Securities Act Registration No. 333-61751
Investment Company Act File No. 811-08953
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
STEIN ROE FLOATING RATE INCOME FUND
(Registrant)
One South Wacker Drive
Chicago, Illinois 60606
Telephone number: 800-338-0593
Heidi J. Walter Cameron S. Avery
Stein Roe Floating Rate Bell, Boyd & Lloyd
Income Fund Three First National Plaza
One South Wacker Drive 70 West Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602-4207
(Agents for service)
Approximate date of proposed public offering: As soon as
practicable after the effective date of this registration
statement.
If any securities being registered on this form will be offered
on a delayed or continuous basis in reliance on rule 415 under
the Securities Act of 1933, other than securities offered in
connection with a dividend reinvestment plan, check the
following box. [x]
________________________
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Title of Amount of Maximum Maximum
Securities Shares Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered per Unit Price(1) Fee(2)
- ----------------- ---------- -------- ----------- ------------
Common Shares
of Beneficial
Interest 10,000,000 $10.00 $100,000,000 $29,500
- ----------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the
registration fee.
(2) Previously paid.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
This Registration Statement has also been signed by Stein Roe
Floating Rate Limited Liability Company.
<PAGE>
STEIN ROE FLOATING RATE INCOME FUND
Cross reference sheet pursuant to rule 495(a) of Regulation C
Item No. Location or caption
References are to captions within the part of the registration
statement to which the particular item relates except as
otherwise indicated
Part A (Prospectus)
1. Outside Front Cover Cover Page
2. Cover Pages; Other Cover Page; Outside Back Cover
Offering Information
3. Fee Table and Synopsis Fund Expenses; Prospectus Summary
4. Financial Highlights Not applicable
5. Plan of Distribution Cover Page; Use of Proceeds; How
to Purchase Shares
6. Selling Shareholders Not applicable
7. Use of Proceeds Use of Proceeds; Investment
Objective and Policies; How the
Portfolio Invests; Special Risk
Considerations; Other Investment
Practices
8. General Description of
the Registrant Prospectus Summary; The Fund;
Investment Objectives and Policies;
How the Portfolio Invests; Special
Risk Considerations; Other
Investment Practice; How to
Purchase Shares; Organization and
Description of Shares; Master
Fund/Feeder Fund: Structure and
Risk Factors
9. Management Management of the Fund;
Organization and Description of
Shares; Master Fund/Feeder Fund:
Structure and Risk Factors
10. Capital Stock; Long- The Fund; Distributions and Income
Term Debt and Other Taxes; Periodic Tender Offers;
Securities Organization and Description of
Shares
11. Defaults and Arrears on
Senior Securities Not applicable
12. Legal Proceedings Not applicable
13. Table of Contents of Table of Contents of Statement
the Statement of of Additional Information
Additional Information
Part B (Statement of Additional Information)
14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information
and History Not applicable
17. Investment Objective
and Policies Investment Policies; Portfolio
Investments and Strategies;
Investment Restrictions
18. Management Management
19. Control Persons and
Principal Holders of
Securities Principal Shareholders
20. Investment Advisory and
Other Services Investment Advisory Services;
Bookkeeping and Accounting;
Distributor; Transfer Agent;
Custodian
21. Brokerage Allocation
and Other Practices Portfolio Transactions
22. Tax Status Additional Income Tax Considerations
23. Financial Statements Financial Statements
Part C (Other Information)
24 Financial Statements and Exhibits
25 Marketing Arrangements
26 Other Expenses of Issuance and Distribution
27 Persons Controlled By or Under Common Control With
Registrant
28 Number of Holders of Securities
29 Indemnification
30 Business and Other Connections of Investment Adviser
31 Location of Accounts and Records
32 Management Services
33 Undertakings
<PAGE>
STEIN ROE FLOATING RATE INCOME FUND
THIS PROSPECTUS IS DATED _____________, 1998
Stein Roe Floating Rate Income Fund (the "Fund") is a newly
organized non-diversified, closed-end management investment
company. The Fund's investment objective is to provide a high
level of current income, consistent with preservation of capital.
The Fund is engaged in a continuous public offering of its shares
at the next determined net asset value per share without a sales
charge. The Fund currently seeks to achieve its objective by
investing its net investable assets in Stein Roe Floating Rate
Limited Liability Company (the "Portfolio"), a non-diversified,
closed-end management investment company, which has the same
investment objective as the Fund, rather than investing directly
in and managing its own portfolio of securities.
The Portfolio invests primarily in a portfolio of interests
in floating or variable rate senior loans to corporations,
partnerships and other entities that operate in a variety of
industries and geographic regions. Although the Portfolio's net
asset value per share will vary, the Portfolio's policy of
acquiring interests in floating or variable rate senior loans is
expected to minimize fluctuations in the Portfolio's net asset
value as a result of changes in interest rates. The Portfolio's
net asset value may be affected by defaults by or changes in the
credit quality of borrowers with respect to senior loan interests
in which the Portfolio invests. Fluctuations in the net asset
value per share of the Portfolio will cause fluctuations in the
net asset value per share of the Fund.
The investment adviser to the Fund and to the Portfolio is
Stein Roe & Farnham Incorporated (the "Adviser"). An investment
in the Fund may not be appropriate for all investors and there is
no assurance that the Portfolio or the Fund will achieve its
investment objective. (SEE "INVESTMENT OBJECTIVE AND POLICIES,"
"SPECIAL RISK CONSIDERATIONS," AND "MASTER FUND/FEEDER FUND:
STRUCTURE AND RISK FACTORS.")
In order to provide liquidity to shareholders, each calendar
quarter the Fund will make an offer ("Tender Offer") to repurchase
between 5% and 25% of its outstanding common shares of beneficial
interest ("Shares") at the then current net asset value of the
Shares. Shares will be repurchased at the net asset value
determined as of the close of business on the day the Tender Offer
ends or within a maximum of fourteen days after the Tender Offer
ends as described in "Periodic Tender Offers." See also "Other
Investment Practices-Borrowing" for a discussion of borrowing in
connection with Tender Offers. Each Tender Offer will last for
between three weeks and six weeks. Shareholders will be notified
in writing at the beginning of each Tender Offer. A Tender Offer
is expected to end near the end of May, 1999, and every three
months thereafter.
The Fund does not intend to list the Shares on any national
securities exchange. SHARES OF THE FUND HAVE NO HISTORY OF PUBLIC
TRADING, AND THERE IS NOT EXPECTED TO BE ANY SECONDARY TRADING
MARKET IN THE SHARES. Therefore, an investment in the Shares
should be considered illiquid. (See "Special Risk
Considerations.")
Shares of the Fund are not deposits or obligations of, nor
guaranteed or endorsed by, any bank or depository institution;
further, such Shares are not federally insured by the Federal
Deposit Insurance Corporation, The Federal Reserve Board, or any
other government agency. Shares of the Fund involve investment
risks, including the possible loss of principal.
The Prospectus sets forth concisely the information that a
prospective investor should know before investing in Shares of the
Fund. Please read and retain this Prospectus for future
reference. A Statement of Additional Information regarding the
Fund dated the date of this Prospectus has been filed with the
Securities and Exchange Commission ("SEC") and can be obtained
without charge by calling 1-800-322-0593. A table of contents to
the Statement of Additional Information is located at page __ of
this Prospectus. This Prospectus incorporates by reference the
entire Statement of Additional Information (together with any
supplement to it). The Statement of Additional Information and
other related materials are available at the SEC's internet web
site (http://www.sec.gov).
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.
Price To Sales Proceeds To
Public (1) Load (2) Fund (3)
--------- -------- ----------
Per Share $ 10.00 None $ 10.00
Total $100,000,000 None $100,000,000
- ----------
(1) The Shares are offered on a best efforts basis at a price
equal to net asset value, which initially is $10.00 per Share.
(2) Liberty Securities Corporation will pay all distribution costs
from its own assets.
(3) Assuming the sale of all Shares registered hereby.
TABLE OF CONTENTS
Page
Fund Expenses..........................................3
Prospectus Summary.....................................4
The Fund...............................................8
Investment Objectives and Policies.....................8
Use of Proceeds........................................9
How the Portfolio Invests.............................10
Special Risk Considerations...........................18
Other Investment Practices............................21
Distributions and Income Taxes........................27
Management of the Fund................................29
Periodic Tender Offers................................31
How to Purchase Shares................................33
Shareholder Services..................................35
Net Asset Value.......................................36
Performance Information...............................37
Organization and Description of Shares................38
Master Fund/Feeder Fund: Structure and Risk Factors...39
Appendix--Ratings.....................................41
Statement of Additional Information Table of Contents.44
FUND EXPENSES
The following tables are intended to assist investors in
understanding the various costs and expenses directly or
indirectly associated with investing in the Fund. Because neither
the Portfolio nor the Fund has an operating history, the
information set forth below is based on estimated amounts for the
fiscal year ending June 30, 1999 after expense reimbursement.
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Estimated Annual Fund Operating Expenses
Management and Administrative Fees (after
reimbursement) 0.80%
12b-1 Fees None
Interest Payments on Borrowed Funds None
Other Expenses 0.50%
Total Fund Operating Expenses -----
(after reimbursement) 1.30%
=====
Example
You would pay the following expenses on a $1,000 investment
in the Fund, assuming a 5% annual return:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$13 $41 $71 $157
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 the Fund. 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 gains
distributions are reinvested in additional Shares.
From time to time, the Adviser may voluntarily undertake to
reimburse the Fund for a portion of its operating expenses. The
Adviser has undertaken to reimburse the Fund for its operating
expenses to the extent that such expenses exceed 1.30% of its
average annual net assets. This commitment expires on October 31,
1999. Thereafter, the Adviser may terminate the commitment on 30
days' notice to the Fund. Absent such reimbursement, the
Management and Administrative Fees and Total Operating Expenses
would be 1.10% and 1.60%, respectively. Any such reimbursement
will lower the Fund's overall expense ratio and increase its
overall return to investors. (Also, see "Management-Fees and
Expenses").
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 the 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.
PROSPECTUS SUMMARY
The Fund. Stein Roe Floating Rate Income Fund (the "Fund")
is a newly organized non-diversified, closed-end management
investment company, organized as a Massachusetts business trust on
August 13, 1998 and managed by the Board of Trustees. (See "The
Fund.") Rather than invest in securities directly, the Fund seeks
to achieve its investment objective by using the "master
fund/feeder fund" structure. Under that structure, the Fund and
other investment companies with the same investment objective
invest their assets in another investment company having the same
investment objective and substantially the same investment
policies as the Fund. The purpose of such an arrangement is to
achieve greater operational efficiencies and reduce costs. The
Fund invests all of its net investable assets in Stein Roe
Floating Rate Limited Liability Company (the "Portfolio"), which
is a non-diversified closed-end management investment company
organized as a Delaware limited liability company and managed by
the Board of Managers. The persons who serve as trustees on the
Board of the Fund are the same persons who serve as Managers on
the Board of the Portfolio.
Continuous Offering. The Fund is engaged in a continuous
public offering of its Shares at the next determined net asset
value per share without a sales charge. The minimum initial
investment is $5,000 and the minimum subsequent investment is
$500. The Fund does not intend to list the Shares on any national
securities exchange. The Fund is offered to directors, officers
and employees of Liberty Financial Companies, Inc. and its
subsidiaries, including their immediate family members, to the
trustees of the fund, and to clients of Stein Roe Private Capital
Management. The Fund will make quarterly Tender Offers for all or
a portion of its Shares, as discussed below in this Prospectus
Summary under "Periodic Tender Offers." An investment in the
Shares should be considered illiquid. (See also "The Fund," "How
to Purchase Shares" and "Periodic Tender Offers.")
Investment Objective and Policies. The investment objective
of the Fund and of the Portfolio is to provide a high level of
current income, consistent with preservation of capital. To
achieve this objective the Portfolio invests primarily in a
portfolio of interests in floating or variable rate senior loans
("Senior Loans") to corporations, partnerships and other entities
("Borrowers") that operate in a variety of industries and
geographic regions (including domestic and foreign entities). An
investment in the Fund may not be appropriate for all investors
and is not intended to be a complete investment program. No
assurance can be given that the Portfolio or the Fund will achieve
its investment objective.
How the Portfolio Invests
Under normal market conditions, at least 80% of the
Portfolio's total assets will be invested in Senior Loans of
domestic Borrowers or foreign Borrowers (so long as Senior Loans
to such foreign Borrowers are U.S. dollar denominated and payments
of interest and repayments of principal pursuant to such Senior
Loans are required to be made in U.S. dollars). Although most
Senior Loans are secured, the Portfolio may invest up to 20% of
its total assets in interests in Senior Loans that are not secured
by any collateral and in other permitted investments (as described
below).
In addition, during normal market conditions, the Portfolio
may invest up to 20% of its total assets (including assets
maintained by the Portfolio as a reserve against any additional
loan commitments) in (i) high quality, short-term debt securities
with remaining maturities of one year or less and (ii) warrants,
equity securities and, in limited circumstances, junior debt
securities acquired in connection with the Portfolio's investments
in Senior Loans.
Senior Loans. Senior Loans generally are arranged through
private negotiations between a Borrower and several financial
institutions ("Lenders") represented in each case by one or more
such Lenders acting as agent ("Agent") of the several Lenders. On
behalf of the several Lenders, the Agent is primarily responsible
for negotiating the loan agreement ("Loan Agreement") that
establishes the relative terms and conditions of the Senior Loan
and rights of the Borrower and the several Lenders. Senior Loans
in which the Portfolio will purchase interests generally pay
interest at rates that are periodically redetermined by reference
to a base lending rate plus a premium. These base lending rates
are generally the prime rate offered by one or more major United
States banks ("Prime Rate"), the London Inter-Bank Offered Rate
("LIBOR"), the Certificate of Deposit ("CD") rate or other base
lending rates used by commercial lenders.
Participations and Assignments. The Portfolio may invest in
participations ("Participations") in Senior Loans, may purchase
assignments ("Assignments") of portions of Senior Loans from third
parties and may act as one of the group of Lenders originating a
Senior Loan (an "Original Lender"). When the Portfolio purchases
a Participation, the Portfolio will typically enter into a
contractual relationship with the Lender selling the
Participation, but not with the Borrower. As a result, the
Portfolio will assume the credit risk of both the Borrower and the
Lender selling the Participation, and the Portfolio may not
directly benefit from the collateral supporting the Senior Loan in
which it has purchased the Participation. The Portfolio will
purchase a Participation only when the Lender selling the
Participation, and any other institution interpositioned between
such Lender and the Portfolio at the time of investment have
outstanding debt obligations rated investment grade (BBB or A-3 or
higher by Standard & Poor's Corporation ("S&P") or Baa or P-3 or
higher by Moody's Investors Service ("Moody's")) or determined by
the Adviser to be of comparable quality. Further, the Portfolio
will not purchase interests in Senior Loans unless such Agent,
Lender or interpositioned institution has entered into an
agreement that provides for the holding of payments on the Senior
Loan for the benefit of, or the prompt disbursement of payments
to, the Portfolio. With respect to any given Senior Loan, the
rights of the Portfolio when it acquires a Participation may be
different from, and more limited than, the rights of Original
Lenders or of persons who acquire an Assignment. The Portfolio
may pay a fee or forgo a portion of interest payments to the
Lender selling a Participation or Assignment pursuant to the terms
of such Participation or Assignment.
Portfolio Maturity. The Senior Loans in the Portfolio's
investment portfolio will at all times have a dollar-weighted
average time until next interest rate redetermination of 90 days
or less. Because of prepayment provisions, the actual remaining
maturity of Senior Loans may vary substantially from the stated
maturity of such loans. The Portfolio estimates actual average
maturity of Senior Loans in the portfolio will be approximately
18-24 months.
Defensive Investment Policy. If the Adviser determines that
market conditions temporarily warrant a defensive investment
policy, the Portfolio may, subject to its ability to liquidate its
relatively illiquid portfolio of Senior Loans, invest up to 100%
of its assets in cash and high quality, short-term securities.
The Portfolio may also lend its portfolio securities to other
parties and may enter into repurchase and reverse repurchase
agreements for securities, subject to certain restrictions. For
further discussion of the Portfolio's investment objective and
policies and its investment practices and the associated
considerations, see "Investment Objective and Policies," "How the
Fund Invests," "Other Investment Practices," and "Special Risk
Considerations."
Investment Adviser. Stein Roe & Farnham Incorporated (the
"Adviser") is responsible for managing the investment portfolio of
the Portfolio and the business affairs of the Fund. (See
"Management of the Fund.")
Periodic Tender Offers. The Fund has adopted a fundamental
policy to offer each calendar quarter to repurchase a specified
percentage (between 5% and 25%) of the Shares then outstanding.
In response to each Tender Offer, shareholders may choose to
tender their Shares to the Fund for repurchase. Tender Offers
occur at a price per share equal to the net asset value per share
determined as of the close of business (3:00 p.m., Central time)
on the day the Tender Offer ends or within a maximum of fourteen
days after the Tender Offer ends as described in "Periodic Tender
Offers." Each Tender Offer will last for between three and six
weeks, as stated in a written notice to each Shareholder at the
beginning of each Tender Offer. If a Tender Offer is
oversubscribed, the Fund will repurchase Shares pro rata and may
keep purchasing up to an additional 2% of outstanding Shares.
(See "The Fund," "How to Purchase Shares" and "Periodic Tender
Offers.")
Special Risk Considerations
Net Asset Value Fluctuations. The Portfolio's net asset
value per share is expected to be relatively stable during normal
market conditions because the Portfolio's assets will consist
primarily of floating rate Senior Loans and short-term
instruments. Nevertheless, there are circumstances that could
cause a decline in the Portfolio's net asset value per share and a
corresponding decline in the Fund's net asset value. The
Portfolio is not a money market fund and its net asset value will
fluctuate. As a newly organized entity, the Portfolio has no
operating history.
Risks Associated with Senior Loans. Investments in Senior
Loans involve certain risks, including, among other things, risks
of nonpayment of principal and interest; collateral impairment;
non-diversification and Borrower industry concentration; and that
there is not a fully liquid market for Senior Loans, which may
impair the Portfolio's ability to obtain full value for Senior
Loans sold. In addition, shareholders' ability to liquidate their
investments will be subject to the limits on periodic Tender
Offers.
The Portfolio may invest all or substantially all of its
assets in Senior Loans or other securities that are rated below
investment grade, or in comparable unrated securities. Senior
Loans made in connection with recapitalizations, acquisitions,
leveraged buy-outs, and refinancings are subject to greater credit
risks than other Senior Loans in which the Portfolio may invest.
It is expected that the Portfolio's Senior Loans will consist
primarily of such Senior Loans. These credit risks include the
possibility of a default on the Senior Loan or bankruptcy of the
Borrower. The value of these Senior Loans is subject to a greater
degree of volatility in response to interest rate fluctuations and
these Senior Loans may be less liquid than other Senior Loans.
Risks Associated with Closed-End Funds. The Fund is a
closed-end investment company designed primarily for long-term
investors and not as a trading vehicle. The Fund does not intend
to list the Shares for trading on any national securities
exchange. There is not expected to be any secondary trading
market in the Shares and an investment in the Shares should be
considered illiquid. The shares of closed-end investment
companies often trade at a discount from their net asset values
and, in the unlikely event that a secondary market for the Shares
were to develop, the Shares likewise may trade at a discount from
net asset value.
Risks Associated with Tender Offers. Under certain limited
circumstances, the Fund may suspend or postpone a quarterly Tender
Offer for the repurchase of Shares from the Fund's shareholders.
(The Fund must meet certain regulatory requirements and must give
notice to shareholders in order to suspend or postpone a Tender
Offer.) In that event, shareholders will likely be unable to sell
their Shares. The Fund, the Adviser and Liberty Securities
Corporation (the "Distributor") are prohibited from making a
market in Shares as long as the Fund continues to publicly offer
Shares.
THE FUND
The Fund is a newly organized non-diversified, closed-end
management investment company organized as a Massachusetts
business trust and managed by the Board of Trustees. The Fund is
engaged in a continuous public offering of the Shares at the next
determined net asset value per share without a sales charge. The
Fund's principal office is located at One South Wacker Drive,
Chicago, IL 60606-4685 and its telephone number is 1-800-322-
0593.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide a high level of
current income, consistent with preservation of capital. Rather
than invest in securities directly, the Fund seeks to achieve its
investment objective by using the "master fund/feeder fund"
structure. Under that structure, the Fund and other investment
companies with the same investment objective invest their assets
in another investment company having the same investment objective
and substantially the same investment policies as the Fund. The
purpose of such an arrangement is to achieve greater operational
efficiencies and reduce costs. The Fund's investment experience
will correspond directly to the investment experience of the
Portfolio.
The Fund invests all of its net investable assets in the
Portfolio. The Portfolio seeks to achieve its objective through
investment primarily in a professionally managed portfolio of
interests in Senior Loans to Borrowers that operate in a variety
of industries and geographic regions (including domestic and
foreign entities). Although the Portfolio's net asset value per
share will vary, the Portfolio's policy of acquiring interests in
floating or variable rate Senior Loans is expected to minimize the
fluctuations in the Fund's net asset value per share as a result
of changes in interest rates. The Fund's net asset value may be
affected by changes in the credit quality of Borrowers with
respect to Senior Loan interests in which the Portfolio invests.
Under normal market conditions, the Portfolio will invest at
least 80% of its total assets (either as an Original Lender or as
a purchaser of an Assignment or Participation) in Senior Loans of
domestic Borrowers or foreign Borrowers (so long as Senior Loans
to such foreign Borrowers are U.S. dollar denominated and payments
of interest and repayments of principal pursuant to such Senior
Loans are required to be made in U.S. dollars). Investment in
non-U.S. issuers involves special risks, including that non-U.S.
issuers may be subject to less rigorous accounting and reporting
requirements than are U.S. issuers, less rigorous regulatory
requirements, differing legal systems and laws relating to
creditors' rights, the potential inability to enforce legal
judgments and the potential for political, social and economic
adversities. Although most Senior Loans are collateralized, the
Portfolio may invest up to 20% of its total assets (valued at time
of investment) in Senior Loans that are not secured by any
collateral.
During normal market conditions, the Portfolio may invest up
to 20% of its total assets (including assets maintained by the
Portfolio as a reserve against any additional loan commitments) in
(i) high quality, short-term debt securities with remaining
maturities of one year or less and (ii) warrants, equity
securities and junior debt securities acquired in connection with
the Portfolio's investments in Senior Loans. Such high quality,
short-term securities may include commercial paper rated at least
Baa, P-3 or higher by Moody's or BBB, A-3 or higher by S&P (or if
unrated, determined by the Adviser to be of comparable quality),
interests in short-term loans and short-term loan participations
of Borrowers having short-term debt obligations rated or a short-
term credit rating at least in such rating categories (or having
no such rating, determined by the Adviser to be of comparable
quality), certificates of deposit and bankers' acceptances and
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. Such high quality, short-term
securities may pay interest at rates that are periodically
redetermined or may pay interest at fixed rates.
An investment in the Fund may not be appropriate for all
investors and is not intended to be a complete investment program.
No assurance can be given that the Portfolio or the Fund will
achieve its investment objective.
The Fund is appropriate for investors seeking a high level of
current income consistent with capital preservation. Because the
Fund offers investors higher yield potential with lesser interest
rate risk due to its floating-rate nature, the Fund could be
considered a substitute for lower risk investments, such as short-
term bond funds. However, the Fund is subject to more credit risk
than the typical sort-term bond fund since it invests in unrated
and noninvestment grade senior loans.
USE OF PROCEEDS
The net proceeds from the sale of the Shares offered hereby
will be invested in accordance with the Fund's investment
objective and policies. Pending investment by the Portfolio, the
proceeds may be invested in high quality, short-term securities.
It is expected that the proceeds will be fully invested in
accordance with the Fund's investment objectives and policies
within six months after the commencement of this offering.
HOW THE PORTFOLIO INVESTS
Senior Loans. Senior Loans generally are arranged through
private negotiations between a Borrower and Lenders represented in
each case by one or more Agents of the several Lenders. On behalf
of the several Lenders, the Agent, which is frequently the
commercial bank or other entity that originates the Senior Loan
and the person that invites other parties to join the lending
syndicate, will be primarily responsible for negotiating the Loan
Agreement that establishes the relative terms, conditions and
rights of the Borrower and the several Lenders. In larger
transactions it is common to have several Agents; however,
generally only one such Agent has primary responsibility for
documentation and administration of a Senior Loan. The typical
practice of an Agent or a Lender in relying exclusively or
primarily on reports from the Borrower may involve a risk of fraud
by the Borrower.
In a typical Senior Loan, the Agent administers the terms of
the Loan Agreement and is responsible for the collection of
principal and interest and fee payments from the Borrower and the
apportionment of those payments to the credit of all lenders that
are parties to the Loan Agreement. The Portfolio generally will
rely on the Agent to collect its portion of the payments on a
Senior Loan. Furthermore, the Portfolio will rely on the Agent to
use appropriate creditor remedies against the Borrower.
Typically, under a Loan Agreement, the Agent is given broad
discretion in monitoring the Borrower's performance under the Loan
Agreement and is obligated to use only the same care it would use
in the management of its own property. Upon an event of default,
the Agent typically will act to enforce the Loan Agreement after
instruction from lenders holding a majority of the Senior Loan.
The Borrower compensates the Agent for the Agent's services. This
compensation may include special fees paid on structuring and
funding the Senior Loan and other fees paid on a continuing basis.
It is anticipated that the proceeds of the Senior Loans in
which the Portfolio will acquire interests primarily will be used
to finance leveraged buyouts, recapitalizations, mergers,
acquisitions, stock repurchases, and, to a lesser extent, to
finance internal growth and for other corporate purposes of
Borrowers. Senior Loans have the most senior position in a
Borrower's capital structure, although some Senior Loans may hold
an equal ranking with other senior securities of the Borrower.
The capital structure of a Borrower may include Senior Loans,
senior and junior subordinated debt (which may include "junk
bonds"), preferred stock and common stock issued by the Borrower,
typically in descending order of seniority with respect to claims
on the Borrower's assets. Senior and junior subordinated debt is
collectively referred to in this Prospectus as "junior debt
securities." Senior Loans generally are secured by specific
collateral, which may include guarantees.
To the extent that the Portfolio invests a portion of its
assets in Senior Loans that are not secured by specific
collateral, the Portfolio will not enjoy the benefits associated
with collateralization with respect to such Senior Loans and such
Senior Loans may pose a greater risk of nonpayment of interest or
loss of principal than do collateralized Senior Loans. As
discussed below, the Portfolio may also acquire warrants, equity
securities and junior debt securities issued by the Borrower or
its affiliates as part of a package of investments in the Borrower
or its affiliates. Warrants, equity securities, and junior debt
securities will not be treated as Senior Loans and thus assets
invested in such securities will not count toward the 80% of the
Portfolio's total assets that normally will be invested in Senior
Loans. The Portfolio may acquire interests in warrants, other
equity securities or junior debt securities through a negotiated
restructuring of a Senior Loan or in a bankruptcy proceeding of
the Borrower.
In order to borrow money pursuant to a collateralized Senior
Loan, a Borrower will typically, for the term of the Senior Loan,
pledge as collateral assets, including but not limited to,
accounts receivable, inventory, buildings, other real estate,
trademarks, franchises and common and preferred stock in its
subsidiaries. In addition, in the case of some Senior Loans,
there may be additional collateral pledged in the form of
guarantees by and/or securities of affiliates of the Borrowers.
In certain instances, a collateralized Senior Loan may be secured
only by stock in the Borrower or its subsidiaries. Collateral may
consist of assets that are not readily liquidated, and there is no
assurance that the liquidation of such assets would satisfy fully
a Borrower's obligations under a Senior Loan. Similarly, in the
event of bankruptcy proceedings involving the Borrower, the
Lenders may be delayed or prevented from liquidating collateral or
may choose not to do so as part of their participation in a plan
of reorganization of the Borrower.
Loan Agreements may also include various restrictive
covenants designed to limit the activities of the Borrower in an
effort to protect the right of the Lenders to receive timely
payments of interest on and repayment of principal of the Senior
Loans. Restrictive covenants may include mandatory prepayment
provisions related to excess cash flows and typically include
restrictions on dividend payments, specific mandatory minimum
financial ratios, limits on total debt and other financial tests.
Breach of such a covenant, if not waived by the Lenders, is
generally an event of default under the applicable Loan Agreement
and may give the Lenders the right to accelerate principal and
interest payments. The Adviser will consider the terms of such
restrictive covenants in deciding whether to invest in Senior
Loans for the Portfolio's investment portfolio. When the
Portfolio holds a Participation in a Senior Loan it may not have
the right to vote to waive enforcement of a restrictive covenant
breached by a Borrower. Lenders voting in connection with a
potential waiver of a restrictive covenant may have interests
different from those of the Portfolio and such Lenders will not
consider the interests of the Portfolio in connection with their
votes.
Senior Loans in which the Portfolio will invest generally pay
interest at rates that are periodically redetermined by reference
to a base lending rate plus a premium. These base lending rates
generally are the prime rate offered by one or more major United
States banks (the "Prime Rate"), the London Inter-Bank Offered
Rate ("LIBOR"), the certificate of deposit ("CD") rate or other
base lending rates used by commercial lenders. LIBOR, as provided
for in Loan Agreements, is an average of the interest rates quoted
by several designated banks as the rates at which such banks would
offer to pay interest to major financial institutional depositors
in the London interbank market on U.S. dollar denominated deposits
for a specified period of time. The CD rate, as generally
provided for in Loan Agreements, is the average rate paid on large
certificates of deposit traded in the secondary market. Senior
Loans traditionally have been structured so that Borrowers pay
higher premiums when they elect LIBOR, in order to permit lenders
to obtain generally consistent yields on Senior Loans, regardless
of whether Borrowers select the LIBOR option, or the Prime Rate
option. In recent years, however, the differential between the
lower LIBOR base rates and the higher Prime Rate base rates
prevailing in the commercial bank markets has widened to the point
where the higher Margins paid by Borrowers for LIBOR pricing
options do not currently compensate for the differential between
the Prime Rate and the LIBOR rate. Consequently, Borrowers have
increasingly selected the LIBOR-based pricing option, resulting in
a yield on Senior Loans that is consistently lower than the yield
available from the Prime Rate-based pricing option. This trend
will significantly limit the ability of the Portfolio to achieve a
net return to shareholders that consistently approximates the
average published Prime Rate of leading U.S. banks.
Participations and Assignments. The Portfolio may invest in
Participations in Senior Loans, may purchase Assignments of
portions of Senior Loans from third parties and may act as one of
the group of Original Lenders.
The Portfolio may invest up to 100% of its assets in
Participations. The selling Lenders and other persons
interpositioned between such Lenders and the Portfolio with
respect to Participations will likely conduct their principal
business activities in the banking, finance and financial services
industries. Although, as discussed below, the Portfolio has taken
measures that it believes significantly reduce its exposure to
risks associated with Participations, the Portfolio may be more
susceptible than an investment company that does not invest in
Participations in Senior Loans to any single economic, political
or regulatory occurrence affecting these industries. Persons
engaged in these industries may be more susceptible than are
persons engaged in some other industries to, among other things,
fluctuations in interest rates, changes in the Federal Open Market
Committee's monetary policy, governmental regulations concerning
such industries and concerning capital raising activities
generally and fluctuations in the financial markets generally.
Participation by the Portfolio in a Lender's portion of a
Senior Loan typically will result in the Portfolio having a
contractual relationship only with such Lender, not with the
Borrower. As a result, the Portfolio may have the right to
receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and
only upon receipt by such Lender of such payments from the
Borrower. In connection with purchasing Participations, the
Portfolio generally will have no right to enforce compliance by
the Borrower with the terms of the Loan Agreement, nor any rights
with respect to any funds acquired by other Lenders through set-
off against the Borrower, and the Portfolio may not directly
benefit from the collateral supporting the Senior Loan in which it
has purchased the Participation. As a result, the Portfolio may
assume the credit risk of both the Borrower and the Lender selling
the Participation. In the event of the insolvency of the Lender
selling a Participation, the Portfolio may be treated as a general
creditor of the Lender, and may not benefit from any set-off
between the Lender and the Borrower. In an effort to minimize
such risks, the Portfolio will only acquire Participations if the
Lender selling the Participation, and any other institution
interpositioned between the Portfolio and the Lender, (i) at the
time of investment has outstanding debt or deposit obligations
rated investment grade (BBB or A-3 or higher by S&P or Baa or P-3
or higher by Moody's) or determined by the Adviser to be of
comparable quality and (ii) has entered into an agreement that
provides for the holding of payments on the Senior Loan for the
benefit of, or the prompt disbursement of payments to, the
Portfolio. Long-term debt rated BBB by S&P is regarded by S&P as
having adequate capacity to pay interest and repay principal and
debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation; i.e., it is neither highly protected nor poorly
secured. The Portfolio ordinarily will purchase a Participation
only if, at the time of such purchase, the Portfolio believes that
the party from whom it is purchasing such Participation is
retaining an interest in the underlying Senior Loan. In the event
that the Portfolio does not so believe, it will only purchase such
a Participation if, in addition to the requirements set forth
above, the party from whom the Portfolio is purchasing such
Participation (i) is a bank, a member of a national securities
exchange or other entity designated in the Investment Company Act
of 1940, as amended (the "1940 Act"), as qualified to serve as a
custodian for a registered investment company and (ii) has been
approved as a custodian by the Board of the Portfolio (a
"Designated Custodian").
The Portfolio may also purchase Assignments from Lenders.
The purchaser of an Assignment typically succeeds to all the
rights and obligations under the Loan Agreement of the assigning
Lender and becomes a Lender under the Loan Agreement with the same
rights and obligations as the assigning Lender.
Original Lender Transactions. When the Portfolio is an
Original Lender originating a Senior Loan it may share in a fee
paid by the Borrower to the Original Lenders. The Portfolio will
never act as the Agent or principal negotiator or administrator of
a Senior Loan. When the Portfolio is a Lender, it will have a
direct contractual relationship with the Borrower, may enforce
compliance by the Borrower with the terms of the Loan Agreement
and may under contractual arrangements among the Lenders have
rights with respect to any funds acquired by other Lenders through
set-off. A Lender also has full voting and consent rights under
the applicable Loan Agreement. Action subject to Lender vote or
consent generally requires the vote or consent of the holders of
some specified percentage of the outstanding principal amount of
the Senior Loan. Certain decisions, such as reducing the amount
or increasing the time for payment of interest on or repayment of
principal of a Senior Loan, or releasing collateral therefor,
frequently require the unanimous vote or consent of all Lenders
affected.
The Portfolio will purchase an Assignment or act as a Lender
with respect to a syndicated Senior Loan only where the Agent with
respect to the Senior Loan at the time of investment has
outstanding debt or deposit obligations rated investment grade
(BBB or A-3 or higher by S&P or Baa or P-3 or higher by Moody's)
or determined by the Adviser to be of comparable quality. In
addition, the Portfolio will purchase a Participation only where
the Lender selling the Participation, and any other institution
interpositioned between the Lender and the Portfolio at the time
of investment, have outstanding debt obligations rated investment
grade or determined by the Adviser to be of comparable quality.
Further, the Portfolio will not purchase Participations in a
Senior Loan unless the Agent, Lender or any other interpositioned
institution has entered into an agreement that provides for the
holding of payments on the Senior Loan for the benefit of, or the
prompt disbursement of payments to, the Portfolio.
Loan Agreements typically provide for the termination of the
Agent's agency status in the event that it fails to act as
required under the relevant Loan Agreement, becomes insolvent,
enters FDIC receivership, or if not FDIC insured, enters into
bankruptcy. Should an Agent, Lender or any other interpositioned
institution with respect to an Assignment interpositioned between
the Portfolio and the Borrower become insolvent or enter FDIC
receivership or bankruptcy, any interest in the Senior Loan of any
such interpositioned institution and any loan payment held by any
such interpositioned institution for the benefit of the Portfolio
should not be included in the estate of such interpositioned
institution. If, however, any such amount were included in such
interpositioned institution's estate, the Portfolio would incur
certain costs and delays in realizing payment or could suffer a
loss of principal or interest. In such event, the Portfolio could
experience a decrease in net asset value.
Portfolio Maturity. The Portfolio is not subject to any
restrictions with respect to the maturity of Senior Loans held in
its portfolio. It is currently anticipated that the Portfolio's
assets invested in Senior Loans will consist of Senior Loans with
stated maturities of between three and ten years, inclusive, and
with rates of interest that are redetermined either daily,
monthly, quarterly, semiannually or annually. Investment in
Senior Loans with longer interest rate redetermination periods may
increase fluctuations in the Portfolio's net asset value as a
result of changes in interest rates. The Senior Loans in the
Portfolio's investment portfolio will at all times have a dollar-
weighted average time until the next interest rate redetermination
of 90 days or less. As a result, as short-term interest rates
increase, interest payable to the Portfolio from its investments
in Senior Loans should increase, and as short-term interest rates
decrease, interest payable to the Portfolio from its investments
in Senior Loans should decrease. The amount of time required to
pass before the Portfolio will realize the effects of changing
short-term market interest rates on its portfolio will vary with
the dollar-weighted average time until the next interest rate
redetermination on the Senior Loans in the Portfolio's investment
portfolio. The Portfolio may utilize certain investment practices
to, among other things, shorten the effective interest rate
redetermination period of Senior Loans in its portfolio. In such
event, the Portfolio will consider such shortened period to be the
interest rate redetermination period of the Senior Loan; provided,
however, that the Portfolio will not invest in Senior Loans that
permit the Borrower to select an interest rate redetermination
period in excess of one year. Because most Senior Loans in the
Portfolio's investment portfolio will be subject to mandatory
and/or optional prepayment and there may be significant economic
incentives for a Borrower to prepay its loans, prepayments of
Senior Loans in the Portfolio's investment portfolio may occur.
Accordingly, the actual remaining maturity of the Portfolio's
investment portfolio invested in Senior Loans may vary
substantially from the average stated maturity of the Senior Loans
held in the Portfolio's investment portfolio. As a result of
expected prepayments from time to time of Senior Loans in the
investment portfolio, the Portfolio estimates that the actual
average maturity of the Senior Loans held in its portfolio will be
approximately 18-24 months.
Net Asset Value Fluctuation. When prevailing interest rates
decline, the value of a portfolio invested in fixed-rate
obligations can be expected to rise. Conversely, when prevailing
interest rates rise, the value of a portfolio invested in fixed-
rate obligations can be expected to decline. Although the
Portfolio's net asset value will vary, the Adviser expects the
Portfolio's policy of acquiring interests in floating or variable
rate Senior Loans to minimize fluctuations in net asset value as a
result of changes in interest rates. Accordingly, the Adviser
expects the value of the investment portfolio to fluctuate
significantly less than a portfolio of fixed-rate, longer term
obligations as a result of interest rate changes. However,
changes in prevailing interest rates can be expected to cause some
fluctuation in the Portfolio's net asset value. In addition to
changes in interest rates, defaults by or changes in the credit
quality of Borrowers will also affect the Portfolio's net asset
value. Further, a default or serious deterioration in the credit
quality of a Borrower could cause a prolonged or permanent
decrease in the Portfolio's net asset value. Fluctuations in the
net asset value of the Portfolio will cause fluctuations in the
net asset value of the Fund. Use of a line of credit referred to
herein may magnify fluctuations in net asset value of the Fund.
Debt Restructuring. The Portfolio may purchase and retain in
its portfolio an interest in a Senior Loan to a Borrower that has
filed for protection under the federal bankruptcy laws or has had
an involuntary bankruptcy petition filed against it by its
creditors. The Adviser's decision to purchase or retain such an
interest will depend on its assessment of the suitability of such
investment for the Portfolio, the Borrower's ability to meet debt
service on Senior Loan interests, the likely duration, if any, of
a lapse in the scheduled repayment of principal and prevailing
interest rates. At times, in connection with the restructuring of
a Senior Loan either outside of bankruptcy court or in the context
of bankruptcy court proceedings, the Portfolio may determine or be
required to accept equity securities or junior debt securities in
exchange for all or a portion of a Senior Loan interest.
Depending upon, among other things, the Adviser's evaluation of
the potential value of such securities in relation to the price
that could be obtained by the Portfolio at any given time upon
sale thereof, the Portfolio may determine to hold such securities
in its portfolio. Any equity security or junior debt security
held by the Portfolio will not be treated as a Senior Loan and
thus will not count toward the 80% of the Portfolio's total assets
that normally will be invested in Senior Loans.
Borrower Credit Ratings. Senior Loans historically have not
been rated by nationally recognized statistical rating
organizations, such as S&P or Moody's. Because of the senior
capital structure position of Senior Loans and the collateralized
or guaranteed nature of most Senior Loans, the Portfolio and the
Adviser believe that ratings of other securities issued by a
Borrower do not necessarily reflect adequately the relative
quality of a Borrower's Senior Loans. Therefore, although the
Adviser may consider such ratings in determining whether to invest
in a particular Senior Loan, the Adviser is not required to
consider such ratings and such ratings will not be the
determinative factor in the Adviser's analysis. To the extent
that Senior Loans are rated, the Portfolio may invest in the
lowest rated loans, but does not intend to invest more than 5% of
the Portfolio in Senior Loans rated below B- or B3 by S&P or
Moody's. The Portfolio may invest a substantial portion of its
assets in Senior Loans to Borrowers having outstanding debt
securities rated below investment grade by a nationally recognized
statistical rating organization (or unrated but of comparable
quality to such securities). Debt securities rated below
investment grade (or unrated but of comparable quality) commonly
are referred to as "junk bonds." The Portfolio will invest only
in those Senior Loans with respect to which the Borrower, in the
judgment of the Adviser, demonstrates one or more of the following
characteristics: sufficient cash flow to service debt; adequate
liquidity; successful operating history; strong competitive
position; experienced management; and, with respect to
collateralized Senior Loans, collateral coverage that equals or
exceeds the outstanding principal amount of the Senior Loan. In
addition, the Adviser will consider, and may rely in part, on the
analyses performed by the Agent and other Lenders, including such
persons' determinations with respect to collateral securing a
Senior Loan.
Fees. The Portfolio may be required to pay or may receive
various fees and commissions in connection with purchasing,
selling and holding interests in Senior Loans. The fees normally
paid by Borrowers may include three types: facility fees,
commitment fees and prepayment penalties. Facility fees are paid
to the Lenders upon origination of a Senior Loan. Commitment fees
are paid to Lenders on an ongoing basis based upon the undrawn
portion committed by the Lenders of the underlying Senior Loan.
Lenders may receive prepayment penalties when a Borrower prepays
all or part of a Senior Loan. The Portfolio will receive these
fees directly from the Borrower if the Portfolio is an Original
Lender, or, in the case of commitment fees and prepayment
penalties, if the Portfolio acquires an interest in a Senior Loan
by way of Assignment. Whether or not the Portfolio receives a
facility fee from the Lender in the case of an Assignment, or any
fees in the case of a Participation, depends upon negotiations
between the Portfolio and the Lender selling such interests. When
the Portfolio is an assignee, it may be required to pay a fee, or
forgo a portion of interest and any fees payable to it, to the
Lender selling the Assignment. Occasionally, the assignor will
pay a fee to the assignee based on the portion of the principal
amount of the Senior Loan that is being assigned. A Lender
selling a Participation to the Portfolio may deduct a portion of
the interest and any fees payable to the Portfolio as an
administrative fee prior to payment thereof to the Portfolio. The
Portfolio may be required to pay over or pass along to a purchaser
of an interest in a Senior Loan from the Portfolio a portion of
any fees that the Portfolio would otherwise be entitled to.
Prepayments. Pursuant to the relevant Loan Agreement, a
Borrower may be required in certain circumstances, and may have
the option at any time, to prepay the principal amount of a Senior
Loan, often without incurring a prepayment penalty. Because the
interest rates on Senior Loans are periodically redetermined at
relatively short intervals, the Portfolio and the Adviser believe
that the prepayment of, and subsequent reinvestment by the
Portfolio in, Senior Loans will not have a materially adverse
impact on the yield on the Portfolio's investment portfolio and
may have a beneficial impact on income due to receipt of
prepayment penalties, if any, and any facility fees earned in
connection with reinvestment.
Commitments to Make Additional Payments. A Lender may have
certain obligations pursuant to a Loan Agreement, which may
include the obligation to make additional loans in certain
circumstances. Such circumstances may include, without
limitation, obligations under revolving credit facilities and
facilities that provide for further loans to Borrowers based upon
compliance with specified financial requirements. The Portfolio
currently intends to reserve against any such contingent
obligation by segregating a sufficient amount of cash, liquid
securities and liquid Senior Loans. The Portfolio will not
purchase interests in Senior Loans that would require the
Portfolio to make any such additional loans if the aggregate of
such additional loan commitments would exceed 20% of the
Portfolio's total assets or would cause the Portfolio to fail to
meet the diversification requirements set forth under the heading
"Investment Restrictions" in the Statement of Additional
Information.
Bridge Financing. The Portfolio may acquire interests in
Senior Loans that are designed to provide temporary or "bridge"
financing to a Borrower pending the sale of identified assets or
the arrangement of longer-term loans or the issuance and sale of
debt obligations. A Borrower's use of a bridge loan involves a
risk that the Borrower may be unable to locate permanent financing
to replace the bridge loan, which may impair the Borrower's
perceived credit worthiness.
Other Securities. The Portfolio will acquire such warrants,
equity securities and junior debt securities only as an incident
to the purchase or intended purchase of interests in
collateralized Senior Loans. The Portfolio generally will acquire
interests in warrants, equity securities and junior debt
securities only when the Adviser believes that the relative value
being given by the Portfolio in exchange for such interests is
substantially outweighed by the potential value of such
instruments. Investment in warrants, equity securities and junior
debt securities entail certain risks in addition to those
associated with investments in Senior Loans. Warrants and equity
securities have a subordinate claim on a Borrower's assets as
compared with debt securities and junior debt securities have a
subordinate claim on such assets as compared with Senior Loans.
As such, the values of warrants and equity securities generally
are more dependent on the financial condition of the Borrower and
less dependent on fluctuations in interest rates than are the
values of many debt securities. The values of warrants, equity
securities and junior debt securities may be more volatile than
those of Senior Loans and thus may have an adverse impact on the
ability of the Portfolio to minimize fluctuations in its net asset
value.
Defensive Investment Policy. If the Adviser determines that
market conditions temporarily warrant a defensive investment
policy, the Portfolio may invest, subject to its ability to
liquidate its relatively illiquid portfolio of Senior Loans, up to
100% of its assets in cash and high quality, short-term debt
securities. The Portfolio may also lend its portfolio securities
to other parties and may enter into repurchase and reverse
repurchase agreements for securities, subject to certain
restrictions. For further discussion of the Portfolio's
investment objective and policies and its investment practices and
the associated considerations, see "Other Investment Practices."
Fundamental Restrictions and Policies. Each of the Portfolio
and the Fund has adopted certain fundamental investment
restrictions and policies which may not be changed unless
authorized by a shareholder vote. These are set forth in the
Statement of Additional Information. Among these fundamental
restrictions, the Portfolio and the Fund may not purchase any
security if, as a result of the purchase, more than 25% of the
Fund's or the Portfolio's total assets (taken at current value)
would be invested in the securities of Borrowers and other issuers
having their principal business activities in the same industry
(the electric, gas, water and telephone utility industries being
treated as separate industries for the purpose of this
restriction). However, there is no limitation on purchasing
securities the issuer of which is deemed to be in the financial
institutions industry, which includes commercial banks, thrift
institutions, insurance companies and finance companies. There is
no limitation with respect to obligations issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities.
Except for the fundamental restrictions and policies set forth as
such in the Fund's Statement of Additional Information, the
Portfolio's and the Fund's investment objective and policies are
not fundamental policies and accordingly may be changed by the
Board without obtaining the approval of shareholders.
SPECIAL RISK CONSIDERATIONS
The Fund and the Portfolio are both closed-end investment
companies with no history of operations. The Fund is designed
primarily for long-term investors and not as a trading vehicle.
Ongoing Monitoring. On behalf of the several Lenders, the
Agent generally will be required to administer and manage the
Senior Loan and, with respect to collateralized Senior Loans, to
service or monitor the collateral. In this connection, the
valuation of assets pledged as collateral will reflect market
value and the Agent may rely on independent appraisals as to the
value of specific collateral. The Agent, however, may not obtain
an independent appraisal as to the value of assets pledged as
collateral in all cases. The Portfolio normally will rely
primarily on the Agent (where the Portfolio is an Original Lender
or owns an Assignment) or the selling Lender (where the Portfolio
owns a Participation) to collect principal of and interest on a
Senior Loan. Furthermore, the Portfolio usually will rely on the
Agent (where the Portfolio is an Original Lender or owns an
Assignment) or the selling Lender (where the Portfolio owns a
Participation) to monitor compliance by the Borrower with the
restrictive covenants in the Loan Agreement and notify the
Portfolio of any adverse change in the Borrower's financial
condition or any declaration of insolvency. Collateralized Senior
Loans will frequently be secured by all assets of the Borrower
that qualify as collateral, which may include common stock of the
Borrower or its subsidiaries. Additionally, the terms of the Loan
Agreement may require the Borrower to pledge additional collateral
to secure the Senior Loan, and enable the Agent, upon proper
authorization of the Lenders, to take possession of and liquidate
the collateral and to distribute the liquidation proceeds pro rata
among the Lenders. If the terms of a Senior Loan do not require
the Borrower to pledge additional collateral in the event of a
decline in the value of the original collateral, the Portfolio
will be exposed to the risk that the value of the collateral will
not at all times equal or exceed the amount of the Borrower's
obligations under the Senior Loan. Lenders that have sold
Participation interests in such Senior Loan will distribute
liquidation proceeds received by the Lenders pro rata among the
holders of such Participations. The Adviser will also monitor
these aspects of the Portfolio's investments and, where the
Portfolio is an Original Lender or owns an Assignment, will be
directly involved with the Agent and the other Lenders regarding
the exercise of credit remedies.
Non-Payment. Senior Loans, like other corporate debt
obligations, are subject to the risk of non-payment of scheduled
interest or principal. Such non-payment would result in a
reduction of income to the Portfolio, a reduction in the value of
the Senior Loan experiencing non-payment and a potential decrease
in the net asset value of the Portfolio. The Portfolio generally
will invest in collateralized Senior Loans only if the Adviser
believes the value of the collateral, which may include
guarantees, exceeds the principal amount of the Senior Loan at the
time of initial investment. However, there can be no assurance
that the liquidation of any such collateral would satisfy the
Borrower's obligation in the event of non-payment of scheduled
interest or principal payments, or that such collateral could be
readily liquidated. Moreover, as a practical matter, most
Borrowers cannot satisfy their debts by selling their assets.
Borrowers pay their debts from the cash flow they generate. This
is particularly the case for Borrowers that are highly leveraged.
Many of the Senior Loans purchased by the Portfolio will be to
highly leveraged Borrowers. If the Borrower's cash flow is
insufficient to pay its debts as they come due, the Borrower is
far more likely to seek to restructure its debts than it is to
sell off assets to pay its Senior Loans. Borrowers may try to
restructure their debts either by seeking protection from
creditors under Chapter 11 of the federal Bankruptcy Code or
negotiating a work out. In the event of bankruptcy of a Borrower,
the Portfolio could experience delays or limitations with respect
to its ability to realize the benefits of the collateral securing
a Senior Loan. To the extent that a Senior Loan is collateralized
by stock in the Borrower or its subsidiaries, such stock may lose
all or substantially all of its value in the event of bankruptcy
of the Borrower. The Agent generally is responsible for
determining that the Lenders have obtained a perfected security
interest in the collateral securing the Senior Loan. If a
Borrower files for protection from creditors under Chapter 11 of
the Bankruptcy Code, the Code will impose an automatic stay that
prohibits the Agent from liquidating collateral. The Agent may
ask the bankruptcy court to lift the stay. As a practical matter,
the court is unlikely to lift the stay if it concludes that the
Borrower has a chance to emerge from the reorganization
proceedings and the collateral is likely to hold most of its
value. If the Lenders have a good security interest, the Senior
Loan will be treated as a separate class in the reorganization
proceedings and will retain a priority interest in the collateral.
Chapter 11 reorganization plans typically are the product of
negotiation among the Borrower and the various creditor classes.
Successful negotiations may require the Lenders to extend the time
for repayment, change the interest rate or accept some
consideration in the form of junior debt or equity securities. A
work out outside of bankruptcy may produce similar concessions by
senior lenders.
Some Senior Loans in which the Portfolio may invest are
subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate such Senior
Loans to current or future indebtedness of the Borrower or take
other action detrimental to the holders of Senior Loans, such as
the Portfolio, including, under certain circumstances,
invalidating such Senior Loans. Lenders commonly have certain
obligations pursuant to the Loan Agreement, which may include the
obligation to make additional loans or release collateral in
certain circumstances.
Ratings. The types of Senior Loans in which the Portfolio
will invest historically have not been rated by a nationally
recognized statistical rating organization, have not been
registered with the SEC or any state securities commission and
have not been listed on any national securities exchange.
Although the Portfolio will generally have access to financial and
other information made available to the Lenders in connection with
Senior Loans, the amount of public information available with
respect to Senior Loans will generally be less extensive than that
available for rated, registered or exchange listed securities. As
a result, the performance of the Portfolio and its ability to meet
its investment objective is more dependent on the analytical
ability of the Adviser than would be the case for an investment
company that invest primarily in rated, registered or exchange
listed securities.
To the extent that Senior Loans are rated, the Portfolio may
invest in the lowest rated loans, but does not intend to invest
more than 5% of the Portfolio in Senior Loans rated below B- or B3
by S&P or Moody's.
Restrictions on Resale. Senior Loans, at present, generally
are not readily marketable and may be subject to restrictions on
resale. Interests in Senior Loans generally are not listed on any
national securities exchange or automated quotation system and no
active market may exist for many of the Senior Loans in which the
Portfolio may invest. To the extent that a secondary market may
exist for certain of the Senior Loans in which the Portfolio
invests, such market may be subject to irregular trading activity,
wide bid/ask spreads and extended trade settlement periods. The
Portfolio has no limitation on the amount of its assets that may
be invested in securities that are not readily marketable or are
subject to restrictions on resale. Because a substantial portion
of the Portfolio's assets may be invested in Senior Loan
interests, the ability of the Portfolio to dispose of its
investments in a timely fashion and at a fair price may be
restricted, and the Portfolio and holders of Shares may suffer
capital losses as a result. However, many of the Senior Loans in
which the Portfolio expects to purchase interests are of a
relatively large principal amount and are held by a relatively
large number of owners which should, in the Adviser's opinion,
enhance the relative liquidity of such interests. The risks
associated with illiquidity are particularly acute in situations
where the Portfolio's operations require cash, such as when the
Portfolio tenders for its Shares, and may result in the Portfolio
borrowing to meet short-term cash requirements.
Legislation. To the extent that legislation or state or
federal regulators impose additional requirements or restrictions
with respect to the ability of financial institutions to make
loans in connection with highly leveraged transactions, the
availability of Senior Loan interests for investment by the
Portfolio may be adversely affected. In addition, such
requirements or restrictions may reduce or eliminate sources of
financing for certain Borrowers. Further, to the extent that
legislation or federal or state regulators require such
institutions to dispose of Senior Loan interests relating to
highly leveraged transactions or subject such Senior Loan
interests to increased regulatory scrutiny, such financial
institutions may determine to sell such Senior Loan interests in a
manner that results in a price that, in the opinion of the
Adviser, is not indicative of fair value. Were the Portfolio to
attempt to sell a Senior Loan interest at a time when a financial
institution was engaging in such a sale with respect to the Senior
Loan interest, the price at which the Portfolio could consummate
such a sale might be adversely affected.
Non-Diversification. The Portfolio has registered as a "non-
diversified" investment company so that, subject to its investment
restrictions, it will be able to invest more than 5% of the value
of its assets in the obligations of any single issuer, including
Senior Loans of a single Borrower or Participations purchased from
a single Lender. (See "Investment Restrictions" in the Statement
of Additional Information.) The Portfolio does not intend,
however, to invest more than 5% of the value of its assets in
interests in Senior Loans of a single Borrower. To the extent the
Portfolio invests a relatively high percentage of its assets in
obligations of a limited number of issuers, the Portfolio will be
more susceptible than a more widely diversified investment company
to the consequences of any single corporate, economic, political
or regulatory occurrence.
Other Practices. The Portfolio may use various investment
practices that involve special considerations, including engaging
in interest rate and other hedging transactions, lending its
portfolio securities, entering into when-issued and delayed-
delivery transactions and entering into repurchase and reverse
repurchase agreements. For further discussion of these practices
and associated special considerations, see "Other Investment
Practices."
OTHER INVESTMENT PRACTICES
Miscellaneous. In connection with the investment objective
and policies described above, the Portfolio may: engage in
interest rate and other hedging transactions, lend portfolio
holdings, purchase and sell interests in Senior Loans and other
portfolio debt securities on a "when-issued" or "delayed-delivery"
basis, and enter into repurchase and reverse repurchase
agreements. These investment practices involve certain special
risk considerations. The Adviser may use some or all of the
following investment practices when, in the opinion of the
Adviser, their use is appropriate. Although the Adviser believes
that these investment practices may further the Portfolio's
investment objective, no assurance can be given that the
utilization of these investment practices will achieve that
result.
Structured Notes. The Portfolio may invest up to 5% of its
total assets in structured notes, including "total rate of return
swap" with rates of return determined by reference to the total
rate of return on one or more loans referenced in such notes. The
rate of return on the structured note may be determined by
applying a multiplier to the rate of total return on the
referenced loan or loans. Application of a multiplier is
comparable to the use of financial leverage, a speculative
technique. Leverage magnifies the potential for gain and the risk
of loss, because a relatively small decline in the value of a
referenced note could result in a relatively large loss in the
value of a structured note. Structured notes are treated as
Senior Loans for purposes of the Portfolio's policy of normally
investing at least 80% of its assets in Senior Loans.
Borrowing. The Portfolio is authorized to borrow money for
the purpose of obtaining short-term liquidity in connection with
Tender Offers by the Portfolio for its shares and for temporary,
extraordinary or emergency purposes. Under the requirements of
the 1940 Act, the Portfolio, immediately after any such
borrowings, must have an asset coverage of at least 300%. Asset
coverage is the ratio which the value of the total assets of the
Portfolio, less all liabilities and indebtedness not represented
by senior securities (as that term is defined in the 1940 Act),
bears to the aggregate amount of any such borrowings by the
Portfolio. The rights of any lenders to the Portfolio to receive
payments of interest on and repayments of principal of such
borrowings will be senior to those of the holders of Shares, and
the terms of any such borrowings may contain provisions which
limit certain activities of the Portfolio, including the payment
of dividends to holders of Portfolio shares in certain
circumstances. Further, the terms of any such borrowings may, and
the provisions of the 1940 Act do (in certain circumstances),
grant lenders certain voting rights in the event of default in the
payment of interest or repayment of principal. In the event that
such provisions would impair the Portfolio's status as a regulated
investment company, the Portfolio, subject to its ability to
liquidate its relatively illiquid portfolio, intends to repay the
borrowings. Interest payments and fees incurred in connection
with any such borrowings will reduce the amount of net income
available for payment to the holders of Portfolio shares. The
Portfolio may enter into an agreement with a financial institution
providing for an unsecured discretionary credit facility (the
"Facility"), the proceeds of which may be used to finance, in
part, repurchases. (See "Periodic Tender Offers.")
Interest Rate Swaps and Other Hedging Transactions. The
Portfolio may enter into various interest rate hedging and risk
management transactions. Certain of these interest rate hedging
and risk management transactions may be considered to involve
derivative instruments. A derivative is a financial instrument
whose performance is derived at least in part from the performance
of an underlying index, security or asset. The values of certain
derivatives can be affected dramatically by even small market
movements, sometimes in ways that are difficult to predict. There
are many different types of derivatives with many different uses.
The Portfolio expects to enter into these transactions primarily
to seek to preserve a return on a particular investment or portion
of its portfolio, and may also enter into such transactions to
seek to protect against decreases in the anticipated rate of
return on floating or variable rate financial instruments the
Portfolio owns or anticipates purchasing at a later date, or for
other risk management strategies such as managing the effective
dollar-weighted average duration of the investment portfolio. In
addition, the Portfolio may also engage in hedging transactions,
including entering into put and call options, to seek to protect
the value of its portfolio against declines in net asset value
resulting from changes in interest rates or other market changes.
The Portfolio does not intend to engage in such transactions to
enhance the yield on its portfolio. Market conditions will
determine whether and in what circumstances the Portfolio would
employ any hedging and risk management techniques. The Portfolio
will not engage in any of the transactions for speculative
purposes and will use them only as a means to hedge or manage the
risks associated with assets held in, or anticipated to be
purchased for, the investment portfolio or obligations incurred by
the Portfolio. The successful utilization of hedging and risk
management transactions requires skills different from those
needed in the selection of portfolio securities. The Adviser
believes that it possesses the skills necessary for the successful
utilization of hedging and risk management transactions. The
Portfolio will incur brokerage and other costs in connection with
its hedging transactions.
The Portfolio may enter into interest rate swaps or purchase
or sell interest rate caps or floors. The Portfolio will not sell
interest rate caps or floors that it does not own. Interest rate
swaps involve the exchange by the Portfolio with another party of
their respective obligations to pay or receive interest; e.g., an
exchange of an obligation to make floating rate payments for an
obligation to make fixed rate payments. For example, the
Portfolio may seek to shorten the effective interest rate
redetermination period of a Senior Loan to a Borrower that has
selected an interest rate redetermination period of one year. The
Portfolio could exchange the Borrower's obligation to make fixed
rate payments for one year for an obligation to make payments that
readjust monthly. In such event, the Portfolio would consider the
interest rate redetermination period of such Senior Loan to be the
shorter period.
The purchase of an interest rate cap entitles the purchaser,
to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest at the difference
between the index and the predetermined rate on a notional
principal amount (the reference amount with respect to which
interest obligations are determined although no actual exchange of
principal occurs) from the party selling such interest rate cap.
The purchase of an interest rate floor entitles the purchaser, to
the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest at the difference
between the index and the predetermined rate on a notional
principal amount from the party selling such interest rate floor.
The Portfolio will not enter into swaps, caps or floors, if, on a
net basis, the aggregate notional principal amount with respect to
such agreements exceeds the net assets of the Portfolio.
In circumstances in which the Adviser anticipates that
interest rates will decline, the Portfolio might, for example,
enter into an interest rate swap as the floating rate payor or,
alternatively, purchase an interest rate floor. In the case of
purchasing an interest rate floor, if interest rates declined
below the floor rate, the Portfolio would receive payments from
its counterparty which would wholly or partially offset the
decrease in the payments it would receive with respect to the
portfolio assets being hedged. In the case where the Portfolio
purchases such an interest rate swap, if the floating rate
payments fell below the level of the fixed rate payment set in the
swap agreement, the Portfolio's counterparty would pay the
Portfolio amounts equal to interest computed at the difference
between the fixed and floating rates over the notional principal
amount. Such payments would offset or partially offset the
decrease in the payments the Portfolio would receive with respect
to floating rate portfolio assets being hedged.
The successful use of swaps, caps and floors to preserve the
rate of return on a portfolio of financial instruments depends on
the Adviser's ability to predict correctly the direction and
extent of movements in interest rates. Although the Adviser
believes that use of the hedging and risk management techniques
described above will benefit the Portfolio, if the Adviser's
judgment about the direction or extent of the movement in interest
rates is incorrect, the Portfolio's overall performance would be
worse than if it had not entered into any such transaction. For
example, if the Portfolio had purchased an interest rate swap or
an interest rate floor to hedge against its expectation that
interest rates would decline but instead interest rates rose, the
Portfolio would lose part or all of the benefit of the increased
payments it would receive as a result of the rising interest rates
because it would have to pay amounts to its counterparty under the
swap agreement or would have paid the purchase price of the
interest rate floor.
Inasmuch as these hedging transactions are entered into for
good-faith risk management purposes, the Adviser and the Portfolio
believe such obligations do not constitute senior securities. The
Portfolio will usually enter into interest rate swaps on a net
basis; i.e., where the two parties make net payments with the
Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any,
of the Portfolio's obligations over its entitlements with respect
to each interest rate swap will be accrued and an amount of cash
or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained. If the Portfolio
enters into a swap on other than a net basis, the Portfolio will
maintain the full amount of the Portfolio's obligations under each
such swap. Accordingly, the Portfolio does not treat swaps as
senior securities. The Portfolio may enter into swaps, caps and
floors with member banks of the Federal Reserve System, members of
the New York Stock Exchange or other entities determined to be
creditworthy by the Adviser, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board. If a default occurs by
the other party to such transactions, the Portfolio will have
contractual remedies pursuant to the agreements related to the
transaction, but such remedies may be subject to bankruptcy and
insolvency laws that could affect the Portfolio's rights as a
creditor. The swap market has grown substantially in recent years
with a large number of banks and financial services firms acting
both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively
liquid. Caps and floors are more recent innovations and they are
less liquid than swaps. There can be no assurance, however, that
the Portfolio will be able to enter into interest rate swaps or to
purchase interest rate caps or floors at prices or on terms the
Adviser believes are advantageous to the Portfolio. In addition,
although the terms of interest rate swaps, caps and floors may
provide for termination, there can be no assurance that the
Portfolio will be able to terminate an interest rate swap or to
sell or offset interest rate caps or floors that it has purchased.
New financial products continue to be developed and the
Portfolio may invest in any such products as may be developed to
the extent consistent with its investment objective and the
regulatory and federal tax requirements applicable to investment
companies.
Lending of Portfolio Holdings. The Portfolio may seek to
increase its income by lending financial instruments in its
portfolio in accordance with present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC. Such loans may be made, without limit, to
brokers, dealers, banks or other recognized institutional
Borrowers of financial instruments and would be required to be
secured continuously by collateral, including cash, cash
equivalents or U.S. Treasury bills maintained on a current basis
at an amount at least equal to the market value of the financial
instruments loaned. The Portfolio would have the right to call a
loan and obtain the financial instruments loaned at any time on
five days' notice. For the duration of a loan, the Portfolio
would continue to receive the equivalent of the interest paid by
the issuer on the financial instruments loaned and also would
receive compensation from the investment of the collateral. The
Portfolio would not have the right to vote any financial
instruments having voting rights during the existence of the loan,
but the Portfolio could call the loan in anticipation of an
important vote to be taken among holders of the financial
instruments or in anticipation of the giving or withholding of
their consent on a material matter affecting the financial
instruments. As with other extensions of credit, risks of delay
in recovery or even loss of rights in the collateral exist should
the Borrower of the financial instruments fail financially.
However, the loans would be made only to firms deemed by the
Adviser to be of good standing and when, in the judgment of the
Adviser, the consideration that can be earned currently from loans
of this type justifies the attendant risk. The creditworthiness
of firms to which the Portfolio lends its portfolio holdings will
be monitored on an ongoing basis by the Adviser pursuant to
procedures adopted and reviewed, on an ongoing basis, by the
Board. No specific limitation exists as to the percentage of the
Portfolio's assets that the Portfolio may lend.
"When-issued" and "Delayed-delivery" Transactions. The
Portfolio may also purchase and sell interests in Senior Loans and
other portfolio securities on a "when-issued" and "delayed-
delivery" basis. No income accrues to the Portfolio on such
interests or securities in connection with such purchase
transactions prior to the date the Portfolio actually takes
delivery of such interests or securities. These transactions are
subject to market fluctuation; the value of the interests in
Senior Loans and other portfolio debt securities at delivery may
be more or less than their purchase price, and yields generally
available on such interests or securities when delivery occurs may
be higher or lower than yields on the interests or securities
obtained pursuant to such transactions. Because the Portfolio
relies on the buyer or seller, as the case may be, to consummate
the transaction, failure by the other party to complete the
transaction may result in the Portfolio missing the opportunity of
obtaining a price or yield considered to be advantageous. When
the Portfolio is the buyer in such a transaction, however, it will
maintain cash or liquid securities having an aggregate value equal
to the amount of such purchase commitments until payment is made.
The Portfolio will make commitments to purchase such interests or
securities on such basis only with the intention of actually
acquiring these interests or securities, but the Portfolio may
sell such interests or securities prior to the settlement date if
such sale is considered to be advisable. To the extent the
Portfolio engages in "when-issued" and "delayed-delivery"
transactions, it will do so for the purpose of acquiring interests
or securities for the Portfolio's investment portfolio consistent
with the Portfolio's investment objective and policies and not for
the purpose of investment leverage. No specific limitation exists
as to the percentage of the Portfolio's assets that may be used to
acquire securities on a "when-issued" or "delayed-delivery" basis.
Repurchase Agreements. The Portfolio may enter into
repurchase agreements (a purchase of, and a simultaneous
commitment to resell, a financial instrument at an agreed-upon
price on an agreed-upon date) only with member banks of the
Federal Reserve System and member firms of the New York Stock
Exchange. When participating in repurchase agreements, the
Portfolio buys securities from a seller (e.g., a bank or brokerage
firm) with the agreement that the seller will repurchase the
securities at a higher price at a later date. Such transactions
afford an opportunity for the Portfolio to earn a return on
available cash at minimal market risk, although the Portfolio may
be subject to various delays and risks of loss if the vendor is
unable to meet its obligation to repurchase. Under the 1940 Act,
repurchase agreement are deemed to be collateralized loans of
money by the Portfolio to the seller. In evaluating whether to
enter into a repurchase agreement, the Adviser will consider
carefully the creditworthiness of the vendor. If the member bank
or member firm that is the party to the repurchase agreement
petitions for bankruptcy or otherwise becomes subject to the U.S.
Bankruptcy Code, the law regarding the rights of the Portfolio is
unsettled. The securities underlying a repurchase agreement will
be marked to market every business day so that the value of the
collateral is at least equal to the value of the loan, including
the accrued interest thereon, and the Adviser will monitor the
value of the collateral. No specific limitation exists as to the
percentage of the Portfolio's assets that may be used to
participate in repurchase agreements.
Reverse Repurchase Agreements. The Portfolio may enter into
reverse repurchase agreements with respect to debt obligations
that could otherwise be sold by the Portfolio. A reverse
repurchase agreement is an instrument under which the Portfolio
may sell an underlying debt security and simultaneously obtain the
commitment of the purchaser (a commercial bank or a broker or
dealer) to sell the security back to the Portfolio at an agreed-
upon price on an agreed-upon date. The Portfolio will maintain
cash or liquid securities in an amount sufficient to cover its
obligations with respect to reverse repurchase agreements. The
Portfolio receives payment for such securities only upon physical
delivery or evidence of book entry transfer by its custodian. SEC
regulations require either that securities sold by the Portfolio
under a reverse repurchase agreement be segregated pending
repurchase or that the proceeds be segregated on the Portfolio's
books and records pending repurchase. Reverse repurchase
agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or
restrictions upon the Portfolio's ability to dispose of the
underlying securities. An additional risk is that the market
value of securities sold by the Portfolio under a reverse
repurchase agreement could decline below the price at which the
Portfolio is obligated to repurchase them. Reverse repurchase
agreements will be considered borrowings by the Portfolio and as
such would be subject to the restrictions on borrowing described
in the Statement of Additional Information under "Investment
Restrictions." The Portfolio will not hold more than 5% of the
value of its total assets in reverse repurchase agreements as of
the time the agreement is entered into.
Year 2000 Compliance. Like other investment companies,
financial and business organizations and individuals around the
world, the Fund could be adversely affected if the computer
systems used by the Adviser and other service providers do not
properly process and calculate date-related information and data
from and after January 1, 2000. This is commonly known as the
"Year 2000 Problem." The Fund's Adviser, administrator,
distributor and transfer agent ("Liberty Companies") are taking
steps that they believe are reasonably designed to address the
Year 2000 problem, including communicating with vendors who
furnish services, software and systems to the Fund, to provide
that date-related information and data can be properly processed
after January 1, 2000. Many Fund service providers and vendors,
including the Liberty Companies, are in the process of making Year
2000 modifications to their software and systems and believe that
such modifications will be completed on a timely basis prior to
January 1, 2000. The Fund will not pay the cost of these
modifications. However, no assurances can be given that all
modifications required to ensure proper data processing and
calculation on and after January 1, 2000 will be timely made or
that services to the Fund will not be adversely affected.
Although the loan documentation typically contains assurances
that Borrowers will be in compliance with Year 2000 issues, those
issues could affect the ability of Borrowers to meet their payment
obligations and may adversely affect their credit ratings.
DISTRIBUTIONS AND INCOME TAXES
Distributions. Income dividends are declared each business
day, paid monthly, and confirmed at least quarterly. Capital
gains, if any, are distributed at least annually, usually in
December. Shares accrue dividends as long as they are issued and
outstanding (i.e., from the date net asset value is determined for
the purchase order to the Redemption Pricing Date of the Tender
Offer in which the Shares are accepted for repurchase by the
Fund).
Dividend payments are not guaranteed and may vary with each
payment. The Fund does not pay "interest" or guarantee any fixed
rate of return.
All of your income dividends and capital gains distributions
will be reinvested in additional Shares unless you elect to have
distributions either (1) paid by check; (2) deposited by
electronic transfer into your bank account; (3) applied to
purchase shares in your account with another Stein Roe Fund; or
(4) applied to purchase shares in a Stein Roe Fund account of
another person. (See "Shareholder Services.") Reinvestment
normally occurs on the payable date. If a shareholder elected to
receive dividends and/or capital gains distributions in cash and
the postal or other delivery service selected by the transfer
agent is unable to deliver checks to the shareholder's address of
record, such shareholder's distribution option will automatically
be converted to having all dividends and other distributions
reinvested in additional Shares. The Fund reserves the right to
reinvest the proceeds and future distributions in additional
Shares if checks mailed to you for distributions are returned as
undeliverable or are not presented for payment within six months.
No interest will accrue on amounts represented by uncashed
distribution or redemption checks. Until such time as the Fund is
fully invested, distributions will be less than they might
otherwise be.
The Fund is authorized to borrow money subject to certain
restrictions. (See "Other Investment Practices.") Under the 1940
Act, the Fund may not declare any dividend or other distribution
on its Shares unless the Fund has, at the time of declaration,
asset coverage of at least 300% of its aggregate indebtedness,
after deducting the amount of the distribution. This limitation
may impair the Fund's ability to maintain its qualification for
taxation as a regulated investment company.
Income Taxes. The Fund intends to satisfy those requirements
relating to the sources of its income, the distribution of its
income, and the diversification of its assets necessary to qualify
for the special tax treatment afforded to regulated investment
companies under the Internal Revenue Code (the "Code") and thereby
be relieved of federal income or excise taxes to the extent that
it distributes its net investment income and net realized capital
gains to shareholders in accordance with the timing requirements
imposed by the Code. For a detailed discussion of tax issues
pertaining to the Fund, see "Additional Income Tax Considerations"
in the Statement of Additional Information.
Your distributions will be taxable to you, under income tax
law, whether received in cash or reinvested in additional Shares.
For federal income tax purposes, any distribution that is paid in
January but was declared in the prior calendar year is deemed paid
in the prior calendar year.
You will be subject to federal income tax at ordinary rates
on income dividends and distributions of net short-term capital
gains. Distributions of net long-term capital gains will be
taxable to you as long-term capital gains regardless of the length
of time you have held your Shares.
You will be advised annually as to the source of
distributions for tax purposes. If you are not subject to tax on
your income, you will not be required to pay tax on these amounts.
A holder of Shares who, pursuant to a Tender Offer, tenders
all of his or her Shares (and is not considered to own any other
Shares pursuant to attribution rules contained in the Code) may
realize a taxable gain or loss depending upon the shareholder's
basis in the Shares. Such gain or loss realized on the
disposition of Shares (whether pursuant to a Tender Offer or in
connection with a sale or other taxable disposition of Shares in a
secondary market) generally will be treated as long-term capital
gain or loss if the Shares have been held as a capital asset for
more than one year and as short-term capital gain or loss if held
as a capital asset for one year or less. Starting in 2001, net
long-term capital gains realized upon the disposition of Shares
held longer than five years will be subject to a lower maximum
capital gains tax rate than is currently available. If Shares are
sold at a loss after being held for six months or less, the loss
will be treated as long-term-instead of short-term-capital loss to
the extent of any capital gain distributions received on those
Shares. All or a portion of any loss realized on a sale or
exchange of Shares of the Fund will be disallowed if the
shareholder acquires other Shares within 30 days before or after
the disposition. In such a case, the basis of the Shares acquired
will be adjusted to reflect the disallowed loss.
Different tax consequences may apply to tendering
shareholders other than fully-tendering shareholders described in
the previous paragraph and to non-tendering shareholders in
connection with the Tender Offer. For example, if a shareholder
tenders fewer than all Shares owned by or attributed to him or
her, the proceeds received could be treated as a taxable dividend,
a return of capital, or capital gain depending on the portion of
Shares tendered, the Fund's earnings and profits, and the
shareholder's basis in the tendered Shares. Moreover, when a
shareholder tenders fewer than all Shares owned pursuant to a
Tender Offer, there is a remote possibility that non-tendering
shareholders may be considered to have received a deemed
distribution that is taxable to them in whole or in part. You may
wish to consult your tax advisor prior to tendering.
Backup Withholding. The Fund may be required to withhold
federal income tax ("backup withholding") from certain payments to
a shareholder-generally redemption proceeds. Backup withholding
may be required if:
* the shareholder fails to furnish its properly certified Social
Security or other tax identification number;
* the shareholder fails to certify that its tax identification
number is correct or that it is not subject to backup withholding
due to the underreporting of certain income;
* the Internal Revenue Service ("IRS") informs the Fund that the
shareholder's tax identification number is incorrect.
These certifications are contained in the application that
you should complete and return when you open an account. The Fund
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for the Fund to reimburse you for amounts
withheld. You may, however, claim the amount withheld as a credit
on your federal income tax return.
The federal income tax discussion set forth above is for
general information only. Prospective investors should consult
their advisors regarding the specific federal and state tax
consequences of purchasing, holding and disposing of Shares, as
well as the effects of other state, local and foreign tax laws and
any proposed tax law changes.
MANAGEMENT OF THE FUND
Board of Trustees and Adviser. The Board of Trustees of the
Fund has overall management responsibility for the Fund; the Board
of Managers of the Portfolio has overall management responsibility
for the Portfolio. See "Management" in the Statement of
Additional Information for the names of and other information
about the trustees, managers and officers. Since the Fund and the
Portfolio have the same Board members, they have adopted conflict
of interest procedures to monitor and address potential conflicts
between the interests of the Fund and the Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, IL 60606, is responsible for managing the
investment portfolio of the Portfolio and the business affairs of
the Fund, subject to the direction of their respective Boards.
The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940. The Adviser and its predecessor
have advised and managed mutual funds since 1949. The Adviser is
a wholly owned indirect subsidiary of Liberty Financial Companies,
Inc. ("Liberty Financial"), which in turn is a majority owned
indirect subsidiary of Liberty Mutual Insurance Company. The
Adviser and its predecessor have been providing investment
advisory services since 1932. The Adviser acts as investment
adviser to wealthy individuals, trustees, pensions and profit
sharing plans, charitable organizations and other institutional
investors. As of June 30, 1998 the Adviser managed over $29
billion in assets.
The Adviser's mutual funds and institutional asset management
businesses are managed together with its affiliate, Colonial
Management Associates, Inc. ("CMA"). A single management team
includes employees of each company. CMA is a registered
investment adviser serving mutual funds and institutions. Certain
officers of CMA also are officers of the Adviser in their roles as
managers of the combined business. CMA shares personnel,
facilities and systems with the Adviser that the Adviser uses in
providing services to the Fund.
Portfolio Management. Brian W. Good is a vice president of
the Adviser, and James R. Fellows is vice president of the
Adviser. Mr. Good and Mr. Fellows have been primarily responsible
for the day to day management of the Fund's and the Portfolio's
investment portfolio since the Fund's and the Portfolio's
commencement of investment operation. Mr. Fellows and Mr. Good
have both been employed by the Adviser since April 1998. Prior
thereto, Mr. Good was vice president and portfolio manager at Van
Kampen American Capital since 1989 and Mr. Fellows was vice
president and senior credit analyst at Van Kampen American Capital
since 1988.
Fees and Expenses. The Adviser provides administrative
services to the Fund and the Portfolio and portfolio management
services to the Portfolio. The Adviser is entitled to receive a
monthly administrative fee from the Fund, computed and accrued
daily, based on an annual rate of 0.25% of average net assets and
a monthly management fee from the Portfolio, computed and accrued
daily, based on an annual rate of 0.85% of average net assets of
the Portfolio. However, the Adviser may voluntarily waive a
portion of its fees.
The Adviser provides office space and executive and other
personnel to the Fund and bears any sales or promotional expenses.
The Fund pays all expenses other than those paid by the Adviser,
including but not limited to printing and postage charges and
securities registration and custodian fees and expenses incidental
to its organization.
Transfer Agent. Liberty Funds Services, Inc. ("LFS"), P.O.
Box 1722, Boston, MA 02105, a wholly owned subsidiary of Liberty
Financial, is the agent of the Fund for the transfer of Shares,
disbursement of dividends, and maintenance of shareholder
accounting records. Under a separate agreement, LFS also provides
certain investor accounting services to the Portfolio.
Distributor. The Shares of the Fund are offered for sale
through Liberty Securities Corporation ("Distributor") without any
sales commissions or charges to the Fund or to its subsidiaries.
The Distributor is a wholly owned indirect subsidiary of Liberty
Financial. The business address of the Distributor is 100
Manhattanville Road, Purchase, NY 10577; however, all Fund
correspondence should be mailed to Stein Roe & Farnham
Incorporated, One South Wacker Drive, Chicago, IL 60606. 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, 225 Franklin
Street, Boston, MA 02101, is the custodian of the Fund and has
custody of the securities and cash of the Fund. The custodian,
among other things, attends to the collection of principal and
income and payment for and collection of proceeds of securities
bought and sold by the Fund.
PERIODIC TENDER OFFERS
The Board has adopted share repurchase policies as
fundamental policies. Those policies, which may not be changed
without the vote of the holders of a majority of the Fund's
outstanding voting securities, provide that each calendar quarter,
the Fund intends to make a Tender Offer to repurchase a portion of
the outstanding Shares from shareholders who request repurchases.
The price of the repurchases of Shares normally will be the net
asset value per share determined as of the close of business (3:00
p.m., Central time) on the date the Tender Offer ends or within a
maximum of fourteen days after the Tender Offer ends as described
below.
Repurchase Procedure. At the beginning of each Tender Offer,
the Fund's shareholders will be notified in writing about the
Tender Offer, how they may request that the Fund repurchase their
Shares and the deadline for shareholders to provide their
repurchase requests to the Distributor (the "Repurchase Request
Deadline"), which is the date the Tender Offer ends. The time
between the notification of the shareholders and the Repurchase
Request Deadline may vary from no more than six weeks to no less
than three weeks. For each Tender Offer the Fund will establish
the Repurchase Request Deadline based on factors, such as market
conditions, liquidity of the Fund's assets and shareholder
servicing considerations. The repurchase price of the Shares will
be the net asset value as of the close of the NYSE on the date on
which the repurchase price of Shares will be determined (the
"Repurchase Pricing Date"). It is anticipated that normally the
Repurchase Pricing Date will be the same date as the Repurchase
Request Deadline, and if so, the Repurchase Request Deadline will
be set for a time no later than the close of the NYSE on such
date. The Fund has determined that the Repurchase Pricing Date
may occur no later than the fourteenth day after the Repurchase
Request Deadline or the next business day if the fourteenth day is
not a business day. Within such fourteen day period, the Fund may
use an earlier Repurchase Pricing Date under certain
circumstances.
The Board may establish other policies for repurchases of
Shares that are consistent with the 1940 Act and other pertinent
laws. Shares tendered by shareholders by any Repurchase Request
Deadline will be repurchased subject to the aggregate repurchase
amounts established for that Repurchase Request Deadline.
Repurchase proceeds will be paid to shareholders in cash within
seven days after each Repurchase Pricing Date. The end of the
seven days is referred to as the "Repurchase Payment Deadline."
Repurchase Amounts. The Board, in its sole discretion, will
determine the number of Shares that the Fund will offer to
repurchase (the "Tender Offer Amount") for a given Repurchase
Request Deadline. However, the Tender Offer Amount will be at
least 5% and no more than 25% of the total number of Shares
outstanding on the Repurchase Request Deadline. The first Tender
Offer is expected to end near the end of May, 1999 and every three
months thereafter. Prior to the notification of the Repurchase
Request Deadline, the Board will determine in its sole discretion
the percentage at which the Tender Offer Amount will be set.
If shareholders tender more than the Tender Offer Amount for
a given Tender Offer, the Fund may repurchase an additional amount
of Shares of up to 2% of the Shares outstanding on the Repurchase
Request Deadline. If the Fund determines not to repurchase more
than the Tender Offer Amount, or if the Fund determines to
repurchase the additional 2% of the Shares outstanding, but Fund
shareholders tender Shares in an amount exceeding the Repurchase
Offer Amount plus 2% of the Shares outstanding on the Repurchase
Request Deadline, the Fund will repurchase the Shares on a pro
rata basis. The Fund may, however, accept all Shares tendered by
shareholders who own less than one hundred Shares and who tender
all their Shares, before accepting on a pro rata basis Shares
tendered by other shareholders.
Notices to Shareholders. Notice of each quarterly Tender
Offer (and any additional discretionary repurchase offers) will be
given to each beneficial owner of Shares between twenty-one (21)
and forty-two (42) days before each Repurchase Request Deadline.
The notice will contain information shareholders should consider
in deciding whether or not to tender their Shares. The notice
will also include detailed instructions on how to tender Shares.
The notice will state the Tender Offer Amount. The notice will
also identify the dates of the Repurchase Request Deadline,
scheduled Repurchase Pricing Date, and scheduled Repurchase
Payment Deadline. The notice will describe the risk of
fluctuation in the net asset value between the Repurchase Request
Deadline and the Repurchase Pricing Date, if such dates do not
coincide, and the possibility that the Fund may use an earlier
Repurchase Pricing Date than the scheduled Repurchase Pricing Date
under certain circumstances. The notice will describe (i) the
procedures for shareholders to tender their Shares, (ii) the
procedures for the Fund to repurchase Shares on a pro rata basis,
(iii) the circumstances in which the Fund may suspend or postpone
a Tender Offer, and (iv) the procedures that will enable
shareholders to withdraw or modify their tenders of Shares until
the Repurchase Request Deadline. The notice will set forth the
net asset value of the Shares to be repurchased no more than seven
days before the date of notification, and how shareholders may
ascertain the net asset value after the notification date.
Repurchase Price. The current net asset value of the Shares
is computed daily. The Board has determined that the time at
which the net asset value will be computed will be as of the close
of regular session trading on the NYSE. You may call 1-800-322-
0593 to learn the net asset value per share. The notice of the
repurchase offer will also provide information concerning the net
asset value per share, such as the net asset value as of a recent
date or a sampling of recent net asset values, and a toll-free
number for information regarding the Tender Offer.
Suspension or Postponement of Repurchase Offer. The Fund
will not suspend or postpone a Tender Offer unless a majority of
the Board, including a majority of the Board who are not
"interested persons" of the Fund, as defined in the 1940 Act,
votes to do so. In addition, the Fund will not delay a Tender
Offer unless so required by certain regulatory requirements
described in the notice of the Tender Offer are met. Shareholders
will receive notice of any suspension or postponement and a notice
of any renewed repurchase offer after a suspension or
postponement.
Although the Board believes that Tender Offers for the Shares
generally would increase the liquidity of the Shares, the
acquisition of Shares by the Fund will decrease the total assets
of the Fund and, therefore, have the effect of increasing the
Fund's expense ratio. Because of the nature of the Fund's
investment objective and polices and the Fund's portfolio, the
Adviser anticipates potential difficulty in disposing of portfolio
securities in order to consummate Tender Offers for the Shares.
Liquidity Requirements. The Fund and the Portfolio must
maintain liquid assets equal to their repurchase Tender Offer
Amount from the time that the notice is sent to shareholders until
the Repurchase Pricing Date. The Fund and the Portfolio will
ensure that a percentage of their respective net assets equal to
at least 100 percent of the Tender Offer Amount consists of assets
(a) that can be sold or disposed of in the ordinary course of
business at approximately the price at which the Fund or the
Portfolio, as applicable, has valued the investment within the
time period between the Repurchase Request Deadline and the
Repurchase Payment Deadline; or (b) that mature by the Repurchase
Payment Deadline.
The Board of the Portfolio has adopted procedures that are
reasonably designed to ensure that the assets of the Fund and the
Portfolio are sufficiently liquid so that the Fund and the
Portfolio can comply with the Repurchase Policy and the liquidity
requirements described in the previous paragraph. If, at any
time, the Fund or the Portfolio falls out of compliance with these
liquidity requirements, their respective Boards will take whatever
action they deem appropriate to ensure compliance.
The Fund intends to satisfy the liquidity requirements with
cash on hand, cash raised through borrowings, and Senior Loans.
There is some risk that the need to sell Senior Loans to fund
Tender Offers may affect the market for those Senior Loans. In
turn, this could diminish the Fund's net asset value.
HOW TO PURCHASE SHARES
The Fund is engaged in a continuous public offering of its
Shares at the next determined net asset value per share without a
sales charge. Shares may be purchased through the Distributor.
The Fund is offered to directors, officers and employees of
Liberty Financial Companies, Inc. and its subsidiaries, including
their immediate family members, to the trustees of the fund, and
to clients of Stein Roe Private Capital Management. The Fund does
not intend to list the Shares on any national securities exchange.
You may purchase Shares by check, by wire or electronic
transfer. The initial purchase minimum per Fund account is
$5,000. Subsequent purchases must be at least $500. If you wish
to purchase Shares to be held by a tax-sheltered retirement plan
sponsored by the Adviser, you must obtain special forms for those
plans. (See "Shareholder Services.")
By Check. To make an initial purchase of Shares by check,
please complete and sign the application and mail it, together
with a check made payable to Stein Roe Mutual Funds, to LFS at
P.O. Box 1722, Boston, MA 02105.
You may make subsequent investments by submitting a check
along with either the stub from your Fund account confirmation
statement or a note indicating the amount of the purchase, your
account number, and the name in which your account is registered.
Money orders will not be accepted for initial purchases into new
accounts. Credit card convenience checks will not be accepted for
initial and subsequent purchases into your account. Each
individual check submitted for purchase must be at least $500, and
the Fund generally will not cash, drafts, third or fourth party
checks, or checks drawn on banks outside the United States.
Should an order to purchase Shares of the Fund be cancelled
because your check does not clear, you will be responsible for any
resulting loss incurred by the Fund.
By Wire. You may also pay for Shares by instructing your
bank to wire federal funds (monies of member banks within the
Federal Reserve System) to the Fund at the First National Bank of
Boston. Your bank may charge you a fee for sending the wire. If
you are opening a new account by wire transfer, you must first
call 800-322-0593 to request an account number and furnish your
Social Security or other tax identification number. The Fund will
not be responsible for the consequences of delays, including
delays in the banking or Federal Reserve wire systems. Your bank
must include the full name(s) in which your account is registered
and your Fund account number, and should address its wire as
follows:
First National Bank of Boston
Boston, MA
ABA Routing No. 011000390
Stein Roe Floating Rate Income Fund; Fund No. 23
Account of (exact name(s) in registration)
Shareholder Account No. ______________
By Electronic Transfer. You may also make subsequent
investments by an electronic transfer of funds from your bank
account. Electronic transfer allows you to make purchases at your
request ("Special Investments") by calling 800-322-0593 or at
prescheduled intervals ("Regular Investments"). (See "Shareholder
Services.") Electronic transfer purchases are subject to a $50
minimum and a $100,000 maximum. You may not open a new account
through electronic transfer. Should an order to purchase Shares
of the Fund be cancelled because your electronic transfer does not
clear, you will be responsible for any resulting loss incurred by
the Fund.
Conditions of Purchase. Each purchase order for the Fund
must be accepted by an authorized officer of the Fund or its
authorized agent or designee and is not binding until accepted and
entered on the books of the Fund. Once your purchase order has
been accepted, you may not cancel or revoke it. The Fund reserves
the right not to accept any purchase order that it determines not
to be in the best interests of the Fund. The Fund also reserves
the right to waive or lower its investment minimums for any
reason. The Fund does not issue certificates for Shares.
SHAREHOLDER SERVICES
Reporting to Shareholders. The Fund will send semiannual and
annual reports to shareholders. These reports will include
financial statements audited by the Fund's independent auditors.
The Fund will provide shareholders with information necessary
to prepare federal and state tax returns shortly after the end of
the calendar year.
The Fund will describe the Tender Offer policy in its annual
report to shareholders. The annual report will also disclose the
number of Tender Offers conducted each year, the amount of each
Tender Offer, and the extent to which the Fund repurchased Shares
in an oversubscribed Tender Offer.
Tax-Sheltered Retirement Plans. Booklets describing the
following programs and special forms necessary for establishing
them are available on request:
Prototype Money Purchase Pension and Profit Sharing Plans for
self-employed individuals, partnerships and corporations.
Simplified Employee Pension Plans permitting employers to
provide retirement benefits to their employees by utilizing IRAs
while minimizing administration and reporting requirements.
The purchase of Shares of the Fund may be limited by the
plans' provisions and does not itself establish such plans.
Shareholders considering establishing a retirement plan or
purchasing any Fund Shares in connection with a retirement plan
should consult with their attorney or tax advisor with respect to
plan requirements and tax aspects pertaining to the shareholder.
The $5,000 initial investment minimum for the Fund is not reduced
for retirement accounts even though the accounts have contribution
limits.
Retirement plan investors should be aware of the following
features of the Fund that may impact their decision as to whether
the Fund is an appropriate investment for the retirement plan.
Fund Shares are not liquid. Unlike open-end fund shares, they are
not redeemable on each day that the Fund is open for business, and
unlike traditional closed-end fund shares, Fund Shares are not
traded on any exchange and thus cannot readily be sold. Although
the Fund has adopted policies to provide periodic Tender Offers,
these Tender Offers may not provide shareholders with the degree
of liquidity they desire or may require for tax purposes.
Additionally, even during a Tender Offer a shareholder may not be
able to have all of the shares it wishes to tender be repurchased
by the Fund. If the number of shares tendered by all shareholders
exceeds the repurchase amount authorized by the Board, the Fund
may not be able to repurchase all shares submitted and thus may
repurchase shares on a pro rata basis. These features could
result in a retirement plan not being able to comply with
mandatory distribution requirements. Accordingly, retirement plan
investors may wish to limit the percentage of plan assets (for
example, to 10%) that are invested in the Fund. The Fund does not
monitor retirement plan requirements for an investor. Please
consult your legal, tax or retirement plan specialist before
choosing a retirement plan or electing to invest in the Fund
through a retirement plan. Your investment advisor can help you
make investment decisions for your plan.
NET ASSET VALUE
The purchase or redemption price of the Fund's Shares is its
net asset value per share. The Fund determines the net asset value
of its Shares as of the close of regular session 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. The Portfolio
allocates net asset value, income, and expenses to its feeder
funds in proportion to their respective interests in the
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 a Fund should be determined on
any such day, in which case the determination will be made at 3:00
p.m., Central time. The value of the Portfolio will be determined
by the Adviser, following guidelines established and periodically
reviewed by the Board. Interests in Senior Loans will be valued
by the Adviser on behalf of the Portfolio at fair value, which
approximates market value. In determining fair value, the Adviser
will consider on an ongoing basis, among other factors, (i) the
creditworthiness of the Borrower; (ii) the current interest rate,
period until next interest rate reset, and maturity of such Senior
Loan interests; and (iii) recent prices in the market for
instruments of similar quality, rate, and period until next
interest rate reset and maturity. It is expected that the Fund's
net asset value will fluctuate as a function of interest rate and
credit factors. Because of the short-term nature of such
instruments, however, the Fund's net asset value is expected to
fluctuate less in response to changes in interest rates than the
net asset values of investment companies with portfolios
consisting primarily of fixed-income or longer-term securities.
The Adviser believes that Lenders selling Senior Loan interests or
otherwise involved in a Senior Loan transaction may tend, in
valuing Senior Loan interests for their own account, to be less
sensitive to interest rate and credit quality changes and,
accordingly, the Adviser does not intend to rely solely on such
valuations in valuing the Senior Loan interests for the
Portfolio's account. In addition, because a secondary trading
market in Senior Loans has not yet fully developed, in valuing
Senior Loans, the Adviser may not rely solely on, but may
consider, to the extent the Adviser believes such information to
be reliable, prices or quotations provided by banks, dealers or
pricing services with respect to secondary market transactions in
Senior Loans. To the extent that an active secondary market in
Senior Loan interests develops to a reliable degree, the Adviser
may rely to an increasing extent on such market prices and
quotations in valuing the Senior Loan interests in the Portfolio.
Other long-term debt securities for which market quotations are
not readily available are valued at 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. In certain circumstances,
portfolio securities will be valued at the last sale price on the
exchange that is the primary market for such securities, or the
last quoted bid price for those securities for which the over-the-
counter market is the primary market or for listed securities in
which there were no sales during the day. The value of interest
rate swaps, caps, and floors will be determined in accordance with
a formula and then confirmed periodically by obtaining a
quotation. 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 the 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.
PERFORMANCE INFORMATION
The Fund seeks to provide an effective yield that is higher
than other short-term instrument alternatives. From time to time,
the Fund may include its current and/or effective yield based on
various specific time periods. Yields will fluctuate from time to
time and are not necessarily representative of future results.
The current yield is calculated by annualizing the most
recent monthly distribution (i.e., multiplying the distribution
amount by 365/31 for a 31 day month) and dividing the product by
the current maximum offering price. The effective yield is
calculated by dividing the current yield by 365/31 and adding 1.
The resulting quotient is then taken to the 365/31st power and
reduced by 1. The result is the effective yield.
On occasion, the Fund may compare its yield to: (a) LIBOR,
quoted daily in the Wall Street Journal; (b) the CD Rate as quoted
daily in the Wall Street Journal as the average of top rates paid
by major New York banks on primary new issues of negotiable CDs,
usually on amounts of $1 million or more; (c) the Prime Rate,
quoted daily in The Wall Street Journal as the base rate on
corporate loans at large U.S. money center commercial banks; (d)
one or more averages compiled by Donoghue's Money Fund Report, a
widely recognized independent publication that monitors the
performance of money market mutual funds; (e) the average yield
reported by the Bank Rate Monitor National IndexTM for money
market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan
statistical areas; (f) yield data published by Lipper Analytical
Services, Inc.; (g) the yield on an investment in 90-day Treasury
bills on a rolling basis, assuming quarterly compounding; or (h)
the yield on an index of loan funds comprised of all continually
offered closed-end bank loan funds, as categorized by Lipper (the
"loan fund index"). In addition, the Fund may compare the Prime
Rate, the Donoghue's averages and the other yield data described
above to each other. Yield comparisons should not be considered
indicative of the Fund's yield or relative performance for any
future period.
Advertisements and communications to present or prospective
shareholders also may cite a total return for any period. Total
return is calculated by subtracting the net asset value of a
single purchase of Shares at a given date from the net asset value
of those Shares (assuming reinvestment of distributions) or a
later date. The difference divided by the original net asset
value is the total return. The Fund may include information about
the total return on the loan fund index, and compare that to the
total return of the Fund and other indices.
All dividends and distributions are assumed to be reinvested
in additional Shares of the Fund at net asset value. Therefore,
the calculation of the Fund's total return and effective yield
reflects the effect of compounding. The calculation of total
return, current yield and effective yield does not reflect the
amount of any shareholder income tax liability, which would reduce
the performance quoted. If the Fund's fees or expenses are waived
or reimbursed, the Fund's performance will be higher.
Finally, the Fund may include information on the history of
its net asset value per share and the net asset value per share of
the loan fund index, including comparisons between them, in
advertisements and other material furnished to present and
prospective shareholders. Information about the performance of
the Fund or other investments is not necessarily indicative of
future performance and should not be considered a representative
of what an investor's yield or total return may be in the future.
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
August 13, 1998, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the Fund's
shareholders or its trustees.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as the Fund could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
However, the Declaration of Trust provides that persons extending
credit to, contracting with, or having any claim against, the Fund
shall look only to its assets for payment under such credit,
contract or claim, and that the shareholders, trustees and
officers of the Fund shall have no personal liability therefor.
The Declaration of Trust requires that notice of such disclaimer
of liability be given in each contract, instrument or undertaking
executed or made on behalf of the Fund. Further, the Declaration
of Trust provides for indemnification of any shareholder against
any loss and expense arising from personal liability solely by
reason of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder
liability is believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the Fund
was unable to meet its obligations.
The Shares are not, and are not expect to be, listed for
trading on any national securities exchange nor, to the Fund's
knowledge, is there, or is there expected to be, any secondary
trading market in the Shares.
Anti-Takeover Provisions in the Declaration of Trust. The
Fund's Declaration of Trust includes provisions that could have
the effect of limiting the ability of other entities or persons to
acquire control of the Fund. In addition, in the event a
secondary market were to develop in the Shares, such provisions
could have the effect of depriving holders of Shares of an
opportunity to sell their Shares at a premium over prevailing
market prices.
The Declaration of Trust requires the favorable vote of the
holders of not less than three-fourths of the outstanding Shares
then entitled to vote to authorize certain transactions, unless at
least three-fourths of the members of the Board then in office and
at least three-fourths of the non-interested trustees who have
acted in such capacities for at least 12 months (or since
commencement of operation if that period is less than 12 months)
authorize such transaction and then only a vote of the majority of
the holders of the outstanding Shares then entitled to vote is
required.
The Board has determined that the voting requirements
described above, which are greater than the minimum requirements
under Massachusetts law or the 1940 Act, are in the best interests
of shareholders generally. Reference should be made to the
Declaration of Trust on file with the SEC for the full text of
these provisions.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
The Fund seeks to achieve its objective by investing all of
its assets in another closed-end fund having an investment
objective identical to that of the Fund. The initial shareholder
of the Fund approved this policy of permitting the Fund to act as
a feeder fund by investing in the Portfolio. Please refer to
"Investment Objective and Policies" for a description of the
investment objectives, policies, and restrictions of the
Portfolio. The management and expenses of both the Fund and the
Portfolio are described under "Fund Expenses" and "Management of
the Fund-Fees and Expenses." The 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.
The common investment objective of the Fund and the Portfolio
is non-fundamental and may be changed without shareholder
approval, subject, however, to at least 30 days' advance written
notice to the Fund's shareholders.
The fundamental policies of the Fund, and the corresponding
fundamental policies of the Portfolio, can be changed only with
shareholder approval.
If the Fund, as a Portfolio investor, is requested to vote on
a proposed change in a fundamental policy of the Portfolio or any
other matter pertaining to the Portfolio (other than continuation
of the business of the Portfolio after withdrawal of another
investor), the Fund will solicit proxies from its shareholders and
vote its interest in the Portfolio for and against such matters
proportionately to the instructions to vote for and against such
matters received from the Fund's shareholders. The Fund will vote
shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting
instructions. There can be no assurance that any matter receiving
a majority of votes cast by the Fund's shareholders will receive a
majority of votes cast by all Portfolio investors. If other
investors hold a majority interest in the Portfolio, they could
have voting control over the Portfolio.
In the event that the Portfolio's fundamental policies were
changed so as to be inconsistent with those of the Fund, the Board
of the Fund would consider what action might be taken, including
changes to the Fund's fundamental policies, withdrawal of the
Fund's assets from the Portfolio and investment of such assets in
another pooled investment entity, or the retention of another
investment adviser. Any of these actions would require the
approval of the Fund's shareholders. The Fund's inability to find
a substitute master fund or comparable investment management could
have a significant impact upon its shareholders' investments. Any
withdrawal of the Fund's assets could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution)
to the Fund. Should such a distribution occur, the Fund would
incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of the Fund and could
affect the liquidity of the Fund.
The Portfolio may permit other investment companies and/or
other institutional investors to invest, but members of the
general public may not invest directly in the Portfolio. Other
investors in the Portfolio are not required to sell their shares
at the same public offering price as the Fund, could incur
different administrative fees and expenses than the 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 the Portfolio. Investment by such other investors
in the Portfolio would provide funds for the purchase of
additional portfolio securities and would tend to reduce the
Portfolio's operating expenses as a percentage of its net assets.
Conversely, large-scale redemptions by any such other investors in
the Portfolio could result in untimely liquidations of the
Portfolio's security holdings, loss of investment flexibility, and
increases in the operating expenses of the Portfolio as a
percentage of its net assets. As a result, the Portfolio's
security holdings may become less diverse, resulting in increased
risk.
Information regarding any other investors in the Portfolio
may be obtained by writing to Stein Roe Floating Rate Limited
Liability Company, Suite 3200, One South Wacker Drive, Chicago, IL
60606 or by calling 800-322-0593. The Adviser may provide
administrative or other services to one or more such investors.
APPENDIX-RATINGS
Ratings in General. A rating of a rating service represents
the service's opinion as to the credit quality of the security
being rated. However, the ratings are general and are not
absolute standards of quality or guarantees as to the
creditworthiness of an issuer. Consequently, the Adviser believes
that the quality of debt securities should be continuously
reviewed and that individual analysts give different weightings to
the various factors involved in credit analysis. A rating is not
a recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons. The following is a
description of the characteristics of ratings used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P").
Corporate Bond Ratings
Ratings By Moody's. Aaa. Bonds rated Aaa are judged to be
the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or an exceptionally stable
margin and principal is secure. Although the various protective
elements are likely to change, such changes as can be visualized
are more unlikely to impair the fundamentally strong position of
such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
Ratings by S&P. AAA. Debt rated AAA has the highest rating.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues only
in small degree.
A. Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than for debt in higher rated categories.
BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no
interest is being paid.
D. Debt rated D is in default, and payment of interest
and/or repayment of principal is in arrears. The D rating is also
used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
NOTES: The ratings from AA to CCC may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing
within the major ratings 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.
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
Page
The Fund......................................................2
Investment Policies...........................................2
Portfolio Investments and Strategies..........................3
Investment Restrictions......................................11
Tender Offers Fundamental Policy.............................14
Management...................................................14
Principal Shareholders.......................................17
Investment Advisory Services.................................17
Distributor..................................................19
Transfer Agent...............................................19
Custodian....................................................20
Independent Auditors.........................................20
Portfolio Transactions.......................................20
Additional Income Tax Considerations.........................22
Investment Performance.......................................22
Financial Statements.........................................23
<PAGE>
Statement of Additional Information Dated _______, 1998
STEIN ROE FLOATING RATE INCOME FUND
Suite 3200, One South Wacker Drive, Chicago, IL 60606
800-322-0593
This Statement of Additional Information is not a prospectus
but provides additional information that should be read in
conjunction with the Fund's Prospectus dated _______, 1998 and any
supplements thereto. A Prospectus may be obtained at no charge by
telephoning 800-322-0593.
TABLE OF CONTENTS
Page
The Fund......................................................2
Investment Policies...........................................2
Portfolio Investments and Strategies..........................3
Investment Restrictions......................................11
Tender Offers Fundamental Policy.............................14
Management...................................................14
Principal Shareholders.......................................17
Investment Advisory Services.................................17
Distributor..................................................19
Transfer Agent...............................................19
Custodian....................................................20
Independent Auditors.........................................20
Portfolio Transactions.......................................20
Additional Income Tax Considerations.........................22
Investment Performance.......................................22
Financial Statements.........................................23
THE FUND
Stein Roe Floating Rate Income Fund (formerly named Stein Roe
Floating Rate Income Trust) (the "Fund") is a newly organized non-
diversified, closed-end management investment company. The Fund
is engaged in a continuous public offering of its Shares at the
next determined net asset value per share without a sales charge.
The Fund will make Tender Offers on a quarterly basis to
repurchase between 5% and 25% of its outstanding Shares at the
then current net asset value of the Shares. The Fund's principal
office is located at Suite 3200 One South Wacker Drive, Chicago,
IL 60606, and its telephone number is 1-800-322-0593. Capitalized
terms used in this Statement of Additional Information and not
otherwise defined have the meanings given them in the Fund's
Prospectus. The Fund's name was changed on November 4, 1998.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative and accounting and recordkeeping services to the
Fund and the Portfolio (described below) and provides investment
advisory services to the Portfolio.
Special Considerations Regarding Master Fund/Feeder Fund
Structure. Rather than invest in securities directly, the Fund
seeks to achieve its objective by pooling its assets with those of
other investment companies for investment in Stein Roe Floating
Rate Limited Liability Company (the "Portfolio"), which has the
same investment objective and substantially the same investment
policies as the Fund. 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
"Master Fund/Feeder Fund: Structure and Risk Factors." The Fund's
investment experience will corresponding directly to the
investment experience of the Portfolio.
INVESTMENT POLICIES
The following information supplements the discussion of the
investment objectives and policies of the Fund and of the
Portfolio described in the Prospectus. In pursuing its objective,
the Fund and the Portfolio will invest as described below and may
employ the investment techniques described in the Prospectus and
elsewhere in this Statement of Additional Information. The
investment objective of the Fund and of the Portfolio is a non-
fundamental policy and may be changed by the Board without the
approval of a "majority of the outstanding voting securities" /1/
of that Fund or Portfolio, as applicable.
- --------------
/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.
- --------------
The investment objective of the Fund and of the Portfolio is
to provide a high level of current income, consistent with
preservation of capital. To achieve this objective the Portfolio
invests primarily in a portfolio of Senior Loans to Borrowers that
operate in a variety of industries and geographic regions
(including domestic and foreign entities).
Under normal market conditions, at least 80% of the
Portfolio's total assets will be invested in Senior Loans of
domestic Borrowers or foreign Borrowers (so long as Senior Loans
to such foreign Borrowers are U.S. dollar denominated and payments
of interest and repayments of principal pursuant to such Senior
Loans are required to be made in U.S. dollars). Although most
Senior Loans are secured, the Portfolio may invest up to 20% of
its total assets in interests in Senior Loans that are not secured
by any collateral and in other permitted investments (as described
below).
In addition, during normal market conditions, the Portfolio
may invest up to 20% of its total assets (including assets
maintained by the Portfolio as a reserve against any additional
loan commitments) in (i) high quality, short-term debt securities
with remaining maturities of one year or less and (ii) warrants,
equity securities and, in limited circumstances, junior debt
securities acquired in connection with the Portfolio's investments
in Senior Loans. Such high quality, short-term securities may
include commercial paper rated at least Baa, P-3 or higher by
Moody's Investors Service ("Moody's") or BBB, A-3 or higher by
Standard & Poor's Corporation ("S&P") (or if unrated, determined
by the Adviser to be of comparable quality), interests in short-
term loans and short-term loan participations of Borrowers having
short-term debt obligations rated or a short-term credit rating at
least in such rating categories (or having no such rating,
determined by the Adviser to be of comparable quality),
certificates of deposit and bankers' acceptances and securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Such high quality, short-term securities may
pay interest at rates that are periodically redetermined or may
pay interest at fixed rates. For more information, please refer
to the Prospectus under the caption "Investment Objectives and
Policies."
PORTFOLIO INVESTMENTS AND STRATEGIES
The following sets forth information about the investment
policies of the Fund and the Portfolio and the types of securities
the Portfolio may buy. Please read this information together with
information in the Prospectus under the caption "How the Fund
Invests."
Senior Loans. Senior Loans generally are arranged through
private negotiations between a Borrower and the Lenders
represented in each case by one or more Agents of the several
Lenders. Senior Loans in which the Portfolio will purchase
interests generally pay interest at rates that are periodically
redetermined by reference to a base lending rate plus a premium.
These base lending rates are generally Prime Rate, LIBOR, the CD
rate or other base lending rates used by commercial lenders. The
Senior Loans in the Portfolio's investment portfolio will at all
times have a dollar-weighted average time until next interest rate
redetermination of 90 days or less. Because of prepayment
provisions, the actual remaining maturity of Senior Loans may vary
substantially from the stated maturity of such loans. The Adviser
estimates actual average maturity of Senior Loans in the portfolio
will be approximately 18-24 months.
Participations and Assignments. The Portfolio may invest in
Participations in Senior Loans, may purchase Assignments of
portions of Senior Loans from third parties and may act as one of
the group of Original Lenders.
When the Portfolio purchases a Participation, the Portfolio
will typically enter into a contractual relationship with the
Lender selling the Participation, but not with the Borrower. As a
result, the Portfolio will assume the credit risk of both the
Borrower and the Lender selling the Participation, and the
Portfolio may not directly benefit from the collateral supporting
the Senior Loan in which it has purchased the Participation. The
Portfolio will purchase a Participation only when the Lender
selling the Participation, and any other institution
interpositioned between such Lender and the Portfolio at the time
of investment have outstanding debt obligations rated investment
grade (BBB or A-3 or higher by S&P or Baa or P-3 or higher by
Moody's) or determined by the Adviser to be of comparable quality.
The rights of the Portfolio when it acquires a Participation may
be different from, and more limited than, the rights of Original
Lenders or of persons who acquire an Assignment. The Portfolio
may pay a fee or forgo a portion of interest payments to the
Lender selling a Participation or Assignment pursuant to the terms
of such Participation or Assignment.
Debt Restucturing. The Portfolio may purchase and retain in
its portfolio an interest in a Senior Loan to a Borrower that has
filed for protection under the federal bankruptcy laws or has had
an involuntary bankruptcy petition filed against it by its
creditors. The Adviser's decision to purchase or retain such an
interest will depend on its assessment of the likelihood that the
Portfolio ultimately will receive full repayment of the principal
amount of the Senior Loan interests, the likely duration, if any,
of a lapse in the scheduled repayment of principal and prevailing
interest rates. At times, in connection with the restructuring of
a Senior Loan either outside of bankruptcy court or in the context
of bankruptcy court proceedings, the Portfolio may determine or be
required to accept equity securities or junior debt securities in
exchange for all or a portion of a Senior Loan interest.
Depending upon, among other things, the Adviser's evaluation of
the potential value of such securities in relation to the price
that could be obtained by the Portfolio at any given time upon
sale thereof, the Portfolio may determine to hold such securities
in its portfolio. Any equity security or junior debt security
held by the Portfolio will not be treated as a Senior Loan and
thus will not count toward the 80% of the Portfolio's total assets
that normally will be invested in Senior Loans.
Bridge Financing. The Portfolio may acquire interests in
Senior Loans that are designed to provide temporary or "bridge"
financing to a Borrower pending the sale of identified assets or
the arrangement of longer-term loans or the issuance and sale of
debt obligations. A Borrower's use of a bridge loan involves a
risk that the Borrower may be unable to locate permanent financing
to replace the bridge loan, which may impair the Borrower's
perceived creditworthiness.
Other Securities. The Portfolio will acquire such warrants,
equity securities and junior debt securities only as an incident
to the purchase or intended purchase of interests in
collateralized Senior Loans. The Portfolio generally will acquire
interests in warrants, equity securities and junior debt
securities only when the Adviser believes that the relative value
being given by the Portfolio in exchange for such interests is
substantially outweighed by the potential value of such
instruments.
Investment in warrants, equity securities and junior debt
securities entails certain risks in addition to those associated
with investments in Senior Loans. Warrants and equity securities
have a subordinate claim on a Borrower's assets as compared with
debt securities, and junior debt securities have a subordinate
claim on such assets as compared with Senior Loans. As such, the
values of warrants and equity securities generally are more
dependent on the financial condition of the Borrower and less
dependent on fluctuations in interest rates than are the values of
many debt securities. The values of warrants, equity securities
and junior debt securities may be more volatile than those of
Senior Loans and thus may have an adverse impact on the ability of
the Portfolio to minimize fluctuations in its net asset value.
Defensive Investment Policy. If the Adviser determines that
market conditions temporarily warrant a defensive investment
policy, the Portfolio may invest, subject to its ability to
liquidate its relatively illiquid portfolio of Senior Loans, up to
100% of its assets in cash and high quality, short-term debt
securities. The Portfolio may also engage in interest rate and
other hedging transactions, lend portfolio holdings, purchase and
sell interests in Senior Loans and other portfolio debt securities
on a "when-issued" or "delayed-delivery" basis, and enter into
repurchase and reverse repurchase agreements. These investment
practices involve certain special risk considerations. The
Adviser may use some or all of the following investment practices
when, in the opinion of the Adviser, their use is appropriate.
Although the Adviser believes that these investment practices may
further the Portfolio's investment objective, no assurance can be
given that the utilization of these investment practices will
achieve that result.
Structured Notes. The Portfolio may invest up to 5% of its
total assets in structured notes, including "total rate of return
swaps" with rates of return determined by reference to the total
rate of return on one or more loans referenced in such notes. The
rate of return on the structured note may be determined by
applying a multiplier to the rate of total return on the
referenced loan or loans. Application of a multiplier is
comparable to the use of financial leverage, which is a
speculative technique. Leverage magnifies the potential for gain
and the risk of loss, because a relatively small decline in the
value of a referenced note could result in a relatively large loss
in the value of a structured note. Structured notes are treated
as Senior Loans for purposes of the Portfolio's policy of normally
investing at least 80% of its assets in Senior Loans.
Borrowing. The Portfolio may borrow money for the purpose of
obtaining short-term liquidity in connection with Tender Offers by
the Portfolio for its shares and for temporary, extraordinary or
emergency purposes. Under the requirements of the 1940 Act, the
Portfolio, immediately after any such borrowings, must have an
asset coverage of at least 300%. Asset coverage is the ratio that
the value of the total assets of the Portfolio, less all
liabilities and indebtedness not represented by senior securities
(as that term is defined in the 1940 Act), bears to the aggregate
amount of any such borrowings by the Portfolio.
The rights of any lenders to the Portfolio to receive
payments of interest on and repayments of principal of such
borrowings will be senior to those of the holders of Portfolio
shares, and the terms of any such borrowings may contain
provisions that limit certain activities of the Portfolio,
including the payment of dividends to holders of Portfolio shares
in certain circumstances. Further, the terms of any such
borrowings may, and the provisions of the 1940 Act do (in certain
circumstances), grant lenders certain voting rights in the event
of default in the payment of interest or repayment of principal.
In the event that such provisions would impair the Portfolio's
status as a regulated investment company, the Portfolio, subject
to the ability of the Portfolio to liquidate its relatively
illiquid portfolio, intends to repay the borrowings. Interest
payments and fees incurred in connection with any such borrowings
will reduce the amount of net income available for payment to the
holders of Portfolio shares. The Portfolio may enter into an
agreement with a financial institution providing for a facility,
the proceeds of which may be used to finance, in part,
repurchases.
Derivatives. The Portfolio may enter into various interest
rate hedging and risk management transactions. Certain of these
interest rate hedging and risk management transactions may be
considered to involve derivative instruments. A derivative is a
financial instrument whose performance is derived at least in part
from the performance of an underlying index, security or asset.
The values of certain derivatives can be affected dramatically by
even small market movements, sometimes in ways that are difficult
to predict. There are many different types of derivatives with
many different uses. The Portfolio expects to enter into these
transactions primarily to seek to preserve a return on a
particular investment or portion of its portfolio, and may also
enter into such transactions to seek to protect against decreases
in the anticipated rate of return on floating or variable rate
financial instruments the Portfolio owns or anticipates purchasing
at a later date, or for other risk management strategies such as
managing the effective dollar-weighted average duration of the
Portfolio's investment portfolio.
Hedging Transactions. In addition, the Portfolio may also
engage in hedging transactions, including entering into put and
call options, to seek to protect the value of its portfolio
against declines in net asset value resulting from changes in
interest rates or other market changes. The Portfolio does not
intend to engage in such transactions to enhance the yield on its
portfolio. Market conditions will determine whether and in what
circumstances the Portfolio would employ any hedging and risk
management techniques. The Portfolio will not engage in any of
the transactions for speculative purposes and will use them only
as a means to hedge or manage the risks associated with assets
held in, or anticipated to be purchased for, the Portfolio's
investment portfolio or obligations incurred by the Portfolio.
The successful utilization of hedging and risk management
transactions requires skills different from those needed in the
selection of portfolio securities. The Adviser believes that it
possesses the skills necessary for the successful utilization of
hedging and risk management transactions. The Portfolio will
incur brokerage and other costs in connection with its hedging
transactions.
Interest Rate Swaps, Caps and Floors. The Portfolio may
enter into interest rate swaps or purchase or sell interest rate
caps or floors. The Portfolio will not sell interest rate caps or
floors that it does not own. Interest rate swaps involve the
exchange by the Portfolio with another party of their respective
obligations to pay or receive interest; e.g., an exchange of an
obligation to make floating rate payments for an obligation to
make fixed rate payments. For example, the Portfolio may seek to
shorten the effective interest rate redetermination period of a
Senior Loan to a Borrower that has selected an interest rate
redetermination period of one year. The Portfolio could exchange
the Borrower's obligation to make fixed rate payments for one year
for an obligation to make payments that readjust monthly. In such
event, the Portfolio would consider the interest rate
redetermination period of such Senior Loan to be the shorter
period.
The purchase of an interest rate cap entitles the purchaser,
to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest at the difference
between the index and the predetermined rate on a notional
principal amount (the reference amount with respect to which
interest obligations are determined although no actual exchange of
principal occurs) from the party selling such interest rate cap.
The purchase of an interest rate floor entitles the purchaser, to
the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest at the difference
between the index and the predetermined rate on a notional
principal amount from the party selling such interest rate floor.
The Portfolio will not enter into swaps, caps or floors, if, on a
net basis, the aggregate notional principal amount with respect to
such agreements exceeds the net assets of the Portfolio.
In circumstances in which the Adviser anticipates that
interest rates will decline, the Portfolio might, for example,
enter into an interest rate swap as the floating rate payor or,
alternatively, purchase an interest rate floor. In the case of
purchasing an interest rate floor, if interest rates declined
below the floor rate, the Portfolio would receive payments from
its counterparty that would wholly or partially offset the
decrease in the payments it would receive with respect to the
portfolio assets being hedged. In the case where the Portfolio
purchases such an interest rate swap, if the floating rate
payments fell below the level of the fixed rate payment set in the
swap agreement, the Portfolio's counterparty would pay the
Portfolio amounts equal to interest computed at the difference
between the fixed and floating rates over the notional principal
amount. Such payments would offset or partially offset the
decrease in the payments the Portfolio would receive with respect
to floating rate portfolio assets being hedged.
The successful use of swaps, caps and floors to preserve the
rate of return on a portfolio of financial instruments depends on
the Adviser's ability to predict correctly the direction and
extent of movements in interest rates. Although the Adviser
believes that use of the hedging and risk management techniques
described above will benefit the Portfolio, if the Adviser's
judgment about the direction or extent of the movement in interest
rates is incorrect, the Portfolio's overall performance could be
worse than if it had not entered into any such transaction. For
example, if the Portfolio had purchased an interest rate swap or
an interest rate floor to hedge against its expectation that
interest rates would decline but instead interest rates rose, the
Portfolio would lose part or all of the benefit of the increased
payments it would receive as a result of the rising interest rates
because it would have to pay amounts to its counterparty under the
swap agreement or would have paid the purchase price of the
interest rate floor.
Inasmuch as these hedging transactions are entered into for
good-faith risk management purposes, the Adviser and the Portfolio
believe such obligations do not constitute senior securities. The
Portfolio will usually enter into interest rate swaps on a net
basis; i.e., where the two parties make net payments with the
Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any,
of the Portfolio's obligations over its entitlements with respect
to each interest rate swap will be accrued and an amount of cash
or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained. If the Portfolio
enters into a swap on other than a net basis, the Portfolio will
maintain the full amount of the Portfolio's obligations under each
such swap. Accordingly, the Portfolio does not treat swaps as
senior securities. The Portfolio may enter into swaps, caps and
floors with member banks of the Federal Reserve System, members of
the New York Stock Exchange or other entities determined to be
creditworthy by the Adviser, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board. If a default occurs by
the other party to such transactions, the Portfolio will have
contractual remedies pursuant to the agreements related to the
transaction, but such remedies may be subject to bankruptcy and
insolvency laws that could affect the Portfolio's rights as a
creditor. The swap market has grown substantially in recent years
with a large number of banks and financial services firms acting
both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively
liquid. Caps and floors are more recent innovations and they are
less liquid than swaps. There can be no assurance, however, that
the Portfolio will be able to enter into interest rate swaps or to
purchase interest rate caps or floors at prices or on terms the
Adviser believes are advantageous to the Portfolio. In addition,
although the terms of interest rate swaps, caps and floors may
provide for termination, there can be no assurance that the
Portfolio will be able to terminate an interest rate swap or to
sell or offset interest rate caps or floors that it has purchased.
New Financial Products. New financial products continue to
be developed and the Portfolio may invest in any such products as
may be developed to the extent consistent with its investment
objective and the regulatory and federal tax requirements
applicable to investment companies.
Lending of Portfolio Holdings. The Portfolio may seek to
increase its income by lending financial instruments in its
portfolio in accordance with present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC. Such loans may be made, without limit, to
brokers, dealers, banks or other recognized institutional
Borrowers of financial instruments and would be required to be
secured continuously by collateral, including cash, cash
equivalents or U.S. Treasury bills maintained on a current basis
at an amount at least equal to the market value of the financial
instruments loaned. The Portfolio would have the right to call a
loan and obtain the financial instruments loaned at any time on
five days' notice. For the duration of a loan, the Portfolio
would continue to receive the equivalent of the interest paid by
the issuer on the financial instruments loaned and also would
receive compensation from the investment of the collateral. The
Portfolio would not have the right to vote any financial
instruments having voting rights during the existence of the loan,
but the Portfolio could call the loan in anticipation of an
important vote to be taken among holders of the financial
instruments or in anticipation of the giving or withholding of
their consent on a material matter affecting the financial
instruments. As with other extensions of credit, such loans
entail risks of delay in recovery or even loss of rights in the
collateral should the Borrower of the financial instruments fail
financially. However, the loans would be made only to borrowers
deemed by the Adviser to be of good standing and when, in the
judgment of the Adviser, the consideration that can be earned
currently from loans of this type justifies the attendant risk.
The creditworthiness of firms to which the Portfolio lends its
portfolio holdings will be monitored on an ongoing basis by the
Adviser pursuant to procedures adopted and reviewed, on an ongoing
basis, by the Board. No specific limitation exists as to the
percentage of the Portfolio's assets that the Portfolio may lend.
"When-Issued" and "Delayed-Delivery" Transactions. The
Portfolio may also purchase and sell interests in Senior Loans and
other portfolio securities on a "when-issued" and "delayed-
delivery" basis. No income accrues to the Portfolio on such
interests or securities in connection with such purchase
transactions prior to the date the Portfolio actually takes
delivery of such interests or securities. These transactions are
subject to market fluctuation, the value of the interests in
Senior Loans and other portfolio debt securities at delivery may
be more or less than their purchase price, and yields generally
available on such interests or securities when delivery occurs may
be higher or lower than yields on the interests or securities
obtained pursuant to such transactions. Because the Portfolio
relies on the buyer or seller, as the case may be, to consummate
the transaction, failure by the other party to complete the
transaction may result in the Portfolio missing the opportunity of
obtaining a price or yield considered to be advantageous. When
the Portfolio is the buyer in such a transaction, however, it will
maintain cash or liquid securities having an aggregate value at
least equal to the amount of such purchase commitments until
payment is made. The Portfolio will make commitments to purchase
such interests or securities on such basis only with the intention
of actually acquiring these interests or securities, but the
Portfolio may sell such interests or securities prior to the
settlement date if such sale is considered to be advisable. To
the extent the Portfolio engages in "when-issued" and "delayed-
delivery" transactions, it will do so for the purpose of acquiring
interests or securities for the Portfolio's investment portfolio
consistent with the Portfolio's investment objective and policies
and not for the purpose of investment leverage. No specific
limitations exist as to the percentage of the Portfolio's assets
that may be used to acquire securities on a "when-issued" or
"delayed-delivery" basis.
Repurchase Agreements. The Portfolio may enter into
repurchase agreements (a purchase of, and simultaneous commitment
to resell, a financial instrument at an agreed upon price on an
agreed upon date) only with member banks of the Federal Reserve
System and member firms of the New York Stock Exchange. In
entering into a repurchase agreement, the Portfolio buys
securities from the bank or broker-dealer, with the agreement that
the seller will repurchase the securities at a higher price at a
later date. Such transactions afford an opportunity for the
Portfolio to earn a return on available cash at minimal market
risk, although the Portfolio may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to
repurchase. Under the 1940 Act, repurchase agreements are deemed
to be collateralized loans of money by the Portfolio to the
Seller. In evaluating whether to enter into a repurchase
agreement, the Adviser will consider carefully the
creditworthiness of the seller. If the bank or broker-dealer that
is the seller petitions for bankruptcy or otherwise becomes
subject to the U.S. Bankruptcy Code, the law regarding the rights
of the Portfolio is unsettled. The securities underlying a
repurchase agreement will be marked to market every business day
and adjusted in amount so that the value of the collateral is at
least equal to the value of the loan, including the accrued
interest thereon, and the Adviser will monitor the value of the
collateral. No specific limitation exists as to the percentage of
the Portfolio's assets that may be invested in repurchase
agreements.
Reverse Repurchase Agreements. The Portfolio may enter into
reverse repurchase agreements with respect to debt obligations
that could otherwise be sold by the Portfolio. Under a reverse
repurchase agreement, the Portfolio sells a debt security and
simultaneously obtain the commitment of the purchaser (a
commercial bank or a broker-dealer) to sell the security back to
the Portfolio at an agreed upon price on an agreed upon date. The
Portfolio will maintain cash or liquid securities in an amount
sufficient to cover its obligations with respect to reverse
repurchase agreements. The Portfolio receives payment for such
securities only upon physical delivery or evidence of book entry
transfer by its custodian. SEC regulations require either that
securities sold by the Portfolio under a reverse repurchase
agreement be segregated pending repurchase or that the proceeds be
segregated on the Portfolio's books and records pending
repurchase. Reverse repurchase agreements could involve certain
risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Portfolio's
ability to dispose of the underlying securities. An additional
risk is that the market value of securities sold by the Portfolio
under a reverse repurchase agreement could decline below the price
at which the Portfolio is obligated to repurchase them. Reverse
repurchase agreements are considered borrowings by the Portfolio
and as such are subject to the restrictions on borrowing described
below under "Investment Restrictions." The Portfolio will not
hold more than 5% of the value of its total assets in reverse
repurchase agreements as of the time the agreement is entered
into.
Rated Securities. For a description of the ratings applied
by Moody's and S&P to short-term securities, please refer to the
Appendix to the Prospectus. The rated short-term securities
described under Investment Policies above include securities given
a rating conditionally by Moody's or provisionally by S&P. If the
rating of a security held by the Portfolio is withdrawn or
reduced, the Portfolio is not required to sell the security, but
the Adviser will consider such fact in determining whether the
Portfolio should continue to hold the security.
Portfolio Turnover. The frequency and amount of portfolio
purchases and sales (known as the "turnover rate") will vary from
year to year. It is anticipated that the Portfolio's turnover
rate will be between 50% and 100%. The portfolio turnover rate is
not expected to exceed 100%, but may vary greatly from year to
year and will not be a limiting factor when the Adviser deems
portfolio changes appropriate. Although the Portfolio generally
does not intend to trade for short-term profits, the securities
held by the Portfolio will be sold whenever the Adviser believes
it is appropriate to do so, without regard to the length of time a
particular security may have been held. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other
transaction costs that the Portfolio will bear directly.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio operate under the following
investment restrictions. Neither the Fund nor the Portfolio may:
(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 (the electric, gas, water and
telephone utility industries being treated as separate industries
for the purpose of this restriction) except that this restriction
does not apply to (i) obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities; (ii)
securities the issuer of which is deemed to be in the financial
institutions industry, which includes commercial banks, thrift
institutions, insurance companies and finance companies; [the Fund
only] or (iii) investment by the Fund of all or substantially all
of its assets in another registered investment company having the
same investment objective and substantially similar investment
policies as the Fund;
(2) invest in a security if, as a result of such investment,
it would hold more than 10% of the outstanding voting securities
(taken at the time of such investment) of any one issuer [the 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) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies that invest in real estate, or
interests therein), except that it may hold for prompt sale and
sell real estate or interests in real estate to which it may gain
an ownership interest through the forfeiture of collateral
securing loans or debt securities held by it;
(4) 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;
(5) 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 (the purchase of Senior Loans, corporate debt securities,
and other investment assets with the proceeds of a permitted
borrowing or securities offering will not be deemed to be the
purchase of securities on margin);
(6) make loans, although it may (a) lend portfolio securities
and participate in an interfund lending program with other
investment companies to which the Adviser provides investment
advisory services 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 (including interests in
Assignments and Participation) and other Senior Loans in which it
is authorized to invest in accordance with its respective
investment objectives and policies;
(7) borrow except that it may (a) borrow for nonleveraging,
temporary or emergency purposes, (b) engage in reverse repurchase
agreements, hedging transactions, when-issued and delayed-delivery
transactions and similar investment strategies, and make other
borrowings, provided that the combination of (a) and (b) shall not
at anytime exceed 33-1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than for
borrowings) or such other percentage permitted by law, and (c)
enter into futures and options transactions (it may borrow from
banks, other investment companies to which the Adviser provides
investment advisory services, and other persons to the extent
permitted by applicable law);
(8) 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, [the 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
(9) issue any senior security except to the extent permitted
under the Investment Company Act of 1940 (for this purpose Senior
Loans shall not be deemed senior securities).
The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the outstanding
voting securities," as previously defined herein.
The Fund and the Portfolio are also subject to the following
restrictions and policies that may be changed by the Board of the
Fund or of the Portfolio, as applicable. None of the following
restrictions shall prevent the Fund from investing all or
substantially all of its assets in another investment company
having the same investment objective and substantially similar
investment policies as the Fund. Unless otherwise indicated,
neither the Fund nor the Portfolio may:
(A) invest for the purpose of exercising control or
management [except to the extent that exercise by the Portfolio of
its rights under Loan Agreements would be deemed to be constitute
such control or management];
(B) purchase more than 3% of the stock of another investment
company (other than the Portfolio) or purchase stock of other
investment companies (other than the Portfolio) equal to more than
5% of its total assets (taken at market value at the time of
purchase) in the case of any one other investment company (other
than the Portfolio) and 10% of such assets (taken at market value
at the time of purchase) in the case of all other investment
companies (other than the Portfolio) 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 /2/;
- ---------------
/2/ The Fund has been informed that the staff of the Securities
and Exchange Commission takes the position that the issuers of
certain CMOs and certain other collateralized assets are
investment companies and that subsidiaries of foreign banks may be
investment companies for purposes of Section 12(d)(1) of the
Investment Company Act of 1940, which limits the ability of one
investment company to invest in another investment company.
Accordingly, the Fund intends to operate within the applicable
limitations under Section 12(d)(1)(A) of that Act.
- ---------------
(C) purchase shares of open-end investment companies, except
in connection with a merger, consolidation, acquisition, or
reorganization;
(D) purchase a put or call option if the aggregate premiums
paid for all put and call options then held 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; /3/
- -------------------
/3/ The Portfolio does not currently intend to purchase a put or
call option if the aggregate premiums paid for all put and call
options then held exceed 5% of its net asses (less the amount by
which any such positions are in-the-money), excluding put and call
options purchased as closing transactions.
- -------------------
(E) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(F) invest in limited partnerships in real estate unless they
are readily marketable;
(G) 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 that 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; /4/
- -------------------
/4/ The Portfolio does not currently intend to commit more than 5%
of its assets to short sales.
- -------------------
(H) 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.
TENDER OFFERS FUNDAMENTAL POLICY
The Board has adopted a resolution setting forth the Fund's
fundamental policy that it will conduct quarterly Tender Offers
(the "Tender Offer Fundamental Policy").
The Tender Offer Fundamental Policy sets the interval between
each Repurchase Offer at one quarter and provides that the Fund
shall conduct a Tender Offer each quarter (unless suspended or
postponed in accordance with regulatory requirements). The
Repurchase Request Deadline will be established by the Fund and
will be based on factors such as market conditions, liquidity of
the Fund's assets and shareholder servicing conditions. The
Tender Offer Fundamental Policy also provides that the repurchase
pricing shall occur not later than fourteenth day after the
Repurchase Request Deadline or the next business day if the
fourteenth day is not a business day.
The Tender Offer Fundamental Policy may only be changed by a
majority vote of the outstanding voting securities. For more
information, please refer to the Prospectus under the caption
"Periodic Tender Offers."
MANAGEMENT
The following table sets forth certain information with
respect to trustees ("Managers" in the case of the Portfolio) and
officers of the Fund and the Portfolio:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
William D. Andrews, 51 Executive Vice-President Executive vice president of
Stein Roe & Farnham Incorporated (the
"Adviser")
Gary A. Anetsberger, 42 Senior Vice-President Chief financial officer and chief
administrative officer of the Mutual
Funds division of the Adviser; senior
vice president of the Adviser since April
1996; vice president of the Adviser prior
thereto
John A. Bacon Jr., 70 (3) Trustee/Manager Private investor
William W. Boyd, 71 Trustee/Manager Chairman and director of
(2)(3) Sterling Plumbing (manufacturer of plumbing
products)
Thomas W. Butch, 41(1)(2) Trustee/Manager, President of the Adviser's
President Mutual Funds division since March 1998;
senior vice president of the Adviser from Sept.
1994 to March 1998; first vice president, corporate
communications, of Mellon Bank Corporation thereto
Lindsay Cook, 46 (1) Trustee/Manager Executive vice president of Liberty Financial
Companies, Inc. (the indirect parent of the Adviser)
since March 1997; senior vice president prior thereto
Kevin M. Carome, 42 Vice-President; Assistant Associate general counsel
Secretary and (since Feb. 1995) vice president of Liberty
Financial Companies, Inc.; general counsel and
secretary of the Adviser since Jan. 1998
James R. Fellows, 33 (4) Vice-President Vice president of the Adviser since April 1998; vice
president and senior credit analyst, Van Kampen
American Capital prior thereto
Brian W. Good, 33 (4) Vice-President Vice president of the Adviser since April 1998; vice
president and portfolio manager, Van Kampen American
Capital prior thereto
Douglas A. Hacker, 42 (3) Trustee/Manager Senior vice president and chief financial officer of
UAL, Inc. (airline) since July 1994; senior vice
president, finance of UAL, Inc. prior thereto
Loren A. Hansen, 50 Executive Vice-President Chief investment officer/equity of Colonial Management
Associates, Inc. since 1997; Executive vice president
of the Adviser since Dec. 1995; vice president of The
Northern Trust (bank) prior thereto
Janet Langford Kelly, 40 Trustee/Manager Senior vice president, secretary and general counsel
(3) of Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner of Sidley &
Austin (law firm) prior thereto
Charles R. Nelson, 56 (3) Trustee/Manager Van Voorhis Professor of Political Economy of the
University of Washington
Nicolette D. Parrish, 48 Vice-President; Senior legal assistant and assistant secretary of
Assistant Secretary the Adviser
Sharon R. Robertson, 36 Controller Accounting manager for the Adviser's Mutual Funds
division
Janet B. Rysz, 42 Assistant Secretary Senior legal assistant and assistant secretary of the
Adviser
Thomas C. Theobald, 61(3) Trustee/Manager Managing director, William Blair Capital Partners
(private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation prior thereto
Scott E. Volk, 27 Treasurer Financial reporting manager for the Adviser's Mutual
Funds division since Oct. 1997; senior auditor with
Ernst & Young LLP from Sept. 1993 to April 1996 and
from Oct. 1996 to Sept. 1997; financial analyst with
John Nuveen & Company Inc. from May 1996 to Sept. 1996
Heidi J. Walter, 31 Vice President; Secretary Vice President of the Adviser since March 1998; senior
legal counsel for the Adviser since Feb. 1998; legal
counsel for the Adviser from March 1995 to Jan. 1998;
associate with Beeler Schad & Diamond PC (law firm)
prior thereto
Margaret O. Zwick, 32 Assistant Treasurer Project manager for the Adviser's Mutual Funds division
since April 1997; compliance manager from Aug. 1995 to
April 1997; compliance accountant, Jan. 1995 to July
1995; section manager, Jan. 1994 to Jan. 1995;
supervisor prior thereto
<FN>
____________________
(1) Trustee who is an "interested person" of the Fund 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) Officer of the Fund but not the Portfolio.
</TABLE>
Certain of the trustees and officers of the Fund and the
Portfolio are trustees or officers of other investment companies
managed by the Adviser. The address of Mr. Boyd is 2900 Golf
Road, Rolling Meadows, IL 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Hacker is P.O. Box 66100,
Chicago, IL 60666; that of Ms. Kelly is Three First National
Plaza, Chicago, IL 60602; that of Mr. Nelson is Department of
Economics, University of Washington, Seattle, WA 98195; that of
Mr. Theobald is Suite 3300, 222 West Adams Street, Chicago, IL
60606; and that of the officers is One South Wacker Drive,
Chicago, IL 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from the Fund. In compensation for their
services to the Fund, trustees who are not "interested persons" of
the Fund or the Adviser are paid an annual retainer plus an
attendance fee for each meeting of the Board or Standing Committee
attended. The Fund has no retirement or pension plan. For the
period from the start of business on _____________, 1998 to June
30, 1999, the end of the Fund's current fiscal year, it is
estimated that the trustees will earn the following compensation
in their capacities as trustees:
Compensation from the
Stein Roe Fund Complex*
-----------------------
Aggregate Compensation Total Average
Name of Trustee from the Trust Compensation Per Series
- ------------------- -------------------- ------------ ----------
Thomas. W. Butch -0- -0- -0-
Lindsay Cook -0- -0- -0-
John A. Bacon, Jr. $700 $49,700 $1,035
William W. Boyd $700 $49,700 $1,035
Douglas A. Hacker $700 $49,700 $1,035
Janet Langford Kelly $700 $49,700 $1,035
Charles R. Nelson $700 $49,700 $1,035
Thomas C. Theobald $700 $49,700 $1,035
____________
*As of the date hereof, the Stein Roe Fund Complex consisted of
the Fund, the Portfolio for which the trustees serve on the Board
of Managers, Stein Roe Institutional Floating Rate Income Fund,
and the following series of open-end funds: four series of Stein
Roe Income Trust, four series of Stein Roe Municipal Trust, 11
series of Stein Roe Investment Trust, 10 series of Stein Roe
Advisor Trust, one series of Stein Roe Trust, 13 series of SR&F
Base Trust, and five series of SteinRoe Variable Investment Trust.
PRINCIPAL SHAREHOLDERS
As of the date of this Prospectus, the Adviser owns 100% of
the issued and outstanding Shares and, until the Fund completes
the public offering of the Shares, the Adviser will be deemed to
control the Fund under the 1940 Act.
INVESTMENT ADVISORY SERVICES
The Adviser provides administrative services to the Fund and
the Portfolio and portfolio management services to the Portfolio.
The Adviser is a wholly owned subsidiary of SteinRoe Services
Inc., 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, C. Allen
Merritt, Jr., Thomas W. Butch, and Hans P. Ziegler. Mr. Leibler
is President and Chief Executive Officer of Liberty Financial; Mr.
Merritt is Chief Operating Officer of Liberty Financial; Mr. Butch
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 and Merritt is Federal Reserve Plaza,
Boston, MA 02210; and that of Messrs. Butch and Ziegler is One
South Wacker Drive, Chicago, IL 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, 1998, the Adviser managed
over $29.1 billion in assets: over $11.2 billion in equities and
over $17.9 billion in fixed income securities (including $1.7
billion in municipal securities). The $29.1 billion in managed
assets included over $9.3 billion held by open-end mutual funds
managed by the Adviser (approximately 14% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 289,000 shareholders. The $9.3 billion in
mutual fund assets included over $748 million in over 42,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 9,000 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At June 30, 1998, the Adviser employed 18
research analysts and 55 account managers. The average
investment-related experience of these individuals was 24 years.
Please refer to the descriptions of the Adviser, the
management and administrative agreements, fees, expense
limitations, and transfer agency services under "Management of the
Fund" and "Fund Expenses" in the Prospectus, which are
incorporated herein by reference.
The Adviser provides office space and executive and other
personnel to the Fund and bears any sales or promotional expenses.
The Fund pays all expenses other than those paid by the Adviser,
including but not limited to printing and postage charges,
securities registration and custodian fees, and expenses
incidental to its organization.
The Fund's administrative agreement provides that the Adviser
shall reimburse the Fund to the extent that total annual expenses
of the Fund (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 the Fund are being offered for sale to the public;
however, such reimbursement for any fiscal year will not exceed
the amount of the fees paid by the Fund under that agreement for
such year. In addition, in the interest of further limiting the
Fund's expenses, the Adviser may voluntarily waive its fees and/or
absorb certain expenses for the Fund, as described in the
Prospectus under "Fund Expenses." Any such reimbursements will
enhance the yield of the Fund.
The 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
the Portfolio or any shareholder of the 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 its obligations and
duties under the agreement.
Any expenses that are attributable solely to the
organization, operation, or business of the Fund shall be paid
solely out of the Fund's assets. Any expenses incurred by the
Fund that are not solely attributable to the Fund are apportioned
in such manner as the Adviser determines is fair and appropriate,
unless otherwise specified by the Board.
Bookkeeping and Accounting
Pursuant to a separate agreement with the Fund, the Adviser
receives a fee for performing certain bookkeeping and accounting
services for the Fund. For these services, the Adviser receives
an annual fee of $25,000 plus .0025 of 1% of average net assets
over $50 million.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Securities
Corporation ("Distributor"), 100 Manhattanville Road, Purchase, NY
10577, under a Distribution Agreement (the "Agreement"). The
Distributor is a subsidiary of Colonial Management Associates,
Inc., which is an indirect subsidiary of Liberty Financial. The
Agreement continues in effect from year to year, provided such
continuance is approved annually (1) by a majority of the Board or
by a majority of the outstanding voting securities of the Fund,
and (2) by a majority of the trustees who are not parties to the
Agreement or interested persons of any such party. The Fund 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 the prospectus and other expenses.
As agent, the Distributor offers Shares of the 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
the Fund. The Distributor offers the Fund's Shares only on a
best-efforts basis.
TRANSFER AGENT
Liberty Funds Services, Inc. ("LFS") performs certain
transfer agency services for the Fund, as described under
"Management of the Fund" in the Prospectus. For performing these
services, the Fund pays LFS a fee at the annual rate of 0.140 of
1% of its average daily net assets. The Board believes the
charges by LFS to the Fund are comparable to those of other
companies performing similar services. (See "Investment Advisory
Services.") Under a separate agreement, SSI also provides certain
investor accounting services to the Portfolio.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 02101, is the custodian for the Fund
and the Portfolio. It is responsible for holding all securities
and cash, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and
collecting income from investments, making all payments covering
expenses, and performing other administrative duties, all as
directed by authorized persons. The Bank does not exercise any
supervisory function in such matters as purchase and sale of
portfolio securities, payment of dividends, or payment of
expenses.
The Fund may invest in obligations of the Bank and may
purchase or sell securities from or to the Bank.
INDEPENDENT AUDITORS
The independent auditors for the Fund and the Portfolio are
Ernst & Young LLP, 233 South Wacker Drive, Chicago, IL 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.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures contracts. 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. Transactions placed through dealers reflect the
spread between the bid and asked prices. Occasionally, the
Portfolio may make purchases of underwritten issues at prices that
include underwriting discounts or selling concessions.
The Adviser's overriding objective in selecting brokers and
dealers to effect portfolio transactions is to seek the best
combination of net price and execution. The best net price,
giving effect to brokerage commission, if any, is an important
factor in this decision; however, a number of other judgmental
factors may also enter into the decision. These factors include
the Adviser's knowledge of negotiated commission rates currently
available and other current transaction costs; the nature of the
security being purchased or sold; the size of the transaction; the
desired timing of the transaction; the activity existing and
expected in the market for the particular security;
confidentiality; the execution, clearance and settlement
capabilities of the broker or dealer selected and others
considered; the Adviser's knowledge of the financial condition of
the broker or dealer selected and such other brokers and dealers;
and the Adviser's knowledge of actual or apparent operation
problems of any broker or dealer. Recognizing the value of these
factors, the Adviser may cause a client to pay a brokerage
commission in excess of that which another broker may have charged
for effecting the same transaction.
The Adviser has established internal policies for the
guidance of its trading personnel, specifying minimum and maximum
commissions to be paid for various types and sizes of transactions
and effected for clients in those cases where the Adviser has
discretion to select the broker or dealer by which the transaction
is to be executed. Transactions which vary from the guidelines
are subject to periodic supervisory review. These guidelines are
reviewed and periodically adjusted, and the general level of
brokerage commissions paid is periodically reviewed by the
Adviser. Evaluations of the reasonableness of brokerage
commissions, based on the factors described in the preceding
paragraph, are made by the Adviser's trading personnel while
effecting portfolio transactions. The general level of brokerage
commissions paid is reviewed by the Adviser, and reports are made
annually to the Board of Trustees.
Where more than one broker or dealer is believed to be
capable of providing a combination of best net price and execution
with respect to a particular portfolio transaction, the Adviser
often selects a broker or dealer that has furnished it with
investment research products or services such as: economic,
industry or company research reports or investment
recommendations; subscriptions to financial publications or
research data compilations; compilations of securities prices,
earnings, dividends, and similar data; computerized data bases;
quotation equipment and services; research or analytical computer
software and services; or services of economic and other
consultants. Such selections are not made pursuant to any
agreement or understanding with any of the brokers or dealers.
However, the Adviser does in some instances request a broker to
provide a specific research or brokerage product or service which
may be proprietary to the broker or produced by a third party and
made available by the broker and, in such instances, the broker in
agreeing to provide the research or brokerage product or service
frequently will indicate to the Adviser a specific or minimum
amount of commissions which it expects to receive by reason of its
provision of the product or service. The Adviser does not agree
with any broker to direct such specific or minimum amounts of
commissions; however, the Adviser does maintain an internal
procedure to identify those brokers who provide it with research
products or services and the value of such products or services,
and the Adviser endeavors to direct sufficient commissions on
client transactions (including commissions on transactions in
fixed income securities effected on an agency basis and, in the
case of transactions for certain types of clients, dealer selling
concessions on new issues of securities) to ensure the continued
receipt of research products or services the Adviser feels are
useful.
In a few instances, the Adviser receives from brokers
products or services which are used by the Adviser both for
investment research and for administrative, marketing, or other
non-research or brokerage purposes. In such instances, the
Adviser makes a good faith effort to determine the relative
proportion of its use of such product or service which is for
investment research or brokerage, and that portion of the cost of
obtaining such product or service may be defrayed through
brokerage commissions generated by client transactions, while the
remaining portion of the costs of obtaining the product or service
is paid by the Adviser in cash. The Adviser may also receive
research in connection with selling concessions and designations
in fixed income offerings.
The Fund does not believe it pays brokerage commissions
higher than those obtainable from other brokers in return for
research or brokerage products or services provided by brokers.
Research or brokerage products or services provided by brokers may
be used by the Adviser in servicing any or all of the clients of
the Adviser and such research products or services may not
necessarily be used by the Adviser in connection with client
accounts which paid commissions to the brokers providing such
products or services.
ADDITIONAL INCOME TAX CONSIDERATIONS
The Fund and the Portfolio intend to comply with the special
provisions of the Internal Revenue Code that relieve the Fund and
the Portfolio, as applicable, of federal income tax to the extent
of their respective net investment income and capital gains
currently distributed to their respective shareholders.
Because capital gain distributions reduce net asset value, if
a shareholder purchases Shares shortly before a record date, he
will, in effect, receive a return of a portion of his investment
in such distribution. The distribution would nonetheless be
taxable to him, even if the net asset value of Shares were reduced
below his cost. However, for federal income tax purposes the
shareholder's original cost would continue as his tax basis.
The Fund expects that none of its dividends will qualify for
the deduction for dividends received by corporate shareholders.
INVESTMENT PERFORMANCE
The Fund may quote yield figures from time to time. The
"Yield" of the Fund is computed by dividing the net investment
income per share earned during a 30-day period (using the average
number of shares entitled to receive dividends) by the net asset
value per share on the last day of the period. The Yield formula
provides for semiannual compounding which assumes that net
investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
6
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1) -1].
Where: a = dividends and interest earned during the period
(For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which
net value is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of the Fund for the
period.
The Fund may quote total return figures from time to time. A
"Total Return" on a per share basis is the amount of dividends
received per share plus or minus the change in the net asset value
per share for a period. A "Total Return Percentage" may be
calculated by dividing the value of a share at the end of a period
(including reinvestment of distributions) by the value of the
share at the beginning of the period and subtracting one. For a
given period, an "Average Annual Total Return" may be computed by
finding the average annual compounded rate that would equate a
hypothetical initial amount invested of $1,000 to the ending
redeemable value.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
The Fund may provide information about the Advisor and its
affiliates and other related funds in sales material or
advertisements provided to investors or prospective investors.
Sales materials or advertisements also may provide information on
the use of investment professionals by investors. For further
information, see "Performance Information" in the Prospectus.
Related Securities. For a description of the ratings applied
by Moody's and S&P to short-term securities, please refer to the
Appendix to the Prospectus. The rated short-term securities
described under Investment Policies above include securities given
a rating conditionally by Moody's or provisionally by S&P. If the
rating of a security held by the Portfolio is withdrawn or
reduced, the Portfolio is not required to sell the security, but
the Adviser will consider such fact in determining whether the
Portfolio should continue to hold the security.
FINANCIAL STATEMENTS
Following are the audited financial statements for the
initial capitalization of the Fund and the report of Ernst & Young
LLP dated November 12, 1998.
Stein Roe Floating Rate Income Fund
Statement of Net Assets
November 12, 1998
Assets:
Cash $100,000
========
Capital:
Paid in Capital (net assets) $100,000
========
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 Floating Rate Income Fund (the "Fund") is a newly
organized non-diversified closed-end management investment
company. The Fund's investment objective is to provide a
high level of current income, consistent with preservation of
capital. The Fund is engaged in a continuous public offering
of its shares at the next determined net asset value per
share without a sales charge. Each calendar quarter, the
Fund intends to make a tender offer to repurchase a portion
of the outstanding shares from shareholders. The Fund will
seek to achieve its objective by investing its net investable
assets in Stein Roe Floating Rate Limited Liability Company
(the "Portfolio"), a non-diversified, closed-end management
investment company, which has the same objective as the Fund,
rather than investing directly in and managing its own
portfolio of securities. The Fund is inactive except for
matters relating to its organization and registration, as a
closed-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. Organizational costs will be borne by the
Adviser.
Note 2. Transactions with Affiliates:
Upon commencement of investment operations, the Adviser will
receive a management fee from the Portfolio computed and
accrued daily, based on an annual rate of 0.850% of average
daily net assets. The Adviser will also receive an
administrative fee from the Fund, computed and accrued daily,
at an annual rate of 0.250% of average daily net assets. The
Adviser has undertaken to reimburse the Fund for its
operating expenses to the extent that such expenses exceed
1.30% of its average annual net assets. This commitment
expires on October 31, 1999. Thereafter, the Adviser may
terminate the commitment on 30 days' notice to the Fund.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees
Stein Roe Floating Rate Income Fund
We have audited the accompanying statement of net assets of Stein
Roe Floating Rate Income Fund as of November 12, 1998. 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 Floating Rate Income Fund at November 12, 1998, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 12, 1998
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
(a) Financial statements included in Part A of this
registration statement:
None
(b) Financial statements included in Part B of this
registration statement:
Stein Roe Floating Rate Income Fund audited financial
statements for its initial capitalization dated
November 12, 1998.
(2) Exhibits:
a. Agreement and Declaration of Trust as amended and restated
on Nov. 3, 1998.
b. By-laws of Registrant dated August 13, 1998 as amended on
Sept. 25, 1998.
c. None.
d. None.
e. None.
f. None.
g. Form of Portfolio Management Agreement between Stein Roe
Floating Rate Limited Liability Company and Stein Roe &
Farnham Incorporated.
h. Underwriting Agreement between Registrant and
Liberty Securities Corporation dated Oct. 15, 1998.
i. None.
j. Form of Custodian Contract between Registrant and State
Street Bank and Trust Company.
k. (1) Form of Transfer Agency Agreement between Registrant and
Liberty Funds Services, Inc.
(2) Form of Accounting and Bookkeeping Agreement between
Registrant and Stein Roe & Farnham Incorporated.
(3) Form of Administrative Agreement between Registrant
and Stein Roe & Farnham Incorporated
l. Opinion and Consent of Bell, Boyd & Lloyd.
m. None.
n. Consent of Ernst & Young LLP.
o. None.
p. None.
q. Stein Roe & Farnham Funds Individual Retirement Account
Plan.
Stein Roe & Farnham Prototype Paired Defined Contribution
Plan.
r. None.
Item 25. Marketing Arrangements
None.
Item 26. Other Expenses of Issuance and Distribution
Registration Fees $29,500
National Association of Securities
Dealers, Inc. Fees 10,500*
State Fees 41,000**
Printing Fees 20,000
Rating Agency Fees 0
Legal and Accounting Fees $170,000**
____________
*The Registrant's investment adviser has paid these fees in
lieu of the Registrant.
**Estimated fees.
Item 27. 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. The
information in the Statement of Additional Information under the
captions "Management," "Investment Advisory Services" and
"Transfer Agent" is incorporated by reference.
Item 28. Number of Holders of Securities
Title of Class Number of Record Holders
----------------------- ------------------------
Stein Roe Floating Rate 1
Income Fund
Item 29. Indemnification
Article Eight 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 each
person who serves or has served at Registrant's request as a
director, officer, or trustee of another organization in which
Registrant has any interest as a shareholder, creditor or
otherwise) ("Covered Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940
Act") provides that neither the Agreement and Declaration of
Trust nor the By-Laws of Registrant, nor any other instrument
pursuant to which Registrant is organized or administered, shall
contain any provision which protects or purports to protect any
trustee or officer of Registrant against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office. In accordance with Section 17(h) of the
1940 Act, Article Eight shall not protect any person against any
liability to Registrant or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article Eight does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Eight unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are not "interested
persons" of Registrant, as defined in Section 2(a)(19) of the
1940 Act ("disinterested trustees"), or (b) an independent legal
counsel as expressed in a written opinion; and
(iii) Registrant will not advance attorneys' fees or other
expenses incurred by a Covered Person in connection with a civil
or criminal action, suit or proceeding unless Registrant
receives an undertaking by or on behalf of the Covered Person to
repay the advance (unless it is ultimately determined that he is
entitled to indemnification) and (a) the Covered Person provides
security for his undertaking, or (b) Registrant is insured
against losses arising by reason of any lawful advances, or (c)
a majority of the disinterested, non-party 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 Eight
does not prevent the recovery from any Covered Person of any
amount paid to such Covered Person in accordance with Article
Eight as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered
Person's action was in, or not opposed to, the best interests of
Registrant or to have been liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Article Eight also provides that its indemnification
provisions are not exclusive.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be
permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer, or controlling person of the Registrant in connection
with 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, the 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 whether such
indemnification by it is against public policy as expressed in
the Securities 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 premium for coverage under such
insurance that would (1) protect any trustee or officer against
any liability to Registrant or its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect its
investment adviser or principal underwriter, if any, against any
liability to Registrant or its shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad
faith, 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.
Pursuant to the indemnification agreement among the
Registrant, its transfer agent and its investment adviser,
the 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 the Registrant or its transfer agent
performed in conformity with a request of the investment adviser
that the transfer agent and the 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
willful misfeasance, bad faith, or negligence in the performance
of its or his duties or by reason of its or his reckless
disregard of its or his obligations and duties under the
distribution agreement.
Item 30. Business and Other Connections of Investment Adviser
The Adviser is a wholly owned subsidiary of SteinRoe Services
Inc. ("SSI"), which in turn is a wholly owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary of
Liberty Corporation Holdings, Inc., which is a wholly owned
subsidiary of LFC Holdings, Inc., which in turn is a subsidiary of
Liberty Mutual Equity Corporation, which in turn is a subsidiary of
Liberty Mutual Insurance Company. The Adviser acts as investment
adviser to individuals, trustees, pension and profit-sharing
plans, charitable organizations, and other investors. In addition
to Registrant, it also acts as investment adviser to other
investment companies having different investment policies.
For a two-year business history of officers and directors
of the Adviser, please refer to the Form ADV of Stein Roe &
Farnham Incorporated and to the section of the Statement of
Additional Information (part B) entitled "Investment Advisory
Services."
Certain directors and officers of the Adviser also serve
and have during the past two years served in various capacities
as officers, directors, or trustees of SSI and of the Registrant
and other investment companies managed by the Adviser. (The
listed entities are located at One South Wacker Drive, Chicago,
Illinois 60606, except for SteinRoe Variable Investment Trust
and Liberty Variable Investment Trust, which are located at
Federal Reserve Plaza, Boston, MA 02210 and LFC Utilities
Trust, which is located at One Financial Center, Boston, MA
02111.) A list of such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
Hans P. Ziegler Director; President; Chairman
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Executive V-P;
Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive Vice-President
Brian M. Hartford Vice-President
William C. Loring Vice-President
Lynn C. Maddox Vice-President
Maureen G. Newman Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President Treasurer
Thomas W. Butch President
Kevin M. Carome Vice-President; Asst. Secretary
E. Bruce Dunn Vice President
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Steven M. Salopek Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
Hans P. Ziegler Executive Vice-President
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Manager
Kevin M. Carome Vice-President; Asst. Secretary
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL FLOATING
RATE INCOME TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Trustee
Kevin M. Carome Vice-President; Asst. Secretary
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
LIBERTY VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Kevin M. Carome Vice President
Item. 31. Location of Accounts and Records
Registrant maintains the records required to be maintained
by it under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the
Investment Company Act of 1940 at its principal executive
offices at One South Wacker Drive, Chicago, Illinois 60606.
Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may
be maintained pursuant to Rule 31a-3 at the main office of
Registrant's transfer agent or custodian.
Item 32. Management Services
None.
Item 33. Undertakings
1. The Registrant undertakes to suspend the offering of shares
until the prospectus is amended if: (a) subsequent to the
effective date of the Registration Statement, the net asset
value declines more than 10 percent from its net asset value
as of the effective date of the Registration Statement; or
(b) the net asset value increases to an amount greater than
its net proceeds as stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. The Registrant undertakes:
a. To file, during any period in which offers or sales are
being made, a post-effective amendment to the
registration statement:
(1) To include any prospectus required by Section
10(a)(3) of the 1933 Act;
(2) To reflect in the prospectus any facts or events
after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(3) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
b. That, for the purpose of determining any liability under
the 1933 Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to
the securities offered therein, and the offering of
those securities at that time shall be deemed to be the
initial bona fide offering thereof; and
c. To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
d. To send by first class mail or other means designed to
ensure equally prompt delivery, within two business days
of receipt of a written or oral request, any Statement
of Additional Information.
5. Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the registrant has duly
caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Chicago, Illinois
on the 17th day of November, 1998.
STEIN ROE FLOATING RATE INCOME FUND
By: THOMAS W. BUTCH
Thomas W. Butch, President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the
dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
THOMAS W. BUTCH President and Trustee Nov. 17, 1998
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President Nov. 17, 1998
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller Nov. 17, 1998
Sharon R. Robertson
Principal Accounting Officer
JOHN A. BACON JR. Trustee Nov. 17, 1998
John A. Bacon Jr.
WILLIAM W. BOYD Trustee Nov. 17, 1998
William W. Boyd
LINDSAY COOK Trustee Nov. 17, 1998
Lindsay Cook
DOUGLAS A. HACKER Trustee Nov. 17, 1998
Douglas A. Hacker
JANET LANGFORD KELLY Trustee Nov. 17, 1998
Janet Langford Kelly
CHARLES R. NELSON Trustee Nov. 17, 1998
Charles R. Nelson
THOMAS C. THEOBALD Trustee Nov. 17, 1998
Thomas C. Theobald
*This Registration Statement has also been signed by the
above persons in their capacities as managers and officers
of Stein Roe Floating Rate Limited Liability Company.
<PAGE>
Index of Exhibits Filed with this Amendment
Exhibit
Number Exhibit
- -------- ---------------------------------------
a. Agreement and Declaration of Trust
b. By-laws
g. Portfolio Management Agreement
h. Underwriting Agreement
j. Custodian Contract
k.(1) Transfer Agency Agreement
(2) Accounting and Bookkeeping Agreement
(3) Administrative Agreement
l. Opinion and Consent of Bell, Boyd & Lloyd
n. Consent of Ernst & Young LLP
q. Stein Roe & Farnham Funds Individual Retirement
Account Plan; Stein Roe & Farnham Prototype Paired
Defined Contribution Plan
STEIN ROE FLOATING RATE INCOME FUND
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
(Stein Roe Floating Rate Income Trust)
This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made
at Chicago, Illinois, this 3rd day of November, 1998, hereby
amends and restates in its entirety the Agreement and Declaration
of Trust formerly known as Stein Roe Floating Rate Income Trust
dated August 13, 1998, by the Trustees hereunder and by the
holders of shares of beneficial interest to be issued hereunder as
hereinafter provided, and shall be effective as of the date
hereof.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities and other assets, which they may from time to
time acquire in any manner as Trustees hereunder, IN TRUST to
manage and dispose of the same upon the following terms and
conditions for the benefit of the holders from time to time of
Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Stein Roe Floating Rate
Income Fund", and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to
time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by the
context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as amended
from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein
or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one class or series of
Shares is authorized by the Trustees, the equal proportionate
transferable units into which each class or series of Shares shall
be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time
to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter", "Majority
Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Person" shall have the meanings given them in the
1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time;
(i) The term "class" or "class of Shares" refers to the
division of Shares into two or more classes as provided in Article
III, Section 1 hereof;
(j) The term "series" or "series of Shares" refers to the division
of Shares representing any class into two or more series as
provided in Article III, Section 1 hereof; and
(k) "Continuing Trustee" shall mean any Trustee (i) who is not a
Person or an Affiliated Person of a Person who enters or
proposes to enter into any transaction with the Trust described in
Section 5 of Article IX hereof (an "Interested Party") and (ii)
who has been a Trustee for a period of at least twelve months (or
since the commencement of the Trust's operations if that period is
less than twelve months), or is a successor to a Continuing
Trustee who is not an Interested Party and was recommended or
elected to succeed a Continuing Trustee by a majority of the then
Continuing Trustees.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed
investment primarily in securities, debt instruments and other
instruments and rights of a financial character.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Trustees may, without Shareholder approval,
authorize one or more classes of Shares (which classes may be
divided into two or more series), Shares of each such class or
series having such preferences, voting powers and special or
relative rights or privileges (including conversion rights, if
any) as the Trustees may determine and as shall be set forth in
the Bylaws. The number of Shares of each class or series
authorized shall be unlimited except as the Bylaws may otherwise
provide. The Trustees may from time to time divide or combine the
Shares of any class or series into a greater or lesser number
without thereby changing the proportionate beneficial interest in
the class or series.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books
of the Trust or a transfer or similar agent. No certificates
certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the issuance
of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer
or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders of each class or series and as to the
number of Shares of each class or series held from time to time by
each Shareholder.
Investment in the Trust
Section 3. The Trustees shall accept investments in the Trust
from such persons and on such terms and for such consideration,
which may consist of cash or tangible or intangible property or a
combination thereof, as they or the Bylaws from time to time
authorize.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right
to subscribe to any additional Shares or other securities issued
by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving
only the rights provided in this Declaration of Trust or the
Bylaws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed to
the terms of this Declaration of Trust and the Bylaws and to have
become a party hereto and thereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate
the same nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole
or any part of the Trust property or right to call for a partition
or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither
the Trust nor the Trustees, nor any officer, employee or agent of
the Trust shall have any power to bind personally any Shareholder,
nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. A Trustee may be elected either by the Trustees or by
the Shareholders. The number of Trustees shall be fixed from time
to time by the Trustees. Each Trustee elected by the Trustees or
the Shareholders shall serve until he or she retires, resigns, is
removed or dies or until the next meeting of Shareholders called
for the purpose of electing Trustees and until the election and
qualification of his successor. At any meeting called for the
purpose, a Trustee may be removed by vote of the holders of two-
thirds of the outstanding Shares.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
Powers
Section 3. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees,
and they shall have all powers necessary or convenient to carry
out that responsibility. Without limiting the foregoing, the
Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business of the Trust
and may amend and repeal them to the extent that such Bylaws do
not reserve that right to the Shareholders of one or more classes
or series. Subject to the voting power of one or more classes or
series of Shares as set forth in the Bylaws, the Trustees may
fill vacancies in or add to their number, and may elect and remove
such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number, and
terminate, any one or more committees consisting of two or more
Trustees, including an executive committee which may, when the
Trustees are not in session, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; they may
employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit
all or any part of such assets in a system or systems for the
central handling of securities, retain a transfer agent or a
Shareholder servicing agent, or both, provide for the distribution
of Shares by the Trust, through one or more principal underwriters
or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general
delegate such authority as they consider desirable to any officer
of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust except
as otherwise provided in Article IX, Section 5;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person
or persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form,
or in the name of the Trustees or of the Trust or in the name of a
custodian, subcustodian or other depositary or a nominee or
nominees or otherwise;
(f) To the extent necessary or appropriate to give effect to the
preferences and special or relative rights or privileges of any
classes or series of Shares, to allocate assets, liabilities,
income and expenses of the Trust to a particular class or classes
or series of Shares or to apportion the same among two or more classes
or series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or sale of
property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(h) To join other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such
power and authority with relation to any security (whether or not
so deposited or transferred) as the Trustees shall deem proper,
and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any matter in controversy, including
but not limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and
to mortgage and pledge the Trust property or any part thereof to
secure any or all of such obligations;
(m) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the
conduct of the business of the Trust, including, without
limitation, insurance policies insuring the assets of the Trust
and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers or
managers, principal underwriters, or independent contractors of
the Trust individually against all claims and liabilities of every
nature arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager, principal
underwriter, or independent contractor, including any action taken
or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such
person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate
by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and
agents of the Trust; and
(o) To purchase or otherwise acquire Shares.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees. Except as otherwise provided herein or from time to
time in the Bylaws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of the
Trustees (a quorum being present), within or without
Massachusetts. Except as otherwise provided herein or from time
to time in the Bylaws, any action to be taken by the Trustees may
be taken at a meeting held by means of a conference telephone or
other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time
and participation by such means shall constitute presence in
person at a meeting, or by written consent of a majority of the
Trustees then in office (or such greater number as may be required
by this Declaration of Trust or the Bylaws).
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay, or to cause to be
paid out of the assets of the Trust, all expenses, fees, charges,
taxes and liabilities incurred or arising in connection with the
Trust, or in connection with the management thereof, including,
but not limited to, the Trustees' compensation and such expenses
and charges for the services of the Trust's officers, employees,
investment adviser or manager, principal underwriter, auditor,
counsel, custodian, transfer agent, Shareholder servicing agent,
and such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper
to incur.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of the Trust shall at all
times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder Vote, the
Trustees may, at any time and from time to time, contract for
exclusive or nonexclusive advisory and/or management services with
any corporation, trust, association or other organization (the
"Manager"), every such contract to comply with such requirements
and restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Trustees may
determine, including, without limitation, authority to determine
from time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to
time, contract with the Manager or any other corporation, trust,
association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares,
every such contract to comply with such requirements and
restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Trustees may
determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of
or for any corporation, trust, association, or other organization,
or of or for any parent or affiliate of any organization, with
which an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal
underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or may hereafter
be made also has an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other business or interests
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability to
the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more classes or
series of Shares as set forth in this Declaration of Trust or in
the Bylaws, the Shareholders shall have power to vote only (i) for
the election of Trustees as provided in Article IV, Section 1,
(ii) for the removal of Trustees as provided in Article IV,
Section 1, (iii) with respect to any Manager as provided in
Article IV, Section 6, (iv) with respect to any termination of
this Trust to the extent and as provided in Article IX, Section 4,
(v) with respect to any merger, consolidation or sale of assets of
the Trust to the extent and as provided in Article IX, Section 5,
(vi) with respect to any conversion of the Trust to the extent and
as provided in Article IX, Section 6, (vii) with respect to any
amendment of this Declaration of Trust to the extent and as
provided in Article IX, Section 9, (viii) to the same extent as
the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, and (ix) with
respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the Bylaws or any
registration of the Trust with the Securities and Exchange
Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. Notwithstanding any other
provision of this Declaration of Trust, on any matter submitted to
a vote of Shareholders, all Shares of the Trust then entitled to
vote shall, except as otherwise provided in the Bylaws, be voted
in the aggregate as a single class without regard to classes or
series of Shares. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and
the burden of proving invalidity shall rest on the challenger.
Until Shares of any class or series are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such class or series.
Voting Power and Meetings
Section 2. Meetings of Shareholders of any or all classes or
series may be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote or
authority of the Shareholders of such class or series as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees
by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder entitled to vote at such meeting at
the Shareholder's address as it appears on the records of the
Trust. If the Trustees shall fail to call or give notice of any
meeting of Shareholders for a period of 30 days after written
application by Shareholders holding at least 25% of the then
outstanding Shares of all classes and series entitled to vote at
such meeting requesting a meeting to be called for a purpose
requiring action by the Shareholders as provided herein or in the
Bylaws, then Shareholders holding at least 25% of the then
outstanding Shares of all classes and series entitled to vote at
such meeting may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees. Notice of a
meeting need not be given to any Shareholder if a written waiver
of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Shareholder who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her.
Quorum and Required Vote
Section 3. A majority of Shares entitled to vote on a particular
matter shall be a quorum for the transaction of business on that
matter at a Shareholders' meeting, except that where this
Declaration of Trust or the Bylaws require that holders of any
class or series shall vote as an individual class or series, then
a majority of the aggregate number of Shares of that class or
series entitled to vote shall be necessary to constitute a quorum
for the transaction of business by that class or series. Any
lesser number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of
further notice. Except when a different vote is required by any
provision of this Declaration of Trust or the Bylaws, a majority
of the Shares voted shall decide any questions and a plurality
shall elect a Trustee, provided that where the Bylaws require that
the holders of any class or series shall vote as an individual
class or series, a majority of the Shares of that class or series
voted on the matter (or a plurality with respect to the election
of a Trustee) shall decide that matter insofar as that class or
series is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the
matter (or such different proportion thereof as shall be required
by any express provision of this Declaration of Trust or the
Bylaws) consent to the action in writing and such written consents
are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a
meeting of Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions, not
inconsistent with this Declaration of Trust, regarding
Shareholders' voting powers, the conduct of meetings and related
matters.
ARTICLE VI
Distributions
The Trustees may each year, or more frequently if they so
determine, distribute to the Shareholders of each class or series
such amounts as the Trustees may determine, subject to the
preferences and special or relative rights or privileges of the
various classes or series of Shares. Any such distribution to the
Shareholders of a particular class or series shall be made to said
Shareholders pro rata in proportion to the number of Shares of
such class or series held by each of them. Such distributions
shall be made in cash or Shares or other property or a combination
thereof as determined by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the
employment of any Trustee for advisory, management, legal,
accounting, investment banking or other services and payment for
the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent,
employee, manager or principal underwriter of the Trust, nor shall
any Trustee be responsible for the act or omission of any other
Trustee, but nothing herein contained shall protect any Trustee
against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking
and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed
or done only in or with respect to their or his or her capacity as
Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") against
all liabilities and expenses, including, but not limited to,
amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any
Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being
or having been such a Covered Person except with respect to any
matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding (a) not
to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust or
(b) to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office. Expenses, including counsel fees so incurred by
any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not
authorized under this Article; provided, however, that either (a)
such Covered Person shall have provided appropriate security for
such undertaking, (b) the Trust shall be insured against losses
arising from any such advance payments or (c) either a majority of
the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office acts on the
matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts
(as opposed to a full trial type inquiry), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the
proceeding was brought, that such Covered Person either (a) did
not act in good faith in the reasonable belief that his or her
action was in the best interests of the Trust or (b) is liable to
the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, indemnification
shall be provided if (a) approved as in the best interests of the
Trust, after notice that it involves such indemnification, by at
least a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees
then in office acts on the matter) upon a determination, based
upon a review of readily available facts (as opposed to a full
trial type inquiry), that such Covered Person acted in good faith
in the reasonable belief that his or her action was in the best
interests of the Trust and is not liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a
review of readily available facts (as opposed to a full trial type
inquiry), to the effect that such Covered Person appears to have
acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against any
liability to the Trust to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office. Any approval pursuant to this
Section shall not prevent the recovery from any Covered Person of
any amount paid to such Covered Person in accordance with this
Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's
action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided shall not
be exclusive of or affect any other rights to which such Covered
Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators, and a "disinterested Trustee" is a Trustee who is
not an "interested person" of the Trust as defined in Section
2(a)(19) of the 1940 Act (or who has been exempted from being an
"interested person" by any rule, regulation or order of the
Securities and Exchange Commission) and against whom none of such
actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has
been pending. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other
than Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his or her being
or having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or
other legal representatives or, in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss
and expense arising from such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or
having any claim against the Trust shall look only to the assets
of the Trust for payment under such credit, contract or claim, and
neither the Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future,
shall be personally liable therefor. Nothing in this Declaration
of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall
give notice that this Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts and shall
recite that the same was executed or made by or on behalf of the
Trust or by them as Trustee or Trustees or as officer or officers
and not individually and that the obligations of such instrument
are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust,
and may contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to bind
any Trustee or Trustees or officer or officers or Shareholder or
Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable for his or her own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else. The Trustees may take advice of counsel or other experts
with respect to the meaning and operation of this Declaration of
Trust, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. Subject to the voting powers
of one or more classes or series of Shares as set forth in this
Declaration of Trust or the Bylaws, the Trust may be terminated at
any time (i) by vote of Shareholders holding at least three-
fourths of the Shares entitled to vote (except if such termination
is recommended by at least three-fourths of the total number of
the Trustees then in office and by at least three-fourths of the
total number of Continuing Trustees then in office, a Majority
Shareholder Vote shall be sufficient authorization) or (ii) by the
Trustees by written notice to the Shareholders, provided that at
least three-fourths of the total number of Trustees then in office
and at least three-fourths of the total number of Continuing
Trustees then in office have approved such action. Upon
termination of the Trust, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or
accrued or anticipated, of the Trust as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as
the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other property, or any
combination thereof, and distribute the proceeds to the
Shareholders, ratably according to the number of Shares held by
the several Shareholders on the date of termination, except to the
extent otherwise required or permitted by the preferences and
special or relative rights or privileges of any classes or series
of Shares.
Merger, Consolidation and Sale of Assets
Section 5. The Trust may merge or consolidate with any other
corporation, association, trust or other organization or may sell,
lease or exchange all or substantially all of its assets,
including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of
Shareholders called for the purpose, or may liquidate or dissolve
when and as authorized, by the affirmative vote of the holders of
not less than three-fourths of the Shares entitled to vote;
provided, however, that if such merger, consolidation, sale,
lease, exchange, liquidation or dissolution is recommended by at
least three-fourths of the total number of Trustees then in office
and by at least three-fourths of the total number of Continuing
Trustees then in office, a Majority Shareholder Vote shall be
sufficient authorization. Nothing contained herein shall be
construed as requiring approval of the Shareholders for any sale
of assets in the ordinary course of business of the Trust. The
provisions of this Section shall be subject to the voting powers
of one or more classes or series of Shares as set forth in this
Declaration of Trust or the Bylaws.
Conversion
Section 6. Subject to the voting powers of one or more classes or
series of Shares as set forth in this Declaration of Trust or the
Bylaws, the Trust may be converted at any time from a "closed-end
company" to an "open-end company" as those terms are defined in
Section 5(a)(2) and 5(a)(1) of the 1940 Act, respectively, as in
effect on the date of the execution hereof, upon the approval of
such a proposal, together with any necessary amendments to the
Declaration of Trust to permit such a conversion, by the holders
of three-fourths of the Shares entitled to vote; provided,
however, that if such proposal is recommended by at least three-
fourths of the total number of Trustees then in office and by at
least three-fourths of the total number of Continuing Trustees
then in office, such proposal may be adopted by a Majority
Shareholder Vote. Upon the adoption of such proposal and related
amendments by the Trust's Shareholders as provided above, the
Trust shall, upon complying with any requirements of the 1940 Act
and state law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote or
consent of the holders of the Shares otherwise required by law,
this Declaration of Trust or the Bylaws or any agreement between
the Trust and any national securities exchange.
Derivative and Class Actions
Section 7. No Shareholder shall bring or maintain any action,
proceeding or claim derivatively or as a class action on behalf of
the Trust or the Shareholders unless approved by the Trustees and,
to the same extent required as to stockholders of a Massachusetts
business corporation, by the Shareholders. A Trustee who is not
an "interested person" of the Trust, as defined in the 1940 Act,
shall not be disqualified from acting on such matter by reason of
such Trustee's service as a director or trustee of one or more
other registered investment companies having the same Manager or
distributor.
Filing and Copies, References, Headings
Section 8. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it
may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the
Secretary of State of The Commonwealth of Massachusetts and with
the Boston City Clerk, as well as any other governmental office
where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of
the Trust as to whether or not any such amendments have been made
and as to any matters in connection with the Trust hereunder, and,
with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in
any such amendment, references to this instrument and all
expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any
such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
Applicable Law
Section 9. This Declaration of Trust is made in The Commonwealth
of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Amendments
Section 10. Subject to the voting powers of one or more classes or
series of Shares, as set forth in this Declaration of Trust or
the Bylaws, this Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then
Trustees (a) when authorized to do so by vote of Shareholders
holding a majority of the Shares entitled to vote, except that an
amendment amending or affecting the provisions of Section 2(k) of
Article I, Section 1 of Article IV, Section 4, 5 or 6 of this
Article IX or this sentence shall require the vote of Shareholders
holding three-fourths of the Shares entitled to vote if such
amendment has not been recommended by at least three-fourths of
the total number of Trustees then in office and by at least three-
fourths of the total number of Continuing Trustees then in office,
or (b) without Shareholder approval as may be necessary or
desirable in order to authorize one or more classes or series of
Shares as provided in Section 1 of Article III. Amendments having
the purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained
herein shall not require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of
the Trust, have hereunto set their hands and seals in the City of
Chicago, Illinois for themselves and their assigns, as of the day
and year first above written and do hereby certify that this
Amended and Restated Agreement and Declaration of Trust has been
authorized by the holders of at least a majority of the
outstanding shares of the Trust.
THOMAS W. BUTCH
Thomas W. Butch
JOHN A. BACON JR.
John A. Bacon Jr.
WILLIAM W. BOYD
William W. Boyd
LINDSAY COOK
Lindsay Cook
DOUGLAS A. HACKER
Douglas A. Hacker
JANET LANGFORD KELLY
Janet Langford Kelly
CHARLES R. NELSON
Charles R. Nelson
THOMAS C. THEOBALD
Thomas C. Theobald
THE STATE OF ILLINOIS
Cook County Chicago, November 3, 1998
Then personally appeared each of the above-named Trustees of Stein
Roe Floating Rate Income Trust and acknowledged the foregoing
instrument to be their free act and deed, before me,
JUDY C. TERRAZINO
Notary Public
My Commission Expires: 10/6/99
[NOTARY SEAL]
The address of the Trust is One South Wacker, Chicago, IL 60606
STEIN ROE FLOATING RATE INCOME FUND
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 FLOATING RATE INCOME FUND
BY-LAWS
(Amended and Restated By-Laws Adopted by Board of
Trustees on August 13, 1998)
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 hereafter amended
("Declaration of Trust") of Stein Roe Floating Rate Income Fund,
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. Each Trustee (whenever
selected) shall hold office until the next meeting of
shareholders called for the purposes of electing
Trustees and until his successor is elected and
qualified or until his earlier death, resignation, or
removal. Each Trustee shall retire on December 31 of
the year during which the Trustee becomes age 74.
The initial Trustee shall be the person designated in
the Declaration of Trust.
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 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.
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.
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.
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
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
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 "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;
(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
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
(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.
(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, 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
MANAGEMENT AGREEMENT
BETWEEN
STEIN ROE FLOATING RATE LIMITED LIABILITY
COMPANY AND
STEIN ROE & FARNHAM INCORPORATED
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, a Delaware
limited liability company under the Investment Company Act of 1940
("1940 Act") as a closed-end non-diversified management investment
company ("LLC"), hereby appoints STEIN ROE & FARNHAM INCORPORATED,
a Delaware corporation registered under the Investment Advisers
Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and portfolio
management services with respect to its assets represented by the
shares of beneficial interest. LLC and Manager hereby agree that:
1. Investment Management Services. Manager shall manage the
investment operations of LLC, subject to the terms of this
Agreement and to the supervision and control of LLC's Board of
Managers ("Board"). Manager agrees to perform, or arrange for the
performance of, the following services for LLC:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets,
and individual securities, commodities and indices as it may
deem necessary or useful in discharging its responsibilities
hereunder;
(b) to formulate and maintain a continuing investment program in a
manner consistent with and subject to (i) LLC's operating
agreement; (ii) LLC's investment objectives, policies, and
restrictions as set forth in written documents furnished by
the LLC to Manager; (iii) all securities, commodities, and tax
laws and regulations applicable to LLC; and (iv) any other
written limits or directions furnished by the Board to
Manager;
(c) unless otherwise directed by the Board, to determine from time
to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by LLC,
and to implement those decisions, including the selection of
entities with or through which such purchases, sales or loans
are to be effected;
(d) to use reasonable efforts to manage LLC so that it will
qualify as a regulated investment company under subchapter M
of the Internal Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to LLC action, and any other rights
pertaining to LLC shall be exercised;
(f) to make available to LLC promptly upon request all of LLC's
records and ledgers and any reports or information reasonably
requested by LLC; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the
Board, with respect to execution of transactions for LLC, Manager
shall place, or arrange for the placement of, all orders for
purchases, sales, or loans with issuers, brokers, dealers or other
counterparties or agents selected by Manager. In connection with
the selection of all such parties for the placement of all such
orders, Manager shall attempt to obtain most favorable execution
and price, but may nevertheless in its sole discretion as a
secondary factor, purchase and sell portfolio securities from and
to brokers and dealers who provide Manager with statistical,
research and other information, analysis, advice, and similar
services. In recognition of such services or brokerage services
provided by a broker or dealer, Manager is hereby authorized to
pay such broker or dealer a commission or spread in excess of that
which might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of the
services so provided.
LLC hereby authorizes any entity or person associated with
Manager that is a member of a national securities exchange to
effect any transaction on the exchange for its account to the
extent permitted by and in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder.
LLC hereby consents to the retention by such entity or person of
compensation for such transactions in accordance with Rule 11a-2-
2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate orders
for its other customers together with any securities of the same
type to be sold or purchased for LLC in order to obtain best
execution or lower brokerage commissions. In such event, Manager
shall allocate the shares so purchased or sold, as well as the
expenses incurred in the transaction, in a manner it considers to
be equitable and fair and consistent with its fiduciary
obligations to LLC and Manager's other customers.
Manager shall for all purposes be deemed to be an independent
contractor and not an agent of LLC and shall, unless otherwise
expressly provided or authorized, have no authority to act for or
represent LLC in any way.
2. Administrative Services. Manager shall supervise the
business and affairs of LLC and shall provide such services and
facilities as may be required for effective administration of LLC
as are not provided by employees or other agents engaged by LLC;
provided that Manager shall not have any obligation to provide
under this Agreement any such services which are the subject of a
separate agreement or arrangement between LLC and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. Use of Affiliated Companies and Subcontractors. In
connection with the services to be provided by Manager under this
Agreement, Manager may, to the extent it deems appropriate, and
subject to compliance with the requirements of applicable laws and
regulations and upon receipt of written approval of the Board,
make use of (i) its affiliated companies and their directors,
managers, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all
such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by
Manager or such parties.
4. Expenses Borne by LLC. Except to the extent expressly
assumed by Manager herein or under a separate agreement between
LLC and Manager and except to the extent required by law to be
paid by Manager, Manager shall not be obligated to pay any costs
or expenses incidental to the organization, operations or business
of LLC. Without limitation, such costs and expenses shall include
but not be limited to:
(a) all charges of depositories, custodians and other agencies for
the safekeeping and servicing of its cash, securities, and
other property;
(b) all charges for equipment or services used for obtaining price
quotations or for communication between Manager or LLC and the
custodian, transfer agent or any other agent selected by LLC;
(c) all charges for administrative and accounting services
provided to LLC by Manager, or any other provider of such
services;
(d) all charges for services of LLC's independent auditors and for
services to LLC by legal counsel;
(e) all compensation of Board, other than those affiliated with
Manager, all expenses incurred in connection with their
services to LLC, and all expenses of meetings of the Board or
committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the LLC ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent revisions
of LLC prospectus(es) and of supplying each then-existing
Unitholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing LLC shares;
(i) all expenses of bond and insurance coverage required by law or
deemed advisable by the Board;
(j) all brokers' commissions and other normal charges incident to
the purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of LLC under the 1940 Act and, to the extent no exemption is
available, expenses of registering LLC's shares under the 1933
Act, of qualifying and maintaining qualification of LLC and
its shares for sale under securities laws of various states or
other jurisdictions and of registration and qualification of
LLC under all other laws applicable to LLC or its business
activities;
(m) all interest on indebtedness, if any, incurred by LLC; and
(n) all fees, dues and other expenses incurred by LLC in
connection with membership of LLC in any trade association or
other investment company organization.
5. Allocation of Expenses Borne by LLC. Any expenses borne
by LLC that are attributable solely to the organization, operation
or business of LLC shall be paid solely out LLC's assets.
6. Expenses Borne by Manager. Manager at its own expense
shall furnish all executive and other personnel, office space, and
office facilities required to render the investment management and
administrative services set forth in this Agreement. Manager
shall pay all expenses of establishing, maintaining, and servicing
the accounts of Unitholders However, Manager shall not be
required to pay or provide any credit for services provided by
LLC's custodian or other agents without additional cost to LLC.
In the event that Manager pays or assumes any expenses of LLC
not required to be paid or assumed by Manager under this
Agreement, Manager shall not be obligated hereby to pay or assume
the same or similar expense in the future; provided that nothing
contained herein shall be deemed to relieve Manager of any
obligation to LLC under any separate agreement or arrangement
between the parties.
7. Management Fee. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder, LLC
shall pay to Manager an annual fee of 0.85% of the average net
assets of LLC. The management fee shall accrue on each calendar
day, and shall be payable monthly on the first business day of the
next succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the number
of days in the calendar year by the applicable annual rate of fee,
and multiplying this product by the net assets of LLC, determined
in the manner established by the Board, as of the close of
business on the last preceding business day on which LLC's net
asset value was determined.
8. Retention of Sub-Adviser. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at Manager's
own cost and expense for the purpose of furnishing one or more of
the services described in Section 1 hereof with respect to LLC.
Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of Manager under this Agreement,
and Manager shall be responsible to LLC for all acts or omissions
of any sub-adviser in connection with the performance of Manager's
duties hereunder.
9. Non-Exclusivity. The services of Manager to LLC
hereunder are not to be deemed exclusive and Manager shall be free
to render similar services to others.
10. Standard of Care. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to LLC or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties under
this Agreement, except for loss or liability resulting from
willful misfeasance, bad faith or gross negligence on Manager's
part or from reckless disregard by Manager of its obligations and
duties under this Agreement.
11. Amendment. This Agreement may not be amended as to LLC
without the affirmative votes (a) of a majority of the Board,
including a majority of those Managers who are not "interested
persons" of LLC or of Manager, voting in person at a meeting
called for the purpose of voting on such approval, and (b) of a
"majority of the outstanding shares" of LLC. The terms
"interested persons" and "vote of a majority of the outstanding
shares" shall be construed in accordance with their respective
definitions in the 1940 Act and, with respect to the latter term,
in accordance with Rule 18f-2 under the 1940 Act.
12. Effective Date and Termination. This Agreement shall
become effective as of the date hereof. This Agreement may be
terminated at any time, without payment of any penalty, by the
Board of LLC, or by a vote of a majority of the outstanding
shares, upon at least sixty (60) days' written notice to Manager.
This Agreement may be terminated by Manager at any time upon at
least sixty (60) days' written notice to LLC. This Agreement
shall terminate automatically in the event of its "assignment" (as
defined in the 1940 Act). Unless terminated as hereinbefore
provided, this Agreement shall continue in effect until June 30,
2000, and thereafter from year to year only so long as such
continuance is specifically approved at least annually (a) by a
majority of those Managers who are not interested persons of Board
or of Manager, voting in person at a meeting called for the
purpose of voting on such approval, and (b) by either the Board of
LLC or by a "vote of a majority of the outstanding shares" of LLC.
13. Ownership of Records; Interparty Reporting. All records
required to be maintained and preserved by LLC pursuant to the
provisions of rules or regulations of the Securities and Exchange
Commission under Section 31(a) of the 1940 Act or other applicable
laws or regulations which are maintained and preserved by Manager
on behalf of LLC and any other records the parties mutually agree
shall be maintained by Manager on behalf of LLC are the property
of LLC and shall be surrendered by Manager promptly on request by
LLC; provided that Manager may at its own expense make and retain
copies of any such records.
LLC shall furnish or otherwise make available to Manager such
copies of the financial statements, proxy statements, reports, and
other information relating to the business and affairs of each
Unitholder in LLC as Manager may, at any time or from time to
time, reasonably require in order to discharge its obligations
under this Agreement.
Manager shall prepare and furnish to LLC statistical data and
other information in such form and at such intervals as LLC may
reasonably request.
14. Non-Liability of Board and Unitholders. Any obligation
of LLC hereunder shall be binding only upon the assets of LLC and
shall not be binding upon any Manager, officer, employee, agent or
Unitholder of LLC. Neither the authorization of any action by the
Board or Unitholders of LLC nor the execution of this Agreement on
behalf of LLC shall impose any liability upon any Manager or any
Unitholder.
15. Use of Manager's Name. LLC may use the name "Stein Roe
_______ LLC" or any other name derived from the name "Stein Roe &
Farnham" only for so long as this Agreement or any extension,
renewal, or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded
to the business of Manager as investment adviser. At such time as
this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, LLC
will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as
investment adviser.
16. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this Agreement.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
Dated: November _, 1998
STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
Attest: By:
Thomas W. Butch
President
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By:
Thomas W. Butch
President, Mutual Funds
division
Nicolette D. Parrish
Assistant Secretary
UNDERWRITING AGREEMENT
BETWEEN
STEIN ROE INSTITUTIONAL FLOATING RATE INCOME FUND
STEIN ROE FLOATING RATE INCOME FUND
AND LIBERTY SECURITIES CORPORATION
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of the
15th day of October, 1998 by and between Stein Roe Institutional
Floating Rate Income Fund and Stein Roe Floating Rate Income Fund,
each 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 Delaware (hereinafter called the
"Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as a closed-end
management investment company registered as an interval fund under
Section 23c-3 of 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
of annual or more frequent revisions of the Fund's Prospectus and
Statement of Additional Information ("SAI") 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; and
WHEREAS, Stein Roe & Farnham Incorporated, investment adviser
to the Funds, or its affiliates, may pay 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 Section 2(a)(29)
of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies of
each of the following in effect on the date hereof and shall
furnish Distributor from time to time properly certified or
authenticated copies of all amendments or supplements thereto:
(a) Agreement and Declaration of Trust;
(b)By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form of
agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies of
any registration statements filed by it with the Securities and
Exchange Commission ("SEC") under SA-33 or ICA-40, together with
any financial statements and exhibits included therein, and all
amendments or supplements thereto hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to time,
in its discretion, reasonably deem necessary or appropriate in the
proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as may
from time to time be indicated in the Fund's Prospectus,
Distributor is authorized to solicit, as agent on behalf
of the Fund, unconditional orders for purchases of the
Fund's Shares authorized for issuance and registered
under SA-33, provided that:
(1) Distributor shall act solely as a disclosed agent on
behalf of and for the account of the Fund;
(2) In all cases except for orders transmitted through
the FundSERV/NSCC system, the Fund or its transfer
agent shall receive directly from investors all
payments for the purchase of the Fund's Shares and
also shall pay directly to shareholders amounts due
to them for the redemption or repurchase of all the
Fund's Shares with Distributor having no rights or
duties to accept such payment or to effect such
redemptions or repurchases;
(3) The Distributor shall receive directly from financial
intermediaries which trade through the FundSERV/NSCC
system all payments for the purchase of the Fund's
Shares and shall also cause to be paid directly to
such intermediaries amounts due to them for the
redemption or repurchase of all the Fund's Shares.
The Distributor shall be acting as the Fund's agent
in accepting payment for the orders and not be acting
in a principal capacity.
(4) Distributor shall confirm all orders received for
purchase of the Fund's Shares which confirmation
shall clearly state (i) that Distributor is acting as
agent of the Fund in the transaction (ii) that all
certificates for redemption, remittances, and
registration instructions should be sent directly to
the Fund, and (iii) the Fund's mailing address;
(5) Distributor shall have no liability for payment for
purchases of the Fund's Shares it sells as agent; and
(5) Each order to purchase Shares of the Fund received by
Distributor shall be subject to acceptance by an
officer of the Fund in Chicago and entry of the order
on the Fund's records or shareholder accounts and is
not binding until so accepted and entered.
The purchase price to the public of the Fund's Shares shall
be the public offering price as defined in Paragraph 6 hereof.
(b) In consideration of the rights granted to the Distributor
under this Agreement, Distributor will use its best efforts (but
only in states in which Distributor may lawfully do so) to solicit
from investors unconditional orders to purchase Shares of the
Fund. The Fund shall make available to the Distributor without
cost to the Distributor such number of copies of the Fund's
currently effective Prospectus and Statement of Additional
Information and copies of all information, financial statements
and other papers which the Distributor may reasonably request for
use in connection with the distribution of Shares.
3.A. Selling Agreements. Distributor is authorized, as
agent on behalf of each Fund, to enter into agreements with other
broker-dealers providing for the solicitation of unconditional
orders for purchases of Fund's Shares authorized for issuance and
registered under SA-33. All such agreements shall be either in
the form of agreement attached hereto or in such other form as may
be approved by the officers of the Fund ("Selling Agreement").
All solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund. The
rights granted to the Distributor shall be non-exclusive in that
the Fund reserves the right to solicit purchases from, and sell
its Shares to, investors. Further, the Fund reserves the right to
issue Shares in connection with the merger or consolidation of any
other investment company, trust or personal holding company with
the Fund, or the Fund's acquisition, by the purchase or otherwise,
of all or substantially all of the assets of an investment
company, trust or personal holding company, or substantially all
of the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares will
not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the Fund.
5. Shares Covered by this Agreement. This Agreement relates
to the solicitation of orders to purchase Shares that are duly
authorized and registered and available for sale by the Fund,
including redeemed or repurchased Shares if and to the extent that
they may be legally sold and if, but only if, the Fund authorizes
the Distributor to sell them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders to
purchase Shares of the Fund at the public offering price. The
public offering price for each accepted subscription for the
Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription. The
net asset value per share shall be determined in the manner
provided in the Fund's Agreement and Declaration of Trust as now
in effect or as they may be amended, and as reflected in the
Fund's then current Prospectus and Statement of Additional
Information.
7. Suspension of Sales. If and whenever the determination
of the Fund's net asset value is suspended and until such
suspension is terminated, no further orders for Shares shall be
accepted by the Fund except such unconditional orders placed with
the Fund and accepted by it before the suspension. In addition,
the Fund reserves the right to suspend sales of Shares if, in the
judgement of the Board of the Fund, it is in the best interest of
the Fund to do so, such suspension to continue for such period as
may be determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to purchase
Shares shall be accepted by the Fund while such suspension remains
in effect unless otherwise directed by its Board.
8. Authorized Representations. No Fund is authorized by the
Distributor to give on behalf of the Distributor any information
or to make any representations other than the information and
representations contained in the Fund's registration statement
filed with the SEC under SA-33 and/or ICA-40 as it may be amended
from time to time.
Distributor is not authorized by the Fund to give on behalf
of the Fund any information or to make any representations in
connection with the sale of Shares other than the information and
representations contained in the Fund's registration statement
filed with the SEC under SA-33 and/or ICA-40, covering Shares, as
such registration statement or the Fund's prospectus may be
amended or supplemented from time to time, or contained in
shareholder reports or other material that may be prepared by or
on behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is authorized
to act as principal underwriter (as such term is defined in ICA-
40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register 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, 1999, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually (a) by
a vote of majority of the members of the Board of the Fund who are
not interested persons of the Distributor or of the Fund, voting
in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of either the Board of the Fund or a
majority of the outstanding shares of the Fund. This Agreement
may be terminated by and between an individual Fund and
Distributor at any time, without the payment of any penalty (a) on
60 days' written notice, by the Board of the Fund or by a vote of
a majority of the outstanding Shares of the Fund, or by
Distributor, or (b) immediately, on written notice by the Board of
the Fund, in the event of termination or suspension of any of the
Registrations. This Agreement will automatically terminate in the
event of its assignment. In interpreting the provisions of this
Paragraph 13, the definitions contained in Section 2(a) of ICA-40
(particularly the definitions of "interested person",
"assignment", and "majority of the outstanding shares") shall be
applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each party
against which enforcement of the change, waiver, discharge, or
termination is sought. If the Fund should at any time deem it
necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the SEC or any other
governmental authority or to obtain any advantage under state or
Federal tax laws and notifies Distributor of the form of such
amendment, and the reasons therefor, and if Distributor should
decline to assent to such amendment, the Fund may terminate this
Agreement forthwith. If Distributor should at any time request
that a change be made in the Fund's Agreement and Declaration of
Trust or By-Laws or in its methods of doing business, in order to
comply with any requirements of Federal law or regulations of the
SEC, or of a national securities association of which Distributor
is or may be a member, relating to the sale of Shares, and the
Fund should not make such necessary changes within a reasonable
time, Distributor may terminate this Agreement forthwith.
15. Liability. It is understood and expressly stipulated
that neither the shareholders of the Fund nor the members of the
Board of the Fund shall be personally liable hereunder. The
obligations of the Fund are not personally binding upon, nor shall
resort to the private property of, any of the members of the Board
of the Fund, nor of the shareholders, officers, employees or
agents of the Fund, but only the Fund's property shall be bound.
A copy of the Declaration of Trust and of each amendment thereto
has been filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City of
Boston, as well as any other governmental office where such filing
may from time to time be required.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way define
or limit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
17. Notice. Any notice required or permitted to be given by
a party to this Agreement or to any other party hereunder shall be
deemed sufficient if delivered in person or sent by registered or
certified mail, postage prepaid, addressed by the party giving
notice to each such other party at the address provided below or
to the last address furnished by each such other party to the
party giving notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: One Manhattanville Road
Purchase, New York 10577
Attn: Secretary
If to Stein Roe & Farnham Incorporated:
One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY SECURITIES CORPORATION
By: BRUCE F. RIPEPI
Bruce F. Ripepi
President
ATTEST:
By: PATRICIA L. WONG
STEIN ROE INSTITUTIONAL FLOATING
RATE INCOME FUND
STEIN ROE FLOATING RATE INCOME FUND
By: THOMAS W. BUTCH
Thomas W. Butch
President
ATTEST:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
CUSTODIAN CONTRACT
This Contract between Stein Roe Floating Rate Income
Fund, a business trust organized and existing under the laws
of The Commonwealth of Massachusetts, having its principal
place of business at One South Wacker Drive, Chicago,
Illinois 60606 hereinafter called the "Fund", and State
Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto
agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of the assets of the Fund, including securities which the
Fund desires to be held in places within the United
States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities")
pursuant to the provisions of the Declaration of Trust. The
Fund agrees to deliver to the Custodian all securities and
cash of the Fund, and all payments of income, payments of
principal or capital distributions received by it with
respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new
or treasury shares of beneficial interest of the Fund
representing interests in the Fund, ("Shares") as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held or received by
the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Article 5), the Custodian shall on behalf of the
Fund from time to time employ one or more sub-custodians,
located in the United States but only in accordance with an
applicable vote by the Board of Trustees of the Fund, and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than
any such sub-custodian has to the Custodian. The Custodian
may employ as sub-custodian for the Fund's foreign
securities the foreign banking institutions and foreign
securities depositories designated in Schedule A hereto but
only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund
all non-cash property, to be held by it in the United
States including all domestic securities owned by
the Fund, 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 the Fund held
by the Custodian or in a U.S. Securities System account
of the Custodian or in the Custodian's Direct Paper
book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions from
the Fund, 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
Fund 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 Fund;
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 Fund;
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 Fund 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 Fund, 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 Fund, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund, 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 Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund, 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 Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund, 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 Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the currently
effective prospectus and statement of additional
information of the Fund, related to the Fund
("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper Instructions
from the Fund, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying
the securities of the Fund 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 Fund or in the name
of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively
to the Fund, unless the Fund has authorized in writing
the appointment of a nominee to be used in common with
other registered investment companies having the same
investment adviser as the Fund, 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 Fund under
the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street
name", the Custodian shall utilize its best efforts
only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts
basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities,
tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States
in the name of the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust
company shall be qualified to act as a custodian under
the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited
with each such bank or trust company shall on behalf of
the Fund be approved by vote of a majority of the Board
of Trustees of the Fund. Such funds shall be deposited
by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the
Fund, make federal funds available to the Fund as of
specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received
in payment for Shares of the Fund which are deposited
into the Fund'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
the Fund 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 Fund'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 the Fund on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will
have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or
data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of
the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund, which may be continuing
instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of the Fund 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 Fund 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 Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d)
in the case of repurchase agreements entered into
between the Fund 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 Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to
repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Fund declared pursuant to the governing documents of
the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the
Fund, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee of the
Fund signed by an officer of the Fund and certified
by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is
to be made.
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund
to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same
extent as if the securities had been received by the
Custodian.
2.9 Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems.
The Custodian may deposit and/or maintain securities
owned by the Fund 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 Fund 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 Fund which are maintained in a
U.S. Securities System shall identify by book-entry
those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for
the account of the Fund 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 Fund. The Custodian shall
transfer securities sold for the account of the
Fund 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 Fund. Copies of all advices from the U.S.
Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund in
the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the U.S. Securities
System's accounting system, internal accounting
control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on
the initial or annual certificate, as the case may
be, required by Article 14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to
the Fund for any loss or damage to the Fund
resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct
of the Custodian or any of its agents or of any of
its or their employees or from failure of the
Custodian or any such agent to enforce effectively
such rights as it may have against the U.S.
Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the
U.S. Securities System or any other person which the
Custodian may have as a consequence of any such loss
or damage if and to the extent that the Fund has not
been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper
System. The Custodian may deposit and/or maintain
securities owned by the Fund in the Direct Paper
System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Fund;
2) The Custodian may keep securities of the Fund 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 Fund which are maintained in
the Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for
the account of the Fund 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 Fund. The Custodian shall transfer
securities sold for the account of the Fund 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 Fund;
5) The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund, in
the form of a written advice or notice, of Direct
Paper on the next business day following such
transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transaction in the U.S. Securities System for the
account of the Fund;
6) The Custodian shall provide the Fund with any report
on its system of internal accounting control as the
Fund may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt
of Proper Instructions from the Fund establish and
maintain a segregated account or accounts into which
account or accounts may be transferred cash and/or
securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any
agreement among the Fund, 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 Fund, (ii) for purposes of segregating cash or
government securities in connection with options
purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold
by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv)
for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund, a certified copy of
a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to
be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments
with respect to domestic securities of the Fund 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 Fund or a nominee of the Fund,
all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities.
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund for the Fund
all written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for
the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund 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 Fund desires to take
action with respect to any tender offer, exchange offer
or any other similar transaction, the Fund shall notify
the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to employ as
sub-custodians for the Fund 's securities and other
assets maintained outside the United States the foreign
banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the
Fund's Board of Trustees, the Custodian and the Fund
may agree to amend Schedule A hereto from time to time
to designate additional foreign banking institutions
and foreign securities depositories to act as sub-
custodian. Upon receipt of Proper Instructions, the
Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining
custody of the Fund 's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody
of the foreign sub-custodians to: (a) "foreign
securities", as defined in paragraph (c)(1) of Rule
17f-5 under the Investment Company Act of 1940, and (b)
cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably
necessary to effect the Fund 's foreign securities
transactions. The Custodian shall identify on its
books as belonging to the Fund, the foreign securities
of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund,
assets of the Fund shall be maintained in a
clearing agency which acts as a securities depository
or in a book-entry system for the central handling of
securities located outside the United States (each a
"Foreign Securities System") only through arrangements
implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof (Foreign
Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities
Systems"). Where possible, such arrangements shall
include entry into agreements containing the provisions
set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities
and other non-cash property for all of its customers,
including the Fund, with a Foreign Sub-custodian in a
single account that is identified as belonging to the
Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with
respect to securities and other non-cash property of
the Fund which are maintained in such account shall
identify by book-entry those securities and other non-
cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be
held separately from any assets of the foreign sub-
custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall
provide that: (a) the assets of the Fund 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 the Fund 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 the Fund; (d)
officers of or auditors employed by, or other
representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Fund, will be given access
to the books and records of the foreign banking
institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Fund s held
by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of
the Fund to be afforded access to the books and records
of any foreign banking institution employed as a
foreign sub-custodian insofar as such books and records
relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other
assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of
entities having possession of the Fund 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 the Fund indicating, as to
securities acquired for the Fund, the identity of the
entity having physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as
otherwise provided in paragraph (b) of this Section
3.8, the provision of Sections 2.2 and 2.7 of this
Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States
by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities
received for the account of the Fund and delivery of
securities maintained for the account of the Fund may
be effected in accordance with the customary
established securities trading or securities processing
practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without
limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the
expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and
hold harmless, the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the
institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect
to any claims against a foreign banking institution as
a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund
has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with
respect to sub-custodians generally in this Contract
and, regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian
shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from
nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-
custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this
paragraph 3.10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved
of any responsibility to the Fund for any loss due to
such delegation, except such loss as may result from
(a) political risk (including, but not limited to,
exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil
strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts
of God, nuclear incident or other losses under
circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
for the benefit of Fund 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 Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available
cash and to dispose of the Fund's assets to the extent
necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall
furnish annually to the Fund, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
in connection with the initial approval of this
Contract. In addition, the Custodian will promptly
inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition
of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from
the Securities and Exchange Commission is notified by
such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity
has declined below $200 million (in each case computed
in accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set
forth in this Contract, the provisions hereof shall not
apply where the custody of the Fund's 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 the Fund in the
United Kingdom shall be maintained in an interest
bearing account established for the Fund with the
Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street
London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed
on the Fund or the Custodian as custodian of the Fund
by the tax law of the United States of America or any
state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian
of the obligations imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of
jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and
other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax
law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund
under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of
Shares of the Fund
The Custodian shall receive from the distributor for
the Shares or from the Transfer Agent of the Fund and
deposit into the account of the Fund such payments
as are received for Shares of the Fund issued or sold
from time to time by the Fund. The Custodian will provide
timely notification to the Fund and the Transfer Agent of
any receipt by it of payments for Shares of the Fund.
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and
any applicable votes of the Board of Trustees of the Fund
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection
with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund
and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialled by one or more person
or persons as the Board of Trustees shall have from time to
time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved,
including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board
of Trustees of the Trust accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices
provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards
for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with
Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor expenses
of handling securities or other similar items
relating to its duties under this Contract, provided
that all such payments shall be accounted for to the
Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
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 Fund except as
otherwise directed by the Board of Trustees of the
Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have
been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote
of the Board of Trustees of the Trust as conclusive evidence
(a) of the authority of any person to act in accordance with
such vote or (b) of any determination or of any action by
the Board of Trustees pursuant to the Declaration of Trust
as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian
of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of
Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board
of Trustees of the Fund to keep the books of account of the
Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to
do so by the Fund, 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 Fund as described in the Fund's currently
effective prospectus related to the Fund and shall advise
the Fund and the Transfer Agent daily of the total amounts
of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer
Agent periodically of the division of such net income among
its various components. The calculations of the net asset
value per share and the daily income of Fund shall be made
at the time or times described from time to time in the
Fund's currently effective prospectus related to the Fund.
9. Records
The Custodian shall with respect to the Fund
create and maintain all records relating to its activities
and obligations under this Contract in such manner as will
meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees
or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at
the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent
accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and
Form N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other
requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as
the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal
accounting control and procedures for safeguarding
securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided
by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies,
the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and
to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of
a three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying
out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund
for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence
or willful misconduct or the negligence or willful
misconduct of a sub-custodian or agent, the Custodian shall
be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or
circumstances beyond the reasonable control of the Custodian
or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of
currency controls or restrictions, the interruption,
suspension or restriction of trading on or the closure of
any securities market, power or other mechanical or
technological failures or interruptions, computer viruses or
communications disruptions, acts of war or terrorism, riots,
revolutions, work stoppages, natural disasters or other
similar events or acts; (ii) errors by the Fund or the
Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this
Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker,
agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the
Custodian's sub-custodian or agent securities purchased or
in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company,
corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the
Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of
bonus, dividends and rights and other accretions or
benefits; (vi) delays or inability to perform its duties due
to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any
provision of any present or future law or regulation or
order of the United States of America, or any state thereof,
or any other country, or political subdivision thereof or of
any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this
Contract.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the
payment of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or
incurring liability of some other form, the Fund, as a
prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and
form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for
any purpose (including but not limited to securities
settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or
liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of
the Fund shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect,
special or consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10
hereof in the absence of receipt of an initial certificate
of the Secretary or an Assistant Secretary that the Board
of Trustees of the Fund has approved the initial use of a
particular Securities System by the Fund, as required by
Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not with respect to the
Fund 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 the Fund; provided
further, however, that the Fund shall not amend or terminate
this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund may at any time
by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller
of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date
of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund shall be
appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and
in the form for transfer, all securities of the Fund then
held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of the Fund held
in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees of the Fund, deliver
at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board
of Trustees shall have been delivered to the Custodian on or
before the date when such termination shall become
effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less
than $25,000,000, all securities, funds and other properties
held by the Custodian on behalf of the Fund and all
instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to
transfer to an account of such successor custodian all of
the securities of the Fund held in any Securities System.
Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other
properties remain in the possession of the Custodian after
the date of termination hereof owing to failure of the Fund
to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains
possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties
and obligations of the Custodian shall remain in full force
and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions
of this Contract as may in their joint opinion be consistent
with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided
that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or
any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of
this Contract.
17. Additional Funds
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the
Custodian relating to the custody of the Fund's assets.
20. Reproduction of Documents
This Contract and all schedules, exhibits, attachments
and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic
or other similar process. The parties hereto all/each agree
that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
21. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires
banks which hold securities for the account of customers to
respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of
that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide
the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide
this information to requesting companies. If the Fund tells
the Custodian "yes" or does not check either "yes" or "no"
below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all
securities owned by the Fund or accounts established by the
Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address
for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [X] The Custodian is not authorized to release the
Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed as of the ___ day of ____________, 1998.
ATTEST STEIN ROE FLOATING RATE INCOME FUND
______________________ By_________________________________
Assistant Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
By _______________________________
Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of Stein Roe Trust for use as sub-custodians for the
Fund's securities and other assets:
(Insert banks and securities depositories)
TRANSFER AGENT AGREEMENT
Agreement dated as of October 19, 1998, between Stein Roe
Floating Rate Income Fund and Stein Roe Institutional Floating
Rate Income Fund, each a Massachusetts business trust (the
"Trust") comprised of the series of portfolios listed in Schedule
A (as the same may from time to time be amended to add or to
delete one or more series, all referred to herein as the "Fund"),
and Liberty Funds Services, Inc. ("LFS"), a Massachusetts
corporation.
WHEREAS, the Trust has appointed LFS as Transfer Agent,
Registrar and Dividend Disbursing Agent for each series of the
Trust listed in Schedule A, each a registered investment company,
WHEREAS, LFS desires to accept such appointment and to
perform such services upon the terms and subject to the conditions
set forth herein; and
WHEREAS, Stein Roe & Farnham, Inc. ("SRF") is the investment
adviser to the Fund and Liberty Securities Corporation is the
principal distributor ("Distributor") of its shares.
NOW THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints LFS to act as its
agent in respect of the purchase, redemption and transfer of Fund
shares and dividend disbursing services in connection with such
shares other than with respect to Fund shares held in omnibus
accounts as to which such services are performed by other
financial institutions as described in the Fund's Prospectus from
time to time. LFS accepts such appointment and will perform the
duties and functions described herein in the manner hereinafter
set forth.
LFS agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in
accordance with the practice of transfer agents of investment
companies registered with the Securities and Exchange Commission
and in compliance with all laws applicable to mutual fund transfer
agents and the Fund.
LFS agrees that it shall perform usual and ordinary services
as transfer agent, registrar and dividend disbursing agent, which
are necessary and appropriate for investment companies registered
with the Securities and Exchange Commission, except as otherwise
specifically excluded herein, including but not limited to:
receiving and processing payments for purchases of Fund shares,
opening shareholder accounts, receiving and processing requests
for liquidation of Fund shares , transferring and canceling stock
certificates, maintaining all shareholder accounts, preparing
annual shareholder meetings lists, mailing proxy materials,
receiving and tabulating proxies, mailing shareholder reports and
prospectuses, account research, shareholder correspondence and
telephone services, providing order room services to brokers,
withholding taxes on accounts, disbursing income dividends and
capital gains distributions, preparing and filing U.S. Treasury
Department Form 1099 for shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable transactions in
shareholder accounts, recording reinvestment of dividends and
distributions in Fund shares, and causing liquidation of shares
and disbursements to be made to withdrawal plan holders.
2. Fees and Charges. The Trust will pay LFS for the
services provided hereunder in accordance with and in the manner
set forth in Schedule B to this Agreement.
3. Representations and Warranties of LFS. LFS represents
and warrants to the Trust that:
(a) It is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(c) It is empowered under applicable state and federal laws
and by its Articles of Organization and By-Laws to enter
into and perform the services contemplated by this
Agreement and it is in compliance and shall continue
during the term of this Agreement to be in compliance
with all such applicable laws;
(d) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement; and
(f) It has filed a Registration Statement on SEC Form TA-1
and will file timely an amendment to same respecting this
Transfer Agent Agreement with the Securities and Exchange
Commission; it is duly registered as a transfer agent as
provided in Section 17Ac of the Securities and Exchange
Act of 1934, and it will remain so registered and will
comply with all state and federal laws and regulations
relating to transfer agents throughout the term of this
Agreement.
4. Representations and Warranties of the Trust. The Trust
represents and warrants to LFS that:
(a) It is a business trust duly organized and existing and in
good standing under the laws of the State of
Massachusetts;
(b) The Fund is an closed-end management investment company
registered as an interval fund under Section 23c-3 of the
Investment Company Act of 1940;
(c) Registration statements under the Securities Act of 1933
and applicable state laws are currently effective and
will remain effective at all times with respect to all
shares of the Fund being offered for sale;
(d) The Trust is empowered under applicable laws and
regulations and by its Agreement and Declaration of Trust
and By-Laws to enter into and perform this Agreement; and
(e) All requisite proceedings and actions have been taken to
authorize it to enter into and perform this Agreement.
5. Copies of Documents. The Trust promptly from time to
time will furnish LFS with copies of the following Trust and Fund
documents and all amendments or supplements thereto: the Agreement
and Declaration of Trust ; the By-Laws; and the Registration
Statement under Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, together with any
other information reasonably requested by LFS. The Prospectus and
Statement of Additional Information contained in such Registration
Statement, as from time to time amended and supplemented, are
herein collectively referred to as the "Fund's Prospectus."
On or before the date of effectiveness of this Agreement, or
as soon thereafter as is reasonably practicable, and from time-to-
time thereafter, the Trust will furnish LFS with certified copies
of the resolutions of the Trustees of the Trust authorizing this
Agreement and designating authorized persons to give instructions
to LFS; if applicable, a specimen of the certificate for shares of
the Fund in the form approved by the Trustees of the Trust, with a
certificate of the Secretary of the Trust as to such approval; and
certificates as to any change in any officer, director, or
authorized person of the Trust.
6. Share Certificates. Unless and until the Trustees of the
Trust resolve that all of the Trust's shares of beneficial
interest, or all of the shares of a particular series or class of
such shares, shall be issued in uncertificated form, LFS shall
maintain a sufficient supply of blank share certificates
representing such shares, in the form approved from time to time
by the Trustees of the Trust. Such blank share certificates shall
be properly signed, manually or by facsimile signature, by the
duly authorized officers of the Trust, and shall bear the seal or
facsimile thereof of the Trust; and notwithstanding the death,
resignation or removal of any officer of the Trust authorized to
sign such share certificates, LFS may continue to countersign
certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Trust.
7. Lost or Destroyed Certificates. In case of the alleged
loss or destruction of any share certificate, no new certificate
shall be issued in lieu thereof, unless there shall first be
furnished to LFS an affidavit of loss or non-receipt by the holder
of shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond paid for by the
shareholder which is satisfactory to LFS and issued by a surety
company satisfactory to LFS. LFS shall place and maintain stop
transfer instructions on all lost certificates as to which it
receives notice.
8. Purchases; Receipt of Funds for Investment. LFS will
maintain one or more accounts with BankBoston, N.A. ("Bank"), in
the name, or for the benefit, of the Trust into which it will
deposit funds payable to LFS or SteinRoe Services, Inc. as agent
for, or otherwise identified as being for the account of, the
Trust, prior to crediting such funds to the respective accounts of
the Trust and the Distributor.
Thereafter, LFS will determine the amount of any such funds
due the Trust (equal to the number of Trust shares sold by the
Trust computed pursuant to paragraph 9 hereof, multiplied by the
net asset value of Trust shares next determined after receipt of
such purchase order) and the amount of funds due the Distributor
(equal to the sales charge applicable to such sale, computed
pursuant to the Prospectus), respectively, deposit the portion due
the Distributor in its account with such bank as may from time to
time be designated by the Distributor ("Distributor's Account"),
deposit the net amount due the Trust in its account with the
financial institution from time to time selected by the Trust as
custodian of the Fund ("Custodian"), and notify the Distributor
and Custodian, respectively, (such notification to the Distributor
to include the amount of such sales charge to be remitted by the
Distributor to the dealer participating in the sale, of such
deposits, such notification to be given as soon as practicable on
the next business day stating the total amount deposited to said
accounts during the previous business day.
9. Shareholder Accounts. Upon receipt of any funds referred
to in paragraph 8, LFS will compute the number of shares purchased
by the shareholder according to the appropriate offering price of
Fund shares determined in accordance with applicable federal laws
and regulations and as described in the Prospectus of the Fund,
and:
(a) In the case of a new shareholder, open and maintain an
open account for such shareholder in the name or names
set forth in the subscription application form;
(b) Unless the Trustees of the Trust have resolved that all
of the Trust's shares of beneficial interest, or all of
the shares of a particular series or class, shall be
issued in uncertificated form, and if specifically
requested in writing by the shareholder, countersign,
issue and mail, by first class mail, to the shareholder
at his or her address, a share certificate for full
shares purchased;
(c) Send to the shareholder a confirmation indicating the
amount of full and fractional shares purchased (in the
case of fractional shares, rounded to three decimal
places) and the price per share;
(d) In the case of a request to establish a plan or program
being offered by the Fund's Prospectus, open and maintain
such plan or program for the shareholder in accordance
with the terms thereof; and
(e) Perform such other services and initiate and maintain
such other books and records as are customarily
undertaken by transfer agents in maintaining shareholder
accounts for registered investment company investors;
all subject to requirements set forth in the Fund's Prospectus
with respect to rejection of orders.
For closed accounts, LFS will maintain account records
through June of the calendar year following the year in which the
account is closed.
10. Unpaid Checks; Accounts Assigned for Collection. If any
check or other order for payment of money on the account of any
shareholder or new investor is returned unpaid for any reason, LFS
will:
(a) Give prompt notification to the Distributor of such non-
payment; and
(b) Take such other steps, including imposition of a
reasonable processing or handling fee, as LFS may, in
LFS's discretion, deem appropriate, or as the Trust or
the Distributor may instruct LFS, provided that any
authorization to pay such order notwithstanding
insufficient shareholder account funds, is expressly on
the condition that the Trust or Distributor, as the case
may be, shall indemnify LFS and payor bank in respect of
such payment.
11. Dividends and Distributions. The Trust will promptly
notify LFS of the declaration of any dividend or distribution with
respect to Fund shares, the amount of such dividend or
distribution, the date each such dividend or distribution shall be
paid, and the record date for determination of shareholders
entitled to receive such dividend or distribution. As dividend
disbursing agent, LFS will, on or about the payment date of any
such dividend or distribution, notify the Custodian of the
estimated amount of cash required to pay such dividend or
distribution, and the Trust agrees that on or before the mailing
date of such dividend or distribution it will instruct the
Custodian to make available to LFS sufficient funds in the
dividend and distribution account maintained by LFS with the Bank.
As dividend disbursing agent, LFS will prepare and distribute to
shareholders any funds to which they are entitled by reason of any
dividend or distribution and, in the case of shareholders entitled
to receive additional shares by reason of any such dividend or
distribution, LFS will make appropriate credits to their accounts
and cause to be prepared and mailed to shareholders confirmation
statements and, of such additional shares. LFS will maintain all
records necessary to reflect the crediting of dividends and
distributions which are reinvested in shares of the Fund.
12. Redemptions. As agent for the Trust, LFS will receive
and process, in accordance with the Fund's Prospectus, share
certificates and requests for redemption of shares, as follows:
(a) If such certificate or request complies with standards
for redemption, LFS will notify the Custodian of the
actual amount of cash required to pay redemptions, and
the Trust hereby instructs the Custodian to make
available to LFS sufficient funds in the redemption
account maintained by LFS with the Bank. LFS will
deposit any contingent deferred sales charge ("CDSC") due
the Distributor in accordance with the Fund's Prospectus,
in the Distributor's Account and pay to the shareholder
from funds deposited from time to time in the redemption
account maintained by LFS with the Bank, the appropriate
redemption price as set forth in the Fund's Prospectus;
(b) If such certificate or request does not comply with the
standards for redemption, LFS will promptly notify the
shareholder and shall effect the redemption at the price
in effect at the time of receipt of documents complying
with the standard; and
(c) LFS shall notify the Trust and the Distributor as soon as
practicable on each business day of the total number of
Trust shares and funds covered by requests for redemption
which were received by LFS in proper form on the previous
business day, and shall notify the Distributor of
deposits to its account with respect to any CDSC.
13. Transfer and Exchanges. LFS will receive and process
transfers of shares of the Fund and exchanges between series of
the Trust and other investments as, and to the extent, permitted
in the Prospectus of the Fund. If shares to be transferred are
represented by outstanding certificates, LFS will, upon surrender
to it of the certificates in proper form for transfer, credit the
same to the transferee on its books. If shares are to be
exchanged , LFS will process such exchange in the same manner as a
redemption and sale of shares, in accordance with the Fund's
Prospectus.
14. Systematic Withdrawal Plans. LFS will administer
systematic withdrawal plans pursuant to the provisions of
withdrawal orders duly executed by shareholders and the Fund's
Prospectus. Prior to the payment date, LFS will withdraw from a
shareholder's account and present for redemption as many shares as
shall be sufficient to make such withdrawal payment pursuant to
the provisions of the shareholder's withdrawal plan and the
Prospectus.
15. Letters of Intent and Other Plans. LFS will process
such letters of intent for investing in shares as are provided for
in the Prospectus, and LFS will act as escrow agent pursuant to
the terms of such letters of intent duly executed by shareholders.
LFS will make appropriate deposits for the adjustment of sales
charges as therein provided and will currently report the same to
the Distributor, it being understood, however, that computations
of any adjustment of sales charge shall be the responsibility of
the Distributor or the Trust. LFS will process such accumulation
plans, group programs and other plans or programs for investing in
shares as are provided for the Prospectus.
16. Tax Returns and Reports. LFS will prepare and file tax
returns and reports with the Internal Revenue Service and any
other federal, state or local governmental agency which may
require such filings, including state abandoned property laws, and
conduct appropriate communications relating thereto, and, if
required, mail to shareholders such forms for reporting dividends
and distributions paid by the Fund as are required by applicable
laws, rules and regulations, and LFS will withhold such sums as
are required to be withheld under applicable Federal and state
income tax laws, rules and regulations. LFS will also make
reasonable attempt to obtain such tax withholding information from
shareholders as is required to be obtained on behalf of the Trust
under applicable federal or state laws.
17. Record Keeping. LFS will maintain records, which at all
times will be the property of the Trust and available for
inspection by the Trust and Distributor, showing for each
shareholder's account the following information:
(a) Name, address, and United States taxpayer identification
or Social Security number, if provided (or amounts
withheld with respect to dividends and distributions on
shares if a taxpayer identification or Social Security
number is not provided);
(b) Number of shares held for which certificates have not
been issued and for which certificates have been issued;
(c) Historical information regarding the account of each
shareholder, including dividends and distributions paid,
if any, and the date and price for transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account;
(e) Information with respect to withholdings of taxes as
required under applicable Federal and state laws and
regulations;
(f) Any capital gain or dividend reinvestment order and plan
application relating to the current maintenance of a
shareholder's account; and
(g) Any instructions as to letters of intent, record
addresses and any correspondence or instructions relating
to the current maintenance of a shareholder's account.
LFS shall maintain at its expense those records necessary to
carry out its duties under this Agreement; remaining records will
be preserved at the Trust's expense for the periods prescribed by
law. In addition, LFS shall maintain at its expense for periods
prescribed by law all records which the Fund or LFS is required to
keep and maintain pursuant to any applicable statute, rule or
regulation, including without limitation Rule 31(a)-1 under the
Investment Company Act of 1940, relating to the maintenance of
records in connection with the services to be provided hereunder.
At the end of the period in which records must be retained by
law, such records and documents will either be provided to the
Trust or destroyed in accordance with prior written authorization
from the Trust.
18. Retirement Plan Services. LFS shall provide sub-
accounting services for retirement plan shareholders representing
group relationships with special recordkeeping needs.
19. Other Information Furnished. LFS will furnish to the
Trust and the Distributor such other information, including
shareholder lists and statistical information, as may be agreed
upon from time to time between LFS, the Distributor or the Trust.
LFS shall notify the Trust of any request or demand to inspect the
share records of the Fund, and will not permit or refuse such
inspection until receipt of written instructions from the Trust as
to such permission or refusal unless required by law.
LFS shall provide to the Trust any results of studies and
evaluations of systems of internal accounting controls performed
for the purpose of meeting the requirements of Regulation
240.17Ad-13(a) of the Securities Exchange Act of 1934.
20. Shareholder Inquiries. LFS will respond promptly to
written correspondence from shareholders, registered
representatives of broker-dealers engaged in selling Trust shares,
the Trust and the Distributor relating to its duties hereunder.
LFS also will respond to telephone inquiries from shareholders
with respect to existing accounts.
21. Communications to Shareholders and Meetings. LFS will
determine all shareholders entitled to receive, and will cause to
be addressed and mailed, all communications by the Fund to its
shareholders, including quarterly and annual statements or
reports, tender offer materials, proxy material for meetings, and
periodic communications. LFS will cause to be received, examined
and tabulated return proxy cards for meetings of shareholders and
certify the vote to the Trust.
22. Insurance. LFS will not reduce or allow to lapse any of
its insurance coverage from time to time in effect, including but
not limited to, errors and omissions, fidelity bond and electronic
data processing coverage, without the prior written consent of the
Trust. Attached as Schedule D to this Agreement is a list of the
insurance coverage which LFS has in effect as of the date of
execution of this Agreement.
24. Duty of Care and Indemnification. LFS will at all times
use reasonable care, due diligence and act in good faith in
performing its duties hereunder. LFS will not be liable or
responsible for delays or errors by reason of circumstances beyond
its control, including without limitation acts of civil or
military authority, national or state emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe,
acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
LFS may rely on certifications of those individuals
designated as authorized persons to give instructions to LFS as to
proceedings or facts in connection with any action taken by the
shareholders of the Fund or Trustees of the Trust, and upon
instructions not inconsistent with this Agreement from individuals
who have been so authorized. Upon receiving authorization from an
individual designated as an authorized person to give instructions
to LFS, LFS may apply to counsel for the Trust, or counsel for
SRF, at the Fund's expense, for advice. With respect to any
action reasonably taken on the basis of such certifications or
instructions or in accordance with the advice of counsel of the
Trust, or counsel for SRF, the Trust will indemnify and hold
harmless LFS from any and all losses, claims, damages, liabilities
and expenses (including reasonable counsel fees and expenses).
The Trust will indemnify LFS against and hold LFS harmless
from any and all losses, claims, damages, liabilities and expenses
(including reasonable counsel fees and expenses) in respect of any
claim, demand, action or suit not resulting from LFS's bad faith,
negligence, lack of due diligence or willful misconduct and
arising out of, or in connection with its duties under this
Agreement.
LFS shall indemnify the Trust against and hold the Trust
harmless from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit resulting from LFS's
bad faith, negligence, lack of due diligence or willful
misconduct, and arising out of, or in connection with, its duties
under this Agreement. For purposes of this Transfer Agent
Agreement, "lack of due diligence" shall mean the processing by
LFS of a Fund share transaction in accordance with a practice that
is not substantially in compliance with (1) a transaction
processing practice approved by the Trust's Trustees, (2)
insurance coverage's, or (3) generally accepted industry practices
of mutual fund agents.
LFS shall also be indemnified and held harmless by the Trust
against any loss, claim, damage, liability and expenses (including
reasonable counsel fees and expenses) by reason of any act done by
it in good faith with due diligence and in reasonable reliance
upon any instrument or certificate for shares reasonably believed
by it (a) to be genuine and (b) to be signed, countersigned or
executed by any person or persons authorized to sign, countersign,
or execute such instrument or certificate.
In addition, the Trust will indemnify and hold LFS harmless
against any loss, claim, damage, liability and expense (including
reasonable counsel fees and expenses) in respect of any claim,
demand, action or suit as a result of the negligence of the Fund,
the Trust or SRF as a result of LFS's acting upon any instructions
reasonably believed by LFS to have been executed or orally
communicated by a duly authorized officer or employee of the Fund,
Trust or SRF as a result of acting in reliance upon written or
oral advice reasonably believed by LFS to have been given by
counsel for the Fund, Trust or SRF.
In any case in which a party to this Agreement may be asked
to indemnify or hold harmless the other party hereto, the party
seeking indemnification shall advise the other party of all
pertinent facts concerning the situation giving rise to the claim
or potential claim for indemnification, and each party shall use
reasonable care to identify and notify the other promptly
concerning any situation which presents or appears likely to
present a claim for indemnification. Prior to admitting to or
agreeing to settle any claim subject to this Section, each party
shall give the other reasonable opportunity to defend against said
claim in either party's name.
25. Termination and Amendment. This Agreement shall
continue in effect until May 30, 1999, and will automatically be
renewed for successive one year terms thereafter unless
terminated, effective as of the expiration of the then current
term, by not less than one hundred eighty (180) days written
notice prior to any renewal date. Upon termination hereof, the
Trust shall pay LFS such compensation as may be due to LFS as of
the date of such termination for services rendered and expenses
incurred, as described in Schedule B. This Agreement may be
modified or amended from time to time by mutual agreement between
the Trust and LFS.
26. Successors. In the event that in connection with
termination of this Agreement a successor to any of LFS's duties
or responsibilities hereunder is designated by the Trust by
written notice to LFS, LFS shall promptly, at the expense of the
Trust, transfer to such successor, a certificate list of the
shareholders of the Fund (with name, address and taxpayer
identification or Social Security number), a historical record of
the account of each shareholder and the status thereof, all other
relevant books, records, correspondence and other data established
or maintained by LFS under this Agreement in machine readable form
and will cooperate in the transfer of such duties and
responsibilities, and in the establishment of books, records and
other data by such successor. LFS shall be entitled to
reimbursement of its reasonable out-of-pocket expenses in respect
of assistance provided in accordance with the preceding sentence.
27. Miscellaneous. This Agreement shall be construed in
accordance with and governed by the laws of The Commonwealth of
Massachusetts.
28. Liability. It is understood and expressly stipulated
that neither the shareholders of the Funds which are series of the
Trust nor the members of the Board of the Trust shall be
personally liable hereunder. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private
property of, any of the members of the Board of the Trust, nor of
the shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound. A copy of the
Declaration of Trust and of each amendment thereto has been filed
by the Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Clerk of the City of Boston, as well as
any other governmental office where such filing may from time to
time be required.
The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions of this Agreement or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall
constitute one and the same instrument.
LFS shall keep confidential all records and information
provided to LFS by the Trust, and prior, present or prospective
shareholders of the Fund, except to the extent disclosures are
required by this Agreement, by the Fund's registration statement,
or by a reasonable request or a valid subpoena or warrant issued
by a court, state or federal agency or other governmental
authority.
Neither LFS nor the Trust may use each other's name in any
written material without written consent of such other party,
provided, however, that such consent shall not unreasonably
withheld. LFS and the Trust hereby consent to all uses of their
respective names which refer in accurate terms to appointment and
duties under this Agreement or which are required by any
governmental or regulatory authority including required filings.
The Trust, the Fund and SRF consent to use of their respective
names and logos by LFS for shareholder correspondence and
statements.
This Agreement shall be binding upon and shall inure to the
benefit of the Trust and LFS and their respective successors and
assigns. Neither the Trust nor LFS shall assign this Agreement
nor its rights and obligations under this Agreement without the
express written consent of the other party.
This Agreement may be amended only in writing by mutual
agreement of the parties.
Any notice and other instrument in writing authorized or
required by this Agreement be given to the Trust or LFS shall be
sufficiently given if addressed to that party and mailed or
delivered to it as its office set for the below or at such other
place as it may from time to time designate in writing.
The Trust and the Fund:
Stein Roe Institutional Floating Rate Income Trust
Stein Roe Floating Rate Income Trust
One South Wacker Drive
Suite 3300
Chicago, Illinois 60606
Attn: Heidi J. Walter, Esq.
LFS:
Liberty Funds Service, Inc.
One Financial Center
Boston, Massachusetts 02111
Attn: Mary McKenzie; with a separate copy to
Attn: Nancy L. Conlin, Esq.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and sealed as of the date first
above written.
STEIN ROE FLOATING RATE INCOME TRUST
STEIN ROE INSTITUTIONAL FLOATING RATE
INCOME TRUST
By:________________________________________
Name: Thomas W. Butch
Title: President
LIBERTY FUNDS SERVICES, INC.
By:_______________________________________
Name: Davey S. Scoon
Title: President
<PAGE>
SCHEDULE A
The Trusts consists of the following series of portfolios:
Stein Roe Institutional Floating Rate Income Fund
Stein Roe Floating Rate Income Fund
SCHEDULE B
Fee Schedule:
Stein Roe Institutional Floating Rate Income Fund- 0.05%
Stein Roe Floating Rate Income Fund- 0.14%
ACCOUNTING AND BOOKKEEPING AGREEMENT
This Agreement is made this __ day of November, 1998, by and
between Stein Roe Floating Rate Income Fund, a Massachusetts
business trust, (hereinafter referred to as the "Fund") and Stein
Roe & Farnham Incorporated ("Stein Roe"), a Delaware corporation.
1. Appointment. The Fund hereby appoints Stein Roe to act as its
agent to perform the services described herein with respect to the
Fund. Stein Roe hereby accepts appointment as the Fund's agent
and agrees to perform the services described herein.
2. Accounting.
(a) Pricing. Stein Roe shall value all securities and other
assets of the Fund, and compute the net asset value per
share of the Fund, 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 the Fund, and pursuant to such other
written procedures or instructions furnished to Stein Roe
by the Fund. To the extent procedures or instructions
used to value securities or other assets of the Fund under
this Agreement are at any time inconsistent with any
applicable law or regulation, the Fund shall provide Stein
Roe with written instructions for valuing such securities
or assets in a manner which the Fund represents to be
consistent with applicable law and regulation.
(b) Net Income. Stein Roe shall calculate with such frequency
as the Fund shall direct, the net income of the Fund for
dividend purposes and on a per share basis. Such
calculation shall be at such times and dates and in such
manner as the Fund 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 Fund is or will be actually
paid, but will accrue such dividend and interest unless
otherwise instructed by the Fund.
(c) Capital Gains and Losses. Stein Roe shall calculate gains
or losses of the Fund from the sale or other disposition
of assets as the Fund shall direct.
(d) Yields. At the request of the Fund, Stein Roe shall
compute yield for the Fund for such periods and using such
formula as shall be instructed by the Fund.
(e) Communication of Information. Stein Roe shall provide the
Fund, the Fund's transfer agent and such other parties as
directed by the Fund with the net asset value per share,
the net income per share and yields for the Fund at such
time and in such manner and format and with such frequency
as the parties mutually agree.
(f) Information Furnished by the Fund. The Fund 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 the Fund.
The Fund 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 Fund if the same are not available
to Stein Roe from a pricing or similar service designated
by the Fund 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 Fund.
3. Recordkeeping.
(a) Stein Roe shall, as agent for the Fund, maintain and keep
current and preserve the general ledger and other
accounts, books, and financial records of the Fund
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 Fund is required to maintain
and preserve in accordance with the Rules shall be and
remain the property of the Fund and shall be surrendered
to the Fund 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 the Fund for
reasonable audit, use and inspection by the Fund, its
agents and any regulatory agency having authority over the
Fund.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized agent
of the Fund for instructions regarding the Fund, and may
consult counsel for the Fund 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 Fund 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 Fund, until receipt of written
notice thereof from the Fund.
(b) Stein Roe may receive and accept a certified copy of a
vote of the Board of Trustees of the Fund 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 Fund 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 Fund shall reimburse Stein Roe for any and
all out-of-pocket expenses and charges in performing services
under this Agreement. For the services provided under this
Agreement, the Fund shall pay Stein Roe an annual fee, calculated
and paid monthly, equal to $25,000 plus .0025 percent per annum of
the average daily net assets in excess of $50 million. Such fee
shall be paid within thirty days after receipt of monthly invoice.
Stein Roe shall invoice the Fund as soon as practicable after the
end of each calendar month, and the Fund shall promptly pay Stein
Roe the invoiced amount.
6. Confidentiality of Records. Stein Roe agrees not to disclose
any information received from the Fund 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 Fund all records in the possession and control of
Stein Roe related to the Fund'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 the Fund.
7. Liability and Indemnification.
(a) Stein Roe shall not be liable to the Fund for any action
taken or thing done by it or its employees or agents on
behalf of 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 Stein Roe,
its employees or agents.
(b) The Fund 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 Fund, or as a result of acting
upon instructions believed by it to have been executed by
a duly authorized agent of the Fund or as a result of
acting upon information provided by the Fund in form and
under policies agreed to by Stein Roe and the Fund,
provided that: (i) 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 (ii) Stein Roe shall give
the Fund 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 Fund from
and against any and all claims, demands, expenses and
liabilities which the Fund 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 the Fund or its other agents
or contractors and (ii) the Fund 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
the Fund.
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
Fund 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 Fund 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 the Fund by written notice to Stein
Roe, Stein Roe shall promptly upon such termination and at the
expense of the Fund, 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 the
Fund, 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 Fund.
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 Fund
and Stein Roe is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any obligation
of the Fund hereunder shall be binding only upon the assets of the
Fund, as provided in the Agreement and Declaration of Fund of the
Fund, and shall not be binding upon any trustee, officer,
employee, agent or shareholder of the Fund. Neither the
authorization of any action by the Trustees or the shareholders of
the Fund, nor the execution of this Agreement on behalf of the
Fund 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.
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 FLOATING RATE INCOME FUND
Attest: By:_____________________________
Thomas W. Butch
___________________ President
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By:____________________________
Thomas W. Butch
President, Mutual Funds
________________________ division
Nicolette D. Parrish
Assistant Secretary
ADMINISTRATIVE AGREEMENT
BETWEEN
STEIN ROE FLOATING RATE INCOME FUND
AND
STEIN ROE & FARNHAM INCORPORATED
STEIN ROE FLOATING RATE INCOME FUND, a Massachusetts business
trust registered under the Securities Act of 1933 ("1933 Act") and
the Investment Company Act of 1940 ("1940 Act") (the "Fund"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation, of Chicago, Illinois ("Administrator"), to furnish
certain administrative services with respect to the Fund.
The Fund and Administrator hereby agree that:
1. Administrative Services. Subject to the terms of this
Agreement and the supervision and control of the Fund's Board of
Trustees ("Trustees"), Administrator shall provide the following
services with respect to the Fund:
(a) Preparation and maintenance of the Fund'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 Fund charter documents and
the filing of all documents required to maintain the Fund'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 Fund's federal, state, and local
income tax returns and calculation of any tax required to be
paid in connection therewith;
(h) Calculation of all 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 the
Fund;
(j) Determination, after consultation with the officers of the
Fund, of the jurisdictions in which shares of beneficial
interest of the 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 Fund by the Board of Trustees (it is agreed
that some person or persons may be officers of both the Fund
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 Fund's Chief
Financial Officer, dissemination of the Fund's quarterly
financial information to the Board of Trustees and preparation
of such other reports relating to the business and affairs of
the Fund as the officers and Board of Trustees may from time
to time reasonably request;
(m) Administration of the Fund'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 Fund 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 Fund 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 Fund, including the oversight of all periodic inspections
of the operations of the Fund and its agents by regulatory
authorities and responses to subpoenas and tax levies;
(r) Handling and resolution of any complaints registered with the
Fund by shareholders, regulatory authorities, and the general
public;
(s) Monitoring legal, tax, regulatory, and industry developments
related to the business affairs of the Fund 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 Fund and
recommendation to the officers and the Board of Trustees of
the Fund of modifications to such policies to facilitate the
protection of shareholders or market competitiveness of the
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 the
Fund for instructions regarding the Fund, and may consult counsel
for the Fund 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 Fund 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 Fund, until
receipt of written notice thereof from the Fund.
4. Expenses Borne by Fund. Except to the extent expressly
assumed by Administrator herein or under a separate agreement
between the Fund and Administrator and except to the extent
required by law to be paid by Administrator, the Fund 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
Fund and the custodian, transfer agent or any other agent
selected by the Fund;
(c) All charges for investment advisory, portfolio management, and
accounting services provided to the Fund by the Administrator,
or any other provider of such services;
(d) All charges for services of the Fund's independent auditors
and for services to the Fund by legal counsel;
(e) All compensation of Trustees, other than those affiliated with
Administrator, all expenses incurred in connection with their
services to the Fund, 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 Fund'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 Fund'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 Fund under the 1940 Act and, to the extent no exemption
is available, expenses of registering the Fund's shares under
the 1933 Act, of qualifying and maintaining qualification 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 other laws applicable to
the Fund or its business activities;
(m) All interest on indebtedness, if any, incurred by the Fund;
and
(n) All fees, dues and other expenses incurred by the Fund in
connection with membership of the Fund in any trade
association or other investment company organization.
5. Allocation of Expenses Borne by the Fund. Any expenses
borne by the Fund that are attributable solely to the
organization, operation or business of the Fund shall be paid
solely out of Fund assets.
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 Fund's custodian or other agents without
additional cost to the Fund.
In the event that Administrator pays or assumes any expenses
of the 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 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 Fund shall pay to Administrator out of the assets
of the Fund fees at the annual rate of 0.25%. 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, the
Fund's 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 the 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 and (iv) other expenses incurred in the
ordinary course of business, 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 the Fund under
this section shall not exceed the administrative fee payable to
Administrator by the Fund under this Agreement.
Any payment to the 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
Fund 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 Fund or its shareholders for any action taken or
thing done by it or its subcontractors or agents on behalf of 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 Fund 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
Fund, or as a result of acting upon any instruction believed by it
to have been executed by a duly authorized agent of the Fund or as
a result of acting upon information provided by the Fund in form
and under policies agreed to by Administrator and the Fund,
provided that: (i) 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 (ii)
Administrator shall give the Fund 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 Fund from
and against any and all claims, demands, expenses and liabilities
which the Fund may sustain or incur arising out of, or incurred
because of, the negligence or misconduct of Administrator or its
agents or subcontractors, provided that the Fund 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
the Fund.
12. Effective Date, Amendment, and Termination. This
Agreement shall become effective as of the date hereof and, unless
terminated as hereinafter provided, shall remain in effect
thereafter from year to year so long as such continuance is
specifically approved with respect to the Fund at least annually
by a majority of the Trustees who are not interested persons of
the Fund or Administrator.
This Agreement may be modified or amended from time to time
by mutual agreement between the Administrator and the Fund and may
be terminated by Administrator or the Fund by at least sixty (60)
days' written notice given by the terminating party to the other
party. Upon termination, the Fund 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 Fund by written
notice to Administrator, upon such termination Administrator shall
promptly, and at the expense of the 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 the 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 the Fund.
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 Fund under
the 1940 Act, the laws of the Commonwealth of Massachusetts or
such other authorities having jurisdiction over the Fund or as may
otherwise be required for the proper operation of the business and
affairs of the Fund (other than those required to be maintained by
any investment adviser retained by the Fund in accordance with
Section 15 of the 1940 Act).
Administrator will periodically send to the Fund all books,
documents, records, and data of the Fund 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 the Fund.
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 Fund. Administrator further
agrees to surrender promptly to the Fund 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.
The Fund 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 the Fund 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 the Fund hereunder shall be binding only upon the
assets of the Fund and shall not be binding upon any Trustee,
officer, employee, agent or shareholder of the Fund. Neither the
authorization of any action by the Trustees or shareholders of the
Fund nor the execution of this Agreement on behalf of the Fund
shall impose any liability upon any Trustee or any shareholder.
16. Use of Administrator's Name. The Fund may use its name
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, the Fund
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: November _, 1998
STEIN ROE FLOATING RATE INCOME FUND
Attest: By:_____________________________
Thomas W. Butch
___________________ President
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By:____________________________
Thomas W. Butch
President, Mutual Funds
________________________ division
Nicolette D. Parrish
Assistant Secretary
BELL, BOYD & LLOYD
1615 L STREET, NW., SUITE 1200
WASHINGTON, D.C. 20036-5610
202 466-6300
FAX 202 463-0678
TELEX 989966
CHICAGO
312 372-1121
FAX 312 372-2098
November 6, 1998
Stein Roe Floating Rate Income Fund
One South Wacker Drive, Suite 3300
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
Stein Roe Floating Rate Income Fund
We have acted as counsel for Stein Roe Floating Rate Income
Fund (the "Fund") in connection with the registration under the
Securities Act of 1933 (the "Act") of 10,000,000 shares of
beneficial interest (the "Shares") of the Fund in registration
statement no. 333-61751 on form N-2 as amended by pre-effective
amendment no. 1 (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 of the Fund, actions of the
board of trustees of the Fund authorizing the issuance of shares
of the Fund and the Registration Statement.
We assume that, upon sale of the Shares, the Fund will
receive the authorized consideration therefor, which will at least
equal the net asset value of the Shares.
Based upon the foregoing, we are of the opinion that the Fund
is authorized to issue 10,000,000 Shares, and that, when the
Shares are issued and sold after the Registration Statement has
been declared effective and the authorized consideration therefor
is received by the Fund, they will be validly issued, fully paid
and nonassessable by the Fund.
The Fund is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such
disclaimer be given in every note, bond, contract, instrument,
certificate or other undertaking issued by or on behalf of the
Fund. The Trust Agreement provides for indemnification for all
loss and expense of any shareholder of the Fund held personally
liable for obligations of the Fund. Thus, the risk of a
<PAGE> 2
Stein Roe Floating Rate Income Fund
November 6, 1998
Page two
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be
unable to meet its obligations.
In rendering the foregoing opinion, we have relied upon the
opinion of Ropes & Gray expressed in their letter to us dated
November 6, 1998.
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,
/S/ BELL, BOYD & LLOYD
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 November
12, 1998 with respect to Stein Roe Floating Rate Income Fund in
the Registration Statement (Form N-2) and related Prospectus and
Statement of Additional Information of Stein Roe Floating Rate
Income 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. 333-61751) and
in this Amendment No. 1 to the Registration Statement under the
Investment Company Act of 1940 (Registration No. 811-08953).
ERNST & YOUNG LLP
Chicago, Illinois
November 12, 1998
STEIN ROE & FARNHAM
PROTOTYPE
PAIRED DEFINED CONTRIBUTION
MONEY PURCHASE PENSION AND
PROFIT SHARING PLANS
<PAGE>
STEIN ROE & FARNHAM
PAIRED DEFINED CONTRIBUTION
TABLE OF CONTENTS
Page
ARTICLE 1 General ----
1.1 Purpose .............................................1
1.2 Trust ...............................................1
ARTICLE 2 Definitions
2.1 Account .............................................1
2.2 Adoption Agreement ..................................1
2.3 Affiliated Employers.................................1
2.4 Beneficiary .........................................1
2.5 Break in Service ....................................2
2.6 Code ................................................2
2.7 Compensation ........................................2
2.8 Custodian ...........................................2
2.9 Determination Date ..................................3
2.10 Earned Income .......................................3
2.11 Effective Date ......................................3
2.12 Eligibility Computation Period ......................3
2.13 Employee ............................................3
2.14 Employer ............................................3
2.15 Employer Contributions ..............................3
2.16 Entry Dates .........................................3
2.17 ERISA ...............................................3
2.18 Hour of Service .....................................4
2.19 Integration Level ...................................6
2.20 Key Employee ........................................6
2.21 Leased Employee .....................................6
2.22 Maximum Disparity Rate ..............................7
2.23 Maximum Profit Sharing Disparity Rate ...............8
2.24 Net Profits .........................................8
2.25 Non-Key Employee ....................................8
2.26 Normal Retirement Age ...............................8
2.27 Owner-Employee ......................................8
2.28 Participant .........................................8
2.29 Plan ................................................8
2.30 Plan Administrator ..................................9
2.31 Plan Year ...........................................9
2.32 Self-Employed Individual ............................9
2.33 Shares ..............................................9
2.34 Sponsor .............................................9
2.35 Taxable Wage Base ...................................9
2.36 Total and Permanent Disability ......................9
2.37 Trust ...............................................9
2.38 Trust Agreement .....................................9
2.39 Trustee .............................................9
2.40 Valuation Date ......................................9
2.41 Vesting Computation Period .........................10
2.42 Year of Service ....................................10
ARTICLE 3 Eligibility and Years of Service
3.1 Eligibility Requirements ...........................10
3.2 Participation and Service Upon Reemployment.........10
3.3 Predecessor Employers ..............................11
ARTICLE 4 Contributions
4.1 Employer Contributions .............................11
4.2 Payment ............................................12
4.3 Nondeductible Voluntary Contributions by
Participants .....................................12
4.4 Rollovers ..........................................12
4.5 Direct Transfers ...................................13
ARTICLE 5 Allocations
5.1 Individual Accounts ................................13
5.2 Minimum Allocation .................................14
5.3 Allocation of Employer Contributions and Foreitures.15
5.4 Coordination of Social Security Integration.........17
5.5 Withdrawals and Distributions.......................17
5.6 Determination of Value of Trust Fund and of
Net Earnings or Losses ...........................17
5.7 Allocation of Net Earnings or Losses ...............17
5.8 Responsibilities of the Plan Administrator .........18
ARTICLE 6 Limitations on Allocations
6.1 Employers Who Do Not Maintain Other Qualified Plans 18
6.2 Employers Who Maintain Other Qualified Master
or Prototype Defined Contribution Plans...........20
6.3 Employers Who, In Addition to This Plan, Maintain
Other Qualified Plans Which Are Defined Contri-
bution Plans Other Than Master or Prototype Plans.21
6.4 Employers Who, In Addition to This Plan,
Maintain a Qualified Defined Benefit Plan.... ....21
6.5 Definitions ........................................21
ARTICLE 7 Trust Fund
7.1 Receipt of Contributions by Trustee ................25
7.2 Investment Responsibility ..........................25
7.3 Investment Limitations .............................26
ARTICLE 8 Vesting
8.1 Nondeductible Voluntary Contributions and Earnings .26
8.2 Rollovers, Transfers and Earnings ..................26
8.3 Employer Contributions and Earnings ................26
8.4 Amendments to Vesting Schedule .....................27
8.5 Determination of Years of Service ..................28
8.6 Forfeiture of Non-Vested Amounts ...................28
8.7 Reinstatement of Benefit ...........................29
ARTICLE 9 Joint and Survivor Annuity Requirements
9.1 General ............................................29
9.2 Qualified Joint and Survivor Annuity ...............29
9.3 Qualified Preretirement Survivor Annuity ...........29
9.4 Definitions ........................................29
9.5 Notice Requirements ................................31
9.6 Safe Harbor Rules ..................................33
9.7 Transitional Rules .................................34
ARTICLE 10 Distribution Provisions
10.1 Vesting on Distribution Before Break in Service ....36
10.2 Restrictions on Immediate Distributions ............37
10.3 Commencement of Benefits ...........................38
10.4 Early Retirement With Age and Service Requirement ..38
10.5 Nontransferability of Annuities ....................38
10.6 Conflicts With Annuity Contracts ...................38
ARTICLE 11 Timing and Modes of Distribution
11.1 General Rules ......................................38
11.2 Required Beginning Date ............................39
11.3 Limits on Distribution Periods .....................39
11.4 Determination of Amount to be Distributed Each Year.39
11.5 Death Distribution Provisions ......................40
11.6 Designation of Beneficiary .........................41
11.7 Definitions ........................................41
11.8 Transitional Rule ..................................44
11.9 Optional Forms of Benefit ..........................45
ARTICLE 12 Withdrawals
12.1 Withdrawal of Nondeductible Voluntary Contributions 46
12.2 Manner of Making Withdrawals .......................46
12.3 Limitations on Withdrawals .........................47
ARTICLE 13 Administration
13.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility ...........47
13.2 Powers and Responsibilities of the Plan
Administrator ....................................47
13.3 Allocation of Duties and Responsibilities ..........48
13.4 Appointment of the Plan Administrator ..............49
13.5 Expenses ...........................................49
13.6 Liabilities ........................................49
13.7 Claims Procedure....................................49
ARTICLE 14 Amendment, Termination and Merger
14.1 Sponsor's Power to Amend ...........................50
14.2 Amendment by Adopting Employer .....................51
14.3 Plan Termination; Discontinuance of Employer
Contributions ....................................51
14.4 Successor Employer .................................52
14.5 Merger, Consolidation or Transfer ..................52
14.6 Special Amendments .................................52
ARTICLE 15 Miscellaneous
15.1 Exclusive Benefit of Participants and Beneficiaries.52
15.2 Nonguarantee of Employment .........................53
15.3 Rights to Trust Assets .............................53
15.4 Nonalienation of Benefits ..........................53
15.5 Aggregation Rules ..................................53
15.6 Failure of Qualification ...........................54
15.7 Applicable Law .....................................54
15.8 Invalidity of Certain Provisions ...................54
AMENDMENTS A AND B AS OF MAY 23, 1994
<PAGE> 1
STEIN ROE & FARNHAM PROTOTYPE PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The Employer hereby establishes this Plan to provide
retirement, death and disability benefits for eligible employees
and their beneficiaries. This Plan is a standardized prototype
paired defined contribution plan and is designed to permit adoption
of profit sharing provisions, money purchase pension provisions, or
both. The provisions herein and the selections made by the
Employer by execution of the Money Purchase Pension or Profit
Sharing Adoption Agreement or Agreements, shall constitute the
Plan. It is intended that the Plan and Trust qualify under
sections 401 and 501 of the Internal Revenue Code of 1986, as
amended, and that it comply with the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
1.2 TRUST. The Employer has simultaneously adopted a Trust to
receive, invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 ACCOUNT. The aggregate of the individual bookkeeping
subaccounts established for each Participant, as provided in
Section 5.1.
2.2 ADOPTION AGREEMENT. The written agreement or agreements of the
Employer and the Trustee by which the Employer establishes this
Plan and adopts the Trust Agreement forming a part hereof, as the
same may be amended from time to time. The Adoption Agreement
contains all the options that may be selected by the Employer. The
information set forth in the Adoption Agreement executed by the
Employer shall be deemed to be a part of this Plan as if set forth
in full herein.
2.3 AFFILIATED EMPLOYERS. The Employer and any corporation which
is a member of a controlled group of corporations (as defined in
section 414(b) of the Code) which includes the Employer, any trade
or business (whether or not incorporated) which is under common
control (as defined in section 414(c) of the Code) with the
Employer, or any service organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in
section 414(m) and (o) of the Code) which includes the Employer.
2.4 BENEFICIARY. The person or persons (natural or otherwise)
designated by a Participant in accordance with Section 11.6 to
receive any undistributed amounts credited to the Participant's
Account under the Plan at the time of the Participant's death.
<PAGE> 2
2.5 BREAK IN SERVICE. An Eligibility Computation Period or Vesting
Computation Period in which an Employee fails to complete more than
five hundred (500) Hours of Service with the Affiliated Employers.
2.6 CODE. The Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
2.7 COMPENSATION.
(a) Compensation means all of each Participant's W-2 earnings.
(b) For any self-employed individual covered under the Plan,
Compensation means Earned Income.
(c) Compensation includes only that Compensation that is actually
paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction
agreement and which is not includable in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code. The effective date of this subsection shall be elected by
the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into account
under the Plan for any year shall not exceed two hundred thousand
dollars ($200,000), as adjusted by the Secretary at the same time
and in the same manner as under section 415(d) of the Code. In
determining the Compensation of a Participant for purposes of this
limitation, the rules of section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only
the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age nineteen (19) before the
close of the year. If, as a result of the application of such
rules, the adjusted two hundred thousand dollar ($200,000)
limitation is exceeded, then (except for purposes of determining
the portion of Compensation up to the Integration Level to the
extent this Plan provides for permitted disparity) the limitation
shall be prorated among the affected individuals in proportion to
each such individual's Compensation as determined under this
section prior to the application of this limitation.
(f) The effective date of this subsection shall be the first Plan
Year beginning on or after January 1, 1989.
2.8 CUSTODIAN. The custodian, if any, designated in the Adoption
Agreement.
<PAGE> 3
2.9 DETERMINATION DATE. With respect to any Plan Year subsequent
to the first Plan Year, the last day of the preceding Plan Year.
For the first Plan Year of the Plan, the last day of that Plan
Year.
2.10 EARNED INCOME. The net earnings from self-employment in the
trade or business with respect to which the Plan is established,
for which personal services of the individual are a material
income-producing factor. Net earnings will be determined without
regard to items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by
contributions to a qualified plan to the extent deductible under
section 404 of the Code. Net earnings shall be determined with
regard to the deduction allowed to the Employer by section 164(f)
of the Code for taxable years beginning after December 31, 1989.
2.11 EFFECTIVE DATE. The first day of the first Plan Year for
which the Plan is effective as specified in the Adoption Agreement.
2.12 ELIGIBILITY COMPUTATION PERIOD. For purposes of determining
Years of Service and Breaks in Service for eligibility to
participate, the initial Eligibility Computation Period shall be
the twelve (12) consecutive month period beginning with the day the
Employee first performs an Hour of Service for the Employer or any
employer required to be aggregated with such Employer under
sections 414(b), (c), (m) or (o) of the Code (employment
commencement date). The succeeding subsequent Eligibility
Computation Periods shall be the twelve (12) consecutive month
periods commencing with the first anniversary of the Employee's
employment commencement date.
2.13 EMPLOYEE. Any person, including a Self-Employed Individual,
who is employed by the Employer maintaining the Plan or any other
employer required to be aggregated with such Employer under
sections 414(b), (c), (m) or (o) of the Code. The term "Employee"
shall also include any Leased Employee deemed to be an Employee of
any Employer described above as provided in sections 414(n) or (o)
of the Code.
2.14 EMPLOYER. The corporation, proprietorship, partnership or
other organization that adopts the Plan by execution of an Adoption
Agreement.
2.15 EMPLOYER CONTRIBUTIONS. The contribution of the Employer to
the Plan and Trust as set forth in Section 4.1 and the Adoption
Agreement.
2.16 ENTRY DATES. The Effective Date shall be the first Entry
Date. Thereafter, the Entry Dates shall be the first day of each
Plan Year and the first day of the seventh month of each Plan Year.
2.17 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
<PAGE> 4
2.18 HOUR OF SERVICE.
(a) Each hour for which an Employee is paid, or entitled to payment
for the performance of duties for the Employer. These hours shall
be credited to the Employee only for the computation period or
periods in which the duties are performed.
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty, or leave of absence. No more than 501 Hours of
Service shall be credited under this paragraph to an Employee on
account of any single, continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period) and no credits shall be given for hours for
which no duties are performed but for which payment by the Employer
is made or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation, unemployment
compensation, or disability insurance laws or where payment solely
reimburses an Employee for medical or medically related expenses
incurred by the Employee. Hours under this paragraph will be
calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor Regulations which are incorporated herein by
this reference.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under paragraph (a) or
paragraph (b), as the case may be, and under this paragraph (c).
These hours shall be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or
payment is made.
(d) Solely for purposes of determining whether an Employee has a
Break in Service, Hours of Service shall also include an
uncompensated authorized leave of absence not in excess of two (2)
years, or military leave while the Employee's reemployment rights
are protected by law or such additional or other periods as granted
by the Employer as military leave (credited on the basis of forty
(40) Hours of Service per week or eight (8) Hours of Service per
working day), provided the Employee returns to employment at the
end of his leave of absence or within ninety (90) days of the end
of his military leave, whichever is applicable.
(e) Hours of Service will be credited for employment with other
members of an affiliated service group (under section 414(m)), a
controlled group of corporations (under section 414(c)) of which
the adopting Employer is a member, and any other entity required to
be aggregated with the Employer pursuant to section
<PAGE> 5
414(o) and the regulations thereunder. Hours of Service will also
be credited for any individual considered an Employee for purposes
of this Plan under section 414(n) or section 414(o) and the
regulations thereunder.
(f) Solely for purposes of determining whether an Employee has a
Break in Service, Hours of Service shall also include absence from
work for maternity or paternity reasons, if the absence begins on
or after the first day of the first Plan Year beginning after 1984.
During this absence, the Employee shall be credited with the Hours
of Service which would have been credited but for the absence, or,
if such hours cannot be determined, with eight (8) hours per day.
An absence from work for maternity or paternity reasons means an
absence:
(i) by reason of the pregnancy of an Employee,
(ii) by reason of the birth of a child of the Employee,
(iii) by reason of the placement of a child with the Employee in
connection with adoption, or
(iv) for purposes of caring for such a child for a period
immediately following such birth or placement.
These Hours of Service shall be credited in the computation period
following the computation period in which the absence begins,
except as necessary to prevent a Break in Service in the
computation period in which the absence begins. However, no more
than five hundred one (501) Hours of Service will be credited for
purposes of any such maternity or paternity absence from work.
(g) The Employer may elect to compute Hours of Service by the use
of one of the Service Equivalencies in the Adoption Agreement.
Only one method may be selected. If selected, the Service
Equivalency must be applied to all Employees covered under the
Plan.
(h) If the Employer amends the method of crediting service from the
elapsed time method described in section 1.410(a)-7 of the Treasury
Regulations to the Hours of Service computation method by the
adoption of this Plan, or an Employee transfers from a plan under
which service is determined on the basis of elapsed time, the
following rules shall apply for purposes of determining the
Employee's service under this Plan up to the time of amendment or
transfer:
(i) The Employee shall receive credit, as of the date of
amendment or transfer, for a number of Years of Service
equal to the number of one-year periods of service credited
to the Employee as of the date of the amendment or transfer;
and
(ii) The Employee shall receive credit in the applicable
computation period which includes the date of amendment or
transfer, for a number of Hours of Service determined by
applying the weekly Service Equivalency specified in
paragraph (g) to any fractional part of a year credited to
the Employee under
<PAGE> 6
this paragraph (h) as of the date of amendment or transfer.
The use of the weekly Service Equivalency shall apply to all
Employees who formerly were credited with service under the
elapsed time method.
2.19 INTEGRATION LEVEL. The Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
2.20 KEY EMPLOYEE.
(a) Any Employee or former Employee (and the beneficiaries of such
Employee) who at any time during the determination period was an
officer of the Employer if such individual's annual Compensation
exceeds fifty percent (50%) of the dollar limitation under section
415(b)(1)(A) of the Code; an owner (or considered an owner under
section 318 of the Code) of one of the ten (10) largest interests
in the Employer if such individual's Compensation exceeds one
hundred percent (100%) of the dollar limitation under section
415(c)(1)(A) of the Code; a five percent (5%) Owner of the
Employer; or a one percent (1%) owner of the Employer who has
annual Compensation of more than one hundred fifty thousand dollars
($150,000).
(b) For purposes of this section, annual Compensation means
compensation as defined in section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's gross
income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
(c) For purposes of this section, determination period is the Plan
Year containing the Determination Date and the four (4) preceding
Plan Years.
2.21 LEASED EMPLOYEE.
(a) Any person (other than an Employee of any of the Affiliated
Employers) who, pursuant to an agreement between any of the
Affiliated Employers and any other person ("leasing organization"),
has performed service for any of the Affiliated Employers (or for
any of the Affiliated Employers and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially
full-time basis for a period of at least one (1) year and such
services are of a type historically performed by Employees in the
Employer's business field. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable
to services performed for the Affiliated Employer shall be treated
as provided by the Affiliated Employer.
<PAGE> 7
(b) A Leased Employee shall not be considered an Employee of an
Affiliated Employer if:
(i) such employee is covered by a money purchase pension plan
providing:
(1) a nonintegrated employer contribution rate of at least
ten percent (10%) of compensation (as defined in section
415(c)(3) of the Code), but including amounts
contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income
under section 125, 402(a)(8), 402(h) or 403(b) of the
Code;
(2) immediate participation;
(3) full and immediate vesting; and
(ii) Leased Employees do not constitute more than twenty percent
(20%) of the Affiliated Employer's non-Highly-Compensated
workforce.
(c) The determination of whether a person is a Leased Employee will
be made pursuant to section 414(n) of the Code.
2.22 MAXIMUM DISPARITY RATE. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with the
table below:
If the Integration Level is
The Applicable
More Than But Not More Than Percentage Is:
--------- ----------------- --------------
$0 X * 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y ** 5.4%
* X = the greater of $10,000 or 20% of the Taxable Wage Base.
** Y = any amount more than 80% of the Taxable Wage Base but less
than 100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base,
the applicable percentage is five and seven-tenths percent (5.7%).
<PAGE> 8
2.23 MAXIMUM PROFIT SHARING DISPARITY RATE. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with the
table below:
If the Integration Level is
The Applicable
More Than But Not More Than Percentage Is:
---------- ----------------- ---------------
$0 X * 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y ** 2.4%
* X = the greater of $10,000 or 20% of the Taxable Wage Base.
** Y = any amount more than 80% of the Taxable Wage Base but less
than 100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base,
the applicable percentage is two and seven-tenths percent (2.7%).
2.24 NET PROFITS. Current earnings (and in the case of a corporate
Employer, accumulated earnings) of the Employer, before federal and
state taxes and contributions to this Plan and any other qualified
plan, as computed by the Employer's accountants, in accordance with
generally accepted accounting principles.
2.25 NON-KEY EMPLOYEE. Any Employee or former Employee who is not
a Key Employee. In addition, any Beneficiary of a Non-Key Employee
shall be treated as a Non-Key Employee.
2.26 NORMAL RETIREMENT AGE. The age selected in the Adoption
Agreement, but not less than age fifty-five (55). If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is
the lesser of that mandatory age or the age specified in the
Adoption Agreement.
2.27 OWNER-EMPLOYEE. An individual who is a sole proprietor or who
is a partner owning more than ten percent (10%) of either the
capital or profits interest of a partnership.
2.28 PARTICIPANT. A person who has met the eligibility
requirements of Section 3.1 and whose Account hereunder has been
neither completely forfeited nor completely distributed.
2.29 PLAN. The prototype paired defined contribution profit
sharing and money purchase pension plans provided under this basic
plan document. References to the Plan shall refer to the profit
sharing provisions, the money purchase pension provisions, or both,
as the context may require.
<PAGE> 9
2.30 PLAN ADMINISTRATOR. The person, persons, or entity appointed
by the Employer pursuant to Article 13 to manage and administer the
Plan.
2.31 PLAN YEAR. The twelve (12) consecutive month period
designated by the Employer in the Adoption Agreement.
2.32 SELF-EMPLOYED INDIVIDUAL. An individual who has Earned Income
for the taxable year from the trade or business for which the Plan
is established, or an individual who would have had Earned Income
for the taxable year but for the fact that the trade or business
had no Net Profits for the taxable year.
2.33 SHARES. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made
available for investment purposes as an investment option under
this Plan.
2.34 SPONSOR. The sponsor designated in the Adoption Agreement
which has made this Plan available to the Employer.
2.35 TAXABLE WAGE BASE. The maximum amount of earnings which may
be considered wages under section 3121(a)(1) of the Code in effect
as of the beginning of the Plan Year.
2.36 TOTAL AND PERMANENT DISABILITY. The inability of the
Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment, which
condition, in the opinion of a physician chosen by the Plan
Administrator, can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
2.37 TRUST. The fund maintained by the Trustee for the investment
of Plan assets in accordance with the terms and conditions of the
Trust Agreement.
2.38 TRUST AGREEMENT. The agreement between the Employer and the
Trustee under which the assets of the Plan are held, administered,
and managed. The provisions of the Trust Agreement shall be
considered an integral part of this Plan as if set forth fully
herein.
2.39 TRUSTEE. The individual or corporate Trustee or Trustees
under the Trust Agreement as they may be constituted from time to
time.
2.40 VALUATION DATE. The last day of each Plan Year and such other
dates as may be determined by the Plan Administrator.
<PAGE> 10
2.41 VESTING COMPUTATION PERIOD. The Plan Year.
2.42 YEAR OF SERVICE. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during
which an Employee of the Affiliated Employers has completed at
least one thousand (1,000) Hours of Service (whether or not
continuous) with the Affiliated Employers. The Employer may, in
the Adoption Agreement, specify a lesser number of hours.
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 ELIGIBILITY REQUIREMENTS.
(a) Each Employee of the Affiliated Employers shall become a
Participant in the Plan as of the first Entry Date after the date
on which the Employee has satisfied the minimum age and service
requirements specified in the Adoption Agreement.
(b) The Employer may elect in the Adoption Agreement to exclude
from participation:
(i) Employees included in a unit of employees covered by a
collective bargaining agreement between the Employer and
Employee representatives, if retirement benefits were the
subject of good faith bargaining (for this purpose, the term
"Employee representatives" does not include any organization
more than half of whose members are Employees who are
owners, officers, or executives of the Employer); and
(ii) Non-resident aliens who receive no earned income from the
Employer which constitutes income from sources within the
United States.
3.2 PARTICIPATION AND SERVICE UPON REEMPLOYMENT. Upon the
reemployment of any Employee, the following rules shall determine
his eligibility to participate in the Plan and his credit for prior
service.
(a) Participation. If the reemployed Employee was a Participant in
the Plan during his prior period of employment, he shall be
eligible upon reemployment to resume participation in the Plan. If
the reemployed Employee was not a Participant in the Plan, he shall
be considered a new Employee and required to meet the requirements
of Section 3.1 in order to be eligible to participate in the Plan,
subject to the reinstatement of credit for prior service under
paragraph (b) below.
<PAGE> 11
(b) Credit for Prior Service. In the case of any Employee who is
reemployed before or after incurring a Break in Service, any Hour
of Service and Year of Service credited to the Employee at the end
of his prior period of employment shall be reinstated as of the
date of his reemployment.
3.3 PREDECESSOR EMPLOYERS. If specified in the Adoption Agreement,
Years of Service with a predecessor employer will be treated as
service for the Employer for eligibility purposes; provided,
however, if the Employer maintains the plan of a predecessor
employer, Years of Service with such employer will be treated as
service with the Employer without regard to any election.
ARTICLE 4
CONTRIBUTIONS
4.1 EMPLOYER CONTRIBUTIONS.
(a) Money Purchase Pension Contribution. For each Plan Year, the
Employer shall contribute to the Trust an amount equal to such
uniform percentage of Compensation of each eligible Participant as
may be determined by the Employer in accordance with the money
purchase pension contribution formula specified in the Adoption
Agreement. Subject to the limitations of Section 5.4, the money
purchase pension contribution formula may be integrated with Social
Security as set forth in the Adoption Agreement.
(b) Profit Sharing Contribution. For each Plan Year, the Employer
shall contribute to the Trust from its Net Profits an amount as may
be determined by the Employer in accordance with the profit sharing
formula set forth in the Adoption Agreement.
(c) Eligible Participants. Subject to the Minimum Allocation rules
of Section 5.2 and the exclusions specified in this section; each
Participant shall be eligible to share in the Employer
Contribution. An Employer may elect in the Adoption Agreement that
Participants who terminate employment during the Plan Year with not
more than five hundred (500) Hours of Service and who are not
Employees as of the last day of the Plan Year (other than
Participants who die, retire or become Totally and Permanently
Disabled during the Plan Year) shall not be eligible to share in
the Employer Contribution. An Employer may further elect in the
Adoption Agreement to allocate a contribution on behalf of a
Participant who completes fewer than five hundred (500) Hours of
Service and is otherwise ineligible to share in the Employer
Contribution. If the Employer fails to specify in the Adoption
Agreement the number of Hours of Service required to share in the
Employer Contribution, the number shall be five hundred (500) Hours
of Service.
<PAGE> 12
(d) Contribution Limitation. In no event shall any Employer
Contribution exceed the maximum amount deductible from the
Employer's income under section 404 of the Code, or the maximum
limitations under section 415 of the Code provided in Article 6.
4.2 PAYMENT. All Employer Contributions to the Trust for any Plan
Year shall be made either in one lump sum or in installments by
check within the time prescribed by law, including extensions
granted by the Internal Revenue Service, for filing the Employer's
federal income tax return for the taxable year with or within which
such Plan Year ends. All Employer Contributions to the Trust for a
money purchase pension plan for any Plan Year shall be made within
the time prescribed by regulations under section 412(c)(10) of the
Code.
4.3 NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS.
(a) This Plan will not accept nondeductible Employee contributions
for the Plan Years beginning after the Plan Year in which this Plan
is adopted by the Employer. Employee contributions made with
respect to Plan Years beginning after December 31, 1986 will be
limited so as to meet the nondiscrimination test of section 401(m).
(b) A separate account shall be maintained by the Trustee for the
nondeductible Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be fully
vested and nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee
contributions made prior to the first Plan Year after the Plan Year
in which the Employer adopts this Plan.
4.4 ROLLOVERS.
(a) Subject to the approval of the Plan Administrator, a
participant who has participated in any other qualified plan
described in section 401(a) of the Code or in a qualified annuity
plan described in section 403(a) of the Code shall be permitted to
make a rollover contribution in the form of cash to the Trust of an
amount received by the Participant that is attributable to
participation in such other plan (reduced by any nondeductible
voluntary contributions he made to the plan), provided that the
rollover contribution complies with all requirements of section
402(a)(5) or section 403(a)(4) of the Code, whichever is
applicable.
<PAGE> 13
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any
documents which the Plan Administrator, in its discretion, deems
necessary for such rollover.
(c) Any rollover contribution to the Trust shall be credited to the
Participant's rollover subaccount established under Section 5.1 and
separately accounted for.
4.5 DIRECT TRANSFERS.
(a) The Plan shall accept a transfer of assets directly from
another plan qualified under section 401(a) or 403(a) of the Code
only if the Plan Administrator, in its sole discretion, agrees to
accept such a transfer. In determining whether to accept such a
transfer the Plan Administrator shall consider the administrative
inconvenience engendered by such a transfer and any risks to the
continued qualification of the Plan under section 401(a) of the
Code. Acceptance of any such transfer shall not preclude the Plan
Administrator from refusing any subsequent such transfers.
(b) Any transfer of assets accepted under this section shall be
credited to the Participant's direct transfer subaccount and shall
be separately accounted for at all times and shall remain subject
to the provisions of the transferor plan (as it existed at the time
of such transfer) to the extent required by section 411(d)(6) of
the Code (including, but not limited to, any rights to Qualified
Joint and Survivor Annuities and Qualified Preretirement Survivor
Annuities) as if such provisions were part of the Plan. In all
other respects, however, such transferred assets will be subject to
the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested and
nonforfeitable.
(d) Before approving such a direct transfer, the Plan Administrator
may request from the Participant or the Employer (or the prior
employer) any documents the Plan Administrator, in its discretion,
deems necessary for such direct transfer.
ARTICLE 5
ALLOCATIONS
5.1 INDIVIDUAL ACCOUNTS. The Plan Administrator shall establish
and maintain an Account in the name of each Participant. The
Account shall contain the following subaccounts:
<PAGE> 14
(a) A money purchase pension contribution subaccount to which shall
be credited each such Participant's share of (i) Employer
Contributions under Section 4.1(a), (ii) the net earnings or net
losses on the investment of the assets of the Trust, (iii)
distributions, and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount;
(b) A profit sharing contribution subaccount to which shall be
credited each such Participant's share of (i) Employer
contributions under Section 4.1(b), (ii) forfeitures, (iii) the net
earnings or net losses on the investment of the assets of the
Trust, (iv) distributions, and (v) dividends, capital gain
distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(c) A nondeductible voluntary contribution subaccount to which
shall be credited nondeductible voluntary contributions by the
Participant under Section 4.3 and the earnings, losses, and
expenses attributable thereto, including dividends, capital gain
distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited (i)
contributions to the Trust accepted under Section 4.5(a); (ii) the
net earnings or net losses on the investment of the assets of the
Trust; (iii) distributions; and (iv) dividends, capital gain
distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(e) A rollover subaccount to which shall be credited (i)
contributions to the Trust accepted under Section 4.4(a); (ii) the
net earnings or net losses on the investment of the assets of the
Trust; (iii) distributions; and (iv) dividends, capital gain
distributions and other earnings received on any Shares credited to
the Participant's subaccount.
5.2 MINIMUM ALLOCATION.
(a) Except as otherwise provided in this section, the Employer
Contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of three percent (3%) of such Participant's Compensation or
in the case where the Employer has no defined benefit plan which
designates this Plan to satisfy section 401 of the Code, the
largest percentage of Employer Contributions and forfeitures, as a
percentage of the first two hundred thousand dollars ($200,000) of
the Key Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the year
because of (i) the Participant's failure to complete one
<PAGE> 15
thousand (1,000) Hours of Service (or any equivalent provided in
the Plan); or (ii) the Participant's failure to make mandatory
Employee Contributions to the Plan; or (iii) Compensation less than
a stated amount. For purposes of this subsection, all defined
contribution plans required to be included in an aggregation group
under section 416(g)(2)(A)(i) shall be treated as a single plan.
(b) For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 6.5(b) of the Plan.
(c) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of
the Plan Year.
(d) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer has provided
in the Adoption Agreement that the minimum allocation or benefit
requirement applicable to top-heavy plans will be met in the other
plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under section 416(b)) may not be forfeited under
section 411(a)(3)(B) or 411(a)(3)(D).
5.3 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES.
(a) All money purchase pension contributions for a given Plan Year
shall be allocated to the Account of the Participant for whom such
contribution was made. Any forfeiture from a Participant's money
purchase pension contribution subaccount arising under the Plan for
a given Plan Year shall be applied as specified in the Adoption
Agreement either: (i) to reduce the Employer Contribution in that
year, or if in excess of the Employer Contribution for such Plan
Year, the excess amounts shall be used to reduce the Employer
Contribution in the next succeeding Plan Year or Years or (ii) to
be added to the Employer Contributions and allocated accordingly.
(b) All profit sharing contributions and forfeitures from a
Participant's profit sharing contribution subaccount will be
allocated to the Account of each Participant in the ratio that such
Participant's Compensation bears to the Compensation of all
Participants. However, if the profit sharing contribution formula
selected in the Adoption Agreement is integrated with Social
Security, profit sharing contributions for the Plan Year plus any
forfeitures will be allocated to Participants' Accounts as follows:
<PAGE> 16
(i) Step One. Contributions and forfeitures will be allocated to
each Participant's Account in the ratio that each
Participant's total Compensation bears to all Participants'
total Compensation, but not in excess of three percent (3%)
of each Participant's Compensation. (Step One is not
applicable if the Employer enters into the Money Purchase
Pension Adoption Agreement.)
(ii) Step Two. Any contributions and forfeitures remaining after
the allocation in Step One (if any) will be allocated to
each Participant's Account in the ratio that each
Participant's Compensation for the Plan Year in excess of
the Integration Level bears to the excess Compensation of
all Participants, but not in excess of three percent (3%).
(Step Two is not applicable if the Employer enters into the
Money Purchase Pension Adoption Agreement.)
(iii) Step Three. Any contributions and forfeitures remaining
after the allocation in Step Two (if any) will be allocated
to each Participant's Account in the ratio that the sum of
each Participant's total Compensation and Compensation in
excess of the Integration Level bears to the sum of all
Participants' total Compensation and Compensation in excess
of the Integration Level, but not in excess of whichever of
the following is applicable:
(A) if the Employer has not adopted the Money Purchase
Pension Adoption Agreement, then the Maximum Profit
Sharing Disparity Rate; or
(B) if the Employer has adopted the Money Purchase Pension
Adoption Agreement, then the lesser of:
(1) the percentage of each Participant's Compensation
for the Plan Year up to the Integration Level
determined by dividing the allocation by such
Compensation (the base contribution percentage); or
(2) the Maximum Disparity Rate.
(iv) Step Four. Any remaining contributions or forfeitures will
be allocated to each Participant's Account in the ratio that
each Participant's total Compensation for the Plan Year
bears to all Participants' total Compensation for that year.
(c) Notwithstanding anything in (A) or (B) above to the contrary,
forfeitures arising under a Participant's money purchase pension
contribution subaccount will only be used to reduce the
contributions of the Participant's Employer who adopted this Plan,
and forfeitures arising under a Participant's profit sharing
<PAGE> 17
contribution subaccount will be reallocated only for the benefit of
Employees of the Participant's Employer who adopted this Plan.
5.4 COORDINATION OF SOCIAL SECURITY INTEGRATION. If the Employer
maintains plans involving integration with Social Security other
than this Plan, and if any Participant is eligible to participate
in more than one of such plans, all such plans will be considered
to be integrated if the extent of the integration of all such plans
does not exceed one hundred percent (100%). For purposes of the
preceding sentence, the extent of integration of a plan is the
ratio (expressed as a percentage) which the actual benefits,
benefit rate, offset rate, or Employer Contribution rate under the
plan bears to the integration limitation applicable to such plan.
If the Employer enters into both the Money Purchase Pension
Adoption Agreement and the Profit Sharing Adoption Agreement under
this Plan, integration with Social Security may only be selected in
one Adoption Agreement.
5.5 WITHDRAWALS AND DISTRIBUTIONS. Any distribution to a
Participant or his Beneficiary, any amount transferred from a
Participant's Account directly to the Trustee of any other
qualified plan described in section 401(a) of the Code or from a
qualified annuity plan described in section 403(a) of the Code, or
any withdrawal by a Participant shall be charged to the appropriate
subaccount(s) of the Participant as of the date of the distribution
or the withdrawal.
5.6 DETERMINATION OF VALUE OF TRUST FUND AND OF NET EARNINGS OR
LOSSES. As of each Valuation Date the Trustee shall determine for
the period then ended the sum of the net earnings or losses of the
Trust (excluding with respect to Shares and other assets
specifically allocated to a specific Participant's subaccount, (i)
dividends and capital gain distributions from Shares, or (ii)
income gains and/or losses attributable to any other assets which
shall reflect accrued but unpaid interest, dividends, gains, or
losses realized from the sale, exchange or collection of assets,
other income received, appreciation in the fair market value of
assets, depreciation in the fair market value of assets,
administration expenses, and taxes and other expenses paid. Gains
or losses realized and adjustments for appreciation or depreciation
in fair market value shall be computed with respect to the
difference between such value as of the preceding Valuation Date or
date of purchase, whichever is applicable, and the value as of the
date of disposition or the current Valuation Date, whichever is
applicable.
5.7 ALLOCATION OF NET EARNINGS OR LOSSES.
(a) As of each Valuation Date the net earnings or losses of the
Trust (excluding with respect to Shares and other assets
specifically allocated to a specific Participant's subaccount (i)
dividends and capital gain distributions from Shares or (ii) income
gains and/or losses attributable to any assets, all of which shall
be specifically allocated to such Participant's subaccount) for the
Valuation Period then ending shall be allocated to the Accounts of
all Participants (or Beneficiaries) having credits in the Fund both
on such date and at the
<PAGE> 18
beginning of such Valuation Period. Such allocation shall be made
by the application of a fraction, the numerator of which is the
value of the Account (excluding the value of Shares and other
assets specifically allocated to a Participant's subaccount) of a
specific Participant (or Beneficiary) as of the immediately
preceding Valuation Date, reduced by any distributions or transfers
therefrom and increased by any rollovers or transfers thereto since
such preceding Valuation Date, and the denominator of which is the
total value of all such Accounts (excluding the value of Shares and
other assets specifically allocated to the subaccounts of all
Participants) as of that preceding Valuation Date, reduced by any
distributions therefrom since such preceding Valuation Date.
(b) To the extent that Shares and other assets are specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, or (ii) income gains and/or
losses attributable to any other assets, all shall be allocated to
such Participant's subaccount.
5.8 RESPONSIBILITIES OF THE PLAN ADMINISTRATOR. The Plan
Administrator shall maintain accurate records with respect to the
contributions made by or on behalf of Participants under the Plan,
and shall furnish the Trustee with written instructions directing
the Trustee to allocate all Plan contributions to the Trust among
the separate Accounts of Participants in accordance with Section
5.1 above. In making any such allocation, the Trustee shall be
fully entitled to rely on the instructions furnished by the Plan
Administrator, and shall be under no duty to make any inquiry or
investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 EMPLOYERS WHO DO NOT MAINTAIN OTHER QUALIFIED PLANS.
(a) If the Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund,
as defined in section 419(e) of the Code, maintained by the
Employer, or an individual medical account as defined in section
415(1)(2) of the Code, maintained by the Employer, which provides
an Annual Addition as defined in Section 6.5(a), the amount of
Annual Additions that may be credited to the Participant's Account
for any Limitation Year will not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan.
If the Employer Contribution that would otherwise be contributed or
allocated to the Participant's Account would cause the Annual
Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the amount contributed or allocated will be reduced so that
the Annual Additions for the Limitation Year will equal the Maximum
Permissible Amount.
<PAGE> 19
(b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation
Year, uniformly determined for all Participants similarly situated.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the allocation
of forfeitures, there is an Excess Amount, the excess will be
disposed of as follows:
(i) Any nondeductible voluntary Employee Contributions, to the
extent they would reduce the Excess Amount, will be returned
to the Participant;
(ii) If after the application of paragraph (i) an Excess Amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's Account will be used to reduce Employer
Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary;
(iii) If after the application of paragraph (i) an Excess Amount
still exists, and the Participant is not covered by the Plan
at the end of the Limitation Year, the Excess Amount will be
held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer
Contributions (including allocation of any forfeitures) for
all remaining Participants in the next Limitation Year, and
each succeeding Limitation Year if necessary;
(iv) If a suspense account is in existence at any time during the
Limitation Year pursuant to this Section, it will not
participate in the allocation of the Trust's investment
gains and losses. If a suspense account is in existence at
any time during a particular Limitation Year, all amounts in
the suspense account must be allocated and reallocated to
Participants' Accounts before any Employer or Employee
Contributions may be made to the Plan for that Limitation
Year. Excess Amounts may not be distributed to Participants
or former Participants.
<PAGE> 20
6.2 EMPLOYERS WHO MAINTAIN OTHER QUALIFIED MASTER OR PROTOTYPE
DEFINED CONTRIBUTION PLANS.
(a) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare
benefit fund as defined in section 419(e) of the Code maintained by
the Employer, or an individual medical account, as defined in
section 415(1)(2) of the Code maintained by the Employer which
provides an Annual Addition as defined in Section 6.5(a), during
any Limitation Year. The Annual Additions which may be credited to
a Participant's Account under this Plan for any such Limitation
Year will not exceed the Maximum Permissible Amount reduced by the
Annual Additions credited to a Participant's Account under the
other plans and welfare benefit funds for the same Limitation Year.
If the Annual Additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by
the Employer are less than the Maximum Permissible Amount and the
Employer Contribution that would otherwise be contributed or
allocated to the Participant's Account under this Plan would cause
the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so
that the Annual Additions under all such plans and funds for the
Limitation Year will equal the Maximum Permissible Amount. If the
Annual Additions with respect to the Participant under such other
defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the
Participant's Account under this Plan for the Limitation Year.
(b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in
Section 6.1(b).
(c) As soon as administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to Section 6.2(c), or as a result of the
allocation of forfeitures, a Participant's Annual Additions under
this Plan and such other plans would result in an Excess Amount for
a Limitation Year, the Excess Amount will be deemed to consist of
the Annual Additions last allocated, except that Annual Additions
attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of
the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan
will be the product of:
(i) the total Excess Amount allocated as of such date, times
<PAGE> 21
(ii) the ratio of (1) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this Plan to (2) the total Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this and all the other qualified master or prototype defined
contribution plans.
(f) Any Excess Amount attributed to this Plan will be disposed of
in the manner described in Section 6.1(d).
6.3 EMPLOYERS WHO, IN ADDITION TO THIS PLAN, MAINTAIN OTHER
QUALIFIED PLANS WHICH ARE DEFINED CONTRIBUTION PLANS OTHER THAN
MASTER OR PROTOTYPE PLANS. If the Participant is covered under
another qualified defined contribution plan maintained by the
Employer which is not a master or prototype plan, Annual Additions
which may be credited to the Participant's Account under this Plan
for any Limitation Year will be limited in accordance with Section
6.2 as though the other plan were a master or prototype plan unless
the Employer provides other limitations in the Adoption Agreement.
6.4 EMPLOYERS WHO, IN ADDITION TO THIS PLAN, MAINTAIN A QUALIFIED
DEFINED BENEFIT PLAN. If the Employer maintains, or at any time
maintained, a qualified defined benefit plan covering any
Participant in this Plan, the sum of the Participant's defined
benefit plan fraction and defined contribution plan fraction will
not exceed 1.0 in any Limitation Year. The Annual Additions which
may be credited to the Participant's Account under this Plan for
any Limitation Year will be limited in accordance with the Adoption
Agreement.
6.5 DEFINITIONS. Unless otherwise expressly provided herein, for
purposes of this article only, the following definitions and rules
of interpretation shall apply:
(a) Annual Additions. The sum of the following amounts credited to
a Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee Contributions;
(iii) Forfeitures; and
(iv) For this purpose, any excess amount applied under Section
6.1(d) or 6.2(f) in the Limitation Year to reduce Employer
Contributions will be considered Annual Additions for such
limitation year.
Amounts allocated after March 31, 1984, to an individual medical
account, as defined in section 415(1)(2) of the Code, which is a
part of a pension or annuity plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a Key Employee, as defined in section
419A(d)(3) of the Code,
<PAGE> 22
under a welfare benefit fund, as defined in section 419(e) of the
Code, maintained by the Employer, are treated as Annual Additions
to a defined contribution plan.
(b) Compensation. A Participant's earned income, wages, salaries,
and fees for professional services and other amounts received for
personal services actually rendered in the course of employment
with the Employer maintaining the Plan (including, but not limited
to, commissions paid salesmen, compensations for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer Contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for
the taxable year in which contributed, or Employer
Contributions under a simplified employee pension plan to
the extent such contributions are excluded from the
Employee's gross income, or any distributions from a plan of
deferred compensation;
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross
income of the Employee).
For purposes of applying the limitations of this Article,
Compensation for a Limitation Year is the Compensation actually
paid or includible in gross income during such year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who is Totally and
Permanently Disabled (as defined in section 22(e)(3) of the Code)
is the Compensation such Participant would have received for the
Limitation Year if the Participant had been paid at the rate of
Compensation paid immediately before becoming Totally and
Permanently Disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is
not a Highly Compensated Employee (as defined in section 414(q) of
the Code), and contributions made on behalf of such Participant are
nonforfeitable when made.
<PAGE> 23
(c) Defined Benefit Fraction. A fraction, the numerator of which
is the sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of one
hundred percent (100%) of the dollar limitation in effect for the
Limitation Year under sections 415(b) and (d) of the Code or one
hundred forty percent (140%) of highest average compensation,
including any adjustments under section 415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than one hundred
twenty-five percent (125%) of the sum of the annual benefits under
such plans which the Participant had accrued as of the close of the
last Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the Plan after May 5,
1986. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the requirements
of section 415 of the Code for all Limitation Years beginning
before January 1, 1987.
(d) Defined Contribution Dollar Limitation. Thirty thousand
dollars ($30,000) or, if greater, one-fourth (1/4) of the defined
benefit dollar limitation set forth in section 415(b)(1) of the
Code as in effect for the Limitation Year.
(e) Defined Contribution Fraction. A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
Account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior Limitation Years (including the Annual Additions attributable
to the Participant's nondeductible voluntary contributions to all
defined benefit plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all welfare
benefit funds, as defined in section 419(e) of the Code and
individual medical accounts, as defined in section 415(1)(2) of the
Code, maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any Limitation Year is
the lesser of one hundred percent (100%) of the dollar limitation
in effect under section 415(c)(1)(A) of the Code or thirty-five
percent (35%) of the Participant's Compensation for such year.
If the Participant was a Participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the
defined benefit fraction would otherwise exceed 1.0 under the terms
of this Plan. Under the adjustment, an amount equal to the product
of (1) the excess of the sum of the fractions over 1.0 times (2)
the denominator of
<PAGE> 24
this fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last Limitation Year
beginning before January 1, 1987, and disregarding any changes in
the terms and conditions of the Plan made after May 5, 1986 but
using the section 415 limitation applicable to the first Limitation
Year beginning on or after January 1, 1987. The Annual Addition
for any Limitation Year beginning before January 1, 1987, shall not
be recomputed to treat all Employee Contributions as Annual
Additions.
(f) Employer. For purposes of this Article, Employer shall mean
the Employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code as
modified by section 415(h) of the Code), all commonly controlled
trades or businesses (as defined in section 414(c) of the Code as
modified by section 415(h) of the Code) or affiliated service
groups (as defined in section 414(m) of the Code) of which the
adopting Employer is a part and any other entity required to be
aggregated with the Employer pursuant to regulations under section
414(o) of the Code.
(g) Excess Amount. The excess of the Participant's Annual Addition
for the Limitation Year over the Maximum Permissible Amount.
(h) Highest Average Compensation. The average compensation for the
three consecutive Plan Years that produce the highest average.
(i) Limitation Year. A Plan Year, or the twelve (12) consecutive
month period elected by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different
twelve (12) consecutive month period, the new Limitation Year must
begin on a date within the Limitation Year in which the amendment
is made.
(j) Master or Prototype Plan. A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue
Service.
(k) Maximum Permissible Amount. The maximum Annual Addition that
may be contributed or allocated to a Participant's Account under
the Plan for any Limitation Year shall not exceed the lesser of:
(i) the Defined Contribution Dollar Limitation; or
(ii) twenty-five percent (25%) of the Participant's Compensation
for the Limitation Year.
<PAGE> 25
The Compensation limitation referred to in subsection (ii) shall
not apply to any contribution for medical benefits (within the
meaning of section 401(h) or section 419A(f)(2) of the Code) which
is otherwise treated as an Annual Addition under section 415(1)(1)
or section 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive
month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following
fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected Annual Benefit. The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if
such benefit is expressed in a form other than a straight life
annuity or Qualified Joint and Survivor Annuity) to which the
Participant would be entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later);
and
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine
benefits under the Plan will remain constant for all future
Limitation Years.
ARTICLE 7
TRUST FUND
7.1 RECEIPT OF CONTRIBUTIONS BY TRUSTEE. All contributions to the
Trust that are received by the Trustee, together with any earnings
thereon, shall be held, managed and administered by the Trustee
named in the Adoption Agreement in accordance with the terms and
conditions of the Trust Agreement and the Plan. The Trustee may
use a Custodian designated by the Sponsor to perform recordkeeping
and custodial functions. The Trustee shall be subject to the
proper directions of the Employer or the Plan Administrator made in
accordance with the terms of the Plan and ERISA.
7.2 INVESTMENT RESPONSIBILITY.
(a) If the Employer elects in the Adoption Agreement to exercise
investment authority and responsibility, the selection of the
investments in which assets of the Trust are invested shall be the
responsibility of the Plan Administrator and each Participant will
have a ratable interest in all assets of the Trust.
<PAGE> 26
(b) If the Adoption Agreement so provides and the Employer elects
to permit each Participant or Beneficiary to select the investments
in his Account, no person, including the Trustee and the Plan
Administrator, shall be liable for any loss or for any breach of
fiduciary duty which results from such Participant's or
Beneficiary's exercise of control.
(c) If the Adoption Agreement so provides and the Employer elects
to permit each Participant or Beneficiary to select the investments
in his Account, the Employer or the Plan Administrator must
complete a schedule of Participant designations.
(d) If Participants and Beneficiaries are permitted to select the
investment in their Accounts, all investment-related expenses,
including administrative fees charged by brokerage houses, will be
charged against the Accounts of the Participants.
(e) The Plan Administrator may at any time change the selection of
investments in which the assets of the Trust are invested, or
subject to such reasonable restrictions as may be imposed by the
Sponsor for administrative convenience, may submit an amended
schedule of Participant designations. Such amended documents may
provide for a variance in the percentages of contributions to any
particular investment or a request that Shares in the Trust be
reinvested in whole or in part in other Shares.
7.3 INVESTMENT LIMITATIONS. The Sponsor may impose reasonable
investment limitations on the Employer and the Plan Administrator
relating to the type of permissible investments in the Trust or the
minimum percentage of Trust assets to be invested in Shares.
ARTICLE 8
VESTING
8.1 NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS AND EARNINGS. The
Participant's nondeductible voluntary contribution subaccount shall
be fully vested and nonforfeitable at all times and no forfeitures
will occur as a result of an Employee's withdrawal of nondeductible
voluntary contributions.
8.2 ROLLOVERS, TRANSFERS AND EARNINGS. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 EMPLOYER CONTRIBUTIONS AND EARNINGS. Notwithstanding the
vesting schedule elected by the Employer in the Adoption Agreement,
the Participant's money purchase pension contribution subaccount
and profit sharing contribution subaccount shall be fully vested
and nonforfeitable upon the Participant's death, disability, or
<PAGE> 27
attainment of Normal Retirement Age. In the absence of any of the
preceding events, the Participant's money purchase contribution
subaccount and his profit sharing contribution subaccount shall
vest in accordance with a minimum vesting schedule specified in the
Adoption Agreement. The schedule must be at least as favorable to
Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years of Service Percent Vested
---------------- --------------
Less than 2 0%
2 but less than 3 20
3 but less than 4 40
4 but less than 5 60
5 but less than 6 80
6 or more 100
(b) Full one hundred percent (100%) vesting after three (3) Years
of Service.
8.4 AMENDMENTS TO VESTING SCHEDULE.
(a) If the Plan's vesting schedule is amended, or the Plan is
amended in any way that directly or indirectly affects the
computation of the Participant's nonforfeitable percentage or if
the Plan is deemed amended by an automatic change to or from a top-
heavy vesting schedule, each Participant with at least three (3)
Years of Service with the Employer may elect, within a reasonable
period after the adoption of the amendment or change, to have the
nonforfeitable percentage computed under the Plan without regard to
such amendment or change. For any Participants who do not have at
least one (1) Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by
substituting "five (5) Years of Service" for "three (3) Years of
Service" where such language appears.
(b) The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and
shall end on the latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or Plan
Administrator.
(c) No amendment to the Plan shall be effective to the extent that
it has the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's Account
balance may be reduced to the extent permitted under section
412(c)(8) of the Code. For purposes of this paragraph, a Plan
<PAGE> 28
amendment which has the effect of decreasing a Participant's
Account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment
shall be treated as reducing an accrued benefit. Furthermore, if
the vesting schedule of a Plan is amended, in the case of an
Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
Employee's right to his Employer-derived accrued benefit will not
be less than his percentage computed under the Plan without regard
to such amendment.
8.5 DETERMINATION OF YEARS OF SERVICE. For purposes of determining
the vested and nonforfeitable percentage of the Participant's
Employer Contribution subaccount, all of the Participant's Years of
Service with the Employer or an Affiliated Employer shall be taken
into account. If specified in the Adoption Agreement, Years of
Service with a predecessor employer will be treated as service for
the Employer; provided, however, if the Employer maintains the plan
of a predecessor employer, Years of Service with such employer will
be treated as service with the Employer without regard to any
election.
8.6 FORFEITURE OF NON-VESTED AMOUNTS.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him
as of the last day of the Plan Year in which a Break in Service
occurs. For Plan Years beginning after 1984, any portion of a
Participant's Account that is not vested shall be forfeited as of
the last day of the Plan Year in which the Participant's fifth
consecutive Break in Service occurs. Any amounts thus forfeited
shall be reallocated as provided in Article 5 and shall not be
considered part of a Participant's Account in computing his vested
interest. The remaining portion of the Participant's Account will
be nonforfeitable.
(b) If a distribution is made at a time when a Participant has a
vested right to less than one hundred percent (100%) of the value
of the Participant's Account attributable to Employer Contributions
and forfeitures, as determined in accordance with the provisions of
Section 8.3, and the nonvested portion of the Participant's Account
has not yet been forfeited in accordance with paragraph (a) above:
(i) a separate remainder subaccount shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(ii) at any relevant time the Participant's vested portion of the
separate remainder subaccount shall be equal to an amount
("X") determined by the formula:
X = P(AB+(R x D)) - (R x D)
<PAGE> 29
For purposes of applying the formula: P is the vested percentage at
the relevant time; AB is the Account Balance at the relevant time;
D is the amount of the distribution; and R is the ratio of the
Account Balance at the relevant time to the Account Balance after
distribution.
8.7 REINSTATEMENT OF BENEFIT. If a benefit is forfeited because a
Participant or Beneficiary cannot be found, such benefit will be
reinstated if a claim is made by the Participant or Beneficiary.
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 GENERAL. The provisions of this Article shall apply to any
Participant who is credited with at least one (1) Hour of Service
with the Employer on or after August 23, 1984, and such other
Participants as provided in Section 9.7.
9.2 QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form
of benefit is selected pursuant to a Qualified Election within the
ninety (90) day period ending on the Annuity Starting Date, a
married Participant's Vested Account Balance will be paid in the
form of a Qualified Joint and Survivor Annuity and an unmarried
Participant's Vested Account Balance will be paid in the form of a
life annuity. The Participant may elect to have such annuity
distributed upon attainment of the Earliest Retirement Age under
the Plan.
9.3 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional
form of benefit has been selected within the Election Period
pursuant to a Qualified Election, if a Participant dies before the
Annuity Starting Date, then 50% of the Participant's Vested Account
Balance shall be applied toward the purchase of an annuity for the
life of the Surviving Spouse. However, the amount of the
Participant's employee-derived Account Balance allocated to the
Surviving Spouse will be in the same proportion as the employee-
derived Account Balance is to the total Account Balance of the
Participant. The Surviving Spouse may elect to have such annuity
distributed within a reasonable period after the Participant's
death.
9.4 DEFINITIONS.
(a) Election Period.
(i) The period which begins on the first day of the Plan Year in
which the Participant attains age thirty-five (35) and ends
on the date of the Participant's death. If a Participant
separates from service prior to the first day of the Plan
Year in which age thirty-five (35) is attained, with respect
to the Account Balance as of the date of separation, the
Election Period shall begin on the date of separation.
<PAGE> 30
(ii) A Participant who has not yet attained age thirty-five (35)
as of the end of any current Plan Year may make a special
Qualified Election to waive the Qualified Preretirement
Survivor Annuity for the period beginning on the date of
such election and ending on the first day of the Plan Year
in which the Participant will attain age thirty-five (35).
Such election shall not be valid unless the Participant
receives a written explanation of the Qualified
Preretirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 9.5.
Qualified Preretirement Survivor Annuity coverage will be
automatically reinstated as of the first day of the Plan
Year in which the Participant attains age thirty-five (35).
Any new waiver on or after such date shall be subject to
the full requirements of this Article.
(b) Earliest Retirement Age. The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
(c) Qualified Election.
(i) A waiver of a Qualified Joint and Survivor Annuity or a
Qualified Preretirement Survivor Annuity. Any waiver of a
Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity shall not be effective
unless:
(1) the Participant's Spouse consents in writing to the
election;
(2) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal
consent (or the Spouse expressly permits designations by
the Participant without any further spousal consent);
(3) the Spouse's consent acknowledges the effect of the
election; and
(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a
Participant's waiver of the Qualified Joint and Survivor
Annuity shall not be effective unless the election
designates a form of benefit payment which may not be
changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any
further spousal consent). If it is established to the
satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver
will be deemed a Qualified Election.
(ii) Any consent by a Spouse obtained under this provision (or
establishment that the consent of Spouse may not be
obtained) shall be effective only with respect to such
Spouse. A consent that permits designations by the
Participant without any requirement of further consent by
such Spouse must
<PAGE> 31
acknowledge that the Spouse has the right to limit consent
to a specific Beneficiary, and a specific form of benefit
where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a
prior waiver may be made by a Participant without the
consent of the Spouse at any time before the commencement of
benefits. The number of revocations shall not be limited.
No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in
Section 9.5.
(d) Qualified Joint and Survivor Annuity. An immediate annuity for
the life of the Participant with a survivor annuity for the life of
the Spouse which equals fifty percent (50%) of the amount of the
annuity which is payable during the joint lives of the Participant
and the Spouse and which is the amount of benefit which can be
purchased with the Participant's Vested Account Balance.
(e) Spouse (Surviving Spouse). The Spouse or Surviving Spouse of
the Participant, provided that a former spouse will be treated as
the Spouse or Surviving Spouse and a current Spouse will not be
treated as the Spouse or Surviving Spouse to the extent provided
under a qualified domestic relations order as described in section
414(p) of the Code.
(f) Annuity Starting Date. The first day of the first period for
which an amount is paid as an annuity or any other form.
(g) Vested Account Balance. The aggregate value of the
Participant's Vested Account Balances derived from Employer and
Employee contributions (including rollovers and direct transfers),
whether vested before or upon death. The provisions of this
Article shall apply to a Participant who is vested in amounts
attributable to Employer Contributions or Employee contributions
(or both) at the time of death or distribution.
9.5 NOTICE REQUIREMENTS.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than thirty (30) days and no more than
ninety (90) days prior to the Annuity Starting Date, provide each
Participant a written explanation of:
(i) the terms and conditions of a Qualified Joint and Survivor
Annuity;
(ii) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity
form of benefit;
<PAGE> 32
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor
Annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity as
described in Section 9.3, the Plan Administrator shall provide each
Participant within the applicable period for such Participant a
written explanation of the Qualified Preretirement Survivor Annuity
in such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements of subsection (a)
applicable to a Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of the
following periods ends last:
(i) the period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two (32) and ending
with the close of the Plan Year preceding the Plan Year in
which the Participant attains age thirty-five (35);
(ii) a reasonable period ending after the individual becomes a
participant;
(iii) a reasonable period ending after subsection (e) ceases to
apply to the Participant;
(iv) a reasonable period ending after this Article first applies
to the Participant.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service in the case
of a Participant who separates from service before attaining age
thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable period
ending after the enumerated events described above in subsection
(ii), (iii) and (iv) is the end of the two-year period beginning
one (1) year prior to the date the applicable event occurs, and
ending one (1) year after that date. In the case of a Participant
who separates from service before the Plan Year in which age
thirty-five (35) is attained, notice shall be provided within the
two (2) year period beginning one (1) year prior to separation and
one (1) year after separation. If such a Participant thereafter
returns to employment with the Employer, the applicable period for
such Participant shall be redetermined.
(e) Notwithstanding the other requirements of this section, the
respective notices prescribed by this Section need not be given to
a Participant if:
<PAGE> 33
(i) the Plan "fully subsidizes" the cost of a Qualified Joint
and Survivor Annuity or Qualified Preretirement Survivor
Annuity;and
(ii) the Plan does not allow the Participant to waive the
Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity and does not allow a married
Participant to designate a nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the costs
of a benefit if no increase in cost, or decrease in benefits to the
Participant, may result from the Participant's failure to elect
another benefit.
9.6 SAFE HARBOR RULES.
(a) This section shall apply to a Participant in a profit sharing
plan, and to any distribution made on or after the first day of the
first Plan Year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible
Employee contributions, as defined in section 72(o)(5)(B) of the
Code, and maintained on behalf of a Participant in a money purchase
pension plan (including a target benefit plan) if the following
conditions are satisfied:
(i) the Participant does not or cannot elect payments in the
form of a life annuity; and
(ii) on the death of a Participant, the Participant's Vested
Account Balance will be paid to the Participant's Surviving
Spouse, but if there is no Surviving Spouse, or if the
Surviving Spouse has consented in a manner conforming to a
Qualified Election, then to the Participant's Designated
Beneficiary.
(b) Distribution of the Vested Account Balance in accordance with
Article 11 shall commence within the ninety (90) day period
following the date of the Participant's death or at such later time
as the Surviving Spouse may elect. The Account Balance shall be
adjusted for gains or losses occurring after the Participant's
death in accordance with the provisions of the Plan governing the
adjustment of Account Balances for other types of distributions.
(c) This section shall not be operative with respect to the portion
of a Participant's Vested Account Balance in a profit sharing plan
representing a direct or indirect transfer of assets from a defined
benefit plan, a money purchase pension plan, a target benefit plan,
a stock bonus plan, or a profit sharing plan which is subject to
the survivor annuity requirements of sections 401(a)(11) and 417 of
the Code. In the case of assets for which this section is
operative, the provisions of this Article, other than Section 9.7,
shall be inoperative.
<PAGE> 34
(d) The Participants may waive the spousal death benefit described
in this section at any time provided that no such waiver shall be
effective unless it satisfies the conditions of Section 9.4(c)
(other than the notification requirement referred to therein) that
would apply to the Participant's waiver of the Qualified
Preretirement Survivor Annuity.
(e) For purposes of this section, Vested Account Balance shall
mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate Account Balance
attributable solely to accumulated deductible Employee
contributions within the meaning of section 72(o)(5)(B) of the
Code. In the case of a profit sharing plan, Vesting Account
Balance shall have the same meaning as provided in Section 9.4(g).
9.7 TRANSITIONAL RULES.
(a) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by
the previous sections of this Article must be given the opportunity
to elect to have the prior sections of this Article apply if such
Participant is credited with at least one (1) Hour of Service under
this Plan or a predecessor plan in a Plan Year beginning on or
after January 1, 1976, and such Participant had at least ten (10)
years of vesting service when he or she separated from service.
(b) Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one (1) Hour of Service under
this Plan or a predecessor plan on or after September 2, 1974, and
who is not otherwise credited with any service in a Plan Year
beginning on or after January 1, 1976, must be given the
opportunity to have his or her benefits paid in accordance with
subsection (d).
(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
(d) Any Participant who has elected pursuant to subsection (b) and
any Participant who does not elect under subsection (a) or who
meets the requirements of subsection (a) except that such
Participant does not have at least ten (10) years of vesting
service when he or she separates from service, shall have his or
her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a
life annuity:
(i) Automatic Joint and Survivor Annuity. If benefits in the
form of a life annuity become payable to a married
Participant who:
<PAGE> 35
(1) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still
working for the Employer; or
(3) begins to receive payments on or after the qualified
early retirement age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the Qualified Early Retirement Age)
and after satisfying the eligibility requirements for
the payment of benefits under the Plan and thereafter
dies before beginning to receive such benefits; then
such benefits will be received under this Plan in the
form of a Qualified Joint and Survivor Annuity, unless
the Participant has elected otherwise during the
Election Period. The Election Period must begin at
least six (6) months before the Participant attains
qualified early retirement age and end not more than
ninety (90) days before the commencement of benefits.
Any election hereunder will be in writing and may be
changed by the Participant at any time.
(ii) Election of Early Survivor Annuity. A Participant who is
employed after attaining the Qualified Early Retirement Age
will be given the opportunity to elect, during the Election
Period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have
been made to the Spouse under the Qualified Joint and
Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision
will be in writing and may be changed by the Participant at
any time. The Election Period begins on the later of (1)
the 90th day before the Participant attains the Qualified
Early Retirement Age; or (2) the date on which participation
begins, and ends on the date the Participant terminates
employment.
(e) the following terms shall have the meanings specified herein:
(i) Qualified Early Retirement Age. The latest of:
(1) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits;
(2) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age; or
(3) the date the Participant begins participation.
<PAGE> 36
(ii) Qualified Joint and Survivor Annuity. An annuity for the
life of the Participant with a survivor annuity for the life
of the Spouse as described in Section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 VESTING ON DISTRIBUTION BEFORE BREAK IN SERVICE.
(a) If an Employee terminates service, and the value of the
Employee's Vested Account Balance derived from Employer and
Employee contributions is not greater than three thousand five
hundred dollars ($3,500), the Employee will receive a distribution
of the value of the entire vested portion of such Account Balance
in a lump sum in kind distribution of Shares and the nonvested
portion will be deemed an immediate forfeiture. For purposes of
this section, if the value of the vested portion of an Employee's
Account Balance is zero, the Employee shall be deemed to have
received a distribution thereof. The vested portion of a
Participant's Account Balance shall not include accumulated
deductible Employee contributions within the meaning of section
72(o)(5)(B) of the Code for Plan Years beginning prior to January
1, 1989.
(b) If an Employee terminates service and elects, in accordance
with this Article, to receive the value of the vested portion of
his Account Balance, the nonvested portion will be deemed an
immediate forfeiture. If the Employee elects to have distributed
less than the entire vested portion of the Account Balance derived
from Employer Contributions, the part of the nonvested portion that
will be deemed an immediate forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Employer Contributions
and the denominator of which is the total value of the vested
portion of the Account Balance derived from Employer Contributions.
(c) If an Employee receives a distribution pursuant to this section
and the Employee resumes employment covered under this Plan, the
portion of the Employee's Account Balance derived from Employer
Contributions will be restored to the amount on the date of
distribution if the Employee repays to the Plan the full amount of
the distribution attributable to Employer Contributions before the
earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer, or the date
the Participant incurs five (5) consecutive one (1) year Breaks in
Service following the date of the distribution. If an Employee is
deemed to receive a distribution pursuant to this section, and the
Employee resumes employment covered under this Plan before the date
the Participant incurs five (5) consecutive one (1) year Breaks in
Service, upon the reemployment of such Employee, the Employer-
derived Account Balance of the Employee will be restored to the
amount on the date of such deemed distribution.
<PAGE> 37
10.2 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS.
(a) If the value of the vested portion of a Participant's Account
Balance derived from Employer and Employee contributions exceeds
(or at the time of any prior distribution exceeded) three thousand
five hundred dollars ($3,500) and the Account Balance is
immediately distributable, the Participant and the Participant's
Spouse (or where either the Participant or the Spouse has died, the
survivor) must consent to any distribution of such Account Balance.
The consent of the Participant and the Participant's Spouse shall
be obtained in writing within the ninety (90) day period ending on
the Annuity Starting Date. The Annuity Starting Date is the first
day of the first period for which an amount is paid as an annuity
or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account Balance is no longer
immediately distributable. Such notification shall include a
general description of the material features, and an explanation of
the relative values of, the optional forms of benefit available
under the Plan in a manner that would satisfy the notice
requirements of section 417(a)(3), and shall be provided no less
than thirty (30) days and no more than ninety (90) days prior to
the Annuity Starting Date.
(b) Notwithstanding the provisions of subsection (a), only the
Participant need consent to the commencement of a distribution in
the form of a Qualified Joint and Survivor Annuity while the
Account Balance is immediately distributable. (Furthermore, if
payment in the form of a Qualified Joint and Survivor Annuity is
not required with respect to the Participant pursuant to Section
9.6 of the Plan, only the Participant need consent to the
distribution of an Account Balance that is immediately
distributable.) Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a
distribution is required to satisfy section 401(a)(9) or section
415 of the Code. In addition, upon termination of this Plan, if
the Plan does not offer an annuity option (purchased from a
commercial provider), the Participant's Account Balance may,
without the Participant's consent, be distributed to the
Participant or transferred to another defined contribution plan
(other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) within the same controlled group.
(c) An Account Balance is immediately distributable if any part of
the Account Balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains (or would have
attained if not deceased) the later of Normal Retirement Age or age
sixty-two (62).
(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of
the first Plan Year beginning after December 31, 1988, the vested
portion of the Participant's Account Balance shall not include
amounts attributable to accumulated deductible Employee
contributions within the meaning of section 72(o)(5)(B) of the
Code.
<PAGE> 38
10.3 COMMENCEMENT OF BENEFITS.
(a) Unless the Participant elects otherwise, distribution of
benefits will begin no later than the 60th day after the latest of
the close of the Plan Year in which:
(i) the Participant attains age sixty-five (65) (or Normal
Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(iii) the Participant terminated service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and
Spouse to consent to a distribution while a benefit is immediately
distributable, within the meaning of Section 10.2 of the Plan,
shall be deemed to be an election to defer commencement of payment
of any benefit sufficient to satisfy this section.
10.4 EARLY RETIREMENT WITH AGE AND SERVICE REQUIREMENT. If a
Participant separates from service before satisfying the age
requirement for early retirement, but has satisfied the service
requirement, the Participant will be entitled to elect an early
retirement benefit upon satisfaction of such age requirement.
10.5 NONTRANSFERABILITY OF ANNUITIES. Any annuity contract
distributed herefrom must be nontransferable.
10.6 CONFLICTS WITH ANNUITY CONTRACTS. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or
Spouse shall comply with the requirements of this Plan.
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 GENERAL RULES.
(a) Subject to Article 9, the requirements of this Article shall
apply to any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Article apply to
calendar years beginning after December 31, 1984.
(b) All distributions required under this Article shall be
determined and made in accordance with the income tax regulations
under section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirement of section 1.401(a)(9)-
2 of the proposed regulations.
<PAGE> 39
11.2 REQUIRED BEGINNING DATE. The entire interest of a Participant
must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date.
11.3 LIMITS ON DISTRIBUTION PERIODS. As of the first Distribution
Calendar Year, distributions, if not made in a lump sum, may only
be made over one of the following periods (or a combination
thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated Beneficiary;
(c) a period certain not extending beyond the Life Expectancy of
the Participant; or
(d) a period certain not extending beyond the joint and last
survivor life expectancy of the Participant and a Designated
Beneficiary.
11.4 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR.
(a) Individual Account.
(i) If a Participant's Benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy of the
Participant or the joint and last survivor life expectancy
of the Participant and the Participant's Designated
Beneficiary or (2) a period not extending beyond the Life
Expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning
with distributions for the first Distribution Calendar Year,
must at least equal the quotient obtained by dividing the
Participant's Benefit by the Applicable Life Expectancy.
(ii) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least
fifty percent (50%) of the present value of the amount
available for distribution is paid within the Life
Expectancy of the Participant.
(iii) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year shall
not be less than the quotient obtained by dividing the
Participant's Benefit by the lesser of (1) the Applicable
Life Expectancy or (2) if the Participant's Spouse is not
the Designated Beneficiary, the applicable divisor
determined from the table set forth in Q&A-4 of section
1.401(a)(9)-2 of the proposed regulations. Distributions
after the death of the Participant shall be distributed
using the Applicable Life Expectancy in subsection (a)(i)
above as the relevant divisor without regard to section
1.401(a)(9)-2 of the proposed regulations.
<PAGE> 40
(iv) The minimum distribution required for the Participant's
first Distribution Calendar Year must be made on or before
the Participant's Required Beginning Date. The minimum
distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the
Employee's Required Beginning Date occurs, must be made on
or before December 31 of that Distribution Calendar Year.
(b) Other Forms. If the Participant's Benefit is distributed in
the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the
requirements of section 401(a)(9) of the Code and the proposed
regulations thereunder.
11.5 DEATH DISTRIBUTION PROVISIONS.
(a) Distribution Beginning Before Death. If the Participant dies
after distribution of his or her interest has begun and on or after
his or her Required Beginning Date the remaining portion of such
interest will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the
Participant's death.
(b) Distribution Beginning After Death. If the Participant dies
before his or her Required Beginning Date, distribution of the
Participant's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made
to receive distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the Life
Expectancy of the Designated Beneficiary commencing on or
before December 31 of the calendar year immediately
following the calendar year in which the Participant dies;
(ii) if the Designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to being in
accordance with (i) above shall not be earlier than the
later of (1) December 31 of the calendar year immediately
following the calendar year in which the Participant died
and (2) December 31 of the calendar year in which the
Participant would have attained age seventy and one-half (70
1/2).
(c) If the Participant has not made an election pursuant to this
section by the time of his or her death, the Participant's
Designated Beneficiary must elect the method of distribution no
later than the earlier of (1) December 31 of the calendar year in
which distributions would be required to begin under this section;
or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the
Participant has no Designated Beneficiary, or if the Designated
Beneficiary does not elect a method of
<PAGE> 41
distribution, distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing
the fifth anniversary of the Participant's death.
(d) For purposes of subsection (b) above, if the Surviving Spouse
dies after the Participant, but before payments to such Spouse
begin, the provisions of subsection (b), with the exception of
paragraph (ii) therein, shall be applied as if the Surviving Spouse
were the Participant.
(e) For purposes of this Section, any amount paid to a child of the
Participant will be treated as if it had been paid to the Surviving
Spouse if the amount becomes payable to the Surviving Spouse when
the child reaches the age of majority.
(f) For the purposes of this Section, distribution of a
Participant's interest is considered to begin on the Participant's
Required Beginning Date (or, if subsection (d) above is applicable,
the date distribution is required to begin to the Surviving Spouse
pursuant to subsection (b) above). If distribution in the form of
an annuity described in Section 11.4(b) above irrevocably commences
to the Participant before the Required Beginning Date, the date
distribution is considered to begin is the date distribution
actually commences.
11.6 DESIGNATION OF BENEFICIARY. Subject to the rules of Article
9, a Participant (or former Participant) may designate from time to
time (i) any person or persons (who may be designated contingently
or successively and may be an entity other than a natural person)
as his Beneficiary who will be entitled to receive any
undistributed amounts credited to the Participant's separate
Account under the Plan at the time of the Participant's death and
(ii) the manner in which such undistributed amounts shall be paid
subject to the limitations set forth in Section 11.5. Any such
designation by a Participant shall be made in writing in the manner
prescribed by the Plan Administrator, and shall be effective only
when filed with the Plan Administrator during the Participant's
lifetime. A Participant may change or revoke his designation at
any time in the manner prescribed by the Plan Administrator. If
the Designated Beneficiary (or each of the Designated
Beneficiaries) predeceases the Participant, the Participant's
Beneficiary designation shall be ineffective. If no Beneficiary
designation is in effect at the time of the Participant's death,
his Beneficiary shall be his Surviving Spouse or, if there is no
Surviving Spouse, his estate.
11.7 DEFINITIONS.
(a) Applicable Life Expectancy. The Life Expectancy (or joint and
last survivor life expectancy) calculated using the attained age of
the Participant (or Designated Beneficiary) as of the Participant's
(or Designated Beneficiary's) birthday in the applicable calendar
year reduced by one (1) for each calendar year which has elapsed
since the date Life Expectancy was first calculated. If Life
Expectancy is being recalculated, the
<PAGE> 42
Applicable Life Expectancy shall be the Life Expectancy as so
recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being
recalculated such succeeding calendar year. If annuity payments
commence in accordance with Section 11.4(b) before the Required
Beginning Date, the applicable calendar year is the year such
payments commence. If distribution is in the form of an immediate
annuity purchased after the Participant's death with the
Participant's remaining interest, the applicable calendar year is
the year of purchase.
(b) Designated Beneficiary. The individual who is designated as
the Beneficiary under the Plan in accordance with section 401(a)(9)
and the proposed regulations thereunder.
(c) Distribution Calendar Year. A calendar year for which a
minimum distribution is required. For distributions beginning
before the Participant's death, the first Distribution Calendar
Year is the calendar year immediately preceding the calendar year
which contains the Participant's Required Beginning Date. For
distributions beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to Section 11.5 above.
(d) Life Expectancy.
(i) Life Expectancy and joint and last survivor life expectancy
are computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the income tax
regulations.
(ii) If elected by the Participant (or Spouse, in the case of
distributions described in Section 11.5(b)(ii) above) by the
time distributions are required to begin, Life Expectancies
shall be recalculated annually. Such election shall be
irrevocable as to the Participant (or Spouse) on the
Required Beginning Date (or the date distributions are
required to commence pursuant to Section 11.5(b)(ii) in the
case of the Spouse). If no election is made by the date
such election would be irrevocable, Life Expectancy will not
be recalculated. If an election is made, the Participant
(or Spouse) shall be solely responsible for advising the
Trustee of the recalculated Life Expectancy each year, no
later than thirty (30) days prior to the beginning of such
year. The Life Expectancy of a non-Spouse Beneficiary may
not be recalculated.
(e) Participant's Benefit.
(i) The Account Balance as of the last valuation date in the
calendar year immediately preceding the Distribution
Calendar Year (valuation calendar year) increased by the
amount of any contributions or forfeitures allocated to the
Account Balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date.
<PAGE> 43
(ii) For purposes of subsection (i) above, if any portion of the
minimum distribution for the first Distribution Calendar
Year is made in the second Distribution Calendar Year on or
before the Required Beginning Date, the amount of the
minimum distribution made in the second Distribution
Calendar Year shall be treated as if it had been made in the
immediately preceding Distribution Calendar Year.
(f) Required Beginning Date.
(i) General Rule. The Required Beginning Date of a Participant
is the first day of April of the calendar year following the
calendar year in which the Participant attains age seventy
and one-half (70 1/2).
(ii) Transitional Rules. The Required Beginning Date of a
Participant who attains age seventy and one-half (70 1/2)
before January 1, 1988, shall be determined in accordance
with (1) or (2) below:
(1) Non-Five Percent Owners. The Required Beginning Date of
a Participant who is not a Five Percent (5%) Owner is
the first day of April of the calendar year following
the calendar year in which the later of retirement or
attainment of age seventy and one-half (70 1/2) occurs.
(2) Five Percent Owners. The Required Beginning Date of a
Participant who is a Five Percent (5%) Owner during any
year beginning after December 31, 1979, is the first day
of April following the later of:
(A) the calendar year in which the Participant attains
age seventy and one-half (70 1/2); or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a Five Percent (5%) Owner, or the calendar
year in which the Participant retires. The Required
Beginning Date of a Participant who is not a Five
Percent (5%) Owner who attains age seventy and one-
half (70 1/2) during 1988 and who has not retired as
of January 1, 1989, is April 1, 1990.
(iii) Five Percent Owner. A Participant is treated as a Five
Percent (5%) Owner for purposes of this section if such
Participant is a Five Percent (5%) Owner as defined in
section 416(i) of the Code (determined in accordance with
section 416 but without regard to whether the Plan is top-
heavy) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age
sixty-six and one-half (66 1/2) or any subsequent year.
<PAGE> 44
(iv) Once distributions have begun to a Five Percent (5%) Owner
under this section, they must continue to be distributed,
even if the Participant ceases to be a Five Percent (5%)
Owner in a subsequent year.
11.8 TRANSITIONAL RULE.
(a) Notwithstanding the other requirements of this Article and
subject to the requirements of Article 9, distribution on behalf of
any Employee, including a Five Percent (5%) Owner, may be made
provided all of the following requirements are met in accordance
with section 242(b)(2) of the Code (regardless of when such
distribution commences):
(i) The distribution by the Trust is one which would not have
disqualified such trust under section 401(a)(9) of the
Internal Revenue Code as in effect prior to amendment by the
Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in
the Trust is being distributed or, if the Employee is
deceased, by a Beneficiary of such Employee.
(iii) Such designation was in writing, was signed by the Employee
or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(v) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distributions will
be made, and in the case of any distribution upon the
Employee's death, the Beneficiaries of the Employee listed
in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with respect to
the distributions to be made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984,
but continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be
presumed to have designated the method of distribution under which
the distribution is being made if the method of distribution was
specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (a)(v).
<PAGE> 45
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the
proposed regulations thereunder. If a designation is revoked
subsequent to the date distributions are required to begin, the
Trust must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been
distributed to satisfy section 401(a)(9) of the Code and the
regulations thereunder but for the section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the proposed regulations.
Any changes in the designation will be considered to be a
revocation of the designation. However, the mere substitution or
addition of another beneficiary (one not named in the designation)
under the designation will not be considered to be a revocation of
the designation, so long as such substitution or addition does not
alter the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules
in Q&A J-2 and Q&A J-3 of the aforesaid regulations shall apply.
11.9 OPTIONAL FORMS OF BENEFIT.
(a) Except to the extent benefits are required to be paid in the
form of an Automatic Joint and Survivor Annuity under Article 9,
any amount which a Participant shall be entitled to receive under
the Plan shall be distributed in one or a combination of the
following ways:
(i) in a lump sum payment of cash, the amount of which shall be
determined by redeeming all Shares credited to the
Participant's Account under the Plan as of the date of
distribution;
(ii) in a lump sum payment including a distribution in kind of
all Shares credited to the Participant's Account under the
Plan as of the date of distribution;
(iii) in substantially equal monthly, quarterly, or annual
installment payments of cash, or the distribution of Shares
in kind, over a period certain not to exceed the Life
Expectancy of the Participant or the joint and last survivor
life expectancy of the Participant and his Beneficiary,
determined in each case as of the earlier of: (1) the end of
the Plan year in which occurs the event entitling the
Participant to a distribution of benefits, or (2) the date
such installments commence;
(iv) if permitted by the Sponsor, in monthly, quarterly, or
annual installment payments of cash, or the distribution of
Shares in kind, so that the amount distributed in each Plan
Year equals the quotient obtained by dividing the
Participant's Account at the beginning of that Plan Year by
the joint and
<PAGE> 46
last survivor life expectancy of the Participant and the
Beneficiary for that Plan Year. The Life Expectancy will be
computed using the recomputation method described in Section
11.7(d). Unless the Spouse of the retired Participant is
the Beneficiary, the actuarial present value of all expected
payments to the retired Participant must be more than fifty
percent (50%) of the actuarial present value of payments to
the retired Participant and the Beneficiary; or
(v) by application of the Participant's vested Account to the
purchase of a nontransferable immediate or deferred annuity
contract, on an individual or group basis. Unless the
Spouse of the retired Participant is the Beneficiary, the
actuarial present value of all expected payments to the
retired Participant must be more than fifty percent (50%) of
the actuarial present value of payments to the retired
Participant and the Beneficiary.
(b) If the Participant fails to select a method of distribution on
or before thirty (30) days prior the Required Beginning Date except
as may be required by Article 9, all amounts which he is entitled
to receive under the Plan shall be promptly distributed to him in a
lump sum payment which, in the discretion of the Plan
Administrator, may be all in cash or may include an in kind
distribution of Shares.
ARTICLE 12
WITHDRAWALS
12.1 WITHDRAWAL OF NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS. Subject
to the Qualified Election requirements of Article 9 and Section
12.3, any Participant who has made nondeductible voluntary
contributions may, upon thirty (30) days' notice in writing filed
with the Plan Administrator, have paid to him all or any portion of
the fair market value of his nondeductible voluntary contribution
subaccount.
12.2 MANNER OF MAKING WITHDRAWALS. Any withdrawal by a Participant
under the Plan shall be made only after the Participant files a
written request with the Plan Administrator specifying the nature
of the withdrawal and the amount of funds requested to be
withdrawn. Upon approving any withdrawal, the Plan Administrator
shall furnish the Trustee with written instructions directing the
Trustee to make the withdrawal in a lump sum payment of cash or an
in kind distribution of Shares to the Participant. In making any
withdrawal payment, the Trustee shall be fully entitled to rely on
the instructions furnished by the Plan Administrator, and shall be
under no duty to make any inquiry or investigation with respect
thereto. Unless Section 9.6 is applicable, if the Participant is
married, his Spouse must consent to the withdrawal pursuant to a
qualified election (as defined in Section 9.4(c)) within the ninety
(90) day period ending on the date of the withdrawal.
<PAGE> 47
12.3 LIMITATIONS ON WITHDRAWALS. The Plan Administrator may
prescribe uniform and nondiscriminatory rules and procedures
limiting the number of times a Participant may make a withdrawal
under the Plan during any Plan Year, and the minimum amount a
Participant may withdraw on any single occasion.
ARTICLE 13
ADMINISTRATION
13.1 DUTIES AND RESPONSIBILITIES OF FIDUCIARIES; ALLOCATION OF
FIDUCIARY RESPONSIBILITY. A fiduciary to the Plan shall have only
those specific powers, duties, responsibilities, and obligations as
are explicitly given him under the Plan and Trust Agreement. In
general, the Employer shall have the sole responsibility for making
contributions to the Plan required under Article 4; appointing the
Trustee and the Plan Administrator; and determining the funds
available for investment under the Plan. The Plan Administrator
shall have the sole responsibility for the administration of the
Plan, as more fully described in Section 13.2. It is intended that
each fiduciary shall be responsible only for the proper exercise of
his own powers, duties, responsibilities, and obligations under the
Plan and Trust Agreement, and shall not be responsible for any act
or failure to act of another fiduciary. A fiduciary may serve in
more than one fiduciary capacity with respect to the Plan.
13.2 POWERS AND RESPONSIBILITIES OF THE PLAN ADMINISTRATOR.
(a) Administration of the Plan. The Plan Administrator shall have
all powers necessary to administer the Plan, including the power to
construe and interpret the Plan documents; to decide all questions
relating to an individual's eligibility to participate in the Plan;
to determine the amount, manner, and timing of any distribution of
benefits or withdrawal under the Plan; to resolve any claim for
benefits in accordance with Section 13.7; to appoint or employ
advisors, including legal counsel; and to render advice with
respect to any of the Plan Administrator's responsibilities under
the Plan. Any construction, interpretation, or application of the
Plan by the Plan Administrator shall be final, conclusive, and
binding. All actions by the Plan Administrator shall be taken
pursuant to uniform standards applied to all persons similarly
situated. The Plan Administrator shall have no power to add to,
subtract from, or modify any of the terms of the Plan, or to change
or add to any benefits provided by the Plan, or to waive or fail to
apply any requirements of eligibility for a benefit under the Plan.
(b) Records and Reports. The Plan Administrator shall be
responsible for maintaining sufficient records to reflect the age
and marital status of each Participant, the Eligibility Computation
Periods in which an Employee is credited with one or more Years of
Service for purposes of determining his eligibility to participate
in the Plan, and the Compensation of each Participant for purposes
of determining the amount of contributions that may be made by or
on behalf of the Participant under the Plan. The Plan
Administrator
<PAGE> 48
shall be responsible for submitting all required reports and
notifications relating to the Plan to Participants or their
Beneficiaries, the Internal Revenue Service and the Department of
Labor. All such records shall be conclusive of the matters
contained therein for all purposes except that a Participant may
request a correction in the record of his age at any time prior to
retirement, and such correction shall be made if, within ninety
(90) days after such request he furnishes in support thereof a
birth certificate, baptismal certificate, or other documentary
proof of age satisfactory to the Plan Administrator.
(c) Furnishing Trustee with Instructions. The Plan Administrator
shall be responsible for furnishing the Trustee with written
instructions regarding all contributions to the Trust, all
distributions to Participants in accordance with Article 10 and all
withdrawals by Participants in accordance with Article 12. In
addition, the Plan Administrator shall be responsible for
furnishing the Trustee with any further information respecting the
Plan which the Trustee may request for the performance of its
duties or for the purpose of making any returns to the Internal
Revenue Service or Department of Labor as may be required of the
Trustee.
(d) Rules and Decisions. The Plan Administrator may adopt such
rules as it deems necessary, desirable, or appropriate in the
administration of the Plan. All rules and decisions of the Plan
Administrator shall be applied uniformly and consistently to all
Participants in similar circumstances. When making a determination
or calculation, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant or Beneficiary, the
Employer, the legal counsel of the Employer, or the Trustee.
(e) Application and Forms for Benefits. The Plan Administrator may
require a Participant or Beneficiary to complete and file with it
an application for a benefit, and to furnish all pertinent
information requested by it. The Plan Administrator may rely upon
all such information so furnished to it, including the
Participant's or Beneficiary's current mailing address.
(f) Facility of Payment. Whenever, in the Plan Administrator's
opinion, a person entitled to receive a payment of a benefit or
installment thereof is under a legal disability or is incapacitated
in any way so as to be unable to manage his financial affairs, it
may direct the Trustee to make payments to such person or to the
legal representative or to a relative or friend of such person for
that person's benefit, or it may direct the Trustee to apply the
payment for the benefit of such person in such manner as it
considers advisable.
13.3 ALLOCATION OF DUTIES AND RESPONSIBILITIES. The Plan
Administrator may, by written instrument, allocate among its
members or employees any of its duties and responsibilities not
already allocated under the Plan or may designate persons other
than members or employees to carry out any of the Plan
Administrator's duties and responsibilities under the Plan. Any
such duties or responsibilities thus allocated must be described in
the written
<PAGE> 49
instrument. If a person other than an Employee of the Employer is
so designated, such person must acknowledge in writing his
acceptance of the duties and responsibilities allocated to him.
13.4 APPOINTMENT OF THE PLAN ADMINISTRATOR. The Employer shall
designate in the Adoption Agreement the Plan Administrator who
shall administer the Employer's Plan. Such Plan Administrator may
consist of an individual, a committee of two or more individuals,
whether or not, in either such case, the individual or any of such
individuals are Employees of the Employer, a consulting firm or
other independent agent, the Trustee (with its consent), or the
Employer itself. The Plan Administrator shall be charged with the
full power and the responsibility for administering the Plan in all
its details. If no Plan Administrator has been appointed by the
Employer, or if the person designated as Plan Administrator by the
Employer is not serving as such for any reason, the Employer shall
be deemed to be the Plan Administrator of the Plan. The Plan
Administrator may be removed by the Employer, or may resign by
giving notice in writing to the Employer, and in the event of the
removal, resignation, or death, or other termination of service by
the Plan Administrator, the Employer shall, as soon as practicable,
appoint a successor Plan Administrator, such successor thereafter
to have all of the rights, privileges, duties, and obligations of
the predecessor Plan Administrator.
13.5 EXPENSES. The Trust shall pay all expenses authorized and
incurred by the Plan Administrator in the administration of the
Plan except to the extent such expenses are paid by an Employer.
13.6 LIABILITIES. The Plan Administrator and each person to whom
duties and responsibilities have been allocated pursuant to Section
13.3 shall be indemnified and held harmless by the Employer with
respect to any alleged breach of responsibilities performed or to
be performed hereunder. The Employer and each Affiliated Employer
shall indemnify and hold harmless the Sponsor against all claims,
liabilities, fines, and penalties, and all expenses reasonably
incurred by or imposed upon him (including, but not limited to,
reasonable attorneys' fees) which arise as a result of actions or
failure to act in connection with the operation and administration
of the Plan.
13.7 CLAIMS PROCEDURE.
(a) Filing a Claim. Any Participant or Beneficiary under the Plan
may file a written claim for a Plan benefit with the Plan
Administrator or with a person named by the Plan Administrator to
receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any
Participant or Beneficiary under the Plan ("claimant"), claimant
shall be given a written notification containing specific reasons
for the denial or limitation of his benefit. The written
notification shall contain specific reference to the pertinent Plan
provisions on which the denial or limitation of his benefit
<PAGE> 50
is based. In addition, it shall contain a description of any other
material or information necessary for the claimant to perfect a
claim, and an explanation of why such material or information is
necessary. The notification shall further provide appropriate
information as to the steps to be taken if the claimant wishes to
submit his claim for review. This written notification shall be
given to a claimant within ninety (90) days after receipt of his
claim by the Plan Administrator unless special circumstances
require an extension of time for processing the claim. If such an
extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the
termination of said ninety (90) day period, and such notice shall
indicate the special circumstances which made the postponement
appropriate.
(c) Right of Review. In the event of a denial or limitation of his
benefit, the claimant or his duly authorized representative shall
be permitted to review pertinent documents and to submit to the
Plan Administrator issues and comments in writing. In addition,
the claimant or his duly authorized representative may make a
written request for a full and fair review of his claim and its
denial by the Plan Administrator; provided, however, that such
written request must be received by the Plan Administrator (or its
delegate to receive such requests) within sixty (60) days after
receipt by the claimant of written notification of the denial or
limitation of the claim. The sixty (60) day requirement may be
waived by the Plan Administrator in appropriate cases.
(d) Decision on Review. A decision shall be rendered by the Plan
Administrator within sixty (60) days after the receipt of the
request for review, provided that where special circumstances
require an extension of time for processing the decision, it may be
postponed on written notice to the claimant (prior to the
expiration of the initial sixty (60) day period) for an additional
sixty (60) days, but in no event shall the decision be rendered
more than one hundred twenty (120) days after the receipt of such
request for review. Any decision by the Plan Administrator shall
be furnished to the claimant in writing and shall set forth the
specific reasons for the decision and the specific Plan provisions
on which the decision is based.
(e) Court Action. No Participant or Beneficiary shall have the
right to seek judicial review of a denial of benefits, or to bring
any action in any court to enforce a claim for benefits prior to
filing a claim for benefits or exhausting his rights to review
under this section.
ARTICLE 14
AMENDMENT, TERMINATION, AND MERGER
14.1 SPONSOR'S POWER TO AMEND. The Sponsor may amend any part of
the Plan, Trust Agreement, or Adoption Agreements at any time and
from time to time. For purposes of Sponsor's amendments, the mass
submitter shall be recognized as the agent of the Sponsor. If the
Sponsor does not adopt the amendments made by the mass submitter,
it will no longer be identical to, or a minor modifier of, the mass
submitter plan.
<PAGE> 51
14.2 AMENDMENT BY ADOPTING EMPLOYER.
(a) Subject to giving written notice to the Trustee by delivery of
a copy of the change signed by the Employer, the Employer may:
(i) change its choice of options in the Adoption Agreement;
(ii) amend the Adoption Agreement to the extent that it may be
necessary to satisfy section 415 or section 416 of the Code
because of the required aggregation of multiple plans;
(iii) add certain model amendments published by the Internal
Revenue Service which specifically provide that their
adoption will not cause the Plan to be treated as
individually designed; and
(iv) discontinue the Plan or the Trust Agreement or give notice
of termination thereof.
(b) An Employer that amends the Plan for any other reason,
including a waiver of the minimum funding requirement under section
412(d) of the Code, will no longer participate in this prototype
plan and will be considered to have an individually designed plan.
14.3 PLAN TERMINATION; DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS.
(a) The Employer may terminate the Plan at any time in whole or in
part. In the event of the dissolution, merger, consolidation, or
reorganization of the Employer, the Plan shall automatically
terminate and the Trust shall be liquidated as provided in
paragraph (b) below unless the Plan is continued by a successor
employer in accordance with Section 14.4.
(b) Upon the complete or partial termination of the Plan or the
complete discontinuance of Employer Contributions under the Plan,
the separate Account of each Participant affected thereby shall
become fully vested and nonforfeitable, and the Plan Administrator
shall direct the Trustee to distribute assets remaining in the
Trust, after payment of any expenses properly chargeable thereto,
to Participants or their Beneficiaries, unless directed by the
Employer to continue the Trust and distribute Participants'
Accounts at such other time and in such other nondiscriminatory
manner as the Employer shall designate, provided that such
distribution shall be in accordance with the provisions of Articles
10 and 11. Upon the completion of such distribution, the Trustee
shall be relieved of all further liability with respect to the
assets so distributed.
<PAGE> 52
14.4 SUCCESSOR EMPLOYER. In the event of the dissolution, merger,
consolidation, or reorganization of the Employer, provision may be
made by which the Plan and Trust shall be continued by the
successor employer, in which case such successor employer shall be
substituted for the Employer under the Plan. The substitution of
the successor employer shall constitute an assumption of Plan
liabilities by the successor employer, and the successor employer
shall have all powers, duties, and responsibilities of the Employer
under the Plan.
14.5 MERGER, CONSOLIDATION, OR TRANSFER. There shall be no merger
or consolidation of the Plan with, or transfer of assets or
liabilities of the Plan to, any other plan of deferred compensation
maintained or to be established for the benefit of all or some of
the Participants of the Plan, unless each Participant would (if
either this Plan or such other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer
which is equal to or greater than the benefit the Participant would
have been entitled to receive immediately before the merger,
consolidation, or transfer (if this Plan had then terminated).
14.6 SPECIAL AMENDMENTS. The Employer may from time to time make
any amendment to the Plan that may be necessary to satisfy section
415 or 416 of the Code. Any such amendment will be adopted by the
Employer by completing overriding Plan language in the Adoption
Agreement. In the event of such an amendment, the Employer must
obtain a separate determination letter from the Internal Revenue
Service to continue reliance on the Plan's qualified status.
ARTICLE 15
MISCELLANEOUS
15.1 EXCLUSIVE BENEFIT OF PARTICIPANTS AND BENEFICIARIES.
(a) All assets of the Trust shall be retained for the exclusive
benefit of Participants and their Beneficiaries, and shall be used
only to pay benefits to such persons or to pay the fees and
expenses of the Trust. The assets of the Trust shall not revert to
the benefit of the Employer, except as otherwise specifically
provided in Section 15.1(b).
(b) To the extent permitted or required by ERISA and the Code,
contributions to the Trust under this Plan are subject to the
following conditions:
(i) If a contribution or any part thereof is made to the Trust
by the Employer under a mistake of fact, such contribution
or part thereof shall be returned to the Employer within one
year after the date the contribution is made;
<PAGE> 53
(ii) In the event the Plan is determined not to meet the initial
qualification requirements of section 401 of the Code,
contributions made in respect of any period for which such
requirements are not met shall be returned to the Employer
within one (1) year after the Plan is determined not to meet
such requirements, but only if the application for the
qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of
the Treasury may prescribe.
(iii) Contributions to the Trust are specifically conditioned on
their deductibility under the Code and, to the extent a
deduction is disallowed for any such contribution, such
amount shall be returned to the Employer within one (1) year
after the date of the disallowance of the deduction.
15.2 NONGUARANTEE OF EMPLOYMENT. Nothing contained in this Plan
shall be construed as a contract of employment between the Employer
and any Employee, or as a right of any Employee to be continued in
the employment of the Employer, or as a limitation of the right of
the Employer to discharge any of its Employees, with or without
cause.
15.3 RIGHTS TO TRUST ASSETS. No Employee, Participant, or
Beneficiary shall have any right to, or interest in, any assets of
the Trust upon termination of employment or otherwise, except as
provided under the Plan. All payments of benefits under the Plan
shall be made solely out of the assets of the Trust.
15.4 NONALIENATION OF BENEFITS. No benefit or interest available
hereunder will be subject to assignment or alienation, either
voluntarily or involuntarily. The preceding sentence shall also
apply to the creation, assignment, or recognition of a right to any
benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in section 414(p) of
the Code, or any domestic relations order entered before January 1,
1985.
15.5 AGGREGATION RULES.
(a) Except as provided in Article 6, all Employees of the Employer
or any affiliated employer will be treated as employed by a single
employer.
(b) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, this
Plan and the plan established for other trades or businesses must,
when looked at as a single plan, satisfy sections 401(a) and (d)
for the Employees of this and all other trades or businesses.
<PAGE> 54
(c) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in
a plan which satisfies section 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
(d) If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not controlled
and the individual controls a trade or business, then the
contributions or benefits which are controlled must be as favorable
as those provided for him under the most favorable plan of the
trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c), and (d), an Owner-
Employee, or two or more Owner-Employees, will be considered to
control a trade or business if the Owner-Employee, or two or more
Owner-Employees together:
(i) own the entire interest in an unincorporated trade or
business; or
(ii) in the case of a partnership, own more than fifty percent
(50%) of either the capital interest or the profits interest
in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two
or more Owner-Employees shall be treated as owning an interest in a
partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-
Employees, are considered to control within the meaning of the
preceding sentence.
15.6 FAILURE OF QUALIFICATION. If this Plan or any part of it
fails to attain or retain qualification, such plan will no longer
participate in this master/prototype plan and will be considered an
individually designed plan.
15.7 APPLICABLE LAW. Except to the extent otherwise required by
ERISA, as amended, this Plan shall be construed and enforced in
accordance with the laws of the state in which the Employer's
principal place of business is located, as specified in the
Adoption Agreement.
15.8 INVALIDITY OF CERTAIN PROVISIONS. If any provisions of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof and
the Plan shall be construed and enforced as if such provisions, to
the extent invalid or unenforceable, had not been included.
<PAGE>
Internal Revenue Service
Plan Description: Prototype Standardized Profit Sharing Plan
FM 50253965002-01 Case: 9005260 EIN: 36-3447638
PD 02 Plan: 00! Letter Serial No. D248808a
Department of the Treasury
Washington, DC 20224
Personal Contac: Ms. Grandison
Telephone Number: (202) 566-4708
Ref. Reply: E EP Q 3
Date: 07/16/90
STEIN ROE & FARNHAM INC.
300 WEST ADAMS STREET
SUITE 1200
CHICAGO IL 60690
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable
under section 401 of the Internal Revenue Code for use by employers
for the benefit of their employees. This opinion relates only to
the acceptability of the form of the plan under the Internal
Revenue Code. It is not an opinion of the effect of other Federal
or local statutes.
You must furnish a copy of this letter to each employer who adopts
this plan. You are also required to send a copy of the approved
form of the plan, any approved amendments and related documents to
each Key District Director of Internal Revenue Service in whose
jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a
ruling or determination as to whether an employer's plan qualifies
under Code section 401(a) An employer who adopts this plan will be
considered to have a plan qualified under Code section 401(a)
provided all the terms of the plan are followed, and the
eligibility requirements and contribution or benefit provisions are
not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the
Key District Director will not issue a determination letter with
regard to this plan.
Our opinion does not apply to the form of the plan for purposes of
Code section 401(a)(16) if: (1) an employer ever maintained another
qualified plan for one or more employees who are covered by this
plan, other than a specified paired plan within the meaning of
section 7 of Rev. Proc. 89-9, 1989-6 I.R.B. 14; or (2) after
December 31, 1985, the employer maintains a welfare benefit fund
defined in Code section 419(e), which provides postretirement
medical benefits allocated to separate accounts for key employees
as defined in Code section 419A(d)(3). In such situations, the
employer should request a determination as to whether the plan,
considered with all related qualified plans and, if appropriate,
welfare benefit funds, satisfies the requirements of Code section
401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS
processing of this case, please call the above telephone number.
This number is only for use of the plan sponsor. Individual
participants and/or adopting employers with questions concerning
the plan should contact the plan sponsor. The plan's adoption
agreement must include the sponsor's address and telephone number
for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your
telephone number and the most convenient time for us to call in
case we need more information. Whether you call or write, please
refer to the Letter Serial Number and File Folder Number shown in
the heading of this letter.
You should keep this letter as a permanent record. Please notify
us if you modify or discontinue sponsorship of this plan.
Sincerely yours,
[SIGNATURE OF OFFICER]
Chief, Employee Plans Qualifications
Branch
09637
<PAGE>
Internal Revenue Service
Plan Description: Prototype Standardized Money Purchase Pension
Plan
FM 50253965002-02 Case: 9005261 EIN: 36-3447638
PD 02 Plan: 002 Letter Serial No. D248809a
Department of the Treasury
Washington, DC 20224
Personal Contac: Ms. Grandison
Telephone Number: (202) 566-4708
Ref. Reply: E EP Q 3
Date: 07/16/90
STEIN ROE & FARNHAM INC.
300 WEST ADAMS STREET
SUITE 1200
CHICAGO IL 60690
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable
under section 401 of the Internal Revenue Code for use by employers
for the benefit of their employees. This opinion relates only to
the acceptability of the form of the plan under the Internal
Revenue Code. It is not an opinion of the effect of other Federal
or local statutes.
You must furnish a copy of this letter to each employer who adopts
this plan. You are also required to send a copy of the approved
form of the plan, any approved amendments and related documents to
each Key District Director of Internal Revenue Service in whose
jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a
ruling or determination as to whether an employer's plan qualifies
under Code section 401(a) An employer who adopts this plan will be
considered to have a plan qualified under Code section 401(a)
provided all the terms of the plan are followed, and the
eligibility requirements and contribution or benefit provisions are
not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the
Key District Director will not issue a determination letter with
regard to this plan.
Our opinion does not apply to the form of the plan for purposes of
Code section 401(a)(16) if: (1) an employer ever maintained another
qualified plan for one or more employees who are covered by this
plan, other than a specified paired plan within the meaning of
section 7 of Rev. Proc. 89-9, 1989-6 I.R.B. 14; or (2) after
December 31, 1985, the employer maintains a welfare benefit fund
defined in Code section 419(e), which provides postretirement
medical benefits allocated to separate accounts for key employees
as defined in Code section 419A(d)(3). In such situations, the
employer should request a determination as to whether the plan,
considered with all related qualified plans and, if appropriate,
welfare benefit funds, satisfies the requirements of Code section
401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS
processing of this case, please call the above telephone number.
This number is only for use of the plan sponsor. Individual
participants and/or adopting employers with questions concerning
the plan should contact the plan sponsor. The plan's adoption
agreement must include the sponsor's address and telephone number
for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your
telephone number and the most convenient time for us to call in
case we need more information. Whether you call or write, please
refer to the Letter Serial Number and File Folder Number shown in
the heading of this letter.
You should keep this letter as a permanent record. Please notify
us if you modify or discontinue sponsorship of this plan.
Sincerely yours,
[SIGNATURE OF OFFICER]
Chief, Employee Plans Qualifications
Branch
09638
<PAGE>
CORRECTED
AMENDMENT B TO THE
STEIN ROE & FARNHAM PROTOTYPE PAIRED
DEFINED CONTRIBUTION MONEY PURCHASE PENSION &
PROFIT-SHARING PLAN
(MAY 23, 1994)
Stein Roe & Farnham Incorporated, sponsor of the Stein Roe &
Farnham Prototype Paired Defined Contribution Money Purchase
Pension and Profit-Sharing Plans, including the related Trust and
Adoption Agreements (the "Prototype Plan"), hereby amends the
Prototype Plan effective as provided below.
FIRST
Article 11 of the plan is hereby amended by adding the
following at the end thereof as a new section 11.10 which is the
word-for-word adoption of the model language contained in Revenue
Procedure 93-12, for distributions made on or after January 1,
1993, as follows:
"11.10 DIRECT ROLLOVERS. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a
Distributee's election under this provision, a Distributee
may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
Definitions
(a) Eligible Rollover Distribution. An Eligible Rollover
Distribution is any distribution of all or any portion of
the balance to the credit of the Distributee, except than
an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten
(10) years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the
Code; and the portion of any distribution that is not
includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with
respect to employer securities).
(b) Eligible Retirement Plan. An Eligible Retirement Plan
is an individual retirement account described in section
408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified
trust described in section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution
to the surviving spouse, an Eligible Retirement Plan is
an individual retirement account or individual retirement
annuity.
(c) Distributee. A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are Distributees
with regard to the interest of the spouse or former
spouse.
(d) Direct Rollover. A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the
Distributee."
SECOND
Section 2.7 of Article 2 of this Plan is hereby amended by
adding the following at the end thereof which is the word-for-word
adoption of the model language contained in Revenue Procedure 94-13
as follows:
"In addition to the other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the Plan
to the contrary, for Plan Years beginning on or after January
1, 1994, the annual Compensation of each Employee taken into
account under the Plan shall not exceed the OBRA '93 Annual
Compensation Limit. The OBRA '93 Annual Compensation Limit is
$150,000, as adjusted by the Commissioner for increases in the
cost-of-living in accordance with section 401(a)(17)(B) of the
Internal Revenue Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined
("Determination Period") beginning in such calendar year. If
a Determination Period consists of fewer than 12 months, the
OBRA '93 Annual Compensation Limit will be multiplied by a
fraction, the numerator of which is the number of months in
the Determination Period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under section
401(a)(17) of the Code shall mean the OBRA '93 Annual
Compensation Limit set forth in this provision.
If Compensation for any prior Determination Period is taken
into account in determining an Employee's benefits accruing in
the current Plan Year, the Compensation for that prior
Determination Period is subject to the OBRA '93 Annual
Compensation Limit in effect for that prior Determination
Period. For this purpose, for Determination Periods beginning
before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 Annual Compensation Limit
is $150,000."
Except as expressly amended herein, the Prototype Plan remain in
full force and effect.
Executed this 23rd day of May, 1994.
STEIN ROE & FARNHAM INCORPORATED
By: TIMOTHY K. ARMOUR
Timothy K. Armour
President - Mutual Funds Division
Attest: JILAINE HUMMEL BAUER
Jilaine Hummel Bauer
Assistant Secretary
<PAGE> 1
STEIN ROE & FARNHAM PROTOTYPE TRUST AGREEMENT
The Employer has established a Plan for the benefit of Participants
therein pursuant to section 401 of the Internal Revenue Code of
1986, as amended. As part of the Plan, the Employer has requested
such person or persons (individual, corporate, or other entity), as
may be designated in the Adoption Agreement, to serve as Trustee
pursuant to the Trust established for the investment of
contributions under the Plan upon the terms and conditions set
forth in this Trust Agreement.
Unless the context of this Trust Agreement clearly indicates
otherwise, the terms defined in Article 2 of the Plan entered into
by the Employer, of which this Trust Agreement forms a part, shall,
when used herein, have the same meaning as in the Plan.
ARTICLE 1
ACCOUNTS
1.1 ESTABLISHING ACCOUNTS. The Trustee shall open and maintain a
Trust account for the Plan and, as part thereof, Participants'
Accounts for such individuals as the Plan Administrator shall, from
time to time, give written notice to the Trustee as being
Participants in the Plan. The Trustee shall also open and maintain
such other subaccounts as may be appropriate or desirable to aid in
the administration of the Plan. Separate subaccounts shall be
maintained for each Participant and shall be credited with the
contributions made by the Employer and with forfeitures allocated
to each such Participant pursuant to the Plan (and all earnings
thereon). If nondeductible voluntary contributions by Participants
are permitted by the Plan, the Trustee shall open and maintain as
part of the Trust a separate subaccount to be credited with the
Participant's nondeductible voluntary contributions (and all
earnings attributable to such contributions). If trustee transfers
or rollover contributions from another qualified plan are received,
the Trustee shall open and maintain a separate rollover subaccount
for each Participant, each such subaccount to be credited with the
Participant's trustee transfers or rollover contributions (and all
earnings attributable to such contributions).
1.2 CHARGES AGAINST ACCOUNTS. Upon receipt of written instructions
from the Plan Administrator, the Trustee shall charge the
appropriate subaccount of the Participant for any withdrawals,
expenses, or distributions made under the Plan and any forfeiture,
which may be required under the Plan, of unvested interests
attributable to Employer Contributions. The Plan Administrator
will give written instructions to the Trustee specifying the manner
in which Employer Contributions and any forfeiture of the nonvested
portion of the Accounts, as allocated by the Plan Administrator in
accordance with the provisions of the Plan, are to be credited to
the various Accounts maintained for Participants.
1.3 PROSPECTUS TO BE PROVIDED. The Plan Administrator shall ensure
that a Participant who makes a nondeductible voluntary contribution
has previously received a copy of the then current prospectus
relating to the Shares. Delivery of such a nondeductible voluntary
contribution, pursuant to the provisions of the Plan by the Plan
Administrator to the Trustee shall entitle the Trustee to assume
that the Participant has received such a prospectus.
ARTICLE 2
RECEIPT OF CONTRIBUTIONS
The Trustee shall accept and hold in the Trust contributions made
by the Employer and Participants under the Plan. The Plan
Administrator shall give written instructions to the Trustee
specifying the Participants' Account to which contributions are to
be credited, the amount of each such credit which is attributable
to Employer Contributions, and the amount, if any, which is
attributable to the Participant's nondeductible voluntary
contributions. If written instructions are not received by the
Trustee, or if such instructions are received but are deemed by the
Trustee to be unclear, upon notice to the Employer, the Trustee may
elect to hold all or part of any such contributions in cash,
without liability for rising security prices or distributions made,
pending receipt by it from the Plan Administrator of written
instructions or other clarifications, or the Trustee may return the
contribution to the Employer. If any contributions or earnings are
less than any minimum which the then current prospectus for the
Shares requires, the Trustee may hold the specified portion of
contributions or earnings in cash, without interest, until such
time as the proper amount has been contributed or earned so that
the investment in the Shares required under the Plan may be made.
ARTICLE 3
INVESTMENT POWERS OF THE TRUSTEE
3.1 INVESTMENT OF ACCOUNT ASSETS. The Trustee shall invest the
amount of each contribution made hereunder and all earnings of the
Trust in full and fractional Shares in accordance with the current
prospectus for such Shares, in such amounts and proportions as
shall from time to time be designated by the Plan Administrator on
forms provided by the Sponsor, and shall credit such Shares to the
Accounts of each Participant on whose behalf or by whom the
contributions are made and any forfeitures are allocated. All
dividends and capital gain distributions received on the Shares
held by the Trustee in each Account, shall, if received in cash, be
reinvested in such Shares in accordance with the current prospectus
for such Shares and shall in any event be credited to such account.
If any distribution on Shares may be received at the election of
the shareholder in additional Shares, the Trustee shall so elect.
The Trustee shall deliver, or cause to be executed and delivered,
to the Plan Administrator all notices, prospectuses, financial
statements, proxies, and proxy soliciting materials relating to
Shares held hereunder. The Trustee shall not vote any of the
Shares held hereunder, except in accordance with the written
instructions of the Plan Administrator which shall be in accordance
with the directions of the Participants who are the beneficial
owners of such Shares. If no such written instructions are
received, such Shares shall be voted in accordance with the best
interests of the Participant (or Beneficiary) for which they are so
held. The obligations of the Trustee hereunder may be delegated by
it as provided in Sections 9.1 and 9.2.
The Trustee shall sell Shares and purchase Shares to accomplish any
change in investments desired by the Employer as indicated on any
amended Adoption Agreement or other instruction in accordance with
the terms of the Plan.
Notwithstanding the above, if periodic payments are being made to a
Participant pursuant to Article 4 hereof, any dividends received on
Shares held in such Participant's Account, which dividends are
invested at an offering price which includes a sales charge, need
not be invested in additional Shares but may be held for
distribution to the Participant in periodic payments. In such
instances, the Trustee may make election necessary to receive any
such dividends in cash.
3.2 DIRECTED INVESTMENTS. When so instructed by the Plan
Administrator, the Trustee shall invest all or any portion of the
individual Account of any Participant in accordance with the
direction of the Employer or such Participant in lieu of
participation in the general assets of the Trust. Such directed
investments shall be accounted for separately for each Participant.
Except as otherwise provided herein, the Trustee shall not have any
discretion, and is specifically prohibited from exercising any
control or direction, with respect to such directed investments.
Each Participant who directs the investment of his Account shall be
solely and absolutely responsible for the investment or
reinvestment of all direct investment assets held on his behalf in
Trust shall not question any such direction, review any securities
or other such assets, or make suggestions with respect to the
investment, retention or disposition of any such assets; provided
that:
(a) If any contributions are transmitted to or otherwise
received or held as a directed investment asset without
investment directions from the Participant, the Trustee may
retain such amounts in a noninterest-bearing savings account
in a federally insured institution for the benefit of the
Participant;
(b) The Trustee may establish such reasonable rules and
regulations, applied on a uniform basis for all Participants
with respect to the requirements for, and the form and
manner of, effectuating any transactions with respect to
directed investment assets including, without limitation,
minimum amounts, rules applicable to conversion of directed
investments into general assets of the Trust, and
appropriate adjustments (based on fair market values) to
Accounts in order to reflect any such conversion, as the
Trustee shall determine to be consistent with the purposes
of the Plan. Any such rules and regulations shall be
binding upon all persons interested in the Trust;
(c) The Trustee may establish a procedure for the periodic
review of directed investment assets to determine, in light
of the facts and circumstances reasonably known to the
Trustee, whether any actual or proposed investment of such
assets constitute a prohibited transaction as that term is
defined in Sections 406-408 of ERISA and the corresponding
provisions of the Code. If the Trustee determines that any
investment constitutes or would constitute a prohibited
transaction, the Trustee shall promptly communicate this
determination to the Plan Administrator, and shall recommend
that the investment be prevented or disposed of, as the case
may be, and may recommend any other action authorized or
required by law, to prevent or remedy the transaction;
(d) In accordance with and pursuant to uniform and
nondiscriminatory rules established under and in accordance
with the Plan, the Trustee may deny the Plan Administrator's
application to allow a directed investment proposed by a
Participant; and
(e) Notwithstanding anything herein to the contrary, in no event
shall the Trustee engage in any transaction that would be
prohibited under ERISA.
3.3 GENERAL INVESTMENT POWERS. Subject to any investment
limitations or minimum requirements for investment in Shares
imposed by the Sponsor, and subject to investment instructions
given by the Employer, the Trustee shall be authorized and
empowered to invest and reinvest all or any part of the Trust in
any property, real or personal or mixed, including, but not being
limited to, capital or common stock (whether voting or nonvoting
and whether or not currently paying a dividend), preferred or
preference stock (whether voting or nonvoting or whether or not
currently paying a dividend), Shares of regulated investment
companies, convertible securities, corporate and governmental
obligations, leaseholds, ground rents, mortgages, and other
interests in realty, trust and participation certificates, oil,
mineral, or gas properties, royalty interests or rights, including
equipment pertaining thereto, notes, and other evidence of
indebtedness or ownership, secured or unsecured, contracts, choses
in action, and warrants and other instruments entitling the owner
thereof to subscribe to or purchase any of the aforesaid. Subject
to any investment limitations or requirements imposed by the
Sponsor relating to the type of permissible investments in the
Trust or the minimum percentage of Trust assets to be invested in
Shares, and subject to the provisions of Article 8 hereof, in
making and retaining such investments and reinvestments pursuant
hereto, the Trustee shall not be bound as to the character of any
investments by any statute, rule of court, or custom governing the
investment of Trust funds.
3.4 INVESTMENT IN COMBINED FUNDS. If the Trust is a banking
institution, subject to any investment limitations or minimum
requirements for investment in Shares imposed by the Sponsor, and
subject to investment instructions given by the Employer, it may,
subject to the election of the Sponsor or the Employer, cause funds
of this Trust to be invested in commingled funds for qualified
employee benefit plan trusts and such commingled funds are hereby
adopted and made a part of the Plan of which this Trust is a part,
and any funds of this Trust invested in any such commingled funds
shall be subject to all the provisions thereof, as the same may be
amended from time to time.
3.5 OTHER POWERS OF THE TRUSTEE. The Trustee is authorized and
empowered with respect to the Trust:
(a) Subject to any investment limitations or minimum
requirements for investment in Shares imposed by the
Sponsor, and subject to investment instructions given by the
Employer, to sell, exchange, convey, transfer, or otherwise
dispose of, either at public or private sale, any property,
real or personal or mixed, at any time held by it, for such
consideration and on such terms and conditions as to credit
or otherwise as the Trustee may deem best;
(b) Subject to the provisions of Section 3.1, to vote in person
or by proxy any stocks, bonds, or other securities held by
it; to exercise any options appurtenant to any stocks,
bonds, or other securities, or to exercise any rights to
subscribe for additional stocks, bonds, or other securities,
and to make any and all necessary payments therefore; to
join in, or to dissent from, and to oppose the
reorganization, consolidation, liquidation, sale, or merger
of corporations, or properties in which it may be interested
as Trustee, upon such terms and conditions it may deem wise;
(c) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry
out the powers herein granted;
(d) To register any investment held in the Trust in the name of
the Trust or in the name of a nominee, and to hold any
investment in bearer form, but the books and records of the
Trustee shall at all times show that all such investments
are part of the Trust;
(e) To employ suitable agents and counsel (who may also be
agents and/or counsel for the Employer or the Sponsor) and
to pay their reasonable expenses and compensation;
(f) To borrow or raise monies for the purpose of the Trust from
any source and, for any sum so borrowed to issue its
promissory note as Trustee and to secure the repayment
thereof by pledging all or any part of the Trust Fund, but
nothing herein contained shall obligate the Trustee to
render itself liable individually for the amount of any such
borrowing; and no person loaning money to the Trustee shall
be bound to see to the application of money loaned or to
inquire into the validity or propriety of any such
borrowing.
Each and all of the foregoing powers may be exercised without a
court order of approval. No one dealing with the Trustee need
inquire concerning the validity or propriety of anything that is
done or need see to the application of any money paid or property
transferred to or upon the order of the Trustee.
3.6 GENERAL POWERS. The Trustee shall have all of the powers
necessary or desirable to do all acts, take all such proceedings,
and exercise all such rights and privileges, whether or not
expressly authorized herein, which it may deem necessary or proper
for the administration and protection of the property of the Trust
and to accomplish any action provided for in the Plan.
ARTICLE 4
DISTRIBUTIONS FROM A PARTICIPANT'S ACCOUNT
Distributions from the Trust shall be made by the Trustee in
accordance with proper written directions of the Plan Administrator
in accordance with the provisions of Section 11.2 of the Plan, and
the Plan Administrator shall have the sole responsibility for
determining that the directions given conform to the provisions of
the Plan and applicable law, including (without limitation)
responsibility for calculating the vested interests of the
Participants, for calculating the amounts payable to a Participant
pursuant to Article 9 of the Plan, and for determining the proper
person to whom benefits are payable under the Plan.
ARTICLE 5
REPORTS OF THE TRUSTEE AND THE PLAN ADMINISTRATOR
The Trustee shall keep accurate and detailed records of all
receipts, investments, disbursements, and other transactions
required to be performed hereunder with respect to the Trust. The
Trustee shall file with the Plan Administrator a written report or
reports reflecting the receipts, disbursements, and other
transactions effected by it with respect to the Trust during such
Plan Year and the assets and liabilities of the Trust at the close
of the Plan Year. Such report or reports shall be open to
inspection by any Participant for a period of one hundred eighty
(180) days immediately following the date on which it is filed with
the Plan Administrator. Except as otherwise prescribed by ERISA,
upon the expiration of such one hundred eighty (180) day period,
the Trustee shall be forever released and discharged from all
liability and accountability to anyone with respect to its acts,
transactions, duties, obligations, or responsibilities as shown in
or reflected by such report, except with respect to any such acts
or transactions as to which the Plan Administrator shall have filed
written objections with the Trustee within such one hundred eighty
(180) day period, and except for willful misconduct or lack of good
faith on the part of the Trustee.
ARTICLE 6
TRUSTEE'S FEE AND EXPENSES OF THE TRUST
The Trustee's fees for performing its duties hereunder shall be
such reasonable amounts as shall be respectively established by the
Trustee from time to time; provided that no Trustee who is an
Employee of an Employer may receive a Trustee fee. The Trustee
shall furnish the Employer with its current schedule of fees and
shall give written notice to the Employer whenever its fees are
changed or revised. Such fees, any taxes of any kind whatsoever
which may be levied or assessed upon or in respect of the Trust, to
the extent incurred by the Trustee, and any and all expenses
incurred by the Trustee in the performance of its duties, including
fees for legal services rendered to the Trustee shall, unless paid
by the Employer, be paid from the Trust in the manner provided in
the Plan.
Unless paid by the Employer, all fees of the Trustee and taxes and
other expenses charged to a Participant's Account may be collected
by the Trustee from the amount of any contribution to be credited
or distribution to be charged to such Account or may be paid by
redeeming or selling assets credited to such Account.
ARTICLE 7
DUTIES OF THE EMPLOYER AND THE PLAN ADMINISTRATOR
7.1 INFORMATION AND DATA TO BE FURNISHED TO TRUSTEE. In addition
to making the contributions called for in Article 2 hereof, the
Employer, through the Plan Administrator, agrees to furnish the
Trustee with such information and data relative to the Plan as is
necessary for the proper administration of the Trust established
hereunder.
7.2 LIMITATIONS OF DUTIES. Neither the Employer nor any of its
officers, directors, or partners, nor the Plan Administrator shall
have any duties or obligations with respect to this Trust
Agreement, except those expressly set forth herein and in the Plan.
ARTICLE 8
LIABILITY OF THE TRUST
8.1 TRUSTEE'S LIABILITY.
(a) The Employer shall indemnify and save the Trustee (including
its affiliates, representatives and agents) harmless from
and against any liability, cost or other expense, including,
but not limited to, the payment of attorneys' fees that the
Trustee may incur in connection with this Agreement or the
Plan unless such liability, cost or other expense (whether
direct or indirect) arises from the Trustee's own willful
misconduct or gross negligence. The Employer recognizes
that a burden of litigation may be imposed upon the Trustee
as a result of some act or transaction for which it has no
responsibility or over which it has no control under this
Agreement. Therefore, the Employer agrees to indemnify and
hold harmless and, if requested, defend the Trustee
(including its affiliates, representatives and agents) from
any expenses (including counsel fees, liabilities, claims,
damages, actions, suits or other charges) incurred by the
Trustee in prosecuting or defending against any such
litigation.
(b) The Trustee shall not be liable for, and the Employer will
indemnify and hold harmless the Trustee (including its
affiliates, representatives and agents) from and against all
liability or expense (including counsel fees) because of (i)
any investment action taken or omitted by the Trustee in
accordance with any direction of the Employer or a
Participant, or investment inaction in the absence of
directions from the Employer or a Participant or (ii) any
investment action taken by the Trustee pursuant to an order
to purchase or sell securities placed by the Employer or a
Participant directly with a broker, dealer or issuer. It is
understood that although, when the Trustee is subject to the
direction of the Employer or a Participant the Trustee will
perform is subject to the portion of the Fund subject to
such direction (the Directed Fund"), such duties do not
involve the exercise of any discretionary authority or other
authority to manage and control assets of the Directed Fund
and will be performed in the normal course of business by
officers and employees of the Trustee or its affiliates,
representatives or agents who may be unfamiliar with
investment management. It is agreed that the Trustee is not
undertaking any duty or obligation, express or implied, to
review, and will not be deemed to have any knowledge of or
responsibility with respect to, any transaction involving
the investment of the Directed Fund as a result of the
performance of its ministerial duties. Therefore, in the
event that "knowledge" of the Trustee shall be a
prerequisite to imposing a duty upon or determining
liability of the Trustee under the Plan or this Trust or any
law or regulation regulating the conduct of the Trustee,
with respect to the Directed Fund, as a result of any act or
omission of the Employer or any Participant, or as a result
of any transaction engaged in by any of them, then the
receipt and processing of investment orders and other
documents relating to Plan assets by an officer or other
employee of the Trustee or its affiliates, representatives
or agents engaged in the performance of purely ministerial
functions shall not constitute "knowledge" of the Trustee.
(c) Notwithstanding the foregoing provisions of this Trust
Agreement, the Trustee shall discharge its duties hereunder
with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with
like aims. Any investments selected by the Trustee without
specific direction from the Employer shall be selected to
diversify the investments of the Trust Fund so as to
minimize the risk of large losses, unless in the
circumstances it is clearly prudent not to do so. The
Trustee shall perform its duties in accordance with this
Trust Agreement insofar as this Trust Agreement is
consistent with the provisions of ERISA. To the extent not
prohibited by ERISA, the Trustee shall not be responsible in
any way for any action or omission of the Employer or the
Plan Administrator with respect to the performance of their
duties and obligations set forth in the Plan. To the extent
not prohibited by ERISA, the Trustee shall not be
responsible for any action or omission of any of its agents,
or with respect to reliance upon advice of its counsel
(whether or not such counsel is also counsel to the Employer
or to the Plan Administrator), provided that such agents or
counsel were prudently chosen by the Trustee and that the
Trustee relied in good faith upon the action of such agent
or the advice of such counsel. The Trustee shall be
indemnified and held harmless by the Employer against
liability or losses occurring by reason of any act or
omission of the Trustee under this Trust Agreement, unless
such act or omission is due to its own willful nonfeasance,
malfeasance, or misfeasance or other breach of duty under
ERISA, to the extent that such indemnification does not
violate ERISA or any other federal or state laws.
ARTICLE 9
DELEGATION OF POWERS
9.1 DELEGATION BY THE TRUSTEE. With respect to Shares held by the
Plan, the Trustee hereby delegates to the Custodian designated by
the Sponsor the functions designated in (a) through (d) hereunder,
other than the investment, management, or control of the Trust
assets. The Trustee may delegate in writing pursuant to a
procedure permitted and established by the Sponsor, to a person
(individual, corporate, or other entity) designated by the Sponsor
as an agent or custodian, any of the powers or functions of the
Trustee hereunder other than the investment, management or control
of the Trust assets, including (without limitation):
(a) Custodianship of all or any part of the assets of the Trust;
(b) Maintaining and accounting for the Trust and for
Participants and other Accounts as a part thereof;
(c) Distribution of benefits as directed by the Plan
Administrator; and
(d) Preparation of the annual report on the status of the Trust.
The agent or custodian so appointed may act as agent for the
Trustee, without investment responsibility, for fees to be mutually
agreed upon the Employer and the agent or custodian and paid in the
same manner as a Trustee's fees. The Trustee shall not be
responsible for any act or omission of the agent or custodian
arising from any such delegation, except to the extent provided in
Section 8.1.
9.2 Delegating with Employer Approval. The Trustee (whether or not
a bank or trust company) and the Employer may, by mutual agreement,
arrange for the delegation by the Trustee to the Plan Administrator
or any agent of the Employer of any powers or functions of the
Trustee hereunder other than the investment and custody of the
Trust assets. The Trustee shall not be responsible for any act or
omission of such person or persons arising from any such
delegation, except to the extent provided in Article 8.
ARTICLE 10
AMENDMENT
As provided in Section 14.1 of the Plan, and subject to the
limitations set forth therein, the prototype Adoption Agreement,
Plan, and Trust Agreement may be amended at any time, in whole or
in part, by the Sponsor. The Trustee hereby delegates authority to
the Sponsor, and to any successor Sponsor, to so amend the
prototype Adoption Agreement, Plan, and Trust Agreement and the
Trustee hereby agrees that it shall be deemed to have consented to
any amendment so made which does not increase the duties of the
Trustee without its consent.
ARTICLE 11
RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time upon thirty (30) days' notice in
writing to the Employer, and may be removed by the Sponsor or
Employer at any time upon thirty (30) days' notice in writing to
the Trustee. Upon resignation or removal, the Sponsor or Employer
shall appoint a successor Trustee or Trustees. Upon receipt by the
Trustee of written acceptance of such appointment by the successor
Trustee, the Trustee shall transfer and pay over to such successor
the assets of the Trust and all records pertaining thereto,
provided that any successor Trustee shall agree not to dispose of
any such records without the Trustee's consent. The successor
Trustee shall be entitled to rely on all accounts, records, and
other documents received by it from the Trustee, and shall not
incur any liability whatsoever for such reliance. The Trustee is
authorized, however, to reserve such sum of money or property as it
may deem advisable for payment of all its fees, compensation,
costs, and expenses, or for payment of any other liabilities
constituting a charge on or against the assets of the Trust or on
or against the Trustee, with any balance of such reserve remaining
after the payment of all such items to be paid over to the
successor Trustee. Upon the assignment, transfer, and payment over
of the assets of the Trust, and obtaining a receipt thereof from
the successor Trustee, the Trustee shall be released and discharged
for any and all claims, demands, duties, and obligations arising
out of the Trust and its management thereof, excepting only claims
based upon the Trustee's willful misconduct or lack of good faith.
The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Agreement that it qualify under
section 401 of the Code. If within thirty (30) days after the
Trustee's resignation or removal, the Employer has not appointed a
successor Trustee which has accepted such appointment, the Trustee
shall, unless it elects to terminate the Trust pursuant to Article
7, appoint such successor itself.
ARTICLE 12
TERMINATION OF THE TRUST
12.1 TERM OF THE TRUST. This Trust shall continue as to the
Employer so long as the Plan is in full force and effect. If the
Plan ceases to be in full force and effect, this Trust shall
thereupon terminate unless expressly extended by the Employer.
12.2 TERMINATION BY THE TRUSTEE. The Trustee may elect to
terminate the Trust if within thirty (30) days after its
resignation or removal pursuant to Article 11 the Employer has not
appointed a successor Trustee which has accepted such appointment.
Termination of the Trust shall be effected by distributing all
assets thereof to the Participants or other persons entitled
thereto pursuant to the direction of the Plan Administrator (or in
the absence of such direction, as determined by the Trustee) as
provided in Section 14.2 of the Plan, subject to the Trustee's
right to reserve its funds as provided in Article 11 hereof. Upon
the completion of such distribution, the Trustee shall be relieved
from all further liability with respect to all amounts so paid,
othr than any liability arising out of the Trustee's willful
misconduct or lack of good faith.
ARTICLE 13
MISCELLANEOUS
13.1 NO DIVERSION OF ASSETS. At no time shall it be possible for
any part of the assets of the Trust to be used for or diverted to
purposes other than for the exclusive benefit of Participants and
their beneficiaries or revert to the Employer, except as
specifically provided in the Plan or this Agreement.
13.2 NOTICES. Any notice from the Trustee to the Employer or from
the Employer to the Trustee provided for in the Plan and Trust
shall be effective if sent by first class mail at their respective
last address of record.
13.3 MULTIPLE TRUSTEES. In the event that there shall be two (2)
or more Trustees serving hereunder, any action taken or decision
made by any such Trustee may be taken or made by a majority of them
with the same effect as if all had jointed therein, if there be
more than two (2), or unanimously if there be two (2).
13.4 CONFLICT WITH PLAN. In the event of any conflict between the
provisions of the Plan and those of this Agreement, the former
shall prevail.
13.5 APPLICABLE LAW. Except to the extent otherwise required by
ERISA, as amended, this Agreement shall be construed in accordance
with the laws of the state where the Trustee has its principal
place of business, as specified in the Adoption Agreement.
<PAGE>
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLANS
FEES
==================================================================
New Plan Set-up $50 per plan /1/
- - Adoption of prototype plan
- - IRS determination letter
- - Fund prospectuses
- - Set-up of participant fund accounts.
Annual Account Maintenance $10 per fund account /2/
Return of Excess Contributions $5 per transaction /3/
Transfers to investments outside $5 per transaction /3/
the Stein Roe Family of Funds
Distributions $5 per transaction /4/
- - Federal Withholding
- - IRS reporting
- ---------
/1/ Please submit a check payable to SteinRoe Services Inc. along with
your adoption agreement.
/2/ Automatically assessed by a redemption of fund shares unless pre-
paid annually.
/3/ Automatically assessed by a redemption of fund shares.
/4/ Automatically assessed by a redemption of fund shares at time of
distribution. This fee is assessed for lump sum and partial
distributions, and for setting up and changing frequency, amount or
number of installment payouts.
<PAGE>
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLAN
CHECKLIST FOR ESTABLISHING YOUR PLAN
==============================================================
For each plan you adopt, please follow the steps listed below. If you
have any questions or need additional information, please call a
shareholder representative toll free at 1-800-338-2550.
1. Review the Plan documents with your tax and legal advisers.
2. Complete the ADOPTION AGREEMENT. Please refer to the
INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT for
detailed instructions. (MODEL RESOLUTIONS adopting the Plan
are enclosed for use by corporate employers.) If you are
amending an existing plan, also complete the enclosed ASSET
TRANSFER FORM.
3. If contributions are being made for employees or partners,
furnish each of them a PARTICIPANT INVESTMENT ELECTION FORM and
copies of the prospectuses of the SteinRoe Mutual Funds
available for investment so that they may make their investment
elections.
4. Complete the INVESTMENT ALLOCATION FORM.
5. Mail the following to the SteinRoe Mutual Funds, P.O. Box 1131,
Chicago, Illinois 60690, Attention: SteinRoe Services:
- ADOPTION AGREEMENT (Also furnish your trustee and plan
administrator with copies and retain a copy for your files.)
- INVESTMENT ALLOCATION FORM
- ADOPTING RESOLUTIONS (corporate employers only)
- ASSET TRANSFER FORM (amended plans only)
- A check for the amount of your initial contribution ($500
investment minimum) and the Plan installation fee ($50 per
Plan) made payable to SteinRoe Services Inc. (If you do not
include the installation fee, your contribution will be
reduced by that amount.) If you elect Participant Account
Recordkeeping on the INVESTMENT ALLOCATION FORM, you may
also include an additional amount for the annual maintenance
fee ($10 per Fund account) provided you also write the words
"Annual fee" and the amount of the fee total on your check.
7. After we receive your forms and check in good order, we will
send you confirmation of your investment which also will serve
as acknowledgement that your plan has been accepted.
10611 0292
<PAGE>
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLAN
INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT
================================================================
To establish your SteinRoe Plan, complete the appropriate Adoption
Agreement(s) by following these instructions. If you have any
questions about the SteinRoe Plan or the Adoption Agreement(s),
please call a SteinRoe shareholder representative toll free at 1-800-
338-2550.
Are the Plans Appropriate For You?
You may adopt one or both of the SteinRoe Plans - a Profit Sharing
Plan (with discretionary contributions made out of profits) and a
Money Purchase Pension Plan (with contributions based on a formula,
made regardless of profits). These plans are called "paired plans"
because, so long as they are adopted individually or in combination
with one another, each is designed to meet certain coverage and
benefit requirements of the Internal Revenue Code.
If you are a "qualifying" employer, you may adopt either SteinRoe
Plan and rely on the IRS opinion letter received by Stein Roe &
Farnham Incorporated concerning its tax qualification. A
"qualifying" employer is an employer who does not presently maintain
(and has never maintained) another tax-qualified plan covering some
of the same participants other than a paired standardized plan
offered by Stein Roe & Farnham Incorporated. The SteinRoe Plan IRS
opinion letter serial numbers are D248808a for the Profit-Sharing
Plan (Plan #001) and D248809a for the Money Purchase Pension Plan
(Plan #002).]
If you maintain another tax-qualified plan in addition to your
SteinRoe Plan, you are a non-qualifying employer and must apply for
your own determination letter from the IRS Key District Director
assigned to the District in which you have your principal place of
business. Application must be made on IRS Forms 5302 and 5307 and
advance notice of the application must be given to all employees and
certain other persons in accordance with special IRS rules and
procedures. If you are a non-qualifying employer, we suggest you
discuss this application procedure with your legal adviser.
Because they are paired standardized plans, the SteinRoe Plans do not
permit a number of alternatives and include certain limitations which
make them inappropriate or unavailable for some employers. For
example, all employees of an employer adopting a SteinRoe Plan and
the employees of any affiliated employers who meet the eligibility
requirements (except for those who are members of a collective
bargaining unit under certain conditions and certain non-resident
aliens) must be covered by the SteinRoe Plan. This can be a drawback
for some employers because contributions on behalf of employees of
affiliated employers are not deductible unless the affiliated
employers also adopt the SteinRoe Plan. In addition, employers who
adopt a SteinRoe Plan are subject to the rules applicable to top-
heavy plans regardless of whether their individual plans are, in
fact, top-heavy. Therefore, you should discuss with your legal
adviser whether adoption of the SteinRoe Plans is appropriate for
your circumstances.
Which Plan Should You Adopt?
Under the Money Purchase Pension Plan, an employer contributes a
specified percentage of each participant's compensation each year
regardless of profits. The maximum deductible contribution amount is
25% of compensation up to $30,000 for each participant. Under the
Profit-Sharing Plan, an employer makes discretionary contributions
out of profits each year of up to the lesser of 15% of compensation
or $30,000. If you adopt both Plans, your combined contributions may
not exceed 25% of compensation up to $30,000. For purposes of these
calculations, compensation in excess of $209,200 (for 1990) is not
included.
In the case of a plan participant who is self-employed, the
contribution percentage limits described above are applied to the
participant's net earnings reduced by his share of the deductible
employer contribution. This effectively reduces the Money Purchase
Pension Plan and Profit-Sharing Plan contribution percentage limits
applicable to net earnings unreduced by the deductible contribution
to 20% and 13.044%, respectively.
By adopting both Plans, you gain the flexibility of contributing the
maximum amount in years during which you have sufficient profits
while retaining the possibility of contributing a lesser amount in
less profitable years. For example, an employer who wishes to
contribute the maximum amount in profitable years, but a lesser
amount in less profitable years, might elect to contribute 10% each
year under the Money Purchase Pension Plan and a discretionary amount
of up to 15% under the Profit-Sharing Plan in those years when the
employer has sufficient profits.
* * * *
Employer Data (Section II)
Your plan will be effective as of the first day of the first Plan
Year for which you adopt the Plan. The Plan Year may be the taxable
year for your business or any other consecutive twelve-month period
you wish to designate. If affiliated employers are adopting the
Plan, insert "See Exhibit" in Sections A and F and attach a page
indicating the name and type of entity for the employer and each
affiliated employer. If you are amending an existing plan, you also
must complete the enclosed Stein Roe & Farnham Defined Contribution Plan
Asset Transfer Form.
Eligibility (Section III)
Employees who meet the eligibility requirements on the Effective Date
will become Participants immediately. All other employees who become
Participants on the earlier of the first day of the Plan Year or the
first day of the seventh month of the Plan Year on or after they meet
the eligibility requirements which you select in this section.
Credited Service (Section IV)
A. For purposes of calculating eligibility and vesting service, a
minimum of 1,000 Hours of Service per Plan Year is required unless
you elect a lesser amount.
B. To determine Hours of Service, you must keep records of actual
hours worked unless you elect one of the Service Equivalency methods
numbered 2 through 5.
Compensation (Section V)
Compensation means W-2 earnings (or, in the case of a self-employed
person, Earned Income) up to $209,200 for 1990 (as adjusted from time
to time under the Code) actually paid during the Plan Year unless you
elect to include Employer Contributions made pursuant to a salary
reduction agreement.
Contributions (Section VI - Money Purchase Pension Plan)
Allocation of Employer Contributions (Section VII - Profit-Sharing
Plan)
A. The law requires an employer to contribute a minimum amount each
year for each Participant who is not a Key Employee as more fully
explained in this section and Section 5.2 of the Plan. Social
security contributions may not be considered in calculating this
minimum allocation.
B. This section permits you to integrate Employer Contributions with
social security contributions. If a plan is integrated, higher-paid
Participants earning compensation over the compensation level you
select will receive a proportionately larger share of Employer Contributions
than Participants earning compensation under the compensation level you
select because social security contributions by an employer are
considered in the calculation process. For a more complete explanation
of the integrated plan contribution method, please see Section 2.19,
2.22, 2.23, 2.35, 5.3, and 5.4 of the Plan.
Contribution Eligibility (Section VI.D - Money Purchase Pension Plan;
Section VII.C - Profit-Sharing Plan)
A Participant is entitled to share in Employer Contributions for the
Plan Year in which he retires, dies, or becomes totally and permanently
disabled. However, if he terminates employment for any other reason,
this section permits you to elect not to make an Employer Contribution
on his behalf if he is not employed on the last day of the Plan Year and
he worked 500 Hours of Service or less during the Plan Year. The Hours
of Service required for an Employer Contribution must exceed 500 hours
unless you specify a lesser number in the blank.
Allocation Limitations (Section X - Money Purchase Pension Plan; Section
XI - Profit-Sharing Plan)
Complete this section only if you maintain tax-qualified plans in
addition to the SteinRoe Plans.
This section describes how contributions or benefits are eliminated or
reduced in any year in which the aggregate contributions or benefits for
any Participant total more than the permitted limit for a Participant
covered by plans in addition to one or both of the SteinRoe Plans.
Since these provisions are highly technical and must be coordinated with
similar provisions in your other plans (to assure that the entire excess
amount of contributions and benefits, if any, is eliminated), we suggest
you discuss this matter with your legal adviser. You also should
consider whether you should include special or additional provisions to
satisfy the legal requirements for multiple plans.
Administration (Section XI - Money Purchase Pension Plan; Section XII -
Profit-Sharing Plan)
A. This section requires you to designate plan administrator. The plan
administrator is responsible for interpreting the provisions of your
plan and deciding all questions relating to your plan. Neither SteinRoe
Services Inc., Stein Roe & Farnham Incorporated, nor the SteinRoe Mutual
Funds may be designated as plan administrator. If you fail to designate
a plan administrator, the plan administrator will be the employer.
B. "Named Fiduciaries" are persons, in addition to the plan
administrator, who are responsible for controlling and managing the
operation and administration of your plan. Neither SteinRoe Services
Inc., Stein Roe & Farnham Incorporated, nor the SteinRoe Mutual Funds
may be designated as named Fiduciaries.
Trustee (Section XII - Money Purchase Pension Plan; Section XIII -
Profit-Sharing Plan)
The SteinRoe Plans permit you to select your own trustee or co-trustees
whose duties are outlined in the Trust Agreement accompanying the Plans.
You may select one or more individuals, or a corporation, partnership or
other organization which is authorized to exercise trust powers.
However, neither SteinRoe Services Inc., Stein Roe & Farnham
Incorporated, nor the SteinRoe Mutual Funds may act as trustee of your
plan. Also, generally an employer that is a corporation or partnership
may not act as trustee. However, officers of a corporation or members
of its board of directors and members of a partnership may do so. The
trustee(s) you select must sign the Adoption Agreement in this section.
Employer Signature (Section XIII - Money Purchase Pension Plan; Section
XIV - Profit-Sharing Plan)
Both the employer and each affiliated employer should date and sign the
Adoption Agreement in this section. If an affiliated employer does not
adopt the Plan, contributions still must be made on behalf of its
employees but they will not be deductible.
Bonding Requirements
Under ERISA, each fiduciary (other than certain exempt corporate
fiduciaries) of a tax-qualified retirement plan (and every other person
who handles the plan assets) must be bonded by a corporate surety
company authorized to issue federal surety bonds by the Secretary of the
Treasury. A surety bond protects the plan against loss through fraud or
dishonesty on the part of the fiduciary. Generally, the amount of the
bond must be the greater of $1,000 or 10% of a plan's assets.
The plan administrator and trustee of your plan are fiduciaries. In
addition, depending on your individual facts and circumstances, you may
have other fiduciaries. We suggest you check with your legal adviser as
to the fiduciaries who should be bonded under your plan and the
appropriate form and amount of bond you should obtain.
10618 1190
<PAGE>
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLAN
MODEL RESOLUTIONS
(For Corporations Only)
===================================================================
INSTRUCTIONS: Your board of directors must adopt resolutions
authorizing the adoption of your Plan on or before the end of your
corporation's taxable year. These model resolutions may be used if your
bylaws permit resolutions to be adopted without a meeting. Resolution 1
should only be used if you are amending an existing plan to become the
Plan. Resolution 3 should only be used if you wish to specify a
Limitation Year under Plan Sections 6.4 and 6.5(i) other than your Plan
Year. The resolution(s) should be signed by each director and returned
with your Adoption Agreement. You should also retain a copy of your
resolution(s) and Adoption Agreement with your corporate records.
* * * *
We, the undersigned, being all of the directors of ______________
_______________________________________________________________,
in lieu of holding a meeting on the date hereof, hereby consent to the
adoption of, and adopt, the following resolutions:
[ ] 1. RESOLVED, that the ______________________ is hereby amended
(Name of present plan)
by the action taken pursuant to the following resolution(s):
2. RESOLVED, that the Stein Roe & Farnham Paired Prototype Defined
Contribution Plan and its related Trust Agreement be and hereby are
adopted in the form and with those elections as indicated in the
attached Adoption Agreement and that the officers of this corporation be
and hereby are authorized and directed to execute the Adoption Agreement
and to do such other acts and execute such other documents as may be
necessary or desirable to establish and implement the Plan and Trust.
[ ] 3. RESOLVED, that the "Limitation Year" of this corporation and all
commonly controlled corporations, trades, or businesses adopting the
Plan and Trust for purposes of Internal Revenue Code section 415 shall
be the consecutive 12-month period beginning ______________ and ending
______________.
(Month and day) (Month and day)
Date: ________________ Directors:
______________________________________
(signature)
(SEAL)
______________________________________
(signature)
______________________________________
(signature)
______________________________________
(signature)
10621 1190
<PAGE>
PARTICIPANT ALLOCATION FORM
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLANS
=================================================================
Complete the participant investment information listed below and return
this form along with your check made payable to SteinRoe Services Inc.
to: Stein Roe Mutual Funds, P.O. Box 804058, Chicago, Illinois 60680,
Attention: Stein Roe Retirement Plan Department. If you have any
questions, please call us at 1-800-405-5070.
A list of the Stein Roe Funds available for investment can be found in
this kit. If this is your initial investment, you must return this form
with your Adoption Agreement. Payment of the plan set-up fee ($50 per
plan) must be made at the time of your initial investment.
If establishing both a Money Purchase Pension and Profit Sharing Plan,
use separate Participant Investment Forms for each.
- -----------------------------------------------------------------
SECTION I - GENERAL INFORMATION
Employer Name: ____________________________ EIN: __________________
Note: Your Trustee should apply to the IRS on IRS Form SS-4 for a
separate Tax I.D. number for your trust.
Employer Address: ________________________________________________
________________________________________________
City State Zip
Telephone: ______________________
Type of Plan (Check one):
[ ] Money Purchase Pension [ ] Profit-Sharing
SECTION II - PARTICIPANT INVESTMENT AND FUND ALLOCATION
1. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
2. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
3. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
4. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
5. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
6. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
7. Participant Name _______________
Fund* $ Amt.
Social Security No. ____________ Name By Fund
--------------------------
Address: _______________________
________________________________
City State Zip
Participant is (Check one): [ ] Employee [ ] Owner
*If no Fund is specified, contributions will be invested in Stein Roe
Government Reserves, a money market fund.
- -------------------------------------------------------------------
I, the Plan Administrator, certify that the investment instructions
indicated on this form represent each participant's election(s) as
relayed to me by each participant for the listed contribution.
X____________________________________ __________________________
Signature Date
<PAGE>
ASSET TRANSFER FORM
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLANS
==================================================================
Instructions: To transfer assets held under another tax-qualified plan
to your Stein Roe & Farnham Defined Contribution Plan, complete and
return this form to Stein Roe Mutual Funds, P.O. Box 804058, Chicago,
Illinois 60680-4058, Attention: SteinRoe Services Inc. If you need to
establish your Stein Roe Plan, also complete and attach the appropriate
Adoption Agreement. If you already have established your Stein Roe
Plan, you must attach a copy of your Adoption Agreement, and notify the
IRS that you are merging your plans by filing Form 5310 with the IRS 30
days in advance of your merger. If you have questions about Form 5310,
please contact your legal adviser. If you have questions about this
form or the Stein Roe Plan, please call a Retirement Plan Representative
toll-free at 1-800-405-5070.
I. STEIN ROE PLAN (If this is a new plan, enter "New" in place of the
name and attach your Adoption Agreement.)
Name of Plan ____________________________________________
Type of Plan (Check one):
[ ] Profit Sharing [ ] Money Purchase Pension
Employer's Name __________________________ Phone _____________
Trustee's Name ___________________________ Phone _____________
Trustee's Address _____________________________________________
II. PRIOR PLAN
Name of Plan ____________________________________________
Trustee's Name ___________________________ Phone _____________
Trustee's Address _____________________________________________
Did the IRS issue a favorable opinion/determination letter on your Prior
Plan?
[ ] Yes [ ] No
III. ASSET TRANSFER (Check and complete one.)
[ ] A. Asset Transfer by Plan Amendment. Effective ________, 19__,
the Employer amended and restated the Prior Plan to be the
Stein Roe Plan as set forth in the attached Adoption
Agreement.
[ ] B. Asset Transfer by Plan Merger. Effective ___________, 19__,
the Employer adopted the Stein Roe Plan attached hereto. By
executing this form and by all other necessary and proper
acts as may be required of the Employer, the Employer hereby
merges the Prior Plan into the Stein Roe Plan.
Employer and Trustee of the Stein Roe Plan hereby authorize and direct
SteinRoe Services Inc. to forward a signed copy of this form to the
Trustee of the Prior Plan or, if none, the holder of annuity contracts
or other contracts issued by an insurance company (the "contract
holder") which shall serve as their direction to liquidate all Prior
Plan holdings and forward a check for the proceeds made payable and
addressed to SteinRoe Services Inc. for investment in the Stein Roe
Mutual Funds specified on the reverse side of this form. The
trustee/contract holder of the Prior Plan is hereby authorized and
directed to do that which is necessary under the Prior Plan and
applicable law to effectuate a direct transfer of funds from the Prior
Plan to the Stein Roe Plan without said funds being made available to
any participant or beneficiary or to the Employer. Employer hereby
warrants that the amendment merger of the Prior Plan is permitted under
applicable law, that all assets transferred qualify for transfer under
both the Stein Roe Plan and the Prior Plan, and that all acts required
thereunder have been or will be timely performed, including the filing
of Form 5310 with the IRS, if required.
IV. ASSET TRANSFER INFORMATION (Complete for each participant for whom
assets are being transferred. Use additional sheets if necessary. If
asset type is not specified, assets will be treated as deductible
Employer Contributions for all purposes. Rollovers must qualify under
Article 4 of the Stein Roe Plan.)
PARTICIPANTS'
NAMES (1) ______________ (2) ____________ (3) _____________
A. Employer
Contributions
(a) Current
year $______________ $____________ $_____________
(b) Prior
years $______________ $____________ $_____________
Sole proprietorship/Partnership Plans only: Amounts attributable to Pre-
1984 Owner-Employee Contributions
($______________) ($____________) ($____________)
(c) Sub-Total $______________ $____________ $_____________
B. Non-deductible
Voluntary
Contributions $______________ $____________ $_____________
C. Rollover
Contributions $______________ $____________ $_____________
D. Total $______________ $____________ $_____________
V. INVESTMENTS (If no Fund is specified, assets will be invested in
Stein Roe Government Reserves Fund, a money market fund. If a new
account is being opened, enter "New" under "Account No." Identify
contribution type with appropriate symbol after "Contribution Amount":
Employer (E); Voluntary (V); Rollover (R); or other Transfer (T).)
Fund Name Code
Stein Roe Balanced Fund (31)
Stein Roe Growth Stock Fund (32)
Stein Roe Capital Opportunities Fund (33)
Stein Roe International Fund (12)
Stein Roe Income Fund (09)
Stein Roe Government Income Fund (10)
Stein Roe Intermediate Bond Fund (35)
Stein Roe Cash Reserves Fund (36)
Stein Roe Special Fund (34)
Stein Roe Government Reserves Fund (39)
Stein Roe Growth & Income Fund (11)
Contri-
Fund Account bution
Participant's Name Social Security No. Code Number Amount
- -------------------------------------------------------------------
1. _______________ ___________________ ____ _________ $_______
2. _______________ ___________________ ____ _________ $_______
3. _______________ ___________________ ____ _________ $_______
TOTAL $
=======
VI. SIGNATURES (Participants' signatures are required if proceeds
transferred include their voluntary contributions.)
A. Plan Administrator: ______________________________ _________
(Signature) (Date)
B. Plan Trustee: ____________________________________ _________
(Signature) (Date)
C. Employer: ________________________________________ _________
(Signature & Title) (Date)
D. Participants: 1. _________________________________ ________
(Date)
2. _________________________________ ________
(Date)
3. _________________________________ ________
(Date)
VII. SIGNATURE GUARANTEE
________________________________________________
(Name of Institution)
________________________________________________
(Signature & Title)
<PAGE>
STEIN ROE & FARNHAM DEFINED CONTRIBUTION PLAN
BENEFICIARY DESIGNATION FORM
(Please Print of Type)
===================================================================
INSTRUCTIONS: To designate a Beneficiary to receive your death benefits
under the Plan, complete and file this form with your Plan
Administrator. Before competing the form, please read Sections 11.5
through 11.8 of the Plan and the reverse side. If you have any
questions, please call a shareholder representative toll free at (800)
338-2550.
I. GENERAL.
Name of Plan: ____________________________________________
Employer's Name ____________________ Phone: (___) ________
Address : ________________________________________________
(Street)
__________________________________________________________
(City) (State) (Zip)
Participant's Name: ________________ Phone: (___) ________
(During Business Hours)
Address : ________________________________________________
(Street)
__________________________________________________________
(City) (State) (Zip)
Social Security No.: _____________________________________
Date of Birth: _________ Sex: ____ Marital Status: ______
If married, Spouse's Name: _______________________________
Date of Birth: _______________ Social Security No.: ______
II. BENEFICIARY DESIGNATION.
Subject to certain rights your surviving spouse (if any) has to your
death benefits (explained in General Provision 9 on the reverse side),
your death benefits will be paid to your estate unless you dsignate a
Beneficiary on this form. If you are receiving benefits in the form of
installments at the time of your death, your death benefits will
continue to be paid to your Beneficiary(ies) under the same method.
Notwithstanding any Beneficiary designation you make on this form, if
you are receiving installments at the time of your death payable over a
period based on a joint and last survivor life expectancy of you and a
Beneficiary you designated at the time you elected installment payments,
your death benefits will be paid to that Beneficiary if he or she
survives you. If you are receiving benefits in the form of an annuity
at the time of your death, the terms of your annuity contract shall
govern the payment of your death benefits. If you are not receiving
benefits at the time of your death, your death benefits will be
distributed as your Beneficiary(ies) direct in accordance with Plan
Section 11.5(c). Payment of your death benefits will commence as soon
as practicable after your death unless your Beneficiary(ies) elect to
delay distribution as permitted under Plan Section 11.5(c).
I hereby revoke all prior designations of Beneficiaries and designate
the following Beneficiary(ies) to receive my death benefits:
NAME & DISTRIBUTION SOCIAL SECURITY BIRTH
RELATIONSHIP ADDRESS PERCENT OR TAX ID NO. DATE
- ------------ ------- ------------ --------------- -----
A. Primary Beneficiary(ies).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
B. Contingent Beneficiary(ies).
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
C. Minor Beneficiary. (If Beneficiary is a minor, please specify
custodian to whom death benefits should be paid.) If
_____________ is a minor at the time of my death, I hereby desig-
(Beneficiary)
nate __________ as custodian under _______________________________
(Custodian) State where minor/custodian resides) the
Uniform Gifts (Transfers) to Minors Act to receive said beneficiary's
interest.
III. SIGNATURES.
A. Participant: If I am married, by signing below, I
acknowledge that I understand General Provision 9 on the
reverse side. General provision 9 explains that my spouse has
the right to a certain portion of my death benefits payable
in the form of a Qualified Survivor Annuity. I also
understand that if I am at least age 35 (or if applicable
regulations otherwise permit) I may waive the Qualified
Survivor Annuity by checking the following box provided my
spouse consents thereto by signing below and having his or her
signature notarized. [ ]
SIGNATURE: ________________________________ DATE: ____________
B. Participant's Spouse. (Only required if you are married
and waiving the Qualified Survivor Annuity.)
I hereby consent to the elections made by my spouse on this
form, including waiver of the distribution of his or her death
benefits in the form of a Qualified Survivor Annuity, which
form of distribution gives me the right to a certain portion
of his or her death benefits under the Plan payable to me in
the form of a nontransferable life annuity. I understand that
by signing below I am giving up this right which may result in
my not receiving any of his or her death benefits under the
Plan. I also understand that I am not required to sign below
and that my consent is irrevocable. Unless the following box
is checked, I further consent to any future changes my spouse
makes to his or her elections on this form, including a change
in a designated Beneficiary and understand that by so doing I
am giving up my right to limit my consent to the specific
elections made on this form. [ ]
SIGNATURE: ________________________________ DATE: ____________
Subscribed and sworn to before me this _____ day of _____________, 19__
_________________________________
(Notary Public)
(SEAL) My Commission Expires: __________
PSIMPP (1190)
<PAGE>
GENERAL PROVISIONS
==================
1. In order for death benefit designations you make on the front of
this form to be effective, this form must be filed with your Plan
Administrator prior to your death.
2. Notwithstanding any other provision of the Plan or this form to the
contrary, if your surviving spouse is your Beneficiary and he or she
elects to receive your death benefits in the form of installment
payments as provided in Plan Section 11.9(a)(iv) and then dies before
payments commence, your death benefits will be distributed in accordance
with Plan Section 11.9 as if your spouse were a Participant.
3. Trust Beneficiary(ies).
(a) If you name a trust as Beneficiary, the trustee of that
trust must be qualified to act at the time each payment to the
trust becomes due (subject to the terms of (b) and (c) below).
(b) If no qualified trustee claims the portion of your death
benefit payable to the trust within 18 months after your death,
or if, within that period, it is established to the
satisfaction of your Plan Trustee that no trustee can or will
qualify to receive such amounts, such amounts shall be paid as
provided for in General Provision 4 below.
(c) If any payment would otherwise be made to the trustee(s) of
a trust which has terminated, such payment and any and all
later payments shall be made to the beneficiaries who received
the principal of such trust upon its termination and in the
same proportions as through such trust had terminated on the
date of each such payment.
4. Except to the extent otherwise expressly provided on the front of
this form, and subject to General Provision 3(c) above, your death
benefits:
(a) shall be paid in equal shares to your surviving Primary
Beneficiaries who are living at the time each such payment
becomes due.
(b) if there is no surviving Primary Beneficiary at the time a
payment becomes due, the payment shall be paid in equal shares
to the Surviving Contingent Beneficiaries at the time each such
payment becomes due; and
(c) if there is no Surviving Beneficiary to receive any amount
which becomes payable, such amount shall be paid to the
executor or administrator of your estate.
5. Neither the Plan nor the persons administering the Plan shall be
responsible for any failure of a trustee, executor or administrator to
perform the duties of trustee, executor or administrator, nor for the
application or disposition of any money paid to a trustee, executor or
administrator or trust beneficiary, and any money so paid shall fully
discharge the Plan and such persons for the amounts so paid.
6. The Plan and the persons administering the Plan shall be fully
discharged from all liability to any and all persons claiming under the
Plan in relying on evidence provided by affidavit or otherwise as shall
be satisfactory to persons administering the Plan in deterimining the
existence of any trust, the identity and qualifications of any
trustee(s), or any other questions of fact relative to payments due
under this Plan, and in making payment either to the trustee(s), any
beneficiary of a trust, or the executors or administrators of your
estate, as the case may be.
7. If any person to whom all or a portion of your death benefits is
payable is a minor and if either (i) you have not designated a person to
receive the minor's interest on behalf of such minor as Custodian under
the Illinois Uniform Transfers Act or similar statute, or (ii) the
person you designated refuses or is unable to act, your Plan Trustee may
in its sole discretion:
(a) distribute the interest to the legal guardian of such
minor; or
(b) designate an adult member of the minor's family, guardian
or a trust company (including your Plan Trustee), as those
terms are defined in the Illinois Transfers Act, or similar
statute, and distribute such minor's interest to the person so
designated.
8. The terms, provisions and limitations of the Plan and related Trust
Agreement and any amendments thereto are controlling over these General
Provisions and shall always govern all rights of you and your
Beneficiary(ies) and all persons claiming under, by or through them, or
any of them.
9. Explanation of Qualified Survivor Annuity.
If you die while you are married and before payment of your benefits has
commenced, the law requires 50% of your death benefits to be paid to
your surviving spouse in the form of a nontransferable life annuity
("Qualified Survivor Annuity") unless you waive this requirement.
However, if you waive this requirement, your spouse may not receive any
of your death benefits.
The amount of the annuity payments to your surviving spouse will
depend on the amount used to purchase the annuity and the annuity
purchase rate charged by the insurance company issuing the annuity. The
annuity will be purchased by your Plan Trustee from an insurance company
which it selects.
You may waive the Qualified Survivor Annuity at any time beginning
after the first day of the Plan Year during which you reach age 35 by
checking the box in Part III.A of this form provided your spouse
consents to your waiver by also signing in Part III.B and has his or her
signature notarized.
If you waive the Qualified Survivor Annuity, you may revoke your
waiver at any time before the earlier of your death or the date your
benefits commence. If you waive the Qualified Survivor Annuity and your
spouse consents thereto and you subsequently marry a different person,
your waiver will become void unless your new spouse consents thereto in
the same manner.
10. If any installment payment is less than a minimum amount that may
be established from time to time by Stein Roe & Farnham Incorporated or
the persons administering the Plan, then, at the option of any of them,
such installments may be paid less frequently. If the balance in the
account is less than $3,500 on the date installments are to commence,
the total balance shall be paid in a lump sum distribution in kind to
the person then entitled to receive such payments, the contingent
interest of any other person notwithstanding.
11. Notwithstanding any benefit distribution provision of the Plan or
any benefit distribution election by a Participant, all benefit
distributions are subject to the qualified domestic relations order
provisions of section 414(p) of the Internal Revenue Code.
<PAGE>
STEIN ROE & FARNHAM PROFIT SHARING
ADOPTION AGREEMENT #001
This is the Adoption Agreement for the Stein Roe & Farnham
Profit Sharing Plan (Prototype Paired Defined Contribution Plan
#001). The Plan is a prototype profit sharing plan designed to
be adopted either singly or in combination with the Stein Roe &
Farnham Money Purchase Pension Plan (Prototype Paired Defined
Contribution Plan #002). Please refer to the Checklist for
Establishing Your Plan and the Instructions for Completing Your
Adoption Agreement. You may also wish to consult with your tax
and legal advisors before executing your Adoption Agreement.
Failure to properly complete your Adoption Agreement may result
in disqualification of your Plan.
- -----------------------------------------------------------
The Employer hereby establishes a profit sharing plan and a
trust upon the respective terms and conditions contained in the
Prototype Paired Defined Contribution Plan (the "Plan") and the
Trust Agreement annexed hereto and appoints as Trustee of such
Trust the person(s) who have executed this Adoption Agreement
evidencing their acceptance of such appointment. The Plan and
the Trust Agreement shall be supplemented and modified by the
terms and conditions contained in this Adoption Agreement and
shall be effective on the Effective Date. The Sponsor will
inform the Employer of any amendments made to the Plan or the
discontinuance or abandonment of the Plan.
- -----------------------------------------------------------
I. SPONSOR DATA
A. Sponsor: Stein Roe & Farnham Incorporated.
B. Address: P.O. Box 804058, Chicago, Illinois 60680-4058,
Attention: Retirement Plan Department
C. Telephone: (800) 338-2550.
D. Sponsor of the Plan shall be Stein Roe & Farnham
Incorporated, or such other person qualified to act as
Sponsor as from time to time shall be designated by Stein
Roe & Farnham Incorporated on 30 days' written notice to the
Employer. If the Sponsor shall determine that it is no
longer desirable for it to act as Sponsor of this prototype
plan, it may resign as Sponsor and relieve itself of any
further responsibilities by giving the Employer 30 days'
prior written notice by certified or registered mail, return
receipt requested, postage prepaid. Employer agrees to
indemnify and hold harmless the Sponsor and each of its
officers, agents and employees against all claims,
liabilities, fines and penalties and expenses reasonably
incurred by or imposed upon it (including but not limited to
reasonable attorneys' fees) which arise as a result of
Employer's or Trustee's actions or failure to act in
connection with the operation and administration of the
Plan.
- -----------------------------------------------------------
II. EMPLOYER DATA
A. _________________________________________________________
Name of Employer and Employer Identification Number (EIN)
B. _________________________________________________________
Street Address
_________________________________________________________
City State Zip Code
C. _________________ D._________________________ E.__________
Telephone Number Employer's Taxable Year End Plan Year End
F. The Employer is:
[ ] a corporate entity
[ ] a non-corporate entity (e.g., self-employed person)
[ ] a corporation electing to be taxed under Subchapter S
G. _________________________
Effective Date (should be first day of the Plan Year)
H. If this is an amendment of an existing plan, complete the
following:
________________________________________________________
Name of Prior Plan
_____________________________________ _______________
Effective Date of Amendment Effective Date
(Should be the first day of the Plan of Prior Plan
Year of amendment)
I. _______________________________________________________
Limitation Year End (if different from E above)
- -----------------------------------------------------------
III. ELIGIBILITY
A. Employees shall be eligible to participate in the Plan upon
completion of the eligibility requirements (Plan Section
3.1; complete 1 and 2):
1. Years of Service. The Employee must complete (check
one):
[ ] One Year of Service.
[ ] ____ Years of Service. (You can require less or
more than one Year of Service, but not more than
two (2). If you select more than one Year of
Service, the Employee must be one hundred percent
(100%) vested once he becomes eligible, and you
must select vesting schedule B in Section IX of
this Adoption Agreement. If the Year of Service is
or includes a fractional year, an Employee will not
be required to complete any specified number of
Hours of Service (Section IV.A of this Adoption
Agreement) to receive credit for such fractional
year.)
2. Age. The Employee has attained age ____ (not greater
than age 21).
B. All Employees will be eligible to participate in the Plan
with the exception of the following (Plan Section 3.1; check
one or both, if applicable):
1. [ ] Union Employees. (Employees included in a unit
covered by a collective bargaining agreement between
the Employer and Employee representatives (as
defined in Section 3.1(b)(i) of the Plan), if
retirement benefits were the subject of good faith
bargaining.)
2. [ ] Nonresident Aliens. (Employees who are nonresident
aliens and who receive no earned income from the
Employer which constitutes income from sources
within the United States.)
Note: For purposes of this Section III, the term "Employee"
includes all employees of this Employer or any employer
aggregated with this Employer under Sections 414(b), (c), (m),
or (o) of the Internal Revenue Code and individuals who are
Leased Employees required to be considered Employees of any such
employer under Section 414(n) or (o) of the Code. If you or
your family own an interest in one or more trades or businesses
or lease employees from another trade or business, employees of
that trade or business may have to be considered Employees
eligible to participate in the Plan and you should discuss the
matter with your legal advisor.
- -----------------------------------------------------------
IV. CREDITED SERVICE
A. The Plan provides that a Year of Service requires at least
1,000 hours during any Plan Year. If a lower number of
hours is desired, state the number here: _____ (Plan Section
2.42.)
B. The Plan permits Hours of Service to be determined by the
use of Service Equivalencies under one of the methods
selected below. (Plan Section 2.19; check one.)
1. [ ] On the basis of actual hours for which an Employee is
paid or entitled to payment.
2. [ ] On the basis of days worked. An Employee will be
credited with ten (10) Hours of Service if under
Section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during
the day.
3. [ ] On the basis of weeks worked. An Employee will be
credited with forty-five (45) Hours of Service if
under Section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during
the week.
4. [ ] On the basis of semi-monthly payroll periods. An
Employee will be credited with ninety-five (95) Hours
of Service if under Section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour
of Service during the semi-monthly payroll period.
5. [ ] On the basis of months worked. An Employee will be
credited with one hundred ninety (190) Hours of
Service if under Section 2.19 of the Plan such
Employee would be credited with at least one (1) Hour
of Service during the month.
C. Service with predecessor employer. (Plan Sections 3.3 and
8.5; choose 1 or 2.)
1. [ ] No credit will be given for service with a
predecessor employer.
2. [ ] Credit will be given for service with the following
predecessor employer(s):
Note: The Plan provides that if this is a continuation of a
predecessor plan, service under the predecessor plan must be
counted.
- -----------------------------------------------------------
V. COMPENSATION
A. Compensation (Plan Section 2.7; choose 1 or 2):
1. [ ] shall include
- or -
2. [ ] shall not include
Employer Contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of
the Employee under Sections 125, 402(a)(8), 402(h) or 403(b)
of the Code.
B. The effective date of the election in A above shall be
_______________________________________________________
(not earlier than the first day of the first Plan Year
beginning after 1986).
- -----------------------------------------------------------
VI. CONTRIBUTIONS
Profit Sharing Plan Formula. (Plan Section 4.1(b); choose A or
B.)
A. [ ] Discretionary pursuant to Employer resolution. If no
resolution is adopted, then _______% of Participants'
compensation, not to exceed current and accumulated Net
Profits.
B. [ ] _______% of Participants' compensation, plus
discretionary amount, if any, by Employer resolution, not
to exceed current and accumulated Net Profits.
Note: Each of these formulas is subject to maximum limitations
on contributions as provided in the Plan and the Internal
Revenue Code. In no event may the Employer Contribution exceed
15% of the aggregate compensation of all Participants for the
year, plus up to 10% credit carryover in certain circumstances.
Additional limitations are included in the Plan where the
Employer also has another qualified retirement plan. An
individual Participant's limit on contributions and forfeitures
per year is generally the lesser of 25% of compensation or
$30,000.
- -----------------------------------------------------------
VII. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. Minimum Allocation. (Plan Section 5.2.)
Participants who are eligible to receive the minimum
allocation provided by Section 5.2 of the Plan shall receive
a minimum allocation of contributions and forfeitures under
this Plan equal to 3% of compensation, or if lesser, but
only for integrated plans, the largest percentage of
compensation allocated on behalf of any Key Employee for the
Plan Year. If the Employer maintains a defined benefit plan
which is required to provide a minimum benefit to each Non-
Key Employee, the defined benefit minimum for any Non-Key
Employee covered by both the defined benefit plan and this
Plan may be offset by contributions made to this Plan
provided the defined benefit plan so permits. If the
Participant also participates in the Stein Roe & Farnham
Money Purchase Pension Plan, the required minimum allocation
must be made under the Money Purchase Pension Plan.
B. Formula. (Plan Section 5.3(b); choose 1 or 2.)
1. [ ] Non-Integrated Plan. Employer contributions shall be
allocated to the accounts of all eligible
Participants prorated upon compensation.
2. [ ] Integrated Plan. Employer contributions and
forfeitures in excess of those allocated under A
above shall be integrated with Social Security and
allocated in accordance with the provisions of Plan
Section 5.3(b). The Plan's Integration Level shall
be (choose (a), (b) or (c)):
(a) [ ] Taxable Wage Base. (The maximum amount
considered as wages for such year under
Section 3121(a)(1) of the Internal Revenue
Code (the Social Security Taxable Wage Base)
as of the beginning of the Plan Year.)
-or-
(b) [ ] $_______ (a dollar amount not to exceed the
Taxable Wage Base).
-or-
(c) [ ] _____% of the Taxable Wage Base (not to
exceed 100%).
Note: If you maintain any other plan in addition to this Plan,
only one plan may be integrated with Social Security.
C. Contribution Eligibility. (Plan Section 4.1(c).)
The Plan provides that all Participants will share in
Employer Contributions for the Plan Year, except the
following (if elected):
[ ] Participants who terminate employment during the Plan
Year with not more than 500 Hours of Service and who
are not Employees as of the last day of the Plan Year
(other than Participants who die, retire, or become
Totally and Permanently Disabled). If a lesser
number of hours than 500 is desired, state the number
here:
- -----------------------------------------------------------
VIII. DISTRIBUTIONS
Normal Retirement Age. (Plan Section 2.26; choose A and/or B.)
A. [ ] The date a Participant reaches age ____ (not more than 65
or less than 55). If no age is indicated, Normal
Retirement Age shall be 65.
B. [ ] The later of age _____ (not more than 65) or the _____
(not more than 5th) anniversary of the day the
Participant commenced participation in the Plan. The
participation commencement date is the first day of the
first Plan Year in which the Participant commenced
participation in the Plan.
- -----------------------------------------------------------
IX. VESTING
Employer Contributions will become vested if the Participant
terminates employment for any reasons other than retirement,
death, or disability pursuant to the following schedule. (Plan
Section 8.3; choose A, B, C, or D.) If a service requirement
greater than 1 year is chosen for eligibility in Section III.A.1
of this Adoption Agreement, vesting Schedule B must be chosen.
A. [ ] Years of Service Vested Percentage
---------------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100 percent vesting immediately after satisfaction of the
eligibility requirements.
C. [ ] 100 percent vesting after ______ (not to exceed 3) years
of service.
D.[ ] Years of Service Vested Percentage
---------------- ----------------------------
1 year ______%
2 years ______% (not less than 20%)
3 years ______% (not less than 40%)
4 years ______% (not less than 60%)
5 years ______% (not less than 80%)
6 years 100%
Note: If vesting Schedule D is chosen, the vesting percentages
inserted must be at least as rapid as one of the above vesting
schedules at all points in time.
- -----------------------------------------------------------
X. INVESTMENTS
Each Participant shall be solely responsible for the investment
of his Account to the extent Invested in the Investment
Companies by giving such directions to the Plan Administrator
who will transmit them to the Trustee. The Trustee shall then
transmit the directions to SteinRoe Services Inc., transfer
agent for the Investment Companies. All investments shall be
subject to the restrictions and limitations set forth below and
in the Stein Roe & Farnham Prototype Paired Defined Contribution
Plan Contribution Allocation Form. No other investment
restrictions or limitations shall be imposed by the Plan
Sponsor.
A. Investment Companies. Each Participant's Account shall be
invested in the Investment Companies listed below and such
additional Investment Companies as may be made available
from time to time by Stein Roe & Farnham Incorporated;
provided, however, that no such Investment Company shall be
available to a Participant for investment unless and until
the Investment Company is registered for sale with the
Securities and Exchange Commission and the relevant
regulatory authority in the state in which the Participant
permanently resides. If no Investment Company is specified
for all or a portion of Trust assets, said assets shall be
invested in Stein Roe Cash Reserves Fund. Investments in
the Investment Companies are subject to the terms and
conditions set forth in the Investment Companies'
Prospectuses and Statements of Additional Information.
Stein Roe Cash Reserves Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Balanced Fund
Stein Roe Emerging Markets Fund
Stein Roe High Yield Fund
Stein Roe Growth Opportunities Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
Stein Roe Special Venture Fund
Stein Roe Young Investor Fund
B. Other Investments of Trust Assets. (Optional.) You may
elect to permit Trust assets to be invested in vehicles
other than the Investment Companies provided at least 75% of
the Trust assets are invested in the Investment Companies
and/or are subject to an investment advisory agreement
between Stein Roe & Farnham Incorporated and either one or
more Participants, or the Trustee, and further provided that
this 75% limitation may be waived or reduced by Stein Roe &
Farnham Incorporated. The Employer and Trustee are
responsible for establishing uniform and non-discriminatory
rules with respect to Other Investments. If you wish to
permit Other Investments, check the following box and
indicate the percentage of Trust assets to be so invested in
the blank. If the box is checked but no percentage is
entered or a percentage greater than 25% is entered in the
blank, the percentage shall be deemed to be 25%.
[ ] In addition to Investments in the Investment Companies,
up to ____% of the Trust assets may be invested in Other
Investments in accordance with such terms and conditions
as the Employer and the Trustee shall agree.
C. Telephone Exchange Privilege. (This Privilege permits the
Trustee to redeem shares with a value of not less than
$1,000 in one Investment Company by telephone and
automatically apply the proceeds to purchase shares of
another Investment Company subject to the terms and
conditions described below and in each Investment Company's
Prospectus as in effect from time to time. The Privilege
automatically applies to all Participant Accounts unless you
elect to decline the Privilege by checking the box.)
[ ] I do not want the Telephone Exchange Privilege.
The Privilege authorizes any Investment Company and its
transfer agent, each as the Trustee's attorney-in-fact, to
honor any telephonic requests, whether from the Trustee or
any other person, to redeem shares owned by the Trust in the
Investment Company and to direct the purchase with the
proceeds of shares of any of the other Investment Companies
available under the Privilege. Neither the Investment
Company nor its transfer agent, nor their officers,
directors or trustees, agents or employees shall be liable
for any loss, liability, cost or expense for acting upon
such requests. The certification, authorization,
appointments and restrictions herein shall continue until
five (5) business days after any Investment Company, the
Shares of which are held under the Plan, and its transfer
agent receive written notice from the Trustee of any change
thereof, which change, with the exception of termination,
will require a signature guarantee. Telephone Exchanges
generally are limited to four round-trips per year (a round-
trip being an exchange from one Investment Company to
another and back). Each Investment Company or its transfer
agent may suspend, limit or terminate the Privilege without
notice to the Trustee. Each Investment Company and its
transfer agent is further authorized to record telephone
instructions pursuant to this Privilege.
D. Valuations. Each Participant's Account invested in shares
of the Investment Companies shall be valued each business
day of the Investment Company as provided in the Prospectus
and Statement of Additional Information of the Investment
Company.
E. Contribution Restrictions. Contributions shall be subject
to the following restrictions, unless waived or reduced by
Stein Roe & Farnham Incorporated:
1. Contributions by or on behalf of each Participant may
only be invested in one Investment Company unless a
minimum of $500 is invested in each.
2. Each Employer Contribution shall be at least $50 and may
be made as often as once each calendar month.
3. Each Rollover Contribution shall be at least $500.
F. Fees. Fees to the Sponsor shall be those fees as shall be
established from time to time by the Sponsor. Unless the
Employer by separate agreement agrees to pay fees hereunder
directly, all fees shall be charged against each
Participant's Accounts either by reduction of contributions
into such Accounts or by redemption of shares of the
Investment Companies held for such Accounts. In the event
extraordinary services resulting from unusual administrative
responsibilities not herein contemplated are required,
additional extraordinary fees may be charged.
- -----------------------------------------------------------
XI. ALLOCATION LIMITATIONS
Complete this section only if you maintain or ever maintained
another qualified plan (other than the Stein Roe & Farnham Money
Purchase Pension Plan) in which any Participant in this Plan is
(or was) a Participant or could become a Participant. This
section must also be completed if you maintain a welfare benefit
fund, as defined in Section 419(e) of the Code, or an individual
medical account, as defined in Section 415(1)(2) of the Code,
under which amounts are treated as annual additions with respect
to any Participant in this Plan.
A. If a Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a
master or prototype plan (Plan Section 6.3; choose either 1
or 2):
1.[ ] The provisions of Section 6.2 will apply as if the
other plan were a master or prototype plan.
2. [ ] On an attachment, provide the method under which the
plans will limit total annual additions to the maximum
permissible amount, and will properly reduce any
excess amounts, in a manner that precludes Employer
discretion.
B. If a Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer, attach an
explanation of the method under which the plans involved
will satisfy the 1.0 limitation in a manner that precludes
Employer discretion. (Plan Section 6.4.)
- -----------------------------------------------------------
XII. ADMINISTRATION
A. The Plan Administrator of the Plan will be (Plan Sections
2.30 and 13.4; choose 1,2,3, or 4):
1. [ ] The Trustee.
2. [ ] The Employer.
3. [ ] An Individual Plan Administrator designated by the
Employer:
___________________________________________________
Name
___________________________________________________
Business Address
4. [ ] A Committee of two or more Employees designated by
the Employer:
Name Title Signature Phone
___________________________________________________
___________________________________________________
___________________________________________________
Note: If no Plan Administrator has been designated or serving
at any time, the Employer will be deemed the Plan Administrator.
(Plan Section 13.4.)
B. Named Fiduciaries. The Plan Administrator (including all
members of a committee, if a committee is named) is a Named
Fiduciary for the Plan. If other persons are also to be
Named Fiduciaries, their names and addresses are:
Name Address
_________________________________________________________
_________________________________________________________
C. Powers. The Named Fiduciaries have all of the powers set
forth in the Plan. If any powers or duties are to be
allocated among them, or delegated to third parties,
indicate below what the powers or duties are and to whom
they are to be delegated. (Plan Section 13.3.)
_________________________________________________________
_________________________________________________________
_________________________________________________________
D. Withholding. If the Employer has not elected to permit
Trust assets to be invested in Other Investments in Section
X.B hereof, the Plan Administrator hereby directs SteinRoe
Services Inc., as transfer agent of the Investment Companies
listed in Section X.A hereof and such additional Investment
Companies as may be made available from time to time by
Stein Roe & Farnham Incorporated, to withhold federal income
tax from any designated distribution as defined in section
3405(d)(1) of the Internal Revenue Code, unless the
recipient properly elects in writing not to have withholding
apply, and hereby agrees to provide SteinRoe Services Inc.
with such information as may be required by SteinRoe
Services Inc. to withhold said tax.
- -----------------------------------------------------------
XIII. THE TRUSTEE
A. The Employer hereby appoints the following to serve as
Trustee(s) (Plan Section 2.39; name one or more):
________________________________ _____________________________
Date Name
________________________________ _____________________________
Witness Address
_____________________________
Signature
________________________________ _____________________________
Date Name
________________________________ _____________________________
Witness Address
_____________________________
Signature
- -----------------------------------------------------------
XIV. EMPLOYER SIGNATURE
The Employer acknowledges receipt of the current Prospectuses of
the Investment Companies designated for investment under the
Plan and represents that it has delivered copies thereof to each
Participant in the Plan, and that it will deliver to each
Participant making contributions and each new Participant a copy
of the then current Prospectuses of such Investment Companies.
The Employer further represents that the information in this
Adoption Agreement shall become effective only when approved and
countersigned by the Trustee(s). The right to reject this
Adoption Agreement for any reason is reserved.
Note: This Adoption Agreement must be used only in conjunction
with the basic Plan document #001. An Employer who has ever
maintained or who later adopts any plan (including, after
December 31, 1985, a welfare benefit fund, as defined in section
419(e) of the Code, which provides post-retirement medical
benefits allocated to separate accounts for Key Employees as
defined in Section 419A(d)(3)), or an individual medical
account, as defined in Section 415(1)(2) of the Code, in
addition to this Plan (other than the Stein Roe & Farnham Money
Purchase Pension Plan) may not rely on the opinion letter issued
by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Section 401 of the
Internal Revenue Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the plans are
qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
The Adoption Agreement consists of 7 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption
Agreement to be executed by its duly authorized officers this
_____ day of _________________, 19 _____.
Date _____________________ ______________________________
Employer
(Corporate Seal)
By: _________________________
Signature
_________________________
Name
Attest: _____________________
_________________________
Title
10/97
<PAGE>
STEIN ROE & FARNHAM MONEY PURCHASE PENSION
ADOPTION AGREEMENT #002
This is the Adoption Agreement for the Stein Roe & Farnham Money
Purchase Pension Plan (Prototype Paired Defined Contribution Plan
#002). The Plan is a prototype money purchase pension plan
designed to be adopted either singly or in combination with the
Stein Roe & Farnham Profit Sharing Plan (Prototype Paired Defined
Contribution Plan #001). Please refer to the Checklist for
Establishing Your Plan and the Instructions for Completing Your
Adoption Agreement. You may also wish to consult with your tax and
legal advisers before executing your Adoption Agreement. Failure
to properly complete your Adoption Agreement may result in
disqualification of your Plan.
The Employer hereby establishes a money purchase pension plan and a
trust upon the respective terms and conditions contained in the
Prototype Paired Defined Contribution Plan (the "Plan") and the
Trust Agreement annexed hereto and appoints as Trustee of such
Trust the person(s) who have executed this Adoption Agreement
evidencing their acceptance of such appointment. The Plan and the
Trust Agreement shall be supplemented and modified by the terms and
conditions contained in this Adoption Agreement and shall be
effective on the Effective Date. The Sponsor will inform the
Employer of any amendments made to the Plan or the discontinuance
or abandonment of the Plan.
- -------------------------------------------------------------------
I. SPONSOR DATA
A. Sponsor: Stein Roe & Farnham Incorporated
B. Address: P.O. Box 804058, Chicago, Illinois 60680-4058,
Attention: Retirement Plan Department
C. Telephone: (800) 405-5070
D. Sponsor of the Plan shall be Stein Roe & Farnham Incorporated,
or such other person qualified to act as Sponsor as from time
to time shall be designated by Stein Roe & Farnham Incorporated
on 30 days' written notice to the Employer. If the Sponsor
shall determine that it is no longer desirable for it to act as
Sponsor of this prototype plan, it may resign as Sponsor and
relieve itself of any further responsibilities by giving the
Employer 30 days' prior written notice by certified or
registered mail, return receipt requested, postage prepaid.
Employer agrees to indemnify and hold harmless the Sponsor and
each of its officers, agents and employees against all claims,
liabilities, fines and penalties and expenses reasonably
incurred by or imposed upon it (including but not limited to
reasonable attorneys' fees) which arise as a result of
Employer's or trustee's actions or failure to act in connection
with the operation and administration of the Plan.
- -------------------------------------------------------------------
II. EMPLOYER DATA
A. _____________________________________________________________
Name of Employer and Employer Identification Number (EIN)
B. _____________________________________________________________
Street Address
_____________________________________________________________
City State Zip Code
C. ________________ D. _____________________ E. _______________
Telephone Number Employer's Taxable Year End Plan Year End
F. The Employer is:
[ ] a corporate entity
[ ] a non-corporate entity (e.g., self-employed person)
[ ] a corporation electing to be taxed under Subchapter S
G. __________________________________
Effective Date (Should be first day of the Plan Year)
H. If this is an amendment of an existing plan, complete the
following:
___________________________________________________________
Name of Prior Plan
___________________________________________________________
Effective Date of Amendment (Should be the first day of the
Plan Year of amendment)
___________________________________________________________
Effective Date of Prior Plan
I. ___________________________________________________________
Limitation Year End (if different from E above)
- -----------------------------------------------------------------
III. ELIGIBILITY
A. Employees shall be eligible to participate in the Plan upon
completion of the eligibility requirements (Plan Section 3.1;
complete 1 and 2):
1. Years of Service. The Employee must complete (check one):
[ ] One Year of Service.
[ ] _____ Years of Service. (You can require less or more
than one Year of Service, but not more than two (2). If
you select more than one Year of Service, the Employee
must be one hundred percent (100%) vested once he
becomes eligible, and you must select vesting schedule B
in Section VIII of this Adoption Agreement. If the Year
of Service is or includes a fractional year, an Employee
will not be required to complete any specified number of
Hours of Service (Section IV.A of this Adoption
Agreement) to receive credit for such fractional year.)
2. Age. The Employee has attained age ____ (not greater than
age 21).
B. All Employees will be eligible to participate in the Plan with
the exception of the following (Plan Section 3.1; check one or
both, if applicable):
1. [ ] Union Employees. (Employees included in a unit covered
by a collective bargaining agreement between the
Employer and Employee representatives (as defined in
Section 3.1(b)(i) of the Plan), if retirement benefit
were the subject of good faith bargaining.)
2. [ ] Nonresident Aliens. (Employees who are nonresident
aliens and who receive no earned income from the
Employer which constitutes income from sources within
the United States.)
Note: For purposes of this Section III, the term "Employee"
includes all employees of this Employer or any employer aggregated
with this Employer under section 414(b), (c), (m), or (o) of the
Internal Revenue Code and individuals who are Leased Employees
required to be considered Employees of any such employer under
section 414(n) or (o) of the Code. If you or your family own an
interest in one or more trades or businesses or lease employees
from another trade or business, employees of that trade or business
may have to be considered Employees eligible to participate in the
Plan and you should discuss the matter with your legal adviser.
- ------------------------------------------------------------------
IV. CREDITED SERVICE
A. The Plan provides that a Year of Service requires at least
1,000 hours during any Plan Year. If a lower number of hours
is desired, state the number here: _____ (Plan Section 2.42.)
B. The Plan permits Hours of Service to be determined by the use
of Service Equivalencies under one of the methods selected
below. (Plan Section 2.19; check one.)
1. [ ] On the basis of actual hours for which an Employee is
paid or entitled to payment.
2. [ ] On the basis of days worked. An Employee will be
credited with ten (10) Hours of Service if under Section
2.19 of the Plan such Employee would be credited with at
least one (1) Hour of Service during the day.
3. [ ] On the basis of weeks worked. An Employee will be
credited with forty-five (45) Hours of Service if under
Section 2.19 of the Plan such Employee would be credited
with at least one (1) Hour of Service during the week.
4. [ ] On the basis of semi-monthly payroll periods. An
Employee will be credited with ninety-five (95) Hours of
Service if under Section 2.19 of the Plan such Employee
would be credited with at least one (1) Hour of Service
during the semi-monthly payroll period.
5. [ ] On the basis of months worked. An Employee will be
credited with one hundred ninety (190) Hours of Service
if under Section 2.19 of the Plan such Employee would be
credited with at least one (1) Hour of Service during
the month.
C. Service with predecessor employer. (Plan Section 3.3 and 8.5;
choose 1 or 2.)
1. [ ] No credit will be given for service with a predecessor
employer.
2. [ ] Credit will be given for service with the following
predecessor employer(s):______________________________
______________________________________________________
Note: The Plan provides that if this is a continuation of a
predecessor plan, service under the predecessor plan must be
counted.
- -----------------------------------------------------------------
V. COMPENSATION
A. Compensation (Plan Section 2.7; choose 1 or 2):
1. [ ] shall include
- or -
2. [ ] shall not include
Employer Contributions made pursuant to a salary reduction
agreement which are not includible in the gross income of the
Employee under sections 125, 402(a)(8), 402(h) or 403(b) of the
Code.
B. The effective date of the election in A above shall be _________
(not earlier than the first day of the first Plan Year beginning after 1986).
- ------------------------------------------------------------------
VI. CONTRIBUTIONS
A. Minimum Allocation. (Plan Section 5.2.)
Participants who are eligible to receive the minimum allocation
provided by Section 5.2 of the Plan shall receive a minimum
contribution under this Plan equal to 3% of Compensation, or if
lesser, the largest percentage of Compensation allocated on
behalf of any Key Employee for the Plan Year. If the Employer
maintains a defined benefit plan which is required to provide a
minimum benefit to each Non-Key Employee, the defined benefit
minimum for any Non-Key Employee covered by both the defined
benefit plan and this Plan may be offset by contributions made
to this Plan provided the defined benefit plan so permits. If
the Participant also participates in the Stein Roe & Farnham
Profit Sharing Plan, the required minimum allocation must be
made under this Plan, even if the integrated plan combination
formula is selected.
B. Employer Contribution Formula. (Plan Section 4.1(a); choose 1
or 2.)
1. [ ] Non-Integrated Plan. The Employer will contribute
______% (not more than 25%) of compensation for each
Participant inclusive of the Minimum Allocation required
by A above.
2. [ ] Integrated Plan (complete a; b is optional). (a) The
Employer will contribute an amount equal to _____% (base
contribution percentage; not less than 3%) of each
Participant's Compensation (as defined in Section 2.7 of
the Plan) for the Plan Year, up to the Integration
Level plus ____% ("Integration Percentage") (not less
than 3% and not to exceed the base contribution
percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the Maximum Disparity
Rate) of such Participant's compensation for the Plan
Year in excess of the Integration Level.
The Integration Level shall be (choose one):
(i) [ ] Taxable Wage Base: (The maximum amount
considered as wages for such year under
Section 3121(a)(1) of the Internal Revenue
Code (the social security taxable wage base)
as of the beginning of the Plan Year.)
(ii) [ ] $______ (a dollar amount not to exceed the
amount in (i) above).
(iii) [ ] _______% of the amount in (i) above (not to
exceed 100%).
(b) [ ] The Employer will contribute ______% (not to
exceed 25% minus the Integration Percentage) of
Compensation for each Participant.
Note: If you maintain any other plan in addition to this plan only
one plan may be integrated with social security.
C. Forfeitures for a given Plan Year (Plan Section 5.3(a); choose
1 or 2):
1. [ ] Shall be applied to reduce the Employer Contribution in
that year, or if in excess of the Employer Contribution
for such Plan Year, the excess amounts shall be used to
reduce the Employer Contribution in the next succeeding
Plan Year or Years.
-or-
2. [ ] Shall be added to the Employer Contribution and
allocated accordingly.
D. Contribution Eligibility (Plan Section 4.1(c)).
The Plan provides that all Participants will share in Employer
Contributions for the Plan Year, except the following (if
elected):
[ ] Participants who terminate employment during the Plan Year
with not more than 500 Hours of Service and who are not
Employees as of the last day of the Plan Year (other than
Participants who die, retire or become Totally and
Permanently Disabled). If a fewer number of Hours than 500
is desired, state the number here:______________
- -------------------------------------------------------------------
VII. DISTRIBUTIONS
Normal Retirement Age. (Plan Section 2.26; choose A and/or B.)
A. [ ] The date a Participant reaches age ______ (not more than 65
or less than 55). If no age is indicated, Normal
Retirement Age shall be 65.
B. [ ] The later of age ______ (not more than 65) or the ______
(not more than 5th) anniversary of the day the Participant
commenced participation in the Plan. The participation
commencement date is if the first day of the first Plan
Year in which the Participant commenced participation in
the Plan.
- -------------------------------------------------------------------
VIII. VESTING
Employer Contributions will become vested if the Participant
terminates employment for any reasons other than retirement, death,
or disability pursuant to the following schedule. (Plan Section
8.3; choose A, B, C, or D. If a service requirement greater than 1
year is chosen for eligibility in Section III.A.1 of this Adoption
Agreement, vesting schedule B must be chosen.)
A. [ ] Years of Service Vested Percentage
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
B. [ ] 100 percent vesting immediately after satisfaction of the
eligibility requirements.
C. [ ] 100 percent vesting after ______ (not to exceed 3) years of
service.
D. [ ] Years of Service Vested Percentage
1 year ______%
2 years ______% (not less than 20%)
3 years ______% (not less than 40%)
4 years ______% (not less than 60%)
5 years ______% (not less than 80%)
6 years 100%
Note: If vesting schedule D is chosen, the vesting percentages
inserted must be at least as rapid as one of the above vesting
schedules at all points in time.
- -------------------------------------------------------------------
IX. INVESTMENTS
Each Participant shall be solely responsible for the investment of
his Account to the extent invested in the Investment Companies by
giving such directions to the Plan Administrator who will transmit
them to the Trustee. The Trustee shall then transmit the
directions to SteinRoe Services Inc., transfer agent for the
Investment Companies. All investments shall be subject to the
restrictions and limitations set forth below and in the Stein Roe &
Farnham Prototype Paired Defined Contribution Plan Contribution
Allocation Form. No other investment restrictions or limitations
shall be imposed by the Plan Sponsor.
A. Investment Companies. Each Participant's Account shall be
invested in the Investment Companies listed below and such
additional Investment Companies as may be made available from
time to time by Stein Roe & Farnham Incorporated; provided,
however, that no such Investment Company shall be available to
a Participant for investment unless and until the Investment
Company is registered for sale with the Securities and Exchange
Commission and the relevant regulatory authority in the state
in which the Participant permanently resides. If no Investment
Company is specified for all or a portion of Trust assets, said
assets shall be invested in Stein Roe Cash Reserves.
Investments in the Investment Companies are subject to the
terms and conditions set forth in the Investment Companies'
Prospectuses and Statements of Additional Information.
Stein Roe Cash Reserves Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Balanced Fund
Stein Roe Emerging Markets Fund
Stein Roe High Yield Fund
Stein Roe Growth Opportunities Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
Stein Roe Special Venture Fund
Stein Roe Young Investor Fund
B. Other Investments of Trust Assets. (Optional). You may elect
to permit Trust assets to be invested in vehicles other than
the Investment Companies provided at least 75% of the Trust
assets are invested in the Investment Companies and/or are
subject to an investment advisory agreement between Stein Roe &
Farnham Incorporated and either one or more Participants, or
the Trustee, and further provided that this 75% limitation may
be waived or reduced by Stein Roe & Farnham Incorporated. The
Employer and Trustee are responsible for establishing uniform
and non-discriminatory rules with respect to Other Investments.
If you wish to permit Other Investments, check the following
box and indicate the percentage of Trust assets to be so
invested in the blank. If the box is checked but no percentage
is entered or a percentage greater than 25% is entered in the
blank, the percentage shall be deemed to be 25%.
[ ] In addition to Investments in the Investment Companies, up to
_____% of the Trust assets may be Invested in Other Investments
in accordance with such terms and conditions as the Employer
and the Trustee shall agree.
C. Telephone Exchange Privilege. (This privilege permits the
Trustee to redeem shares with a value of not less than $1,000
in one Investment Company by telephone or telegraph and
automatically apply the proceeds to purchase shares of another
Investment Company subject to the terms and conditions
described below and in each Investment Company's Prospectus as
in effect from time to time. The Privilege automatically
applies to all Participant Accounts unless you elect to decline
the Privilege by checking the box.)
[ ] I do not want the Telephone Exchange Privilege.
The Privilege authorizes any Investment Company and its
transfer agent, each as the Trustee's attorney-in-fact, to
honor any telegraphic or telephonic requests, whether from the
Trustee or any other person, to redeem shares owned by the
Trust in the Investment Company and to direct the purchase with
the proceeds of shares of any of the other Investment Companies
available under the Privilege. Neither the Investment Company
nor its transfer agent, nor their officers, directors or
trustees, agents or employees shall be liable for any loss,
liability, cost or expense for acting upon such requests. The
certification, authorization, appointments and restrictions
herein shall continue until five(5) business days after any
Investment Company, the Shares of which are held under the
Plan, and its transfer agent receive written notice from the
Trustee of any change thereof, which change, with the exception
of termination, will require a signature guarantee. Telephone
Exchanges generally are limited to four round-trips per year (a
round-trip being an exchange from one Investment Company to
another and back). Each Investment Company or its transfer
agent may suspend, limit or terminate the Privilege without
notice to the Trustee. Each Investment Company and its
transfer agent is further authorized to record telephone
instructions pursuant to this Privilege.
D. Valuations. Each Participant's Account invested in shares of
the Investment Companies shall be valued each business day of
the Investment Company as provided in the Prospectus and
Statement of Additional Information of the Investment Company.
E. Contribution Restrictions. Contributions shall be subject to
the following restrictions, unless waived or reduced by Stein
Roe & Farnham Incorporated:
1. Contributions by or on behalf of each Participant may only
be invested in one Investment Company unless a minimum of
$500 is invested in each.
2. Each Employer Contribution shall be at least $50 and may be
made as often as once each calendar month.
3. Each Rollover Contribution shall be at least $500.
F. Fees. Fees to the Sponsor shall be those fees as shall be
established from time to time by the Sponsor. Unless the
Employer by separate agreement agrees to pay fees hereunder
directly, all fees shall be charged against each Participant's
Accounts either by reduction of contributions into such
Accounts or by redemption of shares of the Investment Companies
held for such Accounts. In the event extraordinary services
resulting from unusual administrative responsibilities not
herein contemplated are required, additional extraordinary fees
may be charged.
- -------------------------------------------------------------------
X. ALLOCATION LIMITATIONS
Complete this section only if you maintain or ever maintained
another qualified plan (other than the Stein Roe & Farnham Profit
Sharing Plan) in which any Participant in this Plan is (or was) a
Participant or could become a Participant. This section must also
be completed if you maintain a welfare benefit fund, as defined in
Section 419(e) of the Code, or an individual medical account, as
defined in Section 415(1)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this
Plan.
A. If a Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a
master or prototype plan (Plan Section 6.3; choose either 1 or
2):
1. [ ] The provisions of Section 6.2 will apply as if the
other plan were a master or prototype plan.
2. [ ] On an attachment, provide the method under which the
plans will limit total annual additions to the maximum
permissible amount, and will properly reduce any excess
amounts, in a manner that precludes Employer
discretion.
B. If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, attach an explanation
of the method under which the plans involved will satisfy the
1.0 limitation in a manner that precludes Employer discretion.
(Plan Section 6.4.)
- -------------------------------------------------------------------
XI. ADMINISTRATION
A. The Plan Administrator of the Plan will be (Plan Sections 2.30
and 13.4; choose 1, 2, 3, or 4):
1. [ ] The Trustee.
2. [ ] The Employer.
3. [ ] An Individual Plan Administrator designated by the
Employer:
__________________________________________
Name
______________________________________________
Address
4. A Committee of two or more Employees designated by the
Employer:
Name Title Signature
________________________________________________________
________________________________________________________
________________________________________________________
Note: If no Plan Administrator has been designated or serving at
any time, the Employer will be deemed the Plan Administrator.
(Plan Section 13.4.)
B. Named Fiduciaries. The Plan Administrator (including all
members of a committee, if a committee is named) is a Named
Fiduciary for the Plan. If other persons are also to be Named
Fiduciaries, their names and addresses are:
Name Address
______________________________________________________________
______________________________________________________________
C. Powers. The Named Fiduciaries have all of the powers set forth
in the Plan. If any powers or duties are to be allocated among
them, or delegated to third parties, indicate below what the
powers or duties are and to whom they are to be delegated.
(Plan Section 13.3.)
_____________________________________________________________
______________________________________________________________
______________________________________________________________
D. Withholding. If the Employer has not elected to permit Trust
assets to be invested in Other Investments in Section IX.B
hereof, the Plan Administrator hereby directs SteinRoe Services
Inc., as transfer agent of the Investment Companies listed in
Section IX.A hereof and such additional Investment Companies as
may be made available from time to time by Stein Roe & Farnham
Incorporated, to withhold federal income tax from any
designated distribution as defined in Section 3405(d)(1) of the
Internal Revenue Code, unless the recipient properly elects in
writing not to have withholding apply, and hereby agrees to
provide SteinRoe Services Inc. with such information as may be
required by SteinRoe Services Inc. to withhold said tax.
- -------------------------------------------------------------------
XII. THE TRUSTEE
Employer hereby appoints the following to serve as Trustee(s) (Plan
Section 2.39; name one or more):
________________________________ _____________________________
Date Name
________________________________ _____________________________
Witness Address
_____________________________
Signature
________________________________ _____________________________
Date Name
________________________________ _____________________________
Witness Address
_____________________________
Signature
- ------------------------------------------------------------
XIII. EMPLOYER SIGNATURE
The Employer acknowledges receipt of the current Prospectuses of
the Investment Companies designated for investment under the Plan
and represent that it has delivered copies thereof to each
Participant in the Plan, and that it will deliver to each
Participant making contributions and each new Participant a copy of
the then current Prospectuses of such Investment Companies. The
Employer further represents that the information in this Adoption
Agreement shall become effective only when approved and
countersigned by the Trustee(s). The right to reject this Adoption
Agreement for any reason is reserved.
Note: This Adoption Agreement must be used only in conjunction with
the basic plan document #01. An Employer who has ever maintained
or who later adopts any plan (including, after December 31, 1985, a
welfare benefit fund, as defined in section 419(e) of the Code,
which provides post-retirement medical benefits allocated to
separate accounts for Key Employees as defined in Section
419A(d)(3)), or an individual medical account, as defined in
Section 415(1)(2) of the Code, in addition to this Plan (other than
the Stein Roe & Farnham Profit Sharing Plan) may not rely on the
opinion letter issued by the National Office of the Internal
Revenue Service as evidence that this Plan is qualified under
Section 401 of the Internal Revenue Code. If the Employer who
adopts or maintains multiple plans wishes to obtain reliance that
the plans are qualified, application for a determination letter
should be made to the appropriate Key District Director of Internal
Revenue.
The Adoption Agreement consists of 6 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement
to be executed by its duly authorized officers this ________ day of
______________________, 19 _____.
Date _________________________ ________________________________
Employer
(Corporate Seal)
By: ______________________________
Signature
______________________________
Name
Attest: __________________________
______________________________
Title
10/97
<PAGE>
EXHIBIT 14(a)
Stein Roe Funds
Individual Retirement Account
Inside you will find:
How to Establish an IRA
IRA Disclosure Statement
Stein Roe IRA Plan
<PAGE> 1
TABLE OF CONTENTS
Page
IRA Disclosure Statement ...........1
Revocation Rights...................1
Eligibility.........................2
Contributions.......................2
Contribution Corrections............5
Rollover Contributions and
Asset Transfers...................5
Spousal IRA Contributions...........7
Distribution of Benefits............7
Taxation of Distributions...........8
Reporting to the Internal
Revenue Service...................9
Prohibited Transactions............10
The Custodian and the Plan Sponsor.10
Investment of Contributions........10
Charges and Fees...................11
Simplified Employee Pension Plans..12
Stein Roe Funds Individual
Retirement Account Plan..........14
IRA DISCLOSURE STATEMENT
We are required to give you this Disclosure Statement in order to
assure that you are informed and understand the nature of an
Individual Retirement Account ("IRA"). The Individual Retirement
Account Plan and the Application Form transmitted with this
booklet are considered a single document which, in a
substantially similar form, was approved by the Internal Revenue
Service as a tax-qualified Individual Retirement Account Plan
("IRA" or the "Plan") and received Internal Revenue Service
Prototype Plan No. D100035d dated September 19, 1996. We intend
to apply to the Service for approval of the Plan as amended and
restated in this booklet and will advise Plan Participants when
the Service responds to our application. Internal Revenue Service
approval is a determination only as to the form of the documents
and does not mean that the Service approves the merits of the
Plan.
By adopting the Plan, your IRA is qualified under the
Internal Revenue Code. Use of the Plan also simplifies and
minimizes the administration and investment of your IRA assets.
Please note that this is not a SIMPLE retirement plan document
under code section 408(p).
We urge you to read this booklet carefully before adopting
the Plan.
REVOCATION RIGHTS
If you establish an IRA under the Stein Roe Funds Individual
Retirement Account Plan and you receive this booklet less than
seven days preceding the date on which you established your IRA,
you have the right to revoke your IRA. (If you receive this
booklet at least seven days prior to the date on which you
establish your IRA, you do not have this right.) If you revoke
your IRA, the full amount of your contributions will be refunded
without reduction for fees, expenses or market fluctuations. In
order to avoid possible losses in market values of
<PAGE> 2
contributions during the seven-day revocation period, the
Custodian reserves the right not to invest your contributions in
excess of $2,000 until the end of the revocation period unless
you invest them in Stein Roe Cash Reserves Fund. For your
convenience, initial contributions of $2,000 or less generally
will be invested as soon as possible.
Should you decide to revoke your IRA as described above, you
may do so and will receive a full refund only if you call
SteinRoe Services Inc. ("SSI"), agent of the Custodian, during
normal business hours within seven days from the date on which
your IRA is established -- you may call toll free at 800-338-
2550. Your telephone IRA revocation instructions will be tape-
recorded. If you fail to properly revoke your IRA within seven
days after it is established, you may not revoke your IRA at a
later date.
The rest of this Disclosure Statement is a general outline
of the provisions of the Plan and certain important
considerations involved in a decision to adopt the Plan for
retirement savings.
ELIGIBILITY
If you are employed (or self-employed) and under age 70 1/2 at
the end of a taxable year, you may establish an IRA. A spouse
with little or no compensation can establish a Spousal IRA if at
the end of a taxable year he or she is under age 70 1/2 and still
married. For federal income tax purposes, your IRA contributions
may be treated as deductible or nondeductible as discussed below.
You may establish an IRA for the purpose of making a rollover
contribution, regardless of your age or employment status.
CONTRIBUTIONS
In General
As long as you are eligible, you may make annual contributions to
an IRA in an amount of up to the lesser of 100 percent of
compensation or $2,000. Similarly, you may contribute up to
$2,000 to an eligible spouse's IRA as long as the combined total
contributions to both spouse's IRAs do not exceed the combined
compensation of you and your spouse. You must file a joint
federal income tax return and your spouse's taxable compensation
for the year must be less than yours. This means that total
combined contributions to both IRAs can be as much as $4,000 a
year. The amount contributed may be divided between your IRAs in
any way you decide as long as not more than $2,000 is contributed
to either spouse's IRA for a single year. If you reach age 70 1/2
before your spouse does and you are still employed, you may no
longer make contributions to your IRA, but you may continue to
make spousal contributions to your spouse's account until the
year your spouse reaches age 70 1/2. Contributions that exceed
the maximum limits are excess contributions subject to penalties
described later in this booklet.
Compensation includes salary, bonuses, wages, overtime pay,
tips, professional fees, earned income from self-employment, and
taxable alimony or separate maintenance payments. It does not
include rental income, dividends or interest, or amounts received
as pension, annuity or deferred compensation income.
Your IRA contributions are held in a Custodial Account
exclusively for your benefit and the benefit of any beneficiaries
you may designate on a Beneficiary Form delivered to the
Custodian. The assets in your IRA generally may not be combined
with those of another individual, and your right to the entire
balance in your IRA is nonforfeitable.
IRA contributions for a given year may be made until the due
date for filing your federal income tax return for that year
(generally April 15) but not including extensions. You must
designate the tax year for which each contribution is made. If
you do not designate the desired year for a contribution, your
contribution will be applied to the current year.
<PAGE> 3
Under the Plan, the minimum initial contribution is $500 per
Mutual Fund account. This minimum amount must be contributed in a
single payment when you establish your IRA. Thereafter,
contributions can be made in amounts as small as $50 each. These
minimums do not apply to IRAs established as part of a Simplified
Employee Pension Plan ("SEP") in which there is more than one
participant. Stein Roe & Farnham also may waive or reduce these
minimums.
Deductible Contribution Limit
General - If neither you nor your spouse, if married, has been an
active participant in an employer-maintained retirement plan
during the year for which your contribution is made,
contributions are deductible to the full extent of the
contribution limit. For individual accounts this means you may
deduct your contribution up to the lesser of $2,000 or 100
percent of your individual compensation. The deductibility of
contributions to a Spousal IRA is determined by the same rules as
those applicable to regular contributions. You may deduct the
contribution to the IRA of a spouse with less compensation in the
amount of the lesser of: i) $2,000; or ii) the compensation of
both spouses, reduced by any deduction allowed for contributions
to the IRA of the spouse with more compensation. The deduction
for contributions to both spouse's IRAs may be further limited if
either spouse is covered by an employer-maintained retirement
plan.
If either you or, if you are married, your spouse, is an
active participant in an employer-maintained retirement plan, the
deductibility of your contribution depends upon your modified
adjusted gross income ("MAGI") and filing status for the year for
which your contribution is made. Your contribution is fully
deductible if your MAGI is less than $40,000 if you are married,
or $25,000 if you are unmarried. Your deduction is eliminated
when your MAGI reaches $50,000 if you are married, or $35,000 if
you are unmarried. Your deduction is phased out if your MAGI is
between these amounts as explained below. These rules assume
that, if you are married, you are going to file a joint
tax return.
For active participants who are married but do not live with
a spouse, for any part of the year and file a separate return,
the deductibility of contributions is determined as if you were
unmarried. If you are married and living together but file
separate tax returns, you and your spouse can take only a partial
deduction for your respective IRA contributions if your
individual MAGI is less than $10,000, and no deduction if your
individual MAGI is $10,000 or over.
Active Participant - Your annual IRS Form W-2 from your employer
should indicate whether you are an active participant for
purposes of your IRA deduction. In general, you (or your spouse)
are considered an active participant in an employer-maintained
retirement plan for any year if you participate in a qualified
defined benefit plan, a defined contribution plan (such as a
money purchase pension, profit-sharing, 401(k), stock bonus or
annuity plan), a SEP, a SIMPLE, or a government plan (excluding
unfunded deferred compensation plans under section 457 of the
Internal Revenue Code) during any part of the plan year ending
with or within the year for which you make an IRA contribution.
You are treated as an active participant even if your plan
benefits are not yet fully vested and nonforfeitable, but you are
not treated as an active participant if you have not yet
satisfied the plan's eligibility requirements for minimum age or
service. You also are treated as an active participant for any
year in which you make a voluntary or mandatory contribution to
an employer-maintained retirement plan, even if your employer
makes no contribution to the plan on your behalf.
<PAGE> 4
Modified Adjusted Gross Income ("MAGI") - If you are an active
participant in an employer-maintained retirement plan, your MAGI
must be calculated to determine what portion, if any of your IRA
contribution is deductible. It is not necessarily the same as the
amount shown on the "adjusted gross income" line of your federal
income tax return. Refer to IRS Publication 590 for details. Note
that for purposes of your IRA deduction limit, your MAGI includes
any taxable Social Security benefits you receive for the year, as
well as passive activity losses or credits derived from the
conduct of a trade or business in which you do not materially
participate. If you are married and file a joint return, your
deductible contribution limit is determined on the basis of the
combined MAGI of you and your spouse.
Nondeductible Contribution Limit
To the extent you are not eligible to make a deductible
contribution, you may make a nondeductible contribution to your
IRA up to the excess of (i) your aggregate contribution limit
(100 percent of compensation up to $2,000 for individuals, 100
percent of combined compensation up to $4,000 for a married
couple) over (ii) the applicable deductible contribution limit.
You must designate nondeductible contributions for a given
year on IRS Form 8606, which must be filed with your federal
income tax return for that year. You should retain a copy of your
return and IRS Form 8606 for your reference in determining the
amount of cumulative deductible and nondeductible contributions.
Your return and IRS Form 8606 will be needed to determine the
taxable portion of any withdrawals you make. You need not specify
whether a contribution is deductible to the Custodian of your IRA
because it does not differentiate between deductible and
nondeductible contributions on its records.
Determining Your Deductible and Nondeductible Contribution Limits
Active participants in employer-maintained retirement plans (at
certain income levels) will need to determine deductible and
nondeductible contribution limits for a regular IRA. For single
individuals with MAGI between $25,000 and $35,000, or for a
married individual with combined MAGI between $40,000 and
$50,000:
1. Determine Excess MAGI by subtracting the applicable threshold
amount (i.e., subtract $40,000, if filing jointly; $25,000 or
$0 if not) from your actual MAGI; if the result is more than
$10,000 or less than zero, this calculation is not applicable;
your contribution is either completely nondeductible or fully
deductible--see above.
2. Subtract the Excess MAGI determined in Step 1 from $10,000.
3. Multiply the result in Step 2 by 20 percent and round the
product up to the next highest multiple of $10. This is your
deductible contribution limit. If, however, the product is
less than $200 but greater than $0, your deductible
contribution limit is $200.
4. Subtract your deductible contribution limit from your
contribution limit (100 percent of compensation up to $2,000
for individuals). This is your nondeductible contribution
limit.
Example: A single working individual with MAGI of $32,000, who is
an active participant in an employer-maintained retirement plan.
The contribution limit is $2,000 and the applicable threshold
is $25,000.
Step 1: Excess MAGI: $32,000 - $25,000 = $7,000
Step 2: Margin: $10,000 - $7,000 = $3,000
Step 3: Deductible Portion: $3,000 x 20% = $600
Step 4: Nondeductible Contribution Limit:
$2,000 - $600 = $1,400
<PAGE> 5
Note: This computation applies separately to each working
spouse with a regular IRA (contributions are limited by each
individual's income). Consult your tax advisor or IRS Publication
590 for details about figuring the deductibility of contributions
to a Spousal IRA.
CONTRIBUTION CORRECTIONS
Contributions in excess of your maximum allowable annual
contribution limit are treated as excess contributions whether or
not you deduct them. You will be liable for a nondeductible
excise tax of 6 percent on the amount of the excess for the year
the excess contribution is made unless (i) you withdraw the
excess and the income earned on the excess prior to the due date
for filing your federal income tax return (including extensions)
and (ii) you do not deduct the excess on your federal income tax
return.
You may direct the Custodian to return the excess or apply
the excess as a contribution for a subsequent year by completing
an Excess Contribution Correction Form. The Custodian will
automatically treat contributions to your IRA account in excess
of the maximum dollar contribution limit ($2,000 per individual
account) as a contribution for the subsequent year unless you
direct the Custodian in writing to distribute to you such excess
and the income earned on the excess prior to the deadline for
filing your federal income tax return for the year for which the
excess contribution was made. If contributions to your account
are less than $2,000, but are in excess of your compensation, the
Custodian will not take any action unless you direct the
Custodian to make a corrective distribution by properly
completing an Excess Contribution Correction Form.
If an excess contribution remains in your IRA after the due
date for filing your tax return, you will be subject to the 6
percent excise tax for each year the excess remains uncorrected.
If you withdraw the excess after the date for filing your federal
income tax return for the year in which the excess contribution
was made and the total contribution for that year exceeded
$2,250, the amount withdrawn may be taxed as ordinary income and
also may be subject to a nondeductible excise tax on premature
distributions equal to 10 percent of the amount withdrawn. The
withdrawal penalty (but not the 6 percent excise tax) may be
avoided if you correct your excess contribution by applying the
excess as a contribution for a later year.
Contributions you deduct in excess of your deductible
contribution limit also are treated as excess contributions to
the extent you do not designate them as nondeductible
contributions or, if permitted, correct them by withdrawal or
reallocation to a subsequent year as described above.
ROLLOVER CONTRIBUTIONS AND ASSET TRANSFERS
Eligible Rollover Distributions
You may defer taxation on an eligible rollover distribution from
your employer's tax-qualified plan or 403(b) plan by making a
rollover contribution of the distribution to an IRA within 60
days of the date of the distribution. In addition, if you are a
spouse or former spouse who is receiving an eligible rollover
distribution paid by reason of your spouse's death or pursuant to
a qualified domestic relations order (within the meaning of
section 414(p) of the Internal Revenue Code) issued in a divorce
or similar proceeding, you may make a rollover contribution of
that distribution. An "eligible rollover distribution" is a
distribution of all or any part of the taxable portion of the
balance to your credit in your employer's tax-qualified plan
except (i) any distribution that is required to be made because
you have reached age 70 1/2 ; (ii) any distribution made over
your life or life
<PAGE> 6
expectancy (or the lives or life expectancies of you and a
designated beneficiary); and (iii) any distribution which is part
of a series of substantially equal payments over a period of 10
or more years.
You may roll over all or any portion of an eligible rollover
distribution, but only that portion which is properly rolled over
into an IRA will be eligible for the tax deferral. The remainder
will generally be included in your gross income as ordinary
income subject to federal income tax in the year in which you
receive it. If your qualifying distribution includes property
other than cash, you may sell the property and roll over cash
equal to the fair market value of the property or, with the
consent of the Custodian, you may roll over
the property.
Eligible rollover distributions are subject to mandatory 20
percent federal income tax withholding unless you elect a direct
rollover to an IRA or tax-qualified plan. If you elect a direct
rollover, your distribution proceeds must be made payable to the
trustee or custodian of the IRA or tax-qualified plan to which
the rollover is made. If the proceeds are made payable to you, 20
percent mandatory withholding will apply, but you still may roll
over an amount equal to all or any portion of your eligible
rollover distribution. Accordingly, in the case of an eligible
rollover distribution paid to you (less the amount withheld), you
may roll over an amount equal to the eligible rollover
distribution by supplementing the rollover with cash from other
sources.
IRA Rollover Contributions and Asset Transfers
You also may make an IRA-to-IRA rollover contribution, but you
are limited to one IRA-to-IRA rollover every 12 months (beginning
on the date you receive your IRA distribution, and not on the
date you make your rollover contribution). However, a tax-free
IRA asset transfer from one custodian to another is not treated
as a rollover and, therefore, is not subject to the 12-month
limitation. You may make an IRA asset transfer to a Stein Roe IRA
by completing the Asset Transfer section of the Application Form.
An asset transfer from your Stein Roe IRA to another custodian
will be made upon receipt by SSI of a written request signed by
both you and your successor custodian in a form acceptable to
SSI. If you make an asset transfer from your Stein Roe IRA in the
year you reach age 70 1/2 or any subsequent year, the amount
transferred will be reduced by any amount required to satisfy the
minimum distribution requirement for the year of transfer as
provided in Section 4 of the Plan. The amount by which the
transfer is reduced shall be distributed to you.
In general, asset transfers and rollover contributions may
be invested in the same IRA as regular contributions. However, if
assets are transferred or rolled over from a plan ("transferor
plan") after distribution from the transferor plan required by
sections 401(a)(9), 408(a)(6) or 408(b)(3) of the Code has
commenced ("required distribution"), the assets must be placed in
a separate IRA if you are receiving required distributions from
your preexisting IRA over a period longer than the period over
which you were receiving required distributions from the
transferor plan. (The assets from the transferor plan must be
distributed over a period no longer than the period established
under the transferor plan.) In addition, an eligible rollover
distribution must be rolled over into a separate IRA if you wish
to preserve the ability to later roll over those assets to
another qualified plan.
If you wish to make a rollover contribution to the Plan, you
must complete the appropriate sections of the Application Form.
If you decide to make a rollover from your Stein Roe IRA to
another IRA, you must complete and return a Distribution Request
Form to SSI. To avoid income and premature distribution
<PAGE> 7
taxes, a rollover must be made within 60 days of the date of the
distribution.
The Stein Roe Funds IRA Plan is not a SIMPLE retirement
plan. You may not transfer or roll over SIMPLE IRA assets into
this Plan.
SPOUSAL IRA
If you are married and employed (or self-employed), you may be
able to contribute to a Spousal IRA for your spouse who has
little or no compensation, as long as you file a joint federal
income tax return. For more information about contributions to
Spousal IRAs, see the earlier discussion in the section entitled
"Contributions."
Under this arrangement, each spouse must sign a separate
Application Form to establish separate IRAs. Because a separate
IRA is established for each of you, you may make regular IRA
contributions to a Spousal IRA that was established in a previous
year. Conversely, Spousal IRA contributions may be made to an IRA
established in a prior year for the purpose of making regular
contributions. Except for the limitations discussed above, a
Spousal IRA is identical to a regular IRA.
DISTRIBUTION OF BENEFITS
General
You may request a distribution from your IRA by completing and
returning to SSI a Distribution Request Form acceptable to the
Custodian. Distributions must begin no later than April 1
following the year in which you attain age 70 1/2. (If you and
your spouse maintain IRAs under a spousal arrangement, then your
age determines whether you are required to take distributions
from your IRA and your spouse's age is the relevant age for your
spouse's IRA.)
You may elect to receive your distribution in cash or in
Mutual Fund shares by either one, or a combination of, the
following methods:
- - In a lump sum; or
- - In installment payments payable over a period of time not
greater than your life expectancy or the joint and last
survivor life expectancy of you and your designated
beneficiary.
Minimum Distribution Requirements
Beginning with the year in which you reach age 70 1/2, you must
begin to receive a minimum distribution amount each year. Your
initial minimum distribution must be made no later than April 1
following the year you reach age 70 1/2; thereafter, your minimum
distribution must be made no later than December 31 of each year.
Thus, if you defer your first minimum distribution until the year
following the year you reach age 70 1/2, you will be required to
withdraw a minimum distribution amount for both the prior and
current year.
In general, the minimum distribution amount you are required
to withdraw each year is equal to the balance in your Stein Roe
IRA (aggregating all Mutual Fund accounts maintained under your
IRA) on December 31 of the prior year divided by the applicable
life expectancy. Your aggregate account balance, however, is
increased by any rollover contributions to your Stein Roe IRA
received after December 31 that were distributed from another IRA
or tax-qualified plan before December 31. If you establish an
installment plan, you are responsible for verifying that you have
withdrawn the requisite minimum distribution amount each year and
making additional withdrawals, if necessary. If you maintain more
than one IRA, your minimum distribution amount must be determined
separately for each IRA.
The applicable life expectancy used to determine your
minimum distribution amount each year is either your life
expectancy or the joint and last survivor life expectancy of you
and your designated beneficiary (who is either an individual or a
trust meeting certain requirements)
<PAGE> 8
determined in the year you reach age 70 1/2 by using Internal
Revenue Service life expectancy tables, reduced by one for each
year elapsed since that year, unless you elect to recalculate
life expectancy. You may recalculate your life expectancy or, if
your spouse is your designated beneficiary, your spouse's life
expectancy, or the joint and last survivor life expectancy of you
and your spouse each year. Your election to recalculate or not
recalculate life expectancy becomes irrevocable on the April 1
following the year you reach age 70 1/2. If you elect to
recalculate life expectancy and you (or your spouse, if
applicable) die after payments have commenced, the life
expectancy of the deceased will be reduced to zero and the
maximum period over which the remaining benefits may be paid to
your beneficiaries will be correspondingly reduced. If your
method of distribution is based on the joint and last survivor
life expectancy of you and a non-spouse beneficiary, the method
must comply with regulations designed to assure at least 50
percent of the present value of the amount available for
distribution is paid within your life expectancy. These
regulations require certain minimum distributions based on an IRS
table.
Distribution of Death Benefits
You may designate one or more beneficiaries to receive the
benefits in your IRA upon your death by filing a properly
executed Beneficiary Form with the Custodian. If you do not
designate a beneficiary, your death benefits will be distributed
to your surviving spouse if you are married or, if you have no
surviving spouse, to your estate. If your beneficiary fails to
elect a method of distribution, your death benefits will be
distributed in a lump sum.
If distributions to you have commenced before your death,
and you die on or after April 1 of the year following the year
you reach age 70 1/2, your death benefits must be distributed at
least as rapidly as under the method by which you were receiving
distributions. If you die before April 1 of the year following
the year you reach age 70 1/2, regardless of whether
distributions to you have commenced, your death benefits must be
distributed no later than five years after the last day of the
year in which you die unless your designated beneficiary (who is
either an individual or a trust meeting certain requirements)
elects the alternative distribution method described in the next
paragraph.
If he or she qualifies to elect the alternative distribution
method, your designated beneficiary may elect to receive your
death benefits in installments over a period of as long as his or
her life expectancy, provided such installments commence no later
than the last day of the year following the year in which you
die. If your sole beneficiary is your surviving spouse,
commencement of such payments may be further delayed until the
end of the calendar year in which you would have reached age 70
1/2. Under this alternative method, your designated beneficiary's
life expectancy is determined as of his or her birthday in the
year payments commence. In addition, if your designated
beneficiary is your surviving spouse, your spouse may elect to
treat his or her share of your death benefits as his or her own
IRA, subject to the distribution requirements applicable to a
participant.
For more complete information on the distribution of death
benefits, please refer to Sections 4.4 and 4.5 of the Plan and
the Beneficiary Form.
TAXATION OF DISTRIBUTIONS
General
In general, distributions from your IRA are taxed to the
recipient as ordinary income in the year of receipt and do not
receive the more favorable federal income tax treatment afforded
recipients of distributions from certain kinds of tax-qualified
retirement plans, such as special income averaging. However,
recipients are
<PAGE> 9
eligible to utilize the general income averaging provisions of
the Internal Revenue Code. In some instances, installment
payments may reduce the total tax paid by the recipient by
extending taxation over a number of years.
If you have made nondeductible contributions to any IRA, a
portion of your distribution will be nontaxable. The nontaxable
amount is the portion of your distribution that bears the same
ratio to the distribution as (i) your aggregate nondeductible
contributions to all of your IRAs bear to (ii) the aggregate
balance in all of your IRAs on the last day of the year in which
you received your distribution plus the amount of your
distribution. For this purpose, the balances in all IRAs that you
maintain (including rollovers and SEPs) and all distributions you
receive during the year must be aggregated.
Distributions are subject to withholding of federal income
tax at a rate of 10 percent unless you elect not to have
withholding apply.
Additional Taxes on Distributions
If you receive a distribution prior to age 59 1/2, the taxable
portion of your distribution generally will be treated as a
premature distribution subject to a 10 percent additional tax.
This additional tax normally does not apply, however, to
distributions: 1) by reason of your death or permanent
disability; 2) to the extent of your payment of unreimbursed
medical expenses in excess of 7.5 percent of your adjusted gross
income; 3) to the extent of your payment for health insurance for
yourself, your spouse and dependents during a period of extended
unemployment; 4) payable in substantially equal installments over
a period no greater than your life expectancy or the joint and
last survivor life expectancy of you and your designated
beneficiary; 5) to an alternate payee pursuant to a qualified
domestic relations order; or 6) of the principal amount of an
excess deferral in accordance with applicable rules and
regulations.
If you fail to withdraw the minimum distribution amount for
any year after reaching age 70 1/2, you will be subject to a 50
percent additional tax on the amount by which the required
minimum distribution amount exceeds the amount withdrawn. Prior
to 1997, if aggregate distributions from all of your IRAs and any
tax-qualified retirement plans exceeded $155,000, you were
subject to a 15 percent additional tax on the excess amount. This
excess distribution tax has been repealed. As a result, beginning
in 1997, if you are age 59 1/2 you may withdraw an unlimited
amount (subject to regular income taxes) without the additional
15 percent tax. You should consult your tax and legal advisors to
determine if this is an appropriate strategy in your particular
case.
The 15 percent tax on excess retirement accumulations also
has been repealed for purposes of all estates and decedents dying
after December 31, 1996.
REPORTING TO THE INTERNAL REVENUE SERVICE
Each year the Custodian will send you IRS Form 5498, which
reports contributions made to your IRA for the prior year. The
Custodian also will report to you your prior year distributions
on IRS Form 1099-R. Copies of these reports also
are filed with the Internal Revenue Service ("IRS").
If you make a nondeductible contribution to your IRA, you
must report it to the IRS on IRS Form 8606, which must be filed
with your federal income tax return for the year for which the
contribution is made. If you owe additional taxes on excess
contributions, on premature distributions or for insufficient or
excessive distributions, you must file IRS Form 5329 with the
IRS. IRS Form 5330 must be filed in connection with a prohibited
transaction.
<PAGE> 10
PROHIBITED TRANSACTIONS
If you engage in a "prohibited transaction" with your IRA, your
IRA will lose its tax exemption and you will be treated as having
received a distribution of your IRA as of the first day of the
year in which you engaged in the prohibited transaction. The
deemed distribution would be subject to federal income tax and,
if you are under age 59 1/2, to the additional 10 percent tax on
premature distributions on the balance in your IRA. Prohibited
transactions include such transactions as the selling to, buying
from, leasing any property to or from, lending to or borrowing
from, furnishing goods or services to, or receiving goods or
services from, a "party in interest" (i.e., a party related in
some way to your IRA). You also are prohibited from improperly
using the income or assets of your IRA, or allowing certain other
"disqualified persons" to do so. However, a transfer of all or a
portion of your IRA pursuant to a "qualified domestic relations
order" such as a property settlement agreement under a divorce
decree is not considered a prohibited transaction.
Further, your IRA may not be invested in life insurance, nor
may any part of your IRA be pledged as security for a loan. If
you do pledge your IRA, you will be treated as if you received a
taxable distribution of the portion of your IRA assets used as
security for the loan. This portion of your IRA would be subject
to federal income tax and, if you are under age 59 1/2, the
additional 10 percent tax on premature distributions.
THE CUSTODIAN AND THE PLAN SPONSOR
The Custodian is named in the Application Form and is responsible
for the administration of the Plan in accordance with the terms
of the Application Form and Plan. The Custodian has engaged
SteinRoe Services Inc. ("SSI"), the parent of the Plan Sponsor,
Stein Roe & Farnham Incorporated, to perform most of the
ministerial functions in connection with the maintenance of Stein
Roe Mutual Fund accounts established under the Plan. SSI also
serves as transfer agent for each of the Stein Roe Mutual Funds.
Stein Roe & Farnham, as Plan Sponsor, has the authority to amend
the Plan on behalf of all participants.
INVESTMENT OF CONTRIBUTIONS
The Plan provides a wide range of investment alternatives from
which you may construct a portfolio to suit your own retirement
planning needs. You may invest your IRA in shares of one or any
combination of the no-load Stein Roe Mutual Funds (the "Mutual
Funds" or "Funds") listed on the Application Form. If you have at
least $250,000 in your IRA, you also may invest your IRA in other
investments in addition to (or in lieu of) the Stein Roe Funds.
However, at least 50 percent of your IRA must be invested in the
Stein Roe Funds and/or be subject to an investment advisory
agreement with Stein Roe & Farnham. Stein Roe & Farnham may elect
to reduce or waive these minimums.
The investment minimum required to establish an account with
any of the Funds is $500, unless Stein Roe & Farnham waives or
reduces this minimum. Subsequent contributions to the same Mutual
Fund account can be as small as $50. If your retirement
investment objectives change, you may change your portfolio by
exchanging shares of one Fund for those of another. The Stein Roe
Mutual Funds levy no sales commissions or 12b-1 charges.
In selecting a Stein Roe Mutual Fund for investment, it is
important that the investment objective of the Mutual Fund
selected be consistent with your retirement and investment
objectives. Important information concerning the Stein Roe
<PAGE> 11
Mutual Funds and their investment objectives, policies and
restrictions is contained in the Funds' prospectuses and
financial reports. Growth in value is not guaranteed or
projected. All income dividends and capital gains distributions
paid on Mutual Fund shares are invested in accordance with the
Mutual Fund's prospectus.
For more complete information on the Mutual Funds, including
management fees and expenses, obtain the Mutual Funds'
prospectuses by calling toll free 800-338-2550. Read the
prospectuses carefully before you invest or send money. You can
get information about the Mutual Funds, including prospectuses
and daily share price information, by accessing Stein Roe's
Internet address at http://www.steinroe.com.
CHARGES AND FEES
Stein Roe Fund Fees
All of the Stein Roe Funds are pure no-load investments. You pay
no sales commissions or 12b-1 charges for purchasing or
exchanging Fund shares. With the exception of the Emerging Market
Fund, no Fund charges redemption fees. In the case of the
Emerging Markets Fund, a redemption fee of 1 percent is charged
only on shares held less than 90 days. It is payable to the Fund
for the benefit of remaining shareholders. Each Fund does,
however, pay certain operational expenses, including management
fees. For complete information about Fund expenses and the method
of calculating each Fund's net asset value per share, please read
the Fund prospectuses available in writing and via the Stein Roe
web site at http://www.steinroe.com.
Custodial Fees
Your IRA is subject to custodial fees as provided in the IRA
Plan. These custodial fees will be paid by converting Fund Shares
in IRA accounts to cash, as determined by Stein Roe Mutual Funds.
In general, these fees are for the maintenance of your IRA
account(s)--Stein Roe Mutual Funds are no-load funds and no fees
are charged based on your contributions.
SteinRoe Services Inc. performs most of the ministerial
functions in maintaining Fund accounts. As a result, it receives
a substantial portion of your IRA custodial fees. Following are
descriptions of custodial fees for Stein Roe IRA accounts. These
fees may be changed upon 45 days' written notice to you. The
Custodian also reserves the right to waive or reduce any of its
charges or fees.
1. Fund Account Annual Maintenance Fee: $10 (maximum $30)
For IRA accounts for which the aggregate balance of all Fund
accounts is less than $10,000 on the valuation date, a Fund
Account Annual Maintenance Fee will apply. A fee of $10 will be
charged for each Fund account maintained by you during any part
of the subject calendar year -- limit three Fund accounts. Stein
Roe Mutual Funds will determine which Fund accounts are charged.
2. Distribution Fee: $10
For all IRA accounts, a distribution fee will be charged for each
distribution from a Fund account--in the case of installment
payments, however, this fee is charged only at the time the
installment plan is established.
3. Termnation fee: $10
For all IRA accounts, a termination fee will be charged for each
Fund account liquidated in connection with the termination or
transfer of your IRA. This fee is not applicable to accounts
which are distributed pursuant to an installment plan.
4. Other Services
For all IRA accounts for which the Custodian is required to
perform services not ordinarily provided under the Plan,
including making participant-directed investments of large
Custodial accounts of
<PAGE> 12
$250,000 or more pursuant to Section 7.3 of the Plan, the
Custodian may charge such additional fees as are appropriate.
SIMPLIFIED EMPLOYEE PENSION PLANS
The Internal Revenue Code permits certain employers to establish
Simplified Employee Pension Plans ("SEPs") to which annual
contributions may be made on behalf of all employees meeting
certain eligibility requirements ("non-elective contributions").
If adopted before January 1, 1997, an additional feature may
allow employees to make pretax salary reduction contributions
("elective deferrals"). In general, except as otherwise
specifically stated in the Plan, the provisions of the Plan apply
to IRAs to which SEP contributions are made and each participant
in the SEP has all the rights described herein with respect to an
ordinary IRA, including, for example, the right to select the
Funds in which contributions shall be invested.
As an employer, you may establish a SEP either by designing
your own SEP or by executing IRS Form 5305-SEP. If you do not
presently maintain any other qualified plan (except another SEP)
and you have never maintained a defined benefit plan, you may
establish a SEP by using IRS Form 5305-SEP. If you are a member
of an affiliated service group or a controlled group of
corporations, trades or business (described in Internal Revenue
Code sections 414 (m), (b) and (c), respectively) all eligible
employees of the member employers must participate. You also may
not use IRS Form 5305-SEP if you have any leased employees
(described in Internal Revenue Code section 414(n)). You may
establish a SEP up until your tax return due date (including
extensions) for the year for which contributions are first made.
If you decide to adopt a SEP, you must cover all employees
who have attained a minimum age requirement (which cannot be more
than 21 years) and performed services for you for a minimum
period (which cannot be more than any part of three of the
preceding five calendar years). Except as described below, for
any year for which you make a non-elective employer contribution,
contributions must be made for each employee who was eligible for
any part of the year, including those who are no longer employed
by you as of the SEP contribution date. Under a SEP, each
eligible employee must establish an IRA. If an eligible employee
does not establish an IRA, you must establish one for that
individual. Otherwise, your other employees may not participate
and other adverse tax consequences may result.
Prior to January 1, 1997, SEP plans could adopt a salary
deferral option pursuant to which contributions also could be
made at the election of the employee through "pretax" salary
reduction contributions ("elective deferrals"). Although this
option is no longer available, SEP plans having the salary
deferral option in place as of December 31, 1996, can continue to
operate in all respects, including adding new employees and
making contributions. In such a plan, an elective deferral is
permitted in a given year only if at least 50 percent of all
eligible employees elect to make them. In addition, the elective
deferrals of certain highly compensated employees, as a
percentage of each employee's compensation, may not exceed 125
percent of the average amount deferred as a percentage of
compensation by all other eligible employees.
Excluded Employees
Under a SEP, a contribution need not be made on behalf of any
eligible employee whose compensation is less than a specified
amount indexed for inflation for the calendar year. (For 1997,
you need not make a contribution on behalf of an individual whose
compensation is less than $400.) The following groups of persons
also may be excluded:
1. Employees who are members of a
<PAGE> 13
collective bargaining unit, represented by a collective
bargaining agent, and covered by a collective bargaining
agreement where retirement benefits were the subject of good
faith bargaining; and
2. Employees who are nonresident aliens and who receive from the
employer no earned income that constitutes income from
sources in the United States as defined by the Internal
Revenue Code.
SEP Contributions
Each year, total contributions for any participant under a SEP
(including elective deferrals) are limited to the lesser of 15
percent of an employee's compensation up to $160,000 (for 1997),
or $30,000. For SEP plans with an elective deferral feature,
eligible employees may make elective deferrals that reduce gross
income of up to $9,500 (for 1997), subject to the overall $30,000
and 15 percent limits. All three of these dollar limits are
subject to adjustment each year for cost-of-living increases.
Deductible non-elective contributions in excess of the
maximum allowable annual contribution limit are excess
contributions and are subject to the regular IRA excess
contribution rules. Elective deferrals in excess of the maximum
allowable annual deferral limit are excess elective deferrals
subject to special rules. For more information on the treatment
of excess elective deferrals, please refer to Section 3.5 of the
Plan. SEP contributions are in addition to any regular IRA
contributions your employees make as individuals. Although you
are neither required to make non-elective contributions each
year, nor to make them at the same percentage rate each year, for
each year in which you make a non-elective contribution your
contribution must be made on behalf of each eligible employee who
has met the age and service requirement of your SEP and you are
responsible for allocating your contributions among all eligible
employees in proportion to their respective compensation. Your
non-elective contributions may be made for a year up to the date
on which your business tax return is due (including extensions).
Miscellaneous
As an employer, you are responsible for all aspects of the
interpretation, operation and administration of your SEP,
including the determination of contributions and their
allocation.
If in any year an employee's account does not qualify as an
IRA or the SEP contribution is not properly made, contributions
to that employee's account may be treated as compensation and any
deduction for the contribution (plus any regular IRA
contributions the employee makes) may be subject to the regular
IRA contribution limitations and the regular IRA excess
contribution and premature distribution rules.
This Disclosure Statement is not intended as a complete or
definitive explanation or interpretation of the laws and
regulations applicable to IRAs or the Stein Roe Mutual Funds
Individual Retirement Account Plan. Establishing an IRA for
retirement savings represents a decision that has significant
legal, financial and tax implications. If you are considering
adopting an IRA, we suggest that you consult with counsel
regarding the legal, financial and tax consequences of doing so.
Further information also can be obtained from any district office
of the Internal Revenue Service.
<PAGE> 14
STEIN ROE FUNDS
INDIVIDUAL RETIREMENT ACCOUNT PLAN
SECTION 1 - INTRODUCTION
The Custodian designated in the Application Form, by separate
agreement and by facsimile signature of its authorized officer
thereon, agrees that an individual retirement account is
established under section 408(a) of the Code and the terms of
this Plan pursuant to which it agrees to serve as Custodian when
it is appointed under a properly executed Application Form sent
to the Custodian in accordance with the terms of the Application
Form and the Plan.
SECTION 2 - DEFINITIONS
As used herein:
2.1 "Beneficiary" means any person designated by a Participant
in accordance with Section 4.5 hereof to receive any death
benefits which shall be payable under the Plan.
2.2 "Code" means the Internal Revenue Code of 1986, as from time
to time amended, any regulations issued thereunder and any
subsequent Internal Revenue Code.
2.3 "Compensation" means the total compensation received by a
Participant for each Plan Year during which he is a
Participant, including wages, salary, professional fees, or
other amounts derived from or received for personal service
actually rendered (including, but not limited to, salesmen's
commissions, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums,
tips and bonuses) and Earned Income (reduced by the
deduction, if any, taken for contributions by a self-
employed individual to a tax-qualified retirement plan
covering such self-employed individual). Compensation also
includes any amount includible in a Participant's gross
income under section 71 of the Code with respect to a
divorce or separation instrument described in section
71(b)(2)(A). Compensation does not include amounts derived
from or received as earnings or profits from property
(including, but not limited to, interest and dividends) or
amounts not includible in gross income. Compensation also
does not include any amount received as a pension or annuity
or as deferred compensation.
2.4 "Custodial Account" means the individual retirement account
established for the Participant under the Plan.
2.5 "Custodian" means the financial institution named in the
Application Form and any successor thereto.
2.6 "Disabled" or "Disability" means the inability to engage in
any substantial gainful activity because of a medically
determinable physical or mental impairment that can be
expected to result in death or be of a long, continued and
indefinite duration.
2.7 "Earned Income" means Earned Income of a Participant after
deductions under section 404 of the Code but before federal
income taxes for each taxable year for which a contribution
is made to his Custodial Account by him or on his behalf.
Earned Income shall equal his net earnings from self-
employment to the extent that such net earnings constitute
compensation for personal services actually rendered by him
for such year; provided, however, that his personal services
must be a material income-producing factor in his
profession, trade or business. If a Participant derives
income from services as an author or inventor, the term
Earned Income includes gain (other than any gain from the
sale or exchange of a capital asset) and net
<PAGE> 15
earnings derived from the sale or other disposition of, the
transfer of any interest in, or the licensing of the use of
property (other than goodwill) by the Participant if
personal efforts created such property.
2.8 "Excess Deferral" means, for any taxable year, the amount of
any excess contribution made under a cash or deferral
arrangement to an annuity plan described in section 403(a)
of the Code, an annuity contract described in section 403(b)
of the Code, a SEP, or a plan described in section
501(c)(18) of the Code.
2.9 "Mutual Fund" or "Mutual Funds" means the Mutual Fund(s)
specified in the Application Form in which assets of the
Custodial Account may be invested. No Mutual Fund shall be
available for investment under the Plan (i) prior to the
date the prospectus for such Mutual Fund discloses its
availability or (ii) with respect to any Participant who
resides in any state in which shares of the Mutual Fund are
not available for sale.
2.10 "Nonworking Spouse" means a Participant's spouse who has
less taxable compensation than the Participant for the year
for which a contribution is made.
2.11 "Participant" means the person who executes the Application
Form effective on the date of execution.
2.12 "Plan" means the Individual Retirement Account Plan as
provided in this document and the Application Form (the
provisions of which are incorporated herein by reference)
and any amendments thereof.
2.13 "Rollover Contribution" means a rollover contribution as
described in section 402(c), section 403(a)(4), section
403(b)(8), section 408(d)(3), or, prior to their repeal,
sections 405(d)(3), 409(b)(3)(C) or 409(b)(D) of the Code.
2.14 "SEP Contribution" means a contribution made by the
employer of a Participant pursuant to section 408(k) of the
Code under a Simplified Employee Pension Plan ("SEP") established
by the use of Internal Revenue Service Form 5305-SEP or
Internal Revenue Service Form 5305A-SEP.
2.15 "Sponsor" means Stein Roe & Farnham Incorporated ("Stein
Roe & Farnham"), or such other person qualified to act as
sponsor as from time to time designated by Stein Roe &
Farnham.
SECTION 3 - CONTRIBUTIONS
3.1 Restriction on Contributions. Except for Rollover
Contributions under Section 5.2 hereof, all contributions
shall be made in cash. Each contribution must be accompanied
by written instructions on a form, provided or permitted by
the Custodian, specifying the Participant's Custodial
Account to which they are to be credited and the manner in
which they are to be invested. Except for Rollover
Contributions and SEP Contributions, no contributions may be
made by or on behalf of any Participant for any taxable year
beginning in the year the Participant reaches age 70 1/2.
The Custodian may accept such contributions by or on behalf
of the Participant as it may receive from time to time,
provided, however, that except in the case of Rollover
Contributions, the Custodian shall not accept contributions
made by or on behalf of a Participant for any taxable year
in excess of the maximum dollar amount specified in Section
3.3 hereof (or such other maximum dollar amount as may from
time to time be permitted under the Code). This Plan is not
a SIMPLE retirement plan and no participant shall make
<PAGE> 16
SIMPLE plan contributions by rollover or otherwise.
3.2 Minimum Contribution Amounts. The minimum initial
contribution is $500 per Mutual Fund account. This minimum
amount must be contributed in a single payment when an IRA
is established, and at such time as a Participant makes his
or her initial investment in each additional Mutual Fund.
Thereafter, contributions can be made in amounts of not less
than $50. These minimums do not apply to IRAs established as
part of a Simplified Employee Pension Plan ("SEP"). Stein
Roe & Farnham also may waive or reduce these minimums.
3.3 Maximum Contribution Amounts.
(a) Regular Contributions. Except as otherwise expressly
provided in this Section and Section 5 hereof, the
aggregate amount of contributions by or on behalf of a
Participant for the taxable year shall be not more than
an amount equal to the lesser of 100 percent of the
Compensation of the Participant within the taxable year
or $2,000.
(b) SEP Contributions. For any taxable year, the aggregate
amount of contributions to a Simplified Employee Pension
plan ("SEP Contribution") made by an employer on behalf
of a Participant may not exceed the lesser of $30,000
(or such other amount as may from time to time be
permitted under the Code or regulations thereunder) or
15 percent of the Participant's Compensation paid by the
employer determined without regard to such contribution
or Compensation in excess of the annual compensation
limit set forth by the Omnibus Budget Reconciliation Act
of 1993 (OBRA'93). The OBRA'93 annual compensation limit
is $160,000 (in 1997), as adjusted by the Internal
Revenue Service for increases in the cost of living in
accordance with section 401(a)(17) - 1(b) of the Code.
The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months,
over which compensation is determined (determination
period) beginning in such calendar year. If a
determination period consists of fewer than 12 months,
the OBRA'93 annual compensation limit will be multiplied
by a fraction, the numerator of which is the number of
months in the determination period, and the denominator
of which is 12. SEP Contributions made on behalf of a
Participant to a SEP providing for elective employee
deferrals may not exceed $9,500 for 1997 (or such other
amount as may from time to time be permitted under the
Code). SEP Contributions may be made in addition to
regular or rollover contributions made by or on behalf
of the Participant as described elsewhere herein.
(c) Spousal Contributions. For any taxable year in which a
Participant is married (as described in section 143(a)
of the Code) to a Nonworking Spouse with whom a joint
tax return is filed, the Participant may elect to make
contributions on behalf of the Nonworking Spouse to a
Custodial Account that the Nonworking Spouse has
established by executing an Application Form. Under this
arrangement, the aggregate contributions made to the
Custodial Accounts of both the Participant and the
Nonworking Spouse for any taxable year may
<PAGE> 17
not exceed the lesser of $4,000 or 100 percent of the
combined compensation of both spouses; provided,
however, that the contribution to the Participant's
account cannot exceed the lesser of his or her
compensation or $2,000, and that to the Nonworking
Spouse's account may not exceed the remaining balance of
the couple's contribution limit up to $2,000.
A Nonworking Spouse who establishes a Custodial
Account under this Subsection shall be treated as a
Participant under the Plan for all purposes and, for any
taxable year in which the Nonworking Spouse has
Compensation, the Participant and the Nonworking Spouse
may make contributions to their respective Custodial
Accounts as provided in Section 3.3(a).
3.4 Contribution Corrections. If, for any taxable year,
aggregate contributions of a type specified in Section 3.3
hereof made by or on behalf of a Participant exceed the
maximum permissible amount, and provided no deduction is
allowed for the excess amount, then, no later than April 15
of the following year, the Custodian shall eliminate the
excess by: (a) treating it as a contribution for the
following year to the maximum extent allowable an amount
equal to the lesser of (i) the balance in the Custodial
Account of the Participant, or (ii) the excess amount
(together with an amount equal to the net income earned on
the excess amount); and (b) distributing the remainder, if
any, to the Participant. If a contribution: (a) exceeds the
maximum permissible percentage amounts set forth in Section
3.3 hereof; (b) exceeds the amount permitted after
application of the special discrimination tests under
section 408(k)(6) of the Code or, in the case of a
contribution intended to be a Rollover Contribution, exceeds
the amount qualifying as such; or (c) is an excess
contribution within the meaning of section 4973 of the Code,
the Participant must direct the Custodian in proper written
form to either return the excess amount or apply it as a
contribution for the following year--in the absence of such
direction, the Custodian shall take no action.
3.5 Treatment of Excess Deferrals. If the Participant directs
the Custodian in writing, not later than the first March 1
following the end of the year for which an Excess Deferral
was made, to distribute the amount of the Excess Deferral
contributed to the Plan and any earnings thereon, then the
Custodian shall distribute such amount and any earnings
thereon to the Participant no later than the first April 15
following the end of the year for which the Excess Deferral
was made. In the absence of such notification and direction,
the Custodian shall take no action.
SECTION 4 - DISTRIBUTIONS
4.1 General. The Custodian shall distribute the amount credited
to the Custodial Account of a Participant at such times and
in such amounts as the Participant shall direct on a form
provided or permitted by the Custodian and in a manner
consistent with the prospectus(es) of the Mutual Fund(s) in
which the Custodial Account is invested. Such distributions
to a Participant shall commence no later than April 1
following the close of the calendar year in which he or she
reaches age 70 1/2. Distributions of Excess Contributions
and Excess Deferrals shall be made in accordance with
<PAGE> 18
Sections 3.4 and 3.5 hereof, respectively. Except as
provided above, if a distribution is made from the
Participant's Custodial Account prior to the date the
Participant attains age 59 1/2 for reasons other than (i)
Disability or death; (ii) to the extent of your payment of
unreimbursed medical expenses in excess of 7.5 percent of
Adjusted Gross Income; (iii) to the extent of payments for
health insurance for the Participant, his or her spouse and
dependents, where the Participant has been unemployed and
received federal or state unemployment compensation for at
least 12 weeks; (iv) as part of a series of substantially
equal periodic payments made over the life expectancy of the
Participant or the joint and last survivor life expectancy
of the Participant and the Participant's Beneficiary; (v) as
a distribution to an alternate payee under a qualified
domestic relations order (within the meaning of section
414(p) of the Code); or (vi) as a distribution of the
principal amount of an Excess Deferral pursuant to Section
3.5 hereof; then the tax on such distribution shall be
increased by an amount equal to 10 percent of the taxable
portion thereof. The Participant may direct either an
immediate distribution that shall be made or commence on the
date (or as near thereto as is practicable) the Custodian
receives the Participant's written request in proper form,
or a future distribution that shall commence on a date
specified in such request which shall be within a reasonable
time after the filing of such form. The Participant
represents and warrants that all distribution instructions
provided to the Custodian shall be in accordance with the
terms of the Plan.
If the Custodian does not receive instructions to effect
distribution to a Participant prior to the time the
distribution is required to commence, the Custodian will not
effect a distribution.
If any installment payment to a Participant or
Beneficiary is less than a minimum amount that may be
established from time to time by Stein Roe & Farnham or the
Custodian, then, at the option of either of them, one or
more payments under such method may be paid less frequently
or the value of the Custodial Account may be paid in one sum
to the person then entitled to receive such payments--the
contingent interest of any Beneficiary notwithstanding.
4.2 Payment on Disability. If a Participant becomes Disabled,
the amount credited to the Custodial Account may be
distributed, in accordance with the distribution provision
of Sections 4.1 and 4.3 hereof, commencing on the date the
Custodian receives notification from the Participant of
Disability in a form acceptable to the Custodian. Before
making any distribution in the case of the Disability of a
Participant prior to the date the Participant reaches age 59
1/2, the Custodian shall be furnished with proof of such
Disability. Proof of Disability shall mean either (1) proof
that such Participant's application for disability benefits
under the federal Social Security Act has been approved, or
(2) submission of a Certificate of Disability form provided
or permitted by the Custodian showing the same degree of
proof as would be required by such Participant in applying
for disability benefits under the federal Social Security
Act.
4.3 Method of Distribution.
(a) Distributions to a Participant made for any reason other
than the death of the Participant may be paid in cash or in
kind in one or a
<PAGE> 19
combination of the following ways:
(i) in a lump sum; or
(ii) in annual or more frequent installments over a
period certain not to exceed the life expectancy of
the Participant, or the joint and last survivor life
expectancy, determined as provided in Section 4.6
hereof, of the Participant and the Participant's
individual Beneficiary. Even if installment payments
have commenced pursuant to this option, the
Participant may receive a distribution of the
balance in his Custodial Account, or of any part
thereof, upon written request as described in
Section 4.1 hereof to the Custodian.
(b) If the Participant elects to receive installment
payments, then (except as otherwise permitted under
regulations for distributions required to commence prior
to January 1, 1988), beginning with the year the
Participant reaches age 70 1/2, the minimum distribution
required for that year shall be at least equal to the
lesser of the balance in the Participant's Custodial
Account or the quotient obtained by dividing the balance
in the Custodial Account as of the close of business on
December 31 of the prior year [reduced, in the case of
the year ("Second Distribution Year") following the year
in which the Participant reached age 70 1/2, by any
distribution made during the Second Distribution Year on
or prior to April 1 to satisfy the minimum distribution
requirement for the year the Participant reached age 70
1/2 by the life expectancy of the Participant (or, if
applicable, the joint and last survivor life expectancy
of the Participant and the Participant's Beneficiary),
determined as provided in Section 4.6 hereof.
Distributions for the year in which a Participant
reaches age 70 1/2 will be deemed timely made if made on
or prior to April 1 of the succeeding calendar year.
(c) For purposes of determining the minimum amount required
to be distributed under Section 4.3(b) hereof, the
balance in the Custodial Account as of December 31 of
any year shall be increased by the amount of any
Rollover Contribution from another individual retirement
account or tax-qualified retirement plan that was
received after December 31 and was distributed from such
other individual retirement account or a tax-qualified
retirement plan on or prior to December 31.
(d) In the case of a Rollover Contribution or an amount
transferred to the Plan pursuant to Section 5 hereof
that was distributed (or transferred) from an individual
retirement account or tax-qualified retirement plan
("transferor plan") after the April 1 of the year
following the year in which the Participant reached age
70 1/2, such assets must be held in a Custodial Account
separate from any other Custodial Account from which the
Participant is receiving installment payments in
accordance with Section 4.3(b) hereof, which payments
are being made over a period longer than the period over
which the Participant was receiving installment payments
from the transferor plan. Distribution from such
separate Custodial Account shall begin no later than the
year following the year of the rollover or transfer with
payments over a
<PAGE> 20
period established under the transferor plan. The
designated beneficiary under the transferor plan shall
be substituted for the Beneficiary designated hereunder
if the distribution period for such separate Custodial
Account period is determined based on the joint and last
survivor life expectancy of the Participant and
designated Beneficiary.
(e) Notwithstanding any other provisions in this Plan,
effective for distributions made before the
Participant's death, where the distribution period is
longer than the Participant's life expectancy and the
Participant's spouse is not the Beneficiary, the minimum
amount required to be distributed each year, beginning
with the year the Participant reaches age 70 1/2, shall
be at least the quotient obtained by dividing the
balance in the Custodial Account as of the close of
business on December 31 of the prior year [reduced, in
the case of the year ("Second Distribution Year")
following the year in which the Participant reached age
70 1/2, by any distribution made during the Second
Distribution Year on or prior to April 1 to satisfy the
minimum distribution requirement for the year the
Participant reached age 70 1/2] by the lesser of (i) the
joint and last survivor life expectancy of the
Participant and the Participant's Beneficiary determined
as provided in Section 4.6 hereof, or (ii) the
applicable divisor determined from the table set forth
in Q&A-4 or Q&A-5, as applicable, of Prop. Treas. Reg.
Section 1.401(a)(9)-2.
4.4 Distribution on Death of Participant.
(a) If the Participant dies after payment has commenced
under Section 4.3 hereof, and on or after the April 1
following the year in which the Participant reached age
70 1/2, the balance in his or her Custodial Account
shall be distributed to the Participant's Beneficiary,
designated in accordance with Section 4.5 hereof, at
least as rapidly as under the method of distribution by
which payments were being made to the Participant prior
to death.
(b) If a Participant dies before the April 1 following the
year in which the Participant reaches age 70 1/2, the
balance in his or her Custodial Account shall be
distributed to the Participant's Beneficiary, designated
in accordance with Section 4.5 hereof, as the
Beneficiary shall elect:
(i) in a lump sum no later than December 31 of the year
that contains the fifth anniversary of the
Participant's death or, if later, if the
Participant's sole Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year
in which the Participant would have reached age 70
1/2; or
(ii) in annual or more frequent installment payments over
a period certain not to exceed the life expectancy,
determined in accordance with Section 4.6 hereof, of
the Beneficiary. If the Participant's sole
Beneficiary is the Participant's surviving spouse,
payments shall commence no later than the later of
December 31 of the year following the year in which
the Participant died, or December 31 of the calendar
year in which the Participant would have reached age
70 1/2. In all
<PAGE> 21
other cases, payments shall commence no later than
December 31 of the calendar year immediately
following the year in which the Participant died.
Even if installment payments have commenced pursuant
to this option, the Beneficiary may receive a
distribution of the balance in his Custodial
Account, or any part thereof, upon written request
as described in Section 4.1 hereof to the Custodian.
(c) If a Participant's spouse is named as Beneficiary in
accordance with Section 4.5 hereof, then notwithstanding
the provisions of Sections 4.4(a) and (b) hereof, the
Participant's spouse may elect to treat the interest in
the Participant's Custodial Account to which the spouse
becomes entitled upon the Participant's death as the
spouse's own individual retirement account subject to
the distribution provisions of Section 4.3 hereof by
execution of a new Application Form establishing the
spouse's own Custodial Account not later than the date
of filing the Participant's federal estate tax return
or, if earlier, the due date (including any extensions)
for such return. The determination of whether an
election has been made by a Participant's spouse to
treat the spouse's portion of death benefits as his or
her own individual retirement account will be made in
accordance with applicable rulings and regulations.
(d) Before making any distribution in the case of death of a
Participant, the Custodian shall be furnished with such
certified death certificates, inheritance tax releases,
indemnity agreements and other documents as may be
required by the Custodian.
(e) If a Participant dies before the total amount in the
Custodial Account has been distributed and the
Participant's Beneficiary is other than the
Participant's spouse, no additional cash contributions
or Rollover Contributions may be accepted by the
Custodian.
(f) To the extent prescribed by regulation under the Code,
for purposes of this Section 4.4, any amount paid to a
child of the Participant will be treated as if it had
been paid to the surviving spouse, provided the balance
in the Participant's Custodial Account when the child
reaches the age of majority (or when any other
designated event permitted under regulations occurs)
will become payable to the surviving spouse.
4.5 Beneficiary Designation. A Participant shall have the right
to designate or to change the Beneficiary to receive the
balance in the Custodial Account at the time of the
Participant's death. Such designation may include contingent
or successive Beneficiaries. A Beneficiary designated by a
Participant shall select the method by which benefits
payable to him or her shall be paid. Designations by a
Participant and selection of a distribution method by a
Beneficiary shall be subject to the provisions of Section
4.4 hereof and shall be made on a form provided or permitted
by the Custodian. A designation properly completed by a
Participant shall be effective upon receipt by the Custodian
no later than 30 days after the death of the Participant. If
no properly completed Beneficiary designation is received by
the Custodian within 30 days after the Participant's death,
the Custodial Account shall be distributed in cash
<PAGE> 22
or kind, as the Custodian directs, in a lump sum to the
Participant's surviving spouse or, if there is no surviving
spouse, to the Participant's estate. A selection of
distribution method properly completed by a Beneficiary
shall be effective upon receipt by the Custodian no later
than the earliest of (i) the date the Custodian receives
instructions to distribute the Custodial Account of the
deceased Participant, which instructions it determines to be
in good order, or (ii) December 1 of the year that contains
the fifth anniversary of the Participant's death. If the
Custodian fails to receive from a Beneficiary a properly
completed designation of distribution method within the time
prescribed above, the Participant's Custodial Account shall
be distributed over the course of five (5) years in
substantially equal installments commencing no later than
December 31 of the year of the Participant's death.
The Custodian shall be responsible for determining the
identity of persons who qualify as the Beneficiaries
entitled to receive distributions upon the death of a
Participant and the identity of the person who qualifies as
the executor or administrator of the Participant's estate in
accordance with applicable regulations. If any person to
whom all or a portion of the Participant's interest is
payable is a minor, payment of such minor's interest shall
be made on behalf of such minor to the person designated by
the Participant in his Beneficiary Designation to receive
such minor's interest as a custodian under the Illinois
Uniform Transfers Act or similar statute. If the Participant
does not designate a custodian to receive the minor's
interest on behalf of such minor, or if the person
designated refuses or is unable to act, the Custodian may in
his sole discretion:
(a) distribute the interest to the legal guardian of such
minor; or
(b) designate an adult member of the minor's family, a
guardian or a trust company (including the Custodian),
as those terms are defined in the Illinois Uniform
Transfers Act, as custodian for such minor under the
Illinois Uniform Transfers Act or similar statute and
distribute such minor's interest to the person so
designated. The person designated as custodian under the
Illinois Uniform Transfers Act or similar statute shall
hold, manage and distribute such property in accordance
with the provisions of such statute.
The Participant shall be responsible for determining
the Beneficiary whose life expectancy is to be used in
determining the maximum period of time over which the
Custodian Account may be distributed under Section 4.3 or
4.4 hereof. The designation of such Beneficiary shall be
irrevocable as of April 1 of the year following the year in
which the Participant attains age 70 1/2. If a Participant
designates more than one individual Beneficiary, the
Beneficiary (other than a Beneficiary whose receipt of
benefits is contingent on the death of a prior Beneficiary)
with the shortest life expectancy shall be the Beneficiary
whose life expectancy is used to determine the maximum
period over which installment distributions may be made from
the Custodial Account. If a Participant has a Beneficiary
(other than a trust described in the next sentence) that is
not an individual, then distributions from the Custodial
Account shall not be made under a method that takes into
account the life expectancy of a Beneficiary. If a
Participant designates
<PAGE> 23
a trust as a Beneficiary, and as of the later of the date on
which the trust is named as a beneficiary or April 1 of the
year following the year in which the Participant attains age
70 1/2, and as of all subsequent times the following
requirements are met, the individual beneficiary of the
trust having the shortest life expectancy shall be the
Beneficiary considered in determining the appropriate
Beneficiary life expectancy to be used hereunder:
(a) There are no beneficiaries of the trust (other than
beneficiaries whose receipt of benefits is contingent on
the death of a prior beneficiary) who are not
individuals.
(b) The trust is a valid trust under state law, or would be
but for the fact that there is no corpus.
(c) The trust is irrevocable.
(d) The beneficiaries of the trust who are Beneficiaries
with respect to the Custodial Account are identifiable
from the trust instrument.
(e) A copy of the trust is provided to the Custodian.
The Custodian and its officers, employees, attorneys and
agents shall be fully discharged from all liability to any
and all persons making a claim to the Participant's
Custodial Account under the Plan in relying on evidence by
affidavit or otherwise as shall be satisfactory to the
Custodian in determining any questions of fact relative to
payments under the Plan, including the existence or identity
of any Beneficiary or trustee designated by the Participant,
the administrator or executor of the Participant's estate or
any person authorized to act on behalf of any such person.
Further, any amount paid to any such person in accordance
with the terms of the Plan shall fully discharge the
Custodian for the amount so paid.
4.6 Determination of Life Expectancies.
(a) General Rule. For purposes of this Section 4, life
expectancy and joint and last survivor life expectancy
shall be computed by the Participant (and, if applicable
after the Participant's death, by the Beneficiary) by
using the Tables V and VI life return multiples in
Regulation 1.72-9 under the Code. The life expectancy of
the Participant and a spouse Beneficiary may be
redetermined, but not more frequently than annually. The
Participant's election to determine life expectancy will
become irrevocable on April 1 of the year following the
year in which the Participant reaches age 70 1/2. In the
case of distributions pursuant to Section 4.4(b)(ii)
hereof, a spousal Beneficiary election to redetermine
life expectancy will become irrevocable on the date
distributions are required to commence thereunder. If no
election concerning redetermination of life expectancy
is made by the date such election would be irrevocable,
life expectancy will not be redetermined.
(b) Life Expectancy Not Recalculated. If the life expectancy
of the Participant and the Beneficiary are not
recalculated, then the following provisions apply to the
determination of life expectancy. If distribution is
being made under Section 4.3(b) hereof, the life
expectancy of the Participant and the Beneficiary shall
be determined as of their respective attained ages as of
their respective birthdays in the calendar year in which
the Participant reached age 70 1/2, reduced by one for
each year that has elapsed since the year the
Participant reached age 70 1/2. If distribution is
being made
<PAGE> 24
under Section 4.4(b)(ii) hereof, the life expectancy of
the Beneficiary shall be determined as of the
Beneficiary's attained age as of his birthday in the
calendar year in which distributions are required to
commence thereunder, reduced by one for each year that
has elapsed since such calendar year.
(c) If the life expectancy of the Participant and/or a
spouse Beneficiary is to be recalculated, then the
following provisions shall apply to determine life
expectancy, and the Participant (or, if applicable, the
spouse Beneficiary) shall be solely responsible for
advising the Custodian of the redetermined life
expectancy annually, no later than 30 days prior to the
beginning of each calendar year in which an installment
payment is to be made.
If distribution is being made under Section 4.3(b)
hereof, the Participant's life expectancy (or the joint
and last survivor life expectancy of the Participant and
his or her spouse Beneficiary) each year beginning with
the year in which the Participant reached age 70 1/2,
using the Participant's (and, if applicable, the spouse
Beneficiary's) attained age as of the Participant's
birthday (and, if applicable, the spouse Beneficiary's
birthday) in each such year.
If distribution is being made under Section 4.3(b)
hereof and the life expectancy of the Participant but
not his or her Beneficiary is being recalculated, the
applicable joint and last survivor life expectancy shall
be recalculated by using an adjusted age of the
Beneficiary. The adjusted age of the Beneficiary shall
be determined by reducing the life expectancy of the
Beneficiary (determined as of his attained age on his or
her birthday in the calendar year in which the
Participant reached age 70 1/2) by one for each year
that has elapsed since the calendar year in which the
Participant reached age 70 1/2, and locating the age
that corresponds to that life expectancy (rounded to the
next highest integer, if not a whole number of years) in
Table V of Regulation 1.72-9 under the Code.
If distribution is being made pursuant to Section
4.4(b)(ii) hereof and the life expectancy of the
Participant's spouse Beneficiary is being recalculated,
the life expectancy of the spouse Beneficiary will be
determined based on her attained age as of her birthday
in the calendar year in which distributions are required
to commence to her under Section 4.4(b)(ii) hereof.
Upon the death of the Participant or the Beneficiary,
the recalculated life expectancy of the decedent will be
reduced to zero in the calendar year of death. The
balance in the Custodial Account must be distributed
prior to the last day of the calendar year in which the
last applicable life expectancy is reduced to zero.
4.7 Distributions in Accordance with Regulations. In all cases,
distributions hereunder are not permitted except in
accordance with applicable regulations promulgated by the
Secretary of the Treasury.
SECTION 5 - TRANSFERS AND ROLLOVER CONTRIBUTIONS
5.1 Transfers. Any person may adopt the Plan for the sole
purpose of transferring to the Custodian in cash
<PAGE> 25
or, with the consent of the Custodian, in kind, any part of
the assets of an individual retirement account (but not a
SIMPLE document) held for the person's benefit by another
custodian, trustee or insurance company; provided however,
that the Custodian may elect not to accept a transfer unless
it is preceded by asset transfer instructions satisfactory
to the Custodian. In case of assets transferred to the Plan
and held in a separate Custodial Account in the year the
Participant reaches age 70 1/2 or in any subsequent year as
provided in Section 4.3(d) hereof, the asset transfer
instructions must be accompanied by a Distribution Request
Form and a Beneficiary Form applicable to the transferred
assets computed in accordance with the distribution method
in effect under the transferor individual retirement
account. Transfers from the Custodian to a successor
custodian or trustee shall be made in accordance with
Section 6.4 hereof.
5.2 Rollover Contributions to the Plan. Any person may adopt the
Plan for the sole purpose of making a Rollover Contribution
(but not from a SIMPLE plan) in cash or, with the consent of
the Custodian, in kind, in an amount of not less than $500
(unless waived or reduced by Stein Roe & Farnham); provided
however, that the Custodian may elect not to accept a
Rollover Contribution unless rollover contribution
instructions satisfactory to the Custodian are provided at
the time the Rollover Contribution is made or at such later
date as the Custodian may permit. A person adopting the Plan
for the sole purpose of making a Rollover Contribution shall
be treated as a Participant under the Plan for all purposes.
If the Rollover Contribution was distributed from the
distribution plan after April 1 of the year following the
year in which the Participant reaches ages 70 1/2 and the
Rollover Contribution is held in a separate Custodial
Account as provided in Section 4.3(d) hereof, the Rollover
Contribution instructions must be accompanied by a
Distribution Request Form and a Beneficiary Form applicable
to the amount rolled over computed in accordance with the
distribution method in effect under the distribution plan.
5.3 Rollover Contributions from the Plan. On, or as soon as
reasonably possible after, the date the Custodian receives
from a Participant a Distribution Request Form provided or
permitted by the Custodian, or at a future date specified in
the Form which shall be within a reasonable time after the
date the Custodian receives it, stating that the Participant
wishes to make a Rollover Contribution from the Plan, the
Custodian shall distribute such amount from the
Participant's Custodial Account as the Participant shall
direct in a manner consistent with the prospectus(es) of the
Mutual Fund(s) in which the Custodial Account is invested.
The Custodian may make such distribution to the Participant
without inquiry as to whether the statements made by the
Participant in the Distribution Request Form are correct,
and in no event shall the Custodian or any officers,
employees, attorneys or agents of the Custodian be liable
for any costs, expenses, or income or excise taxes which
might arise by virtue of the Custodian's making such
distribution. The Participant represents and warrants that
all directions contained within the Distribution Request
Form shall be and are in accordance with the terms of the
Plan.
<PAGE> 26
SECTION 6 - ADMINISTRATION
6.1 General. Except as provided herein, the Plan shall be
administered by the Participant, who shall have sole
responsibility for the operation of the Plan in accordance
with its terms and shall determine all questions arising out
of the administration, interpretation, and application of
the Plan (which determination shall be conclusive and
binding on all persons). The Participant also shall have
sole authority on behalf of any and all persons having or
claiming any interest in the Participant's Custodial
Account. The Participant shall have the sole authority and
responsibility to determine the amount of the contributions
(except for SEP Contributions, which shall be the
responsibility of both the Participant and the Participant's
employer) and distributions to be made under the Plan --
neither the Custodian nor any other person shall be
responsible therefor, or for any consequences to the
Participant resulting from making of contributions which are
in excess of those permitted, or the failure to make
distributions required, under the Plan or Code. In no event
shall the Custodian, or any of its officers, employees,
attorneys or agents be liable for any such costs, expenses,
income taxes or excise taxes that might accrue by virtue of
a failure to comply with the requirements of the Plan or the
Code.
The Participant intends that the Custodial Account under
the Plan shall qualify and be tax exempt under section 408
of the Code, but if it should ever not so qualify, all
assets held in the Custodial Account shall be distributed to
the Participant in accordance with the termination
provisions of Section 8 hereof. Until advised to the
contrary, the Custodian may assume the Custodial Account is
so qualified and tax exempt.
6.2 Establishment of Custodial Account. The Custodian shall
establish and maintain a Custodial Account for the
Participant whose interest therein shall immediately become,
and at all times shall remain, nonforfeitable.
The Participant shall promptly notify the Custodian in
writing of any changes in the Participant's name or address.
The Participant warrants that at no time shall any part of
the assets of the Custodial Account, after deducting any
expenses properly chargeable to the Custodial Account, be
used for or diverted to purposes other than for the
exclusive benefit of the Participant and his or her
Beneficiaries.
6.3 Reports of Custodian. The Custodian shall keep accurate and
detailed records of all receipts, disbursements and other
transactions relating to the Custodial Account. As soon as
practicable after the close of each taxable year (or after
the Custodian's resignation or removal pursuant to Section
6.4 hereof) and whenever required by the Code, the Custodian
shall deliver to the Participant a written report reflecting
receipts, disbursements and other transactions effected in
the Custodial Account during such period, and fair market
value of the assets and liabilities of the Custodial Account
as of the close of such period.
The Custodian shall keep such records, make such
identifications and file with the Internal Revenue Service
such returns and other information concerning the Custodial
Account as may be required of it under the Code or forms
adopted by the Treasury Department thereunder. Further, the
Participant and the Custodian shall furnish to each other
<PAGE> 27
such information relevant to the Plan and Custodial Account
as may be required by the Code or such forms.
Unless the Participant sends the Custodian written objection
to a report within 60 days of delivery, the Participant
shall be deemed to have approved such report and the
Custodian and its officers, employees, attorneys and agents
shall be forever released and discharged from all liability
and accountability to anyone with respect to their acts,
transactions, duties and obligations or responsibilities as
shown on, or reflected by, such report. Nothing in the Plan
shall prevent the Custodian from having its accounts
judicially settled by a court of competent jurisdiction.
6.4 Registration or Removal of Custodian. The Custodian may
resign at any time upon 30 days' notice in writing to the
Participant and to Stein Roe & Farnham and may be removed by
the Participant (or Stein Roe & Farnham as agent for the
Participant) at any time upon notice in writing to the
Custodian. Upon such resignation or removal, the Participant
(or Stein Roe & Farnham as agent for the Participant) shall
appoint a successor custodian, which successor shall be a
"bank" as defined in section 401(d) of the Code or such
other person who demonstrates to the satisfaction of the
Secretary of the Treasury or his delegate that the manner in
which such other person will administer the Custodial
Account will be consistent with the requirements of section
408 of the Code. Upon receipt by the Custodian of written
acceptance of such appointment by the successor custodian,
the Custodian shall transfer and pay over to such successor
the assets of the Custodial Account and all records
pertaining thereto. However, the Custodian shall, if the
transfer occurs in the year the Participant reaches age 70
1/2 or any subsequent year, distribute to the Participant
any amount required to satisfy the minimum distribution
requirements for the year of transfer, as provided in
Section 4. Further, the Custodian is authorized to reserve
such sum of money as it may deem advisable for payment of
all its fees, compensation, costs and expenses, or for
payment of any other liabilities constituting a charge on or
against the assets of the Custodial Account, or on or
against the Custodian, with any balance of such reserve
remaining after the payment of such items to be paid over to
the successor custodian. The successor custodian shall hold
the assets paid over to it under terms similar to those of
the Agreement that qualify the Custodial Account under
section 408(h) of the Code.
If, within 30 days after the Custodian's resignation or
removal the Participant (or Stein Roe & Farnham as agent for
the Participant) has not appointed a successor custodian
which has accepted the appointment, the Custodian shall,
unless it elects to terminate the Custodial Account pursuant
to Section 6.5, appoint such successor itself. The Custodian
shall not be liable for the acts or omissions of any
successor custodian whether or not the Custodian makes such
appointment itself.
6.5 Termination of Account. The Custodian may elect to terminate
the Custodial Account if, within 30 days after its
resignation or removal pursuant to Section 6.4, the
Participant (or Stein Roe & Farnham as agent for the
Participant) has not appointed a successor custodian which
has accepted such appointment. Termination of the Custodial
Account shall be effected by distributing all assets thereof
to the
<PAGE> 28
Participant pursuant to the written direction of the
Participant (who represents and warrants that such
directions shall be in accordance with the provisions of
the Plan) or, if the Participant fails or is unable to give
such directions, such distribution shall be effected in such
manner as is determined by the Custodian, in each instance
in accordance with and subject to the provisions and
limitations of the Plan. Upon the completion of such
distribution, the Custodian shall be relieved from all
further liability with respect to all amounts so paid.
6.6 Other Matters Concerning the Custodian. To the extent
permitted by federal law, the Custodian shall not be
responsible in any way for the collection of contributions
provided for under the Plan, the purpose or propriety of any
distribution made pursuant to Section 4 hereof, or any other
action taken at the Participant's direction. The Custodian
shall also not have any duty or responsibility to determine
whether information furnished to it by the Participant is
correct or whether amounts contributed to the Custodial
Account are tax deductible or whether amounts distributed
from the Custodial Account are subject to income or excise
tax or any other tax whatsoever. To the extent permitted by
federal law, nothing contained in the Plan, either expressly
or by implication, shall be deemed to impose any powers,
duties or responsibilities on the Custodian other than those
set forth herein. The Custodian and its officers, employees,
attorneys and agents shall be indemnified and saved
harmless by the Participant (and the legal representatives,
heirs, successors or agents) and from the Custodial Account
from and against any and all personal liability arising from
actions taken at the Participant's direction, and from any
and all other liability whatsoever that may arise in
connection with the administration of the Plan, except the
obligation of the Custodian to perform in accordance with
the provisions of the Plan and with respect to the Custodial
Account unless the Participant shall furnish the Custodian
with instruction in proper form and such instruction shall
have been specifically agreed to by the Custodian. The
Custodian shall be under no duty to defend or engage in any
suit with respect to the Custodial Account unless the
Custodian shall have first agreed in writing to do so and
shall have been fully indemnified to the satisfaction of the
Custodian. The Custodian shall be protected in acting upon
any order or direction from a Participant (including any
order or direction permitted by and in accordance with and
subject to the terms and conditions of the Telephone
Exchange Privilege, if applicable) or any other notice,
request, consent, certificate, or other instrument on paper
believed by it to be genuine and to have been properly
executed (including Beneficiary Designations received from a
Participant) and, so long as it acts in good faith, in
taking or omitting to take any other action.
The Custodian is authorized to allocate fiduciary
responsibilities and duties between or among itself and any
other fiduciary or fiduciaries, if any, and to delegate any
of its ministerial, clerical or administrative functions to
or among such persons as it shall deem appropriate; provided
however, that in no event shall the Custodian either
allocate or delegate its responsibilities and duties for the
management of assets held in the Custodial Account except
for Participant-directed investments of large Custodial
Accounts under Section 7.3 hereof.
<PAGE> 29
The Custodian may allocate or delegate any of its
responsibilities and duties hereunder by following a
procedure pursuant to which it shall (1) allocate or
delegate its responsibilities and duties in a written
agreement between it and each person to whom such
responsibilities and duties are allocated or delegated
(which agreement shall describe the nature and the extent of
such allocation or delegation), and (2) specify in writing
to the Participant the name of the person or persons to whom
such responsibilities and duties are allocated or delegated,
the nature and extent of the responsibilities and duties
that are allocated or delegated and the terms and conditions
of such allocation or delegation, including compensation
therefor (if any). The Custodian shall not be liable for any
act or omission of the person or persons to whom such
responsibilities and duties are allocated or delegated.
SECTION 7 - INVESTMENT OF PLAN ASSETS
7.1 General. Except as otherwise permitted under Section 7.3
hereof, contributions by or on behalf of a Participant shall
be invested by the Custodian solely in the Mutual Funds the
Participant or the Beneficiary (or the duly authorized agent
of either of them) shall elect on a form provided or
permitted by the Custodian. At such times as the Participant
or the Beneficiary (or the duly authorized agent of either
of them) shall deem appropriate, changes of investment may
be made by written instruction to the Custodian on such form
as is provided or permitted by the Custodian. If the
Telephone Exchange Privilege has been elected on the
Application Form, such changes may be made by telephone or
such other means of communication permitted by, and in
accordance with, the terms and conditions of the Telephone
Exchange Privilege. No change shall be effective until
received by the Custodian and, once effective, shall remain
in effect until properly changed. If a Participant or a
Beneficiary (or duly authorized agent of either of them)
fails to properly direct the investment of the Custodial
Account, such Participant's Custodial Account shall be
invested in shares of the Mutual Fund specified in the
Application Form for such circumstances. Instructions
concerning the investment of the assets held in a Custodial
Account shall be executed by the Custodian on, or as soon as
reasonably practicable after, the date the Custodian
receives instructions in proper form.
The Participant warrants that no investment made pursuant
to his or her direction under this Section shall cause the
Custodial Account to lose its exemption as provided in
section 408(e)(2) of the Code.
The assets of a Custodial Account shall not be commingled
with other property except in a common trust fund or a
common investment fund and shall not be invested in life
insurance contracts or in "collectibles" as defined in
section 408(m) of the Code.
7.2 Mutual Fund Investments. Plan assets invested in shares of
the Mutual Fund(s) shall be made in accordance with, and
shall be subject to, the provisions of the prospectus(es) of
such Mutual Funds(s) and such shares shall be registered in
the name of the Custodian or its nominee until distributed.
The Participant for whom such shares are acquired shall be
the beneficial owner of such shares.
<PAGE> 30
Except as otherwise provided herein, all income dividends
and capital gain distributions paid on Mutual Fund shares
held in a Custodial Account shall be invested in accordance
with the Mutual Funds' prospectuses unless the Participant
instructs the Custodian to invest the income dividends and
capital gains distributions in another Mutual Fund within
the Participant's IRA. If any distribution may be received
in shares, cash or other property at the election of the
shareholder, the Custodian shall elect to make such
distribution in shares in accordance with the Mutual Funds'
prospectuses. If over age 59 1/2, a Participant may elect to
receive income dividends and capital gain distributions in
cash as part of a distribution from the Custodial Account.
The Mutual Funds in which the assets held in the
Custodial Account are invested shall furnish to the
Custodian, and the Custodian shall promptly deliver to the
Participant, confirmation of all investments, changes of
investment and investments of distributions paid with
respect to Mutual Fund shares held in the Participant's
Custodial Account and all notices, prospectuses, financial
statements, proxies, and proxy soliciting materials relating
to such shares. To the extent required, the Custodian or its
nominee shall sign such proxies as record owner of such
shares, but shall not otherwise vote them except in
accordance with the written instructions of the Participant.
Delivery by the Custodian of any of these items to the
Participant shall be deemed to be on the date such items are
mailed by the Custodian to the Participant at the
Participant's last address of record (or to such other
address as the Participant shall direct); provided however,
that anything herein to the contrary notwithstanding, such
delivery by the Custodian shall be in compliance with the
minimum requirements of applicable securities laws.
7.3 Investment of Large Custodial Accounts.
(a) Notwithstanding the provisions of the Plan to the
contrary, a Participant who has a Custodial Account with
a balance of not less than $250,000 (unless waived or
reduced by Stein Roe & Farnham) may, if so elected on a
form acceptable to the Custodian, direct the Custodian
in writing to invest such Custodial Account and income
therefrom in such stocks, bonds, notes, shares of other
mutual funds registered under the Investment Company Act
of 1940, as amended, or other property, real or
personal, as the Participant deems appropriate. However,
if the value of the Custodial Account shall at any time
be less than $100,000 (unless waived or reduced by Stein
Roe & Farnham), the investment of the Custodial Account
shall be limited to the Mutual Funds. Further, any
amount invested pursuant to this Section in an
investment, other than securities traded on a national
stock exchange or in the over-the-counter market, shall
be subject to the prior written agreement of the
Custodian, and not less than 50 percent (unless waived
or reduced by Stein Roe & Farnham) of the Participant's
Custodial Account shall be invested in the Mutual Funds
and/or be subject to an Investment Advisory Agreement
between the Participant and Stein Roe & Farnham.
(b) The Custodian may charge the Custodial Account of the
Participant who elects to invest
<PAGE> 31
the Custodial Account pursuant to this Section such fees
as the Custodian and the Participant may from time to
time agree in writing.
(c) Subject to the direction of the Participant, the
Custodian shall have the following powers with respect
to a Custodial Account invested pursuant to this
Section:
(i) to invest all or any portion of the Custodial
Account in investment contracts issued by an
insurance company, including, but not limited to,
guaranteed income contracts, immediate participation
guarantee contracts, group annuity contracts and
deposit administration contracts, and to excise all
rights under such contracts in the manner directed
by the Participant; provided that, notwithstanding
the foregoing, no such investment shall be made in
life insurance contracts or in any other investment
which would cause the Participant's Custodial
Account to lose its exemption as provided in section
408(e)(2) of the Code;
(ii) to keep, in its sole discretion, such portion of the
Custodial Account in cash balances (regardless of
whether interest is paid on such balances) with a
bank or trust company (including the Custodian) as
the Custodian may from time to time deem to be in
the best interest of the Participant, and the
Custodian shall not be liable for any loss of
interest on cash so held; provided, however, that
any cash balances held by the Custodian shall bear a
reasonable rate of interest;
(iii) to sell, exchange, convey, transfer or otherwise
dispose of any property held by it by private sale
or contract or by public auction, and no person
dealing with the Custodian shall be bound to see to
the application of the purchase money or to inquire
into the validity, expediency or propriety of any
such sale or other disposition;
(iv) to vote (or refrain from voting), either in person
or by general or limited proxy, any securities; to
exercise any conversion privileges, subscription
rights or other options and to make any payments
incidental thereto; to consent to or otherwise
participate in reorganizations or other changes
affecting corporate securities and delegate
discretionary power and to pay any assessments or
charges in connection therewith; and to generally
exercise any powers of any owner with respect to
stocks, bonds, securities or other property (other
than shares of Mutual Funds) held in the account;
(v) to make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and
all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
(vi) to register any investments made pursuant to this
Section in its own name or in the name of a nominee
and to hold any investment in bearer form, but the
books
<PAGE> 32
and records of the Custodian shall at all times show
that all such investments are part of the
Participant's Custodial Account;
(vii) to employ, and pay compensation to, suitable
agents, custodians, counsel and accountants as the
Custodian deems necessary or desirable to manage or
protect the Custodial Account, and if the Custodian
shall employ counsel, the Custodian shall be fully
protected in acting on the advice of such counsel;
and
(viii) to do all acts, whether or not expressly
authorized, which the Custodian may deem necessary
or proper for the protection of the property held
hereunder.
SECTION 8 - AMENDMENT AND TERMINATION
The Participant may amend the Application Form or terminate the
Custodial Account and Stein Roe & Farnham may, as agent for the
Participant, amend the Plan (including retroactive amendment of
the Plan), by delivering to the Custodian a signed copy of such
amendment or a notice of termination; provided however, that the
Custodian's duties may not be increased without its written
consent. By mutual agreement, Stein Roe & Farnham and the
Custodian may change the Custodial Fees set forth in the
Application Form upon 45 days' written notice to the Participant.
In the event that the Participant amends the Plan, other
than by amending the Application Form, the Participant's Plan
shall no longer be considered as approved by the Internal Revenue
Service as adoption of this prototype IRA Plan.
No amendment or termination shall be effective if it would
cause or permit any part of the Custodial Account to be diverted
to purposes other than for the exclusive benefit of the
Participant (and the Participant's Beneficiaries) and no
retroactive amendment shall be effective if it deprives any
Participant of any benefit to which the Participant was entitled
under the Plan by reason of contributions made before the
amendment, unless such amendment is necessary to conform the Plan
to, or satisfy the requirements of, the Code.
SECTION 9 - MISCELLANEOUS
9.1 Status of Participants. Neither the Participant nor any
other person shall have any legal or equitable right against
the Custodian or Stein Roe & Farnham, except as provided
herein.
9.2 Loss of Exemption of Custodial Account. If the Custodian
receives notice that the Participant's Custodial Account has
lost its tax-exempt status under section 408(e)(2) of the
Code for any reason, including by reason of a transaction
prohibited by section 4975 of the Code, the Custodian shall
distribute to the Participant the entire balance in the
Custodial Account, in cash or in kind, in the sole
discretion of the Custodian no later than 90 days after the
date the Custodian receives such notice.
9.3 Payment of Taxes, Expenses and Custodial Fees. The Custodian
shall pay out of the Custodial Account any income, gift,
estate or inheritance taxes or other tax of any kind
whatsoever that may be levied upon or assessed against or in
respect of the Custodial Account (other than transfer
taxes), and any expenses of investment management or
investment advisory services rendered to the Custodial
Account, and at its option, collect any amounts so charged
from the amount of any
<PAGE> 33
contribution to be credited to or distribution to be made
from the Custodial Account or by sale or liquidation of the
assets credited to such account. If the assets of the
Custodial Account are insufficient to satisfy such charges,
the Participant shall pay any deficit therein to the
Custodian.
Any transfer taxes incurred by the Custodian in
connection with the investment and reinvestment or transfer
of the assets of the Custodial Account and all other
administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal service
rendered to the Custodian and such compensation to the
Custodian as may be established from time to time by the
Custodian, shall be collected by the Custodian from the
amount of any contribution credited to or distribution to be
made from the Custodial Account or by sale or liquidation of
the assets credited thereto.
Until otherwise changed in accordance with the terms of
Section 8 hereof, the Custodian shall receive fees for its
services with respect to a Participant's Custodial Account
as set forth in the Application Form and shall receive such
additional fees as may be agreed upon by it and the
Participant from time to time for its services in connection
with investments made pursuant to Section 7.3 hereof.
Payment of any taxes, expenses or Custodial fees
described in this Section may also be paid directly by, or
on behalf of, the Participant subject to agreement by the
Custodian.
9.4 Gender and Number. Except where the context indicates to the
contrary, when used herein, masculine terms shall be deemed
to include the feminine, and singular the plural. In Section
3.3(c) and 4.4 hereof, feminine terms shall be deemed to
include the masculine.
9.5 Other Conditions. A Participant, by participating in the
Plan, expressly agrees that he shall look solely to the
assets of the Custodial Account for the payment of any
benefits to which he or she is entitled under the Plan. The
benefits provided under the Plan shall not be subject to
alienation, assignment, garnishment, attachment, execution
or levy of any kind, and any attempt to do so shall not be
recognized, except by the Custodian for the taxes, expenses
and Custodial fees described in Section 9.3 hereof and
except to such extent as may be required by law. The Plan
and any forms provide by the Custodian, including the
Beneficiary Designation filed pursuant to Section 4.5 and
all property rights of the Participant under the Plan, shall
be construed, administered, and enforced according to the
laws of the State of Illinois, other than its laws with
respect to choice of laws, except to the extent preempted by
the Employee Retirement Income Security Act of 1974, as
amended.
<PAGE>
Internal Revenue Servic Department of the Treasury
Plan Name: IRA Custodial Account Washgton, DC 20224
FFN: 50153960000-001 Case: 9670156 EIN: 36-3447638
Letter Serial No: 0100035d
Person to Contact: Ms. Arrington
STEIN ROE & FARNHAM INC.
Telephone Number: (202) 622-8173
ONE SOUTH WACKER STREET
Refer Reply to: CP:E:EP:T2
CHICAGO, IL 60606
Date: 09/19/96
Dear Applicant:
In our opinion, the amendment to the form of the prototype trust,
custodial account or annuity contract identified above does not
adversely affect its acceptability under section 408 of the
Internal Revenue Code, as amended by the Tax Reform Act of 1986.
Each individual who adopts this approved plan will be considered
to have a retirement savings program that satisfies the
requirements of Code section 408, provided they follow the terms
of the program, do not engage in certain transactions specified
in Code section 408(e), and, if the arrangement is a trust or
custodial account, the trustee or custodian is a bank within the
meaning of Code section 408(n) or has been approved by the
Internal Revenue Service pursuant to Code section 408(a)(2).
Please provide a copy of this letter to each person affected.
The Internal Revenue Service has not evaluated the merits of this
savings program and does not guarantee contributions or
investments made under the savings program. Furthermore, this
letter does not express any opinion as to the applicability of
Code section 4975, regarding prohibited transactions.
Code section 408(I) and related regulations require that the
trustee, custodian or issuer of a contract provide a disclosure
statement to each participant in this program as specified in the
regulations. Publication 590, Tax Information on Individual
Retirement Arrangements, gives information about the items to be
disclosed. The trustee, custodian or issuer of a contract is also
required to provide each adopting individual with annual reports
of savings program transactions.
Your program may have to be amended to include or revise
provisions in order to comply with future changes in the law or
regulations.
If you have any questions concerning IRS processing of this case,
call us at the above telephone number. Please refer to the File
Folder Number (FFN) shown in the heading of this letter. Please
provide those adopting this plan with your telephone number, and
advise them to contact your office if they have any questions
about the operation of this plan.
You should keep this letter a permanent record. Please notify us
if you terminate the form of this plan.
Sincerely yours,
Signature
Chief, Employee Plans Technical Branch 2
<PAGE>
The Stein Roe Mutual Funds
Stein Roe Government Reserves Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe High Yield Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Young Investor Fund
Stein Roe Special Fund
Stein Roe Growth Opportunities Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
Stein Roe Emerging Markets Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-8900
1-800-338-2550
http://www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd
Floor
Liberty Securities Corporation, Distributor
Member SIPC
IRAPD 7/97
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
IRA APPLICATION
Prototype Plan No. D100035d dated September 19, 1996
Use this application to establish an Individual Retirement Account
(IRA) in a Stein Roe Mutual Fund. If you have any questions,
please call us at 800-338-2550.
1 PARTICIPANT
Please complete a separate form for each type of IRA you wish to
establish.
______________________________________________________________
First name Middle initial Last name
______________________________________________________________
Street Address
______________________________________________________________
City State Zip code
______________________________________________________________
Daytime telephone Evening telephone
______________________________________________________________
Social security number Date of Birth
_____________________________ as custodian for the above
Name of one custodian only* (if above participant is a minor)
participant under the ________________________________________
Minor state of residence (if applicable)
Uniform Gifts (Transfers) to Minors Act.
*The custodian is the individual responsible for managing the
account until the minor reaches the age of majority (18 or 21,
depending upon the state). The individual acting as custodian
needs to complete the above line and sign the application
(Section 9).
2 CONTRIBUTION TYPE
Please select one contribution type. The initial investment
minimum is $500 per fund account, except for a SEP-IRA. Please
refer to the Plan Booklet for an explanation of each contribution
type. Enclose a check payable to Stein Roe Mutual Funds for at
least $500, unless you are making an IRA asset transfer.
[ ] A. Contribution to Regular IRA
Contribution is for current year unless you specify
different year: 19__
[ ] B. SEP-IRA
[ ] C. Asset Transfer
Complete Section 11.
[ ] D. Conduit/Segregated IRA Rollover Account
[ ] E. Rollover
I have enclosed a check payable to Stein Roe Mutual Funds
in the amount of $_____
This represents a rollover from:
[ ] IRA
[ ] SEP-IRA
[ ] Spousal IRA
[ ] 403(b) Plan
[ ] Transfer Incident to Divorce from IRA/Tax-
qualified Plan
[ ] Spousal Death Benefit
Distribution from Tax-qualified Plan
[ ] Direct Rollover
[ ] Other
Date qualifying distribution was made*: ______
*This may not be more than 60 days prior to date SteinRoe Services
Inc. receives your Rollover Contribution.
3 INVESTMENT OF CONTRIBUTIONS
Please select your investments. If you do not choose a Fund, your
contributions will be invested in Stein Roe Cash Reserves
Fund, a money market fund.
Stein Roe Fund IRA
- ---------------------------------------
Government Reserves Fund $______
Cash Reserves Fund ______
Government Income Fund ______
Intermediate Bond Fund ______
Income Fund ______
High Yield Fund ______
Balanced Fund ______
Growth & Income Fund ______
Growth Stock Fund ______
Young Investor Fund ______
Special Fund ______
Growth Opportunities Fund ______
Special Venture Fund ______
Capital Opportunities Fund ______
International Fund ______
Emerging Markets Fund** ______
Total Contributions $
======
**To discourage short-term trading, there is a 1 percent redemption
fee imposed on the sale of shares held for less than 90 days.
4 AUTOMATIC INVESTMENT PLAN
Please allow 3 weeks to establish this option.
[ ] A. Regular Investment. This privilege allows you to make
current year contributions to your IRA directly from your bank
checking or savings account by electronic transfer. Please be
sure the amount you specify does not exceed your maximum
permissible annual contribution amount.
________________________________________________________________
Fund name Account number Amount
(or "new") ($50 monthly minimum)
________________________________________________________________
Fund name Account number Amount
(or "new") ($50 monthly minimum)
________________________________________________________________
Fund name Account number Amount
(or "new") ($50 monthly minimum)
I authorize Stein Roe Mutual Funds to draw on my bank account to
purchase shares for the account(s) listed above (check one box
only):
[ ] Monthly [ ] Quarterly [ ] Every 6 months [ ] Annually
These purchases should be made on or about the:[ ] 5th or
[ ] 20th day of the month
Please begin: [ ] Immediately or [ ] ______ specify month
[ ] B. Special Investments. You can also purchase shares by
telephone and pay for them by electronic transfer from your bank
account on request. Check the box above for this option, which
saves you the trouble and expense of arranging a wire transfer
or writing a check. Please also complete the bank information
below ($50 minimum; $100,000 maximum)
IRA contributions made through the Automatic Investment Plan will
be credited as a contribution for the year in which the shares are
purchased. You are solely responsible for adhering to applicable
contribution limitations.
Bank Information [ ] Checking [ ] Savings
_________________________________________________________
Name of bank
_________________________________________________________
Street address of bank
_________________________________________________________
City State Zip code
_________________________________________________________
Name(s) on bank account
_________________________________________________________
Bank account number ACH routing number
Attach a voided check to this form and verify the above
information with your bank.
5 AUTOMATIC EXCHANGE PLAN*
With this privilege you can authorize Stein Roe to regularly
exchange shares from one Stein Roe Fund to another with the same
account registration. A $500 minimum applies to each new account.
_________________________________________________________
Redeem shares from (Fund Name) Account number
_________________________________________________________
Amount ($50 monthly minimum)
_________________________________________________________
Purchase shares in (Fund name) Account number
(or "new")
Check one box below and fill in dates between the 1st and 28th
of the month:
[ ] Twice monthly on the ___ and ___ beginning ______________
specify month
[ ] Monthly on the _____ beginning _________________
specify month
[ ] Quarterly on the ________ of ___________________
list four months
[ ] Twice yearly on the ______ of ___________________
list two months
[ ] Annually on the _________ of ___________________
specify month
6 TELEPHONE EXCHANGE*
Unless you check the box below, you are electing to have the
privilege to exchange shares between your IRA accounts by
telephone.
[ ] I do NOT want the telephone exchange privilege.
Anyone who is supplied with the proper account information can
make telephone exchanges on your behalf. You may make up to four
round trip telephone exchanges every 12 months. A round trip is
the exchange from one Fund to another, and back again. Stein Roe
reserves the right to discontinue or modify the exchange
privilege, and certain restrictions apply.
7 CUSTODIAL ACCOUNTS OF $250,000 OR MORE
If you are establishing an IRA by transfer or rollover of an
amount of at least $250,000, you may select investments other than
the Stein Roe Mutual Funds in accordance with the terms of the
Plan by checking the following box and attaching a separate letter
of investment instructions. [ ]
8 DIVIDEND DISTRIBUTION OPTION*
Dividends and capital gains will automatically be reinvested into
your IRA fund account. If you would like to have your dividends
and capital gains distributions invested in a different Stein Roe
Mutual Fund within your IRA, please complete this section.
Note: The Fund into which you direct your dividends or capital
gains must be registered exactly the same as your current account
registration.
A. Reinvest my [ ] dividends into
[ ] capital gains into
Fund name: ____________________________
Account number: ________________________ (or "new")
B. Pay in cash to address of record.*
[ ] dividends [ ] capital gains
*If you are 59 1/2, you can elect to have your dividends/capital
gains paid in cash to the address of record.
9 SIGNATURE
Sign exactly as your name is printed in Section 1.
I hereby adopt the Stein Roe Funds Individual Retirement Account
Plan and appoint First Bank, N.A. to serve as Custodian as
provided therein. I have read the Plan documents, including the
General Provisions on the reverse side of this form, and agree to
be bound by their terms. I have received the current
prospectus(es) of the Fund(s) in which my initial contribution is
to be invested and agree to be bound by their terms.
Unless I have declined the Telephone Exchange Privilege in Section
6, I have authorized any Fund the shares of which are purchased
for my IRA, and SteinRoe Services Inc., transfer agent for the
Fund(s) and agent for my IRA Custodian (the "Stein Roe Parties")
to act upon instructions received by telephone to exchange shares
held for shares of any other Stein Roe Fund. I agree that no Stein
Roe Parties will be liable for any loss, injury, damage or expense
as a result of action upon, and will not be responsible for the
authenticity of any telephone instructions, and will hold the
Stein Roe Parties harmless from any loss, claims or liability
arising from its or their compliance with these instructions.
Accordingly, I understand that I will bear any risk of loss
resulting from unauthorized instructions. I understand that the
Stein Roe Parties employ reasonable procedures to confirm that
telephone instructions are genuine.
Signature: ____________________________
Date: _________________________________
10 CUSTODIAN ACCEPTANCE
The undersigned, First Bank, N.A., by separate agreement and the
below signature, offers to serve as Custodian in accordance with
the Stein Roe Funds Individual Retirement Account Plan once this
Application form has been properly completed and delivered (or
mailed) to the Custodian. If relating to an asset transfer, the
undersigned accepts the appointment as successor Custodian of the
above referenced account(s) and directs the resigning custodian to
liquidate the assets and remit as described above.
OFFER TO SERVE AS CUSTODIAN:
First Bank National Association
By: TERRY S. RICHTER
11 IRA Asset Transfer Information
Please complete this section only if you are making an IRA asset
transfer. Please consult the resigning custodian to determine if
there are any special requirements (e.g. signature guarantee) you
must meet before making an asset transfer.
Resigning Custodian Information
_________________________________________________________
Resigning custodian
_________________________________________________________
Street address or P.O. box
_________________________________________________________
City State Zip code
_________________________________________________________
Account representative
_________________________________________________________
Daytime telephone
_________________________________________________________
Account name and number to be transferred
Type of IRA Transferred to Stein Roe
[ ] Regular [ ] Rollover [ ] SEP-IRA
If you are making an IRA asset transfer, please complete the form
on the reverse side.
*Redemption Fee
Although Stein Roe Emerging Markets Fund is 100 percent no-load,
with no 12b-1 fees and no sales charges, there is a 1 percent
redemption fee imposed on the sale of shares held for less than 90
days to discourage short-term trading.
Transfer Instructions (continued from previous page)
Please liquidate all assets (or $ ___________) in the above-
referenced account on ____________ (if no date, liquidate
immediately) and remit proceeds payable to Stein Roe Mutual Funds
for the IRA of the individual listed in Section 1 to the following
address:
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
If your IRA is invested in a certificate of deposit (C.D.) and the
IRA C.D. investment matures in less than 15 days, please notify your
custodian that we will be sending asset transfer instructions. If
your IRA C.D. investment matures in more than 30 days, please
check with your custodian to determine if a penalty
will apply for early liquidation.
Signature For Asset Transfer
_____________________________
Sign here and in Section 9
Signature Guarantee (May be required by resigning custodian. Please
contact resigning custodian for instructions.)
Signature Guaranteed by:
_________________________________________________________
Name of institution
_________________________________________________________
Name of authorized officer
_________________________________________________________
Signature of authorized officer
Guarantor's Stamp:
Stein Roe account representatives are available weekdays from 7
a.m. to 8 p.m. and weekends from 8 a.m. to 2 p.m.(Central Time)
If you have any questions, please call us toll free at 800-338-
2550
Please return this completed form to:
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
General Provisions
1. Plan Establishment.
Your IRA will be established when SteinRoe Services Inc.
receives your properly completed form. If you fail to complete
this form properly, the establishment of your IRA may be
delayed.
2. Charges and Fees.
Custodial Fees. Your IRA is subject to custodial fees as
provided in the IRA Plan. These custodial fees will be paid
by converting Fund shares in IRA accounts to cash, as
determined by Stein Roe Mutual Funds. In general, these
fees are for the maintenance of your IRA account(s) - Stein
Roe Mutual Funds are no-load funds and no fees are charged
based on your contributions. SteinRoe Services Inc. performs
most of the ministerial functions in maintaining Fund accounts.
As a result, it receives a substantial portion of your IRA
custodial fees. Following are descriptions of custodial fees
for Stein Roe IRA accounts. These fees may be changed upon 45
days' written notice to you. The Custodian also reserves the
right to waive or reduce any of its charges or fees.
1. Fund Account Annual Maintenance Fee: $10 (maximum $30)
For IRA accounts for which the aggregate balance of all Fund
accounts is less than $10,000 on the valuation date, a Fund
account Annual Maintenance Fee will apply. A fee of $10 will
be charged for each Fund account maintained by you during any
part of the subject calendar year - limit three Fund accounts.
Stein Roe Mutual Funds will determine which Fund accounts are
charged.
2. Distribution fee: $10
For IRA accounts, a distribution fee will be charged for each
distribution from a Fund account - in the case of installment
payments, however, this fee is charges only at the time the
installment plan is established.
3. Termination fee: $10
For all IRA accounts, a termination fee will be charged for
each Fund account liquidated in connection with the termination
or transfer of your IRA. This fee is not applicable to accounts
which are distributed pursuant to an installment plan.
4. Other Services
For all IRA account for which the Custodian is required to
perform services not ordinarily provided under the Plan,
including making participant-directed investments of large
Custodial accounts of $250,000 or more pursuant to Section 7.3
of the Plan, the Custodian may charge such additional fees
as are appropriate.
3. Telephone Inquiry Responses.
The Funds in which contributions by you or on your behalf are
invested and SteinRoe Services Inc., as transfer agent for the
Funds and as agent for the Custodian of the Plan, are
authorized to respond to any written inquiries from you and any
telephonic inquiries (WHETHER FROM YOU OR ANY PERSON) relating
to the status of your IRA and none of the Funds, SteinRoe
Services Inc., or the Custodian shall be held liable for any
action taken or information communicated pursuant to any such
communication.
4. Terms of Privileges.
The following terms and conditions and those stated in the
prospectus as in effect from time to time apply to the Fund
Privileges you elect:
a. None of the Funds, the Funds' transfer agent, your IRA
Custodian nor their respective officers, trustees nor
directors, agents nor employees shall be liable for any
loss, liability, cost or expense for acting upon
instructions furnished under a Privilege.
b. You agree that any Privilege you elect shall continue until
five business days after any Fund, (shares of which are held
in your IRA) or its transfer agent, receive notice from you
of any change thereof. You also agree that any Fund offering
a Privilege, its transfer agent or your IRA Custodian may
suspend, limit or terminate any Privilege or its use at any
time without prior notice to you. You agree that none of the
Funds, their transfer agent, or your IRA Custodian shall be
held liable for any action taken or information communicated
pursuant to this authorization.
c. You authorize the Fund(s) and its transfer agent to initiate
any and all credit or debit entries (and reversals thereof)
to effect electronic transfers under any Privilege and
redeem shares of any Funds(s) you own equal to the amount of
any loss incurred by any of them in effecting any electronic
transfer and retain the proceeds.
d. You understand that the Funds or their transfer agent will
generally record (by electronic means or otherwise) any
telephonic instruction given pursuant to a Privilege and you
expressly authorize such recording. You also understand and
agree that the Funds and your transfer agent reserve the
right to refuse any telephonic instruction.
5. Transfers/Rollovers by Persons over age 70 1/2.
If you are making an asset transfer/rollover contribution after
the April 1 of the year following the year you reach age 70 1/2
or a subsequent year, your assets transferred/rolled over must
be distributed over a period no longer than the period over
which they were scheduled to be distributed from your
transferor/distributing plan. If you already have a Stein Roe
IRA and are scheduled to receive distributions from that IRA
over a period longer than the period over which you were
scheduled to receive distributions from the transferor/
distributing plan, you must establish a new Stein Roe IRA for
your transfer/rollover. In addition, you must complete and
return with this form a Distribution Request Form requesting
that your transferred/rolled over assets be distributed at
least as rapidly as under the distribution method in effect
under your transferor/distributing plan. If the distribution
period for your transferor/distributing plan is based on the
joint and last survivor life expectancies of you and a
designated beneficiary, you cannot extend the payment period
under the Stein Roe IRA into which your assets are transferred/
rolled over by naming a younger Beneficiary. You may designate
a different Beneficiary than under your transferor/distributing
plan, but if that Beneficiary has a shorter life expectancy
than the beneficiary designated under your transferor plan,
your maximum IRA payment period must be correspondingly
reduced. If that Beneficiary has a life expectancy longer than
the beneficiary designated under your transferor/ distributing
plan, your maximum IRA payment period still must be the same as
under the transferor/distributing plan. In either event, you
must designate a Beneficiary for the Stein Roe IRA into which
your assets are transferred/rolled over by completing and
returning an IRA Beneficiary Form with your Distribution
Request Form. For other rollover provisions, see Plan Booklet.
IRAAP 0897
<PAGE>
[Stein Roe Mutual Funds Logo]
IRA BENEFICIARY FORM
For all Stein Roe Mutual Fund Shareholders.
INSTRUCTIONS
If you do not designate a Beneficiary by properly completing and
returning this form, your IRA death benefits will be paid in a
lump sum to your surviving spouse or, if you have none, to your
estate. For further information on death benefit distributions,
please see Section 4 of the IRA Plan. Because your Beneficiary
Designation may have important tax and legal ramifications, we
suggest that you consult with your counsel about completion of
this form.
1 PARTICIPANT
________________________________________________________________
First Name Middle Initial Last Name
________________________________________________________________
Street Address
________________________________________________________________
City State Zip Code
________________________________________________________________
Daytime Telephone Evening Telephone
________________________________________________________________
Social Security Number Date of Birth
I hereby revoke all prior Beneficiary Designations and designate
the following as the Beneficiary(ies) of my IRA(s) identified
below. I retain the right to change this designation under the
terms of my IRA and subject to the General Provision on the
reverse side of this form. I understand and agree that my
Beneficiary(ies) shall elect the method of death benefit
distribution.
2 TYPE OF IRA
This Beneficiary Designation shall apply to all of your IRAs
unless you specify a particular IRA by checking the appropriate
box below. See General Provision 3 on the reverse side for
instructions on when a specific designation may be required for
IRA rollovers or transfers.
[ ] Regular [ ] Transfer
[ ] Rollover [ ] SEP
3 BENEFICIARIES
Include date of trust or trust number if Beneficiary is a trust.
A. Primary Beneficiary(ies)
1. ________________________________________________________
Name & Relationship
________________________________________________________
Mailing Address
________________________________________________________
% of Distribution SSN/TIN Date of Birth
2. ________________________________________________________
Name & Relationship
________________________________________________________
Mailing Address
________________________________________________________
% of Distribution SSN/TIN Date of Birth
B. Contingent Beneficiary(ies)
1. ________________________________________________________
Name & Relationship
________________________________________________________
Mailing Address
________________________________________________________
% of Distribution SSN/TIN Date of Birth
2. ________________________________________________________
Name & Relationship
________________________________________________________
Mailing Address
________________________________________________________
% of Distribution SSN/TIN Date of Birth
C. Minor Beneficiary(ies):
If you designate a minor beneficiary, please designate a
custodian under the Illinois Uniform Transfers Act, or similar
statute.
____________________________________________________________
Name of Minor
____________________________________________________________
Name of Custodian
4 SIGNATURE
By signing below you agree to all the General Provisions on the
reverse side of this form.
________________________________________________________
Signature Date
By signing below I hereby transfer my marital interest in my
spouse's IRA to the Beneficiary(ies) designated above.
_______________________________________________________________
Participant's Spouse's Signature (Community Property States Only)
<PAGE>
GENERAL PROVISIONS
1. Effectiveness. This Beneficiary Designation shall not be
valid until it has been properly completed and received by the
Custodian not later than 30 days after the date of your death.
2. Beneficiary Eligibility. In order for a Beneficiary to
receive your death benefits:
(a) if such Beneficiary is your surviving spouse and he/she
dies before one or more payments become due, each such
payment shall be payable as if he/she were the
Participant;
(b) if such Beneficiary is an individual who is not your
surviving spouse, such individual Beneficiary must survive
you and be living at the time each payment to which he is
entitled becomes due; and
(c) if such Beneficiary is a trust, the trustee of that trust
must be qualified to act at the time each payment to the
trust becomes due (subject to the terms of Provision 4
below).
3. Transfers and Rollovers. If you transfer or roll over assets
from another IRA or tax-qualified plan ("transferor plan")
after April 1 of the year following the year you reach age 70
1/2, those assets must be distributed over a period no longer
than the period over which they were scheduled to be
distributed from the transferor plan. If you are receiving
distributions from another IRA established by adoption of the
Stein Roe IRA Plan over a period longer than the period over
which you were receiving distributions from the transferor
plan, the assets transferred or rolled over must continue to
be distributed over the transferor plan period. In order to
do so, you must establish a separate IRA for the assets
transferred or rolled over. If the transferor plan period is
based on the joint and last survivor life expectancies of you
and a beneficiary designated under the transferor plan, you
cannot extend the payment period for the IRA into which the
assets are transferred or rolled over by designating a younger
Beneficiary. You may designate a different Beneficiary for
the IRA, but if that Beneficiary has a shorter life expectancy
than the beneficiary designated under the transferor plan,
your maximum IRA payment period must be correspondingly
reduced. If the IRA Beneficiary has a life expectancy longer
than the beneficiary designated under the transferor plan,
your maximum payment period still must be the same as under
the transferor plan.
4. Trust Beneficiaries.
(a) If you name a trust as a Beneficiary on the face of this
form but no qualified trustee claims the portion of your
death benefits payable to the trust within 18 months after
your death, or if, within that period, it is established
to the satisfaction of the Custodian that no trustee can
or will qualify to receive such amounts, such amounts
shall be paid to such other of your Beneficiaries, if any,
who are eligible to receive your death benefits under
Provision 2 above.
(b) If you name a trust as a Beneficiary (other than a trust
described in the next sentence) your death benefits must
be paid to the trust in a lump sum no later than December
31 of the year that contains the fifth anniversary of your
death. A trust Beneficiary that meets the following
requirements on the later of the date on which the trust
is named as Beneficiary or April 1 of the year following
the year in which you reach 70 1/2, and as of all
subsequent times, may elect to receive your death benefits
over a maximum period equal to the life expectancy of the
oldest trust Beneficiary:
(i) there are no trust beneficiaries (other than
beneficiaries whose receipt of benefits is contingent
on the death of a prior beneficiary) who are not
individuals.;
(ii) the trust is a valid trust under state law, or would
be but for the fact that there is no corpus;
(iii) the trust is irrevocable;
(iv) the trust beneficiaries who are Beneficiaries of your
IRA are identifiable from the trust instrument; and
(v) a copy of the trust instrument is provided to the
Custodian.
5. Fiduciary Responsibility. The Custodian and the Plan are not
responsible for any failure of a trustee, executor or
administrator to perform the duties of trustee, executor or
administrator, nor for the application or disposition of any
money paid to a trustee, executor or administrator or trust
beneficiary, and any money so paid shall fully discharge the
Custodian and the Plan for the amount so paid.
6. Evidence. The Plan and Custodian shall be fully discharged
from all liability to any and all persons claiming under the
Plan in relying on evidence provided by affidavit or otherwise
as shall be satisfactory to the Custodian in determining the
existence of any trust, the identity and qualification of any
trustee(s) or any other questions of fact relative to payments
due under the Plan, and in making payment either to the
trustee(s), any beneficiary of a trust or the executors or
administrators of your estate, as the case may be.
7. Minor Beneficiaries. If any person to whom all or a portion
of your interest is payable is a minor and if either (i) you
have not designated a person to receive the minor's interest
on behalf of such minor as Custodian under the Illinois
Uniform Transfers Act, or similar statute, or (ii) the person
you designated refuses or is unable to act, the Custodian may
in its sole discretion:
(a) distribute the interest to the legal guardian of such
minor, or
(b) designate an adult member of the minor's family, a
guardian or a trust company (including the Custodian), as
those terms defined in the Illinois Uniform Transfer Act,
or similar statute, and distribute such minor's interest
to the person so designated.
8. Controlling terms. The terms, provisions and limitations of
the Plan and any amendments thereof which may be made from
time to time are controlling over these General Provisions and
shall always govern all rights of you and your
Beneficiary(ies) and all persons claiming under, by or through
them or any of them.
If you have any questions, please call us toll-free weekdays from
7 a.m. to 8 p.m. and weekends from 8 a.m. to 5 p.m. (Central Time)
at 800 338-2550.
Please send this completed from to:
Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA 02205-8900
Stein Roe Counselor [service mark] clients call your account
executive toll-free weekdays from 8 a.m. to 6 p.m. (Central Time)
at 800-322-8222.
Stein Roe Counselor [service mark] clients please send this
completed form to:
Stein Roe Counselor [service mark]
P.O. Box 803938
Chicago, IL 6068l0-3938
IRABN 0696
