1933 Act Registration No. 333-13331
1940 Act File No. 811-07823
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
STEIN ROE INSTITUTIONAL TRUST
Registrant
One South Wacker Drive, Chicago, Illinois 60606
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
& Secretary Three First National Plaza
Stein Roe Institutional Trust Suite 3300
One South Wacker Drive 70 W. Madison Street
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has previously elected to register pursuant to Rule 24f-2
an indefinite number of shares of beneficial interest of the series
Stein Roe Institutional High Yield Fund.
This Registration Statement has also been signed by SR&F Base Trust
as it relates to Stein Roe Institutional High Yield Fund.
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
CROSS REFERENCE SHEET
ITEM
NO. CAPTION
- ----- -------
PART A (PROSPECTUS)
1 Front cover
2 Fee Table; Summary
3 (a) Inapplicable
(b) Inapplicable
(c) Investment Return
(d) Inapplicable
4 Organization and Description of Shares; The Fund;
Investment Policies; Investment Restrictions; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser, Fees and
Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see statement of
additional information: General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) For More Information
(f) Distributions and Income Taxes
(g) Distributions and Income Taxes
(h) Special Considerations Regarding Master Fund/Feeder Fund
Structure
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares; Net Asset Value
(c) How to Purchase Shares
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares
(b) How to Redeem Shares
(c) Inappicable
(d) How to Redeem Shares
9 Inapplicable
PART B (STATEMENT OF ADDITIONAL INFORMATION)
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Inapplicable
16(a) Investment Advisory Services; Management; see prospectus:
Management
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Inapplicable
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares
(b) Purchases and Redemptions; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22 Investment Performance
23 Balance Sheet
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE> 1
[STEIN ROE MUTUAL FUNDS LOGO]
PROSPECTUS
STEIN ROE INSTITUTIONAL HIGH YIELD FUND
Institutional High Yield Fund seeks total return by investing
for a high level of current income and capital growth.
Institutional High Yield Fund seeks to achieve its objective by
investing all of its net investable assets in shares of SR&F
High Yield Portfolio, a portfolio of SR&F Base Trust that has
the same investment objective and substantially the same
investment policies as Institutional High Yield Fund. High
Yield Portfolio invests primarily in high-yield, high-risk
medium- and lower-quality debt securities. LOWER-QUALITY
SECURITIES, COMMONLY KNOWN AS "JUNK BONDS," ARE SUBJECT TO A
GREATER RISK WITH REGARD TO PAYMENT OF INTEREST AND RETURN OF
PRINCIPAL THAN HIGHER-RATED BONDS. INVESTORS SHOULD CAREFULLY
CONSIDER THE RISKS ASSOCIATED WITH JUNK BONDS BEFORE INVESTING.
(SEE INVESTMENT POLICIES, RISKS AND INVESTMENT CONSIDERATIONS,
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND
STRUCTURE, AND APPENDIX.)
Institutional High Yield Fund is a "no-load" fund. There are no
sales or redemption charges, and the Fund has no 12b-1 plan.
Institutional High Yield Fund is a series of the Stein Roe
Institutional Trust and High Yield Portfolio is a series of SR&F
Base Trust. Each Trust is a diversified open-end management
investment company.
Shares of Institutional High Yield Fund are available primarily
through Intermediaries who provide accounting, recordkeeping,
and other services to investors and who hold Fund shares in
omnibus accounts for their clients. (See How to Purchase
Shares.)
This prospectus contains information you should know before
investing in Institutional High Yield Fund. Please read it
carefully and retain it for future reference.
A Statement of Additional Information dated January 1, 1997,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information may be obtained without
charge by writing to Stein Roe Funds, Suite 3200, One South
Wacker Drive, Chicago, Illinois 60606, or by calling Stein Roe
Advisor and Dealer Services at 800-322-0593.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is January 1, 1997.
TABLE OF CONTENTS
Page
Summary.................................2
Fee Table ..............................3
The Fund................................4
Investment Policies.....................4
Portfolio Investments and Strategies....6
Investment Restrictions ................9
Risks and Investment Considerations ...10
How to Purchase Shares.................11
How to Redeem Shares ..................12
Net Asset Value .......................12
Distributions and Income Taxes.........13
Investment Return......................13
Management ............................14
Organization and Description of Shares.15
Special Considerations Regarding the
Master Fund/Feeder Fund Structure....16
For More Information ..................18
Appendix...............................18
SUMMARY
Stein Roe Institutional High Yield Fund ("Institutional High
Yield Fund") is a series of the Stein Roe Institutional Trust,
an open-end diversified management investment company organized
as a Massachusetts business trust. Institutional High Yield
Fund offers institutional investors the advantage of a "no-load"
fund, with Stein Roe & Farnham Incorporated and its affiliates
providing customized services as investment adviser,
administrator, transfer agent, and distributor. (See The Fund
and Organization and Description of Shares.) This prospectus is
not a solicitation in any jurisdiction in which shares of
Institutional High Yield Fund are not qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. Institutional High Yield
Fund invests all of its net investable assets in SR&F High Yield
Portfolio ("High Yield Portfolio"). High Yield Portfolio
invests in a diversified portfolio of securities in accordance
with the identical investment objective and substantially the
same investment policies as those of Institutional High Yield
Fund. High Yield Portfolio seeks total return by investing for
a high level of current income and capital growth. High Yield
Portfolio invests primarily in high-yield, high-risk medium- and
lower-quality debt securities. Medium-quality debt securities,
although considered investment grade, may have some speculative
characteristics. Lower-quality debt securities are obligations
of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the
possibility of issuer default and bankruptcy, and are commonly
referred to as "junk bonds."
For a more detailed discussion of the investment objectives and
policies, please see Investment Policies and Portfolio
Investments and Strategies. There is, of course, no assurance
that Institutional High Yield Fund will achieve its investment
objective.
INVESTMENT RISKS. The risks inherent in Institutional High
Yield Fund depend primarily upon the term and quality of the
obligations in the investment portfolio of High Yield Portfolio,
as well as on market conditions. Interest rate fluctuations
will affect the Fund's net asset value and, therefore, the total
return from an investment in Institutional High Yield Fund.
Interest rate fluctuations will affect income on variable rate
securities and on securities purchased as other portfolio
securities mature. Since yields on debt securities available
for purchase vary over time, no specific yield on shares of
Institutional High Yield Fund can be assured. Institutional
High Yield Fund is designed for investors who can accept the
heightened level of risk and principal fluctuation inherent in a
portfolio that invests at least 65% of its assets in medium- and
lower-quality debt securities. High Yield Portfolio may invest
in foreign securities, which may entail a greater degree of risk
than investing in securities of domestic issuers. Please see
Investment Restrictions and Risks and Investment Considerations
for further information.
PURCHASES AND REDEMPTIONS. Fund shares are available primarily
through pension plan administrators, broker-dealers, or other
intermediaries (each an "Intermediary"), who provide accounting,
recordkeeping, and other services to investors and who hold Fund
shares in omnibus accounts for their clients. For additional
information on purchasing (buying) and redeeming (selling)
shares, see How to Purchase Shares and How to Redeem Shares.
DISTRIBUTIONS. Dividends are declared each business day and are
paid monthly. Dividends will be reinvested in additional shares
of Institutional High Yield Fund unless the Intermediary holding
the omnibus account elects to receive them in cash. (See
Distributions and Income Taxes.)
MANAGEMENT AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") is investment adviser to High Yield Portfolio. In
addition, it provides administrative services to Institutional
High Yield Fund and High Yield Portfolio. For a description of
the Adviser and its fees, see Management.
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.....................None
Sales Load Imposed on Reinvested Dividends..........None
Deferred Sales Load.................................None
Redemption Fees.....................................None
Exchange Fees.......................................None
ANNUAL FUND OPERATING EXPENSES (after fee
waiver; as a percentage of average net assets)
Management and Administrative Fees
(after fee waiver)...............................0.50%
12b-1 Fees..........................................None
Other Expenses......................................0.25%
-----
Total Fund Operating Expenses (after fee waiver)....0.75%
=====
EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; and (2) redemption at the end of
each time period:
1 year 3 years
------ --------
$8 $24
The purpose of the Fee Table is to assist you in understanding
the various costs and expenses that you will bear directly or
indirectly as an investor in Institutional High Yield Fund.
Because Institutional High Yield Fund has no operating history,
the information in the table is based upon an estimate of
expenses, assuming net assets of $50 million. The figures
assume that the percentage amounts listed under Annual Fund
Operating Expenses remain the same during each of the periods
and that all income dividends and capital gain distributions are
reinvested in additional Fund shares.
From time to time, the Adviser may voluntarily waive a portion
of its fees payable by Institutional High Yield Fund and the
Fund's pro rata share of the fees payable by High Yield
Portfolio. The Adviser has agreed to voluntarily waive such
fees to the extent the ordinary operating expenses of
Institutional High Yield Fund exceed 0.75% of its annual average
net assets. This commitment expires on October 31, 1999,
subject to earlier termination by the Adviser on 30 days' notice
to the Fund. Absent such expense undertaking, the estimated
Management and Administrative Fees and Total Fund Operating
Expenses would be 0.65% and 1.03%, respectively. Any such
reimbursement will lower Institutional High Yield Fund's overall
expense ratio and increase its overall return to investors.
(Also see Management--Fees and Expenses.)
Institutional High Yield Fund pays the Adviser an administrative
fee based on its average daily net assets and High Yield
Portfolio pays the Adviser a management fee based on its average
daily net assets. The Fee Table summarizes the expenses of both
Institutional High Yield Fund and High Yield Portfolio. Fees
and expenses are described under Management. Institutional High
Yield Fund bears its proportionate share of Portfolio expenses.
The Trustees of Institutional Trust have considered whether the
annual operating expenses of Institutional High Yield Fund,
including its proportionate share of the expenses of High Yield
Portfolio, would be more or less than if Institutional High
Yield Fund invested directly in the securities held by High
Yield Portfolio, and concluded that Institutional High Yield
Fund's expenses would not be materially greater in such case.
The figures in the Example are not necessarily indicative of
past or future expenses, and actual expenses may be greater or
less than those shown. Although information such as that shown
in the Example and Fee Table is useful in reviewing
Institutional High Yield Fund's expenses and in providing a
basis for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods.
THE FUND
STEIN ROE INSTITUTIONAL HIGH YIELD FUND ("Institutional High
Yield Fund") is a no-load, diversified "mutual fund."
Institutional High Yield Fund does not impose commissions or
charges when shares are purchased or redeemed. Institutional
High Yield Fund is a series of the Stein Roe Institutional Trust
("Institutional Trust"), an open-end management investment
company, which is authorized to issue shares of beneficial
interest in separate series.
Stein Roe & Farnham Incorporated (the "Adviser") provides
portfolio management services to High Yield Portfolio and
administrative services to Institutional High Yield Fund and
High Yield Portfolio.
Rather than invest in securities directly, Institutional High
Yield Fund seeks to achieve its investment objective by using
the "master fund/feeder fund" structure. Under that structure,
Institutional High Yield Fund and other investment companies
and/or institutional investors with the same investment
objective invest their assets in another investment company
having the same investment objective and substantially the same
investment policies and restrictions as Institutional High Yield
Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. Institutional High
Yield Fund invests all of its net investable assets in shares of
SR&F High Yield Portfolio ("High Yield Portfolio"), which is a
series of SR&F Base Trust ("Base Trust"). (See Special
Considerations Regarding Master Fund/Feeder Fund Structure.)
INVESTMENT POLICIES
Institutional High Yield Fund and High Yield Portfolio each seek
total return by investing for a high level of current income and
capital growth. Further information on portfolio investments
and strategies may be found under Portfolio Investments and
Strategies in this prospectus and in the Statement of Additional
Information. Institutional High Yield Fund seeks to achieve its
objective by investing all of its assets in High Yield
Portfolio. The investment policies of High Yield Portfolio are
substantially identical to those of Institutional High Yield
Fund.
High Yield Portfolio invests principally in high-yield, high-
risk medium- and lower-quality debt securities. The medium- and
lower-quality debt securities in which High Yield Portfolio will
invest normally offer a current yield or yield to maturity that
is significantly higher than the yield from securities rated in
the three highest categories assigned by rating services such as
Standard & Poor's Corporation ("S&P") and by Moody's Investors
Service, Inc. ("Moody's").
Under normal circumstances, at least 65% of High Yield
Portfolio's assets will be invested in high-yield, high-risk
medium- and lower-quality debt securities rated lower than Baa
by Moody's or lower than BBB by S&P, or equivalent ratings as
determined by other rating agencies, or unrated securities that
the Adviser determines to be of comparable quality. Medium-
quality debt securities, although considered investment grade,
have some speculative characteristics. Lower-quality debt
securities are obligations of issuers that are considered
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal according to the terms of
the obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy, and
are commonly referred to as "junk bonds." Some issuers of debt
securities choose not to have their securities rated by a rating
service, and High Yield Portfolio may invest in unrated
securities that the Adviser has researched thoroughly and
believes are suitable for investment. High Yield Portfolio may
invest in debt obligations that are in default, but such
obligations are not expected to exceed 10% of High Yield
Portfolio's assets.
High Yield Portfolio may invest up to 35% of its total assets in
other securities including, but not limited to, pay-in-kind
bonds, securities issued in private placements, bank loans, zero
coupon bonds, foreign securities, convertible securities,
futures, and options. High Yield Portfolio may also invest in
higher-quality debt securities. Under normal market conditions,
however, High Yield Portfolio is unlikely to emphasize higher-
quality debt securities since generally they offer lower yields
than medium- and lower-quality debt securities with similar
maturities. High Yield Portfolio may also invest in common
stocks and securities that are convertible into common stocks,
such as warrants.
Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer
default or bankruptcy. High Yield Portfolio seeks to reduce
investment risk through diversification, credit analysis, and
evaluation of developments in both the economy and financial
markets.
An economic downturn could severely disrupt the high-yield
market and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest. In
addition, lower-quality bonds are less sensitive to interest
rate changes than higher-quality instruments (see Risks and
Investment Considerations) and generally are more sensitive to
adverse economic changes or individual corporate developments.
During a period of adverse economic changes, including a period
of rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment
obligations.
Achievement of the investment objective will be more dependent
on the Adviser's credit analysis than would be the case if High
Yield Portfolio were investing in higher-quality debt
securities. Since the ratings of rating services (which
evaluate the safety of principal and interest payments, not
market risks) are used only as preliminary indicators of
investment quality, the Adviser employs its own credit research
and analysis, from which it has developed a proprietary credit
rating system based upon comparative credit analyses of issuers
within the same industry. These analyses may take into
consideration such quantitative factors as an issuer's present
and potential liquidity, profitability, internal capability to
generate funds, debt/equity ratio and debt servicing
capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology,
and foreign business exposure.
Lower-quality debt securities are obligations of issuers that
are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal according
to the terms of the obligation and, therefore, carry greater
investment risk, including the possibility of issuer default and
bankruptcy, and are commonly referred to as "junk bonds." The
lowest rating assigned by Moody's is for bonds that can be
regarded as having extremely poor prospects of ever attaining
any real investment standing.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the
market for them is less broad. The market for unrated debt
securities is even narrower. During periods of thin trading in
these markets, the spread between bid and asked prices is likely
to increase significantly, and High Yield Portfolio may have
greater difficulty selling its portfolio securities. (See Net
Asset Value.) The market value of these securities and their
liquidity may be affected by adverse publicity and investor
perceptions.
PORTFOLIO INVESTMENTS AND STRATEGIES
FOREIGN SECURITIES. High Yield Portfolio may invest in foreign
securities, but will not invest in a foreign security if, as a
result of such investment, more than 25% of its total assets
would be invested in foreign securities. For purposes of this
restriction, foreign debt securities do not include securities
represented by American Depositary Receipts ("ADRs"), foreign
debt securities denominated in U.S. dollars, or securities
guaranteed by a U.S. person such as a corporation domiciled in
the United States that is a parent or affiliate of the issuer of
the securities being guaranteed. High Yield Portfolio may
invest in sponsored or unsponsored ADRs. In addition to, or in
lieu of, such direct investment, High Yield Portfolio may
construct a synthetic foreign position by (a) purchasing a debt
instrument denominated in one currency, generally U.S. dollars;
and (b) concurrently entering into a forward contract to deliver
a corresponding amount of that currency in exchange for a
different currency on a future date and at a specified rate of
exchange. Because of the availability of a variety of highly
liquid U.S. dollar debt instruments, a synthetic foreign
position utilizing such U.S. dollar instruments may offer
greater liquidity than direct investment in foreign currency
debt instruments. In connection with the purchase of foreign
securities, High Yield Portfolio may contract to purchase an
amount of foreign currency sufficient to pay the purchase price
of the securities at the settlement date. (See Risks and
Investment Considerations.)
DERIVATIVES. Consistent with its objective, High Yield
Portfolio may invest in a broad array of financial instruments
and securities, including conventional exchange-traded and non-
exchange traded options, futures contracts, futures options,
securities collateralized by underlying pools of mortgages or
other receivables, and other instruments, the value of which is
"derived" from the performance of an underlying asset or a
"benchmark" such as a security index, an interest rate, or a
currency ("Derivatives"). High Yield Portfolio does not expect
to invest more than 5% of its net assets in any type of
Derivative except: options, futures contracts, and futures
options.
Derivatives are most often used to manage investment risk or to
create an investment position indirectly because they are more
efficient or less costly than direct investment. They also may
be used in an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's
ability to correctly predict changes in the levels and
directions of movements in security prices, interest rates and
other market factors affecting the Derivative itself or the
value of the underlying asset or benchmark. In addition,
correlations in the performance of an underlying asset to a
Derivative may not be well established. Finally, privately
negotiated and over-the-counter Derivatives may not be as well
regulated and may be less marketable than exchange-traded
Derivatives. For additional information on Derivatives, please
refer to the Statement of Additional Information.
MORTGAGE AND OTHER ASSET-BACKED DEBT SECURITIES. High Yield
Portfolio may invest in securities secured by mortgages or other
assets such as automobile or home improvement loans and credit
card receivables. These instruments may be issued or guaranteed
by the U.S. Government or by its agencies or instrumentalities
or by private entities such as commercial, mortgage and
investment banks and financial companies or financial
subsidiaries of industrial companies.
Securities issued by GNMA represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the
Farmers Home Administration, or guaranteed by the Veterans
Administration. Securities issued by FNMA and FHLMC, U.S.
Government-sponsored corporations, also represent an interest in
a pool of mortgages.
The timely payment of principal and interest on GNMA securities
is guaranteed by GNMA and backed by the full faith and credit of
the U.S. Treasury. FNMA guarantees full and timely payment of
interest and principal on FNMA securities. FHLMC guarantees
timely payment of interest and ultimate collection of principal
on FHLMC securities. FNMA and FHLMC securities are not backed
by the full faith and credit of the U.S. Treasury.
Mortgage-backed debt securities, such as those issued by GNMA,
FNMA, and FHLMC, are of the "modified pass-through type," which
means the interest and principal payments on mortgages in the
pool are "passed through" to investors. During periods of
declining interest rates, there is increased likelihood that
mortgages will be prepaid, with a resulting loss of the full-
term benefit of any premium paid by High Yield Portfolio on
purchase of such securities; in addition, the proceeds of
prepayment would likely be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest in
underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs"), which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are
not guaranteed by either the U.S. Government or by its agencies
or instrumentalities and are usually issued in multiple classes,
each of which has different payment rights, pre-payment risks,
and yield characteristics. Mortgage-backed securities involve
the risk of pre-payment of the underlying mortgages at a faster
or slower rate than the established schedule. Pre-payments
generally increase with falling interest rates and decrease with
rising rates, but they also are influenced by economic, social,
and market factors. If mortgages are pre-paid during periods of
declining interest rates, there would be a resulting loss of the
full-term benefit of any premium paid by High Yield Portfolio on
purchase of the CMO, and the proceeds of pre-payment would
likely be invested at lower interest rates. High Yield
Portfolio tends to invest in CMOs of classes known as planned
amortization classes ("PACs") which have pre-payment protection
features tending to make them less susceptible to price
volatility.
Non-mortgage asset-backed securities usually have less pre-
payment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans which finance payments on the securities
themselves. Therefore, greater emphasis is placed on the credit
quality of the security issuer and the guarantor, if any.
Asset-backed securities tend to experience greater price
volatility than straight debt securities.
FLOATING RATE INSTRUMENTS. High Yield Portfolio may also invest
in floating rate instruments which provide for periodic
adjustments in coupon interest rates that are automatically
reset based on changes in amount and direction of specified
market interest rates. In addition, the adjusted duration of
some of these instruments may be materially shorter than their
stated maturities. To the extent such instruments are subject
to lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with
an adjusted duration of 2 would increase by approximately 2%.
High Yield Portfolio does not intend to invest more than 5% of
its net assets in floating rate instruments.
FUTURES AND OPTIONS. High Yield Portfolio may purchase and
write both call options and put options on securities, indexes
and foreign currencies, and enter into interest rate, index and
foreign currency futures contracts. High Yield Portfolio may
also write options on such futures contracts and purchase other
types of forward or investment contracts linked to individual
securities, indexes or other benchmarks, consistent with its
investment objective, in order to provide additional revenue,
or to hedge against changes in security prices, interest rates,
or currency fluctuations. High Yield Portfolio may write a call
or put option only if the option is covered. As the writer of a
covered call option, High Yield Portfolio foregoes, during the
option's life, the opportunity to profit from increases in
market value of the security covering the call option above the
sum of the premium and the exercise price of the call. There
can be no assurance that a liquid market will exist when High
Yield Portfolio seeks to close out a position. Because of low
margin deposits required, the use of futures contracts involves
a high degree of leverage, and may result in losses in excess of
the amount of the margin deposit.
LENDING OF PORTFOLIO SECURITIES. Subject to certain
restrictions, High Yield Portfolio may lend portfolio securities
to broker-dealers and banks. Any such loan must be continuously
secured by collateral in cash or cash equivalents maintained on
a current basis in an amount at least equal to the market value
of the securities loaned by High Yield Portfolio. High Yield
Portfolio would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be
in the form of a fixed fee or a percentage of the collateral.
High Yield Portfolio would have the right to call the loan and
obtain the securities loaned at any time on notice of not more
than five business days. In the event of bankruptcy or other
default of the borrower, High Yield Portfolio could experience
both delays in liquidating the loan collateral or recovering the
loaned securities and losses including (a) possible decline in
the value of the collateral or in the value of the securities
loaned during the period while the Portfolio seeks to enforce
its rights thereto; (b) possible subnormal levels of income and
lack of access to income during this period; and (c) expenses of
enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY
COMMITMENTS. High Yield Portfolio's assets may include
securities purchased on a when-issued or delayed-delivery basis.
Although the payment and interest terms of these securities are
established at the time the purchaser enters into the
commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have
changed. High Yield Portfolio makes such commitments only with
the intention of actually acquiring the securities, but may sell
the securities before settlement date if the Adviser deems it
advisable for investment reasons. Securities purchased in this
manner involve a risk of loss if the value of the security
purchased declines before the settlement date.
When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that High Yield
Portfolio will sell securities with a commitment to purchase
similar, but not identical, securities at a future date.
Generally, the securities are repurchased at a price lower than
the sales price. Dollar roll transactions involve the risk of
restrictions on the Portfolio's ability to repurchase the
security if the counterparty becomes insolvent; an adverse
change in the price of the security during the period of the
roll or that the value of the security repurchased will be less
than the security sold; and transaction costs exceeding the
return earned by High Yield Portfolio on the sales proceeds of
the dollar roll.
High Yield Portfolio may also invest in securities purchased on
a standby commitment basis, which is a delayed-delivery
agreement in which High Yield Portfolio binds itself to accept
delivery of a security at the option of the other party to the
agreement.
PIK AND ZERO COUPON BONDS. High Yield Portfolio may invest up
to 20% of its total assets in zero coupon bonds and bonds the
interest on which is payable in kind ("PIK bonds"). A zero
coupon bond is a bond that does not pay interest for its entire
life. A PIK bond pays interest in the form of additional
securities. The market prices of both zero coupon and PIK bonds
are affected to a greater extent by changes in prevailing levels
of interest rates and thereby tend to be more volatile in price
than securities that pay interest periodically and in cash. In
addition, because High Yield Portfolio accrues income with
respect to these securities prior to the receipt of such
interest in cash, it may have to dispose of portfolio securities
under disadvantageous circumstances in order to obtain cash
needed to pay income dividends in amounts necessary to avoid
unfavorable tax consequences.
SHORT SALES AGAINST THE BOX. The Fund may sell short securities
it owns or has the right to acquire without further
consideration, a technique called selling short "against the
box." Short sales against the box may protect the Fund against
the risk of losses in the value of its portfolio securities
because any unrealized losses with respect to such securities
should be wholly or partly offset by a corresponding gain in the
short position. However, any potential gains in such securities
should be wholly or partially offset by a corresponding loss in
the short position. Short sales against the box may be used to
lock in a profit on a security when, for tax reasons or
otherwise, the Adviser does not want to sell the security. For
a more complete explanation, please refer to the Statement of
Additional Information.
PORTFOLIO TURNOVER. In attempting to attain its objective, High
Yield Portfolio may sell portfolio securities without regard to
the period of time they have been held. Further, the Adviser
may purchase and sell securities for the investment portfolio
with a view to maximizing current return, even if portfolio
changes would cause the realization of capital gains. Although
the average stated maturity of High Yield Portfolio will be from
five to ten years, the Adviser may adjust the average effective
maturity of High Yield Portfolio's portfolio from time to time,
depending on its assessment of the relative yields available on
securities of different maturities and its expectations of
future changes in interest rates. As a result, the turnover
rate of High Yield Portfolio may vary from year to year. The
turnover rate for High Yield Portfolio may exceed 100%, but is
not expected to exceed 200% under normal market conditions. A
high rate of portfolio turnover may result in increased
transaction expenses and the realization of capital gains (which
may be taxable) or losses. (See Distributions and Income
Taxes.)
INVESTMENT RESTRICTIONS
Neither Institutional High Yield Fund nor High Yield Portfolio
may invest in a security if, as a result of such investment: (1)
with respect to 75% of its assets, more than 5% of its total
assets would be invested in the securities of any one issuer,
except for U.S. Government Securities or repurchase agreements
/1/; for such securities; or (2) 25% or more of its total assets
would be invested in the securities of a group of issuers in the
same industry, except that this restriction does not apply to
U.S. Government Securities. Notwithstanding these limitations,
Institutional High Yield Fund, but not High Yield Portfolio, may
invest all of its assets in another registered investment
company having the same investment objective and substantially
similar investment policies as the Fund.
- --------------
/1/ A repurchase agreement involves a sale of securities to High
Yield Portfolio with the concurrent agreement of the seller
(bank or securities dealer) to repurchase the securities at the
same price plus an amount equal to an agreed-upon interest rate
within a specified time. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Portfolio
could experience both delays in liquidating the underlying
securities and losses. The Portfolio may not invest more than
10% of its net assets in repurchase agreements maturing in more
than seven days and other illiquid securities.
- -------------
Neither Institutional High Yield Fund nor High Yield Portfolio
may make loans except that it may (1) purchase money market
instruments and enter into repurchase agreements; (2) acquire
publicly-distributed or privately-placed debt securities; (3)
lend its portfolio securities under certain conditions; and (4)
participate in an interfund lending program with other Stein Roe
Funds. Neither may borrow money, except for non-leveraging,
temporary, or emergency purposes or in connection with
participation in the interfund lending program. Neither the
aggregate borrowings (including reverse repurchase agreements)
nor the aggregate loans at any one time may exceed 33 1/3% of
the value of total assets. Additional securities may not be
purchased when borrowings, less proceeds receivable from sales
of portfolio securities, exceed 5% of total assets.
The policies set forth in the first two paragraphs under
Investment Restrictions (but not the footnote) are fundamental
policies of Institutional High Yield Fund and High Yield
Portfolio. /2/ The Statement of Additional Information contains
all of the investment restrictions.
- ---------------
/2/A fundamental policy may be changed only with the approval of
a "majority of the outstanding voting securities" as defined in
the Investment Company Act.
- --------------
RISKS AND INVESTMENT CONSIDERATIONS
The risks inherent in Institutional High Yield Fund depend
primarily upon the term and quality of the obligations in High
Yield Portfolio's investment portfolio, as well as on market
conditions. Although High Yield Portfolio seeks to reduce risk
by investing in a diversified portfolio, this does not eliminate
all risk. Institutional High Yield Fund is designed for
investors who can accept the heightened level of risk and
principal fluctuation which might result from a portfolio that
invests at least 65% of its assets in medium- and lower-quality
debt securities.
The market value of securities in the investment portfolio tends
to vary inversely with the level of interest rates. As a
result, interest rate fluctuations may affect net asset value.
(Because yields on debt securities available for purchase by
High Yield Portfolio vary over time, no specific yield on shares
of Institutional High Yield Fund can be assured.) In addition,
if the bonds in the investment portfolio contain call,
prepayment or redemption provisions, during a period of
declining interest rates, these securities are likely to be
redeemed, and High Yield Portfolio may have to replace the
security with a lower yielding security, resulting in a
decreased return for investors.
Investments in foreign securities, including ADRs, represent
both risks and opportunities not typically associated with
investments in domestic issuers. Risks of foreign investing
include currency risk, less complete financial information on
issuers, less market liquidity, more market volatility, less
well-developed and regulated markets, and greater political
instability. In addition, various restrictions by foreign
governments on investments by non-residents may apply, including
imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned
by non-residents. Foreign investments also tend to involve
higher transaction and custody costs.
High Yield Portfolio may enter into foreign currency forward
contracts and use options and futures contracts, as described
elsewhere in this prospectus, to limit or reduce foreign
currency risk.
There can be no assurance that Institutional High Yield Fund or
High Yield Portfolio will achieve its objective, nor can High
Yield Portfolio assure that payments of interest and principal
on portfolio securities will be made when due. If, after
purchase by High Yield Portfolio, the rating of a portfolio
security is lost or reduced, High Yield Portfolio would not be
required to sell the security, but the Adviser would consider
such a change in deciding whether High Yield Portfolio should
retain the security in its investment portfolio.
The investment objective of Institutional High Yield Fund and
High Yield Portfolio is not fundamental and may be changed by
the respective Board of Trustees without a vote of shareholders.
HOW TO PURCHASE SHARES
Fund shares are available primarily through pension plan
administrators, broker-dealers, or other intermediaries (each an
"Intermediary") who provides accounting, recordkeeping, and
other services to investors and who hold Fund shares in omnibus
accounts for their clients. Shares may also be available to
clients of the Adviser if, in the judgment of the Adviser, the
sale of shares to such clients would not adversely affect the
Fund or its shareholders. The initial purchase minimum is
$250,000 and the minimum subsequent investment is $10,000.
Institutional Trust reserves the right to waive or lower its
investment minimum for any reason. Investors may be charged a
fee if they effect transactions in Fund shares through a broker
or agent. The Adviser and Institutional High Yield Fund do not
recommend, endorse, or receive compensation from any
Intermediary.
Each Intermediary will establish its own procedures applicable
to its clients for the purchase of Institutional High Yield Fund
shares in its account, including minimum initial and additional
investments and the acceptable methods of payment for shares.
Shares are purchased at the net asset value next determined
after receipt of your order by the Fund's transfer agent. Net
asset value is calculated as of the close of the New York Stock
Exchange ("NYSE"), generally 3:00 p.m. central time. Your
Intermediary may be closed on days when the NYSE is open.
As a result, prices for Fund shares may be significantly
affected on days when you have no access to your Intermediary
to buy shares. Institutional High Yield Fund will not issue
a certificate for your shares.
Any purchase of shares must be paid for in U.S. dollars.
Institutional High Yield Fund has the right to suspend the
offering of its shares for a period of time. Institutional High
Yield Fund also has the right to accept or reject a purchase
order its sole discretion, including certain purchase orders
using an exchange of shares.
HOW TO REDEEM SHARES
If you purchased shares through an Intermediary, you can redeem
(sell) all or some of your Fund shares only through an account
with that Intermediary and in accordance with procedures
established by the Intermediary applicable to its clients for
the redemption of Fund shares. Shares are redeemed at the net
asset value next calculated after a redemption order is received
and accepted by the Fund's transfer agent. Your Intermediary may be
closed on days when the NYSE is open. As a result, prices for
Institutional High Yield Fund shares may be significantly
affected on days when you have no access to your Intermediary to
redeem shares.
Redemption proceeds will be paid to Intermediaries as agreed
with Institutional High Yield Fund, but in any case within seven
calendar days. Institutional High Yield Fund may suspend
redemptions or postpone payments on days when the NYSE is closed
(other than weekends and holidays), when trading on the NYSE is
restricted, or as permitted by the Securities and Exchange
Commission.
Institutional Trust reserves the right to redeem shares in any
account and send the proceeds to the appropriate Intermediary if
shares in that account do not have a value of at least $250,000.
An Intermediary would be notified that its account is below the
minimum and would be allowed 30 days to increase the account
before the redemption is processed.
For information regarding exchanging shares of Institutional
High Yield Fund for shares of another Stein Roe Fund, please see
the Statement of Additional Information.
NET ASSET VALUE
The purchase and redemption price of Institutional High Yield
Fund's shares is its net asset value per share. Institutional
High Yield Fund determines the net asset value of its shares as
of the close of trading on the New York Stock Exchange ("NYSE")
(currently 3:00 p.m., central time) by dividing the difference
between the values of its assets and liabilities by the number
of shares outstanding. High Yield Portfolio allocates net asset
value, income, and expenses to Institutional High Yield Fund and
any other of its feeder funds in proportion to their respective
interests in High Yield Portfolio.
Net asset value will not be determined on days when the NYSE is
closed unless, in the judgment of the Board of Trustees, the net
asset value of Institutional High Yield Fund should be
determined on any such day, in which case the determination will
be made at 3:00 p.m., central time.
Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Long-term
straight-debt securities for which market quotations are not
readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. Short-term debt securities
with remaining maturities of 60 days or less are valued at their
amortized cost, which does not take into account unrealized
gains or losses. The Board believes that the amortized cost
represents a fair value for such securities. Short-term debt
securities with remaining maturities of more than 60 days for
which market quotations are not readily available are valued by
use of a matrix prepared by the Adviser based on quotations for
comparable securities. Other assets and securities held by High
Yield Portfolio for which these valuation methods do not produce
a fair value are valued by a method that the Board believes will
determine a fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared each business day,
paid monthly, and confirmed at least quarterly. Institutional
High Yield Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized
from the sale of securities during the twelve-month period ended
October 31 in that year. Institutional High Yield Fund intends
to distribute any undistributed net investment income and net
realized capital gains in the following year.
All income dividends and capital gain distributions paid on
shares in an account will be reinvested in additional shares
unless the Intermediary or other account holder elects to have
distributions paid in cash. Reinvestment normally occurs on the
payable date. Institutional Trust reserves the right to
reinvest the proceeds and future distributions in additional
shares of Institutional High Yield Fund if checks for
distributions mailed to the account holder are returned as
undeliverable or are not presented for payment within six
months.
INCOME TAXES. Distributions to shareholders will be taxable,
under income tax law, whether received in cash or reinvested in
additional shares. For federal income tax purposes, any
distribution that is paid in January but was declared in the
prior calendar year is deemed paid in the prior calendar year.
Shareholders will be subject to federal income tax at ordinary
rates on income dividends and distributions of net short-term
capital gain. Distributions of net long-term capital gain will
be taxable to you as long-term capital gain regardless of the
length of time you have held your shares.
Shareholders will be advised annually as to the source of
distributions. If you are not subject to tax on your income,
you will not be required to pay tax on these amounts.
If a shareholder realizes a loss on the sale or exchange of Fund
shares held for six months or less, the short-term loss is
recharacterized as long-term to the extent of any long-term
capital gain distributions received with respect to those
shares.
For federal income tax purposes, Institutional High Yield Fund
is treated as a separate taxable entity distinct from any other
series of the Institutional Trust. High Yield Portfolio intends
to qualify for the special tax treatment afforded regulated
investment companies under Subchapter M of the Internal Revenue
Code, so that it will be relieved of federal income tax on that
part of its net investment income and net capital gain that is
distributed to shareholders.
This section is not intended to be a full discussion of income
tax laws and their effect on shareholders. You may wish to
consult your own tax advisor.
INVESTMENT RETURN
The total return from an investment in Institutional High Yield
Fund is measured by the distributions received (assuming
reinvestment) plus or minus the change in the net asset value
per share for a given period. A total return percentage may be
calculated by dividing the value of a share at the end of the
period (including reinvestment of distributions) by the value of
the share at the beginning of the period and subtracting one.
For a given period, an average annual total return may be
calculated by finding the average annual compounded rate that
would equate a hypothetical $1,000 investment to the ending
redeemable value.
The yield of Institutional High Yield Fund is calculated by
dividing its net investment income per share (a hypothetical
figure as defined in the SEC rules) during a 30-day period by
the net asset value per share on the last day of the period.
The yield formula provides for semiannual compounding, which
assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.
Comparison of Institutional High Yield Fund's yield or total
return with those of alternative investments should consider
differences between Institutional High Yield Fund and the
alternative investments, the periods and methods used in
calculation of the return being compared, and the impact of
taxes on alternative investments. Yield figures are not based
on actual dividends paid. Past performance is not necessarily
indicative of future results. To obtain current yield or total
return information, you may call 800-322-0593.
MANAGEMENT
TRUSTEES AND INVESTMENT ADVISER. The Board of Trustees of the
Institutional Trust has overall management responsibility for
Institutional Trust and Institutional High Yield Fund; the Board
of Base Trust has overall management responsibility for
Institutional Portfolio. See Management in the Statement of
Additional Information for the names of and other information
about the trustees and officers. Since Institutional Trust and
Base Trust have the same trustees, the trustees have adopted
conflict of interest procedures to monitor and address potential
conflicts between the interests of Institutional High Yield Fund
and High Yield Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolio of High Yield Portfolio and the business
affairs of Institutional High Yield Fund, High Yield Portfolio,
Institutional Trust, and Base Trust, subject to the direction of
the respective Board. The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940.
The Adviser was organized in 1986 to succeed to the business of
Stein Roe & Farnham, a partnership that had advised and managed
mutual funds since 1949. The Adviser is a wholly owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty
Financial"), which in turn is a majority owned indirect
subsidiary of Liberty Mutual Insurance Company.
PORTFOLIO MANAGERS. Ann H. Benjamin has been portfolio manager
of High Yield Portfolio since its inception in 1996. She is a
senior vice president of the Adviser and has been associated
with the Adviser since 1989. She has also been portfolio
manager of Stein Roe Income Fund since 1990. Ms. Benjamin has
12 years' experience in the analysis and investment of medium-
and lower-quality debt securities. She received her B.B.A. from
Chatham College in 1980 and her M.A. from Carnegie Mellon
University in 1985. Ms. Benjamin managed $309 million in mutual
fund net assets for the Adviser as of June 30, 1996, serves as
High-Yield Credit Research Manager for the Adviser, and is a
member of the Adviser's Fixed Income Credit Review Committee.
Stephen F. Lockman has been associate portfolio manager of High
Yield Portfolio since its inception in 1996. Mr. Lockman is a
senior vice president of the Adviser and has been employed by
the Adviser since January 1994. A chartered financial analyst,
Mr. Lockman received a B.S. degree from the University of
Illinois in 1983 and an M.B.A. from DePaul University in 1986.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Institutional High Yield Fund, computed
and accrued daily, at an annual rate of .150% of the first $500
million of average net assets and .125% thereafter; and a
monthly management fee from High Yield Portfolio, computed and
accrued daily, at an annual rate of .500% of the first $500
million of average net assets and .475% thereafter. However, as
noted above under Fee Table, the Adviser may voluntarily waive a
portion of its fees.
The Adviser provides office space and executive and other
personnel to Institutional Trust and Base Trust and bears any
sales or promotional expenses. All expenses of Institutional
High Yield Fund (other than those paid by the Adviser)
including, but not limited to, printing and postage charges,
securities registration fees, custodian and transfer agency
fees, legal and auditing fees, compensation of trustees not
affiliated with the Adviser, and expenses incidental to its
organization are paid out of the assets of Institutional High
Yield Fund.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Institutional
High Yield Fund and High Yield Portfolio including computation
of net asset value and calculation of net income and capital
gains and losses on disposition of assets.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities and options and
futures contracts for Institutional High Yield Fund and High
Yield Portfolio. In doing so, the Adviser seeks to obtain the
best combination of price and execution, which involves a number
of judgmental factors.
TRANSFER AGENT. SteinRoe Services Inc. ("SSI"), One South
Wacker Drive, Chicago, Illinois 60606, a wholly owned subsidiary
of Liberty Financial, is the agent of Institutional Trust for
the transfer of shares, disbursement of dividends, and
maintenance of shareholder accounting records.
DISTRIBUTOR. The shares of Institutional High Yield Fund are
offered for sale through Liberty Securities Corporation
("Distributor") without any sales commissions or charges to
Institutional High Yield Fund or to their shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Financial. The business address of the Distributor is 600
Atlantic Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to SteinRoe Services Inc. at P.O. Box 8900, Boston,
Massachusetts 02205. All distribution and promotional expenses
are paid by the Adviser, including payments to the Distributor
for sales of Fund shares.
CUSTODIAN. State Street Bank and Trust Company (the "Bank"),
225 Franklin Street, Boston, Massachusetts 02101, is the
custodian for Institutional High Yield Fund. Foreign securities
are maintained in the custody of foreign banks and trust
companies that are members of the Bank's Global Custody Network
or foreign depositories used by such members. (See Custodian in
the Statement of Additional Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
Institutional 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 Institutional Trust's shareholders or its
trustees. Institutional Trust may issue an unlimited number of
shares, in one or more series as the Board may authorize.
Currently, Institutional High Yield Fund is the only series
authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as Institutional Trust could, in some
circumstances, be held personally liable for unsatisfied
obligations of Institutional Trust. The Declaration of Trust
provides that persons extending credit to, contracting with, or
having any claim against, Institutional Trust or any particular
series shall look only to the assets of Institutional Trust or
of the respective series for payment under such credit, contract
or claim, and that the shareholders, trustees and officers of
Institutional Trust shall have no personal liability therefor.
The Declaration of Trust requires that notice of such disclaimer
of liability be given in each contract, instrument or
undertaking executed or made on behalf of Institutional 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 Institutional 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
Institutional Trust is also believed to be remote, because it
would be limited to claims to which the disclaimer did not apply
and to circumstances in which the other Fund was unable to meet
its obligations.
SPECIAL CONSIDERATIONS REGARDING THE
MASTER FUND/FEEDER FUND STRUCTURE
Institutional High Yield Fund, an open-end management investment
company, seeks to achieve its objective by investing all of its
assets in shares of another mutual fund having an investment
objective identical to that of Institutional High Yield Fund.
The initial shareholder of Institutional High Yield Fund
approved this policy of permitting Institutional High Yield Fund
to act as a feeder fund by investing in High Yield Portfolio.
Please refer to the Investment Policies, Portfolio Investments
and Strategies, and Investment Restrictions for a description of
the investment objectives, policies, and restrictions of
Institutional High Yield Fund and High Yield Portfolio. The
management and expenses of both Institutional High Yield Fund
and High Yield Portfolio are described under the Fee Table and
Management. Institutional High Yield Fund bears its
proportionate share of Portfolio expenses.
The Adviser has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
SR&F High Yield Portfolio is a separate series of SR&F Base
Trust ("Base Trust"), a Massachusetts common trust organized
under an Agreement and Declaration of Trust ("Declaration of
Trust") dated August 23, 1993. The Declaration of Trust of the
Base Trust provides that Institutional High Yield Fund and other
investors in High Yield Portfolio will each be liable for all
obligations of High Yield Portfolio that are not satisfied by
High Yield Portfolio. However, the risk of Institutional High
Yield Fund incurring financial loss on account of such liability
is limited to circumstances in which both inadequate insurance
existed and High Yield Portfolio itself were unable to meet its
obligations. Accordingly, the Trustees of Institutional Trust
believe that neither Institutional High Yield Fund nor its
shareholders will be adversely affected by reason of
Institutional High Yield Fund's investing in High Yield
Portfolio.
The Declaration of Trust of Base Trust provides that High Yield
Portfolio will terminate 120 days after the withdrawal of
Institutional High Yield Fund or any other investor in High
Yield Portfolio, unless the remaining investors vote to agree to
continue the business of High Yield Portfolio. The Trustees of
Institutional Trust may vote Institutional High Yield Fund's
interests in High Yield Portfolio for such continuation without
approval of Institutional High Yield Fund's shareholders.
The common investment objective of Institutional High Yield Fund
and High Yield Portfolio is non-fundamental and may be changed
without shareholder approval, subject, however, to at least 30
days' advance written notice to Institutional High Yield Fund's
shareholders.
The fundamental policies of Institutional High Yield Fund and
the corresponding fundamental policies of the Portfolio can be
changed only with shareholder approval.
If Institutional High Yield Fund, as a Portfolio investor, is
requested to vote on a proposed change in fundamental policy of
High Yield Portfolio or any other matter pertaining to High
Yield Portfolio (other than continuation of the business of High
Yield Portfolio after withdrawal of another investor),
Institutional High Yield Fund will solicit proxies from its
shareholders and vote its interest in High Yield Portfolio for
and against such matters proportionately to the instructions to
vote for and against such matters received from Fund
shareholders. Institutional High Yield Fund will vote shares
for which it receives no voting instructions in the same
proportion as the shares for which it receives voting
instructions. If there are other investors in High Yield
Portfolio, there can be no assurance that any matter receiving a
majority of votes cast by Fund shareholders will receive a
majority of votes cast by all High Yield Portfolio investors.
If other investors hold a majority interest in High Yield
Portfolio, they could have voting control over High Yield
Portfolio.
In the event that High Yield Portfolio's fundamental policies
were changed so as to be inconsistent with those of
Institutional High Yield Fund, the Board of Trustees of
Institutional Trust would consider what action might be taken,
including changes to Institutional High Yield Fund's fundamental
policies, withdrawal of Institutional High Yield Fund's assets
from High Yield Portfolio and investment of such assets in
another pooled investment entity, or the retention of another
investment adviser. Any of these actions would require the
approval of Institutional High Yield Fund's shareholders.
Institutional High Yield Fund's inability to find a substitute
master fund or comparable investment management could have a
significant impact upon its shareholders' investments. Any
withdrawal of Institutional High Yield Fund's assets could
result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) to Institutional High Yield
Fund. Should such a distribution occur, Institutional High
Yield Fund would incur brokerage fees or other transaction costs
in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified
portfolio of investments for Institutional High Yield Fund and
could affect the liquidity of Institutional High Yield Fund.
Each investor in High Yield Portfolio, including Institutional
High Yield Fund, may add to or reduce its investment in High
Yield Portfolio on each day the NYSE is open for business. The
investor's percentage of the aggregate interests in High Yield
Portfolio will be computed as the percentage equal to the
fraction (i) the numerator of which is the beginning of the day
value of such investor's investment in High Yield Portfolio on
such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in
High Yield Portfolio effected on such day; and (ii) the
denominator of which is the aggregate beginning of the day net
asset value of High Yield Portfolio on such day plus or minus,
as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in High Yield
Portfolio by all investors in High Yield Portfolio. The
percentage so determined will then be applied to determine the
value of the investor's interest in High Yield Portfolio as of
the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in High Yield Portfolio, but
members of the general public may not invest directly in High
Yield Portfolio. Other investors in High Yield Portfolio are
not required to sell their shares at the same public offering
price as Institutional High Yield Fund, could incur different
administrative fees and expenses than Institutional High Yield
Fund, and their shares might be sold with a sales commission.
Therefore, Fund shareholders might have different investment
returns than shareholders in another investment company that
invests exclusively in High Yield Portfolio. Investment by such
other investors in High Yield Portfolio would provide funds for
the purchase of additional portfolio securities and would tend
to reduce the Portfolio's operating expenses as a percentage of
its net assets. Conversely, large-scale redemptions by any such
other investors in High Yield Portfolio could result in untimely
liquidations of High Yield Portfolio's security holdings, loss
of investment flexibility, and increases in the operating
expenses of High Yield Portfolio as a percentage of its net
assets. As a result, High Yield Portfolio's security holdings
may become less diverse, resulting in increased risk.
Currently one other investment company invests in High Yield
Portfolio, and that is Stein Roe High Yield Fund, a series of
Stein Roe Income Trust. Information regarding any investment
company that may invest in High Yield Portfolio in the future
may be obtained by writing to SR&F Base Trust, Suite 3200, One
South Wacker Drive, Chicago, Illinois 60606 or by calling 800-
338-2550. The Adviser may provide administrative or other
services to one or more of such investors.
FOR MORE INFORMATION
Contact Stein Roe Advisor and Dealer Services at 800-322-0593 for
more information about this Fund.
APPENDIX--RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as
to the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer.
Consequently, the Adviser believes that the quality of debt
securities in which High Yield Portfolio invests should be
continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or
hold a security because it does not take into account market
value or suitability for a particular investor. When a security
has received a rating from more than one service, each rating
should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating
services from other sources that they consider reliable.
Ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information, or for other
reasons.
The following is a description of the characteristics of ratings
used by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P").
CORPORATE BOND RATINGS
RATINGS BY MOODY'S
A. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by
a large or an exceptionally stable margin and principal is
secure. Although the various protective elements are likely to
change, such changes as can be visualized are more unlikely to
impair the fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
bonds.
A. Bonds rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt
in this category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no
interest is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
NOTES: The ratings from AA to CCC may be modified by the
addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Foreign debt is
rated on the same basis as domestic debt measuring the
creditworthiness of the issuer; ratings of foreign debt do not
take into account currency exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high
volatility or high variability in expected returns due to non-
credit risks. Examples of such obligations are: securities
whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and
interest only and principal only mortgage securities. The
absence of an "r" symbol should not be taken as an indication
that an obligation will exhibit no volatility or variability in
total return.
COMMERCIAL PAPER RATINGS
RATINGS BY MOODY'S
Moody's employs the following three designations, all judged to
be investment grade, to indicate the relative repayment capacity
of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its commercial paper
obligations are supported by the credit of another entity or
entities, Moody's, in assigning ratings to such issuers,
evaluates the financial strength of the indicated affiliated
corporations, commercial banks, insurance companies, foreign
governments or other entities, but only as one factor in the
total rating assessment.
RATINGS BY S&P
A brief description of the applicable rating symbols and their
meaning follows:
A. Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this
category are further refined with the designations 1, 2, and 3
to indicate the relative degree of safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is very strong. Those issues
determined to possess overwhelming safety characteristics will
be denoted with a plus (+) sign designation.
______________________
<PAGE> 1
Statement of Additional Information Dated January 1, 1997
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
This Statement of Additional Information is not a
prospectus but provides additional information that should be
read in conjunction with the Prospectus dated January 1, 1997
and any supplements thereto. The Prospectus may be obtained at
no charge by telephoning Stein Roe Advisor and Dealer Services at
800-322-0593.
TABLE OF CONTENTS
Page
General Information and History..........................2
Investment Policies......................................3
Portfolio Investments and Strategies.....................5
Investment Restrictions.................................21
Additional Investment Considerations....................24
Purchases and Redemptions...............................25
Management..............................................26
Principal Shareholders..................................30
Investment Advisory Services............................30
Distributor.............................................32
Transfer Agent..........................................32
Custodian...............................................32
Independent Auditors....................................33
Portfolio Transactions..................................33
Additional Income Tax Considerations....................35
Investment Performance..................................35
Balance Sheet...........................................40
GENERAL INFORMATION AND HISTORY
Stein Roe Institutional High Yield Fund ("Institutional
High Yield Fund") is a series of the Stein Roe Institutional
Trust ("Institutional Trust"). Institutional High Yield Fund
invests all of its net investable assets in shares of SR&F High
Yield Portfolio ("High Yield Portfolio"), which is a series of
shares of SR&F Base Trust ("Base Trust").
Currently Institutional High Yield Fund is the only series
of Institutional Trust authorized and outstanding. Each share
of a series 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,
Institutional 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
Institutional Trust's outstanding shares, Institutional Trust
will call a special meeting for the purpose of voting upon the
question of removal of a trustee or trustees and will assist in
the communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940. All shares
of Institutional Trust are voted together in the election of
trustees. On any other matter submitted to a vote of
shareholders, shares are voted by individual series and not in
the aggregate, except that shares are voted in the aggregate
when required by the Investment Company Act of 1940 or other
applicable law. When the Board of Trustees determines that the
matter affects only the interests of one or more series,
shareholders of the unaffected series are not entitled to vote
on such matters.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative and accounting and recordkeeping services to
Institutional High Yield Fund and High Yield Portfolio and
provides investment advisory services to High Yield Portfolio.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND
STRUCTURE
Rather than invest in securities directly, Institutional
High Yield Fund seeks to achieve its objective by pooling its
assets with assets of other investment companies and/or
institutional investors for investment in another mutual fund
having the same investment objective and substantially the same
investment policies and restrictions. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. For more information, please refer to the
Prospectus under the caption Special Considerations Regarding
the Master Fund/Feeder Fund Structure.
INVESTMENT POLICIES
The following information supplements the discussion of the
investment objective and policies of Institutional High Yield
Fund and High Yield Portfolio described in the Prospectus. In
pursuing its objective, High Yield Portfolio will invest as
described below and may employ the investment techniques
described in the Prospectus and in this Statement of Additional
Information under Portfolio Investments and Strategies. The
investment objective is a non-fundamental policy and may be
changed by the Board of Trustees without the approval of a
"majority of the outstanding voting securities" /1/ of
Institutional High Yield Fund or High Yield Portfolio.
- -------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding
shares are present or represented by proxy or (ii) more than 50%
of the outstanding shares.
- ------------
Institutional High Yield Fund seeks to achieve its
objective by investing all of its assets in High Yield
Portfolio. The investment policies of Institutional High Yield
Fund and High Yield Portfolio are substantially identical. High
Yield Portfolio seeks total return by investing for a high level
of current income and capital growth.
High Yield Portfolio invests principally in high-yield,
high-risk medium- and lower-quality debt securities. The
medium- and lower-quality debt securities in which High Yield
Portfolio will invest normally offer a current yield or yield to
maturity that is significantly higher than the yield from
securities rated in the three highest categories assigned by
rating services such as Standard & Poor's Corporation ("S&P")
and by Moody's Investors Service, Inc. ("Moody's").
Under normal circumstances, at least 65% of High Yield
Portfolio's assets will be invested in high-yield, high-risk
medium- and lower-quality debt securities rated lower than Baa
by Moody's or lower than BBB by S&P, or equivalent ratings as
determined by other rating agencies, or unrated securities that
the Adviser determines to be of comparable quality. Medium-
quality debt securities, although considered investment grade,
have some speculative characteristics. Lower-quality debt
securities are obligations of issuers that are considered
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal according to the terms of
the obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy, and
are commonly referred to as "junk bonds." Some issuers of debt
securities choose not to have their securities rated by a rating
service, and High Yield Portfolio may invest in unrated
securities that the Adviser has researched thoroughly and
believes are suitable for investment. High Yield Portfolio may
invest in debt obligations that are in default, but such
obligations are not expected to exceed 10% of High Yield
Portfolio's assets.
High Yield Portfolio may invest up to 35% of its total
assets in other securities including, but not limited to, pay-
in-kind bonds, securities issued in private placements, bank
loans, zero coupon bonds, foreign securities, convertible
securities, futures, and options. High Yield Portfolio may also
invest in higher-quality debt securities. Under normal market
conditions, however, High Yield Portfolio is unlikely to
emphasize higher-quality debt securities since generally they
offer lower yields than medium- and lower-quality debt
securities with similar maturities. High Yield Portfolio may
also invest in common stocks and securities that are convertible
into common stocks, such as warrants.
Investment in medium- or lower-quality debt securities
involves greater investment risk, including the possibility of
issuer default or bankruptcy. High Yield Portfolio seeks to
reduce investment risk through diversification, credit analysis,
and evaluation of developments in both the economy and financial
markets.
An economic downturn could severely disrupt the high-yield
market and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest. In
addition, lower-quality bonds are less sensitive to interest
rate changes than higher-quality instruments (see Risks and
Investment Considerations) and generally are more sensitive to
adverse economic changes or individual corporate developments.
During a period of adverse economic changes, including a period
of rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment
obligations.
Achievement of the investment objective will be more dependent
on the Adviser's credit analysis than would be the case if High
Yield Portfolio were investing in higher-quality debt
securities. Since the ratings of rating services (which
evaluate the safety of principal and interest payments, not
market risks) are used only as preliminary indicators of
investment quality, the Adviser employs its own credit research
and analysis, from which it has developed a proprietary credit
rating system based upon comparative credit analyses of issuers
within the same industry. These analyses may take into
consideration such quantitative factors as an issuer's present
and potential liquidity, profitability, internal capability to
generate funds, debt/equity ratio and debt servicing
capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology,
and foreign business exposure.
Lower-quality debt securities are obligations of issuers
that are considered predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal
according to the terms of the obligation and, therefore, carry
greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk
bonds." The lowest rating assigned by Moody's is for bonds that
can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the
market for them is less broad. The market for unrated debt
securities is even narrower. During periods of thin trading in
these markets, the spread between bid and asked prices is likely
to increase significantly, and High Yield Portfolio may have
greater difficulty selling its portfolio securities. The market
value of these securities and their liquidity may be affected by
adverse publicity and investor perceptions.
PORTFOLIO INVESTMENTS AND STRATEGIES
DERIVATIVES
Consistent with its objective, High Yield Portfolio may
invest in a broad array of financial instruments and securities,
including conventional exchange-traded and non-exchange traded
options, futures contracts, futures options, securities
collateralized by underlying pools of mortgages or other
receivables, and other instruments the value of which is
"derived" from the performance of an underlying asset or a
"benchmark" such as a security index, an interest rate, or a
currency ("Derivatives").
Derivatives are most often used to manage investment risk
or to create an investment position indirectly because it is
more efficient or less costly than direct investment that cannot
be readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's
ability to correctly predict changes in the levels and
directions of movements in security prices, interest rates and
other market factors affecting the Derivative itself or the
value of the underlying asset or benchmark. In addition,
correlations in the performance of an underlying asset to a
Derivative may not be well established. Finally, privately
negotiated and over-the-counter Derivatives may not be as well
regulated and may be less marketable than exchange-traded
Derivatives.
High Yield Portfolio does not intend to invest more than 5%
of its assets in any type of Derivative except for options,
futures contracts, and futures options.
MORTGAGE AND OTHER ASSET-BACKED SECURITIES
High Yield Portfolio may invest in securities secured by
mortgages or other assets such as automobile or home improvement
loans and credit card receivables. These instruments may be
issued or guaranteed by the U.S. Government or by its agencies
or instrumentalities or by private entities such as commercial,
mortgage and investment banks and financial companies or
financial subsidiaries of industrial companies.
Mortgage-backed securities provide either a pro rata
interest in underlying mortgages or an interest in
collateralized mortgage obligations ("CMOs") which represent a
right to interest and/or principal payments from an underlying
mortgage pool. CMOs are not guaranteed by either the U.S.
Government or by its agencies or instrumentalities, and are
usually issued in multiple classes each of which has different
payment rights, pre-payment risks and yield characteristics.
Mortgage-backed securities involve the risk of pre-payment on
the underlying mortgages at a faster or slower rate than the
established schedule. Pre-payments generally increase with
falling interest rates and decrease with rising rates but they
also are influenced by economic, social and market factors. If
mortgages are pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit
of any premium paid by High Yield Portfolio on purchase of the
CMO, and the proceeds of pre-payment would likely be invested at
lower interest rates. High Yield Portfolio intends to invest in
CMOs of classes known as planned amortization classes ("PACs")
which have pre-payment protection features tending to make them
less susceptible to price volatility.
Non-mortgage asset-backed securities usually have less pre-
payment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans which finance payments on the securities
themselves. Therefore, greater emphasis is placed on the credit
quality of the security issuer and the guarantor, if any.
FLOATING RATE INSTRUMENTS
High Yield Portfolio may also invest in floating rate
instruments which provide for periodic adjustments in coupon
interest rates that are automatically reset based on changes in
amount and direction of specified market interest rates. In
addition, the adjusted duration of some of these instruments may
be materially shorter than their stated maturities. To the
extent such instruments are subject to lifetime or periodic
interest rate caps or floors, such instruments may experience
greater price volatility than debt instruments without such
features. Adjusted duration is an inverse relationship between
market price and interest rates and refers to the approximate
percentage change in price for a 100 basis point change in
yield. For example, if interest rates decrease by 100 basis
points, a market price of a security with an adjusted duration
of 2 would increase by approximately 2%. High Yield Portfolio
does not intend to invest more than 5% of its net assets in
floating rate instruments.
LENDING OF PORTFOLIO SECURITIES
Subject to restriction (7) under Investment Restrictions,
High Yield Portfolio may lend its portfolio securities to
broker-dealers and banks. Any such loan must be continuously
secured by collateral in cash or cash equivalents maintained on
a current basis in an amount at least equal to the market value
of the securities loaned by High Yield Portfolio. High Yield
Portfolio would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be
in the form of a fixed fee or a percentage of the collateral.
High Yield Portfolio would have the right to call the loan and
obtain the securities loaned at any time on notice of not more
than five business days. In the event of bankruptcy or other
default of the borrower, High Yield Portfolio could experience
both delays in liquidating the loan collateral or recovering the
loaned securities and losses including (a) possible decline in
the value of the collateral or in the value of the securities
loaned during the period while High Yield Portfolio seeks to
enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c)
expenses of enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE
AGREEMENTS; STANDBY COMMITMENTS
High Yield Portfolio may purchase instruments on a when-
issued or delayed-delivery basis. Although payment terms are
established at the time High Yield Portfolio enters into the
commitment, the instruments may be delivered and paid for some
time after the date of purchase, when their value may have
changed and the yields available in the market may be greater.
High Yield Portfolio will make such commitments only with the
intention of actually acquiring the instruments, but may sell
them before settlement date if it is deemed advisable for
investment reasons. Securities purchased in this manner involve
risk of loss if the value of the security purchased declines
before settlement date.
High Yield Portfolio may purchase securities on a when-
issued or delayed-delivery basis, as described in the
Prospectus. High Yield Portfolio makes such commitments only
with the intention of actually acquiring the securities, but may
sell the securities before settlement date if the Adviser deems
it advisable for investment reasons. Securities purchased on a
when-issued or delayed-delivery basis are sometimes done on a
"dollar roll" basis. Dollar roll transactions consist of the
sale by High Yield Portfolio of securities with a commitment to
purchase similar but not identical securities, generally at a
lower price at a future date. A dollar roll may be renewed
after cash settlement and initially may involve only a firm
commitment agreement by High Yield Portfolio to buy a security.
A dollar roll transaction involves the following risks: if the
broker-dealer to whom High Yield Portfolio sells the security
becomes insolvent, High Yield Portfolio's right to purchase or
repurchase the security may be restricted; the value of the
security may change adversely over the term of the dollar roll;
the security which High Yield Portfolio is required to
repurchase may be worth less than a security which High Yield
Portfolio originally held; and the return earned by High Yield
Portfolio with the proceeds of a dollar roll may not exceed
transaction costs.
High Yield Portfolio may enter into reverse repurchase
agreements with banks and securities dealers. A reverse
repurchase agreement is a repurchase agreement in which High
Yield Portfolio is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed-upon time
and price. Use of a reverse repurchase agreement may be
preferable to a regular sale and later repurchase of securities
because it avoids certain market risks and transaction costs.
At the time High Yield Portfolio enters into a binding
obligation to purchase securities on a when-issued basis or
enters into a reverse repurchase agreement, liquid assets (cash,
U.S. Government or other "high grade" debt obligations) of High
Yield Portfolio having a value at least as great as the purchase
price of the securities to be purchased will be segregated on
the books of High Yield Portfolio and held by the custodian
throughout the period of the obligation. The use of these
investment strategies, as well as borrowing under a line of
credit as described below, may increase net asset value
fluctuation.
Standby commitment agreements create an additional risk for
High Yield Portfolio because the other party to the standby
agreement generally will not be obligated to deliver the
security, but High Yield Portfolio will be obligated to accept
it if delivered. Depending on market conditions, High Yield
Portfolio may receive a commitment fee for assuming this
obligation. If prevailing market interest rates increase during
the period between the date of the agreement and the settlement
date, the other party can be expected to deliver the security
and, in effect, pass any decline in value to High Yield
Portfolio. If the value of the security increases after the
agreement is made, however, the other party is unlikely to
deliver the security. In other words, a decrease in the value
of the securities to be purchased under the terms of a standby
commitment agreement will likely result in the delivery of the
security, and, therefore, such decrease will be reflected in
High Yield Portfolio's net asset value. However, any increase
in the value of the securities to be purchased will likely
result in the non-delivery of the security and, therefore, such
increase will not affect the net asset value unless and until
High Yield Portfolio actually obtains the security.
SHORT SALES AGAINST THE BOX
High Yield Portfolio may sell securities short against the
box; that is, enter into short sales of securities that it
currently owns or has the right to acquire through the
conversion or exchange of other securities that it owns at no
additional cost. High Yield Portfolio may make short sales of
securities only if at all times when a short position is open
High Yield Portfolio owns at least an equal amount of such
securities or securities convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short, at no additional cost.
In a short sale against the box, High Yield Portfolio does
not deliver from its portfolio the securities sold. Instead,
High Yield Portfolio borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the
broker-dealer delivers such securities, on behalf of High Yield
Portfolio, to the purchaser of such securities. High Yield
Portfolio is required to pay to the broker-dealer the amount of
any dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold
short, High Yield Portfolio must deposit and continuously
maintain in a separate account with High Yield Portfolio's
custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities
at no additional cost. High Yield Portfolio is said to have a
short position in the securities sold until it delivers to the
broker-dealer the securities sold. High Yield Portfolio may
close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the
securities sold short, rather than by delivering portfolio
securities.
Short sales may protect High Yield Portfolio against the
risk of losses in the value of its portfolio securities because
any unrealized losses with respect to such portfolio securities
should be wholly or partially offset by a corresponding gain in
the short position. However, any potential gains in such
portfolio securities should be wholly or partially offset by a
corresponding loss in the short position. The extent to which
such gains or losses are offset will depend upon the amount of
securities sold short relative to the amount High Yield
Portfolio owns, either directly or indirectly, and, in the case
where High Yield Portfolio owns convertible securities, changes
in the conversion premium.
Short sale transactions involve certain risks. If the
price of the security sold short increases between the time of
the short sale and the time High Yield Portfolio replaces the
borrowed security, High Yield Portfolio will incur a loss and if
the price declines during this period, High Yield Portfolio will
realize a short-term capital gain. Any realized short-term
capital gain will be decreased, and any incurred loss increased,
by the amount of transaction costs and any premium, dividend or
interest which High Yield Portfolio may have to pay in
connection with such short sale. Certain provisions of the
Internal Revenue Code may limit the degree to which High Yield
Portfolio is able to enter into short sales. There is no
limitation on the amount of High Yield Portfolio's assets that,
in the aggregate, may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales
and allocated to segregated accounts in connection with short
sales. High Yield Portfolio currently expects that no more than
5% of its total assets would be involved in short sales against
the box.
LINE OF CREDIT
Subject to restriction (8) under Investment Restrictions,
High Yield Portfolio may establish and maintain a line of credit
with a major bank in order to permit borrowing on a temporary
basis to meet share redemption requests in circumstances in
which temporary borrowing may be preferable to liquidation of
portfolio securities.
INTERFUND BORROWING AND LENDING PROGRAM
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, Institutional High Yield Fund has received
permission to lend money to, and borrow money from, other mutual
funds advised by the Adviser. Institutional High Yield Fund
will borrow through the program when the costs are equal to or
lower than the costs of bank loans.
PIK AND ZERO COUPON BONDS
High Yield Portfolio may invest up to 20% of its assets in
zero coupon bonds and bonds the interest on which is payable in
kind ("PIK bonds"). A zero coupon bond is a bond that does not
pay interest for its entire life. A PIK bond pays interest in
the form of additional securities. The market prices of both
zero coupon and PIK bonds are affected to a greater extent by
changes in prevailing levels of interest rates and thereby tend
to be more volatile in price than securities that pay interest
periodically and in cash. In addition, because High Yield
Portfolio accrues income with respect to these securities prior
to the receipt of such interest in cash, it may have to dispose
of portfolio securities under disadvantageous circumstances in
order to obtain cash needed to pay income dividends in amounts
necessary to avoid unfavorable tax consequences.
RATED SECURITIES
For a description of the ratings applied by rating services
to debt securities, please refer to the Appendix. The rated
debt securities described under Investment Policies above for
High Yield Portfolio include securities given a rating
conditionally by Moody's or provisionally by S&P. If the rating
of a security held by High Yield Portfolio is withdrawn or
reduced, High Yield Portfolio is not required to sell the
security, but the Adviser will consider such fact in determining
whether High Yield Portfolio should continue to hold the
security. To the extent that the ratings accorded by Moody's or
S&P for debt securities may change as a result of changes in
such organizations, or changes in their rating systems, High
Yield Portfolio will attempt to use comparable ratings as
standards for its investments in debt securities in accordance
with its investment policies.
FOREIGN SECURITIES
High Yield Portfolio may invest up to 25% of total assets
(taken at market value at the time of investment) in securities
of foreign issuers that are not publicly traded in the United
States ("foreign securities"). For purposes of these limits,
foreign securities do not include securities represented by
American Depositary Receipts ("ADRs"), securities denominated in
U.S. dollars, or securities guaranteed by U.S. persons.
Investment in foreign securities may involve a greater degree of
risk (including risks relating to exchange fluctuations, tax
provisions, or expropriation of assets) than does investment in
securities of domestic issuers.
High Yield Portfolio may invest in both "sponsored" and
"unsponsored" ADRs. In a sponsored ADR, the issuer typically
pays some or all of the expenses of the depositary and agrees to
provide its regular shareholder communications to ADR holders.
An unsponsored ADR is created independently of the issuer of the
underlying security. The ADR holders generally pay the expenses
of the depositary and do not have an undertaking from the issuer
of the underlying security to furnish shareholder
communications. High Yield Portfolio does not expects to invest
as much as 5% of its total assets in unsponsored ADRs.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, High Yield
Portfolio's investment performance is affected by the strength
or weakness of the U.S. dollar against these currencies. For
example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the
investment portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in
value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction
hedging and portfolio hedging under Currency Exchange
Transactions.)
Investors should understand and consider carefully the
risks involved in foreign investing. Investing in foreign
securities, positions in which are generally denominated in
foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising
both risks and opportunities not typically associated with
investing in U.S. securities. These considerations include:
fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to
the United States; less public information with respect to
issuers of securities; less governmental supervision of stock
exchanges, securities brokers, and issuers of securities; lack
of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading
practices; less liquidity and frequently greater price
volatility in foreign markets than in the United States;
possible imposition of foreign taxes; possible investment in
securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational,
and financial protections applicable to foreign sub-custodial
arrangements.
Although High Yield Portfolio will try to invest in
companies and governments of countries having stable political
environments, there is the possibility of expropriation or
confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange
controls, the adoption of foreign government restrictions, or
other adverse political, social or diplomatic developments that
could affect investment in these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash)
basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward
contracts are contractual agreements to purchase or sell a
specified currency at a specified future date (or within a
specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks
and broker-dealers, are not exchange traded, and are usually for
less than one year, but may be renewed.
High Yield Portfolio's foreign currency exchange
transactions are limited to transaction and portfolio hedging
involving either specific transactions or portfolio positions,
except to the extent described below under Synthetic Foreign
Positions. Transaction hedging is the purchase or sale of
forward contracts with respect to specific receivables or
payables of High Yield Portfolio arising in connection with the
purchase and sale of its portfolio securities. Portfolio
hedging is the use of forward contracts with respect to
portfolio security positions denominated or quoted in a
particular foreign currency. Portfolio hedging allows High
Yield Portfolio to limit or reduce its exposure in a foreign
currency by entering into a forward contract to sell such
foreign currency (or another foreign currency that acts as a
proxy for that currency) at a future date for a price payable in
U.S. dollars so that the value of the foreign-denominated
portfolio securities can be approximately matched by a foreign-
denominated liability. High Yield Portfolio may not engage in
portfolio hedging with respect to the currency of a particular
country to an extent greater than the aggregate market value (at
the time of making such sale) of the securities held in its
portfolio denominated or quoted in that particular currency,
except that High Yield Portfolio may hedge all or part of its
foreign currency exposure through the use of a basket of
currencies or a proxy currency where such currencies or currency
act as an effective proxy for other currencies. In such a case,
High Yield Portfolio may enter into a forward contract where the
amount of the foreign currency to be sold exceeds the value of
the securities denominated in such currency. The use of this
basket hedging technique may be more efficient and economical
than entering into separate forward contracts for each currency
held in High Yield Portfolio. High Yield Portfolio may not
engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a
particular currency, High Yield Portfolio may either sell the
portfolio security related to such contract and make delivery of
the currency, or it may retain the security and either acquire
the currency on the spot market or terminate its contractual
obligation to deliver the currency by purchasing an offsetting
contract with the same currency trader obligating it to purchase
on the same maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for High
Yield Portfolio to purchase additional currency on the spot
market (and bear the expense of such purchase) if the market
value of the security is less than the amount of currency High
Yield Portfolio is obligated to deliver and if a decision is
made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some
of the currency received upon the sale of the portfolio security
if its market value exceeds the amount of currency High Yield
Portfolio is obligated to deliver.
If High Yield Portfolio retains the portfolio security and
engages in an offsetting transaction, High Yield Portfolio will
incur a gain or a loss to the extent that there has been
movement in forward contract prices. If High Yield Portfolio
engages in an offsetting transaction, it may subsequently enter
into a new forward contract to sell the currency. Should
forward prices decline during the period between High Yield
Portfolio's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for
the purchase of the currency, High Yield Portfolio will realize
a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, High Yield Portfolio
will suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive High
Yield Portfolio of unrealized profits or force High Yield
Portfolio to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does
not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline.
Such transactions also preclude the opportunity for gain if the
value of the hedged currency should rise. Moreover, it may not
be possible for High Yield Portfolio to hedge against a
devaluation that is so generally anticipated that High Yield
Portfolio is not able to contract to sell the currency at a
price above the devaluation level it anticipates. The cost to
High Yield Portfolio of engaging in currency exchange
transactions varies with such factors as the currency involved,
the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are
involved.
Synthetic Foreign Positions. High Yield Portfolio may
invest in debt instruments denominated in foreign currencies.
In addition to, or in lieu of, such direct investment, High
Yield Portfolio may construct a synthetic foreign position by
(a) purchasing a debt instrument denominated in one currency,
generally U.S. dollars, and (b) concurrently entering into a
forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date
and at a specified rate of exchange. Because of the
availability of a variety of highly liquid U.S. dollar debt
instruments, a synthetic foreign position utilizing such U.S.
dollar instruments may offer greater liquidity than direct
investment in foreign currency debt instruments. The results of
a direct investment in a foreign currency and a concurrent
construction of a synthetic position in such foreign currency,
in terms of both income yield and gain or loss from changes in
currency exchange rates, in general should be similar, but would
not be identical because the components of the alternative
investments would not be identical.
High Yield Portfolio may also construct a synthetic foreign
position by entering into a swap arrangement. A swap is a
contractual agreement between two parties to exchange cash
flows--at the time of the swap agreement and again at maturity,
and, with some swaps, at various intervals through the period of
the agreement. The use of swaps to construct a synthetic
foreign position would generally entail the swap of interest
rates and currencies. A currency swap is a contractual
arrangement between two parties to exchange principal amounts in
different currencies at a predetermined foreign exchange rate.
An interest rate swap is a contractual agreement between two
parties to exchange interest payments on identical principal
amounts. An interest rate swap may be between a floating and a
fixed rate instrument, a domestic and a foreign instrument, or
any other type of cash flow exchange. A currency swap generally
has the same risk characteristics as a forward currency
contract, and all types of swaps have counter-party risk.
Depending on the facts and circumstances, swaps may be
considered illiquid. Illiquid securities usually have greater
investment risk and are subject to greater price volatility.
The net amount of the excess, if any, of High Yield Portfolio's
obligations over which it is entitled to receive with respect to
an interest rate or currency swap will be accrued daily and
liquid assets (cash, U.S. Government securities, or other "high
grade" debt obligations) of High Yield Portfolio having a value
at least equal to such accrued excess will be segregated on the
books of High Yield Portfolio and held by the Custodian for the
duration of the swap.
High Yield Portfolio may also construct a synthetic foreign
position by purchasing an instrument whose return is tied to the
return of the desired foreign position. An investment in these
"principal exchange rate linked securities" (often called PERLS)
can produce a similar return to a direct investment in a foreign
security.
RULE 144A SECURITIES
High Yield Portfolio may purchase securities that have been
privately placed but that are eligible for purchase and sale
under Rule 144A under the 1933 Act. That Rule permits certain
qualified institutional buyers, such as High Yield Portfolio, to
trade in privately placed securities that have not been
registered for sale under the 1933 Act. The Adviser, under the
supervision of the Board of Trustees, will consider whether
securities purchased under Rule 144A are illiquid and thus
subject to High Yield Portfolio's restriction of investing no
more than 10% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not
is a question of fact. In making this determination, the
Adviser will consider the trading markets for the specific
security, taking into account the unregistered nature of a Rule
144A security. In addition, the Adviser could consider the (1)
frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market,
and (4) nature of the security and of marketplace trades (e.g.,
the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The
liquidity of Rule 144A securities would be monitored and, if as
a result of changed conditions, it is determined that a Rule
144A security is no longer liquid, High Yield Portfolio's
holdings of illiquid securities would be reviewed to determine
what, if any, steps are required to assure that High Yield
Portfolio does not invest more than 10% of its assets in
illiquid securities. Investing in Rule 144A securities could
have the effect of increasing the amount of High Yield
Portfolio's assets invested in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
High Yield Portfolio does not expect to invest as much as 5% of
its total assets in Rule 144A securities that have not been
deemed to be liquid by the Adviser.
PORTFOLIO TURNOVER
The turnover rate for High Yield Portfolio in the future
may vary greatly from year to year, and when portfolio changes
are deemed appropriate due to market or other conditions, such
turnover rate may be greater than might otherwise be
anticipated. A high rate of portfolio turnover may result in
increased transaction expenses and the realization of capital
gains or losses. Distributions of any net realized gains are
subject to federal income tax. (See Risks and Investment
Considerations and Distributions and Income Taxes in the
Prospectus, and Additional Income Tax Considerations in this
Statement of Additional Information.)
OPTIONS ON SECURITIES AND INDEXES
High Yield Portfolio may purchase and may sell both put
options and call options on debt or other securities or indexes
in standardized contracts traded on national securities
exchanges, boards of trade, or similar entities, or quoted on
NASDAQ, and agreements, sometimes called cash puts, that may
accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium,
the right to buy from (call) or sell to (put) the seller
(writer) of the option the security underlying the option (or
the cash value of the index) at a specified exercise price at
any time during the term of the option. The writer of an option
on an individual security has the obligation upon exercise of
the option to deliver the underlying security upon payment of
the exercise price or to pay the exercise price upon delivery of
the underlying security. Upon exercise, the writer of an option
on an index is obligated to pay the difference between the cash
value of the index and the exercise price multiplied by the
specified multiplier for the index option. (An index is
designed to reflect specified facets of a particular financial
or securities market, a specific group of financial instruments
or securities, or certain economic indicators.)
High Yield Portfolio will write call options and put
options only if they are "covered." In the case of a call
option on a security, the option is "covered" if High Yield
Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without
additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such
amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities held in its
portfolio.
If an option written by High Yield Portfolio expires, High
Yield Portfolio realizes a capital gain equal to the premium
received at the time the option was written. If an option
purchased by High Yield Portfolio expires, High Yield Portfolio
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option
of the same series (type, exchange, underlying security or
index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction
can be effected when High Yield Portfolio desires.
High Yield Portfolio will realize a capital gain from a
closing purchase transaction if the cost of the closing option
is less than the premium received from writing the option, or,
if it is more, High Yield Portfolio will realize a capital loss.
If the premium received from a closing sale transaction is more
than the premium paid to purchase the option, High Yield
Portfolio will realize a capital gain or, if it is less, High
Yield Portfolio will realize a capital loss. The principal
factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market
price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration
date.
A put or call option purchased by High Yield Portfolio is
an asset of High Yield Portfolio, valued initially at the
premium paid for the option. The premium received for an option
written by High Yield Portfolio is recorded as a deferred
credit. The value of an option purchased or written is marked-
to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange
or no closing price is available, at the mean between the last
bid and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options
on securities and on indexes. For example, there are
significant differences between the securities markets and
options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to
achieve its objectives. A decision as to whether, when and how
to use options involves the exercise of skill and judgment, and
even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when High Yield Portfolio seeks to close out an option position.
If High Yield Portfolio were unable to close out an option that
it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option would expire
and become worthless. If High Yield Portfolio were unable to
close out a covered call option that it had written on a
security, it would not be able to sell the underlying security
until the option expired. As the writer of a covered call
option, High Yield Portfolio foregoes, during the option's life,
the opportunity to profit from increases in the market value of
the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased by High
Yield Portfolio, High Yield Portfolio would not be able to close
out the option. If restrictions on exercise were imposed, High
Yield Portfolio might be unable to exercise an option it has
purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
High Yield Portfolio may use interest rate futures
contracts and index futures contracts. An interest rate or
index futures contract provides for the future sale by one party
and purchase by another party of a specified quantity of a
financial instrument or the cash value of an index /2/ at a
specified price and time. A public market exists in futures
contracts covering a number of indexes as well as the following
financial instruments: U.S. Treasury bonds; U.S. Treasury notes;
GNMA Certificates; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; Eurodollar
certificates of deposit; and foreign currencies. It is expected
that other futures contracts will be developed and traded.
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/2/A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at
the close of the last trading day of the contract and the price
at which the index contract was originally written. Although
the value of a securities index is a function of the value of
certain specified securities, no physical delivery of those
securities is made.
- --------------
High Yield Portfolio may purchase and write call and put
futures options. Futures options possess many of the same
characteristics as options on securities and indexes (discussed
above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is
true. High Yield Portfolio might, for example, use futures
contracts to hedge against or gain exposure to fluctuations in
the general level of security prices, anticipated changes in
interest rates or currency fluctuations that might adversely
affect either the value of High Yield Portfolio's securities or
the price of the securities that High Yield Portfolio intends to
purchase. Although other techniques could be used to reduce
High Yield Portfolio's exposure to security price, interest rate
and currency fluctuations, High Yield Portfolio may be able to
achieve its exposure more effectively and perhaps at a lower
cost by using futures contracts and futures options.
High Yield Portfolio will only enter into futures contracts
and futures options that are standardized and traded on an
exchange, board of trade, or similar entity, or quoted on an
automated quotation system.
The success of any futures transaction depends on the
Adviser correctly predicting changes in the level and direction
of security prices, interest rates, currency exchange rates and
other factors. Should those predictions be incorrect, High
Yield Portfolio's return might have been better had the
transaction not been attempted; however, in the absence of the
ability to use futures contracts, the Adviser might have taken
portfolio actions in anticipation of the same market movements
with similar investment results but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by
High Yield Portfolio, High Yield Portfolio is required to
deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other
securities acceptable to the broker ("initial margin"). The
margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term
of the contract. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract
that is returned to High Yield Portfolio upon termination of the
contract, assuming all contractual obligations have been
satisfied. High Yield Portfolio expects to earn interest income
on its initial margin deposits. A futures contract held by High
Yield Portfolio is valued daily at the official settlement price
of the exchange on which it is traded. Each day High Yield
Portfolio pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract.
This process is known as "marking-to-market." Variation margin
paid or received by High Yield Portfolio does not represent a
borrowing or loan by High Yield Portfolio but is instead
settlement between High Yield Portfolio and the broker of the
amount one would owe the other if the futures contract had
expired at the close of the previous trading day. In computing
daily net asset value, High Yield Portfolio will mark-to-market
its open futures positions.
High Yield Portfolio is also required to deposit and
maintain margin with respect to put and call options on futures
contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and
the related initial margin requirements), the current market
value of the option, and other futures positions held by High
Yield Portfolio.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or
sales of matching futures contracts (same exchange, underlying
security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, High Yield
Portfolio realizes a capital gain, or if it is more, High Yield
Portfolio realizes a capital loss. Conversely, if an offsetting
sale price is more than the original purchase price, High Yield
Portfolio realizes a capital gain, or if it is less, High Yield
Portfolio realizes a capital loss. The transaction costs must
also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options as hedging techniques. A purchase
or sale of a futures contract may result in losses in excess of
the amount invested in the futures contract. In trying to
increase or reduce market exposure, there can be no guarantee
that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In
addition, there are significant differences between the
securities and futures markets that could result in an imperfect
correlation between the markets, causing a given transaction not
to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in
speculative market demand for futures, futures options and debt
securities, including technical influences in futures trading
and futures options and differences between the financial
instruments and the instruments underlying the standard
contracts available for trading in such respects as interest
rate levels, maturities, and creditworthiness of issuers. A
decision as to whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount
that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached
in a futures contract subject to the limit, no more trades may
be made on that day at a price beyond that limit. The daily
limit governs only price movements during a particular trading
day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved
to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of
positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist
at a time when High Yield Portfolio seeks to close out a futures
or a futures option position. High Yield Portfolio would be
exposed to possible loss on the position during the interval of
inability to close and would continue to be required to meet
margin requirements until the position is closed. In addition,
many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will
develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts, or futures options of
types other than those described herein are traded in the
future, High Yield Portfolio may also use those investment
vehicles, provided the Board of Trustees determines that their
use is consistent with High Yield Portfolio's investment
objective.
High Yield Portfolio will not enter into a futures contract
or purchase an option thereon if, immediately thereafter, the
initial margin deposits for futures contracts held by High Yield
Portfolio plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-
the-money," /3/ would exceed 5% of High Yield Portfolio's total
assets.
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/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- -------------
When purchasing a futures contract or writing a put on a
futures contract, High Yield Portfolio must maintain with its
custodian (or broker, if legally permitted) cash or cash
equivalents (including any margin) equal to the market value of
such contract. When writing a call option on a futures
contract, High Yield Portfolio similarly will maintain with its
custodian cash or cash equivalents (including any margin) equal
to the amount by which such option is in-the-money until the
option expires or is closed out by High Yield Portfolio.
High Yield Portfolio may not maintain open short positions
in futures contracts, call options written on futures contracts
or call options written on indexes if, in the aggregate, the
market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus
unrealized gains and losses on the open positions, adjusted for
the historical relative volatility of the relationship between
the portfolio and the positions. For this purpose, to the
extent High Yield Portfolio has written call options on specific
securities in its portfolio, the value of those securities will
be deducted from the current market value of the securities
portfolio.
In order to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being deemed a
"commodity pool operator," High Yield Portfolio will use
commodity futures or commodity options contracts solely for bona
fide hedging purposes within the meaning and intent of
Regulation 1.3(z), or, with respect to positions in commodity
futures and commodity options contracts that do not come within
the meaning and intent of 1.3(z), the aggregate initial margin
and premiums required to establish such positions will not
exceed 5% of the fair market value of the assets of High Yield
Portfolio, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into [in
the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section
190.01(x) of the Commission Regulations) may be excluded in
computing such 5%].
As long as Institutional High Yield Fund continues to sell
its shares in certain states, High Yield Portfolio's options
transactions will also be subject to certain non-fundamental
investment restrictions set forth under Investment Restrictions
in this Statement of Additional Information.
TAXATION OF OPTIONS AND FUTURES
If High Yield Portfolio exercises a call or put option that
it holds, the premium paid for the option is added to the cost
basis of the security purchased (call) or deducted from the
proceeds of the security sold (put). For cash settlement
options and futures options exercised by High Yield Portfolio,
the difference between the cash received at exercise and the
premium paid is a capital gain or loss.
If a call or put option written by High Yield Portfolio is
exercised, the premium is included in the proceeds of the sale
of the underlying security (call) or reduces the cost basis of
the security purchased (put). For cash settlement options and
futures options written by High Yield Portfolio, the difference
between the cash paid at exercise and the premium received is a
capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by High Yield
Portfolio was in-the-money at the time it was written and the
security covering the option was held for more than the long-
term holding period prior to the writing of the option, any loss
realized as a result of a closing purchase transaction will be
long-term. The holding period of the securities covering an in-
the-money option will not include the period of time the option
is outstanding.
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price
on the earlier of delivery notice date or expiration date. If
High Yield Portfolio delivers securities under a futures
contract, High Yield Portfolio also realizes a capital gain or
loss on those securities.
For federal income tax purposes, High Yield Portfolio
generally is required to recognize as income for each taxable
year its net unrealized gains and losses as of the end of the
year on options, futures and futures options positions ("year-
end mark-to-market"). Generally, any gain or loss recognized
with respect to such positions (either by year-end mark-to-
market or by actual closing of the positions) is considered to
be 60% long-term and 40% short-term, without regard to the
holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the
recognition of losses on certain positions (including options,
futures and futures options positions, the related securities
and certain successor positions thereto) may be deferred to a
later taxable year. Sale of futures contracts or writing of
call options (or futures call options) or buying put options (or
futures put options) that are intended to hedge against a change
in the value of securities held by High Yield Portfolio: (1)
will affect the holding period of the hedged securities; and (2)
may cause unrealized gain or loss on such securities to be
recognized upon entry into the hedge.
In order for High Yield Portfolio to continue to qualify
for federal income tax treatment as a regulated investment
company, at least 90% of its gross income for a taxable year
must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other
income (including but not limited to gains from options,
futures, and forward contracts). In addition, gains realized on
the sale or other disposition of securities held for less than
three months must be limited to less than 30% of High Yield
Portfolio's annual gross income. Any net gain realized from
futures (or futures options) contracts will be considered gain
from the sale of securities and therefore be qualifying income
for purposes of the 90% requirement. In order to avoid
realizing excessive gains on securities held less than three
months, High Yield Portfolio may be required to defer the
closing out of certain positions beyond the time when it would
otherwise be advantageous to do so.
Institutional High Yield Fund distributes to shareholders
annually any net capital gains that have been recognized for
federal income tax purposes (including year-end mark-to-market
gains) on options and futures transactions. Such distributions
are combined with distributions of capital gains realized on the
other investments and shareholders are advised of the nature of
the payments.
INVESTMENT RESTRICTIONS
Institutional High Yield Fund and High Yield Portfolio
operate under the following investment restrictions.
Institutional High Yield Fund and High Yield Portfolio may not:
(1) invest in a security if, as a result of such
investment, more than 25% of its total assets (taken at market
value at the time of such investment) would be invested in the
securities of issuers in any particular industry, except that
this restriction does not apply to U.S. Government Securities,
and [Institutional High Yield Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(2) invest in a security if, with respect to 75% of its
assets, as a result of such investment, more than 5% of its
total assets (taken at market value at the time of such
investment) would be invested in the securities of any one
issuer, except that this restriction does not apply to U.S.
Government Securities or repurchase agreements for such
securities and [Institutional High Yield Fund only] except that
all or substantially all of the assets of the Fund may be
invested in another registered investment company having the
same investment objective and substantially similar investment
policies as the Fund;
(3) invest in a security if, as a result of such
investment, it would hold more than 10% (taken at the time of
such investment) of the outstanding voting securities of any one
issuer, [Institutional High Yield Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate, or
interests therein);
(5) purchase or sell commodities or commodities contracts
or oil, gas or mineral programs, except that it may enter into
(i) futures and options on futures and (ii) forward contracts;
(6) purchase securities on margin, except for use of
short-term credit necessary for clearance of purchases and sales
of portfolio securities, but it may make margin deposits in
connection with transactions in options, futures, and options on
futures;
(7) make loans, although it may (a) lend portfolio
securities and participate in an interfund lending program with
other Stein Roe Funds and Portfolios provided that no such loan
may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of its total assets (taken at market
value at the time of such loans); (b) purchase money market
instruments and enter into repurchase agreements; and (c)
acquire publicly-distributed or privately-placed debt
securities;
(8) borrow except that it may (a) borrow for non-
leveraging, temporary or emergency purposes, (b) engage in
reverse repurchase agreements and make other borrowings,
provided that the combination of (a) and (b) shall not exceed 33
1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings) or such other
percentage permitted by law, and (c) enter into futures and
options transactions; it may borrow from banks, other Stein Roe
Funds and Portfolios, and other persons to the extent permitted
by applicable law;
(9) act as an underwriter of securities, except insofar as
it may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933 on disposition of securities acquired
subject to legal or contractual restrictions on resale,
[Institutional High Yield Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or
(10) issue any senior security except to the extent
permitted under the Investment Company Act of 1940.
The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the
outstanding voting securities" of the Fund or High Yield
Portfolio, as previously defined herein. The policy on the
scope of transactions involving lending of portfolio securities
to broker-dealers and banks (as set forth herein under Portfolio
Investments and Strategies) is also a fundamental policy.
Institutional High Yield Fund and High Yield Portfolio are
also subject to the following restrictions and policies that may
be changed by the Board of Trustees. None of the following
restrictions shall prevent it from investing all or
substantially all of its assets in another investment company
having the same investment objective and substantially similar
investment policies as the Fund. Unless otherwise indicated,
Institutional High Yield Fund and High Yield Portfolio may not:
(A) invest for the purpose of exercising control or
management;
(B) purchase more than 3% of the stock of another
investment company or purchase stock of other investment
companies equal to more than 5% of its total assets (valued at
time of purchase) in the case of any one other investment
company and 10% of such assets (valued at time of purchase) in
the case of all other investment companies in the aggregate; any
such purchases are to be made in the open market where no profit
to a sponsor or dealer results from the purchase, other than the
customary broker's commission, except for securities acquired as
part of a merger, consolidation or acquisition of assets;/4/
- ------------
/4/Stein Roe Funds have been informed that the staff of the
Securities and Exchange Commission takes the position that the
issuers of certain CMOs and certain other collateralized assets
are investment companies and that subsidiaries of foreign banks
may be investment companies for purposes of Section 12(d)(1) of
the Investment Company Act of 1940, which limits the ability of
one investment company to invest in another investment company.
Accordingly, High Yield Portfolio intends to operate within the
applicable limitations under Section 12(d)(1)(A) of that Act.
- ------------
(C) mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or
held by it, except as may be necessary in connection with (i)
borrowings permitted in (8) above and (ii) options, futures, and
options on futures;
(D) purchase or retain securities of any issuer if 5% of
the securities of such issuer are owned by those officers and
trustees or directors of the Trust or of its investment adviser
who each own beneficially more than l/2 of 1% of its securities;
(E) purchase portfolio securities from, or sell portfolio
securities to, any of the officers and directors or trustees of
the Trust or of its investment adviser;
(F) purchase shares of other open-end investment
companies, except in connection with a merger, consolidation,
acquisition, or reorganization;
(G) invest more than 5% of its net assets (valued at time
of investment) in warrants, nor more than 2% of its net assets
in warrants which are not listed on the New York or American
Stock Exchange;
(H) 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;
(I) write an option on a security unless the option is
issued by the Options Clearing Corporation, an exchange, or
similar entity;
(J) buy or sell an option on a security, a futures
contract, or an option on a futures contract unless the option,
the futures contract, or the option on the futures contract is
offered through the facilities of a national securities
association or listed on a national exchange or similar entity;
(K) invest in limited partnerships in real estate unless
they are readily marketable;
(L) sell securities short unless (i) it owns or has the
right to obtain securities equivalent in kind and amount to
those sold short at no added cost or (ii) the securities sold
are "when issued" or "when distributed" securities which it
expects to receive in a recapitalization, reorganization, or
other exchange for securities it contemporaneously owns or has
the right to obtain and provided that transactions in options,
futures, and options on futures are not treated as short sales;
(M) invest more than 5% of its total assets (taken at
market value at the time of a particular investment) in
securities of issuers (other than issuers of federal agency
obligations or securities issued or guaranteed by any foreign
country or asset-backed securities) that, together with any
predecessors or unconditional guarantors, have been in
continuous operation for less than three years ("unseasoned
issuers");
(N) invest more than 15% of its total assets (taken at
market value at the time of a particular investment) in
restricted securities, other than securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933;
(O) invest more than 15% of its total assets (taken at
market value at the time of a particular investment) in
restricted securities and securities of unseasoned issuers; or
(P) invest more than 10% of its net assets (taken at
market value at the time of a particular investment) in illiquid
securities /5/, including repurchase agreements maturing in more
than seven days.
- -------------
/5/ In the judgment of the Adviser, Private Placement Notes,
which are issued pursuant to Section 4(2) of the Securities Act
of 1933, generally are readily marketable even though they are
subject to certain legal restrictions on resale. As such, they
are not treated as being subject to the limitation on illiquid
securities.
- -------------
ADDITIONAL INVESTMENT CONSIDERATIONS
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
build wealth for generations, it has been guided by three
primary objectives which it believes are the foundation of a
successful investment program. These objectives are
preservation of capital, limited volatility through managed
risk, and consistent above-average returns, as appropriate for
the particular client or managed account.
Because every investor's needs are different, Stein Roe
mutual funds are designed to accommodate different investment
objectives, risk tolerance levels, and time horizons. In
selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment
objectives compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share
price, such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If
you have a longer investment time frame, you may seek to
maximize your investment returns by investing in a mutual fund
that offers greater yield or appreciation potential in exchange
for greater investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks
which will vary depending on investment objective and security
type. However, mutual funds seek to reduce risk through
professional investment management and portfolio
diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values
than bond or money market mutual funds. Although there is no
guarantee that they will be able to maintain a stable net asset
value of $1.00 per share, money market funds emphasize safety of
principal and liquidity, but tend to offer lower income
potential than bond funds. Bond funds tend to offer higher
income potential than money market funds but tend to have
greater risk of principal and yield volatility.
In addition, the Adviser believes that investment in a high
yield fund provides an opportunity to diversify an investment
portfolio because the economic factors that affect the
performance of high-yield, high-risk debt securities differ from
those that affect the performance of high-quality debt
securities or equity securities.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
and Net Asset Value, and that information is incorporated herein
by reference. The Prospectus discloses that shares may be
purchased (or redeemed) through investment dealers, banks, or
other intermediaries. It is the responsibility of any such
intermediary to establish procedures insuring the prompt
transmission to Institutional Trust of any such purchase order.
The state of Texas has asked that mutual funds disclose in their
Statement of Additional Information, as a reminder to any such
intermediary, that it must be registered as a dealer in Texas.
Through an account with an Intermediary, a shareholder may
be able to exchange shares of Institutional High Yield Fund for
shares of another Stein Roe Fund. Each Intermediary will
establish its own exchange policy and procedures for its
accounts. Shares are exchanged at the next price calculated on
a day the NYSE is open, after an exchange order is received and
accepted by an Intermediary.
- - Shares can be exchanged only between accounts registered in
the same name, address, and taxpayer ID number of the
Intermediary.
- - An exchange can be made only into a Stein Roe Fund whose
shares are eligible for sale in the state where the Intermediary
is located.
- - An exchange may have tax consequences.
- - Institutional High Yield Fund may refuse any exchange orders
from any Intermediary if for any reason they are not deemed to
be in the best interests of the Fund and its shareholders.
- - Institutional High Yield Fund may impose other restrictions on
the exchange privilege, or modify or terminate the privilege,
but will try to give each Intermediary advance notice whenever
it can reasonably do so.
Institutional High Yield Fund's net asset value is
determined on days on which the New York Stock Exchange (the
"NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in
February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these
holidays falls on a Saturday or Sunday, the NYSE will be closed
on the preceding Friday or the following Monday, respectively.
Net asset value will not be determined on days when the NYSE is
closed unless, in the judgment of the Board of Trustees, net
asset value of Institutional High Yield Fund should be
determined on any such day, in which case the determination will
be made at 3:00 p.m., central time.
Institutional Trust reserves the right to suspend or
postpone redemptions of shares of its series during any period
when: (a) trading on the NYSE is restricted, as determined by
the Securities and Exchange Commission, or the NYSE is closed
for other than customary weekend and holiday closings; (b) the
Securities and Exchange Commission has by order permitted such
suspension; or (c) an emergency, as determined by the Securities
and Exchange Commission, exists, making disposal of portfolio
securities or valuation of net assets of a series not reasonably
practicable.
Institutional Trust intends to pay all redemptions in cash
and is obligated to redeem shares of its series solely in cash
up to the lesser of $250,000 or one percent of the net assets of
Institutional High Yield Fund during any 90-day period for any
one shareholder. However, redemptions in excess of such limit
may be paid wholly or partly by a distribution in kind of
securities. If redemptions were made in kind, the redeeming
shareholders might incur transaction costs in selling the
securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, Institutional Trust reserves the right to redeem
shares in any account for their then-current value (which will
be promptly paid to the investor) if at any time the shares in
the account do not have a value of at least $100,000. An
investor will be notified that the value of his account is less
than the minimum and allowed at least 30 days to bring the value
of the account up to at least $100,000 before the redemption is
processed. The Agreement and Declaration of Trust also
authorizes Institutional Trust to redeem shares under certain
other circumstances as may be specified by the Board of
Trustees.
MANAGEMENT
The following table sets forth certain information with
respect to trustees and officers of Institutional Trust:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME AGE INSTITUTIONAL TRUST DURING PAST FIVE YEARS
<C> <S> <S> <S>
Gary A. Anetsberger 41 Senior Vice-President Chief Financial Officer of the
(4) Mutual Funds division of Stein
Roe & Farnham Incorporated
(the "Adviser"); senior vice
president of the Adviser since
April, 1996; vice president
of the Adviser prior thereto
Timothy K. Armour 48 President; Trustee President of the Mutual Funds
(1)(2)(4) division of the Adviser and
director of the Adviser since
June, 1992; senior vice president
and director of marketing of
Citibank Illinois prior thereto
Jilaine Hummel Bauer 41 Executive Vice-President; General counsel and secretary of
(4) Secretary the Adviser since November 1995;
senior vice president of the
Adviser since April, 1992; vice
president of the Adviser prior
thereto
Ann H. Benjamin 38 Vice-President Senior vice president of the
Adviser since July, 1994; vice
president of the Adviser from
January, 1992 to July, 1994;
associate of the Adviser prior
thereto
Kenneth L. Block 76 Trustee Chairman Emeritus of A. T. Kearney,
(3)(4) Inc. (international management
consultants)
William W. Boyd 70 Trustee Chairman and director of Sterling
(3)(4) Plumbing Group, Inc. (manufacturer
of plumbing products) since 1992;
chairman, president, and chief
executive officer of Sterling
Plumbing Group, Inc. prior thereto
Thomas W. Butch 39 Vice-President Senior vice president of the
Adviser since September, 1994;
first vice president, corporate
communications, of Mellon Bank
Corporation prior thereto
Lindsay Cook(1)(4) 44 Trustee Senior vice president of Liberty
Financial Companies, Inc. (the
indirect parent of the Adviser)
Philip J. Crosley 50 Vice-President Senior Vice President of the
Adviser since February, 1996;
Vice President, Institutional
Sales-Advisor Sales, Invesco
Funds Group prior thereto
Douglas A. Hacker 41 Trustee Senior vice president and chief
(3)(4) financial officer, United
Airlines, since July, 1994;
senior vice president - Finance,
United Airlines, February, 1993
to July, 1994; vice president,
American Airlines prior thereto
Janet Langford Kelly 39 Trustee Senior vice president, secretary
(3)(4) and general counsel, Sara Lee
Corporation (branded, packaged,
consumer-products manufacturer),
since 1995; partner, Sidley &
Austin (law firm), 1991 through 1994
Michael T. Kennedy 34 Vice-President Senior vice president of the
Adviser since October, 1994;
vice president of the Adviser
from January, 1992 to October,
1994; associate of the Adviser
prior thereto
Steven P. Luetger 43 Vice-President Senior vice president of the Adviser
Lynn C. Maddox 55 Vice-President Senior vice president of the Adviser
Anne E. Marcel 38 Vice-President Vice president of the Adviser
since April, 1996; manager,
Mutual Fund Sales & Services
of the Adviser since October,
1994; supervisor of the Counselor
Department of the Adviser from
October, 1992 to October, 1994;
vice president of Selected
Financial Services prior thereto
Francis W. Morley 76 Trustee Chairman of Employer Plan
(2)(3)(4) Administrators and Consultants
Co. (designer, administrator,
and communicator of employee
benefit plans)
Jane M. Naeseth 46 Vice-President Senior vice president of the
Adviser since January, 1991; vice
president of the Adviser prior thereto
Charles R. Nelson 54 Trustee Van Voorhis Professor of Political
(3) (4) Economy of the University of Washington
Nicolette D. Parrish 47 Vice-President; Senior compliance administrator and
(4) Assistant Secretary assistant secretary of the Adviser
since November 1995; senior legal
assistant for the Adviser prior thereto
Cynthia A. Prah (4) 34 Vice-President Manager of Shareholder
Transaction Processing for
the Adviser
Sharon R. Robertson 35 Controller Accounting manager for the Adviser's
(4) Mutual Funds division
Janet B. Rysz (4) 41 Assistant Secretary Senior compliance administrator
and assistant secretary of the
Adviser
Thomas P. Sorbo 35 Vice-President Senior vice president of the
Adviser since January, 1994;
vice president of the Adviser
from September, 1992 to December,
1993; associate of Travelers
Insurance Company prior thereto
Thomas C. Theobald 59 Trustee Managing partner, William Blair
(3) (4) Capital Partners (private equity
fund) since 1994; chief executive
officer and chairman of the Board
of Directors of Continental Bank
Corporation prior thereto
Heidi J. Walter (4) 29 Vice-President Legal counsel for the Adviser
since March, 1995; associate with
Beeler Schad & Diamond, P,C.
prior thereto
Hans P. Ziegler (4) 55 Executive Vice-President Chief executive officer of the
Adviser since May, 1994;
president of the Investment
Counsel division of the Adviser
from July, 1993 to June, 1994;
president and chief executive
officer, Pitcairn Financial
Management Group prior thereto
Margaret O. Zwick 30 Treasurer Compliance manager for the Adviser's
(4) Mutual Funds division since
August 1995; compliance
accountant, January 1995 to
July 1995; section manager,
January 1994 to January 1995;
supervisor prior thereto
</TABLE>
______________________
(1) Trustee who is an "interested person" of Institutional Trust
and of the Adviser, as defined in the Investment Company Act
of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope
and results of the audit.
(4) This person holds the corresponding officer or trustee
position with the Base Trust.
Certain of the trustees and officers of Institutional Trust
and of Base Trust are trustees or officers of other investment
companies managed by the Adviser. Mr. Armour, Ms. Bauer, and
Mr. Cook are also vice presidents of Institutional High Yield
Fund's distributor, Liberty Securities Corporation. The address
of Mr. Block is 11 Woodley Road, Winnetka, Illinois 60093; that
of Mr. Boyd is 2900 Golf Road, Rolling Meadows, Illinois 60008;
that of Mr. Cook is 600 Atlantic Avenue, Boston, MA 02210; that
of Mr. Hacker is P.O. Box 66100, Chicago, IL 60666; that of Ms.
Kelly is Three First National Plaza, Chicago, Illinois 60602;
that of Mr. Morley is 20 North Wacker Drive, Suite 2275,
Chicago, Illinois 60606; that of Mr. Nelson is Department of
Economics, University of Washington, Seattle, Washington 98195;
that of Mr. Theobald is Suite 3300, 222 West Adams Street,
Chicago, IL 60606; and that of the officers is One South Wacker
Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from Institutional Trust. In
compensation for their services to Institutional Trust, trustees
who are not "interested persons" of Institutional Trust or the
Adviser are paid an annual retainer of $8,000 (divided equally
among the series of Institutional Trust) plus an attendance fee
from each series for each meeting of the Board or standing
committee thereof attended at which business for the series is
conducted. The attendance fees (other than for a Nominating
Committee meeting) are based on each series' net assets as of
the preceding December 31. For a series with net assets of less
than $50 million, the fee is $50 per meeting; with $51 to $250
million, the fee is $200 per meeting; with $251 million to $500
million, $350; with $501 million to $750 million, $500; with
$751 million to $1 billion, $650; and with over $1 billion in
net assets, $800. For Institutional High Yield Fund and any
other series of Institutional Trust participating in the master
fund/feeder fund structure, the trustees' attendance fee is paid
solely by the master portfolio. Each non-interested trustee
also receives $500 from Institutional Trust for attending each
meeting of the Nominating Committee. Institutional Trust has no
retirement or pension plan. The following table sets forth
compensation paid to the trustees by the Stein Roe Fund complex
during the year ended June 30, 1996:
Total Compensation from
Name of Trustee the Stein Roe Fund Complex*
- ------------------ ---------------------------
Timothy K. Armour -0-
Lindsay Cook -0-
Douglas A. Hacker -0-
Thomas C. Theobald -0-
Kenneth L. Block $82,417
William W. Boyd 86,317
Francis W. Morley 82,017
Charles R. Nelson 86,317
Gordon R. Worley 82,817
_______________
* During this period, the Stein Roe Fund Complex consisted of
the six series of Income Trust, four series of Stein Roe
Municipal Trust, eight series of Stein Roe Investment Trust, and
one series of Base Trust. Messrs. Hacker and Theobald were
elected trustees of those Trusts on June 18, 1996, and,
therefore, did not receive any compensation for the year ended
June 30, 1996. Mr. Worley retired as a trustee on December 31,
1996; and Ms. Kelly became a trustee on January 1, 1997.
PRINCIPAL SHAREHOLDERS
As of the date of this Statement of Additional Information,
Institutional High Yield Fund had only one shareholder, Stein
Roe & Farnham Incorporated, which held 10,000 shares.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides administrative
services to Institutional High Yield Fund and High Yield
Portfolio and portfolio management services to High Yield
Portfolio. The Adviser is a wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), Institutional High Yield Funds' transfer
agent, which is a wholly owned subsidiary of Liberty Financial
Companies, Inc. ("Liberty Financial"), which is a majority owned
subsidiary of LFC Holdings, Inc., which is a wholly owned
subsidiary of Liberty Mutual Equity Corporation, which is a
wholly owned subsidiary of Liberty Mutual Insurance Company.
Liberty Mutual Insurance Company is a mutual insurance company,
principally in the property/casualty insurance field, organized
under the laws of Massachusetts in 1912.
The directors of the Adviser are Kenneth R. Leibler, Harold
W. Cogger, C. Allen Merritt, Jr., Timothy K. Armour, and Hans P.
Ziegler. Mr. Leibler is President and Chief Executive Officer
of Liberty Financial; Mr. Cogger is Executive Vice President of
Liberty Financial; Mr. Merritt is Senior Vice President and
Treasurer of Liberty Financial; Mr. Armour is President of the
Adviser's Mutual Funds division; and Mr. Ziegler is Chief
Executive Officer of the Adviser. The business address of
Messrs. Leibler, Cogger, and Merritt is Federal Reserve Plaza,
Boston, Massachusetts 02210; and that of Messrs. Armour, and
Ziegler is One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of June 30, 1996, the Adviser
managed over $24.7 billion in assets: over $7.4 billion in
equities and over $17.3 billion in fixed-income securities
(including $1.2 billion in municipal securities). The $24.7
billion in managed assets included over $7 billion held by open-
end mutual funds managed by the Adviser (approximately 16% of
the mutual fund assets were held by clients of the Adviser).
These mutual funds were owned by over 189,000 shareholders. The
$7 billion in mutual fund assets included over $660 million in
over 38,000 IRA accounts. In managing those assets, the Adviser
utilizes a proprietary computer-based information system that
maintains and regularly updates information for approximately
6,500 companies. The Adviser also monitors over 1,400 issues
via a proprietary credit analysis system. At June 30, 1996, the
Adviser employed approximately 16 research analysts and 32
account managers. The average investment-related experience of
these individuals was 20 years.
Please refer to the description of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under Management and
Fee Table in the Prospectus, which is incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to Institutional High Yield Fund and bears any sales
or promotional expenses. Institutional High Yield Fund pays all
expenses other than those paid by the Adviser, including but not
limited to printing and postage charges and securities
registration and custodian fees and expenses incidental to its
organization.
Institutional High Yield Fund's administrative agreement
provides that the Adviser shall reimburse the Fund to the extent
that its total annual expenses (including fees paid to the
Adviser, but excluding taxes, interest, brokers' commissions and
other normal charges incident to the purchase and sale of
portfolio securities, and expenses of litigation to the extent
permitted under applicable state law) exceed the applicable
limits prescribed by any state in which shares of Institutional
High Yield Fund are being offered for sale to the public;
however, such reimbursement for any fiscal year will not exceed
the amount of the fees paid by Institutional High Yield Fund
under that agreement for such year. In addition, in the
interest of further limiting Institutional High Yield Fund's
expenses, the Adviser may voluntarily waive its management fee
and/or absorb certain its expenses, as described in the
Prospectus under Fee Table. Any such reimbursements will
enhance the yield of the Fund.
High Yield Portfolio's management agreement provides that
neither the Adviser nor any of its directors, officers,
stockholders (or partners of stockholders), agents, or employees
shall have any liability to Base Trust or any shareholder of
High Yield Portfolio for any error of judgment, mistake of law
or any loss arising out of any investment, or for any other act
or omission in the performance by the Adviser of its duties
under the agreement, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the Adviser's part
in the performance of its duties or from reckless disregard by
the Adviser of the Adviser's obligations and duties under that
agreement.
Any expenses that are attributable solely to the
organization, operation, or business of Institutional High Yield
Fund shall be paid solely out of that Fund's assets. Any
expenses incurred by Institutional Trust that are not solely
attributable to a particular Fund are apportioned in such manner
as the Adviser determines is fair and appropriate, unless
otherwise specified by the Board of Trustees.
DISTRIBUTOR
Shares of Institutional High Yield Fund are distributed by
Liberty Securities Corporation ("LSC"), under a Distribution
Agreement as described under Management in the Prospectus, which
is incorporated herein by reference. The Distribution Agreement
continues in effect from year to year, provided such continuance
is approved annually (i) by a majority of the trustees or by a
majority of the outstanding voting securities of Institutional
Trust, and (ii) by a majority of the trustees who are not
parties to the Agreement or interested persons of any such
party. Institutional Trust has agreed to pay all expenses in
connection with registration of its shares with the Securities
and Exchange Commission and auditing and filing fees in
connection with registration of its shares under the various
state blue sky laws and assumes the cost of preparation of
prospectuses and other expenses.
As agent, LSC offers shares of Institutional High Yield
Fund to investors in states where the shares are qualified for
sale, at net asset value, without sales commissions or other
sales load to the investor. No sales commission or "12b-1"
payment is paid by Institutional High Yield Fund. LSC offers
Institutional High Yield Fund's shares only on a best-efforts
basis.
TRANSFER AGENT
SSI performs certain transfer agency services for
Institutional Trust, as described under Management in the
Prospectus. For performing these services, SSI receives from
Institutional High Yield Fund a fee based on an annual rate of
.05 of 1% of average daily net assets of Institutional High
Yield Fund. The Board of Trustees believes the charges by SSI
are comparable to those of other companies performing similar
services. (See Investment Advisory Services.)
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian
for Institutional Trust and Base Trust. It is responsible for
holding all securities and cash, receiving and paying for
securities purchased, delivering against payment securities
sold, receiving and collecting income from investments, making
all payments covering expenses, and performing other
administrative duties, all as directed by authorized persons.
The custodian does not exercise any supervisory function in such
matters as purchase and sale of portfolio securities, payment of
dividends, or payment of expenses.
Portfolio securities purchased in the U.S. are maintained
in the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the
U.S. are maintained in the custody of foreign banks and trust
companies that are members of the Bank's Global Custody Network,
and foreign depositories ("foreign sub-custodians"). Each of
the domestic and foreign custodial institutions holding
portfolio securities has been approved by the Board of Trustees
in accordance with regulations under the Investment Company Act
of 1940.
Each Board of Trustees reviews, at least annually, whether
it is in the best interest of Institutional High Yield Fund,
High Yield Portfolio, and their shareholders to maintain assets
in each custodial institution. However, with respect to foreign
sub-custodians, there can be no assurance that it, and the value
of its shares, will not be adversely affected by acts of foreign
governments, financial or operational difficulties of the
foreign sub-custodians, difficulties and costs of obtaining
jurisdiction over, or enforcing judgments against, the foreign
sub-custodians, or application of foreign law to the foreign
sub-custodial arrangements. Accordingly, an investor should
recognize that the non-investment risks involved in holding
assets abroad are greater than those associated with investing
in the United States.
Institutional High Yield Fund and High Yield Portfolio may
invest in obligations of the custodian and may purchase or sell
securities from or to the custodian.
INDEPENDENT AUDITORS
The independent auditors for Institutional Trust and High
Yield Portfolio are Ernst & Young LLP, 233 South Wacker Drive,
Chicago, Illinois 60606. The independent auditors audit and
report on the annual financial statements, review certain
regulatory reports and the federal income tax returns, and
perform other professional accounting, auditing, tax and
advisory services when engaged to do so by the applicable Trust.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures contracts for High
Yield Portfolio. Purchases and sales of portfolio securities
are ordinarily transacted with the issuer or with a primary
market maker acting as principal or agent for the securities on
a net basis, with no brokerage commission being paid by High
Yield Portfolio. Transactions placed through dealers reflect
the spread between the bid and asked prices. Occasionally, High
Yield Portfolio may make purchases of underwritten issues at
prices that include underwriting discounts or selling
concessions.
The Adviser's overriding objective in effecting portfolio
transactions is to seek to obtain the best combination of price
and execution. The best net price, giving effect to transaction
charges, if any, and other costs, normally is an important
factor in this decision, but a number of other judgmental
factors may also enter into the decision. These include: the
Adviser's knowledge of current transaction costs; the nature of
the security being traded; the size of the transaction; the
desired timing of the trade; the activity existing and expected
in the market for the particular security; confidentiality; the
execution, clearance and settlement capabilities of the broker
or dealer selected and others that are considered; the Adviser's
knowledge of the financial stability of the broker or dealer
selected and such other brokers or dealers; and the Adviser's
knowledge of actual or apparent operational problems of any
broker or dealer. Recognizing the value of these factors, High
Yield Portfolio may incur a transaction charge in excess of that
which another broker or dealer may have charged for effecting
the same transaction. Evaluations of the reasonableness of the
costs of portfolio transactions, based on the foregoing factors,
are made on an ongoing basis by the Adviser's staff and reports
are made annually to the Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to
be capable of providing the best combination of price and
execution with respect to a particular portfolio transaction for
High Yield Portfolio, the Adviser often selects a broker or
dealer that has furnished it with research products or services
such as research reports, subscriptions to financial
publications and research compilations, compilations of
securities prices, earnings, dividends and similar data, and
computer databases, quotation equipment and services, research-
oriented computer software and services, and services of
economic and other consultants. Selection of brokers or dealers
is not made pursuant to an agreement or understanding with any
of the brokers or dealers; however, the Adviser uses an internal
allocation procedure to identify those brokers or dealers who
provide it with research products or services and the amount of
research products or services they provide, and endeavors to
direct sufficient commissions generated by its clients' accounts
in the aggregate, including High Yield Portfolio, to such
brokers or dealers to ensure the continued receipt of research
products or services the Adviser feels are useful. In certain
instances, the Adviser receives from brokers and dealers
products or services which are used both as investment research
and for administrative, marketing, or other non-research
purposes. In such instances, the Adviser makes a good faith
effort to determine the relative proportions of such products or
services which may be considered as investment research. The
portion of the costs of such products or services attributable
to research usage may be defrayed by the Adviser (without prior
agreement or understanding, as noted above) through brokerage
commissions generated by transactions of clients (including High
Yield Portfolio), while the portion of the costs attributable to
non-research usage of such products or services is paid by the
Adviser in cash. No person acting on behalf of High Yield
Portfolio is authorized, in recognition of the value of research
products or services, to pay a price in excess of that which
another broker or dealer might have charged for effecting the
same transaction. Research products or services furnished by
brokers and dealers through whom transactions are effected may
be used in servicing any or all of the clients of the Adviser
and not all such research products or services are used in
connection with the management of High Yield Portfolio.
The Board has reviewed the legal developments pertaining to
and the practicability of attempting to recapture underwriting
discounts or selling concessions when portfolio securities are
purchased in underwritten offerings. The Board has been advised
by counsel that recapture by a mutual fund currently is not
permitted under the Rules of Fair Practice of the National
Association of Securities Dealers ("NASD").
ADDITIONAL INCOME TAX CONSIDERATIONS
Institutional High Yield Fund and High Yield Portfolio
intend to comply with the special provisions of the Internal
Revenue Code that relieve it of federal income tax to the extent
of its net investment income and capital gains currently
distributed to shareholders.
Because capital gain distributions reduce net asset value,
if a shareholder purchases shares shortly before a record date,
he will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would
nonetheless be taxable to him, even if the net asset value of
shares were reduced below his cost. However, for federal income
tax purposes the shareholder's original cost would continue as
his tax basis.
Institutional High Yield Fund expects that none of its
dividends will qualify for the deduction for dividends received
by corporate shareholders.
INVESTMENT PERFORMANCE
Institutional High Yield Fund may quote yield figures from
time to time. "Yield" is computed by dividing the net
investment income per share earned during a 30-day period (using
the average number of shares entitled to receive dividends) by
the net asset value per share on the last day of the period.
The Yield formula provides for semiannual compounding which
assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.
For a given period, an "Average Annual Total Return" may be
computed by finding the average annual compounded rate that
would equate a hypothetical initial amount invested of $1,000 to
the ending redeemable value.
6
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1) -1].
Where: a = dividends and interest earned during the period
. (For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which
net asset value is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of Institutional High
Yield Fund for the period.
_____________________
Institutional High Yield Fund may quote total return
figures from time to time. A "Total Return" on a per share
basis is the amount of dividends received per share plus or
minus the change in the net asset value per share for a period.
A "Total Return Percentage" may be calculated by dividing the
value of a share at the end of a period (including reinvestment
of distributions) by the value of the share at the beginning of
the period and subtracting one.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must
pay on a current basis. They are not necessarily indicative of
future results. The performance of Institutional High Yield
Fund is a result of conditions in the securities markets,
portfolio management, and operating expenses. Although
investment performance information is useful in reviewing
Institutional High Yield Fund's performance and in providing
some basis for comparison with other investment alternatives, it
should not be used for comparison with other investments using
different reinvestment assumptions or time periods.
In advertising and sales literature, Institutional High
Yield Fund may compare its yield and performance with that of
other mutual funds, indexes or averages of other mutual funds,
indexes of related financial assets or data, and other competing
investment and deposit products available from or through other
financial institutions. The composition of these indexes or
averages differs from that of Institutional High Yield.
Comparison of Institutional High Yield Fund to an alternative
investment should be made with consideration of differences in
features and expected performance.
All of the indexes and averages noted below will be
obtained from the indicated sources or reporting services, which
Institutional Trust believes to be generally accurate.
Institutional High Yield Fund may also note its mention in
newspapers, magazines, or other media from time to time.
However, Institutional Trust assumes no responsibility for the
accuracy of such data. Newspapers and magazines that might
mention Institutional High Yield Fund include, but are not
limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Associated Press
Barron's
Bloomberg
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Decoder
Gourmet
Individual Investor
Investment Adviser
Investment Dealers' Digest
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
Institutional High Yield Fund may compare its performance
to the Consumer Price Index (All Urban), a widely-recognized
measure of inflation.
The performance of Institutional High Yield Fund may be
compared to the following as indicated below:
CS First Boston High Yield Index
ICD High Yield Index
Lehman High Yield Bond Index
Lehman High Yield Corporate Bond Index
Merrill Lynch High-Yield Master Index
Morningstar Corporate Bond (General) Average
Salomon Brothers Extended High Yield Market Index
Salomon Brothers High Yield Market Index
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. Institutional High
Yield Fund may also use comparative performance as computed in a
ranking by these services or category averages and rankings
provided by another independent service. Should these services
reclassify Institutional High Yield Fund to a different category
or develop (and place it into) a new category, it may compare
its performance or rank against other funds in the newly-
assigned category (or the average of such category) as published
by the service.
In advertising and sales literature, Institutional High
Yield Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's
rating system is based on risk-adjusted total return performance
and is expressed in a star-rating format. The risk-adjusted
number is computed by subtracting Institutional High Yield
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, Institutional High Yield Fund may use
historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson
constructs (or obtains) very long-term (since 1926) total return
data (including, for example, total return indexes, total return
percentages, average annual total returns and standard
deviations of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
____________________
Institutional High Yield Fund may also use hypothetical
returns to be used as an example in a mix of asset allocation
strategies. One such example is reflected in the chart below,
which shows the effect of tax deferral on a hypothetical
investment. This chart assumes that an investor invested $2,000
a year on January 1, for any specified period, in both a Tax-
Deferred Investment and a Taxable Investment, that both
investments earn either 6%, 8% or 10% compounded annually, and
that the investor withdrew the entire amount at the end of the
period. (A tax rate of 39.6% is applied annually to the Taxable
Investment and on the withdrawal of earnings on the Tax-Deferred
Investment.)
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 150,484 82,067 97,780 117,014
20 62,943 75,543 91,947 59,362 68,109 78,351
15 41,684 47,304 54,099 40,358 44,675 49,514
10 24,797 26,820 29,098 24,453 26,165 28,006
5 11,178 11,613 12,072 11,141 11,546 11,965
1 2,072 2,096 2,121 2,072 2,096 2,121
Average Life Calculations. From time to time,
Institutional High Yield Fund may quote an average life figure
for its portfolio. Average life is the weighted average period
over which the Adviser expects the principal to be paid, and
differs from stated maturity in that it estimates the effect of
expected principal prepayments and call provisions. With
respect to GNMA securities and other mortgage-backed securities,
average life is likely to be substantially less than the stated
maturity of the mortgages in the underlying pools. With respect
to obligations with call provisions, average life is typically
the next call date on which the obligation reasonably may be
expected to be called. Securities without prepayment or call
provisions generally have an average life equal to their stated
maturity.
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average
cost per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
<PAGE>
BALANCE SEET
Stein Roe Institutional High Yield Fund
Statement of Net Assets
December 12, 1996
Assets:
Cash $100,000
Unamortized organization costs 50,000
--------
Total Assets 150,000
========
Liabilities:
Payable to the Adviser for
organization costs incurred 50,000
Capital
Paid in Capital (net assets) 100,000
--------
Total Liabilities and Capital $150,000
========
Shares Outstanding (Unlimited number
authorized) 10,000
========
Net Asset Value (Capital) Per Share $ 10.00
========
NOTES TO STATEMENT OF NET ASSETS
Note 1. Organization:
Stein Roe Institutional High Yield Fund (the "Fund") is a
separate series of the Stein Roe Institutional Trust (the
"Trust"), an open-end diversified management investment
company organized as a Massachusetts business trust. The
Fund will invest all of its net investable assets in SR&F
High Yield Portfolio (the "Portfolio"), a separate series of
the SR&F Base Trust. The Fund is inactive except for matters
relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940,
and the sale of 10,000 shares of the Fund for $100,000 to
Stein Roe & Farnham Incorporated (the "Adviser"), an indirect
wholly owned subsidiary of Liberty Financial Companies, Inc.
Organization costs will be amortized on a straight-line basis
against income over various periods of up to sixty months
from the commencement of public offering by the Fund,
depending on the nature of the individual costs.
Note 2. Transactions with Affiliates:
Upon commencement of investment operations, the Adviser will
receive a management fee from the Portfolio computed and
accrued daily, at an annual rate of 0.500% of the first $500
million of daily net assets and 0.475% thereafter. The
Adviser will also receive an administrative fee from the
Fund, computed and accrued daily, at an annual rate of 0.150%
of the first $500 million of daily net assets and 0.125%
thereafter.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees
Stein Roe Institutional Trust
We have audited the accompanying statement of net assets of
Stein Roe Institutional High Yield Fund, a series of Stein
Roe Institutional Trust, as of December 12, 1996. This
statement of net assets is the responsibility of the Fund's
management. Our responsibility is to express an opinion on
this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
statement of net assets. An audit also includes assessing
the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of
net assets presentation. We believe that our audit of the
statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above
presents fairly, in all material respects, the financial
position of Stein Roe Institutional High Yield Fund at
December 12, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 12, 1996
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. Financial statements included in Part A of this
Registration Statement: None.
2. Financial statements included in Part B of this Registration
Statement:
(a) Balance sheet as of December 12 1996.
(b) Report of independent auditors.
(b) Exhibits:
1. Agreement and Declaration of Trust. (Incorporated by
reference to Exhibit 1 to Registrant's Registration
Statement on Form N-1A, No. 333-13331.)
2. By-Laws of Registrant as amended on October 30, 1997.
3. None.
4. None.
5. None.
6. Form of underwriting agreement between Registrant and
Liberty Securities Corporation.
7. None.
8. Form of custodian contract between Registrant and State
Street Bank and Trust Company.
9. (a) Form of transfer agency agreement between Registrant
and Stein Roe Services Inc.
(b) Administrative agreement between Registrant and Stein
Roe & Farnham Incorporated dated December 12, 1996.
(c) Accounting and bookkeeping agreement between Regis-
trant and Stein Roe & Farnham Incorporated dated
December 12, 1996..
10. Opinion and consent of Bell, Boyd & Lloyd.
11. Consent of Ernst & Young LLP.
12. None.
13. Subscription agreement.
14. None.
15. None.
16. Inapplicable.
17. Inapplicable.
18. Inapplicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlling, controlled by, or under common control with other
persons within the meaning of this Item. See "Investment Advisory
Services," "Management," and "Transfer Agent" in the Statement of
Additional Information, each of which is incorporated herein by
reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
Title of Series as of December 12, 1996
--------------- -----------------------
Stein Roe Institutional High Yield Fund 1
ITEM 27. INDEMNIFICATION.
Article VIII of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including persons who serve or
have served at Registrant's request as directors, officers, or
trustees of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act")
provides that neither the Agreement and Declaration of Trust nor
the By-Laws of Registrant, nor any other instrument pursuant to
which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section 17(h) of the 1940 Act, Article VIII shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article VIII does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable to the Registrant or its shareholders
by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office, indemnification is permitted under Article VIII if (a)
approved as in the best interest of the Registrant, after notice
that it involves such indemnification, by at least a majority of
the Trustees who are disinterested persons are not "interested
persons" as defined in Section 2(a)(19) of the 1940 Act
("disinterested trustees"), upon determination, based upon a review
of readily available facts (but not a full trial-type inquiry) that
such Covered Person is not liable to the Registrant or its
shareholders by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office or (b) there has been
obtained a opinion in writing of independent legal counsel, based
upon a review of readily available facts (but not a full trial-type
inquiry) to the effect that such indemnification would not protect
such Covered Person against any liability to the Trust to which
such Covered Person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; and
(iii) Registrant will not advance expenses, including counsel
fees(but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), incurred by a Covered Person
unless Registrant receives an undertaking by or on behalf of the
Covered Person to repay the advance if it is ultimately determined
that indemnification of such expenses is not authorized by Article
VII and (a) the Covered Person provides security for his
undertaking, or (b) Registrant is insured against losses arising by
reason of such Covered Person's failure to fulfill his undertaking,
or (c) a majority of the disinterested trustees of Registrant or an
independent legal counsel as expressed in a written opinion,
determine, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that
the Covered Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article VIII does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article VIII as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction to have been liable to the
Trust or its shareholders by reason of wilful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Article VIII also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser, and persons
affiliated with them are insured against certain expenses in
connection with the defense of actions, suits, or proceedings, and
certain liabilities that might be imposed as a result of such
actions, suits, or proceedings. Registrant will not pay any
portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of wilful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Registrant expects to enter into an indemnification agreement among
Registrant, its transfer agent and its investment adviser pursuant
to which Registrant, its trustees, officers and employees, its
transfer agent and the transfer agent's directors, officers and
employees are indemnified by Registrant's investment adviser
against any and all losses, liabilities, damages, claims and
expenses arising out of any act or omission of Registrant or its
transfer agent performed in conformity with a request of the
investment adviser that the transfer agent and Registrant deviate
from their normal procedures in connection with the issue,
redemption or transfer of shares for a client of the investment
adviser.
Registrant, its trustees, officers, employees and representatives
and each person, if any, who controls the Registrant within the
meaning of Section 15 of the Securities Act of 1933 are
indemnified by the distributor of Registrant's shares (the
"distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of wilful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly-owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary of
LFC Holdings, Inc., which in turn is a subsidiary of Liberty Mutual
Equity Corporation, which in turn is a subsidiary of Liberty Mutual
Insurance Company. The Adviser acts as investment adviser to
individuals, trustees, pension and profit-sharing plans, charitable
organizations, and other investors. In addition to Registrant, it
also acts as investment adviser to other investment companies
having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
Stein Roe Investment Trust, Stein Roe Municipal Trust, SR&F Base
Trust, Stein Roe Income Trust, Stein Roe Advisor Trust,
Stein Roe Trust, SteinRoe Variable Investment Trust and LFC Utilities
Trust, investment companies managed by the Adviser. (The listed
entities are located at One South Wacker Drive, Chicago, Illinois
60606, except for SteinRoe Variable Investment Trust, which is
located at Federal Reserve Plaza, Boston, MA 02210 and LFC Utilities
Trust, which is located at One Financial Center, Boston, MA 02111.)
A list of such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Hans P. Ziegler Director, President, Vice Chairman
Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
Michael T. Kennedy Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Alfred F. Kugel Trustee
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary Vice-President
Thomas W. Butch Vice-President
Joanne T. Costopoulos Vice-President
Philip J. Crosley Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE TRUST and STEIN ROE ADVISOR TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INSTITUTIONAL TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Securities
Corporation, is a wholly owned subsidiary of Liberty Investment
Services, Inc., a wholly owned subsidiary of Liberty Financial
Services, Inc. which, in turn, is a wholly owned subsidiary of
Liberty Financial Companies, Inc. Liberty Financial Companies,
Inc. is a public corporation whose majority shareholder is LFC
Holdings, Inc., a wholly owned subsidiary of Liberty Mutual Equity
Corporation. Liberty Mutual Equity Corporation is a wholly owned
subsidiary of Liberty Mutual Insurance Company.
Liberty Securities Corporation is principal underwriter for the
following investment companies:
Stein Roe Income Trust
Stein Roe Municipal Trust
Stein Roe Investment Trust
Stein Roe Institutional Trust
Stein Roe Advisor Trust
Set forth below is information concerning the directors and
officers of Liberty Securities Corporation:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------------------ -------------------- ---------------
Porter P. Morgan Chairman of the Board; Director None
Frank L. Tarantino President; Chief Operating
Officer; Director None
Robert L. Spadafora Executive Vice President -
Sales and Marketing None
John T. Treece, Jr. Senior Vice President - Operations None
John W. Reading Senior Vice President and
Assistant Secretary None
Valerie A. Arendell Senior Vice President - Sales None
Gerald H. Stanney, Vice President and Compliance
Jr. Officer (Boston) None
Jilaine Hummel Bauer Vice President and Compliance Exec. V-P &
Officer (Chicago) Secretary
Timothy K. Armour Vice President President,
Trustee
Lindsay Cook Vice President Trustee
Ralph E. Nixon Vice President None
Glenn E. Williams Assistant Vice President None
Philip J. Iudice Treasurer None
John A. Benning Secretary None
John A. Davenport Assistant Secretary None
C. Allen Merritt, Jr. Assistant Treasurer; Assistant
Secretary; Director None
The principal business address of Mr. Armour and Ms. Bauer is One
South Wacker Drive, Chicago, IL 60606; that of Mr. Williams is Two
Righter Parkway, Wilmington, DE 19803; and that of the other
officers is 600 Atlantic Avenue, Boston, MA 02210-2214.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Jilaine Hummel Bauer
Executive Vice-President and Secretary
One South Wacker Drive
Chicago, Illinois 60606
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to file a post-effective amendment
using financial statements, which need not be certified, within
four to six months from the effective date of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this 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 16th day of
December, 1996.
STEIN ROE INSTITUTIONAL TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- ------------------
TIMOTHY K. ARMOUR President and Trustee December 16, 1996
Timothy K. Armour
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President December 16, 1996
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller December 16, 1996
Sharon R. Robertson
Principal Accounting Officer
KENNETH L. BLOCK Trustee December 16, 1996
Kenneth L. Block
WILLIAM W. BOYD Trustee December 16, 1996
William W. Boyd
LINDSAY COOK Trustee December 16, 1996
Lindsay Cook
DOUGLAS A. HACKER Trustee December 16, 1996
Douglas A. Hacker
FRANCIS W. MORLEY Trustee December 16, 1996
Francis W. Morley
CHARLES R. NELSON Trustee December 16, 1996
Charles R. Nelson
THOMAS C. THEOBALD Trustee December 16, 1996
Thomas C. Theobald
GORDON R. WORLEY Trustee December 16, 1996
Gordon R. Worley
*This Registration Statement has also been signed by the above
persons in their capacities as trustees and officers of SR&F Base
Trust
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
INDEX TO EXHIBITS FILED WITH THIS REGISTRATION STATEMENT
Exhibit
Number Description
- ------- -------------
2 By-Laws of Registrant
6 Underwriting agreement
8 Custodian contract
9(a) Transfer agency agreement
(b) Administrative agreement
(c) Accounting and bookkeeping agreement
10 Opinion and consent of Bell, Boyd & Lloyd
11 Consent of Ernst & Young LLP
13 Subscription agreement
EXHIBIT 2
STEIN ROE INSTITUTIONAL TRUST
BY-LAWS
<PAGE>
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL.............................1
Section 1.01. Agreement and Declaration of Trust........1
Section 1.02. Principal Office..........................1
Section 1.03. Seal......................................1
ARTICLE II. BOARD OF TRUSTEES...............................1
Section 2.01. Number and Term of Office.................1
Section 2.02. Power to Declare Dividends................1
Section 2.03. Annual and Regular Meetings...............2
Section 2.04. Special Meetings..........................3
Section 2.05. Notice....................................3
Section 2.06. Waiver of Notice..........................3
Section 2.07. Quorum and Voting.........................3
Section 2.08. Action Without a Meeting..................3
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES.......3
Section 3.01. How Constituted...........................3
Section 3.02. Powers of the Executive Committee.........4
Section 3.03. Other Committees of the Board of Trustees.4
Section 3.04. Proceedings, Quorum and Manner of Acting..4
Section 3.05. Other Committees..........................4
Section 3.06. Action Without a Meeting..................4
Section 3.07. Waiver of Notice..........................4
ARTICLE IV. OFFICERS........................................5
Section 4.01. General...................................5
Section 4.02. Election, Term of Office and
Qualifications.........................5
Section 4.03. Resignation...............................5
Section 4.04. Removal...................................5
Section 4.05. Vacancies and Newly Created Offices.......5
Section 4.06. Chairman of the Board.....................6
Section 4.07. President.................................6
Section 4.08. Executive Vice-Presidents and Vice-
Presidents.............................6
Section 4.09. Senior Vice-President.....................6
Section 4.10. Treasurer and Assistant Treasurers........6
Section 4.11. Secretary and Assistant Secretaries.......7
Section 4.12. Controller and Assistant Controllers......7
Section 4.13. Subordinate Officers......................7
Section 4.14. Remuneration..............................7
Section 4.15. Surety Bonds..............................7
ARTICLE V. CUSTODY OF SECURITIES............................8
Section 5.01. Employment of a Custodian.................8
Section 5.02. Provisions of Custodian Contract..........8
Section 5.03. Action upon Termination of Custodian
Contract................................9
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS SECURITY
HOLDER........................................9
Section 6.01. General...................................9
Section 6.02. Checks, Notes, Drafts, Etc................9
Section 6.03. Rights as Security Holder................10
ARTICLE VII. SHARES OF BENEFICIAL INTEREST.................10
Section 7.01. Certificates.............................10
Section 7.02. Uncertificated Shares....................10
Section 7.03. Transfers of Shares......................10
Section 7.04. Registered Shareholders..................11
Section 7.05. Transfer Agents and Registrars...........11
Section 7.06. Fixing of Record Date....................11
Section 7.07. Lost, Stolen, or Destroyed Certificates..11
Section 7.08. Resumption of Issuance of Certificates/
Cancellation of Certificates............12
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT......................12
Section 8.01. Fiscal Year..............................12
Section 8.02. Accountants..............................12
ARTICLE IX. AMENDMENTS.....................................12
Section 9.01. General..................................12
Section 9.02. By Shareholders Only.....................12
ARTICLE X. MISCELLANEOUS...................................13
Section 10.01. Restrictions and Limitations............13
<PAGE> 1
STEIN ROE INSTITUTIONAL TRUST
BY-LAWS
(By-Laws Adopted by Board of Trustees on July 31, 1996
as amended and restated on October 30, 1996)
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST, LOCATION OF
OFFICES AND SEAL
Section 1.01. Agreement and Declaration of Trust.
These By-Laws shall be subject to the Agreement and
Declaration of Trust as now in effect or hereinafter amended
("Declaration of Trust") of Stein Roe Institutional Trust, a
Massachusetts business trust established by the Declaration
of Trust (the "Trust").
Section 1.02. Principal Office. A principal office of
the Trust shall be located in Boston, Massachusetts. The
Trust may also maintain a principal office in the City of
Chicago, State of Illinois. The Trust may, in addition,
establish and maintain such other offices and places of
business as the Board of Trustees may from time to time
determine.
Section 1.03. Seal. The seal of the Trust shall be
circular in form and shall bear the name of the Trust, the
word "Massachusetts," and the year of its organization. The
form of the seal shall be subject to alteration by the Board
of Trustees and the seal may be used by causing it or a
facsimile to be impressed or affixed or printed or otherwise
reproduced. Any officer or Trustee of the Trust shall have
authority to affix the seal of the Trust to any document
requiring the same. Unless otherwise required by the Board
of Trustees, the seal shall not be necessary to be placed on,
and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by
or on behalf of the Trust.
ARTICLE II. BOARD OF TRUSTEES
Section 2.01. Number and Term of Office. The Board of
Trustees shall initially consist of the initial sole Trustee,
which number may be increased or subsequently decreased by a
resolution of a majority of the entire Board of Trustees,
provided that the number of Trustees shall not be less than
one nor more than twenty-one, except that subsequent to any
sale of Shares pursuant to a public offering, there shall not
be less than three Trustees. Each Trustee (whenever
selected) shall hold office until the next meeting of
shareholders called for the purposes of electing Trustees and
until his successor is elected and qualified or until his
earlier death, resignation, or removal. Each Trustee shall
retire on December 31 of the year during which the Trustee
becomes age 72, provided, however, that any Trustee age 70 or
older on February 3, 1993, shall retire on December 31 of the
year during which the Trustee becomes age 77.
Section 2.02. Power to Declare Dividends.
(a) The Board of Trustees, from time to time as it may
deem advisable, may declare and pay dividends to the
shareholders of any series of the Trust in cash or other
property of that series, out of any source available to that
series for
<PAGE>
dividends, according to the respective rights and interests
of shareholders of that series and in accordance with the
applicable provisions of the Declaration of Trust.
(b) The Board of Trustees may prescribe from time to
time that dividends declared on shares of a series may be
payable at the election of any of the shareholders of that
series (exercisable before the declaration of the dividend),
either in cash or in shares of that series; provided that the
net asset value of the shares received by a shareholder
electing to receive dividends in shares (determined as of
such time as the Board of Trustees shall have prescribed in
accordance with the Declaration of Trust) shall not exceed
the full amount of cash to which the shareholder would be
entitled if he elected to receive cash.
(c) The Board of Trustees shall cause any dividend
payment to shareholders of a series to be accompanied by a
written statement if wholly or partly from any source other
than:
(i) such series' accumulated undistributed net income
[determined in accordance with generally accepted
accounting principles and the rules and
regulations then in effect of the Securities and
Exchange Commission or any other governmental
body having similar jurisdiction over the Trust
(the "SEC")] and not including profits or losses
realized upon the sale of securities or other
properties of the series; or
(ii) the series' net income so determined for the
current or preceding fiscal year.
Such statement shall adequately disclose the source or
sources of such payment and the basis of calculation and
shall be in such form as the SEC may prescribe.
Section 2.03. Annual and Regular Meetings. Annual and
regular meetings of the Board of Trustees may be held without
call or notice and at such places at such times as the Board
of Trustees may from time to time determine provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. Members of
the Board of Trustees or any committee designated thereby may
participate in a meeting of such Board or committee by means
of a conference telephone or other communications equipment,
by means of which all persons participating in the meeting
can hear each other at the same time. Participation by such
means shall constitute presence in person at a meeting;
provided, however, that the Board of Trustees shall not enter
into, renew, or perform any contract or agreement, written or
oral, whereby a person undertakes regularly to serve or act
as investment adviser with respect to any series of the Trust
unless the terms of such contract or agreement and any
renewal thereof have been approved by the vote of a majority
of Trustees who are not parties to such contract or agreement
or interested persons of any such party, which votes shall be
cast at a meeting called for the purpose of voting on such
approval at which such persons are physically present.
<PAGE>
Section 2.04. Special Meetings. Special meetings of
the Board of Trustees shall be held whenever called and at
such place and time determined by the President, Executive
Vice-President or Secretary (or, in the absence or disability
of the President, Executive Vice-President and Secretary, by
any Vice-President), or a majority of the Trustees then in
office, at the time and place specified in the respective
notices or waivers of notice of such meetings.
Section 2.05. Notice. If notice of a meeting of the
Board of Trustees is required or desired to be given, notice
stating the time and place shall be mailed to each Trustee at
his residence or regular place of business at least five days
before the day on which the meeting is to be held or caused
to be delivered to him personally or to be transmitted to him
by telephone, telegraph, cable, or wireless at least one day
before the meeting.
Section 2.06. Waiver of Notice. No notice required or
desired to be given of any meeting need be given to any
Trustee who attends such meeting in person or to any Trustee
who waives notice of such meeting in writing (which waiver
shall be filed with records of such meeting), whether before
or after the time of the meeting.
Section 2.07. Quorum and Voting. At all meetings of
the Board of Trustees, the presence of one-third of the
number of Trustees then in office shall constitute a quorum
for the transaction of business; provided, however, a quorum
shall not be less than the lesser of two Trustees or 100% of
all Trustees then in office. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting
without further notice, from time to time, until a quorum
shall be present. The action of a majority of the Trustees
present at a meeting at which a quorum is present shall be
the action of the Board of Trustees, unless the concurrence
of a greater proportion is required for such action by law,
by the Declaration of Trust, or by these By- Laws.
Section 2.08. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board
of Trustees may be taken without a meeting, if written
consents thereto are signed by a majority of the members of
the Board, unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees.
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. By resolution adopted
by the Board of Trustees, the Board may designate one or more
committees, including an Executive Committee, each of which
shall consist of at least two Trustees. Each member of a
committee shall be a Trustee and shall hold office during the
pleasure of the Board.
<PAGE>
Section 3.02. Powers of the Executive Committee.
Unless otherwise provided by resolution of the Board of
Trustees, the Executive Committee shall have and may exercise
all powers of the Board of Trustees in the management of the
business and affairs of the Trust that may lawfully be
exercised by an executive committee, except the power to
recommend to shareholders any matter requiring shareholder
approval, amend the Declaration of Trust or By-Laws, or
approve any merger or share exchange that does not require
shareholder approval.
Section 3.03. Other Committees of the Board of
Trustees. To the extent provided by resolution of the Board,
other committees of the Board shall have and may exercise any
of the powers that may lawfully be granted to the Executive
Committee.
Section 3.04. Proceedings, Quorum and Manner of Acting.
In the absence of appropriate resolution of the Board of
Trustees, each committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting as it
shall deem proper and desirable, provided that the quorum
shall not be less than two Trustees except that, in the case
of a committee (other than the Executive Committee)
consisting of two Trustees, one Trustee shall constitute a
quorum unless the Board by resolution specifies that a quorum
for that committee shall consist of two Trustees. In the
absence of any member of any such committee, the members
thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of
Trustees to act in the place of such absent member.
Section 3.05. Other Committees. The Board of Trustees
may appoint other committees, each consisting of one or more
persons, who need not be Trustees. Each such committee shall
have such powers and perform such duties as may be assigned
to it from time to time by the Board of Trustees, but shall
not exercise any power which may lawfully be exercised only
by the Board of Trustees or a committee thereof.
Section 3.06. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of any
committee may be taken without a meeting, if written consents
thereto are signed by a majority of the members of the
committee unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees or
of the committee.
Section 3.07. Waiver of Notice. Whenever any notice of
the time, place or purpose of any meeting of any committee is
required to be given under the provisions of any applicable
law or under the provisions of the Declaration of Trust or
these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the
records of the meeting, whether before or after the holding
of such meeting, or actual attendance at the meeting in
person, shall be deemed equivalent to the giving of such
notice to such persons.
<PAGE>
ARTICLE IV. OFFICERS
Section 4.01. General. The officers of the Trust shall
be a President, a Secretary, a Senior Vice-President, a
Treasurer and a Controller, and may include one or more
Executive Vice-Presidents, Vice-Presidents, Assistant
Secretaries, Assistant Treasurers or Assistant Controllers
and such other officers as may be appointed in accordance
with the provisions of Section 4.13 hereof. The Board of
Trustees may elect, but shall not be required to elect, a
Chairman of the Board.
Section 4.02. Election, Term of Office and
Qualifications. The officers of the Trust (except those
appointed pursuant to Section 4.13 hereof) shall be chosen by
the Board of Trustees at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting
and thereafter annually. If any officers are not chosen at
any annual meeting, such officers may be chosen at any
subsequent regular or special meeting of the Board. Except
as provided in Sections 4.03, 4.04 and 4.05 hereof, each
officer chosen by the Board of Trustees shall hold office
until the next annual meeting of the Board of Trustees and
until his successor shall have been chosen and qualified or
until his earlier death. Any person may hold one or more
offices of the Trust except the offices of President and
Vice-President, but no officer shall execute, acknowledge, or
verify an instrument in more than one capacity, if such
instrument is required by law, by the Declaration of Trust,
or by these By-Laws to be executed, acknowledged or verified
by two or more officers. The Chairman of the Board, if any,
shall be chosen from among the Trustees of the Trust and may
hold such office only so long as he continues to be a
Trustee. No other officer need be a Trustee.
Section 4.03. Resignation. Any officer may resign his
office at any time by delivering a written resignation to the
Board of Trustees, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 4.04. Removal. Any officer may be removed from
office, whenever in the Board's judgment the best interest of
the Trust will be served thereby, by the vote of a majority
of the Board of Trustees given at any regular or special
meeting. In addition, any officer or agent appointed in
accordance with the provisions of Section 4.13 hereof may be
removed, either with or without cause, by any officer upon
whom such power of removal shall have been conferred by the
Board of Trustees.
Section 4.05. Vacancies and Newly Created Offices. If
any vacancy shall occur in any office by reason of death,
resignation, removal, disqualification, or other cause, or if
any new office shall be created, such vacancy or newly
created office may be filled by the Board of Trustees at any
regular or special meeting or, in the case of any office
created pursuant to Section 4.13 hereof, by any officer upon
whom such power shall have been conferred by the Board of
Trustees. An officer chosen by the Board of Trustees to fill
a vacancy or a newly created office shall serve until the
next annual meeting of the Board of Trustees and until his
<PAGE>
successor shall have been chosen and qualified or until his
earlier death, resignation or removal.
Section 4.06. Chairman of the Board. In the absence or
disability of the President, the Chairman of the Board, if
there be such an officer, shall preside at all shareholders'
meetings and at all meetings of the Board of Trustees. He
shall have such other powers and perform such other duties as
may be assigned to him from time to time by the Board of
Trustees.
Section 4.07. President. The President shall be the
chief executive officer and shall preside at all
shareholders' meetings and at all meetings of the Board of
Trustees. Subject to the supervision of the Board of
Trustees, he shall have the general charge of the business,
affairs and property of the Trust and general supervision
over its other officers, employees and agents.
Section 4.08. Executive Vice-Presidents and Vice-
Presidents. The Board of Trustees may from time to time
elect one or more Executive Vice-Presidents and one or more
Vice-Presidents, who shall have such powers and perform such
duties as from time to time may be assigned to them by the
Board of Trustees or the President. At the request of the
President, the Executive Vice-President, and if no Executive
Vice-President is present or able, the Vice-President may
perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. If there are two or more
Executive Vice-Presidents or Vice-Presidents, the earliest
elected to the more senior office present and able shall
perform the duties of the President in his absence or
disability.
Section 4.09. Senior Vice-President. The Senior Vice-
President shall be the principal financial officer of the
Trust and shall have general charge of the finances and books
of account of the Trust. Except as otherwise provided by the
Board of Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the
Custodian of its duties with respect thereto. He shall
render to the Board of Trustees, whenever directed by the
Board, an account of the financial condition of the Trust and
of all his transactions as Senior Vice-President; and as soon
as possible after the close of each fiscal year he shall make
and submit to the Board of Trustees a like report for such
fiscal year. He shall perform all the acts incidental to the
office of Senior Vice-President, subject to the control of
the Board of Trustees. At the request of any Executive Vice-
President, or if no Executive Vice-President is present or
able, the Senior Vice-President may perform all of the duties
of the Executive Vice-President (except to the extent that
such duties have otherwise been delegated by or pursuant to
these By-Laws) and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the Executive
Vice-President.
Section 4.10. Treasurer and Assistant Treasurers. The
Treasurer and any Assistant Treasurer may perform such duties
of the Senior Vice-President as the Senior Vice-President or
the Board of Trustees may assign, and, in the absence of
<PAGE>
the Senior Vice-President, may perform all the duties of the
Senior Vice-President.
Section 4.11. Secretary and Assistant Secretaries. The
Secretary shall attend to the giving and serving of all
notices of the Trust and shall record all proceedings of the
meetings of the shareholders, Trustees, the Executive
Committee and other committees, in a book to be kept for that
purpose. He shall keep in safe custody the seal of the
Trust, and shall have charge of the records of the Trust,
including the share books and such other books and papers as
the Board of Trustees may direct and such books, reports,
certificates and other documents required by law to be kept,
all of which shall, at all reasonable times, be open to
inspection by any Trustee. He shall perform all the acts
incidental to the office of Secretary, subject to the control
of the Board of Trustees.
Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Trustees may
assign, and, in the absence of the Secretary, he may perform
all the duties of the Secretary.
Section 4.12. Controller and Assistant Controllers.
The Controller shall be the chief accounting officer of the
Trust. He shall direct the preparation and maintenance, on a
current basis, of such accounting books, records and reports
as may be necessary to permit the directors, officers and
executives of the Trust or as may be required by law. He
shall perform all the acts incidental to the office of
Controller, subject to the control of the Board of Trustees,
the Executive Vice-President or the Senior Vice-President.
Any Assistant Controller may perform such duties of the
Controller as the Controller or the Board of Trustees may
assign, of the Controller.
Section 4.13. Subordinate Officers. The Board of
Trustees from time to time may appoint such other officers or
agents as it may deem advisable, each of whom shall have such
title, hold office for such period, have such authority and
perform such duties as the Board of Trustees may determine.
The Board of Trustees from time to time may delegate to one
or more officers or agents the power to appoint any such
subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 4.14. Remuneration. The salaries, if any, or
other compensation of the officers of the Trust shall be
fixed from time to time by resolution of the Board of
Trustees, except that the Board of Trustees may by resolution
delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate
officers or agents appointed in accordance with the
provisions of Section 4.13 hereof.
Section 4.15. Surety Bonds. The Board of Trustees may
require any officer or agent of the Trust to execute a bond
to the Trust [including, without limitation, any bond
required by the Investment Company Act of 1940, or any rule
or regulation thereunder, all as now in effect or as
hereafter amended or added (the
<PAGE>
"1940 Act") and the rules and regulations of the SEC] in such
sum and with such surety or sureties as the Board of Trustees
may determine, conditioned upon the faithful performance of
his duties to the Trust, including responsibility for
negligence and for the accounting of any of the Trust's
property, funds, or securities that may come into his hands.
ARTICLE V. CUSTODY OF SECURITIES
Section 5.01. Employment of a Custodian. The Trust
shall place and at all times maintain in the custody of a
Custodian (including any sub-custodian for the Custodian) all
securities owned by the Trust and cash representing the
proceeds from sales of securities owned by the Trust and of
capital stock or other units of beneficial interest issued to
the Trust, payments of principal upon securities owned by the
Trust, or capital distribution in respect to capital stock or
other units of beneficial interest owned by the Trust,
pursuant to a written contract with such Custodian. The
Custodian shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided
profits (as shown in its last published report).
Section 5.02. Provisions of Custodian Contract. The
Custodian contract shall be upon such terms and conditions
and may provide for such compensation as the Board of
Trustees deems necessary or appropriate, provided such
contract shall further provide that the Custodian shall
deliver securities owned by the Trust only upon sale of such
securities for the account of the Trust and receipt of
payment therefor by the Custodian or when such securities may
be called, redeemed, retired, or otherwise become payable.
Such limitations shall not prevent:
(a) the delivery of securities for examination to the
broker selling the same in accord with the "street delivery"
custom whereby such securities are delivered to such broker
in exchange for a delivery receipt exchanged on the same day
for an uncertified check of such broker to be presented on
the same day for certification;
(b) the delivery of securities of an issuer in exchange
for or for conversion into other securities alone or cash and
other securities, pursuant to any plan of merger,
consolidation, reorganization, recapitalization, or
readjustment of the securities of such issuer;
(c) the conversion by the Custodian of securities owned
by the Trust, pursuant to the provisions of such securities,
into other securities;
(d) the surrender by the Custodian of warrants, rights,
or similar securities owned by the Trust in the exercise of
such warrants, rights, or similar securities, or the
surrender of interim receipts or temporary securities for
definitive securities;
<PAGE>
(e) the delivery of securities as collateral on
borrowing effected by the Trust; or
(f) the delivery of securities owned by the Trust as a
redemption in kind of securities issued by the Trust.
The Custodian shall deliver funds of the Trust for the
purchase of securities for the portfolio of the Trust only
upon the delivery of such securities to the Custodian, but
such limitation shall not prevent the release of funds by the
Custodian for redemption of shares issued by the Trust, for
payment of interest, dividend disbursements, taxes or
management fees, for payments in connection with the
conversion, exchange or surrender of securities owned by the
Trust as set forth in subparagraphs (b), (c) and (d) above or
for operating expenses of the Trust.
The term "security" shall be broadly construed and shall
include, without limitation, the various types of securities
set forth in Section 3(a)(10) of the Securities Exchange Act
of 1934.
Section 5.03. Action upon Termination of Custodian
Contract. The contract of employment of the Custodian may be
terminated by either party on 60 days' written notice to the
other party. Upon termination of the Custodian contract,
resignation of the Custodian, or inability of the Custodian
to continue to serve, the Board of Trustees shall use its
best efforts to obtain a successor custodian. If a successor
custodian is found, the Trust shall require the retiring
Custodian to deliver the cash and securities owned by the
Trust directly to the successor custodian. In the event that
no successor custodian which has the required qualifications
and is willing to serve can be found, the Board of Trustees
shall call a special meeting of the shareholders to submit to
the shareholders, before delivery of the cash and securities
owned by the Trust to other than a successor custodian, the
question of whether the Trust shall function without a
custodian or shall be liquidated.
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS
SECURITY HOLDER
Section 6.01. General. All deeds, documents,
transfers, contracts, agreements and other instruments
requiring execution by the Trust shall be signed by the
President, the Executive Vice-President, the Senior Vice-
President, the Controller, the Secretary, or the Treasurer,
or as the Board of Trustees may otherwise, from time to time,
authorize. Any such authorization may be general or confined
to specific instances.
Section 6.02. Checks, Notes, Drafts, Etc. Except as
otherwise authorized by the Board of Trustees, all checks and
drafts for the payment of money shall be signed in the name
of the Trust by the Custodian, and all requisitions or orders
for the payment of money by the Custodian or for the issue of
checks and drafts therefor, all promissory notes, all
assignments of shares or securities standing in
<PAGE>
the name of the Trust and all requisitions or orders for the
assignment of shares or securities standing in the name of
the Custodian or its nominee, or for the execution of powers
to transfer the same, shall be signed in the name of the
Trust by not less than two of its officers. Promissory
notes, checks, or drafts payable to the Trust may be endorsed
only to the order of the Custodian or its agent.
Section 6.03. Rights as Security Holder. Unless
otherwise ordered by the Board of Trustees, any officer shall
have full power and authority on behalf of the Trust to (1)
exercise (or waive) any and all rights, powers and privileges
incident to the ownership of any securities or other
obligations which may be owned by the Trust; and (2) attend
and to act and to vote, or in the name of the Trust to
execute proxies to vote, at any meeting of security holders
of any company in which the Trust may hold securities. At
any such meeting, any officer shall possess and may exercise
(in person or by proxy) any and all rights, powers and
privileges incident to the ownership of such securities.
ARTICLE VII. SHARES OF BENEFICIAL INTEREST
Section 7.01. Certificates. The Trust shall not issue
share certificates unless the Trustees so authorize. In the
event that certificates are issued, each certificate will be
valid if signed by the President or a Vice-President and
countersigned by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer and sealed with the
seal. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other
form of seal. In case any officer who has signed any
certificate ceases to be an officer of the Trust before the
certificate was issued, the certificate nevertheless has the
same effect as if the officer had not ceased to be such
officer as of the date of its issue.
Section 7.02. Uncertificated Shares. The Trust's share
ledger shall be deemed to represent and certify the number of
full and/or fractional shares of a series owned of record by
a shareholder in those instances where a certificate for such
shares has not been issued.
Section 7.03. Transfers of Shares. Shares of any
series of the Trust shall be transferable on the books of the
Trust at the request of the record holder thereof in person
or by a duly authorized attorney, upon presentation to the
Trust or its transfer agent of a duly executed assignment or
authority to transfer, or proper evidence of succession, and,
if the shares are represented by a certificate, a duly
endorsed certificate or certificates of shares surrendered
for cancellation, and with such proof of the authenticity of
the signatures as the Trust or its transfer agent may
reasonably require, provided, whether or not such shares are
represented by any certificate or certificates of shares,
that:
(a) the Trust has no duty to inquire into adverse claims
or has discharged any such duty;
(b) any applicable law relating to the collection of
taxes has been complied with; and
<PAGE>
(c) the transfer is in fact rightful or is to a bona
fide purchaser.
The transfer shall be recorded on the books of the Trust
and the old certificates, if any, shall be cancelled.
Section 7.04. Registered Shareholders. The Trust shall
be entitled to treat the holder of record of shares of each
series as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Commonwealth of
Massachusetts.
Section 7.05. Transfer Agents and Registrars. The
Board of Trustees may, from time to time, appoint or remove
transfer agents and/or registrars of transfers of shares of
the Trust, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment
being made, all certificates representing shares thereafter
issued shall be countersigned by one of such transfer agents
or by one of such registrars of transfers or by both and
shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
Section 7.06. Fixing of Record Date. The Board of
Trustees may fix in advance a date as a record date for the
determination of the shareholders of any series entitled to
notice of or to vote at any meeting of such shareholders or
any adjournment thereof, or to express consent to Trust
action in writing without a meeting, or to receive payment of
any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change,
conversion, or exchange of shares of such series, or for the
purpose of any other lawful action, provided that such record
date shall not be a date more than 60 days, and, in the case
of a meeting of shareholders, not less than 10 days, prior to
the date on which the particular action requiring such
determination of shareholders of such series is to be taken.
In such case only such shareholders as shall be shareholders
of record of such series on the record date so fixed shall be
entitled to such notice of, and to vote at, such meeting or
adjournment, or to give such consent, or to receive payment
of such dividend or other distribution, or to receive such
allotment of rights, or to exercise such rights, or to take
such other action, as the case may be, notwithstanding any
transfer or redemption of any shares of such series on the
books of the Trust after any such record date. If no record
date has been fixed for the determination of shareholders,
the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day on which notice
of the meeting is mailed, which shall not be more than 60
days before the meeting, or, if notice is waived by all
shareholders entitled thereto, at the close of business on
the tenth day before the day on which the meeting is held.
Section 7.07. Lost, Stolen, or Destroyed Certificates.
Before transferring on the books of the Trust shares
represented by a certificate that is alleged to have been
lost, stolen, or destroyed, the Board of Trustees or any
officer authorized by the Board may, in its or his
discretion, require the owner of the lost, stolen, or
destroyed certificate (or his legal representative) to give
the Trust a bond or other indemnity, in such form and in such
amount as of the Board or any such officer may direct and
with such surety or sureties as may be satisfactory to the
Board or any such officer, sufficient to indemnify the Trust
against any claim that may be made against it on account of
the alleged loss, theft, or destruction of any such
certificate.
Section 7.08. Resumption of Issuance of
Certificates/Cancellation of Certificates. The Trustees may
at any time resume the issuance of share certificates. The
Trustees may, by written notice to each shareholder, require
the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not
affect the ownership of shares in the Trust.
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT
Section 8.01. Fiscal Year. The fiscal year of each
series of shares of the Trust shall be established by the
Board of Trustees.
Section 8.02. Accountants. For each series of the
shares of the Trust, the Trust shall employ an independent
public accountant or firm of independent public accountants
as the Accountant for such series to examine and certify or
issue its report on the financial statements of that series
of the Trust. Each Accountant's certificates and reports
shall be addressed both to the Board of Trustees and to the
shareholders of the applicable series.
ARTICLE IX. AMENDMENTS
Section 9.01. General. Except as provided in Section
9.02 hereof, all By-Laws of the Trust, whether adopted by the
Board of Trustees or the shareholders, shall be subject to
amendment, alteration, or repeal, and new By-Laws may be
made, by the affirmative vote of either:
(a) the holders of record of a majority of the votes
represented by outstanding shares of the Trust entitled to
vote at any meeting, the notice or waiver of notice of which
shall have specified or summarized the proposed amendment,
alteration, repeal, or new By-Law; or
(b) a majority of the Trustees, at any regular or
special meeting.
Section 9.02. By Shareholders Only.
(a) No amendment of any section of these By-Laws shall
be made except by the shareholders of the Trust, if the By-
Laws provide that such section may not be amended, altered or
repealed except by the shareholders.
<PAGE>
(b) From and after the issue of any shares of the Trust
to the public, no amendment of this Article IX or Article X
shall be made except by the shareholders of the Trust.
ARTICLE X. MISCELLANEOUS
Section 10.01. Restrictions and Limitations.
(a) Except as hereinafter provided, no officer or
Trustee of the Trust, no officer, director, or stockholder
(or partner of a stockholder) of the investment adviser of
the Trust (as that term is defined in the 1940 Act) or of any
underwriter of the Trust, and no investment adviser or
underwriter of the Trust shall take long or short positions
in the securities issued by the Trust. The foregoing
provision shall not prevent the purchase from the Trust of
shares of any series issued by the Trust by any person at the
price available to shareholders of the Trust generally at the
time of such purchase, or as described in the current
Prospectus of the Trust, or prior to commencement of the
public offering of shares of the Trust, at the net asset
value of such shares.
(b) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust or to any officer, director,
or stockholder (or partner of a stockholder) of, or person
financially interested in, the investment adviser or any
underwriter of the Trust, or to the investment adviser of the
Trust or to any underwriter of the Trust.
(c) The Trust shall not restrict the transferability or
negotiability of the shares of the Trust, except in
conformity with the statements with respect thereto contained
in the Trust's Registration Statement, and not in
contravention of such rules and regulations as the SEC may
prescribe.
(d) The Trust shall not permit any officer or Trustee of
the Trust, or any officer, director, or stockholder (or
partner of a stockholder) of the investment adviser or any
underwriter of the Trust to deal for or on behalf of the
Trust with himself as principal or agent, or with any
partnership, association, or trust in which he has a
financial interest; provided that the foregoing provisions
shall not prevent (1) officers and Trustees of the Trust from
buying, holding, redeeming, or selling shares in the Trust,
or from being officers, directors, or stockholders (or
partners of a stockholder) of or otherwise financially
interested in the investment adviser or any underwriter of
the Trust; (2) purchases or sales of securities or other
property by the Trust from or to an affiliated person or to
the investment adviser or any underwriter of the Trust, if
such transactions are not prohibited by the 1940 Act or have
been exempted by SEC order from the prohibitions of the 1940
Act; (3) purchases of investments for the portfolio of the
Trust through a securities dealer who is, or one or more of
whose partners, stockholders, officers, or directors is, an
officer or Trustee of the Trust, if such transactions are
handled in the capacity of broker only and commissions
charged do not exceed customary brokerage charges for such
services; (4) employment of legal counsel, registrar,
transfer agent, dividend disbursing agent, or custodian who
is, or has a partner,
<PAGE>
stockholder, officer, or director who is, an officer or
Trustee of the Trust, if only customary fees are charged for
services to the Trust; (5) sharing statistical, research,
legal and management expenses and office hire and expenses
with any other investment company in which an officer or
Trustee of the Trust is an officer, trustee, or director or
otherwise financially interested.
END OF BY-LAWS
EXHIBIT 6
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INSTITUTIONAL TRUST
AND LIBERTY SECURITIES CORPORATION
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 12th day of December, 1996 by and between Stein Roe
Institutional Trust, a business trust organized and existing
under the laws of the Commonwealth of Massachusetts
(hereinafter called the "Fund"), and Liberty Securities
Corporation, a corporation organized and existing under the
laws of the State of Delaware (hereinafter call the
"Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the Investment
Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and, the laws of each state (including the
District of Columbia and Puerto Rico) in which it engages in
business to the extent such law requires, and is a member of
the National Association of Securities Dealers ("NASD") (such
registrations and membership are referred to collectively as
the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its transfer,
shareholder recordkeeping, dividend disbursing and redemption
agents, if any; all expenses of notices, proxy solicitation
material and reports to shareholders; all expenses of
preparation and printing of annual or more frequent revisions
of the Fund's Prospectus and Statement of Additional
Information and of supplying copies thereof to shareholders;
all expenses of registering and maintaining the registration
of the Fund under ICA-40 and of the Fund's Shares under the
Securities Act of 1933, as amended ("SA-33"); all expenses of
qualifying and maintaining qualification of such Fund and of
the Fund's Shares for sale under securities laws of various
states or other jurisdictions and of registration and
qualification of the Fund under all laws applicable to the
Fund or its business activities;
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, shall pay all expenses incurred in the
sale and promotion of the Fund;
NOW, THEREFORE, in consideration of the premises and the
mutual promises hereinafter set forth, the parties hereto
agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in Sections
2(a)(29) of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form of
agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as may from
time to time be indicated in the Fund's Prospectus,
Distributor is authorized to solicit, as agent on behalf of
the Fund, unconditional orders for purchases of the Fund's
Shares authorized for issuance and registered under SA-33,
provided that:
(1) Distributor shall act solely as a disclosed
agent on behalf of and for the account of the
Fund;
(2) The Fund or its transfer agent shall receive
directly from investors all payments for the
purchase of the Fund's Shares and also shall pay
directly to shareholders amounts due to them for
the redemption or repurchase of all the Fund's
Shares with Distributor having no rights or
duties to accept such payment or to effect such
redemptions or repurchases;
(3) Distributor shall confirm all orders received
for purchase of the Fund's Shares which
confirmation shall clearly state (i) that
Distributor is acting as agent of the Fund in
the transaction (ii) that all certificates for
redemption, remittances, and registration
instructions should be sent directly to the
Fund, and (iii) the Fund's mailing address;
(4) Distributor shall have no liability for payment
for purchases of the Fund's Shares it sells as
agent; and
(5) Each order to purchase Shares of the Fund
received by Distributor shall be subject to
acceptance by an officer of the Fund in Chicago
and entry of the order on the Fund's records or
shareholder accounts and is not binding until so
accepted and entered.
The purchase price to the public of the Fund's Shares
shall be the public offering price as defined in Paragraph 6
hereof.
(b) In consideration of the rights granted to the
Distributor under this Agreement, Distributor will use its
best efforts (but only in states in which Distributor may
lawfully do so) to solicit from investors unconditional
orders to purchase Shares of the Fund. The Fund shall make
available to the Distributor without cost to the Distributor
such number of copies of the Fund's currently effective
Prospectus and Statement of Additional Information and copies
of all information, financial statements and other papers
which the Distributor may reasonably request for use in
connection with the distribution of Shares.
3.A. Selling Agreements. Distributor is authorized, as
agent on behalf of each Fund, to enter into agreements with
other broker-dealers providing for the solicitation of
unconditional orders for purchases of Fund's Shares
authorized for issuance and registered under SA-33. All such
agreements shall be either in the form of agreement attached
hereto or in such other form as may be approved by the
officers of the Fund ("Selling Agreement"). All
solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
5. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares that
are duly authorized and registered and available for sale by
the Fund, including redeemed or repurchased Shares if and to
the extent that they may be legally sold and if, but only if,
the Fund authorizes the Distributor to sell them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders to
purchase Shares of the Fund at the public offering price.
The public offering price for each accepted subscription for
the Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription.
The net asset value per share shall be determined in the
manner provided in the Fund's Agreement and Declaration of
Trust as now in effect or as they may be amended, and as
reflected in the Fund's then current Prospectus and Statement
of Additional Information.
7. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, no further orders for
Shares shall be accepted by the Fund except such
unconditional orders placed with the Fund and accepted by it
before the suspension. In addition, the Fund reserves the
right to suspend sales of Shares if, in the judgement of the
Board of the Fund, it is in the best interest of the Fund to
do so, such suspension to continue for such period as may be
determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to
purchase Shares shall be accepted by the Fund while such
suspension remains in effect unless otherwise directed by its
Board.
8. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any
representations in connection with the sale of Shares other
than the information and representations contained in the
Fund's registration statement filed with the SEC under SA-33
and/or ICA-40, covering Shares, as such registration
statement or the Fund's prospectus may be amended or
supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on
behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is
authorized to act as principal underwriter (as such term is
defined in ICA-40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register either (i) an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, or (ii) a definite
number of Shares as the Fund shall deem advisable pursuant to
Rule 24e-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the Fund,
and to maintain such qualification; provided, however, that
nothing herein shall be deemed to prevent the Fund from
registering its shares without approval of the Distributor in
any state it deems appropriate.
10. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform in
all respects with applicable federal and state laws and the
rules and regulations of the NASD. Distributor will use its
best efforts to maintain its Registrations in good standing
during the term of this Agreement and will promptly notify
the Fund and Stein Roe & Farnham Incorporated in the event of
the suspension or termination of any of the Registrations.
11. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
12. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the meaning
of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to which
the Fund or such of the members of its Board and of its
officers, employees, representatives, or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise, arising out of the
acquisition of any Shares of the Fund by any person which (i)
may be based upon any wrongful act by Distributor or any of
Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement
of Additional Information, shareholder report or other
information covering Shares of the Fund filed or made public
by the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon information furnished to
the Fund by Distributor in writing. In no case (i) is
Distributor's indemnity in favor of the Fund, or any person
indemnified, to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund or
such person would otherwise be subject by reason of willful
misfeasance, bad faith, or negligence in the performance of
its or his duties or by reason of its or his reckless
disregard of its or his obligations and duties under this
Agreement or (ii) is Distributor to be liable under its
indemnity agreement contained in this paragraph with respect
to any claim made against the Fund or any person indemnified
unless the Fund or such person, as the case may be, shall
have notified Distributor in writing of the claim within a
reasonable time after the summons, or other first written
notification, giving information of the nature of the claim
served upon the Fund or upon such person (or after the Fund
or such person shall have received notice of such service on
any designated agent). However, failure to notify
Distributor of any such claim shall not relieve Distributor
from any liability which Distributor may have to the Fund or
any person against whom such action is brought otherwise than
on account of Distributor's indemnity agreement contained in
this Paragraph.
Distributor shall be entitled to participate, at its own
expense, in the defense, or, if Distributor so elects, to
assume the defense of any suit brought to enforce any such
claim but, if Distributor elects to assume the defense, such
defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain such
legal counsel, persons indemnified who are defendants in the
suit shall bear the fees and expenses of any additional legal
counsel retained by them. If Distributor does not elect to
assume the defense of any such suit, Distributor will
reimburse persons indemnified who are defendants in such suit
for the reasonable fees of any legal counsel retained by them
in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33 against
any and all losses, liabilities, damages, claims or expenses
(including the damage, claim or expense and reasonable legal
counsel fees incurred in connection therewith) to which
Distributor or such of its directors, officers, employees,
representatives or controlling person or persons may become
subject under SA-33, under any other statute, at common law,
or otherwise arising out of the acquisition of any Shares by
any person which (i) may be based upon any wrongful act by
the Fund or any of the members of the Fund's Board, or the
Fund's officers, employees or representatives other than
Distributor, or (ii) may be based upon any untrue statement
or alleged untrue statement of a material fact contained in a
registration statement, Prospectus, Statement of Additional
Information, shareholder report or other information covering
Shares filed or made public by the Fund or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading unless such statement or omission was made in
reliance upon information furnished by Distributor to the
Fund. In no case (i) is the Fund's indemnity in favor of the
Distributor or any person indemnified to be deemed to protect
the Distributor or such indemnified person against any
liability to which Distributor or such indemnified person
would otherwise be subject by reason of willful misfeasance,
bad faith, or negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its
or his obligations and duties under this Agreement, or (ii)
is the Fund to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made
against Distributor or any person indemnified unless
Distributor, or such person, as the case may be, shall have
notified the Fund in writing of the claim within a reasonable
time after the summons, or other first written notification,
giving information of the nature of the claim served upon
Distributor or upon such person (or after Distributor or such
person shall have received notice of such service on any
designated agent). However, failure to notify a Fund of any
such claim shall not relieve the Fund from any liability
which the Fund may have to Distributor or any person against
whom such action is brought otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but, if
the Fund elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants in
the suit. In the event that the Fund elects to assume the
defense of any such suit and retain such legal counsel, the
persons indemnified who are defendants in the suit shall bear
the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the persons
indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by
them in such litigation.
13. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement shall
become effective upon its execution ("Effective Date") and
unless terminated as provided herein, shall remain in effect
through June 30, 1997, and from year to year thereafter, but
only so long as such continuance is specifically approved at
least annually (a) by a vote of majority of the members of
the Board of the Fund who are not interested persons of the
Distributor or of the Fund, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by
the vote of either the Board of the Fund or a majority of the
outstanding shares of the Fund. This Agreement may be
terminated by and between an individual Fund and Distributor
at any time, without the payment of any penalty (a) on 60
days' written notice, by the Board of the Fund or by a vote
of a majority of the outstanding Shares of the Fund, or by
Distributor, or (b) immediately, on written notice by the
Board of the Fund, in the event of termination or suspension
of any of the Registrations. This Agreement will
automatically terminate in the event of its assignment. In
interpreting the provisions of this Paragraph 13, the
definitions contained in Section 2(a) of ICA-40 (particularly
the definitions of "interested person", "assignment", and
"majority of the outstanding shares") shall be applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best interests
of the Fund that any amendment of this Agreement be made in
order to comply with the recommendations or requirements of
the SEC or any other governmental authority or to obtain any
advantage under state or Federal tax laws and notifies
Distributor of the form of such amendment, and the reasons
therefor, and if Distributor should decline to assent to such
amendment, the Fund may terminate this Agreement forthwith.
If Distributor should at any time request that a change be
made in the Fund's Agreement and Declaration of Trust or By-
Laws or in its methods of doing business, in order to comply
with any requirements of Federal law or regulations of the
SEC, or of a national securities association of which
Distributor is or may be a member, relating to the sale of
Shares, and the Fund should not make such necessary changes
within a reasonable time, Distributor may terminate this
Agreement forthwith.
15. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other party
at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: 600 Atlantic Avenue
Boston, Massachusetts 02210
Attn: Secretary
If to Stein Roe & Farnham Incorporated:
One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY SECURITIES CORPORATION
By:_____________________________
ATTEST:
__________________________
Secretary
STEIN ROE INSTITUTIONAL TRUST
By: ____________________
Timothy K. Armour
President
ATTEST:
______________________
Jilaine Hummel Bauer
Secretary
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By: ___________________
Hans P. Ziegler, Chief Executive Officer
ATTEST:
_____________________________
Jilaine Hummel Bauer, Secretary
<PAGE>
EXHIBIT A TO DISTRIBUTION AGREEMENT
BETWEEN THE STEIN ROE INSTITUTIONAL TRUST AND
LIBERTY SECURITIES CORPORATION
The series of the Trust covered by this agreement are:
Name of Series Effective Date
- --------------- ----------------
Stein Roe Institutional High Yield Fund January 1, 1997
Dated: December 12, 1996
<PAGE>
Date _____________
LIBERTY SECURITIES CORPORATION
STEIN ROE ____ FUND
SELLING AGREEMENT
Dear Sirs:
As the principal underwriter of Stein Roe ____ Fund (the
"Fund"), a series of Stein Roe Institutional Trust (the
"Trust"), a Massachusetts business trust registered under the
Investment Company Act of 1940 as an open-end investment
company, we invite you as agent for your customer to
participate in the distribution of shares of beneficial
interest in the Fund ("Shares"), subject to the following
terms and conditions:
1. We hereby grant to you the right to make Shares
available to, and to solicit orders to purchase Shares by,
the public, subject to applicable federal and state law, the
Agreement and Declaration of Trust and By-laws of the Trust,
and the current Prospectus and Statement of Additional
Information relating to the Fund attached hereto (the
"Prospectus"). You will forward to us or to the Trust's
transfer agent, as we may direct from time to time, all
orders for the purchase of Shares obtained by you, subject to
such terms and conditions as to the form of payment, minimum
initial and subsequent purchase and otherwise, and in
accordance with such procedures and directions, as we may
specify from time to time. All orders are subject to
acceptance by an authorized officer of the Trust in Chicago
and the Trust reserves the right in its sole discretion to
reject any order. Share purchases are not binding on the
Trust until accepted and entered on the books of the Fund.
No Share purchase shall be effective until payment is
received by the Trust in the form of Federal funds. If a
Share purchase by check is cancelled because the check does
not clear, you will be responsible for any loss to the Fund
or to us resulting therefrom.
2. The public offering price of the Shares shall be the
net asset value per share of the outstanding Shares
determined in accordance with the then current Prospectus.
No sales charge shall apply.
3. As used in this Agreement, the term "Registration
Statement" with regard to the Fund shall mean the
Registration Statement most recently filed by the Trust with
the Securities and Exchange Commission and effective under
the Securities Act of 1933, as such Registration Statement is
amended by any amendments thereto at the time in effect, and
the terms "prospectus" and "statement of additional
information" with regard to the Fund shall mean the form of
prospectus and statement of additional information relating
to the Fund as attached hereto filed by the Trust as part of
the Registration Statement, as such form of prospectus and
statement of additional information may be amended or
supplemented from time to time.
4. You hereby represent that you are and will remain
during the term of this Agreement duly registered as a
broker-dealer under the Securities Exchange Act of 1934 and
under the securities laws of each state where your activities
require such registration, and that you are and will remain
during the term of this Agreement a member in good standing
of the National Association of Securities Dealers, Inc.
("NASD"). In the conduct of your activities hereunder, you
will abide by all applicable rules and regulations of the
NASD, including, without limitation, Rule 26 of the Rules of
Fair Practice of the NASD as in effect form time to time, and
all applicable federal and state securities laws, including
without limitation, the prospectus delivery requirements of
the Securities Act of 1933.
5. This Agreement is subject to the right of the Trust
at any time to withdraw all offerings of the Shares by
written notice to us at our principal office. You
acknowledge that the Trust will not issue certificates
representing Shares.
6. Your obligations under this Agreement are not to be
deemed exclusive, and you shall be free to render similar
services to others so long as your services hereunder are not
impaired thereby.
7. You will sell Shares only to residents of states or
other jurisdictions where we have notified you that the
Shares have been registered or qualified for sale to the
public or are exempt from such qualification or registration.
Neither we nor the Trust will have any obligation to register
or qualify the Shares in any particular jurisdiction. We
shall not be liable or responsible for the issue, form
validity, enforceability or value of the Shares or for any
matter in connection therewith, except lack of good faith on
our part, and no obligation not expressly assumed by us in
this Agreement shall be implied therefrom. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any person acquiring any
Shares to waive compliance with any provision of the
Securities Act of 1933, or to relieve the parties hereto from
any liability arising thereunder.
8. You are not authorized to make any representations
concerning the Fund, the Trust or the Shares except those
contained in the then current prospectus and statement of
additional information relating to the Fund, or printed
information issued by the Trust or by us as information
supplemental to such prospectus and statement of additional
information. We will supply you with a reasonable number of
copies of the then current prospectus and statement of
additional information of the Fund, and reasonable quantities
of any supplemental sales literature, sales bulletins, and
additional information as may be issued by us or the Trust.
You will not use any advertising or sales material relating
to the Fund other than materials supplied by the Trust or us,
unless such other material is approved in writing by us in
advance of such use.
9. You will not have any authority to act as agent for
the Trust, for us or for any other dealer. All transactions
between you and us contemplated by this Agreement shall be as
agents.
10. Either party to this Agreement may terminate this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it is
either delivered personally to the other party, is mailed
postpaid or delivered by telecopier to the other party at its
address listed below. This Agreement may be amended by us at
any time, and your placing of an order after the effective
date of any such amendment shall constitute your acceptance
thereof.
Liberty Securities Corporation Dealer
600 Atlantic Avenue ________________
Boston, Massachusetts 02210 ________________
Attention: ________________ ________________
Telecopier: _______________
with copy to:
Stein Roe Institutional Trust
One South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
Telecopier: ________
11. This Agreement constitutes the entire agreement
between you and us relating to the subject matter hereof and
supersedes all prior or written agreements between us. This
Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and shall be binding upon
both parties hereto when signed by us and accepted by you in
the space provided below.
Very truly yours,
LIBERTY SECURITIES CORPORATION
BY: ____________________
The undersigned hereby accepts your invitation to
participate in the distribution of Shares and agrees to each
of the terms and conditions set forth in this letter.
___________________________
Dealer
Date: ____________________ By: _______________________
(Signature of Officer)
Pay Office of Dealer:
__________________________ ___________________________
Street Address (Print Name of Officer)
__________________________
City/State/Zip
__________________________
Telephone Number
EXHIBIT 8
CUSTODIAN CONTRACT
Between
STEIN ROE INSTITUTIONAL TRUST
and
STATE STREET BANK AND TRUST COMPANY
Global/Series/Trust
21E593
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It......................................................1
2. Duties of the Custodian with Respect to Property
of the Trust Held by the Custodian in the United
States
2.1 Holding Securities.................................2
2.2 Delivery of Securities.............................2
2.3 Registration of Securities.........................5
2.4 Bank Accounts......................................5
2.5 Availability of Federal Trusts.....................5
2.6 Collection of Income...............................6
2.7 Payment of Trust Monies............................6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...............................8
2.9 Appointment of Agents..............................8
2.10 Deposit of Trust Assets in U.S. Securities
System.............................................8
2.11 Trust Assets Held in the Custodian's Direct
Paper System.......................................9
2.12 Segregated Account................................10
2.13 Ownership Certificates for Tax Purposes...........11
2.14 Proxies...........................................11
2.15 Communications Relating to Portfolio Securities...11
3. Duties of the Custodian with Respect to Property of
the Trust Held Outside of the United States............12
3.1 Appointment of Foreign Sub-Custodians.............12
3.2 Assets to be Held.................................12
3.3 Foreign Securities Systems........................12
3.4 Holding Securities................................13
3.5 Agreements with Foreign Banking Institutions......13
3.6 Access of Independent Accountants of the Trust....13
3.7 Reports by Custodian..............................13
3.8 Transactions in Foreign Custody Account...........14
3.9 Liability of Foreign Sub-Custodians...............14
3.10 Liability of Custodian............................14
3.11 Reimbursement for Advances........................15
3.12 Monitoring Responsibilities.......................15
3.13 Branches of U.S. Banks............................16
3.14 Tax Law...........................................16
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Trust.................................16
5. Proper Instructions....................................17
6. Actions Permitted Without Express Authority............17
7. Evidence of Authority..................................18
8 . Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net
Income.................................................18
9. Records................................................19
10. Opinion of Trust's Independent Accountants.............19
11. Reports to Trust by Independent Public Accountants.....19
12. Compensation of Custodian..............................19
13. Responsibility of Custodian............................20
14. Effective Period, Termination and Amendment............21
15. Successor Custodian....................................22
16. Interpretive and Additional Provisions.................23
17. Additional Trusts......................................23
18. Massachusetts Law to Apply.............................23
19. Prior Contracts........................................24
20. Reproduction of Documents..............................24
21. Shareholder Communications Election....................24
<PAGE>
CUSTODIAN CONTRACT
This Contract between Stein Roe Institutional Trust, a
business trust organized and existing under the laws of The
Commonwealth of Massachusetts, having its principal place of
business at 1 South Wacker Drive, Chicago, Illinois 60606
hereinafter called the "Trust", and State Street Bank and
Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Trust is authorized to issue shares in
separate series, with each such series representing interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in
one series, the Stein Roe Institutional High Yield Fund (such
series together with all other series subsequently
established by the Trust and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto
agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian
of the assets of the Portfolios of the Trust, including
securities which the Trust, on behalf of the applicable
Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities")
pursuant to the provisions of the Declaration of Trust. The
Trust on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all
payments of income, payments of principal or capital
distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares
of beneficial interest of the Trust representing interests in
the Portfolios, ("Shares") as may be issued or sold from time
to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more
sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees
of the Trust on behalf of the applicable Portfolio(s), and
provided that the Custodian shall have no more or less
responsibility or liability to the Trust on account of any
actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian. The Custodian
may employ as sub-custodian for the Trust's foreign
securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Trust Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Portfolio
all non-cash property, to be held by it in the United
States including all domestic securities owned by such
Portfolio, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency
which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury
(each, a U.S. Securities System") and (b) commercial
paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by
the Custodian or in a U.S. Securities System account of
the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Trust
on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions
of Section 2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.9 or into the name or nominee name of
any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Trust on behalf
of the Portfolio, which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the book-
entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Trust on behalf of the Portfolio
requiring a pledge of assets by the Trust on behalf
of the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of the Portfolio,
the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio of
the Trust;
13) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of the Portfolio,
the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions by
the Portfolio of the Trust;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Trust, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the currently
effective prospectus and statement of additional
information of the Trust, related to the Portfolio
("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from
the Trust on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary
or an Assistant Secretary, specifying the securities
of the Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name
of any nominee of the Trust on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall
be assigned exclusively to the Portfolio, unless the
Trust has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies having the same investment adviser
as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name
or nominee name of any sub-custodian appointed pursuant
to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good
delivery form. If, however, the Trust directs the
Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Trust on such securities and to
notify the Trust on a best efforts basis only of
relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of each Portfolio of the Trust, subject only
to draft or order by the Custodian acting pursuant to
the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio
in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of
1940. Trusts held by the Custodian for a Portfolio may
be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the
Trusts to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees
of the Trust. Such Trusts shall be deposited by the
Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Trusts. Upon mutual agreement
between the Trust on behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Trust on behalf of a
Portfolio, make federal Trusts available to such
Portfolio as of specified times agreed upon from time to
time by the Trust and the Custodian in the amount of
checks received in payment for Shares of such Portfolio
which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held
by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due each Portfolio on securities loaned pursuant
to the provisions of Section 2.2 (10) shall be the
responsibility of the Trust. The Custodian will have no
duty or responsibility in connection therewith, other
than to provide the Trust with such information or data
as may be necessary to assist the Trust in arranging for
the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 Payment of Trust Monies. Upon receipt of Proper
Instructions from the Trust on behalf of the applicable
Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases
only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.11; (d) in the
case of repurchase agreements entered into between
the Trust on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase
by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the
Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit
account of the Trust in any bank, whether domestic or
foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from
the Trust as defined in Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Trust whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing
documents of the Trust;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Trust
on behalf of the Portfolio, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee of the Trust signed by an officer
of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in
advance of receipt of the securities purchased in the
absence of specific written instructions from the Trust
on behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely liable to the Trust for
such securities to the same extent as if the securities
had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Trust Assets in U.S. Securities Systems.
The Custodian may deposit and/or maintain securities
owned by a Portfolio in a clearing agency registered
with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934,
which acts as a securities depository, or in the book-
entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and
regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in
a U.S. Securities System provided that such
securities are represented in an account ("Account")
of the Custodian in the U.S. Securities System which
shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
U.S. Securities System shall identify by book-entry
those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the U.S. Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the
account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish
the Trust on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall
furnish to the Trust on behalf of the Portfolio
copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for
the account of the Portfolio;
4) The Custodian shall provide the Trust for the
Portfolio with any report obtained by the Custodian
on the U.S. Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the U.S.
Securities System;
5) The Custodian shall have received from the Trust on
behalf of the Portfolio the initial or annual
certificate, as the case may be, required by Article
14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Trust for the benefit of the Portfolio for any loss
or damage to the Portfolio resulting from use of the
U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or
from failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the U.S. Securities System; at the election
of the Trust, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other
person which the Custodian may have as a consequence
of any such loss or damage if and to the extent that
the Portfolio has not been made whole for any such
loss or damage.
2.11 Trust Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Trust on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in
the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an
entry on the records of the Custodian to reflect such
payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Trust on behalf of
the Portfolio confirmation of each transfer to or
from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next
business day following such transfer and shall
furnish to the Trust on behalf of the Portfolio
copies of daily transaction sheets reflecting each
day's transaction in the U.S. Securities System for
the account of the Portfolio;
6) The Custodian shall provide the Trust on behalf of
the Portfolio with any report on its system of
internal accounting control as the Trust may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt
of Proper Instructions from the Trust on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Trust on behalf of
the Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Portfolio or commodity
futures contracts or options thereon purchased or sold
by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition
to Proper Instructions from the Trust on behalf of the
applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee
signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities.
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Trust for each Portfolio
all written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Trust on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly
to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian
is to take such action.
3. Duties of the Custodian with Respect to Property of the
Trust Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Trust hereby
authorizes and instructs the Custodian to employ as sub-
custodians for the Portfolio's securities and other
assets maintained outside the United States the foreign
banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-
custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a
certified resolution of the Trust's Board of Trustees,
the Custodian and the Trust may agree to amend Schedule
A hereto from time to time to designate additional
foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of
Proper Instructions, the Trust may instruct the
Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign
securities", as defined in paragraph (c)(1) of Rule 17f-
5 under the Investment Company Act of 1940, and (b) cash
and cash equivalents in such amounts as the Custodian
or the Trust may determine to be reasonably necessary to
effect the Portfolio's foreign securities transactions.
The Custodian shall identify on its books as belonging
to the Trust, the foreign securities of the Trust held
by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be
agreed upon in writing by the Custodian and the Trust,
assets of the Portfolios shall be maintained in a
clearing agency which acts as a securities depository or
in a book-entry system for the central handling of
securities located outside the United States (each a
"Foreign Securities System") only through arrangements
implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof (Foreign
Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities
Systems"). Where possible, such arrangements shall
include entry into agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities
and other non-cash property for all of its customers,
including the Trust, with a Foreign Sub-custodian in a
single account that is identified as belonging to the
Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with
respect to securities and other non-cash property of the
Trust which are maintained in such account shall
identify by book-entry those securities and other non-
cash property belonging to the Trust and (ii) the
Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be
held separately from any assets of the foreign sub-
custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
provide that: (a) the assets of each Portfolio will not
be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio
will be freely transferable without the payment of money
or value other than for custody or administration; (c)
adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d)
officers of or auditors employed by, or other
representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Trust, will be given access
to the books and records of the foreign banking
institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolios
held by the foreign sub-custodian will be subject only
to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Trust. Upon
request of the Trust, the Custodian will use its best
efforts to arrange for the independent accountants of
the Trust to be afforded access to the books and records
of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate
to the performance of such foreign banking institution
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the
Trust from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of
entities having possession of the Portfolio(s)
securities and other assets and advices or notifications
of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for
the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as
otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract
shall apply, mutatis mutandis to the foreign securities
of the Trust held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities
received for the account of each applicable Portfolio
and delivery of securities maintained for the account of
each applicable Portfolio may be effected in accordance
with the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Trust agrees to
hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold
harmless, the Custodian and the Trust from and against
any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the
Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence
of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Trust has not been
made whole for any such loss, damage, cost, expense,
liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect
to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any
responsibility to the Trust for any loss due to such
delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Trust requires the
Custodian to advance cash or securities for any purpose
for the benefit of a Portfolio including the purchase or
sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except
such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the applicable Portfolio shall be security
therefor and should the Trust fail to repay the
Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall
furnish annually to the Trust, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Trust
in connection with the initial approval of this
Contract. In addition, the Custodian will promptly
inform the Trust in the event that the Custodian learns
of a material adverse change in the financial condition
of a foreign sub-custodian or any material loss of the
assets of the Trust or in the case of any foreign sub-
custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set
forth in this Contract, the provisions hereof shall not
apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification
set forth in Section 26(a) of said Act. The appointment
of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Trust in the
United Kingdom shall be maintained in an interest
bearing account established for the Trust with the
Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street
London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed
on the Trust or the Custodian as custodian of the Trust
by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the
responsibility of the Trust to notify the Custodian of
the obligations imposed on the Trust or the Custodian as
custodian of the Trust by the tax law of jurisdictions
other than those mentioned in the above sentence,
including responsibility for withholding and other
taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the
Trust with respect to any claim for exemption or reTrust
under the tax law of jurisdictions for which the Trust
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of
Shares of the Trust
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Trust and deposit
into the account of the appropriate Portfolio such payments
as are received for Shares of that Portfolio issued or sold
from time to time by the Trust. The Custodian will provide
timely notification to the Trust on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such Trusts as may be available for the purpose but
subject to the limitations of the Declaration of Trust and
any applicable votes of the Board of Trustees of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make Trusts available
for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire Trusts to or through a commercial bank
designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Trust, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the
Trust to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Trust
and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialled by one or more person or
persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a
specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Trust shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board
of Trustees of the Trust accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices
provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with
Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Trust on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor expenses
of handling securities or other similar items
relating to its duties under this Contract, provided
that all such payments shall be accounted for to the
Trust on behalf of the Portfolio;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the
Trust.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Trust. The
Custodian may receive and accept a certified copy of a vote
of the Board of Trustees of the Trust as conclusive evidence
(a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as
in full force and effect until receipt by the Custodian of
written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board
of Trustees of the Trust to keep the books of account of each
Portfolio and/or compute the net asset value per share of the
outstanding shares of each Portfolio or, if directed in
writing to do so by the Trust on behalf of the Portfolio,
shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as
described in the Trust's currently effective prospectus
related to such Portfolio and shall advise the Trust and the
Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Trust to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components.
The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or
times described from time to time in the Trust's currently
effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relating to its activities
and obligations under this Contract in such manner as will
meet the obligations of the Trust under the Investment
Company Act of 1940, with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or
agents of the Trust and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at
the Trust's request, supply the Trust with a tabulation of
securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust and
the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Trust's Independent Accountant
The Custodian shall take all reasonable action, as the
Trust on behalf of each applicable Portfolio may from time to
time request, to obtain from year to year favorable opinions
from the Trust's independent accountants with respect to its
activities hereunder in connection with the preparation of
the Trust's Form N-1A, and Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect to
any other requirements of such Commission.
11. Reports to Trust by Independent Public Accountants
The Custodian shall provide the Trust, on behalf of each
of the Portfolios at such times as the Trust may reasonably
require, with reports by independent public accountants on
the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Trust to provide
reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Trust on behalf of
each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and
to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying
out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Trust
for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence
or willful misconduct or the negligence or willful misconduct
of a sub-custodian or agent, the Custodian shall be without
liability to the Trust for any loss, liability, claim or
expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian
or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of
currency controls or restrictions, the interruption,
suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions,
work stoppages, natural disasters or other similar events or
acts; (ii) errors by the Trust or the Investment Advisor in
their instructions to the Custodian provided such
instructions have been in accordance with this Contract;
(iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-
custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body
in charge of registering or transferring securities in the
name of the Custodian, the Trust, the Custodian's sub-
custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and
rights and other accretions or benefits; (vi) delays or
inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or
future law or regulation or order of the United States of
America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this
Contract.
If the Trust requires the Custodian to take any action
with respect to securities, which action involves the payment
of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to
the Trust being liable for the payment of money or incurring
liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory
to it.
If the Trust requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) or in the
event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of
the Trust shall be security therefor and should the Trust
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the
Trust assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect,
special or consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however
that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Trust has
approved the initial use of a particular Securities System by
such Portfolio, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under
Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has approved the initial use of the
Direct Paper System by such Portfolio; provided further,
however, that the Trust shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust,
and further provided, that the Trust on behalf of one or more
of the Portfolios may at any time by action of its Board of
Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination
and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Trust, of one or more
of the Portfolios shall be appointed by the Board of Trustees
of the Trust, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities of
each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities
System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees of the Trust, deliver
at the office of the Custodian and transfer such securities,
Trusts and other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board
of Trustees shall have been delivered to the Custodian on or
before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all
securities, Trusts and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments
held by the Custodian relative thereto and all other property
held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor
custodian all of the securities of each such Portfolio held
in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this
Contract.
In the event that securities, Trusts and other
properties remain in the possession of the Custodian after
the date of termination hereof owing to failure of the Trust
to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains
possession of such securities, Trusts and other properties
and the provisions of this Contract relating to the duties
and obligations of the Custodian shall remain in full force
and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Trust on behalf of each of the Portfolios,
may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may
in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and
shall be annexed hereto, provided that no such interpretive
or additional provisions shall contravene any applicable
federal or state regulations or any provision of the
Declaration of Trust of the Trust. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Portfolios
In the event that the Trust establishes one or more
series of Shares in addition to the Stein Roe Institutional
High Yield Fund with respect to which it desires to have the
Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if
the Custodian agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Trust on behalf of
each of the Portfolios and the Custodian relating to the
custody of the Trust's assets.
20. Reproduction of Documents
This Contract and all schedules, exhibits, attachments
and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree
that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
21. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of
that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Trust
to indicate whether it authorizes the Custodian to provide
the Trust's name, address, and share position to requesting
companies whose securities the Trust owns. If the Trust
tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Trust tells the
Custodian "yes" or does not check either "yes" or "no" below,
the Custodian is required by the rule to treat the Trust as
consenting to disclosure of this information for all
securities owned by the Trust or any Trusts or accounts
established by the Trust. For the Trust's protection, the
Rule prohibits the requesting company from using the Trust's
name and address for any purpose other than corporate
communications. Please indicate below whether the Trust
consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Trust's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Trust's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed as of the day of , 1996.
ATTEST STEIN ROE INSTITUTIONAL TRUST
By __________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
By ___________________________
Executive Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of Stein Roe Institutional Trust for use as sub-
custodians for the Trust's securities and other assets:
(Insert banks and securities depositories)
Certified:
____________________________
Trust's Authorized Officer
Date_________
EXHIBIT 9(a)
AGENCY AGREEMENT
This agreement is made this ___ day of ________, 1996, by
and between STEIN ROE INSTITUTIONAL TRUST (the "Trust"), a
Massachusetts business trust, and STEINROE SERVICES INC.
(hereinafter referred to as "SSI"), a Massachusetts
corporation.
WITNESSETH:
1. APPOINTMENT. The Trust hereby appoints SSI,
effective as of the date hereof, as its agent in connection
with the issue, redemption, and transfer of shares of
beneficial interest of the Trust, including shares of each
respective series of the Trust (hereinafter called the
"Shares"), and to process investment income and capital gain
distributions with respect to such Shares, to perform certain
duties in connection with the Trust's withdrawal and other
plans, to mail proxy and other materials to the Trust's
shareholders upon the terms and conditions set forth herein,
and to perform such other and further duties as are agreed
upon between the parties from time to time.
2. ACKNOWLEDGMENT. SSI acknowledges that it has
received from the Trust the following documents:
A. A certified copy of the Agreement and Declaration
of Trust and any amendments thereto;
B. A certified copy of the By-Laws of Trust;
C. A certified copy of the resolution of its Board
of Trustees authorizing this Agreement;
D. Specimens of all forms of Share certificates as
approved by its Board of Trustees with a
statement of its Secretary certifying such
approval;
E. Samples of all account application forms and
other documents relating to shareholders
accounts, including terms of its Systematic
Withdrawal Plan;
F. Certified copies of any resolutions of the Board
of Trustees authorizing the issue of authorized
but unissued Shares;
G. An opinion of counsel for the Trust with respect
to the validity of the Shares, the status of
repurchased Shares and the number of Shares with
respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the
signatures of the officers of the Trust who are
authorized to sign Share certificates, to sign
checks and to sign written instructions to SSI.
3. ADDITIONAL DOCUMENTATION. The Trust will also
furnish SSI from time to time with the following documents:
A. Certified copies of each amendment to its
Agreement and Declaration of Trust and By-Laws;
B. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereto with respect to its Shares;
C. Certified copies of each resolution of the Board
of Trustees authorizing officers to give
instructions to SSI;
D. Specimens of all new Share certificates
accompanied by certified copies of Board of
Trustees resolutions approving such forms;
E. Forms and terms with respect to new plans that
may be instituted and such other certificates,
documents or opinions that SSI may from time to
time, in its discretion, deem necessary or
appropriate in the proper performance of its
duties.
4. AUTHORIZED SHARES. The Trust certifies to SSI that,
as of the date of this Agreement, it may issue unlimited
number of Shares of the same class in one or more series as
the Board of Trustees may authorize. The series authorized as
of the date of this Agreement are listed in Schedule B.
5. REGISTRATION OF SHARES. SSI shall record issuances
of Shares based on the information provided by the Trust. SSI
shall have no obligation to a Trust, when countersigning and
issuing Shares, whether evidenced by certificates or in
uncertificated form, to take cognizance of any law relating to
the issuance and sale of Shares, except as specifically agreed
in writing between SSI and the Trusts, and shall have no such
obligation to any shareholder except as specifically provided
in Sections 8-205, 8-208 and 8-406 of the Uniform Commercial
Code. Based on data provided by the Trust of Shares
registered or qualified for sale in various states, SSI will
advise the Trusts when any sale of Shares to a resident of a
state would result in total sales in that state in excess of
the amount registered or qualified in that state.
6. SHARE CERTIFICATES. The Trust shall supply SSI with
a sufficient supply of serially pre-numbered blank Share
certificates, which shall contain the appropriate series
designation, if applicable. Such blank certificates shall be
properly prepared and signed by authorized officers of Trust
manually or, if authorized by Trust, by facsimile and shall
bear the seal of Trust or a facsimile thereof.
Notwithstanding the death, resignation, or removal of any
officer authorized to sign certificates, SSI may continue to
countersign certificates which bear the manual or facsimile
signature of such officer as directed by Trust.
7. CHECKS. The Trust shall supply SSI with a sufficient
supply of serially pre-numbered blank checks for the dividend
bank accounts and for the principal bank accounts of Trust.
SSI shall prepare and sign by facsimile signature plates,
bearing the facsimiles of the signatures of authorized
signatories, dividend account checks for payment of ordinary
income dividends and capital gain distributions and principal
account checks for payment of redemptions of Shares, including
those in connection with the Trusts' Withdrawal Plans, refunds
on subscriptions and other capital payments on Shares, in
accordance with this Agreement. SSI shall hold signature
facsimile plates for this purpose and shall exercise
reasonable care in their transportation, storage or use. SSI
may deliver such signature facsimile plates to an agent or
contractor to perform the services described herein, but shall
not be relieved of its duties hereunder by any such delivery.
8. RECORDKEEPING. SSI shall maintain records showing
for each shareholder's account in the appropriate series of
the Trust, the following information and such other
information as may be mutually agreed to from time to time by
the Trusts and SSI:
A. To the extent such information is provided by
shareholders: name(s), address, alphabetical sort
key, client number, tax identification number,
account number, the existence of any special
service or transaction privilege offered by the
Trust and applicable to the shareholder's account
including but not limited to the telephone
exchange privilege, and other similar
information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year
regarding the account of the shareholder,
including transactions to date, date of each
transaction, price per share, amount and type of
each purchase and redemption, transfers, amount
of accrued dividends, the amount and date of all
distributions paid, price per share, and amount
of all distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for
the calendar year as required under applicable
Federal and state laws, rules and regulations;
G. The certificate number and date of issuance of
each Share certificate outstanding, if any,
representing a shareholder's Shares in each
account, the number of Shares so represented, and
any stop legend on each certificate;
H. Information with respect to gross proceeds of all
sales transactions as required under applicable
Federal income tax laws, rules and regulations;
and
I. Such other information as may be agreed upon by
the Trusts and SSI from time to time.
SSI shall maintain for any account that is closed
("Closed Account") the aforesaid records through the June of
the calendar year following the year in which the account is
closed or such other period as may be mutually agreed to from
time to time by such Trust and SSI.
9. ADMINISTRATIVE SERVICES. SSI shall furnish the
following administrative services to the Trust:
A. Coordination of the printing and dissemination of
Prospectuses, financial reports, and other
shareholder information as are agreed to by SSI
and the Trust from time to time.
B Maintenance of data and statistics and preparation
of reports for internal use and for distribution
to the Board of Trustees concerning shareholder
transaction and service activity.
C. Handling of requests from third parties involving
shareholder records, including, but not limited
to, record subpoenas, tax levies, and orders
issued by courts or administrative or regulatory
agencies.
D. Development and monitoring of shareholder service
programs that may be offered from time to time,
including, but not limited to, individual
retirement account and tax-qualified retirement
plan programs, checkwriting redemption
privileges, automatic purchase, exchange and
redemption programs, audio response services,
programs involving electronic transfer of funds,
and lock box facilities.
E. Provision of facilities, hardware and software
systems, and equipment in Chicago (and other
locations mutually agreed to by SSI and the
Trusts) to meet the needs of shareholders and
prospective shareholders, including, but not
limited to, walk-in facilities, toll-free
telephone numbers, electronic audio and other
communication, accounting and recordkeeping
systems to handle shareholder transaction,
inquiry and other activity, and to provide
management and other personnel required to staff
such facilities and administer such systems.
10. SHAREHOLDER SERVICES. SSI shall provide the
following services as are requested by a Trust in addition to
the transactional and recordkeeping services provided for
elsewhere herein:
A. Responding to communications from shareholders or
their representatives or agents concerning any
matters pertaining to shares registered in their
names, including, but not limited to, (i) net
asset value and average cost basis information;
(ii) shareholder services, plans, options, and
privileges; and (ii) with respect to the series
of the Trust represented by such shares,
information concerning investment policies,
portfolio holdings, performance, and shareholder
distributions and the classification thereof for
tax purposes.
B. Handling of shareholder complaints and
correspondence directed to or brought to the
attention of SSI.
C. Soliciting and tabulating proxies of shareholders
and answering questions concerning the subject
matter thereof.
D. Under the direction of the officers of the Trust,
administering a program whereby shareholders
whose mail from the Trust is returned are
identified, current address information for such
shareholders is solicited, and shares and
dividend or redemption proceeds owned by
shareholders who cannot be located are escheated
to the proper authorities in accordance with
applicable laws and regulations.
E. Preparing and disseminating special data,
notices, reports, programs, and literature for
certain categories of shareholders based on
account characteristics, or for shareholders
generally in light of industry, market, product,
tax, or legal developments.
F. Assisting any institutional servicing or
recordkeeping agent engaged by SSI and approved
by the Trust in the development, implementation,
and maintenance of special programs and systems
to enhance overall shareholder servicing
capability, consisting of:
(i) Product and system training for personnel of
the institutional servicing agent.
(ii) Joint programs with the institutional
servicing agent to develop customized
shareholder software systems, account
statements, and other information and
reports.
(iii) Electronic and telephonic systems and other
technological means by which shareholder
information, account data, and cost of
securities may be exchanged among SSI, the
institutional servicing agent, and their
respective agents or vendors.
G. Furnishing sub-accounting services for retirement
plan shareholders and other shareholders
representing group relationships with special
recordkeeping needs.
H. Providing and supervising the services of
employees whose principal responsibility and
function will be to preserve and strengthen the
Trust's relationships with its shareholders.
I. Such other shareholder and shareholder-related
services, whether similar to or different from
those described in this section as the parties
may from time to time agree in writing.
11. PURCHASES. Upon receipt of a request for purchase of
Shares containing data required by a Trust for processing of a
purchase transaction, SSI will:
A. Compute the number of Shares of the appropriate
series of the Trust to which the purchaser is
entitled and the dollar value of the transaction
according to the price of such Shares as provided
by the Trust for purchases made at that time and
date;
B. In the case of a new shareholder, establish an
account for the shareholder, including the
information specified in Section 8 hereof; in the
case of an Exchange as described in Section 14
below by telephone or telegraph, the account
shall have exactly the same registration as that
of the account of the other series of the Trust
or any other series of another Trust from which
the Exchange was made;
C. Transmit to the shareholder by mail or
electronically a confirmation of the purchase, as
directed by the Trust, in such format as agreed
to by SSI and the Trusts, including all
information called for thereby, and, in the case
of a purchase for a new account, shall also
furnish the shareholder a current Prospectus of
the applicable series;
D. If applicable, prepare a refund check in the
amount of any overpayment of the subscription
price and deliver it to the Trust for signing;
and
E. If a certificate is requested by the shareholder,
prepare, countersign, issue and mail, not earlier
than 30 days after the date of purchase, to the
shareholder at his address of record a Share
certificate for such full Shares purchased.
12. REDEMPTIONS. Instructions to redeem Shares of any
series of a Trust, including instructions for an Exchange as
described in Section 14 below, may be furnished in written
form, or by other means, including but not limited to
telephonic or electronic transmission or by writing a special
form of check, as may be mutually agreed to from time to time
by the Trust and SSI. Upon receipt by SSI of instructions to
redeem which are in "good order," as defined in the Prospectus
of the applicable series and satisfactory to SSI, SSI will:
A. Compute the amount due for the Shares and the
total number of all the Shares redeemed in
accordance with the price per Share as provided
by the Trust for redemptions of such Shares at
that time and date, and transmit to the
shareholder by mail or electronically a
confirmation of the redemption, as directed by
the Trust, in such format as agreed to by SSI and
the Trust, including all information called for
thereby;
B. Confirmations of redemptions that result in the
payment of accrued dividends shall indicate the
amount of such payment and any amounts withheld;
C. In the case of a redemption in written form other
than by Exchange, SSI shall transmit to the
shareholder by check or, as may be mutually
agreed to by the Trust and SSI and requested by
the shareholder, electronic means, an amount
equal to the redemption price and any payment of
accrued dividends occasioned by the redemption,
net of any amounts withheld under applicable
Federal and state laws, rules and regulations on
or before the seventh calendar day following the
date on which instructions to redeem in "good
order" as defined in the Prospectus of the
applicable series, which instructions are
satisfactory to SSI as received by SSI. In the
case of an Exchange, SSI shall use the proceeds
of the redemption, net of any amounts withheld
under applicable Federal and state laws, rules
and regulations, to purchase Shares of any other
series of the Trust or any other series of
another Trust selected by the person requesting
the Exchange;
D. In the case of Exchanges by telephone or
telegraph, redemptions by telephone or electronic
transmission and redemptions by writing a special
form of check, SSI shall deliver to the Trust, on
the business day following the effective date of
such transaction, a listing of such transaction
data in a format agreed to by the Trusts and SSI
from time to time;
E. If any Share certificate or instruction to redeem
tendered to SSI is not satisfactory to SSI, it
shall promptly notify the Trust of such fact
together with the reason therefor;
F. SSI shall cancel promptly Share certificates
received in proper form for redemption and issue,
countersign and mail new Share certificates for
the Shares represented by certificates so
cancelled which are not redeemed;
G. SSI shall advise the Trust and refuse to process
any redemption by electronic transmission or
Exchange by telephone or telegraph or redemptions
by writing a special form of check, if such
transaction would result in the redemption of
Shares represented by outstanding certificates,
unless otherwise instructed by an officer of the
Trust.
13. ADMINISTRATION OF WITHDRAWAL PLANS. A redemption
made pursuant to a Withdrawal Plan offered by the Trusts shall
be effected by SSI at the net asset value per Share of the
appropriate series of the Trust on the twentieth day or the
next business day of the month in which the recipient is
scheduled to receive the withdrawal payment. SSI shall
prepare and mail to the recipient on or before the seventh
calendar day after the date of redemption a check in the
amount of each required payment, net of any amounts withheld
under applicable Federal and state laws, rules and
regulations, and also furnish the shareholder a confirmation
of the redemption as described in Section 12 above.
14. EXCHANGES. Upon receipt by SSI of a request to
exchange Shares of a series of a Trust held in a shareholder's
account for those of any other series of the Trust or any
other series of another Trust or vice versa in written form,
by telephone or telegraph or by other electronic means,
containing data required by the Trust for processing such a
transaction, SSI will:
A. If the request is by telephone, telegraph or
other electronic means, verify that the
shareholder has furnished both the series of a
Trust from and to which the Exchange is to be
made authorization, in a form acceptable to such
Trust, to accept Exchange instructions for his
account by such means.
B. Process a redemption of the Shares of the series
of the Trust to be redeemed in connection with
the Exchange and apply the proceeds thereof, net
of any amounts withheld under applicable Federal
and state laws, rules and regulations, to
purchase shares of any other series of the Trust
or any other series of another Trust being
acquired in accordance with the respective
Trust's redemption and purchase policies and
Sections 11 and 12 of this Agreement.
Any redemption and purchase pursuant to an Exchange shall
be effected as of the time and prices applicable to an order
for redemption or purchase received at the time the request
for Exchange is received.
15. TRANSFER OF SHARES. Upon receipt by SSI of a
request for a transfer of Shares of any series of a Trust, and
receipt of a Share certificate for transfer or an order for
the transfer of Shares in the case of an uncertificated
account, in either case with such endorsements, instruments of
assignment or evidence of succession as may be required by SSI
and accompanied by payment of such transfer taxes, if any, as
may be applicable, and satisfaction of any other conditions
for registration of transfers contained in the Trust's By-
Laws, Prospectuses, and Statements of Additional Information,
SSI will verify the balance of Shares of such series of the
Trust in the account; record the transfer of ownership of such
Shares in its Share certificate and shareholder records for
such series; cancel Share certificates for Shares surrendered
for transfer; establish an account pursuant to Section 8 for
the transferee if a new shareholder; prepare, countersign and
mail new Share certificates for a like number of Shares in the
case of a certificated account; and transmit to the
shareholder by mail or electronically confirmation of the
transfer for each account affected, in a format agreed to by
SSI and the Trust, including all information called for
thereby. SSI shall be responsible for determining that
certificates, orders for transfer, and supporting documents,
if any, are in proper legal form for the transfer of Shares.
16. CHANGES IN SHAREHOLDER RECORDS. Changes in items of
information specified in Section 8 not relating to change in
ownership of Shares will be made by SSI upon receipt of a
request for such change in a format agreed to by SSI and the
Trusts. In the case of any change that SSI and the Trusts
agree requires confirmation, a confirmation of such change in
a format agreed to by SSI and the Trusts shall be transmitted
to the shareholder by mail or electronically.
17. REFUSAL TO REDEEM OR TRANSFER. SSI reserves the
right to refuse to redeem or transfer Shares until reasonably
satisfied that the endorsement on the Share certificates or
written request presented is valid and genuine, and for such
purpose may require where reasonably necessary or appropriate
a guarantee of signature. SSI also reserves the right to
refuse to redeem or transfer Shares until satisfied that the
requested transfer or redemption is legally authorized, and it
shall incur no liability for the refusal in good faith to make
transfers or redemptions which it, in its judgment, deems
improper or unauthorized. Notwithstanding the foregoing, SSI
shall redeem or transfer Shares even though not satisfied as
to the endorsement or legal authority if it is first
indemnified to its reasonable satisfaction against all
expenses and liabilities to which it might, in its judgment,
be subjected by such action.
18. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. The Trust
will promptly inform SSI of the declaration of any dividend or
other distribution with respect to Shares of any series of the
Trust, including the amount of distribution, the amount of
withholding under applicable Federal and state laws, rules and
regulations, if any, dividend number, if any, record date, ex-
dividend date, payable date and price at which dividends or
other distributions are to be reinvested.
In the case of any series of a Trust for which dividends
shall be declared daily and paid monthly or quarterly, SSI
will credit the dividend payable to each shareholder thereof
to a dividend account of the shareholder and will provide the
Trust on each business day with reports of the total amount of
dividends credited and such other data as are agreed upon by
the Trust and SSI. Promptly after the payable date for the
Trust, SSI will provide the Trust with reports showing the
accounts which have been paid a dividend or other
distribution, the amount received by each account, the amount
withheld as required under applicable Federal and state laws,
rules and regulations, if any, the amount of the dividend or
distribution paid in cash or reinvested in Shares, and the
total amount of cash and Shares required for payment of the
dividend or other distribution.
In the case of each other series of the Trust, SSI will
provide the Trust promptly following the record date therefor
with reports of the total amount of dividends payable with
respect thereto and such other data as are agreed to by the
Trusts and SSI. Promptly after the payable date therefor, SSI
will provide the Trust with reports showing the accounts which
are to be paid a dividend or other distribution, the amount to
be received by each account, the amount to be withheld as
required under applicable Federal and state laws, rules and
regulations, if any, whether such dividend or distribution is
to be paid in cash or reinvested in Shares, and the total
amount of cash and Shares required for the payment of such
dividend or distribution.
At times agreed to by the Trusts and SSI, SSI will
transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and
confirmation thereof. Where distributions are reinvested, the
price and date of reinvestment will be those supplied by the
Trusts. Confirmations will be prepared by SSI in a format
agreed to by SSI and the Trusts.
19. WITHHOLDING. Under applicable Federal and state
laws, rules and regulations requiring withholding from
dividends and other distributions and payments to
shareholders, SSI shall be responsible for determining the
amount to be withheld and the Trusts shall forward that amount
to SSI, which will deposit said amount with, and report said
amount to, the proper governmental agency as required
thereunder. Liability for any amounts withheld, whether or
not actually withheld, and for any penalties which may be
imposed upon the payor for failure to withhold, report, or
deposit the proper amount, and for any interest due on said
amount, shall be borne by the Trusts and SSI as provided in
Section 37 hereof.
Upon receipt of a certificate from a shareholder
pertaining to withholding (including exemptions therefrom)
containing such information as required by a Trust of the
shareholder under applicable Federal and state laws, rules and
regulations, SSI shall promptly process the certificate, which
shall become effective as soon as reasonably possible after
receipt by SSI, but no later than may be required by
applicable Federal and state laws, rules and regulations.
At the time a shareholder account is established with a
Trust, the Trust shall be responsible for (i) soliciting the
shareholder's tax identification number in the manner and form
required under applicable Federal and state laws, rules and
regulations; (ii) identifying and rejecting an obviously
incorrect number (as defined under applicable Federal and
state laws, rules and regulations) and (iii) furnishing to SSI
the number and any related information provided by or on
behalf of the shareholder. SSI shall be responsible for any
subsequent communications to the shareholder that may be
required in this regard.
In the case of withholding an amount in excess of the
proper amount from a payment made by or on behalf of a Trust
to a shareholder except as otherwise provided by applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately adjust the
shareholder's account, as well as succeeding deposits;
provided, however, that when an adjustment would result in an
adjustment across calendar years, SSI shall not be required to
make such adjustment.
In the case of (i) a failure to withhold the proper
amount from a dividend or other distribution or payment made
by or on behalf of any series of a Trust to a shareholder or
(ii) any penalties attributable to (a) a failure to withhold
the proper amount or (b) the shareholder's failure to provide
the Trust or SSI with correct information requested in order
to comply with withholding requirements under applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately cause the redemption
of Shares from the shareholder's account with such series
having a value not exceeding the sum of such deficit amount
and applicable penalties and apply the proceeds to reimburse
whomever has borne the expense resulting from the
shareholder's failure. If the value of the Shares in the
shareholder's account with the series is less than the sum of
the deficit amount and applicable penalties, SSI may cause the
redemption of Shares having a value not exceeding such
difference from any account, including a joint account, of the
shareholder with any other series of the Trust or any other
series of another Trust, subject to the consent of the other
Trust, and apply the proceeds to reimburse whoever has borne
the expense resulting from the shareholder's failure.
20. MAILINGS. SSI shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. SSI shall mail financial reports furnished by each series
of a Trust to shareholders as requested and will mail the
current Prospectus for each series of the Trust to
shareholders of such series once each year;
B. SSI shall mail to shareholders of each series of a Trust
proxy material for each duly scheduled meeting of shareholders
of that series;
C. SSI shall include in any of the above mailings such other
enclosures as are compatible for mailing purposes as
reasonably requested by the Trusts;
D. SSI shall make such other mailings upon such terms and
conditions and for such fees as are agreed to by SSI and the
Trust from time to time.
The Trusts shall deliver all material required to be
furnished to SSI for any scheduled mailing sufficiently in
advance of the date for such mailing, so that SSI may effect
the scheduled mailing.
21. TAX INFORMATION RETURNS AND REPORTS. SSI will
prepare and file with the appropriate governmental agencies,
such information, returns and reports as are required to be so
filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other
distributions and payments under applicable Federal and state
laws, rules and regulations, and (iii) gross proceeds of sales
transactions as required and as the Trusts shall direct SSI.
Further, SSI shall prepare and deliver to the Trusts reports
showing amounts withheld from dividends and other
distributions and payments made for each series of the Trusts.
22. INFORMATION TO BE FURNISHED TO SHAREHOLDERS. SSI
will prepare and transmit to each shareholder of the Trust
annually in such format as is reasonably requested by the
Trust, and as agreed to by SSI, information returns and
reports for reporting dividends and other distribution and
payments, amounts withheld, if any, and gross proceeds of
sales transactions as required under applicable Federal and
state laws, rules and regulations.
23. STOP ORDERS. Upon receipt of a request from a Trust
or a shareholder that a "stop" should be placed on the
shareholder's account, SSI will maintain a record of such
"stop" and notify the Trust if any transaction request is
received from a shareholder which would reduce the number of
Shares in an account on which a "stop" has been placed. SSI
will inform the Trusts of any information SSI receives
relating to a "stop." SSI shall also maintain for the Trusts
the record of share certificates on which a "stop" has been
placed, it being understood that a certificate "stop" does not
mean a "stop" on the shareholder's entire account to which a
certificate may relate.
24. SHARE SPLITS AND SHARE DIVIDENDS. If a Trust elects
to declare a Share dividend or split for any series, the
services and fees with respect thereto will be negotiated by
the Trust and SSI.
25. REPLACEMENT OF SHARE CERTIFICATES. SSI may issue a
new Share certificate in place of a Share certificate
represented as not having been received or as having been
lost, stolen, seized or destroyed, upon receiving instructions
from a Trust and indemnity satisfactory to SSI, and may issue
a new Share certificate in exchange for, and upon surrender
of, an identifiable mutilated Share certificate. Such
instructions from the Trust shall be in such form as has been
approved by its Board of Trustees and shall be in accordance
with the provisions of its By-Laws governing such matters.
26. UNCLAIMED AND UNDELIVERED SHARE CERTIFICATES. Where
a Share certificate is in the possession of SSI for any
reason, and has not been claimed by the record holder or
cannot be delivered to the record holder, SSI shall cancel
said certificate and reflect as uncertificated Shares on the
shareholder's account record the Shares represented by said
cancelled certificate.
27. REPORTS AND FILES. SSI shall maintain the files and
furnish the statistical and other information listed on
Schedule C. However, SSI reserves the right to delete, change
or add to the files maintained and information provided so
long as such deletions, additions or changes do not impair the
receipt of services described elsewhere in this Agreement.
SSI shall also use its best efforts to obtain such additional
statistical and other information as the Trusts may reasonably
request within the capabilities of SSI, for such additional
consideration as may be agreed to by SSI and the Trusts.
28. EXAMINATION OF DAILY TRANSACTIONS. The Trusts will
examine reports reflecting each day's transactions and other
data delivered to it for the accuracy of the transactions
reflected therein and failure to reflect transactions that
should have been reflected therein. If SSI has not received
from a Trust, within five (5) business days after delivery of
such reports to the Trust, written notice, which may be in the
form of an appropriate transaction instruction submitted by
the Trust for the purpose of correcting the error or omission,
as to any errors or omissions which a reasonable inspection
and normal audit and control procedure would reveal, then all
transactions reflected in such reports shall be deemed to be
correct and accepted by the Trust, and SSI shall have no
further responsibility for the omission from or correction,
deletion, or inclusion of any transaction reflected or which
should have been reflected therein, or any liability to the
Trust or any third person on account of such error or
omission.
29. DISPOSITION OF BOOKS, RECORDS, AND CANCELLED SHARE
CERTIFICATES. SSI will periodically send to the Trust all
books, documents, and records of the Trust no longer needed
for current purposes and Share certificates which have been
cancelled in transfer or in redemption; such books, documents,
records, and Share certificates shall be safely stored by the
Trusts for future reference for such period as is required and
by any means permitted by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other
relevant statutes. SSI shall have no liability for loss or
destruction of said books, documents, records, or Share
certificates after they are returned to the Trusts.
30. INSPECTION OF SHARE BOOKS. In case of any request
or demand for inspection of the books of a Trust reflecting
ownership of the Shares therein ("Share books"), SSI will make
a reasonable effort to notify the Trust and to secure
instructions as to permitting or refusing such inspection.
SSI reserves the right, however, to exhibit the Share books to
any person in case it is advised by its counsel that it may be
held liable for the failure to exhibit the Share books to such
person.
31. FEES. The Trust shall pay to SSI for its services
hereunder fees computed as set forth in Schedule A hereto.
32. OUT-OF-POCKET EXPENSES. The Trust shall reimburse
SSI for any and all out-of-pocket expenses and charges in
performing services under this Agreement (other than charges
for normal data processing services and related software,
equipment and facilities) including, but not limited to,
mailing service, postage, printing of shareholder statements,
the cost of any and all forms of the Trust and other materials
used by SSI in communicating with shareholders of the Trust,
the cost of any equipment or service used for communicating
with the Trust's custodian bank or other agent of the Trust,
and all costs of telephone communication with or on behalf of
shareholders allocated in a manner mutually acceptable to the
Trust and SSI.
33. INSTRUCTIONS, OPINION OF COUNSEL, AND SIGNATURES.
At any time SSI may apply to a duly authorized agent of a
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice
or opinion of such counsel. SSI shall be protected in acting
upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by SSI to be genuine and to have been signed by the
proper person or persons and shall not be held to have notice
of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
34. TRUSTS' LEGAL RESPONSIBILITY. The Trust assumes
full responsibility for the preparation, contents, and
distribution of each Prospectus and Statement of Additional
Information of the Trust, and for complying with all
applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and
any laws, rules, and regulations of government authorities
having jurisdiction over the Trust except that SSI shall be
responsible for all laws, rules and regulations of government
authorities having jurisdiction over transfer agents and their
activities. SSI assumes full responsibility for complying
with due diligence requirements of payors of reportable
dividends and of brokers under the Internal Revenue Code with
respect to shareholder accounts.
35. REGISTRATION OF SSI AS TRANSFER AGENT. SSI
represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of
the Securities Exchange Act of 1934 and will notify the Trusts
promptly if such registration is revoked or if any proceeding
is commenced before the Securities and Exchange Commission
which may lead to such revocation.
36. CONFIDENTIALITY OF RECORDS. SSI agrees not to
disclose any information received from the Trusts to any other
customer of SSI or to any other person except SSI's employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SSI shall return to the Trusts all records in the
possession and control of SSI related to the Trusts'
activities, other than SSI's own business records, it being
also understood that any programs and systems used by SSI to
provide the services rendered hereunder will not be given to
the Trusts.
Notwithstanding the foregoing, it is understood and
agreed that SSI may maintain with the Trusts' records
information and data to be utilized by SSI in providing
services to entities serving as trustees and/or custodians of
prototype Tax-Qualified Retirement Plans, IRA Plans, plans for
employees of public schools or tax-exempt organizations, or
other plans which invest in the Shares. In the event that
this Agreement is terminated, SSI may transfer and retain from
the records maintained for the Trusts such information and
data relating to participants in such aforementioned plans as
may be required for SSI to continue providing its services to
such trustees and/or custodians.
37. LIABILITY AND INDEMNIFICATION. SSI shall not be
liable to the Trusts for any action taken or thing done by it
or its agents or contractors on behalf of a Trust in carrying
out the terms and provisions of this Agreement if done in good
faith and without negligence or misconduct on the part of SSI,
its agents or contractors.
The Trust shall indemnify and hold SSI, and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses,
including reasonable expenses for counsel, incurred by it in
connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
contractors in the performance of its duties hereunder to the
Trusts, or as a result of acting upon any instruction believed
by it to have been executed by a duly authorized agent of a
Trust or as a result of acting upon information provided by a
Trust in form and under policies agreed to by SSI and the
Trusts provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular series or group of series of Shares, such
indemnification shall be only out of the assets of that series
or group of series; (ii) this indemnification shall not apply
to actions or omissions constituting negligence or misconduct
of SSI or its agents or contractors, including but not limited
to willful misfeasance, bad faith, or gross negligence in the
performance of their duties, or reckless disregard of their
obligations and duties under this Agreement; and (iii) SSI
shall give a Trust prompt notice and reasonable opportunity to
defend against any such claim or action in its own name or in
the name of SSI.
SSI shall indemnify and hold harmless the Trust from and
against any and all claims, demands, expenses and liabilities
which the Trust may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of SSI or
its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of the Trust or its
other agents or contractors and (ii) the Trust shall give SSI
prompt notice and reasonable opportunity to defend against any
such claim or action in its own name or in the name of the
Trust.
38. INSURANCE. SSI represents that it has available to
it the insurance coverage set forth on Schedule D hereto, and
agrees to notify the Trusts in advance of any proposed
deletion or reduction in said insurance.
39. FURTHER ASSURANCES. Each party agrees to perform
such further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
40. DUAL INTERESTS. It is understood that some person
or persons may be trustees, directors, officers, or
shareholders of both the Trusts and SSI, and that the
existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder except as
otherwise provided by specific provision of applicable law.
41. AMENDMENT AND TERMINATION. This Agreement may be
modified or amended from time to time by mutual agreement
between the parties hereto and may be terminated by at least
one hundred eighty (180) days' written notice given by one
party to the other. Upon termination hereof, the Trust shall
pay to SSI such compensation as may be due as of the date of
such termination and shall reimburse SSI for its costs,
expenses, and disbursements payable under this Agreement to
such date. In the event that in connection with termination a
successor to any of the duties or responsibilities of SSI
hereunder is designated by the Trust by written notice to SSI,
it shall promptly upon such termination and at the expense of
the Trust, transfer to such successor a certified list of
shareholders of each series of the Trust (with name, address,
and tax identification number), a record of the account of
each shareholder and status thereof, and all other relevant
books, records, and data established or maintained by SSI
under this Agreement and shall cooperate in the transfer of
such duties and responsibilities, including provision, at the
expense of the Trust, for assistance from SSI personnel in the
establishment of books, records, and other data by such
successor.
42. ASSIGNMENT.
A. Except as provided below, neither this Agreement nor
any rights or obligations hereunder may be assigned by
either party without the written consent of the
other party.
B. This Agreement shall inure to the benefit of and
be binding upon the parties and their respective
permitted successors and assigns.
C. SSI may subcontract for the performance of any of
its duties or obligations under this Agreement with
any person if such subcontract is approved by the
Board of Trustees of a Trust provided, however,
that SSI shall be as fully responsible to the
Trust for the acts and omissions of any
subcontractor as it is for its own acts and
omissions.
43. NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trusts is One South Wacker Drive, Chicago,
Illinois 60606, Attention: Secretary, and that of SSI for this
purpose is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
44. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of a Trust hereunder shall be binding only upon the
assets of that Trust (or the applicable series thereof), as
provided in its Agreement and Declaration of Trust, and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of the Trust or upon any other Trust. Neither the
authorization of any action by the Trustees or the
shareholders of a Trust, nor the execution of this Agreement
on behalf of the Trust shall impose any liability upon any
Trustee or any shareholder. Nothing in this Agreement shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement.
45. REFERENCES AND HEADINGS. In this Agreement and in
any such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
STEIN ROE INSTITUTIONAL TRUST
ATTEST: By: ____________________________
Tomothy K. Armour, President
____________________________
Jilaine Hummel Bauer, Secretary
STEINROE SERVICES INC.
ATTEST: By: __________________________
Hans P. Ziegler
President
____________________________
Jilaine Hummel Bauer, Secretary
<PAGE>
Schedule A
Agency Agreement
Fees pursuant to Section 31 of the Agency Agreement shall
be calculated in accordance with the following schedule. For
each series, the fee shall accrue on each calendar day and
shall be payable monthly on the first business day of the next
succeeding calendar month.
The daily fee accrual shall be computed by multiplying
the fraction of one divided by the number of days in the
calendar year by the applicable annual fee and multiplying
this product by the net assets of the series, determined in
the manner established by the Board of Trustees of the
applicable Trust, as of the close of business on the last
preceding business day on which the series' net asset value
was determined.
Series Annual Fee
- ---------------------------- ----------------------------------
Stein Roe Institutional High
Yield Fund 0.050% of average daily net assets
Dated: _______, 1996
<PAGE>
Schedule B
Agency Agreement
The Series of the Trust covered by this agreement are as follows:
Name of Series Effective Date
- ---------------------------------------- ------------------
Stein Roe Institutional High Yield Fund
Dated: _________, 1996
<PAGE>
SCHEDULE C
SYSTEM DESCRIPTION
TRANSACTION PROCESSING LOG - PROCESSING SPAN IN DAYS
EXPEDITED REDEMPTION FILE - BATCH MAINTENANCE JOURNAL
DAILY CRT OPERATOR STATISTICS
DAILY BATCH MONITORING REPORT
ONLINE NEW ACCOUNT REPORT
DETAIL DAILY "AS OF" REPORT - BY ACCOUNTABILITY
SPECIAL HANDLING - DAILY CONFIRMATIONS
BANK ACCOUNT OUTSTANDING BALANCE VERIFICATION
MISCELLANEOUS FEE JOURNAL
BATCH ENTRY SUMMARY REPORT
ACCOUNT CLOSEOUT ADJUSTMENTS - SUMMARY REPORT
REDEMPTION CHECK REGISTER
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
DST INC. - DDPS DAILY CASH RECAP REPORT
DAILY UPDATE (MU100) ERROR LISTING
EXCHANGE DISTRIBUTION SUMMARY REPORT
BATCH TRANSMISSION ERRORS - TRANSACTION ID: DFUNP
DAILY CHECK RECONCILIATION UPDATE REGISTER UCHECK
UPDATES
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
WIRE INSTRUCTION REPORT FOR DIRECT REDEMPTIONS
TRANSFER RECORD DAILY DVND INCREASE JOURNAL
RECORD DATE JOURNAL
DAILY RECAP & SHARE CONTROL SHEET - SHARE AMOUNT
EXCHANGE CLOSE-OUT AUTOMATIC REINVESTMENT REPORT BY
EXCHANGE (FROM) FUND
DETAIL DAILY "AS OF" REPORT - BY REASON CODE
SHAREOWNER CHECK-CONFIRM RECONCILIATION
DAILY/FREE DAILY BALANCE LISTING - ALPHA CODE SEQUENCE
CONSOLIDATED ERROR REPORTING
DAILY CONFIRMED UNPAID PURCHASE JOURNAL - NO LOAD
REQUESTS FOR DUPLICATE CONFIRMS
CALCULATED DAILY DIVIDEND RATE
EXTERNAL CHECK/INVESTMENT ISSUANCE REPORT
IN-HOUSE CHECK ISSUANCE REPORT
AUTOMATED CLEARING HOUSE REDEMPTION TRANSACTIONS
STEINROE FUNDS
ACH PURCHASE TRANSACTIONS REPORT
ACH MONTHLY REDEMPTION/PURCHASE - TRANSACTION REPORT
STEIN ROE & FARNHAM TRANSFER RECORD FOR DIRECT PAYMENTS
REDEMPTION CHECK REGISTER
DAILY DIVIDEND ACCRUAL CLOSEOUTS COMBINED WITH CLOSEOUT
REDEMPTION WIRES
DAILY DIVIDEND ACCRUAL CLOSEOUTS UNMATCHED CLOSEOUT
ACCRUAL ERROR REPORT
AVERAGE COST ACCOUNT CALCULATION EXCEPTION REPORT FOR
DAILY AVERAGE COST FORMS REQUEST
NEW FOREIGN ACCOUNT REPORT
BATCH BALANCE LISTING
TRANSACTION TRACER REPORT
BATCH BALANCE LISTING - ACCOUNT DETAIL
TIMER - SWITCH UPDATE VERIFICATION
REDEMPTION & ADDRESS CHANGE PROCESSED SAME DAY WARNING
REPORT
AUTOMATE CLEARING HOUSE PRENOTE TRANSACTIONS
STEINROE FUNDS
EXRED WARNING REPORT
EXCHANGE WARNING REPORT UNLIKE TAX ID NUMBERS
INVESTOR TRANSFER TRANSACTIONS LISTING INVESTOR
DISTRIBUTOR CODE: STR
DETAIL DAILY "AS OF" REPORT BY TRANSACTION CODE
DAILY "AS OF" REPORT
DAILY FUND SHARE BALANCE ERROR LIST
DAILY BATCH BALANCE
DAILY SHAREOWNER MAINTENANCE ERROR LISTING
EXPEDITED REDEMPTION FILE STATUS JOURNAL
NEW ACCOUNT VERIFICATION QUALITY REPORT
SYSTEMATIC EXCHANGE DAILY MAINTENANCE ACTIVITY
ADDITIONAL MAIL MAINTENANCE JOURNAL
BATCH TRANSMISSION ERRORS TRANSACTION ID: ATRANS
DEALER FILE MAINTENANCE REPORT
CHECK-WRITING REDEMPTION REPORT
ASSET ALLOCATION - REALLOCATION
NEW ACCOUNT REPORT
SCHEDULE D
<TABLE>
SCHEDULE OF INSURANCE
STEIN ROE & FARNHAM INCORPORATED
ONE SOUTH WACKER DRIVE
CHICAGO, IL 60606-4685
<CAPTION>
CARRIER POLICY NO. TERM COVERAGE EXPOSURE/RATE LIMITS PREMIUM
- --------- ------------ -------- --------- ---------------------------- -------------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal (96)7626-89 01/01/95 Workers' FL-8810 $213,000 .71 Workers' Compensation: Statutory $61,612
Insurance. -79 -96 Compensation NY-8810 $660,000 .57
Co sation Experience Mod. .97 Employers Liability:
Premium Disc. 10.1% Bodily Injury by Accident:
$100,000 each accident
IL-8810 $18,900,000 .42
IL-8742 $ 710,000 .92 Bodily Injury by Disease:
Experience Mod. .97 $500,000 policy limit
IL Schedule Credit 25%
Premium Discount 10.1% Bodily Injury by Disease:
$100,000 each employee
Flat Coverage Monopolistic
Fund States 50. x 6
Expense Constant 160
- ------------------------------------------------------------------------------------------------------------------------------------
Federal 681-26-32 01/01/95 Financial Blanket Personal $2,000,000 General Aggregate
$21,686.92
Insurance -96 Package Property Limit $11,070,000 (other than Products Completed
Co. Policy Operations)
Two Scheduled Locations: $1,000,000 Products Completed
Puerto Rico $30,300 Operations Aggregate Limit
1510 Skokie Blvd. $600,000
$1,000,000 Personal & Advertising
Library Values: $80,000 Injury Limit
Fine Arts: $399,387 $1,000,000 Each Occurrence Limit
Inland Marine - Valuable $10,000 Medical Expense Limit
Papers
General Liability based on $100,000 Personal Property Damage
square feet to Rented Premises Limit
- ---------------------------------------------------------------------------------------------------------------------------------
Vigilant 7312-72-46 01/01/95 Foreign Liability & N.O. Auto $1,765 General Liability: $3,100
Insurance -96 Package Policy Workers' Compensation 1,335 $1,000,000 Commercial Liability
Co. for Bodily Injury or Property
General Damage Liability per occurrence
Liability $50 Per Person, per trip- & Personal Injury or Advertising
Flat. Based on: Injury caused by an offense
Automobile Total Employees - 20 $1,000,000 Annual Aggregate -
Liability-DIC/ No. of Trips 49 Products/Completed Operations
Excess Auto Total No. of Days 104
$250,000 Fire Legal Liability
Foreign Volun- $10,000 Medical Expense Per person
ary Workers'
Compensation $30,000 Medical Expense per accident
Automobile Liability - DIC/Excess Auto
$1,000,000 Bodily Injury per person
$1,000,000 Bodily Injury per occurrence
$1,000,000 Property damage per occurrence
$10,000 Medial Expense per person
$30,000 Medical Per Accident
Foreign Voluntary Workers'
Compensation - Statutory
$100,000 Employers Liability Limit
$20,000 Repatriation Expense for
any one Employee
- -----------------------------------------------------------------------------------------------------------------------------------
St. Paul IM01200804 01/01/95 Electronic Data/Media Flat $400 for Computer Equipment $4,132,731 $6,987
Insurance -96 Data $500,000 limit
Co. Processing
Business Interruption -
1,000,000 limit Valuable Papers & Records 600,000
Contingent Business Interrup-
tion: 1,000,000 - Kansas City Business Interruption 1,000,000
100,000 - Downers Grove
Deductible Contingent Business
Computer Equipment, Data and Interruption 1,100,000
Media and Extra Expense
Combined $1,000
Special Breakdown Deductible Extra Expense 500,000
$5,000
Transit
Computer Equipment $50,000
Data & Media $50,000
Valuable Papers $5,000
- ------------------------------------------------------------------------------------------------------------------------------------
Gulf GA5743948P 02/15/96 Excess Mutual $15,000,000 excess of $5,000,000 $540,935
Insurance -96 Fund D&O/E&O excess of underlying deductible
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Federal 81391969-A 02/15/95 Investment Limits of Liability $25,000,000 $211,312
Insurance -96 Company Assets Extended Forgery 10,000,000
Co. Protection Bond Threats to Persons 5,000,000
Uncollectible items of Deposit 500,000
Audit Expense 100,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 9(b)
ADMINISTRATIVE AGREEMENT
BETWEEN
STEIN ROE INSTITUTIONAL TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEIN ROE INSTITUTIONAL TRUST, a Massachusetts business
trust registered under the Securities Act of 1933 ("1933 Act")
and the Investment Company Act of 1940 ("1940 Act") (the
"Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation, of Chicago, Illinois ("Administrator"),
to furnish certain administrative services with respect to the
Trust and the series of the Trust listed in Schedule A hereto,
as such schedule may be amended from time to time (each such
series hereinafter referred to as "Fund").
The Trust and Administrator hereby agree that:
1. ADMINISTRATIVE SERVICES. Subject to the terms of this
Agreement and the supervision and control of the Trust's Board
of Trustees ("Trustees"), Administrator shall provide the
following services with respect to the Trust:
(a) Preparation and maintenance of the Trust's registration
statement with the Securities and Exchange Commission
("SEC");
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Fund
("Prospectus");
(c) Preparation, filing with appropriate regulatory
authorities, and dissemination of various reports for the
Fund, including but not limited to semiannual reports to
shareholders under Section 30(d) of the 1940 Act, annual
and semiannual reports on Form N-SAR, and notices pursuant
to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including the
collection of all information required for preparation of
proxy statements, the preparation and filing with
appropriate regulatory agencies of such proxy statements,
the supervision of solicitation of shareholders and
shareholder nominees in connection therewith, tabulation
(or supervision of the tabulation) of votes, response to
all inquiries regarding such meetings from shareholders,
the public and the media, and preparation and retention of
all minutes and all other records required to be kept in
connection with such meetings;
(e) Maintenance and retention of all Trust charter documents
and the filing of all documents required to maintain the
Trust's status as a Massachusetts business trust and as a
registered open-end investment company;
(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board of Trustees and
committees thereof and preparation and retention of all
minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax
required to be paid in connection therewith;
(h) Calculation of all Trust and Fund expenses and arrangement
for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of
each Fund;
(j) Determination, after consultation with the officers of the
Trust, of the jurisdictions in which shares of beneficial
interest of each Fund ("Shares") shall be registered or
qualified for sale, or may be sold pursuant to an exemption
from such registration or qualification, and preparation
and maintenance of the registration or qualification of the
Shares for sale under the securities laws of each such
jurisdiction;
(k) Provision of the services of persons who may be appointed
as officers of the Trust by the Board of Trustees (it is
agreed that some person or persons may be officers of both
the Trust and the Administrator, and that the existence of
any such dual interest shall not affect the validity of
this Agreement except as otherwise provided by specific
provision of applicable law);
(l) Preparation and, subject to approval of the Trust's Chief
Financial Officer, dissemination of the Trust's and each
Fund's quarterly financial information to the Board of
Trustees and preparation of such other reports relating to
the business and affairs of the Trust and each Fund as the
officers and Board of Trustees may from time to time
reasonably request;
(m) Administration of the Trust's Code of Ethics and periodic
reporting to the Board of Trustees of Trustee and officer
compliance therewith;
(n) Provision of internal legal, accounting, compliance, audit,
and risk management services and periodic reporting to the
Board of Trustees with respect to such services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to,
custody, tax, transfer agency, disaster recovery, audit,
and legal services;
(p) Negotiation and arrangement for insurance desired or
required of the Trust and administering all claims
thereunder;
(q) Response to all inquiries by regulatory agencies, the
press, and the general public concerning the business and
affairs of the Trust, including the oversight of all
periodic inspections of the operations of the Trust and its
agents by regulatory authorities and responses to subpoenas
and tax levies;
(r) Handling and resolution of any complaints registered with
the Trust by shareholders, regulatory authorities, and the
general public;
(s) Monitoring legal, tax, regulatory, and industry
developments related to the business affairs of the Trust
and communicating such developments to the officers and
Board of Trustees as they may reasonably request or as the
Administrator believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of Trustees of
the Trust of modifications to such policies to facilitate
the protection of shareholders or market competitiveness of
the Trust and Fund and to the extent necessary to comply
with new legal or regulatory requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio
information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in
connection with the litigation or settlement of such
claims.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Administrator
under this Agreement, Administrator may, to the extent it deems
appropriate, and subject to compliance with the requirements of
applicable laws and regulations and upon receipt of approval of
the Trustees, make use of (i) its affiliated companies and
their directors, trustees, officers, and employees and (ii)
subcontractors selected by Administrator, provided that
Administrator shall supervise and remain fully responsible for
the services of all such third parties in accordance with and
to the extent provided by this Agreement. All costs and
expenses associated with services provided by any such third
parties shall be borne by Administrator or such parties.
3. INSTRUCTIONS, OPINIONS OF COUNSEL, AND SIGNATURES. At
any time Administrator may apply to a duly authorized agent of
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice
or opinion of such counsel. Administrator shall be protected
in acting upon any such instruction, advice, or opinion and
upon any other paper or document delivered by the Trust or such
counsel believed by Administrator to be genuine and to have
been signed by the proper person or persons and shall not be
held to have notice of any change of authority of any officer
or agent of the Trust, until receipt of written notice thereof
from the Trust.
4. EXPENSES BORNE BY TRUST. Except to the extent
expressly assumed by Administrator herein or under a separate
agreement between the Trust and Administrator and except to the
extent required by law to be paid by Administrator, the Trust
shall pay all costs and expenses incidental to its
organization, operations and business. Without limitation,
such costs and expenses shall include but not be limited to:
(a) All charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) All charges for equipment or services used for obtaining
price quotations or for communication between Administrator
or the Trust and the custodian, transfer agent or any other
agent selected by the Trust;
(c) All charges for investment advisory, portfolio management,
and accounting services provided to the Trust by the
Administrator, or any other provider of such services;
(d) All charges for services of the Trust's independent
auditors and for services to the Trust by legal counsel;
(e) All compensation of Trustees, other than those affiliated
with Administrator, all expenses incurred in connection
with their services to the Trust, and all expenses of
meetings of the Trustees or committees thereof;
(f) All expenses incidental to holding meetings of
shareholders, including printing and of supplying each
record-date shareholder with notice and proxy solicitation
material, and all other proxy solicitation expenses;
(g) All expenses of printing of annual or more frequent
revisions of the Trust's prospectus(es) and of supplying
each then-existing shareholder with a copy of a revised
prospectus;
(h) All expenses related to preparing and transmitting
certificates representing the Trust's shares;
(i) All expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) All brokers' commissions and other normal charges incident
to the purchase, sale, or lending of Fund securities;
(k) All taxes and governmental fees payable to Federal, state
or other governmental agencies, domestic or foreign,
including all stamp or other transfer taxes;
(l) All expenses of registering and maintaining the
registration of the Trust under the 1940 Act and, to the
extent no exemption is available, expenses of registering
the Trust's shares under the 1933 Act, of qualifying and
maintaining qualification of the Trust and of the Trust's
shares for sale under securities laws of various states or
other jurisdictions and of registration and qualification
of the Trust under all other laws applicable to the Trust
or its business activities;
(m) All interest on indebtedness, if any, incurred by the Trust
or a Fund; and
(n) All fees, dues and other expenses incurred by the Trust in
connection with membership of the Trust in any trade
association or other investment company organization.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by the Trust that are attributable solely to the
organization, operation or business of a Fund shall be paid
solely out of Fund assets. Any expense borne by the Trust
which is not solely attributable to a Fund, nor solely to any
other series of shares of the Trust, shall be apportioned in
such manner as Administrator determines is fair and
appropriate, or as otherwise specified by the Board of
Trustees.
6. EXPENSES BORNE BY ADMINISTRATOR. Administrator at its
own expense shall furnish all executive and other personnel,
office space, and office facilities required to render the
services set forth in this Agreement. However, Administrator
shall not be required to pay or provide any credit for services
provided by the Trust's custodian or other agents without
additional cost to the Trust.
In the event that Administrator pays or assumes any
expenses of the Trust or a Fund not required to be paid or
assumed by Administrator under this Agreement, Administrator
shall not be obligated hereby to pay or assume the same or
similar expense in the future; provided that nothing contained
herein shall be deemed to relieve Administrator of any
obligation to the Trust or a Fund under any separate agreement
or arrangement between the parties.
7. ADMINISTRATION FEE. For the services rendered,
facilities provided, and charges assumed and paid by
Administrator hereunder, the Trust shall pay to Administrator
out of the assets of each Fund fees at the annual rate for such
Fund as set forth in Schedule B to this Agreement. For each
Fund, the administrative fee shall accrue on each calendar day,
and shall be payable monthly on the first business day of the
next succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual
rate of fee, and multiplying this product by the net assets of
the Fund, determined in the manner established by the Board of
Trustees, as of the close of business on the last preceding
business day on which the Fund's net asset value was
determined.
8. STATE EXPENSE LIMITATION. If for any fiscal year of a
Fund, its aggregate operating expenses ("Aggregate Operating
Expenses") exceed the applicable percentage expense limit
imposed under the securities law and regulations of any state
in which Shares of the Fund are qualified for sale (the "State
Expense Limit"), the Administrator shall pay such Fund the
amount of such excess. For purposes of this State Expense
Limit, Aggregate Operating Expenses shall (a) include (i) any
fees or expense reimbursements payable to Administrator
pursuant to this Agreement and (ii) to the extent the Fund
invests all or a portion of its assets in another investment
company registered under the 1940 Act, the pro rata portion of
that company's operating expenses allocated to the Fund, and
(iii) any compensation payable to Administrator pursuant to any
separate agreement relating to the Fund's investment operations
and portfolio management, but (b) exclude any interest, taxes,
brokerage commissions, and other normal charges incident to the
purchase, sale or loan of securities, commodity interests or
other investments held by the Fund, litigation and
indemnification expense, and other extraordinary expenses not
incurred in the ordinary course of business. Except as
otherwise agreed to by the parties or unless otherwise required
by the law or regulation of any state, any reimbursement by
Administrator to a Fund under this section shall not exceed the
administrative fee payable to Administrator by the Fund under
this Agreement.
Any payment to a Fund by Administrator hereunder shall be
made monthly, by annualizing the Aggregate Operating Expenses
for each month as of the last day of the month. An adjustment
for payments made during any fiscal year of the Fund shall be
made on or before the last day of the first month following
such fiscal year of the Fund if the Annual Operating Expenses
for such fiscal year (i) do not exceed the State Expense
Limitation or (ii) for such fiscal year there is no applicable
State Expense Limit.
9. NON-EXCLUSIVITY. The services of Administrator to the
Trust hereunder are not to be deemed exclusive and
Administrator shall be free to render similar services to
others.
10. STANDARD OF CARE. Neither Administrator, nor any of
its directors, officers or stockholders, agents or employees
shall be liable to the Trust, any Fund, or its shareholders for
any action taken or thing done by it or its subcontractors or
agents on behalf of the Trust or the Fund in carrying out the
terms and provisions of this Agreement if done in good faith
and without negligence or misconduct on the part of
Administrator, its subcontractors, or agents.
11. INDEMNIFICATION. The Trust shall indemnify and hold
Administrator and its controlling persons, if any, harmless
from any and all claims, actions, suits, losses, costs,
damages, and expenses, including reasonable expenses for
counsel, incurred by it in connection with its acceptance of
this Agreement, in connection with any action or omission by it
or its agents or subcontractors in the performance of its
duties hereunder to the Trust, or as a result of acting upon
any instruction believed by it to have been executed by a duly
authorized agent of the Trust or as a result of acting upon
information provided by the Trust in form and under policies
agreed to by Administrator and the Trust, provided that: (i)
to the extent such claims, actions, suits, losses, costs,
damages, or expenses relate solely to a particular Fund or
group of Funds, such indemnification shall be only out of the
assets of that Fund or group of Funds; (ii) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of Administrator or its
agents or subcontractors, including but not limited to willful
misfeasance, bad faith, or gross negligence in the performance
of their duties, or reckless disregard of their obligations and
duties under this Agreement; and (iii) Administrator shall give
the Trust prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or in the name
of Administrator.
Administrator shall indemnify and hold harmless the Trust
from and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising out
of, or incurred because of, the negligence or misconduct of
Administrator or its agents or subcontractors, provided that
such Trust shall give Administrator prompt notice and
reasonable opportunity to defend against any such claim or
action in its own name or in the name of such Trust.
12. EFFECTIVE DATE, AMENDMENT, AND TERMINATION. This
Agreement shall become effective as to any Fund as of the
effective date for that Fund specified in Schedule A hereto
and, unless terminated as hereinafter provided, shall remain in
effect with respect to such Fund thereafter from year to year
so long as such continuance is specifically approved with
respect to that Fund at least annually by a majority of the
Trustees who are not interested persons of Trust or
Administrator.
As to any Trust or Fund of that Trust, this Agreement may
be modified or amended from time to time by mutual agreement
between the Administrator and the Trust and may be terminated
by Administrator or Trust by at least sixty (60) days' written
notice given by the terminating party to the other party. Upon
termination as to any Fund, the Trust shall pay to
Administrator such compensation as may be due under this
Agreement as of the date of such termination and shall
reimburse Administrator for its costs, expenses, and
disbursements payable under this Agreement to such date. In
the event that, in connection with a termination, a successor
to any of the duties or responsibilities of Administrator
hereunder is designated by the Trust by written notice to
Administrator, upon such termination Administrator shall
promptly, and at the expense of the Trust or Fund with respect
to which this Agreement is terminated, transfer to such
successor all relevant books, records, and data established or
maintained by Administrator under this Agreement and shall
cooperate in the transfer of such duties and responsibilities,
including provision, at the expense of such Fund, for
assistance from Administrator personnel in the establishment of
books, records, and other data by such successor.
13. ASSIGNMENT. Any interest of Administrator under this
Agreement shall not be assigned either voluntarily or
involuntarily, by operation of law or otherwise, without the
prior written consent of Trust.
14. BOOKS AND RECORDS. Administrator shall maintain, or
oversee the maintenance by such other persons as may from time
to time be approved by the Board of Trustees to maintain, the
books, documents, records, and data required to be kept by the
Trust under the 1940 Act, the laws of the Commonwealth of
Massachusetts or such other authorities having jurisdiction
over the Trust or the Fund or as may otherwise be required for
the proper operation of the business and affairs of the Trust
or the Fund (other than those required to be maintained by any
investment adviser retained by the Trust on behalf of a Fund in
accordance with Section 15 of the 1940 Act).
Administrator will periodically send to the Trust all
books, documents, records, and data of the Trust and each of
its Funds listed in Schedule A that are no longer needed for
current purposes or required to be retained as set forth
herein. Administrator shall have no liability for loss or
destruction of said books, documents, records, or data after
they are returned to such Trust.
Administrator agrees that all such books, documents,
records, and data which it maintains shall be maintained in
accordance with Rule 31a-3 of the 1940 Act and that any such
items maintained by it shall be the property of the Trust.
Administrator further agrees to surrender promptly to the Trust
any such items it maintains upon request, provided that the
Administrator shall be permitted to retain a copy of all such
items. Administrator agrees to preserve all such items
maintained under Rule 31a-1 for the period prescribed under
Rule 31a-2 of the 1940 Act.
Trust shall furnish or otherwise make available to
Administrator such copies of the financial statements, proxy
statements, reports, and other information relating to the
business and affairs of each Fund of the Trust as Administrator
may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not
be binding upon any Trustee, officer, employee, agent or
shareholder of Trust. Neither the authorization of any action
by the Trustees or shareholders of Trust nor the execution of
this Agreement on behalf of Trust shall impose any liability
upon any Trustee or any shareholder.
16. USE OF ADMINISTRATOR'S NAME. The Trust may use its
name and the names of its Funds listed in Schedule A or any
other name derived from the name "Stein Roe & Farnham" only for
so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of Administrator as it relates to the services it
has agreed to furnish under this Agreement. At such time as
this Agreement or any extension, renewal or amendment hereof,
or such other similar agreement shall no longer be in effect,
Trust will cease to use any name derived from the name "Stein
Roe & Farnham" or otherwise connected with Administrator, or
with any organization which shall have succeeded to
Administrator's business herein described.
17. REFERENCES AND HEADINGS. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder" shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect
of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original.
Dated: December 12, 1996
STEIN ROE INSTITUTIONAL TRUST
By: TIMOTHY K. ARMOUR
Timothy K. Armour
President
Attest:
JILAINE HUMMEL BAUER
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Hans P. Ziegler
Chief Executive Officer
Attest:
JLAINE HUMMEL BAUER
Jilaine Hummel Bauer
Secretary
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are
as follows:
Effective Date
---------------
Stein Roe Institutional High Yield Fund January 1, 1997
Dated: December 12, 1996
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated with respect to each Fund in accordance with the
following schedule applicable to average daily net assets of
the Fund:
Administrative Fee
Fund Schedule
- ---------------------------- ----------------------------
Stein Roe Institutional 0.150% of first $500 million,
High Yield Fund 0.125% thereafter
Dated: December 12, 1996
EXHIBIT 9(c)
ACCOUNTING AND BOOKKEEPING AGREEMENT
This Agreement is made this 12th day of December. 1996, by
and between Stein Roe Institutional Trust, a Massachusetts
business trust, (hereinafter referred to as the "Trust") and
Stein Roe & Farnham Incorporated ("Stein Roe"), a Delaware
corporation.
1. Appointment. The Trust hereby appoints Stein Roe to act as
its agent to perform the services described herein with respect
to each series of shares of the Trust (the "Series") identified
in and beginning on the date specified on Appendix I to this
Agreement, as may be amended from time to time. Stein Roe
hereby accepts appointment as the Trust's agent and agrees to
perform the services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, Stein Roe shall
value all securities and other assets of the Series, and
compute the net asset value per share of such Series, at such
times and dates and in the manner and by such methodology as is
specified in the then currently effective prospectus and
statement of additional information for such Series, and
pursuant to such other written procedures or instructions
furnished to Stein Roe by the Trust. To the extent procedures
or instructions used to value securities or other assets of a
Series under this Agreement are at any time inconsistent with
any applicable law or regulation, the Trust shall provide Stein
Roe with written instructions for valuing such securities or
assets in a manner which the Trust represents to be consistent
with applicable law and regulation.
(b) Net Income. Stein Roe shall calculate with such
frequency as the Trust shall direct, the net income of each
Series of the Trust for dividend purposes and on a per share
basis. Such calculation shall be at such times and dates and
in such manner as the Trust shall instruct Stein Roe in
writing. For purposes of such calculation, Stein Roe shall not
be responsible for determining whether any dividend or interest
accruable to the Trust is or will be actually paid, but will
accrue such dividend and interest unless otherwise instructed
by the Trust.
(c) Capital Gains and Losses. Stein Roe shall calculate
gains or losses of each Series of the Trust from the sale or
other disposition of assets of that Series as the Trust shall
direct.
(d) Yields. At the request of the Trust, Stein Roe shall
compute yields for each Series of the Trust for such periods
and using such formula as shall be instructed by the Trust.
(e) Communication of Information. Stein Roe shall provide
the Trust, the Trust's transfer agent and such other parties as
directed by the Trust with the net asset value per share, the
net income per share and yields for each Series of the Trust at
such time and in such manner and format and with such frequency
as the parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish Stein Roe with any and all instructions, explanations,
information, specifications and documentation deemed necessary
by Stein Roe in the performance of its duties hereunder,
including, without limitation, the amounts and/or written
formula for calculating the amounts, and times of accrual of
liabilities and expenses of each Series of the Trust. The
Trust shall also at any time and from time to time furnish
Stein Roe with bid, offer and/or market values of securities
owned by the Trust if the same are not available to Stein Roe
from a pricing or similar service designated by the Trust for
use by Stein Roe to value securities or other assets. Stein
Roe shall at no time be required to commence or maintain any
utilization of, or subscriptions to, any such service which
shall be the sole responsibility and expense of the Trust.
3. Recordkeeping.
(a) Stein Roe shall, as agent for the Trust, maintain and
keep current and preserve the general ledger and other
accounts, books, and financial records of the Trust relating to
activities and obligations under this Agreement in accordance
with the applicable provisions of Section 31(a) of the General
Rules and Regulations under the Investment Company Act of 1940,
as amended (the "Rules").
(b) All records maintained and preserved by Stein Roe
pursuant to this Agreement which the Trust is required to
maintain and preserve in accordance with the Rules shall be and
remain the property of the Trust and shall be surrendered to
the Trust promptly upon request in the form in which such
records have been maintained and preserved.
(c) Stein Roe shall make available on its premises during
regular business hours all records of a Trust for reasonable
audit, use and inspection by the Trust, its agents and any
regulatory agency having authority over the Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized
agent of the Trust for instructions regarding the Trust, and
may consult counsel for such Trust or its own counsel, in
respect of any matter arising in connection with this
Agreement, and it shall not be liable for any action taken or
omitted by it in good faith in accordance with such
instructions or with the advice or opinion of such counsel.
Stein Roe shall be protected in acting upon any such
instruction, advice, or opinion and upon any other paper or
document delivered by the Trust or such counsel believed by
Stein Roe to be genuine and to have been signed by the proper
person or persons and shall not be held to have notice of any
change of authority of any officer or agent of the Trust, until
receipt of written notice thereof from such Trust.
(b) Stein Roe may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as conclusive
evidence of (i) the authority of any person to act in
accordance with such vote or (ii) any determination or any
action by the Board of Trustees pursuant to its Agreement and
Declaration of Trust as described in such vote, and such vote
may be considered as in full force and effect until receipt by
Stein Roe of written notice to the contrary.
5. Compensation. The Trust shall reimburse Stein Roe from the
assets of the respective applicable Series of the Trust, for
any and all out-of-pocket expenses and charges in performing
services under this Agreement and such compensation as is
provided in Appendix II to this Agreement, as amended from time
to time. Stein Roe shall invoice the Trust as soon as
practicable after the end of each calendar month, with
allocation among the respective Series and full detail, and the
Trust shall promptly pay Stein Roe the invoiced amount.
6. Confidentiality of Records. Stein Roe agrees not to
disclose any information received from the Trust to any other
client of Stein Roe or to any other person except its employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, Stein Roe shall return to the Trust all records in
the possession and control of Stein Roe related to such Trust's
activities, other than Stein Roe's own business records, it
being also understood and agreed that any programs and systems
used by Stein Roe to provide the services rendered hereunder
will not be given to any Trust.
7. Liability and Indemnification.
(a) Stein Roe shall not be liable to any Trust for any
action taken or thing done by it or its employees or agents on
behalf of the Trust in carrying out the terms and provisions of
this Agreement if done in good faith and without negligence or
misconduct on the part of Stein Roe, its employees or agents.
(b) The Trust shall indemnify and hold Stein Roe, and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses, including
reasonable expenses for counsel, incurred by it in connection
with its acceptance of this Agreement, in connection with any
action or omission by it or its employees or agents in the
performance of its duties hereunder to the Trust, or as a
result of acting upon instructions believed by it to have been
executed by a duly authorized agent of the Trust or as a result
of acting upon information provided by the Trust in form and
under policies agreed to by Stein Roe and the Trust, provided
that: (i) to the extent such claims, actions, suits, losses,
costs, damages, or expenses relate solely to one or more
Series, such indemnification shall be only out of the assets of
that Series or group of Series; (ii) this indemnification shall
not apply to actions or omissions constituting negligence or
misconduct on the part of Stein Roe or its employees or agents,
including but not limited to willful misfeasance, bad faith, or
gross negligence in the performance of their duties, or
reckless disregard of their obligations and duties under this
Agreement; and (iii) Stein Roe shall give the Trust prompt
notice and reasonable opportunity to defend against any such
claim or action in its own name or in the name of Stein Roe.
(c) Stein Roe shall indemnify and hold harmless the Trust
from and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising out
of, or incurred because of, the negligence or misconduct of
Stein Roe or its agents or contractors, or the breach by Stein
Roe of its obligations under this Agreement, provided that:
(i) this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on the part of
such Trust or its other agents or contractors and (ii) such
Trust shall give Stein Roe prompt notice and reasonable
opportunity to defend against any such claim or action in its
own name or in the name of such Trust.
8. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some
person or persons may be trustees, officers, or shareholders of
both the Trusts and Stein Roe, and that the existence of any
such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided by
specific provision of applicable law.
10. Amendment and Termination. This Agreement may be modified
or amended from time to time, or terminated, by mutual
agreement between the parties hereto and may be terminated by
at least one hundred eighty (180) days' written notice given by
one party to the other. Upon termination hereof, the Trust
shall pay to Stein Roe such compensation as may be due from it
as of the date of such termination, and shall reimburse Stein
Roe for its costs, expenses, and disbursements payable under
this Agreement to such date. In the event that, in connection
with termination, a successor to any of the duties or
responsibilities of Stein Roe hereunder is designated by a
Trust by written notice to Stein Roe, Stein Roe shall promptly
upon such termination and at the expense of such Trust, deliver
to such successor all relevant books, records, and data
established or maintained by Stein Roe under this Agreement and
shall cooperate in the transfer of such duties and
responsibilities, including provision, at the expense of such
Trust, for assistance from Stein Roe personnel in the
establishment of books, records, and other data by such
successor.
11. Assignment. Any interest of Stein Roe under this
Agreement shall not be assigned or transferred either
voluntarily or involuntarily, by operation of law or otherwise,
without prior written notice to the Trust.
12. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trust and Stein Roe is One South Wacker
Drive, Chicago, Illinois 60606, Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any obligation
of the Trust hereunder shall be binding only upon the assets of
that Trust (or the applicable Series thereof), as provided in
the Agreement and Declaration of Trust of that Trust, and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of the Trust or upon any other Trust. Neither the
authorization of any action by the Trustees or the shareholders
of the Trust, nor the execution of this Agreement on behalf of
the Trust shall impose any liability upon any Trustee or any
shareholder. Nothing in this Agreement shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by willful misfeasance, bad faith or gross
negligence in the performance of his duties, or reckless
disregard of his obligations and duties under this Agreement.
In connection with the discharge and satisfaction of any claim
made by Stein Roe against the Trust involving more than one
Series, the Trust shall have the exclusive right to determine
the appropriate allocations of liability for any such claim
between or among the Series.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect
of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
STEIN ROE INSTITUTIONAL TRUST
By: TIMOTHY K. ARMOUR
Timothy K. Armour, President
JILAINE HUMMEL BAUER
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: TIMOTHY K. ARMOUR
Timothy K. Armour
President, Mutual Funds Division
JILAINE HUMMEL BAUER
Jilaine Hummel Bauer
Assistant Secretary
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX I
The series of Stein Roe Institutional Trust currently subject
to this Agreement are as follows:
Series Effective Date
- --------- ---------------
Stein Roe Institutional High Yield Fund January 1, 1997
Dated: December 12,1996
<PAGE>
STEIN ROE INSTITUTIONAL TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX II
For the services provided under the Accounting &
Bookkeeping Agreement (the "Agreement"), the Trust shall pay
Stein Roe an annual fee with respect to each series, calculated
and paid monthly, equal to $25,000 plus .0025 percent per annum
of the average daily net assets of the series in excess of $50
million. Such fee shall be paid within thirty days after
receipt of monthly invoice.
<PAGE>
EXHIBIT 10
BELL, BOYD & LLOYD
THREE FIRST NATIONAL PLAZA
70 WEST MADISON STREET, SUITE 3300
CHICAGO, ILLINOIS 60602-4207
312 372-1121
FAX 312 372-2098
December 12, 1996
Stein Roe Institutional Trust
One South Wacker Drive, #3500
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
Stein Roe Institutional High Yield Fund
We have acted as counsel for Stein Roe Institutional
Trust (the "Trust") in connection with the registration under
the Securities Act of 1933 (the "Act") of an indefinite
number of shares of beneficial interest (the "Shares") of the
series of the Trust designated Stein Roe Institutional High
Yield Fund (the "Fund") in registration statement no. 333-
13331 on form N-1A (the "Registration Statement").
In this connection we have examined originals, or copies
certified or otherwise identified to our satisfaction, of
such documents, corporate and other records, certificates and
other papers as we deemed it necessary to examine for the
purpose of this opinion, including the agreement and
declaration of trust (the "Trust Agreement") and by-laws (the
"By-laws") of the Trust, actions of the board of trustees of
the Trust authorizing the issuance of shares of the Fund and
the Registration Statement.
Based on such examination, we are of the opinion that
upon the issuance and delivery of the Shares of the Fund in
accordance with the Trust Agreement and the actions of the
board of trustees authorizing the issuance of the Shares, and
the receipt by the Trust of the authorized consideration
therefor, the Shares so issued will be validly issued, fully
paid and nonassessable (although shareholders of the Fund may
be subject to liability under certain circumstances as
described in the statement of additional information of the
Trust included as Part B of the Registration Statement under
the caption "Declaration of Trust").
In rendering the foregoing opinion, we have relied upon
the opinion of Ropes & Gray expressed in their letter to us
dated December 12, 1996.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not
admit that we are in the category of persons whose consent is
required under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our report dated
December 12, 1996 with respect to Stein Roe Institutional
High Yield Fund in the Registration Statement (Form N-1A) of
Stein Roe Institutional Trust and related Prospectus and
Statement of Additional Information of Stein Roe
Institutional High Yield Fund filed with the Securities and
Exchange Commission in this Pre-Effective Amendment No. 1 to
the Registration Statement under the Securities Act of 1933
(Registration No. 333-13331) and in this Amendment No. 1 to
the Registration Statement under the Investment Company Act
of 1940 (Registration No. 811-07823).
ERNST & YOUNG LLP
Chicago, Illinois
December 12, 1996
Exhibit 13
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
Subscription Agreement and Investment Letter
1. Share Subscription. The undersigned agrees to purchase
from Stein Roe Institutional Trust (the "Trust"), a
Massachusetts business trust, the number of shares of beneficial
interest in the Trust of the series designated Stein Roe
Institutional High Yield Fund (the "Shares") set forth below, on
the terms and conditions set forth herein, and hereby tenders
the amount of the price required to purchase these Shares at a
price of $10.00 per Share.
The undersigned understands that the Trust has filed a
post-effective amendment to its registration statement with the
Securities and Exchange Commission (No. 333-13331) on Form N-1A
to register the Shares, which contains the Preliminary
Prospectus describing the Trust and the Shares. By its
execution hereof, the undersigned hereby acknowledges receipt of
a copy of the Preliminary Prospectus.
The undersigned recognizes that the Trust has not commenced
the public offering of the Shares. Accordingly, a number of
features of the Trust, with respect to the Shares described in
the Preliminary Prospectus including, without limitation, the
declaration and payment of dividends and redemption of the
Shares upon request of shareholders, are not, in fact, in
existence at the present time and will not be instituted until
the Trust's post-effective amendment to its registration
statement, as amended, under the Securities Act of 1933, is made
effective.
2. Representations and Warranties. The undersigned hereby
represents and warrants as follows:
(a) It is aware that no federal or state agency has made
any findings or determination as to the fairness for
investment in, nor any recommendation nor
endorsement of, the Shares;
(b) It has such knowledge and experience of financial
and business matters as will enable it to utilize
the information made available to it in connection
with the offering of the Shares, to evaluate the
merits and risks of the prospective investment, and
to make an informed investment decision;
(c) It recognizes that the issuance of the Shares has
only recently been authorized and, further, that
investment in the Shares involves certain risks, and
it has taken full cognizance of and understands all
of the risks related to the purchase of the Shares,
and it acknowledges that it has suitable financial
resources and anticipated income to bear the
economic risk of such an investment;
(d) It is purchasing the Shares for its own account, for
investment, and not with any intention of
distribution or resale of the Shares, either in
whole or in part;
(e) It will not sell the Shares purchased by it without
registration of the Shares under the Securities Act
of 1933 or exemption therefrom;
(f) It has been furnished with, and has carefully read,
this Agreement and the Preliminary Prospectus and
such material documents relating to the Shares as it
has requested and as have been provided to it by the
Trust;
(g) It has also had the opportunity to ask questions of,
and receive answers from, the Trust concerning the
Shares and the terms of the offering. The
undersigned certifies under penalties of perjury
that the number shown on this form is its correct
tax identification number and that it is not subject
to backup withholding as a result of a failure to
report all interest and dividend income to the
Internal Revenue Service.
3. Shareholder Liability. The undersigned recognizes that,
under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, it
is aware that the Agreement and Declaration of Trust of the
Trust disclaims liability of the shareholders, trustees, and
officers of the Trust for acts or obligations of the Trust,
which acts and obligations are binding only on the assets and
property of the Trust (or the applicable series thereof), and
requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. It is also aware that the Agreement
and Declaration of Trust provides for indemnification out of the
property of the Trust (or the applicable series thereof), for
all losses and expenses of any shareholder held personally
liable for the obligations of the Trust (or the applicable
series thereof).
4. Rejection of Subscription. The undersigned recognizes
that the Trust reserves the unrestricted right to reject or
limit any subscription and to close the offer at any time.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on December 6, 1996.
Number of Shares: 10,000 Shares.
Subscription price: $10.00 per Share.
STEIN ROE & FARNHAM
INCORPORATED
By: HANS P. ZIEGLER
Hans P. Ziegler
Chief Executive Officer
(Name and Title)
36-3447638
(Tax Identification Number)
