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. 26 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 27 [X]
STEIN ROE MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-338-2550
Heidi J. Walter Cameron S. Avery
Vice-President and Secretary Bell, Boyd & Lloyd
Stein Roe Municipal Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602
(Name and Address of Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has elected to register pursuant to Rule 24f-2 an
indefinite number of shares of beneficial interest of the
following series: Stein Roe Intermediate Municipals Fund, Stein
Roe Municipal Money Market Fund, Stein Roe Managed Municipals
Fund, and Stein Roe High-Yield Municipals Fund.
This amendment to the Registration Statement has also been
signed by SR&F Base Trust as it relates to Stein Roe Municipal
Money Market Fund and Stein Roe High-Yield Municipals Fund.
STEIN ROE 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;
Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions; Investment Considerations and
Risks; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser,
Fees and Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses; Financial Highlights; Fee
Table
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see statement of
additional information: General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary
(f) Shareholder Services; Distributions and Income Taxes
(g) Distributions and Income Taxes
(h) Master Fund/Feeder Fund: Structure and Risk Factors
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
(g) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares--Purchases Through Third Parties
(c) How to Redeem Shares--General Redemption Policies
(d) How to Redeem Shares--General Redemption Policies
9 Inapplicable
PART B
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management, Fee Table
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Auditors
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares, Shareholder Services
(b) Purchases and Redemptions; Additional Information on Net
Asset Value--Municipal Money Fund and Municipal Money
Portfolio; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22 Investment Performance
23 Financial Statements
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
Prospectus Nov. 1, 1998
Stein Roe Mutual Funds
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Municipal Money Fund seeks maximum current income exempt from
federal income tax. It attempts to maintain relative stability of
principal and liquidity by investing principally in a diversified
portfolio of short-term Municipal Securities.
Intermediate Municipals Fund 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 Fund 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 Fund 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 Investment
Policies-High-Yield Municipals Fund.)
Each of Municipal Money Fund and High-Yield Municipals Fund
seeks to achieve its objective by investing all of its net
investable assets in a corresponding Portfolio of SR&F Base Trust
that has the identical investment objective and substantially the
same investment policies as the Fund. The investment experience
of Municipal Money Fund and High-Yield Municipals Fund will
correspond to that of their respective Portfolios. (See Master
Fund/Feeder Fund: Structure and Risk Factors.)
Each Fund is a "no-load" fund. There are no sales or
redemption charges, and the Funds have no 12b-1 plans. The Funds
are series of Stein Roe Municipal Trust and the Portfolios are
series of SR&F Base Trust. Each trust is an open-end management
investment company. This prospectus contains information you
should know before investing in the Funds. Please read it
carefully and retain it for future reference.
Municipal Money Fund is a money market fund, and attempts to
maintain its net asset value at $1.00 per share. Shares of the
Fund are neither insured nor guaranteed by the U.S. Government,
and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
High-Yield Municipals Fund may invest up to 100% of its total
net assets in lower-rated municipal bonds, commonly known as "junk
bonds." These bonds are subject to a greater risk with regard to
payment of interest and return of principal than higher-rated
bonds. Investors should carefully consider the risks associated
with junk bonds before investing. (See Risks and Investment
Considerations.)
A Statement of Additional Information dated Nov. 1, 1998,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. That
information, material incorporated by reference, and other
information regarding registrants that file electronically with
the SEC is available at the SEC's website, www.sec.gov. This
prospectus is also available electronically by using Stein Roe's
Internet address: www.steinroe.com. You can get a free paper
copy of the prospectus, the Statement of Additional Information,
and the most recent financial statements by calling 800-338-2550
or by writing to Stein Roe Funds, Suite 3200, One South Wacker
Drive, Chicago, Illinois 60606.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE OF CONTENTS
Page
Summary...................................3
Fee Table ................................6
Financial Highlights .....................7
The Funds ................................9
Investment Policies......................10
Municipal Money Fund..................10
Intermediate Municipals ..............11
Managed Municipals ...................12
High-Yield Municipals Fund............12
Portfolio Investments and Strategies.....13
Investment Restrictions..................16
Risks and Investment Considerations .....17
How to Purchase Shares ..................19
By Check .............................19
By Wire ..............................20
By Electronic Transfer ...............20
By Exchange ..........................21
Conditions of Purchase ...............21
Purchases Through Third Parties.......21
Purchase Price and Effective Date.....21
How to Redeem Shares.....................22
By Written Request ...................22
By Exchange ..........................22
Special Redemption Privileges ........22
General Redemption Policies ..........24
Shareholder Services ....................25
Net Asset Value .........................27
Distributions and Income Taxes...........28
Investment Return .......................29
Management...............................30
Organization and Description of Shares...32
Master Fund/Feeder Fund: Structure
and Risk Factors......................33
Appendix-Ratings.........................35
Certificate of Authorization ............42
SUMMARY
Stein Roe Municipal Money Market Fund ("Municipal Money Fund"),
Stein Roe Intermediate Municipals Fund ("Intermediate
Municipals"), Stein Roe Managed Municipals Fund ("Managed
Municipals"), and Stein Roe High-Yield Municipals Fund ("High-
Yield Municipals Fund") are series of Stein Roe Municipal Trust
(the "Trust"), an open-end 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.) This prospectus is not a
solicitation in any jurisdiction in which shares of the Funds are
not qualified for sale.
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.)
Municipal Money Fund invests all of its net investable assets in
SR&F Municipal Money Market Portfolio ("Municipal Money
Portfolio"), which invests in a diversified portfolio of
securities in accordance with an investment objective identical
and investment policies substantially similar to those of
Municipal Money Fund.
Municipal Money Portfolio seeks current income exempt from
federal income tax by investing principally in "short-term"
Municipal Securities. In pursuing that objective, Municipal Money
Portfolio attempts to maintain relative stability of principal and
liquidity. Although there can be no assurance that either
Municipal Money Portfolio or Municipal Money 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. Municipal Money 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. Municipal Money 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.
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, S&P or Fitch IBCA (except that
if the Fund relies on ratings by S&P for municipal notes, such
notes must be within the two highest ratings); (ii) if unrated, of
comparable quality as determined by the Adviser; or (iii) backed
by the full faith and credit or guarantee of the U.S. Government.
Managed Municipals seeks a high level of current income that is
exempt from federal income tax, consistent with the preservation
of capital, by investing primarily in long-term Municipal
Securities. At least 75% of the Fund's investments in Municipal
Securities will be (i) rated at the time of purchase within the
three highest ratings assigned by Moody's, S&P or Fitch IBCA
(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 Fund invests all of its net investable
assets in SR&F High-Yield Municipals Portfolio, which 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 investment 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 depend
primarily upon the maturity and quality of the obligations in
their respective portfolios, as well as on market conditions.
Municipal Money Fund is designed for investors who seek little or
no fluctuation in portfolio value. Intermediate Municipals is
appropriate for investors who seek more tax-exempt income than is
usually available from tax-exempt money funds and who can accept
some fluctuation in portfolio value. Managed Municipals is
appropriate for investors who seek higher tax-exempt income than
normally provided by shorter-term tax-exempt securities and who
can accept the greater portfolio fluctuation associated with long-
term Municipal Securities. High-Yield Municipals Fund 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 Portfolio may invest in Municipal Securities
the interest on which is subject to the alternative minimum tax.
For a more detailed discussion of the investment objectives and
policies, please see Investment Policies. There is, of course, no
assurance that any Fund or 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). Lower initial investment
minimums apply to UGMAs and automatic investment plans. Shares
may be purchased by check, by bank wire, by electronic transfer,
or by exchange from another no-load Stein Roe Fund. For more
detailed information, see How to Purchase Shares.
Redemptions. For information on redeeming Fund shares, including
the special redemption privileges, see How to Redeem Shares.
Distributions. Dividends are declared each business day and are
paid monthly. Dividends will be reinvested in additional Fund
shares unless you elect to have them paid in cash, deposited by
electronic transfer into your bank account, or invested in shares
of another no-load Stein Roe Fund. (See Distributions and Income
Taxes and Shareholder Services.)
Management and Fees. Stein Roe & Farnham Incorporated (the
"Adviser") provides investment advisory services to Intermediate
Municipals, Managed Municipals, High-Yield Municipals Portfolio,
and Municipal Money Portfolio. In addition, it provides
administrative and bookkeeping and accounting services to each
Fund and each Portfolio. For a description of the Adviser and the
fees it receives for these services, see Management.
If you have any additional questions about the Funds, please
feel free to discuss them with a Stein Roe account representative
by calling 800-338-2550.
FEE TABLE
High-
Muni- Inter- Yield
cipal mediate Muni-
Money Muni- Managed cipals
Fund cipals Municipals Fund
----- ------ ---------- ------
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None None None None
Sales Load Imposed on Reinvested
Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees* None None None None
Exchange Fees None None None None
Annual Fund Operating Expenses
(after fee waiver in the case
of Municipal Money Fund and
Intermediate Municipals;
as a percentage of average
net assets)
Management and Administrative
Fees (after fee waiver in the
case of Municipal Money Fund
and Intermediate Municipals) 0.34% 0.46% 0.52% 0.55%
12b-1 Fees None None None None
Other Expenses 0.36% 0.24% 0.20% 0.20%
----- ----- ----- -----
Total Fund Operating Expenses 0.70% 0.70% 0.72% 0.75%
===== ===== ===== =====
____________________
*There is a $7.00 charge for wiring redemption proceeds to your
bank. A fee of $5.00 per quarter may be charged for accounts that
fall below stated minimums. (See How to Redeem Shares-General
Redemption Policies.)
Examples. You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Municipal Money Fund $7 $22 $39 $87
Intermediate Municipals 7 22 39 87
Managed Municipals 7 23 40 89
High-Yield Municipals Fund 8 24 42 93
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.
From time to time, the Adviser may voluntarily waive a
portion of its fees payable by a Fund. The Adviser has agreed to
voluntarily waive such fees for Municipal Money Fund and
Intermediate Municipals to the extent that either Fund's ordinary
operating expenses exceed .7 of 1% of its annual average net
assets through Oct. 31, 1999, subject to earlier review and
possible termination by the Adviser on 30 days' notice to the
Fund. Any such reimbursement will lower a Fund's overall expense
ratio and increase its overall return to investors. Absent such
expense undertaking, Management and Administrative Fees and Total
Fund Operating Expenses would have been 0.50% and 0.86% for
Municipal Money Fund and 0.57% and 0.81% for Intermediate
Municipals, respectively.
Each Fund participating in the master fund/feeder fund
structure ("feeder fund") pays the Adviser an administrative fee
based on the Fund's average daily net assets and each Portfolio
pays the Adviser a management fee based on its average daily net
assets. The expenses of both the feeder funds and the Portfolios
are summarized in the Fee Table and are described under
Management. Each feeder fund will bear its proportionate share of
the fees and expenses of the corresponding Portfolio. The
trustees of the Trust have considered whether the annual operating
expenses of each feeder fund, including its proportionate share of
the expenses of the Portfolio, would be more or less than if the
feeder fund invested directly in the securities held by the
Portfolio. The trustees concluded that the feeder funds' expenses
would not be greater in such case.
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 gains distributions
are reinvested in additional Fund shares; and that, for purposes
of fee breakpoints, 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 in
the Examples and Fee Table is useful in reviewing the Funds'
expenses and in providing a basis for comparison with other mutual
funds, it should not be used for comparison with other investments
using different assumptions or time periods.
FINANCIAL HIGHLIGHTS
The following tables reflect the results of operations of the
Funds on a per-share basis for the periods shown and have been
audited by Ernst & Young LLP, independent auditors. 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 without charge upon request, contains
additional performance information.
Municipal Money Fund
<TABLE>
Years Ended June 30,
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment
income .056 .054 .046 .032 .020 .019 .030 .031 .030 .031
Distributions from
net investment
income (.056) (.054) (.046) (.032) (.020) (.019) (.030) (.031) (.030) (.031)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
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
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of expenses
to average net
assets (a) 0.67% 0.67% 0.68% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net in-
vestment income
to average net
assets (b) 5.57% 5.40% 4.66% 3.19% 1.96% 1.88% 2.96% 3.09% 2.98% 3.06%
Total return (b) 5.74% 5.52% 4.74% 3.25% 1.97% 1.90% 3.02% 3.13% 3.04% 3.10%
Net assets, end of
period (000
omitted) $254,261 $255,953 $237,403 $199,037 $195,887 $165,820 $146,704 $120,432 $118,424 $115,279
</TABLE>
Intermediate Municipals
<TABLE>
Years Ended June 30,
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <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 $11.16 $11.22 $11.38
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Invest-
ment Operations
Net investment
income .62 .63 .62 .57 .54 .53 .53 .55 .55 .54
Net realized and
unrealized gains
(losses) on invest-
ments .07 .07 .22 .50 .63 (.39) .16 .06 .22 .22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .69 .70 .84 1.07 1.17 .14 .69 .61 .77 .76
Distributions
Net investment income (.62) (.63) (.62) (.57) (.54) (.53) (.53) (.55) (.55) (.54)
Net realized gains - (.03) (.03) (.17) (.12) (.17) - - (.06) (.03)
In excess of realized
gains - - - - - (.01) - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.62) (.66) (.65) (.74) (.66) (.71) (.53) (.55) (.61) (.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period $10.50 $10.54 $10.73 $11.06 $11.57 $11.00 $11.16 $11.22 $11.38 $11.57
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net
expenses to
average net
assets (a) 0.80% 0.80% 0.80% 0.79% 0.72% 0.71% 0.74% 0.70% 0.70% 0.70%
Ratio of net invest-
ment income to
average net
assets (b) 5.96% 5.96% 5.79% 5.23% 4.79% .63% 4.94% 4.82% 4.84% 4.70%
Portfolio turnover
rate 83% 141% 96% 109% 96% 55% 67% 66% 44% 29%
Total return (b) 6.85% 6.85% 8.18% 10.31% 10.92% 1.16% 6.59% 5.47% 7.07% 6.84%
Net assets, end of
period (000s
omitted) $91,304 $98,918 $118,651 $165,401 $245,441 $238,053 $212,489 $204,726 $196,006 $195,651
</TABLE>
Managed
Municipals
<TABLE>
Years Ended June 30,
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <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 $ 8.79 $ 8.85 $ 9.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Invest-
ment Operations
Net investment
income .61 .59 .56 .55 .52 .50 .51 .48 .48 .48
Net realized and
unrealized gains
(losses) on
investments .44 (.06) .19 .46 .42 (.51) .09 .06 .26 .27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 1.05 .53 .75 1.01 .94 (.01) .60 .54 .74 .75
Distributions
Net investment
income (.61) (.59) (.56) (.55) (.52) (.50) (.51) (.48) (.48) (.48)
Net realized gains (.03) (.25) (.05) (.20) (.15) (.11) - - - -
In excess of realized
gains - - - - - (.06) - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.64) (.84) (.61) (.75) (.67) (.67) (.51) (.48) (.48) (.48)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period $ 9.02 $ 8.71 $ 8.85 $ 9.11 $ 9.38 $ 8.70 $ 8.79 $ 8.85 $ 9.11 $ 9.38
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net
expenses to
average net assets 0.65% 0.66% 0.66% 0.64% 0.64% 0.65% 0.65% 0.72% 0.73% 0.72%
Ratio of net invest-
ment income to
average net assets 7.00% 6.66% 6.39% 6.17% 5.65% 5.45% 5.85% 5.41% 5.31% 5.14%
Portfolio turnover
rate 102% 95% 203% 94% 63% 36% 33% 40% 16% 12%
Total return 12.69% 6.15% 8.92% 11.95% 10.79% (0.29%) 7.12% 6.24% 8.56% 8.37%
Net assets, end of
period (000
omitted) $514,898 $584,081 $655,930 $725,472 $776,694 $687,252 $629,730 $606,359 $582,366 $583,138
</TABLE>
High-Yield Municipals Fund
<TABLE>
Years Ended June 30,
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <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 $11.31 $11.40 $11.67
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Invest-
ment Operations
Net investment
income .88 .85 .82 .80 .71 .67 .66 .67 .72 .65
Net realized and
unrealized gains
(losses) on
investments .63 .02 .17 .22 .18 (.54) .25 .09 .27 .30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations 1.51 .87 .99 1.02 .89 .13 .91 .76 .99 .95
Distributions
Net investment
income (.88) (.85) (.82) (.80) (.71) (.67) (.66) (.67) (.72) (.65)
Net realized gains (.03) (.21) (.16) (.18) (.17) (.17) - - - -
In excess of realized
gains - - - - - (.07) - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.91) (1.06) (.98) (.98) (.88) (.91) (.66) (.67) (.72) (.65)
Net Asset Value,
End of Period $11.97 $11.78 $11.79 $11.83 $11.84 $11.06 $11.31 $11.40 $11.67 $11.97
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net ex-
penses to average
net assets 0.73% 0.71% 0.71% 0.69% 0.73% 0.76% 0.86% 0.85% 0.77% 0.75%
Ratio of net invest-
ment income to
average net assets 7.54% 7.22% 7.00% 6.75% 6.04% 5.76% 5.98% 5.86% 6.20% 5.48%
Portfolio turnover
rate 208% 261% 195% 88% 75% 36% 23% 34% 11% 8%(c)
Total return 13.79% 7.59% 8.79% 9.01% 7.88% 0.95% 8.54% 6.83% 8.91% 8.32%
Net assets, end of
period (000
omitted) $277,620 $310,582 $373,948 $410,613 $359,103 $308,181 $281,155 $282,956 $306,070 $341,780
</TABLE>
- --------------------
(a) 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, 0.78%, 0.84%, 0.86%
and 0.86% for the years ended June 30, 1995 through 1998,
respectively; and for Intermediate Municipals, 0.82%, 0.81%
and 0.81% for the years ended June 30, 1989 through 1991,
respectively, and 0.76%, 0.81%, 0.82% and 0.81% for the years
ended June 30, 1995 through 1998.
(b) Computed giving effect to the Adviser's fee waiver.
(c) Prior to commencement of operations of the Portfolio.
THE FUNDS
The mutual funds offered by this prospectus are Stein Roe
Municipal Money Market Fund ("Municipal Money Fund"), Stein Roe
Intermediate Municipals Fund ("Intermediate Municipals"), Stein
Roe Managed Municipals Fund ("Managed Municipals"), and Stein Roe
High-Yield Municipals Fund ("High-Yield Municipals Fund")
(collectively, the "Funds"). Each of the Funds is a no-load
"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 Stein Roe Municipal Trust (the
"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
bookkeeping services to the Funds and the Portfolios. The Adviser
also manages several other mutual funds with different investment
objectives, including international funds, equity funds, taxable
bond funds, and money market funds. To obtain prospectuses and
other information on any of those mutual funds, please call 800-
338-2550.
On Sept. 28, 1995 and Feb. 2, 1998, respectively, Municipal
Money Fund and High-Yield Municipals Fund became "feeder funds"-
that is, each invested all of its respective assets in a "master
fund" that has an investment objective identical to that of the
Fund. Each master fund is a series of SR&F Base Trust; each
master fund is referred to as a "Portfolio." Prior to converting
to a feeder fund, each Fund had invested its assets in a
diversified group of securities. Under the "master fund/feeder
fund structure," a feeder fund and one or more other feeder funds
pool their assets in a master portfolio that has the same
investment objective and substantially the same investment
policies as the feeder funds. The purpose of such an arrangement
is to achieve greater operational efficiencies and reduce costs.
The assets of each Portfolio are managed by the Adviser in the
same manner as the assets of the feeder fund were managed before
conversion to the master fund/feeder fund structure. Managed
Municipals and Intermediate Municipals may at some time in the
future convert to the master fund/feeder fund structure; such
change would be made only if the trustees determine it to be in
the best interests of a Fund and its shareholders. (For more
information, see Master Fund/Feeder Fund: Structure and Risk
Factors.)
INVESTMENT POLICIES
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 in the section below
and also may employ the investment techniques described elsewhere
in this prospectus.
Municipal Money Fund. Municipal Money Fund seeks maximum current
income exempt from federal income tax by investing principally in
a diversified portfolio of "short-term" Municipal Securities.
Municipal Money Fund seeks to achieve its objective by investing
all of its net investable assets in SR&F Municipal Money Market
Portfolio ("Municipal Money Portfolio"), which has the identical
investment objective.
In pursuing that objective, Municipal Money 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,
Municipal Money Portfolio follows procedures that its Board of
Trustees believes are reasonably designed to stabilize its price
per share at $1.00. These procedures and the 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
Municipal Money 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.
- --------------
/1/ A fundamental policy may be changed only with the approval of
a "majority of the outstanding voting securities" as defined in
the Investment Company Act of 1940.
/2/ A defensive position is one that temporarily reduces exposure
to anticipated adverse market changes.
- --------------
Municipal Money Portfolio may invest in Municipal Securities
that, at the time of purchase, are rated within the two highest
ratings assigned by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P"), except that if it relies on
ratings by Moody's for municipal commercial paper or ratings by
S&P for short-term municipal notes, such securities must carry the
highest rating assigned by the respective rating service. /3/
Municipal Money Portfolio may also invest in unrated securities
that, in the opinion of its Board of Trustees, are at least equal
in quality to the foregoing ratings. Municipal Money Portfolio
also may invest in [i] securities backed by the full faith and
credit of the U.S. Government or [ii] securities as to which
payment of principal and interest is collateralized by an escrow
of securities issued or guaranteed by the U.S. Government or by
its agencies or instrumentalities ["U.S. Government Securities"].
The policies described in the preceding three sentences (except
for the portions in brackets) are fundamental policies. In
accordance with SEC Rule 2a-7 under the Investment Company Act,
each security in which Municipal Money 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.
- ---------------
/3/ For a description of Moody's, S&P and Fitch ratings, see the
Appendix. 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. In addition,
rating modifiers showing relative standing within a rating
category do not affect whether a security is eligible for
purchase.
- ---------------
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, S&P or Fitch IBCA (except that
if the Fund relies on ratings by S&P for municipal notes, such
notes must be within the two highest ratings); (ii) if unrated, of
comparable quality as determined by the Adviser; or (iii) backed
by the U.S. Government or by an agency or instrumentality of the
U.S. Government or by U.S. Government Securities. The Fund may
also invest up to 25% of its assets in other Municipal Securities
without any minimum credit quality requirement, including those
for which a limited market may exist, which normally involve
greater risk of loss of principal or income and higher yield.
Managed Municipals. This Fund seeks a high level of current
income that is exempt from federal income tax, consistent with the
preservation of capital, by investing in a diversified portfolio
of Municipal Securities. The Fund invests primarily in long-term
Municipal Securities (generally maturing in more than ten years)
but may also invest in shorter-term securities as a temporary
defensive move.
It is a fundamental policy that the Fund's assets will be
invested so that at least 80% of its income will be exempt from
federal income tax, except during periods in which the Adviser
believes a temporary defensive position is advisable.
At least 75% of the Fund's investments in Municipal
Securities will be (i) rated at the time of purchase within the
three highest ratings assigned by Moody's, S&P or Fitch IBCA
(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 Fund. This Fund seeks a high current yield
exempt from federal income tax by investing primarily in a
diversified portfolio of Municipal Securities. High-Yield
Municipals Fund invests all of its net investable assets in SR&F
High-Yield Municipals Portfolio ("High-Yield Municipals
Portfolio"), which has the identical investment objective. High-
Yield Municipals Portfolio 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 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 investment
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 High-Yield Municipals Portfolio may have
greater difficulty selling its portfolio securities.
Although High-Yield Municipals Portfolio 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. High-Yield Municipals Portfolio may
invest in debt obligations that are in default, but such
obligations are not expected to exceed 10% of its assets.
For the fiscal year ended June 30, 1998, the investment
portfolio was invested, on average, as follows: AAA, 19.6%; AA,
10.0%; A, 21.4%; BBB, 21.7%; BB and below or unrated, 27.3%. The
ratings are based on a dollar-weighted average, computed
quarterly, and reflect the higher of S&P or Moody's ratings. The
ratings do not necessarily reflect the current or future
composition of High-Yield Municipals Portfolio.
PORTFOLIO INVESTMENTS AND STRATEGIES
For purposes of discussion under Portfolio Investments and
Strategies, Investment Restrictions and Risks and Investment
Considerations, the term "the Fund" refers to Municipal Money
Fund, Municipal Money Portfolio, Intermediate Municipals, Managed
Municipals, High-Yield Municipals Fund, and High-Yield Municipals
Portfolio.
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
Municipal Money 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 Investment Policies-
High-Yield Municipals Fund.
The two principal classifications of Municipal Securities are
"general obligation" and "revenue" bonds. "General obligation"
bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. "Revenue"
bonds are usually payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue bonds,
the credit quality of which is normally directly related to the
credit standing of the industrial user involved. Municipal
Securities may bear either fixed or variable rates of interest.
Variable rate securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize
fluctuation in values of the instruments.
Within the principal classifications of Municipal Securities,
there are various types of instruments, including municipal bonds,
municipal notes, municipal leases, custodial receipts, and
participation certificates. Municipal notes include tax, revenue,
and bond anticipation notes of short maturity, generally less than
three years, which are issued to obtain temporary funds for
various public purposes. Municipal lease securities, and
participation certificates therein, evidence certain types of
interests in lease or installment purchase contract obligations of
a municipal authority or other entity. Custodial receipts
represent ownership in future interest or principal payments (or
both) on certain Municipal Securities and are underwritten by
securities dealers or banks. Some Municipal Securities may not be
backed by the faith, credit, and taxing power of the issuer and
may involve "non-appropriation" clauses, which provide that the
municipal authority is not obligated to make lease or other
contractual payments, unless specific annual appropriations are
made by the municipality. Each Fund may invest more than 5% of
its net assets in municipal bonds and notes, but does not expect
to invest more than 5% of its net assets in the other Municipal
Securities described in this paragraph. The Board is responsible
for determining the credit quality of unrated municipal leases on
an ongoing basis, including an assessment of the likelihood that
such leases will not be cancelled.
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 Municipal Money
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 Municipal Money Portfolio, if the quality of such a
security falls below the minimum level applicable at the time of
acquisition, the Fund must dispose of the security, unless the
Board of Trustees determines that it is in the best interests of
the Fund and its shareholders to retain the security.
When-Issued and Delayed-Delivery Securities; Forward Commitments.
Each Fund's assets may include securities purchased on a when-
issued or delayed-delivery basis, and each Fund may purchase
forward commitments. 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. The Funds may participate in an interfund
lending program, subject to certain restrictions described in the
Statement of Additional Information.
Private Placements. Each Fund may invest in securities that are
purchased in private placements (including privately placed
securities eligible for purchase and sale under Rule 144A of the
Securities Act of 1933) and, accordingly, are subject to
restrictions on resale as a matter of contract or under federal
securities laws. Because there may be relatively few potential
purchasers for such investments, especially under adverse market
or economic conditions or in the event of adverse changes in the
financial condition of the issuer, a Fund could find it more
difficult to sell such securities when the Adviser believes it is
advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. At
times, it may also be more difficult to determine the fair value
of such securities for purposes of computing a Fund's net asset
value.
Standby Commitments. To facilitate portfolio liquidity, each Fund
may obtain standby commitments when it purchases Municipal
Securities. A standby commitment gives the holder the right to
sell the underlying security to the seller at an agreed-upon price
on certain dates or within a specified period.
Participation Interests. Each Fund may also purchase
participation interests or certificates of participation in all or
part of specific holdings of Municipal Securities, including
municipal lease obligations. Some participation interests,
certificates of participation, and municipal lease obligations are
illiquid and, as such, will be subject to the Funds' 10% limit on
investments in illiquid securities, except High-Yield Municipals
Portfolio, which is subject to a 15% limitation on investments in
illiquid securities.
Short Sales Against the Box. A Fund may sell short securities it
owns or has the right to acquire without further consideration, a
technique called selling short "against the box." Short sales
against the box may protect the Fund against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such securities should be wholly or partly
offset by a corresponding gain in the short position. However,
any potential gains in such securities should be wholly or
partially offset by a corresponding loss in the short position.
Short sales against the box may be used to lock in a profit on a
security when, for tax reasons or otherwise, the Adviser does not
want to sell the security. For a more complete explanation,
please refer to the Statement of Additional Information.
Futures and Options. Intermediate Municipals, Managed Municipals,
and High-Yield Municipals Portfolio each may purchase and write
both call options and put options on securities and on indexes,
and enter into interest rate and index futures contracts and
options on such futures contracts in order to provide additional
revenue, or to hedge against changes in security prices or
interest rates. Each Fund may write a call or put option only if
the option is covered. As the writer of a covered call option,
the Fund foregoes, during the option's life, the opportunity to
profit from increases in market value of the security covering the
call option above the sum of the premium and the exercise price of
the call. Because of low margin deposits required, the use of
futures contracts involves a high degree of leverage, and may
result in losses in excess of the amount of the margin deposit.
Since there can be no assurance that a liquid market will exist
when the Fund seeks to close out a position, these risks may
become magnified.
Tender Option Bonds; Trust Receipts. Each Fund may purchase
tender option bonds and trust receipts. A tender option bond is a
Municipal Security (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing
short-term tax-exempt rates, that has been coupled with the
agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants
the security holders the option, at periodic intervals, to tender
their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial
institution receives periodic fees equal to the difference between
the Municipal Security's fixed coupon rate and the rate, as
determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities,
coupled with the tender option, to trade at par on the date of
such determination. Thus, after payment of this fee, the security
holder effectively holds a demand obligation that bears interest
at the prevailing short-term tax-exempt rate. The Adviser will
consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Securities, of any custodian, and of the
third-party provider of the tender option. In certain instances
and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on
the underlying Municipal Securities and for other reasons. A Fund
may invest up to 10% of net assets in tender option bonds and
trust receipts.
INVESTMENT RESTRICTIONS
Each Fund and Portfolio is diversified as that term is defined in
the Investment Company Act of 1940.
No Fund will: (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except for obligations issued or guaranteed by the
U.S. Government or by its agencies or instrumentalities or
repurchase agreements for such securities /4/; 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 a Portfolio,
may invest all or substantially all of its assets in another
investment company having the identical investment objective under
a master fund/feeder fund structure.
- --------------
/4/ Notwithstanding the foregoing, and in accordance with Rule 2a-
7 of the Investment Company Act of 1940 (the "Rule"), Municipal
Money Fund and Municipal Money Portfolio will not, immediately
after the acquisition of any security (other than a Government
Security or certain other securities as permitted under the Rule),
invest more than 5% of its total assets in the securities of any
one issuer; provided, however, that each may invest up to 25% of
its total assets in First Tier Securities (as that term is defined
in the Rule) of a single issuer for a period of up to three
business days after the purchase thereof.
- --------------
Although no Fund may make loans, each may (1) purchase money
market instruments and enter into repurchase agreements; (2)
acquire publicly distributed or privately placed debt securities;
and (3) participate in an interfund lending program with other
Stein Roe Funds and Portfolios. A Fund may not borrow money,
except for nonleveraging, temporary, or emergency purposes or in
connection with participation in the interfund lending program.
Neither the aggregate borrowings (including reverse repurchase
agreements) nor aggregate loans at any one time may exceed 33 1/3%
of the value of its total assets. (See, however, Risks and
Investment Considerations.) Additional securities may not be
purchased when borrowings, less proceeds receivable from sales of
portfolio securities, exceed 5% of total assets.
The restrictions described in the second and third paragraphs
of this section are fundamental policies. 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 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 Fund is designed for investors who seek a high
level of tax-exempt income and who can accept still greater
fluctuation in portfolio value and other risks, such as increased
credit risk, associated with medium- and lower-quality long-term
Municipal Securities.
Although the Funds currently limit their investments in
Municipal Securities to those the interest on which is exempt from
the regular federal income tax, each Fund may invest up to 100% of
its total assets in Municipal Securities the interest on which is
subject to the federal alternative minimum tax. (See
Distributions and Income Taxes.)
Each Fund's objective is not fundamental and may be changed
by the Board of Trustees without a vote of shareholders. If there
is a change in a Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in
light of their then-current financial position and needs. There
can be no assurance that a Fund will achieve its objective, nor
can a Fund assure that payments of interest and principal on
portfolio obligations will be made when due. In seeking to attain
its objective, a Fund may sell securities without regard to the
period of time they have been held. As a result, the turnover
rate may vary from year to year. A high rate of portfolio
turnover may result in increased transaction costs and the
realization of capital gains or losses.
Each Fund may invest 25% or more of its assets in Municipal
Securities that are related in such a way that an economic,
business, or political development affecting one such security
could also affect the other securities. For example, Municipal
Securities the interest upon which is paid from revenues of
similar-type projects, such as hospitals, utilities or housing,
would be so related. Each Fund may invest 25% or more of its
assets in industrial development bonds (subject to the
concentration restrictions described in this prospectus under
Investment Restrictions and in the Statement of Additional
Information). Assets that are not invested in Municipal
Securities may be held in cash or invested in short-term taxable
investments./5/ Because Municipal Money Portfolio invests in
securities backed by banks and other financial institutions,
changes in the credit quality of these institutions could cause
losses to the Fund and affect its net asset value.
- -----------------
/5/ The policy expressed in this sentence is a fundamental policy
of Municipal Money Fund, Municipal Money Portfolio, and Managed
Municipals.
- -----------------
High-Yield (High-Risk) Municipal Securities. High-Yield
Municipals Portfolio may purchase high-yield Municipal Securities,
commonly referred to as "junk bonds," which are Municipal
Securities rated lower than investment grade. Although high-yield
Municipal Securities generally offer higher yields than investment
grade Municipal Securities with comparable maturities, high-yield
Municipal Securities involve greater risks and their total return
and yield can be expected to fluctuate more than those of
investment grade Municipal Securities. High-yield Municipal
Securities are regarded as predominantly speculative with respect
to the issuer's continuing ability to meet principal and interest
payments, and are also subject to the risks associated with
substantial market-price volatility resulting from changes in
interest rates and economic conditions, as well as the possibility
of default or bankruptcy. A real or perceived economic downturn
or higher interest rates could cause a decline in the price of
high-yield Municipal Securities. Some additional risks include
the possibility that the Fund's interest in a high-yield Municipal
Security could be subordinated to the prior claims of other
creditors, and the tax or other advantages of high-yield Municipal
Securities could be limited or restricted by Congress. High-yield
Municipal Securities are thinly traded and can be more difficult
to sell and value accurately than high-quality Municipal
Securities. Successful investment in high-yield Municipal
Securities involves greater investment risk and is highly
dependent on the Adviser's credit analysis. Because reliable
objective pricing data may not be readily available, the Adviser's
judgment may play a greater role in the valuation process.
Intermediate Municipals and Managed Municipals may also invest in
high-yield Municipal Securities, but at least 75% of the total
assets in each Fund must be invested in investment grade Municipal
Securities.
Year 2000 Compliance. Like other investment companies, financial
and business organizations and individuals around the world, the
Funds could be adversely affected if the computer systems used by
the Adviser and other service providers do not properly process
and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000
Problem." The Funds' Adviser, administrator, distributor and
transfer agent ("Liberty Companies") are taking steps that they
believe are reasonably designed to address the Year 2000 problem,
including working with vendors who furnish services, software and
systems to the Funds, to provide that date-related information and
data can be properly processed after January 1, 2000. Many Fund
service providers and vendors, including the Liberty Companies,
are in the process of making Year 2000 modifications to their
software and systems and believe that such modifications will be
completed on a timely basis prior to January 1, 2000. The Funds
will not pay the cost of these modifications. However, no
assurances can be given that all modifications required to ensure
proper data processing and calculation on and after January 1,
2000 will be timely made or that services to the Funds will not be
adversely affected.
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
no-load Stein Roe 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. The initial purchase minimum is waived for shareholders
who participate in the Stein Roe Counselor [service mark] program
and for clients of the Adviser. Subsequent purchases must be at
least $100, or at least $50 if you purchase by electronic
transfer. (See Shareholder Services.)
By Check. To make an initial purchase of shares of a Fund by
check, please complete and sign the application and mail it,
together with a check made payable to Stein Roe Mutual Funds, to
SteinRoe Services Inc., P.O. Box 8900, Boston, Massachusetts
02205. Participants in the Stein Roe Counselor [service mark]
program should send orders to SteinRoe Services Inc., P.O. Box
803938, Chicago, Illinois 60680.
You may make subsequent investments by submitting a check
along with either the stub from your Fund account confirmation
statement or a note indicating the amount of the purchase, your
account number, and the name in which your account is registered.
Money orders will not be accepted for initial purchases into new
accounts. Credit card convenience checks will not be accepted for
initial or subsequent purchases into your account. Each
individual check submitted for purchase must be at least $100, and
the Funds generally will not accept cash, drafts, third or fourth
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 also may pay for shares by instructing your bank to
wire federal funds (monies of member banks within the Federal
Reserve System) to the First National Bank of Boston. Your bank
may charge you a fee for sending the wire. If you are opening a
new account by wire transfer, you must first call 800-338-2550 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:
First National Bank of Boston
Boston, Massachusetts
ABA Routing No. 011000390
Attention: SteinRoe Services Inc.
Account No. 560-99696
Fund No. ___; Stein Roe _____ Fund
Account of (exact name(s) in registration)
Shareholder Account No. ________
Fund Numbers:
37-Managed Municipals Fund
30-Municipal Money Market Fund
28-High-Yield Municipals Fund
08-Intermediate Municipals Fund
Participants in the Stein Roe Counselor [service mark] program
should address their wires as follows:
First National Bank of Boston
Boston, Massachusetts
ABA Routing No. 011000390
Attention: SteinRoe Services Inc.
Account No. 560-99696
Fund No. ___; Stein Roe _____ Fund
Account of (exact name(s) in registration)
Counselor Account No. ________
By Electronic Transfer. You may also make subsequent investments
by an electronic transfer of funds from your bank account.
Electronic transfer allows you to make purchases at your request
("Special Investments") by calling 800-338-2550 or at prescheduled
intervals ("Regular Investments") elected on your application.
(See Shareholder Services.) Electronic transfer purchases are
subject to a $50 minimum and a $100,000 maximum. You may not open
a new account through electronic transfer. Should an order to
purchase shares of a Fund be cancelled because your electronic
transfer does not clear, you will be responsible for any resulting
loss incurred by that Fund.
By Exchange. You may purchase shares by exchange of shares from
another no-load Stein Roe Fund account either by phone (if the
Telephone Exchange Privilege has been established on the account
from which the exchange is being made), by mail, in person, or
automatically at regular intervals (if you have elected the
Automatic Exchange Privilege). Restrictions apply; please review
the information under How to Redeem Shares-By Exchange.
Conditions of Purchase. Each purchase order for a Fund must be
accepted by an authorized officer of the Trust or its authorized
agent or designee 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; you may, however,
redeem the shares. The Trust reserves the right not to accept any
purchase order that it determines not to be in the best interests
of the Trust or of a Fund's shareholders. The 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 certain broker-dealers, banks, or other
intermediaries ("Intermediaries"). These Intermediaries may
charge for their services or place limitations on the extent to
which you may use the services offered by the Trust. There are no
charges or limitations imposed by the Trust (other than those
described in this prospectus) if shares are purchased (or
redeemed) directly from the Trust.
An Intermediary, who accepts orders that are processed at the
net asset value next determined after receipt of the order by the
Intermediary, accepts such orders as authorized agent or designee
of the Fund. The Intermediary is required to segregate any orders
received on a business day after the close of regular session
trading on the New York Stock Exchange and transmit those orders
separately for execution at the net asset value next determined
after that business day.
Purchase Price and Effective Date. Each purchase of a Fund's
shares made directly with the Fund is made at that Fund's net
asset value (see Net Asset Value) next determined after receipt of
an order in good form, including receipt of payment as follows:
A purchase by check or wire transfer is made at the net asset
value next determined after the Fund receives 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
instruction received by telephone on a business day before 3:00
p.m., Central time, is effective on the next business day. Shares
begin earning dividends on the day following the day on which they
are purchased.
Each purchase of Fund shares through an Intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the net asset value next determined after the
receipt of the order by the Intermediary.
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 SteinRoe Services Inc., P.O. Box 8900, Boston, Massachusetts
02205. Participants in the Stein Roe Counselor [service mark]
program should send redemption requests to SteinRoe Services Inc.,
P.O. Box 803938, 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, in English, and must indicate
the number of shares or the 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) The request must include other supporting legal documents as
required from organizations, executors, administrators,
trustees, or others acting 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 no-
load Stein Roe Fund offered for sale in your state if your signed,
properly completed application is on file. An exchange
transaction is a sale and purchase of shares for federal income
tax purposes and may result in capital gain or loss. Before
exercising the Exchange Privilege, you should obtain the
prospectus for the no-load Stein Roe Fund in which you wish to
invest and read it carefully. The registration of the account to
which you are making an exchange must be exactly the same as that
of the Fund account from which the exchange is made and the amount
you exchange must meet any applicable minimum investment of the
no-load Stein Roe Fund being purchased. 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 no-load Stein
Roe Fund to which you exchange on the next business day. An
exchange may be made by following the redemption procedure
described under By Written Request and indicating the no-load
Stein Roe Fund to be purchased-a signature guarantee normally is
not required. (See also the discussion below of the Telephone
Exchange Privilege and Automatic Exchanges.)
Special Redemption Privileges. The Telephone Exchange Privilege
and the Telephone Redemption by Check Privilege will be
established automatically for you when you open your account
unless you decline these Privileges on your application. Other
Privileges must be specifically elected. If you do not want the
Telephone Exchange and Redemption Privileges, check the box(es)
under the section "Telephone Redemption Options" when completing
your application. In addition, a signature guarantee may be
required to establish a Privilege after you open your account. If
you establish both the Telephone Redemption by Wire Privilege and
the Electronic Transfer Privilege, the bank account that you
designate for both Privileges must be the same.
You may not use any of the Special Redemption Privileges if
you hold certificates for any of your Fund shares. (See also
General Redemption Policies.)
Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 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 no-load
Stein Roe Fund, and then back to that Fund). In addition, the
Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange. (See General Redemption Policies.)
The Trust reserves the right to suspend or terminate at any
time and without prior notice the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Funds.
Therefore, regardless of the number of telephone exchange round-
trips made by an investor, the Trust generally will not honor
requests for Telephone Exchanges by shareholders identified by the
Trust as "market-timers" if the officers of the Trust determine
the order not to be in the best interests of the Trust or its
shareholders. The Trust generally identifies as a "market-timer"
an investor whose investment decisions appear to be based on
actual or anticipated near-term changes in the securities markets
rather than for investment considerations. Moreover, the Trust
reserves the right to suspend, limit, modify, or terminate at any
time and without prior notice the Telephone Exchange Privilege in
its entirety. Because such a step would be taken only if the
Board of Trustees believes it would be in the best interests of
the 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 no-load Stein Roe Fund account
on a regular basis.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 800-338-2550. The
proceeds will be sent by check to your registered address.
Telephone Redemption by Wire Privilege. You may use this
Privilege to redeem shares from your account by calling 800-338-
2550. The proceeds will be transmitted by wire to your account at
a commercial bank previously designated by you that is a member of
the Federal Reserve System. The fee for wiring proceeds
(currently $7.00 per transaction) will be deducted from the amount
wired. There is a $1,000 minimum on each Telephone Redemption by
Wire; in addition, shareholders of Intermediate Municipals, High-
Yield Municipals Fund, and Managed Municipals are subject to a
maximum amount of $100,000.
Check-Writing Privilege (Municipal Money Fund accounts only).
You may 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 First National Bank of Boston, and you
will be subject to the bank's procedures and rules relating to its
checking accounts and to this Privilege.
Electronic Transfer Privilege. You may redeem shares by
calling 800-338-2550 and requesting an electronic transfer
("Special Redemption") of the proceeds to an 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 3:00 p.m., Central 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 call 800-338-2550 if you have any questions
about requirements for a redemption before submitting your
request. The Trust reserves the right to require a properly
completed application before making payment for shares redeemed.
The 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 the Trust
intends to pay proceeds of a Telephone Redemption paid by wire on
the next business day. The Trust will not be responsible for the
consequences of delays, including delays in the mail, banking, or
Federal Reserve wire systems. If you attempt to redeem shares
within 15 days after they have been purchased by check or
electronic transfer, the Trust will delay payment of the
redemption proceeds to you until it can verify that payment for
the purchase of those shares has been (or will be) collected. To
reduce such delays, the Trust recommends that your purchase be
made by federal funds wire through your bank. Generally, you may
not use any Special Redemption Privilege to redeem shares
purchased by check (other than certified or cashiers' checks) or
electronic transfer until 15 days after their date of purchase.
The Trust reserves the right at any time without prior notice
to suspend, limit, modify, or terminate any Privilege or its use
in any manner by any person or class.
Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Funds employ
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Funds and
their transfer agent to tape-record all instructions to redeem.
In addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder 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.
The Trust reserves the right to redeem shares in any account
and send the proceeds to the owner of record if the shares in the
account do not have a value of at least $1,000. If the value of
the account is more than $10, a shareholder would be notified that
his account is below the minimum and would be allowed 30 days to
increase the account before the redemption is processed. The
Trust reserves the right to redeem any account with a value of $10
or less without prior written notice to the shareholder. Due to
the proportionately higher costs of maintaining small accounts,
the transfer agent may charge and deduct from the account a $5 per
quarter minimum balance fee if the account is a regular account
with a balance below $2,000 or an UGMA account with a balance
below $800. This minimum balance fee does not apply to: (1)
shareholders whose accounts in the Stein Roe Funds total $50,000
or more, (2) Stein Roe IRAs, (3) other Stein Roe prototype
retirement plans, (4) accounts with automatic investment plans
(unless regular investments have been discontinued), or (5)
omnibus or nominee accounts. The transfer agent may waive the
fee, at its discretion, in the event of significant market
corrections.
Shares in any account you maintain with a Fund or any of the
other Stein Roe Funds may be redeemed to the extent necessary to
reimburse any Stein Roe Fund for any loss you cause it to sustain
(such as loss from an uncollected check or electronic transfer or
any 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 through an automatic investment plan will be confirmed to
you quarterly. In addition, the Trust will send you semiannual
and annual reports showing portfolio holdings and will provide you
annually with tax information.
To reduce the volume of mail you receive, only one copy of
certain materials, such as prospectuses and shareholder reports,
will be mailed to your household (same address). Please call 800-
338-2550 if you wish to receive additional copies free of charge.
This policy may not apply if you purchased shares through an
Intermediary.
Funds-on-Call(r) Automated Telephone Service. To access Stein Roe
Funds-on-Call(r), just call 800-338-2550 on any touch-tone
telephone and follow the recorded instructions. Funds-on-Call(r)
provides yields, prices, latest dividends, account balances, last
transaction, and other information 24 hours a day, seven days a
week. You also may use Funds-on-Call(r) to make Special
Investments and Redemptions, Telephone Exchanges, and Telephone
Redemptions by Check. These transactions are subject to the terms
and conditions of the individual privileges. (See How to Purchase
Shares and How to Redeem Shares.) Information regarding your
account is available to you via Funds-on-Call(r) only after you
follow an activation process the first time you call. Your
account information is protected by a personal identification
number (PIN) that you establish.
Stein Roe Counselor [service mark] Program. The Stein Roe
Counselor [service mark] program is a professional investment
advisory service available to shareholders. This program is
designed to provide investment guidance in helping investors to
select a portfolio of Stein Roe Funds.
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 800-338-2550 or write the Trust for
additional information and forms.
Dividend Purchase Option-diversify your Fund investments by
having distributions from one Fund account automatically invested
in another no-load Stein Roe Fund account. Before establishing
this option, you should obtain and carefully read the prospectus
of the Stein Roe Fund into which you wish to have your
distributions invested. The account from which distributions are
made must be of sufficient size to allow each distribution to
usually be at least $25. 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)-have income
dividends and capital gains distributions deposited directly into
your bank account.
Telephone Redemption by Check Privilege ($1,000 minimum) and
Telephone Exchange Privilege ($50 minimum)-established
automatically when you open your account unless you decline them
on your application. (See How to Redeem Shares-Special Redemption
Privileges.)
Telephone Redemption by Wire Privilege-redeem shares from
your account by phone and have the proceeds transmitted by wire to
your bank account ($1,000 minimum; $100,000 maximum for
shareholders of Intermediate Municipals, High-Yield Municipals
Fund, and Managed Municipals).
Check-Writing Privilege-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)-redeem shares
at any time and have the proceeds deposited directly to your bank
account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)-purchase Fund
shares at regular intervals directly from your bank account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)-purchase Fund
shares by telephone and pay for them by electronic transfer of
funds from your bank account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan-automatically redeem a fixed dollar
amount from your Fund account and invest it in another no-load
Stein Roe Fund account on a regular basis ($50 minimum; $100,000
maximum).
Automatic Redemptions (electronic transfer)-have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank account ($50 minimum; $100,000 maximum).
Systematic Withdrawals-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 or redemption price of each Fund's shares is its net
asset value per share. Each Fund determines the net asset value
of its shares as of the close of regular session trading on the
New York Stock Exchange ("NYSE") (currently 3:00 p.m., Central
time) by dividing the difference between the values of its assets
and liabilities by the number of its shares outstanding. Net
asset value will not be determined on days when the NYSE is closed
unless, in the judgment of the Board of Trustees, the net asset
value of a Fund should be determined on any such day, in which
case the determination will be made at 3:00 p.m., Central time.
Each Portfolio allocates net asset value, income and expenses to
its feeder funds in proportion to their respective interests in
the Portfolio.
Securities held by Intermediate Municipals, Managed
Municipals, or High-Yield Municipals Portfolio 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 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.
We value a security at fair value if the value of the
security has been materially affected by events that have occurred
after the close of the market on whatever exchange the security is
traded. In this circumstance, we use fair value pricing to
protect long-term investors from the actions of short-term
investors who might buy or redeem shares in an attempt to profit
from short-term market movements.
Securities held by Municipal Money 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 Municipal Money 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. 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 Municipal Money Portfolio for which this valuation
method does not produce a fair value are valued at a fair value
determined by its Board.
DISTRIBUTIONS AND INCOME TAXES
Distributions. Income dividends are declared each business day,
and are paid monthly and confirmed at least quarterly. For
federal income tax purposes, any distribution that is paid in
January but was declared in the prior calendar year is deemed paid
in the prior calendar year. Each Fund intends to distribute by
the end of each calendar year at least 98% of any net capital
gains realized from the sale of securities during the 12-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 gains distributions
will be reinvested in additional shares unless you elect to have
distributions either (1) paid by check; (2) deposited by
electronic transfer into your bank account; (3) applied to
purchase shares in your account with another Stein Roe Fund; or
(4) applied to purchase shares in a Stein Roe Fund account of
another person. (See Shareholder Services.) Reinvestment
normally occurs on the payable date. If a shareholder elected to
receive dividends and/or capital gains distributions in cash and
the postal or other delivery service selected by the transfer
agent is unable to deliver checks to the shareholder's address of
record, such shareholder's distribution option will automatically
be converted to having all dividends and other distributions
reinvested in additional shares. The 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.
No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Income Taxes. The Funds and Portfolios 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 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 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 gains is taxable to you as ordinary income.
Distributions of net long-term capital gains are taxable to you as
long-term capital gains 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 gains distributions paid during the year.
The portion of your dividends and distributions that is taxable
will be taxable to you whether received in cash or reinvested in
additional shares.
If you are receiving Social Security benefits, tax-exempt
income, including exempt-interest dividends received from the
Funds, will be added to your taxable income in determining whether
a portion of your benefits will be subject to federal income tax.
Interest on borrowings you incur to purchase or carry shares of a
Fund is not deductible for federal income tax purposes. You may
be subject to state and local taxes on distributions from the
Funds, including those distributions that are exempt from federal
income tax.
For federal income tax purposes, each Fund is treated as a
separate taxable entity distinct from the other series of the
Trust.
This section is not intended to be a full discussion of
income tax laws and their effect on shareholders. You may wish to
consult your own tax advisor.
Backup Withholding. The Trust may be required to withhold federal
income tax ("backup withholding") from certain payments to you-
generally redemption proceeds. Backup withholding may be required
if:
- - You fail to furnish your properly certified Social Security or
other tax identification number;
- - You fail to certify that your tax identification number is
correct or that you are not subject to backup withholding due to
the underreporting of certain income;
- - The Internal Revenue Service informs the Trust that your tax
identification number is incorrect.
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. You may, however, claim the amount withheld
as a credit on your federal income tax return.
INVESTMENT RETURN
The total return from an investment in a Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.
Because Municipal Money Fund strives to maintain a $1.00 per
share value, its return is usually quoted either as a current
seven-day yield, calculated by totaling the dividends on a Fund
share for the previous seven days and restating that yield as an
annual rate, or as an effective yield, calculated by adjusting the
current yield to assume daily compounding. Municipal Money Fund's
current and effective yields for the seven-day period ended Sept.
30, 1998, were 3.24% and 3.29%, respectively. To obtain current
yield information, you may call 800-338-2550.
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 no guarantee of future results.
MANAGEMENT
Trustees and Investment Adviser. The Board of Trustees of the
Trust and the Board of Trustees of SR&F Base Trust have overall
management responsibility for the Funds and the Portfolios,
respectively. See the Statement of Additional Information for the
names of and other information about the trustees and officers.
Since the Trust and SR&F Base Trust have the same trustees, the
trustees have adopted conflict of interest procedures to monitor
and address potential conflicts between the interests of the
feeder funds and the Portfolios.
The Adviser, Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, Illinois 60606, is responsible for managing
the investment portfolios and the business affairs of the Funds,
the Portfolios, the Trust and SR&F 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 (or its predecessor) has advised and managed mutual funds
since 1949. The Adviser is a wholly owned indirect subsidiary of
Liberty Financial Companies, Inc. ("Liberty Financial"), which in
turn is a majority owned indirect subsidiary of Liberty Mutual
Insurance Company.
The Adviser's mutual funds and institutional asset management
businesses are managed together with its affiliate, Colonial
Management Associates, Inc. ("CMA"). A single management team
includes employees of each company. CMA is a registered
investment adviser serving mutual funds and institutions. Certain
officers of CMA also are officers of the Adviser in their roles as
managers of the combined business. CMA shares personnel,
facilities and systems with the Adviser that the Adviser uses in
providing services to the Funds.
In approving the use of a single combined prospectus, the
Boards considered the possibility that one Fund (or Portfolio)
might be liable for misstatements in the prospectus regarding
information concerning another Fund (or Portfolio).
Portfolio Managers. Veronica M. Wallace has been portfolio
manager of Municipal Money Portfolio since 1995. Ms. Wallace is a
vice president of the Adviser and was formerly a trader in taxable
money market instruments for the Adviser. As of June 30, 1998,
she was responsible for managing $132 million in mutual fund net
assets.
William C. Loring and Brian M. Hartford have been co-
portfolio managers of Managed Municipals since November 1998.
Messrs. Loring and Hartford are jointly employed as Vice
Presidents by CMA and the Adviser (each of which is an indirect
wholly owned subsidiary of Liberty Financial). They have co-
managed the Colonial Tax-Exempt Fund since May 1997. Mr. Loring
has also managed the Colonial Intermediate Bond Fund since 1993.
Messrs. Loring and Hartford have managed various other Colonial
tax-exempt funds since 1986 and 1993, respectively.
Maureen G. Newman has been portfolio manager of High-Yield
Municipals Portfolio since November 1998. Ms. Newman is jointly
employed by CMA and the Adviser. She has managed tax-exempt funds
for CMA since May 1996. Prior to joining CMA, Ms. Newman was a
portfolio manager and bond analyst at Fidelity Investments from
May 1985 to May 1996.
Joanne T. Costopoulos has been portfolio manager of
Intermediate Municipals since 1991. She is a senior vice
president of the Adviser, which she joined in 1982, and was
responsible for managing $195 million in mutual fund net assets as
of June 30, 1998. 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.
Fees and Expenses. The Adviser provides administrative services
to the Funds under an administrative agreement and investment
management services to Intermediate Municipals, Managed
Municipals, Municipal Money Portfolio and High-Yield Municipals
Portfolio under separate management agreements. The Adviser is
entitled to receive a monthly administrative fee and a monthly
portfolio management fee, based on average net assets and computed
and accrued daily, at the following annual rates:
MANAGEMENT ADMINISTRATIVE
FUND FEE FEE
- ------------- --------------- ---------------
Intermediate .450% up to $100, .150% up to $100,
Municipals .425% next $100, .125% next $100,
Fund .400% thereafter .100% thereafter
High-Yield .-- .150% up to $100, .
Municipals .125% next $100,
Fund .100% thereafter
High-Yield .450% up to $100, . --
Municipals .425% next $100, .
Portfolio .400% thereafter .
Managed .450% up to $100, .150% up to $100, .
Municipals .425% next $100, .125% next $100,
Fund .400% next $800, .100% next $800,
.375% thereafter .075% thereafter
Municipal -- .250% up to $500,
Money .200% next $500,
Fund .150% thereafter
Municipal .250% --
Money
Portfolio
Under a separate agreement with each Trust, the Adviser
provides certain accounting and bookkeeping services to the Funds
and the Portfolios, including computation of net asset value and
calculation of net income and capital gains and losses on
disposition of assets.
Portfolio Transactions. The Adviser places the orders for the
purchase and sale of portfolio securities. In doing so, the
Adviser seeks to obtain the best combination of price and
execution, which involves a number of judgmental factors.
The Adviser may use both its own trading facilities and those of
CMA to place orders for the purchase and sale of portfolio
securities for Managed Municipals and High-Yield Municipals
Portfolio. For trades placed through CMA, in selecting broker-
dealers, the Adviser may direct CMA to consider research and
brokerage services furnished to the Adviser.
Transfer Agent. SteinRoe Services Inc., One South Wacker Drive,
Chicago, Illinois 60606, a wholly owned subsidiary of Liberty
Financial, is the agent of the Trust for the transfer of shares,
disbursement of dividends, and maintenance of shareholder
accounting records.
Distributor. Shares of the Funds are distributed by Liberty Funds
Distributor, Inc. ("Distributor"), One Financial Center, Boston,
Massachusetts 02111. The Distributor is a subsidiary of Colonial
Management Associates, Inc., which is an indirect subsidiary of
Liberty Financial. Fund shares are offered for sale without any
sales commissions or charges to the Funds or to their
shareholders. All distribution and promotional expenses are paid
by the Adviser, including payments to the Distributor for sales of
Fund shares.
All Fund correspondence (including purchase and redemption
orders) should be mailed to SteinRoe Services Inc., P.O. Box 8900,
Boston, Massachusetts 02205. Participants in the Stein Roe
Counselor [service mark] program should send orders to SteinRoe
Services Inc., P.O. Box 803938, Chicago, Illinois 60680.
Custodian. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
the Funds and the Portfolios. (See Custodian in the Statement of
Additional Information.)
ORGANIZATION AND DESCRIPTION OF SHARES
Each Fund is a separate series of the Trust, a Massachusetts
business trust organized under an Agreement and Declaration of
Trust ("Declaration of Trust") dated Oct. 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 the Trust's shareholders or its trustees. The
Trust may issue an unlimited number of shares, in one or more
series as the Board may authorize. Currently, four series are
authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as the Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against, the Trust or
any particular 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 shall have
no personal liability therefor. The Declaration of Trust requires
that notice of such disclaimer of liability be given in each
contract, instrument or undertaking executed or made on behalf of
the Trust. The Declaration of Trust provides for indemnification
of any shareholder against any loss and expense arising from
personal liability solely by reason of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote,
because it would be limited to circumstances in which the
disclaimer was inoperative and the Trust was unable to meet its
obligations.
The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of the Trust
also is believed to be remote, because it would be limited to
claims to which the disclaimer did not apply and to circumstances
in which the other series was unable to meet its obligations.
As a business trust, the Trust is not required to hold annual
shareholder meetings. However, special meetings may be called for
purposes such as electing or removing trustees, changing
fundamental policies, or approving an investment advisory
contract.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Each of Municipal Money Fund and High-Yield Municipals Fund (each
a series of the Trust, an open-end management investment company)
seeks to achieve its objective by investing all of its assets in
another mutual fund having an investment objective identical to
that of the Fund. The shareholders of each Fund approved this
policy of permitting a Fund to act as a feeder fund by investing
in a master Portfolio. Please refer to Investment Policies,
Portfolio Investments and Strategies, and Investment Restrictions
for a description of the investment objectives, policies, and
restrictions of the Funds and the Portfolios. The management fees
and expenses of the Funds and the Portfolios are described under
Fee Table and Management. Each Fund bears its proportionate share
of the expenses of its master Portfolio.
The Adviser has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
Each Portfolio is a separate series of SR&F Base Trust ("Base
Trust"), a Massachusetts common law trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
Aug. 23, 1993. The Declaration of Trust of Base Trust provides
that a Fund and other investors in a Portfolio will be liable for
all obligations of that Portfolio that are not satisfied by the
Portfolio. However, the risk of a Fund incurring financial loss
on account of such liability is limited to circumstances in which
liability was inadequately insured and a Portfolio was unable to
meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Funds nor their shareholders will be
adversely affected by reason of a Fund's investing in a Portfolio.
The Declaration of Trust of Base Trust provides that a
Portfolio will terminate 120 days after the withdrawal of a 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 the Trust may vote a Fund's interests in a
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objective of each Fund and its master
Portfolio is non-fundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to Fund shareholders. The fundamental
policies of each Fund and the corresponding fundamental policies
of its master Portfolio can be changed only with shareholder
approval.
If a Fund, as a Portfolio investor, is requested to vote on a
change in a fundamental policy of a 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. A Fund will vote shares
for which it receives no voting instructions in the same
proportion as the shares for which it receives voting
instructions. There can be no assurance that any matter receiving
a majority of votes cast by Fund shareholders will receive a
majority of votes cast by all investors in the Portfolio. If
other investors hold a majority interest in a Portfolio, they
could have voting control over that Portfolio.
In the event that a Portfolio's fundamental policies were
changed so as to be inconsistent with those of the corresponding
Fund, the Board of Trustees of the Trust would consider what
action might be taken, including changes to the Fund's fundamental
policies, withdrawal of the Fund's assets from the Portfolio and
investment of such assets in another pooled investment entity, or
the retention of an investment adviser to invest those assets
directly in a portfolio of securities. Any of these actions would
require the approval of a Fund's shareholders. A 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 a 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 could 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 a Portfolio, including a Fund, may add to or
reduce its investment in the Portfolio on each day the NYSE is
open for business. The investor's percentage of the aggregate
interests in the Portfolio will be computed as the percentage
equal to the fraction (i) the numerator of which is the beginning
of the day value of such investor's investment in the Portfolio on
such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of the
Portfolio on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate
investments in 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 the close
of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in a Portfolio, but members of
the general public may not invest directly in the Portfolio.
Other investors in a Portfolio are not required to sell their
shares at the same public offering price as a Fund, might incur
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 a
Portfolio. Investment by such other investors in a 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 a Portfolio could
result in untimely liquidations of the Portfolio's security
holdings, loss of investment flexibility, and increases in the
operating expenses of the Portfolio as a percentage of its net
assets. As a result, a Portfolio's security holdings may become
less diverse, resulting in increased risk.
Information regarding other investors in a Portfolio may be
obtained by writing to SR&F Base Trust at Suite 3200, One South
Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550. The
Adviser may provide administrative or other services to one or
more of such investors.
APPENDIX-RATINGS
Ratings in General. A rating of a rating service represents the
service's opinion as to the credit quality of the security being
rated. However, the ratings are general and are not absolute
standards of quality or guarantees as to the creditworthiness of
an issuer. Consequently, the Adviser believes that the quality of
Municipal Securities should be continuously reviewed and that
individual analysts give different weightings to the various
factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security, because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons. The Adviser, through
independent analysis, attempts to discern variations in credit
ratings of the published services, and to anticipate changes in
credit ratings. The following is a description of the
characteristics of certain ratings used by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"),
and Fitch IBCA.
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.
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: Moody's applies numerical modifiers 1, 2, and 3 in the Aa
through B classifications of its municipal bond rating system and
in the Aa through Caa 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.
Municipal Notes: MIG 1. This designation denotes best quality.
There is present strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to
the market for refinancing.
MIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
MIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Demand Feature of Variable Rate Demand Securities: Moody's may
assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
VMIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
VMIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Commercial Paper: Moody's employs the following three
designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper
obligations are supported by the credit of another entity or
entities, Moody's, in assigning ratings to such issuers, evaluates
the financial strength of the indicated affiliated corporations,
commercial banks, insurance companies, foreign governments, or
other entities, but only as one factor in the total rating
assessment.
Corporate Bonds: The description of the applicable rating symbols
and their meanings is identical to that of its Municipal Bond
ratings as set forth above.
Ratings by S&P:
Municipal Bonds: AAA. Bonds rated AAA have the highest rating.
Capacity to pay interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher-rated categories.
BBB. Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category
than for bonds in higher-rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. The rating C1 is reserved for income bonds on which no
interest is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating also is issued
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTE: The ratings from AA to CCC may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within
the major ratings categories.
Provisional Ratings. The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comment
on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Municipal Notes: SP-1. Notes rated SP-1 have very strong or
strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are
designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Notes due in three years or less normally receive a note rating.
Notes maturing beyond three years normally receive a bond rating,
although the following criteria are used in making that
assessment:
- - Amortization schedule (the larger the final maturity relative to
other maturities, the more likely the issue will be rated as a
note).
- - Source of payment (the more dependent the issue is on the market
for its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities: S&P assigns
dual ratings to all long-term debt issues that have as part of
their provisions a demand feature. The first rating addresses the
likelihood of repayment of principal and interest as due, and the
second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are usually used
to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with
commercial paper symbols (for example, SP-1+/A-1+).
Commercial Paper: A. Issues assigned this highest rating are
regarded as having the greatest capacity for timely payment.
Issues in this category are further refined with the designations
1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are designed A-1+.
Corporate Bonds: The description of the applicable rating symbols
and their meanings is substantially the same as its Municipal Bond
ratings set forth above.
RATINGS BY FITCH IBCA
Investment Grade Bond Ratings
Fitch IBCA investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a
particular security. The ratings represent Fitch IBCA's
assessment of the issuer's ability to meet the obligations of a
specific debt or preferred issue in a timely manner. The rating
takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and
prospective financial condition and operating performance of the
issuer and any guarantor, as well as the economic and political
environment that might affect the issuer's future financial
strength and credit quality.
Fitch IBCA ratings do not reflect any credit enhancement that may
be provided by insurance policies or financial guaranties unless
otherwise indicated.
Fitch IBCA ratings are not recommendations to buy, sell, or hold
any security. Ratings do not comment on the adequacy of market
price, the suitability of any security for a particular investor,
or the tax-exempt nature or taxability of payments made in respect
of any security. Fitch IBCA ratings are based on information
obtained from issuers, other obligors, underwriters, their
experts, and other sources Fitch IBCA believes to be reliable.
Fitch IBCA does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a
result of changes in, or the unavailability of, information or for
other reasons.
AAA. Bonds and preferred stock considered to be investment grade
and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and/or dividends and
repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA. Bonds and preferred stock considered to be investment grade
and of very high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bond and
preferred rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+.
A. Bonds and preferred stock considered to be investment grade
and of high quality. The obligor's ability to pay interest and/or
dividends and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and
circumstances than debt or preferred securities with higher
ratings.
BBB. Bonds and preferred stock considered to be investment grade
and of satisfactory credit quality. The obligor's ability to pay
interest or dividends and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these securities and, therefore, impair timely payment. The
likelihood that the ratings of these bonds or preferred will fall
below investment grade is higher than for securities with higher
ratings.
BB. Bonds are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B. Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC. Bonds have certain identifiable characteristics which, if
not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic
environment.
CC. Bonds are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C. Bonds are in imminent default in payment of interest or
principal.
DDD, DD, and D. Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the
highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) or Minus (-). Plus and minus signs are used with a
rating symbol to indicate the relative position of a credit within
the rating category. Plus and minus signs, however, are not used
in the AAA, DDD, DD or D categories.
NR. Indicates that Fitch IBCA does not rate the specific issue.
Conditional. A conditional rating is premised on the successful
completion of a project or the occurrence of a specific event.
Suspended. A rating is suspended when Fitch IBCA deems the amount
of information available from the issuer to be inadequate for
rating purposes.
Withdrawn. A rating will be withdrawn when an issue matures or is
called or refinanced, and, at Fitch IBCA's discretion, when an
issuer fails to furnish proper and timely information.
FitchAlert. Ratings are placed on FitchAlert to notify investors
of an occurrence that is likely to result in a rating change and
the likely direction of such change. These are designated as
"Positive," indicating a potential upgrade, "Negative," for
potential downgrade, or "Evolving," where ratings may be raised or
lowered. FitchAlert is relatively short-term and should be
resolved within 12 months.
Ratings Outlook. An outlook is used to describe the most likely
direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative." The absence of a
designation indicates a stable outlook.
Short-Term Ratings
F-1+. Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2. Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+ and
F-1 ratings.
F-3. Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could
cause these securities to be rated below investment grade.
F-S. Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
D. Default. Issues assigned this rating are in actual or
imminent payment default.
<PAGE>
Stein Roe Mutual Funds
Certificate of Authorization
for use by corporations and associations only
Corporations or associations 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 a Stein Roe account representative at 800-338-2550 .
The undersigned hereby certifies that he is the duly elected
Secretary of ____________________________
(name of Corporation/Association)
(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 By-laws provide that he is the only
person authorized to so act.
Unless expressly declined on the Application (or other form
acceptable to the Funds), the undersigned further certifies that
the Corporation has authorized by resolution or otherwise the
establishment of the Telephone Exchange and Telephone Redemption
by Check Privileges for the Corporation's account with any Fund
offering any such Privilege. If elected on the Application (or
other form acceptable to the Funds), the undersigned also
certifies that the Corporation has similarly authorized
establishment of the Electronic Transfer, Telephone Redemption by
Wire, and Check-Writing Privileges for the Corporation's account
with any Fund offering said Privileges. The undersigned has
further authorized each Fund and its transfer agent to honor any
written, telephonic, or telegraphic instructions furnished
pursuant to any such Privilege by any person believed by the Fund
or its transfer agent or their agents, officers, directors,
trustees, or employees to be authorized to act on behalf of the
Corporation and agrees that neither the Fund nor its transfer
agent, their agents, officers, directors, trustees, or employees
will be liable for any loss, liability, cost, or expense for
acting upon any such instructions.
These authorizations shall continue in effect until five business
days after the Fund and its transfer agent receive written notice
from the Corporation of any change.
IN WITNESS WHEREOF, I have hereunto subscribed my name as
Secretary and affixed the seal of this Corporation this ____ day
of ________________, 19____.
________________________________
Secretary
_________________________________
Signature Guarantee*
*Only required if the person signing
the Certificate is the only person
named as "Authorized Person."
CORPORATE
SEAL
HERE
<PAGE>
For More Information
You can obtain more information about the Funds' investments in
their semiannual and annual reports to shareholders. These
reports discuss the market conditions and investment strategies
that affected the Funds' performance over the past six months and
year.
You may wish to read the SAI for more information on the Funds.
The SAI is incorporated into this prospectus by reference, which
means that it is legally considered to be part of this prospectus
and you are deemed to have been told of its contents.
BOND FUNDS
To obtain free copies of Funds' semiannual and annual reports or
SAI, and to request other information about the Funds, write or
call:
Stein Roe Mutual Funds
One South Wacker Drive
Suite 3200
Chicago, IL 60606
800-338-2550
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the Securities and Exchange Commission (SEC) at
www.sec.gov. You can also obtain copies by visiting the SEC's
Public Reference Room in Washington, DC, by calling 800-SEC-0330,
or by sending your request and the appropriate fee to the SEC's
public reference section, Washington, DC 20549-6009.
Investment Company Act file number: 811-4367
LIBERTY FUNDS DISTRIBUTOR, INC.
<PAGE>
Statement of Additional Information Dated Nov. 1, 1998
STEIN ROE MUNICIPAL TRUST
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
800-338-2550
This Statement of Additional Information is not a prospectus
but provides additional information that should be read in
conjunction with the Prospectus dated Nov. 1, 1998, and any
supplements thereto. The Prospectus may be obtained at no charge
by telephoning 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 Fund..............................6
Portfolio Investments and Strategies.......................6
Investment Restrictions...................................19
Additional Investment Considerations......................22
Purchases and Redemptions.................................24
Management................................................26
Financial Statements......................................28
Principal Shareholders....................................29
Investment Advisory Services..............................29
Distributor...............................................32
Transfer Agent............................................32
Custodian.................................................32
Independent Auditors......................................33
Portfolio Transactions....................................33
Additional Income Tax Considerations......................35
Investment Performance....................................36
Additional Information on Net Asset Value -
Municipal Money Fund and Municipal Money Portfolio......43
Glossary..................................................44
GENERAL INFORMATION AND HISTORY
The following mutual funds are separate series of Stein Roe
Municipal Trust (the "Trust"):
Stein Roe Municipal Money Market Fund ("Municipal Money
Fund")
Stein Roe Intermediate Municipals Fund ("Intermediate
Municipals Fund")
Stein Roe Managed Municipals Fund ("Managed Municipals
Fund")
Stein Roe High-Yield Municipals Fund ("High-Yield
Municipals Fund")
Each series of the Trust invests in a separate portfolio of
securities and other assets, with its own objectives and policies.
The series of the Trust are referred to collectively as "the
Funds." The name of the Trust and each of its series was changed
on Nov. 1, 1995 to separate "SteinRoe" into two words.
Currently, four series of the Trust are authorized and
outstanding. Each share of a series, without par value, is
entitled to participate pro rata in any dividends and other
distributions declared by the Board on shares of that series, and
all shares of a series have equal rights in the event of
liquidation of that series. Each whole share (or fractional
share) of the 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, the Trust is not
required to hold annual shareholder meetings. However, special
meetings may be called for purposes such as electing or removing
trustees, changing fundamental policies, or approving an
investment advisory contract. If requested to do so by the
holders of at least 10% of its outstanding shares, the Trust will
call a special meeting for the purpose of voting upon the question
of removal of a trustee or trustees and will assist in the
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940. All shares of the
Trust are voted together in the election of trustees. On any
other matter submitted to a vote of shareholders, shares are voted
in the aggregate and not by individual series, except that shares
are voted by individual series when required by the Investment
Company Act of 1940 or other applicable law, or when the Board of
Trustees determines that the matter affects only the interests of
one or more series, in which case shareholders of the unaffected
series are not entitled to vote on such matters.
Stein Roe & Farnham Incorporated (the "Adviser") is
responsible for the business affairs of the Trusts and serves as
investment adviser to Intermediate Municipals, Managed Municipals,
Municipal Money Portfolio, and High-Yield Municipals Portfolio.
It also provides administrative and bookkeeping and accounting
services to the Funds and Portfolios.
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 those of other
investment companies for investment in another mutual fund having
the same investment objective and substantially the same
investment policies as its feeder funds. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. 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 Funds
currently operating under the master fund/feeder fund structure
are Municipal Money Fund and High-Yield Municipals Fund, which
converted into feeder funds on Sept. 28, 1995 and Feb. 2, 1998,
respectively. Municipal Money Fund invests all of its net
investable assets in SR&F Municipal Money Market Portfolio
("Municipal Money Portfolio") and High-Yield Municipals Fund
invests all of its net investable assets in SR&F High-Yield
Municipals Portfolio ("High-Yield Municipals Portfolio"). The
master funds are series of SR&F Base Trust and are referred to
collectively as the "Portfolios." For more information, please
refer to the Prospectus under the caption Master Fund/Feeder Fund:
Structure and Risk Factors.
INVESTMENT POLICIES
The following information supplements the discussion of the
Funds' respective investment objectives and policies described in
the Prospectus. In pursuing its objective, each Fund will invest
as described below and may employ investment techniques described
in the Prospectus and elsewhere in this Statement of Additional
Information. Investments and strategies that are common to two or
more Funds are described under Portfolio Investments and
Strategies. Each Fund's investment objective is not fundamental
and may be changed by the Board of Trustees without the approval
of a "majority of the outstanding voting securities" (see
definition in the Glossary) of that Fund.
Municipal Money Fund
This Fund seeks maximum current income exempt from federal
income tax. The Fund seeks to achieve its objective by investing
all of its net investable assets in shares of Municipal Money
Portfolio, which has an identical investment objective and
substantially identical investment policies. In pursuing its
objective, Municipal Money Portfolio attempts to maintain relative
stability of principal and liquidity. Municipal Money 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
Municipal Money 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, Municipal Money 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 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 Municipal Money
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.
- --------------
/1/ The Boards of Trustees of the Trust and SR&F 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, Municipal Money Portfolio will not invest
in a variable rate security whose demand feature is conditional
unless the Board of Trustees determines that the security is at
least the economic equivalent of a variable rate security with an
unconditional demand feature or (a) the demand feature is rated
within the two highest ratings assigned by Moody's or within the
equivalent ratings assigned by S&P and (b) the underlying security
is rated within the two highest ratings assigned by Moody's or
S&P. The Board of Trustees has determined that a variable rate
security where the demand feature is suspended only after a
default followed by an acceleration of maturity is the economic
equivalent of a variable rate security with an unconditional
demand feature.
/2/ For a description of Moody's and S&P quality ratings, see the
Appendix to the Prospectus. 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. In addition, rating modifiers showing relative standing
within a rating category do not affect whether a security is
eligible for purchase.
- --------------
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.
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.
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 Fund
This Fund seeks a high current yield exempt from federal
income tax. High-Yield Municipals Fund seeks to achieve its
objective by investing all of its net investable assets in shares
of High-Yield Municipals Portfolio, which has an identical
investment objective and substantially identical investment
policies. High-Yield Municipals Portfolio 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 High-Yield Municipals
Portfolio will be made when due.
It is a fundamental policy that normally the 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 High-Yield Municipals Portfolio 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. High-Yield Municipals Portfolio may
invest in debt obligations that are in default, but such
obligations are not expected to exceed 10% of its assets.
PORTFOLIO INVESTMENTS AND STRATEGIES
The following investment policies and techniques have been
adopted by each Fund or Portfolio as indicated. Unless otherwise
noted, for purposes of discussion under Portfolio Investments and
Strategies, Investment Restrictions, and Additional Investment
Considerations, the term "the Fund" refers to each Fund and each
Portfolio.
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 Portfolio, other
money market instruments, and in the case of Municipal Money
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 Managed Municipals,
securities dealers. Municipal Money Portfolio limits repurchase
agreements to those that are short-term, subject to item (g) 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.
- ------------
/3/ In the case of Municipal Money Fund, Municipal Money
Portfolio, and Managed Municipals, the policies described in this
paragraph are fundamental.
- ------------
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").
Private Placements
Each Fund may invest in securities that are purchased in
private placements (including privately placed securities eligible
for purchase and sale under Rule 144A of the Securities Act of
1933 ["1933 Act"]) and, accordingly, are subject to restrictions
on resale as a matter of contract or under federal securities
laws. Because there may be relatively few potential purchasers
for such investments, especially under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, a Fund could find it more difficult to
sell such securities when the Adviser believes it is advisable to
do so or may be able to sell such securities only at prices lower
than if such securities were more widely held. At times, it may
also be more difficult to determine the fair value of such
securities for purposes of computing a Fund's net asset value.
Rule 144A Securities
Rule 144A permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities that
have not been registered for sale under the 1933 Act. The
Adviser, under the supervision of the Board of Trustees, will
consider whether securities purchased under Rule 144A are illiquid
and thus subject to the Funds' restriction of investing no more
than 10% of its net assets in illiquid securities for all Funds
other than High-Yield Municipals Portfolio and no more than 15%
for that Fund. A determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this
determination, the Adviser will consider the trading markets for
the specific security, taking into account the unregistered nature
of a Rule 144A security. In addition, the Adviser could consider
the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market,
and (4) nature of the security and of marketplace trades (e.g.,
the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The liquidity
of Rule 144A securities would be monitored and if, as a result of
changed conditions, it is determined that a Rule 144A security is
no longer liquid, a Fund's holdings of illiquid securities would
be reviewed to determine what, if any, steps are required to
assure that the Fund does not invest more than 10% of its assets
in illiquid securities for all Funds other than High-Yield
Municipals Portfolio and no more than 15% for that Fund.
Investing in Rule 144A securities could have the effect of
increasing the amount of a Fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to
purchase such securities. No Fund expects to invest as much as 5%
of its total assets in Rule 144A securities that have not been
deemed to be liquid by the Adviser.
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. The 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 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.
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. The determinations concerning the liquidity and
appropriate valuation of a municipal lease obligation, as with any
other municipal security, are made based on all relevant factors.
These factors may include, among others: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers
willing to purchase or sell the security and the number of other
potential buyers; (3) the willingness of dealers to undertake to
make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer.
Tender option bonds are not included in the calculation of
the 5% total net asset limitation for participation interests.
When-Issued and Delayed-Delivery Securities; Forward Commitments
Each Fund may purchase securities on a when-issued or
delayed-delivery basis or purchase forward commitments, 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 Against the Box
Each Fund may sell securities short against the box; that is,
enter into short sales of securities that it currently owns or has
the right to acquire through the conversion or exchange of other
securities that it owns at no additional cost. A Fund may make
short sales of securities only if at all times when a short
position is open it owns at least an equal amount of such
securities or securities convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short, at no additional cost.
In a short sale against the box, a Fund does not deliver from
its portfolio the securities sold. Instead, the Fund borrows the
securities sold short from a broker-dealer through which the short
sale is executed, and the broker-dealer delivers such securities,
on behalf of the Fund, to the purchaser of such securities. The
Fund is required to pay to the broker-dealer the amount of any
dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold
short, the Fund must deposit and continuously maintain in a
separate account with its custodian an equivalent amount of the
securities sold short or securities convertible into or
exchangeable for such securities at no additional cost. A Fund is
said to have a short position in the securities sold until it
delivers to the broker-dealer the securities sold. A Fund may
close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities
sold short, rather than by delivering portfolio securities.
Short sales may protect a Fund against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such portfolio securities should be wholly
or partially offset by a corresponding gain in the short position.
However, any potential gains in such portfolio securities should
be wholly or partially offset by a corresponding loss in the short
position. The extent to which such gains or losses are offset
will depend upon the amount of securities sold short relative to
the amount the Fund owns, either directly or indirectly, and, in
the case where the Fund owns convertible securities, changes in
the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss and if the price declines during this period,
the Fund will realize a short-term capital gain. Any realized
short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium,
dividend or interest which the Fund may have to pay in connection
with such short sale. Certain provisions of the Internal Revenue
Code may limit the degree to which a Fund is able to enter into
short sales. There is no limitation on the amount of each Fund's
assets that, in the aggregate, may be deposited as collateral for
the obligation to replace securities borrowed to effect short
sales and allocated to segregated accounts in connection with
short sales. No Fund currently expects that more than 5% of its
total assets would be involved in short sales against the box.
Repurchase Agreements
Each Fund may invest in repurchase agreements, provided that
it will not invest more than 15% (High-Yield Municipals Portfolio)
or 10% (Managed Municipals, Intermediate Municipals, and Municipal
Money Portfolio) of net assets in repurchase agreements maturing
in more than seven days and any other illiquid securities. A
repurchase agreement is a sale of securities to a Fund in which
the seller agrees to repurchase the securities at a higher price,
which includes an amount representing interest on the purchase
price, within a specified time. In the event of bankruptcy of the
seller, a Fund could experience both losses and delays in
liquidating its collateral.
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 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 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
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, S&P, or
Fitch IBCA 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 Portfolio.
Zero Coupon Bonds
Each of Intermediate Municipals, Managed Municipals, and
High-Yield Municipals Portfolio 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.
Tender Option Bonds; Trust Receipts
Each Fund may purchase tender option bonds and trust
receipts. A tender option bond is a Municipal Security (generally
held pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially higher
than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face
value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the
difference between the Municipal Security's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the
date of such determination. Thus, after payment of this fee, the
security holder effectively holds a demand obligation that bears
interest at the prevailing short-term tax-exempt rate. The
Adviser will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Securities, of any
custodian, and of the third-party provider of the tender option.
In certain instances and for certain tender option bonds, the
option may be terminable in the event of a default in payment of
principal or interest on the underlying Municipal Securities and
for other reasons. A Fund may invest up to 10% of net assets in
tender option bonds and trust receipts.
Interfund Borrowing and Lending Program
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Funds may lend money to and borrow money
from other mutual funds advised by the Adviser. A Fund will
borrow through the program when borrowing is necessary and
appropriate and the costs are equal to or lower than the costs of
bank loans.
Portfolio Turnover
Although the 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. A high rate of
portfolio turnover, 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 Portfolio 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 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.
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 Portfolio 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.
- -----------
/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.
- --------------
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 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 accurate
predictions of changes in the level and direction of interest
rates and other factors. Should those predictions be incorrect,
the return might have been better had the transaction not been
attempted; however, in the absence of the ability to use futures
contracts, the Adviser might have taken portfolio actions in
anticipation of the same market movements with similar investment
results but, presumably, at greater transaction costs.
A 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.
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 Portfolio 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 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%].
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 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). 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.
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.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
The Funds and Portfolios operate 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). A Fund or Portfolio may not:
(i) invest in a security if, with respect to 75% of its
assets, as a result of such investment, more than 5% of its total
assets (taken at market value at the time of 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 [Funds only] except that all or substantially all of the
assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund [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 it and guaranteed by such guarantor
(plus any other investments in securities issued by the guarantor)
does not exceed 10% of its total assets];/5/ /6/
- --------------
/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.
/6/ Notwithstanding the foregoing, and in accordance with Rule 2a-
7 of the Investment Company Act of 1940 (the "Rule"), Municipal
Money Fund and Municipal Money Portfolio will not, immediately
after the acquisition of any security (other than a Government
Security or certain other securities as permitted under the Rule),
invest more than 5% of its total assets in the securities of any
one issuer; provided, however, that each may invest up to 25% of
its total assets in First Tier Securities (as that term is defined
in the Rule) of a single issuer for a period of up to three
business days after the purchase thereof.
- --------------
(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, High-Yield Municipals Fund, and High-Yield
Municipals Portfolio only] but it may make margin deposits in
connection with futures and options transactions;
(iii) make loans, although it may (a) participate in an
interfund lending program with other Stein Roe Funds and
Portfolios provided that no such loan may be made if, as a result,
the aggregate of such loans would exceed 33 1/3% of the value of
its total assets; (b) purchase money market instruments and enter
into repurchase agreements; and (c) acquire publicly distributed
or privately placed debt securities;
(iv) borrow except that it may (a) borrow for nonleveraging,
temporary or emergency purposes and (b) engage in reverse
repurchase agreements and make other borrowings, provided that the
combination of (a) and (b) shall not exceed 33 1/3% of the value
of its total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law; it may borrow from banks, other Stein Roe Funds
and Portfolios, and other persons to the extent permitted by
applicable law;
(v) mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by it
except (a) as may be necessary in connection with borrowings
mentioned in (iv) above, and [Intermediate Municipals, Managed
Municipals, High-Yield Municipals Fund, and High-Yield Municipals
Portfolio 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, [Funds only] except that all or substantially
all of the assets of the Fund may be invested in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund;
(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, High-Yield Municipals Fund and High-Yield
Municipals Portfolio only] except that it may enter into futures
and options transactions;
(ix) [Municipal Money Fund only] purchase any securities
other than those described under Investment Policies-Municipal
Money Fund, and under Portfolio Investments and Strategies;
[Managed Municipals only] purchase any securities other than those
described under Investment Policies-Managed Municipals and under
Portfolio Investments and Strategies; or
(x) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions (other than material within brackets)
are fundamental policies of the Funds and Portfolios. The Funds
and Portfolios have also adopted the following restrictions that
may be required by various laws and administrative positions.
These restrictions are not fundamental. None of the following
restrictions shall prevent Municipal Money Fund, Intermediate
Municipals, Managed Municipals, or High-Yield Municipals Fund from
investing all or substantially all of its assets in another
investment company having the same investment objective and
substantially similar investment policies as the Fund. No Fund or
Portfolio may:
(a) own more than 10% of the outstanding voting securities of
an issuer;
(b) invest in companies for the purpose of exercising control
or management;
(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) act as an underwriter of securities, except that it may
participate as part of a group in bidding, or bid alone, for the
purchase of Municipal Securities directly from an issuer for its
own portfolio;
(f) sell securities short unless (1) it 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 it expects to
receive in a recapitalization, reorganization, or other exchange
for securities it contemporaneously owns or has the right to
obtain and provided that it may purchase standby commitments and
securities subject to a demand feature entitling it to require
sellers of securities to the Fund to repurchase them upon demand
by the Fund [Intermediate Municipals, Managed Municipals, High-
Yield Municipals Fund, and High-Yield Municipals Portfolio only]
and that transactions in options, futures, and options on futures
are not treated as short sales;
(g) [Municipal Money Fund, Municipal Money Portfolio,
Intermediate Municipals, and Managed Municipals only] invest more
than 10% of its net assets (taken at market value at the time of a
particular investment) in illiquid securities, including
repurchase agreements maturing in more than seven days; [High-
Yield Municipals Fund and High-Yield Municipals Portfolio only]
invest more than 15% of its net assets (taken at market value at
the time of a particular investment) in illiquid securities,
including repurchase agreements maturing in more than seven days;
(h) purchase shares of other open-end investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
(i) 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;
(j) [Intermediate Municipals, Managed Municipals, High-Yield
Municipals Fund, and High-Yield Municipals Portfolio only] write
an option on a security unless the option is issued by the Options
Clearing Corporation, an exchange, or similar entity;
(k) [Intermediate Municipals, Managed Municipals, High-Yield
Municipals Fund, and High-Yield Municipals Portfolio only]
purchase a put or call option if the aggregate premiums paid for
all put and call options exceed 20% of its net assets (less the
amount by which any such positions are in-the-money), excluding
put and call options purchased as closing transactions.
ADDITIONAL INVESTMENT CONSIDERATIONS
Medium-quality Municipal Securities are obligations of
municipal issuers that, in the opinion of the Adviser, possess
adequate, but not outstanding, capacities to service the
obligations. Lower-quality Municipal Securities are obligations
of issuers that are considered predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer
default and bankruptcy, and are commonly referred to as "junk
bonds." The characteristics attributed to medium- and lower-
quality obligations by the Adviser are much the same as those
attributed to medium- and lower-quality obligations by rating
services (see the Appendix to the Prospectus). 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 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 Adviser believes to
be financially sound, there can be no assurance that they will be
able to honor their obligations to the Fund.
* * * * *
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
build wealth for generations, it has been guided by three primary
objectives which it believes are the foundation of a successful
investment program. These objectives are preservation of capital,
limited volatility through managed risk, and consistent above-
average returns, as appropriate for the particular client or
managed account.
Because every investor's needs are different, Stein Roe
mutual funds are designed to accommodate different investment
objectives, risk tolerance levels, and time horizons. In
selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
In addition, the Adviser believes that investment in a high
yield fund provides an opportunity to diversify an investment
portfolio because the economic factors that affect the performance
of high-yield, high-risk debt securities differ from those that
affect the performance of high-quality debt securities or equity
securities.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
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 mutual funds disclose in their Statement
of Additional Information, as a reminder to any such bank or
institution, that it must be registered as a dealer in Texas.
You may purchase (or redeem) shares through certain broker-
dealers, banks, or other intermediaries ("Intermediaries"). These
Intermediaries may charge for their services or place limitations
on the extent to which you may use the services offered by the
Trust. There are no charges or limitations imposed by the Trust,
other than those described in the prospectus, if shares are
purchased (or redeemed) directly from the Trust. Some
Intermediaries that maintain nominee accounts with the Funds for
their clients for whom they hold Fund shares charge an annual fee
of up to 0.35% of the average net assets held in such accounts for
accounting, servicing, and distribution services they provide with
respect to the underlying Fund shares. The Adviser and the Funds'
transfer agent share in the expense of these fees, and the Adviser
pays all sales and promotional expenses.
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 January, the third Monday in
February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays
falls on a Saturday or Sunday, the NYSE will be closed on the
preceding Friday or the following Monday, respectively. Net asset
value will not be determined on days when the NYSE is closed
unless, in the judgment of the Board of Trustees, net asset value
of a Fund should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Central time.
The Trust intends to pay all redemptions in cash and is
obligated to redeem shares of a Fund solely in cash up to the
lesser of $250,000 or one percent of the net assets of that Fund
during any 90-day period for any one shareholder. However,
redemptions in excess of such limit may be paid wholly or partly
by a distribution in kind of securities. If redemptions were made
in kind, the redeeming shareholders might incur transaction costs
in selling the securities received in the redemptions.
Although Municipal Money Fund does not currently charge a fee
to its shareholders for the use of the special Check-Writing
Redemption Privilege offered by that Fund, described under How to
Redeem Shares in the Prospectus, the Fund pays for the cost of
printing and mailing checks to its shareholders and pays charges
of the bank for payment of each check. The Trust reserves the
right to establish a direct charge to shareholders for use of the
Privilege and both the Trust and the bank reserve the right to
terminate this service.
The 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.
The Trust reserves the right to redeem shares in any account
and send the proceeds to the owner of record if the shares in the
account do not have a value of at least $1,000. If the value of
the account is more than $10, a shareholder would be notified that
his account is below the minimum and would be allowed 30 days to
increase the account before the redemption is processed. The
Trust reserves the right to redeem any account with a value of $10
or less without prior written notice to the shareholder. Due to
the proportionately higher costs of maintaining small accounts,
the transfer agent may charge and deduct from the account a $5 per
quarter minimum balance fee if the account is a regular account
with a balance below $2,000 or an UGMA account with a balance
below $800. This minimum balance fee does not apply to: (1)
shareholders whose accounts in the Stein Roe Funds total $50,000
or more, (2) Stein Roe IRAs, (3) other Stein Roe prototype
retirement plans, (4) accounts with automatic investment plans
(unless regular investments have been discontinued), or (5)
omnibus or nominee accounts. The transfer agent may waive the
fee, at its discretion, in the event of significant market
corrections. 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 the Trust:
<TABLE>
<CAPTION>
Position(s) held Principal occupation(s)
Name with the Trust during past five years
- ------------------ ------------------------ -----------------------------------
<S> <C> <C>
William D. Andrews, 51 (4) Executive Vice-President Executive vice president of Stein Roe & Farnham
Incorporated (the "Adviser")
Gary A. Anetsberger, 42(4) Senior Vice-President Chief financial officer and chief administrative
officer of the Mutual Funds division of the Adviser;
senior vice president of the Adviser since April 1996;
vice president of the Adviser prior thereto
William W. Boyd, 71 Trustee Chairman and director of Sterling Plumbing
(2)(3)(4) (manufacturer of plumbing products)
Thomas W. Butch, 41 Trustee; President President of the Mutual Funds division and director of
(1)(2)(4) the Adviser since March 1998; senior vice president of
the Adviser from Sept. 1994 to March 1998; first vice
president, corporate communications, of Mellon Bank
Corporation prior thereto
Kevin M. Carome, 42 (4) Vice-President; Associate General Counsel and (since Feb. 1995) Vice
Assistant Secretary President of Liberty Financial Companies, Inc.; General
Counsel and Secretary of the Adviser since Jan. 1998
Lindsay Cook, 46 (1) (4) Trustee Executive vice president of Liberty Financial
Companies, Inc. (the indirect parent of the Adviser)
since March 1997; senior vice president prior thereto
Joanne T. Costopoulos, 51 Vice-President Senior portfolio manager of the Adviser; senior vice
president of the Adviser since Nov. 1995; vice
president of the Adviser from Jan. 1994 to Nov. 1995;
associate of the Adviser prior thereto
Douglas A. Hacker,43(3)(4) Trustee Senior vice president and chief financial officer of
UAL, Inc. (airline) since July 1994; senior vice
president, finance of UAL, Inc. prior thereto
Loren A. Hansen, 50 (4) Executive Vice-President Chief investment officer/equity of Colonial Management
Associates, Inc. since 1997; executive vice president
of the Adviser since Dec. 1995; vice president of The
Northern Trust (bank) prior thereto
Janet Langford Kelly, 40 Trustee Senior vice president, secretary and general counsel of
(3)(4) Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner, Sidley &
Austin (law firm) prior thereto
Lynn C. Maddox, 57 Vice-President Senior vice president of the Adviser
Charles R. Nelson,57(3)(4) Trustee Van Voorhis Professor of Political Economy of the
University of Washington
Nicolette D. Parrish,48(4) Vice-President; Senior legal assistant for the Adviser
Assistant Secretary
Sharon R. Robertson, 36(4) Controller Accounting manager for the Adviser's Mutual Funds
division
Janet B. Rysz, 43 (4) Assistant Secretary Senior legal assistant and assistant secretary of the
Adviser
Thomas C. Theobald, 61 Trustee Managing director, William Blair Capital Partners
(3)(4) (private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation, 1987-1994
Scott E. Volk, 27 (4) Treasurer Financial reporting manager for the Adviser's Mutual
Funds division since Oct. 1997; senior auditor with
Ernst & Young LLP from Sept. 1993 to April 1996 and
from Oct. 1996 to Sept. 1997; financial analyst with
John Nuveen & Company Inc. from May 1996 to Sept. 1996
Veronica M. Wallace, 52 Vice-President Vice president of the Adviser since March 1998;
portfolio manager for the Adviser since Sept. 1995;
trader in taxable short-term instruments for the
Adviser prior thereto
Heidi J. Walter, 31 (4) Vice-President; Vice president of the Adviser since March 1998; senior
Secretary legal counsel for the Adviser since Feb. 1998; legal
counsel for the Adviser from March 1995 to Jan. 1998;
associate with Beeler Schad & Diamond, PC (law firm)
prior thereto
Hans P. Ziegler, 57 (4) Executive Vice-President Chief executive officer of the Adviser since May 1994;
president of the Investment Counsel division of the
Adviser prior thereto
Margaret O. Zwick, 32 (4) Assistant Treasurer Project manager for the Adviser's Mutual Funds division
since April 1997; compliance manager, Aug. 1995 to
April 1997; compliance accountant, Jan. 1995 to July
1995; section manager, Jan. 1994 to Jan. 1995;
supervisor prior thereto
<FN>
____________________________
(1) Trustee who is an "interested person" of the Trust and of the
Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
(4) This person also holds the corresponding officer or trustee
position with SR&F Base Trust.
</TABLE>
Certain of the trustees and officers of the Trust and of SR&F
Base Trust are trustees or officers of other investment companies
managed by the Adviser. Mr. Anetsberger, Mr. Butch, and Ms.
Walter are also officers of Liberty Funds Distributor, Inc., the
Funds' distributor. The address of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Hacker is P.O. Box 66100,
Chicago, IL 60666; that of Ms. Kelly is Three First National
Plaza, Chicago, Illinois 60602; that of Mr. Nelson is Department
of Economics, University of Washington, Seattle, Washington 98195;
that of Mr. Theobald is Suite 3300, 222 West Adams Street,
Chicago, IL 60606; and that of the officers is One South Wacker
Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from the Trust. In compensation for
their services to the Trust, trustees who are not "interested
persons" of the Trust or the Adviser are paid an annual retainer
plus an attendance fee for each meeting of the Board or standing
committee thereof attended. The Trust has no retirement or
pension plan. The following table sets forth compensation paid
during the fiscal year ended June 30, 1998 to each of the
trustees:
Compensation from the
Stein Roe Fund Complex*
-----------------------
Aggregate Compensation Total Average
Name of Trustee from the Trust Compensation Per Series
- ------------------- -------------------- ------------ ----------
Timothy K. Armour** -0- -0- -0-
Thomas W. Butch** -0- -0- -0-
Lindsay Cook -0- -0- -0-
Kenneth L. Block** $ 7,150 $ 49,000 $1,114
William W. Boyd 15,150 124,552 2,831
Douglas A. Hacker 13,950 120,198 2,732
Janet Langford Kelly 13,950 117,000 2,659
Francis W. Morley** 7,150 49,000 1,114
Charles R. Nelson 15,150 124,202 2,823
Thomas C. Theobald 13,950 120,198 2,732
_______________
* At June 30, 1998, the Stein Roe Fund Complex consisted of four
series of the Trust, four series of Stein Roe Income Trust, one
series of Stein Roe Institutional Trust, 11 series of Stein Roe
Investment Trust, 10 series of Stein Roe Advisor Trust, one
series of Stein Roe Trust, and 13 series of SR&F Base Trust.
** Messrs. Block and Morley retired as trustees on Dec. 31, 1997.
Mr. Armour resigned as a trustee and Mr. Butch was elected a
trustee on April 14, 1998.
FINANCIAL STATEMENTS
Please refer to the Funds' June 30, 1998 Financial Statements
(statements of assets and liabilities and schedules of investments
as of June 30, 1998 and the statements of operations, changes in
net assets, and notes thereto) and the report of independent
auditors contained in the June 30, 1998 Annual Report of the
Funds. The Financial Statements and the report of independent
auditors (but no other material from the Annual Report) are
incorporated herein by reference. The Annual Report may be
obtained at no charge by telephoning 800-338-2550.
PRINCIPAL SHAREHOLDERS
As of September 30, 1998, the only persons known by the 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 were as
follows:
Approximate %
of Outstanding
Name and Address Fund Shares Held
- ---------------------- ---------------------- --------------
U.S. Bank National Municipal Money Fund 11.43%
Association* Intermediate Municipals 21.81
410 N. Michigan Avenue Managed Municipals 7.17
Chicago, IL 60611 High-Yield Municipals Fund 13.17
Charles Schwab & Co., Inc.** Intermediate Municipals 11.57
Attn: Mutual Fund Dept. High-Yield Municipals Fund 12.35
101 Montgomery Street
San Francisco, CA 94104
___________________
*Shares held as custodian.
**Shares held for accounts of customers.
The following table shows shares of the Funds as of September
30, 1998, held by the categories of persons indicated and in each
case the approximate percentage of outstanding shares represented:
Clients of the Adviser
in their Client Accounts* Trustees and Officers
------------------------- ---------------------
Shares Held Percent Shares Held Percent
----------- ------- ----------- -------
Municipal Money Fund 35,975,868 31.22% 303,126 **
Intermediate Municipals 5,834,667 33.29 25,777 **
Managed Municipals 15,849,806 25.75 88,029 **
High-Yield Municipals 6,964,947 24.50 21,024 **
_________________
*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 Portfolio, and Municipal Money Portfolio.
The Adviser also provides administrative services to each Fund and
Portfolio. The Adviser is a wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), the Funds' transfer agent, which is a
wholly owned subsidiary of Liberty Financial Companies, Inc.
("Liberty Financial"), which is a majority owned subsidiary of LFC
Holdings, Inc., which is a wholly owned subsidiary of Liberty
Mutual Equity Corporation, which is a wholly owned subsidiary of
Liberty Mutual Insurance Company. Liberty Mutual Insurance
Company is a mutual insurance company, principally in the
property/casualty insurance field, organized under the laws of
Massachusetts in 1912.
The directors of the Adviser are Kenneth R. Leibler, C. Allen
Merritt, Jr., Thomas W. Butch, and Hans P. Ziegler. Mr. Leibler
is President and Chief Executive Officer of Liberty Financial; Mr.
Merritt is Chief Operating Officer of Liberty Financial; Mr. Butch
is President of the Adviser's Mutual Funds division; and Mr.
Ziegler is Chief Executive Officer of the Adviser. The business
address of Messrs. Leibler and Merritt is Federal Reserve Plaza,
Boston, Massachusetts 02210; and that of Messrs. Butch and Ziegler
is One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of June 30, 1998, the Adviser managed
over $29.1 billion in assets: over $11.2 billion in equities and
over $17.9 billion in fixed income securities (including $1.7
billion in municipal securities). The $29.1 billion in managed
assets included over $9.3 billion held by open-end mutual funds
managed by the Adviser (approximately 14% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 289,000 shareholders. The $9.3 billion in
mutual fund assets included over $748 million in over 42,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 9,000 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At June 30, 1998, the Adviser employed 18
research analysts and 55 account managers. The average
investment-related experience of these individuals was 24 years.
Stein Roe Counselor [service mark] and Stein Roe Personal
Counselor [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 Stein Roe Counselor [service mark] are free to self direct
their investments while considering the Adviser's recommendations;
shareholders participating in Stein Roe Personal Counselor
[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 descriptions of the Adviser,
administrative agreement, management agreements, fees, expense
limitations, and transfer agency services under Management and Fee
Table in the Prospectus, which is incorporated herein by
reference. The table below shows gross fees paid and any expense
reimbursements by the Adviser for the past three fiscal years:
YEAR YEAR YEAR
TYPE OF ENDED ENDED ENDED
FUND PAYMENT 6/30/97 6/30/96 6/30/95
- ---------------- ------------ -------- -------- ---------
Municipal Money Advisory fee $ - $ - $ 169,982
Fund Administrative fee 308,403 300,244 248,793
Reimbursement 195,244 194,629 194,035
Municipal Money
Portfolio Management fee 358,516 351,742 289,880
Intermediate
Municipals Advisory fee - - 1,220,311
Management fee 872,480 876,108 -
Administrative fee 274,116 274,088 -
Reimbursement 226,022 240,300 227,352
Managed Muni- Advisory fee - - 3,261,714
cipals Management fee 2,438,272 2,482,110 -
Administrative fee 665,818 674,444 -
High-Yield Muni- Advisory fee - - 1,549,376
cipals Fund Management fee 803,747 1,255,595 -
Administrative fee 401,552 368,923 -
High-Yield Muni- Management fee 579,690 - -
cipals Portfolio
The Adviser provides office space and executive and other
personnel to the Funds and bears any sales or promotional
expenses. Each Fund pays all expenses other than those paid by
the Adviser, including but not limited to printing and postage
charges, securities registration and custodian fees, and expenses
incidental to its organization.
The administrative agreement provides that the Adviser shall
reimburse each 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. In addition, in the interest of further limiting
expenses, from time to time, the Adviser may voluntarily waive its
fees and/or absorb certain expenses for a Fund, as described in
the Prospectus under Fee Table. Any such reimbursements will
enhance the yield of such Fund.
Each management agreement provides that neither the Adviser
nor any of its directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to
the Trust or any shareholder of the Fund (or Portfolio) for any
error of judgment, mistake of law or any loss arising out of any
investment, or for any other act or omission in the performance by
the Adviser of its duties under the agreement, except for
liability resulting from willful misfeasance, bad faith or gross
negligence on the Adviser's part in the performance of its duties
or from reckless disregard by the Adviser of its obligations and
duties under that agreement.
Any expenses that are attributable solely to the
organization, operation, or business of a series of the Trust are
paid solely out of the assets of that series. Any expenses
incurred by the Trust that are not solely attributable to a
particular series 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 these services, the Adviser receives an annual fee
of $25,000 per Fund plus .0025 of 1% of average net assets over
$50 million. During the fiscal years ended June 30, 1996, 1997
and 1998, the Adviser received aggregate fees of $147,330,
$125,437 and $125,832, respectively, from the Trust for services
performed under this agreement.
DISTRIBUTOR
Shares of the Funds are distributed by Liberty Funds
Distributor, Inc. ("Distributor"), One Financial Center, Boston,
MA 02111, under a Distribution Agreement. The Distributor is a
subsidiary of Colonial Management Associates, Inc., which is an
indirect subsidiary of Liberty Financial. The Distribution
Agreement continues in effect from year to year, provided such
continuance is approved annually (1) by a majority of the trustees
or by a majority of the outstanding voting securities of the
Trust, and (2) by a majority of the trustees who are not parties
to the Agreement or interested persons of any such party. The
Trust has agreed to pay all expenses in connection with
registration of its shares with the Securities and Exchange
Commission and auditing and filing fees in connection with
registration of its shares under the various state blue sky laws
and assumes the cost of preparation of prospectuses and other
expenses.
As agent, the Distributor 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. The Distributor offers the Funds' shares only on a
best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for the Trust,
as described under Management 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 Fund of
0.140% of average daily net assets. The Board of Trustees
believes the charges by SSI are comparable to those of other
companies performing similar services. (See Investment Advisory
Services.) Under a separate agreement, SSI also provides certain
investor accounting services to each Portfolio.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02101, is the custodian for the Trust and
SR&F Base Trust. It is responsible for holding all securities and
cash, receiving and paying for securities purchased, delivering
against payment securities sold, receiving and collecting income
from investments, making all payments covering expenses, and
performing other administrative duties, all as directed by
authorized persons. The custodian does not exercise any
supervisory function in such matters as purchase and sale of
portfolio securities, payment of dividends, or payment of expenses
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 Trust and each Portfolio are
Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois
60606. The independent auditors audit and report on the annual
financial statements, review certain regulatory reports and the
federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trusts.
PORTFOLIO TRANSACTIONS
For the purposes of discussion under Portfolio Transactions,
the term "Fund" refers to Municipal Money Fund, Municipal Money
Portfolio, Intermediate Municipals, Managed Municipals, High-Yield
Municipals Fund, and High-Yield Municipals Portfolio.
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures contracts. Portfolio
securities are purchased both in underwritings and in the over-
the-counter market. The Funds paid no commissions on futures
transactions or any other transactions during the past three
fiscal years.
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, 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 selecting brokers and
dealers to effect portfolio transactions is to seek the best
combination of net price and execution. The best net price,
giving effect to brokerage commissions, if any, is an important
factor in this decision; however, a number of other judgmental
factors may also enter into the decision. These factors include
the Adviser's knowledge of negotiated commission rates currently
available and other current transaction costs; the nature of the
security being purchased or sold; the size of the transaction; the
desired timing of the transaction; the activity existing and
expected in the market for the particular security;
confidentiality; the execution, clearance and settlement
capabilities of the broker or dealer selected and others
considered; the Adviser's knowledge of the financial condition of
the broker or dealer selected and such other brokers and dealers;
and the Adviser's knowledge of actual or apparent operation
problems of any broker or dealer. Recognizing the value of these
factors, the Adviser may cause a client to pay a brokerage
commission in excess of that which another broker may have charged
for effecting the same transaction.
The Adviser has established internal policies for the
guidance of its trading personnel, specifying minimum and maximum
commissions to be paid for various types and sizes of transactions
and effected for clients in those cases where the Adviser has
discretion to select the broker or dealer by which the transaction
is to be executed. Transactions which vary from the guidelines
are subject to periodic supervisory review. These guidelines are
reviewed and periodically adjusted, and the general level of
brokerage commissions paid is periodically reviewed by the
Adviser. Evaluations of the reasonableness of brokerage
commissions, based on the factors described in the preceding
paragraph, are made by the Adviser's trading personnel while
effecting portfolio transactions. The general level of brokerage
commissions paid is reviewed by the Adviser, and reports are made
annually to the Board of Trustees.
Where more than one broker or dealer is believed to be
capable of providing a combination of best net price and execution
with respect to a particular portfolio transaction, the Adviser
often selects a broker or dealer that has furnished it with
investment research products or services such as: economic,
industry or company research reports or investment
recommendations; subscriptions to financial publications or
research data compilations; compilations of securities prices,
earnings, dividends, and similar data; computerized data bases;
quotation equipment and services; research or analytical computer
software and services; or services of economic and other
consultants. Such selections are not made pursuant to any
agreement or understanding with any of the brokers or dealers.
However, the Adviser does in some instances request a broker to
provide a specific research or brokerage product or service which
may be proprietary to the broker or produced by a third party and
made available by the broker and, in such instances, the broker in
agreeing to provide the research or brokerage product or service
frequently will indicate to the Adviser a specific or minimum
amount of commissions which it expects to receive by reason of its
provision of the product or service. The Adviser does not agree
with any broker to direct such specific or minimum amounts of
commissions; however, the Adviser does maintain an internal
procedure to identify those brokers who provide it with research
products or services and the value of such products or services,
and the Adviser endeavors to direct sufficient commissions on
client transactions (including commissions on transactions in
fixed income securities effected on an agency basis and, in the
case of transactions for certain types of clients, dealer selling
concessions on new issues of securities) to ensure the continued
receipt of research products or services the Adviser believes are
useful.
In a few instances, the Adviser receives from a broker a
product or service which is used by the Adviser both for
investment research and for administrative, marketing, or other
non-research or brokerage purposes. In such an instance, the
Adviser makes a good faith effort to determine the relative
proportion of its use of such product or service which is for
investment research or brokerage, and that portion of the cost of
obtaining such product or service may be defrayed through
brokerage commissions generated by client transactions, while the
remaining portion of the costs of obtaining the product or service
is paid by the Adviser in cash. The Adviser may also receive
research in connection with selling concessions and designations
in fixed income offerings.
The Fund does not believe it pays brokerage commissions
higher than those obtainable from other brokers in return for
research or brokerage products or services provided by brokers.
Research or brokerage products or services provided by brokers may
be used by the Adviser in servicing any or all of the clients of
the Adviser and such research products or services may not
necessarily be used by the Adviser in connection with client
accounts which paid commissions to the brokers providing such
products or services.
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 for purchases of Municipal Securities in
underwritten offerings. Each Fund 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 to continue to attempt to
recapture underwriting discounts or selling concessions.
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund and 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 a 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.)
Because capital gains distributions reduce net asset value,
if a shareholder purchases shares shortly before a record date he
will, in effect, receive a return of a portion of his investment
in such distribution. The distribution would nonetheless be
taxable to him, even if the net asset value of shares were reduced
below his cost. However, for federal income tax purposes the
shareholder's original cost would continue as his tax basis.
Because the taxable portion of each Fund's investment income
consists primarily of interest, none of its dividends, whether or
not treated as "exempt-interest dividends," will qualify under the
Internal Revenue Code for the dividends received deduction
available to corporations.
Interest on indebtedness incurred or continued by
shareholders to purchase or carry shares of a Fund is not
deductible for federal income tax purposes. Under rules applied
by the Internal Revenue Service to determine whether borrowed
funds are used for the purpose of purchasing or carrying
particular assets, the purchase of shares may, depending upon the
circumstances, be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to the
purchase of shares.
If you redeem at a loss shares of a Fund held for six months
or less, that loss will not be recognized for federal income tax
purposes to the extent of exempt-interest dividends you have
received with respect to those shares. If any such loss exceeds
the amount of the exempt-interest dividends you received, that
excess loss will be treated as a long-term capital loss to the
extent you receive any long-term capital gain distribution with
respect to those shares.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds
should consult their own tax advisors before purchasing shares.
Such persons may find investment in the Funds unsuitable for tax
reasons. Corporate investors may also wish to consult their own
tax advisors 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
For example, the yields of Municipal Money Fund for the
seven-day period ended June 30, 1997 were:
$0.0.000575346 365
-------------- ---
Current Yield = $1.00 x 7 = 3.00%
[1+$0.0.000575346]365/7
---------------------
Effective Yield = $1.00 - 1 = 3.04%
Tax-Equivalent Current Yield = 4.97% (assuming 39.6% tax rate)
Tax-Equivalent Effective Yield = 5.03% (assuming 39.6% tax rate)
The average dollar-weighted portfolio maturity for the seven
days ended June 30, 1998, was 68 days.
In addition to fluctuations reflecting changes in net income
of the Fund, resulting from changes in its proportionate share of
Municipal Money Portfolio's investment income and expenses, the
Fund's yield also would be affected if the Fund or Municipal Money
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 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 Fund
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals Fund 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.
6
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1) - 1]
Where: a = dividends and interest earned during the period.
(For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which net
asset value is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of the Fund for the period.
For example, the Yields of the Funds for the 30-day period ended
June 30, 1998, were:
Intermediate Municipals
Yield = 3.84%
Tax-Equivalent Yield = 6.36%
(assuming 39.6% tax rate)
Managed Municipals
Yield = 4.28%
Tax-Equivalent Yield = 7.09%
(assuming 39.6% tax rate)
High-Yield Municipals Fund
Yield = 4.45%
Tax-Equivalent Yield = 7.37%
(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.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
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, 1998, were:
TOTAL RETURN AVERAGE ANNUAL
FUND TOTAL RETURN PERCENTAGE TOTAL RETURN
- --------------------- ------------ ------------ -------------
Municipal Money Fund
1 year $1,031 3.10% 3.10%
5 years 1,150 15.04 2.84
10 years 1,414 41.43 3.53
Intermediate Municipals
1 year 1,068 6.84 6.84
5 years 1,301 30.10 5.40
10 years 1,966 96.61 6.99
Managed Municipals
1 year 1,084 8.37 8.37
5 years 1,335 33.50 5.95
10 years 2,157 115.74 7.99
High-Yield Municipals Fund
1 year 1,083 8.32 8.32
5 years 1,381 38.12 6.67
10 years 2,163 116.32 8.02
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.
A Fund may 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
Atlantic Monthly
Associated Press
Barron's
Bloomberg
Boston Globe
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Investment Advisor
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Marketing Alert
Gourmet
Individual Investor
Investment Dealers' Digest
Investment News
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Money on Line
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsday
Newsweek
New York Daily News
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
Reuters
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Street.com
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
In advertising and sales literature, 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.
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(tm)-
Stockbroker and General Purpose categories; and the Lipper All
Short-Term Tax-Free Categories(tm).
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(c), a North Palm Beach (Florida)
financial reporting service, in its BANK RATE MONITOR(c) National
Index are averages of the personal account rates offered on the
Wednesday prior to the date of publication by one hundred leading
banks and thrift institutions in the top ten Consolidated Standard
Metropolitan Statistical Areas. Account minimums range upward
from $2,500 in each institution and compounding methods vary.
Super N.O.W. accounts generally offer unlimited checking, while
money market deposit accounts generally restrict the number of
checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution. Bank account deposits may be
insured. Shareholder accounts in the Fund are not insured. Bank
passbook savings accounts compete with money market mutual fund
products with respect to certain liquidity features but may not
offer all of the features available from a money market mutual
fund, such as check writing. Bank passbook savings accounts
normally offer a fixed rate of interest while the yield of the
Fund fluctuates. Bank checking accounts normally do not pay
interest but compete with money market mutual funds with respect
to certain liquidity features (e.g., the ability to write checks
against the account). Bank certificates of deposit may offer
fixed or variable rates for a set term. (Normally, a variety of
terms are available.) Withdrawal of these deposits prior to
maturity will normally be subject to a penalty. In contrast,
shares of the Fund are redeemable at the next determined net asset
value (normally, $1.00 per share) after a request is received,
without charge.
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals Fund
Intermediate Municipals, Managed Municipals, and High-Yield
Municipals Fund may compare performance to the benchmarks
indicated below:
Benchmark Fund(s)
- ------------------------------------ ---------------------------
Lehman Brothers Municipal Bond Index High-Yield Municipals Fund,
Managed Municipals
Lehman Brothers 10-Year Municipal
Bond Index Intermediate Municipals
Lehman Brothers 7-Year Municipal
Bond Index Intermediate Municipals
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 Fund
Lipper Municipal Bond Fund Average Intermediate Municipals,
Managed Municipals,
High-Yield Municipals Fund
Morningstar Municipal Bond
(General) Funds Average Managed Municipals,
Intermediate Municipals
Morningstar Municipal Bond (High-
Yield) Funds Average High-Yield Municipals Fund
Morningstar Long-Term Tax-Exempt
Fund Average High-Yield Municipals Fund,
Intermediate Municipals,
Managed Municipals
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. The 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 its monthly returns less the 3-month
T-bill return) from its load-adjusted total return score. This
numerical score is then translated into rating categories, with
the top 10% labeled five star, the next 22.5% labeled four star,
the next 35% labeled three star, the next 22.5% labeled two star,
and the bottom 10% one star. A high rating reflects either above-
average returns or below-average risk, or both.
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(c), a North Palm Beach (Florida) financial reporting
service, in its BANK RATE MONITOR(c) 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 Fund may also compare their respective tax-equivalent
yields to the average rate for the taxable fund category of the
aforementioned services.
Of course, past performance is not indicative of future
results.
_______________
To illustrate the historical returns on various types of
financial assets, the Funds may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stock
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax-
exempt investing on a hypothetical investment. Tax-exempt income,
however, may be subject to state and local taxes and the federal
alternative minimum tax. Marginal tax brackets are based on 1993
federal tax rates and are subject to change. "Joint Return" is
based on two exemptions and "Single return" is based on one
exemption. The results would differ for different numbers of
exemptions.
TAX-EQUIVALENT YIELDS
A taxable
investment must yield the following
Taxable Income (thousands) Marginal to equal a tax-exempt yield of:
- ----------------------------- Tax -----------------------
- -----------
Joint Return Single Return Bracket 4% 5% 6% 7% 8%
- -------------- ------------- -------- ---- ---- ---- ----- -----
$0.0 - 36.9 $0.0 - 22.1 15% 4.71 5.88 7.06 8.24 9.41
$36.9 - 89.2 $22.1 - 53.5 28% 5.56 6.94 8.33 9.72 11.11
$89.2 - 140.0 $53.5 - 115.0 31% 5.80 7.25 8.70 10.14 11.59
$140.0 - 250.0 $115.0 - 250.0 36% 6.25 7.81 9.38 10.94 12.50
$250.0+ $250.0+ 39.6% 6.62 8.28 9.93 11.59 13.25
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share. Like any investment strategy, dollar cost averaging
can't guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
From time to time, a Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor
[service mark] and the Stein Roe Personal Counselor [service mark]
programs and asset allocation and other investment strategies.
ADDITIONAL INFORMATION ON NET ASSET VALUE-MUNICIPAL
MONEY FUND AND MUNICIPAL MONEY PORTFOLIO
For purposes of discussion in this section, the term "Fund"
refers to Municipal Money Fund and to Municipal Money Portfolio.
Please refer to Net Asset Value in the Prospectus, which is
incorporated herein by reference. The Fund 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
Fund 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 Fund's use of amortized cost and the
maintenance of per share net asset value of $1.00, the Trust has
agreed, with respect to the Fund: (i) to seek to maintain a
dollar-weighted average portfolio maturity appropriate to its
objective of maintaining relative stability of principal and not
in excess of 90 days; (ii) not to purchase a portfolio instrument
with a remaining maturity of greater than thirteen months (for
this purpose the Fund 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 Fund 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 portfolio holdings by the Board of Trustees, at
such intervals as it deems appropriate, to determine whether the
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 Fund'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 use of the amortized cost method of
portfolio valuation to maintain net asset value at $1.00 per
share, the Fund 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 Fund'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 as it deems appropriate. If such deviation exceeds 1/2
of 1%, the Board of Trustees will promptly consider what action,
if any, should be initiated. In the event the Board of Trustees
determines that a deviation exists that may result in material
dilution or other unfair results to investors or existing
shareholders, it will take such action as it considers appropriate
to eliminate or reduce to the extent reasonably practicable such
dilution or unfair results. Actions which the Board might take
include: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; increasing, reducing, or suspending dividends or
distributions from capital or capital gains; or redeeming shares
in kind. The Board might also establish a net asset value per
share by using market values, as a result of which the net asset
value might deviate from $1.00 per share.
GLOSSARY
In-the-money. A call option on a futures contract is "in-the-
money" if the value of the futures contract that is the subject of
the option exceeds the exercise price. A put option on a futures
contract is "in-the-money" if the exercise price exceeds the value
of the futures contract that is the subject of the option.
Issuer. For purposes of diversification under the Investment
Company Act of 1940, identification of the issuer (or issuers) of
a Municipal Security depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the
subdivision, such subdivision would be regarded as the sole
issuer. Similarly, if the obligation is backed only by the assets
and revenues of the non-governmental user, the non-governmental
user would be deemed to be the sole issuer. In addition, if the
bond is backed by the full faith and credit of the U.S.
Government, agencies or instrumentalities of the U.S. Government
or U.S. Government Securities, the U.S. Government or the
appropriate agency or instrumentality would be deemed to be the
sole issuer, and would not be subject to the 5% limitation
applicable to investments in a single issuer as described under
Investment Restrictions in the Prospectus and restriction number
(i) under Investment Restrictions in this Statement of Additional
Information. 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,
Municipal Money Portfolio and Intermediate Municipals, guarantees
and letters of credit described in this paragraph from banks whose
credit is acceptable to these Funds are not restricted in amount
by the restriction against investing more than 25% of their total
assets in securities of non-governmental issuers whose principal
business activities are in the same industry.
Majority of the outstanding voting securities. As used in the
Prospectus and this Statement of Additional Information, this term
means the lesser of (i) 67% or more of the shares at a meeting if
the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Fund.
Municipal Securities. Municipal Securities are debt obligations
issued by or on behalf of the governments of states, territories
or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, the
interest on which is generally exempt from the regular federal
income tax.
The two principal classifications of Municipal Securities are
"general obligation" and "revenue" bonds. "General obligation"
bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. "Revenue"
bonds are usually payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue bonds,
the credit quality of which is normally directly related to the
credit standing of the industrial user involved. Municipal
Securities may bear either fixed or variable rates of interest.
Variable rate securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize
fluctuation in values of the instruments.
Within the principal classifications of Municipal Securities,
there are various types of instruments, including municipal bonds,
municipal notes, municipal leases, custodial receipts, and
participation certificates. Municipal notes include tax, revenue,
and bond anticipation notes of short maturity, generally less than
three years, which are issued to obtain temporary funds for
various public purposes. Municipal lease securities, and
participation certificates therein, evidence certain types of
interests in lease or installment purchases contract obligations
of a municipal authority or other entity. Custodial receipts
represent ownership in future interest or principal payments (or
both) on certain Municipal Securities and are underwritten by
securities dealers or banks. Some Municipal Securities may not be
backed by the faith, credit, and taxing power of the issuer and
may involve "non-appropriation" clauses which provide that the
municipal authority is not obligated to make lease or other
contractual payments, unless specific annual appropriations are
made by the municipality. Each Fund may invest more than 5% of
its net assets in municipal bonds and notes, but does not expect
to invest more than 5% of its net assets in the other Municipal
Securities described in this paragraph.
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 Municipal Money Portfolio, refers to an obligation of one
of the following types, measured from the date of an investment by
the Fund in the obligation (regardless of the duration of the
obligation from the date of original issuance):
1. An obligation of the issuer to pay the entire principal and
accrued interest in no more than thirteen months;
2. An obligation (regardless of the duration before its maturity)
issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities, bearing a variable rate of interest providing
for automatic establishment, no less frequently than annually, of
a new rate or successive new rates of interest by a formula, that
can reasonably be expected to have a market value approximating
its principal amount (a) whenever a new interest rate is
established, in the case of an obligation having a variable rate
of interest, or (b) at any time, in the case of an obligation
having a "floating rate of interest" that changes concurrently
with any change in an identified market interest rate to which it
is pegged;
3. Any other obligation (regardless of the duration before its
maturity) that: (a) has a demand feature entitling the holder to
receive from an issuer the entire principal [or, under the
circumstances described under Investment Policies-Municipal Money
Fund above, the issuer of a guarantee or a letter of credit with
respect to a participation interest in the obligation (acquired
from such issuer)], (i) at any time upon no more than thirty days'
notice or (ii) at specified intervals not exceeding thirteen
months and upon no more than thirty days' notice; (b)(i) has a
variable rate of interest that changes on set dates or (ii) has a
floating rate of interest (as defined in 2 above); and (c) can
reasonably be expected to have a market value approximating its
principal amount (i) whenever a new rate of interest is
established, in the case of an obligation having a variable rate
of interest, or (ii) at any time, in the case of an obligation
having a floating rate of interest; provided that, with respect to
each such obligation that is not rated eligible quality by Moody's
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.
-------------------------
<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:
The following financial statements are incorporated by
reference to Registrant's June 30, 1998 annual report:
Investments as of June 30, 1998 of SR&F Municipal Money
Market Portfolio, Stein Roe Intermediate Municipals Fund,
Stein Roe Managed Municipals Fund and SR&F High-Yield
Municipals Portfolio; and statements of assets and
liabilities as of June 30, 1998, statements of operations
for the year ended June 30, 1998, statements of changes in
net assets for each of the two periods in the period ended
June 30, 1998, notes thereto and report of independent
auditors of SR&F Municipal Money Market Portfolio, Stein
Roe Municipal Money Market Fund, Stein Roe Intermediate
Municipals Fund, Stein Roe Managed Municipals Fund, SR&F
High-Yield Municipals Portfolio, and Stein Roe High-Yield
Municipals Fund.
(b) Exhibits: [Note: As used herein, the term "PEA" refers to a
post-effective amendment to the Registration Statement of the
Registrant under the Securities Act of 1933, No. 2-99356..]
1. (a) Agreement and Declaration of Trust of Registrant as
amended through 10/25/94. (Exhibit 1 to PEA #18.)*
(b) Amendment to Agreement and Declaration of Trust dated
11/1/95. (Exhibit 1(b) to PEA #20.)*
2. (a) By-Laws of Registrant as amended through 2/3/93.
(Exhibit 2 to PEA #21.)*
(b) Amendment to By-Laws dated 2/4/98.
3. None.
4. None.
5. Management agreement between Registrant and
Stein Roe & Farnham Incorporated (the "Adviser") relating
to the series designated Stein Roe Intermediate
Municipals Fund and Stein Roe Managed Municipals Fund as
amended through 2/2/98.
6. Underwriting agreement between Registrant and Liberty
Funds Distributor, Inc. dated 1/1/98.
7. None.
8. Custodian contract between Registrant and State Street
Bank and Trust Company ("Bank") dated 12/31/87 as amended
through May 8, 1995. (Exhibit 8 to PEA #18.)*
9. (a) Transfer agency agreement between Registrant and
SteinRoe Services Inc. dated 8/1/95. (Exhibit 9(a) to
PEA #19.)*
(b) Accounting and Bookkeeping Agreement between
the Registrant and the Adviser dated 11/1/94.
(Exhibit 9(b) to PEA #21.)*
(c) Administrative agreement between Registrant and the
Adviser as amended through 7/1/96. (Exhibit 9(c) to
PEA #21.)*
(d) Sub-transfer agent agreement between SteinRoe Services
Inc. and Colonial Investors Service Center, Inc. as
amended through 4/30/98.
10. Opinions and consents of Bell, Boyd & Lloyd and Ropes &
Gray with respect to the series of Registrant designated
SteinRoe Tax-Exempt Money Fund (now named Stein Roe
Municipal Money Market Fund), Stein Roe Intermediate
Municipals Fund, Stein Roe Managed Municipals Fund, and
Stein Roe High-Yield Municipals Fund. (Exhibit 10 to PEA
#21.)*
11. (a) Opinion and consent of Bell, Boyd & Lloyd regarding
tax-exempt status of standby commitments. (Exhibit
11(a) to PEA #21.)*
(b) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#21.)*
(c) Consent of Ernst & Young LLP.
12. None.
13. Inapplicable.
14. None.
15. None.
16. Schedules for computation of yield and total return.
(Exhibit 16 to PEA #21.)*
17. Financial Data Schedules:
(a) Intermediate Municipals Fund.
(b) High-Yield Municipals Fund.
(c) Municipal Money Market Fund.
(d) Managed Municipals Fund.
18. Inapplicable.
19. (Miscellaneous.)
(a) Funds Application.
(b) Automatic Redemption Services Application. (Exhibit
19(b) to PEA #21.)*
_______________________________
*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 Holders
Title of Series as of July 31, 1998
- ----------------- ------------------------
Stein Roe Intermediate Municipals Fund 2,611
Stein Roe High-Yield Municipals Fund 5,675
Stein Roe Municipal Money Market Fund 2,475
Stein Roe Managed Municipals Fund 7,920
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. In
accordance with Section 17(h) of the 1940 Act, Article Tenth shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
To the extent required under the 1940 Act,
(i) Article Tenth does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Tenth unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are neither "interested
persons" of Registrant, as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel as expressed in a
written opinion; and
(iii) Registrant will not advance attorneys' fees or other
expenses incurred by a Covered Person in connection with a civil
or criminal action, suit or proceeding unless Registrant receives
an undertaking by or on behalf of the Covered Person to repay the
advance (unless it is ultimately determined that he is entitled to
indemnification) and (a) the Covered Person provides security for
his undertaking, or (b) Registrant is insured against losses
arising by reason of any lawful advances, or (c) a majority of the
disinterested, non-party trustees of Registrant or an independent
legal counsel as expressed in a written opinion, determine, based
on a review of readily-available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article Tenth as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that such Covered Person's action
was in, or not opposed to, the best interests of Registrant or to
have been liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such Covered
Person's office.
Article Tenth also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, Stein Roe & Farnham
Incorporated (the "Adviser"), the other investment companies
advised by the Adviser, and persons affiliated with them are
insured against certain expenses in connection with the defense of
actions, suits, or proceedings, and certain liabilities that might
be imposed as a result of such actions, suits, or proceedings.
Registrant will not pay any portion of the premiums for coverage
under such insurance that would (1) protect any trustee or officer
against any liability to Registrant or its shareholders to which
he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect the Adviser
or principal underwriter, if any, against any liability to
Registrant or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence, in the performance of its duties, or by
reason of its reckless disregard of its duties and obligations
under its contract or agreement with the Registrant; for this
purpose the Registrant will rely on an allocation of premiums
determined by the insurance company.
Pursuant to the indemnification agreement dated July 1, 1995,
among the Registrant, its transfer agent and the Adviser,
Registrant, its trustees, officers and employees, its transfer
agent and the transfer agent's directors, officers and employees
are indemnified by Registrant's Adviser against any and all
losses, liabilities, damages, claims and expenses arising out of
any act or omission of the Registrant or its transfer agent
performed in conformity with a request of the Adviser that the
transfer agent and the Registrant deviate from their normal
procedures in connection with the issue, redemption or transfer of
shares for a client of the Adviser.
Registrant, its trustees, officers, employees and representatives
and each person, if any, who controls the Registrant within the
meaning of Section 15 of the Securities Act of 1933 are
indemnified by the distributor of Registrant's shares (the
"distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser is a wholly owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly owned subsidiary of Liberty
Financial Companies, Inc., which a majority owned subsidiary of
LFC Holdings, Inc., which is a wholly owned subsidiary of Liberty
Mutual Equity Corporation, which is a wholly owned subsidiary of
Liberty Mutual Insurance Company. The Adviser acts as investment
adviser to individuals, trustees, pension and profit-sharing
plans, charitable organizations, and other investors. In addition
to Registrant, it also acts as investment adviser to other
investment companies having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (Part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
and other investment companies managed by the Adviser. (The
listed entities are located at One South Wacker Drive, Chicago,
Illinois 60606, except for SteinRoe Variable Investment Trust and
Liberty Variable Investment Trust, which are located at 600
Atlantic Avenue, Boston, MA 02210 and LFC Utilities Trust, which
is located at One Financial Center, Boston, MA 02111.) A list of
such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
Hans P. Ziegler Director; President; Chairman
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President; Trustee Executive V-P
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President; Trustee Exec. V-P; V-P
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President; Trustee Exec. V-P; V-P
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President; Trustee Exec. V-P; V-P
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President; Trustee Exec. V-P; V-P
Kevin M. Carome Vice-President; Asst. Secy.
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive Vice-President
Lynn C. Maddox Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Kevin M. Carome Assistant Secretary
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
William M. Wadden IV Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
LIBERTY VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Kevin M. Carome Secretary
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Manager
Kevin M. Carome Vice-President; Assistant Secretary
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Trustee
Kevin M. Carome Vice-President; Assistant Secretary
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Funds Distributor,
Inc., a subsidiary of Colonial Management Associates, Inc., also
acts in the same capacity to Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial
Trust VI, Colonial Trust VII, Stein Roe Advisor Trust, Stein Roe
Income Trust, Stein Roe Investment Trust, Stein Roe Institutional
Trust and Stein Roe Trust; and sponsor for Colony Growth Plans
(public offering of which was discontinued on June 14, 197l).
The table below lists each director or officer of Liberty Funds
Distributor, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- ---------------
Anderson, Judith Vice President None
Anetsberger, Gary A. Senior Vice President Senior V-P
Babbitt, Debra VP & Compliance Officer None
Ballou, Rich Vice President None
Balzano, Christine R. Vice President None
Bartlett, John Managing Director None
Blumenfeld, Alex Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Butch, Thomas W. Senior Vice President Pres., Trustee
Campbell, Patrick Vice President None
Chrzanowski, Daniel Vice President None
Claiborne, Douglas Vice President None
Clapp, Elizabeth A. Senior Vice President None
Conlin, Nancy L. Director, Clerk None
Davey, Cynthia Sr. Vice President None
Desilets, Marian Vice President None
Devaney, James Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Emerson, Kim P. Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Senior Vice President None
Fifield, Robert Vice President None
Gauger, Richard Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director, Chairman of Board None
Goldberg, Matthew Vice President None
Geunard, Brian Vice President None
Harrington, Tom Sr. Vice President None
Harris, Carla L. Vice President None
Hodgkins, Joseph Sr. Vice President None
Hussey, Robert Senior Vice President None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia Vice President None
Jones, Jonathan Vice President None
Karagiannis, Marilyn Managing Director None
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
McCombe, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morner, Patrick Vice President None
Morse, Jonathan Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Pollard, Brian S. Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Reed, Christopher B. Senior Vice President None
Riegel, Joyce B. Vice President None
Robb, Douglas Vice President None
Sandberg, Travis Vice President None
Scarlott, Rebecca Vice President None
Schulman, David Vice President None
Scoon, Davey Director None
Scott, Michael W. Senior Vice President None
Sideropoulos, Lou Vice President None
Smith, Darren Vice President None
Studer, Eric Vice President None
Sutton, R. Andrew Vice President None
Tambone, James Chief Executive Officer None
Tasiopoulos, Lou President None
Tuttle, Brian Vice President None
Van Etten, Keith Vice President None
Villanova, Paul Vice President None
Wallace, John Vice President None
Walter, Heidi J. Vice President V-P & Secy.
Wess, Valerie Vice President None
Young, Deborah Vice President None
- ---------
* The address of Ms. Harris, Ms. Riegel, Ms. Walter, and Messrs.
Anetsberger, Butch and Pollard is One South Wacker Drive, Chicago,
IL 60606. The address of each other director and officer is One
Financial Center, Boston, MA 02111.
Item 30. Location of Accounts and Records.
Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the
Investment Company Act of 1940 at its principal executive
offices at One South Wacker Drive, Chicago, Illinois 60606.
Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may
be maintained pursuant to Rule 31a-3 at the main office of
Registrant's transfer agent or custodian.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Since the information called for by Item 5A for the Funds (other
than Stein Roe Municipal Money Market Fund, to which this item
does not relate) 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this 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 29th day of October, 1998.
STEIN ROE MUNICIPAL TRUST
By THOMAS W. BUTCH
Thomas W. Butch
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
THOMAS W. BUTCH President and Trustee Oct. 29, 1998
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President Oct. 29, 1998
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller Oct. 29, 1998
Sharon R. Robertson
Principal Accounting Officer
WILLIAM W. BOYD Trustee Oct. 29, 1998
William W. Boyd
LINDSAY COOK Trustee Oct. 29, 1998
Lindsay Cook
DOUGLAS A. HACKER Trustee Oct. 29, 1998
Douglas A. Hacker
JANET LANGFORD KELLY Trustee Oct. 29, 1998
Janet Langford Kelly
CHARLES R. NELSON Trustee Oct. 29, 1998
Charles R. Nelson
THOMAS C. THEOBALD Trustee Oct. 29, 1998
Thomas C. Theobald
* This amendment to the Registration Statement has also been
signed by the above persons in their capacities as trustees and
officers of the SR&F Base Trust as it relates to the Stein Roe
Municipal Money Market Fund and Stein Roe High-Yield Municipals
Fund.
<PAGE>
STEIN ROE MUNICIPAL TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- -----------
2(b) Amendment to By-Laws
5 Management Agreement
6 Underwriting Agreement
9(d) Sub-Transfer Agent Agreement
11(c) Consent of Ernst & Young LLP
17 Financial Data Schedules:
(a) Intermediate Municipals Fund
(b) High-Yield Municipals Fund
(c) Municipal Money Market Fund
(d) Managed Municipals Fund
19(a) Funds Application
<PAGE>
CERTIFICATE
I, Nicolette D. Parrish, hereby certify that I am the
duly elected and acting Assistant Secretary of Stein Roe Municipal
Trust (the "Trust") and that the following is a true and
correct copy of a certain resolution duly adopted by
the Board of Trustees of the Trust at a meeting held in
accordance with the By-Laws on February 4, 1998, and that
such resolution is still in full force and effect:
RESOLVED, that Section 2.01 of the By-Laws is
amended and restated as follows:
Section 2.01. Number and Term of Office. The
Board of Trustees shall initially consist of the
initial sole Trustee, which number may be increased
or subsequently decreased by a resolution of a
majority of the entire Board of Trustees, provided
that the number of Trustees shall not be less than
one nor more than twenty-one. Each Trustee (whenever
selected) shall hold office until the next meeting of
shareholders called for the purposes of electing
Trustees and until his successor is elected and
qualified or until his earlier death, resignation, or
removal. Each Trustee shall retire on December 31 of
the year during which the Trustee becomes age 74.
The initial Trustee shall be the person designated in
the Declaration of Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seals of said Trust this 5th day of February, 1998.
NICOLETTE D. PARRISH
Assistant Secretary
(SEAL)
<PAGE>
Exhibit 5
MANAGEMENT AGREEMENT
BETWEEN
STEIN ROE MUNICIPAL TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEIN ROE 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 furnish investment advisory and portfolio
management services with respect to the portion of its assets
represented by the shares of beneficial interest issued in each
series listed in Schedule A hereto, as such schedule may be
amended from time to time (each such series hereinafter referred
to as "Fund"). Trust and Manager hereby agree that:
1. INVESTMENT MANAGEMENT SERVICES. Manager shall manage
the investment operations of Trust and each Fund, subject to the
terms of this Agreement and to the supervision and control of
Trust's Board of Trustees ("Trustees"). Manager agrees to
perform, or arrange for the performance of, the following
services with respect to each Fund:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and
commodities markets, and individual securities, commodities
and indices as it may deem necessary or useful in
discharging its responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in
a manner consistent with and subject to (i) Trust's
agreement and declaration of trust and by-laws; (ii) the
Fund's investment objectives, policies, and restrictions as
set forth in written documents furnished by the Trust to
Manager; (iii) all securities, commodities, and tax laws and
regulations applicable to the Fund and Trust; and (iv) any
other written limits or directions furnished by the Trustees
to Manager;
(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the
Fund, and to implement those decisions, including the
selection of entities with or through which such purchases,
sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will
qualify as a regulated investment company under subchapter M
of the Internal Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Fund action, and any
other rights pertaining to Trust or the Fund shall be
exercised;
(f) to make available to Trust promptly upon request all of the
Fund's records and ledgers and any reports or information
reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the
Trustees, with respect to execution of transactions for Trust on
behalf of a Fund, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents
selected by Manager. In connection with the selection of all
such parties for the placement of all such orders, Manager shall
attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor,
purchase and sell portfolio securities from and to brokers and
dealers who provide Manager with statistical, research and other
information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such
broker or dealer a commission or spread in excess of that which
might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of
the services so provided.
Trust hereby authorizes any entity or person associated
with Manager that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a
Fund to the extent permitted by and in accordance with Section
11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder. Trust hereby consents to the retention by such
entity or person of compensation for such transactions in
accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for Trust or one or more
Funds in order to obtain best execution or lower brokerage
commissions. In such event, Manager shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair
and consistent with its fiduciary obligations to Trust, the
Funds, and Manager's other customers.
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. ADMINISTRATIVE SERVICES. Manager shall supervise the
business and affairs of Trust and each Fund and shall provide
such services and facilities as may be required for effective
administration of Trust and Funds as are not provided by
employees or other agents engaged by Trust; provided that
Manager shall not have any obligation to provide under this
Agreement any such services which are the subject of a separate
agreement or arrangement between Trust and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Manager under
this Agreement, Manager may, to the extent it deems appropriate,
and subject to compliance with the requirements of applicable
laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all
such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by
Manager or such parties.
4. EXPENSES BORNE BY TRUST. Except to the extent
expressly assumed by Manager herein or under a separate
agreement between Trust and Manager and except to the extent
required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the
organization, operations or business of the Trust. Without
limitation, such costs and expenses shall include but not be
limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or
Trust and the custodian, transfer agent or any other agent
selected by Trust;
(c) all charges for administrative and accounting services
provided to Trust by Manager, or any other provider of such
services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their
services to Trust, and all expenses of meetings of the
Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each
then-existing Unitholder with a copy of a revised
prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident
to the purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of Trust under the 1940 Act and, to the extent no exemption
is available, expenses of registering 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 Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Fund; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association
or other investment company organization.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by Trust that are attributable solely to the organization,
operation or business of a Fund shall be paid solely out of Fund
assets. Any expense borne by Trust which is not solely
attributable to a 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.
6. EXPENSES BORNE BY MANAGER. Manager at its own expense
shall furnish all executive and other personnel, office space,
and office facilities required to render the investment
management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing,
maintaining, and servicing the accounts of Unitholders in each
Fund listed in Exhibit A. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian or other agents without additional cost to
Trust.
In the event that Manager pays or assumes any expenses of
Trust or a Fund not required to be paid or assumed by Manager
under this Agreement, Manager shall not be obligated hereby to
pay or assume the same or similar expense in the future;
provided that nothing contained herein shall be deemed to
relieve Manager of any obligation to Trust or a Fund under any
separate agreement or arrangement between the parties.
7. MANAGEMENT FEE. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder,
Trust shall pay to Manager out of the assets of each Fund fees
at the annual rate for such Fund as set forth in Schedule B to
this Agreement. For each Fund, the management fee shall accrue
on each calendar day, and shall be payable monthly on the first
business day of the next succeeding calendar month. The daily
fee accrual shall be computed by multiplying the fraction of one
divided by the number of days in the calendar year by the
applicable annual rate of fee, and multiplying this product by
the net assets of the Fund, determined in the manner established
by the Board of Trustees, as of the close of business on the
last preceding business day on which the Fund's net asset value
was determined.
8. RETENTION OF SUB-ADVISER. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at
Manager's own cost and expense for the purpose of furnishing one
or more of the services described in Section 1 hereof with
respect to Trust or one or more Funds. Retention of a sub-
adviser shall in no way reduce the responsibilities or
obligations of Manager under this Agreement, and Manager shall
be responsible to Trust and its Funds for all acts or omissions
of any sub-adviser in connection with the performance of
Manager's duties hereunder.
9. NON-EXCLUSIVITY. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be
free to render similar services to others.
10. STANDARD OF CARE. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to Trust or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties
under this Agreement, except for loss or liability resulting
from willful misfeasance, bad faith or gross negligence on
Manager's part or from reckless disregard by Manager of its
obligations and duties under this Agreement.
11. AMENDMENT. This Agreement may not be amended as to
Trust or any Fund 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 Trust or, with respect to an amendment
affecting an individual Fund, a "majority of the outstanding
shares" of that Fund. The terms "interested persons" and "vote
of a majority of the outstanding shares" shall be construed in
accordance with their respective definitions in the 1940 Act
and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
12. EFFECTIVE DATE AND TERMINATION. This Agreement shall
become effective as to any Fund as of the effective date for
that Fund specified in Schedule A hereto. This Agreement may be
terminated at any time, without payment of any penalty, as to
any Fund by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of that 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
the 1940 Act). Unless terminated as hereinbefore provided, this
Agreement shall continue in effect with respect to any Fund
until the end of the initial term applicable to that Fund
specified in Schedule A and thereafter from year to year only so
long as such continuance is specifically approved with respect
to that Fund 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
the Fund.
13. OWNERSHIP OF RECORDS; INTERPARTY REPORTING. All
records required to be maintained and preserved by Trust
pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any
other records the parties mutually agree shall be maintained by
Manager on behalf of Trust are the property of Trust and shall
be surrendered by Manager promptly on request by Trust; provided
that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager
such copies of the financial statements, proxy statements,
reports, and other information relating to the business and
affairs of each Unitholder in a Fund as Manager may, at any time
or from time to time, reasonably require in order to discharge
its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each Fund
statistical data and other information in such form and at such
intervals as Trust may reasonably request.
14. NON-LIABILITY OF TRUSTEES AND UNITHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not
be binding upon any Trustee, officer, employee, agent or
Unitholder of Trust. Neither the authorization of any action by
the Trustees or Unitholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Unitholder.
15. USE OF MANAGER'S NAME. Trust may use the name "Stein
Roe Investment Trust" and the Fund names listed in Schedule A or
any other name derived from the name "Stein Roe & Farnham" only
for so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of 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, Trust
will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as
investment adviser.
16. REFERENCES AND HEADINGS. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: July 1, 1996
STEINROE MUNICIPAL TRUST
BY: TIMOTHY K. ARMOUR, President
Attest:
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
BY: HANS P. ZIEGLER
Chief Executive Officer
Attest:
JILAINE HUMMEL BAUER
Secretary
<PAGE>
STEIN ROE MUNICIPAL TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are
as follows:
Effective End of
Date Initial Term
--------- ------------
Stein Roe Intermediate Municipals Fund 7/1/96 6/30/98
Stein Roe Managed Municipals Fund 7/1/96 6/30/98
Dated: February 2, 1998
STEINROE MUNICIPAL TRUST
BY: THOMAS W. BUTCH
President
Attest:
NICOLETTE D. PARRISH
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
BY: HANS P. ZIEGLER
Chief Executive Officer
Attest:
NICOLETTE D. PARRISH
Assistant Secretary
<PAGE>
STEIN ROE MUNICIPAL TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated in accordance with the following schedules applicable
to average daily net assets of the Funds:
Schedule (Stein Roe Intermediate Municipals Fund)
- -----------------------------------------------------------
0.450% on first $100 million of average daily net assets
0.425% on next $100 million of average daily net assets
0.400% thereafter
Schedule (Stein Roe Managed Municipals Fund)
- ---------------------------------------------
0.450% on first $100 million of average daily net assets
0.425% on next $100 million of average daily net assets
0.400% on next $800 million of average net assets
0.375% thereafter
Dated: February 2, 1998
STEINROE MUNICIPAL TRUST
BY: THOMAS W. BUTCH
Attest: President
NICOLETTE D. PARRISH
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
BY: HANS P. ZIEGLER
Chief Executive Officer
Attest:
NICOLETTE D. PARRISH
Assistant Secretary
<PAGE>
EXHIBIT (e)(1)
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
AND LIBERTY FINANCIAL INVESTMENTS, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 1st day of January 1998 by and between Stein Roe Income
Trust, Stein Roe Investment Trust, Stein Roe Municipal
Trust, Stein Roe Trust and Stein Roe Institutional Trust,
each a business trust organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter
collectively referred to as the "Fund"), and Liberty
Financial Investments, Inc., a corporation organized and
existing under the laws of the State of Delaware
(hereinafter call the "Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the
Investment Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and, the laws of each state (including the
District of Columbia and Puerto Rico) in which it engages in
business to the extent such law requires, and is a member of
the National Association of Securities Dealers ("NASD")
(such registrations and membership are referred to
collectively as the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its
transfer, shareholder recordkeeping, dividend disbursing and
redemption agents, if any; all expenses of notices, proxy
solicitation material and reports to shareholders; all
expenses of preparation and printing of annual or more
frequent revisions of the Fund's Prospectus and Statement of
Additional Information and of supplying copies thereof to
shareholders; all expenses of registering and maintaining
the registration of the Fund under ICA-40 and of the Fund's
Shares under the Securities Act of 1933, as amended ("SA-
33"); all expenses of qualifying and maintaining
qualification of such Fund and of the Fund's Shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Fund under all laws applicable to the Fund or its business
activities;
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, shall pay all expenses incurred in the
sale and promotion of the Fund;
NOW, THEREFORE, in consideration of the premises and
the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in
Sections 2(a)(29) of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form
of agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as may
from time to time be indicated in the Fund's Prospectus,
Distributor is authorized to solicit, as agent on behalf of
the Fund, unconditional orders for purchases of the Fund's
Shares authorized for issuance and registered under SA-33,
provided that:
(1) Distributor shall act solely as a disclosed agent
on behalf of and for the account of the Fund;
(2) In all cases except for orders transmitted through
the FundSERV/NSCC system, the Fund or its transfer
agent shall receive directly from investors all
payments for the purchase of the Fund's Shares and
also shall pay directly to shareholders amounts
due to them for the redemption or repurchase of
all the Fund's Shares with Distributor having no
rights or duties to accept such payment or to
effect such redemptions or repurchases;
(3) The Distributor shall receive directly from
financial intermediaries which trade through the
FundSERV/NSCC system all payments for the purchase
of the Fund's Shares and shall also cause to be
paid directly to such intermediaries amounts due
to them for the redemption or repurchase of all
the Fund's Shares. The Distributor shall be
acting as the Fund's agent in accepting payment
for the orders and not be acting in a principal
capacity.
(4) Distributor shall confirm all orders received for
purchase of the Fund's Shares which confirmation
shall clearly state (i) that Distributor is acting
as agent of the Fund in the transaction (ii) that
all certificates for redemption, remittances, and
registration instructions should be sent directly
to the Fund, and (iii) the Fund's mailing address;
(5) Distributor shall have no liability for payment
for purchases of the Fund's Shares it sells as
agent; and
(5) Each order to purchase Shares of the Fund received
by Distributor shall be subject to acceptance by
an officer of the Fund in Chicago and entry of the
order on the Fund's records or shareholder
accounts and is not binding until so accepted and
entered.
The purchase price to the public of the Fund's Shares
shall be the public offering price as defined in Paragraph 6
hereof.
(b) In consideration of the rights granted to the
Distributor under this Agreement, Distributor will use its
best efforts (but only in states in which Distributor may
lawfully do so) to solicit from investors unconditional
orders to purchase Shares of the Fund. The Fund shall make
available to the Distributor without cost to the Distributor
such number of copies of the Fund's currently effective
Prospectus and Statement of Additional Information and
copies of all information, financial statements and other
papers which the Distributor may reasonably request for use
in connection with the distribution of Shares.
3.A. Selling Agreements. Distributor is authorized,
as agent on behalf of each Fund, to enter into agreements
with other broker-dealers providing for the solicitation of
unconditional orders for purchases of Fund's Shares
authorized for issuance and registered under SA-33. All
such agreements shall be either in the form of agreement
attached hereto or in such other form as may be approved by
the officers of the Fund ("Selling Agreement"). All
solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
5. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares
that are duly authorized and registered and available for
sale by the Fund, including redeemed or repurchased Shares
if and to the extent that they may be legally sold and if,
but only if, the Fund authorizes the Distributor to sell
them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders
to purchase Shares of the Fund at the public offering price.
The public offering price for each accepted subscription for
the Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription.
The net asset value per share shall be determined in the
manner provided in the Fund's Agreement and Declaration of
Trust as now in effect or as they may be amended, and as
reflected in the Fund's then current Prospectus and
Statement of Additional Information.
7. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, no further orders for
Shares shall be accepted by the Fund except such
unconditional orders placed with the Fund and accepted by it
before the suspension. In addition, the Fund reserves the
right to suspend sales of Shares if, in the judgement of the
Board of the Fund, it is in the best interest of the Fund to
do so, such suspension to continue for such period as may be
determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to
purchase Shares shall be accepted by the Fund while such
suspension remains in effect unless otherwise directed by
its Board.
8. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any
representations in connection with the sale of Shares other
than the information and representations contained in the
Fund's registration statement filed with the SEC under SA-33
and/or ICA-40, covering Shares, as such registration
statement or the Fund's prospectus may be amended or
supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on
behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is
authorized to act as principal underwriter (as such term is
defined in ICA-40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register either (i) an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, or (ii) a definite
number of Shares as the Fund shall deem advisable pursuant
to Rule 24e-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the
Fund, and to maintain such qualification; provided, however,
that nothing herein shall be deemed to prevent the Fund from
registering its shares without approval of the Distributor
in any state it deems appropriate.
10. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform
in all respects with applicable federal and state laws and
the rules and regulations of the NASD. Distributor will use
its best efforts to maintain its Registrations in good
standing during the term of this Agreement and will promptly
notify the Fund and Stein Roe & Farnham Incorporated in the
event of the suspension or termination of any of the
Registrations.
11. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
12. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the
meaning of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to
which the Fund or such of the members of its Board and of
its officers, employees, representatives, or controlling
person or persons may become subject under SA-33, under any
other statute, at common law, or otherwise, arising out of
the acquisition of any Shares of the Fund by any person
which (i) may be based upon any wrongful act by Distributor
or any of Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement
of Additional Information, shareholder report or other
information covering Shares of the Fund filed or made public
by the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon information furnished
to the Fund by Distributor in writing. In no case (i) is
Distributor's indemnity in favor of the Fund, or any person
indemnified, to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund
or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties
under this Agreement or (ii) is Distributor to be liable
under its indemnity agreement contained in this paragraph
with respect to any claim made against the Fund or any
person indemnified unless the Fund or such person, as the
case may be, shall have notified Distributor in writing of
the claim within a reasonable time after the summons, or
other first written notification, giving information of the
nature of the claim served upon the Fund or upon such person
(or after the Fund or such person shall have received notice
of such service on any designated agent). However, failure
to notify Distributor of any such claim shall not relieve
Distributor from any liability which Distributor may have to
the Fund or any person against whom such action is brought
otherwise than on account of Distributor's indemnity
agreement contained in this Paragraph.
Distributor shall be entitled to participate, at its
own expense, in the defense, or, if Distributor so elects,
to assume the defense of any suit brought to enforce any
such claim but, if Distributor elects to assume the defense,
such defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain
such legal counsel, persons indemnified who are defendants
in the suit shall bear the fees and expenses of any
additional legal counsel retained by them. If Distributor
does not elect to assume the defense of any such suit,
Distributor will reimburse persons indemnified who are
defendants in such suit for the reasonable fees of any legal
counsel retained by them in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33
against any and all losses, liabilities, damages, claims or
expenses (including the damage, claim or expense and
reasonable legal counsel fees incurred in connection
therewith) to which Distributor or such of its directors,
officers, employees, representatives or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise arising out of the
acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Fund or any of the
members of the Fund's Board, or the Fund's officers,
employees or representatives other than Distributor, or (ii)
may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, Prospectus, Statement of Additional Information,
shareholder report or other information covering Shares
filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon
information furnished by Distributor to the Fund. In no
case (i) is the Fund's indemnity in favor of the Distributor
or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability
to which Distributor or such indemnified person would
otherwise be subject by reason of willful misfeasance, bad
faith, or negligence in the performance of its or his duties
or by reason of its or his reckless disregard of its or his
obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in
this Paragraph with respect to any claim made against
Distributor or any person indemnified unless Distributor, or
such person, as the case may be, shall have notified the
Fund in writing of the claim within a reasonable time after
the summons, or other first written notification, giving
information of the nature of the claim served upon
Distributor or upon such person (or after Distributor or
such person shall have received notice of such service on
any designated agent). However, failure to notify a Fund of
any such claim shall not relieve the Fund from any liability
which the Fund may have to Distributor or any person against
whom such action is brought otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but,
if the Fund elects to assume the defense, such defense shall
be conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants
in the suit. In the event that the Fund elects to assume
the defense of any such suit and retain such legal counsel,
the persons indemnified who are defendants in the suit shall
bear the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the
persons indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained
by them in such litigation.
13. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement
shall become effective upon its execution ("Effective Date")
and unless terminated as provided herein, shall remain in
effect through June 30, 1998, and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually (a) by a vote of
majority of the members of the Board of the Fund who are not
interested persons of the Distributor or of the Fund, voting
in person at a meeting called for the purpose of voting on
such approval, and (b) by the vote of either the Board of
the Fund or a majority of the outstanding shares of the
Fund. This Agreement may be terminated by and between an
individual Fund and Distributor at any time, without the
payment of any penalty (a) on 60 days' written notice, by
the Board of the Fund or by a vote of a majority of the
outstanding Shares of the Fund, or by Distributor, or (b)
immediately, on written notice by the Board of the Fund, in
the event of termination or suspension of any of the
Registrations. This Agreement will automatically terminate
in the event of its assignment. In interpreting the
provisions of this Paragraph 13, the definitions contained
in Section 2(a) of ICA-40 (particularly the definitions of
"interested person", "assignment", and "majority of the
outstanding shares") shall be applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best
interests of the Fund that any amendment of this Agreement
be made in order to comply with the recommendations or
requirements of the SEC or any other governmental authority
or to obtain any advantage under state or Federal tax laws
and notifies Distributor of the form of such amendment, and
the reasons therefor, and if Distributor should decline to
assent to such amendment, the Fund may terminate this
Agreement forthwith. If Distributor should at any time
request that a change be made in the Fund's Agreement and
Declaration of Trust or By-Laws or in its methods of doing
business, in order to comply with any requirements of
Federal law or regulations of the SEC, or of a national
securities association of which Distributor is or may be a
member, relating to the sale of Shares, and the Fund should
not make such necessary changes within a reasonable time,
Distributor may terminate this Agreement forthwith.
15. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. A copy of the
Declaration of Trust and of each amendment thereto has been
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City
of Boston, as well as any other governmental office where
such filing may from time to time be required.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other
party at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: One Financial Center
Boston, Massachusetts 02111
Attn: Secretary
If to Stein Roe & Farnham
Incorporated: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY FINANCIAL INVESTMENTS, INC.
By: TIMOTHY K. ARMOUR
ATTEST:
MARJORIE M. PLUSKOTA
Assistant Clerk
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: HANS P. ZIEGLER
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
<PAGE>
Revised Exhibit A to Underwriting Agreement
Between Stein Roe Investment Trust, Stein Roe Income Trust,
Stein Roe Municipal Trust, Stein Roe Trust and Stein Roe
Institutional Trust and
Liberty Financial Investments, Inc.
STEIN ROE INCOME TRUST STEIN ROE INVESTMENT TRUST
Stein Roe Income Fund Stein Roe Growth & Income Fund
Stein Roe High Yield Fund Stein Roe International Fund
Stein Roe Intermediate Bond Stein Roe Young Investor Fund
Fund Stein Roe Special Venture Fund
Stein Roe Cash Reserves Fund Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital
Opportunities Fund
STEIN ROE MUNICIPAL TRUST Stein Roe Special Fund
Stein Roe Managed Municipals Stein Roe Emerging Markets
Fund Fund
Stein Roe Municipal Money Stein Roe Growth
Market Fund Opportunities Fund
Stein Roe High Yield Municipals
Fund
Stein Roe Intermediate
Municipals Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
<PAGE>
Date _____________
LIBERTY FINANCIAL INVESTMENTS, INC.
STEIN ROE ____ FUND
SELLING AGREEMENT
Dear Sirs:
As the principal underwriter of Stein Roe ____ Fund
(the "Fund"), a series of Stein Roe _____ Trust (the
"Trust"), a Massachusetts business trust registered under
the Investment Company Act of 1940 as an open-end investment
company, we invite you as agent for your customer to
participate in the distribution of shares of beneficial
interest in the Fund ("Shares"), subject to the following
terms and conditions:
1. We hereby grant to you the right to make Shares
available to, and to solicit orders to purchase Shares by,
the public, subject to applicable federal and state law, the
Agreement and Declaration of Trust and By-laws of the Trust,
and the current Prospectus and Statement of Additional
Information relating to the Fund attached hereto (the
"Prospectus"). You will forward to us or to the Trust's
transfer agent, as we may direct from time to time, all
orders for the purchase of Shares obtained by you, subject
to such terms and conditions as to the form of payment,
minimum initial and subsequent purchase and otherwise, and
in accordance with such procedures and directions, as we may
specify from time to time. All orders are subject to
acceptance by an authorized officer of the Trust in Chicago
and the Trust reserves the right in its sole discretion to
reject any order. Share purchases are not binding on the
Trust until accepted and entered on the books of the Fund.
No Share purchase shall be effective until payment is
received by the Trust in the form of Federal funds. If a
Share purchase by check is cancelled because the check does
not clear, you will be responsible for any loss to the Fund
or to us resulting therefrom.
2. The public offering price of the Shares shall be
the net asset value per share of the outstanding Shares
determined in accordance with the then current Prospectus.
No sales charge shall apply.
3. As used in this Agreement, the term "Registration
Statement" with regard to the Fund shall mean the
Registration Statement most recently filed by the Trust with
the Securities and Exchange Commission and effective under
the Securities Act of 1933, as such Registration Statement
is amended by any amendments thereto at the time in effect,
and the terms "prospectus" and "statement of additional
information" with regard to the Fund shall mean the form of
prospectus and statement of additional information relating
to the Fund as attached hereto filed by the Trust as part of
the Registration Statement, as such form of prospectus and
statement of additional information may be amended or
supplemented from time to time.
4. You hereby represent that you are and will remain
during the term of this Agreement duly registered as a
broker-dealer under the Securities Exchange Act of 1934 and
under the securities laws of each state where your
activities require such registration, and that you are and
will remain during the term of this Agreement a member in
good standing of the National Association of Securities
Dealers, Inc. ("NASD"). In the conduct of your activities
hereunder, you will abide by all applicable rules and
regulations of the NASD, including, without limitation, Rule
26 of the Rules of Fair Practice of the NASD as in effect
form time to time, and all applicable federal and state
securities laws, including without limitation, the
prospectus delivery requirements of the Securities Act of
1933.
5. This Agreement is subject to the right of the Trust
at any time to withdraw all offerings of the Shares by
written notice to us at our principal office. You
acknowledge that the Trust will not issue certificates
representing Shares.
6. Your obligations under this Agreement are not to be
deemed exclusive, and you shall be free to render similar
services to others so long as your services hereunder are
not impaired thereby.
7. You will sell Shares only to residents of states or
other jurisdictions where we have notified you that the
Shares have been registered or qualified for sale to the
public or are exempt from such qualification or
registration. Neither we nor the Trust will have any
obligation to register or qualify the Shares in any
particular jurisdiction. We shall not be liable or
responsible for the issue, form validity, enforceability or
value of the Shares or for any matter in connection
therewith, except lack of good faith on our part, and no
obligation not expressly assumed by us in this Agreement
shall be implied therefrom. Nothing herein contained,
however, shall be deemed to be a condition, stipulation or
provision binding any person acquiring any Shares to waive
compliance with any provision of the Securities Act of 1933,
or to relieve the parties hereto from any liability arising
thereunder.
8. You are not authorized to make any representations
concerning the Fund, the Trust or the Shares except those
contained in the then current prospectus and statement of
additional information relating to the Fund, or printed
information issued by the Trust or by us as information
supplemental to such prospectus and statement of additional
information. We will supply you with a reasonable number of
copies of the then current prospectus and statement of
additional information of the Fund, and reasonable
quantities of any supplemental sales literature, sales
bulletins, and additional information as may be issued by us
or the Trust. You will not use any advertising or sales
material relating to the Fund other than materials supplied
by the Trust or us, unless such other material is approved
in writing by us in advance of such use.
9. You will not have any authority to act as agent for
the Trust, for us or for any other dealer. All transactions
between you and us contemplated by this Agreement shall be
as agents.
10. Either party to this Agreement may terminate this
Agreement by giving written notice to the other. Such
notice shall be deemed to have been given on the date on
which it is either delivered personally to the other party,
is mailed postpaid or delivered by telecopier to the other
party at its address listed below. This Agreement may be
amended by us at any time, and your placing of an order
after the effective date of any such amendment shall
constitute your acceptance thereof.
Liberty Financial Investments, Inc. Dealer
One Financial Center ________________
Boston, Massachusetts 02211 ________________
Attention: ________________ ________________
Telecopier: _______________
with copy to:
Stein Roe _____ Trust
One South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
Telecopier: ________
11. This Agreement constitutes the entire agreement
between you and us relating to the subject matter hereof and
supersedes all prior or written agreements between us. This
Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and shall be binding upon
both parties hereto when signed by us and accepted by you in
the space provided below.
Very truly yours,
LIBERTY FINANCIAL INVESTMENTS, INC.
BY: ____________________
The undersigned hereby accepts your invitation to
participate in the distribution of Shares and agrees to each
of the terms and conditions set forth in this letter.
___________________________
Dealer
Date: ____________________ By: _______________________
(Signature of Officer)
Pay Office of Dealer:
__________________________ ___________________________
Street Address (Print Name of Officer)
__________________________
City/State/Zip
__________________________
Telephone Number
<PAGE>
EXHIBIT (h)(4)
SUB-TRANSFER AGENT AGREEMENT
Agreement dated as of July 3, 1996, between SteinRoe
Services Inc. ("SSI"), a Massachusetts corporation, for
itself and on behalf SteinRoe Municipal Trust, SteinRoe
Income Trust and SteinRoe Investment Trust, each a
Massachusetts business trust (all referred to herein as the
"Trust") comprised of the series of portfolios listed in
Schedule A (as the same may from time to time be amended to
add or to delete one or more series, all referred to herein
as the "Fund"), and Colonial Investors Service Center, Inc.
("CISC"), a Massachusetts corporation.
WHEREAS, the Trust has appointed SSI as Transfer Agent,
Registrar and Dividend Disbursing Agent for the Fund, a
registered investment company, pursuant to Restated Agency
Agreement dated August 1, 1995 ("Transfer Agent Agreement");
WHEREAS, SSI is a registered transfer agent duly
authorized to appoint CISC as its agent for purposes of
performing certain transfer agency, registration and dividend
disbursement services in respect of the Trust;
WHEREAS, CISC desires to accept such appointment and to
perform such services upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Stein Roe & Farnham, Inc. ("SRF") is the
investment adviser to the Fund and Liberty Securities
Corporation is the principal underwriter of its shares.
NOW THEREFORE, in consideration of the mutual promises
and covenants set forth herein, the parties hereto agree as
follows:
1. Appointment. SSI hereby appoints CISC to act as its
agent in respect of the purchase, redemption and transfer of
Fund shares and dividend disbursing services in connection
with such shares other than with respect to Fund shares (a)
held under Stein Roe Counselor [service mark] for which SSI
shall perform such services and (b) held in omnibus accounts
with respect to which such services are performed by third
party financial institutions as described in the Fund's
Prospectus from time to time. CISC accepts such appointments
and will perform the duties and functions described herein in
the manner hereinafter set forth. In respect of its duties
and obligations pursuant to this Agreement, CISC will act as
agent of SSI and not as agent of the Trust nor the Fund.
CISC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations
hereunder in accordance with the practice of transfer agents
of investment companies registered with the Securities and
Exchange Commission and in compliance with all laws
applicable to mutual fund transfer agents and the Fund.
<PAGE> 2
CISC agrees that it shall perform usual and ordinary
services as transfer agent, registrar and dividend disbursing
agent, which are necessary and appropriate for investment
companies registered with the Securities and Exchange
Commission, except as otherwise specifically excluded herein,
including but not limited to: receiving and processing
payments for purchases of Fund shares, opening shareholder
accounts, receiving and processing requests for liquidation
of Fund shares , transferring and canceling stock
certificates, maintaining all shareholder accounts, preparing
annual shareholder meetings lists, corresponding with
shareholders regarding transaction rejections, providing
order room services to brokers, withholding taxes on
accounts, disbursing income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department
Form 1099 for shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable
transactions in shareholder accounts, recording reinvestment
of dividends and distributions in Fund shares, and causing
liquidation of shares and disbursements to be made to
withdrawal plan holders. The services to be performed by
CISC under this Agreement may be set forth in a procedures
manual and other documents as mutually agreed to by CISC and
SSI. Specifically excluded from the services to be provided
by CISC are the following: mailing proxy materials,
receiving and tabulating proxies, mailing shareholder reports
and prospectuses, account research, shareholder
correspondence and telephone services regarding general
inquiries, information requests and all other matters except
transaction rejections, all of which SRS agrees to continue
to perform directly on behalf of the Trust and the Fund.
2. Fees and Charges. SSI will pay CISC for the services
provided hereunder in accordance with and in the manner set
forth in Schedule B to this Agreement.
3. Representations and Warranties of CISC. CISC
represents and warrants to SSI that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
by this Agreement and it is in compliance and shall
continue during the term of this Agreement to be in
compliance with all such applicable laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement; and
<PAGE> 3
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission, it is duly
registered as a transfer agent as provided in Section
17Ac of the Securities and Exchange Act of 1934, and
it will remain so registered and will comply with all
state and federal laws and regulations relating to
transfer agents throughout the term of this
Agreement.
4. Representations and Warranties of SSI. SSI
represents and warrants to CISC that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
State of Illinois;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
in this Agreement and in the Transfer Agent Agreement
and it is in compliance and shall continue during the
term of this Agreement to be in compliance with the
Transfer Agent Agreement and all such applicable
laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement and the Transfer Agent Agreement; and
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission; it is duly
registered as a Transfer Agent as provided in Section
17Ac of the Securities Exchange Act of 1934; and it
will remain so registered and comply with all state
and federal laws and regulations relating to transfer
agents throughout the term of this Agreement.
5. Representations and Warranties of the Trust. The
Trust represents and warrants to CISC that:
(a) It is a business trust duly organized and existing
and in good standing under the laws of the State of
Massachusetts;
(b) The Fund is an open-end diversified management
investment company registered under the Investment
Company Act of 1940;
<PAGE> 4
(c) Registration statements under the Securities Act of
1933 and applicable state laws are currently
effective and will remain effective at all times with
respect to all shares of the Fund being offered for
sale;
(d) The Trust is empowered under applicable laws and
regulations and by its Agreement and Declaration of
Trust and By-Laws to enter into and perform this
Agreement; and
(e) All requisite proceedings and actions have been
taken to authorize it to enter into and perform this
Agreement.
6. Copies of Documents. SSI promptly from time to time
will furnish CISC with copies of the following Trust and Fund
documents and all amendments or supplements thereto: the
Agreement and Declaration of Trust ; the By-Laws; and the
Registration Statement under Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended,
together with any other information reasonably requested by
CISC. The Prospectus and Statement of Additional Information
contained in such Registration Statement, as from time to
time amended and supplemented, are herein collectively
referred to as the "Fund's Prospectus."
On or before the date of effectiveness of this
Agreement, or as soon thereafter as is reasonably
practicable, and from time-to-time thereafter, SSI will
furnish CISC with certified copies of the resolutions of the
Trustees of the Trust authorizing this Agreement and
designating authorized persons to give instructions to CISC;
if applicable, a specimen of the certificate for shares of
the Fund in the form approved by the Trustees of the Trust,
with a certificate of the Secretary of the Trust as to such
approval; and certificates as to any change in any officer,
director, or authorized person of the SSI and the Trust.
7. Share Certificates. The Fund has resolved that all
of the Fund's shares shall hereafter be issued in
uncertificated form. Thus, CISC shall not be responsible for
the issuance of certificates representing shares in the Fund.
However, CISC shall maintain a record of each certificate
previously issued and outstanding, the number of shares
represented thereby, and the holder of record of such shares.
8. Lost or Destroyed Certificates. In case of the
alleged loss or destruction of any share certificate, no new
certificate shall be issued in lieu thereof, unless there
shall first be furnished to CISC an affidavit of loss or non-
receipt by the holder of shares with respect to which a
certificate has been lost or destroyed, supported by an
appropriate bond paid for by the shareholder which is
satisfactory to CISC and issued by a surety company
satisfactory to CISC. CISC shall place and maintain stop
transfer instructions on all lost certificates as to which it
receives notice.
9. Receipt of Funds for Investment. CISC will maintain
one or more accounts with The First National Bank of Boston
("Bank"),in the name of SSI into which
<PAGE> 5
it will deposit funds payable to CISC or SSI as agent for, or
otherwise identified as being for the account of, the Trust
or the Fund.
10. Shareholder Accounts. Upon receipt of any funds
referred to in paragraph 9, CISC will compute the number of
shares purchased by the shareholder according to the net
asset value of Fund shares determined in accordance with
applicable federal laws and regulations and as described in
the Prospectus of the Fund and:
(a) In the case of a new shareholder, open and maintain
an open account for such shareholder in the name or
names set forth in the subscription application form;
(b) Send to the shareholder a confirmation indicating the
amount of full and fractional shares purchased (in
the case of fractional shares, rounded to three
decimal places) and the price per share;
(c) In the case of a request to establish a plan or
program being offered by the Fund's Prospectus, open
and maintain such plan or program for the shareholder
in accordance with the terms thereof; and
(d) Perform such other services and initiate and maintain
such other books and records as are customarily
undertaken by transfer agents in maintaining
shareholder accounts for registered investment
company investors;
all subject to requirements set forth in the Fund's
Prospectus with respect to rejection of orders.
For closed accounts, CISC will maintain account records
through June of the calendar year following the year in which
the account is closed, or such other period of time as CISC
and SSI shall mutually agree in writing from time to time.
11. Unpaid Checks; Accounts Assigned for Collection.
If any check or other order for payment of money on the
account of any shareholder or new investor is returned unpaid
for any reason, CISC will:
(a) Give prompt notification to SRS of such non-payment
by facsimile sent prior to 9 a.m. E.S.T.; and
(b) Upon SSI's written instruction, received by facsimile
delivery not later than 11 a.m. E.S.T., authorize
payment of such order notwithstanding insufficient
shareholder account funds, on the condition that SSI
shall indemnify CISC and payor bank in respect of
such payment.
12. Dividends and Distributions. SSI will promptly
notify CISC of the declaration of any dividend or
distribution with respect to Fund shares, the amount of
<PAGE> 6
such dividend or distribution, the date each such dividend or
distribution shall be paid, and the record date for
determination of shareholders entitled to receive such
dividend or distribution. As dividend disbursing agent, CISC
will, on or before the payment date of any such dividend or
distribution, notify the Trust's custodian of the estimated
amount of cash required to pay such dividend or distribution,
and the Trust agrees that on or before the mailing date of
such dividend or distribution it will instruct its custodian
to make available to CISC sufficient funds in the dividend
and distribution account maintained by CISC with the Bank.
As dividend disbursing agent, CISC will prepare and
distribute to shareholders any funds to which they are
entitled by reason of any dividend or distribution and, in
the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, CISC
will make appropriate credits to their accounts and cause to
be prepared and mailed to shareholders confirmation
statements and, of such additional shares. CISC will maintain
all records necessary to reflect the crediting of dividends
and distributions which are reinvested in shares of the Fund.
13. Redemptions. CISC will receive and process for
redemption in accordance with the Fund's Prospectus, share
certificates and requests for redemption of shares as
follows:
(a) If such certificate or request complies with
standards for redemption, CISC will, in accordance
with the Fund's current Prospectus, pay to the
shareholder from funds deposited by the Fund from
time to time in the redemption account maintained by
CISC with the Bank, the appropriate redemption price
as set forth in the Fund's Prospectus; and
(b) If such certificate or request does not comply with
the standards for redemption, CISC will promptly
notify the shareholder and shall effect the
redemption at the price in effect at the time of
receipt of documents complying with the standard.
14. Transfer and Exchanges. CISC will review and
process transfers of shares of the Fund and to the extent, if
any, permitted in the Prospectus of the Fund, exchanges
between series of the Trust received by CISC. If shares to
be transferred are represented by outstanding certificates,
CISC will, upon surrender to it of the certificates in proper
form for transfer, credit the same to the transferee on its
books. If shares are to be exchanged for shares of another
Fund, CISC will process such exchange in the same manner as a
redemption and sale of shares, in accordance with the Fund's
Prospectus may in its.
15. Plans. CISC will process such plans or programs
for investing in shares, and such systematic withdrawal
plans, as are provided for in the Fund's Prospectus.
16. Tax Returns and Reports. CISC will prepare and
file tax returns and reports with the Internal Revenue
Service and any other federal, state or local governmental
agency which may require such filings, including state
abandoned
<PAGE> 7
property laws, and conduct appropriate communications
relating thereto, and, if required, mail to shareholders such
forms for reporting dividends and distributions paid by the
Fund as are required by applicable laws, rules and
regulations, and CISC will withhold such sums as are required
to be withheld under applicable Federal and state income tax
laws, rules and regulations. CISC will periodically provide
SSI with reports showing dividends and distributions paid and
any amounts withheld. CISC will also make reasonable attempt
to obtain such tax withholding information from shareholders
as is required to be obtained on behalf of the Trust under
applicable federal or state laws.
17. Record Keeping. CISC will maintain records, which
at all times will be the property of the Trust and available
for inspection by SSI, showing for each shareholder's account
the following information and such other information as CISC
and SSI shall mutually agree in writing from time to time:
(a) Name, address, and United States taxpayer
identification or Social Security number, if provided
(or amounts withheld with respect to dividends and
distributions on shares if a taxpayer identification
or Social Security number is not provided);
(b) Number of shares held for which certificates have not
been issued and for which certificates have been
issued;
(c) Historical information regarding the account of each
shareholder, including dividends and distributions
paid, if any, gross proceeds of sales transactions,
and the date and price for transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account of which SSI has notified CISI;
(e) Information with respect to withholdings of taxes as
required under applicable Federal and state laws and
regulations;
(f) Any capital gain or dividend reinvestment order and
plan application relating to the current maintenance
of a shareholder's account; and
(g) Any instructions as to record addresses and any
correspondence or instructions relating to the
current maintenance of a shareholder's account.
SSI hereby agrees that CISC shall have no liability or
obligation with respect to the accuracy or completeness of
shareholder account information received by CISC on or about
the Operational Date.
<PAGE> 8
By mutual agreement of CISC and SSI, CISC shall
administer a program whereby reasonable attempt is made to
identify current address information from shareholders whose
mail from the Trust is returned.
CISC shall maintain at its expense those records
necessary to carry out its duties under this Agreement. In
addition, CISC shall maintain at its expense for periods
prescribed by law all records which the Fund or CISC is
required to keep and maintain pursuant to any applicable
statute, rule or regulation, including without limitation
Rule 31(a)-1 under the Investment Company Act of 1940,
relating to the maintenance of records in connection with the
services to be provided hereunder. Upon mutual agreement of
CISC and SSI, CISC shall also maintain other records
requested from time to time by SSI, at SSI's expense.
At the end of the period in which records must be
retained by law, such records and documents will either be
provided to the Trust or destroyed in accordance with prior
written authorization from the Trust.
18. Retirement Plan Services. CISC shall provide sub-
accounting services for retirement plan shareholders
representing group relationships with special recordkeeping
needs.
19. Other Information Furnished. CISC will furnish to
SSI such other information, including shareholder lists and
statistical information as may be agreed upon from time to
time between CISC and SSI. CISC shall notify SSI and the
Trust of any request or demand to inspect the share records
of the Fund, and will not permit or refuse such inspection
until receipt of written instructions from the Trust as to
such permission or refusal unless required by law.
CISC shall provide to the Trust any results of studies
and evaluations of systems of internal accounting controls
performed for the purpose of meeting the requirements of
Regulation 240.17Ad-13(a) of the Securities Exchange Act of
1934.
20. Shareholder Inquiries. CISC will not respond to
written correspondence from fund shareholders or others
relating to the Fund other than those regarding transaction
rejections and clarification of transaction instructions, but
shall forward all such correspondence to SSI.
21. Communications to Shareholders and Meetings. CISC
will determine all shareholders entitled to receive, and will
cause to be addressed and mailed, all communications by the
Fund to its shareholders, including quarterly and annual
reports, proxy material for meetings, and periodic
communications. CISC will cause to be received, examined and
tabulated return proxy cards for meetings of shareholders and
certify the vote to the Trust Fund.
22. Other Services by CISC. CISC shall provide SSI,
with the following additional services:
<PAGE> 9
(a) All CTRAN, CIMAGE, Price Waterhouse Blue Sky 2, and
Pegashares functionality and enhancements (on a
remote basis) as they now exist and as they are
developed and made available to CISC clients;
(b) Initial programs and report enhancements to the CTRAN
System which are necessary to accommodate the Fund as
a no-load fund group;
(c) Development, systems training, technical support,
implementation, and maintenance of special programs
and systems to enhance overall shareholder servicing
capability;
(d) Product and system training for personnel of
institutional servicing agents.
23. Insurance. CISC will not reduce or allow to lapse
any of its insurance coverages from time to time in effect,
including but not limited to errors and omissions, fidelity
bond and electronic data processing coverage, without the
prior written consent of SSI. Attached as Schedule D to this
Agreement is a list of the insurance coverage which CISC has
in effect as of the date of execution of this Agreement and,
if different, will have in effect on the Operational Date.
24. Duty of Care and Indemnification. CISC will at all
times use reasonable care, due diligence and act in good
faith in performing its duties hereunder. CISC will not be
liable or responsible for delays or errors by reason of
circumstances beyond its control, including without
limitation acts of civil or military authority, national or
state emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or
power supply.
CISC may rely on certifications of those individuals
designated as authorized persons to give instructions to CISC
as to proceedings or facts in connection with any action
taken by the shareholders of the Fund or Trustees of the
Trust, and upon instructions not inconsistent with this
Agreement from individuals who have been so authorized. Upon
receiving authorization from an individual designated as an
authorized person to give instructions to CISC, CISC may
apply to counsel for the Trust, or counsel for SSI or the
Fund's investment adviser, at the Fund's expense, for advice.
With respect to any action reasonably taken on the basis of
such certifications or instructions or in accordance with the
advice of counsel of the Trust, or counsel for SSI or the
Fund's investment adviser, the Fund will indemnify and hold
harmless CSC from any and all losses, claims, damages,
liabilities and expenses (including reasonable counsel fees
and expenses).
SSI will indemnify CISC against and hold CISC harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect of any claim, demand, action or suit not resulting
from CISC's bad faith, negligence, lack of due diligence or
willful misconduct and arising out of, or in connection with
its duties under this Agreement.
<PAGE> 10
CISC shall indemnify SSI against and hold SSI harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit resulting from
CISC's bad faith, negligence, lack of due diligence or
willful misconduct, and arising out of, or in connection
with, its duties under this Agreement. For purposes of this
Sub-Transfer Agent Agreement, "lack of due diligence" shall
mean the processing by CISC of a Fund share transaction in
accordance with a practice that is not substantially in
compliance with (1) a transaction processing practice of SSI
approved by Fund Trustees, (2) insurance coverages, or (3)
generally accepted industry practices of mutual fund agents.
CISC shall also be indemnified and held harmless by SSI
against any loss, claim, damage, liability and expenses
(including reasonable counsel fees and expenses) by reason of
any act done by it in good faith with due diligence and in
reasonable reliance upon any instrument or certificate for
shares reasonably believed by it (a) to be genuine and (b) to
be signed, countersigned or executed by any person or persons
authorized to sign, countersign, or execute such instrument
or certificate.
In addition, SSI will indemnify and hold CISC harmless
against any loss, claim, damage, liability and expense
(including reasonable counsel fees and expenses) in respect
of any claim, demand, action or suit as a result of the
negligence of the Fund, Trust SRF or SSI, or as a result of
CISC's acting upon any instructions reasonably believed by
CISC to have been executed or orally communicated by a duly
authorized officer or employee of the Fund, Trust SRF or SSI,
or as a result of acting in reliance upon written or oral
advice reasonably believed by CISC to have been given by
counsel for the Fund, Trust SRF or SSI.
In any case in which a party to this Agreement may be
asked to indemnify or hold harmless the other party hereto,
the party seeking indemnification shall advise the other
party of all pertinent facts concerning the situation giving
rise to the claim or potential claim for indemnification, and
each party shall use reasonable care to identify and notify
the other promptly concerning any situation which presents or
appears likely to present a claim for indemnification.
Prior to admitting to or agreeing to settle any claim subject
to this Section, each party shall give the other reasonable
opportunity to defend against said claim in either party's
name.
25. Employees. CISC and SSI are separately
responsible for the employment, control and conduct of their
respective agents and employees and for injury to such agents
or employees or to others caused by such agents or employees.
CISC and SSI severally assume full responsibility for their
respective agents and employees under applicable statues and
agree to pay all employer taxes thereunder. The conduct of
their respective agents and employees shall be included in
any reference to the conduct of CISC or SSI for all purposes
hereunder.
26. Termination and Amendment. This Agreement shall
continue in effect for eighteen (18) months from the
Operational Date, and will automatically be
<PAGE> 11
renewed for successive one year terms thereafter. After
eighteen (18) months from the Operational Date the Agreement
may be terminated at any time by not less than one hundred
eighty (180) days written notice. Upon termination hereof,
SSI shall pay CISC such compensation as may be due to CISC as
of the date of such termination for services rendered and
expenses incurred, as described in Schedule B. This
Agreement may be modified or amended from time to time by
mutual agreement between SSI and CISC.
27. Successors. In the event that in connection with
termination of this Agreement a successor to any of CISC's
duties or responsibilities hereunder is designated by SSI by
written notice to CISC, CISC shall promptly at the expense of
SSI, transfer to such successor, or if no successor is
designated, transfer to the Trust, a certificate list of the
shareholders of the Fund (with name, address and taxpayer
identification or Social Security number), a historical
record of the account of each shareholder and the status
thereof, all other relevant books, records, correspondence
and other data established or maintained by CISC under this
Agreement in machine readable form and will cooperate in the
transfer of such duties and responsibilities, and in the
establishment of books, records and other data by such
successor. CISC shall be entitled to reimbursement of its
reasonable out-of-pocket expenses in respect of assistance
provided in accordance with the preceding sentence.
28. Miscellaneous. This Agreement shall be construed
in accordance with and governed by the laws of The
Commonwealth of Massachusetts.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit
any of the provisions of this Agreement or otherwise affect
their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
CISC shall keep confidential all records and information
provided to CISC by the Trust, SSI, SRF, and prior, present
or prospective shareholders of the Fund, except, after notice
to SSI , to the extent disclosures are required by this
Agreement, by the Fund's registration statement, or by a
reasonable request or a valid subpoena or warrant issued by a
court, state or federal agency or other governmental
authority.
Neither CISC nor SSI may use each other's name in any
written material without written consent of such other party,
provided , however, that such consent shall not unreasonably
withheld. CISC and SSI hereby consent to all uses of their
respective names which refer in accurate terms to appointment
and duties under this Agreement or which are required by any
governmental or regulatory authority including required
filings. SSI, SRF, the Trust and the Fund consent to use of
their respective names and logos by CISC for shareholder
correspondence and statements
This Agreement shall be binding upon and shall inure to
the benefit of SSI and CISC and their respective successors
and assigns. Neither SSI nor CISC shall assign this
<PAGE> 12
Agreement nor its rights and obligations under this Agreement
without the express written consent of the other party.
This Agreement may be amended only in writing by mutual
agreement of the parties.
Any notice and other instrument in writing authorized or
required by this Agreement t be given to SSI or CISC shall
sufficiently be given if addressed to that party and mailed
or delivered to it as its office set for the below or at such
other place as it may from time to time designate in writing.
SSI, the Trust and the Fund:
SteinRoe Services Inc.
One South Wacker Drive
Suite 3300
Chicago, Illinois 60606
Attn: Jilaine Hummel Bauer, Esq.
CISC:
Colonial Investors Service Center, Inc.
One Financial Center
Boston, Massachusetts 02111
Attn: Mary McKenzie; with a separate copy to
Attn: Nancy L. Conlin, Esq., Legal Department
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and sealed as of the date first
above written.
STEINROE SERVICES INC.
By: TIMOTHY K. ARMOUR
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: D.S. SCOON
Name: Davey S. Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
By: TIMOTHY K. ARMOUR
Name: Timothy K. Armour
Title: President
<PAGE>
SCHEDULE A
Stein Roe Mutual Funds (the "Fund"), consists of the
following series of portfolios:
Stein Roe Investment Trust
- --------------------------
Stein Roe Growth & Income Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Income Trust
- ----------------------
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Municipal Trust
- -------------------------
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Stein Roe Managed Municipals Fund
<PAGE>
SCHEDULE B
This Schedule B is attached to and is part of a certain
Sub-Transfer Agent Agreement ("Agreement") dated July 3, 1996
between SteinRoe Services Inc. ("SSI") and Colonial Investors
Center, Inc. ("CISC").
A. SSI will pay CISC for services rendered under the
Agreement and in accordance with a negotiated allocation of
revenues and reimbursement of costs as follows:
1. As of the Operational Date, CISC and SSI shall agree upon
a fixed monthly per account fee to be paid under the
Agreement, which shall be in an amount equal to 1/12 (a) the
estimated total, determined on an annualized basis, of (1)
all incremental costs incurred by CISC in connection with the
sub-transfer agency relationship, plus (2) 1/2 the net
economic benefit derived by Liberty Financial Companies, the
parent company of both CISC and SSI, as a result of the sub-
transfer agency relationship, (b) divided by the number of
shareholder accounts to be serviced by CISC pursuant to the
Agreement as of the Operational Date.
2. For the first eighteen (18) months of the Agreement, SSI
shall pay CISC, monthly in arrears, commencing with the first
day of August, 1996, and on the first day of each month
thereafter, the greater of (a) the product of the fixed per
account fee determined as provided in paragraph 1. above
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month, and (b) 1/12 the annualized estimated total costs and
benefit determined pursuant to (a) of paragraph 1. above.
All estimates under this paragraph shall be determined no
later than September 30, 1996. The annual fee for the first
eighteen months shall not be less than $1.4 million.
3. Commencing January 1, 1998, and during each calendar year
thereafter, SSI shall pay CISC a fee equal to CISC's budgeted
annual per account expense of providing services pursuant to
the Agreement. Said fee shall be paid monthly in arrears, on
the first day of each month, in an amount equal to the
product of 1/12 the budgeted annual per account fee
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month. All budgeted numbers under this paragraph shall be
determined no later than November 30 each year.
B. The Fund shall be credited each month with balance
credits earned on all Fund cash balances.
Upon thirty (30) days' notice to SSI, CISC may increase
the fees it charges to the extent the cost to CISC of
providing services increases (i) because of changes in the
Fund's Prospectus, or (ii) on account of any change after the
date hereof in law or regulations governing performance of
obligations hereunder.
Fees for any additional services not provided herein, ad
hoc reports or special programming requirements to be
provided by CISC shall be agreed upon by SSI and CISC at such
time as CISC agrees to provide any such services.
In addition to paying CISC fees as described herein, SSI
agrees to reimburse CISC for any and all out-of-pocket
expenses and charges in performing services under the
Agreement (other than charges for normal data processing
services and related software, equipment and facilities)
including, but not limited to, mailing service, postage,
printing of shareholder statements, the cost of any and all
forms of the Trust and other materials used in communicating
with shareholders of the Trust, the cost of any equipment or
service used for communicating with the Trust's custodian
bank or other agent of the Trust, and all costs of telephone
communication with or on behalf of shareholders allocated in
a manner mutually acceptable to CISC and SSI.
<PAGE>
SCHEDULE C
SRS and CSC hereby agree that the date on which the
complete services began ("Operational Date") under the Sub-
Transfer Agent Agreement between them dated July 3, 1996, is:
July , 1996
STEINROE SERVICES INC.
By:________________________________________
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By:________________________________________
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of January 1, 1997, and
effective that date unless otherwise indicated below, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust and Stein Roe Investment Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add Stein Roe Advisor Trust
(effective February 14, 1997), Stein Roe Institutional Trust
(effective January 2, 1997) and Stein Roe Trust (effective
February 14, 1997), comprised of the Series listed on
Schedule A, as amended, and assenting parties to the
contract and to add new series of the existing Trusts. The
amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY DILLON MCKENZIE
Name: Mary Dillon McKenzie
Title: Senior Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: JILAINE HUMMEL BAUER
Name: Jilaine Hummel Bauer
Title: Executive Vice President and Secretary
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of June 30, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to add additional
series of the existing Trusts. The amended Schedule A is as
follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: JOHN W. BYRNE
Name: John W. Byrne
Title: Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 15, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to remove Stein Roe
Advisor Trust as a party to this agreement. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 17, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to remove two series of Income Trust
from Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: ANNE E. MARCEL
Name: Anne E. Marcel
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of April 30, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add one series of Investment Trust
to Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to the
incorporation by reference of our report dated August 14,
1998 with respect to Stein Roe Municipal Money Market Fund,
Stein Roe Intermediate Municipals Fund, Stein Roe Managed
Municipals Fund, Stein Roe High-Yield Municipals Fund,
SR&F Municipal Money Market Portfolio and SR&F High-Yield
Municipals Portfolio in the Registration Statement (Form N-1A)
and related Statement of Additional Information of Stein Roe
Municipal Trust filed with the Securities and Exchange Commission
in this Post-Effective Amendment No. 26 to the Registration
Statement under the Securities Act of 1933 (Registration No.
2-99356) and in this Amendment No. 27 to the Registration
Statement under the Investment Company Act of l940 (Registration
No. 811-4367).
ERNST & YOUNG LLP
Chicago, Illinois
October 21, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE INTERMEDIATE MUNICIPALS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 181,788
<INVESTMENTS-AT-VALUE> 194,524
<RECEIVABLES> 3,485
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 198,103
<PAYABLE-FOR-SECURITIES> 1,958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 494
<TOTAL-LIABILITIES> 2,452
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 182,373
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 542
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,736
<NET-ASSETS> 195,651
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,774
<OTHER-INCOME> 0
<EXPENSES-NET> 1,396
<NET-INVESTMENT-INCOME> 9,378
<REALIZED-GAINS-CURRENT> 753
<APPREC-INCREASE-CURRENT> 3,083
<NET-CHANGE-FROM-OPS> 13,214
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,378
<DISTRIBUTIONS-OF-GAINS> 545
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,733
<NUMBER-OF-SHARES-REDEEMED> 3,542
<SHARES-REINVESTED> 494
<NET-CHANGE-IN-ASSETS> (355)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 334
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 872
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,622
<AVERAGE-NET-ASSETS> 199,455
<PER-SHARE-NAV-BEGIN> 11.38
<PER-SHARE-NII> 0.54
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<PER-SHARE-DIVIDEND> 0.54
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> STEIN ROE HIGH-YIELD MUNICIPALS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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<INVESTMENTS-AT-VALUE> 342,143
<RECEIVABLES> 386
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<TOTAL-ASSETS> 342,603
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 823
<TOTAL-LIABILITIES> 823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 328,828
<SHARES-COMMON-STOCK> 28,542
<SHARES-COMMON-PRIOR> 26,222
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,131)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,083
<NET-ASSETS> 341,780
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,339
<OTHER-INCOME> 0
<EXPENSES-NET> 2,459
<NET-INVESTMENT-INCOME> 17,880
<REALIZED-GAINS-CURRENT> (3,850)
<APPREC-INCREASE-CURRENT> 11,887
<NET-CHANGE-FROM-OPS> 25,917
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,880
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,341
<NUMBER-OF-SHARES-REDEEMED> 4,792
<SHARES-REINVESTED> 771
<NET-CHANGE-IN-ASSETS> 35,710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (9,281)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 804
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,459
<AVERAGE-NET-ASSETS> 326,522
<PER-SHARE-NAV-BEGIN> 11.67
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> 0.65
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.97
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> STEIN ROE MUNICIPAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 114,461
<RECEIVABLES> 1,093
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115,584
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 305
<TOTAL-LIABILITIES> 305
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,287
<SHARES-COMMON-STOCK> 115,214
<SHARES-COMMON-PRIOR> 118,359
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 115,279
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,635
<OTHER-INCOME> 0
<EXPENSES-NET> 864
<NET-INVESTMENT-INCOME> 3,771
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,771
<DISTRIBUTIONS-OF-GAINS> 0
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<NAME> STEIN ROE MANAGED MUNICIPALS FUND
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 512,675
<INVESTMENTS-AT-VALUE> 574,260
<RECEIVABLES> 10,617
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<PAGE>
EXHIBIT (p)
Please do not remove label For office use only ________
[Logo] Stein Roe Mutual Funds
Building Wealth for Generations [service mark]
MUTUAL FUND APPLICATION
Mail to:
STEIN ROE MUTUAL FUNDS
P.O. Box 8900
Boston, MA 02205-8900
This application is for:
[ ] New account
[ ] Change to current account (see Section 13)
_________________________
Account number
- -------------------------------------------------------------------------
If you have questions, please call us toll-free.
Monday - Friday--7 a.m. to 8 p.m. (CST)
Saturday & Sunday--8 a.m. to 2 p.m. (CST)
800-338-2550
http://www.steinroe.com
Liberty Securities Corporation, Distributor
Member SIPC
Stein Roe Mutual Funds, P.O. Box 8900, Boston, MA 02205-8900 800-338-2550
- -------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
Please check one of the boxes below to indicate the type of account
and complete the related information.
[ ] INDIVIDUAL OR [ ] JOINT* ACCOUNT
______________________________________________
Owner's name (First, middle initial, last)
_______________________________________________
Joint owner's name (First, middle initial, last)
____________________________________________________________________
Owner's Social Security number Joint owner's Social Security number
__________________________________________________________
Owner's citizenship Joint owner's citizenship
*Joint tenants with right of survivorship, unless indicated otherwise.
[ ] UNIFORM GIFTS (TRANSFERS) TO MINORS ACCOUNT (UGMA/UTMA)
_________________________________________ as custodian for:
Name of one custodian only
_________________________________________ under the
Name of one minor only
__________________ Uniform Gifts (Transfers) to Minors Act.
State of residence
_____________________________________________________
Minor's Social Security number Minor's birthdate
[ ] ORGANIZATION OR OTHER ACCOUNT
Please complete and return the Certificate of Authorization on the
last page of the prospectus.
_______________________________________________
Name of corporation, partnership, estate, etc.
_________________________________________
Tax identification number
[ ] TRUST OR RETIREMENT ACCOUNT
For a Stein Roe IRA, please call us for a separate application.
_________________________________________
Name of trustee(s)
_________________________________________
_________________________________________
Name of trust
____________________________________________________
Date of trust Trust's tax identification number
_________________________________________
Trust beneficiary(ies)
_________________________________________
Trust beneficiary(ies)
2. ADDRESS
_________________________________________
Street Address or P.O. box
_________________________________________
_________________________________________
City State Zip code
_________________________________________
Daytime telephone Evening Telephone
[ ] CONSOLIDATED QUARTERLY STATEMENTS
Check the box above if you would like to link your new Stein Roe account
to an existing Stein Roe account--even if the existing account is
registered to another member in your household. Linking your accounts
allows us to consolidate your Stein Roe accounts on one quarterly
statement. Please provide the existing Stein Roe account number below.
Statements will be sent to the address on the existing account.
________________________________________________
Existing account number
3. FUND SELECTION
Fill in the amount you would like to invest in each of the funds below.
The initial minimum is $2,500; for custodial accounts (UGMAs), the
minimum is $1,000. When an Automatic Investment Plan in Section 6 is
established, Stein Roe reduces the minimum initial investment to $1,000
for each new account ($500 for UGMAs and $100 for Young Investor Fund).
If you do not specify a fund, your investment will be in Stein Roe Cash
Reserves Fund, a money market fund.
MONEY MARKET FUNDS
Cash Reserves Fund (036) $_____
TAX-EXEMPT FUNDS
Municipal Money Market Fund (030) _____
Intermediate Municipals Fund (008)_____
Managed Municipals Fund (037) _____
High-Yield Municipals Fund (028) _____
BOND FUNDS
Intermediate Bond Fund (035) _____
Income Fund (009) _____
High Yield Fund (015) _____
GROWTH AND INCOME FUNDS
Balanced Fund (031) _____
Growth & Income Fund (011) _____
GROWTH FUNDS
Growth Stock Fund (032) CLOSED*
Young Investor Fund (014) _____
Special Fund (034) _____
Growth Opportunities Fund (020) _____
Special Venture Fund (016) _____
Capital Opportunities (033) _____
International Fund (012) _____
Emerging Markets Fund (018)** _____
*This Fund is closed to new investors. You must be a current shareholder
in any Stein Roe Fund to open an additional account in your name. To
verify your status as a current shareholder, please provide account
number with new investment amount below.
______________________________________________________________________
Current Stein Roe Fund account number New Growth Stock Fund
investment amount
**To discourage short-term trading, there is a 1 percent redemption fee
imposed on the sale of shares held for less than 90 days.
4. INVESTMENT METHOD
Check one box below. (Money orders and cashier's checks not accepted.)
[ ] BY CHECK: Payable to Stein Roe Mutual Funds
[ ] BY EXCHANGE FROM:
Your account must be registered identically to invest by exchange.
______________________________
Fund name
___________________________ ____________________________
Account number Number of shares or $ amount
[ ] BY WIRE: Call us for instructions at 800-338-2550
5. TELEPHONE AND ONLINE REDEMPTION OPTIONS
A. Telephone/Online Redemption Options. You can redeem shares by
telephone or online two ways: with Telephone/Online Redemption, a check
is mailed to your address of record; with Telephone/Online Exchange,
redemption proceeds are used to purchase shares in another Stein Roe
Fund. Most shareholders prefer these conveniences. They apply unless
you check the boxes below.
I DO NOT WANT:
[ ] Telephone Redemption [ ] Online Redemption
[ ] Telephone Exchange [ ] Online Exchange
B. ACH Redemption Option. Check either or both boxes if you wish to be
able to redeem shares at any time by telephone or online and have the
proceeds sent to your bank account designated in Section 8. ($50
minimum; $100,000 maximum.)
[ ] ACH Telephone Redemption
[ ] ACH Online Redemption
C. Telephone Redemption by Wire. Check the box below if you wish to
redeem shares at any time and wire the proceeds to your bank account
designated in Section 8. ($1,000 minimum for all funds; $100,000 maximum
for all funds except money market funds.) [ ]
If you decide to add these options at a later date, you will be required
to obtain a signature guarantee.
6. AUTOMATIC INVESTMENT PLAN
Please allow 3 weeks to establish this option.
[ ] A. Regular Investments. This option allows you to make scheduled
investments into your accounts(s) directly from your bank account
by electronic transfer. When this option is established, Stein
Roe reduces the minimum initial investment to $1,000 for each new
account ($500 for UGMAs and $100 for Young Investor Fund).
Please remember to include a check for the appropriate minimum
and also complete Section 8.
_________________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
_________________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
I authorize Stein Roe Mutual Funds to draw on my bank account to purchase
shares for the account(s) listed above. Check one period below to
indicate the frequency of your automatic investments.
[ ] Monthly [ ] Quarterly [ ] Every 6 months [ ] Annually
Check one box below to indicate which day of the month your investment
should be made:
[ ] 5th or [ ] 20th day of the month
Please begin: [ ] Immediately or [ ] _______ (specify month)
[ ] B. Special Investments. You can also make subsequent purchases by
telephone or online and pay for them by electronic transfer from
your bank account on request. Check the box above for this
option, which saves you the trouble and expense of arranging for a
wire transfer or writing a check. Please also complete Section 8.
($50 minimum; $100,000 maximum).
7. DISTRIBUTION OPTIONS
We will automatically reinvest all distributions for you. If you want
this option, you do not need to fill out this section. Please check
below only if you prefer that your distributions be: invested in
shares of another Stein Roe Fund with the same account registration (a
$1,000 minimum applies to the account in which you are investing);
deposited into your bank account; or sent by check to your registered
address.
Dividends Capital Gains
(check one or both)
[ ] A. Distribution Purchase [ ] [ ]
Invest into _______________ __________________________
Fund name Account number (or "new")
from: _____________________ ___________________________
Fund name Account number (or "new")
[ ] B. Automatic deposit direct to your bank [ ] [ ]
account. Please also complete Section 8.
[ ] C. Send check to registered address [ ] [ ]
8. BANK INFORMATION
Complete this section if you have selected options from Sections 5B, 5C,
6A, 6B, or 7B. You must use the same bank account for these options.
[ ] checking [ ] savings
________________________________________________________________
Name of bank
________________________________________________________________
Street address of bank
________________________________________________________________
City State Zip code
________________________________________________________________
Name(s) on bank account
______________________________ ________________________________
Bank account number ACH Routing number (see diagram below)
Attach voided check here.
- ------------------------------------------------------
Joe Investor 0000
123 Main Street ______ 19__
Anytown, USA 12345
Pay to the
order of ________________________________ $_________
______________________________________________ Dollars
Anytown Bank USA
Memo ____________ ______________________________
1 000 000000 00 0000000000
- ------------------------------------------------------
ACH ROUTING NUMBER YOUR ACCOUNT NUMBER
A unique nine-digit number Unique to your account at
that allows for the electronic your financial institution
transfer of funds and identi-
fies your financial institution
within the Automatic Clearing
House Network.
9. AUTOMATIC EXCHANGE PLAN
With this option you can authorize Stein Roe to regularly exchange shares
from one existing Stein Roe Fund account to another with the same account
registration. A $1,000 minimum applies to each new account.
________________________________________________________________
Redeem shares from (Fund name) Account number
________________________________________________________________
Amount ($50 minimum)
________________________________________________________________
Purchase shares from (Fund name) Account number
Check one box below to indicate frequency of exchange and fill in
dates between the 1st and 28th of the month:
[ ] Twice monthly on the ___ and ___ beginning ______ (Specify month)
[ ] Monthly on the ______ beginning __________ (Specify month)
[ ] Quarterly on the ______ of _______________ (List four months)
[ ] Twice yearly on the _____ of _____________ (List two months)
[ ] Annually on the _____ of _________________ (Specify month)
10. MONEY MARKET FUND OPTIONS
[ ] FREE CHECK WRITING
Available for Cash Reserves Fund and Municipal Money Market Fund only.
Check the above box and complete the signature card below if you wish
to write checks ($50 minimum) on your money market fund account
Please also complete Section 12.
PLEASE DO NOT DETACH
- ---------------------------------------------------------------------
Bank of Boston Check Writing Signature Card (for money market funds only)
Select Fund:[ ] Cash Reserves Fund [ ] Municipal Money Market Fund
Account name(s) as registered: ____________________________
By signing this card, I authorize Bank of Boston to honor any check drawn
by me on an account with the bank and to redeem and pay to bank shares in
my Fund account having a redemption price equal to the amount of such
check. I agree to be subject to the rules governing the Check Writing
Redemption option as in effect from time to time.
Signature (sign as you will on checks) Signature guarantee*
_____________________________________ ________________________________
_____________________________________ ________________________________
Number of signatures on each check*: __________
*Required if you are adding these options to an existing account; or if
you are requesting check writing for a Trust, Corporation or other
Organization account, guarantee required for any person signing these
cards who has not signed in Section 12. Otherwise a signature guarantee
is not required.
If left blank, only one signature is required for joint tenant accounts,
but all signatures are required for all other types of accounts.
For office use only: Account no. _________________ Date: ______________
You are subject to Fund and bank rules pertaining to checking
accounts under the privilege as in effect from time to time. For a
joint tenancy account with rights of survivorship, each owner appoints
each other owner as attorney-in-fact with power to authorize redemptions
on his behalf by signing checks under the privilege unless the reverse
side indicates all owners must sign checks.
You agree to hold Fund and its transfer agent free from any liability
resulting from payment of any forged, altered, lost or stolen check
unless you notify Fund and bank of such misappropriation no later than 14
days after the earliest of the date on which you (a) discover the
misappropriation or (b) receive a copy of the check cancelled by bank. A
copy of a cancelled check paid during a calendar month is deemed
received 6 days after posting in the U.S. mail to your registered address
with Fund unless you notify Fund of non-receipt by certified mail within
20 days after the close of such month.
You agree to hold Fund and its transfer agent free from any liability for
any other check misappropriated by the same wrongdoer and paid from
proceeds of a redemption made in good faith on or after the date you
notify Fund of the first misappropriated check.
- -----------------------------------------------------------------------
11. TERMS AND CONDITIONS OF SERVICES
Please read carefully before signing in Section 12. By electing an
automatic service, you agree to the following terms and conditions and
those stated in the Fund prospectus as in effect from time to time.
*By signing this application, you agree that any privilege you elect may
be restricted or terminated at any time without notice to you. Your
termination of a privilege will be effective no later than five business
days after the Fund(s) or its transfer agent receives 1) your request;
2) notice and proof of your death, or if a trust, termination thereof;
or 3) the closing of an affected Fund or bank account.
*All privileges except Automatic Dividend Deposit, Dividend Purchase
Option, Automatic Investment Plan, Money Market Fund Check Writing,
Automatic Exchange, Automatic Redemption Plan and Telephone Redemption
by Wire will be transferred automatically to any new account you open in
any other Fund offering the privileges into which a telephone or written
exchange is made.
*You authorize the Fund(s) and its transfer agent to initiate any and
all credit or debit entries (and reversals thereof) to effect electronic
transfers under any privilege and redeem shares of any Fund(s) you own
equal to the amount of any loss incurred by any of them in effecting any
electronic transfer and retain the proceeds.
*To discourage short-term trading, there is a 1 percent redemption fee
imposed on the sale of Emerging Markets Fund shares held for less than
90 days.
12. SIGNATURE(S)
By signing this form, I certify that:
*I have received the current Fund prospectus and have read the Terms and
Conditions of Services in Section 11 and agree to be bound by their
terms as governed by Illinois law. I have full authority and legal
capacity to purchase Fund shares and establish and use any related
privileges.
*By signing below, I certify under penalties or perjury that:
-All information and certifications on this application are true and
correct, including the Social Security or other tax identification
number (TIN) in Section 1.
-If I have not provided a TIN, I have not been issued a number but have
applied (or will apply) for one and understand that if I do not
provide the Fund(s) a TIN within 60 days, the Fund(s) will withhold
31 percent from all my dividend, capital gain and redemption payments
until I provide one.
-Check one of the following only if applicable:
[ ] The IRS has informed me I am subject to backup withholding as a
result of a failure to report all interest or dividend income.
[ ] I am a trust or organization that qualifies for the IRS backup
withholding exemption.
*Unless I have declined the Telephone Redemption, Telephone Exchange,
Online Redemption and Online Exchange privileges in Section 5A, I have
authorized the Fund and its agents to act upon instructions received by
telephone to redeem my shares of the Fund or to exchange them for shares
of another Stein Roe Fund, and I agree that, subject to the Funds
employing reasonable procedures to confirm that such telephone or online
instructions are genuine, neither the Fund, nor any of its agents will
be liable for any loss, injury, damage, or expense as a result of acting
upon, and will not be responsible for the authenticity of, any telephone
instructions, and will hold the Fund and its agents harmless from any
loss, claims or liability arising from its or their compliance with
these instructions. Accordingly, I understand that I will bear any
risk of loss resulting from unauthorized instructions.
*THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
Sign below exactly as your name(s) appears in Section 1.
x________________________________________________________________
Signature Date
________________________________________________________________
Title (if owner is an organization)
x________________________________________________________________
joint owner's signature Date
________________________________________________________________
Title (if owner is an organization)
13. SIGNATURE GUARANTEE (IF REQUIRED)
A signature guarantee is not required if you are establishing a new
account. For existing accounts, a signature guarantee is required if
you are adding or making changes to options listed in Sections 5, 6, 7B,
8 or 10. We are unable to accept notarizations.
Signature(s) guaranteed by:
________________________________________________________________
Name of institution
________________________________________________________________
Name of authorized officer
________________________________________________________________
Signature of authorized officer
Guarantor's stamp:
APP10/97
