1933 Act Registration No. 333-17255
1940 Act File No. 811-07955
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
LIBERTY-STEIN ROE ADVISOR 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 & Secretary Bell, Boyd & Lloyd
Liberty-Stein Roe Advisor 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)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant elects to register under the Securities Act of 1933 an
indefinite number of shares of beneficial interest of the series
designated Stein Roe Internet Leaders Fund. 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 Advisor Growth
& Income Fund, Stein Roe Advisor Young Investor Fund, Stein Roe
Advisor Growth Stock Fund, Stein Roe Advisor Special Fund, Stein
Roe Advisor High-Yield Municipals Fund, and Stein Roe Advisor
Intermediate Bond Fund.
<PAGE>
The prospectuses and statements of additional information relating
to the series of Liberty-Stein Roe Advisor Trust designated Stein
Roe Advisor Growth & Income Fund, Stein Roe Advisor Young Investor
Fund, Stein Roe Advisor Growth Stock Fund, Stein Roe Advisor
Special Fund, Stein Roe Advisor High-Yield Municipals Fund, and
Stein Roe Advisor Intermediate Bond Fund are not affected by the
filing of this Post-Effective Amendment No. 10.
<PAGE>
PRELIMINARY PROSPECTUS DATED JUNE 3, 1999
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not a soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Stein Roe Internet Leaders Fund
Prospectus
________, 1999
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>
The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Your Expenses
Your Account
Purchasing Shares
Opening an Account
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
Other Investments and Risks
Short Sales
Futures
Options
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
THE FUND
INVESTMENT GOAL Stein Roe Internet Leaders Fund seeks long-term
growth.
PRINCIPAL INVESTMENT STRATEGY Under normal market circumstances,
the Fund invests at least 65 percent of its assets in companies of
any size that are Internet Sector Companies. Internet Sector
Companies include companies involved in the development, design
and distribution of products and services which form the
infrastructure of the Internet. Internet Sector Companies also
include companies experiencing incremental growth due to business
that is conducted over the Internet.
In selecting investments for the portfolio, the Fund's managers
target established companies, emerging companies and start-up
companies. The portfolio managers consider an established company
to be one that has a significant share of a well-established
market, a stable operating model, and products or services that
are considered an industry standard. The portfolio managers
consider emerging companies to be companies that are past the
start-up phase of development, have established some scale and
internal infrastructure, are in the early stages of profitability
and are one of a few companies competing to provide products or
services that have the potential to become an industry standard.
The portfolio managers consider start-up companies to be companies
that exhibit the potential for rapid growth in markets that are in
the early stages of development. Start-up companies generally
either have many competitors, but have limited market share or
operate in markets which are not fully established.
The portfolio managers may decide to sell a holding if that
holding reaches the portfolio managers' price target or if there
has been some change in a company's fundamentals of the market the
company participates in.
PRINCIPAL INVESTMENT RISKS There are two basic risks for all
mutual funds that invest in stocks: management risk and market
risk. These risks may cause you to lose money when you sell your
shares.
[Callout]
WHAT ARE MARKET AND MANAGEMENT RISKS?
Management risk means that stock selections and other investment
decisions might produce losses or cause the Fund to underperform
when compared to other funds with similar goals. Market risk
means that security prices in a market, sector or industry may
move down. Downward movements will reduce the value of your
investment. Because of management and market risk, there is no
guarantee that the Fund will achieve its investment goal or
perform favorably compared with competing funds.
[End of callout]
Sector Concentration
The Fund has no restrictions to diversify across industry sectors.
Given the nature of the Fund's principal investment strategy, the
Fund will likely concentrate a significant portion of its assets
in the technology sector and may concentrate in other sectors.
When a Fund concentrates in sectors, particularly the technology
sector, the Fund is subject to certain risks. Concentrating
investments in a limited number of industry sectors could result
in the Fund experiencing larger price fluctuations than funds that
invest in a wide range of industry sectors. Fund performance will
largely depend upon the performance of the industry sectors in
which the Fund concentrates, which may differ in direction and
degree from that of the overall stock market. Financial,
economic, business, political, and other developments affecting
those sectors will have a greater effect on the Fund. The value
of technology-related companies is particularly vulnerable to
rapidly changing technology, extensive government regulation, and
relatively high costs of obsolescence caused by technological
advances, which are higher than in other industry sectors.
Start-Up And Other Small Companies
Investments in stocks of start-up and other small companies can be
riskier than investments in larger companies. Start-up and other
small companies often have less-experienced management, limited
product lines, unproven track records or financial reserves.
Start-up and other small companies are more likely to fail or
prove unable to grow. Their securities may trade less frequently,
in smaller volumes, and fluctuate more sharply in price than large
companies. In addition, start-up and other small companies may
not be widely followed by the investment community, which can
lower the demand for their stock.
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. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Fund's investment techniques, please
refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in the Fund if you:
* want a mutual fund that invests in stocks of Internet Sector
Companies as we have defined above
* want the performance potential of a sector fund and are
comfortable with the increased price volatility that may
accompany sector investing
* are a long-term investor
The Fund is not appropriate for investors who:
* can't tolerate the greater price volatility associated with a
sector fund
* are saving for a short-term investment
* need regular current income
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.(a) However, you pay
various other indirect expenses because the Fund pays fees and
other expenses that reduce your investment return.
SHAREHOLDER FEES(a)
(expenses that are deducted from your account)
Redemption fee (as a percentage of amount redeemed) 1.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management fees(b) 0.90%
Distribution 12b-1 fees 0.25%
Other expenses(c) ____%
Total annual fund operating expenses (d) ____%
Less expense reimbursement 1.50%
Net expenses ____%
(a) A 1% redemption fee, retained by the Fund, is imposed only on
redemptions of Fund shares held less than 90 days. There is a
$7 charge for wiring redemption proceeds to your bank. A fee
of $5 per quarter may be charged to accounts that fall below
the required minimum balance.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
(c) Other Expenses are based on projected average annual assets of
$50 million. Fund expenses include 12b-1 fees, management
fees, and administrative costs such as furnishing the Fund
with offices and providing tax and compliance services.
(d) Stein Roe will reimburse the Fund if its annual ordinary
operating expenses exceed 1.50% of average daily net assets.
This commitment expires on Jan. 31, 2000. After
reimbursement, management fees will be ___%. 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 percent 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
Internet Leaders Fund $109 $340
<PAGE>
YOUR ACCOUNT
PURCHASING SHARES You may purchase shares of the Fund without a
sales charge. Your purchases are made at NAV next determined
after the Fund receives your check, wire transfer or electronic
transfer. If the Fund receives your check, wire transfer or
electronic transfer after the close of regular trading on the New
York Stock Exchange (NYSE)-normally 3 p.m. Central time-your
purchase is effective on the next business day. If you
participate in the Stein Roe Counselor [service mark] program or
are a client of Stein Roe Private Capital Management, the minimum
initial investment is determined by those programs.
Purchases through Third Parties
If you purchase Fund shares through certain broker-dealers, banks
or other intermediaries (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 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 NAV 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 NAV next
determined.
Conditions of Purchase
An order to purchase Fund shares is not binding unless and until
an authorized officer, agent or designee of the Fund accepts and
enters it on the Fund's books. 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 shareholders. The Fund may waive or lower its investment
minimums for any reason.
ACCOUNT MINIMUMS
Minimum to Minimum Minimum
Type of Account Open an Account Addition Balance
- -------------------------------------------------------------
Regular $2,500 $100 $1,000
Custodial (UGMA/UTMA) $1,000 $100 $1,000
Automatic Investment Plan $1,000 $50 -
Roth and Traditional IRA $500 $50 $500
Educational IRA $500 $50 $500
Opening an Account
OPENING OR ADDING TO AN ACCOUNT
BY MAIL: Opening an Account:
Complete the application.
Make check payable to Stein Roe Mutual Funds.
Mail application and check to:
SteinRoe Services Inc.
P.O. Box 8900
Boston, MA 02205
If you participate in the Stein Roe Counselor
program, mail the application and check to:
SteinRoe Services Inc.
P.O. Box 803938
Chicago, IL 60680
Adding to an Account:
Make check payable to Stein Roe Mutual Funds. Be
sure to write your account number on the check.
Fill out investment slip (stub from your statement or
confirmation) or include a note indicating the amount
of your purchase, your account number, and the name
in which your account is registered.
Mail check with investment slip or note to the
appropriate address above.
BY WIRE: Opening an Account:
Mail your application to the address listed on the
left, then call 800-338-2550 to obtain an account
number. Include your Social Security Number. To
wire funds, use the instructions below.
Adding to an Account:
Wire funds to:
First National Bank of Boston
ABA: 011000390
Attn.: SSI, Account No. 560-99696
Fund No. __; Stein Roe Internet Leaders Fund
Your name (exactly as in the registration).
Account number
(Counselor Account No. if you participate in the
Stein Roe Counselor program).
BY ELECTRONIC
FUNDS TRANSFER: Opening an Account:
You cannot open a new account via electronic
transfer.
Adding to an Account:
Call 800-338-2550 to make your purchase. To set up
prescheduled purchases, be sure to elect the
Automatic Investment Plan option on your application.
BY EXCHANGE: Opening an Account:
By mail, phone, in person or automatically (be sure
to elect the Automatic Exchange Privilege on your
application).
Adding to an Account:
By mail, phone, in person or automatically (be sure
to elect the Automatic Exchange Privilege on your
application).
THROUGH AN INTERMEDIARY: Opening an Account:
Contact your financial professional.
Adding to an Account:
Contact your financial professional.
All checks must be made payable in U.S. dollars and drawn on U.S.
banks. Third-party checks will not be accepted. Money orders
will not be accepted for initial purchases.
DETERMINING SHARE PRICE 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 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.
To calculate NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the 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
Fund'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. Please follow the instructions below.
SELLING SHARES
By Mail: Send a letter of instruction, in English, including
your account number and the dollar value or number of
shares you wish to sell. Sign the request exactly as
the account is registered. Be sure to include a
signature guarantee. All supporting legal documents
as required from executors, trustees, administrators,
or others acting on accounts not registered in their
names, must accompany the request. We will mail the
check to your registered address.
By Phone: This feature is automatically added to your account
unless you decline it on your application. Call 800-
338-2550 to redeem an amount of $1,000 or more. We
will mail the check to your registered address.
By Wire: Fill out the appropriate areas of the account
application for this feature. Proceeds of $1,000 or
more ($100,000 maximum) may be wired to your
predesignated bank account. Call 800-338-2550 to
give instructions to Stein Roe. There is a $7 charge
for wiring redemption proceeds to your bank.
By Electronic
Transfer: Fill out the appropriate areas of the account
application for this feature. To request an
electronic transfer (not less than $50; not more than
$100,000), call 800-338-2550. We will transfer your
sale proceeds electronically to your bank. The bank
must be a member of the Automated Clearing House.
By Exchange: Call 800-338-2550 to exchange any portion of your
Fund shares for shares in any other Stein Roe no-load
fund.
By Automatic
Exchange: Fill out the appropriate areas of the account
application for this feature. Redeem a fixed amount
on a regular basis (not less than $50 per month; not
more than $100,000) from the Fund for investment in
another Stein Roe no-load fund.
What You Need to Know When Selling Shares
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. If you have any questions about the requirements for
selling your shares, please call 800-338-2550 before submitting
your order.
The Fund redeems shares at the NAV next determined after an order
has been accepted. We mail the proceeds within seven days after
the sale. The Fund normally pays wire redemption or electronic
transfer proceeds on the next business day.
We will not pay sale proceeds until your shares are paid for. If
you attempt to sell shares purchased by check or electronic
transfer within 15 days of the purchase date, we will delay
sending the sale proceeds until we can verify that those shares
are paid for. You may avoid this delay by purchasing shares by a
federal funds wire.
We use procedures reasonably designed to confirm that telephone
instructions are genuine. These include recording the
conversation, testing the identity of the caller by asking for
account information, and sending prompt written confirmation of
the transaction to the shareholder of record. If these procedures
are followed, the Fund and its service providers will not be
liable for any losses due to unauthorized or fraudulent
instructions.
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.
Redemption Fee
The Fund charges a one percent redemption fee on sales of Fund
shares that you have held less than 90 days. The fee is retained
by the Fund for the benefit of the remaining shareholders. The
fee is waived for shares purchased through certain retirement
plans, including 401(k) plans, 403(b) plans, 457 plans, Keogh
accounts, and Stein Roe Profit Sharing and Money Purchase Pension
Plans. The fee waiver may not apply to shares purchased through
an Intermediary maintaining an omnibus account with the Fund.
Before purchasing shares, please check with your account
representative concerning the availability of the waiver. The fee
waiver does not apply to IRA and SEP-IRA accounts. The redemption
fee is intended to encourage long-term investment in the Fund, to
avoid transaction and other expenses caused by early redemptions,
and to facilitate portfolio management. The fee does not benefit
Stein Roe in any way. The Fund may modify the terms of,
terminate, or waive this fee at any time.
Involuntary Redemption
If your account value falls below $1,000, the Fund may redeem your
shares and send the proceeds to the registered address. You will
receive notice 30 days before this happens. If your account falls
below $10, the Fund may redeem your shares without notice to you.
Low Balance Fee
Due to the expense of maintaining accounts with low balances, if
your account balance falls below $2,000 ($800 for custodial
accounts), you will be charged a low balance fee of $5 per
quarter. The low balance fee does not apply to: (1) shareholders
whose accounts in the Stein Roe Funds total $50,000 or more; (2)
Stein Roe IRAs; (3) other Stein Roe prototype retirement plans;
(4) accounts with automatic investment plans (unless regular
investments have been discontinued); or (5) omnibus or nominee
accounts. The Fund can waive the fee, at its discretion, in the
event of significant market corrections.
Distribution and Service Fees
The Fund has adopted a plan under Rule 12b-1 that permits it to
pay marketing and other fees to support the sale and distribution
of shares and the services provided to you by your financial
advisor. Annual distribution and service fees may equal up to
0.25% and are paid out of the assets of the Fund. Over time,
these fees will increase the cost of your shares and may cost you
more than paying other types of sales charges.
Reporting to Shareholders
To reduce the volume of mail you receive, only one copy of certain
materials, such as prospectuses and shareholder reports, will be
mailed to your household (same address). Please call 800-338-2550
if you want to receive additional copies free of charge. This
policy may not apply if you purchase shares through an
intermediary.
Exchanging Shares You may exchange Fund shares for shares of
other Stein Roe no-load funds. Call 800-338-2550 to request a
prospectus and application for the fund you wish to exchange into.
Please be sure to read the prospectus carefully before you
exchange your shares.
The account you exchange into must be registered exactly the same
as the account you exchange from. You must meet all investment
minimum requirements for the fund you wish to exchange into before
we can process your exchange transaction.
An exchange is a redemption and purchase of shares for tax
purposes, and you may realize a gain or a loss when you exchange
Fund shares for shares of another fund.
We may change, suspend or eliminate the exchange service after
notification to you.
Generally, we limit you to four telephone exchanges "roundtrips"
per year. A roundtrip is an exchange out of the Fund into another
Stein Roe no-load fund and then back to the Fund.
Dividends and Distributions The Fund distributes, at least once a
year, virtually all of its net investment income and 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
Fund 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 Fund 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 on the account application to have
distributions paid by check.
[CALLOUT]
OPTIONS FOR RECEIVING DISTRIBUTION AND REDEMPTION PROCEEDS:
* by check
* by electronic transfer into your bank account
* a purchase of shares of another Stein Roe fund
* a purchase of shares in a Stein Roe fund account of another
person
[/CALLOUT]
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 shares of the Fund. 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
If you sell or exchange your shares, any gain or loss is a taxable
event. You may also be subject to state and local income taxes on
dividends or capital gains from the sale or exchange of Fund
shares.
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.
If you have any account questions, you may call 800-338-2550. We
are here seven days a week to help you.
<PAGE>
OTHER INVESTMENTS AND RISKS
The Fund's primary investment strategies and risks are described
in this prospectus. (See "The Fund.") This section and the
Statement of Additional Information (SAI) describe other
investments that the Fund may make and risks associated with them.
The Board of Trustees can change the Fund's investment objective
without shareholder approval.
The Fund's portfolio managers generally make decisions on buying
and selling portfolio investments based upon their judgment that
the decision will improve the Fund's investment return and further
its investment goal. The portfolio managers may also be required
to sell portfolio investments to fund redemptions.
SHORT SALES The Fund may make short sales of securities. Short
selling involves the sale of borrowed securities. When the Fund
thinks the price of a stock will decline, it borrows the stock and
then sells the borrowed stock. When the Fund has to return the
borrowed stock, it tries to buy the stock at a lower price. If
the Fund is successful, it has a capital gain. If the Fund is
unsuccessful and buys the stock at a higher price than the price
at which it sold the stock, the Fund has a capital loss. The
Fund's capital gains and losses may result in federal income tax
consequences to the Fund's shareholders. Short selling involves
certain risks. The Fund could have a loss if the borrowed
security increases in value and if the purchased security declines
in value.
FUTURES The Fund uses futures to hedge against price changes in
the value of its current or intended investments in securities. A
future is an agreement to buy or sell a specific amount of a
financial instrument or physical commodity for an agreed-upon
price at a certain time in the future. The Fund can lose money if
the portfolio managers do not correctly anticipate the market
movements of those underlying securities.
OPTIONS The Fund may buy or sell (write) exchange-listed and
negotiated put and call options for hedging or speculative
purposes. An option is an instrument that provides a right to buy
(call) or sell (put) a particular security, currency, or index of
securities at a fixed price within a certain time period. Such
options may be on individual securities or on indexes.
A put option gives the Fund, in return for the payment of a
premium, the right to sell the underlying security or index to
another party at a fixed price. If the market value of the
underlying security or index declines, the value of the put option
would be expected to rise. If the market value of the underlying
security or index remains the same or rises, however, the put
option could lose all of its value, resulting in a loss to the
Fund.
A call option gives the Fund, in return for the payment of a
premium, the right to purchase the underlying security or index
from another party at a fixed price. If the market value of the
underlying security or index rises, the value of the call option
would also be expected to rise. If the market value of the
underlying security or index remains the same or declines,
however, the call option could lose all of its value, resulting in
a loss to the Fund.
The Fund may invest up to 15 percent of its assets in options.
The Fund is not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too
costly to be used effectively, or may be unable to be used for
other reasons.
PORTFOLIO TURNOVER There are no limits on turnover. Turnover may
vary significantly from year to year. Stein Roe does not expect
it to exceed 200 percent under normal conditions. Portfolio
turnover typically produces capital gains or losses for Fund
shareholders resulting in tax consequences for the Fund's
shareholders. 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 Fund 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. The Fund may not achieve its investment objective
if it takes a defensive position.
INTERFUND LENDING PROGRAM The Fund may lend money to and borrow
money from other funds advised by Stein Roe. The Fund 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. Stein Roe (and its predecessor) has advised and
managed mutual funds since 1949. As of ______, 1999, Stein Roe
managed more than $__ billion in assets. The Fund pays Stein Roe
an annual management fee of 0.75% of average net assets and an
annual administrative fee of 0.15% of average net assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are managed together with that of its affiliate,
Colonial Management Associates, Inc. (CMA), by a combined
management team of employees from both companies. CMA also shares
personnel, facilities, and systems with Stein Roe that may be used
in providing administrative or operational services to the Fund.
CMA is a registered investment adviser. Both Stein Roe and CMA
are subsidiaries of Liberty Financial Companies, Inc.
Stein Roe can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Fund's
Board of Trustees.
PORTFOLIO MANAGERS David P. Brady, Eric S. Maddix, and Steven M.
Salopek are the portfolio managers.
Mr. Brady, a senior vice president, joined Stein Roe in 1993 and
served as an associate portfolio manager of Stein Roe Special Fund
until March 1995. Mr. Brady has been portfolio manager of Stein
Roe Young Investor Fund since March 1995, portfolio manager of
Stein Roe Large Company Focus Fund since June 1998, portfolio
manager of Stein Roe Growth Investor Fund since March 1999, and
portfolio manager of Stein Roe Capital Opportunities Fund since
May 1999 . He holds a B.S. in finance, graduating Magna Cum
Laude, from the University of Arizona and an M.B.A. from the
University of Chicago. As of _____, 1999, Mr. Brady managed $___
million in mutual fund net assets.
Mr. Maddix is a vice president of Stein Roe which he joined in
1987. Mr. Maddix has been co-manager of Stein Roe Growth
Opportunities Fund since its inception in 1997; he was co-manager
of Stein Roe Capital Opportunities Fund from 1996 to January 1999
and associate portfolio manager from 1992 until 1996. He earned a
B.B.A. degree from Iowa State University and M.B.A. degree from
the University of Chicago. As of ___, 1999, Mr. Maddix co-managed
$___ million in mutual fund net assets.
Mr. Salopek joined Stein Roe as a research analyst in June 1996
and is a vice president. Mr. Salopek has been portfolio manager
of Stein Roe Small Company Growth Fund since February 1999 and
portfolio manager of Stein Roe Small Company Growth Fund, Variable
Series since October 1998. He was an analyst with Banc One
Investment Advisors from 1990 to May 1996. Mr. Salopek earned a
B.A. degree and an M.B.A. degree from The Ohio State University.
As of _____, 1999, Mr. Salopek managed $___ million in mutual fund
net assets.
MASTER/FEEDER FUND STRUCTURE The Fund could convert into a
"feeder" fund in a "master/feeder" structure at some future date.
This means that all of the Fund's assets would be invested in a
larger "master" portfolio of securities that has investment
objectives and policies substantially identical to those of the
Fund.
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 and other service providers 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.
However, no assurances can be given that all modifications
required to ensure proper data processing and calculation on and
after Jan. 1, 2000, will be made on a timely basis or that
services to the Fund will not be adversely affected.
<PAGE>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to shareholders. 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 legally 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 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 Securities and Exchange Commission (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.
Investment Company Act file number of Liberty-Stein Roe Advisor
Trust: 811-07955
LIBERTY FUNDS DISTRIBUTOR, INC.
<PAGE>
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 3, 1999
The information in this Statement of Additional Information is not
complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This Statement of Additional
Information is not an offer to sell these securities and is not a
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Statement of Additional Information Dated _______, 1999
LIBERTY-STEIN ROE ADVISOR TRUST
Suite 3200, One South Wacker Drive, Chicago, IL 60606
800-338-2550
Stein Roe Internet Leaders Fund
This Statement of Additional Information ("SAI") is not a
prospectus, but provides additional information that should be
read in conjunction with the prospectus of Stein Roe Internet
Leaders Fund dated _______, 1999, and any supplements thereto
("Prospectus"). The Prospectus may be obtained at no charge by
telephoning 800-338-2550.
TABLE OF CONTENTS
Page
General Information.........................................2
Investment Policies.........................................3
Portfolio Investments and Strategies........................3
Investment Restrictions....................................19
Additional Investment Considerations.......................21
Purchases and Redemptions..................................22
Management.................................................26
Principal Shareholders.....................................29
Investment Advisory and Other Services.....................29
Distributor................................................31
Transfer Agent.............................................32
Custodian..................................................33
Independent Public Accountants.............................33
Portfolio Transactions.....................................34
Additional Income Tax Considerations.......................38
Investment Performance.....................................39
Appendix-Ratings...........................................43
<PAGE>
GENERAL INFORMATION
Stein Roe Internet Leaders Fund (the "Fund") is a series of
Liberty-Stein Roe Advisor 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. Currently, six
series are authorized and outstanding. Each series invests in a
separate portfolio of securities and other assets, with its own
objectives and policies. On Sept. 13, 1996, the spelling of the
name of the Trust was changed from "Adviser" to "Advisor." The
name of the Trust was changed from Stein Roe Advisor Trust to
Liberty-Stein Roe Advisor Trust on March 3, 1999.
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.
Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services and
investment management services to the Fund.
Special Considerations Regarding Master Fund/Feeder Fund Structure
The Fund has the ability to convert into a "feeder fund";
that is, rather than invest in securities directly, it may seek to
achieve its objective by pooling its assets with those of other
investment companies for investment in a separate "master fund"
having the same investment objective and substantially the same
investment policies as its feeder funds. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs.
INVESTMENT POLICIES
The Trust is an open-end management investment company. The
Fund is 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 Fund
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/
- -------------
/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.
- -------------
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities
In pursuing its investment objective, the Fund may invest in
debt securities of corporate and governmental issuers. The risks
inherent in debt securities depend primarily on the term and
quality of the obligations in the investment portfolio as well as
on market conditions. A decline in the prevailing levels of
interest rates generally increases the value of debt securities,
while an increase in rates usually reduces the value of those
securities.
Debt securities within the four highest grades are generally
referred to as "investment grade"). The Fund may invest up to 35%
of its net assets in debt securities, but does not expect to
invest more than 5% of its net assets in debt securities that are
rated below investment grade.
Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held is lost or
reduced below investment grade, the Fund is not required to
dispose of the security, but Stein Roe will consider that fact in
determining whether to should continue to hold the security.
Securities that are rated below investment grade are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When Stein Roe determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, the Fund may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash
equivalents.
Derivatives
Consistent with its objective, the Fund 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, floating rate
instruments, and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency.
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 Fund does not
currently intend to invest more than 5% of its net assets in any
type of Derivative except for options, futures contracts, and
futures options. (See Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by the
Fund on purchase of such securities; in addition, the proceeds of
prepayment would likely be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that 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 pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by the Fund on purchase of the CMO, and the
proceeds of prepayment would likely be invested at lower interest
rates.
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 that finance payments on the securities
themselves.
Floating rate instruments 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%.
Convertible Securities
By investing in convertible securities, the Fund obtains the
right to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, Stein Roe will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities it purchases are frequently
rated investment grade, the Fund may purchase unrated securities
or securities rated below investment grade if the securities meet
Stein Roe's other investment criteria. Convertible securities
rated below investment grade (a) tend to be more sensitive to
interest rate and economic changes, (b) may be obligations of
issuers who are less creditworthy than issuers of higher quality
convertible securities, and (c) may be more thinly traded due to
such securities being less well known to investors than investment
grade convertible securities, common stock or conventional debt
securities. As a result, Stein Roe's own investment research and
analysis tend to be more important in the purchase of such
securities than other factors.
Foreign Securities
The Fund may invest up to 25% of its total assets in foreign
securities, which may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than investment in securities of domestic
issuers. For this purpose, foreign securities do not include
American Depositary Receipts (ADRs) or securities guaranteed by a
United States person. ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the
underlying securities. The Fund may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, the Fund is
likely to bear its proportionate share of the expenses of the
depositary and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored
ADR. The Fund does not intend to invest, nor during the past
fiscal year has it invested, more than 5% of its net 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 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 Fund 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 Fund's foreign currency exchange transactions are limited
to transaction and portfolio hedging involving either specific
transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward contracts with respect to specific
receivables or payables of the Fund 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 it 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 Fund 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 it 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 Fund 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 it
holds. The Fund may not engage in "speculative" currency exchange
transactions.
At the maturity of a forward contract to deliver a particular
currency, the Fund 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 Fund
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 it is obligated to deliver.
If the Fund 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 Fund 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 Fund'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, it 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 Fund 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 it of unrealized profits or force it 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 Fund to hedge against a devaluation that is so
generally anticipated that it is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund 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.
Swaps, Caps, Floors and Collars
The Fund may enter into swaps and may purchase or sell
related caps, floors and collars. It would enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
purchases at a later date. The Fund intends to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream it may be obligated to pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease the exposure to changes in the
value of an index of securities in which the Fund might invest,
the value of a particular security or group of securities, or
foreign currency values. Swap agreements can take many different
forms and are known by a variety of names. The Fund may enter
into any form of swap agreement if Stein Roe determines it is
consistent with its investment objective and policies.
A swap agreement tends to shift the Fund's investment
exposure from one type of investment to another. For example, if
it agrees to exchange payments in dollars at a fixed rate for
payments in a foreign currency the amount of which is determined
by movements of a foreign securities index, the swap agreement
would tend to increase exposure to foreign stock market movements
and foreign currencies. Depending on how it is used, a swap
agreement may increase or decrease the overall volatility of its
investments and its net asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from the
Fund. If a swap agreement calls for payments by the Fund, it must
be prepared to make such payments when due. If the counterparty's
creditworthiness declines, the value of a swap agreement would be
likely to decline, potentially resulting in a loss. The Fund will
not enter into any swap, cap, floor or collar transaction unless,
at the time of entering into such transaction, the unsecured long-
term debt of the counterparty, combined with any credit
enhancements, is rated at least A by Standard & Poor's Corporation
or Moody's Investors Service, Inc. or has an equivalent rating
from a nationally recognized statistical rating organization or is
determined to be of equivalent credit quality by Stein Roe.
The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is
a combination of a cap and floor that preserves a certain return
within a predetermined range of interest rates or values.
At the time the Fund enters into swap arrangements or
purchases or sells caps, floors or collars, liquid assets having a
value at least as great as the commitment underlying the
obligations will be segregated on the books of the Fund and held
by the custodian throughout the period of the obligation.
Lending of Portfolio Securities
Subject to restriction (5) under Investment Restrictions in
this SAI, the Fund 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 Fund. It 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. It 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. It would not have the right to vote the securities
during the existence of the loan but would call the loan to permit
voting of the securities if, in Stein Roe's judgment, a material
event requiring a shareholder vote would otherwise occur before
the loan was repaid. In the event of bankruptcy or other default
of the borrower, it 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 Fund 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
Fund 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 Fund could experience both losses
and delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
The Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time the Fund enters into the
commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have
changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities
before settlement date if Stein Roe deems it advisable for
investment reasons. During its last fiscal year, the Fund did
not, nor does it currently intend to have, commitments to purchase
when-issued securities in excess of 5% of its net assets.
The Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which the Fund 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 Fund 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
securities or other "high-grade" debt obligations) of the Fund
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
Fund 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.
Short Sales "Against the Box"
The Fund 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.
In a short sale against the box, the Fund does not deliver
from its portfolio the securities sold. Instead, it borrows the
securities sold short from a broker-dealer through which the short
sale is executed, and the broker-dealer delivers such securities,
on its behalf, to the purchaser of such securities. The Fund 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, it 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 Fund is said to have a short position in
the securities sold until it delivers to the broker-dealer the
securities sold. It 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 against the risk of losses in the
value of 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 it
owns, either directly or indirectly, and, in the case where it
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 Fund replaces the borrowed security, it will
incur a loss and if the price declines during this period, it 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 it may have to pay in connection with such short
sale. Certain provisions of the Internal Revenue Code may limit
the degree to which the Fund is able to enter into short sales.
There is no limitation on the amount of 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 Fund
currently expects that no more than 5% of its total assets would
be involved in short sales against the box.
Rule 144A Securities
The Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the Securities Act of 1933. That Rule permits certain
qualified institutional buyers, such as the Fund, 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 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
Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that it 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 Fund 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.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this SAI, the Fund 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 may lend money to and borrow money
from other mutual funds advised by Stein Roe. The Fund will
borrow through the program when borrowing is necessary and
appropriate and the costs are equal to or lower than the costs of
bank loans.
Portfolio Turnover
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
that portfolio securities must be held. Portfolio turnover can
occur for a number of reasons such as general conditions in the
securities markets, more favorable investment opportunities in
other securities, or other factors relating to the desirability of
holding or changing a portfolio investment. The Fund may have
greater portfolio turnover than that of a mutual funds that have
the primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly
from year to year. A high rate of portfolio turnover, if it
should occur, would result in increased transaction expenses,
which must be borne by the Fund. High portfolio turnover may also
result in the realization of capital gains or losses and, to the
extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered
ordinary income for federal income tax purposes.
Options on Securities and Indexes
The Fund may purchase and sell put options and call options
on securities, indexes or foreign currencies in standardized
contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on Nasdaq. The Fund may
purchase 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 (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. 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 Fund will write call options and put options only if they
are "covered." For example, in the case of a call option on a
security, the option is "covered" if the Fund 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 Fund expires, it realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Fund 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 it is desired.
The Fund 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, it
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 Fund 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 Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by the Fund 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.
For example, there are significant differences between the
securities markets, the currency markets, and the 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 Fund seeks to close out an option position. If it 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 it
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 on a security, it 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 or written
by the Fund, it would not be able to close out the option. If
restrictions on exercise were imposed, it might be unable to
exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
The Fund may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency 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
(including, but not limited to: the Standard & Poor's 500 Index,
the Value Line Composite Index, and the New York Stock Exchange
Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies).
Other index and financial instrument futures contracts are
available and it is expected that additional 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 Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as
options on securities, indexes and foreign currencies (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 Fund
might, for example, use futures contracts to hedge against or gain
exposure to fluctuations in the general level of stock 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 or increase exposure to
stock price, interest rate and currency fluctuations, the Fund may
be able to achieve its exposure more effectively and perhaps at a
lower cost by using futures contracts and futures options.
The Fund 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 stock 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 by the
Fund, it 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, which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its
initial margin deposits. A futures contract held is valued daily
at the official settlement price of the exchange on which it is
traded. Each day the Fund 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 Fund does not represent a
borrowing or loan by it but is instead settlement between it and
the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In
computing daily net asset value, the Fund will mark-to-market its
open futures positions.
The Fund 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.
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 Fund 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, it 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. 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 the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the investment portfolio, and, in the case of
interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in
the investment portfolio. A decision as to whether, when and how
to use futures contracts 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 stock price or 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. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when the Fund seeks to close out a futures or futures
option position. The Fund 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 Fund may also use those investment vehicles, provided the
Board of Trustees determines that their use is consistent with the
investment objective.
The Fund will not enter into a futures contract or purchase
an option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by it plus premiums paid by it
for open futures option positions, less the amount by which any
such positions are "in-the-money,"/3/ would exceed 5% of total
assets.
- -------------------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- -------------------
When purchasing a futures contract or writing a put option on
a futures contract, the Fund 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 Fund 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.
The Fund 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 it 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 Fund 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 Fund, 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 Fund 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 it, 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 Fund 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 it, 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 Fund 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.
If the Fund writes an equity call option/4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
- -------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
- -------------
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
Fund delivers securities under a futures contract, it also
realizes a capital gain or loss on those securities.
For federal income tax purposes, the Fund 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 futures,
futures options and non-equity 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: (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.
If the Fund were to enter into a short index future, short
index futures option or short index option position and its
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and its stock positions would be deemed to be positions in a mixed
straddle, subject to the above-mentioned loss deferral rules.
In order for the Fund to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or 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 its 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 operates under the following investment
restrictions. It may not:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities or repurchase agreements for
such securities, and 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) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
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) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, 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), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(5) 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;
(6) 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;
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular
industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and 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
(8) 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 defined above. The Fund is also subject to
the following nonfundamental restrictions and policies, which 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 the same
investment policies as the Fund. The Fund may not:
(a) invest in any of the following: (i) interests in oil,
gas, or other mineral leases or exploration or development
programs (except readily marketable securities, including but not
limited to master limited partnership interests, that may
represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles,
spreads, or any combination thereof (except that it may enter into
transactions in options, futures, and options on futures); (iii)
shares of other open-end investment companies, except in
connection with a merger, consolidation, acquisition, or
reorganization; and (iv) limited partnerships in real estate
unless they are readily marketable;
(b) invest in companies for the purpose of exercising control
or management;
(c) 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;
(d) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchange;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) invest more than 25% of its total assets (valued at time
of purchase) in securities of foreign issuers (other than
securities represented by American Depositary Receipts (ADRs) or
securities guaranteed by a U.S. person);
(g) 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;
(h) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions);
(i) invest more than 5% 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;
(j) invest more than 15% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities, including repurchase agreements maturing in more than
seven days.
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.
PURCHASES AND REDEMPTIONS
Purchases Through Third Parties
You may purchase (or redeem) shares through certain broker-
dealers, banks, or other intermediaries ("Intermediaries"). The
state of Texas has asked that investment companies disclose in
their Statements of Additional Information, as a reminder to any
such bank or institution, that it must be registered as a
securities dealer in Texas. 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.
Net Asset Value
The net asset value of the Fund is determined on days on
which the New York Stock Exchange (the "NYSE") is open for regular
session 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 of the Fund should be determined on any
such day, in which case the determination will be made at 3 p.m.,
Central time. Please refer to Your Account-Determining Share
Price in the Prospectus for additional information on how the
purchase and redemption price of Fund shares is determined.
General Redemption Policies
The Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets 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.
The Trust reserves the right to suspend or postpone
redemptions of shares 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
not reasonably practicable.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please call 800-
338-2550 if you have any questions about requirements for a
redemption before submitting your request. The Trust reserves the
right to require a properly completed application before making
payment for shares redeemed.
The Trust will generally mail payment for shares redeemed
within seven days after proper instructions are received.
However, the Trust normally intends to pay proceeds of a Telephone
Redemption paid by wire on the next business day. If you attempt
to redeem shares within 15 days after they have been purchased by
check or electronic transfer, the Trust will delay payment of the
redemption proceeds to you until it can verify that payment for
the purchase of those shares has been (or will be) collected. To
reduce such delays, the Trust recommends that your purchase be
made by federal funds wire through your bank.
Generally, you may not use any Special Redemption Privilege
to redeem shares purchased by check (other than certified or
cashiers' checks) or electronic transfer until 15 days after their
date of purchase. The Trust reserves the right at any time
without prior notice to suspend, limit, modify, or terminate any
Privilege or its use in any manner by any person or class.
Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Fund employs
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Fund and
its transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.
Shares in any account you maintain with the Fund or any of
the other Stein Roe Funds may be redeemed to the extent necessary
to reimburse any Stein Roe Fund for any loss you cause it to
sustain (such as loss from an uncollected check or electronic
transfer for the purchase of shares, or any liability under the
Internal Revenue Code provisions on backup withholding).
The Trust reserves the right to suspend or terminate, at any
time and without prior notice, the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Fund.
Therefore, regardless of the number of telephone exchange round-
trips made by an investor, the Trust generally will not honor
requests for Telephone Exchanges by shareholders identified by the
Trust as "market-timers" if the officers of the Trust determine
the order not to be in the best interests of the Trust or its
shareholders. The Trust generally identifies as a "market-timer"
an investor whose investment decisions appear to be based on
actual or anticipated near-term changes in the securities markets
other than for investment considerations. Moreover, the Trust
reserves the right to suspend, limit, modify, or terminate, at any
time and without prior notice, the Telephone Exchange Privilege in
its entirety. Because such a step would be taken only if the
Board of Trustees believes it would be in the best interests of
the Fund, the Trust expects that it would provide shareholders
with prior written notice of any such action unless the resulting
delay in the suspension, limitation, modification, or termination
of the Telephone Exchange Privilege would adversely affect the
Fund. If the Trust were to suspend, limit, modify, or terminate
the Telephone Exchange Privilege, a shareholder expecting to make
a Telephone Exchange might find that an exchange could not be
processed or that there might be a delay in the implementation of
the exchange. During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by
telephone.
The Telephone Exchange Privilege and the Telephone Redemption
by Check Privilege will be established automatically for you when
you open your account unless you decline these Privileges on your
application. Other Privileges must be specifically elected. A
signature guarantee may be required to establish a Privilege after
you open your account. If you establish both the Telephone
Redemption by Wire Privilege and the Electronic Transfer
Privilege, the bank account that you designate for both Privileges
must be the same. The Telephone Redemption by Check Privilege,
Telephone Redemption by Wire Privilege, and Special Electronic
Transfer Redemptions may not be used to redeem shares held by a
tax-sheltered retirement plan sponsored by Stein Roe.
Redemption Privileges
Exchange Privilege. You may redeem all or any portion of
your Fund shares and use the proceeds to purchase shares of any
other no-load Stein Roe Fund offered for sale in your state if
your signed, properly completed application is on file. An
exchange transaction is a sale and purchase of shares for federal
income tax purposes and may result in capital gain or loss.
Before exercising the Exchange Privilege, you should obtain the
prospectus for the no-load Stein Roe Fund in which you wish to
invest and read it carefully. The registration of the account to
which you are making an exchange must be exactly the same as that
of the Fund account from which the exchange is made and the amount
you exchange must meet any applicable minimum investment of the
no-load Stein Roe Fund being purchased.
Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four
Telephone Exchange round-trips per year and the Fund may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of the Fund into another no-load
Stein Roe Fund, and then back to the Fund). In addition, the
Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange.
Automatic Exchanges. You may use the Automatic Exchange
Privilege to automatically redeem a fixed amount from your Fund
account for investment in another no-load Stein Roe Fund account
on a regular basis ($50 minimum; $100,000 maximum).
Telephone Redemption by Wire Privilege. You may use this
Privilege to redeem shares from your account ($1,000 minimum;
$100,000 maximum) by calling 800-338-2550. The proceeds will be
transmitted by wire to your account at a commercial bank
previously designated by you that is a member of the Federal
Reserve System. The fee for wiring proceeds (currently $7.00 per
transaction) will be deducted from the amount wired.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 800-338-2550. The
proceeds will be sent by check to your registered address.
Electronic Transfer Privilege. You may redeem shares by
calling 800-338-2550 and requesting an electronic transfer
("Special Redemption") of the proceeds to a bank account
previously designated by you at a bank that is a member of the
Automated Clearing House. You may also request electronic
transfers at scheduled intervals ("Automatic Redemptions"). A
Special Redemption request received by telephone after 3 p.m.,
central time, is deemed received on the next business day. You
may purchase Fund shares directly from your bank account either at
regular intervals ("Regular Investments") or upon your request
("Special Investments"). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. You may also have income
dividends and capital gains distributions deposited directly into
your bank account ("Automatic Dividend Deposits").
Systematic Withdrawals. You may have a fixed dollar amount,
declining balance, or fixed percentage of your account redeemed
and sent at regular intervals by check to you or another payee.
Dividend Purchase Option. You may have distributions from
one Fund account automatically invested in another no-load Stein
Roe Fund account. Before establishing this option, you should
obtain and read the prospectus of the Stein Roe Fund into which
you wish to have your distributions invested. The account from
which distributions are made must be of sufficient size to allow
each distribution to usually be at least $25.
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 the trustees and
officers of the Trust:
<TABLE>
<CAPTION>
Position(s) held Principal occupation(s)
Name 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 Senior Vice-President;
Treasurer Chief financial officer and chief
administrative 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., 70 (3) Trustee Private investor
William W. Boyd, 72 (2)(3) Trustee Chairman and director of Sterling Plumbing
(manufacturer of plumbing products)
David P. Brady, 34 Vice-President Senior vice president of Stein Roe since March 1998;
vice president of Stein Roe from Nov. 1995 to March
1998; portfolio manager for Stein Roe since 1993
Thomas W. Butch, 42 President President of the Mutual Funds division of Stein Roe
since March 1998; senior vice president of Stein Roe
from Sept. 1994 to March 1998; first vice president,
corporate communications, of Mellon Bank Corporation
prior thereto
Daniel K. Cantor, 39 Vice-President Senior vice president of Stein Roe
Kevin M. Carome, 42 Executive Vice-President; Senior vice president, legal, Liberty
Assistant Secretary Funds Group LLC (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 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, 46 (1)(2) Trustee Executive vice president of Liberty Financial
Companies, Inc. (the indirect parent of Stein Roe)
since March 1997; senior vice president prior thereto
Erik P. Gustafson, 35 Vice-President Senior portfolio manager of Stein Roe; senior vice
president of Stein Roe since April 1996; vice
president of Stein Roe prior thereto
Douglas A. Hacker, 43 (3) Trustee Senior vice president and chief financial officer of
UAL, Inc. (airline)
Loren A. Hansen, 50 Executive Vice-President Chief investment officer of CMA ("CMA") since 1997;
executive vice president of Stein Roe since Dec. 1995;
vice president of The Northern Trust (bank) prior
thereto
James P. Haynie, 36 Vice-President Vice President of Stein Roe since Oct. 1998; Vice
President of CMA
Harvey B. Hirschhorn, 49 Vice-President Executive vice president, senior portfolio manager,
and chief economist and investment strategist of Stein
Roe; director of research of Stein Roe, 1991 to 1995
Timothy J. Jacoby, 47 Vice-President Fund treasurer for The Colonial Group since Sept. 1996
and chief financial officer since Aug. 1997; senior
vice president of Fidelity Investments prior thereto
Patricia J. Judge, 28 Controller Assistant vice president of Fund accounting for Stein
Roe since March 1999; deputy treasurer for the Chicago
Board of Education from August 1995 to Feb. 1999;
senior auditor for Arthur Andersen LLP prior thereto
Janet Langford Kelly, 41 Trustee Senior vice president, secretary and general counsel
(3) of Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner of Sidley &
Austin (law firm) prior thereto
Michael T. Kennedy, 36 Vice-President Senior vice president of Stein Roe
Gail D. Knudsen, 37 Vice-President Vice president and assistant controller of CMA
Stephen F. Lockman, 37 Vice-President Senior vice president, portfolio manager, and credit
analyst of the Adviser
Eric S. Maddix, 35 Vice-President Senior vice president of Stein Roe since March 1998;
vice president of Stein Roe from Nov. 1995 to March
1998; portfolio manager or research assistant for
Stein Roe since 1987
Lynn C. Maddox, 58 Vice-President Senior vice president of Stein Roe
Arthur J. McQueen, 41 Vice-President Senior vice president of Stein Roe
Charles R. Nelson, 56 (3) Trustee Van Voorhis Professor of Political Economy, Department
of Economics of the University of Washington
Maureen G. Newman, 39 Vice-President Vice President of Stein Roe since Nov. 1998; portfolio
manager and vice president of CMA since May 1996;
portfolio manager and bond analyst at Fidelity
Investments from May 1985 to May 1996
Nicolette D. Parrish, 49 Vice-President; Senior legal assistant and assistant secretary
Assistant Secretary of Stein Roe
Gita R. Rao, 39 Vice-President Vice President of Stein Roe since Oct. 1998; vice
president and portfolio manager for CMA since 1995;
global equity research analyst at Fidelity Management
& Research Company prior thereto
Michael E. Rega, 39 Vice-President Vice President of Stein Roe since Oct. 1998; Vice
President of CMA since 1996
Janet B. Rysz, 43 Assistant Secretary Senior legal assistant and assistant secretary of
Stein Roe
Thomas C. Theobald, 62 (3) Trustee Managing director, William Blair Capital Partners
(private equity fund)
Sharlene A. Thomas, 37 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, 31 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.
</TABLE>
Certain of the trustees and officers of the 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 Fund's
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 3300, 222 West Adams Street, Chicago, IL
60606; that of Mr. Cantor is 1330 Avenue of the Americas, New
York, NY 10019; that of Ms. Knudsen, Ms. Newman, Ms. Rao, and
Messrs. Connaughton, Haynie, Jacoby, and Rega is One Financial
Center, Boston, MA 02111; and that of the other 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 Sept. 30, 1998 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
- ------------------- -------------------- ------------ ----------
Timothy K. Armour** -0- -0- -0-
Thomas W. Butch** -0- -0- -0-
Lindsay Cook -0- -0- -0-
John A. Bacon Jr.** -0- -0- -0-
Kenneth L. Block** $ 3,800 $ 23,100 $ 525
William W. Boyd 21,700 109,902 2,498
Douglas A. Hacker 19,050 101,148 2,299
Janet Langford Kelly 19,050 97,950 2,226
Francis W. Morley** 3,800 23,100 525
Charles R. Nelson 21,700 109,552 2,490
Thomas C. Theobald 19,050 101,148 2,299
_______________
* At Sept. 30, 1998, the Stein Roe Fund Complex consisted of 10
series of the Trust, 11 series of Stein Roe Investment Trust,
four series of Stein Roe Income Trust, four series of Stein Roe
Municipal Trust, one series of Stein Roe Institutional Trust,
one series of Stein Roe Trust, and 13 series of SR&F Base Trust.
**Messrs. Block and Morley retired as trustees on Dec. 31, 1997.
Mr. Armour resigned as a trustee on April 14, 1998. Mr. Butch
served as a trustee from April 14, 1998 to Nov. 3, 1998. Mr.
Bacon was elected a trustee effective Nov. 3, 1998.
PRINCIPAL SHAREHOLDERS
As of the date of this SAI, the Fund had no outstanding
shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Stein Roe & Farnham Incorporated provides investment
management services and administrative services to the Fund.
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 600 Atlantic Avenue, 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 Sept. 30, 1998, Stein Roe managed over $28.3
billion in assets: over $9.4 billion in equities and over $18.9
billion in fixed income securities (including $1.1 billion in
municipal securities). The $28.3 billion in managed assets
included over $8.3 billion held by open-end mutual funds managed
by Stein Roe (approximately 14% of the mutual fund assets were
held by clients of Stein Roe). These mutual funds were owned by
over 295,000 shareholders. The $8.3 billion in mutual fund assets
included over $637 million in over 43,000 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 Sept. 30, 1998, Stein Roe employed 18 research
analysts and 55 account managers. The average investment-related
experience of these individuals was 17 years.
Stein Roe Counselor [service mark] and Stein Roe Personal
Counselor [service mark] are professional investment advisory
services offered to Fund shareholders. Each is designed to help
shareholders construct Fund investment portfolios to suit their
individual needs. Based on information shareholders provide about
their financial circumstances, goals, and objectives in response
to a questionnaire, Stein Roe's investment professionals create
customized portfolio recommendations for investments in the mutual
funds managed by Stein Roe. Shareholders participating in Stein
Roe Counselor [service mark] are free to self direct their
investments while considering Stein Roe's recommendations;
shareholders participating in Stein Roe Personal Counselor
[service mark] enjoy the added benefit of having Stein Roe
implement portfolio recommendations automatically for a fee of 1%
or less, depending on the size of their portfolios. In addition
to reviewing shareholders' circumstances, goals, and objectives
periodically and updating portfolio recommendations to reflect any
changes, the shareholders who participate in these programs are
assigned a dedicated Counselor [service mark] representative.
Other distinctive services include specially designed account
statements with portfolio performance and transaction data,
newsletters, and regular investment, economic, and market updates.
A $50,000 minimum investment is required to participate in either
program.
In return for its services, Stein Roe is entitled to receive
from the Fund a monthly administrative fee at an annual rate of
0.15% of average net assets and a monthly management fee at an
annual rate of 0.85% of average net assets.
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 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,
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 its shares are being
offered for sale to the public; provided, however, Stein Roe is
not required to reimburse the Fund an amount in excess of fees
paid by the Fund under that agreement for such year. In addition,
in the interest of further limiting expenses of the Fund, Stein
Roe may voluntarily waive its fees and/or absorb certain expenses,
as described under The Fund-Your Expenses in the Prospectus. Any
such reimbursement will enhance the yield of the Fund.
The 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
the Trust or any shareholder of the Trust 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 its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the agreement.
Any expenses that are attributable solely to the
organization, operation, or business of the Fund are paid solely
out of its assets. 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 services provided to the Trust, Stein Roe receives
an annual fee of $25,000 per Fund plus .0025 of 1% of average net
assets over $50 million. During the fiscal years ended Sept. 30,
1997 and 1998, Stein Roe received $109,375 and $224,068,
respectively, from the Trust for services provided under this
agreement.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Funds
Distributor, Inc. (the "Distributor"), One Financial Center,
Boston, MA 02111, an indirect subsidiary of Liberty Financial,
under a Distribution Agreement. The Distribution Agreement
continues in effect from year to year, provided such continuance
is approved annually (i) by a majority of the trustees or by a
majority of the outstanding voting securities of the Trust, and
(ii) by a majority of the trustees who are not parties to the
Agreement or interested persons of any such party ("independent
trustees"). The Distributor has no obligation, as underwriter, to
buy Fund shares, and purchases shares only upon receipt of orders
from authorized financial service firms or investors. 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.
The Fund's shares are offered at net asset value, subject to
a Rule 12b-1 fee.
The trustees of the Trust have adopted a plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plan").
The Plan provides that, as compensation for personal service
and/or the maintenance of shareholder accounts, the Distributor
receives a service fee at an annual rate not to exceed 0.25% of
net assets attributed to each class of shares other than Class K
shares. For series of the Trust, such as the Fund, that are not
in a multi-class structure, the Distributor receives a
distribution or service fee at an annual rate not to exceed 0.25%
of the net assets attributed to such series. The Plan also
provides that as compensation for the promotion and distribution
of shares of the series of the Trust including its expenses
related to sale and promotion of Fund shares, the Distributor
receives from each series a fee at an annual rate not exceeding
0.10% of the average net assets attributed to Class A shares, and
0.75% of the average net assets attributed to each of its Class B
and Class C shares. The Plan further provides that, as
compensation for services and/or distribution, the Distributor
receives a fee at an annual rate not to exceed 0.25% of the
average net assets attributable to Class K shares. At this time,
the Distributor has voluntarily agreed to limit the Class A
distribution fee to 0.05% annually. The Distributor may terminate
this voluntary limitation without shareholder approval. Class B
shares automatically convert to Class A shares approximately eight
years after the Class B shares are purchased. Class C and Class K
shares do not convert. The Distributor generally pays this amount
to institutions that distribute Fund shares and provide services
to the Fund and its shareholders. Those institutions may use the
payments for, among other purposes, compensating employees engaged
in sales and/or shareholder servicing. The amount of fees paid by
the Fund during any year may be more or less than the cost of
distribution or other services provided to the Fund. NASD rules
limit the amount of annual distribution fees that may be paid by a
mutual fund and impose a ceiling on the cumulative sales charges
paid. The Trust's Plan complies with those rules.
The trustees believe that the Plan could be a significant
factor in the growth and retention of Fund assets resulting in a
more advantageous expense ratio and increased investment
flexibility which could benefit each class of shareholders. The
Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote
of the trustees, including the independent trustees. The Plan may
not be amended to increase the fee materially without approval by
a vote of a majority of the outstanding voting securities of the
relevant class of shares and all material amendments of the Plan
must be approved by the trustees in the manner provided in the
foregoing sentence. The Plan may be terminated at any time by a
vote of a majority of the independent trustees or by a vote of a
majority of the outstanding voting securities of the relevant
Class of shares.
TRANSFER AGENT
Liberty Funds Services, Inc. (the "Transfer Agent"), P.O. Box
1722, Boston, MA 02105, an indirect subsidiary of Liberty
Financial, is the agent of the Trust for the transfer of shares,
disbursement of dividends, and maintenance of shareholder
accounting records. For performing these services, the Transfer
Agent receives from the Fund a fee based on an annual rate of .25
of 1% of average net assets. The Trust believes the charges by
SSI to the Fund are comparable to those of other companies
performing similar services. (See Investment Advisory and Other
Services.)
Some intermediaries having special selling arrangements with
the Distributor, including certain broker-dealers, bank trust
departments, asset allocation programs sponsored by Stein Roe,
wrap fee programs, and retirement plan service providers
("Intermediaries") that maintain nominee accounts with the Fund
for their clients who are Fund shareholders, may be paid a fee
from the Transfer Agent for shareholder servicing and accounting
services they provide with respect to the underlying Fund shares.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 02101, is the custodian for the 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 and its shareholders to
maintain assets in each of the countries in which the Fund invests
with particular foreign sub-custodians in such countries, pursuant
to contracts between such respective foreign sub-custodians and
the Bank. The review includes an assessment of the risks of
holding assets in any such country (including risks of
expropriation or imposition of exchange controls), the operational
capability and reliability of each such foreign sub-custodian, and
the impact of local laws on each such custody arrangement. Each
Board of Trustees is aided in its review by the Bank, which has
assembled the network of foreign sub-custodians, as well as by
Stein Roe and counsel. However, with respect to foreign sub-
custodians, there can be no assurance that the Fund, 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 may invest in obligations of the Bank and may
purchase or sell securities from or to the Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur
Andersen LLP, 33 West Monroe Street, Chicago, IL 60603. The
accountants 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 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"). 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
Fund. 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 Fund 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 Fund pays ATI a commission for these transactions. The Fund
has 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 Fund may determine,
Stein Roe may consider sales of shares the Fund 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.
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. In addition, the Board of
Trustees 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. However, 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.
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 dividend and capital gains distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date 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 less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent the Fund invests in foreign securities, it may
be subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% of total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Fund may file an election with the Internal
Revenue Service pursuant to which its shareholders will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign
income taxes paid by them, and (iii) deduct such pro rata shares
in computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against
their United States income taxes. Shareholders who do not itemize
deductions for federal income tax purposes will not, however, be
able to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their
share of such taxes in gross income. Shareholders who claim a
foreign tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents
income from each foreign country, if the Fund qualifies to pass
along such credit.
INVESTMENT PERFORMANCE
The Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed 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 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).
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 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 or recognition 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 which might mention the Fund include, but
are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Atlantic Monthly
Associated Press
Barron's
Bloomberg
Boston Globe
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Investment Advisor
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Marketing Alert
Gourmet
Individual Investor
Investment Dealers' Digest
Investment News
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Money on Line
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsday
Newsweek
New York Daily News
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
Reuters
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Street.com
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
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
Fund. 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 Trust believes to be generally accurate.
The Fund may compare its performance to the Consumer Price
Index (All Urban), a widely recognized measure of inflation. Its
performance also may be compared to the following indexes or
averages:
Dow-Jones Industrial Average New York Stock Exchange
Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials Nasdaq Composite
Standard & Poor's 600 Index Nasdaq Industrials
Wilshire 5000 Russell 2000 Index
(These indexes are widely (These indexes generally
recognized indicators of reflect the performance of
general U.S. stock market stocks traded in the
results.) indicated markets.)
In addition, the Fund may compare its performance to the
following benchmarks:
AMEX Computer Technology Index
AMEX Interactive Week
AMEX Interactive Week Internet
CBOE GSTI Internet Index
CBOE Internet Index
CBOE Internet Index Leaps - WXI
CBOE Internet Index Leaps - ZIX
Dow Jones Internet Index
Pacific Stock Exchange Technology Index
S&P Technology Index
TheStreet.com Internet Index
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. The Fund may also use
comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent
service. Should Lipper or another service reclassify the Fund to
a different category or develop (and place it into) a new
category, it may compare its performance or ranking with those of
other funds in the newly assigned category, as published by the
service.
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 the fund's 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 January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<TABLE>
<CAPTION>
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
Interest
Rate 3% 5% 7% 9% 3% 5% 7% 9%
- --------------------------------------------------------------------------------
Com-
pound-
ing
Years Tax-Deferred Investment Taxable Investment
- ---- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 $82,955 $108,031 $145,856 $203,239 $80,217 $98,343 $121,466 $151,057
25 65,164 80,337 101,553 131,327 63,678 75,318 89,528 106,909
20 49,273 57,781 68,829 83,204 48,560 55,476 63,563 73,028
15 35,022 39,250 44,361 50,540 34,739 38,377 42,455 47,025
10 22,184 23,874 25,779 27,925 22,106 23,642 25,294 27,069
5 10,565 10,969 11,393 11,840 10,557 10,943 11,342 11,754
1 2,036 2,060 2,085 2,109 2,036 2,060 2,085 2,109
</TABLE>
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.
From time to time, the Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor
[service mark] and the Stein Roe Personal Counselor [service mark]
programs and asset allocation and other investment strategies.
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 in which a fund invests should be continuously reviewed
and that individual analysts give different weightings to the
various factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources which 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 of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
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.
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.
_______________________
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1933, No.
333-17255. The terms "Pre-Effective Amendment" and "PEA"
refer, respectively, to a pre-effective amendment and a post-
effective amendment to the Registration Statement.]
(a) Agreement and Declaration of Trust as amended through Feb. 12,
1999.
(b)(1) By-Laws of Registrant. (Exhibit 2 to Registration
Statement.)*
(2) Amendment to By-Laws dated Feb. 4, 1998. (Exhibit 2(b)
to PEA #8.)*
(c) None.
(d) None.
(e)(1) Underwriting agreement between Registrant and
Liberty Financial Investments, Inc. dated October 15,
1997. (Exhibit 6(a) to PEA #7.)*
(2) Selling agreement. (Exhibit 6(c) to PEA #2.)*
(f) None.
(g) Custodian contract between Registrant and State Street Bank and
Trust Company dated February 13, 1997. (Exhibit 8 to PEA #1.)*
(h)(1) Form of shareholder servicing and transfer agency
agreement between Registrant and Colonial Investors
Service Center, Inc. (Exhibit 9(e) to PEA #2.)*
(2) Administrative agreement between Registrant and Stein
Roe & Farnham Incorporated dated February 14, 1997.
(Exhibit 9(b) to PEA #1.)*
(3) Accounting and bookkeeping agreement between Registrant
and Stein Roe & Farnham Incorporated dated February 14,
1997. (Exhibit 9(c) to PEA #1.)*
(4) Sub-transfer agent agreement between SteinRoe Services
Inc. and Colonial Investors Service Center, Inc. as
amended through April 30, 1998. (Exhibit (h)(4) to PEA #9.)*
(i)(1) Opinion and consent of Bell, Boyd & Lloyd relating to
Stein Roe Advisor Growth & Income Fund, Stein Roe Advisor
International Fund, Stein Roe Advisor Young Investor Fund,
Stein Roe Advisor Special Venture Fund, Stein Roe Advisor
Balanced Fund, Stein Roe Advisor Growth Stock Fund, and
Stein Roe Advisor Special Fund. (Exhibit 10 to Pre-
Effective Amendment #1.)*
(2) Opinion and consent of Bell, Boyd & Lloyd with respect to
Stein Roe Advisor High-Yield Municipals Fund, Stein Roe
Advisor Intermediate Bond Fund, and Stein Roe Advisor Income
Fund. (Exhibit 10(b) to PEA #5.)*
(j) None.
(k) None.
(l) Inapplicable.
(m) Amended Rule 12b-1 plan dated December 12, 1998.
(n) Financial Data Schedules:
(1) Stein Roe Advisor Growth & Income Fund, Class K
(2) Stein Roe Advisor Young Investor Fund, Class A
(3) Stein Roe Advisor Young Investor Fund, Class K
(4) Stein Roe Advisor Growth Stock Fund, Class A
(5) Stein Roe Advisor Growth Stock Fund, Class B
(6) Stein Roe Advisor Growth Stock Fund, Class C
(7) Stein Roe Advisor Growth Stock Fund, Class K
(8) Stein Roe Advisor Special Fund, Class K
(9) Stein Roe Advisor Intermediate Bond Fund, Class K
(10) Stein Roe Advisor High-Yield Municipals Fund, Class K
(o) Amended Rule 18f-3 plan dated February 4, 1998.
- -----------
*Incorporated by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlling, controlled by, or under common control with other
persons within the meaning of this Item. See "Investment Advisory
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.
The Adviser is a wholly owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary of
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. The Adviser acts as investment
adviser to individuals, trustees, pension and profit-sharing
plans, charitable organizations, and other investors. In addition
to Registrant, it also acts as investment adviser to other
investment companies having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
and other investment companies managed by the Adviser. (The listed
entities are located at One South Wacker Drive, Chicago, Illinois
60606, except for SteinRoe Variable Investment Trust and Liberty
Variable Investment Trust, which are located at Federal Reserve
Plaza, Boston, MA 02210 and LFC Utilities Trust, which is located
at One Financial Center, Boston, MA 02111.) A list of such
capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
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
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. V-P;
V-P; 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
Steven P. Luetger 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. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
E. Bruce Dunn Vice-President
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
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Steven M. Salopek 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. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
E. Bruce Dunn Vice-President
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
Eric S. Maddix 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. V-P;
V-P; 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
E. Bruce Dunn Vice President
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Steven M. Salopek 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
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
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 3rd day of June, 1999.
LIBERTY-STEIN ROE ADVISOR 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 June 3, 1999
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice- June 3, 1999
Gary A. Anetsberger President; Treasurer
Principal Financial Officer
PATRICIA J. JUDGE Controller June 3, 1999
Patricia J. Judge
Principal Accounting Officer
JOHN A. BACON JR. Trustee June 3, 1999
John A. Bacon Jr.
WILLIAM W. BOYD Trustee June 3, 1999
William W. Boyd
LINDSAY COOK Trustee June 3, 1999
Lindsay Cook
DOUGLAS A. HACKER Trustee June 3, 1999
Douglas A. Hacker
JANET LANGFORD KELLY Trustee June 3, 1999
Janet Langford Kelly
CHARLES R. NELSON Trustee June 3, 1999
Charles R. Nelson
THOMAS C. THEOBALD Trustee June 3, 1999
Thomas C. Theobald
<PAGE>
STEIN ROE ADVISOR TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- -------------
(a) Agreement and Declaration of Trust as amended
(m) Amended 12b-1 Plan
(n) Financial Data Schedules:
(1) Stein Roe Advisor Growth & Income Fund, Class K
(2) Stein Roe Advisor Young Investor Fund, Class A
(3) Stein Roe Advisor Young Investor Fund, Class K
(4) Stein Roe Advisor Growth Stock Fund, Class A
(5) Stein Roe Advisor Growth Stock Fund, Class B
(6) Stein Roe Advisor Growth Stock Fund, Class C
(7) Stein Roe Advisor Growth Stock Fund, Class K
(8) Stein Roe Advisor Special Fund, Class K
(9) Stein Roe Advisor Intermediate Bond Fund, Class K
(10) Stein Roe Advisor High-Yield Municipals Fund, Class K
(o) Rule 18f-3 plan
<PAGE>
STEIN ROE ADVISOR TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the duly elected
and qualified Trustees of Stein Roe Advisor 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,
as amended (the "Declaration of Trust"), do hereby amend the
Declaration of Trust as follows and hereby consent to such
amendment:
Article 1, Section I, of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 1. The Trust shall be known as "Liberty-
Stein Roe Advisor 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.
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: February 12, 1999
JOHN A. BACON JR. WILLIAM W. BOYD
John A. Bacon, Jr. William W. Boyd
LINDSAY COOK DOUGLAS A HACKER
Lindsay Cook Douglas A. Hacker
JANET LANGFORD KELLY CHARLES R. NELSON
Janet Langford Kelly Charles R. Nelson
THOMAS C. THEOBALD
Thomas C. Theobald
<PAGE>
STEIN ROE ADVISOR TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the duly elected
and qualified Trustees of Stein Roe Advisor Trust, a
voluntary association with transferable shares organized
under the laws of the Commonwealth of Massachusetts pursuant
to an Agreement and Declaration of Trust dated July 31, 1996
(the "Declaration of Trust"), do hereby amend the Declaration
of Trust as follows and hereby consent to such amendment:
Article VI, Section II of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 2. Any holder of Shares of the Trust may by
presentation of a written request, together with his or
her certificates, if any, for such Shares, in proper
form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the
Trust, redeem his or her Shares for the net asset value
thereof determined and computed in accordance with the
provisions of this Section 2 and the provisions of
Section 7 of this Article VI.
Upon receipt by the Trust or its transfer agent of
such written request for redemption of Shares, such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such Shares are tendered in proper order for transfer to
the Trust or determined as of such other time fixed by
the Trustees as may be permitted or required by the 1940
Act, provided that no such tender shall be required in
the case of Shares for which a certificate or
certificates have not been issued, and in such case such
Shares shall be redeemed at the net asset value per
share of the appropriate series next determined after
such request has been received or determined at such
other time fixed by the Trustees as may be permitted or
required by the 1940 Act.
The amount payable by the Trust upon redemption shall
be reduced by such redemption fee, if any, as the
Trustees may authorize.
The obligation of the Trust to redeem its Shares of
each series or class as set forth above in this Section
2 shall be subject to the conditions that during any
time of emergency, as hereinafter defined, such
obligation may be suspended by the Trust by or under
authority of the Trustees for such period of periods
during such time of emergency as shall be determined by
or under authority of the Trustees. If there is such a
suspension, any Shareholder may withdraw any demand for
redemption and any tender of Shares which has been
received by the Trust during any such period and any
tender of Shares, the applicable net asset value of
which would but for such suspension be calculated as of
a time during such period. Upon such withdrawal, the
Trust shall return to the Shareholder the certificates
therefor, if any. For the purposes of any such
suspension, "time of emergency" shall mean, either with
respect to all Shares of any series of Shares, any
period during which:
a. the New York Stock Exchange is closed other than for
customary weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust
shall have determined, in compliance with any
applicable rules and regulations of the Securities
and Exchange Commission, either that trading on the
New York Stock Exchange is restricted, or that an
emergency exists as a result of which (i) disposal
by the Trust of securities owned by it is not
reasonably practicable or (ii) it is not reasonably
practicable for the Trust fairly to determine the
current value of its net assets; or
c. the suspension or postponement of such obligations
is permitted by order of the Securities and Exchange
Commission.
The Trust may also purchase, repurchase or redeem
Shares in accordance with such other methods, upon such
other terms and subject to such other conditions as the
Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to
purchase or repurchase is made.
This instrument may be executed in several counterparts,
each of which shall be deemed to be an original, but all
taken together shall be one instrument.
Dated: December 13, 1996
TIMOTHY K. ARMOUR DOUGLAS A. HACKER
Timothy K. Armour Douglas A. Hacker
KENNETH L. BLOCK FRANCIS W. MORLEY
Kenneth L. Block Francis W. Morley
WILLIAM W. BOYD CHARLES R. NELSON
William W. Boyd Charles R. Nelson
LINDSAY COOK THOMAS C. THEOBALD
Lindsay Cook Thomas C. Theobald
GORDON R. WORLEY
Gordan R. Worley
<PAGE>
STEIN ROE ADVISER TRUST
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
Stein Roe Adviser Trust (the "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"), hereby certifies that, pursuant to
the unanimous vote of all trustees at a meeting of the Board
of Trustees held in accordance with the By-Laws of the Trust
on September 13, 1996, the following amendment to the
Declaration of Trust has been duly adopted:
Article I, Section 1, of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
Section 1. The Trust shall be known as "Stein Roe
Advisor 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.
IN WITNESS WHEREOF, the Trust has caused this amendment
to be signed and sealed in its name and on its behalf by
Timothy K. Armour, President and Trustee of the Trust, on
Septmber 30, 1996.
STEIN ROE ADVISER TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour,
President and Trustee
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named
Timothy K. Armour, known to me to be the President and a
Trustee of Stein Roe Adviser Trust, and acknowledged the
foregoing instrument to be his free act and deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires: 10/30/97
<PAGE> 1
STEIN ROE ADVISER 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
Adviser 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.
AMENDED STEIN ROE
RULE 12b-1 PLAN AND AGREEMENT
Pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the ("Act"), this Rule 12b-1
Plan and Agreement, as amended (the "Plan") is hereby adopted by
Stein Roe Advisor Trust (the "Trust") for each of the series and
classes (the "Fund") identified in the attached Schedule A,
by a majority of the trustees of the Trust, including a
majority of the trustees who are not "interested persons" of
the Trust (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or
in any agreements related to the Plan (the "non-interested
trustees"). For each fund, this Plan shall become effective
on the date the registration statement of the applicable
Trust becomes effective for such Fund or such other date
indicated in Schedule A.
Section 1. Fee.
(a) Each Fund having Class A, B or C shares shall pay to
Liberty Funds Distributor, Inc. (f/k/a Liberty Financial
Investments, Inc.) (the "Distributor"), a service fee
calculated and paid monthly at the annual rate of 0.25 of
1.00% of the average net asset value of such shares. Each
Fund having Class A shares shall pay to the Distributor a
distribution fee calculated and paid monthly at the annual
rate of 0.10 of 1.00% of the average net asset value of such
shares. Each Fund having Class B or C shares shall pay to the
Distributor a distribution fee calculated and paid monthly at
the annual rate of 0.75 of 1.00% of the average net asset
value of such shares during such month. Each Fund having
Class K shares shall pay to the Distributor a distribution
and/or service fee calculated and paid monthly at the annual
rate of 0.25 of 1.00% of the average net asset value of such
shares during such month.
(b) Such payment of servicing fees represents
compensation for servicing the shares, including
but not limited to relationship management,
retirement plan enrollment meetings and costs
associated with educational conferences and the
preparation of educational materials. Such payment
for distribution fees represents compensation for
expenses incurred by the Distributor for the
promotion and distribution of the shares of the
Fund making the payment, including, but not limited
to the printing of prospectuses and reports used
for sales purposes, advertisements, expenses of
preparation and printing of sales literature and
other sales or promotional expense, including any
compensation, paid to any securities dealer or
others person who has incurred such expense
pursuant to a Selling Agreement executed by such
party and the Distributor.
Section 2. No payments are to be made by the Trust or
any Fund to finance or promote sales of shares other than
pursuant to this Plan.
Section 3. The Distributor shall prepare written
reports to the Trust's board of trustees on a quarterly basis
showing all amounts paid under this Plan and the purposes for
which such payments were made, plus a summary of the expenses
incurred by the Distributor hereunder, together with such
other information as from time to time shall be reasonably
requested by the board of trustees of the Trust.
Section 4. For each Fund, the Plan shall remain in
effect until April 30, 1998 and shall continue in effect from
year to year thereafter only so long as such continuance is
specifically approved at least annually by the vote of a
majority of the trustees of the Trust, including a majority
of the non-interested trustees of each Trust who have no
direct or indirect financial interest in the Plan or in any
agreements related to the Plan, cast in person at a meeting
called for such purpose.
Section 5. So long as the Plan is in effect, nominees
for election as non-interested trustees of each Trust listed
in Schedule A shall be selected by the non-interested
trustees as required by Rule 12b-1 under the Act.
Section 6. The Plan may be terminated as to a Fund,
without penalty, at any time by either a majority of the non-
interested trustees of the applicable Trust or by a vote of a
majority of the outstanding voting securities of that Fund,
and shall terminate automatically in the event of any act
that terminates the Underwriting Agreement with the
Distributor. To the extent the Plan is terminated with
respect to any particular fund or class, such termination
will not affect the Plan with regard to any other fund or
class unless specifically indicated.
Section 7. As to any Fund, the Plan may not be amended
to increase materially the amount authorized by this Plan to
be spent for services described hereunder without approval by
a majority of that Fund's outstanding voting securities, and
all material amendments to the Plan shall be approved by a
vote of a majority of the trustees of the Trust, including a
majority of the non-interested trustees of the Trust who have
no direct or indirect financial interest in the Plan, cast in
person at a meeting called for such purpose.
Section 8. Any obligation of any Trust hereunder shall
be binding only upon the assets of the Trust (or the
applicable Fund) and shall not be binding upon any trustee,
officer, employee, agent, or shareholder of that Trust.
Neither the authorization of any action by the trustees or
shareholders of the Trust nor the execution of this Plan on
behalf of the Trust shall impose any liability upon any
trustee or any shareholder.
This Plan and the terms and provisions thereof are
hereby accepted and agreed to by the Trust and the
Distributor as evidenced by their execution hereof.
Dated as of December 12, 1998
STEIN ROE ADVISOR TRUST LIBERTY FINANCIAL INVESTMENTS, INC.
GARY A. ANETSBERGER THOMAS W. BUTCH
By: Gary A. Anetsberger By: Thomas W. Butch
Senior Vice President Senior Vice President
<PAGE>
SCHEDULE A
Stein Roe Advisor Growth Stock Fund Class A
Class B
Class C
Class K
Stein Roe Advisor Growth & Income Fund Class A
Class B
Class C
Class K
Stein Roe Advisor Special Fund Class A
Class B
Class C
Class K
Stein Roe Advisor Young Investor Fund Class A
Class B
Class C
Class K
Stein Roe Intermediate Bond Fund Class A
Class B
Class C
Class K
Stein Roe Advisor High-Yield Class A
Municipals Fund Class B
Class C
Class K
Stein Roe Retirement Investor Fund Class A
Class B
Class C
Class K
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE ADVISOR GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 476
<RECEIVABLES> 1
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 527
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 481
<TOTAL-LIABILITIES> 481
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 439
<SHARES-COMMON-STOCK> 38
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47
<NET-ASSETS> 481
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 1
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 27
<NET-CHANGE-FROM-OPS> 29
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 367
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48
<AVERAGE-NET-ASSETS> 166,825
<PER-SHARE-NAV-BEGIN> 11.36
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> 0.0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.84
<EXPENSE-RATIO> 1.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> STEIN ROE ADVISOR YOUNG INVESTOR FUND CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 6365
<RECEIVABLES> 1488
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7878
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7625
<SHARES-COMMON-STOCK> 580
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 206
<NET-ASSETS> 7825
<DIVIDEND-INCOME> 2
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> (4)
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 182
<NET-CHANGE-FROM-OPS> 185
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 581
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (9)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58
<AVERAGE-NET-ASSETS> 2141
<PER-SHARE-NAV-BEGIN> 11.67
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.19
<EXPENSE-RATIO> 1.65
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> STEIN ROE ADVISOR YOUNG INVESTOR FUND CLASS K
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 6,365
<RECEIVABLES> 1,488
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,878
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,625
<SHARES-COMMON-STOCK> 13
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 706
<NET-ASSETS> 7,825
<DIVIDEND-INCOME> 2
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> (4)
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 182
<NET-CHANGE-FROM-OPS> 185
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (9)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58
<AVERAGE-NET-ASSETS> 138
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 1.80
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.24
<EXPENSE-RATIO> 1.50
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> STEIN ROE ADVISOR GROWTH STOCK FUND CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 81,746
<RECEIVABLES> 1,589
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,741
<SHARES-COMMON-STOCK> 2,692
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (132)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (778)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,306
<NET-ASSETS> 83,137
<DIVIDEND-INCOME> 155
<INTEREST-INCOME> 46
<OTHER-INCOME> 0
<EXPENSES-NET> 333
<NET-INVESTMENT-INCOME> (132)
<REALIZED-GAINS-CURRENT> (770)
<APPREC-INCREASE-CURRENT> 9,272
<NET-CHANGE-FROM-OPS> 8,370
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,814
<NUMBER-OF-SHARES-REDEEMED> 122
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,886
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 17,827
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.11
<EXPENSE-RATIO> 1.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 062
<NAME> STEIN ROE ADVISOR GROWTH STOCK FUND CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 81,746
<RECEIVABLES> 1,589
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,741
<SHARES-COMMON-STOCK> 3,021
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (132)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (778)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,306
<NET-ASSETS> 83,137
<DIVIDEND-INCOME> 155
<INTEREST-INCOME> 46
<OTHER-INCOME> 0
<EXPENSES-NET> 333
<NET-INVESTMENT-INCOME> (132)
<REALIZED-GAINS-CURRENT> (770)
<APPREC-INCREASE-CURRENT> 9,272
<NET-CHANGE-FROM-OPS> 8,370
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,091
<NUMBER-OF-SHARES-REDEEMED> 70
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,886
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 19,533
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 2.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 063
<NAME> STEIN ROE ADVISOR GROWTH STOCK FUND CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 81,746
<RECEIVABLES> 1,589
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,741
<SHARES-COMMON-STOCK> 545
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (132)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (778)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,306
<NET-ASSETS> 83,137
<DIVIDEND-INCOME> 155
<INTEREST-INCOME> 46
<OTHER-INCOME> 0
<EXPENSES-NET> 333
<NET-INVESTMENT-INCOME> (132)
<REALIZED-GAINS-CURRENT> (770)
<APPREC-INCREASE-CURRENT> 9,272
<NET-CHANGE-FROM-OPS> 8,370
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 561
<NUMBER-OF-SHARES-REDEEMED> 16
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,886
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 2,954
<PER-SHARE-NAV-BEGIN> 11.59
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.03
<EXPENSE-RATIO> 2.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 064
<NAME> STEIN ROE ADVISOR GROWTH STOCK FUND CLASS K
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 81,746
<RECEIVABLES> 1,589
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,741
<SHARES-COMMON-STOCK> 93
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> (132)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (778)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,306
<NET-ASSETS> 83,137
<DIVIDEND-INCOME> 155
<INTEREST-INCOME> 46
<OTHER-INCOME> 0
<EXPENSES-NET> 333
<NET-INVESTMENT-INCOME> (132)
<REALIZED-GAINS-CURRENT> (770)
<APPREC-INCREASE-CURRENT> 9,272
<NET-CHANGE-FROM-OPS> 8,370
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 91
<NUMBER-OF-SHARES-REDEEMED> 20
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 82,886
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 431
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.17
<EXPENSE-RATIO> 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEIN ROE ADVISOR SPECIAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 548
<RECEIVABLES> 2
<ASSETS-OTHER> 44
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 594
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45
<TOTAL-LIABILITIES> 45
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 42
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 44
<NET-ASSETS> 549
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 13
<NET-CHANGE-FROM-OPS> 23
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 424
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (47)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48
<AVERAGE-NET-ASSETS> 219,955
<PER-SHARE-NAV-BEGIN> 12.46
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0.63
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.09
<EXPENSE-RATIO> 1.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEIN ROE ADVISOR INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> FEB-02-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,124
<RECEIVABLES> 5
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,146
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24
<TOTAL-LIABILITIES> 24
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,117
<SHARES-COMMON-STOCK> 212
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9
<NET-ASSETS> 2,122
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22
<OTHER-INCOME> 0
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 19
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> 9
<NET-CHANGE-FROM-OPS> 24
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 220
<NUMBER-OF-SHARES-REDEEMED> 9
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2,122
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 32
<AVERAGE-NET-ASSETS> 760
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> 1.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> STEIN ROE ADVISOR HIGH-YIELD MUNICIPALS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> FEB-02-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1,023
<RECEIVABLES> 10
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,051
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22
<TOTAL-LIABILITIES> 22
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,030
<SHARES-COMMON-STOCK> 103
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1
<NET-ASSETS> 1,029
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12
<OTHER-INCOME> 0
<EXPENSES-NET> 2
<NET-INVESTMENT-INCOME> 10
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 1
<NET-CHANGE-FROM-OPS> 9
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,029
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 31
<AVERAGE-NET-ASSETS> 472
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> 1.10
</TABLE>
<PAGE>
STEIN ROE ADVISOR TRUST
Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940
Effective September 18, 1997
As amended and restated effective February 4, 1998
Each series (each an "Advisor Fund") of Stein Roe Advisor
Trust (the "Trust") identified in the attached Schedule I
may from time to time issue one or more of the following
classes of shares as authorized by the Board of Trustees and
as provided for herein: Class A shares, Class B shares,
Class C shares and Class K shares. Each class is subject to
such investment minimums and other conditions of eligibility
as set forth in the Advisor Funds' prospectuses and
statements of additional information as from time to time in
effect. The differences in expenses among these classes of
shares, and the conversion and exchange features of each
class of shares, are set forth below. These differences are
subject to change, to the extent permitted by law and by the
Declaration of Trust and By-laws of the Trust, by action of
the Board of Trustees.
Class A shares
Class A shares of Advisor Trust Funds, other than those Funds
listed on Schedule II hereto, are offered at net asset value
("NAV") plus the initial sales charges described in the Advisor
Funds' prospectuses and statements of additional information as
from time to time in effect. Initial sales charges may not
exceed 6.50%, and may be reduced or waived as permitted by
Rule 22d-1 under the Investment Company Act of 1940 (the
"1940 Act") and as described in the Advisor Funds'
prospectuses and statements of additional information from
time to time in effect.
Purchases of Class A shares of Advisor Trust Funds listed on
Schedule II hereto, are offered at NAV without an initial sales
charge.
Purchases of $1 million to $5 million of Class A shares that
are redeemed within 18 months from purchase are subject to a
contingent deferred sales charge ("CDSC") of 1% of either
the purchase price or the NAV of the shares redeemed,
whichever is less. Class A shares of Advisor Trust Funds,
other than those Funds listed on Schedule II hereto, are not
otherwise subject to a CDSC. The CDSC may be reduced or
waived as permitted by Rule 6c-10 under the 1940 Act and as
described in the Advisor Funds' prospectuses and statements
of additional information as from time to time in effect.
Purchases of Class A shares of each Advisor Fund listed on
Schedule II that are redeemed within three years from
purchase are subject to a CDSC of up to 2% of either the
purchase price or the NAV of the shares redeemed, whichever
is less. Class A shares purchased with reinvested
distributions are not subject to the CDSC. The CDSC may be
reduced or waived as permitted by Rule 6c-10 under the 1940
Act and as described in the Advisor Funds' prospectuses and
statements of additional information as from time to time in
effect.
Class A shares pay distribution and service fees pursuant to
a plan adopted pursuant to Rule 12b-1 under the 1940 Act
("12b-1 Plan") as described in the Funds' prospectuses and
statements of additional information in effect from time to
time. Such fees may be in amounts up to but may not exceed,
respectively, 0.10% and 0.25% per annum of the average daily
net assets attributable to such class.
Class A shares pay service fees equaling a portion of the
transfer agency fee attributable to that class as described
in the Advisor Funds' prospectuses and statements of
additional information in effect from time to time. Total
transfer agency fees, including such service component, may
not exceed 0.236% of average annual net assets attributable
to the class.
Class A shares of any Advisor Fund may be exchanged, at the
holder's option, for Class A shares of another Advisor Fund
or Class A shares of most funds advised by Colonial
Management Associates, Inc. or distributed by Colonial
Investment Services, Inc. ("Colonial Funds") or its
successor without the payment of a sales charge, except that
if shares of any other Advisor Fund or non-money market
Colonial Fund are exchanged within five months after
purchase for shares of another Advisor Fund or Colonial Fund
with a higher sales charge, then the difference in sales
charges must be paid on the exchange.
In addition, Class A shares of any Advisor Fund may be
exchanged, at the holder's option, for Class A shares of
another Advisor Fund or a Colonial Fund offering Class A
shares, without the payment of a CDSC. The holding period
for determining the CDSC will include the holding period of
the shares exchanged. If the Class A shares received in the
exchange are subsequently redeemed, the amount of the CDSC,
if any, will be determined by the schedule of the Advisor
Fund or Colonial Fund in which the original investment was
made.
Class B shares
Class B shares are offered at NAV, without an initial sales
charge. Class B shares that are redeemed within the period
of time after purchase (not more than 6 years) specified in
each Advisor Fund's prospectus and statement of additional
information as from time to time in effect are subject to a
CDSC of up to 5% of either the purchase price or the NAV of
the shares redeemed, whichever is less; such percentage may
be lower for certain Funds and declines the longer the
shares are held, all as described in the Advisor Funds'
prospectuses and statements of additional information as
from time to time in effect. Class B shares purchased with
reinvested distributions are not subject to a CDSC. The
CDSC is subject to reduction or waiver in certain
circumstances, as permitted by Rule 6c-10 under the 1940 Act
and as described in the Advisor Funds' prospectuses and
statements of additional information as from time to time in
effect.
Class B shares pay distribution and service fees pursuant to
a 12b-1 Plan as described in the Advisor Funds' prospectuses
and statements of additional information in effect from time
to time. Such fees may be in amounts up to but may not
exceed, respectively, 0.75% and 0.25% per annum of the
average daily net assets attributable to such class.
Class B shares pay service fees equaling a portion of the
transfer agency fee attributable to that class as described
in the Advisor Funds' prospectuses and statements of
additional information in effect from time to time. Total
transfer agency fees, including such service component, may
not exceed 0.236% of average annual net assets attributable
to the class.
Class B shares automatically convert to Class A shares of
the same Advisor Fund eight years after purchase, except
that Class B shares purchased through the reinvestment of
dividends and other distributions on Class B shares convert
to Class A shares proportionally to the amount of Class B
shares otherwise being converted.
Class B shares of any Advisor Fund may be exchanged, at the
holder's option, for Class B shares of another Advisor Fund
or a Colonial Fund offering Class B shares, without the
payment of a CDSC. The holding period for determining the
CDSC and the conversion to Class A shares will include the
holding period of the shares exchanged. If the Class B
shares received in the exchange are subsequently redeemed,
the amount of the CDSC, if any, will be determined by the
schedule of the Advisor Fund or Colonial Fund in which the
original investment was made.
Class C shares
Class C shares are offered at NAV without an initial sales
charge. Class C shares that are redeemed within one year
from purchase may be subject to a CDSC of 1% of either the
purchase price or the NAV of the shares redeemed, whichever
is less. Class C shares purchased with reinvested dividends
or capital gain distributions are not subject to a CDSC.
The CDSC may be reduced or waived in certain circumstances
as permitted by Rule 6c-10 under the 1940 Act and as
described in the Advisor Funds' prospectuses and statements
of additional information as from time to time in effect.
Class C shares pay distribution and service fees pursuant to
a 12b-1 Plan as described in the Advisor Funds' prospectuses
and statements of additional information in effect from time
to time. Such fees may be in amounts up to but may not
exceed, respectively, 0.75% and 0.25% per annum of the
average daily net assets attributable to such class.
Class C shares pay service fees equaling a portion of the
transfer agency fee attributable to that class as described
in the Advisor Funds' prospectuses and statements of
additional information in effect from time to time. Total
transfer agency fees, including such service component, may
not exceed 0.236% of average annual net assets attributable
to the class.
Class C shares of any Advisor Fund may be exchanged, at the
holder's option, for Class C shares of another Advisor Fund
or a Colonial Fund offering Class C shares, without the
payment of a CDSC. The holding period for determining the
CDSC will include the holding period of the shares
exchanged. If the Class C shares received in the exchange
are subsequently redeemed, the amount of the CDSC, if any,
will be determined by the schedule of the Advisor Fund or
Colonial Fund in which the original investment was made.
Only one exchange of any Advisor Fund or Colonial Fund's
Class C shares may be made in any three month period. For
this purpose, an exchange into an Advisor Fund or Colonial
Fund and a prior or subsequent exchange out of an Advisor
Fund or Colonial Fund constitutes an "exchange."
Class K shares
Class K shares are offered at NAV, without an initial sales
charge or CDSC.
Class K shares pay distribution and service fees pursuant to
a 12b-1 Plan as described in the Advisor Funds' prospectuses
and statements of additional information in effect from time
to time. Such fees, including such service component, may
not exceed an aggregate amount of 0.25% per annum of the
average daily net assets attributable to such class.
Class K shares pay service fees equaling a portion of the
transfer agency fee attributable to that class as described
in the Advisor Funds' prospectuses and statements of
additional information in effect from time to time. Total
transfer agency fees may not exceed 0.30% of average annual
net assets attributable to the class.
Class K shares of any Advisor Fund may be exchanged, at the
holder's option, for Class K shares of any Advisor Fund or
Colonial Fund.
<PAGE>
SCHEDULE I
Advisor Growth Stock Fund
Advisor Young Investor Fund (see Schedule II)
Advisor Special Fund
Advisor Special Venture Fund
Advisor Special Venture Fund
Advisor Balanced Fund
Advisor International Fund
Advisor Growth & Income Fund
Advisor Intermediate Bond Fund
Advisor Income Fund
Advisor High-Yield Municipals Fund
<PAGE>
SCHEDULE II
Advisor Young Investor Fund
