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1940 Act File No. 811-7996
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 19 [X]
Amendment No. 2 [X]
(check appropriate box or boxes)
SR&F BASE TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Registrant's Principal Offices)
(312) 368-5612
(Registrant's Telephone Number, Including Area Code)
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
and Secretary Three First National Plaza
SR&F Base Trust 70 W. Madison Street
One South Wacker Drive Suite 3200
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
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EXPLANATORY NOTE
This Registrant Statement has been filed by the Registrant
pursuant to Section 8(b) of the Investment Company Act of 1940.
However, beneficial interests in the Registrant are not being
registered under the Securities Act of 1933 (the "1933 Act")
because such interests will be issued solely in private placement
transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant may only be made by investment companies, insurance
company separate accounts, common or commingled trust funds, or
similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell or the
solicitation of an offer to buy any beneficial interests in the
Registrant.
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PART A
Responses to Items 1 through 3 have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form
N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
INTRODUCTION
SR&F Base Trust (the "Trust") is a no-load, diversified, open-end
management investment company which was organized as a trust under
the laws of the Commonwealth of Massachusetts on August 23, 1993.
Beneficial interests in the Trust (the "Interest" or "Interests")
are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2)
of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Trust may be made only by investment companies,
insurance company separate accounts, common or commingled trust
funds, or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act.
The Trust has one series, designated SR&F Municipal Money Market
Portfolio ("Municipal Money Portfolio"). It is expected that
Colonial Municipal Money Market Fund (a series of Colonial Trust
IV) and SteinRoe Municipal Money Market Fund (a series of SteinRoe
Municipal Trust) will be investors in Municipal Money Portfolio.
This registration statement does not construe an offer to sell or
the solicitation of an offer to buy any "security" within the
meaning of the 1933 Act.
INVESTMENT OBJECTIVE
Municipal Money Portfolio seeks maximum current income exempt from
Federal income tax by investing principally in a diversified
portfolio of "short-term" Municipal Securities.
BASIC INVESTMENT STRATEGY
In pursuing its objective, the 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 below).
"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
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/1/ The Board of Trustees of the Trust has determined that the
demand feature of a variable rate demand security rated SP-1+, A-
1+ or A-1 by S&P or MIG 1, MIG 2 or Prime 1 by Moody's is at least
equal in quality to the demand feature of a variable rate demand
security rated VMIG 2 by Moody's. As a non-fundamental policy,
the Portfolio will not invest in a variable rate security whose
demand feature is conditional unless the Board of Trustees
determines that the security is at least the economic equivalent
of a variable rate security with an unconditional demand feature
or (a) the demand feature is rated within the two highest ratings
assigned by Moody's or within the equivalent ratings assigned by
S&P and (b) the underlying security is rated within the two
highest ratings assigned by Moody's or S&P. The Board of Trustees
has determined that a variable rate security where the demand
feature is suspended only after a default followed by an
acceleration of maturity is the economic equivalent of a variable
rate security with an unconditional demand feature.
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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.
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.
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/2/ For a description of Moody's and S&P quality ratings, see the
Appendix. All references to ratings apply to ratings adopted in
the future by Moody's or S&P that are determined by the Board of
Trustees to be equivalent to current ratings.
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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. Municipal Money Portfolio 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.
Municipal Money Portfolio 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 the Portfolio, or the Portfolio 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 Portfolio (see the definition of
"short-term" in the Glossary to Part B), if, after purchase by the
Portfolio, an issue of Municipal Securities ceases to meet the
required rating standards, if any, the Portfolio is not required
to sell such security, but the Adviser would consider such an
event in deciding whether the Portfolio should retain the security
in its portfolio. 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 Portfolio must dispose
of the security, unless the Board of Trustees determines that it
is in the best interests of the Portfolio and its shareholders to
retain the security.
OTHER INVESTMENT PRACTICES
Municipal Money Portfolio may also engage to a limited extent in
the following investment practices each of which may involve
certain special risks.
When-Issued and Delayed-Delivery Securities. Municipal Money
Portfolio's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. Municipal Money Portfolio
makes such commitments only with the intention of actually
acquiring the securities, but may sell the securities before
settlement date if the Adviser deems it
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advisable for investment reasons. Securities purchased in this
manner involve a risk of loss if the value of the security
purchased declines before settlement date.
Standby Commitments. To facilitate portfolio liquidity, Municipal
Money Portfolio 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. Municipal Money Portfolio may also
purchase participation interests or certificates of participation
in all or part of specific holdings of Municipal Securities,
including municipal obligations. Some participation interests,
certificates of participation, and municipal lease obligations are
illiquid and, as such, will be subject to the Portfolio's 10%
limit on investments in illiquid securities.
RISK FACTORS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Although Municipal
Money Portfolio seeks to reduce risk by investing in a diversified
portfolio, this does not eliminate all risk. The risks inherent
in the Portfolio depend primarily upon the maturity and quality of
the obligations in which it invests, as well as on market
conditions. A decline in prevailing levels of interest rates
generally increases the value of securities in which the Portfolio
invests, while an increase in rates usually reduces the value of
those securities. There can be no assurance that it will achieve
its objective, nor can it assure that payments of interest and
principal on portfolio obligations will be made when due.
Generally, high-quality short-term obligations offer lower yields
and less fluctuation in value than long-term low-quality
obligations. Consequently, Municipal Money Portfolio is designed
for investors who seek little or no fluctuation in portfolio
value.
Although Municipal Money Portfolio currently limits its
investments in Municipal Securities to those the interest on which
is exempt from the regular Federal income tax, it may invest up to
100% of its total assets in Municipal Securities the interest on
which is subject to the Federal alternative minimum tax.
Municipal Money Portfolio 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. Municipal Money Portfolio may
invest 25% or more of its assets in industrial development bonds
(subject to the concentration restrictions described in this Part
A under Investment Restrictions and in Part B). Assets of
Municipal Money Portfolio that are not invested in Municipal
Securities may be held in cash or invested in short-term taxable
investments. /3/
PORTFOLIO TURNOVER
In seeking to attain its objective, Municipal Money Portfolio may
sell portfolio securities without regard to the period of time
they have been held. As a result, the turnover rate
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/3/ The policy expressed in this sentence is a fundamental policy
of Municipal Money Portfolio.
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of Municipal Money Portfolio may vary from year to year. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains or losses.
INVESTMENT RESTRICTIONS
Municipal Money Portfolio may not (1) with respect to 75% of its
assets, invest more than 5% of its total assets in the securities
of any one issuer, except for except for obligations issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities or repurchase agreements for such securities
(guarantees or letters of credit of a single guarantor may exceed
this limit); (2) invest 25% or more of its total assets in the
securities of non-governmental issuers whose principal business
activities are in the same industry; or (3) borrow money or pledge
or mortgage its assets, except as a temporary measure for
extraordinary or emergency purposes and then the aggregate
borrowings at any one time (including reverse repurchase
agreements) may not exceed 33 1/3% of its assets (at market
value); additional securities may not be purchased when
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
OTHER INFORMATION
Municipal Money Portfolio's investment policies include additional
restrictions which are described in Part B. Municipal Money
Portfolio's investment objective is non-fundamental and may be
changed by the Board of Trustees without investor approval.
Investors will be notified of any material change in such
policies. Municipal Money Portfolio's fundamental policies may be
changed only with investor approval.
ITEM 5. MANAGEMENT OF THE TRUST.
TRUSTEES
The Board of Trustees of the Trust has overall management
responsibility for the Trust and Municipal Money Portfolio. See
Part B for the names of and other information about the trustees
and officers.
ADVISER
The Trust has retained the services of Stein Roe & Farnham
Incorporated (the "Adviser"), One South Wacker Drive, Chicago,
Illinois 60606, as investment adviser and administrator of
Municipal Money Portfolio. The Adviser is responsible for the
investment management and administration of Municipal Money
Portfolio, subject to the direction of the Board. The Adviser is
registered as an investment adviser under the Investment Advisers
Act of 1940. The Adviser was organized in 1986 to succeed to the
business of Stein Roe & Farnham, a partnership that had advised
and managed mutual funds since 1949. The Adviser is a wholly-
owned indirect subsidiary of Liberty Mutual Insurance Company
("Liberty Mutual").
INVESTOR SERVICES
SteinRoe Services Inc. ("SSI"), One South Wacker Drive, Chicago,
Illinois 60606, a wholly-owned indirect subsidiary of Liberty
Mutual, pursuant to a separate service agreement, also provides
certain investor accounting and recordkeeping services for
Municipal Money Portfolio.
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FEES AND EXPENSES
In return for its services, the Adviser receives a monthly fee
from Municipal Money Portfolio, computed and accrued daily, based
on an annualized rate of 0.25 of 1% of average net assets.
Under a separate agreement with the Trust, the Adviser provides
certain accounting and bookkeeping services to Municipal Money
Portfolio, including computation of the Portfolio's net asset
value and calculation of its net income and capital gains and
losses on disposition of its 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.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for
Municipal Money Portfolio.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
A response to Item 5A has been omitted pursuant to paragraph 4 of
Instruction F of the General Instructions to Form N-1A.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
Investments in the Trust have no preemptive or conversion rights
and are fully paid and non-assessable, except as set forth below.
The Trust is not required to hold annual meetings of investors,
and has no current intention to do so, but the Trust will hold
special meetings of investors when, in the judgment of the
trustees, it is necessary or desirable to submit matters for an
investor vote. Changes in fundamental policies will be submitted
to investors for approval. An investors' meeting will be held
upon the written, specific request to the trustees of investors
holding in the aggregate not less than 10% of the Interests in a
series. Investors have under certain circumstances (e.g., upon
application and submission of certain specified documents to the
trustees by a specified number of shareholders) the right to
communicate with other investors in connection with requesting a
meeting of investors for the purpose of removing one or more
trustees. Investors also have the right to remove one or more
trustees without a meeting by a declaration in writing by a
specified number of investors. Upon liquidation of the Trust or a
series thereof, investors would be entitled to share pro rata in
the net assets available for distribution to investors (unless
another sharing method is required for Federal income tax reasons,
in accordance with the sharing method adopted by the trustees).
The Trust reserves the right to create and issue a number of
series, in which case investors in each series would participate
solely in the earnings, dividends, and assets of the particular
series. Interests in any series of the Trust may be divided into
two or more classes of Interests having such preferences or
special or relative rights or
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privileges as the trustees of the Trust may determine. Currently,
the Trust has only one class of one series.
The Trust is organized as a trust under the laws of the
Commonwealth of Massachusetts. Under the Declaration of Trust,
the trustees are authorized to issue Interests in the Trust. Each
investor in a series is entitled to vote in proportion to the
amount of its investment in the series. Investments in the Trust
may not be transferred, but an investor may withdraw all or a
portion of his investment at any time at net asset value.
Investors in any series of the Trust (e.g., investment companies,
insurance company separate accounts, and common and commingled
trust funds) may be held personally, jointly and severally liable
for all obligations of that series of the Trust. However, the
risk of an investor in a series incurring financial loss on
account of such liability is limited to circumstances in which
both inadequate insurance exists and the Trust itself is unable to
meet its obligations.
It is intended that the assets, income, and distributions will be
managed in such a way that an investor in a series will be able to
satisfy the requirements of Subchapter M of the Code for
qualification as a regulated investment company, assuming that the
investor invested all of its assets in the series.
The net income of a series of the Trust shall consist of (i) all
income accrued less the amortization of any premium, on the assets
of the series, less (ii) all actual and any accrued expenses of
the series determined in accordance with generally accepted
accounting principles. Income includes discount earned (including
both original issue and, by election, market discount) on discount
paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the series. All of the net
income of a series is allocated among the investors in the series
in accordance with their Interests (unless another sharing method
is required for Federal income tax reasons, in accordance with the
sharing method adopted by the trustees).
Under the anticipated method of operation of the Trust, the Trust
will not be subject to any Federal income tax. However, each
investor in a series of the Trust will be taxed on its share (as
determined in accordance with the governing instruments of the
Trust) of the series' ordinary income and capital gain in
determining its income tax liability. The determination of such
share will be made in accordance with an allocation method
designed to satisfy the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
Distributions of net income and capital gain are to be made pro
rata to investors in accordance with their investment in Municipal
Money Portfolio. For Federal income tax purposes, however,
income, gain, or loss may be allocated in a manner other than pro
rata, if necessary to reflect gains or losses properly allocable
to fewer than all investors as a result of contributions of
securities to a series or redemptions of portions of an investor's
unrealized gain or loss in series assets.
ITEM 7. PURCHASE OF SECURITIES.
Interests in Municipal Money Portfolio are issued solely in
private placement transactions that do not involve any "public
offering" within the meaning if Section 4(2) of the 1933 Act.
Investments in Municipal Money Portfolio may be made only by
investment companies, insurance company separate accounts, common
or commingled trust funds,
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or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell
or the solicitation of any offer to buy any "security" within the
meaning of the 1933 Act.
An investment in Municipal Money Portfolio may be made without a
sales load. All investments are made at net asset value next
determined if an order is received by SteinRoe Services Inc., the
Portfolio's investor accounting and recordkeeping agent, by the
designated cutoff time. The net asset value of Municipal Money
Portfolio is determined as of the close of trading on the New York
Stock Exchange (currently 3:00 p.m., Chicago time) every day the
New York Stock Exchange is open for trading ("business day") by
dividing the difference between the values of the Portfolio's
assets and liabilities by the number of shares outstanding. Net
asset value will not be determined on days when the Exchange is
closed unless, in the judgment of the Board of Trustees, the net
asset value should be determined on any such day, in which case
the determination will be made at 3:00 p.m., Chicago time.
The valuation of Municipal Money Portfolio's portfolio securities
is based on their amortized cost, which does not take into account
unrealized gains or losses, in an attempt to maintain its net
asset value at $1.00 per share. The extent of any deviation
between the Portfolio's 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 instruments,
increasing, reducing or suspending distributions, or redeeming
shares in kind. Other assets and securities of the Portfolio for
which this valuation method does not produce a fair value are
valued at a fair value determined by the Board.
Each investor in Municipal Money Portfolio may add to or reduce
its investment in the Portfolio on each business day. On each
such business day, the value of each investor's Interest in the
Portfolio will be determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that business day,
that represents that investor's share of the aggregate Interests
in the Portfolio. Any additions or withdrawals which are to be
effective on that day will then be effected. The investor's
percentage of the aggregate Interests in the Portfolio will then
be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in
the Portfolio, on such day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's
investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the
Portfolio 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 on the following business day.
There is no minimum initial or subsequent investment in Municipal
Money Portfolio.
Municipal Money Portfolio and SteinRoe Services Inc. reserve the
right to cease accepting investments at any time or to reject any
investment order.
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ITEM 8. REDEMPTION OR REPURCHASE.
An investor in Municipal Money Portfolio may redeem all or any
portion of its investment at the next determined net asset value
if a withdrawal request in proper form is furnished by the
investor to SteinRoe Services Inc., the Portfolio's investor
accounting agent, by the designated cutoff time. The proceeds of
a withdrawal will be paid by the Portfolio in Federal funds
normally on the business day the withdrawal is effected, but in
any event within seven days. Investments in Municipal Money
Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal
proceeds postponed during any period in which the New York Stock
Exchange is closed (other than weekends or holidays) or trading on
such Exchange is restricted, or, to the extent otherwise permitted
by the Investment Company Act of 1940, as amended, if an emergency
exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
General Information and History........................12
Investment Objective and Policies......................12
Management of the Trust................................18
Control Persons and Principal Holders of Securities....20
Investment Management and Administrative Services......20
Brokerage Allocation and Other Practices...............22
Capital Stock and Other Securities.....................24
Purchase, Redemption, and Pricing of Securities........26
Tax Status.............................................27
Underwriter............................................30
Calculation of Performance Data........................30
Financial Statements...................................30
Glossary...............................................30
Appendix...............................................32
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
The basic investment policies and strategies of Municipal Money
Portfolio are described in Part A, Item 4. The following
supplements the information contained in Part A regarding certain
miscellaneous investment practices in which Municipal Money
Portfolio may engage and the risks associated therewith.
When-Issued and Delayed-Delivery Securities. Municipal Money
Portfolio may purchase securities on a when-issued or delayed-
delivery basis, as described in Part A. Municipal Money Portfolio
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 Municipal Money Portfolio 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 Portfolio 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 Portfolio and held by the custodian
throughout the period of the obligation.
Reverse Repurchase Agreements. Municipal Money Portfolio may also
enter into reverse repurchase agreements (defined in the Glossary)
with banks and securities dealers. Use
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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.
Municipal Money Portfolio's reverse repurchase agreements and any
other borrowings may not exceed 33 1/3% of its total assets, and
the Portfolio may not purchase additional securities when its
borrowings, less proceeds receivable from the sale of portfolio
securities, exceed 5% of its total assets.
Standby Commitments. Municipal Money Portfolio may obtain standby
commitments when it purchases 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. Municipal Money Portfolio 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 Municipal Money
Portfolio should exceed the current value of the underlying
securities, Municipal Money Portfolio 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
Portfolio's business relationship with the issuer. Municipal
Money Portfolio 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 Municipal Money Portfolio exercises a standby commitment, the
Portfolio 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 Municipal Money
Portfolio's net asset value.
Short Sales. Municipal Money Portfolio may make short sales
"against the box." In a short sale, the Portfolio sells a
borrowed security and is required to return the identical security
to the lender. A short sale "against the box" involves the sale
of a security with respect to which the Portfolio already owns an
equivalent security in kind and amount. A short sale "against the
box" enables the Portfolio to obtain the current market price of a
security which it desires to sell but is unavailable for
settlement.
Line of Credit. Subject to restriction (4) under Investment
Restrictions, Municipal Money Portfolio may establish and maintain
a line of credit with a major bank in order to permit borrowing on
a temporary basis to meet share redemption requests in
circumstances in which temporary borrowing may be preferable to
liquidation of portfolio securities.
Rated Securities. For a description of the ratings applied by
rating services to debt securities, please refer to the Appendix.
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 the Portfolio may be lost or reduced below the
minimum level applicable to its original purchase by the Portfolio
does not require that obligation to be sold, but the Adviser will
consider such fact in determining whether the Portfolio 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 Portfolio
must dispose of the security within a reasonable
<PAGE> 14
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
Portfolio and its shareholders to retain the security.
To the extent that the ratings accorded by Moody's or S&P for
Municipal Securities may change as a result of changes in such
organizations, or changes in their rating systems, Municipal Money
Portfolio 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.
Taxable Securities. Assets of Municipal Money Portfolio that are
not invested in Municipal Securities may be held in cash or
invested in short-term taxable investments /4/ 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) 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 with banks and securities dealers. Municipal Money
Portfolio limits repurchase agreements to those that are short-
term, subject to restriction 18 under Investment Restrictions
(although the underlying securities may not be short-term).
AMT Securities. Although Municipal Money Portfolio currently
limits its investments in Municipal Securities to those the
interest on which is exempt from the regular Federal income tax,
it may invest 100% of its total assets in Municipal Securities the
interest on which is subject to the Federal alternative minimum
tax ("AMT").
Participation Interests. Municipal Money Portfolio may purchase
participation interests or certificates of participation in all or
part of specific holdings of Municipal Securities, but does not
intend to do so unless the tax-exempt status of those
participation interests or certificates of participation is
confirmed to the satisfaction of the Board of Trustees, which may
include consideration of an opinion of counsel as to the tax-
exempt status. Each participation interest would meet the
prescribed quality standards of the Portfolio or be backed by an
irrevocable letter of credit or guarantee of a bank that meets the
prescribed quality standards of the Portfolio. Some participation
interests are illiquid securities.
Municipal Money Portfolio 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
-------------------------
/4/ The policies described in this paragraph are fundamental for
Municipal Money Portfolio.
------------------------------
<PAGE> 15
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. The
Portfolio 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.
Zero Coupon Bonds. Municipal Money 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 the Portfolio accrues income with respect to
these securities prior to the receipt of such interest, it may
have to dispose of portfolio securities under disadvantageous
circumstances in order to obtain cash needed to pay income
dividends in amounts necessary to avoid unfavorable tax
consequences.
Portfolio Turnover. Although the Portfolio does not purchase
securities with a view toward rapid turnover, there are no
limitations on the length of time that portfolio securities must
be held. The turnover rate for Municipal Money Portfolio in the
future may vary greatly from year to year, and when portfolio
changes are deemed appropriate due to market or other conditions,
such turnover rate may be greater than might otherwise be
anticipated. A high rate of portfolio turnover may result in
increased transaction expenses and the realization of capital
gains or losses. Distributions of any net realized gains are
subject to Federal income tax.
INVESTMENT RISKS
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
<PAGE> 16
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 Municipal Money
Portfolio and the value of its portfolio would be affected and, in
such an event, the Portfolio would reevaluate its investment
objectives and policies.
Because Municipal Money Portfolio may invest in industrial
development bonds, its 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, Municipal Money Portfolio may 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 Municipal
Money Portfolio may acquire repurchase agreements and standby
commitments, and the entities from which it 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
Portfolio.
INVESTMENT RESTRICTIONS
Municipal Money Portfolio operates under the following investment
restrictions. Municipal Money Portfolio may not:
(1) 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 [however, in the
case of a guarantor of securities (including an issuer of a
letter of credit), the value of the guarantee (or letter of
credit) may be excluded from this computation if the
aggregate value of securities owned by the Portfolio and
guaranteed by such guarantor (plus any other investments of
the Portfolio in securities issued by the guarantor) does not
exceed 10% of the Portfolio's total assets]; /5/
(2) 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);
---------------------------------
/5/ In the case of a security that is insured as to payment of
principal and interest, the related insurance policy is not deemed
a security, nor is it subject to this investment restriction.
-----------------------------
<PAGE> 17
(3) make loans to other persons, except that the Portfolio may
invest up to 100% of its assets in debt obligations,
including money market instruments;
(4) borrow, except that the Portfolio may borrow up to 33 1/3% of
its total assets, taken at current value at the time of such
borrowing, from banks as a temporary measure for
extraordinary or emergency purposes but not to increase
portfolio income (the total of reverse repurchase agreements
and such borrowings will not exceed 33 1/3% of its total
assets and the Portfolio will not purchase additional
securities at a time when its borrowings, less proceeds
receivable from sales of portfolio securities, exceed 5% of
its total assets);
(5) mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by
the Portfolio except as may be necessary in connection with
borrowings mentioned in (4) above;
(6) 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;
(7) purchase portfolio securities for the Portfolio from, or sell
portfolio securities to, any of the officers, directors, or
trustees of the Trust or of its investment adviser;
(8) purchase or sell commodities or commodities contracts or oil,
gas, or mineral programs;
(9) purchase any securities other than those described in Part A
under Basic Investment Strategy and Other Investment
Practices;
(10) 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 Portfolio, which may be changed only
with the approval of a "majority of its outstanding voting
securities" as defined in the Investment Company Act of 1940. The
Portfolio has also adopted the following restrictions that may be
required by various laws and administrative positions. These
restrictions are not fundamental and may be changed by the Board
of Trustees without a vote of shareholders. The Portfolio may
not:
(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) invest in securities of issuers (other than issuers of Federal
agency obligations or of Municipal Securities) having a
record of less than three years of continuous operation (for
this purpose, the period of operation of any issuer shall
include the
<PAGE> 18
period of operation of any predecessor or unconditional guarantor
of such issuer) if, regarding all such securities, more than
5% of its total assets (taken at market value at the time of
each investment) would be invested in such securities;
(f) 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 the its own portfolio;
(g) purchase or retain securities of an issuer if 5% of the
securities of such issuer are owned by those trustees and
officers of the Trust who own individually more than 1/2 of
1% of such securities;
(h) invest more than 10% of its net assets (taken at market value
at the time of each purchase) in illiquid securities,
including repurchase agreements maturing in more than seven
days;
(i) sell securities short unless (1) the Portfolio owns or has the
right to obtain securities equivalent in kind and amount to
those sold short at no added cost or (2) the securities sold
are "when issued" or "when distributed" securities which the
Portfolio expects to receive in a recapitalization,
reorganization, or other exchange for securities the
Portfolio contemporaneously owns or has the right to obtain
and provided that it may purchase standby commitments and
securities subject to a demand feature entitling the
Portfolio to require sellers of securities to the Portfolio
to repurchase them upon demand by the Portfolio;
(j) purchase shares of other open-end investment companies, except
in connection with a merger, consolidation, acquisition, or
reorganization; or
(k) 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.
ITEM 14. MANAGEMENT OF THE TRUST.
The officers and trustees of the Trust are listed below.
<TABLE>
<CAPTION>
POSITION(s) HELD
NAME AGE WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
------------------- --- --------------------- ---------------------------------------------------------------
<S> <C> <C> <C>
Gary A. Anetsberger 39 Senior Vice-President Vice-President of Stein Roe & Farnham Incorporated (the "Adviser")
since January, 1991; associate of the Adviser prior thereto
Timothy K. Armour 46 President; Trustee President of the Mutual Funds division of the Adviser and director
(1)(2) of the Adviser since June, 1992; senior vice president and director
of marketing of Citibank Illinois prior thereto
Jilaine Hummel Bauer 40 Executive Vice-President; Senior Vice President (since April, 1992) and Assistant Secretary
Secretary (since May, 1990) of the Adviser; vice president of the Adviser
prior thereto
Kenneth L. Block (3) 75 Trustee Chairman Emeritus of A. T. Kearney, Inc. (international management
consultants)
<PAGE> 19
William W. Boyd 69 Trustee Chairman and Director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products) since 1992; chairman,
president, and chief executive officer of Sterling Plumbing Group,
Inc. prior thereto
N. Bruce Callow 49 Executive Vice-President President of the Investment Counsel division of the Adviser since
June, 1994; senior vice president of trust and financial services
for The Northern Trust prior thereto
Lindsay Cook (1) 43 Trustee Senior Vice President of Liberty Financial Companies, Inc. (the
indirect parent of the Adviser)
Philip D. Hausken 37 Vice-President Corporate Counsel for the Adviser since July, 1994; assistant
regional director, midwest regional office of the Securities and
Exchange Commission prior thereto
Stephen P. Lautz 38 Vice-President Vice President of the Adviser since May, 1994; associate of the
Adviser prior thereto
Francis W. Morley 75 Trustee Chairman of Employer Plan Administrators and Consultants Co.
(2)(3) (designer, administrator, and communicator of employee benefit
plans)
Charles R. Nelson (3) 53 Trustee Van Voorhis Professor of Political Economy of the University of
Washington
Nicolette D. Parrish 45 Vice-President; Associate of the Adviser
Assistant Secretary
Sharon R. Robertson 33 Controller Accounting Manager for the Adviser's Mutual Funds division
Janet B. Rysz 39 Assistant Secretary Assistant Secretary of the Adviser
Gordon R. Worley (3) 75 Trustee Private investor
Hans P. Ziegler 54 Executive Vice-President Chief Executive Officer of the Adviser since May, 1994; president
of the Investment Counsel division of the Adviser from July, 1993
to June, 1994; president and chief executive officer, Pitcairn
Financial Management Group prior thereto
Margaret O. Zwick 28 Treasurer Compliance Manager for the Adviser's Mutual Funds division since
August, 1995; held positions of Compliance Accountant, Section
Manager, Supervisor, and Fund Accountant with the division
<FN>
(1) Trustee who is an "interested person" of the Trust and of the
Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
</TABLE>
Each trustee and officer of the Trust holds the same position with
SteinRoe Municipal Trust and certain of the trustees and officers
of the Trust are also trustees or officers of other investment
companies managed by the Adviser. The address of Mr. Block is 11
<PAGE> 20
Woodley Road, Winnetka, Illinois 60093; that of Mr. Boyd is 2900
Golf Road, Rolling Meadows, Illinois 60008; that of Mr. Cook is
600 Atlantic Avenue, Boston, Massachusetts 02210; that of Mr.
Morley is 20 North Wacker Drive, Suite 2275, Chicago, Illinois
60606; that of Mr. Nelson is Department of Economics, University
of Washington, Seattle, Washington 98195; that of Mr. Worley is
1407 Clinton Place, River Forest, Illinois 60305; and that of the
officers is One South Wacker Drive, Chicago, Illinois 60606.
Officers and trustees affiliated with the Adviser serve without
any compensation from the Trust. In compensation for their
services to the Trust, trustees who are not "interested persons"
of the Trust or the Adviser are paid an attendance fee from each
series of the Trust for each meeting of the Board or committee
thereof attended at which business for that series is conducted.
The attendance fees (other than for a Nominating Committee
meeting) are based on each series' net assets as of the preceding
December 31. For a series with net assets of less than $251
million, the fee is $200 per meeting; with $251 million to $500
million, $350; with $501 million to $750 million, $500; with $750
million to $1 billion, $650; and with over $1 billion in net
assets, $800. Each non-interested trustee also receives an
aggregate of $500 for attending each meeting of the Nominating
Committee. The Trust has no retirement or pension plans. The
following table sets forth compensation paid during the fiscal
year ended June 30, 1995 to each of the trustees:
Total Compensation
Aggregate Paid to Trustees
Compensation from the Trust and
from the the SteinRoe Fund
Name of Trustee Trust* Complex (19 Funds)
--------------- ------------ ------------------
Timothy K. Armour -0- -0-
Lindsay Cook -0- -0-
Kenneth L. Block $1,700 $74,850
William W. Boyd 800 48,200
Francis W. Morley 1,700 76,400
Charles R. Nelson 1,700 77,200
Gordon R. Worley 1,700 74,850
-----------------
*Attendance fees for the Base Trust trustees were paid by the
Adviser for the fiscal year ended June 30, 1995.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of the effective date of this Registration Statement, there
were no record holders of Municipal Money Portfolio.
ITEM 16. INVESTMENT MANAGEMENT AND ADMINISTRATIVE SERVICES.
The Trust has retained the services of Stein Roe & Farnham
Incorporated (the "Adviser") as investment adviser and
administrator for Municipal Money Portfolio. The Adviser is a
wholly-owned subsidiary of SteinRoe Services Inc. ("SSI"), which
is a wholly-owned subsidiary of Liberty Financial Companies,
Inc.), which is a majority-owned subsidiary of Liberty Mutual
Equity Corporation, which is a wholly-owned subsidiary of Liberty
Mutual Insurance Company ("Liberty Mutual"). Liberty Mutual is a
mutual insurance company, principally in the property/casualty
insurance field, organized under the laws of Massachusetts in
1912.
<PAGE> 21
The directors of the Adviser are Gary L. Countryman, Kenneth R.
Leibler, Timothy K. Armour, N. Bruce Callow, and Hans P. Ziegler.
Mr. Countryman is Chairman and Chief Executive Officer of Liberty
Mutual Insurance Company; Mr. Leibler is President and Chief
Executive Officer of Liberty Financial Companies, Inc.; Mr. Armour
is President of the Adviser's Mutual Funds division; Mr. Callow is
President of the Adviser's Investment Counsel Division; and Mr.
Ziegler is Chief Executive Officer of the Adviser. The business
address of Mr. Countryman is 175 Berkeley Street, Boston,
Massachusetts 02117; that of Mr. Leibler is Federal Reserve Plaza,
Boston, Massachusetts 02210; that of Messrs. Armour, Callow, and
Ziegler is One South Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing investment
advisory services since 1932. The Adviser acts as investment
adviser to wealthy individuals, trustees, pension and profit
sharing plans, charitable organizations, and other institutional
investors. As of June 30, 1995, the Adviser managed over $22.4
billion in assets: over $4.9 billion in equities and over $17.5
billion in fixed-income securities (including $2.3 billion in
municipal securities). The $22.4 billion in managed assets
included over $5.5 billion held by open-end mutual funds managed
by the Adviser (approximately 21% of the mutual fund assets were
held by clients of the Adviser). These mutual funds were owned by
over 148,000 shareholders. The $5.5 billion in mutual fund assets
included over $550 million in over 33,000 IRA accounts. In
managing those assets, the Adviser utilizes a proprietary
computer-based information system that maintains and regularly
updates information for approximately 6,500 companies. The
Adviser also monitors over 1,400 issues via a proprietary credit
analysis system. At June 30, 1995, the Adviser employed
approximately 17 research analysts and 34 account managers. The
average investment-related experience of these individuals was 19
years.
Please refer to the description of the Adviser, management
agreement and fees in Part A, Item 5. The Adviser provides office
space and executive and other personnel to the Trust. Municipal
Money Portfolio pays all expenses other than those paid by the
Adviser, including but not limited to printing and postage charges
and securities registration and custodian fees and expenses
incidental to its organization.
The advisory agreements also provide 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 for any error of judgment, mistake of
law or any loss arising out of any investment, or for any other
act or omission in the performance by the Adviser of its duties
under the advisory agreement, except for liability resulting from
willful misfeasance, bad faith or gross negligence on the
Adviser's part in the performance of its duties or from reckless
disregard by the Adviser of the Adviser's obligations and duties
under the advisory agreement.
Any expenses that are attributable solely to the organization,
operation, or business of Municipal Money Portfolio shall be paid
solely out of Municipal Money Portfolio's assets. Any expenses
incurred by the Trust that are not solely attributable to a
particular series of the Trust are apportioned in such manner as
the Adviser determines is fair and appropriate, unless otherwise
specified by the Board of Trustees.
<PAGE> 22
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 Municipal Money Portfolio. For these services, the
Adviser receives an annual fee of $25,000 plus .0025 of 1% of
average net assets over $50 million.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the
Trust. It is responsible for holding all securities and cash of
Municipal Money Portfolio, receiving and paying for securities
purchased, delivering against payment securities sold, receiving
and collecting income from investments, making all payments
covering expenses of the Portfolio, 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 Portfolio. Municipal
Money Portfolio may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Ernst & Young LLP, 233
South Wacker Drive, Chicago, Illinois 60606. The independent
auditors audit and report on the Portfolio's annual financial
statements, review certain regulatory reports and the Portfolio's
Federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trust.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Adviser places the orders for the purchase and sale of
portfolio securities for Municipal Money Portfolio.
Municipal Money Portfolio purchases portfolio securities both in
underwritings and in the over-the-counter market. 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. The Portfolio's 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 the Portfolio, but do reflect
the spread between the bid and asked prices. The Adviser may also
transact purchases of portfolio securities directly with the
issuers.
The Adviser's overriding objective in effecting portfolio
transactions is to seek to obtain the best combination of price
and execution. The best net price, giving effect to transaction
charges, if any, and other costs, normally is an important factor
in this decision, but a number of other judgmental factors may
also enter into the decision. These include: the Adviser's
knowledge of current transaction costs; the nature of the security
being traded; the size of the transaction; the desired timing of
the trade; the activity existing and expected in the market for
the particular security; confidentiality; the execution, clearance
and settlement capabilities of the broker or dealer selected and
others that are considered; the Adviser's knowledge of the
financial stability of the broker or dealer selected and such
other brokers or dealers; and the Adviser's knowledge of actual or
<PAGE> 23
apparent operational problems of any broker or dealer.
Recognizing the value of these factors, the Portfolio may incur a
transaction charge in excess of that which another broker or
dealer may have charged for effecting the same transaction.
Evaluations of the reasonableness of the costs of portfolio
transactions, based on the foregoing factors, are made on an
ongoing basis by the Adviser's staff and reports are made annually
to the Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for the
Portfolio, the Adviser often selects a broker or dealer that has
furnished it with research products or services such as research
reports, subscriptions to financial publications and research
compilations, compilations of securities prices, earnings,
dividends and similar data, and computer data bases, quotation
equipment and services, research-oriented computer software and
services, and services of economic and other consultants.
Selection of brokers or dealers is not made pursuant to an
agreement or understanding with any of the brokers or dealers;
however, the Adviser uses an internal allocation procedure to
identify those brokers or dealers who provide it with research
products or services and the amount of research products or
services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate,
including the Portfolio, to such brokers or dealers to ensure the
continued receipt of research products or services the Adviser
feels are useful. In certain instances, the Adviser receives from
brokers and dealers products or services which are used both as
investment research and for administrative, marketing, or other
non-research purposes. In such instances, the Adviser makes a
good faith effort to determine the relative proportions of such
products or services which may be considered as investment
research. The portion of the costs of such products or services
attributable to research usage may be defrayed by the Adviser
(without prior agreement or understanding, as noted above) through
brokerage commissions generated by transactions of clients
(including the Portfolio), while the portions of the costs
attributable to non-research usage of such products or services is
paid by the Adviser in cash. No person acting on behalf of the
Portfolio is authorized, in recognition of the value of research
products or services, to pay a price in excess of that which
another broker or dealer might have charged for effecting the same
transaction. Research products or services furnished by brokers
and dealers through whom transactions are effected may be used in
servicing any or all of the clients of the Adviser and not all
such research products or services are used in connection with the
management of the Portfolio.
The Board has reviewed the legal developments pertaining to and
the practicability of attempting to recapture underwriting
discounts or selling concessions when portfolio securities are
purchased in underwritten offerings. The Board has been advised
by counsel that recapture by a mutual fund currently is not
permitted under the Rules of Fair Practice of the National
Association of Securities Dealers ("NASD"). Therefore, except
with respect to purchases of Municipal Securities which are not
subject to NASD Rules, Municipal Money Portfolio will not attempt
to recapture underwriting discounts or selling concessions.
Municipal Money Portfolio attempts to recapture selling
concessions on purchases during underwritten offerings; however,
the Adviser will not be able to negotiate discounts from the fixed
offering price for those issues for which there is a strong
demand, and will not allow the failure to obtain a discount to
prejudice its
<PAGE> 24
ability to purchase an issue for the Portfolio. The Board
periodically reviews Municipal Money Portfolio's efforts to
recapture concessions and whether it is in the best interests of
the Portfolio to continue to attempt to recapture underwriting
discounts or selling concessions.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the trustees are authorized to
issue Interests in the Trust. Investors are entitled to
participate pro rata in distributions of taxable income, loss,
gain, and credit of the Trust (unless another sharing method is
required for Federal income tax reasons in accordance with the
sharing method adopted by the trustees). Upon liquidation or
dissolution of the Trust, investors are entitled to share pro rata
in the net assets available for distribution to its investors
(unless another sharing method is required for Federal income tax
reasons, in accordance with the sharing method adopted by the
trustees). Investments in the Trust have no preferences,
preemptive, conversion, or similar rights and are fully paid and
nonassessable, except as set forth below. Investments in the
Trust may not be transferred. No certificates representing an
investor's Interest in the Trust will be issued.
Each whole Interest (or fractional Interest) 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 Interest (or
fractional Interest) in United States dollars determined at the
close of business on the record date (for example, an Interest
having a net asset value of $10.50 would be entitled to 10.5
votes). As a common law 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
the Trust's outstanding Interests, 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 holders as required by Section 16(c) of the Investment
Company Act of 1940. All Interests of the Trust are voted
together in the election of trustees. On any other matter
submitted to a vote of holders, Interests are voted by individual
series and not in the aggregate, except that Interests are voted
in the aggregate when required by the Investment Company Act of
1940 or other applicable law. When the Board of Trustees
determines that the matter affects only the interests of one or
more series, holders of the unaffected series are not entitled to
vote on such matters.
The Trust may enter into a merger or consolidation or sell all or
substantially all of its assets if approved by the vote of two-
thirds of its investors (with the vote of each being in proportion
to the respective percentages of the Interests in the Trust),
except that if the trustees recommend such sale of assets, the
approval by vote of a majority of the investors (with the votes of
each being in proportion to their respective percentages of the
Interests of the Trust) will be sufficient. The Trust will
dissolve upon the complete withdrawal, resignation, retirement, or
bankruptcy of any investor and will terminate unless reconstituted
and continued with the consent of all remaining investors. The
Trust may also be terminated (i) if approved by the vote of two-
thirds of its investors (with the votes of each being in
proportion to the amount of their investment), or (ii) by the
trustees by written notice to its investors. The Declaration of
Trust contains a
<PAGE> 25
provision limiting the life of the Trust to a term of years;
consequently, the Trust will terminate on December 31, 2080.
The Trust is organized as a trust under the laws of the
Commonwealth of Massachusetts. Investors in any series of the
Trust may be held personally liable, jointly and severally, for
the obligations and liabilities of that series, subject, however,
to indemnification by that series in the event that there is
imposed upon an investor a greater portion of the liabilities and
obligations of the series than its proportionate interest in the
series. The Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of
the Trust, its investors, trustees, officers, employees, and
agents covering possible tort and other liabilities. Thus, the
risk of an investor incurring financial loss on account of
investor liability is limited to circumstances in which both
inadequate insurance exists and the Trust itself is unable to meet
its obligations.
The Declaration of Trust further provides that obligations of the
Trust are not binding upon the trustees individually but only upon
the property of the Trust and that the trustees will not be liable
for any action or failure to act, but nothing in the Declaration
of Trust protects a trustee against any liability 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.
The Trust reserves the right to create and issue any number of
series, in which case investors in each series would participate
only in the earnings and assets of the particular series.
Investors in each series would be entitled to vote separately to
approve advisory agreements or changes in investment policy, but
investors of all series may vote together in election or selection
of trustees, principal underwriters, and accountants for the
Trust. Upon liquidation or dissolution of the Trust, the
investors in each series would be entitled to share pro rata in
the net assets of their respective series available for
distribution to investors (unless another sharing method is
required for Federal income tax reasons, in accordance with the
sharing method adopted by the trustees). Interests of any series
of the Trust may be divided into two or more classes of Interests
having such preferences or special or relative privileges as the
trustees of the Trust may determine.
Although it is expected that the Trust will initially have 10 or
fewer investors, the number of investors in the Trust will in no
case exceed 500 in order to satisfy certain tax requirements.
This number may be increased or decreased should such requirements
change. Similarly, if Congress enacts certain proposed amendments
to the Code, it may be desirable for the Trust to elect the status
of a regulated investment company ("RIC") as that term is defined
in Subchapter M of the Code, which would require that the Trust
first change its organizational status from that of a
Massachusetts trust to that of a Massachusetts business trust
("MBT") or other entity treated as a corporation under the Code.
The Trust's Declaration of Trust empowers the trustees, on behalf
of the Trust, to change the Trust's organizational form to that of
a MBT or otherwise reorganize as an entity treated as a
corporation under the Code and to elect RIC status without a vote
of the investors. Any such action on the part of the trustees on
behalf of the Trust would be contingent upon there being no
adverse tax consequences to such action.
<PAGE> 26
ITEM 19. PURCHASE, REDEMPTION, AND PRICING OF SECURITIES.
Interests in Municipal Money Portfolio will be issued solely in
private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in Municipal Money Portfolio may only be made by
investment companies, insurance company separate accounts, common
or commingled trust funds, or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This Registration Statement does not
constitute an offer to sell or the solicitation of an offer to buy
any "security" within the meaning of the 1933 Act.
The net asset value per share of Municipal Money Portfolio is
determined by dividing its total assets (i.e., the total current
market value of its investment in the Portfolio) less its
liabilities (including accrued expenses and dividends payable), by
the total number of shares of the Portfolio outstanding at the
time of the determination. Municipal Money Portfolio's net asset
value per share is calculated as of 3:00 p.m. (Chicago time) on
each day the New York Stock Exchange is open for trading.
The value of each investor's investment in Municipal Money
Portfolio will be based on its pro rata share of the total net
asset value of the Portfolio (i.e., the value of its portfolio
securities and other assets less its liabilities) as of the same
date and time.
Please refer to Purchase of Securities in Part A, which is
incorporated herein by reference. Municipal Money Portfolio
values its portfolio by the "amortized cost method" by which it
attempts to maintain its net asset value at $1.00 per share. This
involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the
market value of the instrument. Although this method provides
certainty in valuation, it may result in periods during which
value as determined by amortized cost is higher or lower than the
price the Portfolio would receive if it sold the instrument.
Other assets are valued at a fair value determined in good faith
by the Board of Trustees.
In connection with Municipal Money Portfolio's use of amortized
cost and the maintenance of its per share net asset value of
$1.00, the Trust has agreed, with respect to Municipal Money
Portfolio: (i) to seek to maintain a dollar-weighted average
portfolio maturity appropriate to its objective of maintaining
relative stability of principal and not in excess of 90 days; (ii)
not to purchase a portfolio instrument with a remaining maturity
of greater than thirteen months (for this purpose Municipal Money
Portfolio considers that an instrument has a maturity of thirteen
months or less if it is a "short-term" obligation as defined in
the Glossary); and (iii) to limit its purchase of portfolio
instruments to those instruments that are denominated in U.S.
dollars which the Board of Trustees determines present minimal
credit risks and that are of eligible quality as determined by any
major rating service as defined under SEC Rule 2a-7 or, in the
case of any instrument that is not rated, of comparable quality as
determined by the Board.
Municipal Money Portfolio has also agreed to establish procedures
reasonably designed to stabilize its price per share as computed
for the purpose of sales and redemptions at $1.00. Such
procedures include review of its portfolio holdings by the Board
of
<PAGE> 27
Trustees, at such intervals as it deems appropriate, to determine
whether its 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
Municipal Money Portfolio's investments based on methods which
include consideration of: yields or prices of Municipal Securities
of comparable quality, coupon, maturity and type; indications as
to values from dealers; and general market conditions. The
service may also employ electronic data processing techniques, a
matrix system, or both to determine valuations.
In connection with Municipal Money Portfolio's use of the
amortized cost method of portfolio valuation to maintain its net
asset value at $1.00 per share, the Portfolio might incur or
anticipate an unusual expense, loss, depreciation, gain or
appreciation that would affect its net asset value per share or
income for a particular period. The extent of any deviation
between the 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.
ITEM 20. TAX STATUS.
The Trust is organized as a trust under the laws of the
Commonwealth of Massachusetts. Under the anticipated method of
operation of the Trust, the Trust will not be subject to any
Federal income tax, nor is it expected to have any Massachusetts
income tax liability. The Trust is applying for a private letter
ruling from the Internal Revenue Service to confirm its Federal
tax treatment in certain respects. Each investor in Municipal
Money Portfolio will be taxed on its share (as determined in
accordance with the governing instruments of the Trust) of the
Portfolio's ordinary income and capital gain in determining its
income tax liability. The determination of such share will be
made in accordance with a method designed to satisfy the Code and
regulations promulgated thereunder. There can be no assurance,
however, that the Internal Revenue Service will agree with such a
method of allocation.
Municipal Money Portfolio's taxable year end is June 30.
Although, as described above, the Portfolio will not be subject to
Federal income tax, it will file appropriate income tax returns.
<PAGE> 28
It is intended that Municipal Money Portfolio's assets, income,
and distributions will be managed in such a way that an investor
in Municipal Money Portfolio will be able to satisfy the
requirements of Subchapter M of the Code for qualification as a
RIC, assuming that the investor invests all of its assets in the
Portfolio.
There are certain tax issues that will be relevant to only certain
of the investors, specifically investors that are segregated asset
accounts and investors who contribute assets rather than cash to
Municipal Money Portfolio. It is intended that such segregated
asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met.
Such investors are advised to consult their own tax advisors as to
the tax consequences of an investment in Municipal Money
Portfolio.
ADDITIONAL INCOME TAX CONSIDERATIONS
In order for Colonial Municipal Money Market Fund, SteinRoe
Municipal Money Market Fund, or any other investment company
investing in the Municipal Portfolio 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, gains from the sale of stock or securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts) derived with
respect to its business of investing in stock, securities, or
currencies. In addition, gains realized on the sale or other
disposition of any of the following held or less than three months
must be limited to less than 30% of its annual gross income: (i)
stock or securities, (ii) options, futures, or forward contracts
(other than on foreign currencies), and (iii) foreign currencies
and currency forward contracts that are not directly related to
its principal business of investing in stocks, securities, and
options and futures with respect to stocks or securities. Each of
Colonial Municipal Money Market Fund, SteinRoe Municipal Money
Market Fund, and any such other investment company will also be
required to distribute each year at least 90% of its investment
company taxable income (in order to escape Federal income tax on
distributed amounts) and to meet certain tax diversification
requirements. Because Colonial Municipal Money Market Fund,
SteinRoe Municipal Money Market Fund, or any other investment
company may invest all of its assets in Municipal Money Portfolio,
the Portfolio must satisfy all of these tax requirements in order
for such other investment company to satisfy them. In order to
avoid realizing excessive gains on securities held less than three
months, Municipal Money Portfolio may be required to defer the
closing out of certain positions beyond the time when it would
otherwise be advantageous to do so. Year-end mark-to-market gains
on positions open for less than three months as of the end of
Municipal Money Portfolio's fiscal year are not considered gains
on securities held for less than three months for purposes of the
30% test.
Municipal Money Portfolio will allocate at least annually to the
Colonial Municipal Money Market Fund, SteinRoe Municipal Money
Market Fund and its other shareholders its distributive share of
any net investment income and net capital gains which have been
recognized for Federal income tax purposes (including unrealized
gains at the end of the Portfolio's taxable year on certain
options and futures transactions that are required to be marked-
to-market).
<PAGE> 29
Municipal Money Portfolio 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. The Portfolio
intends to retain for its shareholders the tax-exempt status with
respect to tax-exempt income received by the Portfolio. The
distributions will be designated as "exempt-interest dividends,"
taxable ordinary income, and capital gains. Municipal Money
Portfolio 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 the Portfolio's total income during the year.
Accordingly, income derived from each of these sources by the
Portfolio 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. The Portfolio 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.
Because capital gain distributions reduce net asset value, if a
shareholder purchases shares shortly before a record date he will,
in effect, receive a return of a portion of his investment in such
distribution. The distribution would nonetheless be taxable to
him, even if the net asset value of shares were reduced below his
cost. However, for Federal income tax purposes the shareholder's
original cost would continue as his tax basis.
Because the taxable portion of the Portfolio'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 the Portfolio 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 the Portfolio 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
<PAGE> 30
shares. Such persons may find investment in the Portfolio
unsuitable for tax reasons. Corporate investors may also wish to
consult their own tax advisers before purchasing shares. In
addition, certain property and casualty insurance companies,
financial institutions, and United States branches of foreign
corporations may be adversely affected by the tax treatment of the
interest on Municipal Securities.
ITEM 21. UNDERWRITERS.
Inapplicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Inapplicable.
ITEM 23. FINANCIAL STATEMENTS
Inapplicable
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 Part A and restriction number (1) under
Investment Restrictions in this Part B. 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 Portfolio, guarantees and letters of
credit described in this paragraph from banks whose credit is
acceptable to the Portfolio 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.
<PAGE> 31
SHORT-TERM. This term, as used with respect to Municipal Money
Portfolio, refers to an obligation of one of the following types,
measured from the date of an investment by the Portfolio 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 Basic Investment Strategy in Part
A for Municipal Money Portfolio, 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 Portfolio 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 Part A 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
Portfolio 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> 32
APPENDIX--RATINGS OF MUNICIPAL SECURITIES
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as
to the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer. Consequently,
the Adviser believes that the quality of Municipal Securities
should be continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or
hold a security, because it does not take into account market
value or suitability for a particular investor. When a security
has received a rating from more than one service, each rating
should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating
services from other sources that they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in
or unavailability of such information, or for other reasons. The
Adviser, through independent analysis, attempts to discern
variations in credit ratings of the published services, and to
anticipate changes in credit ratings. The following is a
description of the characteristics of certain ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P").
RATINGS BY MOODY'S
MUNICIPAL BONDS:
AAA. Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such bonds.
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
<PAGE> 33
payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
CA. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
CONDITIONAL RATINGS. Bonds for which the security depends upon
the completion of some act or the fulfillment of some condition
are rated conditionally. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or
elimination of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which
Moody's believes possess the strongest investment attributes are
designated by the symbols Aa 1, A 1, Baa 1, Ba 1, and B 1.
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.
<PAGE> 34
VMIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
VMIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
COMMERCIAL PAPER:
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of
rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper
obligations are supported by the credit of another entity or
entities, Moody's, in assigning ratings to such issuers, evaluates
the financial strength of the indicated affiliated corporations,
commercial banks, insurance companies, foreign governments, or
other entities, but only as one factor in the total rating
assessment.
CORPORATE BONDS:
The description of the applicable rating symbols (Aaa, Aa, A) and
their meanings is identical to that of its Municipal Bond ratings
as set forth above, except for the numerical modifiers. Moody's
applies numerical modifiers 1, 2, and 3 in the Aa and A
classifications of its corporate bond rating system. The modifier
1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
RATINGS BY S&P:
MUNICIPAL BONDS:
AAA. Bonds rated AAA have the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher-rated categories.
BBB. Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category
than for bonds in higher-rated categories.
<PAGE> 35
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+).
<PAGE> 36
COMMERCIAL PAPER:
A. Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree to safety.
A-1. This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are designed A-1+.
CORPORATE BONDS:
The description of the applicable rating symbols and their
meanings is substantially the same as its Municipal Bond ratings
set forth above.
<PAGE> 37
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
None.
(b) Exhibits [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1940,
File No. 811-7996.]
1. Declaration of Trust of Registrant as amended through
August 1, 1995.
2. By-Laws of Registrant.
3. Inapplicable.
4. Inapplicable.
5. Form of Management Agreement between Registrant and Stein
Roe & Farnham Incorporated.
6. Inapplicable pursuant to Instruction F.4 to Form N-1A.
7. Inapplicable.
8. Custodian Agreement between Registrant and State Street
Bank and Trust Company.
9. (a) Form of Investor Service Agreement between Registrant
and SteinRoe Services Inc.
(b) Form of Bookkeeping and Accounting Agreement between
Registrant and Stein Roe & Farnham Incorporated.
10. Inapplicable pursuant to Instruction F.4 of Form N-1A.
11. Inapplicable pursuant to Instruction F.4 of Form N-1A.
12. Inapplicable pursuant to Instruction F.4 of Form N-1A.
13. Inapplicable.
14. Inapplicable.
15. Inapplicable.
16. Inapplicable.
17. Inapplicable.
18. Inapplicable
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or indirectly
controlled by, or under common control with, other persons within
the meaning of this Item.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class Number of Record Holders
------------------------------------- ------------------------
SR&F Municipal Money Market Portfolio 0
<PAGE> 38
ITEM 27. INDEMNIFICATION.
Reference is made to Article X of the Registrant's Declaration of
Trust (Exhibit 1) with respect to indemnification of the trustees
and officers of Registrant against liabilities which may be
incurred by them in such capacities.
Registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser, and persons
affiliated with them are insured against certain expenses in
connection with the defense of actions, suits, or proceedings, and
certain liabilities that might be imposed as a result of such
actions, suits, or proceedings. Registrant will not pay any
portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Registrant expects that Colonial Tax-Exempt Money Market Fund
("Colonial Fund"), a series of Colonial Trust IV ("Colonial
Trust") will invest substantially all of its assets in a portfolio
of Registrant. In that connection, trustees and officers of
Registrant have signed the registration statement of Colonial
Trust ("Colonial Registration Statement") on behalf of Registrant
insofar as the Colonial Registration Statement relates to Colonial
Fund, and Colonial Trust, on behalf of Colonial Fund, has agreed
to indemnify Registrant and its trustees and officers against
certain liabilities which may be incurred by them.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Stein Roe & Farnham Incorporated (the "Adviser") is a wholly-owned
subsidiary of SteinRoe Services Inc. ("SSI"), which is a wholly-
owned subsidiary of Liberty Financial Companies, Inc.), which is a
majority-owned subsidiary of Liberty Mutual Equity Corporation,
which is a wholly-owned subsidiary of Liberty Mutual Insurance
Company. The Adviser acts as investment adviser to individuals,
trustees, pension and profit-sharing plans, charitable
organizations, and other investors. In addition to Registrant, it
also acts as investment adviser to other no-load investment
companies having different investment policies.
During the past two years, neither the Adviser nor any of its
directors or officers, except for Gary L. Countryman, Kenneth R.
Leibler, and N. Bruce Callow has been engaged in any business,
profession, vocation, or employment of a substantial nature either
on their own account or in the capacity of director, officer,
partner, or trustee, other than as an officer or associate of the
Adviser. Mr. Countryman is President of Liberty Mutual Insurance
Company and Liberty Mutual Fire Insurance Company; Mr. Leibler is
President and Chief Operating Officer of Liberty Financial
Companies, Inc.; Mr. Callow was
<PAGE> 39
senior vice president of trust and financial services of The
Northern Trust Company prior to June, 1994.
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
SteinRoe Income Trust, SteinRoe Investment Trust, SteinRoe
Municipal Trust, SteinRoe Variable Investment Trust, investment
companies managed by the Adviser. A list of such capacities is
given below. (SteinRoe Services Inc., SteinRoe Income Trust,
SteinRoe Investment Trust, SteinRoe Municipal Trust, and the
Registrant are located at One South Wacker Drive, Chicago,
Illinois 60606; the address of SteinRoe Variable Investment Trust
is Federal Reserve Plaza, 600 Atlantic Avenue, Boston,
Massachusetts 02210.)
POSITION FORMERLY HELD
CURRENT POSITION WITHIN PAST TWO YEARS
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Gary L. Countryman Director; Chairman
Kenneth J. Kozanda Vice President; Treasurer
Alfred F. Kugel Vice President
Kenneth R. Leibler Director
Keith J. Rudolf Vice President
Hans P. Ziegler Director, President, Vice
Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Daniel K. Cantor Vice-President
Robert A. Christensen Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Harvey B. Hirschhorn Vice-President
Alfred F. Kugel Trustee
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Joanne T. Costopoulos Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
Robert A. Christensen Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Jilaine Hummel Bauer
Executive Vice-President and Secretary
SR&F Base Trust
One South Wacker Drive
Chicago, Illinois 60606.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Inapplicable.
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago and State of Illinois on the
23rd day of August, 1995.
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR
Trustee and President
<PAGE> 43
SR&F BASE TRUST
INDEX TO EXHIBITS FILED WITH THIS REGISTRATION STATEMENT
Exhibit
Number Description
------- -----------
1 Declaration of Trust of Registrant as amended.
2 By-Laws of Registrant.
5 Form of Management Agreement between Registrant and
Stein Roe & Farnham Incorporated.
8 Custodian Agreement between Registrant and State Street
Bank and Trust Company.
9(a) Form of Investor Service Agreement between Registrant
and SteinRoe Services Inc.
9(b) Form of Bookkeeping and Accounting Agreement between
Registrant and Stein Roe & Farnham Incorporated.
<PAGE>
Exhibit 1
DECLARATION OF TRUST
OF
SR&F BASE TRUST
<PAGE>
FIRST: Name.................................................1
SECOND: Purposes............................................1
THIRD: Address and Resident Agent...........................3
FOURTH: Beneficial Interest.................................3
A. Definitions..........................................3
B. Division of Beneficial Interest......................3
C. Ownership of Interests...............................4
D. Status of Interests and Limitation of
Personal Liability............................. ..4
E. Non-Transferability..................................4
FIFTH: No Preemptive Rights.................................4
SIXTH: Issue, Redemption, and Repurchase of Interests
in the Trust......................................4
SECTION I. ISSUE OF INTERESTS IN THE TRUST.............4
1.01. General .......................................4
1.02. Price..........................................5
1.03. Fractional Interests...........................5
1.04. Assets of a Series.............................5
SECTION II. REDEMPTION INTERESTS IN THE TRUST .........6
2.01. Redemption of Interests........................6
2.02. Price..........................................6
2.03. Payment........................................6
2.04. Effect of Suspension of Determination
of Net Asset Value.............................6
2.05. Repurchase by Agreement........................7
2.06. Redemption of Holder's Interest................7
2.07. Additional Provisions Relating to Redemptions..8
SECTION III. NET ASSET VALUE OF INTERESTS IN THE
TRUST..............................................8
3.01. By Whom Determined.............................8
3.02. When Determined................................8
3.03. Suspension of Determination of Net Asset Value.8
3.04. Computation of Per Unit Net Asset Value........8
3.05. Miscellaneous..................................9
SECTION IV. COMPLIANCE WITH INVESTMENT
COMPANY ACT OF 1940...............................10
SEVENTH: Board of Trustees.................................10
A. Election............................................10
B. Effect of Death, Resignation, Etc. of a Trustee.....11
C. Powers..............................................11
D. Payment of Expenses by Trust........................13
E Ownership of Assets of the Trust....................14
F. Advisory, Management and Distribution...............14
<PAGE>
EIGHTH: Liability..........................................15
A. Trustees, Etc. Not Personally Liable................15
B. Trustee's Good Faith Action.........................16
C. Liability of Third Persons Dealing with Trustees....16
D. Joint and Several Liability of Holders..............16
NINTH: Determination of Net Profits, Etc...................16
TENTH: Indemnification.....................................17
A. Indemnification Generally...........................17
B. Determination of Eligibility........................17
C. Holders.............................................18
D. Contractual Rights..................................19
E. Protection of Rights................................19
ELEVENTH: Reservation of Right to Amend....................19
A. By Board of Trustees................................19
B. By Holders..........................................20
TWELFTH: Holders' Voting Powers and Meetings...............20
A. Holders' Voting Powers.............................20
B. Meetings............................................21
C. Quorum and Required Vote............................21
D. Place of Meeting....................................21
E. Notice of Meetings..................................22
F. Ledger of Interests.................................22
G. Action by Written Consent...........................22
THIRTEENTH: Use of Name....................................22
FOURTEENTH: Miscellaneous..................................23
A. Duration and Termination of Trust...................23
B. Filing of Copies, References, Headings..............23
C. Applicable Law......................................24
D. Severability........................................24
E. Incorporation ...........................................24
F. Massachusetts Business Trust.............................24
<PAGE> 1
AGREEMENT AND DECLARATION OF TRUST
THIS AGREEMENT AND DECLARATION OF TRUST ("Declaration of Trust") is
made at Boston, Massachusetts, this 23rd day of August, 1993, by
the Trustee hereunder (together with his successors in trust
hereunder, the "Trustees"), and by the holders of beneficial
interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, the Trustees desire to form a trust fund under the law of
Massachusetts for the investment and reinvestment of its assets;
and
WHEREAS, it is proposed that the trust assets be composed of funds
contributed thereto by the holders of interests in the trust
entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund to
manage and dispose of the same for the benefit of the holders of
the interests in the Trust and subject to the provisions hereof, to
wit:
FIRST: NAME
The name of this Trust is SR&F Base Trust (the "Trust").
SECOND: PURPOSES
The purposes for which the Trust is formed are:
1. To engage in the business of a management investment company;
2. To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of,
to lend or to pledge, to trade in or deal in, securities or
interests of all kinds, or obligations of all kinds, or
rights, warrants, or contracts, and to acquire such
securities, interests, or obligations, of or guaranteed by any
private or public company, corporation, association, general
or limited partnership, trust or other enterprise or
organization, foreign or domestic, or of or guaranteed by any
national, state or local government, foreign or domestic, or
their agencies, instrumentalities or subdivisions, including
but not limited to bonds, debentures, preferred stocks, common
stocks, convertible securities, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable
instruments; options; futures contracts and options on futures
contracts; government securities; and money market
instruments, including but not limited to bank certificates of
deposit, finance paper, commercial paper, bankers'
acceptances, and all kinds of repurchase agreements, of any
corporation, company, trust, association, firm or other
business organization, however established, and of any county,
<PAGE> 2
state, municipality or other political subdivision, or of any other
governmental or quasi-governmental agency or instrumentality;
3. To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of,
foreign currencies, funds, and exchange, and to make deposits
in banks, savings banks, trust companies, and savings and loan
associations, foreign or domestic;
4. To exercise all rights, powers, and privileges as owner of any
securities, property, or assets which might be exercised by
any individual owning such securities, property, or assets in
his own right;
5. To acquire (by purchase, lease, or otherwise) and to hold, use,
maintain, develop, and dispose of (by sale or otherwise) any
property, real or personal, and any interest therein;
6. To aid by further investment any corporation, company, trust,
association, or firm, any obligation of or interest in which
is held by the Trust or in the affairs of which the Trust has
any direct or indirect interest; to do all acts and things
designed to protect, preserve, improve, or enhance the value
of such obligation or interest; to guarantee or become surety
on any or all of the contracts, stocks, bonds, notes,
debentures, and other obligations of any such corporation,
company, trust, association, or firm; and
7. In general, to carry on any other business in connection with or
incidental to any of the foregoing objects and purposes, and
to engage in any and all lawful business except as may be
prohibited to be engaged in by a trust organized under the
laws of the Commonwealth of Massachusetts as in force from
time to time, to do everything necessary, suitable, or proper
for the accomplishment of any purpose or the attainment of any
object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every
other act or thing incidental or appurtenant to or growing out
of or connected with the aforesaid business or purposes,
objects, or powers.
The Trust shall have the power to conduct and carry on its
business, or any part thereof, and to have one or more offices, and
to exercise any or all of its trust powers and rights, in the
Commonwealth of Massachusetts, in any other states, territories,
districts, colonies, and dependencies of the United States, and in
any or all foreign countries.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not
be held to limit or restrict in any manner the general powers of
the Trust.
The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trust
be limited by any law limiting the investments which may be made by
fiduciaries.
<PAGE> 3
THIRD: ADDRESS AND RESIDENT AGENT
The post office address of the principal office of the Trust in the
Commonwealth of Massachusetts is:
c/o CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other office as the Board of Trustees may from time to time
designate.
The name and post office address of the resident agent of the Trust
in the Commonwealth of Massachusetts is:
c/o CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other person as the Board of Trustees may from time to time
designate. Such resident agent is a Massachusetts corporation.
FOURTH: BENEFICIAL INTEREST
A. Definitions.
"Interests" means the equal proportionate non-transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than one
series of Interests is authorized by the Board of Trustees,
the equal proportionate units into which each series shall be
divided from time to time.
"Holders" shall mean as of any particular time all holders of
record of Interests of the Trust at such time.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign
investment company, common and commingled trust fund,
insurance company separate account, group trust or similar
investment arrangement other than an individual, S
corporation, partnership or grantor trust beneficially owned
by any individual, S corporation or partnership.
B. Division of Beneficial Interest. The Interests in the Trust
shall be issued in one or more series as the Board of Trustees
may, without approval of the Holders, authorize. Each series
shall be preferred over all other series with respect to the
assets allocated to that series. The beneficial interest in
each series shall at all times be divided into Interests, each
of which shall represent an equal proportionate interest in
the series with each other Interest of the
<PAGE> 4
same series, none having priority or preference over another. The
number of such Interests authorized hereunder is unlimited
although the number of Holders shall never exceed 500 unless
the Trust receives an opinion of legal counsel to the effect
that a higher number of Holders will not cause the Trust to be
treated as an association taxable as a corporation for Federal
income tax purposes. The Trustees may permit the purchase of
Interests but only if the purchaser is an Institutional
Investor. Subject to applicable law and to such restrictions
as may be adopted by the Trustees, a Holder may increase or
decrease its Interests without limitation. The Board of
Trustees may from time to time divide or combine the Interests
of any series into a greater or lesser number without thereby
changing the proportionate beneficial interests in the series.
C. Ownership of Interests. The ownership of Interests shall be
recorded on the books of the Trust or its agent. The record
books of the Trust as kept by the Trust or any agent of the
Trust, as the case may be, shall be conclusive as to who are
the Holders of each series and as to the number of Interests
of each series held from time to time by each Holder.
D. Status of Interests and Limitation of Personal Liability.
Interests in the Trust shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Holder by virtue of having become a Holder shall be deemed to
have expressly assented to and agreed to be bound by the terms
hereof and to have become a party hereto. Ownership of
Interests in the Trust shall not entitle the Holder to any
title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Interests in the
Trust constitute the Holders to be partners. Except as
specifically provided herein, neither the Trust nor the Board
of Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Holder, nor to
call upon any Holder for the payment of any sum of money or
assessment whatsoever other than such as the Holder may at any
time personally agree to pay.
E. Non-Transferability. Interests in the Trust shall not be
transferable.
FIFTH: NO PREEMPTIVE RIGHTS
Holders shall have no preemptive or other right to receive,
purchase, or subscribe for any additional Interests or other
securities issued by the Trust.
SIXTH: ISSUE, REDEMPTION, AND REPURCHASE OF INTERESTS
IN THE TRUST
SECTION I. ISSUE OF INTERESTS IN THE TRUST
1.01. General. The Board of Trustees may from time to time issue
or cause to be issued Interests in the Trust, in addition to
the then-issued and outstanding Interests and Interests held
by the Trust, in one or more series as the Board of
<PAGE> 5
Trustees may, without approval of the Holders, authorize for a
consideration determined in accordance with Section 1.02
hereof; except that only Interests previously contracted to be
sold may be issued during any period when the determination of
net asset value is suspended pursuant to the provisions of
Section III hereof.
1.02. Price. No Interests of a series shall be issued by the
Trust, except as a dividend distributed to Holders of such
series, for less than an amount which would result in proceeds
to the Trust, in connection with such transaction, of at least
the net asset value per unit of Interests of such series,
determined as set forth in Section III hereof. The net asset
value per unit of Interests applicable to any such transaction
shall be the net asset value per unit of Interests of such
series next determined after receipt of an unconditional order
for purchase of Interests of such series; except that, subject
to applicable rules and regulations, if any, of the Securities
and Exchange Commission or any other governmental body having
similar jurisdiction over the Trust (the "SEC"), the Board of
Trustees may prescribe that requests for purchase received
prior to a time of day (the "cutoff time") preceding the time
of day prescribed for determination of net asset value per
unit of Interests of such series shall be transacted at the
net asset value per unit of Interests next determined and that
requests for purchase received after the cutoff time and
before the time for determination of the next net asset value
per unit of Interests shall be transacted at the net asset
value per unit of Interests next determined after the next net
asset value per unit of Interests of such series. The
criteria for determining what constitutes an unconditional
order for purchase of Interests of a series and the receipt of
such an order shall be prescribed by the Board of Trustees.
1.03. Fractional Interests. The Trust may issue and sell or cause
to be issued and sold fractions of Interests of a series
having pro rata all the rights of full Interests of such
series, including, without limitation, the right to vote and
to receive dividends.
1.04. Assets of a Series. All consideration received by the Trust
for the issue or sale of Interests of each series authorized
by the Board of Trustees, together with all income, earnings,
profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any funds
or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the
series of Interests with respect to which the same were
received by the Trust for all purposes, subject only to the
rights of creditors of Trust assets allocated to such series,
and shall be so recorded upon the books of account of the
Trust and are herein referred to as "assets of" such series.
<PAGE> 6
SECTION II. REDEMPTION INTERESTS IN THE TRUST
2.01. Redemption of Interests. Any Interests of any series of the
Trust may be redeemed at the option of the Holder of such
Interests and, to the extent permitted in Section 2.06 hereof,
at the option of the Trust, at the redemption price for such
Interests, determined in the manner set out in this
Declaration of Trust or in any amendment hereto. Interests
redeemed shall be cancelled. The Trust shall redeem Interests
subject to the conditions and at the price determined as
hereinafter set forth.
2.02. Price. Interests shall be redeemed at the net asset value
per unit of Interest of the appropriate series, determined as
set forth in Section III hereof. The net asset value per unit
of Interest of such series applicable to any such redemption
of Interests shall be the net asset value per unit of Interest
next determined after receipt of a request for redemption of
such Interests in proper form, except that, subject to
applicable rules and regulations, if any, of the SEC, the
Board of Trustees may prescribe that requests for redemption
received prior to the cutoff time preceding the time of day
prescribed for determination of net asset value per unit of
Interest of such series shall be transacted at the net asset
value per unit of Interest next determined and that requests
for redemption after the cutoff time and before the time for
determination of the next net asset value per unit of Interest
shall be transacted at the net asset value per unit of
Interest next determined after the next net asset value per
unit of Interest. The criteria for determining what
constitutes a proper request for redemption of Interests of a
series and the receipt of such request for redemption shall be
prescribed by the Board of Trustees.
2.03. Payment. Subject to the provisions of Section 2.04 hereof,
payment for Interests of a series shall be made in cash to, or
upon the direction of, the Holder of record within seven
calendar days after the date of receipt of (a) a written,
unconditional and irrevocable instruction of the Holder to
redeem, in a form acceptable to the Trust or its designated
agent, and such other documents as the Trust or its designated
agent may require, or (b) such other direction or
authorization of redemption by the Holder as the Board of
Trustees shall authorize. Subject to applicable rules and
regulations, if any, of the SEC, the Trust may pay the
redemption price for such Interests of a series in whole or in
part by a distribution in kind of securities from the
portfolio of the Trust allocated to such series, in lieu of
money, valuing such securities at their value employed for
determining the net asset value governing such redemption
price, and selecting the securities in such manner as the
Board of Trustees may determine to be fair and equitable.
2.04. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 3.03 hereof, the Board of Trustees
shall declare a suspension of the determination of net asset
value of a particular series, (a) the rights of Holders
(including those who shall have requested redemption pursuant
to Sections 2.01, 2.02, and 2.03 hereof but for whom the
redemption price shall not yet
<PAGE> 7
have been determined) to have Interests redeemed and paid for by
the Trust, and (b) the obligation of the Trust to pay for
Interests previously redeemed, shall be suspended until the
termination of such suspension. Any record Holder of
Interests not previously redeemed who shall have his
redemption right so suspended may, during the period of such
suspension, by appropriate written notice of revocation at the
office or agency where request for redemption was made, revoke
any request or instruction for redemption not honored. The
redemption price of Interests for which redemption requests
have been made and not revoked shall be the net asset value of
such Interests next determined as set forth in Section III
hereof after the termination of such suspension, and payment
shall be made within seven days after the date upon which the
requirements of Section 2.03 were met plus the period during
which the determination of net asset value was suspended.
2.05. Repurchase by Agreement. The Trust may repurchase Interests
of the Trust directly, or through a principal underwriter, if
any, or another agent designated for the purpose, by agreement
with the owner thereof at a price not exceeding the net asset
value per unit of Interest of the appropriate series
determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which
may be later determined pursuant to Section III hereof,
provided payment is not made for the Interests prior to the
time as of which such net asset value is determined.
Repurchased Interests shall be treated as having been redeemed
by the Trust and shall be cancelled.
2.06. Redemption of Holder's Interest. The Trust shall have the
right at its option and at any time to redeem Interests of any
Holder at the net asset value thereof determined in accordance
with Section III hereof: (i) if at such time such Holder owns
fewer units of Interest than, or units of Interest having an
aggregate net asset value of less than, an amount determined
from time to time by the Board of Trustees; or (ii) to the
extent that such Holder owns Interests of a particular series
of Interests equal to or in excess of a percentage of the
outstanding Interests of that series determined from time to
time by the Board of Trustees; or (iii) to the extent that
such Holder owns Interests of the Trust representing a
percentage equal to or in excess of a percentage of the
aggregate number of outstanding Interests of the Trust or the
aggregate net asset value of the Trust determined from time to
time by the Board of Trustees, and subject to the Trust's
giving general notice to all Holders of its intention to avail
itself of such right, either by publication in the Trust's
prospectus, if any, or by such other means as the Board of
Trustees may determine. Subject to the same terms and
conditions, the Trust shall also have the right to redeem
Interests in the Trust, or a particular series, owned by any
Holder if, in the opinion of the Board of Trustees, ownership
of Interests in the Trust or series, respectively, has or may
become concentrated to an extent which could cause the Trust
to become a personal holding company within the meaning of the
Internal Revenue Code.
<PAGE> 8
2.07. Additional Provisions Relating to Redemptions. The
completion of redemption of Interests shall constitute a full
discharge of the Trust and the Trustees with respect to such
Interests.
SECTION III. NET ASSET VALUE OF INTERESTS IN THE TRUST
3.01. By Whom Determined. Subject to the provisions of Section
3.04 of this Article SIXTH, the Board of Trustees shall have
the power and duty to determine from time to time the net
asset value per unit of the outstanding Interests of each
series authorized by the Board of Trustees and any such
determination shall be binding on all parties.
3.02. When Determined. The net asset value of a series shall be
determined at such times as the Board of Trustees, subject to
applicable rules and regulations, if any, of the SEC, shall
prescribe, provided that such net asset value shall be
determined at least once each week. In the absence of a
resolution of the Board of Trustees, the net asset value of a
series shall be determined as of the close of trading on the
New York Stock Exchange on each business day.
3.03. Suspension of Determination of Net Asset Value. The Board of
Trustees may declare a suspension of the determination of net
asset value of a series (a) for any period during which
trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed (other than
customary weekend and holiday closings), (b) for any period
during which an emergency exists as a result of which disposal
of the investments held by that series or determination of net
asset value of that series is not reasonably practicable, or
(c) for such period as the SEC by order may permit. Such
suspension shall take effect at such time as the Board of
Trustees shall specify and thereafter there shall be no
determination of net asset value until the Board of Trustees
shall declare the suspension terminated, except that the
suspension shall terminate in any event on the first day on
which (1) the condition giving rise to the suspension shall
have ceased to exist and (2) no other condition exists under
which suspension is authorized under this Section 3.03. Each
declaration by the Board of Trustees pursuant to this Section
3.03 shall be consistent with such official rules and
regulations, if any, relating to the subject matter thereof as
shall have been promulgated by the SEC. To the extent not
inconsistent with such official rules and regulations, the
determination of the Board of Trustees shall be conclusive.
3.04. Computation of Per Unit Net Asset Value.
(a) Net Asset Value Per Unit. The net asset value of each
unit of Interest of a series as of any particular time
shall be the quotient obtained by dividing the value of
the net assets of the Trust allocated to such series by
the total number of units of Interest of such series
outstanding, rounded to such extent as the Board of
Trustees shall determine from time to time.
<PAGE> 9
(b) Value of Trust's Net Assets. The value of the net assets
of the Trust allocated to any series as of any particular
time shall be the value of the assets so allocated less
the liabilities of the Trust so allocated, determined as
follows:
(1) each security for which market quotations are readily
available shall be valued at current market value
determined by methods specified by the Board of
Trustees;
(2) each other security, including any security within
(1) for which the specified price does not appear to
represent a dependable quotation for such security
as of the time of valuation, shall be valued at a
fair value as determined in good faith by the Board
of Trustees;
(3) any cash on hand shall be valued at the face amount
thereof;
(4) any cash on deposit, accounts receivable, and cash
dividends and interest declared or accrued and not
yet received, any prepaid expenses, and any other
current asset shall be valued at the face amount
thereof, unless the Board of Trustees shall
determine that any such item is not worth its face
amount, in which case such asset shall be valued at
a fair value determined in good faith by the Board
of Trustees; and
(5) any other asset shall be valued at a fair value
determined in good faith by the Board of Trustees.
Notwithstanding the foregoing, short-term debt obligations,
commercial paper and repurchase agreements may be, but need
not be, valued on the basis of quoted yields for securities of
comparable maturity, quality and type, or on the basis of
amortized cost. The Board of Trustees may appoint persons to
assist it in the determination of the value of assets,
liabilities and net asset value per unit of Interest of any
series and to make the actual calculations pursuant to the
direction of the Board of Trustees.
3.05. Miscellaneous. For the purposes of this Section III:
(a) Interests of any series issued shall
<PAGE> 10
be deemed to be outstanding commencing immediately after the
time for determination of net asset value per unit of
Interest for purposes of determining their sales price,
pursuant to Section 1.02 hereof, and the net sale price
thereof shall thereupon be deemed an asset of that
series.
(b) Interests of any series for which a request for redemption
has been made in proper form or which are being
repurchased by the Trust shall be deemed to be
outstanding up to and including the time as of which the
redemption or repurchase price for such Interests is
determined. After such time, they shall be deemed to be
no longer outstanding and the price until paid shall
thereupon be deemed to be a liability of that series.
(c) Funds on deposit and contractual obligations payable to
the Trust in foreign currency and liabilities and
contractual obligations payable by the Trust in foreign
currency shall be taken at the current applicable rate of
exchange as nearly as practicable at the time as of which
the net asset value is computed for the series to which
such items relate.
SECTION IV. COMPLIANCE WITH INVESTMENT COMPANY ACT OF 1940
Notwithstanding any of the foregoing provisions of this Article
SIXTH, the Board of Trustees may prescribe such other bases and
times for determining the per unit net asset value of any series of
the Trust as it shall deem necessary or desirable to enable the
Trust to comply with any provision of the Investment Company Act of
1940, or any rule or regulation thereunder, all as now in effect or
hereafter amended or added (the "1940 Act"), or to enable any
principal underwriter or distributor of units of the Trust to
comply with any rule or regulation adopted by any securities
association registered under the Securities Exchange Act of 1934.
SEVENTH: BOARD OF TRUSTEES
A. Election. The number of Trustees shall be fixed pursuant to the
By-Laws. Trustees shall be elected by the Holders, except as
otherwise provided herein. The initial Trustees, each of whom
shall serve until the first meeting of Holders at which
Trustees are elected and until his or her successor is elected
and qualified, or until he or she sooner dies, resigns or is
removed, shall be John A. Benning and such other persons as
the Trustee or Trustees then in office shall, prior to any
sale of Interests pursuant to a public offering, appoint.
Any vacancy occurring in the Board of Trustees may be filled
by the Trustees, unless immediately after filling any such
vacancy, less than two-thirds of the Trustees then holding
office would have been elected to such office by the Holders.
The Board of Trustees shall call a meeting of Holders for the
purpose of electing Trustees whenever less than a majority of
the Trustees have been elected by Holders. Each Trustee
elected by the Holders or by the Board of Trustees shall serve
until the next meeting of Holders, if any, called for the
purpose of reelecting such Trustee or electing a successor to
such Trustee and until the election and qualification of his
or her successor, or until he or she sooner dies, resigns or
is removed. A Trustee may be removed with or without cause (a)
at any meeting called for such purpose by a vote of two-thirds
of the outstanding Interests, (b) by the holders of two-thirds
of the outstanding Interests by declaration in writing filed
with the Custodian of the securities of the Trust, or (c) by
vote of a majority of the Trustees then in office.
<PAGE> 11
B. Effect of Death, Resignation, Etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity
of the Trustees, or any one of them, shall not operate to
annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.
C. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Board
of Trustees, and they shall have all powers necessary or
convenient to carry out that responsibility. Without limiting
the foregoing, the Board of Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the
conduct of the business of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right
to the Holders; they may fill vacancies in their number,
including vacancies resulting from increases in their number,
and may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may
appoint from their own number, and terminate, any one or more
committees consisting of two or more Trustees, including an
executive committee which may, when the Board of Trustees is
not in session, exercise some or all of the power and
authority of the Board of Trustees as the Trustees may
determine; they may appoint an advisory board, the members of
which shall not be Trustees and need not be Holders; they may
employ one or more custodians of the assets of the Trust and
may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems
for the central handling of securities, retain a Holder
services agent, provide for the distribution of Interests by
the Trust, through one or more principal underwriters or
otherwise, set record dates for the determination of Holders
with respect to various matters and in general delegate such
authority as they consider desirable to any officers of the
Trust, to any committee of the Board of Trustees and to any
agent or employee of the Trust or to any such custodian or
underwriter.
Without limiting the foregoing, the Board of Trustees shall
have power and authority:
1. To invest and reinvest in securities, options, futures
contracts, options on futures contracts and other
property, and to hold cash uninvested;
2. To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of
the Trust;
3. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Board of
Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to
securities or property as the Board of Trustees shall
deem proper;
<PAGE> 12
4. To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities
or other assets;
5. To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the
Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
6. To allocate assets, liabilities and expenses of the Trust
to a particular series of Interests or to apportion the
same among two or more series, provided that any
liabilities or expenses incurred by a particular series
of Interests shall be payable solely out of the assets of
that series;
7. To consent to or participate in any plan for the
reorganization, consolidation or merger of any
corporation or issuer, any security of which is or was
held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions
with respect to any security held in the Trust;
8. To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and
in that connection to deposit any security with, or
transfer any security to, any such committee, depositary
or trustee, and to delegate to them such power and
authority with relation to any security (whether or not
so deposited or transferred) as the Board of Trustees
shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such
committee, depositary or trustee as the Board of Trustees
shall deem proper;
9. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust on any matter in
controversy, including but not limited to claims for
taxes;
10. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
11. To borrow funds, securities or other assets;
12. To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guarantee
or suretyship, or otherwise assume liability for payment
thereof; and to mortgage and pledge the Trust property or
any part thereof to secure any of or all of such
obligations or obligations incurred pursuant to Clause 11
hereof;
13. To purchase and pay for, entirely out of Trust property,
such insurance as they may deem necessary or appropriate
for the conduct of the business, including without
limitation, insurance policies insuring the
<PAGE> 13
assets of the Trust and payment of distributions and principal
on its portfolio investments, and insurance policies
insuring the Holders, Trustees, officers, employees,
agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every
nature arising by reason of holding, being or having held
any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person
as Holder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent
contractor, including any action taken or omitted that
may be determined to constitute negligence, whether or
not the Trust would have the power to indemnify such
person against such liability;
14. To pay pensions for faithful service, as deemed
appropriate by the Board of Trustees, and to adopt,
establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the
Trustees, officers, employees, and agents of the Trust;
15. To pay remuneration to each Trustee for his services,
including reimbursement of expenses incurred, as shall be
fixed from time to time by resolution of the Board of
Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other
capacity and receiving compensation therefor; and
16. To do all acts and things appropriate in the furtherance
of the foregoing and in furtherance of the purposes of
the Trust.
The Board of Trustees shall not in any way be bound or limited
by any present or future law or custom in regard to
investments by Trustees. Except as otherwise provided herein
or from time to time in the By-Laws, any action to be taken by
the Board of Trustees may be taken by a majority of the
Trustees present at a meeting of the Board of Trustees (a
quorum being present), within or without Massachusetts,
including any meeting held by means of conference telephone or
other communications equipment by means of which all persons
participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence
in person at a meeting, or by written consents of a majority
of the Trustees then in office.
D. Payment of Expenses by Trust. The Board of Trustees is
authorized to pay or to cause to be paid out of the principal
or income of the Trust, or partly out of principal and partly
out of income, as they deem appropriate, all expenses, fees,
charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the
management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the
<PAGE> 14
services of the Trust's officers, employees, investment adviser or
manager, principal underwriter, auditor, counsel, custodian,
Holder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Board
of Trustees may deem necessary or proper to incur, provided,
however, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a
particular series of Interests, as determined by the Board of
Trustees, shall be payable solely out of the assets of that
series.
E Ownership of Assets of the Trust. Title to all of the assets of
the Trust, including all assets allocated to each series of
Interests, shall at all times be considered as vested in the
Board of Trustees.
F. Advisory, Management and Distribution. Subject to a vote
meeting the requirements of the 194O Act, the Board of
Trustees may, at any time and from time to time, contract for
exclusive or non-exclusive advisory and/or management services
with any partnership, corporation, trust, association or other
organization (the "Adviser"), every such contract to comply
with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other
terms interpretive of or in addition to said requirements and
restrictions as the Board of Trustees may determine,
including, without limitation, authority to determine from
time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the
Trust shall be held uninvested, and to make changes in the
Trust's investments. The Board of Trustees may also, at any
time and from time to time, contract with the Adviser or any
other partnership, corporation, trust, association or other
organization, appointing it exclusive or non-exclusive
distributor or principal underwriter for the Interests, every
such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Board of
Trustees may determine.
The fact that:
(i) any of the Holders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter, or
distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any
parent or affiliate of any organization, with which an
advisory or management contract, or principal
underwriter's or
<PAGE> 15
distributor's contract, or transfer, Holder services or other
agency contract may have been or may hereafter be made,
or that any such organization, or any parent or affiliate
thereof, is a Holder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or
principal underwriter's or distributor's contract, or
Holder services or other agency contract may have been or
may hereafter be made by the Trust also has an advisory
or management contract, or principal underwriter's or
distributor's contract, or transfer, Holder services or
other agency contract with one or more other
corporations, trusts, associations, or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or
disqualify any Holder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Holders.
EIGHTH: LIABILITY
A. Trustees, Etc. Not Personally Liable; Notice. Except as
otherwise provided herein, all persons extending credit to,
contracting with or having any claim against the Trust or a
particular series of Interests shall look only to the assets
of the Trust or the assets of that particular series of
Interests for payment under such credit, contract or claim;
and neither the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be
personally liable therefor.
The Board of Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent,
employee, investment adviser or principal underwriter of the
Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee, but nothing herein shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of
Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by any Trustees or Trustee or by
any officers or officer shall recite that the same was
executed or made by or on behalf of the Trust or by them as
Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are
not binding upon any of them individually but are binding only
upon the assets and property of the Trust, or of the
particular series of Interests to which such instrument
relates, and may contain such further recital as he or she or
they may deem appropriate, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer
individually.
Every note, bond, contract, instrument, certificate, share or
undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Board of Trustees
or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or
with respect to their or his capacity as Trustees or Trustee,
and such Trustees or Trustee shall not be personally liable
thereon.
<PAGE> 16
B. Trustee's Good Faith Action; Expert Advice; No Bond or Surety.
The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A
Trustee shall be liable for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and
shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond
as such, nor any surety if a bond is required.
C. Liability of Third Persons Dealing with Trustees. No person
dealing with the Board of Trustees or any Trustee shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by either or to see to the
application of any payments made or property transferred to
the Trust or upon its order.
D. Joint and Several Liability of Holders. Each Holder shall be
jointly and severally liable (with rights of contribution
inter se in proportion to their respective Interests in the
Trust or in a series of the Trust) for the liabilities and
obligations of the Trust or any series thereof if the Trust or
series fails to satisfy such liabilities or obligations;
provided, however, that, to the extent assets are available in
the Trust or the series, the Trust or series shall indemnify
and hold each Holder harmless from and against any claim or
liability to which such Holder may become subject by reason of
its being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or
liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than its
proportionate share, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by it in
connection with such obligation or liability. The rights
accruing to a Holder under this Article EIGHTH, Section D
shall not exclude any other right to which such Holder may be
lawfully entitled, nor shall anything herein contained
restrict the right of the Trust or any series thereof to
indemnify or reimburse a Holder in any appropriate situation,
even if such indemnification or reimbursement is not
specifically provided hereunder. Notwithstanding the
indemnification provisions contained herein, it is intended
that each Holder shall remain jointly and severally liable at
law to the creditors of the Trust or any series of the Trust.
NINTH: DETERMINATION OF NET PROFITS, ETC.; DISTRIBUTIONS
With respect to each series of Interests authorized by the Board of
Trustees, the Board is expressly authorized to determine in
accordance with generally accepted accounting principles and
practices what constitutes net income, profits or earnings, or
surplus and capital, to include in net income, profits or earnings
the portion of subscription or redemption prices attributable to
accrued net income, profits or
<PAGE> 17
earnings in such prices, and to determine what accounting periods
shall be used by the Trust for any purpose, whether annual or any
other period, including daily; to set apart out of any funds of
such series such reserves for such purposes as it shall determine
and to abolish the same; to make distributions in cash, securities,
or other property from surplus or capital or any funds of such
series legally available therefor, at such intervals (which may be
as frequently as daily) or on such other periodic basis as it shall
determine; to make such distributions by means of a formula or
other method of determination at meetings held less frequently than
the frequency of the effectiveness of such declarations; to
establish payment dates for distributions on any basis, including
dates occurring less frequently than the effectiveness of the
declaration thereof; and to provide for the payment of declared
distributions on a date earlier than the specified payment date in
the case of Holders of such series redeeming their entire ownership
of Interests of such series.
No distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Interests of any
series shall be effected by the Trust other than from the assets of
such series.
TENTH: INDEMNIFICATION
A. Indemnification Generally. The Trust shall indemnify, to the
fullest extent permitted by applicable law, each person who is
or has been a Trustee or officer (including each person who
serves or has served at the Trust's request as a director,
officer, or trustee of another organization in which the Trust
has any interest as a Holder, creditor or otherwise, and any
heir, administrator or executor of such person) (a "Covered
Person") against all liabilities and expenses, including but
not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and attorney's fees
reasonably incurred by such Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil, criminal, administrative or
investigative, and any appeal therefrom (a "Proceeding"),
before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as
a party or otherwise or with which such person may be or may
have been threatened, while in office or thereafter, by reason
of being or having been such a Covered Person.
B. Determination of Eligibility. Notwithstanding the provisions of
Section A of Article TENTH, to the extent required under the
1940 Act,
(i) Article TENTH, Section A, shall not protect any person
against any liability to the Trust or to its Holders 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
<PAGE> 18
liable by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved
in the conduct of his office, no indemnification shall be
permitted unless a determination that such person was not
so liable shall have been made on behalf of the Trust by
(a) the vote of a majority of the "disinterested, non-
party Trustees," as defined below, or (b) an independent
legal counsel as expressed in a written opinion; and
(iii) the Trust shall not advance attorneys' fees incurred by
a Covered Person in connection with Proceeding unless the
Trust receives an undertaking by or on behalf of the
Covered Person to repay the advance (unless it is
ultimately determined that he is entitled to
indemnification) and (a) the Covered Person shall provide
security for his undertaking, or (b) the Trust shall be
insured against losses arising by reason of any lawful
advances, or (c) a majority of the disinterested, non-
party Trustees of the Trust or an independent legal
counsel, as expressed in a written opinion, shall
determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately will
be found entitled to indemnification. Such undertaking
shall provide that the Covered Person to whom the advance
was made shall not be obligated to repay pursuant to such
undertaking until the final determination of any pending
Proceeding in a court of competent jurisdiction,
including appeals therefrom, concerning the right of such
Covered Person to be indemnified by the Trust or the
obligation of such person to repay pursuant to the
undertaking.
Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid
to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to
have acted in good faith in the reasonable belief that
such Covered Person's action was in, or not opposed to,
the best interests of the Trust or to have been liable to
the Trust or its Holders by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
As used in this Article TENTH, the term "disinterested,
non-party Trustee" is a Trustee who is not an "interested
person" of the Trust, as defined in Section 2(a)(19) of
the 1940 Act and against whom none of the Proceedings in
question or another action, suit or other Proceeding on
the same or similar grounds is then or has been pending.
C. Holders. In case any Holder or former Holder shall be held to
be personally liable solely by reason of his or her being or
having been a Holder and not because of his or her acts or
omissions or for some other reason, the Holder or former
Holder (or his or her heirs, executors, administrators or
other legal
<PAGE> 19
representatives or in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled to
be held harmless from and indemnified against all loss and
expense arising from such liability.
D. Contractual Rights. This Article TENTH shall be deemed to be a
contract between the Trust and each person who is a Covered
Person at any time this Article TENTH is in effect. Any repeal
or other modification of this Article TENTH or of any
applicable laws shall not limit any rights of indemnification
then existing or arising out of events, acts, or omissions
occurring prior to such repeal or modification, including,
without limitation, the right to indemnification for
Proceedings commenced after such repeal or modification to
enforce this Article TENTH with respect to events, acts or
omissions prior to such repeal or modification.
E. Protection of Rights. If a written claim for indemnification by
a Covered Person under this Article TENTH is not promptly paid
in full by the Trust after receipt by the Trust of a such
claim, or if expenses have not been promptly advanced after
compliance by a Covered Person with the requirements of this
Article TENTH for such advancement, such Covered Person may,
at any time thereafter, bring suit against the Trust to
recover the unpaid amount of the claim or the advancement of
expenses. If successful, in whole or in part, in such suit,
such Covered Person shall also be entitled to be paid the
reasonable expense therefor. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of
its final disposition where the requirements of this Article
TENTH for advancement of expenses have been met by such
Covered Person) that the indemnification of the Covered Person
is prohibited, but the burden of proving such defense shall be
on the Trust. Neither the failure of the Trust, including its
disinterested non-party Trustees or independent legal counsel,
to have made a determination that indemnification of Covered
Person is proper in the circumstances because he or she has
met the applicable standard of conduct required under the 1940
Act, nor the actual determination by the Trust, including its
disinterested non-party Trustees or independent legal counsel,
that the Covered Person had not met such applicable standard
of conduct, shall be a defense to the action or create a
presumption that such Covered Person had not met the
applicable standard of conduct.
ELEVENTH: RESERVATION OF RIGHT TO AMEND
A. By Board of Trustees. Except when otherwise required by the
1940 Act, this Declaration of Trust may be amended at any time
by a majority of the Trustees then in office, provided notice
of any amendment (other than amendments having the purpose of
supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent
provision contained herein, or having any other purpose which
is
<PAGE> 20
ministerial or clerical in nature) shall be mailed promptly to
Holders of record at the close of business on the effective
date of such amendment.
B. By Holders. Except when otherwise required by the 1940 Act,
this Declaration of Trust may be amended at any time by a
majority vote of the Interests of the Trust entitled to be
voted.
TWELFTH: HOLDERS' VOTING POWERS AND MEETINGS
A. Holders' Voting Powers. The Holders shall have power to vote
only (i) for the election or removal of Trustees as provided
in Article SEVENTH, Section A; (ii) with respect to any
investment adviser as provided in Article SEVENTH, Section F;
(iii) with respect to any termination of this Trust or a
series thereof to the extent and as provided in Article
FOURTEENTH; (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article
ELEVENTH, Section B; (v) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Holders; and (vi) with
respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust,
the By-Laws or any registration of the Trust with the SEC, or
as the Board of Trustees may consider necessary or desirable.
Each whole unit of Interest outstanding on the record date
established in accordance with the By-Laws shall be entitled
to one vote as to any matter on which it is entitled to vote
and each fractional unit shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Holders, Interests shall be voted in the aggregate and not by
individual series except: (1) when required by the 1940 Act or
other applicable law, Interests shall be voted by individual
series; or (2) when the Board of Trustees has determined that
the matter affects only the interests of one or more series,
then Holders of the unaffected series shall not be entitled to
vote thereon. There shall be no cumulative voting in the
election of the Board of Trustees.
Interests may be voted in person or by proxy. A proxy with
respect to Interests held in the names of two or more persons
shall be valid if executed by any one of them unless at or
prior to exercise of the proxy, the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenged at or prior to its exercise and
the burden of proving invalidity shall rest on the challenger.
At all meetings of Holders, unless inspectors of election have
been appointed, all questions relating to the qualification of
voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the
meeting. Unless otherwise specified in the proxy, the proxy
shall apply to all Interests of each series of the Trust owned
by the Holder.
<PAGE> 21
Until Interests are issued, the Board of Trustees may exercise
all rights of Holders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by
Holders.
B. Meetings. Meetings of Holders of the Trust or of any series may
be called by the Board of Trustees, the President, the
Executive Vice-President, any Vice-President, or such other
person or persons as may be specified in the By-Laws and held
from time to time for the purpose of taking action upon any
matter requiring the vote or the authority of the Holders of
the Trust or any series as herein provided or upon any other
matter deemed by the Board of Trustees to be necessary or
desirable. Meetings of Holders of the Trust or of any series
shall be called by the Secretary or such other person or
persons as may be specified in the By-Laws upon written
application by Holders holding at least 10% of the outstanding
Interests of the Trust, if Holders of all series are required
hereunder to vote in the aggregate and not by individual
series at such meeting, or of any series, if Holders of such
series are entitled hereunder to vote by individual series at
such meeting, requesting that a meeting be called for a
purpose requiring action by the Holders as provided herein or
in the By-Laws and provided that such application shall state
the purpose or purposes of such meeting and the matters
proposed to be acted on.
C. Quorum and Required Vote. Thirty percent of the Interests
entitled to vote shall be a quorum for the transaction of
business at a Holders' meeting, except that if any provision
of law or of this Declaration of Trust permits or requires
that holders of any series shall vote as a series, then thirty
percent of the aggregate number of Interests of each series
entitled to vote shall be necessary to constitute a quorum for
the transaction of business by that series. Any lesser
number, however, shall be sufficient for adjournments or if no
Interests are represented thereat, any officer present thereat
entitled to preside or act as secretary of such meeting may
adjourn the meeting. Any adjourned session or sessions may be
held within a reasonable time after the date set for the
original meeting without the necessity of further notice.
Except when a larger vote is required by any provision of this
Declaration of Trust or the By-Laws, a majority of the
Interests voted shall decide any questions and a plurality
shall elect any Trustee, provided that where any provision of
law or of this Declaration of Trust permits or requires that
the holders of any series shall vote as a series, then a
majority of the Interests of that series voted on the matter
shall decide that matter insofar as that series is concerned.
The vote upon any question shall be by written ballot whenever
requested by any person entitled to vote but, unless such a
request is made, voting may be conducted by voice vote or in
any other way approved by the meeting.
D. Place of Meeting. All Holders' meetings shall be held at the
office of the Trust in the City of Chicago, State of Illinois,
except that the Board of Trustees or the President of the
Trust may fix a different place of meeting within the
<PAGE> 22
United States, which shall be specified in the notice or waiver of
notice of such meeting.
E. Notice of Meetings; Adjournment. The Secretary or an Assistant
Secretary shall cause notice of the place, date and hour and
the purpose or purposes for which a meeting is called, to be
mailed, postage prepaid, not less than seven days before the
date of such meeting, to each Holder entitled to vote at such
meeting, at his address as it appears on the records of the
Trust. Notice of any Holders' meeting need not be given to
any Holder who shall sign a written waiver of such notice,
whether before or after the time of such meeting, which waiver
shall be filed with the record of such meeting, or to any
Holder who shall attend such meeting in person or by proxy. A
meeting of Holders convened on the date for which it was
called may be adjourned from time to time, without further
notice, to a date not more than 120 days after the original
record date.
F. Ledger of Interests. It shall be the duty of the Secretary or
Assistant Secretary of the Trust to cause an original or
duplicate ledger of Interests to be maintained at the office
of the Trust's transfer agent. Such ledger of Interests may
be in written form or any other form capable of being
converted into written form within a reasonable time for
visual inspection.
G. Action by Written Consent. Any action taken by Holders may be
taken without a meeting if a majority of Holders entitled to
vote on the matter (or such larger proportion thereof as shall
be required by any express provision of this Declaration of
Trust or the By-Laws) consent to the action in writing and
such written consents are filed with the records of the
meetings of Holders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Holders.
THIRTEENTH: USE OF NAME
The Trust acknowledges that it is adopting its trust name, and may
adopt the names of various series of the Trust, through permission
of Stein Roe & Farnham Incorporated, a Delaware corporation, and
agrees that Stein Roe & Farnham Incorporated reserves to itself and
any successor to its business the right to grant the non-exclusive
right to use the name "SR&F Base Trust," or "Stein Roe & Farnham
Base Trust" or "SteinRoe Fund" or "Stein Roe & Farnham Fund" or
"SteinRoe Income Fund" or "Stein Roe __________" or "Stein
___________" or "SteinRoe," or "Stein Roe," or "Stein," or any
similar name to any other entity, including but not limited to any
investment company of which Stein Roe & Farnham Incorporated or any
subsidiary or affiliate thereof or any successor to the business
thereof shall be the investment adviser.
<PAGE> 23
FOURTEENTH: MISCELLANEOUS
A. Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue until December 31,
2080. The Trust may be terminated at any time by vote of
Holders holding a majority of the Interests of each series
entitled to vote or by the Trustees by written notice to the
Holders. Any series of Interests may be terminated at any
time by vote of Holders holding a majority of the Interests of
such series entitled to vote or by the Trustees by written
notice to the Holders of such series.
Upon the withdrawal, resignation, retirement, bankruptcy or
expulsion of any Holder, the Trust shall be dissolved
effective 120 days after the event. However, the remaining
Holders may, by a unanimous affirmative vote at any meeting of
the remaining Holders held prior to 120 days after such event
or by an instrument in writing without a meeting signed by a
majority of the Trustees and consented to by all of the
remaining Holders prior to 120 days after such event, agree to
continue the business of the Trust even if there has been a
prior dissolution.
Upon termination of the Trust or of any one or more series of
Interests, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees,
the Trust shall, in accordance with such procedures as the
Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities, or
any combination thereof, and distribute the proceeds to the
Holders of the series involved, ratably according to the
number of Interests of such series held by the several Holders
of such series on the date of termination.
B. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept
at the office of the Trust where it may be inspected by any
Holder. A copy of this instrument and of any amendment hereof
shall be filed with any governmental office where such filing
may from time to time be required. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made and as to
any matters in connection with the Trust hereunder; and, with
the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all
expressions such as "herein", "hereof", and "hereunder", shall
be deemed to refer to this instrument as amended or affected
by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or
effect of this instrument. This instrument may be executed in
any number of counterparts, each of which shall be deemed an
original.
<PAGE> 24
C. Applicable Law. This Declaration of Trust is made in the
Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to
the laws of said Commonwealth.
D. Severability. If any Article or other portion of this
Declaration of Trust shall be invalidated or held to be
unenforceable on any ground by any court of competent
jurisdiction, the decision of which shall have not been
reversed on appeal, such invalidity or unenforceability shall
not affect the other provisions hereof, and this Declaration
of Trust shall be construed in all respects as if such invalid
or unenforceable provision had been omitted herefrom.
E. Incorporation. Upon a vote of a majority of the Interests of
the Trust or a series thereof, the Trustees may cause to be
organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take
over all of the Trust Property or Trust Property allocated or
belonging to such Series or to carry on any business in which
the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property or Trust
Property allocated or belonging to such Series to any such
corporation, trust, association or organization in exchange
for the equity interest thereof or otherwise, and to lend
money to, subscribe for the equity interests of, and enter
into any contracts with any such corporation, trust,
partnership, association or organization, or any corporation,
partnership, trust, association or organization in which the
Trust or such Series holds or is about to acquire equity
interests. The Trustees may also cause a merger or
consolidation between the Trust or any Series or any
successors thereto and any such corporation, trust,
partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in
effect. Nothing contained herein shall be construed as
requiring approval of the Holders of the Trust or any Series
thereof for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations
or other organizations and selling, conveying or transferring
a portion of the Trust Property or Trust Property allocated to
such Series to such organizations or entities.
F. Massachusetts Business Trust. A majority of the trustees may,
in their sole discretion, amend the Declaration so as to, or
otherwise, adopt the form of organization of a trust with
transferable Interests organized under the laws of The
Commonwealth of Massachusetts, without any further action by
the Holders.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal in the City of Boston, Massachusetts, for himself and his
assigns, as of the day and year first above written.
JOHN A. BENNING
Trustee
<PAGE> 25
COMMONWEALTH OF MASSACHUSETTS)
) SS
COUNTY OF SUFFOLK )
Boston, August 23, 1993.
Then personally appeared the above-named John A. Benning, Trustee,
and acknowledged the foregoing instrument to be his free act and
deed, before me.
CONNIE LOUKAS
Notary Public
My commission expires: October 30, 1998
NOTARIAL SEAL)
<PAGE>
SR&F BASE TRUST
FIRST AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
(JUNE 30, 1994)
The undersigned, being a majority of the duly elected and qualified
Trustees of SR&F Base Trust, a trust formed with nontransferable
units of beneficial interest organized under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust dated August 23, 1993 (the "Declaration of
Trust"), do hereby amend the Declaration of Trust as follows and
hereby consent to such amendment:
1. Article SIXTH, section 1.04 is amended and restated as follows:
"1.04. Assets of a Series. All consideration received
by the Trust for the issue or sale of Interests of each
series authorized by the Board of Trustees, together with
all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to the series
of Interests with respect to which the same were received
by the Trust for all purposes, subject only to the rights
of creditors of Trust assets allocated to such series,
and shall be so recorded upon the books of account of the
Trust and are herein referred to as 'assets of' such
series. Each series of the Trust shall be a separate
subtrust and all assets of such series shall be held in a
separate trust for the benefit of that series' Holders,
and no other series or Holder of any other series of the
Trust shall have any right or interest with respect to
the assets of the aforesaid series."
2. Article FOURTEENTH, Section A is amended and restated as
follows:
"A. Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue
until December 31, 2080. The Trust may be terminated at
any time by vote of Holders holding a majority of the
Interests of each series entitled to vote or by the
Trustees by written notice to the Holders. Any series of
Interests may be terminated at any time by vote of
Holders holding a majority of the Interests of such
series entitled to vote or by the Trustees by written
notice to the Holders of such series.
"Upon the withdrawal, resignation, retirement, bankruptcy
or expulsion of any Holder of an Interest of a series of
the Trust, such series shall be dissolved effective 120
days after the event. However, the remaining Holders of
the Interests of such series may, by a unanimous
affirmative vote at any meeting of such Holders held
prior to 120 days after such event or by an instrument in
writing without a meeting signed by a majority of the
Trustees and consented to by all of the remaining Holders
of the Interests of such series of the Trust prior to 120
days after such event, agree to continue the business of
that series of the Trust even if there has been a prior
dissolution.
"Upon termination of the Trust or of any one or more
series of Interests, after paying or otherwise providing
for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated as may be determined by the
Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce
the remaining assets to distributable form in cash or
shares or other securities, or any combination thereof,
and distribute the proceeds to the Holders of the series
involved, ratably according to the number of Interests of
such series held by the several Holders of such series on
the date of termination."
This instrument may be executed in one or more counterparts, which
together shall constitute a single instrument.
IN WITNESS WHEREOF, each of the undersigned Trustees has hereunto
set his hand and seal, for himself and his assigns, as of the day
and year first above written.
Kenneth L. Block Francis W. Morley
Charles R. Nelson Gordon R. Worley
Anthony G. Zulfer, Jr.
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared the above-named Kenneth L. Block and
acknowledged the foregoing instrument to be his free act and deed,
before me.
MARJORIE M. PLUSKOTA
Notary Public
My commission expires: 8/17/97
(NOTARIAL SEAL)
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared the above-named Francis W. Morley and
acknowledged the foregoing instrument to be his free act and deed,
before me.
MARJORIE M. PLUSKOTA
Notary Public
My commission expires: 8/17/97
(NOTARIAL SEAL)
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared the above-named Charles R. Nelson and
acknowledged the foregoing instrument to be his free act and deed,
before me.
MARJORIE M. PLUSKOTA
Notary Public
My commission expires: 8/17/97
(NOTARIAL SEAL)
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared the above-named Gordon R. Worley and
acknowledged the foregoing instrument to be his free act and deed,
before me.
MARJORIE M. PLUSKOTA
Notary Public
My commission expires: 8/17/97
(NOTARIAL SEAL)
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared the above-named Anthony G. Zulfer, Jr. and
acknowledged the foregoing instrument to be his free act and deed,
before me.
MARJORIE M. PLUSKOTA
Notary Public
My commission expires: 8/17/97
(NOTARIAL SEAL)
<PAGE>
SR&F BASE TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
SR&F Base Trust (the "Trust"), a trust formed with nontransferable
units of beneficial interest organized under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust dated August 23, 1993 (the "Declaration of
Trust"), hereby certifies the following:
Pursuant to a majority of the Interests of the Trust entitled
to be voted, Article TWELFTH of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
TWELFTH: Holders' Voting Rights and Meetings.
A. Holders' Voting Powers. The Holders shall have power to
vote only (i) for the election or removal of Trustees as
provided in Article SEVENTH, Section A; (ii) with respect to
any investment adviser as provided in Article SEVENTH, Section
F; (iii) with respect to any termination of this Trust or a
series thereof to the extent and as provided in Article
FOURTEENTH; (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article
ELEVENTH, Section B; (v) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Holders; and (vi) with
respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust,
the By-Laws or any registration of the Trust with the SEC, or
as the Board of Trustees may consider necessary or desirable.
Each whole unit of Interest (or any fractional unit)
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 unit of interest (or any fractional unit) in
United States dollars determined at the close of business on
the record date (for example, a unit of interest having a net
asset value of $10.50 would be entitled to 10.5 votes).
Notwithstanding any other provision of this Declaration of
Trust, on any matter submitted to a vote of any Holders,
Interests shall be voted in the aggregate and not by
individual series except: (1) when required by the 1940 Act or
other applicable law, Interests shall be voted by individual
series; or (2) when the Board of Trustees has determined that
the matter affects only the interests of one or more series,
then Holders of the unaffected series shall not be entitled to
vote thereon. There shall be no cumulative voting in the
election of the Board of Trustees.
Interests may be voted in person or by proxy. A proxy with
respect to Interests held in the names of two or more persons
shall be valid if executed by one of them unless at or prior
to exercise of the proxy, the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenges at or prior to its exercise and
the burden of proving invalidity shall rest on the challenger.
At all meetings of Holders, unless inspectors of election have
been appointed, all questions relating to the qualification of
voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the
meeting. Unless otherwise specified in the proxy, the proxy
shall apply to all Interests of each series of the Trust owned
by the Holder.
Until Interests are issued, the Board of Trustees may exercise
all rights of Holders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by
Holders.
IN WITNESS WHEREOF, the Trust has caused this amendment to be
signed and sealed in its name and on its behalf by Timothy K.
Armour, President and Trustee of the Trust, on July 6, 1995.
SR&F BASE TRUST
By Timothy K. Armour
President and Trustee
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named Timothy K.
Armour, known to be to be the President and a Trustee of SR&F Base
Trust, and acknowledged the foregoing instrument to be his free act
and deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires 10/30/97
<PAGE>
SR&F BASE TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
August 1, 1995
SR&F Base Trust (the "Trust"), a trust formed with nontransferable
units of beneficial interest organized under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust dated August 23, 1993 (the "Declaration of
Trust"), hereby certifies that, pursuant to the unanimous written
consent of all of the Holders of the Trust entitled to vote, the
following amendment to the Declaration of Trust is has been duly
adopted:
Section D of Article EIGHTH of the Declaration of Trust is
deleted and the following is inserted in lieu thereof:
D. Joint and Several Liability of Holders. Each Holder of any
series of the Trust shall be jointly and severally liable (with
rights of contribution inter se in proportion to their respective
Interests in that series of the Trust) for the liabilities and
obligations of the series, but of no other series, if the series
fails to satisfy such liabilities or obligations; provided, however,
that, to the extent assets are available in the series, the series
shall indemnify and hold each Holder of the series harmless from and
against any claim or liability to which such Holder may become
subject by reason of its being or having been a Holder of the series
to the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders of the series, is greater than
its proportionate share, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by it in connection
with such obligation or liability. The rights accruing to a Holder
under this Article EIGHTH, Section D shall not exclude any other
right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust or any
series thereof to indemnify or reimburse a Holder in any appropriate
situation, even if such indemnification or reimbursement is not
specifically provided hereunder. Notwithstanding the
indemnification provisions contained herein, it is intended that
each Holder of a series shall remain jointly and severally liable at
law to the creditors of that series.
IN WITNESS WHEREOF, the Trust has caused this amendment to be
signed and sealed in its name and on its behalf by Timothy K.
Armour, President and Trustee of the Trust, on August 1, 1995.
SR&F BASE TRUST
By Timothy K. Armour
President and Trustee
STATE OF OF ILLINOIS)
) SS
COUNTY OF COOK )
Then personally appeared before me the above-named Timothy K.
Armour, known to be to be the President and a Trustee of SR&F Base
Trust, and acknowledged the foregoing instrument to be his free act
and deed.
NICOLETTE D. PARRISH
Notary Public
My commission expires 10/30/97
<PAGE>
Exhibit 2
SR&F BASE TRUST
BY-LAWS
<PAGE>
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL.............................1
Section 1.01. Agreement and Declaration of Trust......1
Section 1.02. Principal Office........................1
Section 1.03. Seal....................................1
ARTICLE II. BOARD OF TRUSTEES..............................1
Section 2.01. Number and Term of Office...............1
Section 2.02. Power to Make Distributions.............1
Section 2.03. Annual and Regular Meetings.............2
Section 2.04. Special Meetings........................3
Section 2.05. Notice..................................3
Section 2.06. Waiver of Notice........................3
Section 2.07. Quorum and Voting.......................3
Section 2.08. Action Without a Meeting................3
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES......3
Section 3.01. How Constituted.........................3
Section 3.02. Powers of the Executive Committee.......4
Section 3.03. Other Committees of the Board of
Trustees............................4
Section 3.04. Proceedings, Quorum and Manner of
Acting..............................4
Section 3.05. Other Committees........................4
Section 3.06. Action Without a Meeting................4
Section 3.07. Waiver of Notice........................4
ARTICLE IV. OFFICERS.......................................5
Section 4.01. General.................................5
Section 4.02. Election, Term of Office and
Qualifications......................5
Section 4.03. Resignation.............................5
Section 4.04. Removal.................................5
Section 4.05. Vacancies and Newly Created Offices.....5
Section 4.06. Chairman of the Board...................6
Section 4.07. President...............................6
Section 4.08. Executive Vice-Presidents and Vice-
Presidents...........................6
Section 4.09. Senior Vice-President...................6
Section 4.10. Treasurer and Assistant Treasurers......6
Section 4.11. Secretary and Assistant Secretaries.....7
Section 4.12. Controller and Assistant Controllers....7
Section 4.13. Subordinate Officers....................7
Section 4.14. Remuneration............................7
Section 4.15. Surety Bonds............................7
ARTICLE V. CUSTODY OF SECURITIES...........................8
Section 5.01. Employment of a Custodian...............8
Section 5.02. Provisions of Custodian Contract........8
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS
SECURITY HOLDER...................................8
Section 6.01. General.................................8
Section 6.02. Checks, Notes, Drafts, Etc..............8
Section 6.03. Rights as Security Holder...............8
ARTICLE VII. INTERESTS IN THE TRUST........................9
Section 7.01. Certificates............................9
<PAGE>
Section 7.02. Uncertificated Interests................9
Section 7.03. Transfers of Interests..................9
Section 7.04. Registered Holders......................9
Section 7.05. Registrars..............................9
Section 7.06. Fixing of Record Date...................9
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT.....................10
Section 8.01. Fiscal Year............................10
Section 8.02. Accountants............................10
ARTICLE IX. AMENDMENTS....................................10
Section 9.01. General................................10
Section 9.02. By Holders Only........................10
ARTICLE X. MISCELLANEOUS..................................10
Section 10.01. Restrictions and Limitations..........10
<PAGE> 1
SR&F BASE TRUST
BY-LAWS
(By-Laws Adopted by Board of Trustees on August 23, 1993)
ARTICLE I. AGREEMENT AND DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL
Section 1.01. Agreement and Declaration of Trust.
These By-Laws shall be subject to the Agreement and
Declaration of Trust as now in effect or hereinafter amended
("Declaration of Trust") of SR&F Base Trust, a Massachusetts
trust established by the Declaration of Trust (the "Trust").
Section 1.02. Principal Office. A principal office of
the Trust shall be located in Boston, Massachusetts. The
Trust may also maintain a principal office in the City of
Chicago, State of Illinois. The Trust may, in addition,
establish and maintain such other offices and places of
business as the Board of Trustees may from time to time
determine.
Section 1.03. Seal. The seal of the Trust shall be
circular in form and shall bear the name of the Trust, the
word "Massachusetts," and the year of its organization. The
form of the seal shall be subject to alteration by the Board
of Trustees and the seal may be used by causing it or a
facsimile to be impressed or affixed or printed or otherwise
reproduced. Any officer or Trustee of the Trust shall have
authority to affix the seal of the Trust to any document
requiring the same. Unless otherwise required by the Board
of Trustees, the seal shall not be necessary to be placed on,
and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by
or on behalf of the Trust.
ARTICLE II. BOARD OF TRUSTEES
Section 2.01. Number and Term of Office. The Board of
Trustees shall initially consist of the initial sole Trustee,
which number may be increased or subsequently decreased by a
resolution of a majority of the entire Board of Trustees,
provided that the number of Trustees shall not be less than
one nor more than twenty-one. Each Trustee (whenever
selected) shall hold office until the next meeting of Holders
and until his successor is elected and qualified or until his
earlier death, resignation, or removal. The initial Trustee
shall be the person designated in the Declaration of Trust.
Section 2.02. Power to Make Distributions.
(a) The Board of Trustees, from time to time as it may
deem advisable, may declare and make distributions to the
Holders of any series of the Trust in cash or other property
of that series, out of any source available to that series
for distributions, according to the respective rights and
interests of Holders of that
<PAGE> 2
series and in accordance with the applicable provisions of
the Declaration of Trust.
(b) The Board of Trustees may prescribe from time to
time that distributions declared on Interests of a series may
be payable at the election of any of the Holders of that
series (exercisable before the declaration of the
distribution), either in cash or in Interests of that series;
provided that the net asset value of the Interests received
by a Holder electing to receive distributions in Interests
(determined as of such time as the Board of Trustees shall
have prescribed in accordance with the Declaration of Trust)
shall not exceed the full amount of cash to which the Holder
would be entitled if he elected to receive cash.
(c) The Board of Trustees shall cause any distribution
payment to Holders of a series to be accompanied by a written
statement if wholly or partly from any source other than:
(i) such series' accumulated undistributed net income
[determined in accordance with generally accepted
accounting principles and the rules and regulations
then in effect of the Securities and Exchange
Commission or any other governmental body having
similar jurisdiction over the Trust (the "SEC")]
and not including profits or losses realized upon
the sale of securities or other properties of the
series; or
(ii) the series' net income so determined for the
current or preceding fiscal year.
Such statement shall adequately disclose the source or
sources of such payment and the basis of calculation and
shall be in such form as the SEC may prescribe.
Section 2.03. Annual and Regular Meetings. Annual and
regular meetings of the Board of Trustees may be held without
call or notice and at such places at such times as the Board
of Trustees may from time to time determine provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. Members of
the Board of Trustees or any committee designated thereby may
participate in a meeting of such Board or committee by means
of a conference telephone or other communications equipment,
by means of which all persons participating in the meeting
can hear each other at the same time. Participation by such
means shall constitute presence in person at a meeting;
provided, however, that the Board of Trustees shall not enter
into, renew, or perform any contract or agreement, written or
oral, whereby a person undertakes regularly to serve or act
as investment adviser with respect to any series of the Trust
unless the terms of such contract or agreement and any
renewal thereof have been approved by the vote of a majority
of Trustees who are not parties to such contract or agreement
or interested persons of any such
<PAGE> 3
party, which votes shall be cast at a meeting called for the
purpose of voting on such approval at which such persons are
physically present.
Section 2.04. Special Meetings. Special meetings of
the Board of Trustees shall be held whenever called and at
such place and time determined by the President, Executive
Vice-President or Secretary (or, in the absence or disability
of the President, Executive Vice-President and Secretary, by
any Vice-President), or a majority of the Trustees then in
office, at the time and place specified in the respective
notices or waivers of notice of such meetings.
Section 2.05. Notice. If notice of a meeting of the
Board of Trustees is required or desired to be given, notice
stating the time and place shall be mailed to each Trustee at
his residence or regular place of business at least five days
before the day on which the meeting is to be held or caused
to be delivered to him personally or to be transmitted to him
by telephone, telegraph, cable, or wireless at least one day
before the meeting.
Section 2.06. Waiver of Notice. No notice required or
desired to be given of any meeting need be given to any
Trustee who attends such meeting in person or to any Trustee
who waives notice of such meeting in writing (which waiver
shall be filed with records of such meeting), whether before
or after the time of the meeting.
Section 2.07. Quorum and Voting. At all meetings of
the Board of Trustees, the presence of one-third of the
number of Trustees then in office shall constitute a quorum
for the transaction of business; provided, however, a quorum
shall not be less than the lesser of two Trustees or 100% of
all Trustees then in office. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting
without further notice, from time to time, until a quorum
shall be present. The action of a majority of the Trustees
present at a meeting at which a quorum is present shall be
the action of the Board of Trustees, unless the concurrence
of a greater proportion is required for such action by law,
by the Declaration of Trust, or by these By- Laws.
Section 2.08. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board
of Trustees may be taken without a meeting, if written
consents thereto are signed by a majority of the members of
the Board, unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees.
ARTICLE III. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. By resolution adopted
by the Board of Trustees, the Board may designate one or more
committees, including an Executive Committee, each of which
shall consist of at least two Trustees. Each
<PAGE> 4
member of a committee shall be a Trustee and shall hold
office during the pleasure of the Board.
Section 3.02. Powers of the Executive Committee.
Unless otherwise provided by resolution of the Board of
Trustees, the Executive Committee shall have and may exercise
all powers of the Board of Trustees in the management of the
business and affairs of the Trust that may lawfully be
exercised by an executive committee, except the power to
recommend to Holders any matter requiring Holder approval,
amend the Declaration of Trust or By-Laws, or approve any
merger or share exchange that does not require Holder
approval.
Section 3.03. Other Committees of the Board of
Trustees. To the extent provided by resolution of the Board,
other committees of the Board shall have and may exercise any
of the powers that may lawfully be granted to the Executive
Committee.
Section 3.04. Proceedings, Quorum and Manner of Acting.
In the absence of appropriate resolution of the Board of
Trustees, each committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting as it
shall deem proper and desirable, provided that the quorum
shall not be less than two Trustees except that, in the case
of a committee (other than the Executive Committee)
consisting of two Trustees, one Trustee shall constitute a
quorum unless the Board by resolution specifies that a quorum
for that committee shall consist of two Trustees. In the
absence of any member of any such committee, the members
thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of
Trustees to act in the place of such absent member.
Section 3.05. Other Committees. The Board of Trustees
may appoint other committees, each consisting of one or more
persons, who need not be Trustees. Each such committee shall
have such powers and perform such duties as may be assigned
to it from time to time by the Board of Trustees, but shall
not exercise any power which may lawfully be exercised only
by the Board of Trustees or a committee thereof.
Section 3.06. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of any
committee may be taken without a meeting, if written consents
thereto are signed by a majority of the members of the
committee unless the consent of a larger number is required
pursuant to applicable law in which case the consents of such
number shall be required, and such written consents are filed
with the minutes of proceedings of the Board of Trustees or
of the committee.
Section 3.07. Waiver of Notice. Whenever any notice of
the time, place or purpose of any meeting of any committee is
required to be given under the provisions of any applicable
law or under the provisions of the Declaration of Trust or
these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the
records of the meeting, whether
<PAGE> 5
before or after the holding of such meeting, or actual
attendance at the meeting in person, shall be deemed
equivalent to the giving of such notice to such persons.
ARTICLE IV. OFFICERS
Section 4.01. General. The officers of the Trust shall
be a President, a Secretary, a Senior Vice-President, a
Treasurer and a Controller, and may include one or more
Executive Vice-Presidents, Vice-Presidents, Assistant
Secretaries, Assistant Treasurers or Assistant Controllers
and such other officers as may be appointed in accordance
with the provisions of Section 4.13 hereof. The Board of
Trustees may elect, but shall not be required to elect, a
Chairman of the Board.
Section 4.02. Election, Term of Office and
Qualifications. The officers of the Trust (except those
appointed pursuant to Section 4.13 hereof) shall be chosen by
the Board of Trustees at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting
and thereafter annually. If any officers are not chosen at
any annual meeting, such officers may be chosen at any
subsequent regular or special meeting of the Board. Except as
provided in Sections 4.03, 4.04 and 4.05 hereof, each
<PAGE> 6
officer chosen by the Board of Trustees shall hold office
until the next annual meeting of the Board of Trustees and
until his successor shall have been chosen and qualified or
until his earlier death. Any person may hold one or more
offices of the Trust except the offices of President and
Vice-President, but no officer shall execute, acknowledge, or
verify an instrument in more than one capacity, if such
instrument is required by law, by the Declaration of Trust,
or by these By-Laws to be executed, acknowledged or verified
by two or more officers. The Chairman of the Board, if any,
shall be chosen from among the Trustees of the Trust and may
hold such office only so long as he continues to be a
Trustee. No other officer need be a Trustee.
Section 4.03. Resignation. Any officer may resign his
office at any time by delivering a written resignation to the
Board of Trustees, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 4.04. Removal. Any officer may be removed from
office, whenever in the Board's judgment the best interest of
the Trust will be served thereby, by the vote of a majority
of the Board of Trustees given at any regular or special
meeting. In addition, any officer or agent appointed in
accordance with the provisions of Section 4.13 hereof may be
removed, either with or without cause, by any officer upon
whom such power of removal shall have been conferred by the
Board of Trustees.
Section 4.05. Vacancies and Newly Created Offices. If
any vacancy shall occur in any office by reason of death,
resignation, removal, disqualification, or other cause, or if
any new office shall be created, such vacancy or newly
created office may be filled by the Board of Trustees at any
regular or special meeting or, in the case of any office
created pursuant to Section 4.13 hereof, by any officer upon
whom such power shall have been conferred by the Board of
Trustees. An officer chosen by the Board of Trustees to fill
a vacancy or a newly created office shall serve until the
next annual meeting of the Board of Trustees and until his
successor shall have been chosen and qualified or until his
earlier death, resignation or removal.
Section 4.06. Chairman of the Board. In the absence or
disability of the President, the Chairman of the Board, if
there be such an officer, shall preside at all Holders'
meetings and at all meetings of the Board of Trustees. He
shall have such other powers and perform such other duties as
may be assigned to him from time to time by the Board of
Trustees.
Section 4.07. President. The President shall be the
chief executive officer and shall preside at all Holders'
meetings and at all meetings of the Board of Trustees.
Subject to the supervision of the Board of Trustees, he shall
have the general charge of the business, affairs and property
of the Trust and general supervision over its other officers,
employees and agents.
Section 4.08. Executive Vice-Presidents and Vice-
Presidents. The Board of Trustees may from time to time
elect one or more Executive Vice-Presidents and one or more
Vice-Presidents, who shall have such powers and perform such
duties as from time to time may be assigned to them by the
Board of Trustees or the President. At the request of the
President, the Executive Vice- President, and if no Executive
Vice-President is present or able, the Vice- President may
perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. If there are two or more
Executive Vice-Presidents or Vice- Presidents, the earliest
elected to the more senior office present and able shall
perform the duties of the President in his absence or
disability.
Section 4.09. Senior Vice-President. The Senior Vice-
President shall be the principal financial officer of the
Trust and shall have general charge of the finances and books
of account of the Trust. Except as otherwise provided by the
Board of Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the
Custodian of its duties with respect thereto. He shall
render to the Board of Trustees, whenever directed by the
Board, an account of the financial condition of the Trust and
of all his transactions as Senior Vice-President; and as soon
as possible after the close of each fiscal year he shall make
and submit to the Board of Trustees a like report for such
fiscal year. He shall perform all the acts incidental to the
office of Senior Vice-President, subject to the control of
the Board of Trustees. At the request of any Executive Vice-
President, or if no Executive Vice-President is present or
able, the Senior Vice-President may perform all of the duties
of the Executive Vice-President (except to the extent that
such duties have otherwise been delegated by or pursuant to
these By-Laws) and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the Executive
Vice-President.
Section 4.10. Treasurer and Assistant Treasurers. The
Treasurer and any Assistant Treasurer may perform such duties
of the Senior Vice-President as the
<PAGE> 7
Senior Vice-President or the Board of Trustees may assign,
and, in the absence of the Senior Vice-President, may perform
all the duties of the Senior Vice-President.
Section 4.11. Secretary and Assistant Secretaries. The
Secretary shall attend to the giving and serving of all
notices of the Trust and shall record all proceedings of the
meetings of the Holders, Trustees, the Executive Committee
and other committees, in a book to be kept for that purpose.
He shall keep in safe custody the seal of the Trust, and
shall have charge of the records of the Trust, including the
share books and such other books and papers as the Board of
Trustees may direct and such books, reports, certificates and
other documents required by law to be kept, all of which
shall, at all reasonable times, be open to inspection by any
Trustee. He shall perform all the acts incidental to the
office of Secretary, subject to the control of the Board of
Trustees.
Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Trustees may
assign, and, in the absence of the Secretary, he may perform
all the duties of the Secretary.
Section 4.12. Controller and Assistant Controllers.
The Controller shall be the chief accounting officer of the
Trust. He shall direct the preparation and maintenance, on a
current basis, of such accounting books, records and reports
as may be necessary to permit the directors, officers and
executives of the Trust or as may be required by law. He
shall perform all the acts incidental to the office of
Controller, subject to the control of the Board of Trustees,
the Executive Vice-President or the Senior Vice-President.
Any Assistant Controller may perform such duties of the
Controller as the Controller or the Board of Trustees may
assign, of the Controller.
Section 4.13. Subordinate Officers. The Board of
Trustees from time to time may appoint such other officers or
agents as it may deem advisable, each of whom shall have such
title, hold office for such period, have such authority and
perform such duties as the Board of Trustees may determine.
The Board of Trustees from time to time may delegate to one
or more officers or agents the power to appoint any such
subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 4.14. Remuneration. The salaries, if any, or
other compensation of the officers of the Trust shall be
fixed from time to time by resolution of the Board of
Trustees, except that the Board of Trustees may by resolution
delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate
officers or agents appointed in accordance with the
provisions of Section 4.13 hereof.
Section 4.15. Surety Bonds. The Board of Trustees may
require any officer or agent of the Trust to execute a bond
to the Trust [including, without limitation, any bond
required by the Investment Company Act of 1940, or any rule
or
<PAGE> 8
regulation thereunder, all as now in effect or as hereafter
amended or added (the "1940 Act") and the rules and
regulations of the SEC] in such sum and with such surety or
sureties as the Board of Trustees may determine, conditioned
upon the faithful performance of his duties to the Trust,
including responsibility for negligence and for the
accounting of any of the Trust's property, funds, or
securities that may come into his hands.
ARTICLE V. CUSTODY OF SECURITIES
Section 5.01. Employment of a Custodian. The Trust
shall place and at all times maintain in the custody of a
Custodian (including any sub-custodian for the Custodian) all
securities owned by the Trust and cash representing the
proceeds from sales of securities owned by the Trust and of
capital stock or other units of beneficial interest issued to
the Trust, payments of principal or interst upon securities
owned by the Trust, or capital distribution in respect to
capital stock or other units of beneficial interest owned by
the Trust, pursuant to a written contract with such
Custodian. The Custodian shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus
and undivided profits (as shown in its last published
report).
Section 5.02. Provisions of Custodian Contract. The
Custodian contract shall be upon such terms and conditions
and may provide for such compensation as the Board of
Trustees deems necessary or appropriate.
ARTICLE VI. EXECUTION OF INSTRUMENTS, RIGHTS AS
SECURITY HOLDER
Section 6.01. General. All deeds, documents,
transfers, contracts, agreements and other instruments
requiring execution by the Trust shall be signed by the
President, the Executive Vice-President, the Senior Vice-
President, the Controller, the Secretary, or the Treasurer,
or as the Board of Trustees may otherwise, from time to time,
authorize. Any such authorization may be general or confined
to specific instances.
Section 6.02. Checks, Notes, Drafts, Etc. Except as
otherwise authorized by the Board of Trustees, all checks and
drafts for the payment of money shall be signed in the name
of the Trust by the Custodian, and all requisitions or orders
for the payment of money by the Custodian or for the issue of
checks and drafts therefor, all promissory notes, all
assignments of shares or securities standing in the name of
the Trust and all requisitions or orders for the assignment
of shares or securities standing in the name of the Custodian
or its nominee, or for the execution of powers to transfer
the same, shall be signed in the name of the Trust by not
less than two of its officers. Promissory notes, checks, or
drafts payable to the Trust may be endorsed only to the order
of the Custodian or its agent.
Section 6.03. Rights as Security Holder. Unless
otherwise ordered by the Board of Trustees, any officer shall
have full power and authority on behalf of the Trust to (1)
exercise (or waive) any and all rights, powers and privileges
incident
<PAGE> 9
to the ownership of any securities or other obligations which
may be owned by the Trust; and (2) attend and to act and to
vote, or in the name of the Trust to execute proxies to vote,
at any meeting of security holders of any company in which
the Trust may hold securities. At any such meeting, any
officer shall possess and may exercise (in person or by
proxy) any and all rights, powers and privileges incident to
the ownership of such securities.
ARTICLE VII. INTERESTS IN THE TRUST
Section 7.01. Certificates. The Trust shall not issue
share certificates.
Section 7.02. Uncertificated Interests. The Trust's
share ledger shall be deemed to represent and certify the
number of full and/or fractional Interests of a series owned
of record by a Holder.
Section 7.03. Transfers of Interests. Interests of any
series of the Trust shall be non-transferable on the books of
the Trust.
Section 7.04. Registered Holders. The Trust shall be
entitled to treat the holder of record of Interests of each
series as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or
interest in such Interests on the part of any other person,
whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Commonwealth of
Massachusetts.
Section 7.05. Registrars. The Board of Trustees may,
from time to time, appoint or remove registrars of Interests
of the Trust.
Section 7.06. Fixing of Record Date. The Board of
Trustees may fix in advance a date as a record date for the
determination of the Holders of any series entitled to notice
of or to vote at any meeting of such Holders or any
adjournment thereof, or to express consent to Trust action in
writing without a meeting, or to receive payment of any
distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion, or exchange of
Interests of such series, or for the purpose of any other
lawful action, provided that such record date shall not be a
date more than 60 days, and, in the case of a meeting of
Holders, not less than 10 days, prior to the date on which
the particular action requiring such determination of Holders
of such series is to be taken. In such case only such Holders
as shall be Holders of record of such series on the record
date so fixed shall be entitled to such notice of, and to
vote at, such meeting or adjournment, or to give such
consent, or to receive payment of such distribution, or to
receive such allotment of rights, or to exercise such rights,
or to take such other action, as the case may be,
notwithstanding any redemption or issuance of any Interests
of such series on the books of the Trust after any such
record date. If no record date has been fixed for the
determination of Holders, the record date for the
determination of Holders entitled to notice of or to vote at
a meeting of Holders shall be at the close of business on the
day on which notice of the meeting is mailed, which shall not
be more than 60 days before the
<PAGE> 10
meeting, or, if notice is waived by all Holders entitled
thereto, at the close of business on the tenth day before the
day on which the meeting is held.
ARTICLE VIII. FISCAL YEAR, ACCOUNTANT
Section 8.01. Fiscal Year. The fiscal year of each
series of Interests of the Trust shall be established by the
Board of Trustees.
Section 8.02. Accountants. For each series of the
Interests of the Trust, the Trust shall employ an independent
public accountant or firm of independent public accountants
as the Accountant for such series to examine and certify or
issue its report on the financial statements of that series
of the Trust. Each Accountant's certificates and reports
shall be addressed both to the Board of Trustees and to the
Holders of the applicable series.
ARTICLE IX. AMENDMENTS
Section 9.01. General. Except as provided in Section
9.02 hereof, all By-Laws of the Trust, whether adopted by the
Board of Trustees or the Holders, shall be subject to
amendment, alteration, or repeal, and new By-Laws may be
made, by the affirmative vote of a majority of either:
(a) the holders of record of the outstanding Interests
of the Trust entitled to vote at any meeting, the notice or
waiver of notice of which shall have specified or summarized
the proposed amendment, alteration, repeal, or new By-Law; or
(b) the Trustees, at any regular or special meeting.
Section 9.02. By Holders Only.
(a) No amendment of any section of these By-Laws shall
be made except by the Holders of the Trust, if the By-Laws
provide that such section may not be amended, altered or
repealed except by the Holders.
(b) From and after the issue of any Interests of the
Trust to the public, no amendment of this Article IX or
Article X shall be made except by the Holders of the Trust.
ARTICLE X. MISCELLANEOUS
Section 10.01. Restrictions and Limitations.
(a) Except as hereinafter provided, no officer or
Trustee of the Trust, no officer, director, or stockholder
(or partner of a stockholder) of the investment adviser of
the Trust (as that term is defined in the 1940 Act) or of any
underwriter of the Trust, and no investment adviser or
underwriter of the Trust shall take long or short positions
in the securities issued by the Trust. The
<PAGE> 11
foregoing provision shall not prevent the purchase from the
Trust of Interests of any series issued by the Trust by any
person at the price available to Holders of the Trust
generally at the time of such purchase, or as described in
the current Prospectus of the Trust, or prior to commencement
of the public offering of Interests of the Trust, at the net
asset value of such Interests.
(b) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust or to any officer, director,
or stockholder (or partner of a stockholder) of, or person
financially interested in, the investment adviser or any
underwriter of the Trust, or to the investment adviser of the
Trust or to any underwriter of the Trust.
(c) The Trust shall not permit any officer or Trustee of
the Trust, or any officer, director, or stockholder (or
partner of a stockholder) of the investment adviser or any
underwriter of the Trust to deal for or on behalf of the
Trust with himself as principal or agent, or with any
partnership, association, or trust in which he has a
financial interest; provided that the foregoing provisions
shall not prevent (1) officers and Trustees of the Trust from
being officers, directors, or stockholders (or partners of a
stockholder) of or otherwise financially interested in the
investment adviser or any underwriter of the Trust; (2)
purchases or sales of securities or other property by the
Trust from or to an affiliated person or to the investment
adviser or any underwriter of the Trust, if such transactions
are not prohibited by the 1940 Act or have been exempted by
SEC order from the prohibitions of the 1940 Act; (3)
purchases of investments for the portfolio of the Trust
through a securities dealer who is, or one or more of whose
partners, stockholders, officers, or directors is, an officer
or Trustee of the Trust, if such transactions are handled in
the capacity of broker only and commissions charged do not
exceed customary brokerage charges for such services; (4)
employment of legal counsel, registrar, transfer agent,
distribution disbursing agent, or custodian who is, or has a
partner, stockholder, officer, or director who is, an officer
or Trustee of the Trust, if only customary fees are charged
for services to the Trust; (5) sharing statistical, research,
legal and management expenses and office hire and expenses
with any other investment company in which an officer or
Trustee of the Trust is an officer, trustee, or director or
otherwise financially interested.
END OF BY-LAWS
<PAGE>
Exhibit 5
MANAGEMENT AGREEMENT
BETWEEN
SR&F BASE TRUST AND
STEIN ROE & FARNHAM INCORPORATED
SR&F BASE TRUST, a Massachusetts common law 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 "Portfolio"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage
the investment operations of Trust and each Portfolio, 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 Portfolio:
(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 Portfolio'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 Portfolio 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
Portfolio, 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 Portfolio 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 Portfolio action, and
any other rights pertaining to Trust or the Portfolio shall
be exercised;
(f) to make available to Trust promptly upon request all of the
Portfolio'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 Portfolio, 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
Portfolio 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
Portfolios 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
Portfolios, 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 Portfolio and shall
provide such services and facilities as may be required for
effective administration of Trust and Portfolios 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
Portfolio; 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 Portfolio shall be paid solely out of
Portfolio assets. Any expense borne by Trust which is not
solely attributable to a Portfolio, 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
Portfolio 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 Portfolio 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 Portfolio
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 Portfolio
fees at the annual rate for such Portfolio as set forth in
Schedule B to this Agreement. For each Portfolio, 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 Portfolio,
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 Portfolio'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 Portfolios. 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 Portfolios 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 Portfolio 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 Portfolio, a "majority of the
outstanding shares" of that Portfolio. 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 Portfolio as of the effective date
for that Portfolio specified in Schedule A hereto. This
Agreement may be terminated at any time, without payment of any
penalty, as to any Portfolio by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that
Portfolio, 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 Portfolio until the end of the initial term
applicable to that Portfolio specified in Schedule A and
thereafter from year to year only so long as such continuance is
specifically approved with respect to that Portfolio 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 Portfolio.
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 Portfolio 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
Portfolio 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 Portfolio 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 "SR&F
Base Trust" and the Portfolio 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: August 15, 1995
SR&F BASE TRUST
By: Timothy K. Armour, President
Attest:
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: Hans P. Ziegler
Chief Executive Officer
Attest:
Keith J. Rudolf
Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Portfolios of SR&F Base Trust currently subject to this
Agreement are as follows:
Effective End of
Date Initial Term
----------- ------------
SR&F Municipal Money Market
Portfolio 9/28/95 6/30/97
Dated: August 15, 1995
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of the SR&F Base Trust
Management Agreement shall be calculated in accordance with the
following schedule(s):
SR&F Municipal Money Market Portfolio
0.250% of average daily net asset
Dated: August 15, 1995
<PAGE>
EXHIBIT 8
CUSTODIAN CONTRACT
Contract between SR&F Base Trust, a trust fund organized
under the laws of the Commonwealth of Massachusetts having its
principal place of business at 300 West Adams Street, Chicago,
Illinois 60606, hereinafter called the "Trust," and State Street
Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts 02101, hereinafter called the "Custodian."
WHEREAS, the Trust is authorized to issue shares of
beneficial interest ("Shares") in separate series, with each such
series representing interests in a separate portfolio of
securities and other assets (any such series being referred to as
a "Fund"); and
WHEREAS, the following series have been authorized: SR&F
Base Fund;
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT. The
Trust hereby employs the Custodian as the custodian of its assets,
pursuant to the provisions of its Agreement and Declaration of
Trust. The Trust agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it with
respect to all securities owned by the Trust from time to time,
and the cash consideration received by it for such new or treasury
Shares, of any series, with or without par value, of the Trust as
may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Trust held or received by
the Trust and not delivered to the Custodian or any sub-custodian
appointed as prescribed herein.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.17), the Custodian shall from time to time employ one or
more sub-custodians, but only in accordance with an applicable
vote by the Board of Trustees of the Trust, and provided that the
Custodian shall have no more or less responsibility or liability
to the Trust on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the
Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE TRUST
HELD IT.
2.1. HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities, owned by the Trust and allocated to that
Fund, other than (a) securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for
which the
<PAGE> 2
Custodian acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the
Custodian pursuant to Section 2.12.A.
2.2. DELIVERY OF SECURITIES. The Custodian shall release and
deliver securities owned by the Trust, held for the account of a
Fund, held either (i) by the Custodian, (ii) in a Securities
System account of the Custodian, or (iii) in the Custodian's
Direct Paper book entry system account ("Direct Paper System
Account") only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties,
and only in the following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of the Trust or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian and will be held by the Custodian
for the account of the Fund;
(7) To the broker selling the same for examination in accordance
with the "street delivery" custom;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization, or readjustment
of the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new
<PAGE> 3
securities and cash, if any, are to be delivered to the Custodian
and will be held by the Custodian for the account of the Fund;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian and will be held by the Custodian for
the account of the Fund;
(10) For delivery in connection with any loans of securities made
by the Trust from the Fund's portfolio, but only against receipt
of adequate collateral as agreed upon from time to time by the
Custodian and the Trust, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in
the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by the Trust prior to the receipt
of such collateral;
(11) For delivery as security in connection with any borrowings by
the Trust requiring a pledge of assets in the Fund's portfolio,
but only against receipt of amounts borrowed;
(12) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer,
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with options transactions by the
Trust;
(13) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization
or organizations, regarding account deposits in connection with
futures transactions by the Trust for the account of the Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Trust, for delivery to such Transfer
Agent or to the holders of Shares of the Fund in connection with
distributions in kind, as may be described from time to time in
the Fund's currently effective prospectus and statement of
additional information ("prospectus"), in satisfaction of requests
by holders of Shares of the Fund for repurchase or redemption;
<PAGE> 4
(15) For delivery in connection with any reverse repurchase
agreement entered into by the Trust with respect to the Fund, but
only against receipt for the account of the Fund of the amount
payable by the other party to the agreement;
(16) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by
an officer of the Trust and certified by the Secretary or an
Assistant Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purposes to be proper purposes, and naming the
person or persons to whom delivery of such securities shall be
made; and
(17) In the case of a sale effected through the Direct Paper
System of the Custodian, in accordance with the provisions of
Section 2.12.A hereof.
2.3. REGISTRATION OF SECURITIES. Securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Trust or in the name of any nominee of the Trust
for the account of the particular Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Trust
for the account of such Fund unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Trust, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee name
of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Trust under
the terms of this Contract shall be in "street name" or other good
delivery form.
2.4. BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts for each Fund in the name of the
Trust, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of that Fund, other than
cash maintained by the Trust in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Trust may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act
of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity. If and when
<PAGE> 5
authorized by Proper Instructions in accordance with a resolution
adopted by the Board of Trustees, the Custodian may open and
maintain an additional account or accounts in such other bank or
trust company as may be designated by such instructions, such
account or accounts, however, to be in the name of the Custodian
in its capacity as the Custodian and subject only to its draft or
credit in accordance with the terms of this Contract. The
Custodian shall furnish the Trust, not later than twenty (20)
calendar days after the last business day of each month, a
statement reflecting the current status of its internal
reconciliation of the closing balance as of that day in all
accounts described in this Paragraph to the balance shown on the
daily cash report for the day rendered to the Trust.
2.5. PAYMENTS FOR SHARES. The Custodian shall receive from the
Trust or from the Transfer Agent of the Trust and deposit into a
Fund's account such payments as are received for Shares of that
Fund issued or sold from time to time by the Trust. The Custodian
will provide timely notification to the Trust and the Transfer
Agent of any receipt by it of payments for Shares of each Fund.
2.6. INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual
agreement between the Trust and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions,
(1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Trust; and
(2) make federal funds available to the Trust as of specified
times agreed upon from time to time by the Trust and the
Custodian in the amount of checks received in payment for Shares
of a Fund which are deposited into that Fund's account.
2.7. COLLECTION OF INCOME. The Custodian shall collect on a
timely basis all income and other payments with respect to
registered securities held hereunder to which the Trust shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian
or agent thereof and shall credit such income, as collected, to
the appropriate Fund account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. Income due the Trust on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Trust. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Trust with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the Custodian of
the income to which
<PAGE> 6
the Trust is properly entitled. The Custodian shall notify the
Trust of any income or such other payments that are not collected
in due course within a reasonable time after they become payable.
2.8. PAYMENT OF TRUST MONEYS. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out Trust
moneys held in a Fund's account in the following cases only:
(1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but only
(a) against the delivery of such securities, or evidence of title
to such options, futures contracts or options on futures
contracts, to the Custodian (or any banking firm or trust company
doing business in the United States or abroad which is qualified
under the Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Trust or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.12.A; or (d) in the
case of repurchase agreements entered into between the Trust (on
behalf of the Fund) and the Custodian, or another bank, or a
broker-dealer, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
segregated non-proprietary account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Trust of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Trust;
(2) In connection with conversion, exchange or surrender of
securities owned by the Trust in the Fund's portfolio as set forth
in Section 2.2 hereof;
(3) For the redemption or repurchase of Fund Shares issued by the
Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by the
Trust for the account of the Fund, including but not limited to
the following payments: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
<PAGE> 7
(5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short from the Fund's portfolio;
(7) or any other proper purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by
an officer of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence of
specific written Proper Instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Trust for
such securities to the same extent as if the securities had been
received by the Custodian, except that in the case of a repurchase
agreement entered into by the Trust with a bank, or with a broker-
dealer clearing through a bank, which is a member of the Federal
Reserve System, the Custodian may transfer funds to the account of
such bank prior to the receipt of (i) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve Bank
of Boston or (ii) of the safe-keeping receipt, provided that such
securities have in fact been so transferred by book-entry.
2.10. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF A
FUND. From such funds as may be available for the purpose, but
subject to the limitations of the Agreement and Declaration of
Trust and any applicable votes of the Board of Trustees pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds in the account of a Fund available
for payment to holders of Shares of that Fund who have delivered
to the Transfer Agent a request for redemption or repurchase of
their Shares. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the
Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Trust to
holders of Shares of the Fund, when presented to the Custodian in
accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
<PAGE> 8
2.11. APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any
other bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, to act as a custodian,
as its agent to carry out such of the provisions of this Article 2
as the Custodian may from time to time direct; provided, however,
that the appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
2.12. DEPOSIT OF TRUST ASSETS IN SECURITIES SYSTEM. The
Custodian may deposit and/or maintain securities owned by the
Trust in a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to
herein as "Securities System", in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules
and regulations, if any, and subject to the following provisions:
(1) The Custodian may keep securities of the Trust in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Trust which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Trust and further
identify the Fund in whose portfolio the securities are held;
(3) The Custodian shall pay for securities purchased for the
account of a Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of that Fund.
The Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of that Fund.
Copies of all advices from the Securities System of transfers of
securities for the account of a Fund shall identify the Fund, be
maintained for that Fund by the Custodian and be provided to the
Trust at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the account of
that Fund in the form of a written advice or notice and shall
furnish to the Trust copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account
of that Fund.
<PAGE> 9
(4) The Custodian shall provide the Trust with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
the Trust resulting from the use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their employees
or from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole for any
such loss or damage.
2.12.A. TRUST ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by the
Trust, held for the account of a Fund, in the Direct Paper System
of the Custodian subject to the following provisions:
(1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
(2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian, or otherwise for customers;
(3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
(4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon the making of an
entry on the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Fund;
<PAGE> 10
(5) The Custodian shall furnish the Trust confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Trust copies of
daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund; and
(6) The Custodian shall provide the Trust with any report on its
system of internal accounting controls as the Trust may reasonably
request from time to time.
2.13. SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Trust,
(ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Trust
for the account of such Fund or commodity futures contracts or
options thereon purchased or sold by the Trust for the account of
such Fund, (iii) for the purposes of compliance by the Trust with
the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to
be proper purposes.
2.14. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Trust
held by it and in connection with transfers of securities.
2.15. PROXIES. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Trust or a nominee of
the Trust, all proxies, without indication of the manner in
<PAGE> 11
which such proxies are to be voted, and shall promptly deliver to
the Trust such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.16. COMMUNICATIONS RELATING TO TRUST PORTFOLIO SECURITIES. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Trust and the maturity of futures contracts purchased or
sold by the Trust) received by the Custodian from issuers of the
securities being held for the Trust. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the
Trust all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Trust desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Trust shall notify the Custodian at least one business day prior
to the date on which the Custodian is to take such action.
2.17. PROPER INSTRUCTIONS. Proper Instructions as used
throughout this Article 2 means a writing signed or initialed by
one or more persons as the Board of Trustees shall have from time
to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. The Trust shall cause all
oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees of the Trust accompanied by
a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected
directly between electromechanical or electronic devices provided
that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Trust's assets.
2.18. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian
may in its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties
under this Contract, provided that all such payments shall be
accounted for to the Trust;
(2) surrender securities in temporary form for securities in
definitive form;
<PAGE> 12
(3) endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Trust except as otherwise directed by the Board of Trustees of
the Trust.
2.19. EVIDENCE OF AUTHORITY. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the
Trust. The Custodian may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as conclusive evidence
(a) of the authority of any person to act in accordance with such
vote or (b) of any determination or of any action by the Board of
Trustees pursuant to its Agreement and Declaration of Trust as
described in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written notice
to the contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME. The Custodian
shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees to keep the
books of account of each Fund and/or compute the net asset value
per share of the outstanding shares of each Fund or, if requested
by the Trust and agreed to by the Custodian, shall itself keep
such books of account and/or compute such net asset value per
share. If so requested, the Custodian shall also calculate daily
the net income of each Fund as described in that Fund's currently
effective prospectus and shall advise the Trust and the Transfer
Agent daily of the total amounts of such net income and, if
instructed in writing by an officer for the Trust to do so, shall
advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net
asset value per share and the daily income of a Fund shall be made
at the time or times described from time to time in that Fund's
currently effective prospectus.
4. RECORDS. The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Trust under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules and procedures which may be applicable to the
Trust. All such records shall be the property of the Trust and
shall at times during the regular business hours of the Custodian
be open for inspection by duly authorized officers, employees or
agents of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's request,
supply the Trust with a list of securities held by the Custodian
for the account of each Fund and shall, when requested to do so
<PAGE> 13
by the Trust and for such compensation as shall be agreed upon
between the Trust and the Custodian, include certificate numbers
in such lists.
5. OPINION OF TRUST'S INDEPENDENT ACCOUNTANT. The Custodian
shall take all reasonable action, as the Trust may from time to
time request, to obtain from year to year favorable opinions from
the Trust's independent accountants with respect to its activities
hereunder in connection with the preparation of the Trust's Form
N-1A, and the Form N-SAR or other annual reports to the SEC and
with respect to any other requirements of the SEC.
6. REPORTS TO TRUST BY INDEPENDENT PUBLIC ACCOUNTANTS. The
Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public accountants
on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Contract; such reports shall
be of sufficient scope and in sufficient detail, as may reasonably
be required by the Trust, to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, shall so state.
7. COMPENSATION OF CUSTODIAN. The Custodian shall be entitled to
reasonable compensation for its services and expenses as
Custodian, as agreed upon from time to time between the Trust and
the Custodian.
8. RESPONSIBILITY OF CUSTODIAN. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered
by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties. The Custodian shall be held
to the exercise of reasonable care in carrying out the provisions
of this Contract, but shall be kept indemnified by and shall be
without liability to the Trust for any action taken or omitted by
it in good faith without negligence. It shall be entitled to rely
on and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in
accordance with a separate Agreement entered into between the
Custodian and the Trust.
If the Trust requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in
the Custodian or its nominee assigned to the Trust being liable
for the payment of money or incurring liability of some other
form, the Trust, as a prerequisite to requiring the
<PAGE> 14
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Trust requires the Custodian to advance on behalf of the
account of the Fund cash or securities for any purpose or in the
event that the Custodian or its nominee shall incur on behalf of,
or be assessed with respect to, the account of the Fund any taxes,
charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at
any time held for the account of the Fund shall be security
therefor and should the Trust fail to repay the Custodian promptly
after receipt of notice of such amount owing, the Custodian shall
be entitled to utilize available cash of such Fund and to dispose
of the assets held for such Fund to the extent necessary to obtain
reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Contract
shall become effective as of its execution, shall continue in full
force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.12 hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Trust has
approved the initial use of a particular Securities System and the
receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the
Trust of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended, and
that the Custodian shall not act under Section 2.12.A hereof in
the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of Trustees has approved
the initial use of the Direct Paper System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has reviewed the use by the Trust of the
Direct Paper System; provided further, however, that the Trust
shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of its
Agreement and Declaration of Trust, and further provided, that the
Trust may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
<PAGE> 15
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. SUCCESSOR CUSTODIAN. If a successor custodian shall be
appointed by the Board of Trustees of the Trust, the Custodian
shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for
transfer, all securities and all funds and other assets then held
by it hereunder and shall transfer to an account of the successor
custodian all of the Trust's securities held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote
of the Board of Trustees of the Trust, deliver at the office of
the Custodian and transfer such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to
an account of such successor custodian all of the Trust's
securities held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under
this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination
hereof owing to failure of the Trust to procure the certified copy
of vote referred to or of the Board of Trustees to appoint a
successor custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and
effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with
the operation of this Contract, the Custodian and the Trust may
from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provisions of the Agreement and
<PAGE> 16
Declaration of Trust of the Trust. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. MASSACHUSETTS LAW TO APPLY. This Contract shall be construed
and the provisions thereof interpreted under and in accordance
with laws of The Commonwealth of Massachusetts.
13. PRIOR CONTRACTS. This Contract supersedes and terminates, as
of the date hereof, all prior contracts between the Trust and the
Custodian relating to the custody of the Trust's assets.
14. NOTICES. Notices and other writings delivered or mailed by
registered mail postage prepaid to the Trust, Attention:
Secretary, Twelfth Floor, 300 West Adams, Chicago, Illinois 60606,
or to the Custodian, Attention: Custody and Shareholder Services-
-Stein Roe & Farnham Incorporated, 225 Franklin Street, Boston,
Massachusetts 02101, or to such other address as the Trust or
State Street may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective addresses.
15. SUCCESSORS. This Agreement shall be binding on and shall
inure to the benefit of the Trust and the Custodian and their
respective successors.
16. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligation
of the Trust hereunder shall be binding only upon the assets of
the Trust (or the applicable Fund), as provided in the Agreement
and Declaration of Trust of the Trust, and shall not be binding
upon any Trustee, officer, employee, agent or shareholder of the
Trust nor upon the assets held in the account of any other Fund.
Neither the authorization of any action by the Trustees or the
shareholders of a Fund, nor the execution of this Contract on
behalf of the Trust shall impose any liability upon any Trustee or
any shareholder. Nothing in this Contract shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by willful misfeasance, bad faith or gross
negligence in the performance of his duties, or reckless disregard
of his obligations and duties under this Contract.
17. ADDITIONAL FUNDS. In the event that the Trust establishes
one or more series of Shares in addition to the series referenced
herein with respect to which it desires to have Custodian render
services as Custodian under the terms hereof, it shall so notify
Custodian in writing, and if Custodian agrees in writing to
provide such services, such series of Shares shall become a Fund
hereunder.
<PAGE> 17
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 6th
day of April, 1994.
SR&F BASE TRUST
BY: Timothy K. Armour
President
ATTEST:
Nicolette D. Parrish,
Assistant Secretary
STATE STREET BANK AND TRUST
COMPANY
BY:
Vice President
ATTEST:
Assistant Secretary
<PAGE> 18
ADDENDUM TO CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company
(the "Custodian") and SR&F Base Trust (the "Trust").
WHEREAS, the Custodian and the Trust are parties to a Custodian
Contract dated April 6, 1994 (the "Custodian Contract") governing
the terms and conditions under which the Custodian maintains
custody of the securities and other assets of the Trust; and
WHEREAS, the terms of the Custodian Contract provide for the
maintenance of the Trust's foreign securities, and cash incidental
to transactions in such securities, in the custody of certain
foreign banking institutions and foreign securities depositories;
and
WHEREAS, the parties hereto desire to provide for maintenance of
certain of the Trust's foreign securities and other assets in the
custody of State Street London Limited ("London Limited"), a
company incorporated under the laws of the United Kingdom with the
power to act as a trustee and as a custodian of securities;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Trust hereby agree to the
following terms and conditions:
1. The Trust hereby authorizes and instructs the Custodian to
employ the services of London Limited, as the sub-custodian in the
United Kingdom, to hold securities and other assets of the Trust,
subject to the terms of the Custodian Contract and to the terms
and conditions hereof.
2. The securities to be held by London Limited shall be limited to
"foreign securities" as defined by paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940 (the "1940 Act").
3. Cash held for the Trust in the United Kingdom shall be
maintained in an interest bearing account established for the
Trust with London Limited, which account shall be subject to the
direction of the Custodian, London Limited, or both.
4. The Custodian represents that it has obtained an order from the
Securities and Exchange Commission, pursuant to Section 6(c) of
the 1940 Act, exempting the Custodian and the Trust from the
provisions of Section 17(f) of said Act, to the extent necessary
to permit the securities and other assets of the Trust to be
maintained in the custody of London Limited pursuant hereto.
5. In delegating custody duties and obligations to London Limited
as permitted hereunder, the Custodian agrees that it shall not be
relieved of any
<PAGE> 19
responsibility to the Trust for any loss due to such delegation to
London Limited, except such loss as may result from: (a) political
risk (including but not limited to, exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil
strife or armed hostilities) or (b) other risk of loss (excluding
bankruptcy or insolvency of London Limited not caused by a
political risk) for which neither the Custodian not London Limited
would be liable (including, but not limited to, losses due to Acts
of God, nuclear incident and other losses under circumstances
where the Custodian and the Trust Company have exercised
reasonable care).
6. Except as specifically superseded or modified herein, the terms
and conditions of the Custodian Contract shall continue to apply
with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 6th
day of April, 1994.
SR&F BASE TRUST
BY: Timothy K. Armour
President
ATTEST:
Nicolette D. Parrish,
Assistant Secretary
STATE STREET BANK AND TRUST
COMPANY
BY:
Vice President
ATTEST:
Assistant Secretary
<PAGE>
Exhibit 9(a)
INVESTOR SERVICE AGREEMENT
SR&F BASE TRUST, a Massachusetts trust registered under the
Investment Company Act of 1940 (the "Act") as an open-end
diversified management investment company (the "Trust"), hereby
appoints SteinRoe Services Inc., a Massachusetts corporation, of
Chicago, Illinois ("SSI"), to furnish certain investor
accounting, recordkeeping, and administrative services for the
portion of the assets of the Trust represented by the shares of
beneficial interest issued in the Portfolios listed in Schedule
A hereto (the "Portfolios"). In connection therewith, Trust and
SSI hereby agree that:
1 PORTFOLIO SERVICES.
A. Services. SSI will perform the services set forth in
Schedule B hereto relating to the establishment and maintenance
of accounts of holders of beneficial interests in the Portfolio.
It is understood that beneficial interests in the Portfolio will
be held of record only by investment companies, insurance
company separate accounts, common or commingled trust funds or
similar organizations, and that SSI's duties and
responsibilities hereunder shall relate only to such record
investor accounts and not to the accounts of holders of shares
of, or interests in, such institutions.
B. Maintenance of Records. SSI shall maintain all records
relating to the accounts of holders of beneficial interest in
the Portfolio which the Portfolio is required to maintain
pursuant to Rule 31a-1 under the Act and shall preserve such
records for the periods prescribed by Rule 31a-2 thereunder.
All such records are and shall remain the property and under the
control of the Portfolio and shall upon request be made
available during reasonable business hours to the Trust's Board
of Trustees or auditors at SSI's offices.
C. Uncontrollable Events. SSI shall not be liable for
damage, delays or errors occurring by reason of circumstances
beyond its control, including but not limited to acts of civil
or military authority, national emergencies, fires, flood or
catastrophe, acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
D. Fees and Charges. For the services rendered by SSI
pursuant to this Agreement, each Portfolio will pay SSI a fee in
the amount shown in Schedule B hereto.
E. Out-of-Pocket Expenses. The Trust shall reimburse SSI
for any and all out-of-pocket expenses and charges in performing
services under this Agreement.
2. MAINTENANCE OF RECORDS. All records maintained by SSI in
connection with the performance of its duties under this
Agreement with respect to a Portfolio will remain the property
of the Portfolio and will be preserved by SSI for the periods
prescribed in Rule 31a-2 under the Act or such other applicable
rules that may be adopted from time to time under the Act. In
the event of termination of this Agreement, such records will be
promptly delivered to the Trust. Such records may be inspected
by the Trust or its agents at reasonable times.
3. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL. All computer
programs, magnetic tapes, written procedures, and similar items
developed and used by SSI in the performance of this Agreement
shall be the property of SSI and will not become the property of
the Portfolio or the Trust.
4. REGISTRATION OF SSI AS TRANSFER AGENT. SSI represents that
it is registered with the Securities and Exchange Commission as
a transfer agent under Section 17A of the Securities Exchange
Act of 1934, as amended, and will notify the Trust promptly if
such registration is revoked or if any proceeding is commenced
before the Securities and Exchange Commission which may lead to
such revocation.
5. INSTRUCTIONS, OPINION OF COUNSEL, AND SIGNATURES. At any
time, SSI may apply to an officer of the Trust for instructions
and may consult legal counsel for the Trust or its own legal
counsel in respect of any matter arising in connection with this
Agreement, and SSI shall not be liable for any action taken or
omitted by it in good faith in accordance with such instructions
or with the advice or opinion of such legal counsel. SSI shall
be protected in acting upon any such instruction, advice, or
opinion and upon any other paper or document delivered by the
Portfolio or such legal counsel reasonably believed by SSI to be
genuine and to have been signed by the proper person or persons
and shall not be held to have notice of any change of authority
of any officer or agent of the Trust until receipt of written
notice thereof from the Trust.
6. LIABILITY OF SSI. SSI will at all times act in good faith
in the performance of its duties and obligations under this
Agreement, but assumes no responsibility and shall not be liable
for loss or damage unless caused by the negligence, bad faith,
or willful or wanton misconduct of SSI or its employees. SSI
shall in no event be liable for consequential damages, lost
profits, or other special damages, even if informed of the
possibility of such damage or loss.
7. INDEMNIFICATION BY TRUST. The Trust will indemnify and hold
SSI harmless from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by SSI arising
from: (i) any action or omission by SSI in the performance of
its duties hereunder, (ii) SSI's acting upon instructions
believed by it to have been executed by a duly authorized
officer of the Trust or (iii) SSI's acting upon information
provided by the Trust in the form and under policies agreed to
by SSI and the Trust. SSI shall not be entitled to such
indemnification for loss, cost, damage or expense arising from
actions or omissions constituting negligence, bad faith or
willful or wanton misconduct of SSI or its agents. Prior to
confessing any claim against it which may be subject to this
indemnification, SSI shall give the Trust reasonable opportunity
to defend against said claim in its own name or in the name of
SSI.
8. LIMITATION OF LIABILITY OF TRUST. The term "SR&F Base
Trust" means and refers to the Trust under a Declaration of
Trust of the Trust dated August 23, 1993, as the same may
subsequently thereto have been or subsequently hereto be
amended. It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the
Trust personally, but shall bind only the trust property of the
Portfolio, as provided in the Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and this Agreement has
been signed by an authorized officer of the Trust, acting as
such, and neither such authorization by such Trustees or such
execution and delivery by such officer shall be deemed to have
been made by any of them but shall bind only the trust property
of the Portfolio as provided in the Declaration of Trust.
9. INDEMNIFICATION BY SSI. SSI will indemnify and hold the
Trust harmless from all loss, cost, damage and expense,
including reasonable expenses for legal counsel, incurred by the
Trust because of the negligence, bad faith or willful or wanton
misconduct of SSI or its agents.
10. EXECUTION, AMENDMENT, AND TERMINATION. The term of this
Agreement shall begin on the date hereof and continue until
terminated as herein provided. This Agreement may be modified
or amended from time to time by mutual agreement between the
parties hereto and may be terminated by at least 60 days'
written notice given by one party to the other. Upon
termination hereof, the Trust shall pay to SSI such compensation
as may be due as of the date of such termination, and shall
likewise reimburse SSI for its costs, expenses and disbursements
payable under the Agreement to such date.
11. SSI'S USE OF THE SERVICES OF OTHERS. SSI may, at its cost,
employ, retain or otherwise avail itself of the services or
facilities of other persons or organizations necessary,
appropriate or convenient for the discharge of SSI's duties and
obligations hereunder.
12. ASSIGNMENT. This Agreement may not be assigned (as that
term is defined in the Act) by SSI without the prior written
consent of the Trust. The Agreement shall automatically and
immediately terminate in the event of its assignment without the
prior written consent of the Trust.
13. STATE LAW. The Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of
Illinois.
14. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any
of the provisions hereof or otherwise affect their construction
or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of this 15th day of August, 1995.
STEINROE SERVICES INC.
By: Stephen P. Lautz,
Vice President
Attest: Jilaine Hummel Bauer
Secretary
SR&F BASE TRUST
By: Timothy K. Armour,
President
Attest: Jilaine Hummel Bauer
Secretary
<PAGE>
SCHEDULE A
The Portfolios of SR&F Base Trust currently subject to this
Agreement are as follows:
Name of Portfolio Effective Date
----------------- --------------
SR&F Municipal Money
Market Portfolio 9/28/95
Dated: August 15, 1995
<PAGE>
SCHEDULE B
The services to be performed by SSI with respect to the
beneficial interests in the Portfolio pursuant to paragraph 1
are as follows:
1. Establishing and maintaining investor accounts as
instructed and reporting thereon;
2. Processing additions to and withdrawals of amounts in
investor accounts;
3. Reporting the amount of each investor's beneficial
interest in the Portfolio to the Portfolio and such investors on
a daily basis;
4. Providing such assistance as may be reasonably required
to enable the Trust and its properly authorized auditors,
examiners, and others designated by the Trust to properly
understand and examine all books, records, computer files,
microfilm, magnetic disks, and other items maintained pursuant
to this Agreement, and to assist as required in such
examination; and
5. Any necessary or required tax reporting.
The fee for the foregoing services payable pursuant to
paragraph 1.D shall be $500 per month, payable in arrears on or
before the 10th day of each calendar month.
<PAGE>
Exhibit 9(b)
STEINROE FUNDS
ACCOUNTING AND BOOKKEEPING AGREEMENT
NOVEMBER 1,1994
This Agreement is made this 1st day of November. 1994, by
and between SR&F Base Trust, a Massachusetts common law trust,
(hereinafter referred to as the "Trust") and Stein Roe &
Farnham Incorporated ("SteinRoe"), a Delaware corporation.
1. Appointment. Each Trust hereby appoints SteinRoe to act as
its agent to perform the services described herein with respect
to each series of shares of the Trust (the "Series") identified
in and beginning on the date specified on Appendix I to this
Agreement, as may be amended from time to time. SteinRoe
hereby accepts appointment as each Trust's agent and agrees to
perform the services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, SteinRoe shall
value all securities and other assets of the Series,
and compute the net asset value per share of such
Series, at such times and dates and in the manner and
by such methodology as is specified in the then
currently effective prospectus and statement of
additional information for such Series, and pursuant
to such other written procedures or instructions
furnished to SteinRoe by the Trust. To the extent
procedures or instructions used to value securities
or other assets of a Series under this Agreement are
at any time inconsistent with any applicable law or
regulation, the Trust shall provide SteinRoe with
written instructions for valuing such securities or
assets in a manner which the Trust represents to be
consistent with applicable law and regulation.
(b) Net Income. SteinRoe shall calculate with such
frequency as the Trust shall direct, the net income
of each Series of the Trust for dividend purposes and
on a per share basis. Such calculation shall be at
such times and dates and in such manner as the Trust
shall instruct SteinRoe in writing. For purposes of
such calculation, SteinRoe shall not be responsible
for determining whether any dividend or interest
accruable to the Trust is or will be actually paid,
but will accrue such dividend and interest unless
otherwise instructed by the Trust.
(c) Capital Gains and Losses. SteinRoe shall calculate
gains or losses of each Series of the Trust from the
sale or other disposition of assets of that Series as
the Trust shall direct.
(d) Yields. At the request of the Trust, SteinRoe shall
compute yields for each Series of the Trust for such
periods and using such formula as shall be instructed
by the Trust.
(e) Communication of Information. SteinRoe shall provide
the Trust, the Trust's transfer agent and such other
parties as directed by the Trust with the net asset
value per share, the net income per share and yields
for each Series of the Trust at such time and in such
manner and format and with such frequency as the
parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish SteinRoe with any and all instructions,
explanations, information, specifications and
documentation deemed necessary by SteinRoe in the
performance of its duties hereunder, including,
without limitation, the amounts and/or written
formula for calculating the amounts, and times of
accrual of liabilities and expenses of each Series of
the Trust. The Trust shall also at any time and from
time to time furnish SteinRoe with bid, offer and/or
market values of securities owned by the Trust if the
same are not available to SteinRoe from a pricing or
similar service designated by the Trust for use by
SteinRoe to value securities or other assets.
SteinRoe shall at no time be required to commence or
maintain any utilization of, or subscriptions to, any
such service which shall be the sole responsibility
and expense of the Trust.
3. Recordkeeping.
(a) SteinRoe shall, as agent for the Trust, maintain and
keep current and preserve the general ledger and
other accounts, books, and financial records of the
Trust relating to activities and obligations under
this Agreement in accordance with the applicable
provisions of Section 31(a) of the General Rules and
Regulations under the Investment Company Act of 1940,
as amended (the "Rules").
(b) All records maintained and preserved by SteinRoe
pursuant to this Agreement which the Trust is
required to maintain and preserve in accordance with
the Rules shall be and remain the property of the
Trust and shall be surrendered to the Trust promptly
upon request in the form in which such records have
been maintained and preserved.
(c) SteinRoe shall make available on its premises during
regular business hours all records of a Trust for
reasonable audit, use and inspection by the Trust,
its agents and any regulatory agency having authority
over the Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized
agent of the Trust for instructions regarding the
Trust, and may consult counsel for such Trust or its
own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be
liable for any action taken or omitted by it in good
faith in accordance with such instructions or with
the advice or opinion of such counsel. SteinRoe
shall be protected in acting upon any such
instruction, advice, or opinion and upon any other
paper or document delivered by the Trust or such
counsel believed by SteinRoe to be genuine and to
have been signed by the proper person or persons and
shall not be held to have notice of any change of
authority of any officer or agent of the Trust, until
receipt of written notice thereof from such Trust.
(b) SteinRoe may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as
conclusive evidence of (i) the authority of any
person to act in accordance with such vote or (ii)
any determination or any action by the Board of
Trustees pursuant to its Agreement and Declaration of
Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt
by SteinRoe of written notice to the contrary.
5. Compensation. The Trust shall reimburse SteinRoe from the
assets of the respective applicable Series of the Trust, for
any and all out-of-pocket expenses and charges in performing
services under this Agreement and such compensation as is
provided in Appendix II to this Agreement, as amended from time
to time. SteinRoe shall invoice the Trust as soon as
practicable after the end of each calendar month, with
allocation among the respective Series and full detail, and the
Trust shall promptly pay SteinRoe the invoiced amount.
6. Confidentiality of Records. SteinRoe agrees not to
disclose any information received from the Trust to any other
client of SteinRoe or to any other person except its employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SteinRoe shall return to each Trust all records in
the possession and control of SteinRoe related to such Trust's
activities, other than SteinRoe's own business records, it
being also understood and agreed that any programs and systems
used by SteinRoe to provide the services rendered hereunder
will not be given to any Trust.
7. Liability and Indemnification.
(a) SteinRoe shall not be liable to any Trust for any
action taken or thing done by it or its employees or
agents on behalf of the Trust in carrying out the
terms and provisions of this Agreement if done in
good faith and without negligence or misconduct on
the part of SteinRoe, its employees or agents.
(b) Each Trust shall indemnify and hold SteinRoe, and its
controlling persons, if any, harmless from any and
all claims, actions, suits, losses, costs, damages,
and expenses, including reasonable expenses for
counsel, incurred by it in connection with its
acceptance of this Agreement, in connection with any
action or omission by it or its employees or agents
in the performance of its duties hereunder to the
Trust, or as a result of acting upon instructions
believed by it to have been executed by a duly
authorized agent of the Trust or as a result of
acting upon information provided by the Trust in form
and under policies agreed to by SteinRoe and the
Trust, provided that: (i) to the extent such claims,
actions, suits, losses, costs, damages, or expenses
relate solely to one or more Series, such
indemnification shall be only out of the assets of
that Series or group of Series; (ii) this
indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of SteinRoe or its employees or agents,
including but not limited to willful misfeasance, bad
faith, or gross negligence in the performance of
their duties, or reckless disregard of their
obligations and duties under this Agreement; and
(iii) SteinRoe shall give the Trust prompt notice and
reasonable opportunity to defend against any such
claim or action in its own name or in the name of
SteinRoe.
(c) SteinRoe shall indemnify and hold harmless each Trust
from and against any and all claims, demands,
expenses and liabilities which such Trust may sustain
or incur arising out of, or incurred because of, the
negligence or misconduct of SteinRoe or its agents or
contractors, or the breach by SteinRoe of its
obligations under this Agreement, provided that: (i)
this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of such Trust or its other agents or
contractors and (ii) such Trust shall give SteinRoe
prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or
in the name of such Trust.
8. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some
person or persons may be trustees, officers, or shareholders of
both the Trusts and SteinRoe, and that the existence of any
such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided by
specific provision of applicable law.
10. Amendment and Termination. This Agreement may be modified
or amended from time to time, or terminated, by mutual
agreement between the parties hereto and may be terminated by
at least one hundred eighty (180) days' written notice given by
one party to the other. Upon termination hereof, each Trust
shall pay to SteinRoe such compensation as may be due from it
as of the date of such termination, and shall reimburse
SteinRoe for its costs, expenses, and disbursements payable
under this Agreement to such date. In the event that, in
connection with termination, a successor to any of the duties
or responsibilities of SteinRoe hereunder is designated by a
Trust by written notice to SteinRoe, SteinRoe shall promptly
upon such termination and at the expense of such Trust, deliver
to such successor all relevant books, records, and data
established or maintained by SteinRoe under this Agreement and
shall cooperate in the transfer of such duties and
responsibilities, including provision, at the expense of such
Trust, for assistance from SteinRoe personnel in the
establishment of books, records, and other data by such
successor.
11. Assignment. Any interest of SteinRoe under this Agreement
shall not be assigned or transferred either voluntarily or
involuntarily, by operation of law or otherwise, without prior
written notice to each Trust.
12. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of each Trust and SteinRoe is One South Wacker
Drive, Chicago, Illinois 60606, Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any
obligation of the Trust hereunder shall be binding only upon
the assets of that Trust (or the applicable Series thereof), as
provided in the Agreement and Declaration of Trust of that
Trust, and shall not be binding upon any Trustee, officer,
employee, agent or shareholder of the Trust or upon any other
Trust. Neither the authorization of any action by the Trustees
or the shareholders of the Trust, nor the execution of this
Agreement on behalf of the Trust shall impose any liability
upon any Trustee or any shareholder. Nothing in this Agreement
shall protect any Trustee against any liability to which such
Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement. In connection with the discharge and satisfaction
of any claim made by SteinRoe against the Trust involving more
than one Series, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Series.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect
of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
SR&F BASE TRUST
By: Timothy K. Armour, President
Attest:
Jilaine Hummel Bauer,
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: Timothy K. Armour,
President - Funds Division
Attest:
Jilaine Hummel Bauer,
Assistant Secretary
<PAGE>
SR&F BASE TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX I
The series of SR&F Base Trust currently subject to this
Agreement are as follows:
Effective
Date
----------
SR&F Municipal Money Market Portfolio 9/28/95
Dated: August 15, 1995
<PAGE>
SR&F BASE TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX II
For the services provided under the Accounting &
Bookkeeping Agreement (the "Agreement"), the Trust shall pay
SteinRoe an annual fee with respect to each series, calculated
and paid monthly, equal to $25,000 plus .0025 percent per annum
of the average daily net assets of the series in excess of $50
million. Such fee shall be paid within thirty days after
receipt of monthly invoice.
