<PAGE>
1933 Act Registration No. 2-99356
1940 Act File No. 811-4367
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 19 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 20 [X]
STEINROE MUNICIPAL TRUST
P. O. Box 804058, Chicago, Illinois 60680
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
& Secretary Three First National Plaza
SteinRoe Municipal Trust Suite 3200
One South Wacker Drive 70 W. Madison Street
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on November 1, 1995 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has elected to register pursuant to Rule 24f-2 an
indefinite number of shares of beneficial interest of the following
series: SteinRoe Intermediate Municipals, SteinRoe Municipal Money
Market Fund, SteinRoe Managed Municipals, and SteinRoe High-Yield
Municipals. The Rule 24f-2 Notice for the fiscal year ended June
30, 1995 was filed on August 25, 1995.
This amendment to the Registration Statement has also been signed by
SR&F Base Trust as it relates to SteinRoe Municipal Money Market
Fund.
Amending Parts A, B and C and filing exhibits.
<PAGE> 2
STEINROE MUNICIPAL TRUST
CROSS REFERENCE SHEET
ITEM
NO. CAPTION
- ---- -------
PART A
1 Front cover
2 Fee Table; Summary
3 (a) Financial Highlights
(b) Inapplicable
(c) Investment Return
(d) Financial Highlights
4 Organization and Description of Shares; The Funds; How the
Funds Invest; Portfolio Investments and Strategies;
Restrictions on the Funds' Investments; Investment
Considerations and Risks; Summary--Investment Risks
5 (a) Management of the Funds--Trustees and Investment Adviser
(b) Management of the Funds--Trustees and Investment Adviser, Fees
and Expenses
(c) Management of the Funds--Portfolio Managers
(d) Inapplicable
(e) Management of the Funds--Transfer Agent
(f) Management of the Funds--Fees and Expenses; Financial
Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see statement of
additional information: General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary
(f) Shareholder Services; Distributions and Income Taxes
(g) Distributions and Income Taxes
(h) Organization and Description of Shares--Special Considerations
Regarding Master Fund/Feeder Fund Structure
7 How to Purchase Shares
(a) Management of the Funds--Distributor
(b) How to Purchase Shares--Purchase Price and Effective Date; Net
Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares--Purchases Through Third Parties
(c) How to Redeem Shares--General Redemption Policies
(d) How to Redeem Shares--General Redemption Policies
9 Inapplicable
PART B
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
<PAGE> 3
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management of the Funds
(b) Investment Advisory Services
(c) Inapplicable
(d) Inapplicable
(e) Investment Advisory Services
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares, Shareholder Services
(b) Purchases and Redemptions; Additional Information on Net
Asset Value--Municipal Money Fund and the Portfolio; see
prospectus: Net Asset
Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22 Investment Performance
23 Financial Statements
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE> 1
MUNICIPAL MONEY FUND seeks maximum current income exempt from
federal income tax. The Fund seeks to achieve its objective by
investing all of its net investable assets in shares of SR&F
Municipal Money Market Portfolio, a portfolio of SR&F Base Trust
that has the same investment objective and substantially the same
investment restrictions as the Fund. The Portfolio attempts to
maintain relative stability of principal and liquidity by
investing principally in a diversified portfolio of short-term
Municipal Securities. (See Organization and Description of
Shares--Special Considerations Regarding Master Fund/Feeder Fund
Structure.)
INTERMEDIATE MUNICIPALS seeks a high current yield exempt from
federal income tax, consistent with the preservation of capital.
It invests primarily in a diversified portfolio of intermediate-
term Municipal Securities.
MANAGED MUNICIPALS seeks a high level of current income exempt
from federal income tax, consistent with the preservation of
capital. It invests primarily in a diversified portfolio of long-
term Municipal Securities.
HIGH-YIELD MUNICIPALS seeks a high current yield exempt from
federal income tax. It invests principally in a diversified
portfolio of long-term medium- or lower-quality Municipal
Securities, which may involve greater risk. (See How the Funds
Invest--High-Yield Municipals.)
Each Fund is a "no-load" fund. There are no sales or redemption
charges, and the Funds have no 12b-1 plans. The Funds are series
of STEIN ROE MUNICIPAL TRUST and the Portfolio is a series of SR&F
Base Trust. Each trust is a diversified open-end management
investment company. This prospectus contains information you
should know before investing in the Funds. Please read it
carefully and retain it for future reference.
Municipal Money Fund is a money market fund, and attempts to
maintain its net asset value at $1.00 per share. SHARES OF THE
FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT,
AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
HIGH-YIELD MUNICIPALS MAY INVEST UP TO 100% OF ITS TOTAL NET
ASSETS IN LOWER-RATED MUNICIPAL BONDS, COMMONLY KNOWN AS "JUNK
BONDS." THESE BONDS ARE SUBJECT TO A GREATER RISK WITH REGARD TO
PAYMENT OF INTEREST AND RETURN OF PRINCIPAL THAN HIGHER-RATED
BONDS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS ASSOCIATED
WITH JUNK BONDS BEFORE INVESTING. (SEE RISKS AND INVESTMENT
CONSIDERATIONS.
A Statement of Additional Information dated November 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at the address shown on the back cover or by calling 1
800 338-2550.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is November 1, 1995.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary..................................2
Fee Table ...............................5
Financial Highlights ....................6
The Funds ..............................10
How the Funds Invest....................11
Municipal Money Fund.................11
Intermediate Municipals .............12
Managed Municipals ..................13
High-Yield Municipals................13
Portfolio Investments and Strategies....14
Restrictions on the Funds' Investments..16
Risks and Investment Considerations ....17
How to Purchase Shares .................18
By Check ............................18
By Wire .............................19
By Electronic Transfer ..............19
By Exchange .........................19
Purchase Price and Effective Date....19
Conditions of Purchase ..............20
Purchases Through Third Parties......20
How to Redeem Shares....................20
By Written Request ..................20
By Exchange .........................21
Special Redemption Privileges .......21
General Redemption Policies .........22
Shareholder Services ...................24
Net Asset Value ........................25
Distributions and Income Taxes..........26
Investment Return ......................27
Management of the Funds ................28
Organization and Description of Shares..30
Certificate of Authorization ...........33
SUMMARY
Stein Roe Municipal Money Market Fund ("Municipal Money Fund"),
Stein Roe Intermediate Municipals ("Intermediate Municipals"),
Stein Roe Managed Municipals ("Managed Municipals"), and Stein Roe
High-Yield Municipals ("High-Yield Municipals") are series of
Stein Roe Municipal Trust, an open-end diversified management
investment company organized as a Massachusetts business trust.
Each Fund is a "no-load" fund. There are no sales or redemption
charges. (See The Funds and Organization and Description of
Shares.)
INVESTMENT OBJECTIVES AND POLICIES. Each Fund seeks a high level
of current income that is exempt from federal income tax by
investing in various types of Municipal Securities. (See
Portfolio Investments and Strategies.)
<PAGE> 3
MUNICIPAL MONEY FUND invests all of its net investable assets in
SR&F Municipal Money Market Portfolio (the "Portfolio"). The
Portfolio invests in a diversified portfolio of securities in
accordance with an investment objective and investment policies
identical to those of the Fund.
The Portfolio seeks current income exempt from federal income tax
by investing principally in "short-term" Municipal Securities. In
pursuing that objective, the Portfolio attempts to maintain
relative stability of principal and liquidity. Although there can
be no assurance that either the Portfolio or the Fund will always
be able to do so, each of them follows procedures that are
intended to afford a reasonable expectation that its price per
share will be stabilized at $1.00. The Portfolio invests
primarily in Municipal Securities rated within the top two grades
assigned by Moody's or S&P, except for certain types of issues
which must carry the highest rating. The Portfolio may also
invest in unrated securities that, in the opinion of the Board of
Trustees, are at least equal in quality to the foregoing ratings.
Prior to September 28, 1995, Municipal Money Fund invested
directly in Municipal Securities.
INTERMEDIATE MUNICIPALS seeks a high current yield exempt from
federal income tax, consistent with the preservation of capital,
by investing primarily in "intermediate-term" Municipal
Securities. At least 75% of the Fund's investments in Municipal
Securities will be (i) rated at the time of purchase within the
three highest ratings by Moody's or S&P (except that if the Fund
relies on ratings by S&P for municipal notes, such notes must be
within the two highest ratings), (ii) if unrated, of comparable
quality as determined by the Adviser, or (iii) backed by the full
faith and credit or guarantee of the U.S. Government.
MANAGED MUNICIPALS seeks a high level of current income that is
exempt from federal income tax, consistent with the preservation
of capital, by investing primarily in long-term Municipal
Securities. At least 75% of the Fund's investments in Municipal
Securities will be (i) rated at the time of purchase within the
three highest ratings assigned by Moody's or S&P (except that if
the Fund relies on ratings by S&P for municipal notes, such notes
must be within the two highest ratings for such securities), or
(ii) backed by the full faith and credit or guarantee of the U.S.
Government.
HIGH-YIELD MUNICIPALS seeks a high current yield exempt from
federal income tax by investing principally in long-term, medium-
or lower-quality Municipal Securities. Medium-quality Municipal
Securities are obligations of issuers that the Adviser believes
possess adequate, but not outstanding, capacities to service the
obligations. Lower-quality Municipal Securities are obligations
of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk
bonds." The Adviser attributes to medium- and lower-quality
obligations the same general characteristics as do rating
services. Because many issuers of medium- and lower-quality
Municipal Securities choose not to have their obligations rated by
a rating agency, many of the obligations in the Fund's portfolio
may be unrated. The market for unrated securities is usually less
broad than for rated obligations, which could adversely affect
their marketability.
<PAGE> 4
INVESTMENT RISKS. The risks inherent in each Fund and the
Portfolio depend primarily upon the maturity and quality of the
obligations in their respective portfolios, as well as on market
conditions. Municipal Money Fund is designed for investors who
seek little or no fluctuation in portfolio value. Intermediate
Municipals is appropriate for investors who seek more tax-exempt
income than is usually available from tax-exempt money funds and
who can accept some fluctuation in portfolio value. Managed
Municipals is appropriate for investors who seek higher tax-exempt
income than normally provided by shorter-term tax-exempt
securities and who can accept the greater portfolio fluctuation
associated with long-term Municipal Securities. High-Yield
Municipals is designed for investors who seek a high level of tax-
exempt income and who can accept still greater fluctuation in
portfolio value and other risks, such as increased credit risk,
associated with medium- or lower-quality long-term Municipal
Securities. See Risks and Investment Considerations for further
information.
Each Fund and the Portfolio may invest in Municipal Securities the
interest on which is subject to the alternative minimum tax. For
a more detailed discussion of their investment objective and
policies, please see How the Funds Invest. There is, of course,
no assurance that a Fund or the Portfolio will achieve its
investment objective.
PURCHASES. The minimum initial investment for each Fund is
$2,500, and additional investments must be at least $100 (only $50
for purchases by electronic transfer). Shares may be purchased by
check, by bank wire, by electronic transfer, or by exchange from
another Stein Roe Fund. For more detailed information, see How to
Purchase Shares.
REDEMPTIONS. For information on redeeming Fund shares, including
the special redemption privileges, see How to Redeem Shares.
DISTRIBUTIONS. Dividends are declared each business day and are
paid monthly. Dividends will be reinvested into your Fund account
unless you elect to have them paid in cash, deposited by
electronic transfer into your bank checking account, or invested
into another Stein Roe Fund account. (See Distributions and
Income Taxes and Shareholder Services.)
MANAGEMENT AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") is investment adviser to Intermediate Municipals,
Managed Municipals, High-Yield Municipals, and the Portfolio. In
addition, it provides administrative and bookkeeping and
accounting services to each Fund and the Portfolio. For a
description of the Adviser and the fees it receives for these
services, see Management of the Funds.
If you have any additional questions about the Funds or the
Portfolio, please feel free to discuss them with an account
representative by calling 1 800 338-2550.
<PAGE> 5
FEE TABLE
Municipal High-
Money Intermediate Managed Yield
Fund Municipals Municipals Municipals
-------- ----------- ---------- ----------
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None None
Sales Load Imposed on
Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None* None* None* None*
Exchange Fees None None None None
ANNUAL FUND OPERATING EXPENSES
(AFTER EXPENSE REIMBURSEMENTS
IN THE CASE OF MUNICIPAL MONEY
FUND AND INTERMEDIATE
MUNICIPALS) (as a percentage
of average net assets)
Management and Administrative
Fees (after expense reimburse-
ments in the case of Municipal
Money Fund and Intermediate
Municipals) 0.42% 0.51% 0.52% 0.55%
12b-1 Fees None None None None
Other Expenses 0.28% 0.19% 0.22% 0.37%
----- ----- ----- -----
Total Fund Operating Expenses
(after expense reimbursements
in the case of Municipal Money
Fund and Intermediate
Municipals) 0.70% 0.70% 0.74% 0.92%
----- ----- ----- -----
----- ----- ----- -----
____________________
*There is a $3.50 charge for wiring redemption proceeds to your
bank.
EXAMPLES. You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Municipal Money Fund $7 $22 $39 $87
Intermediate Municipals 7 22 39 87
Managed Municipals 8 24 41 92
High-Yield Municipals 9 29 51 113
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 a Fund. The information in the table
is based upon actual expenses incurred in the last fiscal year,
except for Intermediate Municipals, which has been adjusted to
reflect the expense limitation, and for Managed Municipals and
High-Yield Municipals, which have been adjusted to reflect changes
in the Funds' transfer agency services and fees. (Also see
Management of the Funds--Fees and Expenses.)
On September 28, 1995, Municipal Money Fund began investing all of
its net investable assets in the Portfolio and its management fee
structure was changed. Since that date, the Fund pays the Adviser
an administrative fee based on the Fund's average daily net assets
and the Portfolio pays the Adviser a management fee based on the
Portfolio's average daily net assets. The management and expenses
of both Municipal Money Fund and the Portfolio are summarized in
the Fee Table and are described under Management of the Funds.
The Fund will bear its proportionate share of Portfolio expenses.
The trustees of the Trust have considered whether the annual
operating expenses of Municipal Money Fund, including its
proportionate share of the expenses of the Portfolio,
<PAGE> 6
would be more or less than if the Fund invested directly in the
securities held by the Portfolio, and concluded that the Fund's
expenses would not be greater in such case.
From time to time, the Adviser may voluntarily absorb certain
expenses of a Fund. The Adviser has agreed to voluntarily absorb
the expenses of each of Municipal Money Fund and Intermediate
Municipals to the extent that the Fund's expenses exceed .7 of 1%
of its annual average net assets through October 31, 1996, subject
to earlier termination by the Adviser on 30 days' notice. This
undertaking became effective on May 1, 1995 for Intermediate
Municipals. Any such absorption will temporarily lower a Fund's
overall expense ratio and increase its overall return to
investors. Absent such expense undertaking, Total Fund Operating
Expenses would have been 0.78% for Municipal Money Fund and 0.76%
for Intermediate Municipals.
For purposes of the Examples above, the figures assume that the
percentage amounts listed for the respective Funds under Annual
Fund Operating Expenses remain the same during each of the
periods, that all income dividends and capital gain distributions
are reinvested in additional Fund shares, and that, for purposes
of management fee breakpoints, if any, the Funds' respective net
assets remain at the same levels as in the most recently completed
fiscal year.
The figures in the Examples 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 above
is useful in reviewing the Funds' 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.
FINANCIAL HIGHLIGHTS
The tables below reflect the results of operations of the Funds on
a per-share basis for the periods shown. The tables for Municipal
Money Fund and High-Yield Municipals and information for the
periods beginning after December 31, 1987 for Managed Municipals
and Intermediate Municipals have been audited by Ernst & Young
LLP, independent auditors. All of the auditors' reports related
to information for these periods were unqualified. These tables
should be read in conjunction with the respective Fund's financial
statements and notes thereto. The Funds' annual report, which may
be obtained from the Trust upon request without charge, contains
additional performance information.
<PAGE> 7
MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net investment income .047 .041 .040 .021 .056 .054 .046 .032 .020 .019 .030
Distributions from net
investment income (.047) (.041) (.040) (.021) (.056) (.054) (.046) (.032) (.020) (.019) (.030)
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Ratio of expenses to
average net assets (b) 0.60% 0.60% 0.69% *0.67% 0.67% 0.67% 0.68% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment
income to average net
assets (c) 4.74% 4.05% 4.08% *4.25% 5.57% 5.40% 4.66% 3.19% 1.96% 1.88% 2.96%
Total return 4.82% 4.22% 4.11% *4.29% 5.74% 5.52% 4.74% 3.25% 1.97% 1.90% 3.02%
Net assets, end of
period (000 omitted) $152,277 $251,465 $306,971 $294,116 $254,261 $255,953 $237,403 $199,037 $195,887 $165,820 $146,704
</TABLE>
<PAGE> 8
INTERMEDIATE MUNICIPALS
<TABLE>
<CAPTION>
Six
Period Years Months
Ended Ended Ended
Dec. 31, December 31, June 30, Years Ended June 30,
1985 (a) 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.14 $10.76 $10.37 $10.43 $10.50 $10.54 $10.73 $11.06 $11.57 $11.00
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
Income from Investment
Operations
Net investment income .12 .58 .57 .29 .62 .63 .62 .57 .54 .53 .53
Net realized and
unrealized gains (losses)
on investments .14 .62 (.38) .06 .07 .07 .22 .50 .63 (.39) .16
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
Total from investment
operations .26 1.20 .19 .35 .69 .70 .84 1.07 1.17 .14 .69
Distributions
Net investment income (.12) (.58) (.57) (.29) (.62) (.63) (.62) (.57) (.54) (.53) (.53)
Net realized capital gains -- -- (.01) -- -- (.03) (.03) (.17) (.12) (.17) --
In excess of realized
gains -- -- -- -- -- -- -- -- -- (.01) --
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
Total distributions (.12) (.58) (.58) (.29) (.62) (.66) (.65) (.74) (.66) (.71) (.53)
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $10.14 $10.76 $10.37 $10.43 $10.50 $10.54 $10.73 $11.06 $11.57 $11.00 $11.16
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
-------- ----- ------ ------ ------ ------ ------- ------ ------ ------ ------
Ratio of net expenses to
average net assets (b) *0.80% 0.80% 0.80% *0.80% 0.80% 0.80% 0.80% 0.79% 0.72% 0.71% 0.74%
Ratio of net investment
income to average net
assets (c) *5.82% 5.45% 5.47 *5.66% 5.96% 5.96% 5.79% 5.23% 4.79% 4.63% 4.94%
Portfolio turnover rate 0% 10% 49% **22% 83% 141% 96% 109% 96% 55% 67%
Total return **2.61% 12.09% 1.93% **3.45% 6.85% 6.85% 8.18% 10.31% 10.92% 1.16% 6.59%
Net assets, end of
period (000s omitted) $22,973 $104,750 $96,143 $97,308 $91,304 $98,918 $118,651 $165,401 $245,441 $238,053 $212,489
</TABLE>
<PAGE> 9
MANAGED MUNICIPALS
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $7.89 $8.93 $9.22 $8.50 $8.61 $9.02 $8.71 $8.85 $9.11 $9.38 $8.70
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
Income from Investment
Operations
Net investment income .68 .67 .61 .30 .61 .59 .56 .55 .52 .50 .51
Net realized and
unrealized gains (losses)
on investments 1.07 1.21 (.59) .11 .44 (.06) .19 .46 .42 (.51) .09
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations 1.75 1.88 .02 .41 1.05 .53 .75 1.01 .94 (.01) .60
Distributions
Net investment income (.68) (.67) (.61) (.30) (.61) (.59) (.56) (.55) (.52) (.50) (.51)
Net realized capital gains (.03) (.92) (.13) -- (.03) (.25) (.05) (.20) (.15) (.11) --
In excess of realized
gains -- -- -- -- -- -- -- -- -- (.06) --
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
Total distributions (.71) (1.59) (.74) (.30) (.64) (.84) (.61) (.75) (.67) (.67) (.51)
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $8.93 $9.22 $8.50 $8.61 $9.02 $8.71 $8.85 $9.11 $9.38 $8.70 $8.79
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ------- ----- ----- ----- ----- ----- ----- -----
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% *0.65% 0.65% 0.66% 0.66% 0.64% 0.64% 0.65% 0.65%
Ratio of net investment
income to average net
assets 8.11% 7.04% 6.99% *7.03% 7.00% 6.66% 6.39% 6.17% 5.65% 5.45% 5.85%
Portfolio turnover rate 113% 92% 113% **28% 102% 95% 203% 94% 63% 36% 33%
Total return 23.00% 21.70% 0.39% **4.90% 12.69% 6.15% 8.92% 11.95% 10.79% (0.29%) 7.12%
Net assets, end of
period (000 omitted) $357,360 $523,947 $458,170 $467,595 $514,898 $584,081 $655,930 $725,472 $776,694 $687,252 $629,730
</TABLE>
<PAGE> 10
HIGH-YIELD MUNICIPALS
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.02 $11.10 $12.06 $11.06 $11.37 $11.97 $11.78 $11.79 $11.83 $11.84 $11.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Income from Investment
Operations
Net investment income .94 .90 .87 .44 .88 .85 .82 .80 .71 .67 .66
Net realized and
unrealized gains
(losses) on investments 1.08 1.11 (.89) .31 .63 .02 .17 .22 .18 (.54) .25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total from investment
operations 2.02 2.01 (.02) .75 1.51 .87 .99 1.02 .89 .13 .91
Distributions
Net investment income (.94) (.90) (.87) (.44) (.88) (.85) (.82) (.80) (.71) (.67) (.66)
Net realized capital
gains -- (.15) (.11) -- (.03) (.21) (.16) (.18) (.17) (.17) --
In excess of realized
gains -- -- -- -- -- -- -- -- -- (.07) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total distributions (.94) (1.05) (.98) (.44) (.91) (1.06) (.98) (.98) (.88) (.91) (.66)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
NET ASSET VALUE,
END OF PERIOD $11.10 $12.06 $11.06 $11.37 $11.97 $11.78 $11.79 $11.83 $11.84 $11.06 $11.31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Ratio of net expenses
to average net
assets (b) 0.80% 0.76% 0.73% *0.76% 0.73% 0.71% 0.71% 0.69% 0.73% 0.76% 0.86%
Ratio of net investment
income to average net
assets (c) 8.89% 7.77% 8.20% *7.87% 7.54% 7.22% 7.00% 6.75% 6.04% 5.76% 5.98%
Portfolio turnover rate 46% 34% 110% **53% 208% 261% 195% 88% 75% 36% 23%
Total return 20.96% 18.64% (0.16%) **6.89% 13.79% 7.59% 8.79% 9.01% 7.88% 0.95% 8.54%
Net assets, end of
period (000 omitted) $99,796 $225,883 $181,600 $201,274 $277,620 $310,582 $373,948 $410,613 $359,103 $308,181 $281,155
<FN>
*Annualized.
**Not annualized.
(a) Intermediate Municipals commenced operations on October 9,
1985 .
(b) If the Funds had paid all of their expenses and there had
been no reimbursement of expenses by the Adviser, these ratios
would have been: for Municipal Money Fund, 0.72%, 0.70% and
0.78% for the years ended December 31, 1985 and 1986, and June
30, 1995, respectively; for Intermediate Municipals, 2.38% for
the period ended December 31, 1985, 0.94% and 0.83% for the
years ended December 31, 1986 and 1987, respectively, 0.87% for
the six months ended June 30, 1988, and 0.82%, 0.81%, and
0.81% for the years ended June 30, 1989 through 1991,
respectively, and 0.76% for the year ended June 30, 1995; and
for High-Yield Municipals, 0.81% for the year ended December
31, 1985.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
THE FUNDS
The mutual funds offered by this prospectus are Stein Roe
Municipal Money Market Fund ("Municipal Money Fund"), Stein Roe
Intermediate Municipals ("Intermediate Municipals"), Stein Roe
Managed Municipals ("Managed Municipals"), and Stein Roe High-
Yield Municipals ("High-Yield Municipals") (collectively, the
"Funds"). Each of the Funds is a no-load, diversified "mutual
fund." Mutual funds sell their own shares to investors and invest
the proceeds in a portfolio of securities. A mutual fund allows
you to pool your money with that of other investors in order to
obtain professional investment management. Mutual funds generally
make it possible for you to obtain
<PAGE> 11
greater diversification of your investments and simplify your
recordkeeping. The Funds do not impose commissions or charges
when shares are purchased or redeemed.
The Funds are series of the Stein Roe Municipal Trust (the
"Municipal Trust"), an open-end management investment company,
which is authorized to issue shares of beneficial interest in
separate series. Each series represents interests in a separate
portfolio of securities and other assets, with its own investment
objectives and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and accounting and
recordkeeping services to the Funds and the Portfolio. The
Adviser also manages several other no-load mutual funds with
different investment objectives, including international funds,
equity funds, taxable bond funds, and money market funds. To
obtain prospectuses and other information on any of those mutual
funds, please call 1 800 338-2550.
Rather than invest in securities directly, each Fund may seek to
achieve its investment objective by converting to a "master
fund/feeder fund" structure. Under that structure, the Fund and
other mutual funds with the same investment objective would invest
their assets in another investment company having the same
investment objective and substantially the same investment
policies and restrictions as the Fund. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. It is expected that any such investment company
would be managed by the Adviser in substantially the same manner
as the Fund. The only Fund operating under the Master Fund/Feeder
Fund structure is Municipal Money Fund, which converted to the
Master Fund/Feeder Fund structure on September 28, 1995. If
another Fund were to convert to the Master Fund/Feeder Fund
structure, shareholders of that Fund would be given at least 30
days' prior notice, although they would not be entitled to vote on
the action. Such investment would be made only if the Trustees
determine it to be in the best interests of a Fund and its
shareholders. (See Organization and Description of Shares--
Special Considerations Regarding Master Fund/Feeder Fund
Structure.)
HOW THE FUNDS INVEST
Each Fund seeks a high level of current income that is exempt from
federal income tax by investing in Municipal Securities (described
under Portfolio Investments and Strategies below), consistent with
specified maturity and quality standards that differ among the
Funds. Each Fund will invest as described below and also may
employ the investment techniques described elsewhere in this
prospectus.
MUNICIPAL MONEY FUND. Municipal Money Fund seeks to achieve its
objective by investing all of its assets in the Portfolio. The
investment policies of the Portfolio and the Fund are identical.
The Portfolio seeks maximum current income exempt from federal
income tax by investing principally in a diversified portfolio of
"short-term" Municipal Securities. In pursuing that objective,
the Portfolio attempts to maintain relative stability of principal
and liquidity. Generally, "short-term" securities are those with
remaining maturities of no more than thirteen months. Although
there can be no assurance that it will always be able to do so,
the Portfolio follows procedures that its Board of Trustees
believes are reasonably designed to stabilize its price per share
at $1.00. These procedures and the
<PAGE> 12
definition of "short-term" are described in detail in the
Statement of Additional Information.
It is a fundamental policy /1/ that normally at least 80% of the
Portfolio's investments will produce income that is exempt from
federal income tax, except for periods that the Adviser believes
require a defensive position /2/ for the protection of
shareholders.
The Portfolio may invest in Municipal Securities that, at the time
of purchase, are rated within the two highest ratings assigned by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"), except that if it relies on ratings by
Moody's for municipal commercial paper or ratings by S&P for
short-term municipal notes, such securities must carry the highest
rating assigned by the respective rating service./3/ The
Portfolio may also invest in unrated securities that, in the
opinion of its Board of Trustees, are at least equal in quality to
the foregoing ratings. The Portfolio also may invest in [i]
securities backed by the full faith and credit of the U.S.
Government or [ii] securities as to which payment of principal and
interest is collateralized by an escrow of securities issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities ["U.S. Government Securities"]. The policies
described in the preceding three sentences (except for the
portions in brackets) are fundamental policies. In accordance
with SEC Rule 2a-7 under the Investment Company Act, each security
in which the Portfolio invests will be U.S. dollar denominated and
(i) rated (or be issued by an issuer that is rated with respect to
its short-term debt) within the two highest rating categories for
short-term debt by at least two nationally recognized statistical
rating organizations ("NRSRO") or, if rated by only one NRSRO,
rated within the two highest rating categories by that NRSRO, or,
if unrated, determined by or under the direction of the Board of
Trustees of Base Trust to be of comparable quality, and (ii)
determined by or under the direction of the Board of Trustees of
Base Trust to present minimal credit risks.
INTERMEDIATE MUNICIPALS. This Fund seeks a high current yield
exempt from federal income tax, consistent with the preservation
of capital, by investing primarily in a diversified portfolio of
"intermediate-term" Municipal Securities. Normally, at least 65%
of the Fund's assets will be invested in Municipal Securities with
a maturity of ten years or less (including Municipal Securities
with longer maturities, but under which the holder is entitled to
receive, upon demand at a stated time within ten years, the entire
principal and accrued interest). In addition, the Fund's
portfolio is expected to have a dollar-weighted average maturity
of between three and ten years.
It is a fundamental policy that normally at least 80% of the
Fund's investments will produce income that is exempt from federal
income tax, except during periods that the Adviser believes
require a temporary defensive position for the protection of
shareholders.
- -----------------
/1/ A fundamental policy of a Fund or Portfolio may be changed
only with the approval of a "majority of its outstanding voting
securities" as defined in the Investment Company Act of 1940..
/2/ A defensive position is one that temporarily reduces a Fund's
or Portfolio's exposure to anticipated adverse market changes.
/3/ For a description of Moody's and S&P ratings, see the Appendix
to the Statement of Additional Information. All references to
ratings apply to any ratings adopted in the future by a rating
service that are determined by the Board of Trustees to be
equivalent to current ratings.
- ------------------
<PAGE> 13
At least 75% of the Fund's investments in Municipal Securities
will be (i) rated at the time of purchase within the three highest
ratings by Moody's or S&P (except that if the Fund relies on
ratings by S&P for municipal notes, such notes must be within the
two highest ratings), (ii) if unrated, of comparable quality as
determined by the Adviser, or (iii) backed by the U.S. Government
or by an agency or instrumentality of the U.S. Government or by
U.S. Government Securities. The Fund may also invest up to 25% of
its assets in other Municipal Securities without any minimum
credit quality requirement, including those for which a limited
market may exist, which normally involve greater risk of loss of
principal or income and higher yield.
MANAGED MUNICIPALS. This Fund seeks a high level of current
income that is exempt from federal income tax, consistent with the
preservation of capital, by investing in a diversified portfolio
of Municipal Securities. The Fund invests primarily in long-term
Municipal Securities (generally maturing in more than ten years)
but may also invest in shorter-term securities as a temporary
defensive move.
It is a fundamental policy that the Fund's assets will be invested
so that at least 80% of its income will be exempt from federal
income tax, except during periods in which the Adviser believes a
temporary defensive position is advisable.
At least 75% of the Fund's investments in Municipal Securities
will be (i) rated at the time of purchase within the three highest
ratings assigned by Moody's or S&P (except that if the Fund relies
on ratings by S&P for municipal notes, such notes must be within
the two highest ratings for such securities) or (ii) backed by the
U.S. Government, by an agency or instrumentality of the U.S.
Government or by U.S. Government Securities. The Fund may also
invest up to 25% of its assets in other Municipal Securities
without any minimum credit quality requirement, including those
for which a limited market may exist, which normally involve
greater risk of loss of principal or income and higher yield.
HIGH-YIELD MUNICIPALS. This Fund seeks a high current yield
exempt from federal income tax by investing primarily in a
diversified portfolio of Municipal Securities. The Fund invests
principally in long-term (generally maturing in more than ten
years) medium- or lower-quality Municipal Securities bearing a
high rate of interest income; possible capital appreciation is of
secondary importance.
It is a fundamental policy that normally the Fund's assets will be
invested so that at least 80% of its gross income will be derived
from securities the interest on which is exempt from federal
income tax in the opinion of counsel for the issuers of such
securities, except during periods in which the Adviser believes a
temporary defensive position is advisable.
Medium-quality Municipal Securities are obligations of issuers
that the Adviser believes possess adequate, but not outstanding,
capacities to service the obligations. Lower-quality Municipal
Securities are obligations of issuers that are considered
predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal according to the terms of the
obligation and, therefore, carry greater investment risk,
including the possibility of issuer default and bankruptcy, and
are commonly referred to as "junk bonds." The lowest rating
assigned by Moody's is for bonds that can be
<PAGE> 14
regarded as having extremely poor prospects of ever attaining any
real investment standing. The Adviser attributes to medium- and
lower-quality obligations the same general characteristics as do
rating services. Because many issuers of medium- and lower-
quality Municipal Securities choose not to have their obligations
rated by a rating agency, many of the obligations in the Fund's
portfolio may be unrated.
Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer
default or bankruptcy. An economic downturn could severely
disrupt this market and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and
interest. During a period of adverse economic changes, including
a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest
payment obligations.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the market
for them is less broad. The market for unrated debt securities is
even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase
significantly, and the Fund may have greater difficulty selling
its portfolio securities.
Although the Fund invests principally in medium- or lower-quality
Municipal Securities, it may invest in Municipal Securities of
higher quality when the Adviser believes it is appropriate to do
so.
For the fiscal year ended June 30, 1995, the Fund's portfolio was
invested, on average, as follows: high-quality short-term
instruments, 2.8%; AAA, 18.2%; AA, 12.7%; A, 27.0%; BBB, 21.3%;
BB, 3.2%; and unrated, 14.8%. The ratings are based on a dollar-
weighted average, computed monthly, and reflect the higher of S&P
or Moody's ratings. The ratings do not necessarily reflect the
current or future composition of the Fund's portfolio.
PORTFOLIO INVESTMENTS AND STRATEGIES
MUNICIPAL SECURITIES. Municipal Securities are debt obligations
issued by or on behalf of the governments of states, territories
or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, the
interest on which is generally exempt from the regular federal
income tax. Except with respect to Municipal Money Fund and the
Portfolio and subject to each Fund's investment policies described
above, each Fund may invest in Municipal Securities rated with any
credit rating below investment grade. Medium- and lower-quality
Municipal Securities involve greater investment risk, as discussed
above under How the Funds Invest--High-Yield Municipals.
The two principal classifications of Municipal Securities are
"general obligation" and "revenue" bonds. "General obligation"
bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. "Revenue"
bonds are usually payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue bonds,
the credit quality of which is normally directly related to the
credit standing of the industrial user involved. Municipal
Securities may bear either fixed or variable rates of
<PAGE> 15
interest. Variable rate securities bear rates of interest that
are adjusted periodically according to formulae intended to
minimize fluctuation in values of the instruments.
Within the principal classifications of Municipal Securities,
there are various types of instruments, including municipal bonds,
municipal notes, municipal leases, custodial receipts, and
participation certificates. Municipal notes include tax, revenue,
and bond anticipation notes of short maturity, generally less than
three years, which are issued to obtain temporary funds for
various public purposes. Municipal lease securities, and
participation certificates therein, evidence certain types of
interests in lease or installment purchase contract obligations of
a municipal authority or other entity. Custodial receipts
represent ownership in future interest or principal payments (or
both) on certain Municipal Securities and are underwritten by
securities dealers or banks. Some Municipal Securities may not be
backed by the faith, credit, and taxing power of the issuer and
may involve "non-appropriation" clauses which provide that the
municipal authority is not obligated to make lease or other
contractual payments, unless specific annual appropriations are
made by the municipality. Each Fund may invest more than 5% of
its net assets in municipal bonds and notes, but does not expect
to invest more than 5% of its net assets in the other Municipal
Securities described in this paragraph.
The Funds may also purchase Municipal Securities that are insured
as to the timely payment of interest and principal. Such insured
Municipal Securities may already be insured when purchased by a
Fund or the Fund may purchase insurance in order to turn an
uninsured Municipal Security into an insured Municipal Security.
Some Municipal Securities are backed by (i) the full faith and
credit of the U.S. Government, (ii) agencies or instrumentalities
of the U.S. Government, or (iii) U.S. Government Securities.
Except with respect to Municipal Securities with a demand feature
acquired by Municipal Money Fund and the Portfolio (see the
definition of "short-term" in the Statement of Additional
Information), if, after purchase by a Fund, an issue of Municipal
Securities ceases to meet the required rating standards, if any,
the Fund is not required to sell such security, but the Adviser
would consider such an event in deciding whether the Fund should
retain the security in its portfolio. In the case of Municipal
Securities with a demand feature acquired by Municipal Money Fund
or the Portfolio, if the quality of such a security falls below
the minimum level applicable at the time of acquisition, the Fund
must dispose of the security, unless the Board of Trustees
determines that it is in the best interests of the Fund and its
shareholders to retain the security.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund's assets
may include securities purchased on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into
the commitment, the securities may be delivered and paid for a
month or more after the date of purchase, when their value may
have changed. The Funds make such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if it is deemed advisable for
investment reasons. Securities purchased in this manner involve a
risk of loss if the value of the security purchased declines
before settlement date.
<PAGE> 16
STANDBY COMMITMENTS. To facilitate portfolio liquidity, each Fund
may obtain standby commitments when it purchases Municipal
Securities. A standby commitment gives the holder the right to
sell the underlying security to the seller at an agreed-upon price
on certain dates or within a specified period.
PARTICIPATION INTERESTS. Each Fund may also purchase
participation interests or certificates of participation in all or
part of specific holdings of Municipal Securities, including
municipal lease obligations. Some participation interests,
certificates of participation, and municipal lease obligations are
illiquid and, as such, will be subject to the Funds' 10% limit on
investments in illiquid securities.
FUTURES AND OPTIONS. Each of Intermediate Municipals, Managed
Municipals, and High-Yield Municipals may purchase and write both
call options and put options on securities and on indexes, and
enter into interest rate and index futures contracts and options
on such futures contracts in order to provide additional revenue,
or to hedge against changes in security prices or interest rates.
Each Fund may write a call or put option only if the option is
covered. As the writer of a covered call option, the Fund
foregoes, during the option's life, the opportunity to profit from
increases in market value of the security covering the call option
above the sum of the premium and the exercise price of the call.
Because of low margin deposits required, the use of futures
contracts involves a high degree of leverage, and may result in
losses in excess of the amount of the margin deposit. Since there
can be no assurance that a liquid market will exist when the Fund
seeks to close out a position, these risks may become magnified.
RESTRICTIONS ON THE FUNDS' INVESTMENTS
For purposes of discussion under Restrictions on the Funds'
Investments and Risks and Investment Considerations, the term "the
Fund" refers to Municipal Money Fund, Intermediate Municipals,
Managed Municipals, High-Yield Municipals, and the Portfolio.
No Fund will: (i) with respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of any one
issuer (except for obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities or repurchase
agreements for such securities; guarantees or letters of credit of
a single guarantor may exceed this limit; see the Statement of
Additional Information); or (ii) invest more than 25% of its total
assets in securities of non-governmental issuers whose principal
business activities are in the same industry. Notwithstanding
these limitations, each Fund, but not the Portfolio, may invest
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. No Fund
may borrow money or pledge or mortgage its assets except as a
temporary measure for extraordinary or emergency purposes, and
then the aggregate borrowings at any one time (including any
reverse repurchase agreements) may not exceed 33 1/3% of its
assets (at market value). No Fund may purchase additional
securities when its borrowings, less proceeds receivable from
sales of portfolio securities, exceed 5% of its total assets.
(See, however, Risks and Investment Considerations.) The
restrictions described in this section are fundamental policies of
the Funds. All of the investment restrictions are set forth in
the Statement of Additional Information.
<PAGE> 17
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Although each Fund
seeks to reduce risk by investing (directly or, in the case of
Municipal Money Fund, through the Portfolio) in a diversified
portfolio, this does not eliminate all risk. The risks inherent
in each Fund depend primarily upon the maturity and quality of the
obligations in which the Fund invests, as well as on market
conditions. A decline in prevailing levels of interest rates
generally increases the value of securities in which a Fund
invests, while an increase in rates usually reduces the value of
those securities.
Generally, high-quality short-term obligations offer lower yields
and less fluctuation in value than long-term low-quality
obligations. Consequently, Municipal Money Fund is designed for
investors who seek little or no fluctuation in portfolio value.
Intermediate Municipals is appropriate for investors who seek more
tax-exempt income than is usually available from tax-exempt money
funds and who can accept some fluctuation in portfolio value.
Managed Municipals is appropriate for investors who seek higher
tax-exempt income than normally provided by shorter-term tax-
exempt securities and who can accept the greater portfolio
fluctuation associated with long-term Municipal Securities. High-
Yield Municipals is designed for investors who seek a high level
of tax-exempt income and who can accept still greater fluctuation
in portfolio value and other risks, such as increased credit risk,
associated with medium- and lower-quality long-term Municipal
Securities.
Although the Funds currently limit their investments in Municipal
Securities to those the interest on which is exempt from the
regular federal income tax, each Fund may invest up to 100% of its
total assets in Municipal Securities the interest on which is
subject to the federal alternative minimum tax. (See
Distributions and Income Taxes.)
Each Fund's objective is not fundamental and may be changed by the
Board of Trustees without a vote of shareholders. If there is a
change in a Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in
light of their then-current financial position and needs. There
can be no assurance that a Fund will achieve its objective, nor
can a Fund assure that payments of interest and principal on
portfolio obligations will be made when due. In seeking to attain
its objective, a Fund may sell securities without regard to the
period of time they have been held. As a result, the turnover
rate may vary from year to year. A high rate of portfolio
turnover may result in increased transaction costs and the
realization of capital gains or losses.
Each Fund may invest 25% or more of its assets in Municipal
Securities that are related in such a way that an economic,
business, or political development affecting one such security
could also affect the other securities. For example, Municipal
Securities the interest upon which is paid from revenues of
similar-type projects, such as hospitals, utilities, or housing,
would be so related. Each Fund may invest 25% or more of its
assets in industrial development bonds (subject to the
concentration restrictions described in this prospectus under
Restrictions on the Funds' Investments and in the Statement of
<PAGE> 18
Additional Information). Assets of a Fund that are not invested
in Municipal Securities may be held in cash or invested in short-
term taxable investments. /4/
HIGH-YIELD (HIGH-RISK) MUNICIPAL SECURITIES. High-Yield
Municipals may purchase high-yield Municipal Securities, commonly
referred to as "junk bonds," which are Municipal Securities rated
lower than investment grade. Although high-yield Municipal
Securities generally offer higher yields than investment grade
Municipal Securities with comparable maturities, high-yield
Municipal Securities involve greater risks and their total return
and yield can be expected to fluctuate more than those of
investment grade Municipal Securities. High-yield Municipal
Securities are regarded as predominantly speculative with respect
to the issuer's continuing ability to meet principal and interest
payments and are also subject to the risks associated with
substantial market-price volatility resulting from changes in
interest rates and economic conditions, as well as the possibility
of default or bankruptcy. A real or perceived economic downturn
or higher interest rates could cause a decline in the price of
high-yield Municipal Securities. Some additional risks include
the possibility that the Fund's interest in a high-yield Municipal
Security could be subordinated to the prior claims of other
creditors and the tax or other advantages of high-yield Municipal
Securities could be limited or restricted by Congress. High-yield
Municipal Securities are thinly traded and can be more difficult
to sell and value accurately than high-quality Municipal
Securities. Successful investment in high-yield Municipal
Securities involves greater investment risk and is highly
dependent on the Adviser's credit analysis. Because reliable
objective pricing data may not be readily available, the Adviser's
judgment may play a greater role in the valuation process.
Intermediate Municipals and Managed Municipals may also invest in
high-yield Municipal Securities, but at least 75% of the total
assets in each Fund must be invested in investment grade Municipal
Securities.
HOW TO PURCHASE SHARES
You may purchase shares of any of the Funds by check, by wire, by
electronic transfer, or by exchange from your account with another
Stein Roe Fund. The initial purchase minimum per Fund account is
$2,500; and the minimum for Uniform Gifts/Transfers to Minors Act
("UGMA") accounts is $1,000; and the minimum for accounts
established under an automatic investment plan (i.e., Regular
Investments, Dividend Purchase Option, or the Automatic Exchange
Plan) is $1,000 for regular accounts and $500 for UGMA accounts.
The initial purchase minimum is waived for shareholders who
participate in the Stein Roe Counselor [service mark] or Stein Roe
Counselor Preferred [service mark] Programs and for clients of the
Adviser. Subsequent purchases must be at least $100, or at least
$50 if you purchase by electronic transfer. (See Shareholder
Services.)
BY CHECK. To make an initial purchase of shares of a Fund, please
complete and sign the Application and mail it to P.O. Box 804058,
Chicago, Illinois 60680, together with a check made payable to
Stein Roe Funds.
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.
- --------------------
/4/ The policy expressed in this sentence is a fundamental policy
of Municipal Money Fund, the Portfolio, and Managed Municipals.
- --------------------
<PAGE> 19
Each individual check submitted for purchase must be at least
$100, and the Trust generally will not accept cash, drafts, third
party checks, or checks drawn on banks outside of the United
States. Should an order to purchase shares of a Fund be cancelled
because your check does not clear, you will be responsible for any
resulting loss incurred by that 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 Funds' custodian bank. Your bank may
charge you a fee for sending the wire. If you are opening a new
account by wire transfer, you must first telephone the Trust to
request an account number and furnish your social security or
other tax identification number. Neither the Funds nor the Trust
will 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:
State Street Bank and Trust Company
ABA Routing No. 011000028
Boston, Massachusetts
Attention: Custody
Fund No. ____; Stein Roe _______
Account of (exact name(s) in registration)
Shareholder Account No. _____
Fund Numbers:
7101--Managed Municipals
7110--Municipal Money Fund
7113--High-Yield Municipals
7114--Intermediate Municipals
BY ELECTRONIC TRANSFER. You may also make subsequent investments
by an electronic transfer of funds from your bank checking
account. Electronic transfer allows you to make purchases at your
request ("Special Investments") by calling 1 800 338-2550 or at
pre-scheduled 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 a Fund be cancelled because your electronic transfer does not
clear, you will be responsible for any resulting loss incurred by
that Fund.
BY EXCHANGE. You may purchase shares by exchange of shares from
another Stein Roe Fund account either by phone (if the Telephone
Exchange Privilege has been established on the account from which
the exchange is being made), by mail, in person, or automatically
at regular intervals (if you have elected Automatic Exchanges).
Restrictions apply; please review the information under How to
Redeem Shares--By Exchange.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of a Fund's
shares is made at that Fund's net asset value (see Net Asset
Value) next determined after receipt of payment as follows:
A purchase by check or wire transfer is made at the net asset
value next determined after receipt by the Fund of the check or
wire transfer of funds in payment of the purchase.
<PAGE> 20
A purchase by electronic transfer is made at the net asset value
next determined after the Fund receives the electronic transfer
from your bank. A Special Electronic Transfer Investment order
received by telephone on a business day before 2:00 p.m., Chicago
time, is effective on the next business day. Shares begin earning
dividends on the day following the day on which they are
purchased.
CONDITIONS OF PURCHASE. Each purchase order for a Fund must be
accepted by an authorized officer of Municipal Trust in Chicago
and is not binding until accepted and entered on the books of that
Fund. Once your purchase order has been accepted, you may not
cancel or revoke it; however, you may redeem the shares.
Municipal Trust reserves the right not to accept any purchase
order that it determines not to be in the best interest of the
Trust or of a Fund's shareholders. Municipal Trust also reserves
the right to waive or lower its investment minimums for any
reason. The Trust does not issue certificates for shares.
PURCHASES THROUGH THIRD PARTIES. You may purchase (or redeem)
shares through investment dealers, banks, or other financial
institutions. These institutions may charge for their services or
place limitations on the extent to which you may use the services
offered by Municipal Trust. There are no charges or limitations
imposed by the Trust (other than those described in this
prospectus) if shares are purchased (or redeemed) directly from
the Trust.
Some financial institutions which maintain nominee accounts with
the Fund for their clients who are Fund shareholders charge an
annual fee of up to 0.25% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. Such fees are
paid by the Adviser.
HOW TO REDEEM SHARES
BY WRITTEN REQUEST. You may redeem all or a portion of your
shares of a Fund by submitting a written request in "good order"
to Municipal Trust at P.O. Box 804058, Chicago, Illinois 60680. A
redemption request will be considered to have been received in
good order if the following conditions are satisfied:
(1) the request must be in writing, indicate the number of shares
or dollar amount to be redeemed, and identify the shareholder's
account number;
(2) the request must be signed by the shareholder(s) exactly as
the shares are registered;
(3) the request must be accompanied by any certificates for the
shares, either properly endorsed for transfer, or accompanied
by a stock assignment properly endorsed exactly as the shares
are registered;
(4) the signatures on either the written redemption request or the
certificates (or the accompanying stock power) must be
guaranteed (a signature guarantee is not a notarization, but is
a widely accepted way to protect you and the Funds by verifying
your signature);
(5) corporations and associations must submit with each request a
completed Certificate of Authorization included in this
prospectus (or a form of resolution acceptable to the Trust);
and
(6) other supporting legal documents may be required from
organizations, executors, administrators, trustees, or others
acting on accounts not registered in their names.
<PAGE> 21
BY EXCHANGE. You may redeem all or any portion of your Fund
shares and use the proceeds to purchase shares of any other Stein
Roe Fund offered for sale in your state if your signed, properly
completed Application is on file. An exchange transaction is a
sale and purchase of shares for federal income tax purposes and
may result in capital gain or loss. Before exercising the
Exchange Privilege, you should obtain the prospectus for the Stein
Roe Fund in which you wish to invest and read it carefully. The
registration of the account to which you are making an exchange
must be exactly the same as that of the Fund account from which
the exchange is made and the amount you exchange must meet any
applicable minimum investment of the Stein Roe Fund being
purchased. Unless you have elected to receive your dividends in
cash, on an exchange of all shares, any accrued unpaid dividends
will be invested in the Stein Roe Fund to which you exchange on
the next business day. An exchange may be made by following the
redemption procedure described above under By Written Request and
indicating the Stein Roe Fund to be purchased, except that a
signature guarantee normally is not required. (See also the
discussion below of the Telephone Exchange Privilege and Automatic
Exchanges.)
SPECIAL REDEMPTION PRIVILEGES. The Telephone Exchange Privilege
and the Telephone Redemption by Check Privilege will be
established automatically for you when you open your account
unless you decline these Privileges on your Application. Other
Privileges must be specifically elected. If you do not want the
Telephone Exchange and Redemption Privileges, check the box(es)
under the section "Telephone Redemption Options" when completing
your Application. In addition, a signature guarantee may be
required to establish a Privilege after you open your account. If
you establish both the Telephone Redemption by Wire Privilege and
the Electronic Transfer Privilege, the bank account that you
designate for both Privileges must be the same.
You may not use any of the Special Redemption Privileges if you
hold certificates for any of your Fund shares. (See also General
Redemption Policies.)
Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $50 or more from your account
by calling 1 800 338-2550 or by sending a telegram; new accounts
opened by exchange are subject to the $2,500 initial purchase
minimum. Generally, you will be limited to four Telephone
Exchange round-trips per year and the Funds may refuse requests
for Telephone Exchanges in excess of four round-trips (a round-
trip being the exchange out of a Fund into another Stein Roe Fund,
and then back to that Fund). Also, Municipal Trust's general
redemption policies apply to redemptions of shares by Telephone
Exchange. (See General Redemption Policies.)
Municipal Trust reserves the right at any time without prior
notice to suspend or terminate the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Funds.
Therefore, the Trust generally will not honor requests for
Telephone Exchanges by shareholders identified by the Trust as
"market-timers." Moreover, the Trust reserves the right at any
time without prior notice to suspend, limit, modify, or terminate
the Telephone Exchange Privilege in its entirety. Because such a
step would be taken only if the Board of Trustees believes it
<PAGE> 22
would be in the best interests of the Funds, the Trust expects
that it would provide shareholders with prior written notice of
any such action unless it appears that the resulting delay in the
suspension, limitation, modification, or termination of the
Telephone Exchange Privilege would adversely affect the Funds. If
the Trust were to suspend, limit, modify, or terminate the
Telephone Exchange Privilege, a shareholder expecting to make a
Telephone Exchange might find that an exchange could not be
processed or that there might be a delay in the implementation of
the exchange. (See How to Redeem Shares--By Exchange.) During
periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone.
Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another Stein Roe Fund account on a regular basis.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 1 800 338-2550. The
proceeds will be sent by check to your registered address.
Telephone Redemption by Wire Privilege. You may use this
Privilege to redeem an amount of $1,000 or more from your account
by calling 1 800 338-2550. The proceeds will be transmitted by
wire to your account at a commercial bank previously designated by
you that is a member of the Federal Reserve System. The fee for
wiring proceeds (currently $3.50 per transaction) will be deducted
from the amount wired.
Check-Writing Privilege (Municipal Money Fund accounts only). You
may also redeem shares by writing special checks in the amounts of
$50 or more. Your checks are drawn against a special checking
account maintained with the custodian, and you will be subject to
the custodian's procedures and rules relating to its checking
accounts and to this Privilege.
Electronic Transfer Privilege. You may redeem shares by calling 1
800 338-2550 and requesting an electronic transfer ("Special
Redemption") of the proceeds to a checking account previously
designated by you at a bank that is a member of the Automated
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. A Special Redemption request
received by telephone after 2:00 p.m., Chicago time, is deemed
received on the next business day.
GENERAL REDEMPTION POLICIES. You may not cancel or revoke your
redemption order once instructions have been received and
accepted. The Trust cannot accept a redemption request that
specifies a particular date or price for redemption or any special
conditions. Please telephone the Trust if you have any questions
about requirements for a redemption before submitting your
request. The Trust reserves the right to require a properly
completed Application before making payment for shares redeemed.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon that Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares and may result
in a realized capital gain or loss.
<PAGE> 23
The Trust will generally mail payment for shares redeemed within
seven days after proper instructions are received. However,
Municipal Money Fund normally intends to pay proceeds of a written
redemption within two business days and the Funds intend to pay
proceeds of a Telephone Redemption paid by wire on the next
business day. The Trust will not be responsible for the
consequences of delays, including delays in the mail, banking, or
Federal Reserve wire systems. If you attempt to redeem shares
within 15 days after they have been purchased by check or
electronic transfer, the Trust may delay payment of the redemption
proceeds to you until it can verify that payment for the purchase
of those shares has been (or will be) collected. To reduce such
delays, the Trust recommends that your purchase be made by federal
funds wire through your bank.
The Trust reserves the right at any time without prior notice to
suspend, limit, modify, or terminate any Privilege or its use in
any manner by any person or class.
Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Funds employ
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Funds and
their transfer agent to tape-record all instructions to redeem.
In addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests the shareholder to review the transactions and inform the
Fund immediately if there is a problem. If a Fund does not follow
reasonable procedures for protecting shareholders against loss on
telephone transactions, it may be liable for any losses due to
unauthorized or fraudulent instructions.
Generally, you may not use the Exchange Privilege or any Special
Redemption Privilege to redeem shares purchased by check (other
than certified or cashiers' checks) or electronic transfer until
15 days after their date of purchase.
The Trust reserves the right to redeem shares in any account and
send the proceeds to the owner if the shares in the account do not
have a value of at least $1,000. A shareholder would be notified
that his account is below the minimum and allowed 30 days to
increase the account before the redemption is processed.
Shares in any account you maintain with a Fund or any of the other
Stein Roe Funds may be redeemed to the extent necessary to
reimburse any Stein Roe Fund for any loss it sustains that is
caused by you (such as losses from uncollected checks and
electronic transfers or any Stein Roe Fund liability under the
Internal Revenue Code provisions on backup withholding).
<PAGE> 24
SHAREHOLDER SERVICES
REPORTING TO SHAREHOLDERS. You will receive a confirmation
statement reflecting each of your purchases and redemptions of
shares of a Fund, as well as periodic statements detailing
distributions made by that Fund. Shares purchased by reinvestment
of dividends, by cross-reinvestment of dividends from another
Fund, or pursuant to an automatic investment plan will be
confirmed to you quarterly. In addition, the Trust will send you
semiannual and annual reports showing Fund portfolio holdings and
will provide you annually with tax information.
FUNDS-ON-CALL [REGISTERED MARK] 24-HOUR INFORMATION SERVICE. To
access the Stein Roe Funds-on-Call [registered mark] automated
telephone service, just call 1 800 338-2550 on any touch-tone
telephone and follow the recorded instructions. Funds-on-Call
[registered mark] provides yields, prices, latest dividends,
account balances, last transaction, and other information 24 hours
a day, seven days a week.
FUNDS-ON-CALL [REGISTERED MARK] AUTOMATED TELEPHONE TRANSACTIONS.
If you have established the Funds-on-Call [registered mark]
transaction privilege (Funds-on-Call [registered mark] Application
will be required), you may initiate Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by
Check 24 hours a day, seven days a week by calling 1 800 338-2550
on a touch-tone telephone. These transactions are subject to the
terms and conditions of the individual privileges. (See How to
Purchase Shares and How to Redeem Shares.)
STEIN ROE COUNSELOR [SERVICE MARK] PROGRAM. The Adviser offers a
Stein Roe Counselor [service mark] and a Stein Roe Counselor
Preferred [service mark] program. The programs are designed to
provide investment guidance in helping investors to select a
portfolio of Stein Roe Mutual Funds. The Stein Roe Counselor
Preferred [service mark] program, which automatically adjusts
client portfolios, has a fee of up to 1% of assets.
RECORDKEEPING AND ADMINISTRATION SERVICES. If you oversee or
administer investments for a group of investors, we offer a
variety of services.
SPECIAL SERVICES. The following special services are available to
shareholders. Please call 1 800 338-2550 or write the Trust for
additional information and forms.
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another Stein Roe Fund account. Before establishing this
option, you should obtain and read carefully the prospectus of the
Stein Roe Fund into which you wish to have your distributions
invested. The account from which distributions are made must be
of sufficient size that each distribution will usually be at least
$25. The account into which distributions are to be invested may
be opened with an initial investment of only $1,000.
Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.
Telephone Redemption by Check Privilege ($1,000 minimum) and
Telephone Exchange Privilege ($50 minimum)--established
automatically when you open your account unless
<PAGE> 25
you decline them on your Application. (See How to Redeem Shares--
Special Redemption Privileges.)
Telephone Redemption by Wire Privilege--to redeem shares from your
account by phone and have the proceeds transmitted by wire to your
checking account ($1,000 minimum).
Check-Writing Privilege--to redeem shares by writing special
checks against your Fund account ($50 minimum per check). (This
Privilege is available only for Municipal Money Fund accounts.)
Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another Stein Roe
Fund account on a regular basis ($50 minimum; $100,000 maximum).
Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.
NET ASSET VALUE
The purchase and redemption price of each Fund's shares is its net
asset value per share. Each Fund and the Portfolio determines the
net asset value of its shares as of the close of trading on the
New York Stock Exchange (currently 3:00 p.m., Chicago time) by
dividing the difference between the values of its assets and
liabilities by the number of its shares outstanding. Municipal
Money Fund's shares of the Portfolio are valued at their net asset
value.
Net asset value will not be determined on days when the Exchange
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., Chicago
time.
Securities held by Intermediate Municipals, Managed Municipals, or
High-Yield Municipals are valued based on valuations provided by a
pricing service. These valuations are reviewed by the Adviser.
If the Adviser believes that a valuation received from the service
does not represent a fair value, it values the obligation by a
method that the
<PAGE> 26
Board of Municipal Trust believes will determine a fair value.
The Board may approve the use of another pricing service and any
pricing service used may employ electronic data processing
techniques, including a so-called "matrix" system, to determine
valuations. Other assets and securities are valued by a method
that the Board believes will determine a fair value.
Securities held by the Portfolio are valued at their amortized
cost, which does not take into account unrealized gains or losses,
in an attempt to maintain the net asset value of each of the
Portfolio and Municipal Money Fund at $1.00 per share. The extent
of any deviation between the net asset value based upon market
quotations or equivalents and $1.00 per share based on amortized
cost will be examined by the Board of Trustees of the Base Trust.
If such deviation were to exceed 1/2 of 1%, the Board would
consider what action, if any, should be taken, including selling
portfolio securities, increasing, reducing or suspending
distributions, or redeeming shares in kind. Other assets and
securities of the Portfolio for which this valuation method does
not produce a fair value are valued at a fair value determined by
its Board.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are declared each business day,
and are paid monthly and confirmed at least quarterly. 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. Each Fund intends to distribute by
the end of each calendar year at least 98% of any net capital
gains realized from the sale of securities during the twelve-month
period ended October 31 in that year. The Funds intend to
distribute any undistributed net realized capital gains in the
following year.
All of your income dividends and capital gain 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 checking 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. The Trust reserves the right
to reinvest the proceeds and future distributions in additional
Fund shares if checks mailed to you for distributions are returned
as undeliverable or are not presented for payment within six
months.
INCOME TAXES. All of the Funds and the Portfolio currently limit
their investments in Municipal Securities to those the interest on
which they believe is exempt from the regular federal income tax
("exempt-interest dividends"). Each Fund and the Portfolio may
invest up to 100% of its total assets in Municipal Securities the
interest on which is subject to the alternative minimum tax. In
addition, if a Fund or the Portfolio should ever invest in
securities the interest on which is not exempt, dividends paid by
it from such interest would be subject to federal income tax at
ordinary rates.
The portion of the dividends you receive representing net short-
term capital gain is taxable to you as ordinary income.
Distributions of net long-term capital gain are taxable to you as
long-term capital gain regardless of the length of time you have
held your Fund shares.
<PAGE> 27
Promptly after the end of each calendar year, you will receive a
statement of the federal income tax status of all dividends and
capital gain distributions paid during the year. The portion of
your dividends and distributions that are taxable will be taxable
to you whether received in cash or reinvested in additional
shares.
If you are receiving social security benefits, tax-exempt income,
including exempt-interest dividends received from the Funds, will
be added to your taxable income in determining whether a portion
of your benefits will be subject to federal income tax. Interest
on borrowings you incur to purchase or carry shares of a Fund is
not deductible for federal income tax purposes. You may be
subject to state and local taxes on distributions from the Funds,
including those distributions that are exempt from federal income
tax.
For federal income tax purposes, each Fund is treated as a
separate taxable entity distinct from the other series of the
Trust.
This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.
BACKUP WITHHOLDING. If (a) you fail to (i) furnish your properly
certified social security or other tax identification number or
(ii) certify that your tax identification number is correct or
that you are not subject to backup withholding due to the
underreporting of certain income, or (b) the Internal Revenue
Service informs the Trust that your tax identification number is
incorrect, the Trust may be required to withhold federal income
tax ("backup withholding") from certain payments (including
redemption proceeds) to you. These certifications are contained
in the Application that you should complete and return when you
open an account. The Funds must promptly pay to the IRS all
amounts withheld. Therefore, it is usually not possible for a
Fund to reimburse you for amounts withheld. However, you may
claim the amount withheld as a credit on your federal income tax
return.
INVESTMENT RETURN
The total return from an investment in a Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.
Because Municipal Money Fund strives to maintain a $1.00 per share
value, its return is usually quoted either as a current seven-day
yield, calculated by totaling the dividends on a Fund share for
the previous seven days and restating that yield as an annual
rate, or as an effective yield, calculated by adjusting the
current yield to assume daily compounding. Municipal Money Fund's
current and effective yields for the seven-day period ended
September 30, 1995, were ____% and ____%, respectively. To obtain
current yield information, you may call 1 800 338-2550 or write to
the address shown on the back cover.
<PAGE> 28
The value of the three other Funds will fluctuate. Therefore, the
current yield of each of these Funds is calculated by dividing its
net investment income per share (a hypothetical figure as defined
in the SEC rules) during a 30-day period by the net asset value
per share on the last day of the period. The yield formula
provides for semiannual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
Comparison of a Fund's yield or total return with those of
alternative investments should consider differences between that
Fund and the alternative investments, the periods and methods used
in the calculation of the return being compared, and the impact of
taxes on alternative investments. Except for Municipal Money
Fund, yield figures are not based on actual dividends paid. Past
performance is not necessarily indicative of future results.
MANAGEMENT OF THE FUNDS
TRUSTEES AND INVESTMENT ADVISEr. The Board of Trustees of
Municipal Trust and the Board of Trustees of Base Trust have
overall management responsibility for the Trust and the Funds and
the Portfolio, respectively. See the Statement of Additional
Information for the names of and other information about the
trustees and officers. Since Municipal Trust and Base Trust have
the same trustees, the trustees have adopted conflict of interest
procedures to monitor and address potential conflicts between the
interests of Municipal Money Fund and the Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolios of the Funds and the Portfolio and the
business affairs of the Funds, the Portfolio, Municipal Trust and
Base Trust, subject to the direction of the respective Boards.
The Adviser is registered as an investment adviser under the
Investment Advisers Act. The Adviser was organized in 1986 to
succeed to the business of Stein Roe & Farnham, a partnership that
had advised and managed mutual funds since 1949. The Adviser is a
wholly-owned indirect subsidiary of Liberty Mutual Insurance
Company ("Liberty Mutual").
In approving the use of a single combined prospectus, the Boards
considered the possibility that one Fund (or the Portfolio) might
be liable for misstatements in the prospectus regarding
information concerning another Fund (or the Portfolio).
PORTFOLIO MANAGERS. M. Jane McCart has been portfolio manager of
Managed Municipals since August 1991 and of High-Yield Municipals
since February 1995. Prior to August 1991, she had been portfolio
manager of Municipal Money Fund since its inception in 1983 and of
Intermediate Municipals since its inception in 1985. Ms. McCart
is a vice-president of the Trust and a senior vice president of
the Adviser, and has been associated with the Adviser since 1983.
From 1973 to 1983, she was with the National Bank of Detroit. She
received her B.S.B.A. degree from Lawrence Technological
University in 1973 and, as of June 30, 1995, was responsible for
managing $909 million in mutual fund assets. Ms. McCart is
assisted in managing the Funds by Ms. Costopoulos.
Joanne T. Costopoulos has been portfolio manager of Intermediate
Municipals since August 1991 and is a vice-president of the Trust
and of the Adviser. Responsible for managing $212 million in
mutual fund assets as of June 30, 1995, she joined the Adviser
<PAGE> 29
in 1982. In her previous position as a head trader in the fixed-
income area, she traded tax-exempt securities for both
institutional and individual investment portfolios. She received
her B.A. in business administration from Elmhurst College in 1985.
Ms. Costopoulos is assisted in managing the Fund by Ms. McCart.
FEES AND EXPENSES. The Adviser receives a monthly investment
advisory fee (for investment management and administrative
services), computed and accrued daily based on the average net
assets of each Fund other than Municipal Money Fund, at the
following annual rates: Intermediate Municipals and High-Yield
Municipals, .6 of 1% of the first $100 million of average net
assets, .55 of 1% of the next $100 million, and .5 of 1%
thereafter; and Managed Municipals, .6 of 1% of the first $100
million, .55 of 1% of the next $100 million, .5 of 1% of the next
$800 million, and .45 of 1% thereafter.
Through September 28, 1995, the Adviser received an investment
advisory fee from Municipal Money Fund at an annual rate of .5 of
1% of average net assets. Effective September 28, 1995, the
Adviser receives from the Portfolio a monthly portfolio management
fee, computed and accrued daily, based on the Portfolio's average
net assets, at the annual rate of .25 of 1%. Beginning September
28, 1995, the Adviser also provides administrative services to
Municipal Money Fund under a separate administrative agreement for
a monthly fee, computed and accrued daily, at an annual rate of
.25 of 1% of the first $500 million of average net assets, .20 of
1% of the next $500 million, and .15 of 1% thereafter.
For the fiscal year ended June 30, 1995, the annualized advisory
fees for Municipal Money Fund, Intermediate Municipals, Managed
Municipals and High-Yield Municipals, after the expense
limitations described under Fee Table, were .42%, .51%, .52%, and
.55% of average net assets, respectively.
Under a separate agreement with the Trust, the Adviser provides
certain accounting and bookkeeping services to the Funds,
including computation of each Fund's net asset value and
calculation of its net income and capital gains and losses on
disposition of Fund assets.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of portfolio securities for each Fund and the
Portfolio. In doing so, the Adviser seeks to obtain the best
combination of price and execution, which involves a number of
judgmental factors.
TRANSFER AGENT. SteinRoe Services Inc., One South Wacker Drive,
Chicago, Illinois 60606, a wholly-owned indirect subsidiary of
Liberty Mutual, is the agent of the Trust for the transfer of
shares, disbursement of dividends, and maintenance of shareholder
accounting records.
DISTRIBUTOR. The shares of each Fund are offered for sale through
Liberty Securities Corporation ("Distributor") without any sales
commissions or charges to the Funds or to their shareholders. The
Distributor is a wholly-owned indirect subsidiary of Liberty
Mutual. The business address of the Distributor is 600 Atlantic
Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to the Trust at P.O. Box 804058, Chicago, Illinois
60680.
<PAGE> 30
All distribution and promotional expenses are paid by the Adviser,
including payments to the Distributor for sales of Fund shares.
ORGANIZATION AND DESCRIPTION OF SHARES
Each Fund is a separate series of Municipal Trust, a Massachusetts
business trust organized under an Agreement and Declaration of
Trust ("Declaration of Trust") dated October 6, 1987, 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 Municipal Trust's shareholders or its
trustees. The Trust may issue an unlimited number of shares, in
one or more series as the Board may authorize. Currently, four
series are authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Municipal Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against, the Trust or
any particular Fund shall look only to the assets of the Trust or
of the respective Fund for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.
The risk of a particular Fund incurring financial loss on account
of unsatisfied liability of another Fund of the Trust is also
believed to be remote, because it would be limited to claims to
which the disclaimer did not apply and to circumstances in which
the other Fund was unable to meet its obligations.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND
STRUCTURE.
Municipal Money Fund, an open-end management investment company,
seeks to achieve its objective by investing all of its assets in
shares of another mutual fund having an identical investment
objective to the Fund. This policy permitting the Fund to act as
a Feeder Fund by investing in the Portfolio, acting as a Master
Fund, was approved by the Fund's shareholders. Please refer to
the Fee Table, How the Funds Invest--Municipal Money Fund, and
Restrictions on the Funds' Investments for a description of the
investment objectives, policies, and restrictions of the Fund and
the Portfolio. The management and expenses of both Municipal
Money Fund and the Portfolio are described under the Fee Table and
Management of the Funds. The Fund will bear its proportionate
share of Portfolio expenses.
Although most of the mutual funds managed by the Adviser are
conventionally structured funds, the Adviser has been providing
investment management services in connection with another fund
employing the Master Fund/Feeder Fund structure since August,
1991.
<PAGE> 31
SR&F Municipal Money Market Portfolio is a separate series of SR&F
Base Trust (the "Base Trust"), a Massachusetts common trust
organized under an Agreement and Declaration of Trust
("Declaration of Trust") dated August 23, 1993. The Declaration
of Trust of the Base Trust provides that Municipal Money Fund and
other investors in the Portfolio will each be liable for all
obligations of the Portfolio that are not satisfied by the
Portfolio. However, the risk of Municipal Money Fund incurring
financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the
Portfolio itself were unable to meet its obligations.
Accordingly, the Trustees of Municipal Trust believe that neither
Municipal Money Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio.
The Declaration of Trust of Base Trust provides that the Portfolio
will terminate 120 days after the withdrawal of Municipal Money
Fund or any other investor in the Portfolio, unless the remaining
investors vote to agree to continue the business of the Portfolio.
The Trustees of Municipal Trust may vote the Fund's interests in
the Portfolio for such continuation without approval of the Fund's
shareholders.
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
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 Fund shareholders. The Fund will vote
shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting
instructions. If there are other investors in the Portfolio,
there can be no assurance that any matter receiving a majority of
votes cast by Fund shareholders will receive a majority of votes
cast by all Portfolio investors. If other Portfolio investors
hold a majority interest in the Portfolio, they could have voting
control over the Portfolio.
In the event that the Portfolio's fundamental policies were
changed so as to be inconsistent with those of the Fund, the Board
of Trustees of Municipal Trust would consider what action might be
taken, including changes to the Fund's investment objective or
fundamental policies, withdrawal of the Fund's assets from the
Portfolio and investment of such assets in another pooled
investment entity, or the retention of an investment adviser to
invest those assets directly in Municipal Securities. 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
<PAGE> 32
in kind could result in a less diversified portfolio of
investments for the Fund and could affect the liquidity of the
Fund.
Each investor in the Portfolio, including Municipal Money Fund,
may add to or reduce its investment in the Portfolio on each day
the New York Stock Exchange is open for business. At 3:00 p.m.,
Chicago time, on each such business day, the value of each
investor's beneficial interest in the Portfolio will be determined
by multiplying the net asset value of the Portfolio by the
percentage effective for that day which represents that investor's
share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals which are to be effected on that day will
then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as
the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of
3:00 p.m., Chicago time, on such day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and
(ii) the denominator of which is the aggregate net asset value of
the Portfolio as of 3:00 p.m., Chicago time, on such day plus or
minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investment in the Portfolio by all
investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest
in the Portfolio as of 3:00 p.m., Chicago time, on the following
such business day.
Base Trust may permit other investment companies and/or other
institutional investors to invest in the Portfolio, but members of
the general public may not invest directly in the Portfolio.
Other investors in the Portfolio are not required to sell their
shares at the same public offering price as the Fund, could have
different administrative fees and expenses than the Fund, and
might charge a sales commission. Therefore, Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in the
Portfolio. Investment by such other investors in the Portfolio
would provide funds for the purchase of additional portfolio
securities and would tend to reduce the operating expenses as a
percentage of the Portfolio's net assets. Conversely, large-scale
redemptions by any such other investors in the Portfolio could
result in untimely liquidations of the Portfolio's security
holdings, loss of investment flexibility, and increases in the
operating expenses of the Portfolio as a percentage of the
Portfolio's net assets. As a result, the Portfolio's security
holdings may become less diverse, resulting in increased risk.
There is currently no such other investment company that invests
in the Portfolio. Information regarding any investment company
that may invest in the Portfolio in the future may be obtained by
writing to Base Trust at P.O. Box 804058, Chicago, IL 60680 or by
calling 1 800 338-2550. The Adviser may provide administrative or
other services to one or more of such investors.
<PAGE> 33
CERTIFICATE OF AUTHORIZATION (FOR USE BY CORPORATIONS AND
ASSOCIATIONS ONLY)
A corporation or association must complete this Certificate and
submit it with the Fund Application, each written redemption,
transfer or exchange request, and each request to terminate or
change any of the Privileges or special service elections.
If the entity submitting the Certificate is an association, the
word "association" shall be deemed to appear each place the word
"corporation" appears. If the officer signing this Certificate is
named as an authorized person, another officer must countersign
the Certificate. If there is no other officer, the person signing
the Certificate must have his signature guaranteed. If you are
not sure whether you are required to complete this Certificate,
call the office of the Stein Roe Funds, 1 800 338-2550 toll-free.
The undersigned hereby certifies that he is the duly elected
Secretary of ____________________________ (the "Corporation")
(name of Corporation/Association)
and that the following individual(s):
Authorized Persons
_____________________________ __________________________
Name Title
_____________________________ __________________________
Name Title
_____________________________ __________________________
Name Title
is (are) duly authorized by resolution or otherwise to act on
behalf of the Corporation in connection with the Corporation's
ownership of shares of any mutual fund managed by Stein Roe &
Farnham Incorporated (individually, the "Fund" and collectively,
the "Funds") including, without limitation, furnishing any such
Fund and its transfer agent with instructions to transfer or
redeem shares of that Fund payable to any person or in any manner,
or to redeem shares of that Fund and apply the proceeds of such
redemption to purchase shares of another Fund (an "exchange"), and
to execute any necessary forms in connection therewith.
Unless a lesser number is specified, all of the Authorized Persons
must sign written instructions. Number of signatures required:
________.
If the undersigned is the only person authorized to act on behalf
of the Corporation, the undersigned certifies that he is the sole
shareholder, director, and officer of the Corporation and that the
Corporation's Charter and Bylaws provide that he is the only
person authorized to so act.
Unless expressly declined on the Application (or other form
acceptable to the Funds), the undersigned further certifies that
the Corporation has authorized by resolution or otherwise the
establishment of the Telephone Exchange and Telephone Redemption
by Check Privileges for the Corporation's account with any Fund
offering any such Privilege. If elected on the Application (or
other form acceptable to the Funds), the undersigned also
certifies that the Corporation has similarly authorized
establishment of the Electronic Transfer, Telephone Redemption by
Wire, and Check-Writing Privileges for the Corporation's account
with any Fund offering said Privileges. The undersigned has
further authorized each Fund and its transfer agent to honor any
written, telephonic, or telegraphic instructions furnished
pursuant to any such Privilege by any person believed by the Fund
or its transfer agent or their agents, officers, directors,
trustees, or employees to be authorized to act on behalf of the
Corporation and agrees that neither the Fund nor its transfer
agent, their agents, officers, directors, trustees, or employees
will be liable for any loss, liability, cost, or expense for
acting upon any such instructions.
These authorizations shall continue in effect until five business
days after the Fund and its transfer agent receive written notice
from the Corporation of any change.
IN WITNESS WHEREOF, I have hereunto subscribed my name as
Secretary and affixed the seal of this Corporation this ____ day
of ___________________, 19___.
__________________________
Secretary
__________________________
Signature Guarantee*
*Only required if the person signing the Certificate is the only
person named as "Authorized Person."
Corporate
Seal
Here
<PAGE> 34
[STEIN ROE MUTUAL FUNDS LOGO]
The Stein Roe Funds
Stein Roe Government Reserves
Stein Roe Cash Reserves
Stein Roe Limited Maturity Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals
Stein Roe Managed Municipals
Stein Roe High-Yield Municipals
Stein Roe Total Return Fund
Stein Roe Prime Equities
Stein Roe Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Special Venture Fund
P.O. Box 804058
Chicago, Illinois 60680
1 800 338-2550
In Chicago, visit our Fund Center
at One South Wacker Drive
Liberty Securities Corporation, Distributor
03008
<PAGE> 1
Statement of Additional Information Dated November 1, 1995
STEIN ROE MUNICIPAL TRUST
STEIN ROE MUNICIPAL MONEY MARKET FUND
STEIN ROE INTERMEDIATE MUNICIPALS
STEIN ROE MANAGED MUNICIPALS
STEIN ROE HIGH-YIELD MUNICIPALS
P.O. Box 804058, Chicago, Illinois 60680
1 800 338-2550
The Funds listed above are series of shares of beneficial
interest of the Stein Roe Municipal Trust ("Municipal Trust").
Each series of Municipal Trust other than Stein Roe Municipal
Money Market Fund ("Municipal Money Fund") invests in a separate
portfolio of securities and other assets, with its own objectives
and policies. Municipal Money Fund invests all of its assets in
shares of SR&F Municipal Money Market Portfolio ("Portfolio"),
which is a series of shares of beneficial interest of SR&F Base
Trust ("Base Trust"). Municipal Money Fund and the Portfolio have
identical investment objectives and policies.
This Statement of Additional Information is not a prospectus
but provides additional information that should be read in
conjunction with the Prospectus dated November 1, 1995, and any
supplements thereto. The Prospectus may be obtained at no charge
by telephoning 1 800 338-2550.
TABLE OF CONTENTS
Page
General Information and History.............................2
Investment Policies.........................................3
Municipal Money Fund...................................3
Intermediate Municipals................................4
Managed Municipals.....................................5
High-Yield Municipals..................................6
Portfolio Investments and Strategies........................6
Investment Restrictions....................................17
Additional Investment Considerations.......................20
Purchases and Redemptions..................................22
Management.................................................23
Financial Statements.......................................26
Principal Shareholders.....................................26
Investment Advisory Services...............................26
Distributor................................................29
Transfer Agent.............................................29
Custodian..................................................30
Independent Auditors.......................................30
Portfolio Transactions.....................................30
Additional Income Tax Considerations.......................32
Investment Performance.....................................34
Additional Information on Net Asset Value--Municipal
Money Fund and the Portfolio.............................41
Glossary...................................................42
Appendix--Ratings Of Municipal Securities..................45
<PAGE> 2
GENERAL INFORMATION AND HISTORY
Stein Roe & Farnham Incorporated (the "Adviser") is
responsible for the business affairs of the Trusts and serves as
investment adviser and provides accounting and recordkeeping
services to the Funds (other than Municipal Money Fund) and the
Portfolio. It also provides administrative services to the Funds
and the Portfolio.
As used herein, "Municipal Money Fund," "Intermediate
Municipals," "Managed Municipals," and "High-Yield Municipals"
refer to the series of Municipal Trust designated Stein Roe
Municipal Money Market Fund, Stein Roe Intermediate Municipals,
Stein Roe Managed Municipals, and Stein Roe High-Yield Municipals,
respectively. The "Portfolio" refers to SR&F Municipal Money
Market Portfolio.
Currently, four series of Municipal Trust and one series of
Base Trust are authorized and outstanding. The name of Municipal
Trust was changed on August 1, 1991 from SteinRoe Tax-Exempt
Income Trust to SteinRoe Municipal Trust and was changed on
November 1, 1995 to Stein Roe Municipal Trust. Prior to November
1, 1995, Municipal Money Fund, Intermediate Municipals, Managed
Municipals, and High-Yield Municipals were named SteinRoe
Municipal Money Market Fund, SteinRoe Intermediate Municipals,
SteinRoe Managed Municipals, and SteinRoe High-Yield Municipals,
respectively. SteinRoe Municipal Money Market Fund was named
SteinRoe Tax-Exempt Money Fund prior to November 1, 1992.
Each share of a series of Municipal Trust is entitled to
participate pro rata in any dividends and other distributions
declared by the Board on shares of that series, and all shares of
a series have equal rights in the event of liquidation of that
series.
Each whole share (or fractional share) of Municipal Trust
outstanding on the record date established in accordance with the
By-Laws shall be entitled to a number of votes on any matter on
which it is entitled to vote equal to the net asset value of the
share (or fractional share) in United States dollars determined at
the close of business on the record date (for example, a share
having a net asset value of $10.50 would be entitled to 10.5
votes). As a business trust, Municipal Trust is not required to
hold annual shareholder meetings. However, special meetings may
be called for purposes such as electing or removing trustees,
changing fundamental policies, or approving an investment advisory
contract. If requested to do so by the holders of at least 10% of
Municipal Trust's outstanding shares, Municipal Trust will call a
special meeting for the purpose of voting upon the question of
removal of a trustee or trustees and will assist in the
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940. All shares of
Municipal Trust are voted together in the election of trustees.
On any other matter submitted to a vote of shareholders, shares
are voted in the aggregate and not by individual series, except
that shares are voted by individual series when required by the
Investment Company Act of 1940 or other applicable law, or when
the Board of Trustees determines that the matter affects only the
interests of one or more series, in which case shareholders of the
unaffected series are not entitled to vote on such matters.
<PAGE> 3
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
Rather than invest in securities directly, each Fund may seek
to achieve its objective by pooling its assets with assets of
other mutual funds managed by the Adviser for investment in
another mutual fund having the same investment objective and
substantially the same investment policies and restrictions as the
Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. The Adviser is
expected to manage any such mutual fund in which a Fund would
invest. Such investment would be subject to determination by the
Trustees that it was in the best interests of the Fund and its
shareholders, and shareholders would receive advance notice of any
such change. The only Fund currently operating under the Master
Fund/Feeder Fund structure is Municipal Money Fund, which
converted to the Master Fund/Feeder Fund structure on September
28, 1995. For more information, please refer to the Prospectus
under the caption Organization and Description of Shares--Special
Considerations Regarding the Master Fund/Feeder Fund Structure.
INVESTMENT POLICIES
The following information supplements the discussion of the
Funds' respective investment objectives and policies described in
the Prospectus. In pursuing its objective, each Fund will invest
as described below and may employ investment techniques described
in the Prospectus and elsewhere in this Statement of Additional
Information. Investments and strategies that are common to two or
more Funds are described under Portfolio Investments and
Strategies. Each Fund's investment objective is not fundamental
and may be changed by the Board of Trustees without the approval
of a "majority of the outstanding voting securities" (see
definition in the Glossary) of that Fund.
MUNICIPAL MONEY FUND
This Fund seeks maximum current income exempt from federal
income tax. The Fund seeks to achieve its objective by investing
all of its net investable assets in shares of the Portfolio,
another mutual fund that has an identical investment objective and
identical investment policies to the Fund. In pursuing its
objective, the Portfolio attempts to maintain relative stability
of principal and liquidity. The Portfolio invests principally in
a diversified portfolio of short-term Municipal Securities (as
defined in the Prospectus). "Short-term" means a remaining
maturity of no more than thirteen months (or comparable period) as
defined in the Glossary.
It is a fundamental policy that normally at least 80% of the
Portfolio's investments will produce income that is exempt from
federal income tax, except for periods in which the Adviser
believes require a defensive position for the protection of
shareholders.
As a fundamental policy, the Portfolio invests in Municipal
Securities that, at the time of purchase, are: (i) variable rate
demand securities (as defined in the Glossary) whose demand
feature is rated within the two highest ratings assigned by
<PAGE> 4
Moody's Investors Service, Inc. ("Moody's"), VMIG 1 or VMIG 2 /1/;
(ii) notes rated within the two highest short-term municipal
ratings assigned by Moody's, MIG 1 or MIG 2, or within the highest
rating assigned by Standard & Poor's Corporation ("S&P"),/2/ SP-
l+; (iii) municipal commercial paper (short-term promissory notes)
rated Prime-1 by Moody's, or A-l by S&P; (iv) municipal bonds,
including industrial development bonds, rated within the two
highest ratings assigned to municipal bonds by S&P, AAA or AA, or
by Moody's, Aaa or Aa; (v) securities not rated as described in
(i) through (iv) but determined by the Board of Trustees to be at
least equal in quality to one or more of the foregoing ratings,
although other types of obligations of the same issuer might not
be within the foregoing ratings; (vi) securities backed by the
full faith and credit of the U.S. Government; or (vii) securities
as to which the payment of principal and interest is
collateralized by securities issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities ["U.S.
Government Securities"] deposited in an escrow for the benefit of
holders of the securities. In accordance with SEC Rule 2a-7 under
the Investment Company Act, each security in which the Portfolio
invests will be U.S. dollar denominated and (i) rated (or be
issued by an issuer that is rated with respect to its short-term
debt) within the two highest rating categories for short-term debt
by at least two nationally recognized statistical rating
organizations ("NRSRO") or, if rated by only one NRSRO, rated
within the two highest rating categories by that NRSRO, or, if
unrated, determined by or under the direction of the Board of
Trustees to be of comparable quality, and (ii) determined by or
under the direction of the Board of Trustees to present minimal
credit risks.
INTERMEDIATE MUNICIPALS
This Fund seeks a high current yield exempt from federal
income tax, consistent with the preservation of capital. The Fund
attempts to achieve its objective by investing primarily in a
diversified portfolio of "intermediate-term" Municipal Securities.
Normally, at least 65% of the Fund's assets will be invested in
Municipal Securities with a maturity of ten years or less
(including Municipal Securities with a longer maturity, but under
which the holder is entitled to receive, upon demand at a stated
time within ten years, the entire principal and accrued interest).
In addition, the Fund's portfolio is expected to have a dollar-
weighted average maturity of between three and ten years.
- --------------------
/1/ The Boards of Trustees of Municipal Trust and Base Trust have
determined that the demand feature of a variable rate demand
security rated SP-1+, A-1+ or A-1 by S&P or MIG 1, MIG 2 or Prime
1 by Moody's is at least equal in quality to the demand feature of
a variable rate demand security rated VMIG 2 by Moody's. As a
non-fundamental policy, the Portfolio will not invest in a
variable rate security whose demand feature is conditional unless
the Board of Trustees determines that the security is at least the
economic equivalent of a variable rate security with an
unconditional demand feature or (a) the demand feature is rated
within the two highest ratings assigned by Moody's or within the
equivalent ratings assigned by S&P and (b) the underlying security
is rated within the two highest ratings assigned by Moody's or
S&P. The Board of Trustees has determined that a variable rate
security where the demand feature is suspended only after a
default followed by an acceleration of maturity is the economic
equivalent of a variable rate security with an unconditional
demand feature.
/2/ For a description of Moody's and S&P quality ratings, see the
Appendix. All references to ratings apply to ratings adopted in
the future by Moody's or S&P that are determined by the Boards of
Trustees to be equivalent to current ratings
- -------------------
<PAGE> 5
It is a fundamental policy that normally at least 80% of the
Fund's investments will produce income that is exempt from federal
income tax, except during periods that the Adviser believes
require a temporary defensive position for the protection of
shareholders.
The Fund will invest not less than 75% (taken at current
value at time of purchase) of its Municipal Securities
investments, in such proportions as the Adviser shall determine,
in municipal bonds rated at the time of purchase within the three
highest grades by Moody's (Aaa, Aa, and A) or by S&P (AAA, AA and
A) (or in variable rate demand securities whose demand feature is
rated VMIG 1, VMIG 2 or Prime-1 by Moody's or SP-1+, A-1+ or A-1
by S&P), or backed by the U.S. Government or by an agency or
instrumentality of the U.S. Government or by U.S. Government
Securities, or municipal notes that are rated at the time of
purchase within the three highest ratings for such securities by
Moody's (MIG 1, MIG 2, and MIG 3), within the two highest ratings
for such securities by S&P (SP-1+ and SP-1), or, if unrated, of
comparable quality, as determined by the Adviser. The Fund may
also invest up to 25% of its assets in other Municipal Securities
without any minimum credit quality requirement, including
Municipal Securities for which a limited market may exist. These
investments (which are medium- or lower-quality debt securities)
normally involve greater risk of loss of principal or income and
higher yield.
MANAGED MUNICIPALS
This Fund's investment objective is to provide its
shareholders a high level of current income that is exempt from
federal income tax, consistent with the preservation of capital.
The Fund attempts to achieve this objective by investing in a
diversified portfolio of Municipal Securities, the interest from
which is exempt from federal income tax.
It is a fundamental policy that the Fund's assets will be
invested so that at least 80% of its income will be exempt from
federal income tax, except for temporary periods during which, in
the opinion of the Adviser, normal market conditions are not
expected to prevail, including, without limitation, circumstances
that, in the opinion of the Adviser, require an unusual defensive
position for protection of the Fund's shareholders. For purposes
of this policy the Fund does not regard realized capital gains as
income.
The Fund will invest not less than 75% (taken at current
value at time of purchase) of its Municipal Securities
investments, in such proportions as the Adviser shall determine,
in municipal bonds rated at the time of purchase within the three
highest ratings for such securities by Moody's (Aaa, Aa, and A) or
by S&P (AAA, AA, and A) (or in variable rate demand securities
whose demand feature is rated VMIG 1, VMIG 2 or Prime-1 by Moody's
or SP-1+, A-1+ or A-1 by S&P), or backed by the U.S. Government,
by an agency or instrumentality of the U.S. Government or by U.S.
Government Securities, or municipal notes that are rated at the
time of purchase within the three highest ratings for municipal
notes by Moody's (MIG 1, MIG 2, and MIG 3) or within the two
highest ratings for municipal notes by S&P (SP-1+ and SP-1). The
Fund may also invest up to 25% of its assets in other Municipal
Securities without any minimum
<PAGE> 6
credit quality requirement, including Municipal Securities for
which a limited market may exist. These investments (which are
medium- or lower-quality debt securities) normally involve greater
risk of loss of principal or income and higher yield.
The Fund invests primarily in long-term Municipal Securities
(generally maturing in more than ten years) but may also invest in
both short-term and medium-term securities from time to time as a
defensive move.
HIGH-YIELD MUNICIPALS
This Fund seeks a high current yield exempt from federal
income tax. The Fund attempts to achieve this objective by
investing primarily in a diversified portfolio of long-term
medium- or lower-quality Municipal Securities (generally maturing
in more than ten years) bearing a high rate of interest income;
possible capital appreciation is of secondary importance. Of
course, there is no guarantee that the payments of interest and
principal on securities held by the Fund will be made when due.
It is a fundamental policy that normally the Fund's assets
will be invested so that at least 80% of the gross income will be
derived from securities the interest on which is exempt from
federal income tax in the opinion of counsel for the issuers of
such securities, except during periods in which the Adviser
believes a temporary defensive position is advisable.
Although the Fund invests primarily in medium- and lower-
quality Municipal Securities, it may invest in Municipal
Securities of higher quality when the Adviser believes it is
appropriate to do so.
PORTFOLIO INVESTMENTS AND STRATEGIES
In addition to the policies described above, the following
investment policies and techniques have been adopted by each Fund
as indicated. For purposes of discussion under Portfolio
Investments and Strategies, Investment Restrictions, and
Investment Risks, the term "the Fund" refers to Municipal Money
Fund, the Portfolio, Intermediate Municipals, Managed Municipals,
and High-Yield Municipals.
TAXABLE SECURITIES
Assets of each Fund that are not invested in Municipal
Securities may be held in cash or invested in short-term taxable
investments /3/ such as: (1) U.S. Government bills, notes and
bonds; (2) obligations of agencies and instrumentalities of the
U.S. Government (including obligations not backed by the full
faith and credit of the U.S. Government); (3) in the case of
Intermediate Municipals and High-Yield Municipals, other money
market instruments, and in the case of Municipal Money Fund, the
Portfolio, and Managed Municipals, other money market instruments
such as certificates of deposit and bankers' acceptances of
domestic banks having total assets in excess of
- -----------------
/3/ In the case of Municipal Money Fund, the Portfolio, and
Managed Municipals, the policies described in this paragraph are
fundamental.
- ----------------
<PAGE> 7
$1 billion, and corporate commercial paper rated Prime-1 by
Moody's or A-1 by S&P at the time of purchase, or, if unrated,
issued or guaranteed by an issuer with outstanding debt rated Aa
or better by Moody's or AA or better by S&P; and (4) repurchase
agreements (defined in the Glossary) with banks and, for all Funds
except Managed Municipals, securities dealers. Municipal Money
Fund and the Portfolio limit repurchase agreements to those that
are short-term, subject to item (h) under Investment Restrictions
(although the underlying securities may not be short-term).
Managed Municipals limits repurchase agreements to those in which
the underlying collateral consists of securities that the Fund may
purchase directly.
AMT SECURITIES
Although the Funds currently limit their investments in
Municipal Securities to those the interest on which is exempt from
the regular federal income tax, each Fund may invest 100% of its
total assets in Municipal Securities the interest on which is
subject to the federal alternative minimum tax ("AMT").
STANDBY COMMITMENTS
Each Fund may obtain standby commitments when it purchases
Municipal Securities. A standby commitment gives the holder the
right to sell the underlying security to the seller at an agreed-
upon price on certain dates or within a specified period. A Fund
will acquire standby commitments solely to facilitate portfolio
liquidity and not with a view to exercising them at a time when
the exercise price may exceed the current value of the underlying
securities. If the exercise price of a standby commitment held by
a Fund should exceed the current value of the underlying
securities, a Fund may refrain from exercising the standby
commitment in order to avoid causing the issuer of the standby
commitment to sustain a loss and thereby jeopardizing the Fund's
business relationship with the issuer. A Fund will enter into
standby commitments only with banks and securities dealers that,
in the opinion of the Adviser, present minimal credit risks.
However, if a securities dealer or bank is unable to meet its
obligation to repurchase the security when a Fund exercises a
standby commitment, the Fund might be unable to recover all or a
portion of any loss sustained from having to sell the security
elsewhere. Standby commitments will be valued at zero in
determining each Fund's net asset value. Municipal Trust has
received an opinion of Bell, Boyd & Lloyd, counsel to the Trust,
that interest earned by the Funds on Municipal Securities will
continue to be exempt from the regular federal income tax
regardless of the fact that the Fund holds standby commitments
with respect to such Municipal Securities.
PARTICIPATION INTERESTS
Each Fund may purchase participation interests or
certificates of participation in all or part of specific holdings
of Municipal Securities, but does not intend to do so unless the
tax-exempt status of those participation interests or certificates
of participation is confirmed to the satisfaction of the Board of
Trustees, which may include consideration of an opinion of counsel
as to the tax-exempt status. Each participation interest would
meet the prescribed quality standards of the Fund or be backed by
an
<PAGE> 8
irrevocable letter of credit or guarantee of a bank that meets the
prescribed quality standards of the Fund. (See Investment
Policies.) Some participation interests are illiquid securities.
Each Fund may also purchase participations in lease
obligations or installment purchase contract obligations
(hereinafter collectively called "lease obligations") of municipal
authorities or entities. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate, and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to
make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. In
addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more
conventional bonds. Although "non-appropriation" lease
obligations are secured by leased property, disposition of the
property in the event of foreclosure might prove difficult. Each
Fund will seek to minimize these risks by investing primarily in
those "non-appropriation" lease obligations where (1) the nature
of the leased equipment or property is such that its ownership or
use is essential to a governmental function of the municipality,
(2) the lease obligor has maintained good market acceptability in
the past, (3) the investment is of a size that will be attractive
to institutional investors, and (4) the underlying leased
equipment has elements of portability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment
were ever required.
The Board of Trustees has delegated to the Adviser the
responsibility to determine the credit quality of participation
interests.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each Fund may purchase securities on a when-issued or
delayed-delivery basis, as described in the Prospectus. A Fund
makes such commitments only with the intention of actually
acquiring the securities, but may sell the securities before
settlement date if it is deemed advisable for investment reasons.
Securities purchased in this manner involve a risk of loss if the
value of the security purchased declines before settlement date.
At the time a Fund enters into a binding obligation to
purchase securities on a when-issued basis, liquid assets (cash,
U.S. Government or other "high grade" debt obligations) of the
Fund having a value of at least as great as the purchase price of
the securities to be purchased will be segregated on the books of
the Fund and held by the custodian throughout the period of the
obligation.
SHORT SALES
Each Fund may make short sales "against the box." In a short
sale, the Fund sells a borrowed security and is required to return
the identical security to the lender.
<PAGE> 9
A short sale "against the box" involves the sale of a security
with respect to which the Fund already owns an equivalent security
in kind and amount. A short sale "against the box" enables a Fund
to obtain the current market price of a security which it desires
to sell but is unavailable for settlement.
BORROWINGS; REVERSE REPURCHASE AGREEMENTS
Subject to restriction (iv) under Investment Restrictions,
each Fund may establish and maintain a line of credit with a major
bank in order to permit borrowing on a temporary basis to meet
share redemption requests in circumstances in which temporary
borrowing may be preferable to liquidation of portfolio
securities.
Each Fund may also enter into reverse repurchase agreements
(defined in the Glossary) with banks and securities dealers. Use
of a reverse repurchase agreement may be preferable to a regular
sale and later repurchase of the securities because it avoids
certain market risks and transaction costs. The Funds did not
enter into reverse repurchase agreements during the last year and
have no present intention to do so.
A Fund's reverse repurchase agreements and any other
borrowings may not exceed 33 1/3% of its total assets, and the
Fund may not purchase additional securities when its borrowings,
less proceeds receivable from the sale of portfolio securities,
exceed 5% of its total assets.
RATED SECURITIES
The rated securities described under Investment Policies
above for each Fund except for Municipal Money Fund and the
Portfolio include obligations given a rating conditionally by
Moody's or provisionally by S&P.
Except with respect to Municipal Securities with a demand
feature (see the definition of "short-term" in the Glossary)
acquired by Municipal Money Fund or the Portfolio, the fact that
the rating of a Municipal Security held by a Fund may be lost or
reduced below the minimum level applicable to its original
purchase by a Fund does not require that obligation to be sold,
but the Adviser will consider such fact in determining whether
that Fund should continue to hold the obligation. In the case of
Municipal Securities with a demand feature acquired by Municipal
Money Fund or the Portfolio, if the quality of such a security
falls below the minimum level applicable at the time of
acquisition, the Fund must dispose of the security within a
reasonable period of time either by exercising the demand feature
or by selling the security in the secondary market, unless the
Board of Trustees determines that it is in the best interests of
the Fund and its shareholders to retain the security.
To the extent that the ratings accorded by Moody's or S&P for
Municipal Securities may change as a result of changes in such
organizations, or changes in their rating systems, each Fund will
attempt to use comparable ratings as standards for its investments
in Municipal Securities in accordance with its investment
policies. The
<PAGE> 10
Board of Trustees is required to review such ratings with respect
to Municipal Money Fund and the Portfolio.
ZERO COUPON BONDS
Each of Intermediate Municipals, Managed Municipals, and
High-Yield Municipals may invest in zero coupon bonds. A zero
coupon bond is a bond that does not pay interest for its entire
life. The market prices of zero coupon bonds are affected to a
greater extent by changes in prevailing levels of interest rates
and thereby tend to be more volatile in price than securities that
pay interest periodically. In addition, because a Fund accrues
income with respect to these securities prior to the receipt of
such interest, it may have to dispose of portfolio securities
under disadvantageous circumstances in order to obtain cash needed
to pay income dividends in amounts necessary to avoid unfavorable
tax consequences.
PORTFOLIO TURNOVER
Although the Funds do not purchase securities with a view
toward rapid turnover, there are no limitations on the length of
time that portfolio securities must be held. As a result, the
turnover rate may vary from year to year. Recent higher levels of
portfolio turnover for Intermediate Municipals and for High-Yield
Municipals were due, in part, to recognition of capital gains from
favorable investments and from the Adviser's refining of
techniques for reacting to changes in the markets to shift
exposures to certain sectors. A high rate of portfolio turnover
in a Fund, if it should occur, may result in the realization of
capital gains or losses, and, to the extent net short-term capital
gains are realized, any distributions resulting from such gains
will be considered ordinary income for federal income tax
purposes.
For further information on the portfolio turnover rate of
each Fund, see Financial Highlights and Risks and Investment
Considerations in the Prospectus and Additional Tax Considerations
herein.
OPTIONS
Each of Intermediate Municipals, Managed Municipals, and
High-Yield Municipals is permitted to purchase and to write both
call options and put options on debt or other securities or
indexes in standardized contracts traded on U.S. securities
exchanges, boards of trade, or similar entities, or quoted on
NASDAQ, and agreements, sometimes called cash puts, that may
accompany the purchase of a new issue of bonds from a dealer.
Currently there are no publicly-traded options on individual
tax-exempt securities. However, it is anticipated that such
instruments may become available in the future.
An option is a contract that gives the purchaser (holder) of
the option, in return for a premium, the right to buy from (call)
or sell to (put) the seller (writer) of the option the security
underlying the option (or the cash value of an index) at a
specified
<PAGE> 11
exercise price at any time during the term of the option (normally
not exceeding nine months). The writer of the option has the
obligation upon exercise of the option to deliver the underlying
security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise,
the writer of an option on an index is obligated to pay the
difference between the cash value of the index and the exercise
price multiplied by the specified multiplier for the index option.
(An index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities or certain economic indicators.)
A Fund is permitted to write call options and put options
only if they are "covered." In the case of a call option on a
security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or if
additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities held in
its portfolio.
If an option written by a Fund expires, the Fund realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by a Fund expires, the Fund
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when a Fund desires.
A Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is
less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include
supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index and
the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by a Fund is recorded as a
deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid
and asked prices.
Risks Associated with Options. There are several risks
associated with transactions in options on securities and on
indexes. For example, there are significant differences between
the securities markets and options markets that could result in an
imperfect correlation between these markets, causing a given
transaction not to achieve
<PAGE> 12
its objectives. A decision as to whether, when and how to use
options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. If a Fund were
unable to close out an option that it had purchased on a security,
it would have to exercise the option in order to realize any
profit or the option would expire and become worthless. If a Fund
were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying
security until the option expired. As the writer of a covered
call option, a Fund foregoes, during the option's life, the
opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and
the exercise price of the call.
If trading were suspended in an option purchased or written
by a Fund, the Fund would not be able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to
exercise an option it had purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Each of Intermediate Municipals, Managed Municipals, and
High-Yield Municipals may enter into interest rate futures
contracts and index futures contracts. An interest rate or index
futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a financial
instrument or the cash value of an index (such as The Bond Buyer
Municipal Bond Index) /4/ at a specified price and time. A public
market exists in futures contracts covering a number of indexes as
well as the following financial instruments: U.S. Treasury bonds;
U.S. Treasury notes; Government National Mortgage Association
certificates; three-month U.S. Treasury bills; 90-day commercial
paper; bank certificates of deposit; and Eurodollar certificates
of deposit. It is expected that other futures contracts will be
developed and traded. A Fund will engage in transactions
involving new futures contracts (or options thereon) if, in the
opinion of the Board of Trustees, they are appropriate instruments
for the Fund.
Each Fund may purchase and write call options and put options
on futures contracts (futures options). Futures options possess
many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the
right, in return for the premium paid, to assume a long position
(call) or a short position (put) in a futures contract at a
specified exercise price at any time during the period of the
option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned
the opposite short position. In
- --------------------
/4/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made. The Bond Buyer Municipal Bond Index is based on The Bond
Buyer index of 40 actively-traded long-term general obligation and
revenue bonds carrying at least an A rating by Moody's or S&P.
- -------------------
<PAGE> 13
the case of a put option, the opposite is true. For example, a
Fund might use futures contracts to hedge against anticipated
changes in interest rates which might adversely affect either the
value of the Fund's securities or the price of the securities that
the Fund intends to purchase. Although other techniques could be
used to reduce that Fund's exposure to interest rate fluctuations,
the Fund may be able to hedge its exposure more effectively and
perhaps at a lower cost by using futures contracts and futures
options.
The success of any futures technique depends on the Adviser
correctly predicting changes in the level and direction of
interest rates and other factors. Should those predictions be
incorrect, a Fund's return might have been better had the
transaction not been attempted; however, in the absence of the
ability to use futures contracts, the Adviser might have taken
portfolio actions in anticipation of the same market movements
with similar investment results but, presumably, at greater
transaction costs.
Each Fund will only enter into futures contracts and futures
options that are standardized and traded on a U.S. exchange, board
of trade or similar entity, or quoted on an automated quotation
system.
When a purchase or sale of a futures contract is made by a
Fund, the Fund is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S.
Government securities or other securities acceptable to the broker
("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit on the
futures contract that is returned to the Fund upon termination of
the contract, assuming all contractual obligations have been
satisfied. Each Fund expects to earn interest income on its
initial margin deposits. A futures contract held by a Fund is
valued daily at the official settlement price of the exchange on
which it is traded. Each day the Fund pays or receives cash,
called "variation margin," equal to the daily change in value of
the futures contract. This process is known as "marking-to-
market." Variation margin paid or received by a Fund does not
represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would
owe the other if the futures contract had expired at the close of
the previous trading day. In computing daily net asset value,
each Fund will mark to market its open futures positions.
A Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by
it. Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option and other
futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales,
as the case may be, of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price,
the Fund realizes a capital gain, or if it is more,
<PAGE> 14
the Fund realizes a capital loss. Conversely, if an offsetting
sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a
capital loss. The transaction costs must also be included in
these calculations.
Risks Associated with Futures. There are several risks
associated with the use of futures contracts and futures options
as hedging techniques. A purchase or sale of a futures contract
may result in losses in excess of the amount invested in the
futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and debt securities, including technical influences in
futures and futures options trading and differences between the
financial instruments and the instruments underlying the standard
contracts available for trading in such respects as interest rate
levels, maturities, and creditworthiness of issuers. A decision
as to whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or futures option
position. The Fund would be exposed to possible loss on the
position during the interval of inability to close and would
continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed
above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If options, futures contracts, or futures options of types
other than those described herein or in the prospectus are traded
in the future, each of Intermediate Municipals, Managed
Municipals, and High-Yield Municipals may also use those
<PAGE> 15
investment vehicles, provided the Board of Trustees determines
that their use is consistent with the Fund's investment objective.
A Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin
deposits for futures contracts held by the Fund plus premiums paid
by it for open futures option positions, less the amount by which
any such options are "in-the-money" (as defined in the Glossary),
would exceed 5% of the Fund's total assets.
When purchasing a futures contract or writing a put on a
futures contract, a Fund must maintain with its custodian (or
broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contracts. When
writing a call option on a futures contract, a Fund similarly will
maintain cash or cash equivalents (including any margin) equal to
the amount by which such option is in-the-money until the option
expires or is closed out by the Fund.
A Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call
options written on indexes if, in the aggregate, the market value
of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent a Fund has written
call options on specific securities in its portfolio, the value of
those securities will be deducted from the current market value of
the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," each Fund will use commodity futures or commodity
options contracts solely for bona fide hedging purposes within the
meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the
assets of a Fund, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into [in
the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].
As long as it continues to sell its shares in certain states,
each Fund's futures and options transactions will also be subject
to certain non-fundamental investment restrictions set forth below
under Investment Restrictions.
TAXATION OF OPTIONS AND FUTURES
If a Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by a Fund, the difference between the cash
received at exercise and the premium paid is a capital gain or
loss.
<PAGE> 16
If a call or put option written by a Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security
purchased (put). For cash settlement options and futures options
written by a Fund, the difference between the cash paid at
exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by a Fund was in-the-
money at the time it was written and the security covering the
option was held for more than the long-term holding period prior
to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If a Fund
delivers securities under a futures contract, the Fund also
realizes a capital gain or loss on those securities. For federal
income tax purposes, a Fund generally is required to recognize as
income for each taxable year its net unrealized gains and losses
as of the end of the year on options, futures and futures options
positions ("year-end mark-to-market"). Generally, any gain or
loss recognized with respect to such positions (either by year-end
mark-to-market or by actual closing of the positions) is
considered to be 60% long-term and 40% short-term, without regard
to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the
recognition of losses on certain positions (including options,
futures and futures options positions, the related securities and
certain successor positions thereto) may be deferred to a later
taxable year. Sale of futures contracts or writing of call
options (or futures call options) or buying put options (or
futures put options) that are intended to hedge against a change
in the value of securities held by a Fund: (1) will affect the
holding period of the hedged securities; and (2) may cause
unrealized gain or loss on such securities to be recognized upon
entry into the hedge.
In order for a Fund to continue to qualify for federal income
tax treatment as a regulated investment company, at least 90% of
its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies or other income (including but not limited to
gains from options, futures, or forward contracts). In addition,
gains realized on the sale or other disposition of securities held
for less than three months must be limited to less than 30% of the
Fund's annual gross income. Any net gain realized from futures
(or futures options) contracts will be considered gain from the
sale of securities and therefore be qualifying income for purposes
of the 90% requirement. In order to avoid realizing excessive
gains on securities held less than three months, the Fund may be
required to defer the closing out of certain positions beyond the
time when it would otherwise be advantageous to do so.
Each Fund distributes to shareholders annually any net
capital gains that have been recognized for federal income tax
purposes (including year-end mark-to-market
<PAGE> 17
gains) on options and futures transactions. Such distributions
are combined with distributions of capital gains realized on the
Fund's other investments and shareholders will be advised of the
nature of the payments.
INVESTMENT RESTRICTIONS
Each Fund operates under the following investment
restrictions. Restrictions that are fundamental policies, as
indicated below, may not be changed without the approval of a
"majority of the outstanding voting securities" (as defined in the
Glossary). For purposes of discussion under Investment
Restrictions, the term "the Fund" also refers to the Portfolio. A
Fund may not:
(i) invest in a security if, with respect to 75% of the
Fund's assets, as a result of such investment, more than 5% of its
total assets (taken at market value at the time of investment)
would be invested in the securities of any one issuer (for this
purpose, the issuer(s) of a security being deemed to be only the
entity or entities whose assets or revenues are subject to the
principal and interest obligations of the security), other than
obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities or repurchase agreements for such
securities, and [all Funds except the Portfolio] 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 [however, in the case of a guarantor of securities (including
an issuer of a letter of credit), the value of the guarantee (or
letter of credit) may be excluded from this computation if the
aggregate value of securities owned by the Fund and guaranteed by
such guarantor (plus any other investments of the Fund in
securities issued by the guarantor) does not exceed 10% of the
Fund's total assets];/5/
(ii) purchase any securities on margin, except for use of
short-term credit necessary for clearance of purchases and sales
of portfolio securities (this restriction does not apply to
securities purchased on a when-issued or delayed-delivery basis or
to reverse repurchase agreements), [Intermediate Municipals,
Managed Municipals, and High-Yield Municipals only] but the Fund
may make margin deposits in connection with futures and options
transactions;
(iii) make loans to other persons, except that the Fund may
invest up to 100% of its assets in debt obligations, including
money market instruments;
(iv) borrow, except that the Fund may (a) borrow up to 33
1/3% of its total assets, taken at current value at the time of
such borrowing, from banks as a temporary measure for
extraordinary or emergency purposes but not to increase portfolio
income (the total of reverse repurchase agreements and such
borrowings will not exceed 33 1/3% of the Fund's total assets and
the Fund will not purchase additional securities at a time when
its borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets) [the Funds did not
borrow for such purposes during the last fiscal year], and
[Intermediate Municipals, Managed Municipals, and High-Yield
Municipals only] (b) enter into futures and options transactions;
- -----------------------
/5/ In the case of a security that is insured as to payment of
principal and interest, the related insurance policy is not deemed
a security, nor is it subject to this investment restriction.
- -------------------
<PAGE> 18
(v) mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by the
Fund except (a) as may be necessary in connection with borrowings
mentioned in (iv) above, and [Intermediate Municipals, Managed
Municipals, and High-Yield Municipals only] (b) it may enter into
futures and options transactions;
(vi) invest more than 25% of its total assets (taken at
market value at the time of each investment) in securities of non-
governmental issuers whose principal business activities are in
the same industry, [all Funds except the Portfolio] 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;
(vii) purchase portfolio securities for the Fund from, or
sell portfolio securities to, any of the officers, directors, or
trustees of the Trust or of its investment adviser;
(viii) purchase or sell commodities or commodities contracts
or oil, gas, or mineral programs, [Intermediate Municipals,
Managed Municipals, and High-Yield Municipals only] except that
the Fund may enter into futures and options transactions;
(ix) [Municipal Money Fund only] purchase any securities
other than those described under Investment Policies--Municipal
Money Fund, and under Portfolio Investments and Strategies;
[Managed Municipals only] purchase any securities other than those
described under Investment Policies--Managed Municipals and under
Portfolio Investments and Strategies; or
(x) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions (other than material within brackets)
are fundamental policies of the Funds. The Funds have also
adopted the following restrictions that may be required by various
laws and administrative positions. These restrictions are not
fundamental. A Fund may not:
(a) own more than 10% of the outstanding voting securities of
an issuer, [all Funds except the Portfolio] 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;
(b) invest in companies for the purpose of exercising control
or management, [all Funds except the Portfolio] 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;
(c) make investments in the securities of other investment
companies, except in connection with a merger, consolidation, or
reorganization;
(d) purchase or sell real estate (other than Municipal
Securities or money market securities secured by real estate or
interests therein or such securities issued by companies which
invest in real estate or interests therein);
<PAGE> 19
(e) invest in securities of issuers (other than issuers of
federal agency obligations or of Municipal Securities) having a
record of less than three years of continuous operation (for this
purpose, the period of operation of any issuer shall include the
period of operation of any predecessor or unconditional guarantor
of such issuer) if, regarding all such securities, more than 5% of
the Fund's total assets (taken at market value at the time of each
investment) would be invested in such securities, [all Funds
except the Portfolio] 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;
(f) act as an underwriter of securities, except that the Fund
may participate as part of a group in bidding, or bid alone, for
the purchase of Municipal Securities directly from an issuer for
the Fund's own portfolio, and [all Funds except the Portfolio]
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;
(g) purchase or retain securities of an issuer if 5% of the
securities of such issuer are owned by those trustees and officers
of the Fund who own individually more than 1/2 of 1% of such
securities;
(h) invest more than 10% of its net assets (taken at market
value at the time of each purchase) in restricted or illiquid
securities, including repurchase agreements maturing in more than
seven days; or
(i) sell securities short unless (1) the Fund owns or has the
right to obtain securities equivalent in kind and amount to those
sold short at no added cost or (2) the securities sold are "when
issued" or "when distributed" securities which the Fund expects to
receive in a recapitalization, reorganization, or other exchange
for securities the Fund contemporaneously owns or has the right to
obtain and provided that the Fund may purchase standby commitments
and securities subject to a demand feature entitling the Fund to
require sellers of securities to the Fund to repurchase them upon
demand by the Fund [Intermediate Municipals, Managed Municipals,
and High-Yield Municipals only] and that transactions in options,
futures, and options on futures are not treated as short sales.
In addition, as long as a Fund continues to sell its shares
in certain states, it may not: (i) purchase shares of other open-
end investment companies, except in connection with a merger,
consolidation, acquisition, or reorganization and [all Funds
except the Portfolio] 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 (ii)
invest more than 5% of its net assets (valued at time of
investment) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American stock
exchange. Further, as long as a Fund (except Municipal Money Fund
and the Portfolio) continues to sell its shares in certain states,
it may not: (1) write an option on a security unless the option
is issued by the Options Clearing Corporation, an exchange, or
similar entity; (2) buy or sell an option on a security, a futures
contract or an option on a futures contract unless the option, the
futures contract or the option on the futures contract is offered
through the facilities of a national securities association or
listed on a national
<PAGE> 20
exchange or similar entity; or (3) purchase a put or call option
if the aggregate premiums paid for all put and call options exceed
20% of its net assets (less the amount by which any such positions
are in-the-money), excluding put and call options purchased as
closing transactions.
ADDITIONAL INVESTMENT CONSIDERATIONS
Medium-quality Municipal Securities are obligations of
municipal issuers that, in the opinion of the Adviser, possess
adequate, but not outstanding, capacities to service the
obligations. Lower-quality Municipal Securities are obligations
of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk
bonds." The characteristics attributed to medium- and lower-
quality obligations by the Adviser are much the same as those
attributed to medium- and lower-quality obligations by rating
services (see the Appendix). Because many issuers of medium- and
lower-quality Municipal Securities choose not to have their
obligations rated by a rating agency, many of the obligations in
the Fund's portfolio may be unrated.
Investment in medium- or lower-quality debt securities
involves greater investment risk, including the possibility of
issuer default or bankruptcy. An economic downturn could severely
disrupt this market and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and
interest. During a period of adverse economic changes, including
a period of rising interest rates, issuers of such bonds may
experience difficulty in servicing their principal and interest
payment obligations.
Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the market
for them is less broad. The market for unrated debt securities is
even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase
significantly, and the Fund may have greater difficulty selling
its portfolio securities.
The federal bankruptcy statutes relating to the debts of
political subdivisions and authorities of states of the United
States provide that, in certain circumstances, such subdivisions
or authorities may be authorized to initiate bankruptcy
proceedings without prior notice to or consent of creditors, which
proceedings could result in material and adverse changes in the
rights of holders of their obligations.
Lawsuits challenging the validity under state constitutions
of present systems of financing public education have been
initiated or adjudicated in a number of states, and legislation
has been introduced to effect changes in public school financing
in some states. In other instances there have been lawsuits
challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which could
ultimately affect the validity of those Municipal Securities or
the tax-free nature of the interest thereon. In addition, from
time to time proposals have been introduced in Congress to
restrict or eliminate the federal income tax exemption for
<PAGE> 21
interest on Municipal Securities, and similar proposals may be
introduced in the future. Some of the past proposals would have
applied to interest on Municipal Securities issued before the date
of enactment, which would have adversely affected their value to a
material degree. If such proposals are enacted, the availability
of Municipal Securities for investment by the Funds and the value
of the Funds' portfolios would be affected and, in such an event,
the Funds would reevaluate their investment objectives and
policies.
Because the Funds may invest in industrial development bonds,
the Funds' shares may not be an appropriate investment for
"substantial users" of facilities financed by industrial
development bonds or for "related persons of substantial users."
In addition, the Funds invest in Municipal Securities issued
after the effective date of the Tax Reform Act of 1986 (the "1986
Act"), which may be subject to retroactive taxation if they fail
to continue to comply after issuance with certain requirements
imposed by the 1986 Act.
Although the banks and securities dealers from which a Fund
may acquire repurchase agreements and standby commitments, and the
entities from which a Fund may purchase participation interests in
Municipal Securities, will be those that the Funds' Adviser
believes to be financially sound, there can be no assurance that
they will be able to honor their obligations to the Fund.
* * * * *
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. It has worked
to build wealth for generations by being guided by three primary
objectives which it believes are the foundation of a successful
investment program. These objectives are preservation of capital,
limited volatility through managed risk, and consistent above-
average returns.
Because every investor's needs are different, Stein Roe
mutual funds are designed to accommodate different investment
objectives, risk tolerance levels, and time horizons. In
selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goal.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
<PAGE> 22
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
Net Asset Value, and Shareholder Services, and that information is
incorporated herein by reference. The Prospectus discloses that
you may purchase (or redeem) shares through investment dealers,
banks, or other institutions. It is the responsibility of any
such institution to establish procedures insuring the prompt
transmission to the Trust of any such purchase order. The state
of Texas has asked that the Trust disclose in its Statement of
Additional Information, as a reminder to any such bank or
institution, that it must be registered as a dealer in Texas.
Each Fund's net asset value is determined on days on which
the New York Stock Exchange (the "NYSE") is open for trading. The
NYSE is regularly closed on Saturdays and Sundays and on New
Year's Day, the third Monday in February, Good Friday, the last
Monday in May, Independence Day, Labor Day, Thanksgiving, and
Christmas. If one of these holidays falls on a Saturday or
Sunday, the NYSE will be closed on the preceding Friday or the
following Monday, respectively. Net asset value will not be
determined on days when the NYSE is closed unless, in the judgment
of the Board of Trustees, net asset value of a Fund should be
determined on any such day, in which case the determination will
be made at 3:00 p.m., Chicago time.
Municipal Trust intends to pay all redemptions in cash and is
obligated to redeem shares of a Fund solely in cash up to the
lesser of $250,000 or one percent of the net assets of that Fund
during any 90-day period for any one shareholder. However,
redemptions in excess of such limit may be paid wholly or partly
by a distribution in kind of securities. If redemptions were made
in kind, the redeeming shareholders might incur transaction costs
in selling the securities received in the redemptions.
Although Municipal Money Fund does not currently charge a fee
to its shareholders for the use of the special Check-Writing
Redemption Privilege offered by that Fund, described under How to
Redeem Shares in the Prospectus, the Fund pays for the cost of
printing and mailing checks to its shareholders and pays charges
of the custodian for payment of each check. Municipal Trust
reserves the right to establish a
<PAGE> 23
direct charge to shareholders for use of the Privilege and both
the Trust and the custodian reserve the right to terminate this
service.
Municipal Trust reserves the right to suspend or postpone
redemptions of shares of any Fund during any period when: (a)
trading on the NYSE is restricted, as determined by the Securities
and Exchange Commission, or the NYSE is closed for other than
customary weekend and holiday closings; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c)
an emergency, as determined by the Securities and Exchange
Commission, exists, making disposal of portfolio securities or
valuation of net assets of such Fund not reasonably practicable.
Due to the relatively high cost of maintaining smaller
accounts, Municipal Trust reserves the right to redeem shares in
any account for their then-current value (which will be promptly
paid to the investor) if at any time the shares in the account do
not have a value of at least $1,000. An investor will be notified
that the value of his account is less than that minimum and
allowed at least 30 days to bring the value of the account up to
at least $1,000 before the redemption is processed. The Agreement
and Declaration of Trust also authorizes the Trust to redeem
shares under certain other circumstances as may be specified by
the Board of Trustees.
MANAGEMENT
The following table sets forth certain information with
respect to the trustees and officers of Municipal Trust:
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AGE WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ----------------------- --- ---------------------- ----------------------------------------------------
<S> <C> <C> <C>
Gary A. Anetsberger (5) 39 Senior Vice-President Vice-President of Stein Roe & Farnham Incorporated (the
"Adviser") since January, 1991; associate of the
Adviser prior thereto
Timothy K. Armour 47 President; Trustee President of the Mutual Funds division of the Adviser
(1)(2) (4) (5) and Director of the Adviser since June, 1992; senior
vice president and director of marketing of Citibank
Illinois prior thereto
Jilaine Hummel Bauer (5) 40 Executive Vice-President; Senior Vice President (since April, 1992) and
Secretary Assistant Secretary (since May, 1990) of the Adviser;
vice president of the Adviser prior thereto
Kenneth L. Block (3)(5) 75 Trustee Chairman Emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd(3)(4)(5) 69 Trustee Chairman and Director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products) since 1992;
chairman, president, and chief executive officer of
Sterling Plumbing Group, Inc. prior thereto
Thomas W. Butch 38 Vice-President Senior Vice President of the Adviser since September,
1994; first vice president, corporate communications,
of Mellon Bank Corporation prior thereto
<PAGE> 24
N. Bruce Callow(5) 49 Executive Vice-President President of the Investment Counsel division of the
Adviser since June, 1994; senior vice president of
trust and financial services for The Northern Trust
prior thereto
Lindsay Cook (1)(5) 43 Trustee Senior Vice President of Liberty Financial Companies,
Inc. (the indirect parent of the Adviser)
Joanne T. Costopoulos 48 Vice-President Vice President of the Adviser since January, 1994;
associate of the Adviser prior thereto
Philip D. Hausken (5) 37 Vice-President Corporate Counsel for the Adviser since July, 1994;
assistant regional director, midwest regional office of
the Securities and Exchange Commission prior thereto
Stephen P. Lautz (5) 38 Vice-President Vice President of the Adviser since May, 1994;
associate of the Adviser prior thereto
Lynn C. Maddox 54 Vice-President Senior Vice President of the Adviser
Anne E. Marcel 37 Vice-President Manager, Mutual Fund Sales & Services of the Adviser
since October, 1994; supervisor of the Counselor
Department of the Adviser from October, 1992 to
October, 1994; vice president of Selected Financial
Services from May, 1990 to March, 1992
M. Jane McCart 40 Vice-President Senior Vice President of the Adviser since January,
1991; vice president of the Adviser prior thereto
Francis W. Morley 75 Trustee Chairman of Employer Plan Administrators and
(2) (3) (5) Consultants Co. (designer, administrator, and
communicator of employee benefit plans)
Charles R. Nelson 53 Trustee Van Voorhis Professor of Political Economy of the
(3) (4)(5) University of Washington
Nicolette D. Parrish (5) 45 Vice-President; Senior Legal Assistant for the Adviser
Assistant Secretary
Sharon R. Robertson 33 Controller Accounting Manager for the Adviser's Mutual Funds
division
Janet B. Rysz (5) 40 Assistant Secretary Assistant Secretary of the Adviser
Thomas P. Sorbo 34 Vice-President Senior Vice President of the Adviser since January,
1994; vice president of the Adviser from September,
1992 to December, 1993; associate of Travelers
Insurance Company prior thereto
Gordon R. Worley (3)(5) 76 Trustee Private investor
Hans P. Ziegler (5) 54 Executive Vice-President Chief Executive Officer of the Adviser since May, 1994;
president of the Investment Counsel division of the
Adviser from July, 1993 to July, 1994; president and
chief executive officer, Pitcairn Financial Management
Group prior thereto
<PAGE> 25
Margaret O. Zwick 29 Treasurer Compliance Manager for the Adviser's Mutual Funds
division since August, 1995; held positions of
Compliance Accountant, Section Manager, Supervisor, and
Fund Accountant with the division
<FN>
____________________________
(1) Trustee who is an "interested person" of the Trust and of the
Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
(4) Member of the Nominating Committee.
(5) This person also holds the corresponding officer or trustee
position with SR&F Base Trust.
</TABLE>
Certain of the trustees and officers of Municipal Trust and
of Base Trust are trustees or officers of other investment
companies managed by the Adviser. Ms. Bauer and Mr. Cook are also
vice presidents of the Funds' distributor, Liberty Securities
Corporation. The address of Mr. Block is 11 Woodley Road,
Winnetka, Illinois 60093; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Morley is 20 North Wacker
Drive, Suite 2275, Chicago, Illinois 60606; that of Mr. Nelson is
Department of Economics, University of Washington, Seattle,
Washington 98195; that of Mr. Worley is 1407 Clinton Place, River
Forest, Illinois 60305; and that of the officers is One South
Wacker Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from the Trust. In compensation for
their services to the Trust, trustees who are not "interested
persons" of the Trust or the Adviser are paid an annual retainer
of $8,000 (divided equally among the Funds of the Trust) plus an
attendance fee from each Fund for each meeting of the Board or
committee thereof attended at which business for that Fund is
conducted. The attendance fees (other than for a Nominating
Committee meeting) are based on each Fund's net assets as of the
preceding December 31. For a Fund with net assets of less than
$251 million, the fee is $200 per meeting; with $251 million to
$500 million, $350; with $501 million to $750 million, $500; with
$750 million to $1 billion, $650; and with over $1 billion in net
assets, $800. Each non-interested trustee also receives an
aggregate of $500 for attending each meeting of the Nominating
Committee. The Trust has no retirement or pension plans. The
following table sets forth compensation paid by the Trust during
the fiscal year ended June 30, 1995 to each of the trustees:
Total Compensation Paid
to Trustees from the
Aggregate Compensation Trust and the
Name of Trustee from the Trust Stein Roe Fund Complex*
- --------------- ---------------------- -----------------------
Timothy K. Armour -0- -0-
Lindsay Cook -0- -0-
Kenneth L. Block $22,850 $74,850
William W. Boyd 14,600 48,200
Francis W. Morley 24,400 76,400
Charles R. Nelson 22,850 77,200
Gordon R. Worley 22,850 74,850
<PAGE> 26
___________________
* During this period, the Stein Roe Fund Complex consisted of
four series of Municipal Trust, six series of Stein Roe Income
Trust, eight series of Stein Roe Investment Trust, and one series
of SR&F Base Trust.
FINANCIAL STATEMENTS
Please refer to the Funds' Financial Statements (balance
sheets and schedules of investments as of June 30, 1995 and the
statements of operations, changes in net assets, and notes
thereto) and the report of independent auditors contained in the
Funds' June 30, 1995 Annual Report. The Financial Statements and
the report (but no other material from the Annual Report) are
incorporated herein by reference. The Annual Report may be
obtained at no charge by telephoning 1 800 338-2550.
PRINCIPAL SHAREHOLDERS
As of August 1, 1995, the only person known by Municipal
Trust to own of record or "beneficially" 5% or more of the
outstanding shares of any Fund within the definition of that term
as contained in Rule 13d-3 under the Securities Exchange Act of
1934, was Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, California 94104, which owned of record but not
beneficially approximately 10% of the outstanding shares of
Intermediate Municipals.
The following table shows shares of the Funds held by the
categories of persons indicated and in each case the approximate
percentage of outstanding shares represented:
Clients of the Adviser Trustees and
in their Client Accounts Officers
as of 7/31/95* as of 8/1/95
------------------------ -------------------
Shares Held Percent Shares Held Percent
----------- ------- ----------- ------
Municipal Money Fund 39,852,143 28.3% 371,168 **
Intermediate Municipals 7,383,205 38.7 1,407,284 7.4%
Managed Municipals 19,819,990 27.9 167,088 **
High-Yield Municipals 6,724,964 27.2 51,898 **
_________________
*The Adviser may have discretionary authority over such shares
and, accordingly, they could be deemed to be owned "beneficially"
by the Adviser under Rule 13d-3. However, the Adviser disclaims
actual beneficial ownership of such shares.
**Represents less than 1% of the outstanding shares.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated (the "Adviser") serves as
investment adviser to Intermediate Municipals, Managed Municipals,
High-Yield Municipals, and the Portfolio. Prior to September 28,
1995, the Adviser also served as investment adviser to Municipal
Money Fund. On that date, Municipal Money Fund began investing in
the Portfolio and the Adviser no longer provides investment
advisory services directly to that Fund. The Adviser is a wholly-
owned subsidiary of SteinRoe Services Inc. ("SSI"), the Funds'
transfer agent, which is a wholly-owned subsidiary of Liberty
Financial Companies, Inc., which is a majority-owned subsidiary of
Liberty Mutual Equity Corporation, which is a wholly-owned
subsidiary of Liberty Mutual Insurance
<PAGE> 27
Company ("Liberty Mutual"). Liberty Mutual 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 Gary L. Countryman, Kenneth
R. Leibler, Timothy K. Armour, N. Bruce Callow, and Hans P.
Ziegler. Mr. Countryman is Chairman and Chief Executive Officer
of Liberty Mutual Insurance Company; Mr. Leibler is President and
Chief Executive Officer of Liberty Financial Companies; Mr. Armour
is President of the Adviser's Mutual Funds division; Mr. Callow is
President of the Adviser's Investment Counsel Division; and Mr.
Ziegler is Chief Executive Officer of the Adviser. The business
address of Mr. Countryman is 175 Berkeley Street, Boston,
Massachusetts 02117; that of Mr. Leibler is Federal Reserve Plaza,
Boston, Massachusetts 02210; that of Messrs. Armour, Callow, and
Ziegler is One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of June 30, 1995, the Adviser managed
over $22.4 billion in assets: over $4.9 billion in equities and
over $17.5 billion in fixed-income securities (including $2.3
billion in municipal securities). The $22.4 billion in managed
assets included over $5.5 billion held by open-end mutual funds
managed by the Adviser (approximately 21% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 148,000 shareholders. The $5.5 billion in
mutual fund assets included over $550 million in over 33,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 6,500 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At June 30, 1995, the Adviser employed
approximately 17 research analysts and 34 account managers. The
average investment-related experience of these individuals was 19
years.
Stein Roe CounselorSM and Stein Roe Counselor PreferredSM are
professional investment advisory services offered by the Adviser
to Fund shareholders. Each is designed to help shareholders
construct Fund investment portfolios to suit their individual
needs. Based on information shareholders provide about their
financial goals and objectives in response to a questionnaire, the
Adviser's investment professionals create customized portfolio
recommendations. Shareholders participating in Stein Roe
CounselorSM are free to self direct their investments while
considering the Adviser's recommendations; shareholders
participating in Stein Roe Counselor PreferredSM enjoy the added
benefit of having the Adviser implement portfolio recommendations
automatically for a fee of 1% or less, depending on the size of
their portfolios. In addition to reviewing shareholders' goals
and objectives periodically and updating portfolio recommendations
to reflect any changes, the Adviser provides shareholders
participating in these programs with a dedicated CounselorSM
representative. Other distinctive services include specially
designed account statements with portfolio performance and
transaction data, newsletters, and regular investment, economic,
and market updates. A $50,000 minimum investment is required to
participate in either program.
<PAGE> 28
Please refer to the description of the Adviser, advisory
agreements, advisory fees, expense limitations, and transfer
agency services under Management of the Funds and Fee Table in the
Prospectus, which is incorporated herein by reference. The table
below shows gross advisory fees paid by the Funds and any expense
reimbursements by the Adviser to them. The Portfolio is not
listed because it commenced operations after the most recent
period shown. The fees and expense reimbursements of the Funds
and the Portfolio are described in the Prospectus.
YEAR ENDED YEAR ENDED YEAR ENDED
FUND TYPE OF PAYMENT 6/30/95 6/30/94 6/30/93
- ---------------------- ---------------- ---------- ---------- -----------
Municipal Money Fund Advisory fee $ 786,956 $ 998,500 $1,072,504
Reimbursement 120,433 -0- -0-
Intermediate Municipals Advisory fee 1,248,808 1,415,654 1,174,359
Reimbursement 36,038 -0- -0-
Managed Municipals Advisory fee 3,392,060 3,936,931 3,908,586
High-Yield Municipals Advisory fee 1,587,995 1,846,679 2,034,606
The Adviser provides office space and executive and other
personnel to the Funds and the Portfolio and bears any sales or
promotional expenses. Each Fund and the Portfolio 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.
Each advisory agreement (other than the agreement relating to
the Portfolio) 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 the shares of such 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. The
administrative agreement relating to Municipal Money Fund contains
a similar provision. The administrative agreement is described in
the Prospectus. Municipal Trust believes that currently the most
restrictive state limit on expenses is that of California, which
limit currently is 2 1/2% of the first $30 million of average net
assets, 2% of the next $70 million, and 1 1/2% thereafter. In
addition, in the interest of further limiting expenses, from time
to time, the Funds' Adviser may voluntarily waive its management
fee and/or absorb certain expenses for a Fund, as described in the
Prospectus. Any such reimbursements will enhance the yield of
such Fund.
Each advisory agreement also 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 Trust or any shareholder of the Fund (or 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 advisory
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
<PAGE> 29
reckless disregard by the Adviser of the Adviser's obligations and
duties under the advisory agreement.
Any expenses that are attributable solely to the
organization, operation, or business of a Fund (or the Portfolio)
shall be paid solely out of that Fund's (or the Portfolio's)
assets. Any expenses incurred by the Trust that are not solely
attributable to a particular Fund (or the Portfolio) are
apportioned in such a manner as the Adviser determines is fair and
appropriate, unless otherwise specified by the Board of Trustees.
BOOKKEEPING AND ACCOUNTING AGREEMENT
Pursuant to a separate agreement with the Trust, the Adviser
receives a fee for performing certain bookkeeping and accounting
services for the Funds and the Portfolio. For these services, the
Adviser receives an annual fee of $25,000 per Fund plus .0025 of
1% of average net assets over $50 million. During the fiscal year
ended June 30, 1995, the Adviser received aggregate fees of
$74,069 from the Trust for services performed under this
agreement.
DISTRIBUTOR
Shares of the Funds are distributed by Liberty Securities
Corporation ("LSC") under a Distribution Agreement as described
under Management of the Funds in the Prospectus, which is
incorporated herein by reference. The Distribution Agreement
continues in effect from year to year, provided such continuance
is approved annually (i) by a majority of the trustees or by a
majority of the outstanding voting securities of Municipal Trust,
and (ii) by a majority of the trustees who are not parties to the
Agreement or interested persons of any such party. Municipal
Trust has agreed to pay all expenses in connection with
registration of its shares with the Securities and Exchange
Commission and auditing and filing fees in connection with
registration of its shares under the various state blue sky laws
and assumes the cost of preparation of prospectuses and other
expenses. The Adviser bears all sales and promotional expenses,
including payments to LSC for the sales of Fund shares. The
Adviser also makes payments to other broker-dealers, banks, and
institutions for the sales of Fund shares of 0.25% of the annual
average value of accounts of such shares.
As agent, LSC offers shares of the Funds 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 any
Fund. LSC offers the Funds' shares only on a best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for Municipal
Trust, as described under Management of the Funds in the
Prospectus. For performing these services, SSI receives payments
from Municipal Money Fund of 0.150% of average daily net assets
and payments from Intermediate Municipals, Managed Municipals, and
High-Yield Municipals of 0.150% of average daily net assets.
Through April 30, 1995, the schedule
<PAGE> 30
of fees paid to SSI by each Fund was a follows: (1) a fee of
$4.00 for each new account opened; (2) monthly payments of $1.466
per open shareholder account; (3) payments of $0.611 per closed
shareholder account for each month through June of the calendar
year following the year in which the account is closed; (4)
$0.3025 per shareholder account for each dividend paid; and (5)
$1.415 for each shareholder-initiated transaction. The Board of
Trustees believes the charges by SSI 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, 225 Franklin Street,
Boston, Massachusetts 02101, is the custodian for the Trusts. It
is responsible for holding all securities and cash of the Funds,
receiving and paying for securities purchased, delivering against
payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds,
and performing other administrative duties, all as directed by
authorized persons. The custodian does not exercise any
supervisory function in such matters as purchase and sale of
portfolio securities, payment of dividends, or payment of expenses
of the Funds. The Trusts have authorized the custodian to deposit
certain portfolio securities in central depository systems as
permitted under federal law. The Funds may invest in obligations
of the custodian and may purchase or sell securities from or to
the custodian.
INDEPENDENT AUDITORS
The independent auditors for the Trusts are Ernst & Young
LLP, 233 South Wacker Drive, Chicago, Illinois 60606. The
independent auditors audit and report on the Funds' annual
financial statements, review certain regulatory reports and the
Funds' federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trusts.
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of
portfolio securities for each Fund and the Portfolio and options
and futures contracts entered into by Intermediate Municipals,
Managed Municipals, and High-Yield Municipals. Portfolio
securities are purchased both in underwritings and in the over-
the-counter market. The following table shows any commissions
paid by the Funds on futures transactions during the past three
fiscal years. The Funds did not pay commissions on any other
transactions.
<PAGE> 31
High-Yield Managed Intermediate
Municipals Municipals Municipals
Total brokerage commissions
paid during year ended
6/30/95 $58,366 $58,366 $14,023
Number of futures contracts 4,200 4,200 925
Total brokerage commissions
paid during year ended
6/30/94 $110,292 $38,028 -0-
Total brokerage commissions
paid during year ended
6/30/93 $48,564 $29,904 -0-
Included in the price paid to an underwriter of a portfolio
security is the spread between the price paid by the underwriter
to the issuer and the price paid by the purchaser. Purchases and
sales of portfolio securities in the over-the-counter market
usually are transacted with a broker or dealer on a net basis,
without any brokerage commission being paid by a Fund or
Portfolio, but do reflect the spread between the bid and asked
prices. The Adviser may also transact purchases of portfolio
securities directly with the issuers.
The Adviser's overriding objective in effecting portfolio
transactions is to seek to obtain the best combination of price
and execution. The best net price, giving effect to transaction
charges and other costs, is normally an important factor in this
decision, but a number of other judgmental factors may also enter
into the decision. These include: the Adviser's knowledge of
current transaction costs; the nature of the security being
traded; the size of the transaction; the desired timing of the
trade; the activity existing and expected in the market for the
particular security; confidentiality; the execution, clearance and
settlement capabilities of the broker or dealer selected and
others which are considered; the Adviser's knowledge of the
financial stability of the broker or dealer selected and such
other brokers or dealers; and the Adviser's knowledge of actual or
apparent operational problems of any broker or dealer.
Recognizing the value of these factors, a Fund or the Portfolio
may pay a price in excess of that which another broker or dealer
may have charged for effecting the same transaction or receive a
price lower than that which another broker-dealer may have paid.
Evaluations of the reasonableness of the costs of portfolio
transactions, based on the foregoing factors, are made on an
ongoing basis by the Adviser's staff while effecting portfolio
transactions and reports are made annually to the Board of
Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for a Fund or
the Portfolio, the Adviser often selects a broker or dealer that
has furnished it with research products or services such as
research reports, subscriptions to financial publications and
research compilations, compilations of securities prices,
earnings, dividends and similar data, and computer databases,
quotation equipment and services, research-oriented computer
software and services, and services of economic and other
consultants. Selection of brokers or dealers is not made pursuant
to an agreement or understanding with any of the brokers or
dealers; however, the Adviser uses an internal allocation
procedure to identify those brokers or dealers who provide it with
research products or services and the amount of research products
or services
<PAGE> 32
they provide, and endeavors to direct sufficient commissions
generated by its clients' accounts in the aggregate, including the
Funds and the Portfolio, to such brokers or dealers to ensure the
continued receipt of research products or services the Adviser
feels are useful. In certain instances, the Adviser receives from
brokers and dealers products or services which are used both as
investment research and for administrative, marketing, or other
non-research purposes. In such instances, the Adviser makes a
good faith effort to determine the relative proportions of such
products or services which may be considered as investment
research. The portion of the costs of such products or services
attributable to research usage may be defrayed by the Adviser
(without prior agreement or understanding, as noted above) through
brokerage commissions generated by transactions of clients
(including the Funds and the Portfolio), while the portion of the
costs attributable to non-research usage of such products or
services is paid by the Adviser in cash. No person acting on
behalf of a Fund or the Portfolio is authorized, in recognition of
the value of research products or services, to pay a price in
excess of that which another broker or dealer might have charged
for effecting the same transaction. Research products or services
furnished by brokers and dealers through whom a Fund or the
Portfolio effects transactions may be used in servicing any or all
of the clients of the Adviser and not all such research products
or services are used in connection with the management of such
Fund or Portfolio.
The Board of Trustees of each Trust has reviewed the legal
aspects and the practicability of attempting to recapture
underwriting discounts or selling concessions included in prices
paid by the Funds and the Portfolio for purchases of Municipal
Securities in underwritten offerings. Each Fund and the Portfolio
attempts to recapture selling concessions on purchases during
underwritten offerings; however, the Adviser will not be able to
negotiate discounts from the fixed offering price for those issues
for which there is a strong demand, and will not allow the failure
to obtain a discount to prejudice its ability to purchase an
issue. Each Board periodically reviews efforts to recapture
concessions and whether it is in the best interests of the Funds
and the Portfolio to continue to attempt to recapture
underwriting discounts or selling concessions.
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund and the Portfolio intends to comply with the
special provisions of the Internal Revenue Code that relieve it of
federal income tax to the extent of its net investment income and
capital gains currently distributed to shareholders. Throughout
this section, the term "Fund" also refers to the Portfolio.
Each Fund intends to distribute substantially all of its
income, tax-exempt and taxable, including any net realized capital
gains, and thereby be relieved of any Federal income tax liability
to the extent of such distributions. Each Fund intends to retain
for its shareholders the tax-exempt status with respect to tax-
exempt income received by the Fund. The distributions will be
designated as "exempt-interest dividends," taxable ordinary
income, and capital gains. The Funds may also invest in Municipal
Securities the interest on which is subject to the federal
alternative minimum tax. The source of exempt-interest dividends
on a state-by-state basis and the federal income tax status of all
distributions will be reported to shareholders annually.
<PAGE> 33
Such report will allocate income dividends between tax-exempt,
taxable income, and alternative minimum taxable income in
approximately the same proportions as that Fund's total income
during the year. Accordingly, income derived from each of these
sources by a Fund may vary substantially in any particular
distribution period from the allocation reported to shareholders
annually. The proportion of such dividends that constitutes
taxable income will depend on the relative amounts of assets
invested in taxable securities, the yield relationships between
taxable and tax-exempt securities, and the period of time for
which such securities are held. Each Fund may, under certain
circumstances, temporarily invest its assets so that less than 80%
of gross income during such temporary period will be exempt from
federal income taxes. (See Investment Policies above and How the
Funds Invest in the Prospectus.)
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.
Because the taxable portion of each Fund's investment income
consists primarily of interest, none of its dividends, whether or
not treated as "exempt-interest dividends," will qualify under the
Internal Revenue Code for the dividends received deduction
available to corporations.
Interest on indebtedness incurred or continued by
shareholders to purchase or carry shares of a Fund is not
deductible for federal income tax purposes. Under rules applied
by the Internal Revenue Service to determine whether borrowed
funds are used for the purpose of purchasing or carrying
particular assets, the purchase of shares may, depending upon the
circumstances, be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to the
purchase of shares.
If you redeem at a loss shares of a Fund held for six months
or less, that loss will not be recognized for federal income tax
purposes to the extent of exempt-interest dividends you have
received with respect to those shares. If any such loss exceeds
the amount of the exempt-interest dividends you received, that
excess loss will be treated as a long-term capital loss to the
extent you receive any long-term capital gain distribution with
respect to those shares.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds
should consult their own tax advisors before purchasing shares.
Such persons may find investment in the Funds unsuitable for tax
reasons. Corporate investors may also wish to consult their own
tax advisers before purchasing shares. In addition, certain
property and casualty insurance companies, financial institutions,
and United States branches of foreign corporations may be
adversely affected by the tax treatment of the interest on
Municipal Securities.
<PAGE> 34
INVESTMENT PERFORMANCE
MUNICIPAL MONEY FUND
Municipal Money Fund may quote a "Current Yield" or
"Effective Yield" or both from time to time. The Current Yield is
an annualized yield based on the actual total return for a seven-
day period. The Effective Yield is an annualized yield based on a
daily compounding of the Current Yield. These yields are each
computed by first determining the "Net Change in Account Value"
for a hypothetical account having a share balance of one share at
the beginning of a seven-day period ("Beginning Account Value"),
excluding capital changes. The Net Change in Account Value will
always equal the total dividends declared with respect to the
account, assuming a constant net asset value of $1.00. A "Tax-
Equivalent Yield" is computed by dividing the portion of the
"Yield" that is tax-exempt by one minus a stated income tax rate
and adding the product to that portion, if any, of the yield that
is not tax-exempt.
The yields are then computed as follows:
Net Change in Account Value 365
--------------------------- ----
Current Yield = Beginning Account Value x 7
[1 + Net Change in Account Value]365/7
--------------------------------------
Effective Yield = Beginning Account Value - 1
For example, the yields of Municipal Money Fund for the seven-day
period ended June 30, 1995 were:
0.00067506 365
----------- ---
Current Yield = $1.00 x 7 = 3.52%
[1+$0.00067506]365/7
---------------------
Effective Yield = $1.00 - 1 = 3.58%
Tax-Equivalent Current Yield = 5.84% (assuming 39.6% tax rate)
Tax-Equivalent Effective Yield = 5.94% (assuming 39.6% tax rate)
The average dollar-weighted portfolio maturity for the seven
days ended June 30, 1995 was 47 days.
In addition to fluctuations reflecting changes in net income
of the Fund, resulting from changes in its proportionate share of
the Portfolio's investment income and expenses, the Fund's yield
also would be affected if the Fund or the Portfolio were to
restrict or supplement their respective dividends in order to
maintain a net asset value at $1.00 per share. (See Net Asset
Value in the Prospectus.) Asset changes resulting from net
purchases or net redemptions of Fund or Portfolio shares may
affect yield. Accordingly, the Fund's yield may vary from day to
day and the yield stated for a particular past period is not a
representation as to its future yield. The Fund's yield is not
assured and its principal is not insured; however, the Fund will
attempt to maintain its net asset value per share at $1.00.
<PAGE> 35
Comparison of the Fund's yield with those of alternative
investments (such as savings accounts, various types of bank
deposits, and other money market funds) should be made with
consideration of differences between the Fund and the alternative
investments, differences in the periods and methods used in the
calculation of the yields being compared, and the impact of income
taxes on alternative investments.
INTERMEDIATE MUNICIPALS, MANAGED MUNICIPALS, AND HIGH-YIELD
MUNICIPALS
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals may quote yield figures from time to time. The "Yield"
of a 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. A "Tax-Equivalent Yield" is
computed by dividing the portion of the Yield that is tax-exempt
by one minus a stated income tax rate and adding the product to
that portion, if any, of the Yield that is not tax-exempt.
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1)6 - 1].
Where: a = dividends and interest earned during the period.
(For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which net
asset value is calculated.)
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the net asset value of the Fund.
For example, the Yields of the Funds for the 30-day period ended June
30, 1995 were:
Intermediate Municipals
Yield = 4.44%
Tax-Equivalent Yield = 7.36%
(assuming 39.6% tax rate)
Managed Municipals
Yield = 5.20%
Tax-Equivalent Yield = 8.61%
(assuming 39.6% tax rate)
High-Yield Municipals
Yield = 5.51%
Tax-Equivalent Yield = 9.12%
(assuming 39.6% tax rate)
ALL FUNDS
Each Fund may quote total return figures from time to time.
A "Total Return" on a per share basis is the amount of dividends
distributed per share plus or minus the change in the net asset
value per share for a period. A "Total Return Percentage" may be
calculated by dividing the value of a share at the end of a period
(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
<PAGE> 36
hypothetical initial amount invested of $1,000 to the ending
redeemable value. A Fund may also quote tax-equivalent total
return figures or other tax-equivalent measures of performance.
Average Annual Total Return is computed as follows: ERV = P(1+T)n
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).
For example, for a $1,000 investment in a Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at June 30, 1995 were:
TOTAL RETURN AVERAGE ANNUAL
FUND TOTAL RETURN PERCENTAGE TOTAL RETURN
- --------------------- ------------ ------------ -------------
Municipal Money Fund
1 year $1,030 3.02% 3.02%
5 years 1,158 15.76 2.97
10 years 1,465 46.54 3.90
Intermediate Municipals
1 year 1,066 6.59 6.59
5 years 1,427 42.73 7.38
*Life of Fund 1,976 97.63 7.26
Managed Municipals
1 year 1,071 7.12 7.12
5 years 1,443 44.30 7.61
10 years 2,412 141.23 9.21
High-Yield Municipals
1 year 1,085 8.54 8.54
5 years 1,402 40.19 6.99
10 years 2,361 136.06 8.97
_____________________
*Life of Fund is from commencement of operations on 10/9/85.
Investment performance figures assume reinvestment of all
dividends and distributions, and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of a Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing a Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
In advertising and sales literature, a Fund may compare its
yield and performance with that of other mutual funds, indexes or
averages of other mutual funds, indexes of related financial
assets or data, and other competing investment and deposit
<PAGE> 37
products available from or through other financial institutions.
The composition of these indexes or averages differs from that of
the Funds. Comparison of a Fund to an alternative investment
should be made with consideration of differences in features and
expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which the Funds
believe to be generally accurate. A Fund may also note its
mention in newspapers, magazines, or other media from time to
time. However, the Funds assume no responsibility for the
accuracy of such data. Newspapers and magazines that might
mention the Funds include, but are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Barron's
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Fund Action
Gourmet
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Los Angeles Times
Money
Mutual Fund Letter
Mutual Fund News Service
Mutual Fund Values (Morningstar)
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Smart Money
Smithsonian
Stanger's Investment Adviser
Time
Travel & Leisure
United Mutual Fund Selector
USA Today
U.S. News and World Report
The Wall Street Journal
Working Women
Worth
Your Money
All of the Funds may compare their performance to the
Consumer Price Index (All Urban), a widely-recognized measure of
inflation.
MUNICIPAL MONEY FUND
Municipal Money Fund may compare its yield to the average
yield of the following: Donoghue's Money Fund Averages
[trademark]--Stockbroker and General Purpose and All Tax-Free
[trademark] categories; ICD Money Market Tax Free Funds category;
the Lipper General S-T Tax-Exempt Funds category; and the Lipper
All Short-Term Tax-Free Categories [trademark].
Municipal Money Fund may also compare its tax-equivalent
yield to the average rate for the taxable fund category for the
aforementioned services. Should these
<PAGE> 38
services reclassify the Fund into a different category or develop
(and place the Fund into) a new category, the Fund may compare its
performance, rank, or yield with those of other funds in the
newly-assigned category as published by the service.
Investors may desire to compare Municipal Money Fund's
performance and features to that of various bank products. The
Fund may compare its tax-equivalent yield to the average rates of
bank and thrift institution money market deposit accounts, Super
N.O.W. accounts, and certificates of deposit. The rates published
weekly by the BANK RATE MONITOR [copyright], a North Palm Beach
(Florida) financial reporting service, in its BANK RATE MONITOR
[copyright] National Index are averages of the personal account
rates offered on the Wednesday prior to the date of publication by
one hundred leading banks and thrift institutions in the top ten
Consolidated Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and
compounding methods vary. Super N.O.W. accounts generally offer
unlimited checking, while money market deposit accounts generally
restrict the number of checks that may be written. If more than
one rate is offered, the lowest rate is used. Rates are subject
to change at any time specified by the institution. Bank account
deposits may be insured. Shareholder accounts in the Fund are not
insured. Bank passbook savings accounts compete with money market
mutual fund products with respect to certain liquidity features
but may not offer all of the features available from a money
market mutual fund, such as check writing. Bank passbook savings
accounts normally offer a fixed rate of interest while the yield
of the Fund fluctuates. Bank checking accounts normally do not
pay interest but compete with money market mutual funds with
respect to certain liquidity features (e.g., the ability to write
checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a
variety of terms are available.) Withdrawal of these deposits
prior to maturity will normally be subject to a penalty. In
contrast, shares of the Fund are redeemable at the next determined
net asset value (normally, $1.00 per share) after a request is
received, without charge.
INTERMEDIATE MUNICIPALS, MANAGED MUNICIPALS, AND HIGH-YIELD
MUNICIPALS
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals may compare performance to the following as indicated
below:
<TABLE>
<CAPTION>
BENCHMARK FUND(S)
- --------- -------
<S> <C>
Lipper Intermediate (5-10 year) Municipal
Bond Funds Average Intermediate Municipals
Lipper General Municipal Bond Funds Average Managed Municipals
Lipper High-Yield Municipal Bond Funds Average High-Yield Municipals
Lipper Municipal Bond Fund Average Intermediate Municipals, Managed Municipals,
High-Yield Municipals
ICD High-Quality Municipal Bond Funds Average Intermediate Municipals, Managed Municipals
ICD High-Yield Municipals Bond Funds Average High-Yield Municipals
ICD Tax-Free Fund Average High-Yield Municipals, Intermediate
Municipals, Managed Municipals
Morningstar Municipal Bond (General) Funds
Average Managed Municipals, Intermediate Municipals
Morningstar Municipal Bond (High-Yield) Funds
Average High-Yield Municipals
Morningstar Long-Term Tax-Exempt Fund Average High-Yield Municipals, Intermediate
Municipals, Managed Municipals
</TABLE>
The Lipper, ICD, and Morningstar averages are unweighted
averages of total return performance of mutual funds as
classified, calculated, and published by these independent
services that monitor the performance of mutual funds. The Funds
may also use comparative performance as computed in a ranking by
those services or category averages and rankings provided by
another independent service. Should these services reclassify a
Fund to a different category or develop (and place a Fund into) a
new category, that Fund may compare its performance or rank with
those of other funds in the newly-assigned category (or the
average of such category) as published by the service.
In advertising and sales literature, a Fund may also cite its
rating, recognition, or other mention by Morningstar or any other
entity. Morningstar's rating system is based on risk-adjusted
total return performance and is expressed in a star-rating format.
The risk-adjusted number is computed by subtracting a Fund's risk
score (which is a function of the Fund's monthly returns less the
3-month T-bill return) from the Fund's load-adjusted total return
score. This numerical score is then translated into rating
categories, with the top 10% labeled five star, the next 22.5%
labeled four star, the next 35% labeled three star, the next 22.5%
labeled two star, and the bottom 10% one star. A high rating
reflects either above-average returns or below-average risk, or
both.
Investors may desire to compare a Fund's performance to that
of various bank products. A Fund may compare its tax-equivalent
yield to the average rates of bank and thrift institution
certificates of deposit. The rates published weekly by the BANK
RATE MONITOR [copyright], a North Palm Beach (Florida) financial
reporting service, in its BANK RATE MONITOR [copyright] National
Index are averages of the personal account rates offered on the
Wednesday prior to the date of publication by one hundred leading
banks and thrift institutions in the top ten Consolidated Standard
Metropolitan Statistical Areas. Bank account minimums range
upward from $2,500 in each institution and compounding methods
vary. Rates are subject to change at any time specified by the
institution. A Fund's net asset value and investment return will
vary. Bank account deposits may be insured; Fund accounts are not
insured. Bank certificates of deposit may offer fixed or variable
rates for a set term. Withdrawal of these deposits prior to
maturity will normally be subject to a penalty. In contrast,
shares of the Fund are redeemable at the next determined net asset
value after a request is received, without charge.
<PAGE> 40
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals may also compare their respective tax-equivalent yields
to the average rate for the taxable fund category of the
aforementioned services.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Funds may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stock
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax-
exempt investing on a hypothetical investment. Tax-exempt income,
however, may be subject to state and local taxes and the federal
alternative minimum tax. Marginal tax brackets are based on 1993
federal tax rates and are subject to change. "Joint Return" is
based on two exemptions and "Single return" is based on one
exemption. The results would differ for different numbers of
exemptions.
TAX-EQUIVALENT YIELDS
A taxable
investment must yield the following
Taxable Income (thousands) Marginal to equal a tax-exempt yield of:
- ----------------------------- Tax ----------------------------------
Joint Return Single Return Bracket 4% 5% 6% 7% 8%
- -------------- ------------- -------- ---- ---- ---- ----- -----
$0.0 - 36.9 $0.0 - 22.1 15% 4.71 5.88 7.06 8.24 9.41
$36.9 - 89.2 $22.1 - 53.5 28% 5.56 6.94 8.33 9.72 11.11
$89.2 - 140.0 $53.5 - 115.0 31% 5.80 7.25 8.70 10.14 11.59
$140.0 - 250.0 $115.0 - 250.0 36% 6.25 7.81 9.38 10.94 12.50
$250.0+ $250.0+ 39.6% 6.62 8.28 9.93 11.59 13.25
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves
<PAGE> 41
uninterrupted investing regardless of share price and therefore
may not be appropriate for every investor.
From time to time, a Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor [service
mark] and the Stein Roe Counselor Preferred [service mark] programs and
asset allocation and other investment strategies.
ADDITIONAL INFORMATION ON NET ASSET VALUE--MUNICIPAL MONEY
FUND AND THE PORTFOLIO
Please refer to Net Asset Value in the Prospectus, which is
incorporated herein by reference. The Portfolio values its
portfolio by the "amortized cost method" by which it attempts to
maintain its net asset value at $1.00 per share. This involves
valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the
market value of the instrument. Although this method provides
certainty in valuation, it may result in periods during which
value as determined by amortized cost is higher or lower than the
price the Portfolio would receive if it sold the instrument.
Other assets are valued at a fair value determined in good faith
by the Board of Trustees.
In connection with the Portfolio's use of amortized cost and
the maintenance of its per share net asset value of $1.00, Base
Trust has agreed, with respect to the Portfolio: (i) to seek to
maintain a dollar-weighted average portfolio maturity appropriate
to its objective of maintaining relative stability of principal
and not in excess of 90 days; (ii) not to purchase a portfolio
instrument with a remaining maturity of greater than thirteen
months (for this purpose the Portfolio considers that an
instrument has a maturity of thirteen months or less if it is a
"short-term" obligation as defined in the Glossary); and (iii) to
limit its purchase of portfolio instruments to those instruments
that are denominated in U.S. dollars which the Board of Trustees
determines present minimal credit risks and that are of eligible
quality as determined by any major rating service as defined under
SEC Rule 2a-7 or, in the case of any instrument that is not rated,
of comparable quality as determined by the Board.
The Portfolio has also agreed to establish procedures
reasonably designed to stabilize its price per share as computed
for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Portfolio's portfolio holdings by
the Board of Trustees, at such intervals as it deems appropriate,
to determine whether the Portfolio's net asset value calculated by
using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost. Calculations are
made to compare the value of its investments valued at amortized
cost with market value. Market values are obtained by using
actual quotations provided by market makers, estimates of market
value, values from yield data obtained from reputable sources for
the instruments, values obtained from the Adviser's matrix, or
values obtained from an independent pricing service. Any such
service might value the Portfolio's investments based on methods
which include consideration of: yields or prices of
<PAGE> 42
Municipal Securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market
conditions. The service may also employ electronic data
processing techniques, a matrix system, or both to determine
valuations.
In connection with the Portfolio's use of the amortized cost
method of portfolio valuation to maintain its net asset value at
$1.00 per share, the Portfolio might incur or anticipate an
unusual expense, loss, depreciation, gain or appreciation that
would affect its net asset value per share or income for a
particular period. The extent of any deviation between the
Portfolio's net asset value based upon available market quotations
or market equivalents and $1.00 per share based on amortized cost
will be examined by the Board of Trustees of Base Trust as it
deems appropriate. If such deviation exceeds 1/2 of 1%, the Board
of Trustees will promptly consider what action, if any, should be
initiated. In the event the Board of Trustees determines that a
deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, it will take
such action as it considers appropriate to eliminate or reduce to
the extent reasonably practicable such dilution or unfair results.
Actions which the Board might take include: selling portfolio
instruments prior to maturity to realize capital gains or losses
or to shorten average portfolio maturity; increasing, reducing, or
suspending dividends or distributions from capital or capital
gains; or redeeming shares in kind. The Board might also
establish a net asset value per share by using market values, as a
result of which the net asset value might deviate from $1.00 per
share.
GLOSSARY
IN-THE-MONEY. A call option on a futures contract is "in-the-
money" if the value of the futures contract that is the subject of
the option exceeds the exercise price. A put option on a futures
contract is "in-the-money" if the exercise price exceeds the value
of the futures contract that is the subject of the option.
ISSUER. For purposes of diversification under the Investment
Company Act of 1940, identification of the issuer (or issuers) of
a Municipal Security depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the
subdivision, such subdivision would be regarded as the sole
issuer. Similarly, if the obligation is backed only by the assets
and revenues of the non-governmental user, the non-governmental
user would be deemed to be the sole issuer. In addition, if the
bond is backed by the full faith and credit of the U.S.
Government, agencies or instrumentalities of the U.S. Government
or U.S. Government Securities, the U.S. Government or the
appropriate agency or instrumentality would be deemed to be the
sole issuer, and would not be subject to the 5% limitation
applicable to investments in a single issuer as described under
Restrictions on the Funds' Investments in the Prospectus and
restriction number (i) under Investment Restrictions. If, in any
case, the creating municipal government or another entity
guarantees an obligation or issues a letter of credit to secure
the obligation, the guarantee (or letter of credit) would be
considered a separate security issued by such government or entity
and would be
<PAGE> 43
separately valued and included in the issuer limitation. In the
case of Municipal Money Fund, the Portfolio and Intermediate
Municipals, guarantees and letters of credit described in this
paragraph from banks whose credit is acceptable to these Funds are
not restricted in amount by the restriction against investing more
than 25% of their total assets in securities of non-governmental
issuers whose principal business activities are in the same
industry.
MAJORITY OF THE OUTSTANDING VOTING SECURITIES. As used in the
Prospectus and this Statement of Additional Information, this term
means the lesser of (i) 67% or more of the shares at a meeting if
the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Fund.
MUNICIPAL SECURITIES. Municipal Securities are debt obligations
issued by or on behalf of the governments of states, territories
or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, the
interest on which is generally exempt from the regular federal
income tax.
The two principal classifications of Municipal Securities are
"general obligation" and "revenue" bonds. "General obligation"
bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. "Revenue"
bonds are usually payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue bonds,
the credit quality of which is normally directly related to the
credit standing of the industrial user involved. Municipal
Securities may bear either fixed or variable rates of interest.
Variable rate securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize
fluctuation in values of the instruments.
Within the principal classifications of Municipal Securities,
there are various types of instruments, including municipal bonds,
municipal notes, municipal leases, custodial receipts, and
participation certificates. Municipal notes include tax, revenue,
and bond anticipation notes of short maturity, generally less than
three years, which are issued to obtain temporary funds for
various public purposes. Municipal lease securities, and
participation certificates therein, evidence certain types of
interests in lease or installment purchases contract obligations
of a municipal authority or other entity. Custodial receipts
represent ownership in future interest or principal payments (or
both) on certain Municipal Securities and are underwritten by
securities dealers or banks. Some Municipal Securities may not be
backed by the faith, credit, and taxing power of the issuer and
may involve "non-appropriation" clauses which provide that the
municipal authority is not obligated to make lease or other
contractual payments, unless specific annual appropriations are
made by the municipality. Each Fund may invest more than 5% of
its net assets in municipal bonds and notes, but does not expect
to invest more than 5% of its net assets in the other Municipal
Securities described in this paragraph.
<PAGE> 44
Some Municipal Securities are backed by (i) the full faith
and credit of the U.S. Government, (ii) agencies or
instrumentalities of the U.S. Government, or (iii) U.S. Government
Securities.
REPURCHASE AGREEMENT. A repurchase agreement involves the sale of
securities to the Fund, with the concurrent agreement of the
seller to repurchase the securities at the same price plus an
amount equal to an agreed-upon interest rate, within a specified
time, usually less than one week, but, on occasion, at a later
time. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays
in liquidating the underlying securities and losses, including:
(a) possible decline in the value of the collateral during the
period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
REVERSE REPURCHASE AGREEMENT. A reverse repurchase agreement is a
repurchase agreement in which the Fund is the seller of, rather
than the investor in, securities and agrees to repurchase them at
an agreed-upon time and price.
SHORT-TERM. This term, as used with respect to Municipal Money
Fund and the Portfolio, refers to an obligation of one of the
following types, measured from the date of an investment by the
Fund in the obligation (regardless of the duration of the
obligation from the date of original issuance):
1. An obligation of the issuer to pay the entire principal and
accrued interest in no more than thirteen months;
2. An obligation (regardless of the duration before its maturity)
issued or guaranteed by the U.S. Government or by its agencies
or instrumentalities, bearing a variable rate of interest
providing for automatic establishment, no less frequently than
annually, of a new rate or successive new rates of interest by
a formula, that can reasonably be expected to have a market
value approximating its principal amount (a) whenever a new
interest rate is established, in the case of an obligation
having a variable rate of interest, or (b) at any time, in the
case of an obligation having a "floating rate of interest" that
changes concurrently with any change in an identified market
interest rate to which it is pegged;
3. Any other obligation (regardless of the duration before its
maturity) that: (a) has a demand feature entitling the holder
to receive from an issuer the entire principal [or, under the
circumstances described under Investment Policies--Municipal
Money Fund above, the issuer of a guarantee or a letter of
credit with respect to a participation interest in the
obligation (acquired from such issuer)], (i) at any time upon
no more than thirty days' notice or (ii) at specified intervals
not exceeding thirteen months and upon no more than thirty
days' notice, (b)(i) has a variable rate of interest that
changes on set dates or (ii) has a floating rate of interest
(as defined in 2 above), and (c) can reasonably be expected to
have a market value approximating its principal amount (i)
whenever a new rate of interest is established, in the case of
an obligation having a variable rate of interest, or (ii) at
any time, in the case of an obligation having a floating rate
of interest; provided that, with respect to each such
obligation that is not rated eligible quality by Moody's
<PAGE> 45
or S&P, the Board of Trustees has determined that the obligation
is of eligible quality; or
4. A repurchase agreement that is to be fully performed (or that
the Fund may require be performed) in not more than thirteen
months (regardless of the maturity of the obligation to which
the repurchase agreement relates).
VARIABLE RATE DEMAND SECURITY. This type of security is a
Variable Rate Security (as defined in the Prospectus under
Municipal Securities) which has a demand feature entitling the
purchaser to resell the security to the issuer of the demand
feature at an amount approximately equal to amortized cost or the
principal amount thereof, which may be more or less than the price
the Fund paid for it. The interest rate on a Variable Rate Demand
Security also varies either according to some objective standard,
such as an index of short-term tax-exempt rates, or according to
rates set by or on behalf of the issuer.
APPENDIX--RATINGS OF MUNICIPAL SECURITIES
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 Municipal
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 Adviser, through independent analysis, attempts to
discern variations in credit ratings of the published services,
and to anticipate changes in credit ratings. The following is a
description of the characteristics of certain ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P").
RATINGS BY MOODY'S
MUNICIPAL BONDS:
AAA. Bonds rated Aaa are judged to be of 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 by an exceptionally stable margin and
principal is secure. Although the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
bonds.
<PAGE> 46
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 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.
CONDITIONAL RATINGS. Bonds for which the security depends
upon the completion of some act or the fulfillment of some
condition are rated conditionally. These are bonds secured by (a)
earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or
elimination of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which
Moody's believes possess the strongest investment attributes are
designated by the symbols Aa 1, A 1, Baa 1, Ba 1, and B 1.
<PAGE> 47
MUNICIPAL NOTES:
MIG 1. This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.
MIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
MIG 3. This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is
likely to be less well established.
DEMAND FEATURE OF VARIABLE RATE DEMAND SECURITIES:
Moody's may assign a separate rating to the demand feature of
a variable rate demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.
VMIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
VMIG 3. This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is
likely to be less well established.
COMMERCIAL PAPER:
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.
CORPORATE BONDS:
The description of the applicable rating symbols (Aaa, Aa, A)
and their meanings is identical to that of its Municipal Bond
ratings as set forth above, except for the
<PAGE> 48
numerical modifiers. Moody's applies numerical modifiers 1, 2,
and 3 in the Aa and A classifications of 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:
MUNICIPAL BONDS:
AAA. Bonds rated AAA have the highest rating. Capacity to
pay interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated
issues only in small degree.
A. Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher-rated categories.
BBB. Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this
category than for bonds 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. The rating C1 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 also is
issued upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
NOTE: 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.
PROVISIONAL RATINGS. The letter "p" indicates that the
rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the debt
being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however,
although addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of,
<PAGE> 49
such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
MUNICIPAL NOTES:
SP-1. Notes rated SP-1 have very strong or strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Notes due in three years or less normally receive a note
rating. Notes maturing beyond three years normally receive a bond
rating, although the following criteria are used in making that
assessment:
- Amortization schedule (the larger the final maturity
relative to other maturities, the more likely the issue will be
rated as a note).
- Source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be rated as a
note).
DEMAND FEATURE OF VARIABLE RATE DEMAND SECURITIES:
S&P assigns dual ratings to all long-term debt issues that
have as part of their provisions a demand feature. The first
rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand
feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity and the commercial paper rating
symbols are usually used to denote the put (demand) option (for
example, AAA/A-1+). Normally, demand notes receive note rating
symbols combined with commercial paper symbols (for example, SP-
1+/A-1+).
COMMERCIAL PAPER:
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 to safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are designed A-1+.
CORPORATE BONDS:
The description of the applicable rating symbols and their
meanings is substantially the same as its Municipal Bond ratings
set forth above.
<PAGE> 1
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. Financial statements included in Part A of this Amendment
to the Registration Statement: Financial Highlights.
2. Financial statements included in Part B of this Amendment:
Financial statements (investments as of 6/30/95, balance
sheets as of 6/30/95, statements of operations for the year
ended 6/30/95, statements of changes in net assets for each
of the two years in the period ended 6/30/95, and notes
thereto) and report of independent auditors are
incorporated by reference to Registrant's 6/30/95 annual
report.
(b) Exhibits: [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant under the Securities Act of 1933, No. 2-99356. The
terms "Pre-Effective Amendment" and "PEA" refer, respectively,
to a pre-effective and a post-effective amendment to the
Registration Statement.]
1. Agreement and Declaration of Trust of Registrant as amended
through 10/25/94. (Exhibit 1 to PEA #18.)*
2. (a) By-Laws of Registrant as amended through 10/24/90.
(Exhibit 2 to PEA #10.)*
(b) Amendment to By-Laws dated 2/3/93. (Exhibit 2(b) to
PEA #16.)*
3. None.
4. None.
5. (a) Investment advisory agreement dated 11/1/94 between
Registrant and Stein Roe & Farnham Incorporated (the
"Adviser") relating to the series SteinRoe Municipal
Money Market Fund. (Exhibit 5(a) to PEA #18.)*
(b) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series
SteinRoe Intermediate Municipals. (Exhibit 5(b) to PEA
#18.)*
(c) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series
SteinRoe Managed Municipals. (Exhibit 5(c) to PEA
#18.)*
(d) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series
SteinRoe High-Yield Municipals. (Exhibit 5(d) to PEA
#18.)*
(e) Expense undertaking dated 10/31/94 relating to the
series SteinRoe Municipal Money Market Fund and expense
waiver dated 5/1/95 relating to the series SteinRoe
Intermediate Municipals. (Exhibit 5(e) to PEA #18.)*
6. (a) Form of underwriting agreement between Registrant and
<PAGE> 2
Liberty Securities Corporation. (Exhibit 6(b) to PEA
#3.)*
(b) First amendment to underwriting agreement dated
10/25/89. (Exhibit 6(b) to PEA #9.)*
(c) Second amendment to underwriting agreement dated
10/28/92. (Exhibit 6(c) to PEA #16.)*
7. None.
8. Custodian contract between Registrant and State Street Bank
and Trust Company ("Bank") dated 12/31/87 as amended
through May 8, 1995. (Exhibit 8 to PEA #18.)*
9. (a) Transfer agency agreement between Registrant and
SteinRoe Services Inc. dated 8/1/95.
(b) Form of Accounting and Bookkeeping Agreement between
the Registrant and the Adviser. (Exhibit 9(e) to PEA
#17.)*
(c) Administrative agreement between Registrant and the
Adviser relating to the series SteinRoe Municipal Money
Market Fund.
10. Opinions and consents of Bell, Boyd & Lloyd and Ropes &
Gray with respect to the series of Registrant designated
SteinRoe Municipal Money Market Fund, SteinRoe Intermediate
Municipals, SteinRoe Managed Municipals, and SteinRoe High-
Yield Municipals. (Exhibit 10(a) and 10(b) to PEA #4.)*
11. (a) Opinion and consent of Bell, Boyd & Lloyd regarding
tax-exempt status of standby commitments. (Exhibit
11(a) to Pre-Effective Amendment.)*
(b) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#13.)*
(c) Consent of Ernst & Young LLP.
12. None.
13. Inapplicable.
14. None.
15. None.
16. (a) Schedule for computation of yield of SteinRoe Municipal
Money Market Fund and schedules for computation of
total return of SteinRoe Intermediate Municipals,
SteinRoe Managed Municipals, and SteinRoe High-Yield
Municipals. (Exhibit 16 to PEA #6.)*
(b) Schedule for computation of total return of SteinRoe
Municipal Money Market Fund and schedules for
computation of yield of SteinRoe Intermediate
Municipals, SteinRoe Managed Municipals, and SteinRoe
High-Yield Municipals. (Exhibit 16(b) to PEA #7.)*
17. (a) Financial Data Schedule relating to the series SteinRoe
Municipal Money Market Fund.
(b) Financial Data schedule relating to the series SteinRoe
Intermediate Municipals.
<PAGE> 3
(c) Financial Data schedule relating to the series SteinRoe
Managed Municipals.
(d) Financial Data schedule relating to the series SteinRoe
High-Yield Municipals.
18. Inapplicable.
19. (Miscellaneous.)
(a) Funds Application.
(b) Funds-on-Call Application. (Exhibit 17(b) to PEA
#15).*
(c) Automatic Redemption Services Application. (Exhibit
17(c) to PEA #15).*
_______________________________
*Incorporated by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlled by, or under common control with, other persons within
the meaning of this Item. See "Investment Advisory Services,"
"Management," "Distributor," and "Transfer Agent" in the statement
of additional information, each of which is incorporated herein by
reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record
Title of Series Holders as of July 28, 1995
- ----------------- -----------------------------
SteinRoe Intermediate Municipals 3,041
SteinRoe High-Yield Municipals 6,377
SteinRoe Municipal Money Market Fund 3,493
SteinRoe Managed Municipals 10,795
ITEM 27. INDEMNIFICATION.
Article Tenth 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
<PAGE> 4
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 Tenth 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.
To the extent required under the 1940 Act,
(i) Article Tenth 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 Tenth 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 neither "interested persons" of Registrant,
as defined in Section 2(a)(19) of the 1940 Act, nor parties to the
proceeding ("disinterested, non-party 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 Tenth does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article Tenth 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 Tenth also provides that its indemnification provisions are
not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
<PAGE> 5
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer,
or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Registrant, its trustees and officers, Stein Roe & Farnham
Incorporated (the "Adviser"), the other investment companies advised
by the Adviser, and persons affiliated with them are insured against
certain expenses in connection with the defense of actions, suits,
or proceedings, and certain liabilities that might be imposed as a
result of such actions, suits, or proceedings. Registrant will not
pay any portion of the premiums for coverage under such insurance
that would (1) protect any trustee or officer against any liability
to Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect the Adviser or principal
underwriter, if any, against any liability to Registrant or its
shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence, in
the performance of its duties, or by reason of its reckless
disregard of its duties and obligations under its contract or
agreement with the Registrant; for this purpose the Registrant will
rely on an allocation of premiums determined by the insurance
company.
Pursuant to the indemnification agreement dated July 1, 1995, among
the Registrant, its transfer agent and the Adviser, Registrant, its
trustees, officers and employees, its transfer agent and the
transfer agent's directors, officers and employees are indemnified
by Registrant's 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 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 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
<PAGE> 6
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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), which is a wholly-owned subsidiary of Liberty Financial
Companies, Inc.), which is a majority-owned subsidiary of Liberty
Mutual Equity Corporation, which is a wholly-owned 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 no-load
investment companies having different investment policies.
During the past two years, neither the Adviser nor any of its
directors or officers, except for Gary L. Countryman, Kenneth R.
Leibler, and N. Bruce Callow has been engaged in any business,
profession, vocation, or employment of a substantial nature either
on their own account or in the capacity of director, officer,
partner, or trustee, other than as an officer or associate of the
Adviser. Mr. Countryman is President of Liberty Mutual Insurance
Company and Liberty Mutual Fire Insurance Company; Mr. Leibler is
President and Chief Operating Officer of Liberty Financial
Companies, Inc.; Mr. Callow was senior vice president of trust and
financial services of The Northern Trust Company prior to June,
1994.
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, SteinRoe Income
Trust, SteinRoe Investment Trust, SR&F Base Trust, SteinRoe Variable
Investment Trust and Liberty Financial Trust, investment companies
managed by the Adviser. A list of such capacities is given below.
(The listed entities, except for SteinRoe Variable Investment Trust,
are all located at One South Wacker Drive, Chicago, Illinois 60606;
the address of SteinRoe Variable Investment Trust is Federal Reserve
Plaza, 600 Atlantic Avenue, Boston, Massachusetts 02210.)
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Gary L. Countryman Director; Chairman
Kenneth J. Kozanda Vice President; Treasurer
Alfred F. Kugel Vice President
<PAGE> 7
Kenneth R. Leibler Director
Keith J. Rudolf Vice President
Hans P. Ziegler Director, President,
Vice Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Daniel K. Cantor Vice-President
Robert A. Christensen Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Harvey B. Hirschhorn Vice-President
Alfred F. Kugel Trustee
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
<PAGE> 8
STEINROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Joanne T. Costopoulos Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
Robert A. Christensen Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Securities Corporation,
is a wholly-owned subsidiary of Liberty Investment Services, Inc.,
which in turn is a wholly-owned subsidiary of Liberty Financial
Companies, Inc., which in turn is a subsidiary of Liberty Mutual
Equity Corporation, which in turn is a subsidiary of Liberty Mutual
Insurance Company. Liberty Securities Corporation is principal
underwriter for the following investment companies:
SteinRoe Income Trust
SteinRoe Municipal Trust
SteinRoe Investment Trust
Liberty Growth Properties Limited Partnership
Liberty Income Properties Limited Partnership
Liberty/Heritage Limited Partnership II
Liberty/Kuester Limited Partnership III
Liberty/Manhattan Beach Limited Partnership
Liberty/High Income Plus Limited Partnership
Liberty/Overland Park Limited Partnership
Set forth below is information concerning the directors and officers
of Liberty Securities Corporation:
<PAGE> 9
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------------------ -------------------- ---------------
Porter P. Morgan Chairman of the Board; Director None
Frank L. Tarantino President; Chief Operating
Officer; Director None
Robert L. Spadafora Executive Vice President -
Sales and Marketing None
John T. Treece, Jr. Senior Vice President - Operations None
John W. Reading Senior Vice President, General
Counsel, and Assistant Secretary None
Robert M. Young Senior Vice President - Sales
Development None
Valerie Arendell Senior Vice President - Sales None
Philip J. Iudice Treasurer None
Joanne K. Novak Vice President - Human Resources None
Helene L. Young Vice President - Sales Support None
Gerald H. Stanney, Vice President and Compliance
Jr. Officer (Boston) None
Jilaine Hummel Bauer Vice President and Compliance Exec. V-P &
Officer (Chicago) Secretary
Lindsay Cook Vice President Trustee
Ralph E. Nixon Vice President None
Diane L. Basler Vice President None
Glenn E. Williams Assistant Vice President None
John A. Benning Secretary None
C. Allen Merritt, Jr. Assistant Treasurer; Assistant
Secretary; Director None
The principal business address of Ms. Bauer is One South Wacker
Drive, Chicago, IL 60606; that of Mr. Williams is Two Righter
Parkway, Wilmington, DE 19803; and that of the other officers is
600 Atlantic Avenue, Boston, MA 02210.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Jilaine Hummel Bauer
Executive Vice-President and Secretary
One South Wacker Drive
Chicago, Illinois 60606
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Since the information called for by Item 5A is contained in the
latest annual report to shareholders, Registrant undertakes to
furnish each person to whom a prospectus is delivered with a copy
of the Registrant's latest annual report to shareholders upon
request and without charge.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly
caused this amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 30th day of August,
1995.
STEINROE MUNICIPAL TRUST
By TIMOTHY K. ARMOUR
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
- ------------------------ --------------------- --------------
TIMOTHY K. ARMOUR President and Trustee August 30, 1995
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President August 30, 1995
Principal Financial Officer
SHARON R. ROBERTSON Controller August 30, 1995
Principal Accounting Officer
KENNETH L. BLOCK Trustee August 30, 1995
WILLIAM W. BOYD Trustee August 30, 1995
LINDSAY COOK Trustee August 30, 1995
FRANCIS W. MORLEY Trustee August 30, 1995
CHARLES R. NELSON Trustee August 30, 1995
GORDON R. WORLEY Trustee August 30, 1995
* This amendment to the Registration Statement has also been signed
by the above persons in their capacities as trustees and officers
of the SR&F Base Trust as it relates to the SteinRoe Municipal
Money Market Fund.
<PAGE> 11
STEINROE MUNICIPAL TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- -----------
9(a) Transfer agency agreement
9(b) Administrative agreement
11(c) Consent of Ernst & Young LLP
17(a) Financial Data Schedule for SteinRoe Municipal Money
Market Fund
17(b) Financial Data Schedule for SteinRoe Intermediate
Municipals
17(c) Financial Data Schedule for SteinRoe Managed
Municipals
17(d) Financial Data Schedule for SteinRoe High-Yield
Municipals
19(a) Fund Application
<PAGE> 1
Exhibit 9(a)
RESTATED AGENCY AGREEMENT
This agreement, effective this 1st day of August, 1995,
amends and restates (a) the agreement dated December 31, 1987,
as amended by amendments dated May 1, 1995, July 29, 1992,
February 1, 1991, and August 1, 1988 (the "Agreement") by and
between STEINROE MUNICIPAL TRUST, a Massachusetts business
trust, and STEINROE SERVICES INC. (hereinafter referred to as
"SSI"), a Massachusetts corporation and (b) the agreement
dated February 11, 1986, as amended by amendments dated May 1,
1995, July 29, 1992, February 1, 1991, August 1, 1988, and
March 3, 1987, among STEINROE INCOME TRUST and STEINROE
INVESTMENT TRUST, each a Massachusetts business trust, and
SSI. [SteinRoe Municipal Trust, SteinRoe Income Trust, and
SteinRoe Investment Trust are referred to hereinafter
individually as a "Trust" and collectively as the "Trusts."]
WITNESSETH:
1. APPOINTMENT. Each Trust hereby appoints SSI,
effective as of the date hereof, as its agent in connection
with the issue, redemption, and transfer of shares of
beneficial interest of the Trust, including shares of each
respective series of the Trust (hereinafter called the
"Shares"), and to process investment income and capital gain
distributions with respect to such Shares, to perform certain
duties in connection with the Trust's withdrawal and other
plans, to mail proxy and other materials to the Trust's
shareholders upon the terms and conditions set forth herein,
and to perform such other and further duties as are agreed
upon between the parties from time to time.
2. ACKNOWLEDGMENT. SSI acknowledges that it has
received from each Trust the following documents:
A. A certified copy of the Agreement and Declaration of
Trust and any amendments thereto;
B. A certified copy of the By-Laws of Trust;
C. A certified copy of the resolution of its Board of
Trustees authorizing this Agreement;
D. Specimens of all forms of Share certificates as
approved by its Board of Trustees with a statement
of its Secretary certifying such approval;
E. Samples of all account application forms and other
documents relating to shareholders accounts,
including terms of its Systematic Withdrawal Plan;
F. Certified copies of any resolutions of the Board of
Trustees authorizing the issue of authorized but
unissued Shares;
G. An opinion of counsel for the Trust with respect to
the validity of the Shares, the status of
repurchased Shares and the number of Shares
<PAGE> 2
with respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the signatures of
the officers of the Trust who are authorized to sign
Share certificates, to sign checks and to sign
written instructions to SSI.
3. ADDITIONAL DOCUMENTATION. Each Trust will also furnish
SSI from time to time with the following documents:
A. Certified copies of each amendment to its Agreement
and Declaration of Trust and By-Laws;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereto with
respect to its Shares;
C. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions
to SSI;
D. Specimens of all new Share certificates accompanied
by certified copies of Board of Trustees resolutions
approving such forms;
E. Forms and terms with respect to new plans that may be
instituted and such other certificates, documents or
opinions that SSI may from time to time, in its
discretion, deem necessary or appropriate in the
proper performance of its duties.
4. AUTHORIZED SHARES. Each Trust certifies to SSI that,
as of the date of this Agreement, it may issue unlimited
number of Shares of the same class in one or more series as
the Board of Trustees may authorize. The series authorized as
of the date of this Agreement are listed in Schedule B.
5. REGISTRATION OF SHARES. SSI shall record issuances
of Shares based on the information provided by each Trust.
SSI shall have no obligation to a Trust, when countersigning
and issuing Shares, whether evidenced by certificates or in
uncertificated form, to take cognizance of any law relating to
the issuance and sale of Shares, except as specifically agreed
in writing between SSI and the Trusts, and shall have no such
obligation to any shareholder except as specifically provided
in Sections 8-205, 8-208 and 8-406 of the Uniform Commercial
Code. Based on data provided by each Trust of Shares
registered or qualified for sale in various states, SSI will
advise the Trusts when any sale of Shares to a resident of a
state would result in total sales in that state in excess of
the amount registered or qualified in that state.
6. SHARE CERTIFICATES. Each Trust shall supply SSI with
a sufficient supply of serially pre-numbered blank Share
certificates, which shall contain the appropriate series
designation, if applicable. Such blank certificates shall be
properly prepared and signed by authorized officers of Trust
manually or, if authorized by Trust, by facsimile and shall
bear the seal of Trust or a facsimile thereof. Notwithstanding
the death, resignation, or removal of any officer authorized to
sign
<PAGE> 3
certificates, SSI may continue to countersign certificates
which bear the manual or facsimile signature of such officer
as directed by Trust.
7. CHECKS. Each Trust shall supply SSI with a
sufficient supply of serially pre-numbered blank checks for
the dividend bank accounts and for the principal bank accounts
of Trust. SSI shall prepare and sign by facsimile signature
plates, bearing the facsimiles of the signatures of authorized
signatories, dividend account checks for payment of ordinary
income dividends and capital gain distributions and principal
account checks for payment of redemptions of Shares, including
those in connection with the Trusts' Withdrawal Plans, refunds
on subscriptions and other capital payments on Shares, in
accordance with this Agreement. SSI shall hold signature
facsimile plates for this purpose and shall exercise
reasonable care in their transportation, storage or use. SSI
may deliver such signature facsimile plates to an agent or
contractor to perform the services described herein, but shall
not be relieved of its duties hereunder by any such delivery.
8. RECORDKEEPING. SSI shall maintain records showing
for each shareholder's account in the appropriate series of
each Trust, the following information and such other
information as may be mutually agreed to from time to time by
the Trusts and SSI:
A. To the extent such information is provided by
shareholders: name(s), address, alphabetical sort
key, client number, tax identification number,
account number, the existence of any special service
or transaction privilege offered by the Trust and
applicable to the shareholder's account including
but not limited to the telephone exchange privilege,
and other similar information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year regarding
the account of the shareholder, including
transactions to date, date of each transaction,
price per share, amount and type of each purchase
and redemption, transfers, amount of accrued
dividends, the amount and date of all distributions
paid, price per share, and amount of all
distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for the
calendar year as required under applicable Federal
and state laws, rules and regulations;
G. The certificate number and date of issuance of each
Share certificate outstanding, if any, representing
a shareholder's Shares in each account, the number
of Shares so represented, and any stop legend on
each certificate;
<PAGE> 4
H. Information with respect to gross proceeds of all
sales transactions as required under applicable
Federal income tax laws, rules and regulations; and
I. Such other information as may be agreed upon by the
Trusts and SSI from time to time.
SSI shall maintain for any account that is closed
("Closed Account") the aforesaid records through the June of
the calendar year following the year in which the account is
closed or such other period as may be mutually agreed to from
time to time by such Trust and SSI.
9. ADMINISTRATIVE SERVICES. SSI shall furnish the
following administrative services to each Trust:
A. Coordination of the printing and dissemination of
Prospectuses, financial reports, and other
shareholder information as are agreed to by SSI and
the Trust from time to time.
B Maintenance of data and statistics and preparation of
reports for internal use and for distribution to the
Board of Trustees concerning shareholder transaction
and service activity.
C. Handling of requests from third parties involving
shareholder records, including, but not limited to,
record subpoenas, tax levies, and orders issued by
courts or administrative or regulatory agencies.
D. Development and monitoring of shareholder service
programs that may be offered from time to time,
including, but not limited to, individual retirement
account and tax-qualified retirement plan programs,
checkwriting redemption privileges, automatic
purchase, exchange and redemption programs, audio
response services, programs involving electronic
transfer of funds, and lock box facilities.
E. Provision of facilities, hardware and software
systems, and equipment in Chicago (and other
locations mutually agreed to by SSI and the Trusts)
to meet the needs of shareholders and prospective
shareholders, including, but not limited to, walk-in
facilities, toll-free telephone numbers, electronic
audio and other communication, accounting and
recordkeeping systems to handle shareholder
transaction, inquiry and other activity, and to
provide management and other personnel required to
staff such facilities and administer such systems.
10. SHAREHOLDER SERVICES. SSI shall provide the
following services as are requested by a Trust in addition to
the transactional and recordkeeping services provided for
elsewhere herein:
A. Responding to communications from shareholders or
their representatives or agents concerning any
matters pertaining to shares
<PAGE> 5
registered in their names, including, but not
limited to, (i) net asset value and average cost
basis information; (ii) shareholder services, plans,
options, and privileges; and (ii) with respect to
the series of the Trust represented by such shares,
information concerning investment policies,
portfolio holdings, performance, and shareholder
distributions and the classification thereof for tax
purposes.
B. Handling of shareholder complaints and correspondence
directed to or brought to the attention of SSI.
C. Soliciting and tabulating proxies of shareholders and
answering questions concerning the subject matter
thereof.
D. Under the direction of the officers of the Trust,
administering a program whereby shareholders whose
mail from the Trust is returned are identified,
current address information for such shareholders is
solicited, and shares and dividend or redemption
proceeds owned by shareholders who cannot be located
are escheated to the proper authorities in
accordance with applicable laws and regulations.
E. Preparing and disseminating special data, notices,
reports, programs, and literature for certain
categories of shareholders based on account
characteristics, or for shareholders generally in
light of industry, market, product, tax, or legal
developments.
F. Assisting any institutional servicing or
recordkeeping agent engaged by SSI and approved by
the Trust in the development, implementation, and
maintenance of special programs and systems to
enhance overall shareholder servicing capability,
consisting of:
(i) Product and system training for personnel of
the institutional servicing agent.
(ii) Joint programs with the institutional servicing
agent to develop customized shareholder
software systems, account statements, and other
information and reports.
(iii) Electronic and telephonic systems and other
technological means by which shareholder
information, account data, and cost of
securities may be exchanged among SSI, the
institutional servicing agent, and their
respective agents or vendors.
G. Furnishing sub-accounting services for retirement
plan shareholders and other shareholders
representing group relationships with special
recordkeeping needs.
H. Providing and supervising the services of employees
whose principal responsibility and function will be
to preserve and strengthen the Trust's relationships
with its shareholders.
I. Such other shareholder and shareholder-related
services, whether similar to or different from those
described in this section as the parties may from
time to time agree in writing.
<PAGE> 6
11. PURCHASES. Upon receipt of a request for purchase
of Shares containing data required by a Trust for processing
of a purchase transaction, SSI will:
A. Compute the number of Shares of the appropriate
series of the Trust to which the purchaser is
entitled and the dollar value of the transaction
according to the price of such Shares as provided by
the Trust for purchases made at that time and date;
B. In the case of a new shareholder, establish an
account for the shareholder, including the
information specified in Section 8 hereof; in the
case of an Exchange as described in Section 14 below
by telephone or telegraph, the account shall have
exactly the same registration as that of the account
of the other series of the Trust or any other series
of another Trust from which the Exchange was made;
C. Transmit to the shareholder by mail or electronically
a confirmation of the purchase, as directed by the
Trust, in such format as agreed to by SSI and the
Trusts, including all information called for
thereby, and, in the case of a purchase for a new
account, shall also furnish the shareholder a
current Prospectus of the applicable series;
D. If applicable, prepare a refund check in the amount
of any overpayment of the subscription price and
deliver it to the Trust for signing; and
E. If a certificate is requested by the shareholder,
prepare, countersign, issue and mail, not earlier
than 30 days after the date of purchase, to the
shareholder at his address of record a Share
certificate for such full Shares purchased.
12. REDEMPTIONS. Instructions to redeem Shares of any
series of a Trust, including instructions for an Exchange as
described in Section 14 below, may be furnished in written
form, or by other means, including but not limited to
telephonic or electronic transmission or by writing a special
form of check, as may be mutually agreed to from time to time
by each Trust and SSI. Upon receipt by SSI of instructions to
redeem which are in "good order," as defined in the Prospectus
of the applicable series and satisfactory to SSI, SSI will:
A. Compute the amount due for the Shares and the total
number of all the Shares redeemed in accordance with
the price per Share as provided by the Trust for
redemptions of such Shares at that time and date,
and transmit to the shareholder by mail or
electronically a confirmation of the redemption, as
directed by the Trust, in such format as agreed to
by SSI and the Trust, including all information
called for thereby;
B. Confirmations of redemptions that result in the
payment of accrued dividends shall indicate the
amount of such payment and any amounts withheld;
<PAGE> 7
C. In the case of a redemption in written form other
than by Exchange, SSI shall transmit to the
shareholder by check or, as may be mutually agreed
to by the Trust and SSI and requested by the
shareholder, electronic means, an amount equal to
the redemption price and any payment of accrued
dividends occasioned by the redemption, net of any
amounts withheld under applicable Federal and state
laws, rules and regulations on or before the seventh
calendar day following the date on which
instructions to redeem in "good order" as defined in
the Prospectus of the applicable series, which
instructions are satisfactory to SSI as received by
SSI. In the case of an Exchange, SSI shall use the
proceeds of the redemption, net of any amounts
withheld under applicable Federal and state laws,
rules and regulations, to purchase Shares of any
other series of the Trust or any other series of
another Trust selected by the person requesting the
Exchange;
D. In the case of Exchanges by telephone or telegraph,
redemptions by telephone or electronic transmission
and redemptions by writing a special form of check,
SSI shall deliver to the Trust, on the business day
following the effective date of such transaction, a
listing of such transaction data in a format agreed
to by the Trusts and SSI from time to time;
E. If any Share certificate or instruction to redeem
tendered to SSI is not satisfactory to SSI, it shall
promptly notify the Trust of such fact together with
the reason therefor;
F. SSI shall cancel promptly Share certificates received
in proper form for redemption and issue, countersign
and mail new Share certificates for the Shares
represented by certificates so cancelled which are
not redeemed;
G. SSI shall advise the Trust and refuse to process any
redemption by electronic transmission or Exchange by
telephone or telegraph or redemptions by writing a
special form of check, if such transaction would
result in the redemption of Shares represented by
outstanding certificates, unless otherwise
instructed by an officer of the Trust.
13. ADMINISTRATION OF WITHDRAWAL PLANS. A redemption
made pursuant to a Withdrawal Plan offered by the Trusts shall
be effected by SSI at the net asset value per Share of the
appropriate series of the Trust on the twentieth day or the
next business day of the month in which the recipient is
scheduled to receive the withdrawal payment. SSI shall
prepare and mail to the recipient on or before the seventh
calendar day after the date of redemption a check in the
amount of each required payment, net of any amounts withheld
under applicable Federal and state laws, rules and
regulations, and also furnish the shareholder a confirmation
of the redemption as described in Section 12 above.
14. EXCHANGES. Upon receipt by SSI of a request to
exchange Shares of a series of a Trust held in a shareholder's
account for those of any other series of the
<PAGE> 8
Trust or any other series of another Trust or vice versa in
written form, by telephone or telegraph or by other electronic
means, containing data required by the Trust for processing
such a transaction, SSI will:
A. If the request is by telephone, telegraph or other
electronic means, verify that the shareholder has
furnished both the series of a Trust from and to
which the Exchange is to be made authorization, in a
form acceptable to such Trust, to accept Exchange
instructions for his account by such means.
B. Process a redemption of the Shares of the series of
the Trust to be redeemed in connection with the
Exchange and apply the proceeds thereof, net of any
amounts withheld under applicable Federal and state
laws, rules and regulations, to purchase shares of
any other series of the Trust or any other series of
another Trust being acquired in accordance with the
respective Trust's redemption and purchase policies
and Sections 11 and 12 of this Agreement.
Any redemption and purchase pursuant to an Exchange shall
be effected as of the time and prices applicable to an order
for redemption or purchase received at the time the request
for Exchange is received.
15. TRANSFER OF SHARES. Upon receipt by SSI of a
request for a transfer of Shares of any series of a Trust, and
receipt of a Share certificate for transfer or an order for
the transfer of Shares in the case of an uncertificated
account, in either case with such endorsements, instruments of
assignment or evidence of succession as may be required by SSI
and accompanied by payment of such transfer taxes, if any, as
may be applicable, and satisfaction of any other conditions
for registration of transfers contained in the Trust's By-
Laws, Prospectuses, and Statements of Additional Information,
SSI will verify the balance of Shares of such series of the
Trust in the account; record the transfer of ownership of such
Shares in its Share certificate and shareholder records for
such series; cancel Share certificates for Shares surrendered
for transfer; establish an account pursuant to Section 8 for
the transferee if a new shareholder; prepare, countersign and
mail new Share certificates for a like number of Shares in the
case of a certificated account; and transmit to the
shareholder by mail or electronically confirmation of the
transfer for each account affected, in a format agreed to by
SSI and the Trust, including all information called for
thereby. SSI shall be responsible for determining that
certificates, orders for transfer, and supporting documents,
if any, are in proper legal form for the transfer of Shares.
16. CHANGES IN SHAREHOLDER RECORDS. Changes in items of
information specified in Section 8 not relating to change in
ownership of Shares will be made by SSI upon receipt of a
request for such change in a format agreed to by SSI and the
Trusts. In the case of any change that SSI and the Trusts
agree requires confirmation, a confirmation of such change in
a format agreed to by SSI and the Trusts shall be transmitted
to the shareholder by mail or electronically.
<PAGE> 9
17. REFUSAL TO REDEEM OR TRANSFER. SSI reserves the
right to refuse to redeem or transfer Shares until reasonably
satisfied that the endorsement on the Share certificates or
written request presented is valid and genuine, and for such
purpose may require where reasonably necessary or appropriate
a guarantee of signature. SSI also reserves the right to
refuse to redeem or transfer Shares until satisfied that the
requested transfer or redemption is legally authorized, and it
shall incur no liability for the refusal in good faith to make
transfers or redemptions which it, in its judgment, deems
improper or unauthorized. Notwithstanding the foregoing, SSI
shall redeem or transfer Shares even though not satisfied as
to the endorsement or legal authority if it is first
indemnified to its reasonable satisfaction against all
expenses and liabilities to which it might, in its judgment,
be subjected by such action.
18. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Each
Trust will promptly inform SSI of the declaration of any
dividend or other distribution with respect to Shares of any
series of the Trust, including the amount of distribution, the
amount of withholding under applicable Federal and state laws,
rules and regulations, if any, dividend number, if any, record
date, ex-dividend date, payable date and price at which
dividends or other distributions are to be reinvested.
In the case of any series of a Trust for which dividends
shall be declared daily and paid monthly or quarterly, SSI
will credit the dividend payable to each shareholder thereof
to a dividend account of the shareholder and will provide the
Trust on each business day with reports of the total amount of
dividends credited and such other data as are agreed upon by
the Trust and SSI. Promptly after the payable date for the
Trust, SSI will provide the Trust with reports showing the
accounts which have been paid a dividend or other
distribution, the amount received by each account, the amount
withheld as required under applicable Federal and state laws,
rules and regulations, if any, the amount of the dividend or
distribution paid in cash or reinvested in Shares, and the
total amount of cash and Shares required for payment of the
dividend or other distribution.
In the case of each other series of the Trust, SSI will
provide the Trust promptly following the record date therefor
with reports of the total amount of dividends payable with
respect thereto and such other data as are agreed to by the
Trusts and SSI. Promptly after the payable date therefor, SSI
will provide the Trust with reports showing the accounts which
are to be paid a dividend or other distribution, the amount to
be received by each account, the amount to be withheld as
required under applicable Federal and state laws, rules and
regulations, if any, whether such dividend or distribution is
to be paid in cash or reinvested in Shares, and the total
amount of cash and Shares required for the payment of such
dividend or distribution.
At times agreed to by the Trusts and SSI, SSI will
transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and
confirmation thereof. Where distributions are reinvested, the
price and date of reinvestment will be those supplied by the
Trusts. Confirmations will be prepared by SSI in a format
agreed to by SSI and the Trusts.
<PAGE> 10
19. WITHHOLDING. Under applicable Federal and state
laws, rules and regulations requiring withholding from
dividends and other distributions and payments to
shareholders, SSI shall be responsible for determining the
amount to be withheld and the Trusts shall forward that amount
to SSI, which will deposit said amount with, and report said
amount to, the proper governmental agency as required
thereunder. Liability for any amounts withheld, whether or
not actually withheld, and for any penalties which may be
imposed upon the payor for failure to withhold, report, or
deposit the proper amount, and for any interest due on said
amount, shall be borne by the Trusts and SSI as provided in
Section 37 hereof.
Upon receipt of a certificate from a shareholder
pertaining to withholding (including exemptions therefrom)
containing such information as required by a Trust of the
shareholder under applicable Federal and state laws, rules and
regulations, SSI shall promptly process the certificate, which
shall become effective as soon as reasonably possible after
receipt by SSI, but no later than may be required by
applicable Federal and state laws, rules and regulations.
At the time a shareholder account is established with a
Trust, the Trust shall be responsible for (i) soliciting the
shareholder's tax identification number in the manner and form
required under applicable Federal and state laws, rules and
regulations; (ii) identifying and rejecting an obviously
incorrect number (as defined under applicable Federal and
state laws, rules and regulations) and (iii) furnishing to SSI
the number and any related information provided by or on
behalf of the shareholder. SSI shall be responsible for any
subsequent communications to the shareholder that may be
required in this regard.
In the case of withholding an amount in excess of the
proper amount from a payment made by or on behalf of a Trust
to a shareholder except as otherwise provided by applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately adjust the
shareholder's account, as well as succeeding deposits;
provided, however, that when an adjustment would result in an
adjustment across calendar years, SSI shall not be required to
make such adjustment.
In the case of (i) a failure to withhold the proper
amount from a dividend or other distribution or payment made
by or on behalf of any series of a Trust to a shareholder or
(ii) any penalties attributable to (a) a failure to withhold
the proper amount or (b) the shareholder's failure to provide
the Trust or SSI with correct information requested in order
to comply with withholding requirements under applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately cause the redemption
of Shares from the shareholder's account with such series
having a value not exceeding the sum of such deficit amount
and applicable penalties and apply the proceeds to reimburse
whomever has borne the expense resulting from the
shareholder's failure. If the value of the Shares in the
shareholder's account with the series is less than the sum of
the deficit amount and applicable penalties, SSI may cause the
redemption of Shares having a value not exceeding such
difference from any account, including a joint
<PAGE> 11
account, of the shareholder with any other series of the Trust
or any other series of another Trust, subject to the consent
of the other Trust, and apply the proceeds to reimburse
whoever has borne the expense resulting from the shareholder's
failure.
20. MAILINGS. SSI shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. SSI shall mail financial reports furnished by each
series of a Trust to shareholders as requested and
will mail the current Prospectus for each series of
the Trust to shareholders of such series once each
year;
B. SSI shall mail to shareholders of each series of a
Trust proxy material for each duly scheduled meeting
of shareholders of that series;
C. SSI shall include in any of the above mailings such
other enclosures as are compatible for mailing
purposes as reasonably requested by the Trusts;
D. SSI shall make such other mailings upon such terms
and conditions and for such fees as are agreed to by
SSI and each Trust from time to time.
The Trusts shall deliver all material required to be
furnished to SSI for any scheduled mailing sufficiently in
advance of the date for such mailing, so that SSI may effect
the scheduled mailing.
21. TAX INFORMATION RETURNS AND REPORTS. SSI will
prepare and file with the appropriate governmental agencies,
such information, returns and reports as are required to be so
filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other
distributions and payments under applicable Federal and state
laws, rules and regulations, and (iii) gross proceeds of sales
transactions as required and as the Trusts shall direct SSI.
Further, SSI shall prepare and deliver to the Trusts reports
showing amounts withheld from dividends and other
distributions and payments made for each series of the Trusts.
22. INFORMATION TO BE FURNISHED TO SHAREHOLDERS. SSI
will prepare and transmit to each shareholder of each Trust
annually in such format as is reasonably requested by the
Trust, and as agreed to by SSI, information returns and
reports for reporting dividends and other distribution and
payments, amounts withheld, if any, and gross proceeds of
sales transactions as required under applicable Federal and
state laws, rules and regulations.
23. STOP ORDERS. Upon receipt of a request from a Trust
or a shareholder that a "stop" should be placed on the
shareholder's account, SSI will maintain a record of such
"stop" and notify the Trust if any transaction request is
received from a shareholder which would reduce the number of
Shares in an account on which a "stop" has been placed. SSI
will inform the Trusts of any information SSI receives
relating to a "stop." SSI shall also maintain for the Trusts
the record of share certificates on which a "stop" has been
placed, it being understood that a
<PAGE> 12
certificate "stop" does not mean a "stop" on the shareholder's
entire account to which a certificate may relate.
24. SHARE SPLITS AND SHARE DIVIDENDS. If a Trust elects
to declare a Share dividend or split for any series, the
services and fees with respect thereto will be negotiated by
the Trust and SSI.
25. REPLACEMENT OF SHARE CERTIFICATES. SSI may issue a
new Share certificate in place of a Share certificate
represented as not having been received or as having been
lost, stolen, seized or destroyed, upon receiving instructions
from a Trust and indemnity satisfactory to SSI, and may issue
a new Share certificate in exchange for, and upon surrender
of, an identifiable mutilated Share certificate. Such
instructions from the Trust shall be in such form as has been
approved by its Board of Trustees and shall be in accordance
with the provisions of its By-Laws governing such matters.
26. UNCLAIMED AND UNDELIVERED SHARE CERTIFICATES. Where
a Share certificate is in the possession of SSI for any
reason, and has not been claimed by the record holder or
cannot be delivered to the record holder, SSI shall cancel
said certificate and reflect as uncertificated Shares on the
shareholder's account record the Shares represented by said
cancelled certificate.
27. REPORTS AND FILES. SSI shall maintain the files and
furnish the statistical and other information listed on
Schedule C. However, SSI reserves the right to delete, change
or add to the files maintained and information provided so
long as such deletions, additions or changes do not impair the
receipt of services described elsewhere in this Agreement.
SSI shall also use its best efforts to obtain such additional
statistical and other information as the Trusts may reasonably
request within the capabilities of SSI, for such additional
consideration as may be agreed to by SSI and the Trusts.
28. EXAMINATION OF DAILY TRANSACTIONS. The Trusts will
examine reports reflecting each day's transactions and other
data delivered to it for the accuracy of the transactions
reflected therein and failure to reflect transactions that
should have been reflected therein. If SSI has not received
from a Trust, within five (5) business days after delivery of
such reports to the Trust, written notice, which may be in the
form of an appropriate transaction instruction submitted by
the Trust for the purpose of correcting the error or omission,
as to any errors or omissions which a reasonable inspection
and normal audit and control procedure would reveal, then all
transactions reflected in such reports shall be deemed to be
correct and accepted by the Trust, and SSI shall have no
further responsibility for the omission from or correction,
deletion, or inclusion of any transaction reflected or which
should have been reflected therein, or any liability to the
Trust or any third person on account of such error or
omission.
29. DISPOSITION OF BOOKS, RECORDS, AND CANCELLED SHARE
CERTIFICATES. SSI will periodically send to each Trust all
books, documents, and records of the Trust no longer needed
for current purposes and Share certificates which have been
<PAGE> 13
cancelled in transfer or in redemption; such books, documents,
records, and Share certificates shall be safely stored by the
Trusts for future reference for such period as is required and
by any means permitted by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other
relevant statutes. SSI shall have no liability for loss or
destruction of said books, documents, records, or Share
certificates after they are returned to the Trusts.
30. INSPECTION OF SHARE BOOKS. In case of any request
or demand for inspection of the books of a Trust reflecting
ownership of the Shares therein ("Share books"), SSI will make
a reasonable effort to notify the Trust and to secure
instructions as to permitting or refusing such inspection.
SSI reserves the right, however, to exhibit the Share books to
any person in case it is advised by its counsel that it may be
held liable for the failure to exhibit the Share books to such
person.
31. FEES. Each Trust shall pay to SSI for its services
hereunder fees computed as set forth in Schedule A hereto.
32. OUT-OF-POCKET EXPENSES. Each Trust shall reimburse
SSI for any and all out-of-pocket expenses and charges in
performing services under this Agreement (other than charges
for normal data processing services and related software,
equipment and facilities) including, but not limited to,
mailing service, postage, printing of shareholder statements,
the cost of any and all forms of the Trust and other materials
used by SSI in communicating with shareholders of the Trust,
the cost of any equipment or service used for communicating
with the Trust's custodian bank or other agent of the Trust,
and all costs of telephone communication with or on behalf of
shareholders allocated in a manner mutually acceptable to the
Trust and SSI.
33. INSTRUCTIONS, OPINION OF COUNSEL, AND SIGNATURES.
At any time SSI may apply to a duly authorized agent of a
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice
or opinion of such counsel. SSI shall be protected in acting
upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by SSI to be genuine and to have been signed by the
proper person or persons and shall not be held to have notice
of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
34. TRUSTS' LEGAL RESPONSIBILITY. Each Trust assumes
full responsibility for the preparation, contents, and
distribution of each Prospectus and Statement of Additional
Information of the Trust, and for complying with all
applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and
any laws, rules, and regulations of government authorities
having jurisdiction over the Trust except that SSI shall be
responsible for all laws, rules and regulations of government
authorities having jurisdiction over transfer agents and their
activities. SSI assumes full responsibility for complying
<PAGE> 14
with due diligence requirements of payors of reportable
dividends and of brokers under the Internal Revenue Code with
respect to shareholder accounts.
35. REGISTRATION OF SSI AS TRANSFER AGENT. SSI
represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of
the Securities Exchange Act of 1934 and will notify the Trusts
promptly if such registration is revoked or if any proceeding
is commenced before the Securities and Exchange Commission
which may lead to such revocation.
36. CONFIDENTIALITY OF RECORDS. SSI agrees not to
disclose any information received from the Trusts to any other
customer of SSI or to any other person except SSI's employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SSI shall return to the Trusts all records in the
possession and control of SSI related to the Trusts'
activities, other than SSI's own business records, it being
also understood that any programs and systems used by SSI to
provide the services rendered hereunder will not be given to
the Trusts.
Notwithstanding the foregoing, it is understood and
agreed that SSI may maintain with the Trusts' records
information and data to be utilized by SSI in providing
services to entities serving as trustees and/or custodians of
prototype Tax-Qualified Retirement Plans, IRA Plans, plans for
employees of public schools or tax-exempt organizations, or
other plans which invest in the Shares. In the event that
this Agreement is terminated, SSI may transfer and retain from
the records maintained for the Trusts such information and
data relating to participants in such aforementioned plans as
may be required for SSI to continue providing its services to
such trustees and/or custodians.
37. LIABILITY AND INDEMNIFICATION. SSI shall not be
liable to the Trusts for any action taken or thing done by it
or its agents or contractors on behalf of a Trust in carrying
out the terms and provisions of this Agreement if done in good
faith and without negligence or misconduct on the part of SSI,
its agents or contractors.
Each Trust shall indemnify and hold SSI, and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses,
including reasonable expenses for counsel, incurred by it in
connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
contractors in the performance of its duties hereunder to the
Trusts, or as a result of acting upon any instruction believed
by it to have been executed by a duly authorized agent of a
Trust or as a result of acting upon information provided by a
Trust in form and under policies agreed to by SSI and the
Trusts provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular series or group of series of Shares, such
indemnification shall be only out of the assets of that series
or group of series; (ii) this indemnification shall not apply
to actions or omissions constituting negligence or misconduct
of SSI or its agents or contractors, including but not limited
to willful misfeasance, bad faith, or gross negligence in the
performance of their duties, or reckless disregard of their
obligations and duties under this Agreement;
<PAGE> 15
and (iii) SSI shall give a Trust prompt notice and reasonable
opportunity to defend against any such claim or action in its
own name or in the name of SSI.
SSI shall indemnify and hold harmless each Trust from and
against any and all claims, demands, expenses and liabilities
which the Trust may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of SSI or
its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of the Trust or its
other agents or contractors and (ii) the Trust shall give SSI
prompt notice and reasonable opportunity to defend against any
such claim or action in its own name or in the name of the
Trust.
38. INSURANCE. SSI represents that it has available to
it the insurance coverage set forth on Schedule D hereto, and
agrees to notify the Trusts in advance of any proposed
deletion or reduction in said insurance.
39. FURTHER ASSURANCES. Each party agrees to perform
such further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
40. DUAL INTERESTS. It is understood that some person
or persons may be trustees, directors, officers, or
shareholders of both the Trusts and SSI, and that the
existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder except as
otherwise provided by specific provision of applicable law.
41. AMENDMENT AND TERMINATION. This Agreement may be
modified or amended from time to time by mutual agreement
between the parties hereto and may be terminated by at least
one hundred eighty (180) days' written notice given by one
party to the other. Upon termination hereof, each Trust shall
pay to SSI such compensation as may be due as of the date of
such termination and shall reimburse SSI for its costs,
expenses, and disbursements payable under this Agreement to
such date. In the event that in connection with termination a
successor to any of the duties or responsibilities of SSI
hereunder is designated by the Trust by written notice to SSI,
it shall promptly upon such termination and at the expense of
the Trust, transfer to such successor a certified list of
shareholders of each series of the Trust (with name, address,
and tax identification number), a record of the account of
each shareholder and status thereof, and all other relevant
books, records, and data established or maintained by SSI
under this Agreement and shall cooperate in the transfer of
such duties and responsibilities, including provision, at the
expense of the Trust, for assistance from SSI personnel in the
establishment of books, records, and other data by such
successor.
42. ASSIGNMENT.
A. Except as provided below, neither this Agreement nor
any rights or obligations hereunder may be assigned
by either party without the written consent of the
other party.
<PAGE> 16
B. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective
permitted successors and assigns.
C. SSI may subcontract for the performance of any of its
duties or obligations under this Agreement with any
person if such subcontract is approved by the Board
of Trustees of a Trust provided, however, that SSI
shall be as fully responsible to the Trust for the
acts and omissions of any subcontractor as it is for
its own acts and omissions.
43. NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trusts is One South Wacker Drive, Chicago,
Illinois 60606, Attention: Secretary, and that of SSI for this
purpose is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
44. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of a Trust hereunder shall be binding only upon the
assets of that Trust (or the applicable series thereof), as
provided in its Agreement and Declaration of Trust, and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of the Trust or upon any other Trust. Neither the
authorization of any action by the Trustees or the
shareholders of a Trust, nor the execution of this Agreement
on behalf of the Trust shall impose any liability upon any
Trustee or any shareholder. Nothing in this Agreement shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement.
45. REFERENCES AND HEADINGS. In this Agreement and in
any such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
STEINROE MUNICIPAL TRUST
STEINROE INCOME TRUST
STEINROE INVESTMENT TRUST
ATTEST: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
ATTEST: By: STEPHEN P. LAUTZ
Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE> 18
Schedule A
Agency Agreement
(August 1, 1995)
Fees pursuant to Section 31 of the Agency Agreement shall
be calculated in accordance with the following schedule. For
each series, the fee shall accrue on each calendar day and
shall be payable monthly on the first business day of the next
succeeding calendar month.
The daily fee accrual shall be computed by multiplying
the fraction of one divided by the number of days in the
calendar year by the applicable annual fee and multiplying
this product by the net assets of the series, determined in
the manner established by the Board of Trustees of the
applicable Trust, as of the close of business on the last
preceding business day on which the series' net asset value
was determined.
Type of Series Annual Fee
- -------------------------------- ---------------------------
Fixed Income (non-money fund) 0.140% of average daily net
assets
Fixed Income (money market fund) 0.150% of average daily net
assets
Equity 0.220% of average daily net
assets
Dated: August 1, 1995
<PAGE> 19
Schedule B
Agency Agreement
The Series of the Trusts covered by this agreement are as
follows:
STEINROE INVESTMENT TRUST
SteinRoe Prime Equities
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe Special Venture Fund
SteinRoe Total Return Fund
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
STEINROE INCOME TRUST
SteinRoe Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Cash Reserves
SteinRoe Government Reserves
SteinRoe Limited Maturity Income Fund
STEINROE MUNICIPAL TRUST
SteinRoe Intermediate Municipals
SteinRoe High-Yield Municipals
SteinRoe Municipal Money Market Fund
SteinRoe Managed Municipals
Dated: August 1, 1995
<PAGE> 20
SCHEDULE C
SYSTEM DESCRIPTION
TRANSACTION PROCESSING LOG - PROCESSING SPAN IN DAYS
EXPEDITED REDEMPTION FILE - BATCH MAINTENANCE
JOURNAL
DAILY CRT OPERATOR STATISTICS
DAILY BATCH MONITORING REPORT
ONLINE NEW ACCOUNT REPORT
DETAIL DAILY "AS OF" REPORT - BY ACCOUNTABILITY
SPECIAL HANDLING - DAILY CONFIRMATIONS
BANK ACCOUNT OUTSTANDING BALANCE VERIFICATION
MISCELLANEOUS FEE JOURNAL
BATCH ENTRY SUMMARY REPORT
ACCOUNT CLOSEOUT ADJUSTMENTS - SUMMARY REPORT
REDEMPTION CHECK REGISTER
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
DST INC. - DDPS DAILY CASH RECAP REPORT
DAILY UPDATE (MU100) ERROR LISTING
EXCHANGE DISTRIBUTION SUMMARY REPORT
BATCH TRANSMISSION ERRORS - TRANSACTION ID: DFUNP
DAILY CHECK RECONCILIATION UPDATE REGISTER UCHECK
UPDATES
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
WIRE INSTRUCTION REPORT FOR DIRECT REDEMPTIONS
TRANSFER RECORD DAILY DVND INCREASE JOURNAL
RECORD DATE JOURNAL
DAILY RECAP & SHARE CONTROL SHEET - SHARE AMOUNT
EXCHANGE CLOSE-OUT AUTOMATIC REINVESTMENT REPORT BY
EXCHANGE (FROM) FUND
DETAIL DAILY "AS OF" REPORT - BY REASON CODE
SHAREOWNER CHECK-CONFIRM RECONCILIATION
<PAGE> 21
DAILY/FREE DAILY BALANCE LISTING - ALPHA CODE
SEQUENCE
CONSOLIDATED ERROR REPORTING
DAILY CONFIRMED UNPAID PURCHASE JOURNAL - NO LOAD
REQUESTS FOR DUPLICATE CONFIRMS
CALCULATED DAILY DIVIDEND RATE
EXTERNAL CHECK/INVESTMENT ISSUANCE REPORT
IN-HOUSE CHECK ISSUANCE REPORT
AUTOMATED CLEARING HOUSE REDEMPTION TRANSACTIONS
STEINROE FUNDS
ACH PURCHASE TRANSACTIONS REPORT
ACH MONTHLY REDEMPTION/PURCHASE - TRANSACTION REPORT
STEIN ROE & FARNHAM TRANSFER RECORD FOR DIRECT
PAYMENTS
REDEMPTION CHECK REGISTER
DAILY DIVIDEND ACCRUAL CLOSEOUTS COMBINED WITH
CLOSEOUT REDEMPTION WIRES
DAILY DIVIDEND ACCRUAL CLOSEOUTS UNMATCHED CLOSEOUT
ACCRUAL ERROR REPORT
AVERAGE COST ACCOUNT CALCULATION EXCEPTION REPORT
FOR DAILY AVERAGE COST FORMS REQUEST
NEW FOREIGN ACCOUNT REPORT
BATCH BALANCE LISTING
TRANSACTION TRACER REPORT
BATCH BALANCE LISTING - ACCOUNT DETAIL
TIMER - SWITCH UPDATE VERIFICATION
REDEMPTION & ADDRESS CHANGE PROCESSED SAME DAY
WARNING REPORT
AUTOMATE CLEARING HOUSE PRENOTE TRANSACTIONS
STEINROE FUNDS
EXRED WARNING REPORT
EXCHANGE WARNING REPORT UNLIKE TAX ID NUMBERS
INVESTOR TRANSFER TRANSACTIONS LISTING INVESTOR
DISTRIBUTOR CODE: STR
<PAGE> 22
DETAIL DAILY "AS OF" REPORT BY TRANSACTION CODE
DAILY "AS OF" REPORT
DAILY FUND SHARE BALANCE ERROR LIST
DAILY BATCH BALANCE
DAILY SHAREOWNER MAINTENANCE ERROR LISTING
EXPEDITED REDEMPTION FILE STATUS JOURNAL
NEW ACCOUNT VERIFICATION QUALITY REPORT
SYSTEMATIC EXCHANGE DAILY MAINTENANCE ACTIVITY
ADDITIONAL MAIL MAINTENANCE JOURNAL
BATCH TRANSMISSION ERRORS TRANSACTION ID: ATRANS
DEALER FILE MAINTENANCE REPORT
CHECK-WRITING REDEMPTION REPORT
ASSET ALLOCATION - REALLOCATION
NEW ACCOUNT REPORT
<PAGE> 23
SCHEDULE D
<TABLE>
SCHEDULE OF INSURANCE
STEIN ROE & FARNHAM INCORPORATED
ONE SOUTH WACKER DRIVE
CHICAGO, IL 60606-4685
<CAPTION>
CARRIER POLICY NO. TERM COVERAGE EXPOSURE/RATE LIMITS PREMIUM
- --------- ------------ -------- --------- ---------------------------- -------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal (96)7626-89 01/01/95 Workers' FL-8810 $213,000 .71 Workers' Compensation: Statutory $61,612
Insurance. -79 -96 Compensation NY-8810 $660,000 .57
Co sation Experience Mod. .97 Employers Liability:
Premium Disc. 10.1% Bodily Injury by Accident:
$100,000 each accident
IL-8810 $18,900,000 .42
IL-8742 $ 710,000 .92 Bodily Injury by Disease:
Experience Mod. .97 $500,000 policy limit
IL Schedule Credit 25%
Premium Discount 10.1% Bodily Injury by Disease:
$100,000 each employee
Flat Coverage Monopolistic
Fund States 50. x 6
Expense Constant 160
- ---------------------------------------------------------------------------------------------------------------------------------
Federal 681-26-32 01/01/95 Financial Blanket Personal $2,000,000 General Aggregate $21,686.92
Insurance -96 Package Property Limit $11,070,000 (other than Products Completed
Co. Policy Operations)
Two Scheduled Locations: $1,000,000 Products Completed
Puerto Rico $30,300 Operations Aggregate Limit
1510 Skokie Blvd. $600,000
$1,000,000 Personal & Advertising
Library Values: $80,000 Injury Limit
Fine Arts: $399,387 $1,000,000 Each Occurrence Limit
Inland Marine - Valuable $10,000 Medical Expense Limit
Papers
General Liability based on $100,000 Personal Property Damage
square feet to Rented Premises Limit
- ----------------------------------------------------------------------------------------------------------------------------------
Vigilant 7312-72-46 01/01/95 Foreign Liability & N.O. Auto $1,765 General Liability: $3,100
Insurance -96 Package Policy Workers' Compensation 1,335 $1,000,000 Commercial Liability
Co. for Bodily Injury or Property
General Damage Liability per occurrence
Liability $50 Per Person, per trip- & Personal Injury or Advertising
Flat. Based on: Injury caused by an offense
Automobile Total Employees - 20 $1,000,000 Annual Aggregate -
Liability-DIC/ No. of Trips 49 Products/Completed Operations
Excess Auto Total No. of Days 104
$250,000 Fire Legal Liability
Foreign Volun- $10,000 Medical Expense Per person
ary Workers'
Compensation $30,000 Medical Expense per accident
Automobile Liability - DIC/Excess Auto
$1,000,000 Bodily Injury per person
$1,000,000 Bodily Injury per occurrence
$1,000,000 Property damage per occurrence
$10,000 Medial Expense per person
$30,000 Medical Per Accident
Foreign Voluntary Workers'
Compensation - Statutory
$100,000 Employers Liability Limit
$20,000 Repatriation Expense for
any one Employee
- ---------------------------------------------------------------------------------------------------------------------------------
St. Paul IM01200804 01/01/95 Electronic Data/Media Flat $400 for Computer Equipment $4,132,731 $6,987
Insurance -96 Data $500,000 limit
Co. Processing
Business Interruption -
1,000,000 limit Valuable Papers & Records 600,000
Contingent Business Interrup-
tion: 1,000,000 - Kansas City Business Interruption 1,000,000
100,000 - Downers Grove
Deductible Contingent Business
Computer Equipment, Data and Interruption 1,100,000
Media and Extra Expense
Combined $1,000
Special Breakdown Deductible Extra Expense 500,000
$5,000
Transit
Computer Equipment $50,000
Data & Media $50,000
Valuable Papers $5,000
- -----------------------------------------------------------------------------------------------------------------------------------
Gulf GA5743948P 02/15/96 Excess Mutual $15,000,000 excess of $5,000,000 $540,935
Insurance -96 Fund D&O/E&O excess of underlying deductible
Company
- ---------------------------------------------------------------------------------------------------------------------------------
Federal 81391969-A 02/15/95 Investment Limits of Liability $25,000,000 $211,312
Insurance -96 Company Assets Extended Forgery 10,000,000
Co. Protection Bond Threats to Persons 5,000,000
Uncollectible items of Deposit 500,000
Audit Expense 100,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 9(c)
ADMINISTRATIVE AGREEMENT
BETWEEN
STEINROE MUNICIPAL TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEINROE MUNICIPAL TRUST, a Massachusetts business trust
registered under the Securities Act of 1933 ("1933 Act") and the
Investment Company Act of 1940 ("1940 Act") (the "Trust"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation, of Chicago, Illinois ("Administrator"), to furnish
certain administrative services with respect to the Trust and
the series of the Trust listed in Schedule A hereto, as such
schedule may be amended from time to time (each such series
hereinafter referred to as "Fund").
The Trust and Administrator hereby agree that:
1. Administrative Services. Subject to the terms of this
Agreement and the supervision and control of the Trust's Board
of Trustees ("Trustees"), Administrator shall provide the
following services with respect to the Trust:
(a) Preparation and maintenance of the Trust's registration
statement with the Securities and Exchange Commission
("SEC");
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Fund
("Prospectus");
(c) Preparation, filing with appropriate regulatory authorities,
and dissemination of various reports for the Fund, including
but not limited to semiannual reports to shareholders under
Section 30(d) of the 1940 Act, annual and semiannual reports
on Form N-SAR, and notices pursuant to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including the
collection of all information required for preparation of
proxy statements, the preparation and filing with appropriate
regulatory agencies of such proxy statements, the supervision
of solicitation of shareholders and shareholder nominees in
connection therewith, tabulation (or supervision of the
tabulation) of votes, response to all inquiries regarding
such meetings from shareholders, the public and the media,
and preparation and retention of all minutes and all other
records required to be kept in connection with such meetings;
(e) Maintenance and retention of all Trust charter documents and
the filing of all documents required to maintain the Trust's
status as a Massachusetts business trust and as a registered
open-end investment company;
(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board of Trustees and
committees thereof and preparation and retention of all
minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax required
to be paid in connection therewith;
(h) Calculation of all Trust and Fund expenses and arrangement
for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of each
Fund;
(j) Determination, after consultation with the officers of the
Trust, of the jurisdictions in which shares of beneficial
interest of each Fund ("Shares") shall be registered or
qualified for sale, or may be sold pursuant to an exemption
from such registration or qualification, and preparation and
maintenance of the registration or qualification of the
Shares for sale under the securities laws of each such
jurisdiction;
(k) Provision of the services of persons who may be appointed as
officers of the Trust by the Board of Trustees (it is agreed
that some person or persons may be officers of both the Trust
and the Administrator, and that the existence of any such
dual interest shall not affect the validity of this Agreement
except as otherwise provided by specific provision of
applicable law);
(l) Preparation and, subject to approval of the Trust's Chief
Financial Officer, dissemination of the Trust's and each
Fund's quarterly financial information to the Board of
Trustees and preparation of such other reports relating to
the business and affairs of the Trust and each Fund as the
officers and Board of Trustees may from time to time
reasonably request;
(m) Administration of the Trust's Code of Ethics and periodic
reporting to the Board of Trustees of Trustee and officer
compliance therewith;
(n) Provision of internal legal, accounting, compliance, audit,
and risk management services and periodic reporting to the
Board of Trustees with respect to such services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to, custody,
tax, transfer agency, disaster recovery, audit, and legal
services;
(p) Negotiation and arrangement for insurance desired or
required of the Trust and administering all claims
thereunder;
(q) Response to all inquiries by regulatory agencies, the press,
and the general public concerning the business and affairs of
the Trust, including the oversight of all periodic
inspections of the operations of the Trust and its agents by
regulatory authorities and responses to subpoenas and tax
levies;
(r) Handling and resolution of any complaints registered with
the Trust by shareholders, regulatory authorities, and the
general public;
(s) Monitoring legal, tax, regulatory, and industry developments
related to the business affairs of the Trust and
communicating such developments to the officers and Board of
Trustees as they may reasonably request or as the
Administrator believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of Trustees of
the Trust of modifications to such policies to facilitate the
protection of shareholders or market competitiveness of the
Trust and Fund and to the extent necessary to comply with new
legal or regulatory requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio
information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in connection
with the litigation or settlement of such claims.
2. Use of Affiliated Companies and Subcontractors. In
connection with the services to be provided by Administrator
under this Agreement, Administrator may, to the extent it deems
appropriate, and subject to compliance with the requirements of
applicable laws and regulations and upon receipt of approval of
the Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Administrator, provided that
Administrator shall supervise and remain fully responsible for
the services of all such third parties in accordance with and to
the extent provided by this Agreement. All costs and expenses
associated with services provided by any such third parties
shall be borne by Administrator or such parties.
3. Instructions, Opinions of Counsel, and Signatures. At
any time Administrator may apply to a duly authorized agent of
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice or
opinion of such counsel. Administrator shall be protected in
acting upon any such instruction, advice, or opinion and upon
any other paper or document delivered by the Trust or such
counsel believed by Administrator to be genuine and to have been
signed by the proper person or persons and shall not be held to
have notice of any change of authority of any officer or agent
of the Trust, until receipt of written notice thereof from the
Trust.
4. Expenses Borne by Trust. Except to the extent
expressly assumed by Administrator herein or under a separate
agreement between the Trust and Administrator and except to the
extent required by law to be paid by Administrator, the Trust
shall pay all costs and expenses incidental to its organization,
operations and business. Without limitation, such costs and
expenses shall include but not be limited to:
(a) All charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) All charges for equipment or services used for obtaining
price quotations or for communication between Administrator
or the Trust and the custodian, transfer agent or any other
agent selected by the Trust;
(c) All charges for investment advisory, portfolio management,
and accounting services provided to the Trust by the
Administrator, or any other provider of such services;
(d) All charges for services of the Trust's independent auditors
and for services to the Trust by legal counsel;
(e) All compensation of Trustees, other than those affiliated
with Administrator, all expenses incurred in connection with
their services to the Trust, and all expenses of meetings of
the Trustees or committees thereof;
(f) All expenses incidental to holding meetings of shareholders,
including printing and of supplying each record-date
shareholder with notice and proxy solicitation material, and
all other proxy solicitation expenses;
(g) All expenses of printing of annual or more frequent
revisions of the Trust's prospectus(es) and of supplying each
then-existing shareholder with a copy of a revised
prospectus;
(h) All expenses related to preparing and transmitting
certificates representing the Trust's shares;
(i) All expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) All brokers' commissions and other normal charges incident
to the purchase, sale, or lending of Fund securities;
(k) All taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) All expenses of registering and maintaining the registration
of the Trust under the 1940 Act and, to the extent no
exemption is available, expenses of registering the Trust's
shares under the 1933 Act, of qualifying and maintaining
qualification of the Trust and of the Trust's shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Trust under all other laws applicable to the Trust or its
business activities;
(m) All interest on indebtedness, if any, incurred by the Trust
or a Fund; and
(n) All fees, dues and other expenses incurred by the Trust in
connection with membership of the Trust in any trade
association or other investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses
borne by the Trust that are attributable solely to the
organization, operation or business of a Fund shall be paid
solely out of Fund assets. Any expense borne by the Trust which
is not solely attributable to a Fund, nor solely to any other
series of shares of the Trust, shall be apportioned in such
manner as Administrator determines is fair and appropriate, or
as otherwise specified by the Board of Trustees.
6. Expenses Borne by Administrator. Administrator at its
own expense shall furnish all executive and other personnel,
office space, and office facilities required to render the
services set forth in this Agreement. However, Administrator
shall not be required to pay or provide any credit for services
provided by the Trust's custodian or other agents without
additional cost to the Trust.
In the event that Administrator pays or assumes any
expenses of the Trust or a Fund not required to be paid or
assumed by Administrator under this Agreement, Administrator
shall not be obligated hereby to pay or assume the same or
similar expense in the future; provided that nothing contained
herein shall be deemed to relieve Administrator of any
obligation to the Trust or a Fund under any separate agreement
or arrangement between the parties.
7. Administration Fee. For the services rendered,
facilities provided, and charges assumed and paid by
Administrator hereunder, the Trust shall pay to Administrator
out of the assets of each Fund fees at the annual rate for such
Fund as set forth in Schedule B to this Agreement. For each
Fund, the administrative fee shall accrue on each calendar day,
and shall be payable monthly on the first business day of the
next succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual
rate of fee, and multiplying this product by the net assets of
the Fund, determined in the manner established by the Board of
Trustees, as of the close of business on the last preceding
business day on which the Fund's net asset value was determined.
8. State Expense Limitation. If for any fiscal year of a
Fund, its aggregate operating expenses ("Aggregate Operating
Expenses") exceed the applicable percentage expense limit
imposed under the securities law and regulations of any state in
which Shares of the Fund are qualified for sale (the "State
Expense Limit"), the Administrator shall pay such Fund the
amount of such excess. For purposes of this State Expense
Limit, Aggregate Operating Expenses shall (a) include (i) any
fees or expense reimbursements payable to Administrator pursuant
to this Agreement and (ii) to the extent the Fund invests all or
a portion of its assets in another investment company registered
under the 1940 Act, the pro rata portion of that company's
operating expenses allocated to the Fund, and (iii) any
compensation payable to Administrator pursuant to any separate
agreement relating to the Fund's investment operations and
portfolio management, but (b) exclude any interest, taxes,
brokerage commissions, and other normal charges incident to the
purchase, sale or loan of securities, commodity interests or
other investments held by the Fund, litigation and
indemnification expense, and other extraordinary expenses not
incurred in the ordinary course of business. Except as
otherwise agreed to by the parties or unless otherwise required
by the law or regulation of any state, any reimbursement by
Administrator to a Fund under this section shall not exceed the
administrative fee payable to Administrator by the Fund under
this Agreement.
Any payment to a Fund by Administrator hereunder shall be
made monthly, by annualizing the Aggregate Operating Expenses
for each month as of the last day of the month. An adjustment
for payments made during any fiscal year of the Fund shall be
made on or before the last day of the first month following such
fiscal year of the Fund if the Annual Operating Expenses for
such fiscal year (i) do not exceed the State Expense Limitation
or (ii) for such fiscal year there is no applicable State
Expense Limit.
9. Non-Exclusivity. The services of Administrator to the
Trust hereunder are not to be deemed exclusive and Administrator
shall be free to render similar services to others.
10. Standard of Care. Neither Administrator, nor any of
its directors, officers or stockholders, agents or employees
shall be liable to the Trust, any Fund, or its shareholders for
any action taken or thing done by it or its subcontractors or
agents on behalf of the Trust or the Fund in carrying out the
terms and provisions of this Agreement if done in good faith and
without negligence or misconduct on the part of Administrator,
its subcontractors, or agents.
11. Indemnification. The Trust shall indemnify and hold
Administrator and its controlling persons, if any, harmless from
any and all claims, actions, suits, losses, costs, damages, and
expenses, including reasonable expenses for counsel, incurred by
it in connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
subcontractors in the performance of its duties hereunder to the
Trust, or as a result of acting upon any instruction believed by
it to have been executed by a duly authorized agent of the Trust
or as a result of acting upon information provided by the Trust
in form and under policies agreed to by Administrator and the
Trust, provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular Fund or group of Funds, such indemnification shall be
only out of the assets of that Fund or group of Funds; (ii) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of Administrator or its
agents or subcontractors, including but not limited to willful
misfeasance, bad faith, or gross negligence in the performance
of their duties, or reckless disregard of their obligations and
duties under this Agreement; and (iii) Administrator shall give
the Trust prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or in the name
of Administrator.
Administrator shall indemnify and hold harmless the Trust
from and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising out
of, or incurred because of, the negligence or misconduct of
Administrator or its agents or subcontractors, provided that
such Trust shall give Administrator prompt notice and reasonable
opportunity to defend against any such claim or action in its
own name or in the name of such Trust.
12. Effective Date, Amendment, and Termination. This
Agreement shall become effective as to any Fund as of the
effective date for that Fund specified in Schedule A hereto and,
unless terminated as hereinafter provided, shall remain in
effect with respect to such Fund thereafter from year to year so
long as such continuance is specifically approved with respect
to that Fund at least annually by a majority of the Trustees who
are not interested persons of Trust or Administrator.
As to any Trust or Fund of that Trust, this Agreement may
be modified or amended from time to time by mutual agreement
between the Administrator and the Trust and may be terminated by
Administrator or Trust by at least sixty (60) days' written
notice given by the terminating party to the other party. Upon
termination as to any Fund, the Trust shall pay to Administrator
such compensation as may be due under this Agreement as of the
date of such termination and shall reimburse Administrator for
its costs, expenses, and disbursements payable under this
Agreement to such date. In the event that, in connection with a
termination, a successor to any of the duties or
responsibilities of Administrator hereunder is designated by the
Trust by written notice to Administrator, upon such termination
Administrator shall promptly, and at the expense of the Trust or
Fund with respect to which this Agreement is terminated,
transfer to such successor all relevant books, records, and data
established or maintained by Administrator under this Agreement
and shall cooperate in the transfer of such duties and
responsibilities, including provision, at the expense of such
Fund, for assistance from Administrator personnel in the
establishment of books, records, and other data by such
successor.
13. Assignment. Any interest of Administrator under this
Agreement shall not be assigned either voluntarily or
involuntarily, by operation of law or otherwise, without the
prior written consent of Trust.
14. Books and Records. Administrator shall maintain, or
oversee the maintenance by such other persons as may from time
to time be approved by the Board of Trustees to maintain, the
books, documents, records, and data required to be kept by the
Trust under the 1940 Act, the laws of the Commonwealth of
Massachusetts or such other authorities having jurisdiction over
the Trust or the Fund or as may otherwise be required for the
proper operation of the business and affairs of the Trust or the
Fund (other than those required to be maintained by any
investment adviser retained by the Trust on behalf of a Fund in
accordance with Section 15 of the 1940 Act).
Administrator will periodically send to the Trust all
books, documents, records, and data of the Trust and each of its
Funds listed in Schedule A that are no longer needed for current
purposes or required to be retained as set forth herein.
Administrator shall have no liability for loss or destruction of
said books, documents, records, or data after they are returned
to such Trust.
Administrator agrees that all such books, documents,
records, and data which it maintains shall be maintained in
accordance with Rule 31a-3 of the 1940 Act and that any such
items maintained by it shall be the property of the Trust.
Administrator further agrees to surrender promptly to the Trust
any such items it maintains upon request, provided that the
Administrator shall be permitted to retain a copy of all such
items. Administrator agrees to preserve all such items
maintained under Rule 31a-1 for the period prescribed under Rule
31a-2 of the 1940 Act.
Trust shall furnish or otherwise make available to
Administrator such copies of the financial statements, proxy
statements, reports, and other information relating to the
business and affairs of each Fund of the Trust as Administrator
may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
15. Non-Liability of Trustees and Shareholders. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not
be binding upon any Trustee, officer, employee, agent or
shareholder of Trust. Neither the authorization of any action
by the Trustees or shareholders of Trust nor the execution of
this Agreement on behalf of Trust shall impose any liability
upon any Trustee or any shareholder.
16. Use of Administrator's Name. The Trust may use its
name and the names of its Funds listed in Schedule A or any
other name derived from the name "Stein Roe & Farnham" only for
so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of Administrator as it relates to the services it
has agreed to furnish under this Agreement. At such time as
this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, Trust
will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with Administrator, or with any
organization which shall have succeeded to Administrator's
business herein described.
17. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 15, 1995
STEINROE MUNLICIPAL TRUST
BY: Timothy K. Armour, President
Attest:
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
BY: Hans P. Ziegler
Chief Executive Officer
Attest:
Keith J. Rudolf,
Secretary
<PAGE>
ADMINISTRATIVE AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are
as follows:
EFFECTIVE DATE
---------------
SteinRoe Municipal Money Market Fund September 28, 1995
Dated: August 15, 1995
<PAGE>
ADMINISTRATIVE AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of the SteinRoe Funds
Administrative Agreement shall be calculated with respect to
each Fund in accordance with the following schedule applicable
to average daily net assets of the Fund:
ADMINISTRATIVE FEE
FUND SCHEDULE B1
- ----------------------------- ------------------------------
SteinRoe Municipal Money 0.250% of first $500 million,
Market Fund 0.200% of next $500 million,
0.150% thereafter
Dated: August 15, 1995
Exhibit 11(c)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to the
incorporation by reference of our report dated August 14,
1995 with respect to SteinRoe Municipal Money Market Fund,
SteinRoe Intermediate Municipals, SteinRoe Managed Municipals
and SteinRoe High-Yield Municipals in the Registration
Statement (Form N-1A) and related Prospectus of SteinRoe
Municipal Trust, filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 19 to the
Registration Statement under the Securities Act of 1933
(Registration No. 2-99356) and in this Amendment No. 20 to
the Registration Statement under the Investment Company Act
of l940 (Registration No. 811-4367).
ERNST & YOUNG LLP
Chicago, Illinois
August 25, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEINROE INTERMEDIATE MUNICIPALS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 198,906
<INVESTMENTS-AT-VALUE> 205,980
<RECEIVABLES> 9,419
<ASSETS-OTHER> 625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216,024
<PAYABLE-FOR-SECURITIES> 3,020
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 515
<TOTAL-LIABILITIES> 3,535
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 206,504
<SHARES-COMMON-STOCK> 19,035
<SHARES-COMMON-PRIOR> 21,643
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,089)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,074
<NET-ASSETS> 212,489
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,059
<OTHER-INCOME> 0
<EXPENSES-NET> 785
<NET-INVESTMENT-INCOME> 10,858
<REALIZED-GAINS-CURRENT> (935)
<APPREC-INCREASE-CURRENT> 3,694
<NET-CHANGE-FROM-OPS> 13,617
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,858
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,010
<NUMBER-OF-SHARES-REDEEMED> 9,229
<SHARES-REINVESTED> 611
<NET-CHANGE-IN-ASSETS> (25,564)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (74)
<GROSS-ADVISORY-FEES> 1,249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,670
<AVERAGE-NET-ASSETS> 219,767
<PER-SHARE-NAV-BEGIN> 11.00
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> STEINROE HIGH-YIELD MUNICIPALS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 274,668
<INVESTMENTS-AT-VALUE> 275,321
<RECEIVABLES> 6,414
<ASSETS-OTHER> 321
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 282,056
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 901
<TOTAL-LIABILITIES> 901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 285,513
<SHARES-COMMON-STOCK> 24,855
<SHARES-COMMON-PRIOR> 27,855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,011)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 653
<NET-ASSETS> 281,155
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,673
<OTHER-INCOME> 0
<EXPENSES-NET> 2,488
<NET-INVESTMENT-INCOME> 17,185
<REALIZED-GAINS-CURRENT> (2,660)
<APPREC-INCREASE-CURRENT> 7,892
<NET-CHANGE-FROM-OPS> 22,417
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,185
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,657
<NUMBER-OF-SHARES-REDEEMED> 9,536
<SHARES-REINVESTED> 879
<NET-CHANGE-IN-ASSETS> (27,026)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,171)
<GROSS-ADVISORY-FEES> 1,588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,488
<AVERAGE-NET-ASSETS> 287,603
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> .66
<PER-SHARE-GAIN-APPREC> .25
<PER-SHARE-DIVIDEND> .66
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> STEINROE MUNICIPAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 151,822
<INVESTMENTS-AT-VALUE> 151,822
<RECEIVABLES> 2,095
<ASSETS-OTHER> 1,020
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,937
<PAYABLE-FOR-SECURITIES> 7,807
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 426
<TOTAL-LIABILITIES> 8,233
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 146,706
<SHARES-COMMON-STOCK> 146,631
<SHARES-COMMON-PRIOR> 165,747
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 146,704
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,757
<OTHER-INCOME> 0
<EXPENSES-NET> 1,102
<NET-INVESTMENT-INCOME> 4,655
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,655
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,238
<NUMBER-OF-SHARES-REDEEMED> 262,355
<SHARES-REINVESTED> 4,001
<NET-CHANGE-IN-ASSETS> (19,116)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 73
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 787
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,222
<AVERAGE-NET-ASSETS> 157,387
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> STEINROE MANAGED MUNICIPALS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 593,248
<INVESTMENTS-AT-VALUE> 622,114
<RECEIVABLES> 30,195
<ASSETS-OTHER> 661
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 652,970
<PAYABLE-FOR-SECURITIES> 21,692
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,548
<TOTAL-LIABILITIES> 23,240
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 608,776
<SHARES-COMMON-STOCK> 71,653
<SHARES-COMMON-PRIOR> 79,022
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,912)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,866
<NET-ASSETS> 629,730
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 42,167
<OTHER-INCOME> 0
<EXPENSES-NET> 4,232
<NET-INVESTMENT-INCOME> 37,935
<REALIZED-GAINS-CURRENT> (2,748)
<APPREC-INCREASE-CURRENT> 7,348
<NET-CHANGE-FROM-OPS> 42,535
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,935
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,297
<NUMBER-OF-SHARES-REDEEMED> (19,210)
<SHARES-REINVESTED> 2,544
<NET-CHANGE-IN-ASSETS> (57,522)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,888)
<GROSS-ADVISORY-FEES> 3,392
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,232
<AVERAGE-NET-ASSETS> 648,406
<PER-SHARE-NAV-BEGIN> 8.70
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> .09
<PER-SHARE-DIVIDEND> .51
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.79
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 18(a)
FUND APPLICATION Please do not remove label
[SteinRoe Mutual Funds logo]
02100 295
Mail to: P.O. Box 804058, Chicago, IL 60680-4058
This application is: [ ] New account [ ] Change to current account
(See Section 12)
_________________________
Account number
If you have questions, please call us toll-free (7 a.m. to 7 p.m. Central
Time) 1-800-338-2550
Liberty Securities Corporation, Distributor
Member SIPC
For office use only ______________________
1 YOUR ACCOUNT REGISTRATION
[ ] INDIVIDUAL OR JOINT* ACCOUNT
_______________________________________________
Owner's name (First, middle initial, last)
_______________________________________________
Joint owner's name (First, middle initial, last)
______________________________ ____________________________________
Owner's Social Security number Joint owner's Social Security number
*Joint tenants with right of survivorship, unless indicated otherwise.
[ ] GIFTS (TRANSEFRS) TO MINORS ACCOUNT
_________________________________________ as custodian for:
Name of one custodian only
_________________________________________ under the
Name of one minor only
__________________ Uniform Gifts (Transfers) to Minors Act.
State of residence
_______________________________ ___________________
Minor's Social Security Number Minor's birth date
[ ] TRUST OR RETIREMENT ACCOUNT
(For SteinRoe IRA or other Defined Contribution plan, please call us
for a separate application.)
_________________________________________
Name of trustee(s)
_________________________________________
_________________________________________
Name of trust
______________ _____________________
Date of trust Trust's tax ID number
_________________________________________
Trust beneficiary
[ ] ORGANIZATION OR OTHER ACCOUNT
Please complete and return the Certificate of Authorization on the
last page of the prospectus.
_______________________________________________
Name of corporation, partnership, estate, etc.
_________________________________________
Tax identification number
2 YOUR ADDRESS
_________________________________________
Street or P.O. box
_________________________________________
_________________________________________
City State Zip code
_________________________________________
Daytime telephone Evening telephone
_____________________________ _________________________
Owner's citizenship Joint owner's citizenship
3 YOUR FUND SELECTION
The initial minimum is $2,500; for UGMAs the minimum is $1,000. If you
elect an automatic investment option, the minimum is $1,000 ($500 for
UGMAs). If you do not specify a Fund, your investment will be in
SteinRoe Cash Reserves, a money market fund.
Money Market Funds Growth and Income Funds
- ------------------ ------------------------
Government Reserves _____ Total Return Fund _____
Cash Reserves _____ Prime Equities _____
Tax-Exempt Funds Growth Funds
- ---------------- -------------
Municipal Money Fund _____ Special Fund _____
Intermediate Municipals _____ Growth Stock Fund _____
Managed Municipals _____ Young Investor Fund _____
High-Yield Municipals _____ Special Venture Fund _____
Capital Opportunities _____
Bond Funds International Fund _____
- ----------
Government Income _____
Intermediate Bond _____
Income Fund _____
Limited Maturity Income _____
4 INVESTMENT METHOD
[ ] BY CHECK: Payable to SteinRoe Funds
[ ] BY EXCHANGE FROM:
__________________________
Name of SteinRoe Fund
___________________________ ____________________________
Account number Number of shares or $ amount
[ ] BY WIRE: Call us for instructions at 1-800-338-2550
5 DISTRIBUTION OPTIONS
We will automatically reinvest all distributions for you. If you want
this option, you do not need to fill out this section. Please check
below if you prefer another option. Distributions may be (A) invested in
shares of another SteinRoe Fund with the same account registration (a
$1,000 minimum applies to the account in which you are investing), (B)
deposited into your checking account or (C) sent by check to your
address.
Dividends Capital gains
(check one or both)
[ ] (A) Distribution Purchase
Invest into _______________ [ ] [ ]
Fund name
___________________________
Account number
from: _____________________
Fund name
___________________________
Account number
[ ] (B) Automatic Deposit direct to my [ ] [ ]
checking account (Also complete
Section 9)
[ ] (C) Send check to my address [ ] [ ]
6 MONEY MARKET FUND OPTIONS
These options are only available for Government Reserves, Cash Reserves
and Municipal Money Market Fund.
[ ] A. TELEPHONE REDEMPTION BY WIRE
Check this box if you wish to redeem shares in your account and
wire the proceeds to your bank account designated in Section 9.
[ ] B. FREE CHECK WRITING
Check this box and complete the signature card below if you wish
to write checks ($50 minimum) on your Money Market Fund account
You must also complete Section 11.
- ------------------------------------------------------------------
*DO NOT DETACH*
State Street Bank and Trust Company Check Writing Signature Card
Check Fund: [ ] Cash Reserves [ ] Government [ ] Municipal Money
Reserves Market Fund
Account name(s) as registered: ____________________________
By signing this card, I authorize State Street Bank and Trust Company to
honor any check drawn by me on an account with the bank and to redeem
and pay to bank shares in my Fund account having a redemption price equal
to the amount of such check. I agree to be subject to the rules
governing the Check Writing Redemption option as in effect from time to
time.
Signature (Sign as you will on checks) Signature guarantee*
_____________________________________ ________________________________
_____________________________________ ________________________________
Number of signatures on each check**: __________
(Office use only) Account no. _________________ Date: ______________
*Required if you are adding these options to an existing account; or if
you are requesting checkwriting for a Trust, Corporation or other
Organization account, guarantee required for any person signing these
cards who has not signed in Section 11. Otherwise a signature guarantee
is not required.
**If left blank, only one signature is required for joint tenant
accounts, but all signatures are required for all other types of
accounts.
(OVER)
*DO NOT DETACH*
You are subject to the Fund and bank rules pertaining to checking
accounts under the privilege as in effect from time to time. For a
joint tenancy with rights of survivorship, each owner appoints each other
owner as attorney-in-fact with power to authorize redemptions on his
behalf by signing checks under the privilege unless the reverse side
indicates all owners must sign checks.
You agree to hold Fund and its transfer agent free from any liability
resulting from payment of any forged, altered, lost or stolen check unless
you notify Fund and bank of such misappropriation no later than 14
days after the earliest of the date on which you (a) discover the
misappropriation or (b) receive a copy of the check cancelled by bank. A
copy of a cancelled check paid during a calendar month is deemed
received 6 days after posting in the U.S. mail to your registered address
with Fund unless you notify Fund of non-receipt by certified mail within
20 days after the close of such month.
You agree to hold Fund and its transfer agent free from any liability for
any other check misappropriated by the same wrongdoer and paid from
proceeds of a redemption made in good faith on or after the date you
notify Fund of the first misappropriated check.
- -----------------------------------------------------------------------
7 TELEPHONE REDEMPTION OPTIONS
A. Telephone Redemption Options. You can redeem shares two ways: with
Telephone Redemption, a check is mailed to your address; with Telephone
Exchange, redemption proceeds are used to purchase shares in another
SteinRoe Fund. Most shareholders prefer these conveniences. They apply
unless you check the boxes below:
I DO NOT WANT:
[ ] Telephone Redemption [ ] Telephone Exchange
[ ] B. Special Redemption Option. This allows you to redeem shares at
any time and have the proceeds sent to your bank checking account.
Check the box and complete Section 9 for this option.
If you decide to add these options at a later date, you will be required
to obtain a signature guarantee.
8 AUTOMATIC INVESTMENT PLAN
A. Regular Investments. This option allows you to make scheduled
investments into your accent(s) directly from your bank checking account
by electronic transfer. To establish a new account with this service, a
$1,000 minimum applies to each account except for a $500 minimum which
applies to a Uniform Gift to Minors account. Please also complete
Section 9.
________________________________________________________________
Fund name Account number Amount ($50 minimum)
________________________________________________________________
Fund name Account number Amount ($50 minimum)
I authorize SteinRoe Mutual Funds to draw on my bank account to purchase
shares for the account(s) listed above: (check one period)
[ ] 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 checking account
on request. Check the box above for this option, which saves you the
trouble and expense of arranging for a wire transfer or writing a check.
(Also complete Section 9.)
9 BANK INFORMATION
Complete this section if you have selected options from Sections 5B, 6A,
7B, 8A or 8B. You must use the same bank checking account for these
options.
________________________________________________________________
Name of bank
________________________________________________________________
Street address of bank
________________________________________________________________
City State Zip code
________________________________________________________________
Name(s) on checking account
______________________________ ________________________________
Checking account number ACH Routing number
(Attach a voided check to this form and verify the above information with
your bank.)
Attach voided check here.
10 AUTOMATIC EXCHANGE PLAN
With this option you can authorize SteinRoe to regularly exchange shares
from one SteinRoe Fund account to another with the same account
registration. A $1,000 minimum applies to each new account.
________________________________________________________________
Redeem shares from (fund name) Account number (or "new" if a
new account
________________________________________________________________
Amount ($50 minimum)
________________________________________________________________
Purchase shares from (fund name) Account number (or "new" if a
new account
Check one period 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 _________________ (list one month)
11 YOUR SIGNATURES
By signing this form, I certify that:
- -I have received the current Fund prospectus and SteinRoe Services
brochure and agree to be bound by their terms as governed by Illinois
law. I have full authority and legal capacity to purchase Fund shares
and establish and use any related privileges.
- -By signing below, I certify under penalties or perjury that:
-All information and certifications on this application are true and
correct including the Social Security or other tax identification
number (TIN) in Section 1.
-If I have not provided a TIN, I have not been issued a number but have
applied (or will apply) for one and understand that if I do not
provide the Fund(s) a TIN within 60 days, the Fund(s) will withhold
31% from all my dividend, capital gain and redemption payments until I
provide one.
-Check one of the following only if applicable:
[ ] The IRS has informed me that I am subject to backup withholding as a
result of a failure to report all interest or dividend income.
[ ] I am a trust or organization that qualifies for the IRS backup
withholding exemption.
- -Unless I have declined the Telephone Redemption and Telephone Exchange
privileges in Section 7A, I have authorized the Fund and its agents to
act upon instructions received by telephone to redeem my shares of the
Fund or to exchange them for shares of another SteinRoe Fund, and I
agree that, subject to the Funds employing reasonable procedures to
confirm that such telephone instructions are genuine, neither the Fund,
nor any of its agents will be liable for any loss, injury, damage, or
expense as a result of acting upon, and will not be responsible for the
authenticity of, any telephone instructions, and will hold the Fund and
its agents 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.
Sign below exactly as your name(s) appears in Section 1.
________________________________________________________________
Signature Date
________________________________________________________________
Title (if owner is an organization)
________________________________________________________________
Signature Date
________________________________________________________________
Title (if owner is an organization)
12 SIGNATURE GUARANTEE (IF REQUIRED)
A signature guarantee is not required if you are establishing a new
account. For existing accounts, a signature guarantee is required if
you are adding or making changes to options listed in Sections 5B, 6, 7,
8 or 9. We are unable to accept notarizations.
Signature(s) Guaranteed by:
________________________________________________________________
Name of institution
________________________________________________________________
Name of authorized officer
________________________________________________________________
Signature of authorized officer
Guarantor's stamp:
