eighteen months shall not be less than $1.4 million.
3. Commencing January 1, 1998, and during each calendar year
thereafter, SSI shall pay CISC a fee equal to CISC's budgeted
annual per account expense of providing services pursuant to
the Agreement. Said fee shall be paid monthly in arrears, on
the first day of each month, in an amount equal to the
product of 1/12 the budgeted annual per account fee
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month. All budgeted numbers under this paragraph shall be
determined no later than November 30 each year.
B. The Fund shall be credited each month with balance
credits earned on all Fund cash balances.
Upon thirty (30) days' notice to SSI, CISC may increase
the fees it charges to the extent the cost to CISC of
providing services increases (i) because of changes in the
Fund's Prospectus, or (ii) on account of any change after the
date hereof in law or regulations governing performance of
obligations hereunder.
Fees for any additional services not provided herein, ad
hoc reports or special programming requirements to be
provided by CISC shall be agreed upon by SSI and CISC at such
time as CISC agrees to provide any such services.
In addition to paying CISC fees as described herein, SSI
agrees to reimburse CISC for any and all out-of-pocket
expenses and charges in performing services under the
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 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 CISC and SSI.
<PAGE>
SCHEDULE C
SRS and CSC hereby agree that the date on which the
complete services began ("Operational Date") under the Sub-
Transfer Agent Agreement between them dated July 3, 1996, is:
July , 1996
STEINROE SERVICES INC.
By:________________________________________
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By:________________________________________
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of January 1, 1997, and
effective that date unless otherwise indicated below, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust and Stein Roe Investment Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add Stein Roe Advisor Trust
(effective February 14, 1997), Stein Roe Institutional Trust
(effective January 2, 1997) and Stein Roe Trust (effective
February 14, 1997), comprised of the Series listed on
Schedule A, as amended, and assenting parties to the
contract and to add new series of the existing Trusts. The
amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY DILLON MCKENZIE
Name: Mary Dillon McKenzie
Title: Senior Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: JILAINE HUMMEL BAUER
Name: Jilaine Hummel Bauer
Title: Executive Vice President and Secretary
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of June 30, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to add additional
series of the existing Trusts. The amended Schedule A is as
follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: JOHN W. BYRNE
Name: John W. Byrne
Title: Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 15, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to remove Stein Roe
Advisor Trust as a party to this agreement. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 17, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to remove two series of Income Trust
from Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: ANNE E. MARCEL
Name: Anne E. Marcel
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of April 30, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add one series of Investment Trust
to Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 19, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc. ("CISC") to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title:
Liberty Funds Services, Inc.
By: DAVEY SCOON
Name: Davey Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of February 2, 1999, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc.) to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
STEIN ROE INSTITUTIONAL TRUST
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title:
Liberty Funds Services, Inc.
By: NANCY L. CONLIN
Name: Nancy L. Conlin
Title: Clerk
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of March 31, 1999, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc.) to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
Stein Roe Growth Investor Fund
STEIN ROE INSTITUTIONAL TRUST
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
Liberty Funds Services, Inc.
By: NANCY L. CONLIN
Name: Nancy L. Conlin
Title: Clerk
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to the use
of our report dated August 11, 1999 with respect to Stein Roe
Institutional Client High Yield Fund and SR&F High Yield Portfolio
in the Registration Statement (Form N-1A) and related Statement of
Additional Information of Stein Roe Trust, filed with the
Securities and Exchange Commission in this Post-Effective
Amendment No. 5 to the Registration Statement under the Securities
Act of 1933 (Registration No. 333-19181) and in this Amendment No.
6 to the Registration Statement under the Investment Company Act
of 1940 (Registration No. 811-07997).
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 1999
