<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. 18 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19 [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 and Secretary Bell, Boyd & Lloyd
SteinRoe Municipal Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street,
Chicago, Illinois 60606 Suite 3200
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)
[XX] on August 7, 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, 1994 was filed on August 22, 1994.
Amending Parts A, B and C and filing exhibits.
<PAGE>
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; back cover
(f) Shareholder Services; Distributions and Income Taxes
(g) Distributions and Income Taxes
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--Special Redemption Privileges, 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; Options and Futures
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) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent; see prospectus: Management of the Funds
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 of Municipal Money; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Options and Futures--
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
STEINROE 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.
A Statement of Additional Information dated August 7, 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 August 7, 1995.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary.........................2
Fee Table ......................6
Financial Highlights............8
The Funds .....................13
How the Funds Invest...........14
Municipal Money Fund........14
Intermediate Municipals ....16
Managed Municipals .........17
High-Yield Municipals.......17
Portfolio Investments and
Strategies..................19
Restrictions on the Funds'
Investments..................22
Risks and Investment
Considerations ..............22
How to Purchase Shares ........24
By Check ...................24
By Wire ....................25
By Electronic Transfer .....25
By Exchange ................26
Purchase Price and
Effective Date.........26
Conditions of Purchase .....26
Purchases Through Third
Parties..................26
How to Redeem Shares...........27
By Written Request .........27
By Exchange ................28
Special Redemption
Privileges ................28
General Redemption
Policies .................30
Shareholder Services ..........32
Net Asset Value ...............34
Distributions and Income Taxes.35
Investment Return .............37
Management of the Funds .......38
Organization and
Description of Shares.......41
Certificate of Authorization ..47
SUMMARY
SteinRoe Municipal Money Market Fund ("Municipal Money Fund"), SteinRoe
Intermediate Municipals ("Intermediate Municipals"), SteinRoe Managed
Municipals ("Managed Municipals"), and SteinRoe High-Yield Municipals
("High-Yield Municipals") are series of SteinRoe 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 August 7,
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
<PAGE> 4
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.
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
<PAGE> 5
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 SteinRoe 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 SteinRoe 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, please feel free
to discuss them with a relationship manager by calling 1-800-338-2550.
<PAGE> 6
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
(as a percentage of average
net assets)
Management and Administrative
Fees ... .50% .56% .52% .54%
12b-1 Fees None None None None
Other Expenses . .20% .15% .13% .22%
---- ---- ---- ----
Total Fund Operating Expenses .70% .71% .65% .76%
---- ---- ---- ----
---- ---- ---- ----
____________________
*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 23 40 88
Managed Municipals 7 21 36 81
High-Yield Municipals 8 24 42 94
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. (Also see Management
of the Funds--Fees and Expenses.)
On August 7, 1995, Municipal Money Fund began investing all of its net
investable assets in the Portfolio and its management fee structure was
changed. As of that date, the Fund began paying the
<PAGE> 7
Adviser an administrative fee based on the Fund's average daily net
assets and the Portfolio began paying the Adviser a management fee based
on the Portfolio's average daily net assets. As of the date of this
change, the Fund's income and expenses reflect its proportionate share
of the Portfolio's income and 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, 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 expenses exceed .7 of 1% of the Fund's annual average net assets
through October 31, 1995, subject to earlier termination by the Adviser
on 30 days' notice. There was no expense absorption for any Fund during
the last fiscal year because the Funds' actual expenses were less than
the amount of the expense limitation. Any such absorption will
temporarily lower a Fund's overall expense ratio and increase a Fund's
overall return to investors.
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.
<PAGE> 8
FINANCIAL HIGHLIGHTS
The tables below reflect the results of operations of the Funds on a
per-share basis for the periods shown. The tables up through the year
ended June 30, 1994 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. The
information for the six months ended December 31, 1994 is unaudited.
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> 9
MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
Years Ended December 31, June 30, Years Ended June 30, Dec. 31,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994
---- ---- ---- ------- ---- ---- ---- ---- ---- ----- ---- --------
<S> <C> <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 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income .054 .047 .041 .040 .021 .056 .054 .046 .032 .020 .019 .013
Distributions from
net investment income (.054) (.047) (.041) (.040) (.021) (.056) (.054) (.046) (.032) (.020) (.019) (.013)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
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 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of expenses
to average net
assets (b) 0.60% 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) 5.45% 4.74% 4.05% 4.08% *4.25% 5.57% 5.40% 4.66% 3.19% 1.96% 1.88% *2.61%
Total return 5.59% 4.82% 4.22% 4.11% *4.29% 5.74% 5.52% 4.74% 3.25% 1.97% 1.90% *2.61%
Net assets, end of
period (000 omitted) $145,291 $152,277 $251,465 $306,971 $294,116 $254,261 $255,953 $237,403 $199,037 $195,887 $165,820 $173,935
</TABLE>
<PAGE> 10
INTERMEDIATE MUNICIPALS
<TABLE>
<CAPTION>
Six Six
Period Months Months
Ended Years Ended Ended Ended
Dec. 31, December 31, June 30, Years Ended June 30, Dec. 31,
1985 (a) 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994
------- ---- ---- ------- ---- ----- ---- ---- ---- ---- --------
<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 .26
Net realized and
unrealized gains
(losses) on
investments .14 .62 (.38) .06 .07 .07 .22 .50 .63 (.39) (.30)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .26 1.20 .19 .35 .69 .70 .84 1.07 1.17 .14 (.04)
Distributions
Net investment income (.12) (.58) (.57) (.29) (.62) (.63) (.62) (.57) (.54) (.53) (.26)
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) (.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
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 $10.70
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
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% *0.75%
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% *4.95%
Portfolio turnover
rate 0% 10% 49% **22% 83% 141% 96% 109% 96% 55% **26%
Total return **2.61% 12.09% 1.93% **3.45% 6.85% 6.85% 8.18% 10.31% 10.92% 1.16% **(0.29%)
Net assets, end of
period (000 omitted) $22,973 $104,750 $96,143 $97,308 $91,304 $98,918 $118,651 $165,401 $245,441 $238,053 $216,030
</TABLE>
<PAGE> 11
MANAGED MUNICIPALS
<TABLE>
<CAPTION>
Six Six
Months Months
Ended Ended
Years Ended December 31, June 30, Years Ended June 30, Dec. 31,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 7.71 $ 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 .67 .68 .67 .61 .30 .61 .59 .56 .55 .52 .50 .25
Net realized and
unrealized gains
(losses) on
investments .18 1.07 1.21 (.59) .11 .44 (.06) .19 .46 .42 (.51) (.34)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total from investment
operations .85 1.75 1.88 .02 .41 1.05 .53 .75 1.01 .94 (.01) (.09)
Distributions
Net investment income (.67) (.68) (.67) (.61) (.30) (.61) (.59) (.56) (.55) (.52) (.50) (.25)
Net realized capital
gains -- (.03) (.92) (.13) -- (.03) (.25) (.05) (.20) (.15) (.11) --
In excess of realized
gains -- -- -- -- -- -- -- -- -- -- (.06) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total distributions (.67) (.71) (1.59) (.74) (.30) (.64) (.84) (.61) (.75) (.67) (.67) (.25)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
NET ASSET VALUE,
END OF PERIOD $ 7.89 $ 8.93 $ 9.22 $ 8.50 $ 8.61 $ 9.02 $ 8.71 $ 8.85 $ 9.11 $ 9.38 $ 8.70 $ 8.36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Ratio of expenses to
average net assets 0.64% 0.65% 0.65% 0.65% *0.65% 0.65% 0.66% 0.66% 0.64% 0.64% 0.65% *0.66%
Ratio of net
investment income
to average net
assets 8.74% 8.11% 7.04% 6.99% *7.03% 7.00% 6.66% 6.39% 6.17% 5.65% 5.45% *5.90%
Portfolio turnover
rate 190% 113% 92% 113% **28% 102% 95% 203% 94% 63% 36% **9%
Total return 11.63% 23.00% 21.70% 0.39% **4.90% 12.69% 6.15% 8.92% 11.95% 10.79% (0.29%) **(1.01%)
Net assets, end
of period
(000 omitted) $242,693 $357,360 $523,947 458,170 $467,595 $514,898 $584,081 $655,930 $725,472 $776,694 $687,252 $604,376
</TABLE>
<PAGE> 12
HIGH-YIELD MUNICIPALS
<TABLE>
<CAPTION> Six Six
Period Months Months
Ended Years Ended Ended Ended
Dec. 31, December 31, June 30, Years Ended June 30, Dec. 31,
1984(a) 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1994
------- ---- ---- ---- ------- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $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 .73 .94 .90 .87 .44 .88 .85 .82 .80 .71 .67 .33
Net realized and
unrealized gains
(losses) on
investments .02 1.08 1.11 (.89) .31 .63 .02 .17 .22 .18 (.54) (.42)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total from investment
operations .75 2.02 2.01 (.02) .75 1.51 .87 .99 1.02 .89 .13 (.09)
Distributions
Net investment income (.73) (.94) (.90) (.87) (.44) (.88) (.85) (.82) (.80) (.71) (.67) (.33)
Net realized capital
gains -- -- (.15) (.11) -- (.03) (.21) (.16) (.18) (.17) (.17) --
In excess of realized
gains -- -- -- -- -- -- -- -- -- -- (.07) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total distributions (.73) (.94) (1.05) (.98) (.44) (.91) (1.06) (.98) (.98) (.88) (.91) (.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
NET ASSET VALUE,
END OF PERIOD $10.02 $11.10 $12.06 $11.06 $11.37 $11.97 $11.78 $11.79 $11.83 $11.84 $11.06 $10.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Ratio of net expenses
to average net
assets (b) *0.80% 0.80% 0.76% 0.73% *0.76% 0.73% 0.71% 0.71% 0.69% 0.73% 0.76% *0.89%
Ratio of net investment
income to average
net assets (c) *9.60% 8.89% 7.77% 8.20% *7.87% 7.54% 7.22% 7.00% 6.75% 6.04% 5.76% *5.94%
Portfolio turnover
rate **68% 46% 34% 110% **53% 208% 261% 195% 88% 75% 36% **7%
Total return **7.97% 20.96% 18.64% (0.16%) **6.89% 13.79% 7.59% 8.79% 9.01% 7.88% 0.95% **(0.88%)
Net assets,
end of period
(000 omitted) $32,780 $99,796 $225,883 181,600 $201,274 $277,620 $310,582 $373,948 $410,613 $359,103 $308,181 $264,801
<PAGE> 13
<FN>
*Annualized.
**Not annualized.
(a) The Funds commenced operations on the following dates: Intermediate
Municipals, October 9, 1985 and High-Yield Municipals, March 5, 1984.
(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, 0.70%, 0.72%, and 0.70% for the years
ended December 31, 1984, 1985 and 1986, respectively, and 0.75% for
the six months ended December 31, 1994; 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 for High-
Yield Municipals, 1.43% for the period ended December 31, 1984 and
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 SteinRoe Municipal Money
Market Fund ("Municipal Money Fund"), SteinRoe Intermediate Municipals
("Intermediate Municipals"), SteinRoe Managed Municipals ("Managed
Municipals"), and SteinRoe 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 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 SteinRoe 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
<PAGE> 14
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 August 7, 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
<PAGE> 15
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 the Board of Trustees of Base Trust believes are reasonably
designed to stabilize its price per share at $1.00. These procedures
and the 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 the Portfolio 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 the Board of Trustees of Base Trust,
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
- ----------------------
/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> 16
["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.
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
<PAGE> 17
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
<PAGE> 18
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 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, 1994, the Fund's
<PAGE> 19
portfolio was invested, on average, as follows: high-quality short-term
instruments, 2.72%; AAA, 9.34%; AA, 19.54%; A, 33.20%; BBB, 18.08%; BB,
3.40%; CC, 0.36%; and unrated, 13.36%. 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
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
<PAGE> 20
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.
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
<PAGE> 21
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.
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' 15% 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
<PAGE> 22
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; 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.
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
<PAGE> 23
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
<PAGE> 24
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
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/
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
SteinRoe Fund. The initial purchase minimum per Fund account is $2,500;
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. 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 SteinRoe
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
- ---------------------
/4/ The policy expressed in this sentence is a fundamental policy of
Municipal Money Fund, the Portfolio, and Managed Municipals.
<PAGE> 25
number, and the name in which your account is registered. 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
Boston, Massachusetts
Attention: Custody
Fund No. ____; SteinRoe _______
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.
<PAGE> 26
BY EXCHANGE. You may purchase shares by exchange of shares from another
SteinRoe 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.
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
<PAGE> 27
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. The Fund may pay a portion of
those fees not to exceed the fees and expenses the Fund would pay to its
transfer agent if the shares held in nominee name were registered on the
Fund's books in the individual names of the owners of such shares. The
balance of 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
<PAGE> 28
on accounts not registered in their names.
BY EXCHANGE. You may redeem all or any portion of your Fund shares and
use the proceeds to purchase shares of any other SteinRoe 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 SteinRoe 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 SteinRoe 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 SteinRoe 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 SteinRoe 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.)
<PAGE> 29
Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $1,000 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
SteinRoe 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 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 SteinRoe
<PAGE> 30
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 (Municipal Money Fund accounts
only). 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.
<PAGE> 31
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.
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 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
<PAGE> 32
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.
Shares in any account you maintain with a Fund or any of the other
SteinRoe Funds may be redeemed to the extent necessary to reimburse any
SteinRoe Fund for any loss it sustains that is caused by you (such as
losses from uncollected checks and electronic transfers or any SteinRoe
Fund liability under the Internal Revenue Code provisions on backup
withholding).
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 trademark] 24-HOUR INFORMATION SERVICE. To
access the SteinRoe Funds-on-Call [registered trademark] automated
telephone service, just call 1-800-338-2550 on any touch-tone telephone
and follow the recorded instructions. Funds-on-Call [registered
trademark] provides yields, prices, latest dividends, account balances,
last transaction, and other information 24 hours a day, seven days a
week.
<PAGE> 33
FUNDS-ON-CALL [registered trademark] AUTOMATED TELEPHONE TRANSACTIONS.
If you have established the Funds-on-Call [registered trademark]
transaction privilege (Funds-on-Call [registered trademark] 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.)
STEINROE COUNSELOR [service mark] PROGRAM. The Adviser offers a
SteinRoe Counselor [service mark] and a SteinRoe Counselor Preferred
[service mark] program. The programs are designed to provide investment
guidance in helping investors to select a portfolio of SteinRoe Mutual
Funds. The SteinRoe 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
SteinRoe Fund account. Before establishing this option, you should
obtain and read carefully the prospectus of the SteinRoe 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 and Telephone Exchange
Privilege--established automatically when you open your account unless
you decline them on your Application ($1,000 minimum). (See How to
<PAGE> 34
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). (This Privilege is available only
for Municipal Money Fund accounts.)
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 SteinRoe 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. In the case of Municipal
<PAGE> 35
Money Fund, its 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 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 appropriate 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 the Board
of Base Trust.
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
<PAGE> 36
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 SteinRoe Fund, or (4) applied to purchase shares in a
SteinRoe 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.
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.
<PAGE> 37
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
<PAGE> 38
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, 1994, were 2.84% and 2.89%,
respectively. To obtain current yield information, you may call 1-800-
338-2550 or write to the address shown on the back cover.
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
<PAGE> 39
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. Jill K. Netzel has been portfolio manager of
Municipal Money Fund since August 1994 and of the Portfolio since August
1995. A vice-president of the Trust, she has been associated with the
Adviser since 1989 and was previously employed by Continental Bank,
Smith Barney Harris Upham, and Shearson. Ms. Netzel received her B.S.
degree from the University of South Dakota in 1981. Ms. Netzel is
assisted in managing the Fund and the Portfolio by Joanne T.
Costopoulos.
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, 1994, was
responsible for managing $995 million in mutual fund assets. Ms. McCart
is assisted in managing the Funds by Ms. Costopoulos.
<PAGE> 40
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 $413 million in mutual fund
assets as of June 30, 1994, she joined the Adviser 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.
Prior to August 7, 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 August 7, 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% of the first $500 million, .20 of 1% of the next $500
million, and .15 of 1% thereafter.
Beginning August 7, 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, 1994, the annualized advisory fees
for Municipal Money Fund, Intermediate Municipals, Managed Municipals
and High-Yield Municipals were .50%, .56%, .52%,
<PAGE> 41
and .54% 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.
Please refer to Fee Table for information on the Adviser's undertaking
to limit the Funds' expenses.
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. 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
<PAGE> 42
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
<PAGE> 43
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.
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
<PAGE> 44
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 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
<PAGE> 45
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.
<PAGE> 46
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> 47
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 SteinRoe Funds, 1-800-338-2550 toll-free.
The undersigned hereby certifies that he is the duly elected Secretary
of __________________________________________________
(the "Corporation") 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.
<PAGE> 48
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___.
Corporate _________________________
Seal Secretary
Here
_________________________
Signature Guarantee*
*Only required if the person signing the Certificate is the only person
named as "Authorized Person."
<PAGE> 49
STEINROE & FARNHAM FUNDS LOGO]
THE STEINROE FUNDS
SteinRoe Government Reserves
SteinRoe Cash Reserves
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe 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 August 7, 1995
STEINROE MUNICIPAL TRUST
STEINROE MUNICIPAL MONEY MARKET FUND
STEINROE INTERMEDIATE MUNICIPALS
STEINROE MANAGED MUNICIPALS
STEINROE 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 SteinRoe Municipal Trust ("Municipal Trust"). Each series of Municipal
Trust other than SteinRoe 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 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 August 7, 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
Investment Risks...........................................20
Purchases and Redemptions..................................21
Management.................................................22
Financial Statements.......................................24
Principal Shareholders.....................................25
Investment Advisory Services...............................25
Distributor................................................28
Transfer Agent.............................................28
Custodian..................................................29
Independent Auditors.......................................29
Portfolio Transactions.....................................29
Additional Income Tax Considerations.......................31
Investment Performance.....................................32
Additional Information on Net Asset Value--Municipal
Money Fund and the Portfolio............................39
Glossary...................................................40
Appendix--Ratings Of Municipal Securities..................44
<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 SteinRoe Municipal Money Market Fund, SteinRoe
Intermediate Municipals, SteinRoe Managed Municipals, and SteinRoe High-
Yield Municipals, respectively. The "Portfolio" refers to SR&F Municipal
Money Market Portfolio.
Currently, four series of Municipal Trust and two 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. The series 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.
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
<PAGE> 3
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 August 7, 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
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 Moody's Investors Service, Inc. ("Moody's"),
VMIG 1 or VMIG 2 /1/; (ii) notes rated
- -------------------
/1/ The Board 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 Boards 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.
<PAGE> 4
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.
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.
- -------------------
/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
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 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.
<PAGE> 6
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 $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
- -----------------------
/3/ In the case of Municipal Money Fund, the Portfolio, and Managed
Municipals, the policies described in this paragraph are fundamental.
<PAGE> 7
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
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.
<PAGE> 8
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. 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.
<PAGE> 9
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 Board of Trustees is required
to review such ratings with respect to Municipal Money Fund and the
Portfolio.
<PAGE> 10
ZERO COUPON BONDS
Each Fund 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 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
<PAGE> 11
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 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.
<PAGE> 12
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 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
- ----------------------------
/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
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, 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.
<PAGE> 14
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 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
<PAGE> 15
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.
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
<PAGE> 16
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 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.
<PAGE> 17
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;
(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,
- ------------------------
/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
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. 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);
(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,
<PAGE> 19
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 15% of its net assets (taken at market value at
the time of each purchase) in 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 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.
<PAGE> 20
INVESTMENT RISKS
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 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
<PAGE> 21
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.
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.
<PAGE> 22
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 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>
NAME POSITION(S) HELD WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------ ------------------------------- ----------------------------------------------
<S> <C> <C>
Gary A. Anetsberger (5) Senior Vice-President; Vice-President of Stein Roe & Farnham Incorporated (the
Controller "Adviser") since January, 1991; associate of the Adviser prior
thereto
Timothy K. Armour President; Trustee President of the Mutual Funds division of the Adviser and
(1)(2)(4)(5) Director of the Adviser since June, 1992; senior vice president
and director of marketing of Citibank Illinois prior thereto
Jilaine Hummel Bauer (5) Executive Vice-President Senior Vice President (since April, 1992) and Assistant Secretary
Secretary (since May, 1990) of the Adviser; vice president of the Adviser
prior thereto
Kenneth L. Block (3)(5) Trustee Chairman Emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd (3)(4)(5) 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
<PAGE> 23
Thomas W. Butch Vice-President Senior Vice President of the Adviser since September, 1994; first
vice president, corporate communications, of Mellon Bank
Corporation prior thereto
N. Bruce Callow(5) 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) Trustee Senior Vice President of Liberty Financial Companies, Inc. (the
indirect parent of the Adviser)
Joanne T. Costopoulos Vice-President Vice President of the Adviser since January, 1994; associate of
the Adviser prior thereto
Philip D. Hausken (5) Vice-President Corporate Counsel for the Adviser since July, 1994; assistant
regional director, midwest regional office of the Securities and
Exchange Commission prior thereto
Kenneth A. Kalina (5) Treasurer Associate of the Adviser
Stephen P. Lautz (5) Vice-President Vice President of the Adviser since May, 1994; associate of the
Adviser prior thereto
Lynn C. Maddox Vice-President Senior Vice President of the Adviser
Anne E. Marcel 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 Vice-President Senior Vice President of the Adviser since January, 1991; vice
president of the Adviser prior thereto
Francis W. Morley Trustee Chairman of Employer Plan Administrators and Consultants Co.
(2)(3)(5) (designer, administrator, and communicator of employee benefit
plans)
Charles R. Nelson (3)(4) Trustee Van Voorhis Professor of Political Economy of the University of
(5) Washington
Jill K. Netzel Vice-President Associate of the Adviser
Nicolette D. Parrish (5) Vice-President; Assistant Associate of the Adviser
Secretary
Janet B. Rysz (5) Assistant Secretary Assistant Secretary of the Adviser
Thomas P. Sorbo 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) Trustee Private investor
<PAGE> 24
Hans P. Ziegler (5) 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
Anthony G. Zulfer, Jr. Trustee Emeritus Senior Vice President of the Adviser
<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.
The only compensation paid to the trustees and officers of Municipal
Trust for their services as such consists of attendance fees paid to
trustees who are not "interested persons" of the Trust or the Adviser. The
fee schedule provides for 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 trustees received an aggregate of $71,000 in attendance fees
for the fiscal year ended June 30, 1994.
FINANCIAL STATEMENTS
Please refer to the Funds' Financial Statements (balance sheets and
schedules of investments as of June 30, 1994 and the statements of
operations, changes in net assets, and notes thereto) and the report of
independent auditors contained in the Funds' June 30, 1994 Annual Report and
to the Funds' December 31, 1994 Financial Statements (unaudited balance
sheets and schedules of investments as of December 31, 1994 and the
statements of operations, changes in net assets, and notes thereto)
contained in the December 31, 1994 semiannual report of the Funds. The
Financial
<PAGE> 25
Statements and the report (but no other material from the Annual Report and
the Semiannual Report) are incorporated herein by reference. The Annual
Report and the Semiannual Report may be obtained at no charge by telephoning
1-800-338-2550.
PRINCIPAL SHAREHOLDERS
As of August 1, 1994, 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 11.4% 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
AS OF 7/31/94* 8/1/94
Shares Held Percent Shares Held Percent
Municipal Money Fund 72,410,753 44.1% 2,571,403 **
Intermediate Municipals 9,871,301 45.8% 362,112 **
Managed Municipals 25,295,293 32.2% 497,216 **
High-Yield Municipals 9,886,118 35.8% 137,296 **
_________________
*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 August 7, 1995, the Adviser also
served as investment adviser to Municipal Money Fund. On that date,
however, the Fund began investing in the Portfolio and thereafter the
Adviser no longer provided investment advisory services directly to the
Fund. The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), the Funds' transfer agent, which in turn is a wholly-owned indirect
subsidiary of Liberty Mutual Insurance 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 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
<PAGE> 26
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 December 31, 1994,
the Adviser managed over $22.8 billion in assets: over $5.4 billion in
equities and over $17.4 billion in fixed-income securities (including $2.3
billion in municipal securities). The $22.8 billion in managed assets
included over $6.4 billion held by open-end mutual funds managed by the
Adviser (approximately 25% of the mutual fund assets were held by clients of
the Adviser). These mutual funds were owned by over 149,000 shareholders.
The $6.4 billion in mutual fund assets included over $504 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
December 31, 1994, the Adviser employed 20 research analysts and 42 account
managers. The average investment-related experience of these individuals
was 19 years.
SteinRoe Counselor [service mark] and SteinRoe Counselor Preferred
[service mark] 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 SteinRoe Counselor [service mark] are free to self direct
their investments while considering the Adviser's recommendations;
shareholders participating in SteinRoe Counselor Preferred [service mark]
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 Counselor [service mark] representative. Other
distinctive services include specially designed account statements with
portfolio performance and transaction data, newsletters, and regular
investment, economic, and market updates. A $50,000 minimum investment is
required to participate in either program.
Please refer to the description of the Adviser, advisory agreements,
advisory fees, expense limitations, and transfer agency services under
Management of the Funds 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.
<PAGE> 27
YEAR ENDED YEAR ENDED YEAR ENDED
FUND TYPE OF PAYMENT 6/30/94 6/30/93 6/30/92
- --------------- --------------- ---------- ---------- ---------
Municipal Money
Fund Advisory fee $ 998,500 $1,072,504 $1,155,334
Intermediate
Municipals Advisory fee 1,415,654 1,174,359 827,337
Managed
Municipals Advisory fee 3,936,931 3,908,586 3,643,225
High-Yield
Municipals Advisory fee 1,846,679 2,034,606 2,132,505
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.
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 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
<PAGE> 28
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.
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 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. In addition, each Fund reimburses SSI
for any charges for certain services provided to it by DST Systems, Inc. in
connection with transfer agency services to the Funds. The Board of
Trustees believes the charges by SSI are comparable to those of other
companies performing similar services. (See Investment Advisory Services.)
CUSTODIAN
State Street Bank and Trust Company, 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,
<PAGE> 29
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.
High-Yield Managed Intermediate
Municipals Municipals Municipals
---------- --------- -----------
Total brokerage commissions
paid during year ended
6/30/94 $110,292 $38,028 -0-
Number of futures contracts 7,250 2,500 -0-
Total brokerage commissions
paid during year ended
6/30/93 $48,564 $29,904 -0-
Total brokerage commissions
paid during year ended
6/30/92 $8,390 -0- -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
<PAGE> 30
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 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
<PAGE> 31
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. 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.
<PAGE> 32
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.
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
<PAGE> 33
For example, the yields of Municipal Money Fund for the seven-day
period ended June 30, 1994 were:
0.000392458 365
----------- ---
Current Yield = $1.00 x 7 = 2.05%
[1+$0.000392458]365/7
---------------------
Effective Yield = $1.00 - 1 = 2.07%
Tax-Equivalent Current Yield = 3.39% (assuming 39.6% tax rate)
Tax-Equivalent Effective Yield = 3.42% (assuming 39.6% tax rate)
The average dollar-weighted portfolio maturity for the seven days ended
June 30, 1994 was 45 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.
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.)
<PAGE> 34
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, 1994 were:
Intermediate Municipals
Yield = 4.60%
Tax-Equivalent Yield = 7.61%
(assuming 39.6% tax rate)
Managed Municipals
Yield = 5.30%
Tax-Equivalent Yield = 8.78%
(assuming 39.6% tax rate)
High-Yield Municipals
Yield = 5.42%
Tax-Equivalent Yield = 8.97%
(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
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,
1994 were:
TOTAL TOTAL RETURN AVERAGE ANNUAL
FUND RETURN PERCENTAGE TOTAL RETURN
- -------------------- ------ ------------ --------------
Municipal Money Fund
1 year $1,019 1.90% 1.90%
5 years 1,186 18.57 3.47
10 years 1,499 49.91 4.13
Intermediate Municipals
1 year 1,012 1.16 1.16
5 years 1,431 43.07 7.43
<PAGE> 35
*Life of Fund 1,854 85.40 7.33
Managed Municipals
1 year 997 (0.29) (0.29)
5 years 1,430 43.00 7.42
10 years 2,849 184.85 11.04
High-Yield Municipals
1 year 1,010 0.95 0.95
5 years 1,390 38.96 6.80
10 years 2,705 170.54 10.46
_____________________
*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 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)
<PAGE>
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 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
<PAGE> 37
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
<PAGE> 38
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.
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
<PAGE> 39
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 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 SteinRoe Counselor [service mark] and the SteinRoe 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
<PAGE> 40
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 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
<PAGE> 41
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
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
<PAGE> 42
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.
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
<PAGE> 43
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 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
<PAGE> 44
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.
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.
<PAGE>
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.
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.
<PAGE> 46
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 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
<PAGE> 47
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, 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+).
<PAGE> 48
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>
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 12/31/94, balance
sheets as of 12/31/94, statements of operations for the year
ended 12/31/94, statements of changes in net assets for each
of the two years in the period ended 12/31/94, and notes
thereto) and report of independent auditors are incorporated
by reference to Registrant's 12/31/94 semiannual 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.
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.
(b) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series SteinRoe
Intermediate Municipals.
(c) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series SteinRoe
Managed Municipals.
(d) Investment advisory agreement dated 11/1/94 between
Registrant and the Adviser relating to the series SteinRoe
High-Yield Municipals.
(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.
<PAGE>
6. (a) Form of underwriting agreement between Registrant and
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 December 31, 1987 as amended
through May 8, 1995.
9. (a) Transfer agency agreement between Registrant and SteinRoe
Services Inc. as amended through 5/1/95.
(b) Form of Accounting and Bookkeeping Agreement between the
Registrant and the Adviser. (Exhibit 9(e) to PEA #17.)*
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.)*
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.
<PAGE>
(b) Financial Data schedule relating to the series SteinRoe
Intermediate Municipals.
(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. (Exhibit 18(a) to PEA #17.)*
(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 May 25, 1995
SteinRoe Intermediate Municipals 3,055
SteinRoe High-Yield Municipals 6,459
SteinRoe Municipal Money Market Fund 3,565
SteinRoe Managed Municipals 11,030
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 misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
<PAGE>
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
<PAGE>
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid by a trustee,
officer, or controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, 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 January 26, 1994, 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 the omission or alleged omission to state therein a
material fact required to be stated therein or
<PAGE>
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 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. 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, Hans P. Ziegler,
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. Ziegler was president and chief executive officer of the Pitcairn
Financial Management Group to July, 1993; 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 PAST
CURRENT POSITION 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
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; Vice-President
Secretary
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; Vice-President
Secretary
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; Vice-President
Secretary
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
SteinRoe Municipal Trust
Gary A. Anetsberger Senior Vice-President;
Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Vice-President
Secretary
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
<PAGE>
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:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------ ----------------------------- --------------
Kenneth R. Leibler Chairman of the Board; Director None
Ronald S. Robbins Executive Vice Chairman; Director None
Alan H. Blank Vice Chairman None
Ralph E. Nixon President None
John T. Treece, Jr. Senior Vice President & Treasurer None
John W. Reading Sr. Vice President & Assistant
Secretary None
Valerie A. Arendell Senior Vice President None
Peter J. Babnis Senior Vice President None
John B. Knight Senior Vice President None
Stephen M. O'Neill Senior Vice President None
Robert L. Spadafora Senior Vice President None
Paul G. Martins Vice President & Chief
Financial Officer None
Diane L. Basler Vice President None
Jilaine Hummel Bauer Vice President Exec. V-P &
Secretary
Lindsay Cook Vice President Trustee
Patricia O.
Baeckstrom Vice President None
Susan Sweeney Vice President None
Glenn E. Williams Assistant Vice President None
John A. Benning Secretary None
Charles A. Merritt Assistant Treasurer &
Assistant Secretary 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.
<PAGE>
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>
February 18, 1995
To Our Shareholders
We are pleased to present this semiannual report for SteinRoe's Tax-Exempt
Funds: Municipal Money Market Fund, Intermediate Municipals, Managed
Municipals, and High-Yield Municipals.
Market Review
The year 1994 was not a kind one for stocks or for bonds. According to the
Wall Street Journal, for the first time since 1974, both stock and bond funds
declined in value during the same year.*
The economy chugged along at a pace significantly stronger than most anyone
had predicted. Consumer confidence was fairly strong, personal consumption
spending was brisk in the last half of the year, and manufacturing trended
higher.
Bond market volatility during the year was fueled by the Federal Reserve
Board, which raised rates six times during the year to keep inflation
contained. The federal funds rate rose a total of 2.5 percentage points during
the year. And in the equity arena, the S&P 500 fluctuated in a very narrow
range for an unprecedented third consecutive year.(1)
1995 Outlook
Although 1994 wasn't exactly a year of good investment news, 1995 should be a
better, albeit an interesting, year. Although the year opened on a relatively
weak note, we expect stronger performance to emerge later in the year. With
the exception of a few cautious notes, the year 1995 could outshine 1994 for a
number of reasons:
* Reduced federal deficit. As a result of the new Republican leadership in
Congress, we look for reductions in government expenditures, leading to an
improved outlook for the federal deficit--and for the bond market.
* Lower long-term interest rates. We believe long-term rates peaked in 1994,
and despite some additional short-term volatility, we look for rates to trend
down modestly in 1995 as the markets realize that growth is slowing and
inflation fears have been exaggerated.
* Short-term interest rates. Although further rate increases are expected
during early 1995 (the Fed raised rates by .50 percent in late January), we
believe rates will stabilize later in the year.
* Stock market. Although we don't expect the onset of a traditional bear
market, a cautious near-term attitude continues to seem warranted. We may see
some additional short-term price volatility.
<PAGE>
* Higher demand for U.S. Exports. Growth should benefit from higher demand for
U.S. exports as the economies of our trading partners improve in 1995.
* Continued low inflation. The low value of the dollar and more open world
trade should heighten price competition and help contain inflation.
* Growth stocks favored. There may be a further shift in investor favor from
cyclical stocks toward growth stocks, which have underperformed for much of
the past three years.
* Housing market. Higher mortgage rates will continue to depress the housing
market and housing-purchase related consumption.
Remember the Basics
While the markets are experiencing the kind of short-term volatility we've
seen over the last year or so, we believe it is wise to stick to the basics.
Maintain a well-diversified portfolio. Take advantage of the power of time;
long-term objectives give you time to ride out the markets' lows. Invest
regularly. And, above all, don't panic. If you stick to a disciplined
investment plan, you should find it easier to meet your financial goals.
As always, we thank you for investing with SteinRoe.
Sincerely,
Timothy K. Armour
President, SteinRoe Mutual Funds
* Source: Wall Street Journal, Mutual Fund Quarterly, January 6, 1995, page
R1.
(1) The S&P 500 is not available for direct investment; it is an unmanaged
index generally representative of the U.S. stock market.
Reports from our portfolio managers follow.
<PAGE>
Municipal Money Market Fund
As a result of the Federal Reserve Board's tightening actions, short-term
rates increased substantially during the six-month period ended December 31,
1994. The seven-day yield on the Municipal Money Market Fund portfolio was
4.09 percent on December 31, 1994, up from 2.05 percent on June 30, reflecting
the general rise in short-term rates. However, part of the increase in
tax-exempt rates can also be attributed to year-end selling. For investors in
the 39.6 percent income tax bracket, the December 31 taxable-equivalent yield
was 6.77 percent; for the 31 percent tax bracket, the taxable equivalent yield
was 5.93 percent.*
Interest rate increases during the last half of 1994 resulted in a strong
demand for money market instruments. Many investors sought the relative safety
of short-term issues to reduce price volatility in their portfolios.
During the last half of 1994, we increased the Fund's holdings of Alternative
Minimum Tax (AMT) securities from 18 percent on June 30 to 38 percent on
December 31 to capture the attractive yield differential between AMT and
non-AMT paper. We also purchased tax and revenue anticipation notes, which
were attractive on an after-tax basis, increasing our holdings from 1.8
percent to 14.5 percent.
During the six-month period, we maintained a relatively low dollar-weighted
average portfolio maturity, in light of the potential for additional rate
increases by the Fed. Also, in anticipation of further tightening, we
increased holdings of variable rate notes. Portfolio investment in these notes
was 50.5 percent on June 30, but had risen to 62.7 percent by December 31. As
a result of these moves, our dollar-weighted average portfolio maturity fell
from 50 days on June 30, to 46 days on December 31.
We anticipate additional interest rate increases early in 1995. Continued
reductions in new issue supply--along with the significant amount of cash
expected from coupon payments, pre-refunded bonds and maturities--should keep
spreads at a rich premium to treasuries. We will continue to look for
opportunities to increase holdings of AMT issues to take advantage of higher
yields. Using the proceeds from maturing notes, we will selectively purchase a
limited number of six-month and one-year notes. We currently hold a
significant amount of variable rate paper in anticipation of additional Fed
tightening and higher short-term rates. However, if rates stabilize, we plan
to extend our average maturity. As always, we will continue to work closely
with credit research to maintain high portfolio quality.
Jill Netzel, portfolio manager
* Current yield (annualized), which will fluctuate, is net of all fees and
expenses and represents dividends payable to shareholders for the last seven
days of the reporting period. Income may be subject to state and local taxes
and federal alternative minimum tax. The maximum federal tax rate for
individual and married taxpayers filing jointly is 39.6 percent for taxable
income greater than $250,000; the federal tax rate of 31 percent applies to
taxable income of $55,100--$115,000 for singles, $91,850--$140,000 for married
taxpayers and $78,700--$127,500 for heads of households. The Fund strives to
maintain a $1 per share net asset value. However, an investment in the Fund is
neither insured nor guaranteed, and there is no assurance that the Fund will
be able to maintain a stable net asset value of $1 per share. The Fund's
adviser currently limits expenses to 0.70 percent of average net assets.
Absent this limitation, the current seven-day tax--equivalent and tax-exempt
yields would have been 6.72 percent and 4.06 percent, respectively, on
December 31 and unchanged at June 30.
<PAGE>
Intermediate Municipals
Municipal securities fell into disfavor among investors during the six-month
period ended December 31, 1994, resulting in a severe erosion of tax-exempt
asset levels. The municipal market started the period in good "technical"
condition--low new-issue volume and strong demand. However, concerns about
rising interest rates, price volatility, and the continued market erosion of
"market discount" bonds (affected by the adverse tax treatment of a new law
that treats gains earned on market discount bonds as ordinary income) caused
many shareholders to abandon the municipal market. As a result, mutual funds
were forced to liquidate portions of their holdings to meet significant
shareholder redemptions. As Wall Street sought to minimize its inventories
before year-end and rising interest rates continued to take their toll, the
demand for municipal securities came to a standstill.
By the end of the 6-month period, however, we began to see a reversal of
sentiment towards municipals. Investors began to focus on the attractiveness
of tax-exempts over taxables, particularly the attractive yield differential
offered by municipal securities in the 10- to 15-year range.
Intermediate Municipals' six-month return of -0.29 percent was slightly better
than the -0.89 percent return for the Lehman Municipal 10-Year index, which
consists of investment-grade municipal bonds with maturities of 1 to 10
years.** The Fund was able to outperform the index due to its lower duration
(a measure of price volatility). In an attempt to lower the effects of market
volatility on the Fund's portfolio, we maintained our defensive posture and
shortened the Fund's duration from 6.03 years on June 30 to 5.5 years on
December 31. When interest rates rise, portfolios with shorter durations
generally perform better than portfolios with longer durations.
When quality spreads widened and good values were available during the
six-month period, we sold AA-rated issues and purchased A-rated and Baa-rated
paper to take advantage of the significant yield differential. We continued to
lower our exposure in the electric power sector given our concerns that this
industry is under attack from the courts, Congress, environmental groups and
certain state legislatures.
We expect the municipal market may outperform the treasury market if investors
continue to focus on the attractiveness of municipals on an after-tax basis.
New issue volume is expected to remain low in 1995. If demand improves, the
market should register good relative performance. We will cautiously look for
opportunities to lengthen the Fund's duration and take advantage of best
relative value situations.
Joanne Costopoulos, portfolio manager
<PAGE>
Managed Municipals
The fixed-income markets experienced extreme periods of volatility and a sharp
increase in interest rates during the six-month period ended December 31,
1994. The municipal market fared poorly as the lack of a slowdown in the
economy brought the 30-year U.S. Treasury bond to its 1994 peak yield of 8.17
percent. After the Fed tightened the fed funds rate in mid-November, investor
anxiety seemed to abate and the market recovered from its lows. Nonetheless,
municipal bond funds experienced large redemptions as investors booked tax
losses in the wake of a very difficult year in the municipal markets.
The Fund underperformed the Lehman Municipal Bond index with a return of -1.01
percent for the six-month period ended December 31, 1994, versus a -0.75
percent return for the index, which consists of investment-grade, long-term
municipal bond issues larger than $50 million and dated since January, 1984.**
The Fund underperformed the index due in part to its overweighting of shorter,
pre-refunded issues. Since short-term interest rates increased more than
long-term rates, short-term securities experienced greater price depreciation.
Underperformance in the housing sector also affected the Fund's performance,
since the Fund had a higher concentration of housing issues than the index.
As a result of uncertainty in the fixed-income markets, the Fund continued to
experience negative cash flows during the last half of 1994. In an attempt to
maintain the Fund's duration, we liquidated positions across the maturity
spectrum as we funded redemptions. Throughout the six-month period, we sold
issues with low original issue yields that were subject to the adverse tax
treatment of a new law (which treats gains earned on market discount municipal
bonds as ordinary income). We used the proceeds from these sales to purchase
securities with higher original issue yields that offered greater price
stability.
We are maintaining a cautious posture going into 1995. On the supply side, new
issuance is expected to be even lower than 1994's volume. The supply picture
would normally indicate an opportunity for municipal bonds to outperform the
taxable fixed income markets. However, demand--which was very weak in the
latter part of 1994--remains uncertain. The fixed income markets seem to be
looking for confirmation of a slowdown in the economy. Until this occurs, the
municipal market is vulnerable. Therefore, we plan to maintain our defensive
strategy until an economic slowdown is clearly evident.
Jane McCart, portfolio manager
<PAGE>
High-Yield Municipals
The municipal markets finished one of the most tumultuous years on record with
another six months of weak performance. Early in the six-month period, the
dearth of new issue supply bolstered the performance of municipal securities.
However, as interest rates continued to climb and the fixed-income markets
experienced heightened volatility, many investors abandoned the municipal
market. Following another rate increase in mid-November, investors' concerns
about economic growth and inflation eased and municipals regained some ground.
The Fund's return of -0.88 percent for the six-month period ended December 31,
1994, was slightly less than the -0.75 percent return for the Lehman Municipal
Bond index, which consists of investment-grade, fixed-rate, long-term
municipal bond issues larger than $50 million and dated since January 1984.**
Underperformance in the hospital sector during the six-month period affected
the Fund's performance, since the Fund was overweighted in that sector
compared to the index.
During the last six months of the year, our investment strategy focused on
interest rate risk management. We made selective reductions in interest rate
exposure, which helped to cushion the effects of interest rate increases on
the portfolio. As the year came to a close, the Fund experienced a
significant amount of tax-loss driven selling. As a result, we reduced our
holdings of discount bonds to fund shareholder redemptions. Consequently, the
size of the Fund was reduced, and the percentage of non-rated securities in
the portfolio increased from 16.4 percent at the end of June to 19.3 percent
at the end of December.
As we begin 1995, there is continued concern over whether the Fed's tightening
policy will sufficiently slow economic growth. At present, there is
substantial optimism in the fixed-income markets that economic growth will
slow as the year progresses. If, however, the pace of economic growth is not
contained, the markets may have a difficult time maintaining their current
placid conditions in the months ahead. Nevertheless, we anticipate good
relative performance in the municipal market as the low level of new issue
supply continues.
James S. Grabovac, portfolio manager
**Total return performance includes changes in share price and reinvestment of
income and capital gain distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or loss when you sell shares. Capital gains are subject to local, state
and federal taxes. Income may be subject to local and state taxes and federal
alternative minimum tax.
Lehman indices are unmanaged groups of municipal securities that differ from
the composition of each SteinRoe fund; these indices are not available for
direct investment.
<PAGE>
Investment Comparison
Comparison of change in value of $10,000 investment for the years ended June
30
Intermediate Municipals
This graph compares the performance of Intermediate Municipals to the Lehman
Municipal 10-Year Bond Index, which shows returns for investment-grade
municipal bonds with maturities of one to 10 years.
<TABLE>
Intermediate Municipals
Line Chart:
<CAPTION>
Date Intermediate Municipals Lehman Municipal Index
<S> <C> <C>
10/31/85 10,000 10,000
1986 10,752 11,203
1987 11,446 12,351
1988 12,088 13,205
1989 12,916 14,475
1990 13,800 15,504
1991 14,929 16,937
1992 16,468 18,854
1993 18,267 21,227
1994 18,479 21,437
6 mos. ended 12/31/94 18,424 21,246
<CAPTION>
Average Annual Total Return
(period ended 12/31/94)
One Five From
Year Year Inception*
<S> <C> <C>
- -3.37% 6.57% 6.89%
<FN>
*From October 9, 1985 through December 31, 1994
</TABLE>
<PAGE>
Managed Municipals
This graph compares the performance of Managed Municipals to the Lehman
Municipal Bond Index, showing returns for investment-grade, fixed-rate,
long-term (greater than two years) municipal bond issues larger than $50
million and dated since January 1984.
<TABLE>
Managed Municipals
Line Chart:
<CAPTION>
Date Managed Municipals Lehman Municipal Index
<S> <C> <C>
1985 10,000 10,000
1986 12,071 11,650
1987 12,995 12,656
1988 13,976 13,594
1989 15,749 15,142
1990 16,718 16,173
1991 18,209 17,631
1992 20,385 19,706
1993 22,585 22,063
1994 22,519 22,100
6 mos. ended 12/31/94 22,287 21,934
<CAPTION>
Average Annual Total Return
(period ended 12/31/94)
One Five Ten
Year Year Year
<S> <C> <C>
- -5.39% 6.41% 9.66%
Important: Lehman indices represent unmanaged groups of bonds that differ from
the composition of each SteinRoe fund. Past performance is no guarantee of
future results.
</TABLE>
<PAGE>
<TABLE>
Investment Comparison
Comparison of change in value of $10,000 investment for the years ended June
30
High-Yield Municipals
This graph compares the performance of High-Yield Municipals to the Lehman
Municipal Bond Index, showing returns for investment-grade, fixed-rate,
long-term (greater than two years) municipal bond issues larger than $50
million and dated since January 1984.
High-Yield Municipals
<CAPTION>
Line Chart:
Date High-Yeild Municipals Lehman Municipal Index
<S> <C> <C>
1985 10,000 10,000
1986 11,824 11,650
1987 12,658 12,656
1988 13,755 13,594
1989 15,651 15,142
1990 16,839 16,173
1991 18,318 17,631
1992 19,969 19,706
1993 21,542 22,063
1994 21,748 22,100
6 mos. ended 12/31/94 21,554 21,934
<CAPTION>
Average Annual Total Return
(period ended 12/31/94)
One Five Ten
Year Year Year
<S> <C> <C>
- -4.04% 5.75% 9.15%
Important: Lehman indices represent unmanaged groups of bonds that differ from
the composition of each SteinRoe fund.
Past performance is no guarantee of future results.
</TABLE>
<PAGE>
<TABLE>
Summary of Credit Quality Ratings
<CAPTION>
Standard & Intermediate Managed High-Yield
Moody's or Poor's Municipals Municipals Municipals
<S> <C> <C> <C> <C>
Aaa AAA 60% 37% 20%
Aa AA 14 35 14
A A 22 25 26
Baa BBB 4 2 17
Less Less -- -- 4
Not Rated Not Rated -- 1 19
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
Portfolio breakdowns are stated as a percentage of total portfolio value,
using the higher of Moody's or Standard & Poor's ratings. (The Statement of
Additional Information provides a description of these ratings.) The AAA
rating includes short-term holdings assigned a rating of MIG1, VMIG1, or P-1
by Moody's or a rating of SP-1 or A-1 by Standard & Poor's. Municipal Money
Market Fund invests only in high quality securities, as rated by Moody's and
Standard & Poor's, and unrated securities deemed high quality by the Board of
Trustees.
<PAGE>
<TABLE>
Maturity Profiles
<CAPTION>
Intermediate Managed High-Yield
Maturity Municipals Municipals Municipals
<S> <C> <C> <C>
Less than one year 8% 3% 8%
One to five years 13 14 4
Five to ten years 48 6 7
Ten to twenty years 27 36 25
Over twenty years 4 41 56
---- ---- ----
100% 100% 100%
==== ==== ====
Adjusted Duration* 5.50 7.80 8.15
Portfolio breakdowns are stated as a percentage of total portfolio value. At
quarter-end, the weighted average maturity for Municipal Money Market Fund was
46 days.
<FN>
* Adjusted duration reflects an estimate of the percent the portfolio value
could change for each 1% change in interest rates. A smaller number indicates
less volatility; a larger number indicates more. This number has been adjusted
to take call provisions and the possibility of principal prepayments into
account. The adjusted duration taking into account the open futures positions
at December 31, 1994 for Intermediate Municipals, Managed Municipals and
High-Yield Municipals was 5.0, 7.3 and 7.0, respectively.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Municipal Money Market Fund
Investments as of December 31, 1994
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (100.5%) Amount Value
<S> <C> <C>
Alabama (6.7%)
Alabama Higher Education Loan Corp.
(FSA Insured) Student Loan
3.600% 3/01/95 Series 1994 A $ 500 $ 500
3.800% 3/01/95 Series 1994 B 750 750
Alabama IDA Solid Waste Disposal Revenues
(Pine City Fiber Company L.O.C. Barclays
Bank Plc) V.R.D.B. 5.900% 7,750 7,750
Ardmore I.D.R (Group Dekko L.O.C. Bank
One, Indianapolis) V.R.D.B. 5.750% 1,630 1,630
Phenix City Industrial Development Board
Environmental Improvement Revenue
(Mead Coated Board L.O.C. The
Toronto Dominion Bank) V.R.D.B. 5.900% 1,000 1,000
-------
11,630
Arkansas (4.4%)
Clark County Solid Waste Disposal Revenue
(Reynolds Metals Co. L.O.C. Trust Company
Bank) V.R.D.B. 5.600% 7,600 7,600
California (2.0%)
City of Orange T.R.A.N. 4.750% 8/01/95 2,000 2,007
Los Angeles School District Tax & Revenue
T.R.A.N. Series 94-95 4.500% 7/10/95 1,400 1,406
-------
3,413
Colorado (4.5%)
Arapahoe County Series M (L.O.C. Societe
General) Optional Put 2/28/95 3.900% 4,000 4,000
Colorado G.O. T.R.A.N. 4.500% 6/27/95 1,000 1,002
Colorado Student Obligation Bond Authority
Student Loan Revenue (L.O.C. Student Loan
Marketing Association) V.R.D.B. 5.050% 2,900 2,900
-------
7,902
District of Columbia (1.8%)
District of Columbia Revenue Series 1985
(American University L.O.C. National
Westminster Bank) V.R.D.B. 5.550% 3,100 3,100
Florida (5.5%)
Manatee County P.C.R. (Florida Power & Light
Co.) Series 1994 V.R.D.B. 6.500% 1,400 1,400
Martin County P.C.R. (Florida Power & Light
Co.) Series 1994 V.R.D.B. 6.500% 1,100 1,100
Orlando Utilities Commission Water & Electric
Revenue (pre-refunded to 10/01/95)
8.100% 10/01/96 1,500 1,564
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Florida (Continued)
Putnam County Development Authority P.C.R.
Series 1984 S (Seminole Electric Cooperative,
Inc. gtd. by National Rural Utilities Cooperative
Finance Corp.) V.R.D.B. 5.550% $2,950 $2,950
St. Lucie County P.C.R. Series 1993 (Florida
Power and Light) V.R.D.B. 6.500% 2,600 2,600
-------
9,614
Georgia (0.6%)
Municipal Electric Authority of Georgia (Project
One) Series 1985 A Mandatory Put
2/01/95 3.800% 1,000 1,000
Idaho (1.2%)
Idaho T.A.N. 4.500% 6/29/95 2,000 2,007
Illinois (2.8%)
Illinois Development Finance Authority
Revenue Refunding (L.O.C. Swiss Bank
Corporation) V.R.D.B.
5.100% (Brookdale) 1,000 1,000
5.100% (River Oaks) 865 865
Illinois Health Facilities Authority Revenue
(University of Chicago Hospital)
Optional Put 2/23/95 3.800% 3,000 3,000
-------
4,865
Indiana (3.7%)
Fort Wayne Hospital Authority Revenue
(Parkview Memorial Hospital
L.O.C. Fuji Bank, Ltd.) V.R.D.B.
5.650% Series B 3,000 3,000
5.650% Series C 2,300 2,300
Tipton Economic Development Revenue
(Tipton Apartments Project L.O.C.
Bank One, Indianapolis) V.R.B.D. 5.550% 1,120 1,120
-------
6,420
Iowa (1.1%)
Iowa School Corp. Iowa School Cash
Series 1994 A (Capital Guaranty Insured)
4.250% 7/17/95 2,000 2,007
Kentucky (4.3%)
Covington I.D.R. Series 1991 (White Castle
Distributing L.O.C. Bank One, Columbus)
V.R.D.B. 5.750% 4,515 4,515
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Municipal Money Market Fund
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Kentucky (Continued)
Pendelton County Multiple County Lease
Revenue (Kentucky Association of Counties)
3.700% Mandatory Put 3/01/95 (L.O.C.
Commonwealth Bank of Australia) $2,000 $ 2,000
3.750% Mandatory Put 7/01/95
(L.O.C. PNC of Kentucky) 1,000 1,000
-------
7,515
Louisiana (0.2%)
Parish of St. Charles P.C.R. (Shell Oil Co.)
V.R.D.B. 5.650% 400 400
Maryland (0.6%)
Ann Arundel County E.D.R. (Baltimore
Gas and Electric Company) Mandatory Put
3/01/95 4.400% 1,000 1,000
Michigan (6.3%)
Michigan Housing Development Authority
Rental Housing Revenue Series 1993 B (L.O.C.
Sumitomo Bank, Ltd.) V.R.D.B. 5.700% 2,400 2,400
Michigan Job Development Authority
Series 1985 V.R.D.B.
5.650% I.D.R. (Michigan Sugar Co.-Sebewaing
Project L.O.C. Trust Company Bank) 2,600 2,600
5.750% P.C.R. (Mazda Motor Manufacturing
USA Corp. L.O.C. Sumitomo Bank, Ltd.) 4,000 4,000
Michigan Strategic Fund I.D.R. (Michigan Sugar
Co.-Croswell Project L.O.C. Trust Company
Bank) V.R.D.B. 5.650% 2,000 2,000
-------
11,000
Minnesota (2.3%)
Regents of the University of Minnesota Series G
Optional Put 2/01/95 3.600% 4,000 4,000
Missouri (5.5%)
Columbia Special Obligation Series 1988 A
(L.O.C. Toronto Dominion Bank) V.R.D.B.
5.000% 5,100 5,100
Jefferson County (GHF Holdings L.O.C.
Bank One, Indianapolis) V.R.D.B. 5.750% 4,500 4,500
-------
9,600
New Hampshire (4.0%)
New Hampshire I.D.R. (New England Power Co.)
4.300% Mandatory Put 2/01/95 3,000 3,000
4.450% Mandatory Put 2/02/95 1,000 1,000
3.750% Mandatory Put 2/24/95 3,000 3,000
-------
7,000
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
New Mexico (4.9%)
Albuquerque Hospital Revenue (Sisters of
Charity-St. Joseph) V.R.D.B. 5.500% $1,000 $ 1,000
New Mexico Educational Assistance
Foundation Student Loan Revenue Series I
(L.O.C. Bayerishe Landesbank Girozantrale)
V.R.D.B. 5.150% 7,500 7,500
-------
8,500
New York (1.6%)
New York City T.A.N. 4.250% 2/15/95 2,700 2,702
North Carolina (1.4%)
Yancey County Industrial Facility and Pollution
Control Finance Authority Revenue Series 1988
(Avondale Mills Inc. L.O.C. Trust Company
Bank) V.R.D.B. 5.650% 2,495 2,495
Oregon (1.4%)
Klamath Falls Electric Revenue Salt Caves
Hydroelectricity Series D
Mandatory Put 5/02/95 3.750% 2,360 2,360
Pennsylvania (9.4%)
Carbon County I.D.R. Series B (Panther Crest
Creek Partners L.O.C. National Westminster
Bank) Mandatory Put 2/22/1995 4.450% 2,000 2,000
Pennsylvania Energy Development Authority
(B&W Ebensburg Project L.O.C. Swiss Bank
Corporation) Series 87 & 88 V.R.D.B. 5.100% 6,950 6,950
Pennsylvania T.A.N. 4.750% 6/30/95 4,000 4,009
Philadelphia T.R.A.N. Series D 4.750% 6/15/95 3,000 3,012
Schuykill County I.D.A. Resource Recovery
Revenue (Westwood Energy Properties
Limited Partnership L.O.C. Fuji Bank, Ltd.)
V.R.D.B. 6.050% 300 300
-------
16,271
South Carolina (2.3%)
York County P.C.R. (Saluda River gtd. by
National Rural Utilities Cooperative Finance
Corp.) Mandatory Put 2/15/95 3.500% 4,000 4,000
Texas (7.8%)
Greater East Texas Higher Education Authority
Inc. Student Loan Revenue Series 1993 B
(L.O.C. Student Loan Marketing Association)
Mandatory Put 2/01/95 2.750% 3,000 3,000
Harris County Industrial Development Corp.
(Exxon Corp.) V.R.D.B. 5.650% 2,900 2,900
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Municipal Money Market Fund
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Texas (Continued)
Texas Association of School Boards T.A.N.
Series A 4.750% 8/31/95 $4,000 $ 4,015
Texas T.R.A.N. 5.000% 8/31/95 3,600 3,613
-------
13,528
Virginia (1.4%)
Colonial Heights I.D.A. Revenue Refunding
(Philip Morris Companies) V.R.D.B. 5.650% 2,500 2,500
Wisconsin (11.4%)
Carlton P.C.R. Series 1988 (Wisconsin
Power and Light) V.R.D.B. 5.750% 7,600 7,600
Fond Du Lac I.D.R. (Brenner Tank Inc. L.O.C.
Bank One, Milwaukee) V.R.D.B. 5.750% 4,250 4,250
Fox Lake I.D.A. Revenue Bonds Series 1994
(L.O.C. Bank One, Milwaukee)
V.R.D.B. 5.750% 2,150 2,150
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Wisconsin (Continued)
Holland I.D.R. (White Clover Daily Inc. L.O.C.
Bank One, Milwaukee) V.R.D.B. 5.750% $3,250 $ 3,250
Kenosha I.D.R. (Monarch Plastics Inc. L.O.C.
Bank One, Milwaukee) V.R.D.B. 5.750% 2,600 2,600
---------
19,850
Wyoming (1.4%)
Lincoln County P.C.R. (Exxon Corp.)
Mandatory Put 1/30/95 3.800% 2,500 2,500
--------
Total Municipal Securities (100.5%)
(Amortized Cost $174,779) 174,779
Other Assets, Less Liabilities (-0.5%) (844)
--------
Total Net Assets (100.0%) $173,935
========
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Intermediate Municipals
Investments as of December 31, 1994
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (99.0%) Amount Value
<S> <C> <C>
Alaska (2.3%)
Kenai Peninsula Borough G.O. Refunding
(AMBAC Insured) 8.300% 1/01/99 $1,500 $1,635
North Slope Borough G.O. 8.350% 6/30/98 3,000 3,240
-------
4,875
Arizona (7.1%)
Arizona Transportation Board Highway
Revenue Subordinated Series A
6.000% 7/01/00 1,000 1,019
Cochise County Unified School District No. 68
Series B (FGIC Insured) 9.000% 7/01/01 1,115 1,310
Flagstaff G.O. Series A (FGIC Insured)
6.250% 7/01/99 1,500 1,538
Maricopa County Refunding G.O. Unlimited
Tax (FGIC Insured) 6.250% 7/01/00 2,000 2,051
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Arizona (Continued)
Maricopa County Hospital Revenue (Samaritan
Health Services) (Escrowed in U.S. Treasury
Securities) 7.625% 1/01/08 $2,050 $ 2,263
Maricopa County Unified School District
Refunding
5.500% 7/01/05 No. 69 Paradise Valley
(AMBAC Insured) 2,500 2,370
5.550% 7/01/04 No. 4 Mesa University
(FGIC Insured) 1,500 1,443
Tempe Unified High School District No. 213
Refunding & Improvement (FGIC Insured)
7.000% 7/01/08 500 535
Pima County Refunding G.O.
6.300% 7/01/02 2,500 2,575
-------
15,104
The accompanying notes to financial statements are an integral part of these schedules.
<PAGE>
Intermediate Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Arkansas (1.2%)
Beaver Water District Benton & Washington
Counties Water Revenue Refunding (MBIA
Insured) 6.000% 11/15/04 $2,580 $ 2,613
California (7.0%)
California Housing Finance Agency Revenue
Home Mortgage Series B-1 5.900% 2/01/04 1,000 963
Central Cost Water Authority Revenue
(AMBAC Insured) 5.950% 10/01/03 2,000 2,001
*East Bay Municipal Utility District Water
System Revenue (Escrowed in U.S. Treasury
Securities) (AMBAC Insured) 7.000% 6/01/00 1,400 1,490
Los Angeles Department of Water & Power
Electric Revenue Crossover Refunding
9.000% 9/01/03 2,500 2,982
Port of Oakland Port Revenue Series A (BIG)
(MBIA Insured) 7.600% 11/01/16 1,900 2,576
San Jose Redevelopment Agency Refunding
(Tax Allocation Merged Area Redevelopment
Project) (MBIA Insured) 6.000% 8/01/06 3,000 2,937
Vallejo Revenue Series B (Water Improvement
Project) (FGIC Insured) 6.000% 11/01/01 2,030 2,045
-------
14,994
Colorado (0.5%)
Eagle County School District No. 50 (FGIC
Insured) 5.400% 12/01/00 1,000 995
Delaware (0.5%)
Delaware Economic Development Authority
Water Development Revenue Refunding
(General Waterworks Corp.-Wilmington
Suburban Water Corp.) 6.450% 12/01/07 1,165 1,149
Florida (3.6%)
Florida Division Board Finance Department of
General Services Revenues Department of
Natural Resources Revenue (MBIA Insured)
6.000% 7/01/03 1,000 1,017
Greater Orlando Aviation Authority Airport
Facilities Revenue
8.250% 10/01/08 2,480 2,642
8.250% 10/01/08 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 10/01/98) 270 297
Manatee County P.C.R. (Florida Power & Light)
Series 1994 V.R.D.B. 6.500% 1,000 1,000
St. Lucie County P.C.R. Series 1993 (Florida
Power and Light) V.R.D.B. 6.500% 2,700 2,700
-------
7,656
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Georgia (5.3%)
Atlanta Airport Facilities Revenue Refunding
Series A (AMBAC Insured)
5.500% 1/01/05 $2,000 $ 1,947
6.500% 1/01/07 1,000 1,038
Cobb County & Marietta Water Authority
Revenue Refunding Series B 6.900% 11/01/98 1,000 1,061
Fayette County School District G.O. Series 1994 A
6.250% 3/01/07 950 957
Fulton County Water & Sewer Revenue
Refunding (FGIC Insured) 5.265% 1/01/01 1,000 1,008
Georgia G.O. Series C 7.700% 4/01/00 1,250 1,377
Metropolitan Atlanta Rapid Transit Authority
Sales Tax Revenue Refunding (AMBAC Insured)
6.050% 7/01/01 1,600 1,625
5.800% 7/01/02 1,000 997
Municipal Electric Authority of Georgia Power
Revenue (Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/98) 8.200% 1/01/04 1,250 1,369
-------
11,379
Hawaii (0.5%)
Honolulu (City & County) Refunding G.O.
Series 1990 A 7.350% 7/01/06 1,000 1,086
Illinois (8.9%)
Chicago Midway Airport Revenue Series A
(MBIA Insured)
5.500% 1/01/02 1,000 952
5.700% 1/01/04 1,000 943
Chicago Public Building Commission Building
Revenue Series A (MBIA Insured)
5.250% 12/01/03 3,700 3,453
Chicago Skyway Toll Bridge Revenue Refunding
Series 1994 6.750% 1/01/17 1,500 1,393
Chicago Water Revenue Refunding (FGIC
Insured) 6.500% 11/01/09 2,130 2,129
Cook County Community College District #508
(FGIC Insured) 8.750% 01/01/03 1,000 1,166
DuPage County Forest Preserve District G.O.
8.650% 11/01/97 1,000 1,087
Illinois Development Financial Authority
7.875% 09/01/14 I.D.R. (Church Road
Partnership L.O.C. American National Bank) 1,775 1,825
10.625% 03/01/15 (ComEd) 1,240 1,274
Metropolitan Pier & Exposition Authority
Dedicated State Tax Revenue Series 1992 A
(McCormick Place Expansion Project)
5.050% 6/15/98 1,425 1,403
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Intermediate Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Illinois (Continued)
Metropolitan Pier & Exposition Authority
Dedicated State Tax Revenue Series 1992 A
(McCormick Place Expansion Project)
5.050% 6/15/98 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 6/15/98) $ 60 $ 59
5.900% 6/15/03 1,500 1,478
7.250% 6/15/05 1,750 1,887
-------
19,049
Indiana (4.7%)
Indiana Toll Road Commission Toll Road
Revenue (Escrowed in U.S. Treasury
Securities) 9.000% 1/01/15 2,655 3,336
Indiana Transportation Finance Authority
Airport Facilities Lease Revenue Series A
(United Airlines)
5.600% 11/01/99 1,125 1,123
6.500% 11/01/07 2,250 2,260
Indiana Transportation Finance Authority
Highway Revenue Series A 5.750% 12/01/99 1,145 1,153
Indianapolis Local Public Improvement Bond
Bank 6.500% 2/01/06 Series 1992 D 2,100 2,118
-------
9,990
Kentucky (1.1%)
Kentucky Turnpike Authority Economic
Development Revenue Refunding
(Revitalization Projects) 5.800% 1/01/04 2,500 2,435
Louisiana (3.1%)
Lafayette Public Power Authority Electric
Revenue 9.000% 11/01/96 1,000 1,058
Louisiana Public Facilities Authority Student
Loan Revenue Series A-1 5.900% 9/01/99 2,000 2,017
Parish of St. Charles P.C.R. (Shell Oil Co.)
V.R.D.B. 5.650% 3,600 3,600
-------
6,675
Massachusetts (5.8%)
Massachusetts Bay Transportation Authority
Mass Refunding General Transportation System
7.000% 3/01/07 Series A 2,250 2,378
5.500% 3/01/06 (FGIC Insured) 1,500 1,395
Massachusetts Health and Educational Facilities
Authority Revenue (Daughters of Charity
Carney Hospital)
7.250% 7/01/00 Series C 1,200 1,227
6.000% 7/01/09 Series D 1,000 941
Massachusetts Housing Finance Agency Housing
Revenue Series A (AMBAC Insured)
6.000% 01/01/04 1,300 1,279
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Massachusetts (Continued)
Massachusetts Water Resources Authority
Refunding Series C 6.000% 12/01/11 $3,410 $ 3,206
New England Educational Loan Marketing Corp.
Student Loan Revenue Refunding Series 1985 A
5.800% 3/01/02 2,000 1,976
-------
12,402
Michigan (1.7%)
Detroit Sewer Disposal Revenue (FGIC Insured)
6.100% 7/01/01 1,200 1,219
Michigan Hospital Finance Authority Revenue
(Daughters of Charity)
6.500% 11/01/01 (Providence Hospital) 1,780 1,801
10.000% 11/01/15 (St. Mary's Hospital) 500 530
-------
3,550
Minnesota (1.3%)
Minneapolis St. Paul Metropolitan Airport G.O.
Common Series 7.800% 1/01/03 685 745
Minnesota G.O. 5.600% 10/01/03 2,150 2,108
-------
2,853
Mississippi (0.6%)
Mississippi Higher Education Assistance Corp.
Student Loan Revenue Series C 6.050% 9/01/07 1,470 1,355
Missouri (0.4%)
Missouri Regional Convention & Sports
Complex Authority 6.600% 8/15/03 830 845
Nevada (1.9%)
Clark County P.C.R. Series 1990 A (Southern
California Edison Co.) 7.125% 6/01/09 1,500 1,505
Clark County Passenger Facility Charge
Revenue Series A (McCarran International
Airport) (AMBAC Insured) 5.700% 7/01/02 1,500 1,486
Las Vegas Valley Water District G.O. Limited
Tax (AMBAC Insured) (Escrowed in U.S.
Treasury Securities) (pre-refunded to
8/01/00) 7.000% 8/01/08 1,000 1,078
-------
4,069
New Jersey (1.0%)
New Jersey G.O.
7.000% 4/01/05 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 4/01/01) 1,050 1,122
New Jersey Health Care Facilities Finance
Authority Revenue (Hackensack Medical
Center) (FGIC Insured) 6.100% 7/01/01 1,000 1,016
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Intermediate Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
New Jersey (Continued)
New Jersey Health Care Facilities Finance
Authority Revenue (Christ Hospital Group
Connie Lee Insured) 7.000% 7/01/03 $1,730 $ 1,854
-------
3,992
New Mexico (0.9%)
Gallup P.C.R. (Plains Electric Transmission &
Generating Cooperative Inc.) (MBIA Insured)
6.100% 8/15/02 2,000 2,029
New York (7.2%)
New York City Industrial Development Agency
Special Facility Revenue (Terminal One Group
Association Project)
5.700% 1/01/04 Series 1994 2,170 2,034
5.600% 1/01/03 1,000 942
New York City Municipal Water Finance
Authority Water & Sewer Systems Revenue
Refunding (MBIA Insured) 5.125% 6/15/04 2,000 1,836
New York Dorm Authority Revenue (City
University) 8.125% 7/01/08 5,000 5,379
New York Environmental Facility Corp. P.C.R.
State Water Series D 6.300% 5/15/05 5,000 5,131
-------
15,322
North Carolina (2.3%)
North Carolina Municipal Power Agency No. 1
Catawba Electric Revenue Refunding
5.900% 1/01/03 1,500 1,468
6.000% 1/01/04 3,600 3,518
-------
4,986
Ohio (3.2%)
Columbus G.O. Sewer Improvement No. 26
6.750% 9/15/04 1,000 1,046
Hamilton County Sewer System Revenue
Refunding and Improvement Series A
6.300% 12/01/01 1,000 1,041
Ohio Building Authority State Facilities
Administrative Building Revenue Series A
(MBIA Insured) 5.850% 10/01/07 3,000 2,884
The Student Loan Funding Corp. Cincinnati
Student Loan Revenue Refunding Series 93A
5.750% 8/01/03 2,000 1,923
-------
6,894
Oklahoma (0.5%)
Oklahoma Baptist University Authority Revenue
Refunding (FGIC Insured) 6.300% 12/01/01 1,030 1,066
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Oregon (2.9%)
Portland Sewer System Revenue Refunding
Series B (FGIC Insured) 5.400% 4/01/02 $2,500 $2,450
Port of Morrow Revenue (Portland General
Electric-Boardman Project L.O.C. Industrial
Bank of Japan) V.R.D.B. 5.300% 3,700 3,700
-------
6,150
Pennsylvania (4.4%)
Dauphin County Hospital Authority Revenue
Refunding Series B (Hapsco Group Inc.)
(MBIA Insured) 5.800% 7/01/02 1,600 1,607
Pennsylvania Higher Education Assistance
Agency Student Loan Revenue Refunding
Series 1985 A (FGIC Insured) 6.800% 12/01/00 2,110 2,195
Pennsylvania T.A.N. 4.750% 6/30/95 2,000 2,001
Schuykill County I.D.A. Resource Recovery
Revenue (Westwood Energy Properties
Limited Partnership L.O.C. Fuji Bank, Ltd.)
V.R.D.B. 6.050% 1,400 1,400
Washington County Hospital Authority Lease
Revenue (Escrowed in U.S. Treasury Securities)
(pre-refunded to 6/15/00) 7.450% 12/15/18 2,000 2,216
-------
9,419
South Carolina (3.3%)
Piedmont Municipal Power Agency Electric
Revenue (FGIC Insured) 6.125% 1/01/07 2,065 2,041
South Carolina Education Assistance Authority
Revenue 5.900% 9/01/07 2,040 1,884
South Carolina Ports Authority Revenue
(AMBAC Insured) 6.200% 7/01/01 1,000 1,023
Sumter County Hospital Facilities Revenue
Refunding (Tuomey Regional Medical Center)
(MBIA Insured) 6.625% 11/15/04 2,000 2,100
-------
7,048
Tennessee (1.3%)
Metropolitan Nashville & Davidson County
Water & Sewer Revenue (FGIC Insured)
6.500% 1/01/10 2,750 2,783
Texas (9.4%)
Alief Independent School District G.O. (gtd. by
Permanent School Funding) 8.000% 2/15/99 1,305 1,420
Dallas-Fort Worth Regional Airport Joint
Revenue Refunding Series B 5.750% 11/01/99 1,000 1,009
Dallas Waterworks & Sewer System Revenue
Refunding Series 1988 7.000% 4/01/98 2,000 2,090
Fort Bend Independent School District Unlimited
Tax (gtd. by Permanent School Funding)
7.500% 2/15/00 1,010 1,094
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Intermediate Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Texas (Continued)
Fort Worth Limited Tax 8.350% 3/01/00 $1,250 $ 1,399
Houston Water Conveyance System Contract
Certificates of Participation Series C (AMBAC
Insured) 7.000% 12/15/03 1,000 1,073
Lake Travis Independent School District
Refunding G.O. Unlimited Tax (MBIA
Insured) 6.100% 2/01/98 1,550 1,583
Northside Independent School District G.O.
9.400% 4/01/98 1,850 2,068
Pasadena Water & Sewer Revenue Refunding
(MBIA Insured) 6.000% 10/01/01 500 508
Plano Independent School District G.O.
Unlimited Tax (FGIC Insured) 8.625% 2/15/99 1,900 2,113
Round Rock Independent School District G.O.
Unlimited Tax School Building and Refunding
Series 1991 (MBIA Insured) 8.625% 8/15/00 1,270 1,450
San Antonio Electric & Gas Revenue Refunding
Series 1983 A (Escrowed in U.S. Treasury
Securities) (pre-refunded to 2/01/98)
10.500% 2/01/13 1,000 1,159
San Antonio Water System Revenue Refunding
(FGIC Insured) 6.000% 5/15/01 3,000 3,031
-------
19,997
Utah (0.6%)
Utah Housing Finance Agency Single Family
Mortgage Issue E Series 1986 A
8.300% 7/01/00 515 530
8.400% 7/01/01 655 677
-------
1,207
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Washington (3.1%)
Snohomish County School District No. 2
Refunding G.O. (MBIA Insured)
7.250% 12/01/00 $2,540 $ 2,727
7.000% 12/01/01 2,230 2,373
7.000% 12/01/02 1,500 1,598
-------
6,698
Wisconsin (1.0%)
Carlton P.C.R. Series 1991 (Wisconsin Power
& Light) V.R.D.B. 5.950% 800 800
Wisconsin Clean Water Revenue Series 1
6.400% 6/01/01 1,400 1,433
--------
2,233
Wyoming (0.4%)
Lincoln County P.C.R. (Exxon County)
V.R.D.B. 6.000% 900 900
--------
Total Municipal Securities (99.0%)
(Amortized Cost $215,014) 213,798
Other Assets, Less Liabilities (1.0%) 2,232
--------
Total Net Assets (100%) $216,030
========
<FN>
*Security was pledged to cover margin requirements for open futures contracts.
Futures contracts which were open at December 31, 1994 were as follows:
<CAPTION>
Unrealized
Number of Contract Loss
Type Contracts Value Expiration at 12/31/94
<S> <C> <C> <C> <C>
U.S. Treasury
Bond Futures
(Short) 100 $9,916 March, 1995 $61
The accompanying notes to financial statements are an integral part of this schedule.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Managed Municipals
Investments as of December 31, 1994
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (98.0%) Amount Value
<S> <C> <C>
Arkansas (0.5%)
Arkansas Development Financing Authority
Single Family Mortgage Revenue Series A
(FHA Insured) 8.125% 8/01/14 $2,965 $ 2,972
California (2.3%)
California Health Facilities Finance Authority
Revenue (Daughters of Charity)
9.250% 11/01/15 2,000 2,124
Central Contra Costa Sanitation District Revenue
Waste Water Facilities Improvement Project
(MBIA Insured)
6.250% 9/01/13 2,025 1,926
6.250% 9/01/14 1,295 1,230
Los Angeles Regional Airports Improvement
Corporate Lease Revenue (Laxfuel
Corporation) 6.700% 1/01/22 3,550 3,199
Northern California Power Agency Public Power
Revenue Refunding Series B-1 (Hydroelectric
Project #1) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/98) 8.000% 7/01/24 2,000 2,164
Southern California Public Power Authority
Revenue Refunding
5.000% 7/01/17 Series A (Power Project) 2,500 1,930
5.500% 7/01/23 (Transmission Project) 1,490 1,209
--------
13,782
Colorado (1.6%)
Colorado G.O. T.R.A.N. 4.500% 6/27/95 1,000 999
Colorado Housing Finance Authority
Multifamily Mortgage Revenue
6.000% 10/01/09 1,490 1,393
6.000% 10/01/10 1,590 1,476
6.000% 10/01/11 1,715 1,580
6.000% 10/01/12 1,835 1,677
Municipal Subdistrict Northern Colorado
Water Conservancy District Revenue Series D
6.000% 12/01/15 2,500 2,309
--------
9,434
Connecticut (0.5%)
Connecticut Special Tax Obligation Revenue
(Transportation Infrastructure Project)
6.125% 9/01/12 Series 1992 B 3,000 2,851
Delaware (0.7%)
Delaware Economic Development Authority
Water Development Revenue Refunding
(General Waterworks Corp.-Wilmington
Suburban Water Corp.)
6.450% 12/01/07 Series 1992 B 1,160 1,144
6.500% 12/01/23 Series 1992 A 3,500 3,322
--------
4,466
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Florida (2.7%)
Broward County Public Improvement Revenue
Refunding G.O. Series 1986
12.500% 1/01/03 $ 1,000 $ 1,406
12.500% 1/01/04 1,195 1,716
12.500% 1/01/05 2,000 2,924
Florida Board of Education Capital Outlay
Public Education Series A 5.875% 6/01/16 5,000 4,591
*Florida G.O. (Jacksonville Transportation
Authority Project) (Escrowed in U.S. Treasury
Securities) 9.200% 1/01/15 2,000 2,583
Jacksonville Water and Sewer Development
Revenue (Jacksonville Suburban Utilities-
General Waterworks Corp.) 6.750% 6/01/22 1,500 1,461
Manatee County P.C.R. (Florida Power & Light)
Series 1994 V.R.D.B. 6.500% 410 410
Martin County P.C.R. (Florida Power & Light)
Series 1994 V.R.D.B. 6.500% 400 400
Putnam County Development Authority P.C.R.
(Florida Power & Light) V.R.D.B. 6.500% 900 900
--------
16,391
Georgia (9.9%)
Atlanta Airport Facility Revenue Series 1994 A
(AMBAC Insured)
6.500% 1/01/08 2,750 2,834
6.500% 1/01/10 2,000 2,038
Cartersville Development Authority Revenue
Water & Waste Works Facilities (Anheuser-
Busch) 7.375% 5/01/09 9,000 9,584
Columbia County School District G.O.
(MBIA Insured)
6.750% 4/01/09 1,900 1,986
7.000% 4/01/10 2,125 2,266
7.000% 4/01/11 2,370 2,521
Fulton County Water & Sewer Revenue
Refunding (FGIC Insured)
6.250% 1/01/08 2,100 2,118
6.250% 1/01/09 2,460 2,459
6.375% 1/01/14 13,700 13,512
Metropolitan Atlanta Rapid Transit Authority
Sales Tax Revenue Refunding Series P
(AMBAC Insured) 6.250% 7/01/20 4,000 3,800
Municipal Electric Authority of Georgia
Power Revenue Series V 6.600% 1/01/18 14,100 13,629
Municipal Electric Authority of Georgia
Special Obligation First Crossover Series
(Crossover refunded to 1/01/98)
8.125% 1/01/17 3,100 3,329
--------
60,076
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Managed Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Idaho (0.4%)
Idaho Housing Agency Single Family Mortgage
Revenue (FHA/VA Insured) 7.875% 7/01/24 $ 2,165 $ 2,194
Illinois (10.7%)
Chicago Board of Education Refunding G.O.
Lease Certificates Series A (MBIA Insured)
6.000% 1/01/16 5,000 4,554
Chicago (City of) Gas Supply Revenue Series
1985 D (Peoples Gas Light & Coke Company)
10.250% 3/01/15 550 564
Chicago (City of) Skyway Toll Bridge Revenue
Series 1994 6.750% 1/01/17 1,500 1,393
Illinois Development Finance Authority
10.625% 3/01/15 P.C.R. (Commonwealth
Edison Company) 4,750 4,881
5.950% 1/01/09 (Catholic Charities Housing
Development) 1,450 1,295
Illinois Health Facilities Authority Revenue
Refunding Series 1992 A (Evangelical
Hospitals) 6.250% 4/15/22 1,000 881
Illinois Housing Development Authority
Series A (FHA Insured)
7.800% 12/01/12 2,000 2,004
8.000% 6/01/26 15,000 15,168
Illinois Sales Tax Revenue Refunding Series Q
6.000% 6/15/12 10,000 9,300
Illinois Toll Highway Authority Priority
Revenue Series A 6.300% 1/01/11 7,500 7,178
Metropolitan Fair & Exposition Authority
Dedicated State Tax Revenue (Escrowed in
U.S. Treasury Securities) (pre-refunded to
6/01/96) 8.000% 6/01/10 16,600 17,564
--------
64,782
Indiana (5.2%)
Hammond Sewer & Solid Waste Disposal
Revenue (American Maize Products Co.)
8.000% 12/01/24 5,000 5,020
Indiana Transportation Finance Authority
Airport Facilities Lease Revenue Series A
6.250% 11/01/16 10,950 10,012
Indianapolis Local Public Improvement Bond
Bank Series 1991 C 6.700% 1/01/17 8,285 7,969
Michigan City P.C.R. (Northern Indiana
Public Service Company) 5.700% 10/01/03 8,795 8,263
-------
31,264
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Iowa (0.2%)
Iowa Finance Authority Single Family Mortgage
Revenue Series B (collateralized by
Government & Federal National Mortgage
Association Securities) 7.450% 7/01/23 $ 1,255 $ 1,274
Kansas (0.5%)
Kansas Department of Transportation
Highway Revenue (Escrowed in U.S. Treasury
Securities) (pre-refunded to 3/01/02)
6.500% 3/01/12 3,000 3,134
Kentucky (3.2%)
Kentucky Housing Corp. Revenue Series C
(FHA/VA Insured) 8.100% 1/01/22 2,855 2,930
Kentucky Turnpike Authority Economic
Development Revenue Refunding
(Revitalization Project) (FGIC Insured)
Zero Coupon (Effective Yield 6.600%)
1/01/10 Series 1992 13,500 4,971
Kentucky Turnpike Authority Revenue
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/97) 13.125% 7/01/09 2,425 2,858
Trimble County P.C.R. Series A (Louisville
Gas & Electric Co.)
7.625% 11/01/20 6,670 6,965
7.625% 11/01/20 (Escrowed in U.S.
Treasury Securities) (pre-refunded to
11/01/00) 1,330 1,460
--------
19,184
Louisiana (2.6%)
De Soto Parish Environmental Impact Revenue
(International Paper Co.) Series A
7.700% 11/01/18 3,250 3,341
Louisiana G.O. Series 1994 A (AMBAC Insured)
6.000% 5/01/13 7,250 6,729
Louisiana Public Facility Authority Hospital
Revenue (Hotel Dieu Daughters of Charity
Health System) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 2/01/96)
9.750% 2/01/15 1,000 1,067
Parish of St. Charles P.C.R. (Shell Oil Co.)
V.R.D.B. 5.650% 1,100 1,100
Shreveport Water & Sewer Revenue
Series 1994 A (FGIC Insured)
5.250% 12/01/12 2,005 1,713
5.250% 12/01/13 2,115 1,798
--------
15,748
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Managed Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Maine (1.8%)
Maine Educational Loan Marketing Corporation
Student Loan Revenue
5.850% 11/01/02 Series 1994 A-4 $1,000 $ 975
5.950% 11/01/03 Series 1994 A-4 2,955 2,874
6.500% 11/01/09 Series 1994 B-1 3,000 2,805
Maine Housing Authority Mortgage Revenue
7.550% 11/15/19 Series D-5 2,520 2,510
7.550% 11/15/22 Series D-5 1,750 1,743
--------
10,907
Maryland (1.1%)
Washington Suburban Sanitation District G.O.
6.600% 6/01/16 2,795 2,811
6.625% 6/01/17 1,660 1,667
6.625% 6/01/19 2,320 2,329
--------
6,807
Massachusetts (6.1%)
Massachusetts Bay Transportation Authority
Refunding
7.000% 3/01/14 Series 1994 A 3,150 3,260
6.200% 3/01/16 Series 1992 B 9,825 9,217
7.000% 3/01/19 Series 1994 A 2,500 2,583
Massachusetts College Building Authority
Project Refunding Series A
7.500% 5/01/11 1,500 1,638
7.500% 5/01/14 3,500 3,812
Massachusetts G.O. Refunding Series A
(MBIA Insured) Zero Coupon (Effective
Yield 6.550%) 8/01/03 3,100 1,876
Massachusetts Health & Educational Facilities
Authority Revenue
6.250% 7/01/12 (Massachusetts General
Hospital Project) (AMBAC Insured) 5,750 5,511
6.750% 7/01/24 (Brigham & Women's
Hospital) 7,365 7,004
Massachusetts Water Resources Authority
Refunding 5.500% 11/01/15 Series 1992 B 2,000 1,696
--------
36,597
Michigan (1.8%)
Michigan Hospital Finance Authority Providence
Hospital Revenue Refunding (Daughters of
Charity Health Systems Inc.)
10.000% 11/01/15 7,260 7,690
7.000% 11/01/21 3,000 2,998
--------
10,688
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Minnesota (2.4%)
Minneapolis St. Paul Housing Finance Board
Single Family Mortgage Revenue
(collateralized by Government National
Mortgage Association Securities)
7.250% 8/01/21 $2,705 $ 2,657
7.300% 8/01/31 4,000 4,100
Minnesota Housing Finance Agency Single
Family Mortgage Series A 7.450% 7/01/22 3,990 4,145
Southern Minnesota Municipal Power Agency
Power Supply System Revenue Series C
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/96) 9.000% 1/01/04 2,000 2,116
Western Minnesota Municipal Power Agency
Supply Revenue (Escrowed in U.S. Treasury
Securities) (pre-refunded to 1/01/96)
9.500% 1/01/13 1,500 1,594
--------
14,612
Mississippi (0.5%)
Biloxi Mortgage Revenue Refunding Series 1987
(Biloxi Regional Medical Center) (Escrowed
in U.S. Treasury Securities) 19.000% 8/15/98 2,000 2,818
Missouri (0.3%)
Little Blue Valley Sewer District Revenue
Refunding (AMBAC Insured) (Escrowed in
U.S. Treasury Securities) (pre-refunded to
10/01/98) 9.000% 10/01/07 1,000 1,119
Missouri Housing Community Development
Single Family Mortgage Revenue
9.375% 4/01/16 125 126
St. Louis County Single Family Mortgage
Revenue (MBIA Insured) 9.750% 4/01/10 10 10
Springfield School District Refunding G.O.
Series B (FGIC Insured) 9.500% 3/01/07 600 760
--------
2,015
Nevada (0.7%)
Nevada Housing Division Single Family
Mortgage (FHA/VA Insured) 7.750% 4/01/22 4,050 4,050
New Jersey (2.1%)
Bergen County Utilities Authority Solid
Waste System Revenue Refunding Series A
(FGIC Insured)
6.250% 6/15/06 2,000 2,022
6.250% 6/15/07 3,000 3,009
New Jersey G.O. Series D 6.000% 2/15/11 5,150 4,927
New Jersey Turnpike Authority Turnpike
Revenue Refunding Series C 6.500% 1/01/09 2,900 2,934
--------
12,892
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Managed Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
New Mexico (0.4%)
Albuquerque I.D.R. (Motorola Inc.)
10.000% 6/01/13 $1,000 $ 1,038
University of New Mexico Systems Revenue
Refunding Series 1992 A 6.000% 6/01/21 1,400 1,279
--------
2,317
New York (7.8%)
Erie County Water Authority Water Revenue
Refunding Series 1992 (AMBAC Insured)
Zero Coupon (Effective Yield 7.300%) 12/01/17 660 128
New York City G.O. Series A (Escrowed in
U.S. Treasury Securities) (pre-refunded to
11/01/97) 8.750% 11/01/17 1,000 1,102
New York City Industrial Development Agency
Civic Facilities Revenue (U.S.T.A. National
Tennis Center) (FSA Insured) 6.375% 11/15/14 1,000 971
New York Environmental Facilities
Corporation State Water P.C.R. Revolving
Fund Revenue Series 1991 E (New York City
Municipal Water Finance Authority Project)
6.500% 6/15/14 5,000 4,864
New York I.D.A. Special Facility Revenue
Series 1994 (Terminal One Grove, Associate
L.P. Project)
6.000% 1/01/15 8,340 7,382
6.000% 1/01/19 4,500 3,919
New York Thruway Authority Highway &
Br SA 6.000% 4/01/14 5,000 4,553
Port Authority of New York & New Jersey
Consolidated Bonds Ninety-Third Series
6.125% 6/01/2094 3,500 3,125
Triborough Bridge & Tunnel Authority General
Purpose Revenue
6.625% 1/01/12 Series X 8,715 8,797
8.375% 1/01/16 Series H (Escrowed in U.S.
Treasury Securities) (pre-refunded
to 1/01/96) 5,900 6,207
6.125% 1/01/21 Series Y 6,890 6,381
--------
47,429
North Carolina (2.0%)
North Carolina Eastern Municipal Power
Agency Power Systems Revenue
6.500% 1/01/18 Series 1991 A (Escrowed in
U.S. Treasury Securities) 4,315 4,335
6.500% 1/01/18 Series 1991 A 2,185 2,018
8.000% 1/01/21 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 1/01/98) 240 262
North Carolina Municipal Power Agency
No. 1 Catawba Electric Revenue Series B
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/96) 8.500% 1/01/17 5,000 5,266
--------
11,881
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
North Dakota (0.0%)
North Dakota Housing Finance Agency Single
Family Program Revenue 9.125% 7/01/16 $ 500 $ 52
Ohio (2.9%)
Cincinnati Student Loan Funding Corp.
Student Loan Revenue Series 1993 A
5.750% 8/01/03 5,000 4,807
Franklin County Hospital Revenue Refunding
and Improvement (Riverside Hospital)
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 5/15/00) 7.600% 5/15/20 3,900 4,314
Greater Ohio Housing Assistance Corporation
Mortgage Revenue Refunding (FHA Insured-
Section 8) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 8/01/95) 10.430% 7/01/22 3,381 3,588
Ohio Building Authority Facilities Revenue
Series C (Columbus State Office Building)
7.350% 10/01/04 4,160 4,554
Ohio Water Development Facilities Authority
P.C.R. Series A (Duquesne Light Company)
11.125% 2/01/15 495 511
-------
17,774
Oklahoma (0.3%)
Tulsa County Home Finance Authority
Mortgage Revenue Series 1991 B (collateralized
by Government National Mortgage
Association Securities) 7.550% 5/01/23 1,825 1,858
Oregon (0.2%)
Port of Morrow Revenue (Portland General
Electric-Boardman Project L.O.C. Industrial
Bank of Japan) V.R.D.B. 5.300% 1,000 1,000
Pennsylvania (1.5%)
Allegheny County Sanitation Authority Sewer
Revenue (FGIC Insured) Zero Coupon
(Effective Yield 6.800%) 6/01/07 2,370 1,074
Dauphin County I.D.A. Water Development
Revenue (Dauphin Consolidated Water Supply
General Waterworks Corp.) 6.900% 6/01/24 2,400 2,281
Pennsylvania I.D.A. Economic Development
Revenue (AMBAC Insured) Series 1994
7.000% 1/01/06 1,795 1,922
7.000% 7/01/07 1,185 1,266
Schuykill County I.D.A. Resource Recovery
Revenue (Westwood Energy Properties
Limited Partnership L.O.C. Fuji Bank, Ltd.)
V.R.D.B. 6.050% 2,285 2,285
--------
8,828
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Managed Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Puerto Rico (0.3%)
Puerto Rico Electric Power Authority Revenue
Series S 7.000% 7/01/07 $ 2,000 $ 2,076
Rhode Island (0.9%)
Rhode Island Housing & Mortgage Finance
Corporation 7.550% 10/01/22 5,650 5,674
South Carolina (1.6%)
Richland County Solid Waste Disposal
Facilities Revenue Series 1991 B
(Union Camp Corp.) 7.125% 9/01/21 5,000 4,972
South Carolina Housing Finance Agency
Single Family Mortgage Revenue Series C
7.750% 7/01/22 4,775 4,858
--------
9,830
South Dakota (1.1%)
Heartland Consumers Power District Electric
Revenue Refunding (FSA Insured)
6.000% 1/01/17 7,000 6,394
Tennessee (1.7%)
Tennessee Housing Development Agency
(Homeownership Project) 7.300% 7/01/11 10,000 10,050
Texas (12.3%)
Dallas-Fort Worth Regional Airport Joint
Revenue Refunding 9.125% 11/01/15 1,000 1,055
Harris County Industrial Development Corp.
(Exxon Corp.) Series A V.R.D.B. 6.000% 1,200 1,200
Houston Water Conveyance System Contract
(AMBAC Insured)
6.375% 12/15/06 1,000 1,012
6.375% 12/15/07 3,500 3,515
Houston Water & Sewer Systems Revenue
Refunding
Zero Coupon (Effective Yield 6.800%)
12/01/08 (AMBAC Insured) 4,000 1,600
Zero Coupon (Effective Yield 6.8125%)
12/01/09 (AMBAC Insured) 4,000 1,490
Zero Coupon (Effective Yield 6.850%)
12/01/10 (AMBAC Insured) 3,750 1,297
8.200% 12/01/15 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 12/01/96) 2,915 3,127
8.200% 12/01/16 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 12/01/96) 4,500 4,828
Hurst Euless Bedford Independent School District
Refunding (PSF guaranteed) 6.500% 8/15/24 7,825 7,565
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Texas (Continued)
Lower Colorado River Authority Revenue
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 1/01/96) 9.000% 1/01/09 $ 3,150 $ 3,331
Sabine River Authority P.C.R. (Southwestern
Electric Power Company) Series 1986
8.200% 7/01/14 6,000 6,327
San Antonio Electric & Gas Revenue Series B
(FGIC Insured) Zero Coupon (Effective
Yield 6.050%) 2/01/05 5,000 2,678
Southwest Higher Education Authority Revenue
(Southern Methodist University L.O.C.
Morgan Guaranty) V.R.D.B. 5.300% 1,700 1,700
Texas G.O. Veteran's Welfare Fund
8.300% 12/01/16 (Escrowed in U.S. Treasury
Securities) (pre-refunded to 12/01/99) 15,275 17,032
8.300% 12/01/16 9,725 10,150
Texas Municipal Power Agency Revenue
Refunding (AMBAC Insured)
Zero Coupon (Effective Yield 6.840%) 9/01/07 9,435 4,134
Zero Coupon (Effective Yield 6.900%) 9/01/08 1,475 598
Travis County Housing Finance Agency Single
Family Mortgage (collateralized by Government
National Mortgage Association Securities)
(FGIC Insured) 8.000% 9/01/10 1,560 1,585
--------
74,224
Vermont (0.2%)
Vermont Housing Finance Agency Single
Family Mortgage Revenue Series A
8.150% 5/01/25 1,095 1,124
Virginia (0.5%)
Virginia Beach G.O. Refunding Series B
12.750% 7/15/01 2,000 2,744
Washington (5.1%)
Port of Longview Industrial Development
Corporation Solid Waste Disposal Revenue
(Weyerhaeuser Company) 6.875% 10/01/08 8,250 8,225
Washington G.O.
5.750% 9/01/10 Refunding Series R 3,000 2,759
6.000% 6/01/13 Series B 7,280 6,763
Washington Public Power Supply Systems
Revenue Refunding
Zero Coupon (Effective Yield 6.700%)
7/01/05 Series 1991 B (FGIC Insured)
(Nuclear Project #3) 5,000 2,547
Zero Coupon (Effective Yield 6.950%)
7/01/08 Series B (Nuclear Project #3) 7,000 2,782
6.300% 7/01/12 Series 1992 A (Nuclear
Project #2) 3,500 3,304
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
Managed Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Washington (Continued)
Washington Public Power Supply Systems
Revenue Refunding 6.500% 7/01/18
Series 1991 C (Nuclear Project #3) $5,000 $ 4,701
--------
31,081
Wisconsin (1.4%)
Carlton P.C.R. Series 1991 (Wisconsin Power
& Light) V.R.D.B. 5.950% 400 400
Wisconsin G.O. Series G (Escrowed in U.S.
Treasury Securities) (pre-refunded to 5/01/99)
6.750% 5/01/11 5,000 5,266
Wisconsin Housing and Economic Development
Authority Revenue 7.750% 9/01/10 2,985 3,056
--------
8,722
Wyoming (0.0%)
Sublette County P.C.R. (Exxon Corp.)
V.R.D.B. 5.200% 100 100
<CAPTION>
Market
Municipal Securities (Continued) Value
<S> <C>
Total Municipal Securities (98.0%)
(Amortized Cost $591,849) $592,096
Other Assets, Less Liabilities (2.0%) 12,280
--------
Total Net Assets (100%) $604,376
========
<FN>
*Security was pledged to cover margin requirements for open futures contracts.
Futures contracts which were open at December 31, 1994 were as follows:
<CAPTION>
Unrealized
Number of Contract Loss
Type Contracts Value Expiration at 12/31/94
<S> <C> <C> <C> <C>
U.S. Treasury
Bond Futures
(Short) 300 $29,747 March, 1995 $180
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
High-Yield Municipals
Investments as of December 31, 1994
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (98.1%) Amount Value
<S> <C> <C>
Alabama (0.5%)
Citronelle Utilities Board Water
Sewer and Gas Revenue 11.000% 5/01/13 $1,250 $1,339
Arizona (0.9%)
Arizona Health Facilities Hospital System
Revenue Refunding (Phoenix Memorial
Hospital) 8.125% 6/01/12 2,500 2,532
Arkansas (0.4%)
Conway Hospital Revenue (Conway Memorial
Hospital) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/95) 11.750% 7/01/11 1,000 1,066
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Colorado (3.2%)
Adams County Single Family Mortgage Revenue
Series B (Escrowed in U.S. Treasury Securities)
**11.250% 9/01/11 (pre-refunded to 9/01/09) $ 325 $ 471
**11.250% 9/01/11 (pre-refunded to 9/01/10) 360 526
**11.250% 9/01/11 220 324
11.250% 9/01/12 1,440 2,120
*Briargate Public Building Authority
Landowner's Assessment Lien Revenue
10.250% 12/15/00 Series 1985 A 623 199
9.500% 12/15/07 Series 1986 A 2,295 734
Colorado Health Facilities Authority Revenue
7.250% 4/01/11 (Birchwood Manor
Apartments) (collateralized by Government
National Mortgage Association Securities) 745 752
8.500% 2/15/21 Series B (PSL Health Systems) 3,250 3,414
--------
8,540
The accompanying notes to financial statements are an integral part of these schedules.
<PAGE>
High-Yield Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Florida (3.0%)
*Florida Housing Finance Agency Multi-Family
Housing Revenue (Palm-Aire) 10.000% 1/01/20 $3,000 $ 1,800
Leesburg Capital Improvement Hospital
Revenue Series 1991 A (Leesburg Regional
Medical Center) (Escrowed in U.S. Treasury
Securities) (pre-refunded to 7/01/01)
7.375% 7/01/11 775 853
Putnam County Development Authority P.C.R.
(Florida Power & Light) V.R.D.B. 6.500% 1,000 1,000
Saint Lucie County P.C.R. Series 1993 (Florida
Power and Light) V.R.D.B. 6.500% 700 700
*Sarasota County Health Facilities Authority
Revenue (North Trail Retirement Center)
9.250% 10/01/21 2,950 841
Tavares First Mortgage Revenue Refunding
(Friendly Center of Tavares) 9.250% 10/01/21 3,250 2,762
--------
7,956
Georgia (4.9%)
Cartersville Development Authority Water
and Waste Water Facilities Revenue
(Anheuser Busch) 7.375% 5/01/09 5,000 5,324
Municipal Electric Authority of Georgia
Power Revenue 6.600% 1/01/18 6,065 5,863
Savannah Hospital Authority Revenue
Refunding and Improvement (Candler
Hospital) 7.000% 1/01/23 2,000 1,799
--------
12,986
Guam (0.3%)
Guam Airport Authority General Revenue
Series 1993 B 6.700% 10/01/23 1,000 928
Idaho (1.4%)
Idaho Housing Agency Single Family Mortgage
Revenue Series B (FHA Insured)
7.500% 7/01/24 3,780 3,822
Illinois (3.2%)
Chicago (City of) Skyway Toll Bridge Revenue
Series 1994 6.750% 1/01/17 1,500 1,393
Illinois Development Finance Authority
(Catholic Charities Housing Development)
5.950% 1/01/09 1,400 1,250
Illinois Health Facilities Authority Revenue
Refunding
8.125% 7/01/06 Series 1991 (United
Medical Center) 2,910 3,257
7.000% 2/15/22 Series 1992 (Edward
Hospital Association) 685 669
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Illinois (Continued)
Illinois Housing Development Authority Multi-
Family Housing Series C 7.400% 7/01/23 $ 140 $ 142
Regional Transportation Authority Series A
(AMBAC Insured) 8.000% 6/01/17 1,500 1,717
--------
8,428
Indiana (13.4%)
East Chicago P.C.R. (Inland Steel Company)
Series B (Project #8) 10.750% 12/01/12 425 447
Hammond Sewer & Solid Waste Disposal
Revenue (American Maize Products Co.)
8.000% 12/01/24 4,000 4,016
Indiana Health Facilities Financing Authority
Hospital Revenue Refunding
6.875% 8/01/17 (Riverview Hospital)
Series 1993 1,500 1,318
7.000% 10/01/17 Series A (St. Anthony
Medical Center) 1,000 957
7.200% 10/01/22 (Fayette Memorial
Hospital) 2,200 2,003
Indiana Transportation Finance Authority
Airport Facilities Lease Revenue Series A
6.250% 11/01/16 9,500 8,686
Indianapolis Airport Authority Revenue
Special Facilities (Federal Express Corp.)
7.100% 1/15/17 1,500 1,427
Indianapolis Economic Development Revenue
First Lien
*9.375% 8/01/19 (The Home Place I Project) 1,530 688
*9.500% 2/01/21 (The Home Place II Project) 825 371
Indianapolis Local Public Improvement Bond
Bank Series 1991 C 6.700% 1/01/17 8,900 8,561
Marion County Hospital Authority (Daughters
of Charity Health System St. Vincent's
Hospital and Health Care Center, Inc.)
10.125% 11/01/15 2,125 2,242
New Castle Economic Development Revenue
(Raintree Square Project)
8.650% 4/01/17 Series 1988 A (FHA Insured) 2,860 3,127
*Zero Coupon 3/01/18 Series 1988 B 30,655 77
*Westfield Economic Development Revenue
First Lien (Sanders Glen Project)
9.375% 8/01/19 2,455 1,719
--------
35,639
Iowa (1.5%)
Iowa Housing Finance Authority Single
Family Housing Revenue Zero Coupon
(Effective Yield 10.262%) 9/01/16 43,655 3,921
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
High-Yield Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Kansas (0.7%)
CSJ Health Systems of Wichita Revenue
7.000% 11/15/18 $2,000 $1,910
Louisiana (3.3%)
De Soto Parish Environmental Impact Revenue
(International Paper Co.) Series A
7.700% 11/01/18 2,500 2,570
Louisiana Public Facilities Authority
Hospital Revenue (Women's Hospital
Foundation) 7.250% 10/01/22 2,300 2,127
Louisiana Public Facilities Authority Student
Loan Revenue Series A-2 6.750% 9/01/06 2,000 1,965
Parish of St. Charles P.C.R. (Shell Oil Co.)
V.R.D.B. 5.650% 2,200 2,200
--------
8,862
Massachusetts (7.8%)
Massachusetts Bay Transportation Authority
Refunding Series B 6.200% 3/01/16 5,825 5,464
Massachusetts G.O. Refunding Series A
6.500% 8/01/11 3,000 2,959
Massachusetts Housing Finance Agency
Series A 9.000% 12/01/18 850 886
Massachusetts Industrial Finance Agency
Resource Recovery Revenue Series B
(Southeastern Massachusetts Waste Disposal)
9.250% 7/01/15 6,000 6,507
Massachusetts Municipal Wholesale Electric
Company Power Supply System Revenue
Series 1985 A
13.625% Mandatory Put 1/01/95 5 5
13.625% Mandatory Put 7/01/95 5 5
Massachusetts Water Resources Authority
Series A 5.500% 7/15/22 6,000 4,951
--------
20,777
Michigan (0.3%)
Michigan Hospital Finance Authority Revenue
Series A (Brighton Hospital) 8.625% 10/01/18 850 853
Mississippi (2.8%)
Adams County Hospital Revenue (Jefferson
Davis Memorial Hospital) 7.900% 10/01/08 750 770
Claiborne County P.C.R. (Systems Energy)
9.500% 12/01/13 Series A 750 826
9.875% 12/01/14 Series C 1,000 1,114
Lowndes County Solid Waste Disposal & P.C.R.
Refunding (Weyerhaeuser Company)
6.800% 4/01/22 4,995 4,785
-------
7,495
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Missouri (1.9%)
Nevada Environmental Treatment Waterworks
and Sewer System Revenue 10.000% 3/01/04 $2,000 $2,060
St. Louis I.D.A. Revenue Refunding (Kiel Center
Multipurpose Arena) 7.875% 12/01/24 3,000 2,923
--------
4,983
Montana (0.4%)
Montana Board of Housing Single Family
Mortgage Revenue (FHA/VA Insured)
7.300% 10/01/17 Series B-1 480 483
7.500% 4/01/23 Series B-2 525 522
--------
1,005
Nevada (0.8%)
Humboldt County P.C.R. (Idaho Power
Company) 8.300% 12/01/14 2,000 2,206
New Hampshire (0.9%)
New Hampshire Higher Educational & Health
Facilities (Franklin Pierce College)
6.000% 10/01/18 3,000 2,526
New Jersey (1.9%)
New Jersey Health Care Facilities Financing
Authority Revenue (Passaic-General Hospital
Center) (Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/95)
10.125% 7/01/02 600 633
10.375% 7/01/14 2,440 2,553
New Jersey Health Care Facilities Financing
Authority Revenue Refunding (Raritan Bay
Medical Center) 7.250% 7/01/27 2,200 1,935
--------
5,121
New York (1.7%)
Erie County Water Authority Revenue
Refunding (AMBAC Insured) Zero Coupon
(Effective Yield 7.300%) 12/01/17 660 128
Port Authority New York and New Jersey
Construction Ninety Third Series
6.125% 5/31/2094 2,500 2,232
Triborough Bridge & Tunnel Authority
General Purpose Revenue Series E
7.250% 1/01/10 2,000 2,052
--------
4,412
North Carolina (1.8%)
North Carolina Eastern Municipal Power
Agency Power Systems Revenue
6.125% 1/01/09 Series 1993 B 1,680 1,552
6.500% 1/01/18 Series 1991 A (Escrowed in
U.S. Treasury Securities) 3,320 3,335
-------
4,887
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
High-Yield Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Ohio (5.0%)
Cleveland G.O. (Escrowed in U.S. Treasury
Securities) (pre-refunded to 11/01/95)
9.875% 11/01/02 $ 950 $ 1,013
9.875% 11/01/04 100 107
Greater Allen County Housing Development
Corp. Revenue First Lien (Steiner-McBride
Apartments Project) 10.250% 9/01/03 1,385 1,399
Ohio Building Authority Correctional Facilities
Series A
7.350% 8/01/03 2,000 2,170
7.350% 3/01/04 1,000 1,082
Ohio Water Development Facilities Authority
P.C.R. (Cleveland Electric Illuminating
Company) Mandatory Put 11/01/97 9.750% 5,060 5,381
Oxford Hospital Facilities Revenue Series 1986
(McCullough-Hyde Memorial Hospital)
8.000% 5/01/17 1,000 1,018
--------
12,170
Oregon (1.2%)
Port of Morrow Revenue (Portland General
Electric-Boardman Project L.O.C. Industrial
Bank of Japan) V.R.D.B. 5.300% 3,300 3,300
Pennsylvania (9.0%)
Allentown Area Hospital Authority Revenue
(Sacred Heart Hospital of Allentown)
7.500% 7/01/06 3,460 3,402
Dauphin County I.D.A. Revenue Series A
(Dauphin Consolidated Water Supply
General Waterworks Corp.) 6.900% 6/01/24 2,700 2,566
Delaware County Hospital Authority Revenue
Series A (Mercy Catholic Medical Center)
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/01/97) 7.375% 11/01/12 1,100 1,179
Montgomery County Higher Education &
Health Authority Hospital Revenue
8.750% 7/01/20 (Jeanes Health Systems)
(Escrowed in U.S. Treasury Securities)
(pre-refunded to 7/01/00) 3,200 3,696
6.875% 11/15/20 (Pottstown Memorial
Medical Center) 1,000 880
North Hampton County I.D.A. P.C.R. Series A
(Metropolitan Edison Company)
10.500% 9/01/95 1,500 1,551
Philadelphia Municipal Lease Revenue
Refunding Series 1993 D 6.250% 7/15/13 2,500 2,147
Philadelphia Water & Sewer Revenue Tenth
Series 7.350% 9/01/04 (Escrowed in U.S.
Treasury Securities) 4,155 4,524
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Pennsylvania (Continued)
Schuykill County I.D.A. Resource Recovery
Revenue (Westwood Energy Properties
L.O.C. Fuji Bank Ltd.) V.R.D.B. 6.050% $3,800 $ 3,800
--------
23,745
Puerto Rico (2.3%)
Puerto Rico Highway & Transportation
Authority Highway Revenue Refunding
6.250% 7/01/08 (pre-refunded to 9/01/02) 800 799
6.625% 7/01/12 Series V 2,000 1,980
6.625% 7/01/18 Series T 3,200 3,198
--------
5,977
Tennessee (0.8%)
Knox County Health, Educational and Housing
Facilities Revenue (Baptist Health Systems of
East Tennessee) 8.600% 4/15/16 2,005 2,049
Texas (14.1%)
Alliance Airport Authority Special Facilities
Revenue Series 1991 (American Airlines)
7.000% 12/01/11 4,000 3,664
**Austin Combined Utility Systems Revenue
Refunding (Escrowed in U.S. Treasury Securities)
(pre-refunded to 11/15/95) 10.250% 11/15/12 1,000 1,066
Austin Utility System Revenue (AMBAC Insured)
Zero Coupon (Effective Yield 6.450%) 11/15/09 5,000 1,881
Bexar County Housing Financing Corp Revenue
Series B (collateralized by Government
National Mortgage Association Securities)
9.250% 4/01/16 545 545
Harris County Housing Finance Corp. Single
Family Housing Revenue Series 1983
9.200% 3/15/95 240 240
9.250% 3/15/96 225 224
9.625% 3/15/03 395 388
Houston Independent School District Refunding
G.O. (AMBAC Insured) Zero Coupon (Effective
Yield 6.450%) 8/15/09 4,390 1,653
Houston Water & Sewer Systems Revenue
Refunding Series C (AMBAC Insured) Zero
Coupon (Effective Yield 6.400%) 12/01/08 9,260 3,705
Montgomery County Health Facilities
Development Corp. Hospital Mortgage
Revenue Refunding (Woodlands Medical
Center) 8.850% 8/15/14 2,555 2,688
North Central Health Facilities Development
Corporation Hospital Revenue (Tri-City
Health Center) 9.500% 5/01/21 8,300 8,770
Port Corpus Christi Industrial Development
Corporation Revenue Series A (Valero
Refining & Marketing) 10.250% 6/01/17 4,280 4,695
The accompanying notes to financial statements are an integral part of this schedule.
<PAGE>
High-Yield Municipals
Investments (Continued)
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Texas (Continued)
Sam Rayburn Municipal Power Agency Power
Supply Systems Revenue Refunding
Series 1985 A (pre-refunded to 9/01/95)
9.625% 9/01/04 $ 750 $ 789
San Antonio Electric & Gas Revenue Refunding
Series B (FGIC Insured) Zero Coupon
(Effective Yield 6.100%) 2/01/05 12,325 6,601
Texas Housing Agency Residential Mortgage
Revenue Series D 8.400% 1/01/21 360 375
--------
37,284
Utah (0.8%)
Utah Housing Finance Agency Single Family
Mortgage
7.550% 7/01/23 Series C-3
(FHA/VA Insured) 845 858
7.750% 1/01/23 Series B-2 (FHA Insured) 1,170 1,182
--------
2,040
Washington (6.1%)
Quincy Water and Sewer Revenue Series I
9.250% 11/01/10 2,735 3,212
Washington G.O. Series B 6.400% 6/01/17 5,000 4,814
Washington Health Care Facilities Authority
Revenue (Sacred Heart Medical Center,
Spokane) 6.875% 2/15/12 1,500 1,478
Washington Housing Finance Commission
Single Family Mortgage Revenue Series C
(collateralized by Government and Federal
National Mortgage Association Securities)
Zero Coupon (Effective Yield 7.750%) 1/01/22 1,745 221
Zero Coupon (Effective Yield 7.750%) 7/01/22 1,935 236
Zero Coupon (Effective Yield 7.750%) 1/01/23 1,935 227
Zero Coupon (Effective Yield 7.750%) 7/01/23 1,940 219
Zero Coupon (Effective Yield 7.750%) 1/01/24 1,950 212
Zero Coupon (Effective Yield 7.750%) 7/01/24 1,940 203
<PAGE>
<CAPTION>
Principal Market
Municipal Securities (Continued) Amount Value
<S> <C> <C>
Washington (Continued)
Washington Public Power Supply Systems
Revenue (Nuclear Project #2)
Zero Coupon (Effective Yield 6.888% )
7/01/07 $6,945 $ 2,992
6.300% 7/01/12 Series 1992 A 2,500 2,360
--------
16,174
Wisconsin (1.1%)
Wisconsin Housing and Economic Development
Authority Revenue 7.850% 3/01/24 2,950 3,016
Wyoming (0.7%)
Lincoln County P.C.R. (Exxon County)
V.R.D.B. 6.000% 100 100
Wyoming Community Development Authority
Single Family Mortgage Revenue Series A
(FHA Insured) 7.375% 6/01/17 1,730 1,751
--------
1,851
--------
Total Municipal Securities (98.1%)
(Amortized Cost $275,783) 259,800
Other Assets, Less Liabilities (1.9%) 5,001
--------
Total Net Assets (100.0%) $264,801
========
<FN>
*Non-income producing securities.
**Securities were pledged to cover margin requirements for open futures contracts.
Futures contracts which were open at December 31, 1994 were as follows:
<CAPTION>
Unrealized
Number of Contract Loss
Type Contracts Value Expiration at 12/31/94
<S> <C> <C> <C> <C>
U.S. Treasury
Bond Futures
(Short) 300 $29,747 March, 1995 $180
The accompanying notes to financial statements are an integral part of this schedule.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Balance Sheets
December 31, 1994
(All amounts in thousands)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Fund Municipals Municipals Municipals
<S> <C> <C> <C> <C>
Assets
Investments, at value $174,779 $213,798 $592,096 $259,800
Receivable for investments sold -- -- 225 1,982
Receivable for fund shares sold 1,523 1,107 179 183
Accrued interest receivable 1,191 4,403 12,074 5,059
Cash and other assets 590 941 1,997 360
-------- -------- -------- --------
Total Assets $178,083 $220,249 $606,571 $267,384
======== ======== ======== ========
Liabilities
Payable for investments purchased $ 1,595 $ 3,234 $ -- $ --
Payable for fund shares repurchased 2,406 632 1,162 2,081
Dividends payable 24 143 426 195
Payable to investment adviser and
transfer agent 69 125 356 190
Other liabilities 54 85 251 117
-------- -------- -------- --------
Total Liabilities 4,148 4,219 2,195 2,583
-------- -------- -------- --------
Capital
Paid-in capital 173,864 219,153 614,255 285,81
Net unrealized appreciation (depreciation)
of investments -- (1,277) 67 (16,163)
Accumulated net realized gains (losses)
on investments 71 (1,846) (9,946) (4,848)
-------- -------- -------- --------
Total Capital (Net Assets) 173,935 216,030 604,376 264,801
-------- -------- -------- --------
Total Liabilities and Capital $178,083 $220,249 $606,571 $267,384
======== ======== ======== ========
Shares Outstanding (Unlimited Number
Authorized) 173,864 20,200 72,291 24,882
======== ======== ======== ========
Net Asset Value (Capital) Per Share $ 1.00 $ 10.70 $ 8.36 $ 10.64
======== ======== ======== ========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Statements of Operations
for the Six Months Ended December 31, 1994
(All amounts in thousands)
(Unaudited)
<CAPTION>
Municipal
Money Intermediate Managed High-Yield
Market Fund Municipals Municipals Municipals
<S> <C> <C> <C> <C>
Investment Income
Tax-exempt interest $2,717 $6,433 $21,843 $10,055
-------- -------- -------- --------
Expenses
Management fees 411 642 1,739 811
Transfer agent fees 104 89 251 156
Printing and postage 20 22 64 40
Custodian fees 27 27 41 23
Registration fees 15 12 13 12
Legal and audit fees 13 13 13 186
Trustees' fees 7 8 11 9
Accounting fees 2 2 3 3
Other expenses 17 34 73 77
-------- -------- -------- --------
616 849 2,208 1,317
Reimbursement of expenses by investment adviser (41) -- -- --
-------- -------- -------- --------
Total Expenses 575 849 2,208 1,317
-------- -------- -------- --------
Net Investment Income 2,142 5,584 19,635 8,738
-------- -------- -------- --------
Realized and Unrealized Losses on Investments
Net realized losses on investments (2) (1,180) (4,483) (2,103)
Net realized losses on futures transactions -- (593) (575) (575)
Net change in unrealized appreciation or
depreciation of investments -- (4,656) (21,451) (8,924)
-------- -------- -------- --------
Net Losses on Investments (2) (6,429) (26,509) (11,602)
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations $2,140 $ (845) $ (6,874) $(2,864)
======== ======== ========= ========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Statements of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
Municipal Money Market Fund Intermediate Municipals
Year Ended Six Months Ended Year Ended Six Months Ended
June 30, Dec. 31, June 30, Dec. 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,754 $ 2,142 $ 11,722 $ 5,584
Net realized gains (losses) on investments (15) (2) 59 (1,773)
Net change in unrealized appreciation or
depreciation of investments -- -- (8,963) (4,656)
--------- --------- --------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,739 2,140 2,818 (845)
--------- --------- --------- ---------
Distributions To Shareholders
Dividends from net investment income (3,754) (2,142) (11,722) (5,584)
Distributions from realized gains -- -- (3,978) --
Distributions in excess of realized gains -- -- (74) --
--------- --------- --------- ---------
Total Distributions to Shareholders (3,754) (2,142) (15,774) (5,584)
Share Transactions
Subscriptions of fund shares 316,484 133,860 84,781 37,571
Investment income dividends reinvested 3,276 1,930 7,601 3,665
Capital gain distributions reinvested -- -- 3,393 --
Redemptions of fund shares (349,812) (127,673) (90,207) (56,830)
--------- --------- --------- ---------
Net Increase (Decrease) from
Share Transactions (30,052) 8,117 5,568 (15,594)
--------- --------- --------- ---------
Net Increase (Decrease) in Net Assets (30,067) 8,115 (7,388) (22,023)
Total Net Assets
Beginning of period 195,887 165,820 245,441 238,053
--------- --------- --------- ---------
End of period $165,820 $173,935 $238,053 $216,030
========= ========= ========= =========
Analyses of Changes in Shares of
Beneficial Interest
Subscriptions of fund shares 316,484 133,860 7,360 3,490
Investment income dividends reinvested 3,276 1,930 663 338
Capital gain distributions reinvested -- -- 293 --
--------- --------- --------- ---------
319,760 135,790 8,316 3,828
--------- --------- --------- ---------
Redemptions of fund shares (349,813) (127,673) (7,882) (5,271)
Net increase (decrease) in fund shares (30,053) 8,117 434 (1,443)
Shares outstanding at beginning of period 195,800 165,747 21,209 21,643
--------- --------- --------- ---------
Shares outstanding at end of period 165,747 173,864 21,643 20,200
========= ========= ========= =========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
SteinRoe Municipal Trust
Statements of Changes in Net Assets
(All amounts in thousands)
(Unaudited)
<CAPTION>
Managed Municipals High-Yield Municipals
Year Ended Six Months Ended Year Ended Six Months Ended
June 30, Dec. 31, June 30, Dec. 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Operations
Net investment income $ 41,313 $ 19,635 $ 19,543 $ 8,738
Net realized gains (losses) on investments (800) (5,058) 631 (2,678)
Net change in unrealized appreciation or
depreciation of investments (41,521) (21,451) (15,935) (8,924)
--------- --------- --------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,008) (6,874) 4,239 (2,864)
--------- --------- --------- ---------
Distributions To Shareholders
Dividends from net investment income (41,313) (19,635) (19,543) (8,738)
Distributions from realized gains (8,848) -- (4,738) --
Distributions in excess of realized gains (4,888) -- (2,171) --
--------- --------- --------- ---------
Total Distributions to Shareholders (55,049) (19,635) (26,452) (8,738)
--------- --------- --------- ---------
Share Transactions
Subscriptions of fund shares 66,157 40,272 36,146 35,336
Investment income dividends reinvested 24,661 11,970 11,040 5,113
Capital gain distributions reinvested 11,376 -- 5,379 --
Redemptions of fund shares (135,579) (108,609) (81,274) (72,227)
--------- --------- --------- ---------
Net Increase (Decrease) from
Share Transactions (33,385) (56,367) (28,709) (31,778)
Net Increase (Decrease) in Net Assets (89,442) (82,876) (50,922) (43,380)
Total Net Assets
Beginning of period 776,694 687,252 359,103 308,181
--------- --------- --------- ---------
End of period $687,252 $604,376 $308,181 $264,801
========= ========= ========= =========
Analyses of Changes in Shares of
Beneficial Interest
Subscriptions of fund shares 7,135 4,755 3,124 3,301
Investment income dividends reinvested 2,676 1,406 950 472
Capital gain distributions reinvested 1,221 -- 458 --
--------- --------- --------- ---------
11,032 6,161 4,532 3,773
Redemptions of fund shares (14,771) (12,892) (7,011) (6,746)
--------- --------- --------- ---------
Net increase (decrease) in fund shares (3,739) (6,731) (2,479) (2,973)
Shares outstanding at beginning of period 82,761 79,022 30,334 27,855
--------- --------- --------- ---------
Shares outstanding at end of period 79,022 72,291 27,855 24,882
========= ========= ========= =========
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
SteinRoe Municipal Trust
Notes to Financial Statements
(Unaudited)
Note 1. Significant Accounting Policies
The following are the significant accounting policies of SteinRoe Municipal
Money Market Fund, SteinRoe Intermediate Municipals, SteinRoe Managed
Municipals, and SteinRoe High-Yield Municipals (the "Funds"), each a series of
SteinRoe Municipal Trust (a Massachusetts business trust).
Security Valuations
All securities are valued as of December 30, 1994, the last business day of
the period. Municipal securities are valued at a fair value using a procedure
determined in good faith by the Board of Trustees which has authorized the use
of bid valuations provided by a pricing service except for the Municipal Money
Market Fund. Municipal securities of the Municipal Money Market Fund are
valued at amortized cost. This method involves valuing an instrument at cost
on the purchase date 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 and does not take into
account unrealized securities gains or losses. Other securities and assets of
the Funds are valued by a method that the Board of Trustees believes
represents a fair value.
Futures Contracts
During the six months ended December 31, 1994, Intermediate Municipals,
Managed Municipals and High-Yield Municipals entered into futures contracts to
either hedge against expected declines in the market value of its portfolio
securities or as a temporary substitute for the purchase of individual bonds.
Risks of entering into futures contracts include the possibility that there
may be an illiquid market at the time the Fund seeks to close out a contract
and changes in the value of the futures contract may not correlate with
changes in the value of the portfolio securities being hedged.
Upon entering into a futures contract, the Fund deposits with its custodian
cash or securities in an amount sufficient to meet the initial margin
requirement. Subsequent payments are made or received by the Fund equal to the
daily change in the contract value and are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Federal Income Taxes
No provision is made for Federal income taxes since the Funds elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law. All dividends paid from net investment income by the
Funds constitute tax-exempt interest that is not taxable for federal income
tax purposes; however, a portion of the dividends paid may be includable in
the alternative minimum tax calculation.
<PAGE>
Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly.
Capital gain distributions, if any, are distributed annually.
Effective July 1, 1993, the Funds adopted Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies." The
Statement distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings be reported in the financial statements as a return of capital. It
also requires that differences in the recognition or classification of income
between the financial statements and tax earnings which result in temporary
over-distributions be classified as distributions in excess of net investment
income or net realized gains.
None of the Funds had distributions in excess of net investment income or net
realized gains for the six months ended December 31, 1994.
Other Information
Realized gains or losses from sales of securities are determined on the
specific identified cost basis.
The Municipal Money Market Fund attempts to maintain its net asset value per
share at $1.00, which it believes will be possible under most conditions.
Original issue discounts and premiums on municipal securities of Intermediate
Municipals, Managed Municipals, and High-Yield Municipals are amortized.
A maturity date is not shown for municipal securities bearing variable or
floating interest rates that are adjusted periodically to minimize
fluctuations in the value of such securities.
All amounts, except per share amounts, are shown in thousands.
<PAGE>
Note 2. Trustees' Fees and Transactions with Affiliates
The Funds pay a monthly management fee to Stein Roe & Farnham Incorporated
(the "Adviser"), an indirect wholly owned subsidiary of Liberty Mutual
Insurance Company, for its services as investment adviser and manager. The
management fee is computed at an annual rate for the Municipal Money Market
Fund of .50 of 1% of average daily net assets and for Intermediate Municipals
and High-Yield Municipals at .60 of 1% of the first $100 million of average
daily net assets, .55 of 1% of the next $100 million, and .50 of 1%
thereafter. For Managed Municipals, the management fee is computed at an
annual rate of .60 of 1% of the first $100 million of average daily net
assets, .55 of 1% of the next $100 million, .50 of 1% of the next $800
million, and .45 of 1% thereafter.
The investment advisory agreements of the Funds provide that the Adviser will
reimburse each Fund to the extent that its annual expenses, excluding certain
expenses, exceed the applicable limits prescribed by any state
in which each Fund's shares are offered for sale. In addition, the Adviser has
agreed to reimburse Municipal Money Market Fund for expenses in excess of .70
of 1% of average daily net assets. This expense limitation expires on October
31, 1995, subject to earlier termination by the Adviser on 30 days notice.
The transfer agent fees of the Funds are paid to SteinRoe Services, Inc., an
indirect wholly owned subsidiary of Liberty Mutual Insurance Company.
Pursuant to an agreement which became effective November 1, 1994, the Adviser
provides the Funds with certain fund accounting services. For the six months
ended December 31, 1994, Municipal Money Market, Intermediate Municipals,
Managed Municipals and High-Yield Municipals incurred fees of $2, $2, $3 and
$3, respectively.
Certain officers and trustees of the Trust are also officers of the Adviser.
The compensation of trustees not affiliated with the Adviser for Municipal
Money Market Fund, Intermediate Municipals, Managed Municipals and High-Yield
Municipals for the six months ended December 31, 1994 was $7, $8, $11 and $9,
respectively. No remuneration was paid to any other trustee or officer of the
Trust.
Note 3. Short-Term Debt
To facilitate portfolio liquidity, Intermediate Municipals, Managed Municipals
and High-Yield Municipals maintain borrowing arrangements under which they can
borrow against portfolio securities. There were no borrowings for any of these
Funds during the six months ended December 31, 1994.
<PAGE>
<TABLE>
Note 4. Investment Transactions
The aggregate cost of purchases and proceeds from sales or maturities of
securities (excluding short-term obligations for Intermediate Municipals,
Managed Municipals and High-Yield Municipals) for the six months ended
December 31, 1994 were as follows:
<CAPTION>
Fund Purchases Sales
<S> <C> <C>
Municipal Money Market Fund $218,616 $152,374
Intermediate Municipals 56,091 80,272
Managed Municipals 60,877 128,620
High-Yield Municipals 20,202 54,883
At December 31, 1994, unrealized appreciation and depreciation of investments
on a tax basis and the cost of investments for financial reporting purposes
and for Federal income tax purposes were as follows:
<CAPTION>
Cost of Investments
Net Federal
Appreciation Financial Income
Fund Appreciation Depreciation (Depreciation) Reporting Tax
<S> <C> <C> <C> <C> <C>
Municipal Money Market Fund $ -- $ -- $ -- $174,779 $174,779
Intermediate Municipals 2,378 3,594 (1,216) 215,014 215,014
Managed Municipals 12,296 12,049 247) 591,849 591,849
High-Yield Municipals 6,113 22,096 (15,983) 275,783 275,783
</TABLE>
<PAGE>
<TABLE>
Note 5. Portfolio Composition
The Funds invest in municipal securities including, but not limited to,
general obligation bonds, revenue bonds and escrowed bonds (which are bonds
that have been refinanced, the proceeds of which have been invested in U.S.
Government or agency obligations and set aside to pay off the original issue
at the first call date or maturity). At December 31, 1994, the percentage of
each Fund's portfolio by bond type was as follows:
<CAPTION>
Municipal Money Intermediate Managed High-Yield
Bond Type Market Fund Municipals Municipals Municipals
<S> <C> <C> <C> <C>
General Obligation 5% 23% 16% 6%
Revenue:
Airport -- 8 3 1
Education 5 1 1 --
Hospital 5 5 4 19
Industrial 23 3 3 8
Mortgage 3 2 14 13
Municipal Electric 4 5 9 8
Public Utility 18 7 7 7
Toll 2 5 7 4
Water & Sewer -- 17 7 4
Oil 3 -- -- 2
Other Revenue 14 10 5 9
Paper -- -- 3 2
Sales Tax -- 2 2 --
Student Loan 8 5 2 1
Waste Disposal 9 -- -- 3
Escrowed 1 7 17 13
---- ---- ---- ----
Total 100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
The Funds' investments include certain municipal securities that are insured
by private insurers who guarantee the payment of principal and interest in the
event of default. At December 31, 1994, investments in these securities for
Intermediate Municipals and Managed Municipals represented 41% and 16% of the
portfolio, respectively.
Municipal Money Market Fund's investments include certain short-term
securities that are backed by bank letters of credit used to provide liquidity
to the issuer and/or additional security in the event of default by the
issuer. At December 31, 1994, 57% of the portfolio was backed by bank letters
of credit.
See each Fund's schedule of investments for additional information on
portfolio composition and page 8 for a summary of credit quality ratings.
<PAGE>
<TABLE>
Financial Highlights
(Unaudited)
Selected per share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Ended
Municipal Money Years Ended Dec. 31, June 30,
Market Fund 1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
Net investment income .047 .041 .040 .021
Distributions from net
investment income (.047) (.041) (.040) (.021)
------ ------ ------ ------
Net Asset Value,
End of Period $1.000 $1.000 $1.000 $1.000
====== ====== ====== ======
Ratio of net expenses to
average net assets (a) 0.60% 0.60% 0.69% 0.67%*
Ratio of net investment income
to average net assets (b) 4.74% 4.05% 4.08% 4.25%*
Total return 4.82% 4.22% 4.11% 4.29%*
Net assets, end of period $152,277 $251,465 $306,971 $294,116
<PAGE>
<CAPTION>
Six
Months
Ended
Municipal Money Years Ended June 30, Dec. 31,
Market Fund 1989 1990 1991 1992 1993 1994 1994
<S> <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
------ ------ ------ ------ ------ ------ ------
Net investment income .056 .054 .046 .032 .020 .019 .013
Distributions from net
investment income (.056) (.054) (.046) (.032) (.020) (.019) (.013)
------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ======
Ratio of net expenses to
average net assets (a) 0.67% 0.67% 0.68% 0.70% 0.70% 0.70% 0.70%*
Ratio of net investment income
to average net assets (b) 5.57% 5.40% 4.66% 3.19% 1.96% 1.88% 2.61%*
Total return 5.74% 5.52% 4.74% 3.25% 1.97% 1.90% 2.61%*
Net assets, end of period $254,261 $255,953 $237,403 $199,037 $195,887 $165,820 $173,935
<FN>
* Annualized
(a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio would have
been 0.72% and 0.70% for the years ended December 31, 1985 and 1986,
respectively and 0.75% for the six months ended December 31, 1994.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
(Continued)
(Unaudited)
Selected per share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Period Months
Ended Years Ended Ended
Dec. 31, December 31, June 30,
Intermediate Municipals 1985(a) 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.00 $10.14 $10.76 $10.37
------ ------ ------ ------
Income From Investment
Operations
Net investment income .12 .58 .57 .29
Net realized and unrealized
gains (losses) on investments .14 .62 (.38) .06
------ ------ ------ ------
Total from investment
operations .26 1.20 .19 .35
Distributions
Net investment income (.12) (.58) (.57) (.29)
Net realized gains -- -- (.01) --
In excess of realized gains -- -- -- --
------ ------ ------ ------
Total distributions (.12) (.58) (.58) (.29)
------ ------ ------ ------
Net Asset Value,
End of Period $10.14 $10.76 $10.37 $10.43
====== ====== ====== ======
Ratio of net expenses to
average net assets (b) 0.80%* 0.80% 0.80% 0.80%*
Ratio of net investment
income to average
net assets (c) 5.82%* 5.45% 5.47% 5.66%*
Portfolio turnover rate 0% 10% 49% 22%**
Total return 2.61%** 12.09% 1.93% 3.45%**
Net assets,
end of period $22,973 $104,750 $96,143 $97,308
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
Intermediate Municipals 1989 1990 1991 1992 1993 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.43 $10.50 $10.54 $10.73 $11.06 $11.57 $11.00
------ ------ ------ ------ ------ ------ ------
Income From Investment
Operations
Net investment income .62 .63 .62 .57 .54 .53 .26
Net realized and unrealized
gains (losses) on
investments .07 .07 .22 .50 .63 (.39) (.30)
------ ------ ------ ------ ------ ------ ------
Total from investment
operations .69 .70 .84 1.07 1.17 .14 (.04)
Distributions
Net investment income (.62) (.63) (.62) (.57) (.54) (.53) (.26)
Net realized gains -- (.03) (.03) (.17) (.12) (.17) --
In excess of realized gains -- -- -- -- -- (.01) --
------ ------ ------ ------ ------ ------ ------
Total distributions (.62) (.66) (.65) (.74) (.66) (.71) (.26)
------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period $10.50 $10.54 $10.73 $11.06 $11.57 $11.00 $10.70
====== ====== ====== ====== ====== ====== ======
Ratio of net expenses to
average net assets (b) 0.80% 0.80% 0.80% 0.79% 0.72% 0.71% 0.75%*
Ratio of net investment
income to average
net assets (c) 5.96% 5.96% 5.79% 5.23% 4.79% 4.63% 4.95%*
Portfolio turnover rate 83% 141% 96% 109% 96% 55% 26%**
Total return 6.85% 6.85% 8.18% 10.31% 10.92% 1.16% (0.29%)**
Net assets,
end of period $91,304 $98,918 $118,651 $165,401 $245,441 $238,053 $216,030
<FN>
* Annualized
** Not annualized
a) The Fund commenced operations on October 9, 1985.
b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser in connection
with the expense limitation which expired October 31, 1993, this ratio
would have been 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, 0.82%, 0.81% and 0.81% for the
years ended June 30, 1989 through 1991, respectively.
c) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
(Continued)
(Unaudited)
Selected per share data (for a share outstanding throughout each period), ratios and supplemental data.
<CAPTION>
Six
Months
Ended
Years Ended Dec. 31, June 30,
Managed Municipals 1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $7.89 $8.93 $9.22 $8.50
------ ------ ------ ------
Income From Investment Operations
Net investment income .68 .67 .61 .30
Net realized and unrealize
gains (losses) on
investments 1.07 1.21 (.59) .11
------ ------ ------ ------
Total from investment
operations 1.75 1.88 .02 .41
Distributions
Net investment income (.68) (.67) (.61) (.30)
Net realized gains (.03) (.92) (.13) --
In excess of realized gains -- -- -- --
------ ------ ------ ------
Total distributions (.71) (1.59) (.74) (.30)
------ ------ ------ ------
Net Asset Value,
End of Period $8.93 $9.22 $8.50 $8.61
====== ====== ====== ======
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% 0.65%*
Ratio of net investment
income to average
net assets 8.11% 7.04% 6.99% 7.03%*
Portfolio turnover rate 113% 92% 113% 28%**
Total return 23.00% 21.70% 0.39% 4.90%**
Net assets, end of period $357,360 $523,947 $458,170 $467,595
<PAGE>
<CAPTION>
Six
Months
Ended
Years Ended June 30, Dec. 31,
Managed Municipals 1989 1990 1991 1992 1993 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $8.61 $9.02 $8.71 $8.85 $9.11 $9.38 $8.70
------ ------ ------ ------- ------ ------ ------
Income From Investment Operations
Net investment income .61 .59 .56 .55 .52 .50 .25
Net realized and unrealized
gains (losses) on
investments .44 (.06) .19 .46 .42 (.51) (.34)
------ ------ ------ ------- ------ ------ ------
Total from investment
operations 1.05 .53 .75 1.01 .94 (.01) (.09)
Distributions
Net investment income (.61) (.59) (.56) (.55) (.52) (.50) (.25)
Net realized gains (.03) (.25) (.05) (.20) (.15) (.11) --
In excess of realized gains -- -- -- -- -- (.06) --
------ ------ ------ ------- ------ ------ ------
Total distributions (.64) (.84) (.61) (.75) (.67) (.67) (.25)
------ ------ ------ ------- ------ ------ ------
Net Asset Value,
End of Period $9.02 $8.71 $8.85 $9.11 $9.38 $8.70 $8.36
====== ====== ====== ====== ====== ====== ======
Ratio of expenses to
average net assets 0.65% 0.66% 0.66% 0.64% 0.64% 0.65% 0.66%*
Ratio of net investment
income to average
net assets 7.00% 6.66% 6.39% 6.17% 5.65% 5.45% 5.90%*
Portfolio turnover rate 102% 95% 203% 94% 63% 36% 9%**
Total return 12.69% 6.15% 8.92% 11.95% 10.79% (0.29%) (1.01%)**
Net assets, end of period $514,898 $584,081 $655,930 $725,472 $776,694 $687,252 $604,376
<FN>
* Annualized
** Not annualized
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
(Continued)
(Unaudited)
Selected per share data (for a share outstanding throughout each period),
ratios and supplemental data.
<CAPTION>
Six
Months
Ended
High-Yield Years Ended Dec. 31, June 30,
Municipals 1985 1986 1987 1988
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.02 $11.10 $12.06 $11.06
------ ------ ------ ------
Income From Investment
Operations
Net investment income .94 .90 .87 .44
Net realized and unrealized
gains (losses) on
investments 1.08 1.11 (.89) .31
------ ------ ------ ------
Total from investment
operations 2.02 2.01 (.02) .75
Distributions
Net investment income (.94) (.90) (.87) (.44)
Net realized gains -- (.15) (.11) --
In excess of realized gains -- -- -- --
------ ------ ------ ------
Total distributions (.94) (1.05) (.98) (.44)
------ ------ ------ ------
Net Asset Value,
End of Period $11.10 $12.06 $11.06 $11.37
====== ====== ====== ======
Ratio of net expenses to
average net assets (a) 0.80% 0.76% 0.73% 0.76%*
Ratio of net investment
income to average
net assets (b) 8.89% 7.77% 8.20% 7.87%*
Portfolio turnover rate 46% 34% 110% 53%**
Total return 20.96% 18.64% (0.16%) 6.89%**
Net assets,
end of period $99,796 $225,883 $181,600 $201,274
<PAGE>
<CAPTION>
Six
Months
Ended
High-Yield Years Ended June 30, Dec. 31,
Municipals 1989 1990 1991 1992 1993 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.37 $11.97 $11.78 $11.79 $11.83 $11.84 $11.06
------ ------ ------ ------- ------ ------ ------
Income From Investment
Operations
Net investment income .88 .85 .82 .80 .71 .67 .33
Net realized and unrealized
gains (losses) on
investments .63 .02 .17 .22 .18 (.54) (.42)
------ ------ ------ ------- ------ ------ ------
Total from investment
operations 1.51 .87 .99 1.02 .89 .13 (.09)
Distributions
Net investment income (.88) (.85) (.82) (.80) (.71) (.67) (.33)
Net realized gains (.03) (.21) (.16) (.18) (.17) (.17) --
In excess of realized gains -- -- -- -- -- (.07) --
------ ------ ------ ------- ------ ------ ------
Total distributions (.91) (1.06) (.98) (.98) (.88) (.91) (.33)
------ ------ ------ ------- ------ ------ ------
Net Asset Value,
End of Period $11.97 $11.78 $11.79 $11.83 $11.84 $11.06 $10.64
====== ====== ====== ====== ====== ====== ======
Ratio of net expenses to
average net assets (a) 0.73% 0.71% 0.71% 0.69% 0.73% 0.76% 0.89%*
Ratio of net investment
income to average
net assets (b) 7.54% 7.22% 7.00% 6.75% 6.04% 5.76% 5.94%**
Portfolio turnover rate 208% 261% 195% 88% 75% 36% 7%**
Total return 13.79% 7.59% 8.79% 9.01% 7.88% 0.95% (0.88%)**
Net assets,
end of period $277,620 $310,582 $373,948 $410,613 $359,103 $308,181 $264,801
<FN>
* Annualized
** Not annualized
a) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser
in connection with the expense limitation which expired December 31, 1986,
this ratio would have been 0.81% for the year ended December 31, 1985.
b) Computed giving effect to investment adviser's expense limitation
undertaking.
</TABLE>
<PAGE>
A Guide to SteinRoe Services
We encourage you to take advantage of our free shareholder services. If you
would like additional information about how to establish or use a SteinRoe
service, just call us at 1-800-338-2550.
Purchases
In addition to sending us a check or wire to purchase additional fund shares,
you can take advantage of these convenient automatic services.
- - Automatic Investment Plan--Make regular investments ($50 minimum) in your
SteinRoe account directly from your bank checking account. You select monthly,
quarterly, semiannual or annual purchases.
- - Special Investments--Purchase shares by telephone and pay for them by
electronic transfer from your bank checking account.
Exchanges
- - Telephone Exchange--Call us to exchange $1,000 or more from your account in
one SteinRoe Fund to an identically registered account in another SteinRoe
Fund. You receive this service when you open a SteinRoe Fund account, unless
you elect not to.*
- - Automatic Exchange--SteinRoe will regularly exchange shares from your
account in one SteinRoe Fund to your account in another. You select
twice-monthly, monthly, quarterly, semiannual or annual exchanges.
Redemptions
- - Telephone Redemption by Check--Call to redeem $1,000 or more from your
account. A check will be sent to your registered address. You automatically
receive this service when you open a SteinRoe account, unless you elect not
to.
- - Telephone Redemption by Wire--Redeem shares by phone from your Money Market
Fund account ($1,000 minimum) and wire the proceeds to your bank checking
account. A small fee for wiring proceeds will be deducted from the amount
wired.
- - Special Redemption Option--If you do not want to pre-schedule your
redemptions, you can redeem shares by telephone ($50 minimum/$50,000 maximum)
and have the proceeds sent directly to your bank checking account.
- - Automatic Redemption Plan--Redeem either a fixed dollar or share amount, or
a fixed percentage of your account automatically on a schedule you establish.
You select monthly, quarterly, semiannual or annual withdrawals ($50
minimum/$50,000 maximum), and the proceeds are sent either to your bank
checking account or to an address you specify.
- - Money Market Fund Check Writing--Write checks for $50 or more on your Money
Market Fund account.
<PAGE>
Distributions
Most investors like to reinvest their dividends and capital gain distributions
and put them back to work. However, if you do not want them reinvested,
consider these alternatives:
- - Dividend Purchase Option--Use the distributions from one SteinRoe Fund
account ($25 minimum) to automatically purchase shares in your account with
another SteinRoe Fund.
- - Automatic Dividend Deposit--Instead of receiving your dividends by check,
your distributions are deposited automatically into your bank checking
account.
Recordkeeping
- - Summary of Investments -- Consolidates quarterly transaction and investment
information for any or all of your household's SteinRoe accounts on one
easy-to-read statement. At year-end, provides a complete summary of all
account activity for the year.
* SteinRoe reserves the right to discontinue or modify the exchange privilege,
and certain restrictions apply. Please refer to your prospectus for details.
<PAGE>
SteinRoe
Municipal Trust
Trustees
Timothy K. Armour
President of the Mutual Funds Division and
Director of Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A. T. Kearney, Inc.
William W. Boyd
Chairman and Director of Sterling
Plumbing Group, Inc.
Lindsay Cook
Senior Vice-President of Liberty Financial Companies, Inc.
Francis W. Morley
Chairman, Employer Plan Administrators
and Consultants Co.
Charles R. Nelson
Professor, Department of Economics,
University of Washington
Gordon R. Worley
Private investor
Officers
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice-President, Secretary
N. Bruce Callow, Executive Vice-President
Hans P. Ziegler, Executive Vice-President
Gary A. Anetsberger, Senior Vice-President, Controller
Joanne T. Costopoulos, Vice-President
Philip D. Hausken, Vice-President
Stephen P. Lautz, Vice-President
Lynn C. Maddox, Vice-President
Anne E. Marcel, Vice-President
M. Jane McCart, Vice President
Jill K. Netzel, Vice-President
Nicolette D. Parrish, Vice-President,
Assistant Secretary
Thomas P. Sorbo, Vice-President
Shary Risting Stadler, Vice-President
Kenneth A. Kalina, Treasurer
Janet B. Rysz, Assistant Secretary
Agents and Advisers
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
<PAGE>
To Contact Us. . .
By Phone 1-800-338-2550
Relationship Managers
If you'd like to discuss your investment questions with a relationship
manager, please call our toll-free number weekdays between 7 a.m. and 7 p.m.
(Central Time). Our managers will be happy to answer questions about your
current account, or to provide you with information about opening a new
SteinRoe Fund account, including SteinRoe IRAs, or other retirement plans.
SteinRoe's Funds-on-Call(R)
24-Hour Service Line
Using a touch-tone phone, call our toll-free number anytime, day or night, for
your current account balance, the latest SteinRoe fund prices and yields, and
other information. In addition, if you have a Personal Identification Number
(PIN), you may place the following transaction orders 24 hours a day:
* Exchange shares between your SteinRoe accounts
* Purchase fund shares by electronic transfer
* Order additional account statements and money market fund checks
* Redeem shares by check, wire or electronic transfer.
Please contact a shareholder representative if you would like to apply for a
PIN.
By Mail
If you prefer to contact us by mail or are requesting information about
opening a new account, please write to us at: P.O. Box 804058, Chicago, IL
60680-4058.
In Person
If you are in the Chicago area, please visit our Fund Center located in
downtown Chicago at One South Wacker Drive, 32nd floor. Our managers can
answer questions about your current Fund investments or provide you
information about any of the SteinRoe Funds and retirement plans. Stop by
anytime between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
Tax-Exempt Funds
Semiannual Report
December 31, 1994
Municipal Money Market Fund
Intermediate Municipals
Managed Municipals
High-Yield Municipals
Graphic of building.
P.O. Box 804058
Chicago, Illinois 60680-4058
1-800-338-2550
In Chicago, visit our Fund Center at One South Wacker Drive
Liberty Securities Corporation, Distributor
2/95
20054
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 7th day of June, 1995
STEINROE MUNICIPAL TRUST
By TIMOTHY K. ARMOUR
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 June 7, 1995
Timothy K. Armour,
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President June 7, 1995
Gary A. Anetsberger, and Controller
Principal Financial
and Accounting Officer
KENNETH L. BLOCK Trustee June 7, 1995
Kenneth L. Block
WILLIAM W. BOYD Trustee June 7, 1995
William W. Boyd
LINDSAY COOK Trustee June 7, 1995
Lindsay Cook
FRANCIS W. MORLEY Trustee June 7, 1995
Francis W. Morley
CHARLES R. NELSON Trustee June 7, 1995
Charles R. Nelson
GORDON R. WORLEY Trustee June 7, 1995
Gordon R. Worley
<PAGE>
STEINROE MUNICIPAL TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ----------------------------------------------------------
1 Agreement and Declaration of Trust as amended
5(a) Investment advisory agreement for SteinRoe Municipal Money
Market Fund
5(b) Investment advisory agreement for SteinRoe Intermediate
Municipals
5(c) Investment advisory agreement for SteinRoe Managed
Municipals
5(d) Investment advisory agreement for SteinRoe High-Yield
Municipals
5(e) Expense undertaking for SteinRoe Municipal Money Market Fund
and expense waiver for SteinRoe Intermediate Municipals
8 Custodian contract, as amended
9(a) Transfer agency agreement, as amended
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
<PAGE>
Exhibit 1
STEINROE TAX-EXEMPT INCOME TRUST
AGREEMENT AND DECLARATION OF TRUST
<PAGE>
TABLE OF CONTENTS
First: Name.............................................................1
Second: Purposes........................................................1
Third: Address and Resident Agent.......................................3
Fourth: Shares..........................................................3
A. Definition......................................................3
B. Division of Beneficial Interest.................................3
C. Ownership of Shares.............................................3
D. Status of Shares and Limitations of Personal Liability..........4
Fifth: No Preemptive Rights.............................................4
Sixth: Issue, Redemption, and Repurchase of Shares......................4
Section I. Issue of the Trust's Shares.............................4
1.01 General...................................................4
1.02 Price.....................................................4
1.03 Fractional Shares.........................................5
1.04 Assets of a Series........................................5
Section II. Redemption and Repurchase of the Trust's Shares........5
2.01 Redemption of Shares......................................5
2.02 Price.....................................................5
2.03 Payment...................................................6
2.04 Effect of Suspension of Determination of Net Asset Value..6
2.05 Repurchase by Agreement...................................6
2.06 Redemption of Shareholder's Interest......................6
2.07 Additional Provisions Relating to Redemptions and
Repurchases.........................................7
Section III. Net Asset Value of Shares.............................7
3.01 By Whom Determined........................................7
3.02 When Determined...........................................7
3.03 Suspension of Determination of Net Asset Value............7
3.04 Computation of Per Share Net Asset Value..................8
3.05 Miscellaneous.............................................8
Section IV. Compliance with Investment Company Act of 1940.........9
Seventh: Board of Trustees..............................................9
A. Election........................................................9
B. Effect of Death, Resignation, Etc. of a Trustee................10
C. Powers.........................................................10
D. Payment of Expenses by Trust...................................12
E. Ownership of Assets of the Trust...............................12
F. Advisory, Management and Distribution..........................12
Eighth: Liability......................................................13
A. Trustees, Shareholders, Etc. Not Personally Liable; Notice.....13
B. Trustee's Good Faith Action; Expert Advice; No Bond or Surety..14
C. Liability of Third Persons Dealing with Trustees...............14
Ninth: Determination of Net Profits, Etc.; Dividends...................14
Tenth: Indemnification.................................................15
A. Indemnification Generally......................................15
B. Determination of Eligibility...................................15
C. Indemnification Not Exclusive..................................16
D. Shareholders...................................................17
E. Contractual Rights.............................................17
F. Protection of Rights...........................................17
Eleventh: Reservation of Right to Amend................................17
A. By Board of Trustees...........................................17
B. By Shareholders................................................18
Twelfth: Shareholders' Voting Powers and Meetings......................18
A. Shareholders' Voting Powers....................................18
B. Meetings.......................................................18
C. Quorum and Required Vote.......................................19
D. Place of Meeting...............................................19
E. Notice of Meetings; Adjournment................................19
F. Share Ledger...................................................20
G. Action by Written Consent......................................20
Thirteenth: Use of Name................................................20
Fourteenth: Miscellaneous..............................................20
A. Duration and Termination of Trust..............................20
B. Filing of Copies; References; Headings.........................20
C. Applicable Law.................................................21
D. Severability...................................................21
<PAGE> 1
AGREEMENT AND DECLARATION OF TRUST
THIS AGREEMENT AND DECLARATION OF TRUST ("Declaration of Trust") is
made at Boston, Massachusetts, this 6th day of October, 1987, by the Trustee
hereunder, and by the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed as a voluntary association with
transferable shares under the laws of the Commonwealth of Massachusetts to
carry on the business of an investment company; and
WHEREAS, the Trustee has agreed to manage all property coming into his
hands as Trustee of a voluntary association in the form of a Massachusetts
business trust in accordance with the provisions hereinafter set forth.
NOW THEREFORE, the Trustee hereby declares that he will hold all cash,
securities and other assets that he may from time to time acquire in any
manner as Trustee hereunder in Trust to manage and dispose of the same upon
the following terms and conditions for the pro rata benefit of the holders
from time to time of shares of the applicable series in this Trust as
hereinafter set forth.
FIRST: NAME.
The name of this Trust is SteinRoe Tax-Exempt Income Trust (the
"Trust").
SECOND: PURPOSES.
The purposes for which the Trust is formed are:
1 To engage in the business of a management investment company;
2 To invest and reinvest in, to buy or otherwise acquire, to hold, for
investment or otherwise, to sell or otherwise dispose of, to lend or to
pledge, to trade in or deal in, securities or interests of all kinds, or
obligations of all kinds, or rights, warrants, or contracts, and to
acquire such securities, interests, or obligations, of or guaranteed by
any private or public company, corporation, association, general or
limited partnership, trust or other enterprise or organization, foreign
or domestic, or of or guaranteed by any national, state or local
government, foreign or domestic, or their agencies, instrumentalities or
subdivisions, including but not limited to bonds, debentures, preferred
stocks, common stocks, convertible securities, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable
instruments; options; futures contracts and options on futures
contracts; government securities; and money market instruments,
including but not limited to bank certificates of deposit, finance
paper, commercial paper, bankers'
<PAGE> 2
acceptances, and all kinds of repurchase agreements, of any corporation,
company, trust, association, firm or other business organization,
however established, and of any county, state, municipality or other
political subdivision, or of any other governmental or quasi-
governmental agency or instrumentality;
3 To invest and reinvest in, to buy or otherwise acquire, to hold, for
investment or otherwise, to sell or otherwise dispose of, foreign
currencies, funds, and exchange, and to make deposits in banks, savings
banks, trust companies, and savings and loan associations, foreign or
domestic;
4 To exercise all rights, powers, and privileges as owner of any
securities, property, or assets which might be exercised by any
individual owning such securities, property, or assets in his own right;
5 To acquire (by purchase, lease, or otherwise) and to hold, use,
maintain, develop, and dispose of (by sale or otherwise) any property,
real or personal, and any interest therein;
6 To aid by further investment any corporation, company, trust,
association, or firm, any obligation of or interest in which is held by
the Trust or in the affairs of which the Trust has any direct or
indirect interest; to do all acts and things designed to protect,
preserve, improve, or enhance the value of such obligation or interest;
to guarantee or become surety on any or all of the contracts, stocks,
bonds, notes, debentures, and other obligations of any such corporation,
company, trust, association, or firm; and
7 In general, to carry on any other business in connection with or
incidental to any of the foregoing objects and purposes, and to engage
in any and all lawful business except as may be prohibited to be engaged
in by a business trust organized under the laws of the Commonwealth of
Massachusetts as in force from time to time, to do everything necessary,
suitable, or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore
set forth, either alone or in association with others, and to do every
other act or thing incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects, or powers.
The Trust shall have the power to conduct and carry on its business, or any
part thereof, and to have one or more offices, and to exercise any or all of
its trust powers and rights, in the Commonwealth of Massachusetts, in any
other states, territories, districts, colonies, and dependencies of the
United States, and in any or all foreign countries.
The foregoing clauses shall be construed both as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trust.
<PAGE> 3
THIRD: ADDRESS AND RESIDENT AGENT.
The post office address of the principal office of the Trust in the
Commonwealth of Massachusetts is:
c/o CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other office as the Board of Trustees may from time to time
designate.
The name and post office address of the resident agent of the Trust in
the Commonwealth of Massachusetts is:
CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other person as the Board of Trustees may from time to time
designate. Such resident agent is a Massachusetts corporation.
FOURTH: SHARES.
A. Definition. "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one series of shares is authorized
by the Board of Trustees, the equal proportionate units into which each
series shall be divided from time to time.
B. Division of Beneficial Interest. The shares of the Trust shall be
issued in one or more series as the Board of Trustees may, without
shareholder approval, authorize. Each series shall be preferred over all
other series with respect to the assets allocated to that series. The
beneficial interest in each series shall at all times be divided into shares,
with or without par value as the Board of Trustees shall determine, each of
which shall represent an equal proportionate interest in the series with each
other share of the same series, none having priority or preference over
another. The number of shares authorized shall be unlimited, and the shares
so authorized may be represented in part by fractional shares. The Board of
Trustees may from time to time divide or combine the shares of any series
into a greater or lesser number without thereby changing the proportionate
beneficial interests in the series.
C. Ownership of Shares. The ownership of shares shall be recorded on
the books of the Trust or its transfer or similar agent. No certificates
certifying the ownership of shares shall be issued except as the Board of
Trustees may otherwise determine from time to time. The Board of Trustees
may make such rules as it considers appropriate for the issuance of share
certificates, the transfer of shares and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar agent of the
Trust, as the case may be, shall be conclusive as to who are the shareholders
of each series and as to the number of shares of each series held from time
to time by each shareholder.
<PAGE> 4
D. Status of Shares and Limitation of Personal Liability. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every shareholder by virtue of having become a shareholder shall
be deemed to have expressly assented to and agreed to be bound by the terms
hereof and to have become a party hereto. The death of a shareholder during
the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of such deceased shareholder to an accounting or
to take any action in court or elsewhere against the Trust or the Board of
Trustees, but only to the rights of said decedent under this Trust.
Ownership of shares shall not entitle the shareholder to any title in or to
the whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of
shares constitute the shareholders to be partners. Neither the Trust nor the
Board of Trustees, nor any officer, employee or agent of the Trust shall have
any power to bind personally any shareholder, nor, except as specifically
provided herein, to call upon any shareholder for the payment of any sum of
money or assessment whatsoever other than such as the shareholder may at any
time personally agree to pay.
FIFTH: NO PREEMPTIVE RIGHTS.
Shareholders shall have no preemptive or other right to receive,
purchase, or subscribe for any additional shares or other securities issued
by the Trust.
SIXTH: ISSUE, REDEMPTION, AND REPURCHASE OF SHARES.
SECTION I.
ISSUE OF THE TRUST'S SHARES
1.01. General. The Board of Trustees may from time to time issue,
reissue, sell or cause to be issued and sold any of the Trust's shares in one
or more series as the Board of Trustees may, without shareholder approval,
authorize, including any shares redeemed or repurchased by the Trust, for a
consideration determined in accordance with Section 1.02 hereof; except that
only shares previously contracted to be sold may be issued during any period
when the determination of net asset value is suspended pursuant to the
provisions of Section III hereof.
1.02. Price. No shares of a series shall be issued or sold by the
Trust, except as a share dividend distributed to shareholders of such series,
for less than an amount which would result in proceeds to the Trust, in
connection with such transaction, of at least the net asset value per share
of such series, determined as set forth in Section III hereof. The net asset
value per share applicable to any such transaction shall be the net asset
value per share of such series next determined after receipt of an
unconditional order for purchase of shares of such series; except that,
subject to applicable rules and regulations, if any, of the Securities and
Exchange Commission or any other governmental body having similar
jurisdiction over the Trust (the "SEC"), the Board of Trustees may prescribe
that requests for purchase received prior to a time of day (the "cutoff
time") preceding the time of day prescribed for determination of net asset
value per share of such series shall be transacted at the net asset value per
share next determined and that requests for purchase received after the
cutoff time and before the time for determination of the next net asset value
per share shall
<PAGE> 5
be transacted at the net asset value per share next determined after the next
net asset value per share of such series. The criteria for determining what
constitutes an unconditional order for purchase of shares of a series and the
receipt of such an order shall be prescribed by the Board of Trustees. All
shares, when issued in accordance with the terms of this Section I, shall be
fully paid and nonassessable.
1.03. Fractional Shares. The Trust may issue and sell or cause to be
issued and sold fractions of shares of a series having pro rata all the
rights of full shares of such series, including, without limitation, the
right to vote and to receive dividends.
1.04. Assets of a Series. All consideration received by the Trust for
the issue or sale of shares of each series authorized by the Board of
Trustees, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to the
series of shares with respect to which the same were received by the Trust
for all purposes, subject only to the rights of creditors of Trust assets
allocated to such series, and shall be so recorded upon the books of account
of the Trust and are herein referred to as "assets of" such series.
SECTION II.
REDEMPTION AND REPURCHASE OF THE TRUST'S SHARES
2.01. Redemption of Shares. Any shares of any series of the Trust may
be redeemed at the option of the holder of such shares and, to the extent
permitted in Section 2.06 hereof, at the option of the Trust, at the
redemption price for such shares, determined in the manner set out in this
Declaration of Trust or in any amendment hereto. Unless otherwise provided
by resolution of the Board of Trustees, shares redeemed shall be cancelled.
Redeemed shares which have not been cancelled may be resold by the Trust.
The Trust shall redeem shares subject to the conditions and at the price
determined as hereinafter set forth.
2.02. Price. Shares shall be redeemed at the net asset value per share
of the appropriate series, determined as set forth in Section III hereof.
The net asset value per share of such series applicable to any such
redemption of shares shall be the net asset value per share next determined
after receipt of a request for redemption of such shares in proper form,
except that, subject to applicable rules and regulations, if any, of the SEC,
the Board of Trustees may prescribe that requests for redemption received
prior to the cutoff time preceding the time of day prescribed for
determination of net asset value per share of such series shall be transacted
at the net asset value per share next determined and that requests for
redemption after the cutoff time and before the time for determination of the
next net asset value per share shall be transacted at the net asset value per
share next determined after the next net asset value per share. The criteria
for determining what constitutes a proper request for redemption of shares of
a series and the receipt of such request for redemption shall be prescribed
by the Board of Trustees.
<PAGE> 6
2.03. Payment. Subject to the provisions of Section 2.04 hereof,
payment for shares of a series shall be made in cash to, or upon the
direction of, the shareholder of record within seven calendar days after the
date of receipt of (a) a written, unconditional and irrevocable instruction
of the shareholder to redeem, in a form acceptable to the Trust or its
designated agent, together with any certificates which may have been issued
therefor, endorsed or accompanied by proper instrument of transfer, and such
other documents as the Trust or its designated agent may require or (b) such
other direction or authorization of redemption by the shareholder as the
Board of Trustees shall authorize. Subject to applicable rules and
regulations, if any, of the SEC, the Trust may pay the redemption price for
such shares of a series in whole or in part by a distribution in kind of
securities from the portfolio of the Trust allocated to such series, in lieu
of money, valuing such securities at their value employed for determining the
net asset value governing such redemption price, and selecting the securities
in such manner as the Board of Trustees may determine to be fair and
equitable.
2.04. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 3.03 hereof, the Board of Trustees shall declare a
suspension of the determination of net asset value of a particular series,
(a) the rights of shareholders (including those who shall have requested
redemption pursuant to Sections 2.01, 2.02, and 2.03 hereof but for whom the
redemption price shall not yet have been determined) to have shares redeemed
and paid for by the Trust, and (b) the obligation of the Trust to pay for
shares previously redeemed, shall be suspended until the termination of such
suspension. Any record holder of shares not previously redeemed who shall
have his redemption right so suspended may, during the period of such
suspension, by appropriate written notice of revocation at the office or
agency where request for redemption was made, revoke any request or
instruction for redemption not honored and withdraw any certificates tendered
for redemption. The redemption price of shares for which redemption requests
have been made and not revoked shall be the net asset value of such shares
next determined as set forth in Section III hereof after the termination of
such suspension, and payment shall be made within seven days after the date
upon which the requirements of Section 2.03 were met plus the period during
which the determination of net asset value was suspended.
2.05. Repurchase by Agreement. The Trust may repurchase shares of the
Trust directly, or through a principal underwriter, if any, or another agent
designated for the purpose, by agreement with the owner thereof at a price
not exceeding the net asset value per share of the appropriate series
determined as of the time when the purchase or contract of purchase is made
or the net asset value as of any time which may be later determined pursuant
to Section III hereof, provided payment is not made for the shares prior to
the time as of which such net asset value is determined. Repurchased shares
may be resold by the Trust.
2.06. Redemption of Shareholder's Interest. The Trust shall have the
right at its option and at any time to redeem shares of any shareholder at
the net asset value thereof determined in accordance with Section III hereof:
(i) if at such time such shareholder owns fewer shares than, or shares having
an aggregate net asset value of less than, an amount determined from time to
time by the Board of Trustees; or (ii) to the extent that such shareholder
owns shares of a particular series of shares equal to or in excess of a
percentage
<PAGE> 7
of the outstanding shares of that series determined from time to time by the
Board of Trustees; or (iii) to the extent that such shareholder owns shares
of the Trust representing a percentage equal to or in excess of a percentage
of the aggregate number of outstanding shares of the Trust or the aggregate
net asset value of the Trust determined from time to time by the Board of
Trustees, and subject to the Trust's giving general notice to all
shareholders of its intention to avail itself of such right, either by
publication in the Trust's prospectus, if any, or by such other means as the
Board of Trustees may determine. Subject to the same terms and conditions,
the Trust shall also have the right to redeem shares of the Trust, or a
particular series, owned by any shareholder if, in the opinion of the Board
of Trustees, ownership of shares of the Trust or series, respectively, has or
may become concentrated to an extent which could cause the Trust to become a
personal holding company within the meaning of the Internal Revenue Code.
2.07. Additional Provisions Relating to Redemptions and Repurchases.
The completion of redemption of shares shall constitute a full discharge of
the Trust and the Trustees with respect to such shares, and the Trustees may
require that any certificate or certificates issued by the Trust to evidence
the ownership of such shares shall be surrendered to the Trustees for
cancellation or notation.
SECTION III.
NET ASSET VALUE OF SHARES
3.01. By Whom Determined. Subject to the provisions of Section 3.04 of
this Article SIXTH, the Board of Trustees shall have the power and duty to
determine from time to time the net asset value per share of the outstanding
shares of each series authorized by the Board of Trustees and any such
determination shall be binding on all parties.
3.02. When Determined. The net asset value of a series shall be
determined at such times as the Board of Trustees, subject to applicable
rules and regulations, if any, of the SEC, shall prescribe, provided that
such net asset value shall be determined at least once each week. In the
absence of a resolution of the Board of Trustees, the net asset value of a
series shall be determined as of the close of trading on the New York Stock
Exchange on each business day.
3.03. Suspension of Determination of Net Asset Value. The Board of
Trustees may declare a suspension of the determination of net asset value of
a series (a) for any period during which trading on the New York Stock
Exchange is restricted, as determined by the SEC, or that Exchange is closed
(other than customary weekend and holiday closings), (b) for any period
during which an emergency exists as a result of which disposal of the
investments held by that series or determination of net asset value of that
series is not reasonably practicable, or (c) for such period as the SEC by
order may permit. Such suspension shall take effect at such time as the
Board of Trustees shall specify and thereafter there shall be no
determination of net asset value until the Board of Trustees shall declare
the suspension terminated, except that the suspension shall terminate in any
event on the first day on which (1) the condition giving rise to the
suspension shall have ceased to exist and (2) no other condition exists under
which suspension is authorized under this
<PAGE> 8
Section 3.03. Each declaration by the Board of Trustees pursuant to this
Section 3.03 shall be consistent with such official rules and regulations, if
any, relating to the subject matter thereof as shall have been promulgated by
the SEC. To the extent not inconsistent with such official rules and
regulations, the determination of the Board of Trustees shall be conclusive.
3.04. Computation of Per Share Net Asset Value.
(a) Net Asset Value Per Share. The net asset value of each share of a
series as of any particular time shall be the quotient obtained by dividing
the value of the net assets of the Trust allocated to such series by the
total number of shares of such series outstanding, rounded to such extent as
the Board of Trustees shall determine from time to time.
(b) Value of Trust's Net Assets. The value of the net assets of the
Trust allocated to any series as of any particular time shall be the value of
the assets so allocated less the liabilities of the Trust so allocated,
determined as follows:
(1) each security for which market quotations are readily available
shall be valued at current market value determined by methods specified
by the Board of Trustees;
(2) each other security, including any security within (1) for which the
specified price does not appear to represent a dependable quotation for
such security as of the time of valuation, shall be valued at a fair
value as determined in good faith by the Board of Trustees;
(3) any cash on hand shall be valued at the face amount thereof;
(4) any cash on deposit, accounts receivable, and cash dividends and
interest declared or accrued and not yet received, any prepaid expenses,
and any other current asset shall be valued at the face amount thereof,
unless the Board of Trustees shall determine that any such item is not
worth its face amount, in which case such asset shall be valued at a
fair value determined in good faith by the Board of Trustees; and
(5) any other asset shall be valued at a fair value determined in good
faith by the Board of Trustees.
Notwithstanding the foregoing, short-term debt obligations, commercial
paper and repurchase agreements may be, but need not be, valued on the basis
of quoted yields for securities of comparable maturity, quality and type, or
on the basis of amortized cost. The Board of Trustees may appoint persons to
assist it in the determination of the value of assets, liabilities and net
asset value per share of any series and to make the actual calculations
pursuant to the direction of the Board of Trustees.
3.05. Miscellaneous. For the purposes of this Section III:
a. Shares of any series issued shall be deemed to be outstanding
commencing immediately after the time for determination of net asset value
per share for purposes of determining their sales price, pursuant to Section
1.02
<PAGE> 9
hereof, and the net sale price thereof shall thereupon be deemed an asset of
that series.
b. Shares of any series for which a request for redemption has been
made in proper form or which are being repurchased by the Trust shall be
deemed to be outstanding up to and including the time as of which the
redemption or repurchase price for such shares is determined. After such
time, they shall be deemed to be no longer outstanding and the price until
paid shall thereupon be deemed to be a liability of that series.
c. Funds on deposit and contractual obligations payable to the Trust in
foreign currency and liabilities and contractual obligations payable by the
Trust in foreign currency shall be taken at the current applicable rate of
exchange as nearly as practicable at the time as of which the net asset value
is computed for the series to which such items relate.
SECTION IV.
COMPLIANCE WITH INVESTMENT COMPANY ACT OF 1940
Notwithstanding any of the foregoing provisions of this Article SIXTH,
the Board of Trustees may prescribe such other bases and times for
determining the per share net asset value of any series of the Trust as it
shall deem necessary or desirable to enable the Trust to comply with any
provision of the Investment Company Act of 1940, or any rule or regulation
thereunder, all as now in effect or hereafter amended or added (the "1940
Act"), including any rule or regulation adopted by any securities association
registered under the Securities Exchange Act of 1934.
SEVENTH: BOARD OF TRUSTEES.
A. Election. The number of Trustees shall be fixed pursuant to the By-
Laws. Trustees shall be elected by the shareholders, except as otherwise
provided herein. The initial Trustees, each of whom shall serve until the
first meeting of shareholders at which Trustees are elected and until his or
her successor is elected and qualified, or until he or she sooner dies,
resigns or is removed, shall be David A. Sturms and such other persons as the
Trustee or Trustees then in office shall, prior to any sale of shares
pursuant to a public offering, appoint.
Any vacancy occurring in the Board of Trustees may be filled by the
Trustees, unless immediately after filling any such vacancy, less than two-
thirds of the Trustees then holding office would have been elected to such
office by the shareholders. The Board of Trustees shall call a meeting of
shareholders for the purpose of electing Trustees whenever less than a
majority of the Trustees have been elected by shareholders. Each Trustee
elected by the shareholders or by the Board of Trustees shall serve until the
next meeting of shareholders, if any, called for the purpose of reelecting
such Trustee or electing a successor to such Trustee and until the election
and qualification of his or her successor, or until he or she sooner dies,
resigns or is removed. A Trustee may be removed with or without cause (a) at
any meeting called for such purpose by a vote of two-thirds of the
outstanding
<PAGE> 10
shares, (b) by the holders of two-thirds of the outstanding shares by
declaration in writing filed with the Custodian of the securities of the
Trust, or (c) by vote of a majority of the Trustees then in office.
B. Effect of Death, Resignation, Etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees,
or any one of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
C. Powers. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Board of Trustees, and they
shall have all powers necessary or convenient to carry out that
responsibility. Without limiting the foregoing, the Board of Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for
the conduct of the business of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the shareholders; they
may fill vacancies in their number, including vacancies resulting from
increases in their number, and may elect and remove such officers and appoint
and terminate such agents as they consider appropriate; they may appoint from
their own number, and terminate, any one or more committees consisting of two
or more Trustees, including an executive committee which may, when the Board
of Trustees is not in session, exercise some or all of the power and
authority of the Board of Trustees as the Trustees may determine; they may
appoint an advisory board, the members of which shall not be Trustees and
need not be shareholders; they may employ one or more custodians of the
assets of the Trust and may authorize such custodians to employ subcustodians
and to deposit all or any part of such assets in a system or systems for the
central handling of securities, retain a transfer agent or a shareholder
services agent, or both, provide for the distribution of shares by the Trust,
through one or more principal underwriters or otherwise, set record dates for
the determination of shareholders with respect to various matters and in
general delegate such authority as they consider desirable to any officers of
the Trust, to any committee of the Board of Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Board of Trustees shall have power
and authority:
1. To invest and reinvest in securities, options, futures contracts,
options on futures contracts and other property, and to hold cash uninvested;
2. To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
3. To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Board of
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Board of Trustees
shall deem proper;
4. To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities or other assets;
<PAGE> 11
5. To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the name of
the Trustees or of the Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
6. To allocate assets, liabilities and expenses of the Trust to a
particular series of shares or to apportion the same among two or more
series, provided that any liabilities or expenses incurred by a particular
series of shares shall be payable solely out of the assets of that series;
7. To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which
is or was held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer, and to pay calls
or subscriptions with respect to any security held in the Trust;
8. To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Board of Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depositary or
trustee as the Board of Trustees shall deem proper;
9. To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust on any matter in controversy, including but not limited to
claims for taxes;
10. To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
11. To borrow funds, securities or other assets;
12. To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guarantee or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all of such
obligations or obligations incurred pursuant to Clause 11 hereof;
13. To purchase and pay for, entirely out of Trust property, such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the shareholders,
Trustees, officers, employees, agents, investment advisers or managers,
principal underwriters, or independent contractors of the Trust individually
against all claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by reason of
any action alleged to have been taken or omitted by any such person as
shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person
against such liability;
<PAGE> 12
14. To pay pensions for faithful service, as deemed appropriate by the
Board of Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the purchasing
of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees, and agents of the Trust;
15. To pay remuneration to each Trustee for his services, including
reimbursement of expenses incurred, as shall be fixed from time to time by
resolution of the Board of Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Trust in any other
capacity and receiving compensation therefor; and
16. To do all acts and things appropriate in the furtherance of the
foregoing and in furtherance of the purposes of the Trust.
The Board of Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by Trustees. Except
as otherwise provided herein or from time to time in the By-Laws, any action
to be taken by the Board of Trustees may be taken by a majority of the
Trustees present at a meeting of the Board of Trustees (a quorum being
present), within or without Massachusetts, including any meeting held by
means of conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other at the
same time and participation by such means shall constitute presence in person
at a meeting, or by written consents of a majority of the Trustees then in
office.
D. Payment of Expenses by Trust. The Board of Trustees is authorized
to pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem appropriate,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses
and charges for the services of the Trust's officers, employees, investment
adviser or manager, principal underwriter, auditor, counsel, custodian,
transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Board of
Trustees may deem necessary or proper to incur, provided, however, that all
expenses, fees, charges, taxes and liabilities incurred or arising in
connection with a particular series of shares, as determined by the Board of
Trustees, shall be payable solely out of the assets of that series.
E. Ownership of Assets of the Trust. Title to all of the assets of the
Trust, including all assets allocated to each series of shares, shall at all
times be considered as vested in the Board of Trustees.
F. Advisory, Management and Distribution. Subject to a vote meeting
the requirements of the 194O Act, the Board of Trustees may, at any time and
from time to time, contract for exclusive or non-exclusive advisory and/or
management services with any partnership, corporation, trust, association or
other organization (the "Adviser"), every such contract to comply with such
requirements and restrictions as may be set forth in the By-Laws; and any
such
<PAGE> 13
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Board of Trustees may determine,
including, without limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested, and to make changes
in the Trust's investments. The Board of Trustees may also, at any time and
from time to time, contract with the Adviser or any other partnership,
corporation, trust, association or other organization, appointing it
exclusive or non-exclusive distributor or principal underwriter for the
shares, every such contract to comply with such requirements and restrictions
as may be set forth in the By-Laws; and any such contract may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Board of Trustees may determine.
The fact that:
(i) any of the shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter, or distributor or agent of or for any corporation,
trust, association, or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or management contract,
or principal underwriter's or distributor's contract, or transfer,
shareholder services or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or affiliate thereof,
is a shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder services or other agency
contract may have been or may hereafter be made by the Trust also has an
advisory or management contract, or principal underwriter's or distributor's
contract, or transfer, shareholder services or other agency contract with one
or more other corporations, trusts, associations, or other organizations, or
has other business or interests,
shall not affect the validity of any such contract or disqualify any
shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
shareholders.
EIGHTH: LIABILITY:
A. Trustees, Shareholders, Etc. Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust or a particular series of shares shall look only to the assets of the
Trust or the assets of that particular series of shares for payment under
such credit, contract or claim; and neither the shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor.
The Board of Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, investment
adviser or principal underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, but nothing herein
shall protect
<PAGE> 14
any Trustee against any liability to which such Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by any Trustees or Trustee or by any officers or officer shall give
notice that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the shareholders individually
but are binding only upon the assets and property of the Trust, or of the
particular series of shares to which such instrument relates, and may contain
such further recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer, or shareholders or shareholder individually.
Every note, bond, contract, instrument, certificate, share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Board of Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or done
only in or with respect to their or his capacity as Trustees or Trustee, and
such Trustees or Trustee shall not be personally liable thereon.
B. Trustee's Good Faith Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her
own willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or
law. The Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust, and shall be under
no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
C. Liability of Third Persons Dealing with Trustees. No person dealing
with the Board of Trustees or any Trustee shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by either or to
see to the application of any payments made or property transferred to the
Trust or upon its order.
NINTH: DETERMINATION OF NET PROFITS, ETC.; DIVIDENDS.
With respect to each series of shares authorized by the Board of
Trustees, the Board is expressly authorized to determine in accordance with
generally accepted accounting principles and practices what constitutes net
income, profits or earnings, or surplus and capital, to include in net
income, profits or earnings the portion of subscription or redemption prices
attributable to accrued net income, profits or earnings in such prices, and
to determine what accounting periods shall be used by the Trust for any
purpose, whether annual or any other period, including daily; to set apart
out of any funds of such
<PAGE> 15
series such reserves for such purposes as it shall determine and to abolish
the same; to declare and pay dividends and distributions in cash, securities,
or other property from surplus or capital or any funds of such series legally
available therefor, at such intervals (which may be as frequently as daily)
or on such other periodic basis as it shall determine; to declare such
dividends or distributions by means of a formula or other method of
determination at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends
or any other distributions on any basis, including dates occurring less
frequently than the effectiveness of the declaration thereof; and to provide
for the payment of declared dividends on a date earlier than the specified
payment date in the case of shareholders of such series redeeming their
entire ownership of shares of such series. Inasmuch as the computation of
net income, profits or earnings for Federal income tax purposes may vary from
the computation thereof on the books, the above provisions shall be
interpreted to give to the Board of Trustees the power in its discretion to
distribute for any fiscal year as dividends and as capital gain
distributions, respectively, additional amounts sufficient to enable the
Trust to avoid or reduce its liability for taxes.
No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with
respect to, nor any redemption or repurchase of, the shares of any series
shall be effected by the Trust other than from the assets of such series.
TENTH: INDEMNIFICATION.
A. Indemnification Generally. The Trust shall indemnify, to the
fullest extent permitted by applicable law, each person who is or has been a
Trustee or officer (including each person who serves or has served at the
Trust's request as a director, officer, or trustee of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise, and
any heir, administrator or executor of such person) (a "Covered Person")
against all liabilities and expenses, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties,
and attorney's fees reasonably incurred by such Covered Person in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil, criminal, administrative or investigative, and any appeal
therefrom (a "Proceeding"), before any court or administrative or legislative
body, in which such Covered Person may be or may have been involved as a
party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Covered Person.
B. Determination of Eligibility. Notwithstanding the provisions of
Section A of Article TENTH, to the extent required under the 1940 Act,
(i) Article TENTH, Section A, shall not protect any person against any
liability to the Trust 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;
<PAGE> 16
(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 shall be permitted unless a determination that such person
was not so liable shall have been made on behalf of the Trust by (a) the vote
of a majority of the "disinterested, non-party Trustees," as defined below,
or (b) an independent legal counsel as expressed in a written opinion; and
(iii) the Trust shall not advance attorneys' fees incurred by a Covered
Person in connection with Proceeding unless the Trust 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 shall provide security for his undertaking, or (b) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(c) a majority of the disinterested, non-party Trustees of the Trust or an
independent legal counsel, as expressed in a written opinion, shall
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. Such undertaking shall
provide that the Covered Person to whom the advance was made shall not be
obligated to repay pursuant to such undertaking until the final determination
of any pending Proceeding in a court of competent jurisdiction, including
appeals therefrom, concerning the right of such Covered Person to be
indemnified by the Trust or the obligation of such person to repay pursuant
to the undertaking.
Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered Person's
action was in, or not opposed to, the best interests of the Trust or to have
been liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
As used in this Article TENTH, the term "disinterested, non-party
Trustee" is a Trustee who is not an "interested person" of the Trust, as
defined in Section 2(a)(19) of the 1940 Act and against whom none of the
Proceedings in question or another action, suit or other Proceeding on the
same or similar grounds is then or has been pending.
C. Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. Nothing contained in this Article shall
affect any rights to indemnification to which Covered Persons and other
persons may be entitled by contract (apart from the provisions of this
Article TENTH) or otherwise under law, nor to limit the power of the Trust to
indemnify such persons.
<PAGE> 17
D. Shareholders. In case any shareholder or former shareholder shall
be held to be personally liable solely by reason of his or her being or
having been a shareholder and not because of his or her acts or omissions or
for some other reason, the shareholder or former shareholder (or his or her
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified against
all loss and expense arising from such liability.
E. Contractual Rights. This Article TENTH shall be deemed to be a
contract between the Trust and each person who is a Covered Person at any
time this Article TENTH is in effect. Any repeal or other modification of
this Article TENTH or of any applicable laws shall not limit any rights of
indemnification then existing or arising out of events, acts, or omissions
occurring prior to such repeal or modification, including, without
limitation, the right to indemnification for Proceedings commenced after such
repeal or modification to enforce this Article TENTH with respect to events,
acts or omissions prior to such repeal or modification.
F. Protection of Rights. If a written claim for indemnification by a
Covered Person under this Article TENTH is not promptly paid in full by the
Trust after receipt by the Trust of a such claim, or if expenses have not
been promptly advanced after compliance by a Covered Person with the
requirements of this Article TENTH for such advancement, such Covered Person
may, at any time thereafter, bring suit against the Trust to recover the
unpaid amount of the claim or the advancement of expenses. If successful, in
whole or in part, in such suit, such Covered Person shall also be entitled to
be paid the reasonable expense therefor. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
requirements of this Article TENTH for advancement of expenses have been met
by such Covered Person) that the indemnification of the Covered Person is
prohibited, but the burden of proving such defense shall be on the Trust.
Neither the failure of the Trust, including its disinterested non-party
Trustees or independent legal counsel, to have made a determination that
indemnification of Covered Person is proper in the circumstances because he
or she has met the applicable standard of conduct required under the 1940
Act, nor the actual determination by the Trust, including its disinterested
non-party Trustees or independent legal counsel, that the Covered Person had
not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that such Covered Person had not met the applicable
standard of conduct.
ELEVENTH: RESERVATION OF RIGHT TO AMEND.
A. By Board of Trustees. Except when otherwise required by the 1940
Act, this Declaration of Trust may be amended at any time by a majority of
the Trustees then in office, provided notice of any amendment (other than
amendments having the purpose of supplying any omission, curing any ambiguity
or curing, correcting or supplementing any defective or inconsistent
provision contained herein, or having any other purpose which is ministerial
or clerical in nature) shall be mailed promptly to shareholders of record at
the close of business on the effective date of such amendment.
<PAGE> 18
B. By Shareholders. Except when otherwise required by the 1940 Act,
this Declaration of Trust may be amended at any time by a majority vote of
the shares of the Trust entitled to be voted.
TWELFTH: SHAREHOLDERS' VOTING POWERS AND MEETINGS.
A. Shareholders' Voting Powers. The shareholders shall have power to
vote only (i) for the election or removal of Trustees as provided in Article
SEVENTH, Section A; (ii) with respect to any investment adviser as provided
in Article SEVENTH, Section F; (iii) with respect to any termination of this
Trust or a series thereof to the extent and as provided in Article
FOURTEENTH; (iv) with respect to any amendment of this Declaration of Trust
to the extent and as provided in Article ELEVENTH, Section B; (v) to the same
extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders; and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this Declaration of
Trust, the By-Laws or any registration of the Trust with the SEC, or as the
Board of Trustees may consider necessary or desirable. Each whole share
outstanding on the record date established in accordance with the By-Laws
shall be entitled to one vote as to any matter on which it is entitled to
vote and each fractional share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this Declaration of
Trust, on any matter submitted to a vote of shareholders, shares shall be
voted in the aggregate and not by individual series except: (1) when required
by the 1940 Act or other applicable law, shares shall be voted by individual
series; or (2) when the Board of Trustees has determined that the matter
affects only the interests of one or more series, then shareholders of the
unaffected series shall not be entitled to vote thereon. There shall be no
cumulative voting in the election of the Board of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to
shares held in the names of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy, the Trust
receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At all meetings of
shareholders, unless inspectors of election have been appointed, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of
the meeting. Unless otherwise specified in the proxy, the proxy shall apply
to all shares of each series of the Trust owned by the shareholder.
Until shares are issued, the Board of Trustees may exercise all rights
of shareholders and may take any action required by law, this Declaration of
Trust or the By-Laws to be taken by shareholders.
B. Meetings. Meetings of shareholders of the Trust or of any series
may be called by the Board of Trustees, the President, the Executive Vice-
President, any Vice- President, or such other person or persons as may be
specified in the By-Laws and held from time to time for the purpose of taking
action upon any matter requiring the vote or the authority of the
shareholders of the
<PAGE> 19
Trust or any series as herein provided or upon any other matter deemed by the
Board of Trustees to be necessary or desirable. Meetings of shareholders of
the Trust or of any series shall be called by the Secretary or such other
person or persons as may be specified in the By-Laws upon written application
by shareholders holding at least 10% of the outstanding shares of the Trust,
if shareholders of all series are required hereunder to vote in the aggregate
and not by individual series at such meeting, or of any series, if
shareholders of such series are entitled hereunder to vote by individual
series at such meeting, requesting that a meeting be called for a purpose
requiring action by the shareholders as provided herein or in the By-Laws and
provided that such application shall state the purpose or purposes of such
meeting and the matters proposed to be acted on.
C. Quorum and Required Vote. Thirty percent of the shares entitled to
vote shall be a quorum for the transaction of business at a shareholders'
meeting, except that if any provision of law or of this Declaration of Trust
permits or requires that holders of any series shall vote as a series, then
thirty percent of the aggregate number of shares of each series entitled to
vote shall be necessary to constitute a quorum for the transaction of
business by that series. Any lesser number, however, shall be sufficient for
adjournments or if no shares are represented thereat, any officer present
thereat entitled to preside or act as secretary of such meeting may adjourn
the meeting. Any adjourned session or sessions may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws, a majority of the
shares voted shall decide any questions and a plurality shall elect any
Trustee, provided that where any provision of law or of this Declaration of
Trust permits or requires that the holders of any series shall vote as a
series, then a majority of the shares of that series voted on the matter
shall decide that matter insofar as that series is concerned.
The vote upon any question shall be by written ballot whenever requested
by any person entitled to vote but, unless such a request is made, voting may
be conducted by voice vote or in any other way approved by the meeting.
D. Place of Meeting. All shareholders' meetings shall be held at the
office of the Trust in the City of Chicago, State of Illinois, except that
the Board of Trustees or the President of the Trust may fix a different place
of meeting within the United States, which shall be specified in the notice
or waiver of notice of such meeting.
E. Notice of Meetings; Adjournment. The Secretary or an Assistant
Secretary shall cause notice of the place, date and hour and the purpose or
purposes for which a meeting is called, to be mailed, postage prepaid, not
less than seven days before the date of such meeting, to each shareholder
entitled to vote at such meeting, at his address as it appears on the records
of the Trust. Notice of any shareholders' meeting need not be given to any
shareholder who shall sign a written waiver of such notice, whether before or
after the time of such meeting, which waiver shall be filed with the record
of such meeting, or to any shareholder who shall attend such meeting in
person or by proxy. A meeting of shareholders convened on the date for which
it was called may be adjourned from time to time, without further notice, to
a date not more than 120 days after the original record date.
<PAGE> 20
F. Share Ledger. It shall be the duty of the Secretary or Assistant
Secretary of the Trust to cause an original or duplicate share ledger to be
maintained at the office of the Trust's transfer agent. Such share ledger
may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
G. Action by Written Consent. Any action taken by shareholders may be
taken without a meeting if a majority of shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by any express
provision of this Declaration of Trust or the By-Laws) consent to the action
in writing and such written consents are filed with the records of the
meetings of shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of shareholders.
THIRTEENTH: USE OF NAME.
The Trust acknowledges that it is adopting its trust name, and may adopt
the names of various series of the Trust, through permission of Stein Roe &
Farnham Incorporated, a Delaware corporation, and agrees that Stein Roe &
Farnham Incorporated reserves to itself and any successor to its business the
right to grant the non-exclusive right to use the name "SteinRoe Tax-Exempt
Income Trust," or "Stein Roe & Farnham Tax-Exempt Income Trust" or "SteinRoe
_____ Fund" or "Stein Roe & Farnham ______ Fund" or "SR&F Tax-Exempt Income
Trust" or "Stein Roe __________" or "Stein ___________" or "SteinRoe," or
"Stein Roe," or "Stein," or any similar name to any other entity, including
but not limited to any investment company of which Stein Roe & Farnham
Incorporated or any subsidiary or affiliate thereof or any successor to the
business thereof shall be the investment adviser.
FOURTEENTH: MISCELLANEOUS.
A. Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may
be terminated at any time by vote of shareholders holding a majority of the
shares of each series entitled to vote or by the Trustees by written notice
to the shareholders. Any series of shares may be terminated at any time by
vote of shareholders holding a majority of the shares of such series entitled
to vote or by the Trustees by written notice to the shareholders of such
series.
Upon termination of the Trust or of any one or more series of shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be determined by
the Trustees, the Trust shall, in accordance with such procedures as the
Trustees consider appropriate, reduce the remaining assets to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds to the shareholders of the series involved, ratably
according to the number of shares of such series held by the several
shareholders of such series on the date of termination.
B. Filing of Copies, References, Headings. The original or a copy of
this instrument and of each amendment hereto shall be kept at the office of
<PAGE> 21
the Trust where it may be inspected by any shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of the Commonwealth of Massachusetts and with the Boston City
Clerk, as well as any other governmental office where such filing may from
time to time be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on
a copy certified by an officer of the Trust to be a copy of this instrument
or of any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions such as "herein",
"hereof", and "hereunder", shall be deemed to refer to this instrument as
amended or affected by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts, each of which
shall be deemed an original.
C. Applicable Law. This Declaration of Trust is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of said Commonwealth.
The Trust shall be of the type commonly called a Massachusetts business
trust, and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust.
D. Severability. If any Article or other portion of this Declaration
of Trust shall be invalidated or held to be unenforceable on any ground by
any court of competent jurisdiction, the decision of which shall have not
been reversed on appeal, such invalidity or unenforceability shall not affect
the other provisions hereof, and this Declaration of Trust shall be construed
in all respects as if such invalid or unenforceable provision had been
omitted herefrom.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
in the City of Boston, Massachusetts, for himself and his assigns, as of the
day and year first above written.
DAVID A. STURMS
David A. Sturms, Trustee
COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF SUFFOLK ) SS
Boston, October 16, 1987.
Then personally appeared the above-named David A. Sturms, Trustee, and
acknowledged the foregoing instrument to be his free act and deed, before me.
BONITA C. TIERELI
Notary Public
My commission expires: 1/4/91
(NOTARIAL SEAL)
<PAGE>
STEINROE TAX-EXEMPT INCOME TRUST
AMENDMENT TO AGEEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the duly elected and qualified
Trustees of SteinRoe Tax-Exempt Income Trust, a voluntary association with
transferable shares organized under the laws of the Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust dated October
6, 1987 (the "Declaration of Trust"), do hereby amend the Declaration of
Trust as follows and hereby consent to such amendment:
1. Article First of the Declaration of Trust is deleted and the
following is inserted in lieu thereof:
FIRST: NAME.
The name of the Trust (which is thereafter called the "Trust") is
SteinRoe Municipal Trust.
2. Article Thirteenth is deleted and the following is inserted in lieu
thereof:
THIRTEENTH: USE OF NAME.
The Trust acknowledges that it is adopting its trust name, and may adopt
the names of various series of the Trust, through permission of Stein Roe &
Farnham Incorporated, a Delaware corporation, and agrees that Stein Roe &
Farnham Incorporated reserves to itself and any successor to its business the
right to grant the non-exclusive right to use the name "SteinRoe Municipal
Trust," or "Stein Roe & Farnham Municipal Trust" or "SteinRoe Trust" or
"Stein Roe & Farnham ______ Trust" or "SR&F Municipal Trust" or "Stein Roe
__________" or "Stein ___________" or "SteinRoe," or "Stein Roe," or "Stein,"
or any similar name to any other entity, including but not limited to any
investment company of which Stein Roe & Farnham Incorporated or any
subsidiary or affiliate thereof or any successor to the business thereof
shall be the investment adviser.
This instrument may be executed in several counterparts, each of which
shall been deemed an original, but all taken together shall be one
instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals this 31st day of July, 1991.
KENNETH L. BLOCK CHARLES R. NELSON
FRANCIS W. MORLEY GORDON R. WORLEY
ANTHONY G. ZULFER, JR.
<PAGE>
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named Kenneth L. Block,
Francis W. Morley, Charles R. Nelson, Gordon R. Worley, and Anthony G.
Zulfer, Jr., known to me to be the Trustees of SteinRoe Tax-Exempt Income
Trust, and acknowledged the foregoing instrument to be their free act and
deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires 10/30/93
<PAGE>
STEINROE MUNICIPAL TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
SteinRoe Municipal Trust (the "Trust"), a voluntary association with
transferable shares organized under the laws of the Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust dated October
6, 1987 (the "Declaration of Trust"), hereby certifies the following:
Pursuant to a majority vote of the shares of the Trust entitled to be
voted, Article TWELFTH of the Declaration of Trust is deleted and the
following is inserted in lieu thereof:
TWELFTH: Shareholders' Voting Powers and Meetings.
A. Shareholders' Voting Powers. The shareholders shall have power to
vote only (i) for the election or removal of Trustees as provided in
Article SEVENTH, Section A; (ii) with respect to any investment adviser
as provided in Article SEVENTH, Section F; (iii) with respect to any
termination of this Trust or a series thereof to the extent and as
provided in Article FOURTEENTH; (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Article
ELEVENTH, Section B; (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
shareholders; and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of
Trust, the By-Laws or any registration of the Trust with the SEC, or as
the Board of Trustees may consider necessary or desirable. Each whole
share (or fractional share) outstanding on the record date established
in accordance with the By-Laws shall be entitled to a number of votes on
any matter on which it is entitled to vote equal to the net asset value
of the share (or fractional share) in United States dollars determined
at the close of business on the record date (for example, a share having
a net asset value of $10.50 would be entitled to 10.5 votes).
Notwithstanding any other provision of this Declaration of Trust, on any
matter submitted to a vote of shareholders, shares shall be voted in the
aggregate and not by individual series except: (1) when required by the
1940 Act or other applicable law, shares shall be voted by individual
series; or (2) when the Board of Trustees has determined that the matter
affects only the interests of one or more series, then shareholders of
the unaffected series shall not be entitled to vote thereon. There
shall be no cumulative voting in the election of the Board of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to
shares held in the names of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy,
the Trust
<PAGE>
receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a
shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger. At all meetings of shareholders, unless inspectors of
election have been appointed, all questions relating to the
qualification of voters and the validity of proxies and the acceptance
or rejection of votes shall be decided by the chairman of the meeting.
Unless otherwise specified in the proxy, the proxy shall apply to all
shares of each series of the Trust owned by the shareholder.
Until shares are issued, the Board of Trustees may exercise all rights
of shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by shareholders.
IN WITNESS WHEREOF, the Trust has caused this amendment to be signed and
sealed in its name and on its behalf by Timothy K. Armour, President and
Trustee of the Trust, on October 25, 1994.
STEINROE INVESTMENT TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour
President and Trustee
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named Timothy K. Armour,
known to be to be the President and a Trustee of SteinRoe Investment Trust,
and acknowledged the foregoing instrument to be his free act and deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires 10/30/97
<PAGE> 1
Exhibit 5(a)
INVESTMENT ADVISORY AGREEMENT
STEINROE MUNICIPAL TRUST, a Massachusetts business trust
registered under the Investment Company Act of 1940 ("1940 Act") as
an open-end diversified management investment company ("Trust"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation registered under the Investment Advisers Act of 1940 as
an investment adviser, of Chicago, Illinois ("Manager"), to manage
the portion of its assets represented by the shares of beneficial
interest issued in the series designated STEINROE MUNICIPAL MONEY
MARKET FUND ("Fund") and to furnish certain administrative services.
In connection therewith, Trust and Manager hereby agree that:
1. Management. Manager shall manage the investment and
reinvestment of Trust's assets represented by Fund shares ("Fund
assets") and advise with respect thereto for the period and on the
terms set forth in this Agreement, subject to the overall control of
the Board of Trustees of Trust. Manager shall give due
consideration to the investment policies and restrictions and the
other statements concerning Fund in Trust's agreement and
declaration of trust, by-laws, and registration statements under the
1940 Act and the Securities Act of 1933 ("1933 Act"), and to the
provisions of the Internal Revenue Code applicable to Fund as a
regulated investment company. Manager shall for all purposes be
deemed to be an independent contractor and not an agent of Trust and
shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. Expenses Borne by Trust. Subject to paragraph 3, Trust
shall pay all expenses incidental to its organization, operations
and business not specifically assumed or agreed to be paid by
Manager pursuant to paragraphs 4 and 6, including, without
limitation: all charges of depostories, custodians and other
agencies for the safekeeping and servicing of its cash, securities,
and other property, and of its transfer, shareholder recordkeeping,
dividend disbursing, and redemption agents, if any; all charges for
equipment or services used for obtaining price quotations or for
communication between Manager or Trust and the custodian, transfer
agent or any other agent selected by Trust; all charges for
accounting services provided to Trust by the custodian, the Manager,
or any other provider of accounting services; all charges for
services of Trust's independent auditors; all charges for services
to Trust by legal counsel; all compensation of trustees, other than
those affiliated with Manager, and all expenses incurred in
connection with their services to Trust; all expenses of notices,
proxy solicitation material and reports to its shareholders; all
expenses of preparation and printing of annual or more frequent
revisions of Trust's prospectus and of supplying each then-existing
shareholder or beneficial owner with a copy of such revised
prospectus; all expenses related to preparing and transmitting
certificates representing Trust shares; all expenses of bond and
insurance coverage required by law or deemed advisable by the Board
of Trustees; all brokers' commissions and other normal charges
incident to the purchase and sale of portfolio securities; all taxes
and corporate fees payable to Federal, state or other governmental
agencies, domestic or foreign; all stamp or other transfer taxes;
all expenses of registering and
<PAGE> 2
maintaining the registration of
Trust under the 1940 Act and of Trust's shares under the 1933 Act,
of qualifying and maintaining qualification of Trust and of Trust's
shares for sale under securities laws of various states or other
jurisdictions and of registration and qualification of Trust under
all other laws applicable to the Trust or its business activities;
and all fees, dues or other expenses incurred by Trust in connection
with membership of Trust in any trade association or other
investment company organization.
3. Allocation of Expenses Borne by Trust. Any expenses borne
by Trust that are attributable solely to the organization, operation
or business of Fund shall be paid solely out of Fund assets. Any
expense borne by Trust which is not solely attributable to Fund, nor
solely to any other series of shares of Trust, shall be apportioned
in such manner as Manager determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
4. Expenses Borne by Manager. Manager at its own expense
shall furnish administrative services, executive and other
personnel, office space, and office facilities for conducting that
portion of Trust's business relating to Fund. However, Manager
shall not be required to pay or provide any credit for services
provided by Trust's custodian, transfer agent, or other agents
without additional cost to the Trust.
5. Management Fee. For the services to be rendered and the
charges to be assumed and to be paid by Manager hereunder, Trust
shall pay to Manager out of Fund assets a monthly fee, which is
computed and accrued daily, of (a) one twenty-fourth of one percent
(1/24 of 1%) the average net assets of Fund as determined as of the
close of each day in the monthly period.
6. Expense Limitation. The total expenses allocated to Fund
pursuant to paragraph 3, including fees paid to Manager, but
exclusive of taxes, of interest, of all commissions and other normal
charges incident to the purchase and sale of portfolio securities,
and extraordinary charges such as litigation costs, shall not exceed
the most restrictive applicable limits prescribed by any state in
which Fund shares are being offered for sale to the public, and
Manager agrees to reimburse Trust for any such expense in excess of
such limits, provided that Manager shall not be required to make
such reimbursement for any fiscal year to the extent the
reimbursement exceeds the amount of management fees paid by the Fund
for such year.
7. Non-Exclusivity. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be free
to render similar services to others.
8. Investment in Fund Shares. Neither Manager nor any of its
directors, officers or stockholders (or partners of stockholders)
shall purchase or sell, or take a long or short position in, Fund
shares, except (a) at the same price as the price to the public at
the time of purchase or sale, or (b) prior to the commencement of
the public offering of shares of Fund at the net asset value of such
shares.
9. Standard of Care. Neither Manager, nor any of its
directors, officers or stockholders (or partners of stockholders),
agents or employees shall be liable or responsible to Trust or its
shareholders 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
<PAGE> 3
Manager of its duties under this Agreement, except for liability
resulting from willful misfeasance, bad faith or gross negligence on
Manager's part or from reckless disregard by Manager of its
obligations and duties under this Agreement.
10. Amendment. This Agreement may not be amended without the
affirmative votes (a) of a majority of the Board of Trustees,
including a majority of those trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting
called for the purpose of voting on such approval, and (b) of a
"majority of the outstanding shares" of Fund. The terms "interested
persons" and "vote of a majority of the outstanding shares" shall be
construed in accordance with their respective definitions in
Sections 2(a)(19) and 2(a)(42) of the 1940 Act and, with respect to
the latter term, in accordance with Rule 18f-2 under the 1940 Act.
11. Termination. This Agreement may be terminated at any
time, without payment of any penalty, by the Board of Trustees of
Trust, or by a vote of a majority of the outstanding shares of Fund,
upon at least sixty (60) days' written notice to Manager. This
Agreement may be terminated by Manager at any time upon at least
sixty (60) days' written notice to Trust. This Agreement shall
terminate automatically in the event of its assignment (as defined
in Section 2(a)(4) of the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect until
June 30, 1996 and thereafter from year to year only so long as such
continuance is specifically approved at least annually (a) by a
majority of those trustees who are not interested persons of Trust
or of Manager, voting in person at a meeting called for the purpose
of voting on such approval, and (b) by either the Board of Trustees
of Trust or by a vote of a majority of the outstanding shares of
Fund.
12. Non-Liability of Trustees and Shareholders. Any
obligation of Trust hereunder shall be binding only upon the assets
of Trust (or the applicable series 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.
13. Use of Manager's Name. The Trust may use the name
"SteinRoe Municipal Trust" and the Fund may use the name "SteinRoe
Municipal Money Market Fund" 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 the Manager as investment adviser. At
such time as this Agreement or any extension, renewal or amendment
hereof, or such other similar agreement shall no longer be in
effect, the Trust and Fund will cease to use any name derived from
the name "Stein Roe & Farnham" or otherwise connected with the
Manager, or with any organization which shall have succeeded to the
Manager's business as investment adviser.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to refer
to this Agreement as amended or affected by any
<PAGE> 4
such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or
affect the meaning, construction or effect of this Agreement. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
Dated: November 1, 1994
STEINROE MUNICIPAL TRUST
Attest: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Chief Executive Officer
KEITH J. RUDOLF
Secretary
<PAGE> 1
Exhibit 5(b)
INVESTMENT ADVISORY AGREEMENT
STEINROE MUNICIPAL TRUST, a Massachusetts business trust
registered under the Investment Company Act of 1940 ("1940 Act") as
an open-end diversified management investment company ("Trust"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation registered under the Investment Advisers Act of 1940 as
an investment adviser, of Chicago, Illinois ("Manager"), to manage
the portion of its assets represented by the shares of beneficial
interest issued in the series designated STEINROE INTERMEDIATE
MUNICIPALS ("Fund") and to furnish certain administrative services.
In connection therewith, Trust and Manager hereby agree that:
1. Management. Manager shall manage the investment and
reinvestment of Trust's assets represented by Fund shares ("Fund
assets") and advise with respect thereto for the period and on the
terms set forth in this Agreement, subject to the overall control of
the Board of Trustees of Trust. Manager shall give due
consideration to the investment policies and restrictions and the
other statements concerning Fund in Trust's agreement and
declaration of trust, by-laws, and registration statements under the
1940 Act and the Securities Act of 1933 ("1933 Act"), and to the
provisions of the Internal Revenue Code applicable to Fund as a
regulated investment company. Manager shall for all purposes be
deemed to be an independent contractor and not an agent of Trust and
shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. Expenses Borne by Trust. Subject to paragraph 3, Trust
shall pay all expenses incidental to its organization, operations
and business not specifically assumed or agreed to be paid by
Manager pursuant to paragraphs 4 and 6, including, without
limitation: all charges of depostories, custodians and other
agencies for the safekeeping and servicing of its cash, securities,
and other property, and of its transfer, shareholder recordkeeping,
dividend disbursing, and redemption agents, if any; all charges for
equipment or services used for obtaining price quotations or for
communication between Manager or Trust and the custodian, transfer
agent or any other agent selected by Trust; all charges for
accounting services provided to Trust by the custodian, the Manager,
or any other provider of accounting services; all charges for
services of Trust's independent auditors; all charges for services
to Trust by legal counsel; all compensation of trustees, other than
those affiliated with Manager, and all expenses incurred in
connection with their services to Trust; all expenses of notices,
proxy solicitation material and reports to its shareholders; all
expenses of preparation and printing of annual or more frequent
revisions of Trust's prospectus and of supplying each then-existing
shareholder or beneficial owner with a copy of such revised
prospectus; all expenses related to preparing and transmitting
certificates representing Trust shares; all expenses of bond and
insurance coverage required by law or deemed advisable by the Board
of Trustees; all brokers' commissions and other normal charges
incident to the purchase and sale of portfolio securities; all taxes
and corporate fees payable to Federal, state or other governmental
agencies, domestic or foreign; all stamp or other transfer taxes;
all expenses of registering and
<PAGE> 2
maintaining the registration of
Trust under the 1940 Act and of Trust's shares under the 1933 Act,
of qualifying and maintaining qualification of Trust and of Trust's
shares for sale under securities laws of various states or other
jurisdictions and of registration and qualification of Trust under
all other laws applicable to the Trust or its business activities;
and all fees, dues or other expenses incurred by Trust in connection
with membership of Trust in any trade association or other
investment company organization.
3. Allocation of Expenses Borne by Trust. Any expenses borne
by Trust that are attributable solely to the organization, operation
or business of Fund shall be paid solely out of Fund assets. Any
expense borne by Trust which is not solely attributable to Fund, nor
solely to any other series of shares of Trust, shall be apportioned
in such manner as Manager determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
4. Expenses Borne by Manager. Manager at its own expense
shall furnish administrative services, executive and other
personnel, office space, and office facilities for conducting that
portion of Trust's business relating to Fund. However, Manager
shall not be required to pay or provide any credit for services
provided by Trust's custodian, transfer agent, or other agents
without additional cost to the Trust.
5. Management Fee. For the services to be rendered and the
charges to be assumed and to be paid by Manager hereunder, Trust
shall pay to Manager out of Fund assets a monthly fee, which is
computed and accrued daily, of (a) one twentieth of one percent
(1/20 of 1%) of the first $100 million of the average net assets of
Fund; plus (b) eleven two hundred and fortieths of one percent
(11/240 of 1%) of the average net assets of Fund in excess of $100
million but not exceeding $200 million; plus (c) one twenty-fourth
of one percent (1/24 of 1%) of the average net assets of Fund in
excess of $200 million as determined as of the close of each day in
the monthly period.
6. Expense Limitation. The total expenses allocated to Fund
pursuant to paragraph 3, including fees paid to Manager, but
exclusive of taxes, of interest, of all commissions and other normal
charges incident to the purchase and sale of portfolio securities,
and extraordinary charges such as litigation costs, shall not exceed
the most restrictive applicable limits prescribed by any state in
which Fund shares are being offered for sale to the public, and
Manager agrees to reimburse Trust for any such expense in excess of
such limits, provided that Manager shall not be required to make
such reimbursement for any fiscal year to the extent the
reimbursement exceeds the amount of management fees paid by the Fund
for such year.
7. Non-Exclusivity. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be free
to render similar services to others.
8. Investment in Fund Shares. Neither Manager nor any of its
directors, officers or stockholders (or partners of stockholders)
shall purchase or sell, or take a long or short position in, Fund
shares, except (a) at the same price as the price to the public at
the time of purchase or sale, or (b) prior to the commencement of
the public offering of shares of Fund at the net asset value of such
shares.
<PAGE> 3
9. Standard of Care. Neither Manager, nor any of its
directors, officers or stockholders (or partners of stockholders),
agents or employees shall be liable or responsible to Trust or its
shareholders 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 Manager of its duties under this Agreement,
except for liability resulting from willful misfeasance, bad faith
or gross negligence on Manager's part or from reckless disregard by
Manager of its obligations and duties under this Agreement.
10. Amendment. This Agreement may not be amended without the
affirmative votes (a) of a majority of the Board of Trustees,
including a majority of those trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting
called for the purpose of voting on such approval, and (b) of a
"majority of the outstanding shares" of Fund. The terms "interested
persons" and "vote of a majority of the outstanding shares" shall be
construed in accordance with their respective definitions in
Sections 2(a)(19) and 2(a)(42) of the 1940 Act and, with respect to
the latter term, in accordance with Rule 18f-2 under the 1940 Act.
11. Termination. This Agreement may be terminated at any
time, without payment of any penalty, by the Board of Trustees of
Trust, or by a vote of a majority of the outstanding shares of Fund,
upon at least sixty (60) days' written notice to Manager. This
Agreement may be terminated by Manager at any time upon at least
sixty (60) days' written notice to Trust. This Agreement shall
terminate automatically in the event of its assignment (as defined
in Section 2(a)(4) of the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect until
June 30, 1996 and thereafter from year to year only so long as such
continuance is specifically approved at least annually (a) by a
majority of those trustees who are not interested persons of Trust
or of Manager, voting in person at a meeting called for the purpose
of voting on such approval, and (b) by either the Board of Trustees
of Trust or by a vote of a majority of the outstanding shares of
Fund.
12. Non-Liability of Trustees and Shareholders. Any
obligation of Trust hereunder shall be binding only upon the assets
of Trust (or the applicable series 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.
13. Use of Manager's Name. The Trust may use the name
"SteinRoe Municipal Trust" and the Fund may use the name "SteinRoe
Intermediate Municipals" 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 the Manager as investment adviser. At
such time as this Agreement or any extension, renewal or amendment
hereof, or such other similar agreement shall no longer be in
effect, the Trust and Fund will cease to use any name derived from
the name "Stein Roe & Farnham" or otherwise connected with the
Manager, or with any organization which shall have succeeded to the
Manager's business as investment adviser.
<PAGE> 4
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to refer
to this Agreement as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this Agreement. This Agreement
may be executed in any number of counterparts, each of which shall
be deemed an original.
Dated: November 1, 1994
STEINROE MUNICIPAL TRUST
Attest: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Chief Executive Officer
KEITH J. RUDOLF
Secretary
<PAGE> 1
Exhibit 5(c)
INVESTMENT ADVISORY AGREEMENT
STEINROE MUNICIPAL TRUST, a Massachusetts business trust
registered under the Investment Company Act of 1940 ("1940 Act") as
an open-end diversified management investment company ("Trust"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation registered under the Investment Advisers Act of 1940 as
an investment adviser, of Chicago, Illinois ("Manager"), to manage
the portion of its assets represented by the shares of beneficial
interest issued in the series designated STEINROE MANAGED MUNICIPALS
("Fund") and to furnish certain administrative services. In
connection therewith, Trust and Manager hereby agree that:
1. Management. Manager shall manage the investment and
reinvestment of Trust's assets represented by Fund shares ("Fund
assets") and advise with respect thereto for the period and on the
terms set forth in this Agreement, subject to the overall control of
the Board of Trustees of Trust. Manager shall give due consideration
to the investment policies and restrictions and the other statements
concerning Fund in Trust's agreement and declaration of trust, by-
laws, and registration statements under the 1940 Act and the
Securities Act of 1933 ("1933 Act"), and to the provisions of the
Internal Revenue Code applicable to Fund as a regulated investment
company. Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall, unless
otherwise expressly provided or authorized, have no authority to act
for or represent Trust in any way.
2. Expenses Borne by Trust. Subject to paragraph 3, Trust
shall pay all expenses incidental to its organization, operations and
business not specifically assumed or agreed to be paid by Manager
pursuant to paragraphs 4 and 6, including, without limitation: all
charges of depostories, custodians and other agencies for the
safekeeping and servicing of its cash, securities, and other
property, and of its transfer, shareholder recordkeeping, dividend
disbursing, and redemption agents, if any; all charges for equipment
or services used for obtaining price quotations or for communication
between Manager or Trust and the custodian, transfer agent or any
other agent selected by Trust; all charges for accounting services
provided to Trust by the custodian, the Manager, or any other
provider of accounting services; all charges for services of Trust's
independent auditors; all charges for services to Trust by legal
counsel; all compensation of trustees, other than those affiliated
with Manager, and all expenses incurred in connection with their
services to Trust; all expenses of notices, proxy solicitation
material and reports to its shareholders; all expenses of preparation
and printing of annual or more frequent revisions of Trust's
prospectus and of supplying each then-existing shareholder or
beneficial owner with a copy of such revised prospectus; all expenses
related to preparing and transmitting certificates representing Trust
shares; all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees; all brokers'
commissions and other normal charges incident to the purchase and
sale of portfolio securities; all taxes and corporate fees payable to
Federal, state or other governmental agencies, domestic or foreign;
all stamp or other transfer taxes; all expenses of registering and
maintaining the registration of Trust under the 1940 Act and of
Trust's shares under the 1933 Act, of qualifying and maintaining
<PAGE> 2
qualification of Trust and of Trust's shares for sale under
securities laws of various states or other jurisdictions and of
registration and qualification of Trust under all other laws
applicable to the Trust or its business activities; and all fees,
dues or other expenses incurred by Trust in connection with
membership of Trust in any trade association or other investment
company organization.
3. Allocation of Expenses Borne by Trust. Any expenses borne
by Trust that are attributable solely to the organization, operation
or business of Fund shall be paid solely out of Fund assets. Any
expense borne by Trust which is not solely attributable to Fund, nor
solely to any other series of shares of Trust, shall be apportioned
in such manner as Manager determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
4. Expenses Borne by Manager. Manager at its own expense shall
furnish administrative services, executive and other personnel,
office space, and office facilities for conducting that portion of
Trust's business relating to Fund. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian, transfer agent, or other agents without additional
cost to the Trust.
5. Management Fee. For the services to be rendered and the
charges to be assumed and to be paid by Manager hereunder, Trust
shall pay to Manager out of Fund assets a monthly fee, which is
computed and accrued daily, of (a) one twentieth of one percent (1/20
of 1%) of the first $100 million of the average net assets of Fund;
plus (b) eleven two hundred and fortieths of one percent (11/240 of
1%) of the average net assets of Fund in excess of $100 million but
not exceeding $200 million; plus (c) one twenty-fourth of one percent
(1/24 of 1%) of the average net assets of Fund in excess of $200
million but not exceeding $800 million; plus (d) three-eightieths of
one percent (3/80 of 1%) of the average net assets of Fund in excess
of $800 million, as determined as of the close of each day in the
monthly period.
6. Expense Limitation. The total expenses allocated to Fund
pursuant to paragraph 3, including fees paid to Manager, but
exclusive of taxes, of interest, of all commissions and other normal
charges incident to the purchase and sale of portfolio securities,
and extraordinary charges such as litigation costs, shall not exceed
the most restrictive applicable limits prescribed by any state in
which Fund shares are being offered for sale to the public, and
Manager agrees to reimburse Trust for any such expense in excess of
such limits, provided that Manager shall not be required to make such
reimbursement for any fiscal year to the extent the reimbursement
exceeds the amount of management fees paid by the Fund for such year.
7. Non-Exclusivity. The services of Manager to Trust hereunder
are not to be deemed exclusive and Manager shall be free to render
similar services to others.
8. Investment in Fund Shares. Neither Manager nor any of its
directors, officers or stockholders (or partners of stockholders)
shall purchase or sell, or take a long or short position in, Fund
shares, except (a) at the same price as the price to the public at
the time of purchase or sale, or (b) prior to the commencement of the
public offering of shares of Fund at the net asset value of such
shares.
<PAGE> 3
9. Standard of Care. Neither Manager, nor any of its
directors, officers or stockholders (or partners of stockholders),
agents or employees shall be liable or responsible to Trust or its
shareholders 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 Manager of its duties under this Agreement, except
for liability resulting from willful misfeasance, bad faith or gross
negligence on Manager's part or from reckless disregard by Manager of
its obligations and duties under this Agreement.
10. Amendment. This Agreement may not be amended without the
affirmative votes (a) of a majority of the Board of Trustees,
including a majority of those trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting called
for the purpose of voting on such approval, and (b) of a "majority of
the outstanding shares" of Fund. The terms "interested persons" and
"vote of a majority of the outstanding shares" shall be construed in
accordance with their respective definitions in Sections 2(a)(19) and
2(a)(42) of the 1940 Act and, with respect to the latter term, in
accordance with Rule 18f-2 under the 1940 Act.
11. Termination. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Trustees of Trust, or
by a vote of a majority of the outstanding shares of Fund, upon at
least sixty (60) days' written notice to Manager. This Agreement may
be terminated by Manager at any time upon at least sixty (60) days'
written notice to Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section
2(a)(4) of the 1940 Act). Unless terminated as hereinbefore
provided, this Agreement shall continue in effect until June 30, 1996
and thereafter from year to year only so long as such continuance is
specifically approved at least annually (a) by a majority of those
trustees who are not interested persons of Trust or of Manager,
voting in person at a meeting called for the purpose of voting on
such approval, and (b) by either the Board of Trustees of Trust or by
a vote of a majority of the outstanding shares of Fund.
12. Non-Liability of Trustees and Shareholders. Any obligation
of Trust hereunder shall be binding only upon the assets of Trust (or
the applicable series 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.
13. Use of Manager's Name. The Trust may use the name
"SteinRoe Municipal Trust" and the Fund may use the name "SteinRoe
Managed Municipals" 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 the Manager as investment adviser. At such time as this
Agreement or any extension, renewal or amendment hereof, or such
other similar agreement shall no longer be in effect, the Trust and
Fund will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with the Manager, or with any
<PAGE> 4
organization which shall have succeeded to the Manager's business as
investment adviser.
14. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein," "hereof," and "hereunder" shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings
are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction
or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Dated: November 1, 1994
STEINROE MUNICIPAL TRUST
Attest: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Chief Executive Officer
KEITH J. RUDOLF
Secretary
<PAGE> 1
Exhibit 5(d)
INVESTMENT ADVISORY AGREEMENT
STEINROE MUNICIPAL TRUST, a Massachusetts business trust
registered under the Investment Company Act of 1940 ("1940 Act") as
an open-end diversified management investment company ("Trust"),
hereby appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation registered under the Investment Advisers Act of 1940 as
an investment adviser, of Chicago, Illinois ("Manager"), to manage
the portion of its assets represented by the shares of beneficial
interest issued in the series designated STEINROE HIGH-YIELD
MUNICIPALS ("Fund") and to furnish certain administrative services.
In connection therewith, Trust and Manager hereby agree that:
1. Management. Manager shall manage the investment and
reinvestment of Trust's assets represented by Fund shares ("Fund
assets") and advise with respect thereto for the period and on the
terms set forth in this Agreement, subject to the overall control of
the Board of Trustees of Trust. Manager shall give due consideration
to the investment policies and restrictions and the other statements
concerning Fund in Trust's agreement and declaration of trust, by-
laws, and registration statements under the 1940 Act and the
Securities Act of 1933 ("1933 Act"), and to the provisions of the
Internal Revenue Code applicable to Fund as a regulated investment
company. Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall, unless
otherwise expressly provided or authorized, have no authority to act
for or represent Trust in any way.
2. Expenses Borne by Trust. Subject to paragraph 3, Trust
shall pay all expenses incidental to its organization, operations and
business not specifically assumed or agreed to be paid by Manager
pursuant to paragraphs 4 and 6, including, without limitation: all
charges of depostories, custodians and other agencies for the
safekeeping and servicing of its cash, securities, and other
property, and of its transfer, shareholder recordkeeping, dividend
disbursing, and redemption agents, if any; all charges for equipment
or services used for obtaining price quotations or for communication
between Manager or Trust and the custodian, transfer agent or any
other agent selected by Trust; all charges for accounting services
provided to Trust by the custodian, the Manager, or any other
provider of accounting services; all charges for services of Trust's
independent auditors; all charges for services to Trust by legal
counsel; all compensation of trustees, other than those affiliated
with Manager, and all expenses incurred in connection with their
services to Trust; all expenses of notices, proxy solicitation
material and reports to its shareholders; all expenses of preparation
and printing of annual or more frequent revisions of Trust's
prospectus and of supplying each then-existing shareholder or
beneficial owner with a copy of such revised prospectus; all expenses
related to preparing and transmitting certificates representing Trust
shares; all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees; all brokers'
commissions and other normal charges incident to the purchase and
sale of portfolio securities; all taxes and corporate fees payable to
Federal, state or other governmental agencies, domestic or foreign;
all stamp or other transfer taxes; all expenses of registering and
maintaining the registration of Trust under the 1940 Act and of
Trust's shares under the 1933 Act, of qualifying and maintaining
<PAGE> 2
qualification of Trust and of Trust's shares for sale under
securities laws of various states or other jurisdictions and of
registration and qualification of Trust under all other laws
applicable to the Trust or its business activities; and all fees,
dues or other expenses incurred by Trust in connection with
membership of Trust in any trade association or other investment
company organization.
3. Allocation of Expenses Borne by Trust. Any expenses borne
by Trust that are attributable solely to the organization, operation
or business of Fund shall be paid solely out of Fund assets. Any
expense borne by Trust which is not solely attributable to Fund, nor
solely to any other series of shares of Trust, shall be apportioned
in such manner as Manager determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
4. Expenses Borne by Manager. Manager at its own expense shall
furnish administrative services, executive and other personnel,
office space, and office facilities for conducting that portion of
Trust's business relating to Fund. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian, transfer agent, or other agents without additional
cost to the Trust.
5. Management Fee. For the services to be rendered and the
charges to be assumed and to be paid by Manager hereunder, Trust
shall pay to Manager out of Fund assets a monthly fee, which is
computed and accrued daily, of (a) one twentieth of one percent (1/20
of 1%) of the first $100 million of the average net assets of Fund;
plus (b) eleven two hundred and fortieths of one percent (11/240 of
1%) of the average net assets of Fund in excess of $100 million but
not exceeding $200 million; plus (c) one twenty-fourth of one percent
(1/24 of 1%) of the average net assets of Fund in excess of $200
million as determined as of the close of each day in the monthly
period.
6. Expense Limitation. The total expenses allocated to Fund
pursuant to paragraph 3, including fees paid to Manager, but
exclusive of taxes, of interest, of all commissions and other normal
charges incident to the purchase and sale of portfolio securities,
and extraordinary charges such as litigation costs, shall not exceed
the most restrictive applicable limits prescribed by any state in
which Fund shares are being offered for sale to the public, and
Manager agrees to reimburse Trust for any such expense in excess of
such limits, provided that Manager shall not be required to make such
reimbursement for any fiscal year to the extent the reimbursement
exceeds the amount of management fees paid by the Fund for such year.
7. Non-Exclusivity. The services of Manager to Trust hereunder
are not to be deemed exclusive and Manager shall be free to render
similar services to others.
8. Investment in Fund Shares. Neither Manager nor any of its
directors, officers or stockholders (or partners of stockholders)
shall purchase or sell, or take a long or short position in, Fund
shares, except (a) at the same price as the price to the public at
the time of purchase or sale, or (b) prior to the commencement of the
public offering of shares of Fund at the net asset value of such
shares.
<PAGE> 3
9. Standard of Care. Neither Manager, nor any of its
directors, officers or stockholders (or partners of stockholders),
agents or employees shall be liable or responsible to Trust or its
shareholders 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 Manager of its duties under this Agreement, except
for liability resulting from willful misfeasance, bad faith or gross
negligence on Manager's part or from reckless disregard by Manager of
its obligations and duties under this Agreement.
10. Amendment. This Agreement may not be amended without the
affirmative votes (a) of a majority of the Board of Trustees,
including a majority of those trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting called
for the purpose of voting on such approval, and (b) of a "majority of
the outstanding shares" of Fund. The terms "interested persons" and
"vote of a majority of the outstanding shares" shall be construed in
accordance with their respective definitions in Sections 2(a)(19) and
2(a)(42) of the 1940 Act and, with respect to the latter term, in
accordance with Rule 18f-2 under the 1940 Act.
11. Termination. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Trustees of Trust, or
by a vote of a majority of the outstanding shares of Fund, upon at
least sixty (60) days' written notice to Manager. This Agreement may
be terminated by Manager at any time upon at least sixty (60) days'
written notice to Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section
2(a)(4) of the 1940 Act). Unless terminated as hereinbefore
provided, this Agreement shall continue in effect until June 30, 1996
and thereafter from year to year only so long as such continuance is
specifically approved at least annually (a) by a majority of those
trustees who are not interested persons of Trust or of Manager,
voting in person at a meeting called for the purpose of voting on
such approval, and (b) by either the Board of Trustees of Trust or by
a vote of a majority of the outstanding shares of Fund.
12. Non-Liability of Trustees and Shareholders. Any obligation
of Trust hereunder shall be binding only upon the assets of Trust (or
the applicable series 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.
13. Use of Manager's Name. The Trust may use the name
"SteinRoe Municipal Trust" and the Fund may use the name "SteinRoe
High-Yield Municipals" 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 the Manager as investment adviser. At such time as this
Agreement or any extension, renewal or amendment hereof, or such
other similar agreement shall no longer be in effect, the Trust and
Fund will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with the Manager, or with any
organization which shall have succeeded to the Manager's business as
investment adviser.
<PAGE> 4
14. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein," "hereof," and "hereunder" shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings
are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction
or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Dated: November 1, 1994
STEINROE MUNICIPAL TRUST
Attest: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Chief Executive Officer
KEITH J. RUDOLF
Secretary
<PAGE> 1
Exhibit 5(e)
[STEINROE MUTUAL FUNDS LETTERHEAD]
October 31, 1994
SteinRoe Municipal Trust
P.O. Box 804058
Chicago, Illinois 60680
Re: SteinRoe Municipal Money Market Fund
Gentlemen:
The firm of Stein Roe & Farnham Incorporated hereby
undertakes as follows:
In the interest of limiting the expenses of the series
of SteinRoe Municipal Trust designated SteinRoe
Municipal Money Market Fund (the "Fund"), Stein Roe &
Farnham Incorporated ("SR&F"), the investment adviser to
the Fund, undertakes to reimburse the Fund to the
extent, but only to the extent, that annualized expenses
(excluding taxes, interest, all commissions and other
normal charges incident to the purchase and sale of
portfolio securities, and extraordinary charges such as
litigation costs, but including fees paid to SR&F)
exceed .7 of 1% of average net assets of the Fund
through October 31, 1995, subject to the right of SR&F
on 30 days' notice to terminate this undertaking. The
amount of the expense reimbursement (or any offsetting
reimbursement by the Fund to SR&F) shall be computed on
an annual basis, but accrued and paid monthly.
Sincerely,
STEIN ROE & FARNHAM INCORPORATED
By: TIMOTHY K. ARMOUR
President, Mutual Funds Division
Attest:
By: JILAINE HUMMEL BAUER
Assistant Secretary
<PAGE> 2
[STEINROE MUTUAL FUNDS LETTERHEAD]
May 1, 1995
SteinRoe Municipal Trust
One South Wacker Drive
Chicago, Illinois 60606
Re: SteinRoe Intermediate Municipals
Gentlemen:
The firm of Stein Roe & Farnham Incorporated hereby undertakes as
follows:
In the interest of limiting the expenses of the series of SteinRoe
Municipal Trust designated SteinRoe Intermediate Municipals (the
"Fund"), Stein Roe & Farnham Incorporated ("SR&F"), the investment
adviser to the Fund, undertakes to voluntarily waive its management
fee and/or absorb certain expenses for the Fund to the extent, but
only to the extent, that annualized fees and expenses (excluding
taxes, interest, all commissions and other normal charges incident
to the purchase and sale of portfolio securities, and extraordinary
charges such as litigation costs) during the period that this
undertaking is in effect exceed 0.70% of average net assets of the
Fund. Unless extended in writing by SR&F, this undertaking shall
terminate on October 31, 1995, subject to the right of SR&F on 30
days' written notice to terminate this undertaking. The amount of
the fee waiver and/or expense absorption (or any offsetting
reimbursement by the Fund to SR&F) shall be computed on an annual
basis, but accrued and paid monthly.
Sincerely,
STEIN ROE & FARNHAM INCORPORATED
By: KENNETH J. KOZANDA
Vice President and Treasurer
Attest:
By: JILAINE HUMMEL BAUER
Assistant Secretary
<PAGE>
Exhibit 8
CUSTODIAN CONTRACT
Between
STEINROE TAX-EXEMPT INCOME TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Employment Of Custodian and Property to be
Held By It ...........................................1
2. Duties of the Custodian with Respect to Property
of the Trust Held by the Custodian....................1
2.1 Holding Securities................................1
2.2 Delivery of Securities ...........................2
2.3 Registration of Securities .......................4
2.4 Bank Accounts ....................................4
2.5 Payment for Shares ...............................5
2.6 Investments and Availability of Federal Funds ....5
2.7 Collection of Income .............................5
2.8 Payment of Trust Moneys ..........................6
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased ..................7
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund .............................7
2.11 Appointment of Agents ...........................7
2.12 Deposit of Trust Assets in Securities System ....7
2.13 Segregated Account ..............................9
2.14 Ownership Certificates for Tax Purposes ........10
2.15 Proxies ........................................10
2.16 Communications Relating to Trust
Portfolio Securities ...........................10
2.17 Proper Instructions ............................10
2.18 Actions Permitted Without Express Authority ....10
2.19 Evidence of Authority ..........................11
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and
Net Income ........................................11
4. Records .............................................11
5. Opinion of Trust's Independent Accountant ...........11
6. Reports to Trust by Independent Public Accountants ..12
7. Compensation of Custodian ...........................12
8. Responsibility of Custodian ........................ 12
9. Effective Period, Termination and Amendment .........13
10. Successor Custodian .................................13
11. Interpretive and Additional Provisions ..............14
12. Massachusetts Law to Apply ..........................14
<PAGE>
13. Prior Contracts .....................................14
14. Notices .............................................14
15. Successors ..........................................14
16. Non-Liability of Trustees and Shareholders ..........15
17. Additional Funds ....................................15
<PAGE>
CUSTODIAN CONTRACT
This Contract between SteinRoe Tax-Exempt Income Trust, a
voluntary association organized under the laws of the Commonwealth of
Massachusetts in the form commonly known as a business trust, having
its principal place of business at 300 West Adams Street, Chicago,
Illinois 60606, hereinafter called the "Trust," and State Street Bank
and Trust Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts 02101,
hereinafter called the "Custodian."
WHEREAS, the Trust is authorized to issue shares of beneficial
interest ("Shares") in separate series, with each such series
representing interests in a separate portfolio of securities and other
assets (any such series being referred to as a "Fund"); and
WHEREAS, the following series have been authorized: SteinRoe
Intermediate Municipals, SteinRoe High-Yield Municipals, SteinRoe Tax-
Exempt Money Fund, and SteinRoe Managed Municipals;
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It.
The Trust hereby employs the Custodian as the custodian of its
assets, pursuant to the provisions of its Agreement and Declaration of
Trust. The Trust agrees to deliver to the Custodian all securities
and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to all
securities owned by the Trust from time to time, and the cash
consideration received by it for such new or treasury Shares, of any
series, with or without par value, of the Trust as may be issued or
sold from time to time. The Custodian shall not be responsible for
any property of the Trust held or received by the Trust and not
delivered to the Custodian or any sub-custodian appointed as
prescribed herein.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.17), the Custodian shall from time to time employ one or
more sub-custodians, but only in accordance with an applicable vote by
the Board of Trustees of the Trust, and provided that the Custodian
shall have no more or less responsibility or liability to the Trust on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Trust
Held by the Custodian.
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities, owned by the Trust and allocated to
each Fund, other than securities that are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as
"Securities System."
<PAGE>
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Trust, held for the account of a
Fund, held either by the Custodian or in a Securities System
account of the Custodian, only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into for the
account of the Fund;
(3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of the Trust or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.11 or into the
name or nominee name of any sub-custodian appointed pursuant
to Article 1; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian and will be held by the Custodian for the account
of the Fund;
(7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, in
accordance with "street delivery" custom; provided that in
any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities
except as may arise from the Custodian's own negligence or
wilfull misconduct;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization, or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian and will be held by the Custodian for the account
of the Fund;
<PAGE>
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian and will be held by the
Custodian for the account of the Fund;
(10) For delivery in connection with any loans of securities made
by the Trust from the Fund's portfolio, but only against
receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Trust, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that
in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Trust prior to the
receipt of such collateral;
(11) For delivery as security in connection with any borrowings
by the Trust requiring a pledge of assets in the Fund's
portfolio, but only against receipt of amounts borrowed;
(12) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer, relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with options transactions by the Trust;
(13) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account
deposits in connection with futures transactions by the
Trust for the account of the Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Trust, for delivery to such
Transfer Agent or to the holders of Shares of the Fund in
connection with distributions in kind, as may be described
from time to time in the Fund's currently effective
prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of
Shares of the Fund for repurchase or redemption;
(15) For delivery in connection with any reverse repurchase
agreement entered into by the Trust with respect to the
Fund, but only against receipt for the account of the Fund
of the amount payable by the other party to the agreement;
and
<PAGE>
(16) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees of the Trust ("Board of
Trustees") or of the Executive Committee thereof ("Executive
Committee") signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purposes
to be proper purposes, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Trust or in the name of any nominee of the Trust
for the account of the particular Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the
Trust for the account of such Fund unless the Trust has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Trust, or in the name or nominee name
of any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to Article
1. All securities accepted by the Custodian on behalf of the
Trust under the terms of this Contract shall be in "street name"
or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts for each Fund in the name of the Trust,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of that Fund, other than cash
maintained by the Trust in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Trust may be deposited
by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited
with each such bank or trust company shall be approved by vote of
a majority of the Board of Trustees of the Trust. Such funds
shall be deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that capacity.
If and when authorized by Proper Instructions in accordance with
a resolution adopted by the Board of Trustees, the Custodian may
open and maintain an additional account or accounts in such other
bank or trust company as may be designated by such instructions,
such account or accounts, however, to be in the name of the
Custodian in its capacity as the Custodian and subject only to
its draft or credit in accordance with the terms of this
Contract. The Custodian shall furnish the Trust, not later than
twenty (20) calendar days after the last business day of each
month, a statement reflecting the current status of its internal
reconciliation of the closing balance as of that day in all
accounts described
<PAGE>
in this Paragraph to the balance shown on the daily cash report
for the day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall receive from the Trust
or from the Transfer Agent of the Trust and deposit into a Fund's
account such payments as are received for Shares of that Fund
issued or sold from time to time by the Trust. The Custodian
will provide timely notification to the Trust and the Transfer
Agent of any receipt by it of payments for Shares of each Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual
agreement between the Trust and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions,
(1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and
the Trust; and
(2) make federal funds available to the Trust as of specified
times agreed upon from time to time by the Trust and the
Custodian in the amount of checks received in payment for
Shares of a Fund which are deposited into that Fund's
account.
2.7 Collection of Income. The Custodian shall collect on a timely
basis all income and other payments with respect to registered
securities held hereunder to which the Trust shall be entitled
either by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other payments
with respect to bearer securities if, on the date of payment by
the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the
appropriate Fund account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities
held hereunder. Income due the Trust on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Trust. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Trust with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the Custodian
of the income to which the Trust is properly entitled. The
Custodian shall notify the Trust of any income or such other
payments that are not collected in due course within a reasonable
time after they become payable.
2.8 Payment of Trust Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out Trust moneys held in a
Fund's account in the following cases only:
(1) Upon the purchase of securities, options, futures contracts
or options on futures contracts for the account of
<PAGE>
the Fund but only (a) against the delivery of such
securities, or evidence of title to futures contracts or
options on futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States which is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Trust or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a
purchase for the Fund effected through a Securities System,
in accordance with the conditions set forth in Section 2.12
hereof; or (c) in the case of a repurchase agreement
entered into between the Trust (on behalf of the Fund) and
the Custodian, or another bank, or a broker-dealer, (i)
against delivery of the securities either in certificate
form or through an entry crediting the Custodian's
segregated non-proprietary account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Trust of securities owned
by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities
from the Trust;
(2) In connection with conversion, exchange or surrender of
securities owned by the Trust in the Fund's portfolio as set
forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Fund Shares issued by the
Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by the
Trust for the account of the Fund, including but not limited
to the following payments: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred
expenses;
(5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short from the Fund's portfolio;
(7) For any other proper purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Trust and certified by
its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom
such payment is to be made.
<PAGE>
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence of
specific written Proper Instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Trust
for such securities to the same extent as if the securities had
been received by the Custodian, except that in the case of a
repurchase agreement entered into by the Trust with a bank, or
with a broker-dealer clearing through a bank, which is a member
of the Federal Reserve System, the Custodian may transfer funds
to the account of such bank prior to the receipt of (i) written
evidence that the securities subject to such repurchase agreement
have been transferred by book-entry into a segregated non-
proprietary account of the Custodian maintained with the Federal
Reserve Bank of Boston or (ii) of the safe-keeping receipt,
provided that such securities have in fact been so transferred by
book-entry.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose, but subject
to the limitations of the Agreement and Declaration of Trust and
any applicable votes of the Board of Trustees pursuant thereto,
the Custodian shall, upon receipt of instructions from the
Transfer Agent, make funds in the account of a Fund available for
payment to holders of Shares of that Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through
a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian shall honor checks drawn on the Custodian by
a holder of Shares, which checks have been furnished by the Trust
to holders of Shares of the Fund, when presented to the Custodian
in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12 Deposit of Trust Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Trust in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System", in accordance
<PAGE>
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
(1) The Custodian may keep securities of the Trust in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of
the Trust which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Trust and further identify the Fund in whose portfolio the
securities are held;
(3) The Custodian shall pay for securities purchased for the
account of a Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of that Fund. The Custodian shall
transfer securities sold for the account of a Fund upon (i)
receipt of advice from the Securities System that payment
for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of that
Fund. Copies of all advices from the Securities System of
transfers of securities for the account of a Fund shall
identify the Fund, be maintained for that Fund by the
Custodian and be provided to the Trust at its request. Upon
request, the Custodian shall furnish the Trust confirmation
of each transfer to or from the account of that Fund in the
form of a written advice or notice and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account
of that Fund.
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9
hereof;
(6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to the Trust resulting from the use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or
<PAGE>
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Trust has not been made whole for any such loss or
damage.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act (or any futures commission
merchant registered under the Commodity Exchange Act), relating
to compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Trust, (ii) for purposes of segregating cash
or government securities in connection with options purchased,
sold or written by the Trust for the account of such Fund or
commodity futures contracts or options thereon purchased or sold
by the Trust for the account of such Fund, (iii) for the purposes
of compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper purposes, but
only, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper
purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Trust
held by it and in connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of the Trust or a nominee of the
Trust, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the
Trust such proxies, all proxy soliciting materials and all
notices relating to such securities.
<PAGE>
2.16 Communications Relating to Trust Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Trust and the maturity of futures contracts purchased or
sold by the Trust) received by the Custodian from issuers of the
securities being held for the Trust. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the
Trust all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Trust desires to take action with respect to any
tender offer, exchange offer or any other similar transaction,
the Trust shall notify the Custodian at least one business day
prior to the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialed by one or more
persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested.
Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Trust shall cause all oral
instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees of the Trust accompanied
by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected
directly between electromechanical or electronic devices provided
that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Trust's
assets.
2.18 Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Trust except as otherwise directed by the Board of
Trustees of the Trust.
<PAGE>
2.19 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the
Trust. The Custodian may receive and accept a certified copy of
a vote of the Board of Trustees of the Trust as conclusive
evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by
the Board of Trustees pursuant to its Agreement and Declaration
of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees to keep the books of account of each Fund and/or compute the
net asset value per share of the outstanding shares of each Fund or,
if directed in writing to do so by the Trust, shall itself keep such
books of account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
each Fund as described in that Fund's currently effective prospectus
and shall advise the Trust and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer
for the Trust to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of
a Fund shall be made at the time or times described from time to time
in that Fund's currently effective prospectus.
4. Records.
The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner as
will meet the obligations of the Trust under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules and procedures which may be
applicable to the Trust. All such records shall be the property of
the Trust and shall at times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the
Trust's request, supply the Trust with a list of securities held by
the Custodian for the account of each Fund and shall, when requested
to do so by the Trust and for such compensation as shall be agreed
upon between the Trust and the Custodian, include certificate numbers
in such lists.
5. Opinion of Trust's Independent Accountant.
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to obtain from year to year favorable
opinions from the Trust's independent accountants with respect to its
activities hereunder in connection with the preparation of the Trust's
Form N-1A, and the Form N-SAR or other annual reports to the SEC and
with respect to any other requirements of the SEC.
<PAGE>
6. Reports to Trust by Independent Public Accountants.
The Custodian shall provide the Trust, at such times as the Trust
may reasonably require, with reports by independent public accountants
on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Trust, to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to
time between the Trust and the Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall
be held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties. The Custodian
shall be held to the exercise of reasonable care in carrying out the
provisions of this Contract, but shall be kept indemnified by and
shall be without liability to the Trust for any action taken or
omitted by it in good faith without negligence. It shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for
the Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with
respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Trust being liable for the
payment of money or incurring liability of some other form, the Trust,
as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Trust requires the Custodian to advance on behalf of the
account of the Fund cash or securities for any purpose or in the event
that the Custodian or its nominee shall incur on behalf of, or be
assessed with respect to, the account of the Fund any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Trust fail to repay the
Custodian promptly after receipt of notice of such amount owing, the
Custodian shall be entitled to utilize available cash of such Fund and
to
<PAGE>
dispose of the assets held for such Fund to the extent necessary to
obtain reimbursement.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.12 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has approved the initial use of a
particular Securities System and the receipt of an annual certificate
of the Secretary or an Assistant Secretary that the Board of Trustees
has reviewed the use by the Trust of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended; provided further, however, that the Trust shall
not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of its
Agreement and Declaration of Trust, and further provided, that the
Trust may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of
Trustees of the Trust, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities and all funds
and other assets then held by it hereunder and shall transfer to an
account of the successor custodian all of the Trust's securities held
in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of Trustees of the Trust, deliver at the office of the
Custodian and transfer such securities, funds and other properties in
accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall
have been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds
and other
<PAGE>
properties held by the Custodian and all instruments held by the
Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor
custodian all of the Trust's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination
hereof owing to failure of the Trust to procure the certified copy of
vote referred to or of the Board of Trustees to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian
and the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provisions of the Agreement and Declaration of Trust of the Trust. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Trust and the Custodian relating to
the custody of the Trust's assets.
14. Notices.
Notices and other writings delivered or mailed by registered mail
postage prepaid to the Trust, Attention: Secretary, Twelfth Floor,
300 West Adams, Chicago, Illinois 60606, or to the Custodian,
Attention: Custody and Shareholder Services--Stein Roe & Farnham
Incorporated, 225 Franklin Street, Boston, Massachusetts 02101, or to
such other address as the Trust or State Street may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to
the respective addresses.
15. Successors.
This Agreement shall be binding on and shall inure to the benefit
of the Trust and the Custodian and their respective successors.
<PAGE>
16. Non-Liability of Trustees and Shareholders.
Any obligation of the Trust hereunder shall be binding only upon
the assets of the Trust (or the applicable Fund), as provided in the
Agreement and Declaration of Trust of the Trust, and shall not be
binding upon any Trustee, officer, employee, agent or shareholder of
the Trust nor upon the assets held in the account of any other Fund.
Neither the authorization of any action by the Trustees or the
shareholders of a Fund, nor the execution of this Contract on behalf
of the Trust shall impose any liability upon any Trustee or any
shareholder. Nothing in this Contract 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 Contract.
17. Additional Funds.
In the event that the Trust establishes one or more series of
Shares in addition to the series referenced herein with respect to
which it desires to have Custodian render services as Custodian under
the terms hereof, it shall so notify Custodian in writing, and if
Custodian agrees in writing to provide such services, such series of
Shares shall become a Fund hereunder.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as of
the 31st day of December, 1987.
STEINROE TAX-EXEMPT INCOME TRUST
BY: LAWRENCE R. MAFFIA
Attest: Senior Vice-President
NICOLETTE D. PARRISH
Assistant Secretary
STATE STREET BANK AND TRUST COMPANY
BY: E.D. HAWKINS, JR.
Attest: Vice President
J. FARRELL
Assistant Secretary
<PAGE>
STATE STREET BANK AND TRUST COMPANY
ORIGINATING BANK AGREEMENT
FOR AUTOMATED CLEARING HOUSE SERVICES
In consideration of their mutual promises contained herein,
SteinRoe Tax-Exempt Income Trust ("Company") and State Street Bank and
Trust Company ("SSB") agree as follows:
1. TERMS. Terms used herein which are defined in the Operating
Rules of the New England Automated Clearing House Association ("the
Association") shall have the same meaning herein as they have under
those Operating Rules.
2. PURPOSE. For the purpose of effecting payment through the
Association, the Company may from time to time initiate electronic
credit and debit entries to and from deposit accounts maintained by
its Receiver at a Receiving Depositor Financial Institution
("Receiving Bank"). Under such a plan, SSB will act as an Originating
Depository Financial Institution ("Originating Bank") for the
electronic debit and credit entries originated by the Company in
accordance with the Operating Rules of the Association.
3. RULES. The company shall comply with and be bound by the
Operating Rules of the Association and the Operating Rules of the
National Automated Clearing House Association as in effect from time
to time. The Company represents and warrants to SSB that it is an
Organization and its Receivers are Organizations as defined in the
Operating Rules of the Association.
4. COMPANY ACCOUNT. The Company shall establish or designate in
writing to SSB the Company Account or Accounts (collectively referred
to as the Company Account) at SSB for the purpose of this Agreement.
The Company shall notify SSB in writing of any change in the
designation of the Company Account. Any electronic debit or credit
entry to the Company Account shall be made on the banking day at SSB
on which the entry to or from the account is made at the Receiving
Bank. SSB may debit the Company Account for any amount payable by the
Company to SSB.
5. AUTHORIZATION BY RECEIVRS. Each of the Company's Receivers
participating in this plan will authorize the Company to initiate
electronic debit entries payable at the Receiving Bank where its
checking account is maintained and will authorize such Bank as the
case may be to honor and pay such debit entries. Each of the
Company's Receivers participating in this plan will also authorize the
Company to initiate electronic credit entries for sums due and payable
to it for deposit at the Receiving Bank where its deposit account is
maintained and will authorize such Bank as the case may be to accept
such credit entries.
6. PREPARATION OF ENTRIES. SSB shall prepare Prenotifications
and Entries (referred to herein collectively as "entries") on the
basis of data provided by the Company. Such data (referred to herein
as "entry data") shall be in the form, have the content, and be
transmitted to SSB as set forth by SSB standards. SSB shall have no
obligation to act on entry data received which does not comply with
SSB standards and SSB shall have no obligation to reverse, adjust, or
stop payment or posting of any such entry data received or any entry
prepared therefrom; provided, however, if requested by Company, SSB
shall not unreasonably refuse to reverse, adjust, or stop payment or
posting of any such entry data received on any entry prepared
therefrom.
<PAGE>
7. COMPANY AUTHORIZATIONS.
(a) The Company shall provide, on forms supplied by SSB,
certification of signatures of one or more persons authorized by the
Company (an "Authorized Person") to deliver entry data via electronic
tape or disk to SSB on behalf of the Company under this Agreement.
The signature of each Authorized Person shall be certified by the
Secretary of the Company. All such tape or disk entry data shall be
accompanied by a transmittal letter executed by an Authorized Person.
SSB shall be entitled to act (or refrain from acting, if appropriate)
under this Agreement on any signature reasonably believed by SSB to be
that of an Authorized Person. Any writing bearing such a signature
shall be deemed to have been executed by an Authorized Person on
behalf of the Company.
(b) For transmittal of entry data via telephone or terminal
authorization, SSB will provide passwords to the Company. It is the
responsibility of the Company to control password usage and to guard
against unauthorized use of the password. SSB may act upon all entry
data successfully transmitted via usage of the Company's password and
SSB shall have no obligation, responsibility, or liability for entry
data transmitted via unauthorized use of the Company's password.
8. TRANSMITTAL OF ENTRIES AND SETTLEMENT. Except in the case of
entries initiated to accounts maintained with SSB (referred to herein
as "on us entries"), SSB shall transmit entries which comply with the
requirements provided for herein to the Association and settle for
such entries in accordance with the Association's Rules. Where entry
data is received by SSB prior to a deadline set by SSB, SSB shall
transmit the entries prepared from such entry data (other than on us
entries) to the Association prior to the applicable Association
deadline. In the event SSB receives entry data after 5:00 p.m.,
Chicago time, SSB shall have no obligation to transmit the entries
derived therefrom to the Association prior to the Association
deadline. Any SSB deadline may be changed by SSB from time to time on
30 days' prior written notice to the Company.
9. DEBIT ENTRIES
(a) SSB shall credit the Company Account with the amount of each
debit entry transmitted by SSB to the Association. Thereafter, the
Company shall be entitled to withdraw the amount of such credit. In
the event such a debit entry is returned by a Receiving Bank in
accordance with the Operating Rules after SSB has provided such
credit, the Company shall, upon demand, repay SSB the amount of such
entry.
(b) Upon receipt of debit entries at a Receiving Bank, the
payment amounts will be debited to the Receiver's account, provided,
however, that should such Bank be unable or unwilling to make such
charge, it may return the debit entry in accordance with the Operating
Rules of the Association or SSB Operating Procedures, whichever is
applicable.
10. CREDIT ENTRIES.
(a) SSB shall debit the Company Account with the amount of each
credit entry transmitted by SSB to the Association. The Company shall
maintain in the Company Account sufficient immediately-available funds
to pay each credit entry sent to the Association.
<PAGE>
(b) In the event that there are not sufficient collected funds to
perform the debit, SSB has no obligation to perform the requested
transfer.
(c) SSB shall promptly recredit the Company Account with the
amount of each credit entry (which was a debit to the Company Account)
which is rejected by SSB, and each other credit entry which is
returned by the Receiving Bank, provided that SSB has obtained payment
for the returned entry from such Receiving Bank.
(d) Upon receipt of credit entries at a Receiving Bank, the
payment amounts will be credited to the Receiver's account, provided,
however, that should such Bank be unable or unwilling to make such
credit, it may return the credit entry in accordance with the
Operating Rules of the Association or SSB Operating Procedures,
whichever is applicable. Upon receipt by SSB of the returned credit
entry, the Company account shall be credited with the amount of the
entry.
11. ON US ENTRIES. In the case of on us entries, SSB shall
credit or debit the amount of each such entry to the appropriate
Receiver's account maintained with SSB.
12. REVERSING ENTRIES. SSB shall initiate reversing entries, at
the Company's request, in accordance with the Operating Rules of the
Association; however, SSB does not guarantee that such reversing
entries will be accepted by the Receiving Bank. If a Receiving Bank
does not or cannot accept the reversing entry, SSB shall have no
further obligations to the Company with respect to such reversing
entries, except to notify the Company by telephone followed by written
confirmation.
13. ACCURACY OF ENTRIES. SSB shall not have any responsibility
for the accuracy of any entry furnished by the Company nor shall SSB
be under any duty to furnish advices of entries, or any other
statements to the Receivers concerned, except as otherwise provided by
applicable law or rules. By the act of transmitting entries to SSB,
the Company shall warrant to SSB that the Company has full right to
use and deal with the funds represented by those entries. SSB may act
upon an entry provided by the Company regardless of the medium by
which the entry is transmitted to SSB, including the Company's entries
that will be communicated by the Company to SSB as a result of
telephone authorization. SSB may rely upon the authenticity and
accuracy of communications made to SSB on behalf of the Company. SSB
shall not be responsible nor liable for acting upon, in good faith,
any communication for debit or credit or other entries believed by it
to be genuine, but that were not authorized by the Company; provided
that SSB has acted in accordance with its own procedures and all
applicable rules.
14. BANK LIABILITY. Notwithstanding any provision to the
contrary contained herein, SSB shall only be liable to the Company
under this Agreement for its failure to exercise ordinary care in
performing the services provided for herein. SSB shall have no
liability or responsibility to the Company with regard to any other
matter, including without limitation, any act or omission by the
Association, any other financial institution, the Federal Reserve Bank
of Boston, or any other person or entity. SSB shall have no liability
to the Company for any damages or losses due to strikes, breakdowns or
other nonfunctioning of equipment, impossibility of performance, or
other causes or circumstances beyond SSB's control. In the event that
SSB or its employees shall
<PAGE>
become liable to the Company for failure to exercise ordinary care,
such liability will be limited to actual damages proved, or the amount
of the entry reduced by the amount which could not have been realized
by the exercise of ordinary care, whichever is less. SSB shall have
no liability to the Company for any consequential or special damages.
15. COMPANY LIABLITY. The Company shall be deemed to make the
same warranties to SSB with respect to both on us entries and other
entries subject to this Agreement as SSB is deemed to make under the
Rules, and SSB shall have no responsibility with respect to the
matters so warranted by Company. In the case of on us entries, such
warranties shall apply as of the time such entries are processed by
SSB. The Company shall indemnify and hold SSB harmless from and
against any and all claims, demands, loss, liability, or expenses
(including attorneys' fees and costs) resulting directly or indirectly
from (a) a breach of any such warranty, (b) the debiting or crediting
of the amount of an entry to the account of any person, as requested
by the Company, (c) the delay of any financial institution other than
SSB in debiting or crediting, or the failure of such institution to
debit or credit the amount of any entry, as requested by the Company,
(d) delay of the Company in initiating or the failure of the Company
to initiate any entry, (e) claims by the Company's receivers with
respect to acts or omissions or claimed acts or omissions of the
Company, (f) claims by any Receiving Bank with respect to acts or
omissions or claimed acts or omissions of the Company, (g) claims by
the Association with respect to acts or omissions or claimed acts or
omissions of the Company, and (h) acts of, or claims by, any person or
entity which receives entry data from the Company and transmits such
data to SSB.
16. COOPERATION. The Company and SSB agree to cooperate
promptly and fully in the investigation of any claim asserted by any
person arising out of this Agreement or the transactions contemplated
thereby.
17. SERVICE FEE. The Company shall pay SSB a service fee which
may be changed from time to time by SSB upon 30 days' prior written
notice to the Company. Such service fee shall be paid in cash or by
any other means agreed upon by the Company and SSB from time to time.
18. HEADINGS. Headings are used for reference only and shall
not be deemed a part of this Agreement.
19. TERMINATION. This Agreement may be terminated either by SSB
or the Company upon 30 days' prior notice in writing. Notwithstanding
such termination, this Agreement shall remain in full force and effect
as to all transactions taking place prior to the termination date.
20. APPLICABLE LAW. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts. In the
event of any conflict between provisions of this Agreement and any
applicable law or regulation, these provisions shall be deemed
modified to the extent, and only to the extent, required to comply
with such law or regulation.
21. ENTIRE AGREEMENT. This Agreement supplements the Custodian
Contract dated December 31, 1987 and its amendments, and together they
embody the entire agreement of the parties with regard to the subject
matter hereof and supersedes all previous negotiations,
representations, and agreements with respect thereof. This Agreement
shall be binding upon the parties hereto and
<PAGE>
their respective successors and assignees. This Agreement may be
amended only in writing signed by both parties.
22. NON-LIABILITY OF COMPANY AND ITS SHAREHOLDERS. Any
obligation of the Company hereunder shall be binding only upon the
assets of the Company (or the applicable series there) and shall not
be binding upon any trustee, officer, employee, agent, or shareholder
of the Company. Neither the authorization of any action by the
trustees or shareholders of Company nor the execution of this
Agreement on behalf of Company shall impose any liability upon any
trustee or shareholder.
The Company has executed two counterpart originals of this
Agreement. The Company requests that SSB assent to each one, insert
an effective date on each one, and return one to the Company.
This Agreement is effective as of the 4th day of May, 1989.
STEINROE TAX-EXEMPT INCOME TRUST
By: JAMES D. WINSHIP Date: May 4, 1989
Title: Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY
By: PATRICIA T. MAHONEY Date: May 30, 1989
Title: Vice President
<PAGE>
AMENDMENT TO
CUSTODIAN CONTRACT
Amendment to the Custodian Contract between SteinRoe Tax-Exempt
Income Trust, a business trust organized and existing under the laws
of Massachusetts, having a principal place of business at 300 W.
Adams, Chicago, Illinois 60606 (hereinafter called the "Fund"), and
State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston
Massachusetts 02110 (hereafter called the "Custodian").
WHEREAS: The Fund and the Custodian are parties to a Custodian
Contract dated December 31, 1987 (the "Custodian Contract");
WHEREAS: The Fund desires that the Custodian issue a letter of
credit (the "Letter of Credit") on behalf of the Fund for the benefit
of ICI Mutual Insurance Company (the "Company") in accordance with the
Continuing Letter of Credit and Security Agreement and that the Fund's
obligations to the Custodian with respect to the Letter of Credit
shall be fully collateralized at all times while the Letter of Credit
is outstanding by, among other things, segregated assets of the Fund
equal to 125% of the face amount to the amount of the Letter of
Credit;
WEREAS: the Custodian Contract provides for the establishment of
segregated accounts for proper Fund purposes upon Proper Instructions
(as defined in the Custodian Contract); and
<PAGE>
WHEREAS: The Fund and the Custodian desire to establish a
segregated account to hold the collateral for the Fund's obligations
to the Custodian with respect to the Letter of Credit and to amend the
Custodian Contract to provide for the establishment and maintenance
thereof;
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto hereby amend the
Custodian Contract as follows:
1. Capitalized terms used herein without definition shall have
the meanings ascribed to them in the Custodian Contract.
2. The Fund hereby instructs the Custodian to establish and
maintain a segregated account (the "Letter of Credit Custody Account")
for and in behalf of the Fund as contemplated by Section 2.13(iv) for
the purpose of collateralizing the Fund's obligations under this
Amendment to the Custodian Contract.
3. The Fund shall deposit with the Custodian and the Custodian
shall hold in the Letter of Credit Custody Account cash, U.S.
government securities and other high-grade debt securities owned by
the Fund acceptable to the Custodian (collectively "Collateral
Securities") equal to 125% of the face amount to the amount which the
Company may draw under the Letter of Credit. Upon receipt of such
Collateral Securities in the Letter of Credit Custody Account, the
Custodian shall issue the Letter of Credit to the Company.
<PAGE>
4. The Fund hereby grants to the Custodian a security interest
in the Collateral Securities from time to time in the Letter of Credit
Custody Account (the "Collateral") to secure the performance of the
Fund's obligations to the Custodian with respect to the Letter of
Credit, including, without limitation, under Section 5-114(3) of the
Uniform Commercial Code. The Fund shall register the pledge of
Collateral and execute and deliver to the Custodian such powers and
instruments of assignment as may be requested by the Custodian to
evidence and perfect the limited interest in the Collateral granted
hereby.
5. The Collateral Securities in the Letter of Credit Custody
Account may be substituted or exchanged (including substitutions or
exchanges which increase or decrease the aggregate value of the
Collateral) only pursuant to Proper Instructions from the Fund after
the Fund notifies the Custodian of the contemplated substitution or
exchange and the Custodian agrees that such substitution or exchange
is acceptable to the Custodian.
6. Upon any payment made pursuant to the Letter of Credit by the
Custodian to the Company, the Custodian may withdraw from the Letter
of Credit Custody Account Collateral Securities in an amount equal in
value to the amount actually so paid. The Custodian shall have with
respect to the Collateral so withdrawn all of the
<PAGE>
rights of a secured credit under the Uniform Commercial Code as
adopted in the Commonwealth of Massachusetts at the time of such
withdrawal and all other rights granted or permitted to it under law.
7. The Custodian will transfer upon receipt all income earned on
the Collateral to the Fund custody account unless the Custodian
receives Proper Instructions from the Fund to the contrary.
8. Upon the drawing by the Company of all amounts which may
become payable to it under the Letter of Credit and the withdrawal of
all Collateral Securities with respect thereto by the Custodian
pursuant to Section 6 hereof, or upon the termination of the Letter of
Credit by the Fund with the written consent of the Company, the
Custodian shall transfer any Collateral Securities then remaining in
the Letter of Credit Custody Account to another fund custody account.
9. Collateral held in the Letter of Credit Custody Account shall
be released only in accordance with the provisions of this Amendment
to Custodian Contract. The Collateral shall at all times until
withdrawn pursuant to Section 6 hereof remain the property of the
Fund, subject only to the extent of the interest granted herein to the
Custodian.
10. Notwithstanding any other termination of the Custodian
Contract, the Custodian Contract shall remain in full force and effect
with respect to the Letter of Credit
<PAGE>
Custody Account until transfer of all Collateral Securities pursuant
to Section 8 hereof.
11. The Custodian shall be entitled to reasonable compensation
for its issuance of the Letter of Credit and for its services in
connection with the Letter of Credit Custody Account as agreed upon
from time to time between the Fund and the Custodian.
12. The Custodian Contract as amended hereby, shall be governed
by, and construed and interpreted under, the laws of the Commonwealth
of Massachusetts.
13. The parties agree to execute and deliver all such further
documents and instruments and to take such further action as may be
required to carry out the purposes of the Custodian Contract, as
amended hereby.
14. Except as provided in this Amendment to the Custody
Contract, the Custodian Contract shall remain in full force and
effect, without amendment or modification, and all applicable
provisions of the Custodian Contract, as amended hereby, including,
without limitation, Section 8 thereof, shall govern the Letter of
Credit Custody Account and the rights and obligations of the Fund and
the Custodian under this Amendment to Custodian Contract. No
provision of this Amendment to Custodian Contract shall be deemed to
constitute a waiver of any rights of the Custodian under the Custodian
Contract or under law.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this amendment
to the Custodian Contract to be executed in its name and behalf by its
duly authorized representatives and its seal to be hereunder affixed
as of the 31st day of January, 1990.
STEINROE TAX-EXEMPT INCOME TRUST
BY: LAWRENCE R. MAFFIA
Attest: Senior Vice-President
By: JILAINE HUMMEL BAUER
Secretary
STATE STREET BANK AND TRUST COMPANY
BY: E.D. HAWKINS, JR.
Attest: Vice President
By: J. FARRELL
Assistant Secretary
<PAGE>
[STATE STEET LOGO]
Stein Roe & Farnham Funds
STEINROE INCOME TRUST
SteinRoe Cash Reserves
SteinRoe Government Reserves
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Limited Maturity Income Fund
STEINROE INVESTMENT TRUST
SteinRoe Prime Equities
SteinRoe Total Return Fund
SteinRoe Stock Fund
SteinRoe Special Fund
SteinRoe Capital Opportunities Fund
SteinRoe International Fund
SteinRoe Young Investors Fund
STEINROE MUNICIPAL TRUST
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
A Custody only service has been established between Stein Roe &
Farnham on behalf of the SteinRoe Funds and State Street Bank. This
fee schedule will become effective upon the change from a Full Service
to a Custody only relationship for each individual fund. The
effective dates for each fund are as follows:
March 8, 1994 SteinRoe International Fund (7123) New Fund
April 1, 1994 SteinRoe Stock Fund (7103)
SteinRoe Capital Opportunities Fund (7104)
SteinRoe Total Return Fund(7105)
SteinRoe Special Fund (7106)
SteinRoe Prime Equities (7111)
May 1, 1994 SteinRoe Cash Reserves (7102)
SteinRoe Government Reserves (7109)
SteinRoe Young Investors Fund (7124) New Fund
June 1, 1994 SteinRoe Income Fund (7118)
SteinRoe Limited Maturity Income Fund (7122)
July 1, 1994 SteinRoe Government Income Fund (7116)
The remaining five SteinRoe funds will continue to be billed under the
old fee schedule until their conversion to custody only service.
*Notes* Outgoing wires will continue to be billed at $3.50. This
will remain in effect until November, 1994.
Payments for custody services are due 15 days after receipt of
the invoices and will be charged against the fund's custodian checking
account. In the event SRF has a question on an invoice, payment is
due 5 days after inquiries are responded to.
Stein Roe & Farnham State Street Bank and Trust
GARY A. ANETSBERGER KEVIN J. MORRISSEY
Senior Vice President Vice President
8/15/94 8/4/94
<PAGE>
[STATE STREET LOGO]
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
STEINROE INCOME TRUST
STEINROE INVESTMENT TRUST
STEINROE MUNICIPAL TRUST
STEINROE VARIABLE INVESTMENT TRUST
I. ADMINISTRATION
Domestic Custody Service: Maintain custody of fund assets. Settle
portfolio purchases and sales. Report buy and sell fails. Determine
and collect portfolio income. Make cash disbursements and report cash
transactions. Monitor corporate actions. Report portfolio positions.
ANNUAL FEES
Based on the Total Domestic Assets of LFC Utilities Trust, the
SteinRoe No-Load Funds and the SteinRoe Variable Investment Trust
Funds for which State Street Bank and Trust is custodian. Fees to be
pro-rated per portfolio.
First $5 Billion .75 Basis points
Next $5 Billion .65 Basis points
Excess .55 Basis points
Monthly Minimum for New Funds introduced after July 1, 1994
$750.00 per month
II. GLOBAL CUSTODY
Maintain custody of fund assets. Settle portfolio purchases and
sales. Report buy and sell fails. Determine and collect portfolio
income Make cash disbursements and report cash transactions in local
and base currency. Withhold foreign taxes. File foreign tax
reclaims. Monitor corporate actions. Report portfolio positions.
<PAGE>
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
Austria Australia Denmark Indonesia Argentina
Belgium Hong Kong Finland Philippines Bangladesh
Canada Netherlands France Portugal Brazil
Euroclear New Zealand Ireland Korea Chile
Germany Singapore Italy Spain China
Japan South Africa Luxembourg Sri-Lanka Columbia
Switzerland Malaysia Sweden Cypress
Mexico Taiwan Greece
Norway Hungary
Thailand India
U.K. Israel
Pakistan
Peru
Turkey
Uruguary
Venezuela
A. Asset Charge: (basis points) - based on market value in each
country
Group A Group B Group C Group D Group E
------- ------- ------- ------- -------
First $50 Million 5 8 12 25 40
Next $ 50 Million 4.5 6 10 22 30
Over $100 Million 4 5 8 18 25
B. Global Transaction Charges: (in dollars)
$25.00 $40.00 $55.00 $70.00 $150.00
III. PORTFOLIO TRANSACTIONS
State Street Bank Repos No charge
DTC or Fed Book Entry $9.00
New York Physical Settlements $25.00
Physical Maturities - delivery and collection fees $33.00
PTC Purchase, Sale, Deposit or Withdrawal $9.00
All Other Trades $16.00
<PAGE>
IV. OPTIONS
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration for each option written or
closing contract, per issues, per broker $15.00
Option exercised charge for each option written,
per issue, per broker $15.00
V. LENDING OF SECURITIES
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned
securities $15.00
Deliver securities collateral versus receipt of
loaned securities $25.00
Loan administration - mark-to-market per day,
per loan $ 3.00
VI. FUTURES AND NON-EQUITY OPTIONS
Collateral Segregation $ 6.00
VII. COUPON BONDS
Monitoring for calls and processing coupons for
each coupon issue held--monthly charge $ 5.00
<PAGE>
VIII. PRINCIPAL REDUCTION PAYMENTS
Per pay down $ 7.00
IX. DIVIDEND CHARGES
For items held at the Request of Traders over
record date in Street Form $50.00
X. FDIC INSURANCE
22 basis points on average gross balances.
XI. BALANCE CREDIT
A balance credit will be applied against the fees outlines in
sections I through X above equal to 75% of the 90 Treasury Bill Rate
in effect on the last Monday of the month, adjusted to a monthly
basis, times the average daily domestic cash balance available to the
fund for investment.
XII. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments
and the preparation of special reports will be subject to negotiation.
Fees for automated pricing, yield calculation and other special items
will be negotiated separately.
<PAGE>
XIII. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses
will be made as of the end of each month. Out-of-pocket expenses
include, but are not limited to the following:
- Telephone
- Wire Charges ($5.25 in and $5 out)
- Postage and Insurance
- Courier Service
- Duplicating
- Legal Fees
- Supplies Related to Fund Records
- Rush Transfer ($8 each)
- Sub-custodian Charges
- Price Waterhouse Audit Letter
- Federal Reserve Fee for Return
Check items over $2,500 ($4.25 each)
- Securities Transfer - $15.00 Each
XIV. PAYMENT
The above fees will be charged against the fund's custodian
checking account fifteen (15) days after the invoice is mailed to the
fund's offices.
STEINROE INCOME TRUST STATE STREET BANK AND TRUST COMPANY
STEINROE INVESTMENT TRUST
STEINROE MUNICIPAL TRUST
STEINROE VARIABLE INVESTMENT TRUST
By: GARY A. ANETSBERGER BY: KEVIN J. MORRISSEY
Title: Senior Vice-President Title: Vice President
Date: 5/8/95 Date: May 4, 1995
<PAGE> 1
Exhibit 9(a)
AGENCY AGREEMENT
This Agency Agreement is made this 31st day of December, 1987 by
and between STEINROE TAX-EXEMPT INCOME TRUST, a Massachusetts trust
(hereinafter called the "Fund") and STEINROE SERVICES INC., a
Delaware corporation (hereinafter called "SteinRoe Services").
WITNESSETH:
1. Appointment. The Fund hereby appoints SteinRoe Services,
effective as of the date hereof, as its agent in connection with the
issue, redemption, and transfer of shares of beneficial interest of
the Fund, including shares of each respective series of the Fund
(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 Fund's withdrawal and
other plans, to mail proxy and other materials to the Fund'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. SteinRoe Services acknowledges that it has
received from the Fund the following documents:
A. A certified copy of the Agreement and Declaration of
Trust of Fund and any amendments thereto;
B. A certified copy of the By-Laws of Fund;
C. A certified copy of the resolution of the Board of
Trustees of Fund authorizing this Agreement;
D. Specimens of all forms of Share certificates as approved
by the Board of Trustees of Fund with a statement of the Secretary of
Fund certifying such approval;
E. Samples of all account application forms and other
documents relating to shareholders accounts, including terms of
Fund's 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 Fund with respect to the
validity of the Shares, the status of repurchased Shares and the
number of Shares with respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the signatures of
the officers of Fund who are authorized to sign Share certificates,
to sign checks and to sign written instructions to SteinRoe Services.
<PAGE> 2
3. Additional Documentation. The Fund will also furnish
SteinRoe Services from time to time with the following documents:
A. Certified copies of each amendment to the Agreement and
Declaration of Trust and By-Laws of Fund;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereto with respect to Shares
of Fund;
C. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to SteinRoe
Services;
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
SteinRoe Services may from time to time, in its discretion, deem
necessary or appropriate in the proper performance of its duties.
4. Authorized Shares. The Fund certifies to SteinRoe Services
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 with the following series having been so
authorized as of the date of this Agreement: SteinRoe Intermediate
Municipals, SteinRoe High-Yield Municipals, SteinRoe Tax-Exempt Money
Fund, and SteinRoe Managed Municipals.
5. Registration of Shares. SteinRoe Services shall record
issuances of Shares based on the information provided by the Fund.
SteinRoe Services shall have no obligation to the Fund, 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 SteinRoe Services and the Fund, and shall have no
such obligation to any shareholder except as specifically provided in
Sections 8-205, 8-208 and 8-406 of the Uniform Commercial Code.
Based on data provided by the Fund of Shares registered or qualified
for sale in various states, SteinRoe Services will advise the Funds
when any sale of Shares to a resident of a state would result in
total sales in that state in excess of the amount registered or
qualified in that state.
6. Share Certificates. The Fund shall supply SteinRoe Services
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 Fund manually or, if authorized
by Fund, by facsimile and shall bear the seal of Fund or a facsimile
thereof. Notwithstanding the death, resignation, or removal of any
officer of Fund authorized to sign certificates, SteinRoe Services
may continue to countersign certificates which bear the manual or
facsimile signature of such officer as directed by Fund.
7. Checks. The Fund shall supply SteinRoe Services with a
sufficient supply of serially pre-numbered blank checks for the
dividend bank accounts and for the principal bank accounts of Fund.
SteinRoe Services shall prepare and sign by facsimile signature
plates, bearing the facsimiles of the
<PAGE> 3
signatures of authorized signatories of the Fund, 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 Fund's Withdrawal
Plan, refunds on subscriptions and other capital payments on Shares,
in accordance with this Agreement. SteinRoe Services shall hold
signature facsimile plates for this purpose and shall exercise
reasonable care in their transportation, storage or use. SteinRoe
Services 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. SteinRoe Services shall maintain records
showing for each shareholder's account in the appropriate series of
the Fund, the following information and such other information as may
be mutually agreed to from time to time by the Fund and SteinRoe
Services:
A. To the extent such information is provided by
shareholders of the Fund: 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 Fund and applicable to the shareholder's account including but
not limited to the telephone exchange privilege, and other similar
information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year regarding the
account of the shareholder, including transactions to date, date of
each transaction, price per share, amount and type of each purchase
and redemption, transfers, amount of accrued dividends, the amount
and date of all distributions paid, price per share, and amount of
all distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for the
calendar year as required under applicable Federal and state laws,
rules and regulations;
G. The certificate number and date of issuance of each
Share certificate outstanding, if any, representing a shareholder's
Shares in each account, the number of Shares so represented, and any
stop legend on each certificate;
H. Information with respect to gross proceeds of all sales
transactions as required under applicable Federal income tax laws,
rules and regulations; and
I. Such other information as may be agreed upon by the Fund
and SteinRoe Services from time to time.
<PAGE> 4
9. Purchases. Upon receipt of a request for purchase of Shares
containing data required by a Fund for processing of a purchase
transaction, SteinRoe Services will:
A. Compute the number of Shares of the appropriate series
of the Fund to which the purchaser is entitled and the dollar value
of the transaction according to the price of such Fund Shares as
provided by the Fund 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 12 below
by telephone or telegraph, the account shall have exactly the same
registration as that of the account of the other SteinRoe fund (or
other series of the Fund) from which the Exchange was made;
C. Transmit to the shareholder by mail or electronically a
confirmation of the purchase, as directed by the Fund, in such format
as agreed to by SteinRoe Services and the Fund, including all
information called for thereby, and, in the case of a purchase for a
new account, shall also furnish the shareholder a current Fund
prospectus;
D. If applicable, prepare a refund check in the amount of
any overpayment of the subscription price and deliver it to the Fund
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.
10. Redemptions. Instructions to redeem Shares of any series
of that Fund, including instructions for an Exchange as described in
Section 12 below, may be furnished in written form, or by other
means, including but not limited to telephonic or electronic
transmission or by writing a special form of check, as may be
mutually agreed to from time to time by the Fund and SteinRoe
Services. Upon receipt by SteinRoe Services of instructions to
redeem which are in "good order," as defined in the Prospectus of the
Fund and satisfactory to SteinRoe Services, SteinRoe Services 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 Fund 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
Fund, in such format as agreed to by SteinRoe Services and the Fund,
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> 5
C. In the case of a redemption in written form other than
by Exchange, SteinRoe Services shall transmit to the shareholder by
check or, as may be mutually agreed to by the Fund and SteinRoe
Services 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 Fund, which instructions are satisfactory to SteinRoe Services
as received by SteinRoe Services. In the case of an Exchange,
SteinRoe Services 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 the SteinRoe fund (or the
applicable series of the Fund) 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, SteinRoe Services shall deliver
to the Fund, on the business day following the effective date of such
transaction, a listing of such transaction data in a format agreed to
by the Fund and SteinRoe Services from time to time;
E. If any Share certificate or instruction to redeem
tendered to SteinRoe Services is not satisfactory to SteinRoe
Services, it shall promptly notify the Fund of such fact together
with the reason therefor;
F. SteinRoe Services 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. SteinRoe Services shall advise the Fund 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 Fund.
11. Administration of Withdrawal Plans. A redemption made
pursuant to a Withdrawal Plan offered by the Fund shall be effected
by SteinRoe Services at the net asset value per Share of the
appropriate series of the Fund on the fifth business day prior to the
first day of the month in which the recipient is scheduled to receive
the withdrawal payment. SteinRoe Services 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 10 above.
12. Exchanges. Upon receipt by SteinRoe Services of a request
to exchange Shares of a series of the Fund held in a shareholder's
account for
<PAGE> 6
those of another series of the Fund or of another SteinRoe Fund or
vice versa in written form, by telephone or telegraph or by other
electronic means, containing data required by the Fund for processing
such a transaction, SteinRoe Services will:
A. If the request is by telephone, telegraph or other
electronic means, verify that the shareholder has furnished both the
SteinRoe Funds from and to which the Exchange is to be made
authorization, in a form acceptable to such Funds, to accept Exchange
instructions for his account by such means.
B. Process a redemption of the Shares of the series of the
Fund 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
another SteinRoe Fund (or another series of the Fund) being acquired
in accordance with the respective Fund's redemption and purchase
policies and Sections 9 and 10 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.
13. Transfer of Shares. Upon receipt by SteinRoe Services of a
request for a transfer of Shares of any series of the Fund, 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 SteinRoe Services 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 Fund's By-Laws, Prospectus, and
Statement of Additional Information, SteinRoe Services will verify
the balance of Shares of such series of the Fund 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
SteinRoe Services and the Fund, including all information called for
thereby. SteinRoe Services 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.
14. 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 SteinRoe Services upon receipt of
a request for such change in a format agreed to by SteinRoe Services
and the Fund. In the case of any change that SteinRoe Services and
the Fund agree requires confirmation, a confirmation of such change
in a format agreed to by SteinRoe Services and the Fund shall be
transmitted to the shareholder by mail or electronically.
<PAGE> 7
15. Refusal to Redeem or Transfer. SteinRoe Services 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. SteinRoe Services 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, SteinRoe Services 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.
16. Dividends and Capital Gain Distributions. The Fund will
promptly inform SteinRoe Services of the declaration of any dividend
or other distribution with respect to Shares of any series of the
Fund, 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 the Fund for which dividends shall
be declared daily and paid monthly or quarterly, SteinRoe Services
will credit the dividend payable to each shareholder thereof to a
dividend account of the shareholder and will provide Fund on each
business day with reports of the total amount of dividends credited
and such other data as are agreed upon by the Fund and SteinRoe
Services. Promptly after the payable date for the Fund, SteinRoe
Services will provide the Fund 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 Fund, SteinRoe Services
will provide Fund promptly following the record date therefore with
reports of the total amount of dividends payable with respect thereto
and such other data as are agreed to by Fund and SteinRoe Services.
Promptly after the payable date therefor, SteinRoe Services will
provide the Fund 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 Fund and SteinRoe Services, SteinRoe
Services will transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and confirmation
thereof. Where distributions
<PAGE> 8
are reinvested, the price and date of reinvestment will be those
supplied by the Fund. Confirmations will be prepared by SteinRoe
Services in a format agreed to by SteinRoe Services and the Fund.
17. Withholding. Under applicable Federal and state laws,
rules and regulations requiring withholding from dividends and other
distributions and payments to shareholders, SteinRoe Services shall
be responsible for determining the amount to be withheld and the Fund
shall forward that amount to SteinRoe Services, 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 Fund and SteinRoe Services as provided in Section 35
hereof.
Upon receipt of a certificate from a shareholder pertaining to
withholding (including exemptions therefrom) containing such
information as required by the Fund of the shareholder under
applicable Federal and state laws, rules and regulations, SteinRoe
Services shall promptly process the certificate, which shall become
effective as soon as reasonably possible after receipt by SteinRoe
Services, 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 the Fund,
the Fund 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 SteinRoe Services the number and any related
information provided by or on behalf of the shareholder. SteinRoe
Services 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 the Fund to a
shareholder except as otherwise provided by applicable Federal and
state laws, rules and regulations, SteinRoe Services, at the
direction of the Fund, 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,
SteinRoe Services 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 the Fund 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 Fund or SteinRoe Services
with correct information requested in order to comply with
withholding requirements under applicable Federal and state laws,
rules and regulations, SteinRoe Services, at the direction of the
Fund, 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
<PAGE> 9
series is less than the sum of the deficit amount and applicable
penalties, SteinRoe Services may cause the redemption of Shares
having a value not exceeding such difference from any account,
including a joint account, of the shareholder with any other series
of the Fund or any other SteinRoe Fund, subject to the consent of the
other SteinRoe Fund, and apply the proceeds to reimburse whoever has
borne the expense resulting from the shareholder's failure.
18. Mailings. SteinRoe Services shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. SteinRoe Services shall mail financial reports furnished
by each series of the Fund to shareholders as requested and will mail
the current prospectus for each series of the Fund to shareholders of
such series once each year;
B. SteinRoe Services shall mail to shareholders of each
series of the Fund proxy material for each duly scheduled meeting of
shareholders of that series;
C. SteinRoe Services shall include in any of the above
mailings such other enclosures as are compatible for mailing purposes
as reasonably requested by the Fund;
D. SteinRoe Services shall make such other mailings upon
such terms and conditions and for such fees as are agreed to by
SteinRoe Services and each Fund from time to time.
The Fund shall deliver all material required to be furnished by
it to SteinRoe Services for any scheduled mailing sufficiently in
advance of the date for such mailing, so that SteinRoe Services may
effect the scheduled mailing.
19. Tax Information Returns and Reports. SteinRoe Services
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
Fund shall direct SteinRoe Services. Further, SteinRoe Services
shall prepare and deliver to the Fund reports showing amounts
withheld from dividends and other distributions and payments made for
each series of the Fund.
20. Information to be Furnished to Shareholders. SteinRoe
Services will prepare and transmit to each shareholder of the Fund
annually in such format as is reasonably requested by the Fund, and
as agreed to by SteinRoe Services, 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.
<PAGE> 10
21. Stop Orders. Upon receipt of a request from the Fund or a
shareholder that a "stop" should be placed on the shareholder's
account, SteinRoe Services will maintain a record of such "stop" and
notify the Fund 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. SteinRoe Services will inform the
Fund of any information SteinRoe Services receives relating to a
"stop." SteinRoe Services shall also maintain for the Fund the
record of share certificates on which a "stop" has been placed, it
being understood that a certificate "stop" does not mean a "stop" on
the shareholder's entire account to which a certificate may relate.
22. Share Splits and Share Dividends. If the Fund elects to
declare a Share dividend or split for any series, the services and
fees with respect thereto will be negotiated by the Fund and SteinRoe
Services.
23. Replacement of Share Certificates. SteinRoe Services 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 the
Fund and indemnity satisfactory to SteinRoe Services, and may issue a
new Share certificate in exchange for, and upon surrender of, an
identifiable mutilated Share certificate. Such instructions from the
Fund shall be in such form as has been approved by the Board of
Trustees of the Fund and shall be in accordance with the provisions
of the By-Laws of the Fund governing such matters.
24. Unclaimed and Undelivered Share Certificates. Where a
Share certificate is in the possession of SteinRoe Services for any
reason, and has not been claimed by the record holder or cannot be
delivered to the record holder, SteinRoe Services shall cancel said
certificate and reflect as uncertificated Shares on the shareholder's
account record the Shares represented by said cancelled certificate.
25. Reports and Files. SteinRoe Services shall maintain the
files and furnish the statistical and other information listed on
Schedule B. However, SteinRoe Services 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. SteinRoe
Services shall also use its best efforts to obtain such additional
statistical and other information as the Fund may reasonably request
within the capabilities of SteinRoe Services, for such additional
consideration as may be agreed to by SteinRoe Services and the Fund.
26. Examination of Daily Transactions. The Fund 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 SteinRoe Services has not received from Fund, within
five (5) business days after delivery of such reports to Fund,
written notice, which may be in the form of an appropriate
transaction instruction submitted by Fund 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 Fund, and SteinRoe Services
shall have no further responsibility for
<PAGE> 11
the omission from or correction, deletion, or inclusion of any
transaction reflected or which should have been reflected therein, or
any liability to the Fund or any third person on account of such
error or omission.
27. Disposition of Books, Records, and Cancelled Share
Certificates. SteinRoe Services will periodically send to the Fund
all books, documents, and records of the Fund no longer needed for
current purposes and Share certificates which have been cancelled in
transfer or in redemption; such books, documents, records, and Share
certificates shall be safely stored by the Fund for future reference
for such period as is required by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other relevant
statutes. SteinRoe Services shall have no liability for loss or
destruction of said books, documents, records, or Share certificates
after they are returned to the Fund.
28. Inspection of Share Books. In case of any request or
demand for inspection of the books of the Fund reflecting ownership
of the Fund's Shares therein ("Share books"), SteinRoe Services will
make a reasonable effort to notify the Fund and to secure
instructions as to permitting or refusing such inspection. SteinRoe
Services 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.
29. Fees. The Fund shall pay to SteinRoe Services for its
services hereunder fees computed as set forth in Schedule A hereto.
30. Out-of-Pocket Expenses. The Fund shall reimburse SteinRoe
Services for any and all out-of-pocket expenses and charges in
performing services under this Agreement, including but not limited
to, mailing service, postage, printing of shareholder statements, the
cost of any and all forms of the Fund and other materials used by
SteinRoe Services in communicating with shareholders of the Fund, the
cost of any equipment or service used for communicating with the
Fund's custodian bank or other agent of the Fund, and all costs of
telephone communication with or on behalf of shareholders allocated
in a manner mutually acceptable to the Fund and SteinRoe Services.
31. Instructions, Opinion of Counsel, and Signatures. At any
time SteinRoe Services may apply to a duly authorized agent of the
Fund for instructions regarding the Fund, and may consult counsel for
the Fund or its own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be liable for any
action taken or omitted by it in good faith in accordance with such
instructions or with the advice or opinion of such counsel. SteinRoe
Services shall be protected in acting upon any such instruction,
advice, or opinion and upon any other paper or document delivered by
the Fund or such counsel believed by SteinRoe Services to be genuine
and to have been signed by the proper person or persons and shall not
be held to have notice of any change of authority of any officer or
agent of the Fund, until receipt of written notice thereof from the
Fund.
32. Fund's Legal Responsibility. The Fund assumes full
responsibility for the preparation, contents, and distribution of
each Prospectus and Statement of Additional Information of the Fund,
and for complying with all
<PAGE> 12
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 Fund except that SteinRoe Services shall be responsible for all
laws, rules and regulations of government authorities having
jurisdiction over transfer agents and their activities. SteinRoe
Services assumes full responsibility for complying with due diligence
requirements of payors of reportable dividends and of brokers under
the Internal Revenue Code with respect to shareholder accounts.
33. Registration of SteinRoe Services as Transfer Agent.
SteinRoe Services 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 Fund
promptly if such registration is revoked or if any proceeding is
commenced before the Securities and Exchange Commission which may
lead to such revocation.
34. Confidentiality of Records. SteinRoe Services agrees not
to disclose any information received from the Fund to any other
customer of SteinRoe Services or to any other person except SteinRoe
Services's employees and agents, and shall use its best efforts to
maintain such information as confidential. Upon termination of this
Agreement, SteinRoe Services shall return to the Fund all records in
the possession and control of SteinRoe Services related to the Fund's
activities, other than SteinRoe Services's own business records, it
being also understood that any programs and systems used by SteinRoe
Services to provide the services rendered hereunder will not be given
to the Fund.
Notwithstanding the foregoing, it is understood and agreed that
SteinRoe Services may maintain with the Fund's records information
and data to be utilized by SteinRoe Services 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 Fund's Shares. In the event that this Agreement is terminated,
SteinRoe Services may transfer and retain from the records maintained
for the Fund such information and data relating to participants in
such aforementioned plans as may be required for SteinRoe Services to
continue providing its services to such trustees and/or custodians.
35. Liability and Indemnification. SteinRoe Services shall not
be liable to the Fund for any action taken or thing done by it or its
agents or contractors on behalf of the Fund in carrying out the terms
and provisions of this Agreement if done in good faith and without
negligence or misconduct on the part of SteinRoe Services, its agents
or contractors.
The Fund shall indemnify and hold SteinRoe Services, 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 Fund, or as a result of acting upon any
instruction believed by it to have been executed by a duly authorized
agent of the Fund or as a result of acting upon information provided
<PAGE> 13
by the Fund in form and under policies agreed to by SteinRoe Services
and the Fund 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 SteinRoe Services or its
agents or contractors, including but not limited to willful
misfeasance, bad faith, or gross negligence in the performance of
their duties, or reckless disregard of their obligations and duties
under this Agreement; and (iii) SteinRoe Services shall give the Fund
prompt notice and reasonable opportunity to defend against any such
claim or action in its own name or in the name of SteinRoe Services.
SteinRoe Services shall indemnify and hold harmless the Fund
from and against any and all claims, demands, expenses and
liabilities which the Fund may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of SteinRoe
Services or its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions constituting
negligence or misconduct of the Fund or its other agents or
contractors and (ii) the Fund shall give SteinRoe Services prompt
notice and reasonable opportunity to defend against any such claim or
action in its own name or in the name of the Fund.
36. Insurance. SteinRoe Services represents that it has
available to it the insurance coverage set forth on Schedule C
hereto, and agrees to notify the Fund in advance of any proposed
deletion or reduction in said insurance.
37. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
38. Dual Interests. It is understood that some person or
persons may be trustees, directors, officers, or shareholders of both
the Fund and SteinRoe Services, 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.
39. Amendment and Termination. This Agreement may be modified
or amended from time to time by mutual agreement between the parties
hereto and may be terminated by at least one hundred eighty (180)
days' written notice given by one party to the other. Upon
termination hereof, the Fund shall pay to SteinRoe Services such
compensation as may be due as of the date of such termination and
shall reimburse SteinRoe Services 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 SteinRoe Services hereunder is
designated by the Fund by written notice to SteinRoe Services, it
shall promptly upon such termination and at the expense of the Fund,
transfer to such successor a certified list of shareholders of the
Fund (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
SteinRoe Services under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision, at
<PAGE> 14
the expense of the Fund, for assistance from SteinRoe Services
personnel in the establishment of books, records, and other data by
such successor.
40. Assignment. Any interest of SteinRoe Services under this
Agreement shall not be assigned or transferred, either voluntarily or
involuntarily, by operation of law or otherwise, without the prior
written consent of the Fund.
41. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail, postage
prepaid to the other party at such address as such other party may
designate for the receipt of such notices. Until further notice to
the other parties, it is agreed that the address of the Fund is 300
West Adams Street, Chicago, Illinois 60606, Attention: Secretary, and
that of SteinRoe Services for this purpose is 300 West Adams Street,
Chicago, Illinois 60606, Attention: Secretary.
42. Non-Liability of Trustees and Shareholders. Any obligation
of the Fund hereunder shall be binding only upon the assets of the
Fund (or the applicable series thereof), as provided in the Agreement
and Declaration of Trust of the Fund, and shall not be binding upon
any Trustee, officer, employee, agent or shareholder of the Fund or
upon any other SteinRoe Fund. Neither the authorization of any
action by the Trustees or the shareholders of the Fund, nor the
execution of this Agreement on behalf of the Fund shall impose any
liability upon any Trustee or any shareholder. Nothing in this
Agreement shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement.
43. 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> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
STEINROE TAX-EXEMPT INCOME TRUST
By: JAMES D. WINSHIP
Attest: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: JAMES D. WINSHIP
Attest: Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE> 16
SCHEDULE A TO AGENCY AGREEMENT
This Schedule A is attached to and made part of the Agency
Agreement dated December 31, 1987 (the "Agreement") between STEINROE
TAX-EXEMPT INCOME FUND (the "Fund"), a Massachusetts business trust,
and STEINROE SERVICES INC. ("Service Corp.").
1. Regular fees. Subject to the provisions of Section 39
relating to the modification, amendment and termination of the
Agreement, including this Schedule A, the Fund shall pay to SteinRoe
Services a fee for each of its accounts holding shares of the same
series at the applicable annual rate as set forth below. The fee per
account will be payable monthly at a rate of one-twelfth of the
annual fee and will be changed with respect to any shareholder
account of the respective series in existence during any part of the
applicable month regardless of the portion of the month for which the
account is active.
(a) Base fee:
Type of Series Annual fee
Non-daily dividend $6.00*
Daily dividend $10.00*
--------------
*Plus $0.25 per dividend paid.
(b) Transaction surcharge:
In addition, for each shareholder-initiated transaction, the Fund
shall pay to SteinRoe Services an additional fee of (1) $0.75 for
each such automated transaction (which shall include check-writing
and any other type of transaction as the Fund and SteinRoe Services
shall mutually agree is automated) and (2) $1.25 for each such non-
automated transaction.
For purposes of this Schedule A, shareholder-initiated transactions
shall include any transaction initiated by a shareholder (other than
purchases representing reinvestment of dividends or distributions)
changing the share balance or any other information with respect to
the shareholder's account.
2. Minimum fee. For each series of the Fund, there shall be a
minimum monthly fee, as computed under this schedule, of $500 per
month.
<PAGE> 17
SCHEDULE B
SYSTEM DESCRIPTION
The following outline sets out the files maintained and reports
produced and identifies sub-systems for specific processing.
I. Basic Shareholder Recordkeeping System
Includes maintaining required files and record and producing reports
reflecting the result of processing transactions.
A. Files Maintained:
1. Shareowner Alpha File (contains a cross reference
between a 10-position alpha code and a shareholder
account number within a specified fund code)
2. Shareowner Master File
3. Shareowner History File
4. Letter of Intent File
5. Cumulative Discount File
6. Systematic Withdrawal File
7. Pre-Authorized Check File
8. Additional Mail File
9. Pending Correspondence File
10. Purchase Reminder File
11. Accrued Dividend File
12. Certificate File
13. Price File
14. Check Reconciliation File
15. Dealer Name and Address File
16. Fail Free (Wire Order File)
17. Expedited Redemption File
18. Corporate Action File
19. Year-End Information
20. ARMS system (advertising response system)
B. Reports Produced:
1. Daily Fund Reports
(a) Daily Recap & Share Control Sheet (shares)
(b) Daily Recap & Share Control Sheet (cash amount)
(c) Daily Distribution of Cash Sheet
2. Daily Wire Order Activity Reports
(a) Daily Batch Balance
(b) Daily Confirmed Deletion Report
(c) Master Activity Report
(d) Daily Confirmed Unpaid Purchase Journal
(e) Daily Confirmed Redemption Journal
(f) Fail/Free Balance Listing - Trade Date Sequence
(g) Fail/Free Balance Listing - Alpha Code Sequence
<PAGE> 18
(h) Fail/Free Balance Listing - Order Number Sequence
(i) Fail/Free Balance Listing - Dealer Number
Sequence
(j) Daily Confirmed "As Of" Report
3. Additional Activity Reports (microfiche only)
1. Direct Payments Journal
2. Confirmed Payments w/Transfer Inst. Journal
3. Dividend Share Adjustment Journal
4. Issue From Free File Journal
5. Purchase Cancellation Journal
6. Direct Redemption Journal
7. Dividend Cash Adjustment Journal
8. Confirmed Redemptions Journal
9. Redemption Cancellation Journal
10. Exchange Redemption Journal
11. Exchange Purchase Journal
12. Certificate Deposit Journal
13. Certificate Withdrawal Journal
14. Transfer (debit/minus) Journal
15. Transfer (credit/add) Journal
16. Confirmed Payments Without Trans. Journal
17. Keogh Fee Redemption Journal
18. Fiduciary Contribution Journal
19. Wire Instruction Report for Expedited Redemptions
20. Check-Writing Redemption Report
21. Asset Transfer Journal
22. Dividend Reinvestment to Cash Journal
23. Dividend Cash to Reinvestment Journal
24. SWP Redemption Journal
25. Maintenance Update Journal
26. Pending Correspondence Purge Report
27. Decrease W/H-Purchase Shares
28. Decrease W/H-Remit Cash
29. Increase W/H Redeem Shares
30. Increase W/H Collect Cash
31. Daily "As Of" Report - Reason Code Sequence
32. Daily "As Of" Report - Transfer Code Sequence
33. Daily "As Of" Report - Account Sequence
34. Direct Payments thru Fund Journal
35. Checkwriting Redemption Journal
36. Voluntary Maintenance Journal
37. Expedited Redemption Journal
38. Special Redemptions Journal
39. Replacement Check Journal
40. Daily Dividend Close Out Journal
41. Daily Dividend Decrease Journal
42. Daily Dividend Increase Journal
43. PAC Direct Payments Journal
4. Summary Reports
(a) Fund Share Balance Listing
(b) Net Share Change to Fund
<PAGE> 19
(c) Exchange Distribution Report
(d) Daily CRT Operator Statistics
(e) Staff Summary Statistics
(f) Daily Close-Out Journal
5. Month End Profile Reports
(a) Social Code Report
(b) Shareowner Residence Report
(c) Distribution of Shares Report
(d) Account Summary Report
(e) CWRED Activity Analysis
(f) Monthly Maintenance Journal
(g) 420 Report.
(h) ARMS Monthly Activity Report
6. Internal Operating Reports
1. Daily Transaction Work File Deletions
2. Additional Mail File Error Listing
3. Daily Fund Share Balance Listing
4. Daily Update Error Listing (MUIDO)
5 Keogh/IRA Excess Contribution Report
6. Fail/As Of Trade Extensions
7. Price Update Report
8. Redemption Check Register
9. Shareowner Check/Confirm Report
10. Fiduciary Asset Report
11. Daily Batch Balance Report (Summary)
12. Premature Share Removal Report
13. EXRED Warning Report
14. Expedited Redemption Maintenance Journal
15. Dealer File Maintenance Journal
16. Fail/Free Delinquent Trades
17. Purchase Reminder Maintenance Report
18. Requests for Duplicate Confirms
19. Systematic Withdrawal Plan Journal
20. Purchase/Redemption Invoices
21. New Account Verification Report
22. Check Writing Checks and Report
23. SPAC Reports
24. Confirmations
25. Stop Payment Notices
26. Shareowner Master Record (purged account)
27. Daily Calculated Rate Report (095)
28. 007 Report
29. 030 (Falconer tape)
30. Change of Address Notification'
31. Redemption Checks
32. Stock Certificates
33. ADTRANS Activity Journal
34. Expedited Redemption Report
35. Same Day Wire Report
36. Check-Writing Report
<PAGE> 20
37. Expedited Redemption/DRED Wire Report
38. Daily Batch Balance Detail Report
39. Record Date Journal
40. Stock Certificate Mail Advice
41. Fund Options Maintenance Report
42. Batch Transmission Error Report
7. Shareowner Maintenance Journal
II. Sub-systems to Basic Shareholder Recordkeeping
A. Withdrawal Accounting To Generate Checks and Confirmation
Statements for Systematic Withdrawal Plans
B. Defined Contribution/IRA Accounting - Account Processing
for Defined Contribution and IRA Plans to include the
following:
1. Establishing and Maintaining Accounts
2. Inception-to-Date Accounting
3. Daily Statement Production
4. Collection of Fees
5. Year End Information - W2P, 1099R, Annual Report and
5498 Production
D. Corporate Actions
1. Dividends and Capital Gains Processing and Reporting
2. Year-End Tax Information Reporting (including 1099
Forms)
3. Yearly Transcript (Microfilm)
E. Proxy Processing
1. Proxy Production and Mailing
2. Proxy Tabulation
3. Proxy Vote Tabulation
F. Wire Order Processing
1. Processing Buy or Sell Orders
2. Automatic Calculation of the Trade
3. Verify Dealer/Branch
4. Verify Price
5. Generate Invoices
6. Produce Journals
7. Produce Confirmation Statements
8. Produce Redemption Checks
G. Blue Sky Reporting
1. Automatic Reporting of Wire Trades and Subscription
Trade Data
2. Generating Daily and Monthly Blue Sky Sales and Status
Reporting Including the following:
(a) Blue Sky State Sales Report
(b) Blue Sky State Status Report
(c) Blue Sky Daily Warning Report
(d) Blue Sky Monthly Sales Activity Report
(e) Blue Sky Maintenance Journals
(f) Blue Sky Daily Sales Activity Report
<PAGE> 21
SCHEDULE C
(Revised 9/87)
SCHEDULE OF INSURANCE COVERAGE
Type of Insurance Insurance Underwriter Coverage
Comprehensive Commercial (Note 1)
A. Loss or Damage to Federal Insurance Co. $7,300,000
Property (fire and
extended coverage)
B. Comprehensive Liability Federal Insurance Co. 1,000,000
(bodily injury, property
damage, personal injury)
C. Commercial Umbrella Federal Insurance Co. 10,000,000
(excess liability to (primary - 5 million)
supplement coverage Transamerica Inc. Co.
under primary liability (Excess insurance - 5
policies) million)
Data Processing Insurance (Note 1)
A. Data Processing Equipment Sun Insurance Company $3,298,000
(loss or damage) of New York
B. Blanket media and extra Sun Insurance Company 500,000
expense (costs related of New York
to beginning operations
after a loss)
C. Valuable Papers Sun Insurance Company 100,000
of New York
D. Business Interruption Sun Insurance Company 1,000,000
of New York
E. Contingent Business Sun Insurance Company 1,000,000
Interruption of New York
(Kansas City, MO)
Other (Note 1)
A. Registered Management Federal Insurance Co. $25,000,000
Investment Co. Bond ($100,000
deductible)
B. Errors & Omissions Evanston Insurance Co. 20,000,000
First State Insurance ($5,000
Co. deductible
<PAGE> 22
Each
director
or officer)
Kemper Insurance Co. ($150,000
deductible)
C. Transfer Agents Mail Federal Insurance C $100,000 First
Class Mail
$5,000,000
Registered Mail
D. Fiduciary Liability Federal Insurance Co. 5,000,000
Note (1): Insureds include the firm of Stein Roe & Farnham
Incorporated, as well as each of the SteinRoe Funds.
<PAGE>
FIRST AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 1st day of August, 1988 (the "First
Amendment"), amends the Agency Agreement (including Schedules A, B,
and C) dated December 31, 1987, (the "Agreement"), by and among
SteinRoe Tax-Exempt Income Trust (the "Fund"), a Massachusetts
business trust and SteinRoe Services Inc. ("Service Corp.").
WHEREAS, the Board of Trustees of the Fund has approved an
increase in its overall transfer agency fees, as well as the
institution of additional fees for services provided by Service Corp.
that have grown in significance and for which there was no previous
charge, which fees are:
(1) a 10% increase in base, dividend, and transaction fees, and
elimination of the fee differential for automated and manual
transactions;
(2) a direct pass-through to the Fund of the charges by DST, Inc. to
Service Corp. for systems and facilities DST, Inc. provides to
Service Corp. that enable Service Corp. to perform its services under
this Agreement; and
(3) additional fees for services provided with respect to closed
accounts, as well as certain administrative and shareholder services.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 8 of the Agreement entitled "Record-Keeping" is
amended by adding the following sentence at the end thereof.
"SteinRoe Services 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 Fund and Service Corp."
2. The following are added as new sections of the Agreement
numbered 9 and 10 and the sections currently numbered 9 through 43
are amended by renumbering them as sections 11 through 45:
"9. Administrative Services. Service Corp. shall furnish the
Fund (i) certain administrative services insofar as they relate to
the maintenance of shareholder account records, recordkeeping
systems, and reporting of information to shareholders, in connection
with compliance with applicable securities, tax and other laws and
regulations, and (ii) facilities and personnel to enhance, develop
and implement services, systems and facilities either directly or
through third-party service providers.
<PAGE>
"10. Shareholder Services. In addition to the shareholder
recordkeeping and transactional services provided for elsewhere
herein, Service Corp. shall provide the Fund certain shareholder
information services, including but not limited to, responding to
shareholder inquiries in writing or by telephone, generating data for
shareholders with special information needs, and disseminating
information about tax law changes and other developments affecting
shareholders with respect to their accounts in the Fund."
3. Section 30 of the Agreement (renumbered Section 32 by this
First Amendment) entitled "Out-of-Pocket Expenses" is amended as
follows:
"32. Out-of-Pocket Expenses. The Fund shall reimburse Service
Corp. for any and all out-of-pocket expenses and charges in
performing services under this Agreement, including but not limited
to, mailing service, postage, printing of shareholder statements, the
cost of any and all forms of the Fund and other materials used by
SteinRoe Services in communicating with shareholders of the Fund, the
cost of any equipment or service used for communicating with the
Fund's custodian bank or other agent of the Fund, charges of DST,
Inc. to Service Corp. for use of its system and facilities related to
Service Corp.'s services under this Agreement, and all costs of
telephone communication with or on behalf of shareholders allocated
in a manner mutually acceptable to the Fund and SteinRoe Services."
4. Schedule A to the Agreement is amended and restated in the
form attached hereto.
IN WITNESS WHEREOF, the parties have caused this First Amendment
to be executed as of the day and year first written above.
STEINROE TAX-EXEMPT INCOME TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: JAMES D. WINSHIP
ATTEST: Executive Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
SCHEDULE A TO AGENCY AGREEMENT
This Schedule A, dated August 1, 1988, is attached to and made
part of the Agency Agreement dated December 31, 1987 as amended by a
First Amendment dated August 1, 1988 (the "Agreement"), by and among
SteinRoe Tax-Exempt Income Trust (the "Fund"), a Massachusetts
business trust, and SteinRoe Services Inc. ("Service Corp."), and
constitutes Schedule A referred to in Section 31 of the Agreement
(numbered Section 29 prior to the First Amendment to the Agreement)
for periods commencing and transactions occurring on and after August
1, 1988.
Subject to the provisions of Section 41 (numbered Section 39 prior to
the First Amendment to the Agreement) relating to the modification,
amendment and termination of the Agreement, including this Schedule
A, the Fund shall pay to Service Corp. the following fees. The
services for which these fees are charged are indicated by cross-
reference to the appropriate section of the Agreement. (Sections 11-
45 were numbered sections 9-43 prior to the First Amendment to the
Agreement.)
1. REGULAR FEES
(A) Open Accounts
The Fund shall pay to Service Corp. for each of its
accounts a fee at the applicable annual rate set forth below.
The Account Fees shall be payable each month at a rate of one-
twelfth of the annual rate and shall apply to any account open
during any part of a month.
(i) Account Fees Annual Rate
(a) Base Fee $11.00
(Sections 5, 7, 8,
11-16, and 20-28)
(b) Administration Fee $ 1.50
(Section 9)
(c) Shareholder Service Fee $ 3.50
(Section 10)
(ii) Transaction Fees
(a) Dividends and other $ 0.275
distributions paid on
a single date
(Sections 18 and 19)
(b) Shareholder-initiated $ 1.375
<PAGE>
transactions
(Sections 11, 12, 14, 15, and 19)
(B) Closed Accounts (Section 8)
The Fund shall pay to Service Corp. for each of its Closed
Accounts, as defined in Section 8 of the Agreement, a fee
at the applicable annual rate set forth below beginning
with the month following the month in which an account is
closed, and for each succeeding month the account remains
closed through June of the calendar year following the
year in which the account is closed or such other period
as may be agreed to by the Fund and Service Corp. The fee
shall be payable each month at a rate of one-twelfth of
the annual rate.
Type of Series Annual Rate
Daily dividend $ 7.33
For purposes of this Schedule A, (a) an account shall be considered
closed when the share balance is reduced to zero, and (b) a
shareholder-initiated transaction shall include (i) any transaction
initiated by a shareholder (other than purchases representing
reinvestment of dividends or other distributions) changing the share
balance or any other information with respect to the shareholder's
account and (ii) any phone call initiated by a shareholder to an
automated telephone service system maintained by Service Corp. to
service Fund shareholders, not involving either the marketing or
distribution of a Fund or a transaction as defined in (i) above.
2. MINIMUM FEE
For each series of a Fund, there shall be a minimum monthly fee, as
computed under this Schedule, of $500 per month.
<PAGE>
SECOND AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 1st day of February, 1991 (the "Second
Amendment"), amends the Agency Agreement (including Schedules A, B,
and C) dated December 31, 1987, as amended by a First Amendment dated
August 1, 1988 (the "Agreement"), by and between SteinRoe Tax-Exempt
Income Trust (the "Fund"), a Massachusetts business trust, and
SteinRoe Services Inc. (hereinafter referred to as "Service Corp.").
WHEREAS, the Board of Trustees of the Fund has approved an
increase in its overall transfer agency fees, as well as the
institution of a separate fee for services provided by Service Corp.
in connection with establishing new accounts which are:
(1) a 10% increase in base, administrative, shareholder
servicing, and dividend fees;
(2) a 3% increase in shareholder-initiated transaction fees; and
(3) an additional fee of $4.00 per account for services provided
in connection with establishing new accounts.
NOW, THEREFORE, Schedule A to the Agreement is hereby amended
and restated in the form attached hereto.
IN WITNESS WHEREOF, the parties have caused this Second
Amendment to be executed as of the day and year first written above.
STEINROE TAX-EXEMPT INCOME TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: JAMES D. WINSHIP
ATTEST: Executive Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
SCHEDULE A TO AGENCY AGREEMENT
(February 1, 1991)
This Schedule A, dated February 1, 1991, is attached to and made
part of the Agency Agreement dated December 31, 1987 as amended by a
First Amendment dated August 1, 1988 and a Second Amendment dated
February 1, 1991 (the "Agreement"), by and between SteinRoe Tax-
Exempt Income Trust (the "Fund"), a Massachusetts business trust, and
SteinRoe Services Inc. ("Service Corp."), and constitutes Schedule A
referred to in Section 31 of the Agreement (numbered Section 29 prior
to the First Amendment to the Agreement) for periods commencing and
transactions occurring on and after February 1, 1991.
Subject to the provisions of Section 41 (numbered Section 39 prior to
the First Amendment to the Agreement) relating to the modification,
amendment and termination of the Agreement, including this Schedule
A, the Fund shall pay to Service Corp. the following fees. The
services for which these fees are charged are indicated by cross-
reference to the appropriate section of the Agreement.
1. REGULAR FEES
(A) Open Accounts
The Fund shall pay to Service Corp. for each of its accounts
a fee at the applicable rate set forth below. The Account
Fees, which are stated at an annual rate, shall be payable
each month at a rate of one-twelfth of the annual rate and
shall apply to any account open during any part of a month.
(i) Account Fees
(a) Base Fee $12.10
(Sections 5, 7, 8,
11-16, and 20-28)
(b) Administration Fee $ 1.65
(Section 9)
(c) Shareholder Service Fee $ 3.85
(Section 10)
(ii) Transaction Fees
(a) Dividends and other $ 0.3025
distributions paid on
a single date
(Sections 18 and 19)
(b) New account set up fee $ 4.00
(shareholder-initiated)
(Sections 8, 9, 12, and 13)
(c) Other shareholder-initiated $ 1.415
transactions (Sections
11, 12, 14, 15, and 19)
<PAGE>
(B) Closed Accounts (Section 8)
The Fund shall pay to Service Corp. for each of its Closed
Accounts, as defined in Section 8 of the Agreement, a fee
at an annual rate of $7.33 beginning with the month following
the month in which an account is closed, and for each
succeeding month the account remains closed through June of
the calendar year following the year in which the account is
closed or such other period as may be agreed to by the Fund
and Service Corp. The fee shall be payable each month at a
rate of one-twelfth of the annual rate.
For purposes of this Schedule A, (a) an account shall considered new
whenever a new number is assigned to the account, (b) an account
shall be considered closed when the share balance is reduced to zero,
and (c) a shareholder-initiated transaction shall include (i) any
transaction initiated by a shareholder (other than purchases
representing reinvestment of dividends or other distributions)
changing the share balance or any other information with respect to
the shareholder's account and (ii) any phone call initiated by a
shareholder to an automated telephone service system maintained by
Service Corp. to service Fund shareholders, not involving either the
marketing or distribution of a Fund or a transaction as defined in
(i) above.
2. MINIMUM FEE
For each series of the Fund, there shall be a minimum monthly fee, as
computed under this Schedule, of $500 per month.
<PAGE>
THIRD AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 29th day of July, 1992 (the "Third
Amendment"), amends the Agency Agreement dated December 31, 1987, as
amended by amendments dated February 1, 1991 and August 1, 1988 (the
"Agreement"), by and between SteinRoe Municipal Trust (formerly
SteinRoe Tax-Exempt Income Trust) (the "Fund"), a Massachusetts
business trust, and SteinRoe Services Inc. (hereinafter referred to
as "Service Corp."), a Massachusetts corporation.
WHEREAS, Service Corp. wishes to be able to assign certain of
its duties and responsibilities under the Agreement when the parties
determine it to be in their mutual interest for it to do so;
NOW, THEREFORE, the Agreement is hereby amended by deleting
Section 40 and substituting the following:
"40. Assignment.
"A. Except as provided below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
"B. This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
"C. Service Corp. 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 the Fund
provided, however, that Service Corp. shall be as fully responsible
to the Fund for the acts and omissions of any subcontractor as it is
for its own acts and omissions."
IN WITNESS WHEREOF, the parties have caused this Third Amendment
to be executed as of the day and year first written above.
STEINROE MUNICIPAL TRUST
By: JILAINE HUMMEL BAUER
ATTEST: Vice-President and Secretary
NICOLETTE D. PARRISH
Assistant Secretary
STEINROE SERVICES INC.
By: JEANNE M. LASHBROOK
ATTEST: Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
FOURTH AMENDMENT TO AGENCY AGREEMENT
This amendment made this lst day of May, 1995 (the "Fourth
Amendment") amends the Agency Agreement dated December 31, 1987, as
amended by amendments dated July 29, 1992, February 1, 1991, and
August 1, 1998 (the "Agreement") by and between STEINROE MUNICIPAL
TRUST (the "Fund"), a Massachusetts business trust, and STEINROE
SERVICES INC. (hereinafter referred to as "Service Corp."), a
Massachusetts corporation.
By mutual agreement of the parties, the Agreement is hereby
amended as follows:
1. Sections 9, 10, and 32 (added by a first amendment dated
August 1, 1988) of the Agreement are amended and restated to read as
follows:
"9. Administrative Services. Service Corp. shall furnish the
following administrative services to the Fund:
A. Coordination of the printing and dissemination of
prospectuses, financial reports, and other shareholder information as
are agreed to by Service Corp. and the Fund from time to time.
B. Maintenance of data and statistics and preparation of
reports for internal use and for distribution to the Fund's 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 , and lock box
facilities.
E. Provision of facilities, hardware and software systems,
and equipment in Chicago (and other locations mutually agreed to by
Service Corp. and the Fund) 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. Service Corp. shall provide the
following services as are requested by the Fund in addition to the
transactional and recordkeeping services provided for elsewhere
herein:
<PAGE>
A. Responding to communications from shareholders or their
representatives or agents concerning any matters pertaining to shares
registered in their names, including, but not limited to, (i) net
asset value and average cost basis information; (ii) shareholder
services, plans, options, and privileges; and (ii) with respect to
the series of the Fund 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 Service Corp.
C. Soliciting and tabulating proxies of shareholders and
answering questions concerning the subject matter thereof.
D. Under the direction of the officers of the Fund,
administering a program whereby shareholders whose mail from the Fund
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 Service Corp. and approved by the Fund 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 Service Corp., 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 Fund's relationships with its shareholders.
<PAGE>
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.
32. Out-of-Pocket Expenses. The Fund shall reimburse Service
Corp. 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 Fund and other materials used by Service Corp. in communicating
with shareholders of the Fund, the cost of any equipment or service
used for communicating with the Fund's custodian bank or other agent
of the Fund, and all costs of telephone communication with or on
behalf of shareholders allocated in a manner mutually acceptable to
the Fund and Service Corp."
2. Schedule A to the Agreement is amended and restated in the
form attached hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
STEINROE MUNICIPAL TRUST
By: TIMOTHY K. ARMOUR
ATTEST: President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: STEPHEN P. LAUTZ
ATTEST: Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
Schedule A
Agency Agreement
(as amended on May 1, 1995)
Fees pursuant to Section 31 (previously numbered Section 29) 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 Fund, 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
Dated: May 1, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> STEINROE MUNICIPAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 174,779
<INVESTMENTS-AT-VALUE> 174,779
<RECEIVABLES> 2,714
<ASSETS-OTHER> 590
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,083
<PAYABLE-FOR-SECURITIES> 1,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,553
<TOTAL-LIABILITIES> 4,148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 173,864
<SHARES-COMMON-STOCK> 173,864
<SHARES-COMMON-PRIOR> 165,747
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 71
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 173,935
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,717
<OTHER-INCOME> 0
<EXPENSES-NET> 575
<NET-INVESTMENT-INCOME> 2,142
<REALIZED-GAINS-CURRENT> (2)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,140
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,142)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 133,860
<NUMBER-OF-SHARES-REDEEMED> (127,673)
<SHARES-REINVESTED> 1,930
<NET-CHANGE-IN-ASSETS> 2,140
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 73
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 411
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 616
<AVERAGE-NET-ASSETS> 163,798
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.013
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.013)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEINROE INTERMEDIATE MUNICIPALS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 215,014
<INVESTMENTS-AT-VALUE> 213,798
<RECEIVABLES> 5,510
<ASSETS-OTHER> 941
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 220,249
<PAYABLE-FOR-SECURITIES> 3,234
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 985
<TOTAL-LIABILITIES> 4,219
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,153
<SHARES-COMMON-STOCK> 20,200
<SHARES-COMMON-PRIOR> 21,643
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,846)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,277)
<NET-ASSETS> 216,030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,433
<OTHER-INCOME> 0
<EXPENSES-NET> 849
<NET-INVESTMENT-INCOME> 5,584
<REALIZED-GAINS-CURRENT> (1,773)
<APPREC-INCREASE-CURRENT> (4,656)
<NET-CHANGE-FROM-OPS> (845)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,584)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,490
<NUMBER-OF-SHARES-REDEEMED> (5,271)
<SHARES-REINVESTED> 338
<NET-CHANGE-IN-ASSETS> (845)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (74)
<GROSS-ADVISORY-FEES> 642
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 849
<AVERAGE-NET-ASSETS> 226,246
<PER-SHARE-NAV-BEGIN> 11.00
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> (0.30)
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> .75
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 591,849
<INVESTMENTS-AT-VALUE> 592,096
<RECEIVABLES> 12,478
<ASSETS-OTHER> 1,997
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 606,571
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,195
<TOTAL-LIABILITIES> 2,195
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 614,255
<SHARES-COMMON-STOCK> 72,291
<SHARES-COMMON-PRIOR> 79,022
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,946)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67
<NET-ASSETS> 604,376
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,843
<OTHER-INCOME> 0
<EXPENSES-NET> 2,208
<NET-INVESTMENT-INCOME> 19,635
<REALIZED-GAINS-CURRENT> (5,058)
<APPREC-INCREASE-CURRENT> (21,451)
<NET-CHANGE-FROM-OPS> (6,874)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19,635)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,755
<NUMBER-OF-SHARES-REDEEMED> (12,892)
<SHARES-REINVESTED> 1,406
<NET-CHANGE-IN-ASSETS> (6,874)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,888)
<GROSS-ADVISORY-FEES> 1,739
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,208
<AVERAGE-NET-ASSETS> 663,525
<PER-SHARE-NAV-BEGIN> 8.70
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.36
<EXPENSE-RATIO> 0.66
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 275,783
<INVESTMENTS-AT-VALUE> 259,800
<RECEIVABLES> 7,224
<ASSETS-OTHER> 360
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 267,384
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,583
<TOTAL-LIABILITIES> 2,583
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 285,812
<SHARES-COMMON-STOCK> 24,882
<SHARES-COMMON-PRIOR> 27,855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,848)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,163)
<NET-ASSETS> 264,801
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,055
<OTHER-INCOME> 0
<EXPENSES-NET> 1,317
<NET-INVESTMENT-INCOME> 8,738
<REALIZED-GAINS-CURRENT> (2,678)
<APPREC-INCREASE-CURRENT> (8,924)
<NET-CHANGE-FROM-OPS> (2,864)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,738)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,301
<NUMBER-OF-SHARES-REDEEMED> (6,746)
<SHARES-REINVESTED> 472
<NET-CHANGE-IN-ASSETS> (2,864)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,171)
<GROSS-ADVISORY-FEES> 811
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,317
<AVERAGE-NET-ASSETS> 293,641
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> (0.42)
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
