STEINROE INCOME TRUST, 497, 1995-11-02

STEINROE INCOME TRUST
497, 1995-11-02

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<PAGE> 1
File No. 33-02633
Rule 497(e)

CASH RESERVES FUND.
The Fund seeks to obtain maximum current income consistent with
capital preservation and maintenance of liquidity. The Fund
invests solely in money market instruments maturing in thirteen
months or less from the time of investment.

GOVERNMENT RESERVES FUND
The Fund seeks to obtain maximum current income consistent with
safety of capital and maintenance of liquidity. The Fund invests
in U.S. Government Securities maturing in thirteen months or less
from the date of purchase and repurchase agreements for U.S.
Government Securities regardless of the maturities of such
securities. U.S. Government Securities include securities issued
or guaranteed by the U.S. Government or by its agencies or
instrumentalities.

Each Fund is a "no-load" money market fund and attempts to
maintain its net asset value at $1.00 per share. SHARES OF THE
FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

There are no sales or redemption charges, and the Funds have no
12b-1 plans. The Funds are series of the STEIN ROE INCOME TRUST.

This prospectus contains information you should know before
investing in the Funds. Please read it carefully and retain it
for future reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is November 1, 1995.

<PAGE> 2
TABLE OF CONTENTS
Page
Summary ................................2
Fee Table ..............................4
Financial Highlights....................5
The Funds...............................8
How the Funds Invest ...................9
Cash Reserves........................9
Government Reserves.................10
Restrictions on the Funds' Investments 11
Risks and Investment Considerations ...12
How to Purchase Shares.................14
By Check ...........................14
By Wire.............................15
By Electronic Transfer .............15
By Exchange ........................15
Purchase Price and Effective Date ..15
Conditions of Purchase .............16
Purchases Through Third Parties.....16
How to Redeem Shares ..................16
By Written Request .................16
By Exchange.........................17
Special Redemption Privileges ......18
General Redemption Policies.........20
Shareholder Services...................21
Net Asset Value........................23
Distributions and Income Taxes.........24
Management of the Funds................25
Organization and Description of Shares.27
Certificate of Authorization ..........29

SUMMARY

Stein Roe Government Reserves Fund ("Government Reserves") and Stein
Roe Cash Reserves Fund ("Cash Reserves") are series of the Stein Roe
Income Trust, an open-end diversified management investment
company organized as a Massachusetts business trust. The Funds
are "no-load" funds--there are no sales or redemption charges.
(See The Funds and Organization and Description of Shares.)

NET ASSET VALUE.
Each Fund attempts to maintain its price per share at $1.00.
There is no assurance that the Funds will always be able to do so.
(See Net Asset Value.)

INVESTMENT OBJECTIVES AND POLICIES.
Each Fund is a money market fund with the objective of seeking
maximum current income consistent with safety of capital and
maintenance of liquidity. Government Reserves pursues its
objective by

<PAGE> 3
investing in U.S. Government Securities maturing in
thirteen months or less from the date of purchase and repurchase
agreements for U.S. Government Securities (regardless of the
maturities of such securities). U.S. Government Securities include
securities issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities. Cash Reserves pursues its objective
by investing in a wide range of high-quality U.S. dollar-denominated
money market instruments maturing in thirteen months or less from
the date of purchase. Under normal market conditions, Cash Reserves
will invest at least 25% of its total assets in securities of issuers
in the financial services industry. The securities in which Cash
Reserves may invest generally yield more than the securities in
which Government Reserves may invest. (See How the Funds Invest.)

INVESTMENT RISKS.
Cash Reserves' policy of normally investing at least 25% of its
assets in securities of issuers in the financial services industry
may cause the Fund to be more adversely affected by changes in
market or economic conditions and other circumstances affecting
the financial services industry. In addition, since Cash
Reserves' investment policy permits it to invest in securities of
foreign branches of U.S. banks, U.S. branches of foreign banks,
and foreign banks and their foreign branches, such as negotiable
certificates of deposit (Eurodollar CDs), and securities of
foreign governments, investment in that Fund might involve risks
that are different in some respects from an investment in a fund
that invests only in debt obligations of U.S. domestic issuers.
Because Government Reserves' investment policy permits it to
invest in U.S. Government Securities that are not backed by the
full faith and credit of the U.S. Treasury, investment in that Fund
might involve risks that are different in some respects from an
investment in a fund that invests only in securities that are
backed by the full faith and credit of the U.S. Treasury.
(For a discussion of risks, see Risks and Investment Considerations.)

PURCHASES.
The minimum initial investment for each Fund is $2,500, and
additional investments must be at least $100 (only $50 for
purchases by electronic transfer). Shares may be purchased by
check, by bank wire, by electronic transfer, or by exchange from
another

<PAGE> 4
Stein Roe Fund. For more detailed information, see How to
Purchase Shares.

REDEMPTIONS.
For information on redeeming Fund shares, including the special
redemption privileges, see How to Redeem Shares.

DISTRIBUTIONS.
Dividends are declared each business day and are paid monthly.
Dividends will be reinvested into your Fund account unless you
elect to have them paid in cash, deposited by electronic transfer
into your bank checking account, or invested into another Stein
Roe Fund account. (See Distributions and Income Taxes and
Shareholder Services.)

ADVISER AND FEES.
Stein Roe & Farnham Incorporated (the "Adviser") is investment
adviser to the Funds. For a description of the Adviser and the
advisory fees paid by the Funds, see Management of the Funds.

If you have any additional questions about the Funds, please feel
free to discuss them with an account representative by calling
800-338-2550.

FEE TABLE
Cash Government
Reserves Reserves
--------- ----------
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None* None*
Exchange Fees None None

ANNUAL FUND OPERATING EXPENSES (after
expense reimbursement in the case of
Government Reserves; as a percentage
of average net assets)
Management Fees (after expense reimburse-
ment in the case of Government Reserves) 0.50% 0.45%
12b-1 Fees None None
Other Expenses 0.22% 0.25%
----- ------
Total Fund Operating Expenses (after
expense reimbursement in the case of
Government Reserves) 0.72% 0.70%
----- ------
----- ------
____________________
*There is a $3.50 charge for wiring redemption proceeds to your
bank.

EXAMPLES.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------ ------- ------- --------
Cash Reserves $7 $23 $40 $89
Government Reserves 7 22 39 87

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in a Fund. The table is based upon
actual expenses incurred in the last fiscal year, except for Cash
Reserves, which has been adjusted to reflect changes in the Fund's
transfer agency services and fees. (Also see

<PAGE> 5
Management of the Funds--Fees and Expenses.) From time to time,
the Adviser may voluntarily absorb certain expenses of a Fund.
The Adviser has agreed to voluntarily absorb the expenses of
Government Reserves to the extent that the Fund's expenses exceed
0.7 of 1% of its annual average net assets through October 31,
1996, subject to earlier termination by the Adviser on 30 days'
notice. Any such absorption will temporarily lower the Fund's
overall expense ratio and increase its overall return to investors.
Absent such expense undertaking, Mangement Fees and Total Fund
Operating Expenses for Government Reserves would have been 0.50%
and 0.75%, respectively.

For purposes of the Examples above, the figures assume that the
percentage amounts for the respective Funds listed under Annual
Fund Operating Expenses remain the same during each of the
periods, that all income dividends and capital gain distributions
are reinvested in additional Fund shares, and that, for purposes
of management fee breakpoints, if any, the Funds' respective net
assets remain at the same levels as in the most recently completed
fiscal year.

The figures in the Examples are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown in the
Fee Table and Examples is useful in reviewing the Funds' expenses
and in providing a basis for comparison with other mutual funds,
it should not be used for comparison with other investments using
different assumptions or time periods.

FINANCIAL HIGHLIGHTS

The tables below reflect the results of operations of the Funds on
a per-share basis and have been audited by Ernst & Young LLP,
independent auditors. These tables should be read in conjunction
with the financial statements and notes thereto, which may be
obtained from the Trust without charge upon request.

<PAGE> 6-7
CASH RESERVES
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net investment income 0.075 0.061 0.060 0.032 0.081 0.079 0.068 0.044 0.028 0.028 0.048
Distributions from net
investment income (0.075) (0.061) (0.060) (0.032) (0.081) (0.079) (0.068) (0.044) (0.028) (0.028) (0.048)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Ratio of expenses to
average net assets 0.72% 0.72% 0.72% *0.70% 0.75% 0.76% 0.78% 0.78% 0.79% 0.79% 0.76%
Ratio of net investment
income to average net
assets 7.55% 6.05% 6.02% *6.36% 8.13% 7.94% 6.81% 4.40% 2.81% 2.77% 4.83%
Total return 7.79% 6.25% 6.15% *6.43% 8.41% 8.20% 6.98% 4.49% 2.83% 2.81% 4.96%
Net assets, end of
period (000 omitted) $738,634 $814,544 $962,901 $930,074 $948,018 $949,803 $840,525 $711,087 $627,110 $554,713 $498,163
<FN>
*Annualized.
</TABLE>

GOVERNMENT RESERVES
<TABLE>
<CAPTION>
Years Ended June 30,
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income 0.064 0.050 0.058 0.080 0.078 0.066 0.044 0.027 0.027 0.047
Distributions from net
investment income (0.064) (0.050) (0.058) (0.080) (0.078) (0.066) (0.044) (0.027) (0.027) (0.047)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net expenses to
average net assets (a) 1.03% 1.03% 0.87% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment
income to average net
assets (b) 6.35% 4.97% 5.75% 8.02% 7.79% 6.41% 4.27% 2.75% 2.71% 4.65%
Total return 6.57% 5.11% 5.90% 8.27% 8.05% 6.74% 4.45% 2.78% 2.74% 4.78%
Net assets, end of
period (000 omitted) $33,232 $34,799 $41,787 $50,185 $53,400 $102,860 $132,982 $104,220 $105,488 $93,318
<FN>

(a) If Government Reserves had paid all of its expenses and there
had been no reimbursement of expenses by the Adviser, this
ratio would have been 1.07%, 1.05%, 1.04%, 0.93%, 0.98%, 0.83%,
0.79%, 0.76%, 0.75% and 0.75% for the years ended June 30, 1985
and 1986, and 1988 through 1995, respectively.
(b) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>

<PAGE> 8
THE FUNDS

STEIN ROE CASH RESERVES FUND ("Cash Reserves") and STEIN ROE GOVERNMENT
RESERVES FUND ("Government Reserves") (collectively, the "Funds") are
no-load, diversified "mutual funds." Mutual funds sell their own
shares to investors and use the money they receive to invest in a
portfolio of securities. A mutual fund allows you to pool your
money with that of other investors in order to obtain professional
investment management. Mutual funds generally make it possible
for you to obtain greater diversification of your investments and
simplify your recordkeeping. Because the Funds invest only in
money market instruments, they are called "money market funds."
No-load funds do not impose commissions or charges when shares are
purchased or redeemed.

The Funds are series of the Stein Roe Income Trust (the "Trust"),
an open-end management investment company, which is authorized to
issue shares of beneficial interest in separate series. Each
series represents interests in a separate portfolio of securities
and other assets, with its own investment objectives and policies.

Although there can be no assurance that it will always be able to
do so, each Fund follows procedures designed to stabilize its
price per share at $1.00. The Statement of Additional Information
describes these procedures.

Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and recordkeeping and
accounting services to the Funds. The Adviser also manages
several other no-load mutual funds with different investment
objectives, including international funds, equity funds and
taxable and tax-exempt bond funds. To obtain prospectuses and
other information on any of those mutual funds, please call 800-
338-2550.

Because the Funds strive to maintain a $1.00 per share value,
their return is usually quoted either as a current seven-day
yield, calculated by totaling the dividends on a Fund share for
the previous seven days and restating that yield as an annual
rate, or as an effective yield, calculated by adjusting the
current yield to assume daily compounding. Cash Reserves' current
and effective yields for the seven-day period ended September 29,
1995, were 5.14% and 5.27%, respectively. Government Reserves'
current and effective yields for the seven-day period ended
September 29, 1995, were 5.19% and 5.32%, respectively. Absent
the expense limitation referred to above, current and effective
yields for Government Reserves for the seven-day period ended
September 29, 1995, would have

<PAGE> 9
been 5.09% and 5.22%, respectively. To obtain current yield
information, you may call 800-338-2550 or write to the address
shown on the back cover.

From time to time, the Funds may also quote total return figures.
The total return from an investment in a Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.

Comparison of a Fund's yield or total return with those of
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. Past performance is not
necessarily indicative of future results.

HOW THE FUNDS INVEST

CASH RESERVES.
The Fund seeks to obtain maximum current income consistent with
the preservation of capital and the maintenance of liquidity by
investing all of its assets in U.S. dollar-denominated money
market instruments maturing in thirteen months or less from time
of investment. Each security must be rated (or be issued by an
issuer that is rated with respect to its short-term debt) within
the highest rating category for short-term debt by at least two
nationally recognized statistical rating organizations ("NRSRO"),
or, if unrated, determined by or under the direction of the Board
of Trustees to be of comparable quality. These securities may
include:

<PAGE> 10

$1 billion, or the equivalent in other currencies
(as of the date of the most recent available financial
statements) or of any branches, agencies or subsidiaries (U.S.
or foreign) of any such bank;
(4) Commercial paper of U.S. or foreign issuers;
(5) Notes, bonds, and debentures rated at time of purchase A or
better (or equivalent rating) by at least one NRSRO;
(6) Repurchase agreements /2/ involving securities listed in (1)
above;
(7) Other high-quality short-term obligations.

In accordance with its investment objectives and policies, the
Fund may invest in variable and floating rate money market
instruments which provide for periodic or automatic adjustment in
coupon interest rates that are reset based on changes in amount
and directions of specified short-term interest rates.

Under normal market conditions, the Fund will invest at least 25%
of its total assets in securities of issuers in the financial
services industry (which includes, but is not limited to, banks,
personal credit and business credit institutions, and other
financial services institutions).

The Fund maintains a dollar-weighted average portfolio maturity
appropriate to its objective of maintaining a stable net asset
value per share, and not in excess of 90 days. It is a
fundamental policy /3/ that the maturity of any instrument that
grants the holder an optional right to redeem at par plus interest
and without penalty will be deemed at any time to be the next date
provided for payment on exercise of such optional redemption
right.

GOVERNMENT RESERVES.
The Fund seeks to obtain maximum current income consistent with
safety of capital and maintenance of liquidity by investment in
U.S. Government Securities maturing in thirteen months or less
from the date of purchase. These securities include:

/2/ A sale of securities to the Fund in which the seller (a bank
or securities dealer that the Adviser believes to be financially
sound) agrees to repurchase the securities at a higher price,
which includes an amount representing interest on the purchase
price, within a specified time.

/3/A fundamental policy may be changed only with the approval of a
"majority of the outstanding voting securities" of a Fund as
defined in the Investment Company Act of 1940.
- ------------------

<PAGE> 11
(3) Securities issued or guaranteed as to principal and interest
by agencies or instrumentalities of the U.S. Government that
are not backed by the full faith and credit guarantee of the
U.S. Government;
(4) Repurchase agreements for securities listed in (1), (2); and
(3) above, regardless of the maturities of such underlying
securities.

The U.S. Government Securities in which the Fund is permitted to
invest include: (i) bills, notes, bonds, and other debt
securities, differing as to maturity and rates of interest, that
are issued by and are direct obligations of the U.S. Treasury; and
(ii) other securities that are issued or guaranteed as to
principal and interest by agencies or instrumentalities of the U.S.
Government and that include, but are not limited to, Federal Farm
Credit Banks, Federal Home Loan Banks, Government National Mortgage
Association, Farmers Home Administration, Federal Home Loan Mortgage
Corporation, and Federal National Mortgage Association.

RESTRICTIONS ON THE FUNDS' INVESTMENTS

Neither Fund will: (1) invest more than 10% of its net assets in
illiquid securities, including repurchase agreements maturing in
more than seven days (however, there is otherwise no limitation on
the percentage of a Fund's assets which may be invested in
repurchase agreements); or (2) with respect to 75% of its total
assets, invest more than 5% of its total assets in the securities
of any one issuer--this restriction does not apply to
U.S. Government Securities or repurchase agreements for such
securities. Notwithstanding the limitation on investment in a
single issuer, each Fund may invest all or substantially all of
its assets in another registered investment company having the
same investment objective and substantially similar investment
policies as the Fund.

Neither Fund may make loans with the exception that each Fund may
invest in money market securities and enter into repurchase agreements.
Neither Fund may borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the aggregate
borrowings at any one time may not exceed 33 1/3% of its assets
(at market value). A Fund

<PAGE> 12
may not purchase additional securities when its borrowings,
less proceeds receivable from sales of portfolio securities,
exceed 5% of total assets.

The policies described in the preceding two paragraphs, which
summarize certain important investment restrictions of the Funds,
and Cash Reserves' policy with respect to concentration of
investment in the financial services industry, can be changed only
with the approval of a "majority of the outstanding voting
securities" of a Fund, as defined in the Investment Company Act of
1940. All of the investment restrictions are set forth in the
Statement of Additional Information.

RISKS AND INVESTMENT CONSIDERATIONS

All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. There can be no
guarantee that a Fund will achieve its objective or be able at all
times to maintain its net asset value per share at $1.00.

In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund could experience both delays in
liquidating the underlying securities and losses, including: (a)
possible decline in the value of the collateral during the period
in which the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.

Each Fund's investment objective is not fundamental and may be
changed by the Board of Trustees without a vote of shareholders.
If there is a change in a Fund's investment objective,
shareholders should consider whether the Fund remains an
appropriate investment in light of their then-current financial
position and needs.

Cash Reserves' policy of investing at least 25% of its assets in
securities of issuers in the financial services industry may cause
the Fund to be more adversely affected by changes in market or
economic conditions and other circumstances affecting the
financial services industry. Because Cash Reserves' investment
policy permits it to invest in: securities of foreign branches of
U.S. banks (Eurodollars), U.S. branches of foreign banks (Yankee
dollars), and foreign banks and their foreign branches, such as
negotiable certificates of deposit; securities of foreign
governments; and securities of foreign issuers, such as commercial
paper and corporate notes, bonds and debentures, investment in
that Fund might involve risks that are different in some respects
from an investment in a fund that invests

<PAGE> 13
only in debt obligations of U.S. domestic issuers. Such risks
may include future political and economic developments; the possible
imposition of foreign withholding taxes on interest income payable
on securities held in the portfolio; possible seizure or
nationalization of foreign deposits; the possible establishment
of exchange controls; or the adoption of other foreign governmental
restrictions that might adversely affect the payment of principal
and interest on securities in the portfolio. Additionally, there
may be less public information available about foreign banks and
their branches. Foreign banks and foreign branches of foreign
banks are not regulated by U.S. banking authorities, and generally
are not bound by accounting, auditing, and financial reporting standards
comparable to U.S. banks.

Because Government Reserves' investment policy permits it to
invest in U.S. Government Securities that are not backed by the
full faith and credit of the U.S. Treasury, investment in that
Fund may involve risks that are different in some respects from an
investment in a fund that invests only in securities that are
backed by the full faith and credit of the U.S. Treasury. Such
risks may include a greater risk of loss of principal and interest
on the securities in the Fund's portfolio that are supported only
by the issuing or guaranteeing U.S. Government agency or
instrumentality, since the Fund must look principally or solely to
that entity for ultimate repayment.

Each Fund may invest in securities purchased on a when-issued or
delayed-delivery basis. Although the payment terms of these
securities are established at the time the Fund 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 and the yields then available in the market may be
greater. The Funds will make such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if it is deemed advisable for
investment reasons.

Each Fund may also invest in securities purchased on a standby
commitment basis, which is a delayed-delivery agreement in which
the Fund binds itself to accept delivery of a security at the
option of the other party to the agreement.

The securities in which Cash Reserves may invest generally yield
more than the securities in which Government Reserves may invest.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in money market securities directly, each Fund
may in the future seek to achieve its investment objective by

<PAGE> 14
pooling its assets with assets of other mutual funds managed by
the Adviser for investment in another investment
company having the same investment objective and substantially the
same investment policies and restrictions as the Fund. The
purpose of such an arrangement is to achieve greater operational
efficiencies and reduce costs. It is expected that any such
investment company would be managed by the Adviser in
substantially the same manner as the Fund. Shareholders of a Fund
will be given at least 30 days' prior notice of any such
investment, although they will not be entitled to vote on the
action. Such investment would be made only if the Trustees
determine it to be in the best interests of the Fund and its
shareholders.

HOW TO PURCHASE SHARES

You may purchase shares of either Fund by check, by wire, by
electronic transfer, or by exchange from your account with another
Stein Roe Fund. The initial purchase minimum per Fund account is
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act
("UGMA") accounts is $1,000; the minimum for accounts established
under an automatic investment plan (i.e., Regular Investments,
Dividend Purchase Option, or the Automatic Exchange Plan) is
$1,000 for regular accounts and $500 for UGMA accounts; and the
minimum per account for Stein Roe IRAs is $500. The initial
purchase minimum is waived for shareholders who participate in the
Stein Roe Counselor [service mark] or Stein Roe Counselor
Preferred [service mark] Programs and for clients of the Adviser.
Subsequent purchases must be at least $100, or at least $50 if you
purchase by electronic transfer. If you wish to purchase shares
to be held by a tax-sheltered retirement plan sponsored by the
Adviser, you must obtain special forms for those plans. (See
Shareholder Services.)

BY CHECK.
To make an initial purchase of shares of a Fund, please complete
and sign the Application and mail it to P.O. Box 804058, Chicago,
Illinois 60680, together with a check made payable to Stein Roe
Funds.

You may make subsequent investments by submitting a check along
with either the stub from your Fund account confirmation statement
or a note indicating the amount of the purchase, your account
number, and the name in which your account is registered. Each
individual check submitted for purchase must be at least $100, and
the Trust generally will not accept cash, drafts, third party
checks, or checks drawn on banks outside of the United States.
Should an order to purchase shares of a Fund be

<PAGE> 15
cancelled because your check does not clear, you will be responsible
for any resulting loss incurred by that Fund.

BY WIRE.
You may also pay for shares by instructing your bank to wire
federal funds (monies of member banks within the Federal Reserve
System) to the Funds' custodian bank. Your bank may charge you a
fee for sending the wire. If you are opening a new account by
wire transfer, you must first telephone the Trust to request an
account number and furnish your social security or other tax
identification number. Neither the Funds nor the Trust will be
responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. Your bank must
include the full name(s) in which your account is registered and
your Fund account number, and should address its wire as follows:

State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing No. 011000028
Attention: Custody
Fund No. ____; Stein Roe _____ Reserves Fund
Account of (exact name(s) in registration)
Shareholder Account No. ___________

Fund Numbers:
7102--Cash Reserves
7109--Government Reserves

BY ELECTRONIC TRANSFER.
You may also make subsequent investments by an electronic transfer
of funds from your bank checking account. Electronic transfer
allows you to make purchases at your request ("Special
Investments") by calling 800-338-2550 or at pre-scheduled
intervals ("Regular Investments"). (See Shareholder Services.)
Electronic transfer purchases are subject to a $50 minimum and a
$100,000 maximum. You may not open a new account through
electronic transfer. Should an order to purchase shares of a Fund
be cancelled because your electronic transfer does not clear, you
will be responsible for any resulting loss incurred by that Fund.

BY EXCHANGE.
You may purchase shares by exchange of shares from another Stein
Roe Fund account either by phone (if the Telephone Exchange
Privilege has been established on the account from which the
exchange is being made), by mail, in person, or automatically at
regular intervals (if you have elected Automatic Exchanges).
Restrictions apply; please review the information under How to
Redeem Shares--By Exchange.

PURCHASE PRICE AND EFFECTIVE DATE.
Each purchase of a Fund's shares is made at that Fund's net asset
value (see Net Asset Value) as follows:

<PAGE> 16
Check purchases--net asset value next determined after your check
is converted into federal funds (currently one business day after
receipt of your check). Your investment will begin earning
dividends on the day of purchase.

Wire purchases--net asset value next determined after receipt of
the wire. If your wire is received before 11:00 a.m., Chicago
time, your investment will begin earning dividends on the day of
purchase. If your wire is received at or after 11:00 a.m.,
Chicago time, your investment will begin earning dividends on the
following day.

Electronic transfer--net asset value next determined after the
Fund receives the electronic transfer from your bank. A Special
Electronic Transfer Investment order received by telephone on a
business day before 2:00 p.m., Chicago time, is effective on the
next business day. Your investment will begin earning dividends
on the day following the date of purchase.

CONDITIONS OF PURCHASE.
Each purchase order for a Fund must be accepted by an authorized
officer of the Trust in Chicago and is not binding until accepted
and entered on the books of that Fund. Once your purchase order
has been accepted, you may not cancel or revoke it; however, you
may redeem the shares. The Trust reserves the right not to accept
any purchase order that it determines not to be in the best
interest of the Trust or of a Fund's shareholders. The Trust also
reserves the right to waive or lower its investment minimums for
any reason. The Trust does not issue certificates for shares.

PURCHASES THROUGH THIRD PARTIES.
You may purchase (or redeem) shares through investment dealers,
banks, or other financial institutions. These institutions may
charge for their services or place limitations on the extent to
which you may use the services offered by the Trust. There are no
charges or limitations imposed by the Trust (other than those
described in this prospectus) if shares are purchased (or
redeemed) directly from the Trust.

Some financial institutions which maintain nominee accounts with
the Funds for their clients who are Fund shareholders charge an
annual fee of up to 0.25% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. Such fees are
paid by the Adviser.

HOW TO REDEEM SHARES

BY WRITTEN REQUEST.
You may redeem all or a portion of your shares of a Fund by
submitting a

<PAGE> 17
written request in "good order" to the Trust at P.O.
Box 804058, Chicago, Illinois 60680. A redemption request will be
considered to have been received in good order if the following
conditions are satisfied:

(1) the request must be in writing, indicate the number of shares
or dollar amount to be redeemed, and identify the shareholder's
account number;

(2) the request must be signed by the shareholder(s) exactly as
the shares are registered;

(3) the request must be accompanied by any certificates for the
shares, either properly endorsed for transfer, or accompanied
by a stock assignment properly endorsed exactly as the shares
are registered;

(4) the signatures on either the written redemption request or the
certificates (or the accompanying stock power) must be
guaranteed (a signature guarantee is not a notarization, but is
a widely accepted way to protect you and the Funds by verifying
your signature);

(5) corporations and associations must submit with each request a
completed Certificate of Authorization included in this
prospectus (or a form of resolution acceptable to the Trust);
and

(6) other supporting legal documents may be required from
organizations, executors, administrators, trustees, or others
acting on accounts not registered in their names.

BY EXCHANGE.
You may redeem all or any portion of your Fund shares and use the
proceeds to purchase shares of any other Stein Roe Fund offered
for sale in your state if your signed, properly completed
Application is on file. AN EXCHANGE TRANSACTION IS A SALE AND
PURCHASE OF SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT
IN CAPITAL GAIN OR LOSS. Before exercising the Exchange
Privilege, you should obtain the prospectus for the Stein Roe Fund
in which you wish to invest and read it carefully. The
registration of the account to which you are making an exchange
must be exactly the same as that of the Fund account from which
the exchange is made and the amount you exchange must meet any
applicable minimum investment of the Stein Roe Fund being
purchased. Unless you have elected to receive your dividends in
cash, on an exchange of all shares, any accrued unpaid dividends
will be invested in the Stein Roe Fund to which you exchange on
the next business day. An exchange may be made by following the
redemption procedure described above under By Written Request and
indicating the Stein Roe Fund to be purchased, except that a

<PAGE> 18
signature guarantee normally is not required. (See also the
discussion below of the Telephone Exchange Privilege and Automatic
Exchanges.)

SPECIAL REDEMPTION PRIVILEGES.
The Telephone Exchange Privilege and the Telephone Redemption by
Check Privilege will be established automatically for you when you
open your account unless you decline these Privileges on your
Application. Other Privileges must be specifically elected. If
you do not want the Telephone Exchange and Redemption Privileges,
check the box(es) under the section "Telephone Redemption Options"
when completing your Application. In addition, a signature
guarantee may be required to establish a Privilege after you open
your account. If you establish both the Telephone Redemption by
Wire Privilege and the Electronic Transfer Privilege, the bank
account that you designate for both Privileges must be the same.

You may not use any of the Special Redemption Privileges if you
hold certificates for any of your Fund shares. The Telephone
Redemption by Check, Telephone Redemption by Wire and Check-
Writing Privileges, and Special Electronic Transfer Redemptions
are not available to redeem shares held by a tax-sheltered
retirement plan sponsored by the Adviser. (See also General
Redemption Policies.)

Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $50 or more from your account
by calling 800-338-2550 or by sending a telegram; new accounts
opened by exchange are subject to the $2,500 initial purchase
minimum. GENERALLY, YOU WILL BE LIMITED TO FOUR TELEPHONE
EXCHANGE ROUND-TRIPS PER YEAR AND THE FUNDS MAY REFUSE REQUESTS
FOR TELEPHONE EXCHANGES IN EXCESS OF FOUR ROUND-TRIPS (A ROUND-
TRIP BEING THE EXCHANGE OUT OF A FUND INTO ANOTHER STEIN ROE FUND,
AND THEN BACK TO THAT FUND). Also, the Trust's general redemption
policies apply to redemptions of shares by Telephone Exchange.
(See General Redemption Policies.)

The Trust reserves the right at any time without prior notice to
suspend or terminate the use of the Telephone Exchange Privilege
by any person or class of persons. The Trust believes that use of
the Telephone Exchange Privilege by investors utilizing market-
timing strategies adversely affects the Funds. THEREFORE, THE
TRUST GENERALLY WILL NOT HONOR REQUESTS FOR TELEPHONE EXCHANGES BY
SHAREHOLDERS IDENTIFIED BY THE TRUST AS "MARKET-TIMERS."
Moreover, the Trust reserves the right at any time without prior
notice to suspend, limit, modify, or terminate the Telephone
Exchange Privilege in its

<PAGE> 19
entirety. Because such a step would be
taken only if the Board of Trustees believes it would be in the
best interests of the Funds, the Trust expects that it would
provide shareholders with prior written notice of any such action
unless it appears that the resulting delay in the suspension,
limitation, modification, or termination of the Telephone Exchange
Privilege would adversely affect the Funds. IF THE TRUST WERE TO
SUSPEND, LIMIT, MODIFY, OR TERMINATE THE TELEPHONE EXCHANGE
PRIVILEGE, A SHAREHOLDER EXPECTING TO MAKE A TELEPHONE EXCHANGE
MIGHT FIND THAT AN EXCHANGE COULD NOT BE PROCESSED OR THAT THERE
MIGHT BE A DELAY IN THE IMPLEMENTATION OF THE EXCHANGE. (See How
to Redeem Shares--By Exchange.) During periods of volatile
economic and market conditions, you may have difficulty placing
your exchange by telephone.

Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another Stein Roe Fund account on a regular basis.

Telephone Redemption by Wire Privilege. You may use this
Privilege to redeem an amount of $1,000 or more from your account
by calling 800-338-2550. The proceeds will be transmitted by
wire to your account at a commercial bank previously designated by
you that is a member of the Federal Reserve System. The fee for
wiring proceeds (currently $3.50 per transaction) will be deducted
from the amount wired.

Check-Writing Privilege. You may also redeem shares by writing
special checks in the amounts of $50 or more. Your checks are
drawn against a special checking account maintained with the
custodian, and you will be subject to the custodian's procedures
and rules relating to its checking accounts and to this Privilege.

Electronic Transfer Privilege. You may redeem shares by calling
800-338-2550 and requesting an electronic transfer ("Special
Redemption") of the proceeds to a checking account previously
designated by you at a bank that is a member of the Automated
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. A Special Redemption request
received by telephone after 2:00 p.m., Chicago time, is deemed
received on the next business day.

<PAGE> 20
GENERAL REDEMPTION POLICIES.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please telephone
the Trust if you have any questions about requirements for a
redemption before submitting your request. If you wish to redeem
shares held by a tax-sheltered retirement plan sponsored by the
Adviser, special procedures of those plans apply. (See
Shareholder Services--Tax-Sheltered Retirement Plans.) The Trust
reserves the right to require a properly completed Application
before making payment for shares redeemed.

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon that Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares, even though
each Fund attempts to maintain its net asset value at $1.00
(rounded to the nearest one cent), and may result in a realized
capital gain or loss.

The Trust normally intends to pay proceeds of a redemption within
two business days and generally no later than seven days after
proper instructions are received. If a request for Telephone
Redemption by Wire is received before 11:00 a.m., Chicago time,
the proceeds will be paid on the day the order is received;
proceeds of an order received at or after 11:00 a.m., Chicago
time, will be paid on the next business day. The Trust will not
be responsible for the consequences of delays, including delays in
the mail, banking, or Federal Reserve wire systems. If you
attempt to redeem shares within 15 days after they have been
purchased by check or electronic transfer, the Trust may delay
payment of the redemption proceeds to you until it can verify that
payment for the purchase of those shares has been (or will be)
collected. To reduce such delays, the Trust recommends that your
purchase be made by federal funds wire through your bank.

The Trust reserves the right at any time without prior notice to
suspend, limit, modify, or terminate any Privilege or its use in
any manner by any person or class.

<PAGE> 21
thereunder if they reasonably believe that such instructions are
genuine. The Funds employ procedures reasonably designed to
confirm that instructions communicated by telephone under any
Special Redemption Privilege or the Special Electronic Transfer
Redemption Privilege are genuine. Use of any Special Redemption
Privilege or the Special Electronic Transfer Redemption Privilege
authorizes the Funds and their transfer agent to tape-record all
instructions to redeem. In addition, callers are asked to identify
the account number and registration, and may be required to provide
other forms of identification. Written confirmations of transactions
are mailed promptly to the registered address; a legend on the
confirmation requests the shareholder to review the transactions
and inform the Fund immediately if there is a problem. If a Fund
does not follow reasonable procedures for protecting shareholders
against loss on telephone transactions, it may be liable for any
losses due to unauthorized or fraudulent instructions.

Generally, you may not use the Exchange Privilege or any Special
Redemption Privilege to redeem shares purchased by check (other
than certified or cashiers' checks) or electronic transfer until
15 days after their date of purchase.

The Trust reserves the right to redeem shares in any account and
send the proceeds to the owner if the shares in the account do not
have a value of at least $1,000. A shareholder would be notified
that his account is below the minimum and allowed 30 days to
increase the account before the redemption is processed.

Shares in any account you maintain with a Fund or any of the other
Stein Roe Funds may be redeemed to the extent necessary to
reimburse any Stein Roe Fund for any loss it sustains that is
caused by you (such as losses from uncollected checks and
electronic transfers or any Stein Roe Fund liability under the
Internal Revenue Code provisions on backup withholding).

SHAREHOLDER SERVICES

REPORTING TO SHAREHOLDERS.
You will receive a confirmation statement reflecting each of your
purchases and redemptions of shares of a Fund, as well as periodic
statements detailing distributions made by that Fund. Shares
purchased by reinvestment of dividends, by cross-reinvestment of
dividends from another Fund, or pursuant to an automatic
investment plan will be confirmed to you quarterly. In addition,
the Trust will send you semiannual and annual reports showing Fund
portfolio holdings and will provide you annually with tax
information.

<PAGE> 22
FUNDS-ON-CALL [REGISTERED TRADEMARK] 24-HOUR INFORMATION SERVICE.
To access the Stein Roe Funds-on-Call [registered trademark]
automated telephone service, just call 800-338-2550 on any
touch-tone telephone and follow the recorded instructions. Funds-
on-Call [registered trademark] provides yields, prices, latest
dividends, account balances, last transaction, and other
information 24 hours a day, seven days a week.

FUNDS-ON-CALL [REGISTERED TRADEMARK] AUTOMATED TELEPHONE
TRANSACTIONS.
If you have established the Funds-on-Call [registered trademark]
transaction privilege (Funds-on-Call [registered trademark]
Application will be required), you may initiate Special
Investments and Redemptions, Telephone Exchanges, and Telephone
Redemptions by Check 24 hours a day, seven days a week by calling
800-338-2550 on a touch-tone telephone. These transactions are
subject to the terms and conditions of the individual privileges.
(See How to Purchase Shares and How to Redeem Shares.)

STEIN ROE COUNSELOR [SERVICE MARK] PROGRAM.
The Adviser offers a Stein Roe Counselor [service mark] and a
Stein Roe Counselor Preferred [service mark] program. The
programs are designed to provide investment guidance in helping
investors to select a portfolio of Stein Roe Mutual Funds. The
Stein Roe Counselor Preferred [service mark] program, which
automatically adjusts client portfolios, has a fee of up to 1%
of assets.

RECORDKEEPING AND ADMINISTRATION SERVICES.
If you oversee or administer investments for a group of investors,
we offer a variety of services.

TAX-SHELTERED RETIREMENT PLANS.
Booklets describing the following programs and special forms
necessary for establishing them are available on request. You may
use all of the Stein Roe Funds, except those investing primarily
in tax-exempt securities, in these plans. Please read the
prospectus for each fund in which you plan to invest before making
your investment.

Individual Retirement Accounts ("IRAs") for employed persons and
their non-employed spouses.

Prototype Money Purchase Pension and Profit-Sharing Plans for
self-employed individuals, partnerships, and corporations.

Simplified Employee Pension Plans permitting employers to provide
retirement benefits to their employees by utilizing IRAs while
minimizing administration and reporting requirements.

SPECIAL SERVICES.
The following special services are available to shareholders.
Please call 800-338-2550 or write the Trust for additional
information and forms.

<PAGE> 23
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another Stein Roe Fund account. Before establishing this
option, you should obtain and read carefully the prospectus of the
Stein Roe Fund into which you wish to have your distributions
invested. The account from which distributions are made must be
of sufficient size that each distribution will usually be at least
$25. The account into which distributions are to be invested may
be opened with an initial investment of only $1,000.

Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.

Telephone Redemption by Check Privilege ($1,000 minimum) and
Telephone Exchange Privilege ($50 minimum)--established
automatically when you open your account unless you decline them
on your Application. (See How to Redeem Shares--Special
Redemption Privileges.)

Telephone Redemption by Wire Privilege--to redeem shares from your
account by phone and have the proceeds transmitted by wire to your
checking account ($1,000 minimum).

Check-Writing Privilege--to redeem shares by writing special
checks against your Fund account ($50 minimum per check).

Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).

Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).

Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).

Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another Stein Roe
Fund account on a regular basis ($50 minimum; $100,000 maximum).

Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).

Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.

NET ASSET VALUE

The purchase and redemption price of each Fund's shares is its net

<PAGE> 24
asset value per share. The net asset value of a share of each
Fund is normally determined twice each day: at 11:00 a.m., Chicago
time, and as of the close of trading on the New York Stock
Exchange (currently 3:00 p.m., Chicago time). The net asset value
per share is computed by dividing the difference between the
values of the Fund's assets and liabilities by the number of
shares outstanding and rounding to the nearest cent. Net asset
value will not be determined on days when the Exchange is closed
unless, in the judgment of the Board of Trustees, the net asset
value of a Fund should be determined on any such day, in which
case the determination will be made at 3:00 p.m., Chicago time.

Each Fund attempts to maintain its net asset value at $1.00 per
share. Portfolio securities are valued based on their amortized
cost, which does not take into account unrealized gains or losses.
Other assets and securities of a Fund for which this valuation
method does not produce a fair value are valued at a fair value
determined by the Board. The extent of any deviation between the
Fund'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.

DISTRIBUTIONS AND INCOME TAXES

DISTRIBUTIONS.
A dividend from net income of a Fund is declared each business day
to shareholders of record immediately before 3:00 p.m., Chicago
time. (See How to Purchase Shares.) Dividends are paid monthly
and confirmed at least quarterly. If a Fund's net asset value per
share were to decline, or were believed likely to decline, below
$1.00 (rounded to the nearest cent), the Board might temporarily
reduce or suspend dividends in an effort to maintain net asset
value at $1.00 per share.

All of your income dividends and capital gain distributions will
be reinvested in additional shares unless you elect to have
distributions either (1) paid by check; (2) deposited by
electronic transfer into your bank checking account; (3) applied
to purchase shares in your account with another Stein Roe Fund; or
(4) applied to purchase shares in a Stein Roe Fund account of
another person. (See Shareholder Services.) Reinvestment
normally occurs on the payable date. The Trust reserves the right
to reinvest the proceeds and future distributions in additional
Fund shares if

<PAGE> 25
checks mailed to you for distributions are returned
as undeliverable or are not presented for payment within six
months.

INCOME TAXES.
Your distributions will be taxable to you, under income tax law,
whether received in cash or reinvested in additional shares. For
federal income tax purposes, any distribution that is paid in
January but was declared in the prior calendar year is deemed paid
in the prior calendar year.

You will be subject to federal income tax at ordinary rates on
income dividends and distributions of net short-term capital gain.
Distributions of net long-term capital gain will be taxable to you
as long-term capital gain regardless of the length of time you
have held your shares.

You will be advised annually as to the source of distributions.
If you are not subject to tax on your income, you will not be
required to pay tax on these amounts. Because each Fund's
investment income consists primarily of interest, it is expected
that none of the dividends paid by the Funds will qualify under
the Internal Revenue Code for the dividends received deduction
available to corporations.

For federal income tax purposes, each Fund is treated as a
separate taxable entity distinct from the other series of the
Trust.

This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.

BACKUP WITHHOLDING.
If (a) you fail to (i) furnish your properly certified social
security or other tax identification number or (ii) certify that
your tax identification number is correct or that you are not
subject to backup withholding due to the underreporting of certain
income, or (b) the Internal Revenue Service informs the Trust that
your tax identification number is incorrect, the Trust may be
required to withhold federal income tax ("backup withholding") from
certain payments (including redemption proceeds) to you. These
certifications are contained in the Application that you should
complete and return when you open an account. The Funds must
promptly pay to the IRS all amounts withheld. Therefore, usually
it is not possible for a Fund to reimburse you for amounts withheld.
However, you may claim the amount withheld as a credit on your
federal income tax return.

MANAGEMENT OF THE FUNDS

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Funds. See the Statement of

<PAGE> 26
Additional Information for the names of and other information
about the trustees and officers. The Funds' Adviser, Stein Roe &
Farnham Incorporated, One South Wacker Drive, Chicago, Illinois
60606, is responsible for managing each Fund's investment
portfolio and the business affairs of the Funds and the Trust,
subject to the direction of the Board. The Adviser is registered
as an investment adviser under the Investment Advisers Act.

The Adviser was organized in 1986 to succeed to the business of
Stein Roe & Farnham, a partnership that had advised and managed
mutual funds since 1949. The Adviser is a wholly owned indirect
subsidiary of Liberty Mutual Insurance Company ("Liberty Mutual").

In approving the use of a single combined prospectus, the Board
considered the possibility that one Fund might be liable for
misstatements in the prospectus regarding information concerning
another Fund.

FEES AND EXPENSES.
In return for its services, the Adviser receives a monthly fee
from each Fund, computed and accrued daily, based on that Fund's
average net assets. Effective November 1, 1995, the annualized
fee for each Fund is .50 of 1% of the first $500 million, .45 of
1% of the next $500 million, and .40 of 1% on assets over $1
billion. Prior to that date, that of Cash Reserves was .50 of 1%
on the first $1 billion, .475 of 1% on the next $500 million, and
.45 of 1% thereafter; and that of Government Reserves
was .50 of 1% of average net assets. The annualized fees for Cash
Reserves and Government Reserves, after the expense limitation
described under Fee Table in the case of Government Reserves,
amounted to .50% and .45% of average net assets, respectively, for
the year ended June 30, 1995.

Under a separate agreement with the Trust, the Adviser provides
certain accounting and bookkeeping services to the Funds,
including computation of each Fund's net asset value and
calculation of its net income and capital gains and losses on
disposition of Fund assets.

PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of each
Fund's portfolio securities. In doing so, the Adviser seeks to
obtain the best combination of price and execution, which involves
a number of judgmental factors.

TRANSFER AGENT.
SteinRoe Services Inc., One South Wacker Drive, Chicago, Illinois
60606, a wholly owned indirect subsidiary of Liberty Mutual, is
the agent of the Trust for the transfer of shares, disbursement of
dividends, and maintenance of shareholder accounting records.

<PAGE> 27
DISTRIBUTOR.
The shares of each Fund are offered for sale through Liberty
Securities Corporation ("Distributor") without any sales
commissions or charges to the Funds or to their shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Mutual. The business address of the Distributor is 600 Atlantic
Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to the Trust at P.O. Box 804058, Chicago, Illinois
60680. All distribution and promotional expenses are paid by the
Adviser, including payments to the Distributor for sales of Fund
shares.

CUSTODIAN.
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the
Funds. Foreign securities are maintained in the custody of
foreign banks and trust companies that are members of the Bank's
Global Custody Network or foreign depositories used by such
members. (See Custodian in the Statement of Additional
Information.)

ORGANIZATION AND DESCRIPTION OF SHARES

The Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
January 3, 1986, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, six series are authorized and outstanding.

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular Fund shall look only to the assets of the Trust or of
the respective Fund for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss

<PAGE> 28
on account of shareholder liability is believed to be remote,
because it would be limited to circumstances in which the disclaimer
was inoperative and the Trust was unable to meet its obligations.

The risk of a particular Fund incurring financial loss on account
of unsatisfied liability of another Fund of the Trust is also
believed to be remote, because it would be limited to claims to
which the disclaimer did not apply and to circumstances in which
the other Fund was unable to meet its obligations.

<PAGE> 29
CERTIFICATE OF AUTHORIZATION
(FOR USE BY CORPORATIONS AND ASSOCIATIONS ONLY)

A corporation or association must complete this Certificate and
submit it with the Fund Application, each written redemption,
transfer or exchange request, and each request to terminate or
change any of the Privileges or special service elections.

If the entity submitting the Certificate is an association, the
word "association" shall be deemed to appear each place the word
"corporation" appears. If the officer signing this Certificate is
named as an authorized person, another officer must countersign
the Certificate. If there is no other officer, the person signing
the Certificate must have his signature guaranteed. If you are
not sure whether you are required to complete this Certificate,
call the office of the Stein Roe Funds, 800-338-2550 toll-free.

The undersigned hereby certifies that he is the duly elected
Secretary of ____________________________ (the "Corporation")
(name of Corporation/Association)
and that the following individual(s):

Authorized Persons
_____________________________ __________________________
Name Title
_____________________________ __________________________
Name Title
_____________________________ __________________________
Name Title

is (are) duly authorized by resolution or otherwise to act on
behalf of the Corporation in connection with the Corporation's
ownership of shares of any mutual fund managed by Stein Roe &
Farnham Incorporated (individually, the "Fund" and collectively,
the "Funds") including, without limitation, furnishing any such
Fund and its transfer agent with instructions to transfer or
redeem shares of that Fund payable to any person or in any manner,
or to redeem shares of that Fund and apply the proceeds of such
redemption to purchase shares of another Fund (an "exchange"), and
to execute any necessary forms in connection therewith.

Unless a lesser number is specified, all of the Authorized Persons
must sign written instructions. Number of signatures required:
________.

If the undersigned is the only person authorized to act on behalf
of the Corporation, the undersigned certifies that he is the sole
shareholder, director, and officer of the Corporation and that the
Corporation's Charter and Bylaws provide that he is the only
person authorized to so act.

Unless expressly declined on the Application (or other form
acceptable to the Funds), the undersigned further certifies that
the Corporation has authorized by resolution or otherwise the
establishment of the Telephone Exchange and Telephone Redemption
by Check Privileges for the Corporation's account with any Fund
offering any such Privilege. If elected on the Application (or
other form acceptable to the Funds), the undersigned also
certifies that the Corporation has similarly authorized
establishment of the Electronic Transfer, Telephone Redemption by
Wire, and Check-Writing Privileges for the Corporation's account
with any Fund offering said Privileges. The undersigned has
further authorized each Fund and its transfer agent to honor any
written, telephonic, or telegraphic instructions furnished
pursuant to any such Privilege by any person believed by the Fund
or its transfer agent or their agents, officers, directors,
trustees, or employees to be authorized to act on behalf of the
Corporation and agrees that neither the Fund nor its transfer
agent, their agents, officers, directors, trustees, or employees
will be liable for any loss, liability, cost, or expense for
acting upon any such instructions.

These authorizations shall continue in effect until five business
days after the Fund and its transfer agent receive written notice
from the Corporation of any change.

IN WITNESS WHEREOF, I have hereunto subscribed my name as
Secretary and affixed the seal of this Corporation this ____ day
of ___________________, 19___.

__________________________
Secretary

__________________________
Signature Guarantee*

*Only required if the person signing the Certificate is the only
person named as "Authorized Person."

Corporate
Seal
Here

<PAGE>

[STEIN ROE MUTUAL FUNDS LOGO]

The Stein Roe Funds
Stein Roe Government Reserves Fund
Stein Roe Cash Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Income Fund
Stein Roe Municipal Money Market Fund
Stein Roe Intermediate Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Total Return Fund
Stein Roe Prime Equities
Stein Roe Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Special Venture Fund

P.O. Box 804058
Chicago, Illinois 60680
800-338-2550

In Chicago, visit our Fund Center
at One South Wacker Drive

Liberty Securities Corporation, Distributor

01004-M7A

<PAGE> 1

LIMITED MATURITY INCOME FUND seeks high current income by investing
primarily in U.S. Government and other high-quality debt securities.
The dollar-weighted average effective maturity will not exceed
three years.

GOVERNMENT INCOME FUND seeks high current income by investing
primarily in securities issued or guaranteed by the U.S. Government
or by its agencies or instrumentalities.

INTERMEDIATE BOND FUND seeks high current income by investing
primarily in marketable debt securities. The dollar-weighted
average life of the Fund's portfolio is expected to be between
three and ten years.

INCOME FUND seeks high current income by investing principally
in medium-quality debt securities and, to a lesser extent, in
lower-quality securities which may involve greater risk. (See
How the Funds Invest--Income Fund.)

Each Fund is a "no-load" fund. There are no sales or redemption
charges, and the Funds have no 12b-1 plans. The Funds are series
of the STEIN ROE INCOME TRUST, an open-end management investment
company.

This prospectus contains information you should know before
investing in the Funds. Please read it carefully and retain it
for future reference.

The date of this prospectus is November 1, 1995.

<PAGE> 2
TABLE OF CONTENTS
Page
Summary.................................. 2
Fee Table................................ 5
Financial Highlights..................... 7
The Funds................................12
How the Funds Invest.....................12
Limited Maturity Income Fund..........12
Government Income Fund................14
Intermediate Bond Fund................15
Income Fund...........................17
Portfolio Investments and Strategies.....19
Restrictions on the Funds' Investments ..25
Risks and Investment Considerations..... 26
How to Purchase Shares...................28
By Check..............................28
By Wire...............................29
By Electronic Transfer............... 29
By Exchange.......................... 29
Purchase Price and Effective Date.... 30
Conditions of Purchase............... 30
Purchases Through Third Parties.......30
How to Redeem Shares.................... 30
By Written Request................... 30
By Exchange.......................... 31
Special Redemption Privileges........ 32
General Redemption Policies.......... 33
Shareholder Services.................... 35
Net Asset Value......................... 37
Distributions and Income Taxes...........38
Investment Return....................... 39
Management of the Funds..................40
Organization and Description of Shares.. 42
Certificate of Authorization.............45

<PAGE> 3
SUMMARY

Stein Roe Limited Maturity Income Fund ("Limited Maturity Income
Fund"), Stein Roe Government Income Fund ("Government Income
Fund"), Stein Roe Intermediate Bond Fund ("Intermediate Bond
Fund"), and Stein Roe Income Fund ("Income Fund") are series of
the Stein Roe Income Trust, an open-end diversified management
investment company organized as a Massachusetts business trust.
Each Fund is a "no-load" fund. There are no sales or redemption
charges. (See The Funds and Organization and Description of
Shares.)

INVESTMENT OBJECTIVES AND POLICIES.
Each Fund seeks high current income. The Funds seek to achieve
their objectives by investing primarily in debt obligations of
various types.

LIMITED MATURITY INCOME FUND seeks to provide a high level of
current income, consistent with the preservation of capital. It
attempts to achieve its objective by investing primarily in
securities issued or guaranteed as to principal and interest by
the U.S. Government or by its agencies or instrumentalities ("U.S.
Government Securities") and other high-quality fixed-income
securities.

GOVERNMENT INCOME FUND seeks high current income by investing
primarily in U.S. Government Securities. In addition, the Fund is
permitted to invest up to 20% of its assets in other types of debt
securities, including collateralized mortgage obligations.

INTERMEDIATE BOND FUND pursues a high level of current income,
consistent with capital preservation, by investing primarily in
marketable debt securities. At least 60% of the Fund's assets
will be invested in debt securities rated within the three highest
grades assigned by Moody's or by S&P, or in U.S. Government
Securities, commercial paper, and certain bank obligations. Under
normal market conditions, the Fund invests at least 65% of its
assets in securities with an average life of between three and ten
years, and expects that the dollar-weighted average life of its
portfolio will be between three and ten years.

INCOME FUND seeks high current income by investing principally in
medium-quality debt securities (such as securities rated A or Baa
by Moody's or A or BBB by S&P), with at least 60% of its assets
invested in medium- or higher-quality debt securities. Medium-
quality debt securities may have speculative characteristics. The

<PAGE> 4
Income Fund may also invest to a lesser extent in securities of
lower quality, which may entail greater risk. Lower-quality
securities are commonly referred to as "junk bonds."

For a more detailed discussion of each Fund's investment
objectives and policies, please see How the Funds Invest and
Portfolio Investments and Strategies. There is, of course, no
assurance that the Funds will achieve their investment objectives.

INVESTMENT RISKS.
The risks inherent in each Fund depend primarily upon the term and
quality of the obligations in that Fund's portfolio, as well as on
market conditions. Interest rate fluctuations will affect a
Fund's net asset value, but not the income received by the Fund
from its portfolio securities. However, because yields on debt
securities available for purchase by a Fund vary over time, no
specific yield on shares of a Fund can be assured. Limited
Maturity Income Fund is appropriate for investors who seek higher
yields than are usually available from money market instruments
with stable prices and shorter maturities, but who also want less
net asset fluctuation than that of a longer-term fund.
Intermediate Bond Fund is appropriate for investors who seek high
income with less net asset value fluctuation from interest rate
changes than that of a longer-term fund and who can accept greater
levels of credit and other risks associated with securities that
are rated below investment grade. Government Income Fund is
designed for investors who seek high income with minimum risk
other than the risk of changes in net asset value caused by
fluctuations in prevailing levels of interest rates. Income Fund
is designed for investors who seek a still higher level of income
and who can accept greater levels of credit and other risks
associated with securities of medium or lower quality. Limited
Maturity Income Fund, Intermediate Bond Fund, and Income Fund may
invest in foreign securities, which may entail a greater degree of
risk than investing in securities of domestic issuers. Please see
Restrictions on the Funds' Investments and Risks and Investment
Considerations for further information.

PURCHASES.
The minimum initial investment is $2,500. Additional investments
must be at least $100 (only $50 for purchases by electronic
transfer). Shares may be purchased by check, by bank wire, by
electronic transfer, or by exchange from another Stein Roe Fund.
(See How to Purchase Shares.)

REDEMPTIONS.
For information on redeeming Fund shares, including

<PAGE> 5
the special redemption privileges, please see How to Redeem Shares.

MANAGEMENT AND FEES.
Stein Roe & Farnham Incorporated (the "Adviser") is investment
adviser to the Funds. For a description of the Adviser and the
fees paid by the Funds, see Management of the Funds.

If you have any additional questions about the Funds, please feel
free to discuss them with an account representative by calling
800-338-2550.

FEE TABLE

Limited Govern- Inter-
Maturity ment mediate
Income Income Bond Income
Fund Fund Fund Fund
-------- ------- ------ ------
SHAREHOLDER TRANSACTION EXPENSES

Sales Load Imposed on Purchases None None None None
Sales Load Imposed on Reinvested
Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None

ANNUAL FUND OPERATING EXPENSES
(after expense reimbursement in
the case of each Fund; as a
percentage of average net assets)

Management Fees (after expense
reimbursements) 0.00% 0.51% 0.49% 0.60%
12b-1 Fees None None None None
Other Expenses (after expense
reimbursement in the case of
Limited Maturity Income Fund) 0.65% 0.49% 0.21% 0.22%
----- ----- ----- -----
Total Fund Operating Expenses
(after expense reimbursements) 0.65% 1.00% 0.70% 0.82%
----- ----- ----- -----
----- ----- ----- -----

<PAGE> 6
EXAMPLES.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------- -------- ------- --------
Limited Maturity
Income Fund $7 $21 $36 $81
Government Income Fund 10 32 55 122
Intermediate Bond Fund 7 22 39 87
Income Fund 8 26 46 101

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in a Fund. The table is based upon
actual expenses incurred in the last fiscal year, adjusted for
each Fund's expense limitation in effect on November 1, 1995.
From time to time, the Adviser may voluntarily absorb certain
expenses of a Fund. The Adviser has agreed to voluntarily absorb
the expenses of Limited Maturity Income Fund for expenses in
excess of 0.65 of 1% of average net assets (effective November 1,
1995); Government Income Fund for expenses in excess of 1% of
average net assets; Intermediate Bond Fund for expenses in excess
of 0.70 of 1% of average net assets (effective May 1, 1995); and
Income Fund for expenses in excess of 0.82 of 1% of average net
assets. These commitments expire on October 31, 1996, subject to
earlier termination by the Adviser on 30 days' notice, except for
Income Fund, which expires on October 31, 1998. Prior
to November 1, 1995, the Adviser undertook to reimburse Limited
Maturity Income Fund for expenses in excess of 0.45 of 1%. Absent
such expense undertakings, Management Fees, Other Expenses and
Total Fund Operating Expenses for Limited Maturity Income Fund
would have been 0.60%, 0.67% and 1.27%; and Management Fees and
Total Fund Operating Expenses for Government Income Fund,
Intermediate Bond Fund, and Income Fund would have been 0.60% and
1.09%, 0.50% and 0.71%, and 0.63% and 0.85%, respectively.
Any such absorption will temporarily lower a Fund's overall
expense ratio and increase its overall return to investors. (Also
see Management of the Funds--Fees and Expenses.)

For purposes of the Examples above, the figures assume that the
percentage amounts listed for the respective Funds under Annual
Fund Operating Expenses remain the same during each of the
periods, that all income dividends and capital gain distributions
are reinvested in additional Fund shares, and that, for purposes
of management fee breakpoints, if any, the Funds' respective net
assets remain at the same levels as in the most recently completed
fiscal year.

<PAGE> 7

The figures in the Examples are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown in the
Examples and Fee Table is useful in reviewing the Funds' expenses
and in providing a basis for comparison with other mutual funds,
it should not be used for comparison with other investments using
different assumptions or time periods.

FINANCIAL HIGHLIGHTS

The tables below reflect the results of operations of the Funds on
a per-share basis. The tables for Limited Maturity Income Fund
and Income Fund and information for the years beginning after June
30, 1987, for Government Income Fund and Intermediate Bond Fund
have been audited by Ernst & Young LLP, independent auditors. All
of the auditors' reports related to information for these periods
were unqualified. These tables should be read in conjunction with
the respective Fund's financial statements and notes thereto. The
Funds' annual report, which may be obtained from the Trust without
charge upon request, contains additional performance information.

<PAGE> 8-9
LIMITED MATURITY INCOME FUND

Period
Ended
June 30, Years Ended June 30,
1993 (a) 1994 1995
-------- ------- ------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.01 $9.61
-------- ------- ------
Income from Investment Operation
Net investment income .12 .47 .56
Net realized and unrealized gains
on investments .01 (.40) .09
-------- ------- ------
Total from investment operations .13 .07 .65
Distributions from net investment
income (.12) (.47) (.56)
-------- ------- ------
NET ASSET VALUE, END OF PERIOD $10.01 $9.61 $9.70
-------- ------- ------
-------- ------- ------
Ratio of net expenses to average
net assets (b) *0.45% 0.45% 0.45%
Ratio of net investment income to
average net assets (c) *4.18% 4.81% 5.83%
Portfolio turnover rate **20% 122% 64%
Total return **1.43% 0.66% 6.96%
Net assets, end of period
(000 omitted) $7,619 $35,383 $27,907

GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Period
Ended
June 30, Years Ended June 30,
1986(a) 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------- ---- ----- ------ ------ ----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.10 $ 9.79 $ 9.59 $ 9.77 $ 9.66 $ 9.81 $10.40 $10.46 $ 9.48
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Income from Investment
Operations
Net investment income .24 .72 .74 .78 .76 .75 .72 .64 .56 .62
Net realized and
unrealized gains
(losses) on investments .10 (.31) (.15) .18 (.11) .15 .59 .31 (.77) .37
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Total from investment
operations .34 .41 .59 .96 .65 .90 1.31 .95 (.21) .99
Distributions
Net investment income (.24) (.72) (.74) (.78) (.76) (.75) (.72) (.64) (.56) (.62)
Net realized capital
gains -- -- (.05) -- -- -- -- (.25) (.01) --
In excess of realized
gains -- -- -- -- -- -- -- -- (.20) --
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Total distributions (.24) (.72) (.79) (.78) (.76) (.75) (.72) (.89) (.77) (.62)
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
NET ASSET VALUE,
END OF PERIOD $10.10 $ 9.79 $ 9.59 $ 9.77 $ 9.66 $ 9.81 $10.40 $10.46 $ 9.48 $ 9.85
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Ratio of expenses to
average net assets (b) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.99% 0.95% 0.98% 1.00%
Ratio of net investment
income to average net
assets (c) *7.61% 7.13% 7.68% 8.19% 7.90% 7.65% 7.05% 6.25% 5.49% 6.56%
Portfolio turnover rate **91% 205% 237% 239% 181% 136% 139% 170% 167% 225%
Total return **3.35% 4.01% 6.35% 10.61% 6.92% 9.61% 13.75% 9.60% (2.26%) 10.94%
Net assets, end of
period (000 omitted) $11,970 $22,656 $26,859 $32,011 $46,853 $49,952 $58,978 $61,591 $45,836 $37,280
</TABLE>

<PAGE> 10-11
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Years Ended June 30,
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $8.89 $9.92 $8.77 $8.51 $8.65 $8.38 $8.53 $8.99 $9.26 $8.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment
Operations
Net investment income .84 .74 .68 .74 .73 .69 .69 .65 .56 .58
Net realized and
unrealized gains
(losses) on investments 1.03 (.41) (.12) .14 (.28) .16 .46 .27 (.59) .23
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations 1.87 .33 .56 .88 .45 .85 1.15 .92 (.03) .81
Distributions
Net investment income (.84) (.74) (.68) (.74) (.72) (.70) (.69) (.65) (.56) (.58)
Net realized capital gains -- (.74) (.14) -- -- -- -- -- (.08) --
In excess of realized
gains -- -- -- -- -- -- -- -- (.15) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (.84) (1.48) (.82) (.74) (.72) (.70) (.69) (.65) (.79) (.58)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $9.92 $8.77 $8.51 $8.65 $8.38 $8.53 $8.99 $9.26 $8.44 $8.67
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Ratio of expenses to
average net assets (b) 0.69% 0.68% 0.73% 0.73% 0.74% 0.73% 0.70% 0.67% 0.70% 0.70%
Ratio of net investment
income to average net
assets (c) 9.03% 7.94% 7.97% 8.71% 8.60% 8.17% 7.87% 7.22% 6.20% 6.94%
Portfolio turnover rate 334% 230% 273% 197% 296% 239% 202% 214% 206% 162%
Total return 21.90% 3.40% 6.92% 10.97% 5.33% 10.62% 14.02% 10.59% (0.47%) 10.11%
Net assets, end of
period (000 omitted) $183,440 $188,674 $162,225 $165,056 $161,439 $184,444 $242,948 $311,728 $302,507 $301,733
</TABLE>

INCOME FUND
<TABLE>
<CAPTION>
Period
Ended
June 30, Years Ended June 30,
1986(a) 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $ 9.94 $ 9.71 $ 9.60 $ 9.65 $ 8.95 $ 8.95 $ 9.51 $10.10 $ 9.36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income .30 .98 .95 .95 .92 .80 .76 .75 .69 .71
Net realized and
unrealized gains (losses)
on investments (.06) (.23) (.11) .05 (.70) -- .56 .59 (.74) .43
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .24 .75 .84 1.00 .22 .80 1.32 1.34 (.05) 1.14
Distributions from net
investment income (.30) (.98) (.95) (.95) (.92) (.80) (.76) (.75) (.69) (.71)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.94 $ 9.71 $ 9.60 $ 9.65 $ 8.95 $ 8.95 $ 9.51 $10.10 $ 9.36 $ 9.79
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of expenses to
average net assets (b) *1.00% 0.96% 0.91% 0.90% 0.93% 0.95% 0.90% 0.82% 0.82% 0.82%
Ratio of net investment
income to average net
assets (c) *10.07% 9.90% 10.08% 9.97% 10.02% 8.98% 8.20% 7.62% 6.94% 7.55%
Portfolio turnover rate **84% 153% 158% 94% 90% 77% 76% 39% 53% 64%
Total return **2.42% 7.70% 9.38% 11.06% 2.48% 9.30% 15.30% 14.64% (0.69%) 12.79%
Net assets, end of
period (000 omitted) $32,034 $91,916 $96,611 $110,376 $89,023 $93,952 $112,706 $151,594 $158,886 $174,327
<FN>
*Annualized.
**Not annualized.
(a) Government Income Fund and Income Fund commenced operations on
March 5, 1986 and Limited Maturity Income Fund commenced
operations on March 11, 1993.
(b) If the Funds had paid all of their expenses and there had been
no reimbursement of expenses by the Adviser, these ratios would
have been: for Limited Maturity Income Fund, 3.63% for the
period ended June 30, 1993 and 1.14% and 1.27% for the years
ended June 30, 1994 and 1995, respectively; for Government Income
Fund, 3.33% for the period ended June 30, 1986, and 1.44%, 1.37%,
1.21%, and 1.07% for the years ended June 30, 1987 through 1990,
respectively, and 1.09% for the year ended June 30, 1995; for
Intermediate Bond Fund, 0.71% for the year ended June 30, 1995;
and for Income Fund, 2.01% for the period ended June 30, 1986,
and 0.83% and 0.85% for the years ended June 30, 1994 and 1995,
respectively.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>

<PAGE> 12
THE FUNDS

The mutual funds offered by this prospectus are STEIN ROE LIMITED
MATURITY INCOME FUND ("Limited Maturity Income Fund"), STEIN ROE
GOVERNMENT INCOME FUND ("Government Income Fund"), STEIN ROE
INTERMEDIATE BOND FUND ("Intermediate Bond Fund"), and STEIN ROE
INCOME FUND ("Income Fund") (collectively, the "Funds"). Each of
the Funds is a no-load, diversified "mutual fund." No-load funds
do not impose commissions or charges when shares are purchased or
redeemed. Mutual funds sell their own shares to investors and
invest the proceeds in a portfolio of securities. A mutual fund
allows you to pool your money with that of other investors in
order to obtain professional investment management. Mutual funds
generally make it possible for you to obtain greater diversification
of your investments and simplify your recordkeeping.

Stein Roe & Farnham Incorporated (the "Adviser") is investment
adviser to the Funds. The Adviser also manages several other no-
load mutual funds with different investment objectives, including
equity funds, international funds, tax-exempt bond funds, and
money market funds. To obtain prospectuses and other information
on any of those mutual funds, please call 800-338-2550.

HOW THE FUNDS INVEST

Each Fund seeks a high level of current income. Each Fund
invests as described below. Further information on portfolio
investments and strategies may be found under Portfolio
Investments and Strategies in this prospectus and in the Statement
of Additional Information.

LIMITED MATURITY INCOME FUND.
This Fund's investment objective is to provide a high level of
current income, consistent with the preservation of capital. The
Fund attempts to achieve its objective by investing primarily in
securities issued or guaranteed as to principal and interest by
the U.S. Government or by its agencies or instrumentalities ("U.S.
Government Securities") and other high-quality fixed-income
securities. Depending on market conditions, the Fund may invest a
substantial portion of its assets in mortgage-backed debt
securities issued by GNMA, FNMA, and FHLMC.

<PAGE> 13

In addition, the Fund may invest in principal portions or coupon
portions of U.S. Government Securities that have been separated
(stripped) by banks, brokerage firms, or other entities. Stripped
securities are usually sold separately in the form of receipts or
certificates representing undivided interests in the stripped
portion and are not considered to be issued or guaranteed by the
U.S. Government. Stripped securities may be more volatile than
non-stripped securities. The staff of the Securities and Exchange
Commission believes that mortgage-backed stripped securities are
illiquid. The Fund has temporarily agreed to treat stripped
securities as subject to the Fund's restriction on investment
in illiquid securities.

The Fund may also invest in other types of debt securities;
however, under normal circumstances, at least 65% of the Fund's
total assets will be invested in U.S. Government Securities, non-
U.S. Government Securities that are rated at least AA by Standard
& Poor's Corporation ("S&P") or Aa by Moody's Investors Service,
Inc. ("Moody's") and high-quality money market instruments. The
Fund may invest up to 35% of its assets in other debt securities
that are rated at least investment grade (BBB by S&P or Baa by
Moody's). Securities rated BBB by S&P or Baa by Moody's are
neither highly protected nor poorly secured. Such securities have
some speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity of the issuers of such securities to make
principal and interest payments than is the case for issuers of
higher grade securities. If the rating of a security held by the
Fund is lost or reduced below investment grade, the Fund is not
required to dispose of the security, but the Adviser will consider
that fact in determining whether the Fund should continue to
hold the security.

<PAGE> 14
maturity in that it estimates the effect of expected principal
prepayments and call provisions. With respect to GNMA securities
and other mortgage-backed securities, the effective maturity is
likely to be substantially less than the stated maturity of the
mortgages in the underlying pools. With respect to obligations
with call provisions, the effective maturity is typically the next
call date on which the obligation reasonably may be expected to be
called. Securities without prepayment or call provisions generally
have an effective maturity equal to their stated maturity. During
periods of rising interest rates, the effective maturity of
mortgage-backed securities and callable obligations may increase
because they are less likely to be prepaid, which may result in
greater net asset value fluctuation.

GOVERNMENT INCOME FUND.
This Fund's investment objective is to provide a high level of
current income. It invests primarily in U.S. Government
Securities. Depending on market conditions, the Fund may invest a
substantial portion of its assets in mortgage-backed debt
securities issued by GNMA, FNMA, and FHLMC.

Because the Fund's investment policy permits it to invest in U.S.
Government Securities that are not backed by the full faith and
credit of the U.S. Treasury, investment in the Fund may involve
risks that are different in some respects from an investment in a
fund that invests only in securities that are backed by the full
faith and credit of the U.S. Treasury. Such risks may include a
greater risk of loss of principal and interest on the securities
in the Fund's portfolio that are supported only by the issuing or
guaranteeing U.S. Government agency or instrumentality, since the
Fund must look principally or solely to that entity for ultimate
repayment.

<PAGE> 15
believes that stripped securities are illiquid. The
Fund has temporarily agreed to treat stripped securities as
subject to the Fund's restriction on investment in illiquid
securities. The Fund will invest in debt securities rated at
least investment grade or, if unrated, deemed by the Adviser to be
of comparable quality. Securities rated in the fourth grade are
neither highly protected nor poorly secured. Such securities have
some speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity of the issuers of such securities to make
principal and interest payments than is the case for issuers of
higher grade securities. If the rating of a security held by the
Fund is lost or reduced below investment grade, the Fund is not
required to dispose of the security, but the Adviser will consider
that fact in determining whether the Fund should continue to hold
the security.

INTERMEDIATE BOND FUND.
This Fund's investment objective is to provide a high level of
current income, consistent with the preservation of capital, by
investing primarily in marketable debt securities. Under normal
market conditions, the Fund will invest at least 65% of the value
of its total assets (taken at market value at the time of
investment) in convertible and non-convertible bonds and
debentures, and at least 60% of its assets will be invested in the
following:

(1) Marketable straight-debt securities of domestic issuers, and
of foreign issuers payable in U.S. dollars, rated at time of
purchase within the three highest grades assigned by Moody's or
by S&P;

(2) U.S. Government Securities;

(3) Commercial paper rated Prime-1 by Moody's or A-1 by S&P at
time of purchase, or, if unrated, issued or guaranteed by a
corporation with any outstanding debt rated Aa or better by
Moody's or AA or better by S&P; and

(4) Bank obligations, including repurchase agreements, of banks
having total assets in excess of $1 billion.

<PAGE> 16
other mortgage-backed securities, average life is likely to be
substantially less than the stated maturity of the mortgages in
the underlying pools. With respect to obligations with call
provisions, average life is typically the next call date on which
the obligation reasonably may be expected to be called. Securities
without prepayment or call provisions generally have an average life
equal to their stated maturity. During periods of rising interest
rates, the average life of mortgage-backed securities and callable
obligations may increase substantially because they are not likely
to be prepaid, which may result in greater net asset value
fluctuation.

The Fund also may invest in other debt securities (including those
convertible into or carrying warrants to purchase common stocks or
other equity interests, and privately placed debt securities),
preferred stocks, and marketable common stocks that the Adviser
considers likely to yield relatively high income in relation to
cost.

The Fund may invest up to 35% of its total assets in debt
securities that are rated below investment grade (with no minimum
permitted rating) and that, on balance, are considered predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the possibility
of issuer default and bankruptcy. An economic downturn could
severely disrupt this market and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal
and interest. In addition, lower-quality bonds are less sensitive
to interest rate changes than higher-quality instruments (see Risks
and Investment Considerations) and generally are more sensitive to
adverse economic changes or individual corporate developments.
During a period of adverse economic changes, including a period
of rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment
obligations.

<PAGE> 17
These analyses may take into consideration such quantitative factors as
an issuer's present and potential liquidity, profitability,
internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an
assessment of management, industry characteristics, accounting
methodology, and foreign business exposure.

Debt securities that are rated below investment grade tend to be
less marketable than higher-quality debt securities because the
market for them is less broad. The market for unrated debt
securities is even narrower. During periods of thin trading in
these markets, the spread between bid and asked prices is likely
to increase significantly, and the Fund may have greater
difficulty selling its portfolio securities. (See Net Asset
Value.) The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions.

For the fiscal year ended June 30, 1995, the Fund's portfolio was
invested, on average, as follows: high-quality short-term
instruments, 4.1%; U.S. Government Securities, 39.3%; AAA, 6.3%;
AA, 7.2%; A, 13.3%; BBB, 21.2%; BB, 8.1%; and unrated, 0.5%. The
ratings are based on a dollar-weighted average, computed monthly,
and reflect the higher of S&P or Moody's ratings. The ratings do
not necessarily reflect the current or future composition of the
Fund.

INCOME FUND.

The investment objective of Income Fund is to provide a high level
of current income. Consistent with that investment objective,
capital preservation and capital appreciation are regarded as
secondary objectives.

Income Fund attempts to achieve its objective by investing
principally in medium-quality debt securities, which are
obligations of issuers that the Adviser believes possess adequate,
but not outstanding, capacities to service their debt securities,
such as securities rated A or Baa by Moody's or A or BBB by S&P.
The Adviser generally attributes to medium-quality securities the
same characteristics as do rating services.

Although the Income Fund will invest at least 60% of its assets in
medium- or higher-quality securities, it may also invest to a
lesser extent in securities of lower quality (in the case of rated
securities, having a rating by Moody's or S&P of not less than C).
Although the Fund can invest up to 40% of its assets in lower-
quality securities, it does not intend to invest more than 35% in
lower-quality securities. Lower-quality debt securities are
obligations of issuers that are

<PAGE> 18
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal, and are commonly referred to
as "junk bonds." The Income Fund may invest in lower-quality debt
securities; for example, if the Adviser believes the financial
condition of the issuers or the protection offered to the particular
obligations is stronger than is indicated by low ratings or otherwise.
The Income Fund may invest in higher-quality securities; for example,
under extraordinary economic or financial market conditions, or when
the spreads between the yields on medium- and high-quality securities
are relatively narrow.

Some issuers of debt securities choose not to have their
securities rated by a rating service, and the Income Fund may
invest in unrated securities that the Adviser believes are
suitable for investment.

Investment in medium- or lower-quality debt securities involves
greater investment risk, including the possibility of issuer
default or bankruptcy. An economic downturn could severely
disrupt this market and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and
interest. In addition, lower-quality bonds are less sensitive to
interest rate changes than higher-quality instruments (see Risks
and Investment Considerations) and generally are more sensitive to
adverse economic changes or individual corporate developments.
During a period of adverse economic changes, including a period of
rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment
obligations.

Achievement of the Income Fund's investment objective will be more
dependent on the Adviser's credit analysis than would be the case
if the Fund were investing in higher-quality debt
securities. Since the ratings of rating services (which evaluate
the safety of principal and interest payments, not market risks)
are used only as preliminary indicators of investment quality, the
Adviser employs its own credit research and analysis, from which
it has developed a credit rating system based upon comparative
credit analyses of issuers within the same industry. These
analyses may take into consideration such quantitative factors as
an issuer's present and potential liquidity, profitability,
internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an
assessment of management, industry characteristics, accounting
methodology, and foreign business exposure.

Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities

<PAGE> 19
because the market for them is less broad. The market
for unrated debt securities is even narrower. During periods
of thin trading in these markets, the spread between bid and asked
prices is likely to increase significantly, and the Income Fund may
have greater difficulty selling its portfolio securities. (See Net
Asset Value.) The market value of these securities and their liquidity
may be affected by adverse publicity and investor perceptions.

Under normal market conditions, the Income Fund will invest at
least 65% of the value of its total assets (taken at market value)
in convertible and non-convertible bonds and debentures. Such
securities may be accompanied by the right to acquire equity
securities evidenced by warrants attached to the security or
acquired as part of a unit with the security. Equity securities
acquired by conversion or exercise of such a right may be retained
by the Income Fund for a sufficient time to permit orderly
disposition thereof or to establish long-term holding periods for
federal income tax purposes.

The Income Fund may invest up to 35% of its total assets in other
debt securities, marketable preferred and common stocks, and
foreign and municipal securities that the Adviser considers likely
to yield relatively high income in relation to costs, and rights
to acquire such securities. (Municipal securities are securities
issued by or on behalf of state and local governments, the
interest on which is generally exempt from federal income tax.)
Any assets not otherwise invested may be invested in money market
instruments.

For the fiscal year ended June 30, 1995, the Income Fund's
portfolio was invested, on average, as follows: high-quality
short-term instruments, 3.9%; U.S. Government Securities, 12.6%;
AAA, 3.5%; AA, 2.6%; A, 11.0%; BBB, 37.5%; BB, 25.3%; B, 1.5%; and
unrated, 2.1%. The ratings are based on a dollar-weighted
average, computed monthly, and reflect the higher of S&P or
Moody's ratings. The ratings do not necessarily reflect the
current or future composition of the Income Fund.

PORTFOLIO INVESTMENTS AND STRATEGIES

<PAGE> 20
Mortgage Association ("GNMA"), Federal Farm Credit Banks, Federal
Home Loan Banks, Farmers Home Administration, Federal Home Loan
Mortgage Corporation ("FHLMC"), and Federal National Mortgage Association
("FNMA"). U.S. Government Securities are generally viewed by the Adviser
as being among the safest of debt securities with respect to the timely
payment of principal and interest (but not with respect to any premium
paid on purchase), but generally bear a lower rate of interest than
corporate debt securities. However, they are subject to market risk
like other debt securities, and therefore the Fund's shares can be
expected to fluctuate in value.

DERIVATIVES.
Consistent with its objective, each Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange traded
options, futures contracts, futures options, securities
collateralized by underlying pools of mortgages or other
receivables, and other instruments, the value of which is
"derived" from the performance of an underlying asset or a
"benchmark" such as a security index, an interest rate, or a
currency ("Derivatives"). No Fund expects to invest more than 5%
of its net assets in any type of Derivative except: for each Fund,
options, futures contracts, and futures options; for each Fund
other than Income Fund, mortgage or other asset-backed securities;
and, for Limited Maturity Income Fund, floating rate instruments.

Derivatives are most often used to manage investment risk or to
create an investment position indirectly because it is more
efficient or less costly than direct investment. They also may be
used in an effort to enhance portfolio returns.

The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives. For additional
information on Derivatives, please refer to the Statement of
Additional Information.

MORTGAGE AND OTHER ASSET-BACKED DEBT SECURITIES. Limited
Maturity Income Fund, Government Income Fund, and

<PAGE> 21
Intermediate Bond Fund each may invest in securities secured by mortgages
or other assets such as automobile or home improvement loans and credit
card receivables. These instruments may be issued or guaranteed by the
U.S. Government or by its agencies or instrumentalities or by private
entities such as commercial, mortgage and investment banks and
financial companies or financial subsidiaries of industrial companies.

Securities issued by GNMA represent an interest in a pool of
mortgages insured by the Federal Housing Administration or the
Farmers Home Administration, or guaranteed by the Veterans
Administration. Securities issued by FNMA and FHLMC, U.S.
Government-sponsored corporations, also represent an interest in a
pool of mortgages.

The timely payment of principal and interest on GNMA securities is
guaranteed by GNMA and backed by the full faith and credit of the
U.S. Treasury. FNMA guarantees full and timely payment of
interest and principal on FNMA securities. FHLMC guarantees
timely payment of interest and ultimate collection of principal on
FHLMC securities. FNMA and FHLMC securities are not backed by the
full faith and credit of the U.S. Treasury.

<PAGE> 22
market factors. If mortgages are pre-paid during periods of declining
interest rates, there would be a resulting loss of the full-term
benefit of any premium paid by the Fund on purchase of the CMO,
and the proceeds of pre-payment would likely be invested at lower
interest rates. Each Fund tends to invest in CMOs of classes
known as planned amortization classes ("PACs") which have pre-
payment protection features tending to make them less susceptible
to price volatility.

Non-mortgage asset-backed securities usually have less pre-payment
risk than mortgage-backed securities, but have the risk that the
collateral will not be available to support payments on the
underlying loans which finance payments on the securities
themselves. Therefore, greater emphasis is placed on the credit
quality of the security issuer and the guarantor, if any.

Asset-backed securities tend to experience greater price
volatility than straight debt securities.

FLOATING RATE INSTRUMENTS. Limited Maturity Income Fund may also
invest in floating rate instruments which provide for periodic
adjustments in coupon interest rates that are automatically reset
based on changes in amount and direction of specified market
interest rates. In addition, the adjusted duration of some of
these instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%.

FUTURES AND OPTIONS. Each Fund may purchase and write both call
options and put options on securities, indexes and foreign
currencies, and enter into interest rate, index and foreign
currency futures contracts. Each Fund may also write options on such
futures contracts and purchase other types of forward or investment
contracts linked to individual securities, indexes or other benchmarks
in order to, consistent with its investment objective, provide additional
revenue, or to hedge against changes in security prices, interest
rates, or currency fluctuations. Each Fund may write a call or put
option only if the option is covered. As the

<PAGE> 23
writer of a covered call option, the Fund foregoes, during the
option's life, the opportunity to profit from increases in market
value of the security covering the call option above the sum of the
premium and the exercise price of the call. There can be no assurance
that a liquid market will exist when a Fund seeks to close out a position.

Because of low margin deposits required, the use of futures
contracts involves a high degree of leverage, and may result in
losses in excess of the amount of the margin deposit. Foreign
currency futures and options are permitted only if a Fund is
permitted to invest in foreign securities.

FOREIGN SECURITIES.
Limited Maturity Income Fund, Intermediate Bond Fund, and
Income Fund each may invest in foreign securities. No Fund will invest
in a foreign security if, as a result of such investment, more
than 25% of its total assets would be invested in foreign
securities. For purposes of this restriction, foreign debt
securities do not include securities represented by American
Depositary Receipts ("ADRs"), foreign debt securities denominated
in U.S. dollars, or securities guaranteed by a U.S. person such as
a corporation domiciled in the United States that is a parent or
affiliate of the issuer of the securities being guaranteed. The
Funds may invest in sponsored or unsponsored ADRs. In addition
to, or in lieu of, such direct investment, a Fund may construct a
synthetic foreign position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b)
concurrently entering into a forward contract to deliver a
corresponding amount of that currency in exchange for a different
currency on a future date and at a specified rate of exchange.
Because of the availability of a variety of highly liquid U.S.
dollar debt instruments, a synthetic foreign position utilizing
such U.S. dollar instruments may offer greater liquidity than
direct investment in foreign currency debt instruments. In
connection with the purchase of foreign securities, the Funds may
contract to purchase an amount of foreign currency sufficient to
pay the purchase price of the securities at the settlement date.
At June 30, 1995, no portion of any Fund's assets was invested in
foreign securities as defined above, and no Fund intends to invest
more than 5% of its net assets in foreign securities. (See Risks
and Investment Considerations.)

LENDING OF PORTFOLIO SECURITIES.
Subject to certain restrictions, each Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be
continuously secured by collateral

<PAGE> 24
in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned
by the Fund. The Fund would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned,
and would also receive an additional return that may be in the form
of a fixed fee or a percentage of the collateral. The Fund would have
the right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. In the event of
bankruptcy or other default of the borrower, the Fund could experience
both delays in liquidating the loan collateral or recovering the loaned
securities and losses including (a) possible decline in the value of
the collateral or in the value of the securities loaned during the period
while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
Each Fund's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. A Fund 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 advisable for investment reasons. Securities purchased in this
manner involve a risk of loss if the value of the security purchased
declines before the settlement date.

When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that a Fund will sell
securities with a commitment to purchase similar, but not
identical, securities at a future date. Generally, the securities
are repurchased at a price lower than the sales price. Dollar
roll transactions involve the risk of restrictions on the Fund's
ability to repurchase the security if the counterparty becomes
insolvent; an adverse change in the price of the security during
the period of the roll or that the value the security repurchased
will be less than the security sold; and transaction costs
exceeding the return earned by the Fund on the sales proceeds of
the dollar roll.

Each Fund may also invest in securities purchased on a standby
commitment basis, which is a delayed-delivery agreement in which
the Fund binds itself to

<PAGE> 25
accept delivery of a security at the option of the other party
to the agreement.

PORTFOLIO TURNOVER.
In attempting to attain its objective, each Fund may sell
portfolio securities without regard to the period of time they
have been held. Further, the Adviser may purchase and sell
securities for the portfolios of Limited Maturity Income Fund,
Government Income Fund, and the Income Fund with a view to
maximizing current return, even if portfolio changes would cause
the realization of capital gains. Although the weighted average
effective maturity of the Limited Maturity Income Fund's portfolio
generally will not exceed three years and the average stated
maturity of the portfolios of Government Income Fund and the
Income Fund generally will exceed ten years, the Adviser may
adjust the average effective maturity of a Fund's portfolio from
time to time, depending on its assessment of the relative yields
available on securities of different maturities and its
expectations of future changes in interest rates. As a result,
the turnover rate of the Funds may vary from year to year. The
turnover rate for Limited Maturity Income Fund may exceed 100%,
but is not expected to exceed 200% under normal market conditions.
A high rate of portfolio turnover may result in increased
transaction expenses and the realization of capital gains (which
may be taxable) or losses. (See Financial Highlights and
Distributions and Income Taxes.)

RESTRICTIONS ON THE FUNDS' INVESTMENTS

No Fund may invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements for such securities; or (2) 25% or more of its total
assets would be invested in the securities of a group of issuers
in the same industry, except that this restriction does not apply
to U.S. Government Securities. Notwithstanding these limitations,
each Fund may invest all of its assets in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund.

No Fund may make loans, except that, consistent with its
investment policies and restrictions, each Fund may: (1) invest up
to 100% of its net assets in publicly offered or privately placed
debt securities, (2) lend its portfolio securities under certain
conditions, and (3) enter into repurchase

<PAGE> 26
agreements. /1/ No Fund may borrow money, except as a temporary
measure for extraordinary or emergency purposes and then the aggregate
borrowings at any one time (including reverse repurchase agreements
and dollar rolls) 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.

The policies set forth in the first two paragraphs under
Restrictions on the Funds' Investments (but not the footnote) are
fundamental policies of each Fund. /2/ The Statement of
Additional Information contains all of the investment
restrictions.

RISKS AND INVESTMENT CONSIDERATIONS

All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Although each Fund
seeks to reduce risk by investing in a diversified portfolio, this
does not eliminate all risk. The risks inherent in each Fund
depend primarily upon the term and quality of the obligations in
that Fund's portfolio, as well as on market conditions.

A decline in prevailing levels of interest rates generally
increases the value of securities in a Fund's portfolio, while an
increase in rates usually reduces the value of those securities.
As a result, interest rate fluctuations will affect a Fund's net
asset value, but not the income received by the Fund from its
portfolio securities. (Because yields on debt securities
available for purchase by a Fund vary over time, no specific yield
on shares of a Fund can be assured.) In addition, if the bonds in
a Fund's portfolio contain call, prepayment or redemption
provisions, during a period of declining interest rates, these
securities are likely to be redeemed, and the Fund will probably
be unable to replace them with securities having as great a yield.

Limited Maturity Income Fund is appropriate for investors who seek
higher yields than are usually available from money market
instruments with stable prices and shorter maturities, but who
also want less net asset fluctuation than that of a longer-term
fund; unlike money market funds, however, the Fund does not seek
to maintain a stable net asset value and may not be able to return
dollar-for-dollar
- -----------------------
/1/ A repurchase agreement involves a sale of securities to a Fund
with the concurrent agreement of the seller (bank or securities
dealer) to repurchase the securities at the same price plus an
amount equal to an agreed-upon interest rate within a specified
time. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays
in liquidating the underlying securities and losses. No Fund may
invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days and other illiquid securities.
/2/ A fundamental policy may be changed only with the approval of
a "majority of the outstanding vote securities" of a Fund as
defined in the Investment Company Act.
- --------------------------------

<PAGE> 27
the money invested. Intermediate Bond Fund is
appropriate for investors who seek high income with less net asset
value fluctuation from interest rate changes than that of a
longer-term fund, and who can accept greater levels of credit and
other risks associated with securities that are rated below
investment grade. Government Income Fund is designed for
investors who seek high income with minimum risk other than the
risk of changes in net asset value caused by fluctuations in
prevailing levels of interest rates. Income Fund is designed
for investors who seek a higher level of income and who can accept
greater levels of credit and other risks associated with
securities of medium or lower quality.

Investments in foreign securities, including ADRs, represent both
risks and opportunities not typically associated with investments
in domestic issuers. Risks of foreign investing include currency
risk, less complete financial information on issuers, less market
liquidity, more market volatility, less well-developed and
regulated markets, and greater political instability. In
addition, various restrictions by foreign governments on
investments by non-residents may apply, including imposition of
exchange controls and withholding taxes on dividends, and seizure
or nationalization of investments owned by non-residents. Foreign
investments also tend to involve higher transaction and custody
costs.

Limited Maturity Income Fund, Intermediate Bond Fund, and
Income Fund each may enter into foreign currency forward contracts and
use options and futures contracts, as described elsewhere in this
prospectus, to limit or reduce foreign currency risk.

There can be no assurance that a Fund will achieve its objective,
nor can a Fund assure that payments of interest and principal on
portfolio securities will be made when due. If, after purchase by
a Fund, the rating of a portfolio security is lost or reduced, the
Fund would not be required to sell the security, but the Adviser
would consider such a change in deciding whether the Fund should
retain the security in its portfolio.

The investment objective of each Fund is not fundamental and may
be changed by the Board of Trustees without a vote of
shareholders. If there were a change in a Fund's investment
objective, such change may result in the Fund having an investment
objective different from the objective that the shareholder
considered appropriate at the time of investment in the Fund.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in securities directly, each Fund may in the
future seek to achieve its

<PAGE> 28
investment objective by pooling its assets with assets of other
mutual funds managed by the Adviser for investment in another
investment company having the same investment objective and
substantially the same investment policies and restrictions as
the Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. It is expected that
any such investment company would be managed by the Adviser in
substantially the same manner as the Fund. There are no present
plans to convert any Fund to the Master Fund/Feeder Fund structure.
If a Fund were to convert to the Master Fund/Feeder Fund structure,
shareholders of that Fund would be given at least 30 days' prior
notice, although they would not be entitled to vote on the action.
Such investment would be made only if the Trustees determine it
to be in the best interests of a Fund and its shareholders.

HOW TO PURCHASE SHARES

You may purchase shares of any of the Funds by check, by wire, by
electronic transfer, or by exchange from your account with another
Stein Roe Fund. The initial purchase minimum per Fund account is
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act
("UGMA") accounts is $1,000; the minimum for accounts established
under an automatic investment plan (i.e., Regular Investments,
Dividend Purchase Option, or the Automatic Exchange Plan) is
$1,000 for regular accounts and $500 for UGMA accounts; and the
minimum per account for Stein Roe IRAs is $500. The initial
purchase minimum is waived for shareholders who participate in
the Stein Roe Counselor [Service mark] or Stein Roe Counselor
Preferred [Service mark] Programs. Subsequent purchases must be
at least $100, or at least $50 if you purchase by electronic
transfer. If you wish to purchase shares to be held by a
tax-sheltered retirement plan sponsored by the Adviser, you
must obtain special forms for those plans. (See Shareholder
Services.)

<PAGE> 29
accept cash, drafts, third party checks, or checks drawn on banks
outside of the United States. Should an order to purchase shares
of a Fund be cancelled because your check does not clear, you will
be responsible for any resulting loss incurred by that Fund.

State Street Bank and Trust Company
Boston, Massachusetts
ABA Routing No. 011000028
Attention: Custody
Fund No. ____; Stein Roe _______ Fund
Account of (exact name(s) in registration)
Shareholder Account No. ___________

Fund Numbers:
7116--Government Income Fund
7107--Intermediate Bond Fund
7118--Income Fund
7122--Limited Maturity Income Fund

<PAGE> 30
automatically at regular intervals (if you have elected Automatic
Exchanges). Restrictions apply; please review the information under
How to Redeem Shares--By Exchange.

PURCHASE PRICE AND EFFECTIVE DATE.
Each purchase of a Fund's shares is made at that Fund's net asset
value (see Net Asset Value) next determined after receipt of
payment as follows:

A purchase by check or wire transfer is made at the net asset
value next determined after receipt by the Fund of the check or
wire transfer of funds in payment of the purchase.

A purchase by electronic transfer is made at the net asset value
next determined after the Fund receives the electronic transfer
from your bank. A Special Electronic Transfer Investment order
received by telephone on a business day before 2:00 p.m., Chicago
time, is effective on the next business day. Shares begin earning
dividends on the day following the day on which they are
purchased.

HOW TO REDEEM SHARES

BY WRITTEN REQUEST.
You may redeem all or a portion of your shares

<PAGE> 31
of a Fund by submitting a written request in "good order" to the Trust
at P.O. Box 804058, Chicago, Illinois 60680. A redemption request will
be considered to have been received in good order if the following
conditions are satisfied:

(1) the request must be in writing, indicate the number of shares
or dollar amount to be redeemed, and identify the shareholder's
account number;

(2) the request must be signed by the shareholder(s) exactly as
the shares are registered;

(4) the signatures on either the written redemption request or
the certificates (or the accompanying stock power) must be
guaranteed (a signature guarantee is not a notarization, but is
a widely accepted way to protect you and the Funds by verifying
your signature);

(5) corporations and associations must submit with each request a
completed Certificate of Authorization included in this
prospectus (or a form of resolution acceptable to the Trust);
and

(6) other supporting legal documents may be required from
organizations, executors, administrators, trustees, or others
acting on accounts not registered in their names.

<PAGE> 32
Stein Roe Fund to be purchased, except that a
signature guarantee normally is not required. (See also the
discussion below of the Telephone Exchange Privilege and Automatic
Exchanges.)

You may not use any of the Special Redemption Privileges if you
hold certificates for any of your Fund shares. The Telephone
Redemption by Check Privilege and Special Electronic Transfer
Redemptions are not available to redeem shares held by a tax-
sheltered retirement plan sponsored by the Adviser. (See also
General Redemption Policies.)

<PAGE> 33
Trust expects that it would provide shareholders with prior written
notice of any such action unless it appears that the resulting delay
in the suspension, limitation, modification, or termination of the
Telephone Exchange Privilege would adversely affect the Funds. IF
THE TRUST WERE TO SUSPEND, LIMIT, MODIFY, OR TERMINATE THE TELEPHONE
EXCHANGE PRIVILEGE, A SHAREHOLDER EXPECTING TO MAKE A TELEPHONE EXCHANGE
MIGHT FIND THAT AN EXCHANGE COULD NOT BE PROCESSED OR THAT THERE MIGHT
BE A DELAY IN THE IMPLEMENTATION OF THE EXCHANGE. (See How to Redeem
Shares--By Exchange.) During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by telephone.

Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another Stein Roe Fund account on a regular basis.

Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 800-338-2550. The
proceeds will be sent by check to your registered address.
The Telephone Redemption by Check Privilege is not available to
redeem shares held by a tax-sheltered retirement plan sponsored by the Adviser.

GENERAL REDEMPTION POLICIES.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please telephone
the Trust if you have any questions about requirements for a
redemption before submitting your request. If you wish to redeem
shares held by a tax-sheltered retirement plan sponsored by the
Adviser, special procedures of those plans apply to such
redemptions. (See Shareholder Services--Tax-Sheltered Retirement
Plans.) The Trust reserves the right to require a properly

<PAGE> 34
completed Application before making payment for shares redeemed.

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon that Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares and may result
in a realized capital gain or loss.

The Trust will generally mail payment for shares redeemed within
seven days after proper instructions are received. If you attempt
to redeem shares within 15 days after they have been purchased by
check or electronic transfer, the Trust may delay payment of the
redemption proceeds to you until it can verify that payment for
the purchase of those shares has been (or will be) collected.
To reduce such delays, the Trust recommends that your purchase be
made by federal funds wire through your bank.

The Trust reserves the right at any time without prior notice to
suspend, limit, modify, or terminate any Privilege or its use in
any manner by any person or class.

Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Funds employ
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Funds and
their transfer agent to tape-record all instructions to redeem.
In addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests the shareholder to review the transactions and inform the
Fund immediately if there is a problem. If a Fund does not follow
reasonable procedures for protecting shareholders against loss on
telephone transactions, it may be liable for any losses due to
unauthorized or fraudulent instructions.

Generally, you may not use the Exchange Privilege or any Special
Redemption Privilege to redeem shares purchased by check (other
than certified or cashiers' checks) or

<PAGE> 35
electronic transfer until 15 days after their date of purchase.

SHAREHOLDER SERVICES

FUNDS-ON-CALL [REGISTERED MARK] 24-HOUR INFORMATION SERVICE.
To access the Stein Roe Funds-on-Call [Registered mark] automated
telephone service, just call 800-338-2550 on any touch-tone
telephone and follow the recorded instructions. Funds-on-Call
[Registered mark] provides yields, prices, latest dividends,
account balances, last transaction, and other information 24 hours
a day, seven days a week.

FUNDS-ON-CALL [REGISTERED MARK] AUTOMATED TELEPHONE TRANSACTIONS.
If you have established the Funds-on-Call [Registered mark]
transaction privilege (Funds-on-Call [Registered mark] Application
will be required), you may initiate Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by
Check 24 hours a day, seven days a week by calling 800-338-2550
on a touch-tone telephone. These transactions are subject to the
terms and conditions of the individual privileges. (See How to
Purchase Shares and How to Redeem Shares.)

STEIN ROE COUNSELOR [SERVICE MARK] PROGRAM.
The Adviser offers a Stein Roe Counselor [Service mark] and a
Stein Roe Counselor Preferred [Service mark] program. The
programs are designed to provide investment guidance in helping

<PAGE> 36
investors to select a portfolio of Stein Roe Mutual Funds. The
Stein Roe Counselor Preferred [Service mark] program, which
automatically adjusts client portfolios, has a fee of up to 1% of
assets.

RECORDKEEPING AND ADMINISTRATION SERVICES.
If you oversee or administer investments for a group of investors,
we offer a variety of services.

TAX-SHELTERED RETIREMENT PLANS.
Booklets describing the following programs and special forms
necessary for establishing them are available on request. You may
use all of the Stein Roe Funds, except those investing primarily
in tax-exempt securities, in these plans. Please read the
prospectus for each Fund in which you plan to invest before making
your investment.

Individual Retirement Accounts ("IRAs") for employed persons and
their non-employed spouses.

Prototype Money Purchase Pension and Profit-Sharing Plans for
self-employed individuals, partnerships, and corporations.

Simplified Employee Pension Plans permitting employers to provide
retirement benefits to their employees by utilizing IRAs while
minimizing administration and reporting requirements.

SPECIAL SERVICES.
The following special services are available to shareholders.
Please call 800-338-2550 or write the Trust for additional
information and forms.

Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another Stein Roe Fund account. Before establishing this
option, you should obtain and read carefully the prospectus of the
Stein Roe Fund into which you wish to have your distributions
invested. The account from which distributions are made must be
of sufficient size that each distribution will usually be at least
$25. The account into which distributions are to be invested may
be opened with an initial investment of only $1,000.

Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.

Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).

<PAGE> 37
Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).

Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).

Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another Stein Roe
Fund account on a regular basis ($50 minimum; $100,000 maximum).

Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).

Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.

NET ASSET VALUE

The purchase and redemption price of each Fund's shares is its net
asset value per share. The net asset value of a share of each
Fund is determined as of the close of trading on the New York
Stock Exchange (currently 3:00 p.m., Chicago time) by dividing the
difference between the values of the Fund'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 of a Fund
should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.

Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Long-term
straight-debt securities for which market quotations are not
readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. Short-term debt securities with
remaining maturities of 60 days or less are valued at their
amortized cost, which does not take into account unrealized gains
or losses. The Board believes that the amortized cost represents
a fair value for such securities. Short-term debt securities with
remaining maturities of more than 60 days for which market
quotations are not readily available are valued by use of a matrix
prepared by the Adviser based on quotations for comparable securities.
Other assets and securities held by a Fund for which these

<PAGE> 38
valuation methods do not produce a fair value are valued by a
method that the Board believes will determine a fair value.

DISTRIBUTIONS AND INCOME TAXES

DISTRIBUTIONS.
Income dividends are declared each business day, paid monthly, and
confirmed at least quarterly. Each Fund intends to distribute by
the end of each calendar year at least 98% of any net capital
gains realized from the sale of securities during the twelve-month
period ended October 31 in that year. The Funds intend to
distribute any undistributed net investment income and net
realized capital gains in the following year.

You will be advised annually as to the source of distributions.
If you are not subject to tax on your income, you will not be
required to pay tax on these amounts.

If you redeem shares of a Fund held for six months or less, any
loss on the sale of those shares will be a long-term capital loss
to the extent of any distributions of long-term capital gain you
have received with respect to those shares.

For federal income tax purposes, each Fund is treated as a
separate taxable entity distinct from the other series of the
Trust.

<PAGE> 39
This section is not intended to be a full discussion of income tax
laws and their effect on shareholders. You may wish to consult
your own tax advisor.

BACKUP WITHHOLDING.
If (a) you fail to (i) furnish your properly certified social
security or other tax identification number or (ii) certify that
your tax identification number is correct or that you are not
subject to backup withholding due to the underreporting of certain
income, or (b) the Internal Revenue Service informs the Trust that
your tax identification number is incorrect, the Trust may be
required to withhold federal income tax ("backup withholding")
from certain payments (including redemption proceeds) to you.
These certifications are contained in the Application that you
should complete and return when you open an account. The Funds
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for a Fund to reimburse you for amounts
withheld. However, you may claim the amount withheld as a credit
on your federal income tax return.

INVESTMENT RETURN

The total return from an investment in a Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.

The yield of a Fund is calculated by dividing its net investment
income per share (a hypothetical figure as defined in the SEC
rules) during a 30-day period by the net asset value per share on
the last day of the period. The yield formula provides for
semiannual compounding, which assumes that net investment income
is earned and reinvested at a constant rate and annualized at the
end of a six-month period.

<PAGE> 40
dividends paid. Past performance is not necessarily
indicative of future results. To obtain current yield or total
return information, you may call 800-338-2550 or write to the
address shown on the back cover.

MANAGEMENT OF THE FUNDS

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Funds. See Management in the
Statement of Additional Information for the names of and other
information about the trustees and officers.

The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing the
investment portfolios and the business
affairs of the Funds and the Trust, 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").

PORTFOLIO MANAGERS.
Michael T. Kennedy has been portfolio manager of Government Income
Fund and Intermediate Bond Fund since 1988. He is a vice-
president of the Trust, a senior vice president of the Adviser,
and has been associated with the Adviser since 1987. From 1984 to
1987, he was employed by Homewood Federal Savings and Loan. A
chartered financial analyst and a chartered investment counselor,
he received his B.S. degree from Marquette University in 1984 and
his M.M. from Northwestern University in 1988. Mr. Kennedy is
secretary of the Adviser's Fixed Income Policy Committee and
managed $414 million in mutual fund assets for the Adviser as of
June 30, 1995. Mr. Kennedy is also associate portfolio manager of
Limited Maturity Income Fund.

Steven P. Luetger has been portfolio manager of Limited Maturity
Income Fund since February 1995 and is associate portfolio manager
of Government Income Fund and Intermediate Bond Fund. Mr. Luetger
joined the Adviser in 1978 and is a senior vice president. He
received his B.A. from Knox College in 1975 and M.B.A. from the
University of Chicago in 1980. As of June 30,

<PAGE> 41
1995, Mr. Luetger managed $28 million in mutual fund assets for
the Adviser.

Ann H. Benjamin, a vice-president of the Trust, became portfolio
manager of the Income Fund in January 1990. She is a senior vice
president of the Adviser and has been associated with the Adviser
since 1989. A chartered financial analyst, she received her
B.B.A. from Chatham College in 1980 and her M.A. from Carnegie
Mellon University in 1985. Ms. Benjamin managed $212 million in
mutual fund assets for the Adviser as of June 30, 1995, serves as
High-Yield Credit Research Manager for the Adviser, and is a
member of the Adviser's Fixed Income Credit Review Committee.

Stephen F. Lockman has been associate portfolio manager of Income
Fund since October 1995. Mr. Lockman is a vice president of the
Adviser and has been employed by the Adviser since January 1994.
A chartered financial analyst, Mr. Lockman received a B.S. degree
from the University of Illinois in 1983 and an M.B.A. from DePaul
University in 1986.

FEES AND EXPENSES.
In return for its investment advisory and administrative services,
the Adviser receives a monthly fee from each Fund based on its
average net assets, computed and accrued daily. The annualized
fee for Limited Maturity Income Fund is .60 of 1% of the first
$100 million of average net assets, .55 of 1% of the next $100
million, and .50 of 1% thereafter; that of Intermediate Bond Fund
is .50 of 1% of average net assets; that of Government Income Fund
is .60 of 1% of the first $100 million and .55 of 1% thereafter;
and that of Income Fund is .65 of 1% of the first $100 million and
.60 of 1% thereafter. For the fiscal year ended June 30, 1995,
pursuant to the expense undertaking described under Fee Table, the
Adviser reimbursed Limited Maturity Income Fund $234,580,
resulting in a net payment by the Adviser to the Fund of $62,279.
For the fiscal year ended June 30, 1995, the fees for Government
Income Fund, Intermediate Bond Fund and Income Fund, after each
Fund's expense limitation described under Fee Table, amounted to
.51%, .49% and .60% of average net assets, respectively.

Under a separate agreement with the Trust, the Adviser provides
certain accounting and bookkeeping services to the Funds including
computation of each Fund's net asset value and calculation of its
net income and capital gains and losses on disposition of Fund
assets.

PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures

<PAGE> 42
contracts for the Funds. In doing so, the Adviser seeks to
obtain the best combination of price and execution, which involves
a number of judgmental factors.

TRANSFER AGENT.
SteinRoe Services Inc. ("SSI"), One South Wacker Drive, Chicago,
Illinois 60606, a wholly owned indirect subsidiary of Liberty
Mutual, is the agent of the Trust for the transfer of shares,
disbursement of dividends, and maintenance of shareholder
accounting records.

DISTRIBUTOR.
The shares of each Fund are offered for sale through Liberty
Securities Corporation ("Distributor") without any sales
commissions or charges to the Funds or to their shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Mutual. The business address of the Distributor is 600 Atlantic
Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to the Trust at P.O. Box 804058, Chicago, Illinois
60680. All distribution and promotional expenses are paid by the
Adviser, including payments to the Distributor for sales of Fund
shares.

ORGANIZATION AND DESCRIPTION OF SHARES

<PAGE> 43
the assets of the Trust or of the respective series for payment
under such credit, contract or claim, and that the shareholders,
trustees and officers of the Trust shall have no personal liability
therefor. The Declaration of Trust requires that notice of
such disclaimer of liability be given in each contract, instrument
or undertaking executed or made on behalf of the Trust. The
Declaration of Trust provides for indemnification of any shareholder
against any loss and expense arising from personal liability solely
by reason of being or having been a shareholder. Thus, the risk
of a shareholder incurring financial loss on account of shareholder
liability is believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the Trust
was unable to meet its obligations.

The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of the Trust is
also believed to be remote, because it would be limited to claims
to which the disclaimer did not apply and to circumstances in
which the other Fund was unable to meet its obligations.

<PAGE> 44

<PAGE> 45
CERTIFICATE OF AUTHORIZATION (FOR USE BY CORPORATIONS AND
ASSOCIATIONS ONLY)

The undersigned hereby certifies that he is the duly elected
Secretary of ____________________________ (the "Corporation")
(name of Corporation/Association)
and that the following individual(s):

Unless a lesser number is specified, all of the Authorized Persons
must sign written instructions. Number of signatures required:
________.

These authorizations shall continue in effect until five business
days after the Fund and its transfer agent receive written notice
from the Corporation of any change.

IN WITNESS WHEREOF, I have hereunto subscribed my name as
Secretary and affixed the seal of this Corporation this ____ day
of ___________________, 19___.

__________________________
Secretary

__________________________
Signature Guarantee*

*Only required if the person signing the Certificate is the only
person named as "Authorized Person."

Corporate
Seal
Here

<PAGE>

[STEIN ROE MUTUAL FUNDS LOGO]

P.O. Box 804058
Chicago, Illinois 60680
800-338-2550

In Chicago, visit our Fund Center
at One South Wacker Drive

Liberty Securities Corporation, Distributor

02009

<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE CASH RESERVES FUND
The Fund seeks to obtain maximum current income consistent with
capital preservation and maintenance of liquidity. The Fund
invests solely in money market instruments maturing in thirteen
months or less from time of investment.

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a series of the STEIN ROE INCOME TRUST, an open-end
management investment company. This prospectus contains
information you should know before investing in the Fund. Please
read it carefully and retain it for future reference.

A Statement of Additional Information dated November 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at P.O. Box 804058, Chicago, IL 60680 or by calling
800-322-1130. The Statement of Additional Information contains
information relating to other series of the Stein Roe Income Trust
that may not be available as investment vehicles for your defined
contribution plan.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS
Page
Fee Table ....................2
Financial Highlights..........2
The Fund......................3
How the Fund Invests..........4
Restrictions on the Fund's
Investments ................4
Risks and Investment
Considerations ..............5
How to Purchase Shares .......6
How to Redeem Shares .........6
Net Asset Value ..............7
Distributions and Income
Taxes........................7
Management of the Fund........8
Organization and Description
of Shares...................8
For More Information..........9

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None*
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES (as a percentage
of average net assets)
Management Fees 0.50%
12b-1 Fees None
Other Expenses 0.22%
-----
Total Fund Operating Expenses 0.72%
-----
-----
________________
*There is a $3.50 charge for wiring redemption proceeds to your
bank.

EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------ ------- ------- --------
$7 $23 $40 $89

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based upon
actual expenses incurred in the last fiscal year, adjusted to
reflect the change in transfer agency services and fees. (Also
see Management of the Fund--Fees and Expenses.)

For purposes of the Example above, the figures assume that the
percentage amounts for the Fund listed under Annual Fund Operating
Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, the Fund's net assets remain at the same level as in
the most recently completed fiscal year. The figures in the
Example are not necessarily indicative of past or future expenses,
and actual expenses may be greater or less than those shown.
Although information such as that shown in the Fee Table and
Example is useful in reviewing the Fund's expenses and in providing
a basis for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods. The example does not reflect any
charges or expenses related to your employer's plan.

__________________________
FINANCIAL HIGHLIGHTS

The table below reflects the results of operations of the Fund on
a per-share basis and has been audited by Ernst & Young LLP,
independent auditors. The table should be read in conjunction
with the financial statements and notes thereto, which may be
obtained from the Trust without charge upon request.

<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31, June 30, Years Ended June 30,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net investment income 0.075 0.061 0.060 0.032 0.081 0.079 0.068 0.044 0.028 0.028 0.048
Distributions from net
investment income (0.075) (0.061) (0.060) (0.032) (0.081) (0.079) (0.068) (0.044) (0.028) (0.028) (0.048)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Ratio of expenses to
average net assets 0.72% 0.72% 0.72% *0.70% 0.75% 0.76% 0.78% 0.78% 0.79% 0.79% 0.76%
Ratio of net investment
income to average net
assets 7.55% 6.05% 6.02% *6.36% 8.13% 7.94% 6.81% 4.40% 2.81% 2.77% 4.83%
Total return 7.79% 6.25% 6.15% *6.43% 8.41% 8.20% 6.98% 4.49% 2.83% 2.81% 4.96%
Net assets, end of
period (000 omitted) $738,634 $814,544 $962,901 $930,074 $948,018 $949,803 $840,525 $711,087 $627,110 $554,713 $498,163
<FN>
*Annualized.
</TABLE>

___________________________
THE FUND

STEIN ROE CASH RESERVES FUND (the "Fund") is a no-load, diversified
"mutual fund." Mutual funds sell their own shares to investors
and use the money they receive to invest in a portfolio of
securities. A mutual fund allows you to pool your money with that
of other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping. Because the Fund invests only in money market
instruments, it is called a "money market fund." No-load funds do
not impose commissions or charges when shares are purchased or
redeemed.

The Fund is a series of the Stein Roe Income Trust (the "Trust"),
an open-end management investment company, which is authorized to
issue shares of beneficial interest in separate series. Each
series represents interests in a separate portfolio of securities
and other assets, with its own investment objectives and policies.

Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory and administrative services to the Fund. The
Adviser also manages several other no-load mutual funds with
different investment objectives, including equity funds,
international funds, money market funds, and taxable and tax-
exempt bond funds. To obtain prospectuses and other information
on opening a regular account in any of these mutual funds, please
call 800-338-2550.

Because the Fund strives to maintain a $1.00 per share value, its
return is usually quoted either as a current seven-day yield,
calculated by totaling the dividends on a Fund share for the
previous seven days and restating that yield as an annual rate, or
as an effective yield, calculated by adjusting the current yield
to assume daily compounding. The Fund's current and effective
yields for the seven-day period ended September 29, 1995, were
5.14% and 5.27%, respectively. To obtain current yield information,
you may call 800-338-2550.

From time to time, the Fund may also quote total return figures.
The total return from an investment in the Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.

Comparison of the Fund's yield or total return with those of
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. The Fund's total return does
not reflect any charges or expenses related to your employer's
plan. Past performance is not necessarily indicative of future
results.
___________________________
HOW THE FUND INVESTS

The Fund seeks to obtain maximum current income consistent with
the preservation of capital and the maintenance of liquidity by
investing all of its assets in U.S. dollar-denominated money
market instruments maturing in thirteen months or less from time
of investment. Each security must be rated (or be issued by an
issuer that is rated with respect to its short-term debt) within
the highest rating category for short-term debt by at least two
nationally recognized statistical rating organizations ("NRSRO"),
or, if unrated, determined by or under the direction of the Board
of Trustees to be of comparable quality. These securities may
include:

/2/ A sale of securities to the Fund in which the seller (a bank
or securities dealer that the Adviser believes to be
financially sound) agrees to repurchase the securities at a
higher price, which includes an amount representing interest on
the purchase price, within a specified time.

_____________________

The Fund maintains a dollar-weighted average portfolio maturity
appropriate to its objective of maintaining a stable net asset
value per share, and not in excess of 90 days. It is a
fundamental policy that the maturity of any instrument that grants
the holder an optional right to redeem at par plus interest and
without penalty will be deemed at any time to be the next date
provided for payment on exercise of such optional redemption
right.
___________________________
RESTRICTIONS ON THE
FUND'S INVESTMENTS

The Fund will not: (1) invest more than 10% of its net assets in
illiquid securities, including repurchase agreements maturing in
more than seven days (however, there is otherwise no limitation on
the percentage of the Fund's assets which may be invested in
repurchase agreements); or (2) with respect to 75% of its total
assets, invest more than 5% of its total assets in the securities
of any one issuer--this restriction does not apply to
U.S. Government Securities or repurchase agreements for such
securities. Notwithstanding the limitation on investments in a
single issuer, the Fund may invest all of its assets in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund.

The Fund may not make loans with the exception that it may invest in
money market securities and enter into repurchase agreements.
The Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the aggregate borrowings
at any one time may not exceed 33 1/3% of its assets (at market value).
The Fund may not purchase additional securities when its borrowings,
less proceeds receivable from sales of portfolio securities, exceed
5% of total assets.

The policies described in the preceding two paragraphs, which
summarize certain important investment restrictions of the Fund,
and the policy with respect to concentration of investment in the
financial services industry, can be changed only with the approval
of a "majority of the outstanding voting securities" of the Fund,
as defined in the Investment Company Act of 1940. All of the
investment restrictions are set forth in the Statement of
Additional Information.
___________________________
RISKS AND INVESTMENT
CONSIDERATIONS

All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. There can be no
guarantee that the Fund will achieve its objective or be able at
all times to maintain its net asset value per share at $1.00.

In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund could experience both delays in
liquidating the underlying securities and losses, including: (a)
possible decline in the value of the collateral during the period
in which the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.

The Fund's investment objective is not fundamental and may be
changed by the Board of Trustees without a vote of shareholders.
If there is a change in the Fund's investment objective,
shareholders should consider whether the Fund remains an
appropriate investment in light of their then-current financial
position and needs.

The Fund's policy of investing at least 25% of its assets in
securities of issuers in the financial services industry may cause
the Fund to be more adversely affected by changes in market or
economic conditions and other circumstances affecting the
financial services industry. Because the Fund's investment policy
permits it to invest in: securities of foreign branches of U.S.
banks (Eurodollars), U.S. branches of foreign banks (Yankee
dollars), and foreign banks and their foreign branches, such as
negotiable certificates of deposit; securities of foreign
governments; and securities of foreign issuers, such as commercial
paper and corporate notes, bonds and debentures, investment in the
Fund might involve risks that are different in some respects from
an investment in a fund that invests only in debt obligations of
U.S. domestic issuers. Such risks may include future political
and economic developments; the possible imposition of foreign
withholding taxes on interest income payable on securities held in
the portfolio; possible seizure or nationalization of foreign
deposits; the possible establishment of exchange controls; or the
adoption of other foreign governmental restrictions that might
adversely affect the payment of principal and interest on
securities in the portfolio. Additionally, there may be less
public information available about foreign banks and their
branches. Foreign banks and foreign branches of foreign banks are
not regulated by U.S. banking authorities, and generally are not
bound by accounting, auditing, and financial reporting standards
comparable to U.S. banks.

The Fund may invest in securities purchased on a when-issued or
delayed-delivery basis. Although the payment terms of these
securities are established at the time the Fund 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 and the yields then available in the market may be
greater. The Fund will make such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if it is deemed advisable for
investment reasons.

The Fund may also invest in securities purchased on a standby
commitment basis, which is a delayed-delivery agreement in which
the Fund binds itself to accept delivery of a security at the
option of the other party to the agreement.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in money market securities directly, the Fund
may in the future seek to achieve its investment objective by
pooling all of its assets with assets of other mutual funds
managed by the Adviser for investment in another registered
investment company having the same investment objective and
substantially the same investment policies and restrictions as the
Fund. It is expected that any such investment company would be
managed by the Adviser in substantially the same manner as the
Fund. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. Shareholders of the
Fund will be given at least 30 days' prior notice of any such
investment, although they will not be entitled to vote on the
action. Such investment would be made only if the trustees
determine it to be in the best interests of the Fund and its
shareholders.
___________________________
HOW TO PURCHASE SHARES

All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
shares of the Fund through your employer or limitations on the
amount that may be purchased, please consult your employer.
Shares are sold to eligible defined contribution plans at the
Fund's net asset value (see Net Asset Value) next determined after
receipt of payment by the Fund.

Each purchase order for the Fund must be accepted by an authorized
officer of the Trust in Chicago and is not binding until accepted
and entered on the books of the Fund. Once your purchase order
has been accepted, you may not cancel or revoke it; however, you
may redeem the shares. The Trust reserves the right not to accept
any purchase order that it determines not to be in the best
interest of the Trust or of the Fund's shareholders.

Shares purchased by reinvestment of dividends will be confirmed at
least quarterly. All other purchases and redemptions will be
confirmed as transactions occur.
___________________________
HOW TO REDEEM SHARES

Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange is
open. For more information about how to redeem your shares of the
Fund through your employer's plan, including any charges that may
be imposed by the plan, please consult with your employer.

EXCHANGE PRIVILEGE.
Subject to your plan's restrictions, you may redeem all or any
portion of your Fund shares and use the proceeds to purchase
shares of any other Stein Roe Fund available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Before exercising the Exchange
Privilege, you should obtain the prospectus for the Stein Roe Fund
in which you wish to invest and read it carefully. Contact your
plan administrator for instructions on how to exchange your shares
or to obtain prospectuses of other Stein Roe Funds available
through your plan. The Fund reserves the right to suspend, limit,
modify, or terminate the Exchange Privilege or its use in any
manner by any person or class; shareholders would be notified of
such a change.

GENERAL REDEMPTION POLICIES.
Redemption instructions may not be cancelled or revoked once they
have been received and accepted by the Trust. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions.

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares.
___________________________
NET ASSET VALUE

The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value of a share of the Fund
is normally determined twice each day: at 11:00 a.m., Chicago
time, and as of the close of trading on the New York Stock
Exchange (currently 3:00 p.m., Chicago time). The net asset value
per share is computed by dividing the difference between the
values of the Fund's assets and liabilities by the number of
shares outstanding and rounding to the nearest cent. Net asset
value will not be determined on days when the Exchange is closed
unless, in the judgment of the Board of Trustees, the net asset
value of the Fund should be determined on any such day, in which
case the determination will be made at 3:00 p.m., Chicago time.

The Fund attempts to maintain its net asset value at $1.00 per
share. Portfolio securities are valued based on their amortized
cost, which does not take into account unrealized gains or losses.
Other assets and securities of the Fund for which this valuation
method does not produce a fair value are valued at a fair value
determined by the Board. The extent of any deviation between the
Fund'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.
___________________________
DISTRIBUTIONS AND
INCOME TAXES

DISTRIBUTIONS.
A dividend from net income of the Fund is declared each business
day to shareholders of record immediately before 3:00 p.m.,
Chicago time. Dividends credited to your account are distributed
monthly. If the Fund's net asset value per share were to decline,
or were believed likely to decline, below $1.00 (rounded to the
nearest cent), the Board might temporarily reduce or suspend
dividends in an effort to maintain net asset value at $1.00 per
share.

The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital gain
distributions will be reinvested in additional shares of the Fund.

INCOME TAXES.
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
___________________________
MANAGEMENT OF THE FUND

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Fund. See the Statement of
Additional Information for the names of and other information
about the trustees and officers. The Fund's Adviser, Stein Roe &
Farnham Incorporated, One South Wacker Drive, Chicago, Illinois
60606, is responsible for managing the Fund's investment portfolio
and the business affairs of the Fund and the Trust, subject to the
direction of the Board. The Adviser is registered as an
investment adviser under the Investment Advisers Act.

FEES AND EXPENSES.
In return for its services, the Adviser receives a monthly fee
from the Fund, computed and accrued daily, based on the Fund's
average net assets. Effective November 1, 1995, the annualized
fee is .50 of 1% on the first $500 million, .45 of 1% of the next
$500 million, and .40 of 1% on assets over $1 billion. Prior to
that date, the fee was .50 of 1% on the first $1 billion
.475 of 1% on the next $500 million, and .45 of 1% thereafter.
The annualized fee amounted to .50% of average net
assets for the year ended June 30, 1995.

Under a separate agreement with the Trust, the Adviser provides
certain accounting and bookkeeping services to the Fund, including
computation of the Fund's net asset value and calculation of its
net income and capital gains and losses on disposition of Fund
assets.

PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of the
Fund's portfolio securities. In doing so, the Adviser seeks to
obtain the best combination of price and execution, which involves
a number of judgmental factors.

DISTRIBUTOR.
The shares of the Fund are offered for sale through Liberty
Securities Corporation ("Distributor") without any sales
commissions or charges to the Fund or to its shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Mutual. The business address of the Distributor is 600 Atlantic
Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should
be mailed to the Trust at P.O. Box 804058, Chicago, Illinois
60680. All distribution and promotional expenses are paid by the
Adviser, including payments to the Distributor for sales of Fund
shares.

CUSTODIAN.
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the
Fund. Foreign securities are maintained in the custody of foreign
banks and trust companies that are members of the Bank's Global
Custody Network or foreign depositories used by such members.
(See Custodian in the Statement of Additional Information.)
___________________________
ORGANIZATION AND
DESCRIPTION OF SHARES

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.

Contact a Stein Roe Retirement Plan Representative at 800-322-
1130 for more information about this Fund.

__________________

<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE GOVERNMENT RESERVES FUND
The Fund seeks to obtain maximum current income consistent with
safety of capital and maintenance of liquidity. The Fund invests
in U.S. Government Securities maturing in thirteen months or less
from the date of purchase and repurchase agreements for U.S.
Government Securities regardless of the maturities of such
securities. U.S. Government Securities include securities issued
or guaranteed by the U.S. Government or by its agencies or
instrumentalities.

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a "no-load" money market fund and attempts to maintain
its net asset value at $1.00 per share. SHARES OF THE FUND ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. There are no sales or
redemption charges, and the Fund has no 12b-1 plan. The Fund is a
series of the STEIN ROE INCOME TRUST, an open-end management
investment company. This prospectus contains information you
should know before investing in the Fund. Please read it
carefully and retain it for future reference.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS

Page
Fee Table .............................2
Financial Highlights...................2
The Fund...............................3
How the Fund Invests...................4
Restrictions on the Fund's Investments 4
Risks and Investment Considerations... 5
How to Purchase Shares................ 6
How to Redeem Shares.................. 6
Net Asset Value .......................6
Distributions and Income Taxes.........7
Management of the Fund.................7
Organization and Description of Shares.8
For More Information...................8

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None*
Exchange Fees None

ANNUAL FUND OPERATING EXPENSES (after expense
reimbursement; as a percentage of average net assets)
Management Fees (after expense reimbursement) 0.45%
12b-1 Fees None
Other Expenses 0.25%
-----
Total Fund Operating Expenses (after expense
reimbursement) 0.70%
-----
-----
___________________
*There is a $3.50 charge for wiring redemption proceeds to your
bank.

EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------ ------- ------- --------
7 22 39 87

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based upon
actual expenses incurred in the last fiscal year. (Also see
Management of the Fund--Fees and Expenses.) From time to time,
the Adviser may voluntarily absorb certain expenses of the Fund.
The Adviser has agreed to voluntarily absorb the Fund's expenses
to the extent that they exceed 0.70 of 1% of average net assets
through October 31, 1996, subject to earlier termination by the
Adviser on 30 days' notice. Any such absorption will temporarily
lower the Fund's overall expense ratio and increase its overall
return to investors. Absent such expense undertaking, Management
Fees and Total Fund Operating Expenses would have been 0.50% and
0.75%, respectively.

For purposes of the Example above, the figures assume that the
percentage amounts for the Fund listed under Annual Fund Operating
Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, the Fund's net assets remain at the same level as in
the most recently completed fiscal year. The figures in the Example
are not necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. Although
information such as that shown in the Fee Table and Example is
useful in reviewing the Fund's expenses and in providing a basis
for comparison with other mutual funds, it should not be used for
comparison with other investments using different assumptions or
time periods. The example does not reflect any charges or expenses
related to your employer's plan.

___________________________
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Years Ended June 30,
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income 0.064 0.050 0.058 0.080 0.078 0.066 0.044 0.027 0.027 0.047
Distributions from net
investment income (0.064) (0.050) (0.058) (0.080) (0.078) (0.066) (0.044) (0.027) (0.027) (0.047)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of net expenses to
average net assets (a) 1.03% 1.03% 0.87% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment
income to average net
assets (b) 6.35% 4.97% 5.75% 8.02% 7.79% 6.41% 4.27% 2.75% 2.71% 4.65%
Total return 6.57% 5.11% 5.90% 8.27% 8.05% 6.74% 4.45% 2.78% 2.74% 4.78%
Net assets, end of
period (000 omitted) $33,232 $34,799 $41,787 $50,185 $53,400 $102,860 $132,982 $104,220 $105,488 $93,318
<FN>

(a) If the Fund had paid all of its expenses and there
had been no reimbursement of expenses by the Adviser, this
ratio would have been 1.07%, 1.05%, 1.04%, 0.93%, 0.98%, 0.83%,
0.79%, 0.76%, 0.75% and 0.75% for the years ended June 30, 1985
and 1986, and 1988 through 1995, respectively.
(b) Computed giving effect to the Adviser's expense limitation
undertaking.
___________________________
THE FUND

STEIN ROE GOVERNMENT RESERVES FUND (the "Fund") is a no-load,
diversified "mutual fund." Mutual funds sell their own shares to
investors and use the money they receive to invest in a portfolio
of securities. A mutual fund allows you to pool your money with
that of other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping. Because the Fund invests only in money market
instruments, it is called a "money market fund." No-load funds do
not impose commissions or charges when shares are purchased or
redeemed.

Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory and administrative services to the Fund. The
Adviser also manages several other no-load mutual funds with
different investment objectives, including equity funds,
international funds, money market funds, and taxable and tax-
exempt bond funds. To obtain prospectuses and other information on
opening a regular account in any of these mutual funds, please
call 800-338-2550.

Although there can be no assurance that it will always be able to
do so, the Fund follows procedures designed to stabilize its price
per share at $1.00. The Statement of Additional Information describes
these procedures.Because the Fund strives to maintain a $1.00 per
share value, its return is usually quoted either as a current seven-day
yield, calculated by totaling the dividends on a Fund share for the
previous seven days and restating that yield as an annual rate, or as
an effective yield, calculated by adjusting the current yield to
assume daily compounding. The Fund's current and effective yields
for the seven-day period ended September 29, 1995, were 5.19% and
5.32%, respectively. Absent the expense limitation referred to above,
current and effective yields for the seven-day period ended September
29, 1995, would have been 5.09% and 5.22%, respectively. To obtain
current yield information, you may call 800-338-2550.

The Fund seeks to obtain maximum current income consistent with
safety of capital and maintenance of liquidity by investment in
U.S. Government Securities maturing in thirteen months or less
from the date of purchase. These securities include:

(1) Securities issued by the U.S. Treasury;
(2) Securities issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government that are
backed by the full faith and credit guarantee of the U.S.
Government;
(3) Securities issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government that are
not backed by the full faith and credit guarantee of the U.S.
Government;
(4) Repurchase agreements /1/ for securities listed in (1), (2),
and (3) above, regardless of the maturities of such underlying
securities.

- -----------------
/1/ A sale of securities to the Fund in which the seller (a bank
or securities dealer which the Adviser believes to be financially
sound) agrees to repurchase the securities at a higher price,
which includes an amount representing interest on the purchase
price, within a specified time.
- ------------------

The U.S. Government Securities in which the Fund is permitted to
invest include: (i) bills, notes, bonds, and other debt
securities, differing as to maturity and rates of interest, that
are issued by and are direct obligations of the U.S. Treasury; and
(ii) other securities that are issued or guaranteed as to
principal and interest by agencies or instrumentalities of the
U.S. Government and that include, but are not limited to, Federal
Farm Credit Banks, Federal Home Loan Banks, Government National
Mortgage Association, Farmers Home Administration, Federal Home
Loan Mortgage Corporation, and Federal National Mortgage
Association.

The Fund will not: (1) invest more than 10% of its net assets in
illiquid securities, including repurchase agreements maturing in
more than seven days (however, there is otherwise no limitation on
the percentage of the Fund's assets which may be invested in
repurchase agreements); or (2) with respect to 75% of its total
assets, invest more than 5% of its total assets in the securities
of any one issuer -- this restriction does not apply to
U.S. Government Securities or repurchase agreements for such
securities. Notwithstanding the limitation on investments in a
single issuer, the Fund may invest all of its assets in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund.

The Fund may not make loans with the exception that it may invest
in money market securities and enter into repurchase agreements.
The Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the aggregate
borrowings at any one time may not exceed 33 1/3% of its assets
(at market value). The Fund may not purchase additional securities
when its borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.

The policies described in the preceding two paragraphs, which
summarize certain important investment restrictions of the Fund,
can be changed only with the approval of a "majority of the
outstanding voting securities" of the Fund, as defined in the
Investment Company Act of 1940. All of the investment
restrictions are set forth in the Statement of Additional
Information.
___________________________
RISKS AND INVESTMENT
CONSIDERATIONS

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in money market securities directly, the Fund
may in the future seek to achieve its investment objective by
pooling all of its assets with assets of other mutual funds
managed by the Adviser for investment in another investment
company having the same investment objective and substantially the
same investment policies and restrictions as the Fund. It is
expected that any such investment company would be managed by the
Adviser in substantially the same manner as the Fund. The purpose
of such an arrangement is to achieve greater operational
efficiencies and reduce costs. Shareholders of the Fund will be
given at least 30 days' prior notice of any such investment,
although they will not be entitled to vote on the action. Such
investment would be made only if the trustees determine it to be
in the best interests of the Fund and its shareholders.
___________________________
HOW TO PURCHASE SHARES

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares.
___________________________
NET ASSET VALUE

The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital gain
distributions will be reinvested in additional shares of the Fund.

FEES AND EXPENSES.
In return for its services, the Adviser receives a monthly fee
from the Fund, computed and accrued daily, based on the Fund's
average net assets. Effective November 1, 1995, the annualized
fee is .50 of 1% on the first $500 million, .45 of 1% of the next
$500 million, and .40 of 1% on assets over $1 billion. Prior to
that date, the fee was .50 of 1% of average net assets. The
annualized fee, after the expense limitation described under Fee
Table, amounted to .45% of average net assets for the year ended
June 30, 1995.

CUSTODIAN.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, is the custodian for the Fund. (See
Custodian in the Statement of Additional Information.)
___________________________
ORGANIZATION AND
DESCRIPTION OF SHARES

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.

Contact a Stein Roe Retirement Plan Representative at 800-322-
1130 for more information about this Fund.

_________________

<PAGE>
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE LIMITED MATURITY INCOME FUND
The Fund seeks high current income by investing primarily in U.S.
Government and other high-quality debt securities. The dollar-
weighted average effective maturity will not exceed three years.

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a "no-load" fund. There are no sales or redemption
charges, and the Fund has no 12b-1 plan. The Fund is a series of
the STEIN ROE INCOME TRUST, an open-end management investment
company.

This prospectus contains information you should know before
investing in the Fund. Please read it carefully and retain it for
future reference.

A Statement of Additional Information dated November 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at P.O. Box 804058, Chicago, IL 60680 or by calling 800-
322-1130. The Statement of Additional Information contains
information relating to other series of the Stein Roe Income Trust
that may not be available as investment vehicles for your defined
contribution plan.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS

Page
Fee Table .................................2
Financial Highlights.......................2
The Fund...................................3
How the Fund Invests.......................3
Portfolio Investments and Strategies.......4
Restrictions on the Fund's Investments ....7
Risks and Investment Considerations .......8
How to Purchase Shares ....................9
How to Redeem Shares ......................9
Net Asset Value ..........................10
Distributions and Income Taxes............10
Investment Return.........................10
Management of the Fund....................11
Organization and Description of Shares....12
For More Information......................12

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None

ANNUAL FUND OPERATING EXPENSES (after expense
reimbursement; as a percentage of average
net assets)
Management Fees (after expense reimbursement) 0.00%
12b-1 Fees None
Other Expenses (after expense reimbursement) 0.65%
------
Total Fund Operating Expenses (after expense
reimbursement) 0.65%
------
------

EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of each
time period:

1 year 3 years 5 years 10 years
------- -------- ------- --------
$7 $21 $36 $81

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based upon
actual expenses incurred in the last fiscal year, adjusted for the
expense limitation in effect on November 1, 1995. From time to
time, the Adviser may voluntarily absorb certain expenses of the
Fund. The Adviser has agreed to voluntarily absorb the Fund's
expenses to the extent they exceed 0.65% of average net assets
through October 31, 1996, subject to earlier termination by the
Adviser on 30 days' notice. Any such absorption will temporarily
lower the Fund's overall expense ratio and increase its overall
return to investors. Prior to November 1, 1995, the Adviser
undertook to reimburse the Fund for expenses in excess of 0.45%.
Absent such expense undertaking, the Management Fees, Other
Expenses, and Total Fund Operating Expenses would have been 0.60%,
0.67%, and 1.27%, respectively. (Also see Management of the Fund--
Fees and Expenses.)

For purposes of the Example above, the figures assume that the
percentage amounts listed for the Fund under Annual Fund Operating
Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, the Fund's net assets remain at the same level as in
the most recently completed fiscal year. The figures in the Example
are not necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. Although
information such as that shown in the Fee Table and Example is
useful in reviewing the Fund's expenses and in providing a basis
for comparison with other mutual funds, it should not be used for
comparison with other investments using different assumptions or
time periods. The example does not reflect any charges or expenses
related to your employer's plan.

________________________________
FINANCIAL HIGHLIGHTS

The table below reflects the results of operations of the Fund on a
per-share basis and has been audited by Ernst & Young LLP,
independent auditors. The table should be read in conjunction with
the Fund's financial statements and notes thereto. The Fund's
annual report, which may be obtained from the Trust without charge
upon request, contains additional performance information.

*Annualized.
**Not annualized.

(a) The Fund commenced operations on March 11, 1993.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the Adviser, these ratios would
have been 3.63% for the period ended June 30, 1993 and 1.14%
and 1.27% for the years ended June 30, 1994 and 1995, respectively.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
___________________________
THE FUND

STEIN ROE LIMITED MATURITY INCOME FUND (the "Fund") is a no-load,
diversified "mutual fund." Mutual funds sell their own shares to
investors and invest the proceeds in a portfolio of securities. A
mutual fund allows you to pool your money with that of other
investors in order to obtain professional investment management and
economies of scale from the sharing of expenses. Mutual funds
generally make it possible for you to obtain greater
diversification of your investments and simplify your
recordkeeping. No-load funds do not impose commissions or charges
when shares are purchased or redeemed.

Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory and administrative services to the Fund. The
Adviser also manages several other no-load mutual funds with
different investment objectives, including equity funds,
international funds, other taxable bond funds, tax-exempt bond
funds, and money market funds. To obtain prospectuses and other
information on opening a regular account in any of these mutual
funds, please call 800-338-2550.

___________________________
HOW THE FUND INVESTS

The Fund's investment objective is to provide a high level of
current income, consistent with the preservation of capital. The
Fund attempts to achieve its objective by investing primarily in
securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities ("U.S.
Government Securities") and other high-quality fixed-income
securities. Depending on market conditions, the Fund may invest a
substantial portion of its assets in mortgage-backed debt
securities issued by GNMA, FNMA, and FHLMC. Further information on
portfolio investments and strategies may be found under Portfolio
Investments and Strategies in this prospectus and in the Statement
of Additional Information.

The Fund may also invest in other types of debt securities;
however, under normal circumstances, at least 65% of the Fund's
total assets will be invested in U.S. Government Securities, non-
U.S. Government Securities that are rated at least AA by Standard &
Poor's Corporation ("S&P") or Aa by Moody's Investors Service, Inc.
("Moody's") and high-quality money market instruments. The Fund
may invest up to 35% of its assets in other debt securities that
are rated at least investment grade (BBB by S&P or Baa by Moody's).
Securities rated BBB by S&P or by Moody's are neither highly
protected nor poorly secured. Such securities have some
speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity
of the issuers of such securities to make principal and interest
payments than is the case for issuers of higher grade securities.
If the rating of a security held by the Fund is lost or reduced
below investment grade, the Fund is not required to dispose of the
security, but the Adviser will consider that fact in determining
whether the Fund should continue to hold the security.

Under normal circumstances, the dollar-weighted average maturity of
the portfolio is expected to be no more than ten years. The
average dollar-weighted maturity of the portfolio is the dollar-
weighted average of the stated maturities of all debt instruments
held in the portfolio. In addition, it is expected that under
normal circumstances, the Fund will invest at least 65% of its
total assets in securities with an effective maturity of three
years or less, and that the dollar-weighted average effective
maturity of the portfolio will not exceed three years. The
effective maturity of a debt instrument is the weighted average
period over which the Adviser expects the principal to be paid, and
differs from stated maturity in that it estimates the effect of
expected principal prepayments and call provisions. With respect
to GNMA securities and other mortgage-backed securities, the
effective maturity is likely to be substantially less than the
stated maturity of the mortgages in the underlying pools. With
respect to obligations with call provisions, the effective maturity
is typically the next call date on which the obligation reasonably
may be expected to be called. Securities without prepayment or
call provisions generally have an effective maturity equal to their
stated maturity. During periods of rising interest rates, the
effective maturity of mortgage-backed securities and callable
obligations may increase because they are less likely to be
prepaid, which may result in greater net asset value fluctuation.
___________________________
PORTFOLIO INVESTMENTS
AND STRATEGIES

U.S. GOVERNMENT SECURITIES.
U.S. Government Securities include: (i) bills, notes, bonds, and
other debt securities, differing as to maturity and rates of
interest, that are issued by and are direct obligations of the U.S.
Treasury; and (ii) other securities that are issued or guaranteed
as to principal and interest by the U.S. Government or by its
agencies or instrumentalities and that include, but are not limited
to, Government National Mortgage Association ("GNMA"), Federal Farm
Credit Banks, Federal Home Loan Banks, Farmers Home Administration,
Federal Home Loan Mortgage Corporation ("FHLMC"), and Federal
National Mortgage Association ("FNMA"). U.S. Government Securities
are generally viewed by the Adviser as being among the safest of
debt securities with respect to the timely payment of principal and
interest (but not with respect to any premium paid on purchase),
but generally bear a lower rate of interest than corporate debt
securities. However, they are subject to market risk like other
debt securities, and therefore the Fund's shares can be expected to
fluctuate in value.

DERIVATIVES.
Consistent with its objective, the Fund may invest in a broad array
of financial instruments and securities, including conventional
exchange-traded and non-exchange traded options, futures contracts,
futures options, securities collateralized by underlying pools of
mortgages or other receivables, and other instruments, the value of
which is "derived" from the performance of an underlying asset or a
"benchmark" such as a security index, an interest rate, or a
currency ("Derivatives"). The Fund does not expect to invest more
than 5% of its net assets in any type of Derivative except for
options, futures contracts, futures options, mortgage or other
asset-backed securities, and floating rate instruments.

The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less marketable
than exchange-traded Derivatives. For additional information on
Derivatives, please refer to the Statement of Additional
Information.

MORTGAGE AND OTHER ASSET-BACKED SECURITIES. The Fund may invest in
securities secured by mortgages or other assets such as automobile
or home improvement loans and credit card receivables. These
instruments may be issued or guaranteed by the U.S. Government or
by its agencies or instrumentalities or by private entities such as
commercial, mortgage and investment banks and financial companies
or financial subsidiaries of industrial companies.

The timely payment of principal and interest on GNMA securities is
guaranteed by GNMA and backed by the full faith and credit of the
U.S. Treasury. FNMA guarantees full and timely payment of interest
and principal on FNMA securities. FHLMC guarantees timely payment
of interest and ultimate collection of principal on FHLMC
securities. FNMA and FHLMC securities are not backed by the full
faith and credit of the U.S. Treasury.

Mortgage-backed securities provide either a pro rata interest in
underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs"), which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities and are usually issued in multiple classes, each
of which has different payment rights, pre-payment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
pre-payment on the underlying mortgages at a faster or slower rate
than the established schedule. Pre-payments generally increase
with falling interest rates and decrease with rising rates, but they
also are influenced by economic, social, and market factors. If
mortgages are pre-paid during periods of declining interest rates,
there would be a resulting loss of the full-term benefit of any
premium paid by the Fund on purchase of the CMO, and the proceeds
of pre-payment would likely be invested at lower interest rates.
The Fund tends to invest in CMOs of classes known as planned
amortization classes ("PACs") which have pre-payment protection
features tending to make them less susceptible to price volatility.

Asset-backed securities tend to experience greater price volatility
than straight debt securities.

FLOATING RATE INSTRUMENTS. The Fund may also invest in floating
rate instruments which provide for periodic adjustments in coupon
interest rates that are automatically reset based on changes in
amount and direction of specified market interest rates. In
addition, the adjusted duration of some of these instruments may be
materially shorter than their stated maturities. To the extent
such instruments are subject to lifetime or periodic interest rate
caps or floors, such instruments may experience greater price
volatility than debt instruments without such features. Adjusted
duration is an inverse relationship between market price and
interest rates and refers to the approximate percentage change in
price for a 100 basis point change in yield. For example, if
interest rates decrease by 100 basis points, a market price of a
security with an adjusted duration of 2 would increase by
approximately 2%.

FUTURES AND OPTIONS. The Fund may purchase and write both call
options and put options on securities, indexes and foreign currencies,
and enter into interest rate, index and foreign currency futures
contracts. The Fund may also write options on such futures contracts
and purchase other types of forward or investment contracts linked to
individual securities, indexes or other benchmarks in order to,
consistent with its investment objective, provide additional revenue,
or to hedge against changes in security prices, interest rates, or
currency fluctuations. The Fund may write a call or put option only
if the option is covered. As the writer of a covered call option, the
Fund foregoes, during the option's life, the opportunity to profit from
increases in market value of the security covering the call option
above the sum of the premium and the exercise price of the call. There
can be no assurance that a liquid market will exist when the Fund seeks
to close out a position. Because of low margin deposits required, the
use of futures contracts involves a high degree of leverage, and may
result in losses in excess of the amount of the margin deposit.

FOREIGN SECURITIES.
Although the Fund may invest in foreign securities, it will not
invest in a foreign security if, as a result of such investment,
more than 25% of its total assets would be invested in foreign
securities. For purposes of this restriction, foreign securities
do not include securities represented by American Depositary
Receipts ("ADRs"), foreign debt securities denominated in U.S.
dollars, or securities guaranteed by a U.S. person such as a
corporation domiciled in the United States that is a parent or
affiliate of the issuer of the securities being guaranteed. The
Fund may invest in sponsored or unsponsored ADRs. In addition to,
or in lieu of, such direct investment, the Fund may construct a
synthetic foreign position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b)
concurrently entering into a forward contract to deliver a
corresponding amount of that currency in exchange for a different
currency on a future date and at a specified rate of exchange.
Because of the availability of a variety of highly liquid U.S.
dollar debt instruments, a synthetic foreign position utilizing
such U.S. dollar instruments may offer greater liquidity than
direct investment in foreign currency debt instruments. In
connection with the purchase of foreign securities, the Fund may
contract to purchase an amount of foreign currency sufficient to
pay the purchase price of the securities at the settlement date.
At June 30, 1995, no assets of the Fund were invested in foreign
securities as defined above, and the Fund does not intend to invest
more than 5% of its net assets in such securities. (See Risks and
Investment Considerations.)

LENDING OF PORTFOLIO SECURITIES.
Subject to certain restrictions, the Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be
continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive
an additional return that may be in the form of a fixed fee or a
percentage of the collateral. The Fund would have the right to
call the loan and obtain the securities loaned at any time on
notice of not more than five business days. In the event of
bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses including (a) possible
decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce
its rights thereto; (b) possible subnormal levels of income and
lack of access to income during this period; and (c) expenses of
enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
The Fund's assets may include securities purchased on a when-issued
or delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time the purchaser
enters into the commitment, the securities may be delivered and
paid for a month or more after the date of purchase, when their
value may have changed. The Fund 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
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.

When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that the Fund will sell
securities with a commitment to purchase similar, but not
identical, securities at a future date. Generally, the securities
are repurchased at a price lower than the sales price. Dollar roll
transactions involve the risk of restrictions on the Fund's ability
to repurchase the security if the counterparty becomes insolvent;
an adverse change in the price of the security during the period of
the roll or that the value of the security repurchased will be less
than the security sold; and transaction costs exceeding the return
earned by the Fund on the sales proceeds of the dollar roll.

PORTFOLIO TURNOVER.
In attempting to attain its objective, the Fund may sell portfolio
securities without regard to the period of time they have been
held. Further, the Adviser may purchase and sell securities for
the Fund's portfolio with a view to maximizing current return, even
if portfolio changes would cause the realization of capital gains.
Although the weighted average effective maturity of the Fund's
portfolio generally will not exceed three years, the Adviser may
adjust the average effective maturity of the Fund's portfolio from
time to time, depending on its assessment of the relative yields
available on securities of different maturities and its
expectations of future changes in interest rates. As a result, the
turnover rate of the Fund may vary from year to year, and it may
exceed 100%, but is not expected to exceed 200% under normal market
conditions. A high rate of portfolio turnover may result in
increased transaction expenses and the realization of capital gains
(which may be taxable) or losses. (See Financial Highlights and
Distributions and Income Taxes.)
___________________________
RESTRICTIONS ON THE
FUND'S INVESTMENTS

The Fund may not invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements for such securities, or (2) 25% or more of its total
assets would be invested in the securities of a group of issuers in
the same industry, except that this restriction does not apply to
U.S. Government Securities. Notwithstanding these limitations, the
Fund may invest all of its assets in another registered investment
company having the same investment objective and substantially
similar investment policies as the Fund.

The policies set forth in the first two paragraphs under
Restrictions on the Fund's Investments (but not the footnote) are
fundamental policies of the Fund. The Statement of Additional
Information contains all of the investment restrictions.
- -----------------
/1/ A repurchase agreement involves a sale of securities to the
Fund with the concurrent agreement of the seller (bank or
securities dealer) to repurchase the securities at the same price
plus an amount equal to an agreed-upon interest rate within a
specified time. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses. The
Fund may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid
securities.

- -----------------
___________________________
RISKS AND INVESTMENT
CONSIDERATIONS

All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Although the Fund seeks
to reduce risk by investing in a diversified portfolio, this does
not eliminate all risk. The risks inherent in the Fund depend
primarily upon the term and quality of the obligations in the
Fund's portfolio, as well as on market conditions.

A decline in prevailing levels of interest rates generally
increases the value of securities in the Fund's portfolio, while an
increase in rates usually reduces the value of those securities.
As a result, interest rate fluctuations will affect the Fund's net
asset value, but not the income received by the Fund from its
portfolio securities. (Because yields on debt securities available
for purchase by the Fund vary over time, no specific yield on
shares of the Fund can be assured.) In addition, if the bonds in
the Fund's portfolio contain call, prepayment or redemption
provisions, during a period of declining interest rates, these
securities are likely to be redeemed, and the Fund will probably be
unable to replace them with securities having as great a yield.

The Fund is appropriate for investors who seek higher yields than
are usually available from money market instruments with stable
prices and shorter maturities, but who also want less net asset
fluctuation than that of a longer-term fund. Unlike money market
funds, however, the Fund does not seek to maintain a stable net
asset value and may not be able to return dollar-for-dollar the
money invested.

Investments in foreign securities, including ADRs, represent both
risks and opportunities not typically associated with investments
in domestic issuers. Risks of foreign investing include currency
risk, less complete financial information on issuers, less market
liquidity, more market volatility, less well-developed and
regulated markets, and greater political instability. In addition,
various restrictions by foreign governments on investments by non-
residents may apply, including imposition of exchange controls and
withholding taxes on dividends, and seizure or nationalization of
investments owned by non-residents. Foreign investments also tend
to involve higher transaction and custody costs.

The Fund may enter into foreign currency forward contracts and use
options and futures contracts as described elsewhere in this
prospectus to limit or reduce foreign currency risk.

There can be no assurance that the Fund will achieve its objective,
nor can the Fund assure that payments of interest and principal on
portfolio securities will be made when due. If, after purchase by
the Fund, the rating of a portfolio security is lost or reduced,
the Fund would not be required to sell the security, but the
Adviser would consider such a change in deciding whether the Fund
should retain the security in its portfolio.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in securities directly, the Fund may in the
future seek to achieve its investment objective by pooling its
assets with assets of other mutual funds managed by the Adviser for
investment in another investment company having the same investment
objective and substantially the same investment policies and
restrictions as the Fund. The purpose of such arrangement is to
achieve greater operational efficiencies and reduce costs. It is
expected that any such investment company would be managed by the
Adviser in substantially the same manner as the Fund. Shareholders
of the Fund will be given at least 30 days' prior notice of any
such investment, although they will not be entitled to vote on the
action. Such investment would be made only if the trustees
determine it to be in the best interests of the Fund and its
shareholders.
___________________________
HOW TO PURCHASE SHARES

All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
shares of the Fund through your employer or limitations on the
amount that may be purchased, please consult your employer. Shares
are sold to eligible defined contribution plans at the Fund's net
asset value (see Net Asset Value) next determined after receipt of
payment by the Fund.

Each purchase order for the Fund must be accepted by an authorized
officer of the Trust in Chicago and is not binding until accepted
and entered on the books of the Fund. Once your purchase order has
been accepted, you may not cancel or revoke it; however, you may
redeem the shares. The Trust reserves the right not to accept any
purchase order that it determines not to be in the best interest of
the Trust or of the Fund's shareholders.

Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange is open.
For more information about how to redeem your shares of the Fund
through your employer's plan, including any charges that may be
imposed by the plan, please consult with your employer.

EXCHANGE PRIVILEGE.
Subject to your plan's restrictions, you may redeem all or any
portion of your Fund shares and use the proceeds to purchase shares
of any other Stein Roe Fund available through your employer's
defined contribution plan. (An exchange is commonly referred to as
a "transfer.") Before exercising the Exchange Privilege, you
should obtain the prospectus for the Stein Roe Fund in which you
wish to invest and read it carefully. Contact your plan
administrator for instructions on how to exchange your shares or to
obtain prospectuses of other Stein Roe Funds available through your
plan. The Fund reserves the right to suspend, limit, modify, or
terminate the Exchange Privilege or its use in any manner by any
person or class; shareholders would be notified of such a change.

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares.
___________________________
NET ASSET VALUE

The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value of a share of the Fund
is determined as of the close of trading on the New York State
Exchange (currently 3:00 p.m., Chicago time) by dividing the
difference between the values of the Fund'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 of the Fund
should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.

Securities for which market quotations are readily available at the
time of valuation are valued on that basis. Long-term straight-
debt securities for which market quotations are not readily
available are valued at a fair value based on valuations provided
by pricing services approved by the Board, which may employ
electronic data processing techniques, including a matrix system,
to determine valuations. Short-term debt securities with remaining
maturities of 60 days or less are valued at their amortized cost,
which does not take into account unrealized gains or losses. The
Board believes that the amortized cost represents a fair value for
such securities. Short-term debt securities with remaining
maturities of more than 60 days for which market quotations are not
readily available are valued by use of a matrix prepared by the
Adviser based on quotations for comparable securities. Other
assets and securities held by the Fund for which these valuation
methods do not produce a fair value are valued by a method that the
Board believes will determine a fair value.
___________________________
DISTRIBUTIONS AND
INCOME TAXES

DISTRIBUTIONS.
Income dividends are declared each business day and are paid
monthly. The Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the twelve-month period ended October
31 in that year. The Fund intends to distribute any undistributed
net investment income and net realized capital gains in the
following year.

The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital gain
distributions will be reinvested in additional shares of the Fund.

INCOME TAXES.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that
are necessary for it to be relieved of federal taxes on income and
gain it distributes. The Fund will distribute substantially all of
its ordinary income and net capital gains on a current basis.
Generally, Fund distributions are taxable as ordinary income,
except that any distributions of net long-term capital gains will
be taxed as such. However, distributions by the Fund to employer-
sponsored defined contribution plans that qualify for tax-exempt
treatment under federal income tax laws will not be taxable.
Special tax rules apply to investments through such plans. You
should consult your tax advisor to determine the suitability of the
Fund as an investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable
through an investment in the Fund) from such a plan. This section
is not intended to be a full discussion of income tax laws and
their effect on shareholders.
___________________________
INVESTMENT RETURN

The total return from an investment in the Fund is measured by the
distributions received (assuming reinvestment) plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.

The yield of the Fund is calculated by dividing its net investment
income per share (a hypothetical figure as defined in the SEC
rules) during a 30-day period by the net asset value per share on
the last day of the period. The yield formula provides for
semiannual compounding, which assumes that net investment income is
earned and reinvested at a constant rate and annualized at the end
of a six-month period.

Comparison of the Fund's yield or total return with those of
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. The Fund's total return does not
reflect any charges or expenses related to your employer's plan.
Yield figures are not based on actual dividends paid. Past
performance is not necessarily indicative of future results. To
obtain current yield or total return information, you may call
800-338-2550.

___________________________
MANAGEMENT OF THE FUND

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Fund. See the Statement of
Additional Information for the names of and other information about
the trustees and officers. The Fund's Adviser, Stein Roe & Farnham
Incorporated, One South Wacker Drive, Chicago, Illinois 60606, is
responsible for managing the Fund's investment portfolio and the
business affairs of the Fund and the Trust, subject to the
direction of the Board. The Adviser is registered as an investment
adviser under the Investment Advisers Act.

PORTFOLIO MANAGER.
Steven P. Luetger has been portfolio manager of the Fund since
February 1995 and is a vice-president of the Fund. He is a senior
vice president of the Adviser and has been associated with the
Adviser since 1978. Mr. Luetger received his B.A. from Knox
College in 1975 and M.B.A. from the University of Chicago in 1980.
As of June 30, 1995, he was responsible for managing $28 million in
mutual fund assets. Mr. Luetger is assisted in managing the Fund
by Michael T. Kennedy. Mr. Kennedy is a vice-president of the
Trust, a senior vice president of the Adviser, and has been
associated with the Adviser since 1987. From 1984 to 1987, he was
employed by Homewood Federal Savings and Loan. A chartered
financial analyst and a chartered investment counselor, he received
his B.S. degree from Marquette University in 1984 and his M.M. from
Northwestern University in 1988.

FEES AND EXPENSES.
In return for its services, the Adviser receives a monthly fee from
the Fund based on the Fund's average net assets, computed and
accrued daily. The annualized fee that the Fund has agreed to pay
is 0.60 of 1% of the first $100 million of average net assets, 0.55
of 1% of the next $100 million, and 0.50 of 1% thereafter. For the
fiscal year ended June 30, 1995, pursuant to the expense
undertaking described under Fee Table, the Adviser reimbursed the
Fund $234,580, resulting in a net payment by the Adviser to the
Fund of $62,279.

PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures contracts for the
Fund. In doing so, the Adviser seeks to obtain the best
combination of price and execution, which involves a number of
judgmental factors.

TRANSFER AGENT.
SteinRoe Services Inc., One South Wacker Drive, Chicago, Illinois
60606, a wholly owned indirect subsidiary of Liberty Mutual, is the
agent of the Trust for the transfer of shares, disbursement of
dividends, and maintenance of shareholder accounting records.

DISTRIBUTOR.
The shares of the Fund are offered for sale through Liberty
Securities Corporation ("Distributor") without any sales
commissions or charges to the Fund or to its shareholders. The
Distributor is a wholly owned indirect subsidiary of Liberty
Mutual. The business address of the Distributor is 600 Atlantic
Avenue, Boston, Massachusetts 02210; however, all Fund
correspondence (including purchase and redemption orders) should be
mailed to the Trust at P.O. Box 804058, Chicago, Illinois 60680.
All distribution and promotional expenses are paid by the Adviser,
including payments to the Distributor for sales of Fund shares.

CUSTODIAN.
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the Fund.
Foreign securities are maintained in the custody of foreign banks
and trust companies that are members of the Bank's Global Custody
Network or foreign depositories used by such members. (See
Custodian in the Statement of Additional Information.)
___________________________
ORGANIZATION AND
DESCRIPTION OF SHARES

The Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
January 3, 1986, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the Trust's
shareholders or its trustees. The Trust may issue an unlimited
number of shares, in one or more series as the Board may authorize.
Currently, six series are authorized and outstanding.

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or having
been a shareholder. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is believed to
be remote, because it would be limited to circumstances in which
the disclaimer was inoperative and the Trust was unable to meet its
obligations.

The risk of a particular series incurring financial loss on account
of unsatisfied liability of another series of the Trust is also
believed to be remote, because it would be limited to claims to
which the disclaimer did not apply and to circumstances in which
the other series was unable to meet its obligations.
___________________________
FOR MORE INFORMATION

Contact a Stein Roe Retirement Plan Representative at 800-322-
1130 for more information about this Fund.

_________________

<PAGE>
[STEINROE MUTUAL FUNDS LOGO]

PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE GOVERNMENT INCOME FUND
The Fund seeks high current income by investing primarily in
securities issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities.

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a "no-load" fund. There are no sales or redemption
charges, and the Fund has no 12b-1 plan. The Fund is a series of
the STEIN ROE INCOME TRUST, an open-end management investment
company.

This prospectus contains information you should know before
investing in the Fund. Please read it carefully and retain it for
future reference.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS

Page
Fee Table .................................2
Financial Highlights.......................2
The Fund...................................3
How the Fund Invests.......................4
Portfolio Investments and Strategies.......4
Restrictions on the Fund's Investments ....7
Risks and Investment Considerations .......7
How to Purchase Shares ....................8
How to Redeem Shares ......................8
Net Asset Value ...........................9
Distributions and Income Taxes.............9
Investment Return.........................10
Management of the Fund....................10
Organization and Description of Shares....11
For More Information .....................12

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None

ANNUAL FUND OPERATING EXPENSES (after expense
reimbursement; as a percentage of average
net assets)
Management Fees (after expense reimbursement) 0.51%
12b-1 Fees None
Other Expenses 0.49%
------
Total Fund Operating Expenses (after
expense reimbursement) 1.00%
------
------
EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------- -------- ------- --------
$10 $32 $55 $122

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based upon
actual expenses incurred in the last fiscal year. From time to
time, the Adviser may voluntarily absorb certain expenses of the
Fund. The Adviser has agreed to voluntarily absorb the Fund's
expenses to the extent they exceed 1% of average net assets
through October 31, 1996, subject to earlier termination by the
Adviser on 30 days' notice. Any such absorption will temporarily
lower the Fund's overall expense ratio and increase its overall
return to investors. Absent such expense undertaking, Management
Fees and Total Fund Operating Expenses would have been 0.60% and
1.09%, respectively. (Also see Management of the Fund--Fees
and Expenses.)

For purposes of the Example above, the figures assume that the
percentage amounts listed for the Fund under Annual Fund Operating
Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, the Fund's net assets remain at the same level as in
the most recently completed fiscal year. The figures in the Example
are not necessarily indicative of past or future expenses, and
actual expenses may be greater or less than those shown.
Although information such as that shown in the Fee Table and Example
is useful in reviewing the Fund's expenses and in providing a
basis for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods. The example does not reflect any
charges or expenses related to your employer's plan.

__________________________
FINANCIAL HIGHLIGHTS

The table below reflects the results of operations of the Fund on
a per-share basis. The information for the years beginning after
June 30, 1987, has been audited by Ernst & Young LLP, independent
auditors. All of the auditors' reports related to information for
these periods were unqualified. The table should be read in
conjunction with the Fund's financial statements and notes
thereto. The Fund's annual report, which may be obtained from the
Trust without charge upon request, contains additional performance
information.

</TABLE>
<TABLE>
<CAPTION>
Period
Ended
June 30, Years Ended June 30,
1986(a) 1987 1988 1989 1990 1991 1992 1993 1994 1995
-------- ---- ----- ------ ------ ----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.10 $ 9.79 $ 9.59 $ 9.77 $ 9.66 $ 9.81 $10.40 $10.46 $ 9.48
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Income from Investment
Operations
Net investment income .24 .72 .74 .78 .76 .75 .72 .64 .56 .62
Net realized and
unrealized gains
(losses) on investments .10 (.31) (.15) .18 (.11) .15 .59 .31 (.77) .37
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Total from investment
operations .34 .41 .59 .96 .65 .90 1.31 .95 (.21) .99
Distributions
Net investment income (.24) (.72) (.74) (.78) (.76) (.75) (.72) (.64) (.56) (.62)
Net realized capital
gains -- -- (.05) -- -- -- -- (.25) (.01) --
In excess of realized
gains -- -- -- -- -- -- -- -- (.20) --
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
Total distributions (.24) (.72) (.79) (.78) (.76) (.75) (.72) (.89) (.77) (.62)
------ ---- ----- ------ ------ ----- ------ ------ ------- ------
NET ASSET VALUE,
END OF PERIOD $10.10 $ 9.79 $ 9.59 $ 9.77 $ 9.66 $ 9.81 $10.40 $10.46 $ 9.48 $ 9.85
------ ----- ----- ------ ------ ----- ------ ------ ------- ------
------ ----- ----- ------ ------ ----- ------ ------ ------- ------
Ratio of expenses to
average net assets (b) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.99% 0.95% 0.98% 1.00%
Ratio of net investment
income to average net
assets (c) *7.61% 7.13% 7.68% 8.19% 7.90% 7.65% 7.05% 6.25% 5.49% 6.56%
Portfolio turnover rate **91% 205% 237% 239% 181% 136% 139% 170% 167% 225%
Total return **3.35% 4.01% 6.35% 10.61% 6.92% 9.61% 13.75% 9.60% (2.26%) 10.94%
Net assets, end of
period (000 omitted) $11,970 $22,656 $26,859 $32,011 $46,853 $49,952 $58,978 $61,591 $45,836 $37,280
<FN>
* Annualized.
** Not annualized.
(a) The Fund commenced operations on March 5, 1986.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the Adviser, this ratio would have
been 3.33% for the period ended June 30, 1986; and 1.44%,
1.37%, 1.21%, and 1.07% for the years ended June 30, 1987 through
1990, respectively; and 1.09% for the year ended June 30, 1995.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
___________________________
THE FUND

The mutual fund offered by this prospectus is STEIN ROE GOVERNMENT
INCOME FUND (the "Fund"). The Fund is a no-load, diversified
"mutual fund." No-load funds do not impose commissions or charges
when shares are purchased or redeemed. Mutual funds sell their
own shares to investors and invest the proceeds in a portfolio of
securities. A mutual fund allows you to pool your money with that
of other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping.

Stein Roe & Farnham Incorporated (the "Adviser") is investment
adviser to the Fund. The Adviser also manages several other no-
load mutual funds with different investment objectives, including
other bond funds, equity funds, international funds, tax-exempt
bond funds, and money market funds. To obtain prospectuses and
other information on opening a regular account in any of these
mutual funds, please call 800-338-2550.

___________________________
HOW THE FUND INVESTS

The Fund's investment objective is to provide a high level of
current income. It invests primarily in securities issued or
guaranteed as to principal and interest by the U.S. Government or
by its agencies or instrumentalities ("U.S. Government
Securities"). Depending on market conditions, the Fund may invest
a substantial portion of its assets in mortgage-backed debt
securities issued by GNMA, FNMA, and FHLMC. Further information
on portfolio investments and strategies may be found under
Portfolio Investments and Strategies in this prospectus and in the
Statement of Additional Information.

Under normal market conditions, the Fund will invest at least 80%
of its assets in U.S. Government Securities. The Fund may also
invest up to 20% of its assets in other types of debt securities,
including collateralized mortgage obligations ("CMOs") and
principal portions or coupon portions of U.S. Government
Securities that have been separated (stripped) by banks, brokerage
firms, or other entities. Stripped securities are usually sold
separately in the form of receipts or certificates representing
undivided interests in the stripped portion. CMOs are securities
collateralized by mortgages and mortgage-backed securities. CMOs
are not guaranteed by either the U.S. Government or by its
agencies or instrumentalities. Stripped securities may be more
volatile than non-stripped securities. The staff of the
Securities and Exchange Commission believes that stripped
securities are illiquid. The Fund has temporarily agreed to treat
stripped securities as subject to the Fund's restriction on
investment in illiquid securities. The Fund will invest in debt
securities rated at least investment grade or, if unrated, deemed
by the Adviser to be of comparable quality. Securities rated in
the fourth grade are neither highly protected nor poorly secured.
Such securities may have some speculative characteristics, and
changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity of the issuers of such
securities to make principal and interest payments than is the
case for issuers of higher grade securities. If the rating of a
security held by the Fund is lost or reduced below investment
grade, the Fund is not required to dispose of the security, but
the Adviser will consider that fact in determining whether the
Fund should continue to hold the security.
___________________________
PORTFOLIO INVESTMENTS
AND STRATEGIES

U.S. GOVERNMENT SECURITIES.
U.S. Government Securities include: (i) bills, notes, bonds, and
other debt securities, differing as to maturity and rates of
interest, that are issued by and are direct obligations of the
U.S. Treasury; and (ii) other securities that are issued or
guaranteed as to principal and interest by the U.S. Government or
by its agencies or instrumentalities and that include, but are not
limited to, Government National Mortgage Association ("GNMA"),
Federal Farm Credit Banks, Federal Home Loan Banks, Farmers Home
Administration, Federal Home Loan Mortgage Corporation ("FHLMC"),
and Federal National Mortgage Association ("FNMA"). U.S.
Government Securities are generally viewed by the Adviser as being
among the safest of debt securities with respect to the timely
payment of principal and interest (but not with respect to any
premium paid on purchase), but generally bear a lower rate of
interest than corporate debt securities. However, they are
subject to market risk like other debt securities, and therefore
the Fund's shares can be expected to fluctuate in value.

DERIVATIVES.
Consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange traded options,
futures contracts, futures options, securities collateralized by
underlying pools of mortgages or other receivables, and other
instruments, the value of which is "derived" from the performance
of an underlying asset or a "benchmark" such as a security index,
an interest rate, or a currency ("Derivatives"). In each case,
the value of the instrument or security is "derived" from the
performance of an underlying asset or a "benchmark" such as a
security index, an interest rate, or a currency. The Fund does
not expect to invest more than 5% of its net assets in any type of
Derivative except for options, futures contracts, futures options,
and mortgage or other asset-backed securities.

MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES. The Fund may
invest in securities secured by mortgages or other assets such as
automobile or home improvement loans and credit card receivables.
These instruments may be issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities or by private
entities such as commercial, mortgage and investment banks and
financial companies or financial subsidiaries of industrial
companies.

Mortgage-backed securities provide either a pro rata interest in
underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs"), which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities and are usually issued in multiple classes, each
of which has different payment rights, pre-payment risks, and
yield characteristics. Mortgage-backed securities involve the
risk of pre-payment on the underlying mortgages at a faster or
slower rate than the established schedule. Pre-payments generally
increase with falling interest rates and decrease with rising
rates, but they also are influenced by economic, social, and market
factors. If mortgages are pre-paid during periods of declining
interest rates, there would be a resulting loss of the full-term
benefit of any premium paid by the Fund on purchase of the CMO,
and the proceeds of pre-payment would likely be invested at lower
interest rates. The Fund tends to invest in CMOs of classes known
as planned amortization classes ("PACs") which have pre-payment
protection features tending to make them less susceptible to price
volatility.

Asset-backed securities tend to experience greater price
volatility than straight debt securities.

FUTURES AND OPTIONS. The Fund may purchase and write both call
options and put options on securities and on indexes, and enter
into interest rate and index futures contracts and options on such
futures contracts, consistent with its investment objective, in
order to provide additional revenue, or to hedge against changes
in security prices or interest rates. The Fund may write a call
or put option only if the option is covered. As the writer of a
covered call option, the Fund foregoes, during the option's life,
the opportunity to profit from increases in market value of the
security covering the call option above the sum of the premium and
the exercise price of the call. There can be no assurance that a
liquid market will exist when the Fund seeks to close out a
position. Because of low margin deposits required, the use of
futures contracts involves a high degree of leverage, and may
result in losses in excess of the amount of the margin deposit.

LENDING OF PORTFOLIO SECURITIES.
Subject to certain restrictions, the Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be
continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also
receive an additional return that may be in the form of a fixed
fee or a percentage of the collateral. The Fund would have the
right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. In the event
of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses including (a) possible
decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of
income and lack of access to income during this period; and (c)
expenses of enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
The Fund's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. The Fund 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 advisable for investment reasons. Securities
purchased in this manner involve a risk of loss if the value of
the security purchased declines before the settlement date.

When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that the Fund will
sell securities with a commitment to purchase similar, but not
identical, securities at a future date. Generally, the securities
are repurchased at a price lower than the sales price. Dollar
roll transactions involve the risk of restrictions on the Fund's
ability to repurchase the security if the counterparty becomes
insolvent; an adverse change in the price of the security during
the period of the roll or that the value of the security
repurchased will be less than the security sold; and transaction
costs exceeding the return earned by the Fund on the sales
proceeds of the dollar roll.

PORTFOLIO TURNOVER.
In seeking to attain its objective, the Fund may sell portfolio
securities without regard to the period of time they have been
held. Further, the Adviser may purchase and sell securities for
the Fund's portfolio with a view to maximizing current return,
even if portfolio changes would cause the realization of capital
gains. Although the average stated maturity of the Fund's
portfolio generally will exceed ten years, the Adviser may adjust
the average maturity of the Fund's portfolio from time to time,
depending on its assessment of the relative yields available on
securities of different maturities and its expectations of future
changes in interest rates. As a result, the turnover rate of the
Fund may vary from year to year. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains (which may be taxable) or losses.
(See Financial Highlights and Distributions and Income Taxes.)
___________________________
RESTRICTIONS ON THE
FUND'S INVESTMENTS

The Fund may not invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements for such securities; or (2) 25% or more of its total
assets would be invested in the securities of a group of issuers
in the same industry, except that this restriction does not apply
to U.S. Government Securities. Notwithstanding these limitations,
the Fund may invest all of its assets in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund.

The Fund may not make loans, except that, consistent with its
investment policies and restrictions, it may: (1) invest up to
100% of its net assets in publicly offered or privately placed
debt securities, (2) lend its portfolio securities under certain
circumstances, and (3) enter into repurchase agreements. /1/ The
Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the Fund's aggregate
borrowings at any one time (including reverse repurchase
agreements and dollar rolls) may not exceed 33 1/3% of its total
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.
- --------------
/1/ A repurchase agreement involves a sale of securities to the
Fund with the concurrent agreement of the seller (bank or
securities dealer) to repurchase the securities at the same price
plus an amount equal to an agreed-upon interest rate within a
specified time. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses. The
Fund may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid
securities.
- --------------

A decline in prevailing levels of interest rates generally
increases the value of securities in the Fund's portfolio, while
an increase in rates usually reduces the value of those
securities. As a result, interest rate fluctuations will affect
the Fund's net asset value, but not the income received by the
Fund from its portfolio securities. (Because yields on debt
securities available for purchase by the Fund vary over time, no
specific yield on shares of the Fund can be assured.) In
addition, if the bonds in the Fund's portfolio contain call,
prepayment or redemption provisions, during a period of declining
interest rates, these securities are likely to be redeemed, and
the Fund will probably be unable to replace them with securities
having as great a yield.

The Fund is designed for investors who seek high income with
minimum risk other than the risk of changes in net asset value
caused by fluctuations in prevailing levels of interest rates.

There can be no assurance that the Fund will achieve its
objective, nor can the Fund assure that payments of interest and
principal on portfolio securities will be made when due. If,
after purchase by the Fund, the rating of a portfolio security is
lost or reduced, the Fund would not be required to sell the
security, but the Adviser would consider such a change in deciding
whether the Fund should retain the security in its portfolio.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in securities directly, the Fund may in the
future seek to achieve its investment objective by pooling its
assets with assets of other mutual funds managed by the Adviser
for investment in another investment company having the same
investment objective and substantially the same investment
policies and restrictions as the Fund. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. It is expected that any such investment company
would be managed by the Adviser in substantially the same manner
as the Fund. Shareholders of the Fund will be given at least 30
days' prior notice of any such investment, although they will not
be entitled to vote on the action. Such investment would be made
only if the trustees determine it to be in the best interests of
the Fund and its shareholders.
___________________________
HOW TO PURCHASE SHARES

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares.
___________________________
NET ASSET VALUE

The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value of a share of the Fund
is determined as of the close of trading on the New York Stock
Exchange (currently 3:00 p.m., Chicago time) by dividing the
difference between the values of the Fund'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 of the Fund
should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.

Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Long-term
straight-debt securities for which market quotations are not
readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. Short-term debt securities with
remaining maturities of 60 days or less are valued at their
amortized cost, which does not take into account unrealized gains
or losses. The Board believes that the amortized cost represents
a fair value for such securities. Short-term debt securities with
remaining maturities of more than 60 days for which market
quotations are not readily available are valued by use of a matrix
prepared by the Adviser based on quotations for comparable
securities. Other assets and securities held by the Fund for
which these valuation methods do not produce a fair value are
valued by a method that the Board believes will determine a fair
value.
___________________________
DISTRIBUTIONS AND
INCOME TAXES

DISTRIBUTIONS.
Income dividends are declared each business day and are paid
monthly. The Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the twelve-month period ended
October 31 in that year. The Fund intends to distribute any
undistributed net investment income and net realized capital gains
in the following year.

The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital gain
distributions will be reinvested in additional shares of the Fund.

The yield of the Fund is calculated by dividing its net investment
income per share (a hypothetical figure as defined in the SEC
rules) during a 30-day period by the net asset value per share on
the last day of the period. The yield formula provides for
semiannual compounding, which assumes that net investment income
is earned and reinvested at a constant rate and annualized at the
end of a six-month period.

Comparison of the Fund's yield or total return with those of
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. The Fund's total return does
not reflect any charges or expenses related to your employer's
plan. Yield figures are not based on actual dividends paid. Past
performance is not necessarily indicative of future results. To
obtain current yield or total return information, you may call
800-338-2550.

___________________________
MANAGEMENT OF THE FUND

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Fund. See Management in the
Statement of Additional Information for the names of and other
information about the trustees and officers. The Adviser, Stein
Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
Illinois 60606, is responsible for managing the investment
portfolio and the business affairs of the Fund and the Trust,
subject to the direction of the Board. The Adviser is registered
as an investment adviser under the Investment Advisers Act of
1940.

PORTFOLIO MANAGER.
Michael T. Kennedy has been portfolio manager of the Fund since
1988. He is a vice-president of the Trust, a senior vice
president of the Adviser, and has been associated with the Adviser
since 1987. From 1984 to 1987, he was employed by Homewood
Federal Savings and Loan. A chartered financial analyst and a
chartered investment counselor, he received his B.S. degree from
Marquette University in 1984 and his M.M. from Northwestern
University in 1988. Mr. Kennedy is secretary of the Adviser's
Fixed Income Policy Committee and managed $414 million in mutual
fund assets for the Adviser as of June 30, 1995. Steven P.
Luetger is associate portfolio manager for the Fund. Mr. Luetger
joined the Adviser in 1978 and is a senior vice president. He
received his B.A. from Knox College in 1975 and M.B.A. from the
University of Chicago in 1980.

FEES AND EXPENSES.
In return for its investment advisory and administrative services,
the Adviser receives a monthly fee from the Fund based on its
average net assets, computed and accrued daily. The annualized
fee for the Fund is .60 of 1% of the first $100 million and .55 of
1% thereafter. For the fiscal year ended June 30, 1995, the fee
for the Fund amounted to .51% of average net assets after the
expense limitation described under Fee Table.

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.

Contact a Stein Roe Retirement Plan Representative at 800-322-
1130 for more information about this Fund.

_________________

<PAGE>
[STEINROE MUTUAL FUNDS LOGO]

PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE INTERMEDIATE BOND FUND
The Fund seeks high current income by investing primarily in
marketable debt securities. The dollar-weighted average life of
the Fund's portfolio is expected to be between three and ten
years.

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a "no-load" fund. There are no sales or redemption
charges, and the Fund has no 12b-1 plan. The Fund is a series of
the STEIN ROE INCOME TRUST, an open-end management investment
company.

This prospectus contains information you should know before
investing in the Fund. Please read it carefully and retain it for
future reference.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS

Page
Fee Table .............................2
Financial Highlights...................2
The Fund...............................3
How the Fund Invests...................4
Portfolio Investments and Strategies...5
Restrictions on the Fund's Investments 7
Risks and Investment Considerations ...8
How to Purchase Shares ................9
How to Redeem Shares ..................9
Net Asset Value ......................10
Distributions and Income Taxes........10
Investment Return.....................10
Management of the Fund................11
Organization and Description of
Shares.............................12
For More Information..................13

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None

ANNUAL FUND OPERATING EXPENSES (after expense
reimbursement); as a percentage of average
net assets)
Management Fees (after expense reimbursement) 0.49%
12b-1 Fees None
Other Expenses 0.21%
Total Fund Operating Expenses (after expense
reimbursement) 0.70%

EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------- -------- ------- --------
$7 $22 $39 $87

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based upon
actual expenses incurred in the last fiscal year, adjusted for the
expense limitation in effect on May 1, 1995. From time to time,
the Adviser may voluntarily absorb certain expenses of the Fund.
Effective May 1, 1995, the Adviser has agreed to voluntarily
absorb the Fund's expenses to the extent that they exceed 0.70 of
1% of average net assets through October 31, 1996, subject to
earlier termination by the Adviser on 30 days' written notice.
Any such absorption will temporarily lower the Fund's overall
expense ratio and increase its overall return to investors.
Absent such undertaking, Management Fees and Total Fund Operating
Expenses would have been 0.50% and 0.71%, respectively. (Also
see Management--Fees and Expenses.)

For purposes of the Example above, the figures assume that the
percentage amounts listed for the Fund under Annual Fund Operating
Expenses remain the same during each of the periods and that all
income dividends and capital gain distributions are reinvested in
additional Fund shares. The figures in the Example are not
necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. Although
information such as that shown in the Fee Table and Example
is useful in reviewing the Fund's expenses and in providing a
basis for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods. The example does not reflect any
charges or expenses related to your employer's plan.

__________________________
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Years Ended June 30,
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $8.89 $9.92 $8.77 $8.51 $8.65 $8.38 $8.53 $8.99 $9.26 $8.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment
Operations
Net investment income .84 .74 .68 .74 .73 .69 .69 .65 .56 .58
Net realized and
unrealized gains
(losses) on investments 1.03 (.41) (.12) .14 (.28) .16 .46 .27 (.59) .23
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations 1.87 .33 .56 .88 .45 .85 1.15 .92 (.03) .81
Distributions
Net investment income (.84) (.74) (.68) (.74) (.72) (.70) (.69) (.65) (.56) (.58)
Net realized capital gains -- (.74) (.14) -- -- -- -- -- (.08) --
In excess of realized
gains -- -- -- -- -- -- -- -- (.15) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (.84) (1.48) (.82) (.74) (.72) (.70) (.69) (.65) (.79) (.58)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $9.92 $8.77 $8.51 $8.65 $8.38 $8.53 $8.99 $9.26 $8.44 $8.67
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Ratio of expenses to
average net assets (b) 0.69% 0.68% 0.73% 0.73% 0.74% 0.73% 0.70% 0.67% 0.70% 0.70%
Ratio of net investment
income to average net
assets (c) 9.03% 7.94% 7.97% 8.71% 8.60% 8.17% 7.87% 7.22% 6.20% 6.94%
Portfolio turnover rate 334% 230% 273% 197% 296% 239% 202% 214% 206% 162%
Total return 21.90% 3.40% 6.92% 10.97% 5.33% 10.62% 14.02% 10.59% (0.47%) 10.11%
Net assets, end of
period (000 omitted) $183,440 $188,674 $162,225 $165,056 $161,439 $184,444 $242,948 $311,728 $302,507 $301,733
<FN>
(a)If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the Adviser, this ratio would have
been 0.71% for the year ended June 30, 1995.
(b)Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
___________________________
THE FUND

The mutual fund offered by this prospectus is STEIN ROE
INTERMEDIATE BOND FUND (the "Fund"). The Fund is a no-load,
diversified "mutual fund." No-load funds do not impose
commissions or charges when shares are purchased or redeemed.
Mutual funds sell their own shares to investors and invest the
proceeds in a portfolio of securities. A mutual fund allows you
to pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping.

___________________________
HOW THE FUND INVESTS

The Fund's investment objective is to provide a high level of
current income, consistent with the preservation of capital, by
investing primarily in marketable debt securities. Under normal
market conditions, the Fund will invest at least 65% of the value
of its total assets (taken at market value at the time of
investment) in convertible and non-convertible bonds and
debentures, and at least 60% of its assets will be invested in the
following:

(1) Marketable straight-debt securities of domestic issuers, and of
foreign issuers payable in U.S. dollars, rated at time of
purchase within the three highest grades assigned by Moody's
Investors Service, Inc. ("Moody's") or by Standard & Poor's
Corporation ("S&P");
(2) U.S. Government Securities;
(3) Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time
of purchase, or, if unrated, issued or guaranteed by a
corporation with any outstanding debt rated Aa or better by
Moody's or AA or better by S&P; and
(4) Bank obligations, including repurchase agreements, of banks
having total assets in excess of $1 billion.

The Fund also may invest in mortgaged-backed and other debt
securities (including those convertible into or carrying warrants
to purchase common stocks or other equity interests, and privately
placed debt securities), preferred stocks, and marketable common
stocks that the Adviser considers likely to yield relatively high
income in relation to cost. Further information on portfolio
investments and strategies may be found under Portfolio
Investments and Strategies in this prospectus and in the Statement
of Additional Information.

Under normal market conditions, the Fund invests at least 65% of
its assets in securities with an average life of between three and
ten years, and expects that the dollar-weighted average life of
its portfolio will be between three and ten years. Average life
is the weighted average period over which the Adviser expects the
principal to be paid, and differs from stated maturity in that it
estimates the effect of expected principal prepayments and call
provisions. With respect to GNMA securities and other mortgage-
backed securities, average life is likely to be substantially less
than the stated maturity of the mortgages in the underlying pools.
With respect to obligations with call provisions, average life is
typically the next call date on which the obligation reasonably
may be expected to be called. Securities without prepayment or
call provisions generally have an average life equal to their
stated maturity. During periods of rising interest rates, the
average life of mortgage-backed securities and callable
obligations may increase substantially because they are not likely
to be prepaid, which may result in greater net asset value
fluctuation.

The Fund may invest up to 35% of its total assets in debt
securities that are rated below investment grade (with no
permitted rating) and that, on balance, are considered predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the possibility
of issuer default and bankruptcy. An economic downturn could
severely disrupt this market and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal
and interest. In addition, lower-quality bonds are less sensitive
to interest rate changes than higher-quality instruments (see Risks
and Investment Considerations) and generally are more sensitive to
adverse economic changes or individual corporate developments.
During a period of adverse economic changes, including a period of
rising interest rates, issuers of such bonds may experience
difficulty in servicing their principal and interest payment
obligations.

Achievement of the Fund's investment objective will be more
dependent on the Adviser's credit analysis than would be the case
if the Fund were investing exclusively in investment-grade debt
securities. Since the ratings of rating services (which evaluate
the safety of principal and interest payments, not market risks)
are used only as preliminary indicators of investment quality, the
Adviser employs its own credit research and analysis, from which
it has developed a credit rating system based upon comparative
credit analyses of issuers within the same industry. These
analyses may take into consideration such quantitative factors as
an issuer's present and potential liquidity, profitability,
internal capability to generate funds, debt/equity ratio and debt
servicing capabilities, and such qualitative factors as an
assessment of management, industry characteristics, accounting
methodology, and foreign business exposure.

___________________________
PORTFOLIO INVESTMENTS
AND STRATEGIES

DERIVATIVES.
Consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange traded options,
futures contracts, futures options, securities collateralized by
underlying pools of mortgages or other receivables, and other
instruments, the value of which is "derived" from the performance
of an underlying asset or a "benchmark" such as a security index,
an interest rate, or a currency ("Derivatives"). The Fund does
not expect to invest more than 5% of its net assets in any type of
Derivative except for options, futures contracts, futures options,
and mortgage or other asset-backed securities.

MORTGAGE AND OTHER ASSET-BACKED SECURITIES. The Fund may invest
in securities secured by mortgages or other assets such as
automobile or home improvement loans and credit card receivables.
These instruments may be issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities or by private
entities such as commercial, mortgage and investment banks and
financial companies or financial subsidiaries of industrial
companies.

Mortgage-backed securities provide either a pro rata interest in
underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs"), which represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities and are usually issued in multiple classes, each
of which has different payment rights, pre-payment risks, and
yield characteristics. Mortgage-backed securities involve the
risk of pre-payment on the underlying mortgages at a faster or
slower rate than the established schedule. Pre-payments generally
increase with falling interest rates and decrease with rising
rates, but they also are influenced by economic, social, and market
factors. If mortgages are pre-paid during periods of declining
interest rates, there would be a resulting loss of the full-term
benefit of any premium paid by the Fund on purchase of the CMO,
and the proceeds of pre-payment would likely be invested at lower
interest rates. The Fund tends to invest in CMOs of classes known
as planned amortization classes ("PACs") which have pre-payment
protection features tending to make them less susceptible to price
volatility.

Asset-backed securities tend to experience greater price
volatility than straight debt securities.

FUTURES AND OPTIONS. The Fund may purchase and write both call
options and put options on securities, indexes and foreign
currencies, and enter into interest rate, index and foreign
currency futures contracts. The Fund may also write and options
on such futures contracts and purchase other types of forward or
investment contracts linked to individual securities, indexes or
other benchmarks in order to, consistent with its investment objective,
provide additional revenue, or to hedge against changes in security
prices, interest rates, or currency fluctuations. The Fund may write
a call or put option only if the option is covered. As the writer of
a covered call option, the Fund foregoes, during the option's life, the
opportunity to profit from increases in market value of the security
covering the call option above the sum of the premium and the exercise
price of the call. There can be no assurance that a liquid market will
exist when the Fund seeks to close out a position. Because of low margin
deposits required, the use of futures contracts involves a high degree of
leverage, and may result in losses in excess of the amount of the margin
deposit.

FOREIGN SECURITIES.
Although the Fund may invest in foreign securities, it will not
invest in a foreign security if, as a result of such investment,
more than 10% of its total assets would be invested in foreign
securities. For purposes of this restriction, foreign securities
do not include securities represented by American Depositary
Receipts ("ADRs"), foreign debt securities denominated in U.S.
dollars, or securities guaranteed by a U.S. person such as a
corporation domiciled in the United States that is a parent or
affiliate of the issuer of the securities being guaranteed. The
Fund may invest in sponsored or unsponsored ADRs. In addition to,
or in lieu of, such direct investment, the Fund may construct a
synthetic foreign position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b)
concurrently entering into a forward contract to deliver a
corresponding amount of that currency in exchange for a different
currency on a future date and at a specified rate of exchange.
Because of the availability of a variety of highly liquid U.S.
dollar debt instruments, a synthetic foreign position utilizing
such U.S. dollar instruments may offer greater liquidity than
direct investment in foreign currency debt instruments. In
connection with the purchase of foreign securities, the Fund may
contract to purchase an amount of foreign currency sufficient to
pay the purchase price of the securities at the settlement date.
Foreign securities may involve a greater degree of risk (including
risk related to exchange rate fluctuations, tax provisions, or
expropriation of assets) than do securities of domestic issuers.
At June 30, 1995, no assets of the Fund were invested in foreign
securities as defined above, and the Fund does not currently
intend to invest more than 5% of its net assets in such
securities. (See Risks and Investment Considerations.)

LENDING OF PORTFOLIO SECURITIES.
Subject to certain restrictions, the Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be
continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also
receive an additional return that may be in the form of a fixed
fee or a percentage of the collateral. The Fund would have the
right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. In the event
of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses including (a) possible
decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of
income and lack of access to income during this period; and (c)
expenses of enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
The Fund's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. The Fund 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 advisable for investment reasons. Securities
purchased in this manner involve a risk of loss if the value of
the security purchased declines before the settlement date.

When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that the Fund will
sell securities with a commitment to purchase similar, but not
identical, securities at a future date. Generally, the securities
are repurchased at a price lower than the sales price. Dollar
roll transactions involve the risk of restrictions on the Fund's
ability to repurchase the security if the counterparty becomes
insolvent; an adverse change in the price of the security during
the period of the roll or that the value the security repurchased
will be less than the security sold; and transaction costs
exceeding the return earned by the Fund on the sales proceeds of
the dollar roll.

PORTFOLIO TURNOVER.
In seeking to attain its objective, the Fund may sell portfolio
securities without regard to the period of time they have been
held. The turnover rate of the Fund may vary from year to year.
A high rate of portfolio turnover may result in increased
transaction expenses and the realization of capital gains (which
may be taxable) or losses. (See Financial Highlights and
Distributions and Income Taxes.)
___________________________
RESTRICTIONS ON THE
FUND'S INVESTMENTS

The Fund may not invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements for such securities, or (2) 25% or more of its total
assets would be invested in the securities of a group of issuers
in the same industry, except that this restriction does not apply
to U.S. Government Securities. Notwithstanding these limitations,
the Fund may invest all of its assets in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund.

The policies set forth in the first two paragraphs under
Restrictions on the Fund's Investments (but not the footnote) are
fundamental policies of the Fund. The Statement of Additional
Information contains all of the investment restrictions.
- -------------------
/1/A repurchase agreement involves a sale of securities to the
Fund with the concurrent agreement of the seller (bank or
securities dealer) to repurchase the securities at the same price
plus an amount equal to an agreed-upon interest rate within a
specified time. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses. The
Fund may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid
securities.
- --------------------
___________________________
RISKS AND INVESTMENT
CONSIDERATIONS

A decline in prevailing levels of interest rates generally
increases the value of securities in the Fund's portfolio, while
an increase in rates usually reduces the value of those
securities. As a result, interest rate fluctuations will affect
the Fund's net asset value, but not the income received by the
Fund from its portfolio securities. (Because yields on debt
securities available for purchase by the Fund vary over time, no
specific yield on shares of the Fund can be assured.) In
addition, if the bonds in the Fund's portfolio contain call,
prepayment or redemption provisions, during a period of declining
interest rates, these securities are likely to be redeemed, and
the Fund will probably be unable to replace them with securities
having as great a yield.

The Fund is appropriate for investors who seek high income with
less net asset value fluctuation from interest rate changes than
that of a longer-term fund, and who can accept greater levels of
credit and other risks associated with securities that are rated
below investment grade.

The Fund may enter into foreign currency forward contracts and use
options and futures contracts as described elsewhere in this
prospectus to limit or reduce foreign currency risk.

There can be no assurance that the Fund will achieve its
objective, nor can the Fund assure that payments of interest and
principal on portfolio securities will be made when due. If,
after purchase by the Fund, the rating of a portfolio security is
lost or reduced, the Fund would not be required to sell the
security, but the Adviser would consider such a change in deciding
whether the Fund should retain the security in its portfolio.

MASTER FUND/FEEDER FUND OPTION.
Rather than invest in securities directly, the Fund may in the
future seek to achieve its investment objective by pooling its
assets with assets of other mutual funds managed by the Adviser
for investment in another investment company having the same
investment objective and substantially the same investment
policies and restrictions as the Fund. The purpose of such
arrangement is to achieve greater operational efficiencies and
reduce costs. It is expected that any such investment company
would be managed by the Adviser in substantially the same manner
as the Fund. Shareholders of the Fund will be given at least 30
days' prior notice of any such investment, although they will not
be entitled to vote on the action. Such investment would be made
only if the trustees determine it to be in the best interests of
the Fund and its shareholders.
___________________________
HOW TO PURCHASE SHARES

The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares.
___________________________
NET ASSET VALUE

The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value of a share of the Fund
is determined as of the close of trading on the New York Stock
Exchange (currently 3:00 p.m., Chicago time) by dividing the
difference between the values of the Fund'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 of the Fund
should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.

Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Long-term
straight-debt securities for which market quotations are not
readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may
employ electronic data processing techniques, including a matrix
system, to determine valuations. Short-term debt securities with
remaining maturities of 60 days or less are valued at their
amortized cost, which does not take into account unrealized gains
or losses. The Board believes that the amortized cost represents
fair value for such securities. Short-term debt securities with
remaining maturities of more than 60 days for which market
quotations are not readily available are valued by use of a matrix
prepared by the Adviser based on quotations for comparable
securities. Other assets and securities held by the Fund for
which these valuation methods do not produce a fair value are
valued by a method that the Board believes will determine a fair
value.
___________________________
DISTRIBUTIONS AND
INCOME TAXES

DISTRIBUTIONS.
Income dividends are declared each business day and are paid
monthly. The Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the twelve-month period ended
October 31 in that year. The Fund intends to distribute any
undistributed net investment income and net realized capital gains
in the following year.

The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital gain
distributions will be reinvested in additional shares of the Fund.

The yield of the Fund is calculated by dividing its net investment
income per share (a hypothetical figure as defined in the SEC
rules) during a 30-day period by the net asset value per share on
the last day of the period. The yield formula provides for
semiannual compounding, which assumes that net investment income
is earned and reinvested at a constant rate and annualized at the
end of a six-month period.

Comparison of the Fund's yield or total return with those of
alternative investments should consider differences between the
Fund and the alternative investments, the periods and methods used
in calculation of the return being compared, and the impact of
taxes on alternative investments. The Fund's total return does
not reflect any charges or expenses related to your employer's
plan. Yield figures are not based on actual dividends paid. Past
performance is not necessarily indicative of future results. To
obtain current yield or total return information, you may call
800-338-2550.

___________________________
MANAGEMENT OF THE FUND

TRUSTEES AND INVESTMENT ADVISER.
The Board of Trustees of the Trust and has overall management
responsibility for the Trust and the Fund. See Management in the
Statement of Additional Information for the names of and other
information about the trustees and officers. The Adviser, Stein
Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
Illinois 60606, is responsible for managing the investment
portfolio and the business affairs of the Fund and the Trust,
subject to the direction of the Board. The Adviser is registered
as an investment adviser under the Investment Advisers Act of
1940.

FEES AND EXPENSES.
In return for its investment advisory and administrative services,
the Adviser receives a monthly fee from the Fund based on its
average net assets, computed and accrued daily. The annualized
fee is .50 of 1% of average net assets. For the fiscal year ended
June 30, 1995, the fee amounted to .49% of average net assets,
after the expense limitation described under Fee Table.

Under Massachusetts law, shareholders of a Massachusetts business
trust such as the Trust could, in some circumstances, be held
personally liable for unsatisfied obligations of the trust. The
Declaration of Trust provides that persons extending credit to,
contracting with, or having any claim against, the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers of the
Trust shall have no personal liability therefor. The Declaration
of Trust requires that notice of such disclaimer of liability be
given in each contract, instrument or undertaking executed or made
on behalf of the Trust. The Declaration of Trust provides for
indemnification of any shareholder against any loss and expense
arising from personal liability solely by reason of being or
having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.

Contact a Stein Roe Retirement Plan Representative at 800-322-
1130 for more information about this Fund.

_________________

<PAGE>
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS

STEIN ROE INCOME FUND
The Fund seeks high current income by investing principally in
medium-quality debt securities and, to a lesser extent, in lower-
quality securities which may involve greater risk. (See How the
Fund Invests.)

This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans
("defined contribution plans").

The Fund is a "no-load" fund. There are no sales or redemption
charges, and the Fund has no 12b-1 plan. The Fund is a series of
the STEIN ROE INCOME TRUST, an open-end management investment
company. This prospectus contains information you should know
before investing in the Fund. Please read it carefully and retain
it for future reference.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995

TABLE OF CONTENTS

Page
Fee Table ...............................2
Financial Highlights.....................2
The Fund.................................3
How the Fund Invests.....................4
Portfolio Investments and Strategies.....5
Restrictions on the Fund's Investments ..7
Risks and Investment Considerations .....7
How to Purchase Shares ..................8
How to Redeem Shares ....................9
Net Asset Value .........................9
Distributions and Income Taxes..........10
Investment Return.......................10
Management of the Fund..................10
Organization and Description of Shares..12
For More Information....................12

___________________________
FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None

ANNUAL FUND OPERATING EXPENSES (after expense
reimbursement; as a percentage of average net
assets)
Management Fees (after expense reimbursement) 0.60%
12b-1 Fees None
Other Expenses 0.22%
-----
Total Fund Operating Expenses (after expense
reimbursement) 0.82%
-----
-----

EXAMPLE.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period:

1 year 3 years 5 years 10 years
------- -------- ------- --------
$8 $26 $46 $101

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in the Fund. The table is based on
actual expenses incurred in the last fiscal year. The Adviser has
undertaken to reimburse the Fund for expenses in excess of 0.82%
of average net assets through October 31, 1998. Any such
reimbursement will temporarily lower the Fund's overall expense
ratio and increase its overall return to investors. Absent such
undertaking, the estimated Management Fees and Total Fund Operating
Expenses would have been 0.63% and 0.85%, respectively. (Also
see Management of the Fund--Fees and Expenses.)

For purposes of the Example above, the figures assume that the
percentage amounts listed for the Fund under Annual Fund Operating
Expenses remain the same during each of the periods, that all
income dividends and capital gain distributions are reinvested in
additional Fund shares, and that, for purposes of management fee
breakpoints, the Fund's net assets remain at the same level as in
the most recently completed fiscal year. The figures in the Example
are not necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. Although
information such as that shown in the Fee Table and Example is
useful in reviewing the Fund's expenses and in providing a basis
for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods. The example does not reflect any
charges or expenses related to your employer's plan.

__________________________
FINANCIAL HIGHLIGHTS

The table below reflects the results of operations of the Fund on
a per-share basis and has been audited by Ernst & Young LLP,
independent auditors. The table should be read in conjunction
with the Fund's financial statements and notes thereto. The
Fund's annual report, which may be obtained from the Trust without
charge upon request, contains additional performance information.

<TABLE>
<CAPTION>
Period
Ended
June 30, Years Ended June 30,
1986(a) 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $ 9.94 $ 9.71 $ 9.60 $ 9.65 $ 8.95 $ 8.95 $ 9.51 $10.10 $ 9.36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income .30 .98 .95 .95 .92 .80 .76 .75 .69 .71
Net realized and
unrealized gains (losses)
on investments (.06) (.23) (.11) .05 (.70) -- .56 .59 (.74) .43
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .24 .75 .84 1.00 .22 .80 1.32 1.34 (.05) 1.14
Distributions from net
investment income (.30) (.98) (.95) (.95) (.92) (.80) (.76) (.75) (.69) (.71)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.94 $ 9.71 $ 9.60 $ 9.65 $ 8.95 $ 8.95 $ 9.51 $10.10 $ 9.36 $ 9.79
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of expenses to
average net assets (b) *1.00% 0.96% 0.91% 0.90% 0.93% 0.95% 0.90% 0.82% 0.82% 0.82%
Ratio of net investment
income to average net
assets (c) *10.07% 9.90% 10.08% 9.97% 10.02% 8.98% 8.20% 7.62% 6.94% 7.55%
Portfolio turnover rate **84% 153% 158% 94% 90% 77% 76% 39% 53% 64%
Total return **2.42% 7.70% 9.38% 11.06% 2.48% 9.30% 15.30% 14.64% (0.69%) 12.79%
Net assets, end of
period (000 omitted) $32,034 $91,916 $96,611 $110,376 $89,023 $93,952 $112,706 $151,594 $158,886 $174,327
<FN>
*Annualized.
**Not annualized.
(a)The Fund commenced operations on March 5, 1986.
(b)If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the Adviser, this ratio would have
been 2.01% for the period ended June 30, 1986 and 0.83% and
0.85% for the years ended June 30, 1994 and 1995, respectively.
(c)Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
___________________________
THE FUND

The mutual fund offered by this prospectus is STEIN ROE INCOME
FUND (the "Fund"). The Fund is a no-load, diversified "mutual
fund." No-load funds do not impose commissions or charges when
shares are purchased or redeemed. Mutual funds sell their own
shares to investors and invest the proceeds in a portfolio of
securities. A mutual fund allows you to pool your money with that
of other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping.

___________________________
HOW THE FUND INVESTS

The investment objective of the Fund is to provide a high level of
current income. Consistent with this investment objective,
capital preservation and capital appreciation are regarded as
secondary objectives. The Fund attempts to achieve its objective
by investing principally in medium-quality debt securities, which
are obligations of issuers that the Adviser believes possess
adequate, but not outstanding, capacities to service their debt
securities, such as securities rated A or Baa by Moody's or A or
BBB by S&P. The Adviser generally attributes to medium-quality
securities the same characteristics as do rating services.
Further information on portfolio investments and strategies may be
found under Portfolio Investments and Strategies in this
prospectus and in the Statement of Additional Information.

Although the Fund will invest at least 60% of its assets in
medium- or higher-quality securities, it may also invest to a
lesser extent in securities of lower quality (in the case of rated
securities, having a rating by Moody's or S&P of not less than C).
Although the Fund can invest up to 40% of its assets in lower-
quality securities, it does not intend to invest more than 35% in
lower-quality securities. Lower-quality debt securities are
obligations of issuers that are predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal, and are commonly referred to as "junk bonds." The Fund
may invest in lower-quality debt securities; for example, if the
Adviser believes the financial condition of the issuers or the
protection offered to the particular obligations is stronger than
is indicated by low ratings or otherwise. The Fund may invest in
higher-quality securities; for example, under extraordinary
economic or financial market conditions, or when the spreads
between the yields on medium- and high-quality securities are
relatively narrow.

Some issuers of debt securities choose not to have their
securities rated by a rating service, and the Fund may invest in
unrated securities that the Adviser believes are suitable for
investment.

Achievement of the Fund's investment objective will be more
dependent on the Adviser's credit analysis than would be the case
if the Fund were investing in higher-quality debt securities.
Since the ratings of rating services (which evaluate the safety of
principal and interest payments, not market risks) are used only
as preliminary indicators of investment quality, the Adviser
employs its own credit research and analysis, from which it has
developed a credit rating system based upon comparative credit
analyses of issuers within the same industry. These analyses may
take into consideration such quantitative factors as an issuer's
present and potential liquidity, profitability, internal
capability to generate funds, debt/equity ratio and debt servicing
capabilities, and such qualitative factors as an assessment of
management, industry characteristics, accounting methodology, and
foreign business exposure.

Medium- and lower-quality debt securities tend to be less
marketable than higher-quality debt securities because the market
for them is less broad. The market for unrated debt securities is
even narrower. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase
significantly, and the Fund may have greater difficulty selling
its portfolio securities. (See Net Asset Value.) The market
value of these securities and their liquidity may be affected by
adverse publicity and investor perceptions.

Under normal market conditions, the Fund will invest at least 65%
of the value of its total assets (taken at market value) in
convertible and non-convertible bonds and debentures. Such
securities may be accompanied by the right to acquire equity
securities evidenced by warrants attached to the security or
acquired as part of a unit with the security. Equity securities
acquired by conversion or exercise of such a right may be retained
by the Fund for a sufficient time to permit orderly disposition
thereof or to establish long-term holding periods for federal
income tax purposes.

The Fund may invest up to 35% of its total assets in other debt
securities, marketable preferred and common stocks, and foreign
and municipal securities that the Adviser considers likely to
yield relatively high income in relation to costs, and rights to
acquire such securities. (Municipal securities are securities
issued by or on behalf of state and local governments, the
interest on which is generally exempt from federal income tax.)
Any assets not otherwise invested may be invested in money market
instruments.

For the fiscal year ended June 30, 1995, the Fund's portfolio was
invested, on average, as follows: high-quality short-term
instruments, 3.9%; U.S. Government Securities, 12.6%; AAA, 3.5%;
AA, 2.6%; A, 11.0%; BBB, 37.5%; BB, 25.3%; B, 1.5%; and unrated,
2.1%. The ratings are based on a dollar-weighted average,
computed monthly, and reflect the higher of S&P or Moody's
ratings. The ratings do not necessarily reflect the current or
future composition of the Income Fund.
___________________________
PORTFOLIO INVESTMENTS
AND STRATEGIES

DERIVATIVES.
Consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange traded options,
futures contracts, futures options, securities collateralized by
underlying pools of mortgages or other receivables, and other
instruments, the value of which is "derived" from the performance
of an underlying asset or a "benchmark" such as a security index,
an interest rate, or a currency ("Derivatives"). The Fund does
not expect to invest more than 5% of its net assets in any type of
Derivative except for options, futures contracts, or futures
options.

FUTURES AND OPTIONS. The Fund may purchase and write both call
options and put options on securities, indexes and foreign
currencies, and enter into interest rate, index and foreign
currency futures contracts. The fund may also write options on
such futures contracts and purchase other types of forward or investment
contracts linked to individual securities, indexes or other benchmarks
in order to, consistent with its investment objective, provide
additional revenue, or to hedge against changes in security prices,
interest rates, or currency fluctuations. The Fund may write a call
or put option only if the option is covered. As the writer of a covered
call option, the Fund foregoes, during the option's life, the opportunity
to profit from increases in market value of the security covering the
call option above the sum of the premium and the exercise price of the
call. There can be no assurance that a liquid market will exist when
the Fund seeks to close out a position. Because of low margin deposits
required, the use of futures contracts involves a high degree of leverage,
and may result in losses in excess of the amount of the margin deposit.

FOREIGN SECURITIES.
Although the Fund may invest in foreign securities, it will not
invest in a foreign security if, as a result of such investment,
more than 25% of its total assets would be invested in foreign
securities. For purposes of this restriction, foreign securities
do not include securities represented by American Depositary
Receipts ("ADRs"), foreign debt securities denominated in U.S.
dollars, or securities guaranteed by a U.S. person such as a
corporation domiciled in the United States that is a parent or
affiliate of the issuer of the securities being guaranteed. The
Fund may invest in sponsored or unsponsored ADRs. In addition to,
or in lieu of, such direct investment, the Fund may construct a
synthetic foreign position by (a) purchasing a debt instrument
denominated in one currency, generally U.S. dollars; and (b)
concurrently entering into a forward contract to deliver a
corresponding amount of that currency in exchange for a different
currency on a future date and at a specified rate of exchange.
Because of the availability of a variety of highly liquid U.S.
dollar debt instruments, a synthetic foreign position utilizing
such U.S. dollar instruments may offer greater liquidity than
direct investment in foreign currency debt instruments. In
connection with the purchase of foreign securities, the Fund may
contract to purchase an amount of foreign currency sufficient to
pay the purchase price of the securities at the settlement date.
Foreign securities may involve a greater degree of risk (including
risk related to exchange rate fluctuations, tax provisions, or
expropriation of assets) than do securities of domestic issuers.
At June 30, 1995, no assets of the Fund were invested in foreign
securities as defined above, and the Fund does not currently
intend to invest more than 5% of its net assets in such
securities. (See Risks and Investment Considerations.)

LENDING OF PORTFOLIO SECURITIES.
Subject to certain restrictions, the Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be
continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the
market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also
receive an additional return that may be in the form of a fixed
fee or a percentage of the collateral. The Fund would have the
right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. In the event
of bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses including (a) possible
decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of
income and lack of access to income during this period; and (c)
expenses of enforcing its rights.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; STANDBY COMMITMENTS.
The Fund's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and
interest terms of these securities are established at the time the
purchaser enters into the commitment, the securities may be
delivered and paid for a month or more after the date of purchase,
when their value may have changed. The Fund 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 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.

When-issued or delayed-delivery securities may sometimes be
purchased on a "dollar roll" basis, meaning that the Fund will
sell securities with a commitment to purchase similar, but not
identical, securities at a future date. Generally, the securities
are repurchased at a price lower than the sales price. Dollar
roll transactions involve the risk of restrictions on the Fund's
ability to repurchase the security if the counterparty becomes
insolvent; an adverse change in the price of the security during
the period of the roll or that the value the security repurchased
will be less than the security sold; and transaction costs
exceeding the return earned by the Fund on the sales proceeds of
the dollar roll.

PORTFOLIO TURNOVER.
In seeking to attain its objective, the Fund may sell portfolio
securities without regard to the period of time they have been
held. Further, the Adviser may purchase and sell securities for
the portfolio of the Fund with a view to maximizing current
return, even if portfolio changes would cause the realization of
capital gains. Although the average stated maturity of the Fund's
portfolio generally will exceed ten years, the Adviser may adjust
the average maturity of the Fund's portfolio from time to time,
depending on its assessment of the relative yields available on
securities of different maturities and its expectations of future
changes in interest rates. As a result, the turnover rate of the
Fund may vary from year to year. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains (which may be taxable) or losses.
(See Financial Highlights and Distributions and Income Taxes.)
___________________________
RESTRICTIONS ON THE
FUND'S INVESTMENTS

The Fund may not invest in a security if, as a result of such
investment: (1) with respect to 75% of its assets, more than 5% of
its total assets would be invested in the securities of any one
issuer, except for U.S. Government Securities or repurchase
agreements for such securities; or (2) 25% or more of its total
assets would be invested in the securities of a group of issuers
in the same industry, except that this restriction does not apply
to U.S. Government Securities. Notwithstanding these limitations,
the Fund may invest all or substantially all of its assets in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund.

The Fund may not make loans, except that, consistent with its
investment policies and restrictions, it may: (1) invest up to
100% of its net assets in publicly offered or privately placed
debt securities, (2) lend its portfolio securities under certain
circumstances, and (3) enter into repurchase agreements./1/ The
Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the Fund's aggregate
borrowings at any one time (including reverse repurchase
agreements and dollar rolls) may not exceed 33 1/3% of its total
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.
- -----------------
/1/ A repurchase agreement involves a sale of securities to the
Fund with the concurrent agreement of the seller (bank or
securities dealer) to repurchase the securities at the same price
plus an amount equal to an agreed-upon interest rate within a
specified time. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses. The
Fund may not invest more than 10% of its net assets in repurchase
agreements maturing in more than seven days and other illiquid
securities.
- -----------------

A decline in prevailing levels of interest rates generally
increases the value of securities in the Fund's portfolio, while
an increase in rates usually reduces the value of those
securities. As a result, interest rate fluctuations will affect
the Fund's net asset value, but not the income received by the
Fund from its portfolio securities. (Because yields on debt
securities available for purchase by the Fund vary over time, no
specific yield on shares of the Fund can be assured.) In
addition, if the bonds in the Fund's portfolio contain call,
prepayment or redemption provisions, during a period of declining
interest rates, these securities are likely to be redeemed, and
the Fund will probably be unable to replace them with securities
having as great a yield.

The Fund is designed for investors who seek a higher level of
income and who can accept greater levels of credit and other risks
associated with securities of medium or lower quality.