<PAGE> 1
1933 Act Registration No. 33-11351
1940 Act File No. 811-4978
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 30 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 32 [X]
STEINROE INVESTMENT TRUST
P. O. Box 804058, Chicago, Illinois 60680
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President and Secretary Bell, Boyd & Lloyd
SteinRoe Investment Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street,
Chicago, Illinois 60606 Suite 3200
Chicago, Illinois 60602
(Agents for Service)
It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[XX] on September 1, 1995 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has elected to register pursuant to Rule 24f-2 an
indefinite number of shares of beneficial interest of the
following series: SteinRoe Prime Equities, SteinRoe Total Return
Fund, SteinRoe Growth Stock Fund, SteinRoe Capital Opportunities
Fund, SteinRoe Special Fund, SteinRoe International Fund, SteinRoe
Young Investor Fund, and SteinRoe Special Venture Fund. The Rule
24f-2 Notice for the fiscal year ended September 30, 1994 was
filed on November 28, 1994.
<PAGE> 2
STEINROE INVESTMENT TRUST
CROSS REFERENCE SHEET
ITEM NO. CAPTION
PART A (PROSPECTUS OF GROWTH & INCOME FUNDS
AND GROWTH FUNDS)
1 Front cover
2 Fee Table; Summary
3 (a) Financial Highlights
(b) Financial Highlights
(c) Investment Return
(d) Financial Highlights
4 Organization and Description of Shares; The Funds; How the
Funds Invest; Restrictions on the Funds' Investments; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management of the Funds--Trustees and Investment Adviser
(b) Management of the Funds--Trustees and Investment Adviser,
Fees and Expenses; prospectus supplement dated 9/1/95
(c) Management of the Funds--Portfolio Managers
(d) Inapplicable
(e) Management of the Funds--Transfer Agent
(f) Management of the Funds--Fees and Expenses; Financial
Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary; back cover
(f) Distributions and Income Taxes; Shareholder Services
(g) Distributions and Income Taxes
7 How to Purchase Shares
(a) Management of the Funds--Distributor
(b) How to Purchase Shares--Purchase Price and Effective Date;
Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares
(c) How to Redeem Shares--General Redemption Policies
(d) How to Redeem Shares--Special Redemption Privileges, General
Redemption Policies
9 Inapplicable
PART A (DEFINED CONTRIBUTION PLANS PROSPECTUSES)
1 Front cover
2 (a) Fee Table
(b) Inapplicable
(c) Inapplicable
<PAGE> 3
3 (a) Financial Highlights
(b) Financial Highlights
(c) Investment Return
(d) Financial Highlights
4 Organization and Description of Shares; The Fund; How the
Fund Invests; Restrictions on the Fund's Investments; Risks
and Investment Considerations; Portfolio Investments and
Strategies
5 (a) Management of the Fund--Trustees and Investment Adviser[s]
(b) Management of the Fund--Trustees and Investment Adviser[s],
Fees and Expenses; prospectus supplement dated 9/1/95
(c) Management of the Fund--Portfolio Managers
(d) Inapplicable
(e) Management of the Fund--Transfer Agent
(f) Management of the Fund--Fees and Expenses; Financial
Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) For More Information
(f) Distributions and Income Taxes
(g) Distributions and Income Taxes
7 How to Purchase Shares
(a) Management of the Fund--Distributor
(b) How to Purchase Shares; Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares
(b) Inapplicable
(c) Inapplicable
(d) Inapplicable
9 Inapplicable
PART A (PROSPECTUSES OF STEINROE INTERNATIONAL FUND
AND STEINROE YOUNG INVESTOR FUND)
1 Front cover
2 Fee Table; Summary
3 (a) Financial Highlights
(b) Inapplicable
(c) Investment Return
(d) Financial Highlights
4 Organization and Description of Shares; The Fund;
[International Fund ] How the Fund Invests; [Young Investor
Fund] Investment Policies; [International Fund] Restrictions
on the Fund's Investments; [Young Investor Fund] Investment
Restrictions; Portfolio Investments and Strategies; Risks
and Investment Considerations; Summary--Investment Risks
5 (a) Management of the Fund--Trustees and Investment Adviser[s]
<PAGE> 4
(b) Management of the Fund--Trustees and Investment Adviser[s],
Fees and Expenses; prospectus supplement dated 9/1/95
(c) Management of the Fund--Portfolio Managers
(d) Inapplicable
(e) Management of the Fund--Transfer Agent
(f) Management of the Fund--Fees and Expenses; Financial
Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary; back cover
(f) Distributions and Income Taxes; Shareholder Services
(g) Distributions and Income Taxes
7 How to Purchase Shares
(a) Management of the Fund--Distributor
(b) How to Purchase Shares--Purchase Price and Effective Date;
Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares
(c) How to Redeem Shares--General Redemption Policies
(d) How to Redeem Shares--Special Redemption Privileges, General
Redemption Policies
9 Inapplicable
PART B (STATEMENTS OF ADDITIONAL INFORMATION)
10 Cover page
11 Table of Contents
12 General Information and History; see prospectus:
Organization and Description of Shares;
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions; Options and Futures
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; statement of
additional information supplement dated 9/1/95; see
prospectus: Management of the Fund[s] and prospectus
supplement dated 9/1/95
(b) Investment Advisory Services
(c) Inapplicable
(d) Inapplicable
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Public Accountants
<PAGE> 5
(i) Transfer Agent; see prospectus: Management of the Fund[s]
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions;
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares, Shareholder Services
(b) Purchases and Redemptions; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Options and Futures--
Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22(a) Inapplicable
(b) Investment Performance
23 Financial Statements
PART C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Prime Equities
SteinRoe Total Return Fund
SteinRoe Growth Stock Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe Capital Opportunities Fund
Supplement to February 1, 1995 Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 6 of the Prospectus were changed as
follows:
ANNUAL FUND OPERATING Capital
EXPENSES (as a per- Total Growth Oppor-
centage of average Prime Return Stock Special tunities
net assets) Equities Fund Fund Fund Fund
--------------------- -------- ------ ------ ------- -------
Management and
Administrative Fees 0.75% 0.70% 0.75% 0.85% 0.90%
12b-1 Fees None None None None None
Other Expenses 0.39% 0.37% 0.32% 0.31% 0.31%
----- ----- ----- ----- -----
Total Fund Operating
Expenses 1.14% 1.07% 1.07% 1.16% 1.21%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
----- ------- ------- --------
Prime Equities $12 $36 $63 $139
Total Return Fund 11 34 59 131
Growth Stock Fund 11 34 59 131
Special Fund 12 37 64 141
Capital Opportunities Fund 12 38 67 147
NEW AGREEMENTS. On September 1, 1995, the investment advisory
agreement with Stein Roe & Farnham Incorporated (the "Adviser")
relating to each Fund other than Special Venture Fund was replaced
with an administrative agreement and a management agreement. The
new fee schedules are stated below at annual rates as a percentage
of average daily net assets.
Management Administrative Total
Fund Fee Fees Fees
- ---- -------------- -------------- ---------------
Prime .60% up to $500, .15% up to $500, .75% up to $500,
Equities 55% next $500, .125% next $500, .675% next $500,
. .50% thereafter .10% thereafter .60% thereafter
Total .50% next $500, .15% up to $500, .70% up to $500,
Return .55% up to $500, .125% next $500, .625% next $500,
Fund 45% thereafter .10% thereafter .55% thereafter
Growth ..60% up to $500, .15% up to $500, .75% up to $500,
Stock .55% next $500, .125% next $500, .675% next $500,
Fund .50% thereafter .10% thereafter .60% thereafter
Special .75% up to $500, .15% up to $500, .90% up to $500,
Fund .70% next $500, .125% next $500, .825% next $500,
.65% next $500, .10% next $500, .75% next $500,
.60% thereafter .075% thereafter .675% thereafter
Capital .75% up to $500, .15% up to $500, .90% up to $500,
Oppor- .70% next $500, .125% next $500, .825% next $500,
tunities .65% next $500, .10% next $500, .75% next $500,
Fund .60% thereafter .075% thereafter .675% thereafter
PORTFOLIO MANAGERS. Daniel K. Cantor became co-portfolio
manager of Prime Equities on February 21, 1995, and Lynn C. Maddox
became co-portfolio manager of Total Return Fund on March 10, 1995.
Robert A. Christensen continues to serve as co-portfolio manager of
these Funds, and William Garrison continues as associate portfolio
manager of Prime Equities. Harvey B. Hirschhorn succeeded Kenneth
W. Corba as co-portfolio manager of Growth Stock Fund on March 17,
1995. Erik P. Gustafson continues to serve as co-portfolio manager
of that Fund.
Mr. Cantor is a senior vice president of the Adviser, which he
joined in 1985. A Chartered Financial Analyst, he received a B.A.
degree from the University of Rochester in 1981 and an M.B.A. from
the Wharton School of the University of Pennsylvania in 1985. Mr.
Maddox joined the Adviser in 1971 and is a senior vice president.
He received a B.S. from the Georgia Institute of Technology in 1964
and an M.B.A. from Indiana University in 1971. Mr. Hirschhorn is
executive vice president and director of research services of the
Adviser, which he joined in 1973. He received an A.B. degree from
Rutgers College in 1971 and an M.B.A. from the University of Chicago
in 1973, and is a Chartered Financial Analyst. Please refer to
pages 37-38 of the Prospectus for further information on Messrs.
Christensen, Garrison, and Gustafson.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights (beginning on page 6 of the Prospectus) is
updated by adding the following unaudited financial information for
the six months ended March 31, 1995:
<TABLE>
<CAPTION>
Capital
Total Growth Special Oppor-
Prime Return Stock Special Venture tunities
Equities Fund Fund Fund Fund(a) Fund
-------- ------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $14.54 $25.78 $23.58 $23.54 $10.00 $31.58
------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income .10 .69 .08 .07 .03 .05
Net realized and
unrealized gains
(losses) on investments .47 (.18) 1.27 .53 1.03 3.39
------ ------ ------ ------ ------ ------
Total from investment
operations .57 .51 1.35 .60 1.06 3.44
------ ------ ------ ------ ------ ------
Distributions
Net investment income (.12) (.65) (.15) (.14) (.03) (.02)
Net realized capital
gains (.60) (.28) (3.02) (1.31) (.05) --
------ ------ ------ ------ ------ ------
Total distributions (.72) (.93) (3.17) (1.45) (.08) (.02)
------ ------ ------ ------ ------ ------
NET ASSET VALUE
, END OF PERIOD $14.39 $25.36 $21.76 $22.69 $10.98 $35.00
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Ratio of net expenses
to average net
assets* (b) 0.91% 0.84% 0.95% 0.95% 1.25% 0.94%
Ratio of net
investment income to
average net assets* (c) 1.37% 5.56% 0.70% 0.60% 0.51% 0.30%
Portfolio turnover
rate 46% 25% 16% 23% 17% 26%
Total return 4.14% 2.10% 6.74% 2.94% 10.64% 10.90%
Net assets,
end of period
(000 omitted) $124,430 $218,824 $317,877 $1,193,306 $34,512 $197,519
</TABLE>
*Annualized.
(a) From commencement of operations on October 17, 1994.
(b) If Special Venture Fund had paid all of its expenses and there
had been no reimbursement of expenses by the investment adviser,
this ratio would have been 1.86% for the period.
(c) Computed giving effect to investment adviser's any expense
limitation undertaking.
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
PRIME EQUITIES seeks growth of capital by investing primarily in
large, well-established companies.
TOTAL RETURN FUND seeks to obtain current income and capital
appreciation in order to achieve maximum total return consistent
with reasonable investment risk through investment in a
combination of equity, convertible, and fixed-income securities.
GROWTH STOCK FUND (FORMERLY NAMED STEINROE STOCK FUND) seeks long-
term capital appreciation by investing in common stock and other
equity-type securities.
SPECIAL FUND seeks capital appreciation by investing in securities
that are considered to have limited downside risk relative to
their potential for above-average growth, including securities of
undervalued, under-followed, or out-of-favor companies.
SPECIAL VENTURE FUND seeks long-term capital appreciation by
investing primarily in a diversified portfolio of equity
securities of entrepreneurially managed companies. The Fund
emphasizes investments in financially strong small and medium-
sized companies, based principally on management appraisal and
stock valuation.
CAPITAL OPPORTUNITIES FUND seeks long-term capital appreciation by
investing in aggressive growth companies.
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 STEINROE INVESTMENT TRUST.
This prospectus contains information you should know before
investing in the Funds. Please read it carefully and retain it
for future reference.
A Statement of Additional Information dated February 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at the address shown on the back cover or by calling 1-
800-338-2550.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February 1, 1995.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary ................................2
Fee Table .............................6
Financial Highlights .................. 7
The Funds .............................14
How the Funds Invest ..................14
Prime Equities.......................14
Total Return Fund....................15
Growth Stock Fund....................15
Special Fund.........................16
Special Venture Fund.................16
Capital Opportunities Fund...........17
Portfolio Investments and Strategies. .18
Restrictions on the Funds' Investments.22
Risks and Investment Considerations....23
How to Purchase Shares ................25
By Check ............................25
By Wire..............................25
By Electronic Transfer ..............26
By Exchange .........................26
Purchase Price and Effective Date ...26
Conditions of Purchase ..............27
Purchases Through Third Parties......27
How to Redeem Shares ..................27
By Written Request ..................27
By Exchange .........................28
Special Redemption Privileges .......28
General Redemption Policies .........30
Shareholder Services ..................32
Net Asset Value .......................34
Distributions and Income Taxes ........35
Investment Return .....................37
Management of the Funds ...............37
Organization and Description of Shares.41
Certificate of Authorization...........43
SUMMARY
The mutual funds described in this prospectus are series of the
SteinRoe Investment Trust, an open-end diversified management
investment company. 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.
PRIME EQUITIES seeks growth of capital by investing primarily in
common stocks, convertible securities and other equity-type
investments. The Fund invests primarily in well-established
companies and seeks to limit volatility by investing normally at
least 65% of its total assets in the equity securities of
companies having market capitalizations in excess of $1 billion.
TOTAL RETURN FUND seeks current income and capital appreciation in
order to achieve maximum total return consistent with reasonable
investment risk through investment in a combination of equity,
fixed-income, and convertible securities. There are no
limitations on the amount of the Fund's assets that may be
allocated to the various types of securities. Generally, the
equity portion of the Fund's portfolio will be invested in common
stocks that the Adviser believes have long-term growth
possibilities.
<PAGE> 3
With respect to the fixed-income portion of the portfolio,
emphasis is placed on acquiring investment grade securities.
Securities in the fourth highest grade may have speculative
characteristics.
GROWTH STOCK FUND seeks long-term capital appreciation by normally
investing at least 65% of its total assets in common stocks and
other equity-type securities that the Adviser believes to have
long-term appreciation possibilities.
SPECIAL FUND invests in securities selected for possible capital
appreciation. Particular emphasis is placed on securities that
are considered to have limited downside risk relative to their
potential for above-average growth, including securities of
undervalued, under-followed or out-of-favor companies, and
companies that are low-cost producers of goods or services,
financially strong or run by well-respected managers. The Fund's
investments may include securities of seasoned, established
companies that appear to have appreciation potential, as well as
securities of relatively small, new companies; securities with
limited marketability; new issues of securities; securities of
companies that it appears will benefit from management change, new
technology, new product or service development, or change in
demand; and other securities that the Adviser believes have
capital appreciation possibilities.
SPECIAL VENTURE FUND seeks long-term capital appreciation by
investing primarily in a diversified portfolio of equity
securities of entrepreneurially managed companies that the Adviser
believes represent special opportunities. The Fund emphasizes
investments in financially strong small and medium-sized
companies, based principally on management appraisal and stock
valuation.
CAPITAL OPPORTUNITIES FUND seeks long-term capital appreciation by
investing in aggressive growth companies. An aggressive growth
company, in general, is one that appears to have the ability to
increase its earnings at an above-average rate. These may include
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size that offer strong earnings
growth potential. Such companies may benefit from new products or
services, technological developments, or changes in management.
There can be no guarantee that the Funds will achieve their
investment objectives. Please see How the Funds Invest and
Portfolio Investments and Strategies for further information.
<PAGE> 4
INVESTMENT RISKS.
Prime Equities is designed for long-term investors who desire to
participate in the stock market with moderate investment risk
while seeking to limit market volatility. Total Return Fund is
designed for long-term investors who can accept the fluctuations
in portfolio value and other risks associated with seeking long-
term capital appreciation through investments in securities.
Growth Stock Fund and Special Fund are designed for long-term
investors who desire to participate in the stock market with more
investment risk and volatility than the stock market in general,
but with less investment risk and volatility than aggressive
capital appreciation funds. Special Venture Fund is designed for
long-term investors who want greater return potential than is
available from the stock market in general, and who are willing to
tolerate the greater investment risk and market volatility
associated with investments in small and medium-sized companies.
Capital Opportunities Fund is an aggressive growth fund and is
designed for long-term investors who can accept the fluctuations
in portfolio value and other risks associated with seeking long-
term capital appreciation through investments in common stocks.
Since the Funds may invest in foreign securities, investors should
understand and consider carefully the risks involved in foreign
investing. Investing in foreign securities involves certain
considerations involving both risks and opportunities not
typically associated with investing in U.S. securities. Such
risks include fluctuations in foreign currency exchange rates,
possible imposition of exchange controls, less complete financial
information, political instability, less liquidity, and greater
price volatility.
Please see How the Funds Invest, Portfolio Investments and
Strategies, and Risks and Investment Considerations for further
information.
PURCHASES.
The minimum initial investment for each Fund is $2,500, and
additional investments must be at least $100 (only $50 for
purchases by electronic transfer). Shares may be purchased by
check, by bank wire, by electronic transfer, or by exchange from
another SteinRoe Fund. For more detailed information, see How to
Purchase Shares.
REDEMPTIONS.
For information on redeeming Fund shares, including the special
redemption privileges, see How to Redeem Shares.
<PAGE> 5
NET ASSET VALUE.
The purchase and redemption price of a Fund's shares is its net
asset value per share. The net asset value is determined as of
the close of trading on the New York Stock Exchange. (For more
detailed information, see Net Asset Value.)
DISTRIBUTIONS.
Dividends for Prime Equities and Total Return Fund are normally
declared and paid quarterly, and dividends for the other Funds are
normally declared and paid annually. Distributions 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 in another SteinRoe Fund account.
(See Distributions and Income Taxes and Shareholder Services.)
ADVISER AND FEES.
Stein Roe & Farnham Incorporated (the "Adviser") provides
management and investment advisory services 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 a relationship manager by calling 1-800-
338-2550.
<PAGE> 6
FEE TABLE
Capital
Total Growth Special Oppor-
Prime Return Stock Special Venture tunities
Equities Fund Fund Fund Fund Fund
-------- ------ ------ ------- ------- --------
SHAREHOLDER TRANSACTION
EXPENSES
Sales Load Imposed on
Purchases None None None None None None
Sales Load Imposed on
Reinvested Dividends None None None None None None
Deferred Sales Load None None None None None None
Redemption Fees None None None None None None
Exchange Fees None None None None None None
ANNUAL FUND OPERATING
EXPENSES (as a per-
centage of average
net assets)
Management Fees 0.59% 0.55% 0.74% 0.75% 0.90% 0.75%
12b-1 Fees None None None None None None
Other Expenses (after
expense reimbursement
in the case of Special
Venture Fund) 0.31% 0.28% 0.20% 0.21% 0.35% 0.22%
----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses (after
expense reimbursement
in the case of Special
Venture Fund) 0.90% 0.83% 0.94% 0.96% 1.25% 0.97%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
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
------ ------- ------- --------
Prime Equities $ 9 $29 $50 $111
Total Return Fund 8 26 46 103
Growth Stock Fund 10 30 52 115
Special Fund 10 31 53 118
Special Venture Fund 13 40 69 151
Capital Opportunities Fund 10 31 54 119
The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly as an investor in a Fund. The information in the table
is based upon actual expenses incurred in the last fiscal year,
except for Special Venture Fund. Because Special Venture Fund has
little operating history, the information in the table is based
upon an estimate of expenses, assuming average net assets of $50
million.
<PAGE> 7
The Adviser has undertaken to reimburse Special Venture Fund for
expenses in excess of 1.25% of average net assets through January
31, 1996, subject to earlier termination by the Adviser on 30
days' notice. Absent such expense undertaking, assuming average
net assets of $50 million, the estimated Other Expenses and Total
Fund Operating Expenses for Special Venture Fund would have been
0.45% and 1.35%, respectively. An undertaking limiting the
expenses of Prime Equities to 1% of average assets was in effect
through January 31, 1995. There was no reimbursement to Prime
Equities during the year because its actual expenses did not
exceed the amount of the expense limitation. (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 in 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, net assets remain at the same
level as in the most recently completed fiscal year.
The figures in the Examples are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less
than those shown. Although information such as that shown above
is useful in reviewing the Funds' expenses and in providing a
basis for comparison with other mutual funds, it should not be
used for comparison with other investments using different
assumptions or time periods.
FINANCIAL HIGHLIGHTS
The tables below reflect the results of operations of the Funds on
a per-share basis for the periods shown. Information for periods
after December 31, 1987 for Total Return Fund and the tables for
the other Funds have been audited by Arthur Andersen LLP,
independent public accountants. All of the auditors' reports were
unqualified. These tables should be read in conjunction with the
respective Fund's financial statements and notes thereto. The
Funds' annual report, which may be obtained from the Trust upon
request without charge, contains additional performance
information.
<PAGE> 8
TOTAL RETURN FUND
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $23.40 $21.37 $25.04 $25.07 $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income from Investment
Operations
Net investment income 1.41 1.41 1.33 1.32 .97 1.37 1.28 1.32 1.31 1.26 1.15
Net realized and
unrealized gains
(losses) on investments (.48) 3.87 2.75 (1.06) .45 3.10 (2.92) 4.85 1.48 2.37 (1.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment
operations .93 5.28 4.08 .26 1.42 4.47 (1.64) 6.17 2.79 3.63 .09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Distributions
Net investment income (1.41) (1.42) (1.35) (1.63) (.90) (1.34) (1.36) (1.26) (1.34) (1.30) (1.17)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net realized capital
gains (1.55) (.19) (2.70) (1.45) (.11) (.38) (.73) (.51) (.62) (1.67) (.71)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total distributions (2.96) (1.61) (4.05) (3.08) (1.01) (1.72) (2.09) (1.77) (1.96) (2.97) (1.88)
NET ASSET VALUE,
END OF PERIOD $21.37 $25.04 $25.07 $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57 $25.78
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Ratio of expenses
to average net
assets 0.73% 0.77% 0.79% 0.80% *0.87% 0.90% 0.88% 0.87% 0.85% 0.81% 0.83%
Ratio of net
investment income
to average net
assets 6.94% 6.30% 5.21% 5.12% *5.68% 5.83% 5.36% 5.50% 4.94% 4.69% 4.53%
Portfolio turnover
rate (a) 50% 100% 108% 86% 85% 93% 75% 71% 59% 53% 29%
Total return 4.85% 25.78% 17.11% 0.74% 6.51% 20.76% (6.86%) 29.67% 11.13% 14.57% 0.36%
Net assets,
end of period
(000 omitted) $95,695 $128,676 $149,831 $140,279 $134,225 $144,890 $124,592 $150,689 $173,417 $222,292 $229,274
</TABLE>
<PAGE> 9
PRIME EQUITIES
<TABLE>
<CAPTION>
Period Ended
Sept. 30, Years Ended September 30,
1987 (b) 1988 1989 1990 1991 1992 1993 1994
------- ------ ----- ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.49 $8.88 $11.34 $10.49 $12.27 $13.42 $14.83
------- ------ ----- ------ ------ ------ ----- -------
Income from Investment
Operations
Net investment income .05 .17 .22 .26 .26 .19 .17 .18
Net realized and
unrealized gains
(losses) on investments .47 (1.64) 2.46 (.85) 2.17 1.49 2.16 .40
------- ------ ----- ------ ------ ------ ----- -------
Total from investment
operations .52 (1.47) 2.68 (.59) 2.43 1.68 2.33 .58
------- ------ ----- ------ ------ ------ ----- -------
Distributions
Net investment income (.03) (.14) (.22) (.26) (.29) (.18) (.16) (.16)
Net realized capital
gains -- -- -- -- (.36) (.35) (.76) (.71)
------- ------ ----- ------ ------ ------ ----- -------
Total distributions (.03) (.14) (.22) (.26) (.65) (.53) (.92) (.87)
------- ------ ----- ------ ------ ------ ----- -------
NET ASSET VALUE,
END OF PERIOD $10.49 $8.88 $11.34 $10.49 $12.27 $13.42 $14.83 $14.54
------- ------ ----- ------ ------ ------ ----- -------
------- ------ ----- ------ ------ ------ ----- -------
Ratio of net expenses
to average net
assets (c) *1.91% 1.47% 1.24% 1.08% 1.00% 0.97% 0.88% 0.90%
Ratio of net investment
income to average
net assets (d) *1.43% 2.03% 2.28% 2.40% 2.27% 1.46% 1.23% 1.18%
Portfolio turnover
rate 32% 105% 63% 51% 48% 40% 50% 85%
Total return 5.20% (13.90%) 30.63% (5.25%) 24.12% 14.00% 17.98% 4.03%
Net assets,
end of period
(000 omitted) $22,863 $23,002 $32,562 $43,446 $54,820 $70,724 $100,365 $129,680
</TABLE>
<PAGE> 10
GROWTH STOCK FUND
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $21.36 $14.04 $17.43 $16.97 $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Income from Investment
Operations
Net investment income .36 .31 .26 .24 .19 .34 .39 .33 .18 .15 .13
Net realized and
unrealized gains
(losses) on investments (2.60) 3.38 2.75 .46 (.11) 4.51 (1.17) 5.90 3.01 1.14 .41
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Total from investment
operations (2.24) 3.69 3.01 .70 .08 4.85 (.78) 6.23 3.19 1.29 .54
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Distributions
Net investment income (.38) (.30) (.25) (.29) (.15) (.34) (.37) (.42) (.16) (.10) (.12)
Net realized capital
gains (4.70) -- (3.22) (2.71) -- (.06) -- (.92) (1.17) (.95) (1.73)
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Total distributions (5.08) (.30) (3.47) (3.00) (.15) (.40) (.37) (1.34) (1.33) (1.05) (1.85)
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
NET ASSET VALUE,
END OF PERIOD $14.04 $17.43 $16.97 $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89 $23.58
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Ratio of expenses to
average net assets 0.67% 0.67% 0.67% 0.65% *0.76% 0.77% 0.73% 0.79% 0.92% 0.93% 0.94%
Ratio of net
investment income
to average net assets 2.55% 1.89% 1.34% 1.25% *1.62% 2.05% 2.03% 1.63% 0.75% 0.59% 0.50%
Portfolio turnover
rate (a) 195% 114% 137% 143% 84% 47% 40% 34% 23% 29% 27%
Total return (10.90%) 26.55% 16.91% 5.57% 0.54% 33.86% (4.17%) 36.64% 14.37% 5.09% 2.10%
Net assets,
end of period
(000 omitted) $216,546 $224,371 $226,604 $232,658 $195,641 $206,476 $206,031 $291,767 $372,758 $373,921 $321,502
</TABLE>
<PAGE> 11
SPECIAL FUND
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $17.73 $14.88 $18.41 $16.95 $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Income from Investment
Operations
Net investment income .28 .25 .35 .23 .14 .36 .42 .34 .21 .17 .15
Net realized and
unrealized gains
(losses) on investments (.61) 4.01 2.33 .12 2.16 5.58 (2.10) 4.55 1.50 5.31 .33
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Total from investment
operations (.33) 4.26 2.68 .35 2.30 5.94 (1.68) 4.89 1.71 5.48 .48
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Distributions
Net investment
income (.23) (.19) (.34) (.57) (.01) (.21) (.39) (.34) (.37) (.18) (.21)
Net realized capital
gains (2.29) (.54) (3.80) (3.90) -- (.06) (2.08) (1.32) (.31) (1.16) (1.77)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Total distributions (2.52) (.73) (4.14) (4.47) (.01) (.27) (2.47) (1.66) (.68) (1.34) (1.98)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
NET ASSET VALUE,
END OF PERIOD $14.88 $18.41 $16.95 $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04 $23.54
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Ratio of expenses to
average net assets 0.96% 0.92% 0.92% 0.96% *0.99% 0.96% 1.02% 1.04% 0.99% 0.97% 0.96%
Ratio of net investment
income to average
net assets 1.99% 2.07% 1.75% 1.32% *1.31% 2.12% 2.33% 2.11% 0.99% 0.92% 0.91%
Portfolio turnover
rate (a) 89% 96% 116% 103% 42% 85% 70% 50% 40% 42% 58%
Total return (1.01%) 29.41% 14.70% 4.27% 17.94% 40.00% (8.78%) 32.18% 8.96% 27.35% 2.02%
Net assets,
end of period
(000 omitted) $152,071 $278,082 $253,693 $187,997 $224,628 $322,056 $361,065 $587,259 $626,080 $1,076,818 $1,243,885
</TABLE>
<PAGE> 12
CAPITAL OPPORTUNITIES FUND
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $26.43 $19.37 $23.81 $26.75 $21.23 $21.55 $29.15 $14.63 $22.00 $23.12 $30.88
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Income from Investment
Operations
Net investment income .30 .20 .06 .06 .05 .10 .12 .22 .11 .02 .03
Net realized and
unrealized gains
(losses) on investments (4.69) 4.53 3.93 1.24 .27 7.71 (9.46) 7.47 1.21 7.82 .68
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Total from investment
operations (4.39) 4.73 3.99 1.30 .32 7.81 (9.34) 7.69 1.32 7.84 .71
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Distributions
Net investment income (.12) (.29) (.20) (.09) -- (.10) (.11) (.16) (.20) (.08) (.01)
Net realized capital
gains (2.55) -- (.85) (6.73) -- (.11) (5.07) (.16) -- -- --
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Total distributions (2.67) (.29) (1.05) (6.82) -- (.21) (5.18) (.32) (.20) (.08) (.01)
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
NET ASSET VALUE,
END OF PERIOD $19.37 $23.81 $26.75 $21.23 $21.55 $29.15 $14.63 $22.00 $23.12 $30.88 $31.58
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Ratio of expenses
to average net assets 0.92% 0.95% 0.95% 0.95% *1.01% 1.09% 1.14% 1.18% 1.06% 1.06% 0.97%
Ratio of net investment
income to average
net assets 1.21% 0.94% 0.19% 0.18% *0.34% 0.42% 0.43% 1.19% 0.42% 0.09% 0.04%
Portfolio turnover
rate (a) 85% 90% 116% 133% 164% 245% 171% 69% 46% 55% 46%
Total return (17.31%) 24.58% 16.77% 9.38% 1.51% 36.68% (37.51%) 53.51% 5.99% 34.01% 2.31%
Net assets,
end of period
(000 omitted) $176,093 $176,099 $191,415 $171,973 $194,160 $272,805 $86,342 $129,711 $118,726 $153,101 $175,687
</TABLE>
<PAGE> 13
*Annualized.
(a) For periods ending after December 31, 1984, the portfolio
turnover rate includes long-term U.S. Government securities
transactions. The rate for the year ended December 31, 1984,
which excludes long-term U.S. Government securities, has not
been restated.
(b) From the commencement of operations on March 23, 1987.
(c) If Prime Equities had paid all of its expenses and there had
been no reimbursement by the Adviser, this ratio would have
been 2.49% for the period ended September 30, 1987 and 1.09%
for the year ended September 30, 1990.
(d) Computed giving effect to the Adviser's expense limitation
undertaking.
(e) For the periods indicated below, bank borrowing activity was
as follows:
<TABLE>
<CAPTION>
Average debt Average shares
Debt outstanding outstanding outstanding Average debt
at end of period during period during period per share
Period Ended (in thousands) (in thousands) (in thousands) during period
- ------------------ ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Total Return Fund
December 31, 1986 $-- $ 2 5,506 $0.0004
Growth Stock Fund
December 31, 1985 -- 5 13,977 0.0004
September 30, 1989 -- 124 11,745 0.0106
Special Fund
December 31, 1984 -- 39 9,856 0.0039
December 31, 1986 -- 203 15,251 0.0133
Capital Opportun-
ities Fund
December 31, 1984 -- 30 10,570 0.0028
December 31, 1985 -- 43 8,525 0.0051
December 31, 1986 -- 55 6,953 0.0079
December 31, 1987 -- 292 8,004 0.0365
September 30, 1988 -- 56 8,603 0.0065
September 30, 1989 -- 422 8,033 0.0526
September 30, 1990 200 1,042 7,972 0.1307
</TABLE>
The Funds had no bank borrowings during any other periods.
<PAGE> 14
THE FUNDS
The mutual funds offered by this prospectus are STEINROE PRIME
EQUITIES ("Prime Equities"), STEINROE TOTAL RETURN FUND ("Total
Return Fund"), STEINROE GROWTH STOCK FUND ("Growth Stock Fund"),
STEINROE SPECIAL FUND ("Special Fund"), STEINROE SPECIAL VENTURE
FUND ("Special Venture Fund"), and STEINROE CAPITAL OPPORTUNITIES
FUND ("Capital Opportunities Fund") (collectively, the "Funds").
Each of the Funds 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 such as common
stocks. A mutual fund allows you to pool your money with that of
other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping. The Funds do not impose commissions or
charges when shares are purchased or redeemed.
The Funds are series of the SteinRoe Investment Trust (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and bookkeeping and
accounting services to the Funds. The Adviser also manages and
provides investment advisory services for several other no-load
mutual funds with different investment objectives, including
equity funds, international funds, taxable and tax-exempt bond
funds, and money market funds. To obtain prospectuses and other
information on any of those mutual funds, please call 1-800-338-
2550.
HOW THE FUNDS INVEST
The Funds invest 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.
PRIME EQUITIES.
This Fund's investment objective is growth of capital. It invests
primarily in a broadly diversified portfolio of common stocks and
other equity-type securities (such as preferred stocks, securities
convertible into
<PAGE> 15
or exchangeable for common stocks, and warrants or rights to
purchase common stocks). The portfolio includes securities that
offer income potential in addition to growth of capital, and it is
designed to provide shareholders with more dividend income than a
portfolio focused exclusively on growth.
The Fund invests primarily in well-established companies.
Although the Fund may invest in a broad range of securities,
normally it seeks to limit volatility by investing at least 65% of
its total assets in the equity securities of companies having
market capitalizations in excess of $1 billion. The securities of
those companies are believed to be generally less volatile than
those of companies with smaller capitalizations because companies
with larger capitalizations tend to be more established, with a
reputation for quality management, and tend to have broader, more
highly diversified product lines, broader and deeper resources,
and easier access to credit.
TOTAL RETURN FUND.
This Fund's investment objective is to obtain current income and
capital appreciation in order to achieve maximum total return
consistent with reasonable investment risk through investment in a
combination of equity, fixed-income and convertible securities.
The percentages of Fund assets invested in various types of
securities will vary in accordance with the judgment of the
Adviser. There are no limitations on the amount of the Fund's
assets that may be allocated to the various types of securities.
Generally, the equity portion of the Fund's portfolio will be
invested in common stocks that the Adviser believes have long-term
growth possibilities. With respect to the fixed-income portion of
the portfolio, emphasis is placed on acquiring investment grade
securities.
GROWTH STOCK FUND.
This Fund's investment objective is long-term capital
appreciation, which it attempts to achieve by normally investing
at least 65% of its total assets in common stocks and other
equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks) that, in the opinion of the
Adviser, have long-term appreciation possibilities.
The Fund's investments are selected by the Adviser. Although the
Fund invests primarily in equity securities, it may invest up
<PAGE> 16
to 35% of its total assets in debt securities.
SPECIAL FUND.
This Fund's investment objective is to invest in securities
selected for capital appreciation. Particular emphasis is placed
on securities that are considered to have limited downside risk
relative to their potential for above-average growth, including
securities of undervalued, under-followed or out-of-favor
companies, and companies that are low-cost producers of goods or
services, financially strong or run by well-respected managers.
The Fund may invest in securities of seasoned, established
companies that appear to have appreciation potential, as well as
securities of relatively small, new companies. In addition, it
may invest in securities with limited marketability; new issues of
securities; securities of companies that it appears will benefit
from management change, new technology, new product or service
development, or change in demand; and other securities that the
Adviser believes have capital appreciation possibilities.
However, the Fund does not currently intend to invest, nor has it
invested in the past fiscal year, more than 5% of its net assets
in any of these types of securities. Securities of smaller, newer
companies may be subject to greater price volatility than
securities of larger well-established companies. In addition,
many smaller companies are less well known to the investing public
and may not be as widely followed by the investment community.
The Fund invests primarily in common stocks and other equity-type
securities, including preferred stocks and securities convertible
into equity securities. The Fund may also invest up to 35% of its
total assets in debt securities, but it does not currently intend
to invest, nor in its past fiscal year has it invested, more than
5% of its net assets in debt securities rated below investment
grade.
SPECIAL VENTURE FUND.
This Fund seeks long-term capital appreciation by investing
primarily in a diversified portfolio of common stocks and other
equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed
companies that the Adviser believes represent special
opportunities. The Fund emphasizes investments in financially
strong small and medium-sized companies, based principally on
management appraisal and stock valuation. The Adviser considers
<PAGE> 17
"small" and "medium-sized" companies to be those with market
capitalizations of less than $1 billion and $1-3 billion,
respectively.
In both its initial and ongoing appraisals of a company's
management, the Adviser seeks to know both the principal owners
and senior management and to assess their business judgment and
strategies through personal visits. The Adviser favors companies
whose management has an owner/operator, risk averse orientation
and a demonstrated ability to create wealth for investors.
Attractive company characteristics include unit growth, favorable
cost structures or competitive positions, and financial strength
that enables management to execute business strategies under
difficult conditions. A company is attractively valued when its
stock can be purchased at a meaningful discount to the value of
the underlying business.
The Fund may invest up to 35% of its net
<PAGE> 18
assets in debt securities, but it does not currently intend to
invest more than 5% of its net assets in debt securities rated
below investment grade.
CAPITAL OPPORTUNITIES FUND.
This Fund's investment objective is long-term capital
appreciation, which it attempts to achieve by investing in
selected companies that, in the opinion of the Adviser, offer
opportunities for capital appreciation.
The Fund pursues its objective by investing in aggressive growth
companies. An aggressive growth company, in general, is one that
appears to have the ability to increase its earnings at an above-
average rate. These may include securities of smaller emerging
companies as well as securities of well-seasoned companies of any
size that offer strong earnings growth potential. Such companies
may benefit from new products or services, technological
developments, or changes in management. Securities of smaller
companies may be subject to greater price volatility than
securities of larger companies. In addition, many smaller
companies are less well known to the investing public and may not
be as widely followed by the investment community.
Although it invests primarily in common stocks, the Fund may
invest in all types of equity securities, including preferred
stocks and securities convertible into common stocks. The Fund
may also invest up to 35% of its total assets in debt securities,
but does not currently intend to invest, nor in the past fiscal
year has it invested, more than 5% of its net assets in debt
securities rated below investment grade.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, each Fund may invest in debt
securities of corporate and governmental issuers. Investments in
debt securities by Prime Equities, Total Return Fund, and Growth
Stock Fund are limited to those that are within the four highest
grades (generally referred to as "investment grade") assigned by a
nationally recognized statistical rating organization or, if
unrated, deemed to be of comparable quality by the Adviser.
Securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest and repay
principal. If the rating of a security held by a 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 that Fund should continue to hold the
security. Special Venture Fund does not expect to invest more
than 5% of net assets in debt securities rated below investment
grade. Capital Opportunities Fund and Special Fund may invest up
to 35% of their net assets in debt securities that are rated below
investment grade.
The risks inherent in debt securities depend primarily on the term
and quality of the obligations in a Fund's portfolio as well as on
market conditions. A decline in the prevailing levels of interest
rates generally increases the value of debt securities, while an
increase in rates usually reduces the value of those securities.
Securities that are rated below investment grade 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. When the
Adviser determines that adverse market or economic conditions
exist and considers a temporary defensive position advisable, the
Funds may invest without limitation in high-quality fixed income
securities or hold assets in cash or cash equivalents.
CONVERTIBLE SECURITIES.
By investing in convertible securities, a Fund obtains the right
to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly.
<PAGE> 19
In determining whether to purchase a convertible, the Adviser will
consider substantially the same criteria that would be considered
in purchasing the underlying stock. Although convertible
securities purchased by a Fund are frequently rated investment
grade, the Funds also may purchase unrated securities or
securities rated below investment grade if the securities meet the
Adviser's other investment criteria. Convertible securities rated
below investment grade (a) tend to be more sensitive to interest
rate and economic changes, (b) may be obligations of issuers who
are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such
securities being less well known to investors than either common
stock or conventional debt securities. As a result, the Adviser's
own investment research and analysis tends to be more important in
the purchase of such securities than other factors.
FOREIGN SECURITIES.
Each Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, and securities guaranteed by a U.S. person, each
Fund is limited to investing no more than 25% of its total assets
in foreign securities. (See Risks and Investment Considerations.)
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;
such a contract involves the risk that the value of the foreign
currency may decline relative to the value of the dollar prior to
the settlement date, which risk is in addition to the risk that
the value of the foreign security purchased may decline. The
Funds may also enter into foreign currency contracts as a
<PAGE> 20
hedging technique to limit or reduce exposure to currency
fluctuations. In addition, the Funds may use options and futures
contracts, as described below, to limit or reduce exposure to
currency fluctuations.
As of September 30, 1994, the Funds' holdings of foreign
companies, as a percentage of net assets, were as follows: Prime
Equities, 12.3% (5.1% in foreign securities and 7.2% in ADRs),
Total Return Fund, 6.6% (none in foreign securities and 6.6% in
ADRs), Growth Stock Fund, 10.4% (1.2% in foreign securities and
9.2% in ADRs), Special Fund, 13.0% (7.8% in foreign securities and
5.2% in ADRs), and Capital Opportunities Fund, 2.1% (none in
foreign securities and 2.1% in ADRs).
LENDING PORTFOLIO SECURITIES; WHEN-ISSUED AND DELAYED-DELIVERY
SECURITIES.
Each Fund may make loans of its portfolio securities to broker-
dealers and banks subject to certain restrictions described in the
Statement of Additional Information. 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. A 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.
PORTFOLIO TURNOVER.
Although the Funds do not purchase securities with a view to rapid
turnover, there are no limitations on the length of time portfolio
securities must be held, and the portfolio turnover rate may vary
significantly from year to year. Under normal circumstances,
Special Venture Fund expects to experience moderate portfolio
turnover with an investment time horizon of three to five years,
but its portfolio turnover is not expected to exceed 100%. At
times, Special Fund and Capital Opportunities Fund may invest for
short-term capital appreciation. Flexibility of investment and
emphasis on capital appreciation may involve greater portfolio
turnover than that of mutual funds that have the objectives of
income or maintenance of a balanced investment position. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains and losses. (See
Financial Highlights and Distributions and
<PAGE> 21
Income Taxes.) Growth Stock Fund, Special Fund, Special Venture
Fund, and Capital Opportunities Fund are not intended to be
income-producing investments, although they may produce varying
amounts of income.
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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. No Fund expects to invest more than
5% of its net assets in any type of Derivative except for options,
futures contracts, and futures options.
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 currency exchange rates, 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.
Each Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired investment
objective, provide additional revenue, or to hedge against changes
in security prices, interest rates or currency fluctuations. A
Fund may write a call or put option only if the option is covered.
As the writer of a
<PAGE> 22
covered call option, a 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. In addition, 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.
RESTRICTIONS ON THE FUNDS' INVESTMENTS
No Fund will (i) with respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of any one
issuer (except that this restriction does not apply to securities
of the U.S. Government or repurchase agreements for such
securities, and except that the Fund may invest all of its assets
in shares of another investment company having the identical
investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market). No
Fund will purchase additional securities when its borrowings, less
proceeds receivable from sales of portfolio securities, exceed 5%
of total assets.
The Funds may invest in repurchase agreements,/1/ provided that no
Fund will invest more than 15% of its net assets in repurchase
agreements maturing in more than seven days, and any other
illiquid securities.
The policies summarized in the first paragraph under Restrictions
on the Funds' Investments (except for (i) and (ii) as they relate
to Special Fund) and the policy with respect to concentration of
investments in any one industry described under Risks and
Investment Considerations are fundamental policies and, as such,
can be
- ------------------------------
/1/ A sale of securities to a Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.
<PAGE> 23
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. The Funds' investment objectives are non-fundamental
and, as such, may be changed by the Board of Trustees without
shareholder approval. Any such change may result in a Fund having
an investment objective different from the objective the
shareholder considered appropriate at the time of investment in
the Fund. 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. Prime Equities is
designed for long-term investors who desire to participate in the
stock market with moderate investment risk while seeking to limit
market volatility. Total Return Fund is designed for long-term
investors who can accept the fluctuations in portfolio value and
other risks associated with seeking long-term capital appreciation
through investments in securities. Growth Stock Fund and Special
Fund are designed for long-term investors who desire to
participate in the stock market with more investment risk and
volatility than the stock market in general, but with less
investment risk and volatility than aggressive capital
appreciation funds. Special Venture Fund is designed for long-
term investors who want greater return potential than is available
from the stock market in general, and who are willing to tolerate
the greater investment risk and market volatility associated with
investments in small and medium-sized companies. Capital
Opportunities Fund is an aggressive growth fund and is designed
for long-term investors who can accept the fluctuations in
portfolio value and other risks associated with seeking long-term
capital appreciation through investments in common stocks. Of
course, there can be no guarantee that a Fund will achieve its
objective.
Securities of small and medium-sized companies may be subject to
greater price volatility than securities of larger companies and
tend to have a lower degree of market liquidity. They also may be
more sensitive to changes in economic and business conditions, and
may react differently than securities of larger companies. In
addition, such companies are less well known to the investing
public and may not be as widely followed by the investment
community.
<PAGE> 24
Debt securities rated in the fourth highest grade may have some
speculative characteristics, and changes in economic conditions or
other circumstances may lead to a weakened capacity of the issuers
of such securities to make principal and interest payments.
Securities rated below investment grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest or repay
principal.
Although Prime Equities, Total Return Fund, Special Fund, Special
Venture Fund, and Capital Opportunities Fund do not attempt to
reduce or limit risk through wide industry diversification of
investment, they usually allocate their investments among a number
of different industries rather than concentrating in a particular
industry or group of industries. Growth Stock Fund seeks to
reduce risk by investing in a diversified portfolio, but this does
not eliminate all risk. However, no Fund will invest more than
25% of the total value of its assets (at the time of investment)
in the securities of companies in any one industry. (See How the
Funds Invest.)
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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.
MASTER FUND/FEEDER FUND OPTION.
Rather than invest in securities directly, each 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
<PAGE> 25
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 any of the Funds by check, by wire, by
electronic transfer, or by exchange from your account with another
SteinRoe Fund. The initial purchase minimum per Fund account is
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act
("UGMA") accounts is $1,000; the minimum for accounts established
under an automatic investment plan (i.e., Regular Investments,
Dividend Purchase Option, or Automatic Exchange Plan) is $1,000
for regular accounts and $500 for UGMA accounts; and the minimum
per account for SteinRoe IRAs is $500. The initial purchase
minimum is waived for shareholders who participate in the SteinRoe
Counselor [service mark] and SteinRoe 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 by check, please
complete and sign the Application and mail it to P.O. Box 804058,
Chicago, Illinois 60680, together with a check made payable to
SteinRoe Funds.
You may make subsequent investments by submitting a check along
with either the stub from your Fund account confirmation statement
or a note indicating the amount of the purchase, your account
number, and the name in which your account is registered. Each
individual check submitted for purchase must be at least $100, and
the Trust generally will not accept cash, drafts, third party
checks, or checks drawn on banks outside of the United States.
Should an order to purchase shares of a Fund be cancelled because
your check does not clear, you will be responsible for any
resulting loss incurred by that Fund.
BY WIRE.
You may also pay for shares by instructing your bank to wire
Federal funds (monies of member banks within the Federal Reserve
System) to
<PAGE> 26
the Funds' custodian bank. Your bank may charge you a fee for
sending the wire. If you are opening a new account by wire
transfer, you must first telephone the Trust to request an account
number and furnish your social security or other tax
identification number. Neither the Funds nor the Trust will be
responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. Your bank must
include the full name(s) in which your account is registered and
your Fund account number, and should address its wire as follows:
State Street Bank and Trust Company
Boston, Massachusetts
Attention: Custody
Fund No. ____; SteinRoe _______ Fund
Account of (exact name(s) in registration)
Shareholder Account No. ___________
Fund Numbers:
7111--Prime Equities
7105--Total Return Fund
7103--Growth Stock Fund
7106--Special Fund
7125--Special Venture Fund
7104--Capital Opportunities Fund
BY ELECTRONIC TRANSFER.
You may also make subsequent investments by an electronic transfer
of funds from your bank checking account. Electronic transfer
allows you to make purchases at your request ("Special
Investments") by calling 1-800-338-2550 or at pre-scheduled
intervals ("Regular Investments"). (See Shareholder Services.)
Electronic transfer purchases are subject to a $50 minimum and a
$100,000 maximum. You may not open a new account through
electronic transfer. Should an order to purchase shares of a Fund
be cancelled because your electronic transfer does not clear, you
will be responsible for any resulting loss incurred by that Fund.
BY EXCHANGE.
You may purchase shares by exchange of shares from another
SteinRoe Fund account either by phone (if the Telephone Exchange
Privilege has been established on the account from which the
exchange is being made), by mail, in person, or automatically at
regular intervals (if you have elected Automatic Exchanges).
Restrictions apply; please review the information on the Exchange
Privilege 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
<PAGE> 27
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.
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 that maintain nominee accounts with
the Funds for their clients for whom they hold Fund shares 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. A Fund
may pay a portion of those fees not to exceed the fees and
expenses the Fund would pay to its transfer agent if the shares
held in nominee name were registered on the Fund's books in the
individual names of the beneficial owners of such shares. The
balance of such fees are paid by the Adviser.
HOW TO REDEEM SHARES
BY WRITTEN REQUEST.
You may redeem all or a portion of your shares of a Fund by
submitting a written request in "good order" to the Trust at P.O.
Box 804058, Chicago, Illinois 60680. A redemption request will be
considered to have been received
<PAGE> 28
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 SteinRoe Fund offered for
sale in your state if your signed, properly completed Application
is on file. AN EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF
SHARES FOR FEDERAL INCOME TAX PURPOSES AND MAY RESULT IN CAPITAL
GAIN OR LOSS. Before exercising the Exchange Privilege, you
should obtain the prospectus for the SteinRoe Fund in which you
wish to invest and read it carefully. The registration of the
account to which you are making an exchange must be exactly the
same as that of the Fund account from which the exchange is made
and the amount you exchange must meet any applicable minimum
investment of the SteinRoe Fund being purchased. An exchange may
be made by following the redemption procedure described above
under By Written Request and indicating the SteinRoe Fund to be
purchased, except that a signature guarantee normally is not
required. (See also the discussion below of the Telephone
Exchange Privilege and Automatic Exchanges.)
SPECIAL REDEMPTION PRIVILEGES.
The Telephone Exchange
<PAGE> 29
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.
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.)
Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $1,000 or more from your
account by calling 1-800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. GENERALLY, YOU WILL BE LIMITED TO FOUR
TELEPHONE EXCHANGE ROUND-TRIPS PER YEAR AND THE FUNDS MAY REFUSE
REQUESTS FOR TELEPHONE EXCHANGES IN EXCESS OF FOUR ROUND-TRIPS (A
ROUND-TRIP BEING THE EXCHANGE OUT OF A FUND INTO ANOTHER STEINROE
FUND, AND THEN BACK TO THAT FUND). Also, 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 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 the resulting delay in the
<PAGE> 30
suspension, limitation, modification, or termination of the
Telephone Exchange Privilege would adversely affect the Funds. IF
THE TRUST WERE TO SUSPEND, LIMIT, MODIFY, OR TERMINATE THE
TELEPHONE EXCHANGE PRIVILEGE, A SHAREHOLDER EXPECTING TO MAKE A
TELEPHONE EXCHANGE MIGHT FIND THAT AN EXCHANGE COULD NOT BE
PROCESSED OR THAT THERE MIGHT BE A DELAY IN THE IMPLEMENTATION OF
THE EXCHANGE. (See How to Redeem Shares--By Exchange.) During
periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone.
Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another SteinRoe Fund account on a regular basis.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 1-800-338-2550. The
proceeds will be sent by check to your registered address. The
Telephone Redemption by Check Privilege is not available to redeem
shares held by a tax-sheltered retirement plan sponsored by the
Adviser.
Electronic Transfer Privilege. You may redeem shares by calling
1-800-338-2550 and requesting an electronic transfer ("Special
Redemption") of the proceeds to a checking account previously
designated by you at a bank that is a member of the Automated
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. A Special Redemption request
received by telephone after 2:00 p.m., Chicago time, is deemed
received on the next business day.
GENERAL REDEMPTION POLICIES.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please telephone
the Trust if you have any questions about requirements for a
redemption before submitting your request. 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
<PAGE> 31
properly completed Application before making payment for shares
redeemed.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon that Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares and may result
in a realized capital gain or loss.
The Trust will generally mail payment for shares redeemed within
seven days after proper instructions are received. 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.
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 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
<PAGE> 32
immediately if there is a problem. If a Fund does not follow
reasonable procedures for protecting shareholders against loss on
telephone transactions, it may be liable for any losses due to
unauthorized or fraudulent instructions.
The Trust reserves the right to redeem shares in any account and
send the proceeds to the owner 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
SteinRoe Funds may be redeemed to the extent necessary to
reimburse any SteinRoe Fund for any loss it sustains that is
caused by you (such as losses from uncollected checks and
electronic transfers for the purchase of shares or any SteinRoe
Fund liability under the Internal Revenue Code provisions on
backup withholding).
SHAREHOLDER SERVICES
REPORTING TO SHAREHOLDERS.
You will receive a confirmation statement reflecting each of your
purchases and redemptions of shares of a Fund, as well as periodic
statements detailing distributions made by that Fund. Shares
purchased by reinvestment of dividends, by cross-reinvestment of
dividends from another Fund, or pursuant to an automatic
investment plan will be confirmed to you quarterly. In addition,
the Trust will send you semiannual and annual reports showing Fund
portfolio holdings and will provide you annually with tax
information.
FUNDS-ON-CALL [REGISTERED TRADEMARK] 24-HOUR INFORMATION SERVICE.
To access the SteinRoe Funds-on-Call [registered trademark]
automated telephone service, just call 1-800-338-2550 on any
touch-tone telephone and follow the recorded instructions. Funds-
on-Call [registered trademark] provides yields, prices, latest
dividends, account balances, last transaction, and other
information 24 hours a day, seven days a week.
FUNDS-ON-CALL [REGISTERED TRADEMARK] AUTOMATED TELEPHONE
TRANSACTIONS.
If you have established the Funds-on-Call [registered trademark]
transaction privilege (Funds-on-Call [registered trademark]
Application will be required), you may initiate Special
Investments and Redemptions, Telephone Exchanges, and Telephone
Redemptions by Check 24 hours a day, seven days a week by calling
1-800-338-2550 on a touch-tone telephone. These transactions are
subject to the terms and conditions of the
<PAGE> 32
individual privileges. (See How to Purchase Shares and How to
Redeem Shares.)
STEINROE COUNSELOR [service mark] PROGRAM.
The SteinRoe Counselor [service mark] and SteinRoe Counselor
Preferred [service mark] programs are professional investment
advisory services available to shareholders. These programs are
designed to provide investment guidance in helping investors to
select a portfolio of SteinRoe Funds. The SteinRoe Counselor
Preferred [service mark] program, which automatically adjusts
client portfolios among the SteinRoe Funds, has a fee of up to 1%
of assets.
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 SteinRoe 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 1-800-338-2550 or write the Trust for additional
information and forms.
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another SteinRoe Fund account. Before establishing this
option, you should obtain and read carefully the prospectus of the
SteinRoe Fund into which you wish to have your distributions
invested. The account from which distributions are made must be
of sufficient size that each distribution will usually be at least
$25. The account into which distributions are to be invested may
be opened with an initial investment of only $1,000.
Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.
Telephone Redemption by Check Privilege and Telephone Exchange
Privilege--established automatically when you open your account
unless you decline them on your Application ($1,000
<PAGE> 34
minimum). (See How to Redeem Shares--Special Redemption
Privileges.)
Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another SteinRoe
Fund account on a regular basis ($50 minimum; $100,000 maximum).
Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.
NET ASSET VALUE
The purchase and redemption price of each Fund's shares is its net
asset value per share. The net asset value of a share of each
Fund is determined as of the close of trading on the New York
Stock Exchange ("NYSE") (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 NYSE is closed
unless, in the judgment of the Board of Trustees, the net asset
value of a Fund should be determined on any such day, in which
case the determination will be made at 3:00 p.m., Chicago time.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Long-term straight-debt
<PAGE> 35
obligations are valued at a fair value using a procedure
determined in good faith by the Board of Trustees. Pricing
services approved by the Board provide valuations (some of which
may be "readily available market quotations"). These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the obligation using a method that the Board
believes represents fair value. The Board may approve the use of
other pricing services and any pricing service used may employ
electronic data processing techniques, including a so-called
"matrix" system, to determine valuations. Securities convertible
into stocks are valued at the latest valuation from a principal
market maker. Other assets and securities are valued by a method
that the Board believes represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends for Prime Equities and Total Return Fund are
normally declared and paid quarterly; and income dividends for
Growth Stock Fund, Special Fund, Special Venture Fund, and Capital
Opportunities Fund are normally declared and paid annually. 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. Therefore, an additional dividend may be declared near year
end. The Funds intend to distribute any undistributed net
investment income and net realized capital gains in the following
year.
All of your income dividends and capital gain distributions will
be reinvested in additional shares unless you elect to have
distributions either (1) paid by check, (2) deposited by
electronic transfer into your bank checking account, (3) applied
to purchase shares in your account with another SteinRoe Fund, or
(4) applied to purchase shares in a SteinRoe Fund account of
another person. (See Shareholder Services.) Reinvestment into
the same Fund account normally occurs one business day after the
record date. Investment of distributions into another SteinRoe
Fund account occurs on the payable date. If you choose to receive
your distributions in cash, your distribution check normally will
be mailed approximately 15 days after the record date. The Trust
reserves the right to reinvest the proceeds and future
distributions in additional Fund shares if checks mailed to you
for distributions are returned
<PAGE> 36
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 for
tax purposes. 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.
This discussion of taxation 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. The foregoing
information applies to U.S. shareholders. Foreign shareholders
should consult their tax advisors as to the tax consequences of
ownership of Fund shares.
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.
<PAGE> 37
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.
Comparison of a Fund's total return with 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. Of course, past performance is not necessarily
indicative of future results.
MANAGEMENT OF THE FUNDS
TRUSTEES AND ADVISER.
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Funds. See the Statement of
Additional Information for the names of and additional information
about the trustees and officers. The Funds' Adviser, Stein Roe &
Farnham Incorporated, One South Wacker Drive, Chicago, Illinois
60606, is responsible for managing the Funds, subject to the
direction of the Board of Trustees. 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.
Robert A. Christensen and Millie Adams Hurwitz are co-portfolio
managers of Total Return Fund and Prime Equities. Mr. Christensen
has been portfolio manager of the Total Return Fund since 1981 and
became co-portfolio manager of Prime Equities in August, 1994.
Prior to February, 1995, Ms. Hurwitz was associate portfolio
manager of Total Return Fund. Ms. Hurwitz has been co-portfolio
manager of Prime Equities since August, 1994; prior to that time,
she was associate portfolio manager of that Fund. Mr. Christensen
is a vice-president of
<PAGE> 38
the Trust and a senior vice president of the Adviser, and has been
associated with the Adviser since 1962. A chartered investment
counselor, he received his B.A. degree from Vanderbilt University
in 1955 and M.B.A. from Harvard University in 1962. As of
September 30, 1994, he was responsible for managing $736 million
in mutual fund assets. Ms. Hurwitz, who was employed by the
Adviser as a junior analyst from 1986 to 1989, rejoined the firm
in 1992 as a portfolio manager. From 1989 to 1991 she was a
senior vice president at OLC Corporation. Ms. Hurwitz received
her B.A. and M.M. degrees from Northwestern University in 1985 and
1989, respectively. As of September 30, 1994, she was responsible
for managing $130 million in mutual fund assets. William Garrison
is associate portfolio manager of Prime Equities. Mr. Garrison
joined the Adviser in 1989. He received his A.B. from Princeton
University in 1988.
Growth Stock Fund is managed by the Adviser's Capital Management
Group, a division that specializes in growth stock investing. It
was formed in 1988 to manage the Fund and equity portfolios for
institutional investors. In managing the Fund, the group
emphasizes three basic principles: growth, quality, and time. The
Capital Management Group looks for high-quality companies with
exceptional earnings growth that it believes can be maintained
over a long period of time. The group is comprised of three
portfolio managers: Erik P. Gustafson and Kenneth W. Corba, each
of whom is a vice president of the Trust. Mr. Gustafson is a vice
president of the Adviser, having joined it in 1992. From 1989 to
1992 he was an attorney with Fowler, White, Burnett, Hurley,
Banick & Strickroot. He holds a B.A. from the University of
Virginia (1985) and M.B.A. and J.D. degrees (1989) from Florida
State University. Mr. Corba is a chartered financial analyst who
joined the Adviser in 1984 and is a senior vice president of the
Adviser. He received his B.A. and M.B.A. from the University of
Michigan in 1975 and 1984, respectively.
Gloria J. Santella has been portfolio manager of Capital
Opportunities Fund since October, 1994; she had been co-portfolio
manager of the Fund since March, 1991. Ms. Santella is a vice-
president of the Trust and of the Adviser, having been associated
with the Adviser since 1979. She received her B.B.A. from Loyola
University in 1979 and M.B.A. from the University of Chicago in
1983. As of September 30, 1994,
<PAGE> 39
she managed $176 million in mutual fund assets. Eric S. Maddix is
associate portfolio manager of Capital Opportunities Fund. Mr.
Maddix joined the Adviser in 1987. He received his B.B.A. degree
from Iowa State University in 1986 and his M.B.A. from the
University of Chicago in 1992.
E. Bruce Dunn and Richard B. Peterson are co-portfolio managers of
Special Fund and Special Venture Fund. Each of them is a vice-
president of the Trust and a senior vice president of the Adviser.
Mr. Dunn, a Chartered Investment Counselor, has been associated
with the Adviser since 1964. He received his A.B. degree from
Yale University in 1956 and his M.B.A. from Harvard University in
1958. Mr. Dunn co-managed $1.5 billion in mutual fund assets as
of September 30, 1994. Mr. Peterson, who began his investment
career at Stein Roe & Farnham in 1965 after graduating with a B.A.
from Carleton College in 1962 and the Woodrow Wilson School at
Princeton University in 1964 with a Masters in Public
Administration, rejoined the Adviser in 1991 after 15 years of
equity research and portfolio management experience with State
Farm Investment Management Corporation. As of September 30, 1994,
he was responsible for co-managing $1.4 billion in mutual fund
assets.
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. The annualized fee for Prime Equities is 0.6
of 1% of the first $100 million, 0.55 of 1% of the next $100
million, and 0.5 of 1% thereafter; the fee for Total Return Fund
is 0.625 of 1% up to $100 million and 0.5 of 1% above that amount;
the fee for Growth Stock Fund is 0.75 of 1% up to $250 million,
0.70 of 1% of the next $250 million, and 0.60 of 1% thereafter;
the fee for Special Venture Fund is 0.9 of 1%; and the fee for
each of Special Fund and Capital Opportunities Fund is 0.75 of 1%.
For the year ended September 30, 1994, the fees for Prime
Equities, Total Return Fund, and Growth Stock Fund amounted to
0.59%, 0.55%, and 0.74% of average net assets, respectively. The
fees for Growth Stock Fund, Special Fund, Special Venture Fund,
and Capital Opportunities Fund are higher than the fees paid by
most mutual funds.
The Adviser has undertaken to reimburse Special Venture Fund to
the extent that its annual expenses exceed 1.25% of average net
assets. This expense limitation undertaking expires on January
<PAGE> 40
31, 1996, subject to earlier termination by the Adviser on 30
days' notice. An undertaking limiting the expenses of Prime
Equities to 1% of average net assets expired on January 31, 1995.
The Adviser provides office space and executive and other
personnel to the Trust and bears any sales or promotional
expenses. All expenses of a Fund other than those paid by the
Adviser (including, but not limited to, printing and postage
charges, securities registration fees, custodian and transfer
agency fees, legal and auditing fees, compensation of trustees not
affiliated with the Adviser, and expenses incidental to its
organization) are paid out of the assets of that Fund.
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 transactions for each
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 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
<PAGE> 41
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight series are authorized and
outstanding. On February 1, 1995, the name of the series SteinRoe
Stock Fund was changed to SteinRoe Growth Stock Fund.
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 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> 43
CERTIFICATE OF AUTHORIZATION (FOR USE BY CORPORATIONS AND
ASSOCIATIONS ONLY)
A corporation or association must complete this Certificate and
submit it with the Fund Application, each written redemption,
transfer or exchange request, and each request to terminate or
change any of the Privileges or special service elections.
If the entity submitting the Certificate is an association, the
word "association" shall be deemed to appear each place the word
"corporation" appears. If the officer signing this Certificate is
named as an authorized person, another officer must countersign
the Certificate. If there is no other officer, the person signing
the Certificate must have his signature guaranteed. If you are
not sure whether you are required to complete this Certificate,
call the office of the SteinRoe Funds, 1-800-338-2550 toll-free.
The undersigned hereby certifies that he is the duly elected
Secretary of ________________________________ (the "Corporation")
(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.
<PAGE> 44
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*
Corporate
Seal
Here
*Only required if the person signing the Certificate is the only
person named as "Authorized Person."
<PAGE>
[STEINROE MUTUAL FUNDS LOGO]
The SteinRoe Funds
SteinRoe Government Reserves
SteinRoe Cash Reserves
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe Special Venture Fund
P.O. Box 804058
Chicago, Illinois 60680
1-800-338-2550
In Chicago, visit our Fund Center
at One South Wacker Drive
Liberty Securities Corporation, Distributor
05016
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Young Investor Fund
Supplement to February 1, 1995 Prospectus
________________________________________
NEW AGREEMENTS. On September 1, 1995, the Fund's current
investment advisory agreement with Stein Roe & Farnham Incorporated
("SteinRoe") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets:
New Fee Schedule (dollar amounts in millions)
---------------------------------------------
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.60% up to $500, .20% up to $500, .80% up to $500,
.55% next $500 .15% next $500, .70% next $500,
..50% thereafter .125% thereafter .625% thereafter
SteinRoe's current undertaking to reimburse the Fund for expenses in
excess of 0.99 of 1% of average net assets remains in effect.
MINIMUM INVESTMENT REDUCED. Effective June 22, 1995, the
minimum amount that must be invested to open an account under an
automatic investment plan has been reduced from $500 to $100. (See
How to Purchase Shares.)
PORTFOLIO MANAGERS. Effective March 17, 1995, the portfolio
managers of SteinRoe Young Investor Fund are Erik P. Gustafson,
David P. Brady, and Eric S. Maddix. Mr. Brady is a Portfolio
Manager with Stein Roe & Farnham Incorporated ("SteinRoe"), which he
joined in 1993. From 1986 to 1993, Mr. Brady was an Equity
Investment Analyst with State Farm Mutual Automobile Insurance
Company. A Chartered Financial Analyst, he earned a B.S. in
Finance, graduating Magna Cum Laude, from the University of Arizona
in 1986, and earned an M.B.A. from the University of Chicago in
1989. Mr. Maddix joined SteinRoe in 1987 as a Portfolio Manager.
He received his B.B.A. degree from Iowa State University in 1986 and
his M.B.A. from the University of Chicago in 1992. Please refer to
the section of the prospectus entitled Management of the Fund for
further information about Mr. Gustafson.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $10.24
------
Income from Investment Operations
Net investment income .04
Net realized and unrealized gains on investments 1.13
------
Total from investment operations 1.17
------
Distributions
Net investment income (.08)
------
NET ASSET VALUE, END OF PERIOD $11.33
------
------
Ratio of net expenses to average net assets (a) *0.99%
Ratio of net investment income to average net
assets (b) *0.76%
Portfolio turnover rate **27%
Total return **11.46%
Net assets, end of period (000 omitted) $16,596
*Annualized.
**Not annualized.
(a) Computed giving effect to the investment adviser's expense
limitation undertaking.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio
would have been 3.13% for the period ended March 31, 1995.
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[SteinRoe Mutual Funds logo]
Young Investor Fund
The Fund's objective is long-term capital appreciation. The Fund
invests in securities of companies that affect the lives of
children or teenagers. The Fund is also intended to be a fun,
educational experience for young investors and their parents.
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 SteinRoe Investment 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.
If you have any questions about new Fund accounts, please call 1-
800-403-KIDS (1-800-403-5437); for existing accounts, shareholders
should call 1-800-338-2550.
A Statement of Additional Information dated February 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at the address shown on the back cover or by calling the
Fund.
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 February 1, 1995.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary ...........................2
Fee Table ........................3
Financial Highlights...............4
The Fund ..........................4
Investment Policies ...............5
Portfolio Investments and
Strategies.......................5
Investment Restrictions............7
Risks and Investment
Considerations....................8
How to Purchase Shares ............9
By Check .......................9
By Wire ........................9
By Electronic Transfer..........9
By Exchange ...................10
Purchase Price and
Effective Date .............10
Conditions of Purchase ........10
Purchases Through Third
Parties.....................10
How to Redeem Shares .............11
By Written Request ............11
By Exchange ...................11
Special Redemption Privileges .11
General Redemption Policies ...12
Shareholder Services .............14
Net Asset Value ..................15
Distributions and Income Taxes ...16
Investment Return ................17
Management of the Fund ...........17
Organization and Description of
Shares..........................19
SUMMARY
SteinRoe Young Investor Fund (the "Fund") is a series of the
SteinRoe Investment Trust, an open-end diversified management
investment company. The Fund is a "no-load" fund. There are no
sales or redemption charges. (See The Fund and Organization and
Description of Shares.)
Investment Objectives and Policies.
The Fund's investment objective is long-term capital appreciation.
It seeks to achieve its objective by investing primarily in common
stocks and other equity-type securities that SteinRoe believes to
have long-term appreciation potential. The Fund invests primarily
in securities of companies that appeal to or affect the lives of
children or teenagers. It is designed for long-term investors,
particularly children and teenagers.
In addition to the Fund's investment objective and policies, the
Fund also has an educational objective. It seeks to teach
children and teenagers about the Fund, basic economic principles,
and personal finance through a variety of educational materials
prepared and paid for by the Fund.
There can be no guarantee that the Fund will achieve its
investment objective. Please see Investment Policies and
Portfolio Investments and Strategies for further information.
Investment Risks.
The Fund is designed for long-term investors who are willing to
accept the investment risk and volatility of equity-type
securities in general as well as the specific types of equity
securities emphasized by the Fund. By investing in companies
whose products or services appeal to young investors, the Fund
emphasizes various consumer goods sectors. Since the Fund may
invest in foreign securities, investors should understand and
consider carefully the risks involved in foreign investing.
Investing in foreign securities involves certain considerations
involving both risks and opportunities not typically associated
with investing in U.S. securities. Please see Investment
Policies, Portfolio Investments and Strategies, and Risks and
Investment Considerations for further information.
Purchases.
The minimum initial investment for the Fund is $2,500; the minimum
investment for Uniform Gifts/ Transfers to Minors Act accounts is
$1,000. Additional investments must be at least $50. Shares may
be purchased by check, by bank wire, by electronic transfer, or by
exchange from another SteinRoe Fund. For more detailed
information, see How to Purchase Shares.
Redemptions.
For information on redeeming Fund shares, including the special
redemption privileges, see How to Redeem Shares.
<PAGE> 3
Net Asset Value.
The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value is determined as of
the close of trading on the New York Stock Exchange. (For more
detailed information, see Net Asset Value.)
Distributions.
Dividends are normally declared and paid annually. Distributions
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 in another SteinRoe Fund account.
(See Distributions and Income Taxes and Shareholder Services.)
Management and Fees.
Stein Roe & Farnham Incorporated ("SteinRoe") provides management
and investment advisory services to the Fund. For a description
of SteinRoe and advisory fees, see Management of the Fund.
If you have any additional questions about the Fund, please feel
free to discuss them with a relationship manager by calling 1-800-
338-2550.
FEE TABLE
Shareholder Transaction Expense
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 0.75%
12b-1 Fees None
Other Expenses (after reimbursement
of expenses) 0.24%
-----
Total Fund Operating Expenses (after
reimbursement of expenses) 0.99%
-----
-----
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
------ -------
$10 $32
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. In addition,
SteinRoe has undertaken to reimburse the Fund for expenses in
excess of 0.99% of average net assets through January 31, 1996,
subject to earlier termination by SteinRoe on 30 days' notice.
Absent such expense undertaking, Other Expenses and Total Fund
Operating Expenses would have been 3.83% and 4.58%, 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 in 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, 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 above
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.
<PAGE> 4
Financial Highlights
The table below reflects the results of operations of the Fund on
a per-share basis for the period shown and has been audited by
Arthur Andersen LLP, independent public accountants. The
auditors' report was 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 upon request without charge, contains additional performance
information.
Period Ended
Sept. 30, 1994(a)
----------------
Net Asset Value, Beginning of Period $10.00
------
Income from Investment Operations
Net investment income .03
Net realized and unrealized gains on
investments .21
------
Total from investment operations .24
------
Net Asset Value, End of Period $10.24
------
------
Ratio of expenses to average net assets (b) *0.99%
Ratio of net investment income to average
net assets (c) *1.07%
Portfolio turnover rate **12%
Total return **2.40%
Net assets, end of period (000 omitted) $8,176
________________
*Annualized.
**Not annualized.
(a) From commencement of operations on April 29, 1994.
(b) Computed giving effect to the investment adviser's expense
limitation undertaking.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio
would have been 4.58% for the period ended September 30, 1994.
THE FUND
The Fund is a no-load mutual fund.
SteinRoe Young Investor 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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping. The Fund does not
impose commissions or charges when shares are purchased or
redeemed.
The Fund is a series of the SteinRoe Investment 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.
The Fund is managed by Stein Roe & Farnham.
Stein Roe & Farnham Incorporated ("SteinRoe") provides investment
advisory, administrative, and bookkeeping and accounting services
to the Fund. SteinRoe also manages and provides investment
advisory services for several other no-load mutual funds with
different investment objectives, including equity funds,
international funds, taxable and tax-exempt bond funds, and money
market funds. To obtain prospectuses and other information on any
of those mutual funds, please call 1-800-338-2550.
<PAGE> 5
INVESTMENT POLICIES
The Fund invests primarily in equity securities.
The Fund's investment objective is long-term capital appreciation.
It seeks to achieve its objective by investing primarily in common
stocks and other equity-type securities that, in the opinion of
SteinRoe, have long-term appreciation potential.
The Fund invests in companies that affect the lives of children or
teenagers.
Under normal circumstances, at least 65% of the Fund's total
assets will be invested in securities of companies that, in the
opinion of SteinRoe, directly or through one or more subsidiaries,
affect the lives of children or teenagers. Such companies may
include companies that produce products or services that children
or teenagers use, are aware of, or could potentially have an
interest in.
Although the Fund invests primarily in common stocks and other
equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks), it may invest up to 35% of
its total assets in debt securities. The Fund may invest in
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size. Smaller companies, however,
involve higher risks in that they typically have limited product
lines, markets, and financial or management resources. In
addition, the securities of smaller companies may trade less
frequently and have greater price fluctuation than larger
companies, particularly those operating in countries with
developing markets. The Fund may also employ investment
techniques described elsewhere in this prospectus. (See Risks and
Investment Considerations and Fees and Expenses.)
The Fund is intended to be a fun, educational experience for young
investors and their parents.
In addition to the Fund's investment objective and policies, the
Fund also has an educational objective. The Fund will seek to
educate its shareholders by providing educational materials
regarding personal finance and investing as well as materials on
the Fund and its portfolio holdings.
PORTFOLIO INVESTMENTS AND STRATEGIES
The Fund may invest in "investment grade" debt securities.
In pursuing its investment objective, the Fund may invest in debt
securities. A debt security is an obligation of a borrower to
make payments of principal and interest to the holder of the
security. To the extent the Fund invests in debt securities, such
holdings will be subject to interest rate risk and credit risk.
Interest rate risk is the risk that the value of a portfolio will
fluctuate in response to changes in interest rates. Generally,
the debt component of a portfolio will tend to decrease in value
when interest rates rise and increase in value when interest rates
fall. Credit risk is the risk that an issuer will be unable to
make principal and interest payments when due. Investments in
debt securities are limited to those that are within the four
highest grades (generally referred to as "investment grade")
assigned by a nationally recognized statistical rating
organization or, if unrated, deemed to be of comparable quality by
SteinRoe. Securities in the fourth highest grade may possess
speculative characteristics. 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 SteinRoe will
consider that fact in determining whether the Fund should continue
to hold the security. When SteinRoe considers a temporary
defensive position advisable, the Fund may invest
<PAGE> 6
without limitation in high-quality fixed-income securities, or
hold assets in cash or cash equivalents.
The Fund may invest up to 25% of its assets in foreign securities,
which may entail a greater degree of risk than domestic
securities.
The Fund may invest up to 25% of its total assets in foreign
securities. (See Risks and Investment Considerations.) 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 Fund may contract to purchase an amount of foreign
currency sufficient to pay the purchase price of the securities at
the settlement date; such a contract involves the risk that the
value of the foreign currency may decline relative to the value of
the dollar prior to the settlement date, which risk is in addition
to the risk that the value of the foreign security purchased may
decline.
The Fund may make loans of its portfolio securities to broker-
dealers and banks and enter into reverse repurchase agreements
subject to certain restrictions described in the Statement of
Additional Information. 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. 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 invest in "derivative products."
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, forward contracts, securities
collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that
securitize assets of various types ("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, or an interest rate. The Fund does not expect to
invest more than 5% of its net assets in any type of Derivative
except for options, futures contracts, and futures options.
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 SteinRoe'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
<PAGE> 7
marketable than exchange-traded Derivatives. For additional
information on Derivatives, please refer to the Statement of
Additional Information.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
INVESTMENT RESTRICTIONS
The Fund will seek to limit the impact of any one investment on
the portfolio.
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government and repurchase agreements for
such securities, and except the Fund may invest all of its assets
in shares of another investment company having the identical
investment objective); (ii) invest more than 25% of its total
assets (at the time of investment) in the securities of companies
in any one industry; (iii) acquire more than 10% of the
outstanding voting securities of any one issuer; or (iv) borrow
money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets. The Fund may invest in
repurchase agreements, /1/ provided that it will not invest more than
5% of its net assets in repurchase agreements maturing in more
than seven days, and any other illiquid securities. An investment
in illiquid securities could involve relatively greater risks or
costs to the Fund.
Investment restrictions (i) through (iv) above are fundamental
policies and, as such, can be changed only with the approval of a
"majority of the outstanding voting securities" as defined in the
Investment Company Act of 1940. The investment objective is non-
fundamental and, as such, may be changed by the Board of Trustees
without shareholder approval. Any such change may result in the
Fund having an investment objective different from the objective
the shareholder considered
- ------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.
<PAGE> 8
appropriate at the time of investment in the Fund. All of the
investment restrictions are set forth in the Statement of
Additional Information.
RISKS AND INVESTMENT CONSIDERATIONS
The Fund is designed for long-term investors who desire to
participate in the stock market with an emphasis on companies that
appeal to young investors, with more investment risk and
volatility than the stock market in general but with less
investment risk and volatility than aggressive capital
appreciation funds.
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Fund is designed
for long-term investors who desire to participate in the stock
market with an emphasis on companies that appeal to young
investors, with more investment risk and volatility than the stock
market in general but with less investment risk and volatility
than aggressive capital appreciation funds. Of course, there can
be no guarantee that the Fund will achieve its objective. The
Fund is also designed to be a fun, educational experience for
young investors and their parents.
The Fund seeks to reduce risk by investing in a diversified
portfolio, but this does not eliminate all risk. However, the
Fund will not invest more than 25% of the total value of its
assets (at the time of investment) in the securities of companies
in any one industry. By investing in companies whose products or
services appeal to young investors, the Fund emphasizes various
consumer goods sectors.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. Accordingly, the portfolio
turnover rate may vary significantly from year to year, but is not
expected to exceed 100% under normal market conditions. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains and losses. (See
Distributions and Income Taxes.) The Fund is not intended to be
an income-producing investment, although it may produce income.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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.
Master/Feeder Option.
Rather than investing 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 SteinRoe 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 to
reduce costs. It is expected that any such investment company
would be managed by SteinRoe 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
<PAGE> 9
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
$2,500 minimum investment; $1,000 for UGMA accounts.
You may purchase Fund shares by check, by wire, by electronic
transfer, or by exchange from your account with another SteinRoe
Fund. The initial purchase minimum per Fund account is $2,500;
the minimum for Uniform Gifts/Transfers to Minors Act accounts is
$1,000; the minimum for accounts established under an automatic
investment plan of at least $50 per month (i.e., Regular
Investments or the Automatic Exchange Plan) is $500; and the
minimum per account for SteinRoe IRAs is $500. The initial
purchase minimum is waived for shareholders who participate in the
SteinRoe Counselor [service mark] and SteinRoe Counselor Preferred
[service mark] programs and for clients of SteinRoe. Subsequent
purchases must be at least $50. (See Shareholder Services.)
By Check.
You may purchase shares by check, by wire, by electronic transfer,
or by exchange.
To make an initial purchase of shares of the Fund by check, please
complete and sign the Application and mail it to P.O. Box 804058,
Chicago, Illinois 60680, together with a check made payable to
SteinRoe Funds.
You may make subsequent investments by submitting a check along
with either the stub from your Fund account confirmation statement
or a note indicating the amount of the purchase, your account
number, and the name in which your account is registered. Each
individual check submitted for purchase must be at least $50, 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 the Fund be cancelled
because your check does not clear, you will be responsible for any
resulting loss incurred by the 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 Fund's 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 Fund nor the Trust will be
responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. Your bank must
include the full name(s) in which your account is registered and
your Fund account number, and should address its wire as follows:
State Street Bank and Trust Company
Boston, Massachusetts
Attention: Custody
Fund No. 7124; SteinRoe Young Investor Fund
Account of (exact name(s) in registration)
Shareholder Account No. ___________
By Electronic Transfer.
You may also make subsequent investments by an electronic transfer
of funds from your bank checking account. Electronic transfer
allows you to make purchases at your request ("Special
Investments") by calling 1-
<PAGE> 10
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 the Fund be cancelled
because your electronic transfer does not clear, you will be
responsible for any resulting loss incurred by the Fund.
By Exchange.
You may purchase shares by exchange of shares from another
SteinRoe Fund account either by phone (if the Telephone Exchange
Privilege has been established on the account from which the
exchange is being made), by mail, in person, or automatically at
regular intervals (if you have elected Automatic Exchanges).
Restrictions apply; please review the information on the Exchange
Privilege under How to Redeem Shares--By Exchange.
Purchase Price and Effective Date.
Purchases are made at net asset value.
Each purchase of the Fund's shares is made at the 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.
Conditions of Purchase.
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. The Trust
also reserves the right to waive or lower its investment minimums
for any reason.
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 that maintain nominee accounts with
the Fund for their clients for whom they hold Fund shares charge
an annual fee of up to 0.25% of the average net assets held in
such accounts for accounting, servicing, and distribution services
they provide with respect to the underlying Fund shares. The Fund
may pay a portion of those fees not to exceed the fees and
expenses the Fund would pay to its transfer agent if the shares
held in nominee name were registered on the
<PAGE> 11
Fund's books in the individual names of the beneficial owners of
such shares. The balance of such fees are paid by SteinRoe.
HOW TO REDEEM SHARES
By Written Request.
To make sure your redemption request is in "good order," please
carefully read this section.
You may redeem all or a portion of your shares of the 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;
(3) the signatures on the written redemption request must be
guaranteed (a signature guarantee is not a notarization, but is a
widely accepted way to protect you and the Fund by verifying your
signature);
(4) 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 exchange shares of the Fund for shares of any other
SteinRoe Fund qualified for sale to residents of your state.
You may redeem all or any portion of your Fund shares and use the
proceeds to purchase shares of any other SteinRoe Fund offered for
sale in your state if your signed, properly completed Application
is on file.
An exchange transaction is a sale and purchase of shares for
Federal income tax purposes and may result in capital gain or
loss. Before exercising the Exchange Privilege, you should obtain
the prospectus for the SteinRoe Fund in which you wish to invest
and read it carefully. The registration of the account to which
you are making an exchange must be exactly the same as that of the
Fund account from which the exchange is made and the amount you
exchange must meet any applicable minimum investment of the
SteinRoe Fund being purchased. An exchange may be made by
following the redemption procedure described above under By
Written Request and indicating the SteinRoe Fund to be purchased,
except that a signature guarantee normally is not required. (See
also the discussion below of the Telephone Exchange Privilege and
Automatic Exchanges.)
Special Redemption Privileges.
Telephone Redemption Privileges will be established for you
automatically.
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.
<PAGE> 12
Telephone Exchange Privilege. You may use the Telephone Exchange
Privilege to exchange an amount of $1,000 or more from your
account by calling 1-800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four
Telephone Exchange round-trips per year and the Fund may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of the Fund into another
SteinRoe Fund, and then back to the Fund). Also, the Trust's
general redemption policies apply to redemptions of shares by
Telephone Exchange. (See General Redemption Policies.)
Restrictions on Special Redemption Privileges apply.
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 Fund. Therefore, the
Trust generally will not honor requests for Telephone Exchanges by
shareholders identified by the Trust as "market-timers."
Moreover, the Trust reserves the right at any time without prior
notice to suspend, limit, modify, or terminate the Telephone
Exchange Privilege in its entirety. Because such a step would be
taken only if the Board of Trustees believes it would be in the
best interests of the Fund, the Trust expects that it would
provide shareholders with prior written notice of any such action
unless the resulting delay in the suspension, limitation,
modification, or termination of the Telephone Exchange Privilege
would adversely affect the Fund. If the Trust were to suspend,
limit, modify, or terminate the Telephone Exchange Privilege, a
shareholder expecting to make a Telephone Exchange might find that
an exchange could not be processed or that there might be a delay
in the implementation of the exchange. (See How to Redeem Shares-
- -By Exchange.) During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by
telephone.
Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another SteinRoe Fund account on a regular basis.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 1-800-338-2550. The
proceeds will be sent by check to your registered address.
Electronic Transfer Privilege. You may redeem shares by calling
1-800-338-2550 and requesting an electronic transfer ("Special
Redemption") of the proceeds to a checking account previously
designated by you at a bank that is a member of the Automated
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. A Special Redemption request
received by telephone after 2:00 p.m., Chicago time, is deemed
received on the next business day.
General Redemption Policies.
Please read carefully the 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
<PAGE> 13
questions about requirements for a redemption before submitting
your request. The Trust reserves the right to require a properly
completed Application before making payment for shares redeemed.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon 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 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.
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 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 Fund employs
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 Fund and
its 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 the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.
The Trust reserves the right to redeem shares in any account and
send the proceeds to the owner 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 the Fund or any of the
other SteinRoe Funds may be redeemed to the extent necessary to
reimburse
<PAGE> 14
any SteinRoe Fund for any loss it sustains that is caused by you
(such as losses from uncollected checks and electronic transfers
for the purchase of shares or any SteinRoe Fund liability under
the Internal Revenue Code provisions on backup withholding).
SHAREHOLDER SERVICES
Reporting to Shareholders.
You will receive quarterly communications from the Fund.
You will receive a confirmation statement reflecting each of your
purchases and redemptions of shares of the 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. The Trust will send you
quarterly materials on the Fund and its portfolio holdings, will
send you semiannual and annual reports, and will provide you
annually with tax information.
Funds-on-Call [registered mark] 24-Hour Information Service.
Funds-on-Call [registered mark] allows you to have 24-hour access
to information.
To access the SteinRoe Funds-on-Call [registered mark] automated
telephone service, just call 1-800-338-2550 on any touch-tone
telephone and follow the recorded instructions. Funds-on-Call
[registered mark] provides yields, prices, latest dividends,
account balances, last transaction, and other information 24 hours
a day, seven days a week.
Funds-on-Call [registered mark] Automated Telephone Transactions.
If you have established the Funds-on-Call [registered mark]
transaction privilege (Funds-on-Call [registered mark] Application
will be required), you may initiate Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by
Check 24 hours a day, seven days a week by calling 1-800-338-2550
on a touch-tone telephone. These transactions are subject to the
terms and conditions of the individual privileges. (See How to
Purchase Shares and How to Redeem Shares.)
SteinRoe Counselor [service mark] Program.
The SteinRoe Counselor [service mark] and SteinRoe Counselor
Preferred [service mark] programs are professional investment
advisory services available to shareholders. These programs are
designed to provide investment guidance in helping investors to
select a portfolio of SteinRoe Funds. The SteinRoe Counselor
Preferred [service mark] program, which automatically adjusts
client portfolios among the SteinRoe Funds, has a fee of up to 1%
of assets.
Tax-Sheltered Retirement Plan.
Booklets describing the Individual Retirement Account ("IRA")
program and special forms necessary for establishing it are
available on request. IRAs are available for employed persons and
their non-employed spouses. You may use all of the SteinRoe
Funds, except those investing primarily in tax-exempt securities,
in the plan. Please read the prospectus for each fund in which
you plan to invest before making your investment.
Special Services.
The Fund offers special services to meet your needs.
The following special services are available to shareholders.
Please call 1-800-338-2550 or write the Trust for additional
information and forms.
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another SteinRoe Fund account. Before establishing this
option, you
<PAGE> 15
should obtain and read carefully the prospectus of the SteinRoe
Fund into which you wish to have your distributions invested. The
account from which distributions are made must be of sufficient
size that each distribution will usually be at least $25.
Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.
Telephone Redemption by Check Privilege and Telephone Exchange
Privilege--established automatically when you open your account
unless you decline them on your Application ($1,000 minimum).
(See How to Redeem Shares--Special Redemption Privileges.)
Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another SteinRoe
Fund account on a regular basis ($50 minimum; $100,000 maximum).
Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.
NET ASSET VALUE
The Fund's net asset value is calculated daily.
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 ("NYSE") (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 NYSE 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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities
<PAGE> 16
for which reliable quotations are available are valued at the
latest bid quotation.
DISTRIBUTIONS AND INCOME TAXES
Distributions.
Income dividends are normally declared and paid annually. 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.
Dividends and capital gains will be reinvested automatically
unless you elect another option.
All of your income dividends and capital gain distributions will
be reinvested in additional shares unless you elect to have
distributions either (1) paid by check, (2) deposited by
electronic transfer into your bank checking account, (3) applied
to purchase shares in your account with another SteinRoe Fund, or
(4) applied to purchase shares in a SteinRoe Fund account of
another person. (See Shareholder Services.) Reinvestment into
the same Fund account normally occurs one business day after the
record date. Investment of distributions into another SteinRoe
Fund account occurs on the payable date. If you choose to receive
your distributions in cash, your distribution check normally will
be mailed approximately 15 days after the record date. The Trust
reserves the right to reinvest the proceeds and future
distributions in additional Fund shares if checks mailed to you
for distributions are returned as undeliverable or are not
presented for payment within six months.
Income Taxes.
Fund distributions will be taxable to you.
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 for
tax purposes. If you are not subject to tax on your income, you
may not be required to pay tax on these amounts.
If you redeem shares of the 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, the Fund is treated as a separate
taxable entity distinct from the other series of the Trust.
This discussion of taxation 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. The foregoing
information applies to U.S.
<PAGE> 17
shareholders. Foreign shareholders should consult their tax
advisors as to the tax consequences of ownership of Fund shares.
Backup Withholding.
If you fail to provide a tax identification number, you will be
subject to 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 Fund
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for the 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 Fund's performance is usually quoted as an average annual
total return, which is a historical figure and is not intended to
be indicative of future results.
The total return from an investment in the Fund is measured by the
distributions received (assuming reinvestment of dividends and
capital gains) 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 total return with 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. Of course, past performance is not necessarily
indicative of future results.
MANAGEMENT OF THE FUND
Trustees and Adviser.
The Board of Trustees supervises the Fund and SteinRoe.
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 additional information
about the trustees and officers. 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. SteinRoe is registered as an investment adviser under the
Investment Advisers Act of 1940.
SteinRoe (and its predecessor) has advised and managed mutual
funds since 1949. SteinRoe is a wholly-owned indirect subsidiary
of Liberty Financial Companies, Inc., which in turn is a wholly-
owned indirect subsidiary of Liberty Mutual Insurance Company.
<PAGE> 18
Portfolio Managers.
The Fund's portfolio is managed by Ken Corba and Erik Gustafson.
The Fund is managed by Kenneth W. Corba and Erik P. Gustafson.
Mr. Corba is a chartered financial analyst who joined SteinRoe in
1984 and is a senior vice president of SteinRoe. He received his
B.A.and M.B.A. degrees from the University of Michigan in 1975 and
1984, respectively. Mr. Gustafson is a vice president of the
Adviser, having joined it in 1992. From 1989 to 1992 he was an
attorney with Fowler, White, Burnett, Hurley, Banick & Strickroot.
He holds a B.A. from the University of Virginia (1985) and M.B.A.
and J.D. degrees (1989) from Florida State University.
Fees and Expenses.
SteinRoe receives an advisory fee from the Fund.
In return for its services, SteinRoe receives a monthly fee from
the Fund, computed and accrued daily, based on its average net
assets. The annualized fee is 0.75 of 1% up to $250 million, 0.70
of 1% of the next $250 million of average net assets, and 0.60 of
1% thereafter. This rate of fee is higher than that paid by many
mutual funds. Pursuant to the expense undertaking described
below, SteinRoe reimbursed the Fund $82,109 for the period from
April 29, 1994 (commencement of operations) to September 30, 1994,
resulting in a net payment by SteinRoe of $64,954.
Because of the Fund's educational objective, the Fund's expenses
may be higher.
Because the Fund also has as an objective being an educational
experience for investors, the Fund's non-advisory expenses may be
higher than other mutual funds because of regular educational and
other reporting to shareholders.
Under a separate agreement with the Trust, SteinRoe provides
certain accounting and bookkeeping services to the Fund, including
computation of its net asset value and calculation of its net
income and capital gains and losses on disposition of Fund assets.
SteinRoe is subsidizing the Fund's expenses so as not to exceed
0.99 of 1%.
SteinRoe has undertaken to reimburse the Fund to the extent that
its annual expenses exceed 0.99 of 1% of its average net assets
through January 31, 1996, subject to earlier termination by
SteinRoe on 30 days' notice.
Portfolio Transactions.
SteinRoe places the orders for the purchase and sale of portfolio
securities and options and futures transactions for the Fund. In
doing so, SteinRoe 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
Financial Companies, Inc., which in turn is a wholly-owned
indirect subsidiary of Liberty Mutual Insurance Company, is the
agent of the Trust for the transfer of shares, disbursement of
dividends, and maintenance of shareholder accounting records.
Distributor.
The Fund's shares are offered through Liberty Securities
Corporation.
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)
<PAGE> 19
should be mailed to the Trust at P.O. Box 804058, Chicago,
Illinois 60680. All distribution and promotional expenses are
paid by SteinRoe, 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 Fund is part of a Massachusetts business trust.
The Trust is a Massachusetts business trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
January 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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.
<PAGE> 20
[STEINROE MUTUAL FUNDS LOGO]
The SteinRoe Funds
SteinRoe Government Reserves
SteinRoe Cash Reserves
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe Special Venture Fund
SteinRoe Young Investor Fund
Prospectus
February 1, 1995
P.O. Box 804058
Chicago, Illinois 60680
In Chicago, visit our Fund Center
at One South Wacker Drive
Liberty Securities Corporation, Distributor
08011
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Young Investor Fund
Supplement to February 1, 1995 Prospectus
________________________________________
NEW AGREEMENTS. On September 1, 1995, the Fund's current
investment advisory agreement with Stein Roe & Farnham Incorporated
("SteinRoe") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets:
New Fee Schedule (dollar amounts in millions)
---------------------------------------------
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.60% up to $500, .20% up to $500, .80% up to $500,
.55% next $500 .15% next $500, .70% next $500,
..50% thereafter .125% thereafter .625% thereafter
SteinRoe's current undertaking to reimburse the Fund for expenses in
excess of 0.99 of 1% of average net assets remains in effect.
MINIMUM INVESTMENT REDUCED. Effective June 22, 1995, the
minimum amount that must be invested to open an account under an
automatic investment plan has been reduced from $500 to $100. (See
How to Purchase Shares.)
PORTFOLIO MANAGERS. Effective March 17, 1995, the portfolio
managers of SteinRoe Young Investor Fund are Erik P. Gustafson,
David P. Brady, and Eric S. Maddix. Mr. Brady is a Portfolio
Manager with Stein Roe & Farnham Incorporated ("SteinRoe"), which he
joined in 1993. From 1986 to 1993, Mr. Brady was an Equity
Investment Analyst with State Farm Mutual Automobile Insurance
Company. A Chartered Financial Analyst, he earned a B.S. in
Finance, graduating Magna Cum Laude, from the University of Arizona
in 1986, and earned an M.B.A. from the University of Chicago in
1989. Mr. Maddix joined SteinRoe in 1987 as a Portfolio Manager.
He received his B.B.A. degree from Iowa State University in 1986 and
his M.B.A. from the University of Chicago in 1992. Please refer to
the section of the prospectus entitled Management of the Fund for
further information about Mr. Gustafson.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $10.24
------
Income from Investment Operations
Net investment income .04
Net realized and unrealized gains on investments 1.13
------
Total from investment operations 1.17
------
Distributions
Net investment income (.08)
------
NET ASSET VALUE, END OF PERIOD $11.33
------
------
Ratio of net expenses to average net assets (a) *0.99%
Ratio of net investment income to average net
assets (b) *0.76%
Portfolio turnover rate **27%
Total return **11.46%
Net assets, end of period (000 omitted) $16,596
*Annualized.
**Not annualized.
(a) Computed giving effect to the investment adviser's expense
limitation undertaking.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio
would have been 3.13% for the period ended March 31, 1995.
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[SteinRoe Mutual Funds logo]
Young Investor Fund
The Fund's objective is long-term capital appreciation. The Fund
invests in securities of companies that affect the lives of
children or teenagers. The Fund is also intended to be a fun,
educational experience for young investors and their parents.
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 SteinRoe Investment 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.
If you have any questions about new Fund accounts, please call 1-
800-403-KIDS (1-800-403-5437); for existing accounts, shareholders
should call 1-800-338-2550.
A Statement of Additional Information dated February 1, 1995,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the
Secretary at the address shown on the back cover or by calling the
Fund.
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 February 1, 1995.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary ...........................2
Fee Table ........................4
Financial Highlights...............5
The Fund ..........................5
Investment Policies ...............6
Portfolio Investments and
Strategies.......................7
Investment Restrictions............9
Risks and Investment
Considerations...................10
How to Purchase Shares ...........11
By Check ......................12
By Wire .......................12
By Electronic Transfer.........12
By Exchange ...................13
Purchase Price and
Effective Date .............13
Conditions of Purchase ........13
Purchases Through Third
Parties.....................13
How to Redeem Shares .............14
By Written Request ............14
By Exchange ...................14
Special Redemption Privileges .15
General Redemption Policies ...16
Shareholder Services .............18
Net Asset Value ..................19
Distributions and Income Taxes ...20
Investment Return ................21
Management of the Fund ...........22
Organization and Description of
Shares..........................24
SUMMARY
SteinRoe Young Investor Fund (the "Fund") is a series of the
SteinRoe Investment Trust, an open-end diversified management
investment company. The Fund is a "no-load" fund. There are no
sales or redemption charges. (See The Fund and Organization and
Description of Shares.)
Investment Objectives and Policies.
The Fund's investment objective is long-term capital appreciation.
It seeks to achieve its objective by investing primarily in common
stocks and other equity-type securities that SteinRoe believes to
have long-term appreciation potential. The Fund invests primarily
in securities of companies that appeal to or affect the lives of
children or teenagers. It is designed for long-term investors,
particularly children and teenagers.
In addition to the Fund's investment objective and policies, the
Fund also has an educational objective. It seeks to teach
children and teenagers about the Fund, basic economic principles,
and personal finance through a variety of educational materials
prepared and paid for by the Fund.
There can be no guarantee that the Fund will achieve its
investment objective. Please see Investment Policies and
Portfolio Investments and Strategies for further information.
<PAGE> 3
Investment Risks.
The Fund is designed for long-term investors who are willing to
accept the investment risk and volatility of equity-type
securities in general as well as the specific types of equity
securities emphasized by the Fund. By investing in companies
whose products or services appeal to young investors, the Fund
emphasizes various consumer goods sectors. Since the Fund may
invest in foreign securities, investors should understand and
consider carefully the risks involved in foreign investing.
Investing in foreign securities involves certain considerations
involving both risks and opportunities not typically associated
with investing in U.S. securities. Please see Investment
Policies, Portfolio Investments and Strategies, and Risks and
Investment Considerations for further information.
Purchases.
The minimum initial investment for the Fund is $2,500; the minimum
investment for Uniform Gifts/ Transfers to Minors Act accounts is
$1,000. Additional investments must be at least $50. Shares may
be purchased by check, by bank wire, by electronic transfer, or by
exchange from another SteinRoe Fund. For more detailed
information, see How to Purchase Shares.
Redemptions.
For information on redeeming Fund shares, including the special
redemption privileges, see How to Redeem Shares.
Net Asset Value.
The purchase and redemption price of the Fund's shares is its net
asset value per share. The net asset value is determined as of
the close of trading on the New York Stock Exchange. (For more
detailed information, see Net Asset Value.)
Distributions.
Dividends are normally declared and paid annually. Distributions
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 in another SteinRoe Fund account.
(See Distributions and Income Taxes and Shareholder Services.)
Management and Fees.
Stein Roe & Farnham Incorporated ("SteinRoe") provides management
and investment advisory services to the Fund. For a description
of SteinRoe and advisory fees, see Management of the Fund.
If you have any additional questions about the Fund, please feel
free to discuss them with a relationship manager by calling 1-800-
338-2550.
<PAGE> 4
FEE TABLE
Shareholder Transaction Expense
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 0.75%
12b-1 Fees None
Other Expenses (after reimbursement
of expenses) 0.24%
-----
Total Fund Operating Expenses (after
reimbursement of expenses) 0.99%
-----
-----
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
------ -------
$10 $32
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. In addition,
SteinRoe has undertaken to reimburse the Fund for expenses in
excess of 0.99% of average net assets through January 31, 1996,
subject to earlier termination by SteinRoe on 30 days' notice.
Absent such expense undertaking, Other Expenses and Total Fund
Operating Expenses would have been 3.83% and 4.58%, 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 in 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, 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 above
is useful in reviewing the Fund's expenses and in providing a
basis for comparison with other
<PAGE> 5
mutual funds, it should not be used for comparison with other
investments using different assumptions or time periods.
Financial Highlights
The table below reflects the results of operations of the Fund on
a per-share basis for the period shown and has been audited by
Arthur Andersen LLP, independent public accountants. The
auditors' report was 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 upon request without charge, contains additional performance
information.
Period Ended
Sept. 30, 1994(a)
----------------
Net Asset Value, Beginning of Period $10.00
------
Income from Investment Operations
Net investment income .03
Net realized and unrealized gains on
investments .21
------
Total from investment operations .24
------
Net Asset Value, End of Period $10.24
------
------
Ratio of expenses to average net assets (b) *0.99%
Ratio of net investment income to average
net assets (c) *1.07%
Portfolio turnover rate **12%
Total return **2.40%
Net assets, end of period (000 omitted) $8,176
________________
*Annualized.
**Not annualized.
(a) From commencement of operations on April 29, 1994.
(b) Computed giving effect to the investment adviser's expense
limitation undertaking.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the investment adviser, this ratio
would have been 4.58% for the period ended September 30, 1994.
THE FUND
SteinRoe Young Investor 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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping. The Fund does not
impose commissions or charges when shares are purchased or
redeemed.
<PAGE> 6
The Fund is a series of the SteinRoe Investment 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 ("SteinRoe") provides investment
advisory, administrative, and bookkeeping and accounting services
to the Fund. SteinRoe also manages and provides investment
advisory services for several other no-load mutual funds with
different investment objectives, including equity funds,
international funds, taxable and tax-exempt bond funds, and money
market funds. To obtain prospectuses and other information on any
of those mutual funds, please call 1-800-338-2550.
INVESTMENT POLICIES
The Fund's investment objective is long-term capital appreciation.
It seeks to achieve its objective by investing primarily in common
stocks and other equity-type securities that, in the opinion of
SteinRoe, have long-term appreciation potential.
Under normal circumstances, at least 65% of the Fund's total
assets will be invested in securities of companies that, in the
opinion of SteinRoe, directly or through one or more subsidiaries,
affect the lives of children or teenagers. Such companies may
include companies that produce products or services that children
or teenagers use, are aware of, or could potentially have an
interest in.
Although the Fund invests primarily in common stocks and other
equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks), it may invest up to 35% of
its total assets in debt securities. The Fund may invest in
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size. Smaller companies, however,
involve higher risks in that they typically have limited product
lines, markets, and financial or management resources. In
addition, the securities of smaller companies may trade less
frequently and have greater price fluctuation than larger
companies, particularly those operating in countries with
developing markets. The Fund may also employ investment
techniques described elsewhere in this prospectus. (See Risks and
Investment Considerations and Fees and Expenses.)
In addition to the Fund's investment objective and policies, the
Fund
<PAGE> 7
also has an educational objective. The Fund will seek to educate
its shareholders by providing educational materials regarding
personal finance and investing as well as materials on the Fund
and its portfolio holdings.
PORTFOLIO INVESTMENTS AND STRATEGIES
In pursuing its investment objective, the Fund may invest in debt
securities. A debt security is an obligation of a borrower to
make payments of principal and interest to the holder of the
security. To the extent the Fund invests in debt securities, such
holdings will be subject to interest rate risk and credit risk.
Interest rate risk is the risk that the value of a portfolio will
fluctuate in response to changes in interest rates. Generally,
the debt component of a portfolio will tend to decrease in value
when interest rates rise and increase in value when interest rates
fall. Credit risk is the risk that an issuer will be unable to
make principal and interest payments when due. Investments in
debt securities are limited to those that are within the four
highest grades (generally referred to as "investment grade")
assigned by a nationally recognized statistical rating
organization or, if unrated, deemed to be of comparable quality by
SteinRoe. Securities in the fourth highest grade may possess
speculative characteristics. 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 SteinRoe will
consider that fact in determining whether the Fund should continue
to hold the security. When SteinRoe considers a temporary
defensive position advisable, the Fund may invest without
limitation in high-quality fixed-income securities, or hold assets
in cash or cash equivalents.
The Fund may invest up to 25% of its total assets in foreign
securities. (See Risks and Investment Considerations.) 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
<PAGE> 8
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; such a
contract involves the risk that the value of the foreign currency
may decline relative to the value of the dollar prior to the
settlement date, which risk is in addition to the risk that the
value of the foreign security purchased may decline.
The Fund may make loans of its portfolio securities to broker-
dealers and banks and enter into reverse repurchase agreements
subject to certain restrictions described in the Statement of
Additional Information. 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. 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.
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, forward contracts, securities
collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that
securitize assets of various types ("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, or an interest rate. The Fund does not expect to
invest more than 5% of its net assets in any type of Derivative
except for options, futures contracts, and futures options.
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 SteinRoe'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
<PAGE> 9
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
INVESTMENT RESTRICTIONS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government and repurchase agreements for
such securities, and except the Fund may invest all of its assets
in shares of another investment company having the identical
investment objective); (ii) invest more than 25% of its total
assets (at the time of investment) in the securities of companies
in any one industry; (iii) acquire more than 10% of the
outstanding voting securities of any one issuer; or (iv) borrow
money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets. The Fund may invest in
<PAGE> 10
repurchase agreements, /1/ provided that it will not invest more than
5% of its net assets in repurchase agreements maturing in more
than seven days, and any other illiquid securities. An investment
in illiquid securities could involve relatively greater risks or
costs to the Fund.
Investment restrictions (i) through (iv) above are fundamental
policies and, as such, can be changed only with the approval of a
"majority of the outstanding voting securities" as defined in the
Investment Company Act of 1940. The investment objective is non-
fundamental and, as such, may be changed by the Board of Trustees
without shareholder approval. Any such change may result in the
Fund having an investment objective different from the objective
the shareholder considered
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Fund is designed
for long-term investors who desire to participate in the stock
market with an emphasis on companies that appeal to young
investors, with more investment risk and volatility than the stock
market in general but with less investment risk and volatility
than aggressive capital appreciation funds. Of course, there can
be no guarantee that the Fund will achieve its objective. The
Fund is also designed to be a fun, educational experience for
young investors and their parents.
The Fund seeks to reduce risk by investing in a diversified
portfolio,
but this does not eliminate all risk. However, the Fund will not
invest more than 25% of the total value of its assets (at the time
of investment) in the securities of companies in any one industry.
By investing in companies whose products or services appeal to
young investors, the Fund emphasizes various consumer goods
sectors.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. Accordingly, the portfolio
turnover rate may vary significantly from year to year, but is not
expected to exceed 100% under normal market conditions. A high
rate of portfolio turnover may
- ------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.appropriate at the time of investment in the Fund. All
of the investment restrictions are set forth in the Statement of
Additional Information.
<PAGE> 11
result in increased transaction expenses and the realization of
capital gains and losses. (See Distributions and Income Taxes.)
The Fund is not intended to be an income-producing investment,
although it may produce income.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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.
Master/Feeder Option.
Rather than investing 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 SteinRoe 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 to
reduce costs. It is expected that any such investment company
would be managed by SteinRoe 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
You may purchase Fund shares by check, by wire, by electronic
transfer, or by exchange from your account with another SteinRoe
Fund. The initial purchase minimum per Fund account is $2,500;
the minimum for Uniform Gifts/Transfers to Minors Act accounts is
$1,000; the minimum for accounts established under an automatic
investment plan of at least $50 per month (i.e., Regular
Investments or the Automatic Exchange Plan) is $500; and the
minimum per account for SteinRoe IRAs is $500. The initial
purchase minimum is waived for shareholders who participate in the
<PAGE> 12
SteinRoe Counselor [service mark] and SteinRoe Counselor Preferred
[service mark] programs and for clients of SteinRoe. Subsequent
purchases must be at least $50. (See Shareholder Services.)
By Check.
To make an initial purchase of shares of the Fund by check, please
complete and sign the Application and mail it to P.O. Box 804058,
Chicago, Illinois 60680, together with a check made payable to
SteinRoe Funds.
You may make subsequent investments by submitting a check along
with either the stub from your Fund account confirmation statement
or a note indicating the amount of the purchase, your account
number, and the name in which your account is registered. Each
individual check submitted for purchase must be at least $50, and
the Trust generally will not accept cash, drafts, third party
checks, or checks drawn on banks outside of the United States.
Should an
<PAGE> 13
order to purchase shares of the Fund be cancelled because your
check does not clear, you will be responsible for any resulting
loss incurred by the 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 Fund's 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 Fund nor the Trust will be
responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. Your bank must
include the full name(s) in which your account is registered and
your Fund account number, and should address its wire as follows:
State Street Bank and Trust Company
Boston, Massachusetts
Attention: Custody
Fund No. 7124; SteinRoe Young Investor Fund
Account of (exact name(s) in registration)
Shareholder Account No. ___________
By Electronic Transfer.
You may also make subsequent investments by an electronic transfer
of funds from your bank checking account. Electronic transfer
allows you to make purchases at your request ("Special
Investments") by calling 1-800-338-2550 or at pre-scheduled
intervals ("Regular Investments"). (See Shareholder Services.)
Electronic transfer purchases are subject to a $50 minimum and a
$100,000 maximum. You may not open a new account through
electronic transfer. Should an order to purchase shares of the
Fund be cancelled because your electronic transfer does not clear,
you will be responsible for any resulting loss incurred by the
Fund.
By Exchange.
You may purchase shares by exchange of shares from another
SteinRoe Fund account either by phone (if the Telephone Exchange
Privilege has been established on the account from which the
exchange is being made), by mail, in person, or automatically at
regular intervals (if you have elected Automatic Exchanges).
Restrictions apply; please review the information on the Exchange
Privilege under How to Redeem Shares--By Exchange.
Purchase Price and Effective Date.
Each purchase of the Fund's shares is made at the 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.
Conditions of Purchase.
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. The Trust
also reserves the right to waive or lower its investment minimums
for any reason.
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 that maintain nominee accounts with
the Fund for their clients for whom they hold Fund shares charge
an annual fee of up to 0.25% of the average net assets held in
such accounts for accounting, servicing, and distribution services
<PAGE> 14
they provide with respect to the underlying Fund shares. The Fund
may pay a portion of those fees not to exceed the fees and
expenses the Fund would pay to its transfer agent if the shares
held in nominee name were registered on the Fund's books in the
individual names of the beneficial owners of such shares. The
balance of such fees are paid by SteinRoe.
HOW TO REDEEM SHARES
By Written Request.
You may redeem all or a portion of your shares of the 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;
(3) the signatures on the written redemption request must be
guaranteed (a signature guarantee is not a notarization, but is a
widely accepted way to protect you and the Fund by verifying your
signature);
(4) 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 SteinRoe Fund offered for
sale in your state if your signed, properly completed Application
is on file.
An exchange transaction is a sale and purchase of shares for
Federal income tax purposes and may result in capital gain or
loss. Before exercising the Exchange Privilege, you should obtain
the prospectus for the SteinRoe Fund in which you wish to invest
and read it carefully. The registration of the account to which
you are making an exchange must be exactly the same as that of the
Fund account from which the exchange is made and the amount you
exchange must meet any applicable minimum investment of the
SteinRoe Fund being purchased. An exchange may be made by
following the redemption procedure described above under By
Written Request and indicating the SteinRoe Fund to be purchased,
except that a signature guarantee normally is not required. (See
also the discussion below of the Telephone Exchange Privilege and
Automatic Exchanges.)
<PAGE> 15
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.Telephone Exchange Privilege. You may use the
Telephone Exchange Privilege to exchange an amount of $1,000 or
more from your account by calling 1-800-338-2550 or by sending a
telegram; new accounts opened by exchange are subject to the
$2,500 initial purchase minimum. Generally, you will be limited
to four Telephone Exchange round-trips per year and the Fund may
refuse requests for Telephone Exchanges in excess of four round-
trips (a round-trip being the exchange out of the Fund into
another SteinRoe Fund, and then back to the 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 Fund. Therefore, the
Trust generally will not honor requests for Telephone Exchanges by
shareholders identified by the Trust as "market-timers."
Moreover, the Trust reserves the right at any time without prior
notice to suspend, limit, modify, or terminate the Telephone
Exchange Privilege in its entirety. Because such a step would be
taken only if the Board of Trustees believes it would be in the
best interests of the Fund, the Trust expects that it would
provide shareholders with prior written notice of any such action
unless the resulting delay in the suspension, limitation,
modification, or termination of the Telephone Exchange Privilege
would adversely affect the Fund. 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-
- -
<PAGE> 16
By Exchange.) During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by
telephone.
Automatic Exchanges. You may use the Automatic Exchange Privilege
to automatically redeem a fixed amount from your Fund account for
investment in another SteinRoe Fund account on a regular basis.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 1-800-338-2550. The
proceeds will be sent by check to your registered address.
Electronic Transfer Privilege. You may redeem shares by calling
1-800-338-2550 and requesting an electronic transfer ("Special
Redemption") of the proceeds to a checking account previously
designated by you at a bank that is a member of the Automated
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. A Special Redemption request
received by telephone after 2:00 p.m., Chicago time, is deemed
received on the next business day.
General Redemption Policies.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please telephone
the Trust if you have any questions about requirements for a
redemption before submitting your request. The Trust reserves the
right to require a properly completed Application before making
payment for shares redeemed.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon 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 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
<PAGE> 17
purchase be made by Federal funds wire through your bank.
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 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 Fund employs
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 Fund and
its 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 the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.
The Trust reserves the right to redeem shares in any account and
send the proceeds to the owner 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 the Fund or any of the
other SteinRoe Funds may be redeemed to the extent necessary to
reimburse any SteinRoe Fund for any loss it sustains that is
caused by you (such as losses from uncollected checks and
electronic transfers for the purchase of shares or any SteinRoe
Fund liability under the Internal Revenue Code provisions on
backup withholding).
<PAGE> 18
SHAREHOLDER SERVICES
Reporting to Shareholders.
You will receive a confirmation statement reflecting each of your
purchases and redemptions of shares of the 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. The Trust will send you
quarterly materials on the Fund and its portfolio holdings, will
send you semiannual and annual reports, and will provide you
annually with tax information.
Funds-on-Call [registered mark] 24-Hour Information Service.
To access the SteinRoe Funds-on-Call [registered mark] automated
telephone service, just call 1-800-338-2550 on any touch-tone
telephone and follow the recorded instructions. Funds-on-Call
[registered mark] provides yields, prices, latest dividends,
account balances, last transaction, and other information 24 hours
a day, seven days a week.
Funds-on-Call [registered mark] Automated Telephone Transactions.
If you have established the Funds-on-Call [registered mark]
transaction privilege (Funds-on-Call [registered mark] Application
will be required), you may initiate Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by
Check 24 hours a day, seven days a week by calling 1-800-338-2550
on a touch-tone telephone. These transactions are subject to the
terms and conditions of the individual privileges. (See How to
Purchase Shares and How to Redeem Shares.)
SteinRoe Counselor [service mark] Program.
The SteinRoe Counselor [service mark] and SteinRoe Counselor
Preferred [service mark] programs are professional investment
advisory services available to shareholders. These programs are
designed to provide investment guidance in helping investors to
select a portfolio of SteinRoe Funds. The SteinRoe Counselor
Preferred [service mark] program, which automatically adjusts
client portfolios among the SteinRoe Funds, has a fee of up to 1%
of assets.
Tax-Sheltered Retirement Plan.
Booklets describing the Individual Retirement Account ("IRA")
program and special forms necessary for establishing it are
available on request. IRAs are available for employed persons and
their non-employed spouses. You may use all of the SteinRoe
Funds, except those investing primarily in tax-exempt securities,
in the plan. Please read the prospectus for each fund in which
you plan to invest before making your investment.
Special Services.
The following special services are available to shareholders.
Please call 1-800-338-2550 or write the Trust for additional
information and forms.
<PAGE> 19
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Fund account automatically invested
in another SteinRoe Fund account. Before establishing this
option, you should obtain and read carefully the prospectus of the
SteinRoe Fund into which you wish to have your distributions
invested. The account from which distributions are made must be
of sufficient size that each distribution will usually be at least
$25.
Automatic Dividend Deposit (electronic transfer)--to have income
dividends and capital gain distributions deposited directly into
your bank checking account.
Telephone Redemption by Check Privilege and Telephone Exchange
Privilege--established automatically when you open your account
unless you decline them on your Application ($1,000 minimum).
(See How to Redeem Shares--Special Redemption Privileges.)
Special Redemption Option (electronic transfer)--to redeem shares
at any time and have the proceeds deposited directly to your bank
checking account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--to purchase Fund shares
at regular intervals directly from your bank checking account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--to purchase Fund shares
by telephone and pay for them by electronic transfer of funds from
your checking account ($50 minimum; $100,000 maximum).
Automatic Exchange Plan--to automatically redeem a fixed dollar
amount from your Fund account and invest it in another SteinRoe
Fund account on a regular basis ($50 minimum; $100,000 maximum).
Automatic Redemptions (electronic transfer)--to have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank checking account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--to have a fixed dollar amount, declining
balance, or fixed percentage of your account redeemed and sent at
regular intervals by check to you or another payee.
NET ASSET VALUE
The purchase and redemption price of 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 ("NYSE") (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
<PAGE> 20
the NYSE 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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
DISTRIBUTIONS AND INCOME TAXES
Distributions.
Income dividends are normally declared and paid annually. 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.
All of your income dividends and capital gain distributions will
be reinvested in additional shares unless you elect to have
distributions either (1) paid by check, (2) deposited by
electronic transfer into your bank checking account, (3) applied
to purchase shares in your account with another SteinRoe Fund, or
(4) applied to purchase shares in a SteinRoe Fund account of
another person. (See Shareholder Services.) Reinvestment into
the same Fund account normally occurs one business day after the
record date. Investment of distributions into another SteinRoe
Fund account occurs on the payable date. If you choose to receive
your distributions in cash, your distribution check normally will
be mailed approximately 15 days after the record date. The Trust
reserves the right to reinvest the proceeds and future
distributions in additional Fund shares if checks mailed to you
for distributions are returned as undeliverable or are not
presented for payment within six months.
Income Taxes.
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
<PAGE> 21
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 for
tax purposes. If you are not subject to tax on your income, you
may not be required to pay tax on these amounts.
If you redeem shares of the 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, the Fund is treated as a separate
taxable entity distinct from the other series of the Trust.
This discussion of taxation 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. The foregoing
information applies to U.S. shareholders. Foreign shareholders
should consult their tax advisors as to the tax consequences of
ownership of Fund shares.
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 Fund
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for the 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 the Fund is measured by the
distributions received (assuming reinvestment of dividends and
capital gains) 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
<PAGE> 22
that would equate a hypothetical $1,000 investment to the ending
redeemable value.
Comparison of the Fund's total return with 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. Of course, past performance is not necessarily
indicative of future results.
MANAGEMENT OF THE FUND
Trustees and 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 additional information
about the trustees and officers. 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. SteinRoe is registered as an investment adviser under the
Investment Advisers Act of 1940.
SteinRoe (and its predecessor) has advised and managed mutual
funds since 1949. SteinRoe is a wholly-owned indirect subsidiary
of Liberty Financial Companies, Inc., which in turn is a wholly-
owned indirect subsidiary of Liberty Mutual Insurance Company.
Portfolio Managers.
The Fund is managed by Kenneth W. Corba and Erik P. Gustafson.
Mr. Corba is a chartered financial analyst who joined SteinRoe in
1984 and is a senior vice president of SteinRoe. He received his
B.A.and M.B.A. degrees from the University of Michigan in 1975 and
1984, respectively. Mr. Gustafson is a vice president of the
Adviser, having joined it in 1992. From 1989 to 1992 he was an
attorney with Fowler, White, Burnett, Hurley, Banick & Strickroot.
He holds a B.A. from the University of Virginia (1985) and M.B.A.
and J.D. degrees (1989) from Florida State University.
Fees and Expenses.
In return for its services, SteinRoe receives a monthly fee from
the Fund, computed and accrued daily, based on its average net
assets. The annualized fee is 0.75 of 1% up to $250 million, 0.70
of 1% of the next $250 million of average net assets, and 0.60 of
1% thereafter. This rate of fee is higher than that paid by many
mutual funds. Pursuant to the expense undertaking described
below, SteinRoe reimbursed the Fund $82,109 for the period from
April 29, 1994 (commencement of operations) to September 30, 1994,
resulting in a net payment by SteinRoe of $64,954.
<PAGE> 23
Because the Fund also has as an objective being an educational
experience for investors, the Fund's non-advisory expenses may be
higher than other mutual funds because of regular educational and
other reporting to shareholders.
Under a separate agreement with the Trust, SteinRoe provides
certain accounting and bookkeeping services to the Fund, including
computation of its net asset value and calculation of its net
income and capital gains and losses on disposition of Fund assets.
SteinRoe has undertaken to reimburse the Fund to the extent that
its annual expenses exceed 0.99 of 1% of its average net assets
through January 31, 1996, subject to earlier termination by
SteinRoe on 30 days' notice.
Portfolio Transactions.
SteinRoe places the orders for the purchase and sale of portfolio
securities and options and futures transactions for the Fund. In
doing so, SteinRoe 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
Financial Companies, Inc., which in turn is a wholly-owned
indirect subsidiary of Liberty Mutual Insurance Company, 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
SteinRoe, 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.)
<PAGE> 24
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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.
<PAGE> 25
[STEINROE MUTUAL FUNDS LOGO]
The SteinRoe Funds
SteinRoe Government Reserves
SteinRoe Cash Reserves
SteinRoe Limited Maturity Income Fund
SteinRoe Government Income Fund
SteinRoe Intermediate Bond Fund
SteinRoe Income Fund
SteinRoe Municipal Money Market Fund
SteinRoe Intermediate Municipals
SteinRoe Managed Municipals
SteinRoe High-Yield Municipals
SteinRoe Total Return Fund
SteinRoe Prime Equities
SteinRoe Growth Stock Fund
SteinRoe Capital Opportunities Fund
SteinRoe Special Fund
SteinRoe International Fund
SteinRoe Young Investor Fund
SteinRoe Special Venture Fund
P.O. Box 804058
Chicago, Illinois 60680
In Chicago, visit our Fund Center at One South Wacker Drive, 32nd
Floor
Liberty Securities Corporation, Distributor
08011
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Prime Equities
Supplement to February 1, 1995 Defined Contribution Plan Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 2 of the Prospectus were changed as
follows:
Annual Fund Operating Expenses
(as a percentage of average net assets)
---------------------------------------
Management and Administrative Fees 0.75%
12b-1 Fees None
Other Expenses 0.39%
-----
Total Fund Operating Expenses 1.14%
-----
-----
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$12 $36 $63 $139
NEW AGREEMENTS. On September 1, 1995, the Fund's investment
advisory agreement with Stein Roe & Farnham Incorporated (the
"Adviser") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets.
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.60% up to $500, .15% up to $500, .75% up to $500,
55% next $500, .125% next $500, .675% next $500,
. .50% thereafter .10% thereafter .60% thereafter
PORTFOLIO MANAGERS. Daniel K. Cantor became co-portfolio
manager of the Fund on February 21, 1995. Robert A. Christensen and
William Garrison continue to serve as co-portfolio manager and
associate portfolio manager of the Fund, respectively. Mr. Cantor
is a senior vice president of the Adviser, which he joined in 1985.
A Chartered Financial Analyst, he received a B.A. degree from the
University of Rochester in 1981 and an M.B.A. from the Wharton
School of the University of Pennsylvania in 1985.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $14.54
-------
Income from Investment Operations
Net investment income .10
Net realized and unrealized gains on investments .47
-------
Total from investment operations .57
-------
Distributions
Net investment income (.12)
Net realized capital gains (.60)
-------
Total distributions (.72)
-------
NET ASSET VALUE, END OF PERIOD $14.39
-------
-------
Ratio of net expenses to average net assets
(annualized) 0.91%
Ratio of net investment income to average net
assets (annualized) 1.37%
Portfolio turnover rate 46%
Total return 4.14%
Net assets, end of period (000 omitted) $124,430
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS
STEINROE PRIME EQUITIES
The Fund seeks growth of capital by investing primarily in large,
well-established companies.
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 STEINROE INVESTMENT TRUST.
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 February 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 1-
800-322-1130. The Statement of Additional Information contains
information relating to other series of the SteinRoe Investment
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 FEBRUARY 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 5
Risks and Investment Considerations ...6
How to Purchase Shares.................6
How to Redeem Shares ..................7
Net Asset Value .......................7
Distributions and Income Taxes.........8
Investment Return......................8
Management of the Fund.................8
Organization and Description of Shares.10
For More Information ..................10
<PAGE> 2
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 0.59%
12b-1 Fees None
Other Expenses 0.31%
------
Total Fund Operating Expenses 0.90%
------
------
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
------ ------- ------- --------
$9 $29 $50 $111
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 information in the
table is based upon actual expenses incurred in the last fiscal
year. The Adviser undertook to reimburse the Fund for expenses in
excess of 1% of average net assets through January 31, 1995.
However, there was no reimbursement to the Fund during the year
because its actual expenses did not exceed the amount of the
expense limitation. (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 in 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 above 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. These examples do 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 for
the periods shown on a per-share basis and has been audited by
Arthur Andersen LLP, independent public accountants. All of the
auditors' reports were unqualified. This 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 upon request without charge, contains additional performance
information.
<PAGE> 3
<TABLE>
<CAPTION>
Period Ended
Sept. 30, Years Ended September 30,
1987 (b) 1988 1989 1990 1991 1992 1993 1994
------- ------ ----- ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00 $10.49 $8.88 $11.34 $10.49 $12.27 $13.42 $14.83
------- ------ ----- ------ ------ ------ ----- -------
Income from Investment
Operations
Net investment income .05 .17 .22 .26 .26 .19 .17 .18
Net realized and
unrealized gains
(losses) on investments .47 (1.64) 2.46 (.85) 2.17 1.49 2.16 .40
------- ------ ----- ------ ------ ------ ----- -------
Total from investment
operations .52 (1.47) 2.68 (.59) 2.43 1.68 2.33 .58
------- ------ ----- ------ ------ ------ ----- -------
Distributions
Net investment income (.03) (.14) (.22) (.26) (.29) (.18) (.16) (.16)
Net realized capital
gains -- -- -- -- (.36) (.35) (.76) (.71)
------- ------ ----- ------ ------ ------ ----- -------
Total distributions (.03) (.14) (.22) (.26) (.65) (.53) (.92) (.87)
------- ------ ----- ------ ------ ------ ----- -------
NET ASSET VALUE,
END OF PERIOD $10.49 $8.88 $11.34 $10.49 $12.27 $13.42 $14.83 $14.54
------- ------ ----- ------ ------ ------ ----- -------
------- ------ ----- ------ ------ ------ ----- -------
Ratio of net expenses
to average net
assets (c) *1.91% 1.47% 1.24% 1.08% 1.00% 0.97% 0.88% 0.90%
Ratio of net investment
income to average
net assets (d) *1.43% 2.03% 2.28% 2.40% 2.27% 1.46% 1.23% 1.18%
Portfolio turnover
rate 32% 105% 63% 51% 48% 40% 50% 85%
Total return 5.20% (13.90%) 30.63% (5.25%) 24.12% 14.00% 17.98% 4.03%
Net assets,
end of period
(000 omitted) $22,863 $23,002 $32,562 $43,446 $54,820 $70,724 $100,365 $129,680
<FN>
*Annualized.
(a) From the commencement of operations on March 23, 1987.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement by the Adviser, this ratio would have been 2.49%
for the period ended September 30, 1987 and 1.09% for the year
ended September 30, 1990.
(c) Computed giving effect to the Adviser's expense limitation
undertaking.
</TABLE>
THE FUND
STEINROE PRIME EQUITIES (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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping. The Fund does not
impose commissions or charges when shares are purchased or
redeemed.
The Fund is a series of the STEINROE INVESTMENT TRUST (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and bookkeeping and
accounting services to the Fund. The Adviser also manages several
other no-load mutual funds with different investment objectives,
including equity funds, international funds, taxable and 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 1-800-338-2550.
HOW THE FUND INVESTS
The Fund's investment objective is growth of capital. It invests
primarily in a broadly diversified portfolio of common stocks and
other equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks). The portfolio
<PAGE> 4
includes securities that offer income potential in addition to
growth of capital, and it is designed to provide shareholders with
more dividend income than a portfolio focused exclusively on
growth.
The Fund invests primarily in well-established companies.
Although the Fund may invest in a broad range of securities,
normally it seeks to limit volatility by investing at least 65% of
its total assets in the equity securities of companies having
market capitalizations in excess of $1 billion. The securities of
those companies are believed to be generally less volatile than
those of companies with smaller capitalizations because companies
with larger capitalizations tend to be more established, with a
reputation for quality management, and tend to have broader, more
highly diversified product lines, broader and deeper resources,
and easier access to credit.
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.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. Investment in
debt securities is limited to those that are within the four
highest grades (generally referred to as investment grade).
Securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest and repay
principal. 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. When the Adviser deems a temporary defensive position
advisable, the Fund may invest, without limitation, in high-
quality fixed-income securities, or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
The Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, or securities guaranteed by a U.S. person, the Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
The Fund may invest in sponsored and 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;
such a contract involves the risk that the value of the foreign
currency may decline relative to the value of the dollar prior to
the settlement date, which risk is in addition to the risk that
the value of the foreign security purchased may decline. The Fund
may also enter into foreign currency contracts as a hedging
technique to limit or reduce exposure to currency fluctuations.
In addition, the Fund may use options and futures contracts, as
described below, to limit or reduce exposure to currency
fluctuations. As of September 30, 1994, the Fund's holdings of
foreign companies, as a percentage of net assets, were 12.3% (5.1%
in foreign securities and 7.2% in ADRs).
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
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. 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 make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
<PAGE> 5
PORTFOLIO TURNOVER
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The turnover rate may vary
significantly from year to year. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains and losses. (See Distributions and
Income Taxes and Management of the Fund.)
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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, and futures options.
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government or repurchase agreements for
such securities, and except that the Fund may invest all of its
assets in shares of another investment company having the
identical investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
<PAGE> 6
The Fund may invest in repurchase agreements, /1/ provided that the
Fund will not invest more than 15% of its net assets in repurchase
agreements maturing in more than seven days, and any other
illiquid securities.
The policies summarized in the first paragraph under Restrictions
on the Fund's Investments and the policy with respect to
concentration of investments in any one industry described under
Risks and Investment Considerations are fundamental policies and,
as such, 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. The Fund's investment objective
is non-fundamental and, as such, may be changed by the Board of
Trustees without shareholder approval. Any such change may result
in the Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. 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. The Fund is designed
for long-term investors who desire to participate in the stock
market with moderate investment risk while seeking to limit market
volatility. The Fund usually allocates its investments among a
number of different industries rather than concentrating in a
particular industry or group of industries; however, under
abnormal circumstances, it may invest up to 25% of net assets in a
particular industry or group of industries. There can be no
guarantee that the Fund will achieve its objective.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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.
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
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.
- -----------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an amount
representing interest on the purchase price, within a specified time. In
the event of bankruptcy of the seller, the Fund could experience both
losses and delays in liquidating its collateral.
<PAGE> 7
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
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 SteinRoe 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 SteinRoe 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 SteinRoe 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 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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Long-term straight-debt obligations are valued at a fair value
using a procedure determined in good faith by the Board of
Trustees. Pricing services approved by the Board provide
valuations (some of which may be "readily available market
quotations"). These valuations are reviewed by the Adviser. If
the Adviser believes that a valuation received from the service
does not represent a fair value, it values the obligation
<PAGE> 8
using a method that the Board believes represents fair value. The
Board may approve the use of other pricing services and any
pricing service used may employ electronic data processing
techniques, including a so-called "matrix" system, to determine
valuations. Securities convertible into stocks are valued at the
latest valuation from a principal market maker. Other assets and
securities are valued by a method that the Board believes
represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends are normally declared and paid each calendar
quarter. However, because the Fund is required to distribute at
least 98% of its net investment income by the end of the calendar
year, an additional dividend may be declared near year end. 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
gains 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.
Comparison of the Fund's total return with 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. Of course, past
performance is not necessarily indicative of future results.
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
<PAGE> 9
Fund and the Trust, subject to the direction of the Board of
Trustees. 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").
PORTFOLIO MANAGERS.
Robert A. Christensen and Millie Adams Hurwitz are co-portfolio
managers of the Fund. Mr. Christensen became co-portfolio manager
of the Fund in August, 1994. Ms. Hurwitz has been co-portfolio
manager of the Fund since August, 1994; prior to that time, she
was associate portfolio manager of that Fund. Mr. Christensen is
a vice-president of the Trust and a senior vice president of the
Adviser, and has been associated with the Adviser since 1962. A
chartered investment counselor, he received his B.A. degree from
Vanderbilt University in 1955 and M.B.A. from Harvard University
in 1962. As of September 30, 1994, he was responsible for
managing $736 million in mutual fund assets. Ms. Hurwitz, who
was employed by the Adviser as a junior analyst from 1986 to 1989,
rejoined the firm in 1992 as a portfolio manager. From 1989 to
1991 she was a senior vice president at OLC Corporation. Ms.
Hurwitz received her B.A. and M.M. degrees from Northwestern
University in 1985 and 1989, respectively. As of September 30,
1994, she was responsible for managing $130 million in mutual fund
assets. William Garrison is associate portfolio manager of the
Fund. Mr. Garrison joined the Adviser in 1989. He received his
A.B. from Princeton University in 1988.
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. The annualized fee is 0.6 of 1% up to $100
million 0.55 of 1% of the next $100 million, and 0.5 of 1%
thereafter. For the year ended September 30, 1994, the fee
amounted to 0.59% of average net assets.
The Adviser undertook to reimburse the Fund to the extent that its
annual expenses exceed 1% of average net assetsthrough January 31,
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
portfolio securities and options and futures transactions 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
<PAGE> 10
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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 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.
FOR MORE INFORMATION
Contact a SteinRoe Retirement Plan Representative at 1-800-322-
1130 for more information about this Fund.
______________________
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Total Return Fund
Supplement to February 1, 1995 Defined Contribution Plan Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 2 of the Prospectus were changed as
follows:
Annual Fund Operating Expenses
(as a percentage of average net assets)
-----------------------------------------
Management and Administrative Fees 0.70%
12b-1 Fees None
Other Expenses 0.37%
-----
Total Fund Operating Expenses 1.07%
-----
-----
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$11 $34 $59 $131
NEW AGREEMENTS. On September 1, 1995, the Fund's investment
advisory agreement with Stein Roe & Farnham Incorporated (the
"Adviser") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets.
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.50% next $500, .15% up to $500, .70% up to $500,
.55% up to $500, .125% next $500, .625% next $500,
45% thereafter .10% thereafter .55% thereafter
PORTFOLIO MANAGERS. Lynn C. Maddox became co-portfolio manager
of the Fund on March 10, 1995. Robert A. Christensen continues to
serve as co-portfolio manager of the Fund. Mr. Maddox joined the
Adviser in 1971 and is a senior vice president. He received a B.S.
from the Georgia Institute of Technology in 1964 and an M.B.A. from
Indiana University in 1971.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $25.78
------
Income from Investment Operations
Net investment income .69
Net realized and unrealized losses on investments (.18)
------
Total from investment operations .51
------
Distributions
Net investment income (.65)
Net realized capital gains (.28)
------
Total distributions (.93)
------
NET ASSET VALUE, END OF PERIOD $25.36
------
------
Ratio of net expenses to average net assets
(annualized) 0.84%
Ratio of net investment income to average net
assets (annualized) 5.56%
Portfolio turnover rate 25%
Total return 2.10%
Net assets, end of period (000 omitted) $218,824
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS
STEINROE TOTAL RETURN FUND
The Fund seeks to obtain current income and capital appreciation
in order to achieve maximum total return consistent with
reasonable investment risk through investment in a combination of
equity, convertible, and fixed-income securities.
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 STEINROE INVESTMENT TRUST.
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 February 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 1-
800-322-1130. The Statement of Additional Information contains
information relating to other series of the SteinRoe Investment
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 FEBRUARY 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 6
Risks and Investment Considerations ...6
How to Purchase Shares.................7
How to Redeem Shares ..................7
Net Asset Value .......................8
Distributions and Income Taxes.........8
Investment Return......................9
Management of the Fund.................9
Organization and Description of Shares.10
For More Information ..................10
<PAGE> 2
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 0.55%
12b-1 Fees None
Other Expenses 0.28%
-----
Total Fund Operating Expenses 0.83%
-----
-----
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 $103
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 information in the
table is based upon actual expenses incurred in the last fiscal
year. 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 in 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 above 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. These examples do 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 for
the periods shown on a per-share basis. The information for
periods after December 31, 1987 has been audited by Arthur
Andersen LLP, independent public accountants. All of the
auditors' reports were unqualified. This 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 upon request without charge, contains additional performance
information.
<PAGE> 3
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $23.40 $21.37 $25.04 $25.07 $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income from Investment
Operations
Net investment income 1.41 1.41 1.33 1.32 .97 1.37 1.28 1.32 1.31 1.26 1.15
Net realized and
unrealized gains
(losses) on investments (.48) 3.87 2.75 (1.06) .45 3.10 (2.92) 4.85 1.48 2.37 (1.06)
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment
operations .93 5.28 4.08 .26 1.42 4.47 (1.64) 6.17 2.79 3.63 .09
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Distributions
Net investment income (1.41) (1.42) (1.35) (1.63) (.90) (1.34) (1.36) (1.26) (1.34) (1.30) (1.17)
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net realized capital
gains (1.55) (.19) (2.70) (1.45) (.11) (.38) (.73) (.51) (.62) (1.67) (.71)
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total distributions (2.96) (1.61) (4.05) (3.08) (1.01) (1.72) (2.09) (1.77) (1.96) (2.97) (1.88)
NET ASSET VALUE,
END OF PERIOD $21.37 $25.04 $25.07 $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57 $25.78
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Ratio of expenses
to average net
assets 0.73% 0.77% 0.79% 0.80% *0.87% 0.90% 0.88% 0.87% 0.85% 0.81% 0.83%
Ratio of net
investment income
to average net
assets 6.94% 6.30% 5.21% 5.12% *5.68% 5.83% 5.36% 5.50% 4.94% 4.69% 4.53%
Portfolio turnover
rate (a) 50% 100% 108% 86% 85% 93% 75% 71% 59% 53% 29%
Total return 4.85% 25.78% 17.11% 0.74% 6.51% 20.76% (6.86%) 29.67% 11.13% 14.57% 0.36%
Net assets,
end of period
(000 omitted) $95,695 $128,676 $149,831 $140,279 $134,225 $144,890 $124,592 $150,689 $173,417 $222,292 $229,274
<FN>
*Annualized.
(a) For periods ending after December 31, 1984, the portfolio
turnover rate includes long-term U.S. Government securities
transactions. The rate for the year ended December 31, 1984,
which excludes long-term U.S. Government securities, has not
been restated.
(b) For the year ended December 31, 1986, the average amount of
debt outstanding for the Fund was $2,222, the average number of
shares outstanding was 5,506,763, and the average amount of
debt outstanding was $0.0004 per share. The Fund had no
borrowings outstanding during any other periods.
</TABLE>
THE FUND
STEINROE TOTAL RETURN 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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping. The Fund does not
impose commissions or charges when shares are purchased or
redeemed.
The Fund is a series of the STEINROE INVESTMENT 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.
<PAGE> 4
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and bookkeeping and
accounting services to the Fund. The Adviser also manages several
other no-load mutual funds with different investment objectives,
including equity funds, international funds, taxable and 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 1-800-338-2550.
HOW THE FUND INVESTS
The Fund's investment objective is to obtain current income and
capital appreciation in order to achieve maximum total return
consistent with reasonable investment risk through investment in a
combination of equity, fixed-income and convertible securities.
The percentages of Fund assets invested in various types of
securities will vary in accordance with the judgment of the
Adviser. There are no limitations on the amount of the Fund's
assets that may be allocated to the various types of securities.
Generally, the equity portion of the Fund's portfolio will be
invested in common stocks that the Adviser believes have long-term
growth possibilities. With respect to the fixed-income portion of
the portfolio, emphasis is placed on acquiring investment grade
securities. 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.
PORTFOLIO INVESTMENTS AND STRATEGIES
CONVERTIBLE SECURITIES.
By investing in convertible securities, the Fund obtains the right
to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, the Adviser will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. Although convertible securities purchased by the Fund are
frequently rated investment grade, the Fund also may purchase
unrated securities or securities rated below investment grade if
the securities meet the Adviser's other investment criteria.
Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being less well known to investors
than either common stock or conventional debt securities. As a
result, the Adviser's own investment research and analysis tends
to be more important in the purchase of such securities than other
factors.
DEBT SECURITIES.
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. Investment in
debt securities is limited to those that are within the four
highest grades (generally referred to as investment grade).
Securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest and repay
principal. 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. When the Adviser deems a temporary defensive position
advisable, the Fund may invest, without limitation, in high-
quality fixed-income securities, or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
The Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, or securities guaranteed by a U.S. person, the Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
The Fund 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
<PAGE> 5
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; such a contract involves the
risk that the value of the foreign currency may decline relative
to the value of the dollar prior to the settlement date, which
risk is in addition to the risk that the value of the foreign
security purchased may decline. The Fund may also enter into
foreign currency contracts as a hedging technique to limit or
reduce its exposure to currency fluctuations. In addition, the
Fund may use options and futures contracts, as described below, to
limit or reduce exposure to currency fluctuations. As of
September 30, 1994, the Fund's holdings of foreign companies, as a
percentage of net assets, were 6.6% (none in foreign securities
and 6.6% in ADRs).
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
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. 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 make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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, and futures options.
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
<PAGE> 6
PORTFOLIO TURNOVER.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The turnover rate may vary
significantly from year to year. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains and losses. (See Distributions and
Income Taxes and Management of the Fund.)
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government or repurchase agreements for
such securities, and except that the Fund may invest all of its
assets in shares of another investment company having the
identical investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
The Fund may invest in repurchase agreements, /1/ provided that
the Fund will not invest more than 15% of its net assets in
repurchase agreements maturing in more than seven days, and any
other illiquid securities.
The policies summarized in the first paragraph under Restrictions
on the Fund's Investments and the policy with respect to
concentration of investments in any one industry described under
Risks and Investment Considerations are fundamental policies and,
as such, 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. The Fund's investment objective
is non-fundamental and, as such, may be changed by the Board of
Trustees without shareholder approval. Any such change may result
in the Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. 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. THE FUND IS DESIGNED
FOR LONG-TERM INVESTORS WHO CAN ACCEPT THE FLUCTUATIONS IN
PORTFOLIO VALUE AND OTHER RISKS ASSOCIATED WITH SEEKING LONG-TERM
CAPITAL APPRECIATION THROUGH INVESTMENTS IN SECURITIES. The Fund
usually allocates its investments among a number of different
industries rather than concentrating in a particular industry or
group of industries; however, under abnormal circumstances, it may
invest up to 25% of net assets in a particular industry or group
of industries. There can be no guarantee that the Fund will
achieve its objective.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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
- ------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.
<PAGE> 7
on dividends, and seizure or nationalization of investments owned
by non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
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
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
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 SteinRoe 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 SteinRoe 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 SteinRoe 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.
<PAGE> 8
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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Long-term straight-debt obligations are valued at a fair value
using a procedure determined in good faith by the Board of
Trustees. Pricing services approved by the Board provide
valuations (some of which may be "readily available market
quotations"). These valuations are reviewed by the Adviser. If
the Adviser believes that a valuation received from the service
does not represent a fair value, it values the obligation using a
method that the Board believes represents fair value. The Board
may approve the use of other pricing services and any pricing
service used may employ electronic data processing techniques,
including a so-called "matrix" system, to determine valuations.
Securities convertible into stocks are valued at the latest
valuation from a principal market maker. Other assets and
securities are valued by a method that the Board believes
represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends are normally declared and paid each calendar
quarter. However, because the Fund is required to distribute at
least 98% of its net investment income by the end of the calendar
year, an additional dividend may be declared near year end. 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
gains 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.
<PAGE> 9
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.
Comparison of the Fund's total return with 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. Of course, past
performance is not necessarily indicative of future results.
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 of Trustees. 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").
PORTFOLIO MANAGERS.
Robert A. Christensen and Millie Adams Hurwitz are co-portfolio
managers of the Fund. Mr. Christensen has been portfolio manager
of the Fund since 1981. Prior to February, 1995, Ms. Hurwitz was
associate portfolio manager of the Fund. Mr. Christensen is a
vice-president of the Trust and a senior vice president of the
Adviser, and has been associated with the Adviser since 1962. A
chartered investment counselor, he received his B.A. degree from
Vanderbilt University in 1955 and M.B.A. from Harvard University
in 1962. As of September 30, 1994, he was responsible for
managing $736 million in mutual fund assets. Ms. Hurwitz, who was
employed by the Adviser as a junior analyst from 1986 to 1989,
rejoined the firm in 1992 as a portfolio manager. From 1989 to
1991 she was a senior vice president at OLC Corporation. Ms.
Hurwitz received her B.A. and M.M. degrees from Northwestern
University in 1985 and 1989, respectively. As of September 30,
1994, she was responsible for managing $130 million in mutual fund
assets.
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. The annualized fee is 0.625 of 1% up to $100
million and 0.5 of 1% above that amount. For the year ended
September 30, 1994, the fee amounted to 0.55% of average net
assets.
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.
<PAGE> 10
PORTFOLIO TRANSACTIONS.
The Adviser places the orders for the purchase and sale of
portfolio securities and options and futures transactions 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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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 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.
FOR MORE INFORMATION
Contact a SteinRoe Retirement Plan Representative at 1-800-322-
1130 for more information about this Fund.
_________________
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Growth Stock Fund
Supplement to February 1, 1995 Defined Contribution Plan Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 2 of the Prospectus were changed as
follows:
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ----------------------------------------
Management and Administrative Fees 0.75%
12b-1 Fees None
Other Expenses 0.32%
-----
Total Fund Operating Expenses 1.07%
-----
-----
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$11 $34 $59 $131
NEW AGREEMENTS. On September 1, 1995, the Fund's investment
advisory agreement with Stein Roe & Farnham Incorporated (the
"Adviser") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets.
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
..60% up to $500, .15% up to $500, .75% up to $500,
.55% next $500, .125% next $500, .675% next $500,
.50% thereafter .10% thereafter .60% thereafter
PORTFOLIO MANAGERS. Harvey B. Hirschhorn succeeded Kenneth W.
Corba as co-portfolio manager of Growth Stock Fund on March 17,
1995. Erik P. Gustafson continues to serve as co-portfolio manager
of that Fund. Mr. Hirschhorn is executive vice president and
director of research services of the Adviser, which he joined in
1973. He received an A.B. degree from Rutgers College in 1971 and
an M.B.A. from the University of Chicago in 1973, and is a Chartered
Financial Analyst.
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $23.58
-------
Income from Investment Operations
Net investment income .08
Net realized and unrealized gains on investments 1.27
-------
Total from investment operations 1.35
-------
Distributions
Net investment income (.15)
Net realized capital gains (3.02)
-------
Total distributions (3.17)
-------
NET ASSET VALUE, END OF PERIOD $21.76
-------
-------
Ratio of net expenses to average net assets
(annualized) 0.95%
Ratio of net investment income to average net
assets (annualized) 0.70%
Portfolio turnover rate 16%
Total return 6.74%
Net assets, end of period (000 omitted) $317,877
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS
STEINROE GROWTH STOCK FUND
(FORMERLY NAMED STEINROE STOCK FUND)
The Fund seeks long-term capital appreciation by investing in
common stock and other equity-type securities.
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 STEINROE INVESTMENT TRUST.
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 February 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 1-
800-322-1130. The Statement of Additional Information contains
information relating to other series of the SteinRoe Investment
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 FEBRUARY 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 .6
Risks and Investment Considerations ....6
How to Purchase Shares..................7
How to Redeem Shares ...................7
Net Asset Value ........................7
Distributions and Income Taxes..........8
Investment Return.......................8
Management of the Fund..................9
Organization and Description of Shares.10
For More Information ..................10
<PAGE> 2
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 0.74%
12b-1 Fees None
Other Expenses 0.20%
-----
Total Fund Operating Expenses 0.94%
-----
-----
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 $30 $52 $117
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 information in the
table is based upon actual expenses incurred in the last fiscal
year. 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 in 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 above 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. These examples do 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 for
the periods shown on a per-share basis and has been audited by
Arthur Andersen LLP, independent public accountants. All of the
auditors' reports were unqualified. This 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 upon request without charge, contains additional performance
information.
<PAGE> 3
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $21.36 $14.04 $17.43 $16.97 $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Income from Investment
Operations
Net investment income .36 .31 .26 .24 .19 .34 .39 .33 .18 .15 .13
Net realized and
unrealized gains
(losses) on investments (2.60) 3.38 2.75 .46 (.11) 4.51 (1.17) 5.90 3.01 1.14 .41
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Total from investment
operations (2.24) 3.69 3.01 .70 .08 4.85 (.78) 6.23 3.19 1.29 .54
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Distributions
Net investment income (.38) (.30) (.25) (.29) (.15) (.34) (.37) (.42) (.16) (.10) (.12)
Net realized capital
gains (4.70) -- (3.22) (2.71) -- (.06) -- (.92) (1.17) (.95) (1.73)
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Total distributions (5.08) (.30) (3.47) (3.00) (.15) (.40) (.37) (1.34) (1.33) (1.05) (1.85)
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
NET ASSET VALUE,
END OF PERIOD $14.04 $17.43 $16.97 $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89 $23.58
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
------ ------ ------ ------ ------ ------ ------ ------- ----- ------- ------
Ratio of expenses to
average net assets 0.67% 0.67% 0.67% 0.65% *0.76% 0.77% 0.73% 0.79% 0.92% 0.93% 0.94%
Ratio of net
investment income
to average net assets 2.55% 1.89% 1.34% 1.25% *1.62% 2.05% 2.03% 1.63% 0.75% 0.59% 0.50%
Portfolio turnover
rate (a) 195% 114% 137% 143% 84% 47% 40% 34% 23% 29% 27%
Total return (10.90%) 26.55% 16.91% 5.57% 0.54% 33.86% (4.17%) 36.64% 14.37% 5.09% 2.10%
Net assets,
end of period
(000 omitted) $216,546 $224,371 $226,604 $232,658 $195,641 $206,476 $206,031 $291,767 $372,758 $373,921 $321,502
</TABLE>
*Annualized
(a) For periods ending after December 31, 1984, the portfolio
turnover rate includes long-term U.S. Government securities
transactions. The rate for the year ended December 31, 1984,
which excludes long-term U.S. Government securities, has not
been restated.
(b) For the periods indicated below, bank borrowing activity was
as follows:
<TABLE>
<CAPTION>
Average debt Average shares
Debt outstanding outstanding outstanding Average debt
at end of period during period during period per share
Period Ended (in thousands) (in thousands) (in thousands) during period
- ------------------ ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
December 31, 1985 -- 5 13,977 0.0004
September 30, 1989 -- 124 11,745 0.0106
</TABLE>
The Fund had no bank borrowings during any other periods.
THE FUND
STEINROE GROWTH STOCK 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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors in order to obtain
professional investment management. Mutual funds generally make
it possible for you to obtain greater diversification of your
investments and simplify your recordkeeping. The Fund does not
impose commissions or charges when shares are purchased or
redeemed.
<PAGE> 4
The Fund is a series of the STEINROE INVESTMENT TRUST (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and accounting and
bookkeeping services to the Fund. The Adviser also manages
several other no-load mutual funds with different investment
objectives, including equity funds, international funds, taxable
and 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 1-800-338-2550.
HOW THE FUND INVESTS
The Fund's investment objective is long-term capital appreciation,
which it attempts to achieve by normally investing at least 65% of
its total assets in common stock and other equity-type securities
(such as preferred stocks, securities convertible into or
exchangeable for common stocks, and warrants or rights to purchase
common stocks) that, in the opinion of the Adviser, have long-term
appreciation possibilities.
The Fund's investments are selected by the Adviser. Although the
Fund invests primarily in equity securities, it may invest up to
35% of its total assets in debt securities. 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.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. Investment in
debt securities is limited to those that are within the four
highest grades (generally referred to as investment grade).
Securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest and repay
principal. 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. When the Adviser deems a temporary defensive position
advisable, the Fund may invest, without limitation, in high-
quality fixed-income securities, or hold assets in cash or cash
equivalents.
FOREIGN SECURITIES.
The Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, or securities guaranteed by a U.S. person, the Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
The Fund 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 Fund may
contract to purchase an amount of foreign currency sufficient to
pay the purchase price of the securities at the settlement date;
such a contract involves the risk that the value of the foreign
currency may decline relative to the value of the dollar prior to
the settlement date, which risk is in addition to the risk that
the value of the foreign security purchased may decline. The Fund
may also enter into foreign currency contracts as a hedging
technique to limit or reduce exposure to currency fluctuations.
In addition, the Fund may use options and futures contracts, as
described below, to limit or
<PAGE> 5
reduce exposure to currency fluctuations. As of September 30,
1994, the Fund's holdings of foreign companies, as a percentage of
net assets, were 10.4% (1.2% in foreign securities and 9.2% in
ADRs).
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
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. 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 make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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, and futures options.
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
PORTFOLIO TURNOVER.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The turnover rate may vary
significantly from year to year. A high rate of portfolio
turnover may result in increased transaction expenses and the
realization of capital gains and losses. (See Distributions and
Income Taxes and Management of the Fund.) The Fund is not
intended to be an income-producing investment, although it may
produce varying amounts of income.
<PAGE> 6
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government or repurchase agreements for
such securities, and except that the Fund may invest all of its
assets in shares of another investment company having the
identical investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
The Fund may invest in repurchase agreements,/1/ provided that the
Fund will not invest more than 15% of its net assets in repurchase
agreements maturing in more than seven days, and any other
illiquid securities.
The policies summarized in the first paragraph under Restrictions
on the Fund's Investments and the policy with respect to
concentration of investments in any one industry described under
Risks and Investment Considerations are fundamental policies and,
as such, 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. The Fund's investment objective
is non-fundamental and, as such, may be changed by the Board of
Trustees without shareholder approval. Any such change may result
in the Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. 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. The Fund is designed
for long-term investors who desire to participate in the stock
market with more investment risk and volatility than the stock
market in general, but with less investment risk and volatility
than aggressive capital appreciation funds. The Fund seeks to
reduce risk by investing in a diversified portfolio, but this does
not eliminate all risk. However, under abnormal circumstances,
it may invest up to 25% of net assets in a particular industry or
group of industries. There can be no guarantee that the Fund will
achieve its objective.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include 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.
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
- ------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an amount
representing interest on the purchase price, within a specified time.
In the event of bankruptcy of the seller, the Fund could experience
both losses and delays in liquidating its collateral.
<PAGE> 7
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
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
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 SteinRoe 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 SteinRoe 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 SteinRoe 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 determined as of the close of trading on the New York Stock
Exchange
<PAGE> 8
(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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Other assets and securities are valued by a method that the Board
believes represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends are normally declared and paid annually. 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
gains 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.
Comparison of the Fund's total return with 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. Of course, past
performance is not necessarily indicative of future results.
<PAGE> 9
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 of Trustees. 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").
PORTFOLIO MANAGERS.
The Fund is managed by the Adviser's Capital Management Group, a
division that specializes in growth stock investing. It was
formed in 1988 to manage the Fund and equity portfolios for
institutional investors. In managing the Fund, the group
emphasizes three basic principles: growth, quality, and time. The
Capital Management Group looks for high-quality companies with
exceptional earnings growth that it believes can be maintained
over a long period of time. The group is comprised of two
portfolio managers: Erik P. Gustafson and Kenneth W. Corba, each
of whom is a vice president of the Trust. Mr. Gustafson is a vice
president of the Adviser, having joined it in 1992. From 1989 to
1992 he was an attorney with Fowler, White, Burnett, Hurley,
Banick & Strickroot. He holds a B.A. from the University of
Virginia (1985) and M.B.A. and J.D. degrees (1989) from Florida
State University. Mr. Corba is a chartered financial analyst who
joined the Adviser in 1984 and is a senior vice president of the
Adviser. He received his B.A. and M.B.A. from the University of
Michigan in 1975 and 1984, respectively.
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. The annualized fee is 0.75 of 1% up to $250
million, 0.70 of 1% of the next $250 million, and 0.60 of 1%
thereafter. This fee is higher than the fees paid by most mutual
funds. For the year ended September 30, 1994, the fee amounted to
0.74% of average net assets.
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
portfolio securities and options and futures transactions 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.
<PAGE> 10
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight series are authorized and
outstanding. The name of the Fund was changed on February 1, 1995
from SteinRoe Stock Fund to SteinRoe Growth Stock Fund.
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 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.
FOR MORE INFORMATION
Contact a SteinRoe Retirement Plan Representative at 1-800-322-
1130 for more information about this Fund.
______________
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Capital Opportunities Fund
Supplement to February 1, 1995 Defined Contribution Plan Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 2 of the Prospectus were changed as
follows:
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Management and Administrative Fees 0.90%
12b-1 Fees None
Other Expenses 0.31%
Total Fund Operating Expenses 1.21%
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$12 $38 $67 %147
NEW AGREEMENTS. On September 1, 1995, the Fund's investment
advisory agreement with Stein Roe & Farnham Incorporated (the
"Adviser") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets.
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.75% up to $500, .15% up to $500, .90% up to $500,
.70% next $500, .125% next $500, .825% next $500,
.65% next $500, .10% next $500, .75% next $500,
.60% thereafter .075% thereafter .675% thereafter
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $31.58
------
Income from Investment Operations
Net investment income .05
------
Net realized and unrealized gains on investments 3.39
------
------
Total from investment operations 3.44
Distributions
Net investment income (.02)
Net realized capital gains --
------
Total distributions (.02)
------
NET ASSET VALUE, END OF PERIOD $35.00
------
------
Ratio of net expenses to average net assets
(annualized) 0.94%
Ratio of net investment income to average net
assets (annualized) 0.30%
Portfolio turnover rate 26%
Total return 10.90%
Net assets, end of period (000 omitted) $197,519
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS
STEINROE CAPITAL OPPORTUNITIES FUND
The Fund seeks long-term capital appreciation by investing in
aggressive growth companies.
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 STEINROE INVESTMENT TRUST.
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 February 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 1-
800-322-1130. The Statement of Additional Information contains
information relating to other series of the SteinRoe Investment
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 FEBRUARY 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 ...6
Risks and Investment Considerations ......6
How to Purchase Shares ...................7
How to Redeem Shares .....................7
Net Asset Value ..........................8
Distributions and Income Taxes............8
Investment Return.........................8
Management of the Fund....................9
Organization and Description of Shares...10
For More Information.....................10
<PAGE> 2
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 0.75%
12b-1 Fees None
Other Expenses 0.22%
-----
Total Fund Operating Expenses 0.97%
-----
-----
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 $31 $54 $119
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 information in the
table is based upon actual expenses incurred in the last fiscal
year. 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 in 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 above 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. These
examples do 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 for
the periods shown on a per-share basis and has been audited by
Arthur Andersen LLP, independent public accountants. All of the
auditors' reports were unqualified. This 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 upon request without charge, contains additional performance
information.
<PAGE> 3
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $26.43 $19.37 $23.81 $26.75 $21.23 $21.55 $29.15 $14.63 $22.00 $23.12 $30.88
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Income from Investment
Operations
Net investment income .30 .20 .06 .06 .05 .10 .12 .22 .11 .02 .03
Net realized and
unrealized gains
(losses) on investments (4.69) 4.53 3.93 1.24 .27 7.71 (9.46) 7.47 1.21 7.82 .68
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Total from investment
operations (4.39) 4.73 3.99 1.30 .32 7.81 (9.34) 7.69 1.32 7.84 .71
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Distributions
Net investment income (.12) (.29) (.20) (.09) -- (.10) (.11) (.16) (.20) (.08) (.01)
Net realized capital
gains (2.55) -- (.85) (6.73) -- (.11) (5.07) (.16) -- -- --
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Total distributions (2.67) (.29) (1.05) (6.82) -- (.21) (5.18) (.32) (.20) (.08) (.01)
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
NET ASSET VALUE,
END OF PERIOD $19.37 $23.81 $26.75 $21.23 $21.55 $29.15 $14.63 $22.00 $23.12 $30.88 $31.58
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
------ ------ ------- ------- ------ ------ ------ ------ ------- ------ -------
Ratio of expenses
to average net assets 0.92% 0.95% 0.95% 0.95% *1.01% 1.09% 1.14% 1.18% 1.06% 1.06% 0.97%
Ratio of net investment
income to average
net assets 1.21% 0.94% 0.19% 0.18% *0.34% 0.42% 0.43% 1.19% 0.42% 0.09% 0.04%
Portfolio turnover
rate (a) 85% 90% 116% 133% 164% 245% 171% 69% 46% 55% 46%
Total return (17.31%) 24.58% 16.77% 9.38% 1.51% 36.68% (37.51%) 53.51% 5.99% 34.01% 2.31%
Net assets,
end of period
(000 omitted) $176,093 $176,099 $191,415 $171,973 $194,160 $272,805 $86,342 $129,711 $118,726 $153,101 $175,687
</TABLE>
*Annualized
(a) For periods ending after December 31, 1984, the portfolio
turnover rate includes long-term U.S. Government securities
transactions. The rate for the year ended December 31, 1984,
which excludes long-term U.S. Government securities, has not
been restated.
(b) For the periods indicated below, bank borrowing activity was
as follows:
<TABLE>
<CAPTION>
Average debt Average shares
Debt outstanding outstanding outstanding Average debt
at end of period during period during period per share
Period Ended (in thousands) (in thousands) (in thousands) during period
- ------------------ ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
December 31, 1984 -- 30 10,570 0.0028
December 31, 1985 -- 43 8,525 0.0051
December 31, 1986 -- 55 6,953 0.0079
December 31, 1987 -- 292 8,004 0.0365
September 30, 1988 -- 56 8,603 0.0065
September 30, 1989 -- 422 8,033 0.0526
September 30, 1990 200 1,042 7,972 0.1307
</TABLE>
The Fund had no bank borrowings during any other periods.
THE FUND
STEINROE CAPITAL OPPORTUNITIES 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 such as common stocks. A mutual fund allows you to
pool your money with that of other investors
<PAGE> 4
in order to obtain professional investment management. Mutual
funds generally make it possible for you to obtain greater
diversification of your investments and simplify your
recordkeeping. The Fund does not impose commissions or charges
when shares are purchased or redeemed.
The Fund is a series of the STEINROE INVESTMENT TRUST (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and bookkeeping and
accounting services to the Fund. The Adviser also manages several
other no-load mutual funds with different investment objectives,
including equity funds, international funds, taxable and 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 1-800-338-2550.
HOW THE FUND INVESTS
The Fund's investment objective is long-term capital appreciation,
which it attempts to achieve by investing in selected companies
that, in the opinion of the Adviser, offer opportunities for
capital appreciation.
The Fund pursues its objective by investing in aggressive growth
companies. An aggressive growth company, in general, is one that
appears to have the ability to increase its earnings at an above-
average rate. These may include securities of smaller emerging
companies as well as securities of well-seasoned companies of any
size that offer strong earnings growth potential. Such companies
may benefit from new products or services, technological
developments, or changes in management. Securities of smaller
companies may be subject to greater price volatility than
securities of larger companies. In addition, many smaller
companies are less well known to the investing public and may not
be as widely followed by the investment community.
Although it invests primarily in common stocks, the Fund may
invest in all types of equity securities, including preferred
stocks and securities convertible into common stocks. The Fund
may also invest up to 35% of its total assets in debt securities,
but does not currently intend to invest, nor in the past fiscal
year has it invested, more than 5% of its net assets in debt
securities rated below investment grade. 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.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. The Fund may
invest up to 35% of its net assets in debt securities that are
rated below investment grade 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. When
the Adviser deems a temporary defensive position advisable, the
Fund may invest, without limitation, in high-quality fixed-income
securities, or hold assets in cash or cash equivalents.
FOREIGN SECURITIES.
The Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, or securities guaranteed by a U.S. person, the Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
The Fund may invest in sponsored and 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
<PAGE> 5
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; such a contract involves the risk that the
value of the foreign currency may decline relative to the value of
the dollar prior to the settlement date, which risk is in addition
to the risk that the value of the foreign security purchased may
decline. The Fund may also enter into foreign currency contracts
as a hedging technique to limit or reduce exposure to currency
fluctuations. In addition, the Fund may use options and futures
contracts, as described below, to limit or reduce exposure to
currency fluctuations. As of September 30, 1994, the Fund's
holdings of foreign companies, as a percentage of net assets, were
2.1% (none in foreign securities and 2.1% in ADRs).
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
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. 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 make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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, and futures options.
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
<PAGE> 6
PORTFOLIO TURNOVER.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The turnover rate may vary
significantly from year to year. At times, the Fund may invest
for short-term capital appreciation. Flexibility of investment
and emphasis on capital appreciation may involve greater portfolio
turnover than that of mutual funds that have the objectives of
income or maintenance of a balanced investment position. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains and losses. (See
Financial Highlights and Distributions and Income Taxes.) The
Fund is not intended to be an income-producing investment,
although it may produce varying amounts of income.
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government or repurchase agreements for
such securities, and except that the Fund may invest all of its
assets in shares of another investment company having the
identical investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets.
The Fund may invest in repurchase agreements, /1/ provided that
the Fund will not invest more than 15% of its net assets in
repurchase agreements maturing in more than seven days, and any
other illiquid securities.
The policies summarized in the first paragraph under Restrictions
on the Fund's Investments and the policy with respect to
concentration of investments in any one industry described under
Risks and Investment Considerations are fundamental policies and,
as such, 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. The Fund's investment objective
is non-fundamental and, as such, may be changed by the Board of
Trustees without shareholder approval. Any such change may result
in the Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. 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. The Fund is designed
for long-term investors who can accept the fluctuations in
portfolio value and other risks associated with seeking long-term
capital appreciation through investments in common stocks. The
Fund usually allocates its investments among a number of different
industries rather than concentrating in a particular industry or
group of industries; however, under abnormal circumstances, it may
invest up to 25% of net assets in a particular industry or group
of industries. There can be no guarantee that the Fund will
achieve its objective.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include less complete financial
- ------------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.
<PAGE> 7
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.
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
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
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 SteinRoe 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 SteinRoe 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 SteinRoe 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.
<PAGE> 8
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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Other assets and securities are valued by a method that the Board
believes represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends are normally declared and paid annually. 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
gains 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.
<PAGE> 9
Comparison of the Fund's total return with 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. Of course, past
performance is not necessarily indicative of future results.
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 of Trustees. 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").
PORTFOLIO MANAGERS.
Gloria J. Santella has been portfolio manager of the Fund since
October, 1994; she had been co-portfolio manager of the Fund since
March, 1991. Ms. Santella is a vice-president of the Trust and of
the Adviser, having been associated with the Adviser since 1979.
She received her B.B.A. from Loyola University in 1979 and M.B.A.
from the University of Chicago in 1983. As of September 30, 1994,
she managed $176 million in mutual fund assets. Eric S. Maddix is
associate portfolio manager of the Fund. Mr. Maddix joined the
Adviser in 1987. He received his B.B.A. degree from Iowa State
University in 1986 and his M.B.A. from the University of Chicago
in 1992.
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. The annualized fee is 0.75 of 1%. This fee
is higher than the fees paid by most mutual funds.
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
portfolio securities and options and futures transactions 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
<PAGE> 10
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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 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.
FOR MORE INFORMATION
Contact a SteinRoe Retirement Plan Representative at 1-800-322-
1130 for more information about this Fund.
_______________
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Special Fund
Supplement to February 1, 1995 Defined Contribution Plan Prospectus
_________________________
FEE TABLE. As a result of the transfer agency fee changes
effective May 1, 1995 and the management and administrative fee
changes effective September 1, 1995, annual operating expenses as
shown in the Fee Table on page 2 of the Prospectus were changed as
follows:
Management and Administrative Fees 0.85%
12b-1 Fees None
Other Expenses 0.31%
-----
Total Fund Operating Expenses 1.16%
-----
-----
In addition, the expenses payable on a $1,000 investment in the
hypothetical example following the Fee Table are changed as follows:
1 year 3 years 5 years 10 years
------ ------- ------- -------
$12 $ 37 $ 64 $141
NEW AGREEMENTS. On September 1, 1995, the Fund's investment
advisory agreement with Stein Roe & Farnham Incorporated (the
"Adviser") was replaced with an administrative agreement and a
management agreement. The new fee schedules are stated below at
annual rates as a percentage of average daily net assets.
Management Administrative Total
Fee Fees Fees
-------------- -------------- ---------------
.75% up to $500, .15% up to $500, .90% up to $500,
.70% next $500, .125% next $500, .825% next $500,
.65% next $500, .10% next $500, .75% next $500,
.60% thereafter .075% thereafter .675% thereafter
FINANCIAL HIGHLIGHTS. The per share data (for a share
outstanding throughout the period) contained in the section
Financial Highlights is updated by adding the following unaudited
financial information for the six months ended March 31, 1995:
NET ASSET VALUE, BEGINNING OF PERIOD $23.54
------
Income from Investment Operations
Net investment income .07
Net realized and unrealized gains on investments .53
------
Total from investment operations .60
------
Distributions
Net investment income (.14)
------
Net realized capital gains (1.31)
------
Total distributions (1.45)
------
------
NET ASSET VALUE, END OF PERIOD $22.69
Ratio of net expenses to average net assets
(annualized) 0.95%
Ratio of net investment income to average net
assets (annualized) 0.60%
Portfolio turnover rate 23%
Total return 2.94%
Net assets, end of period (000 omitted) $1,193,306
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 1, 1995
<PAGE> 1
[STEINROE MUTUAL FUNDS LOGO]
PROSPECTUS
DEFINED CONTRIBUTION PLANS
STEINROE SPECIAL FUND
The Fund seeks capital appreciation by investing in securities
that are considered to have limited downside risk relative to
their potential for above-average growth, including securities of
undervalued, under-followed, or out-of-favor companies.
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 STEINROE INVESTMENT TRUST.
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 February 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 1-
800-322-1130. The Statement of Additional Information contains
information relating to other series of the SteinRoe Investment
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 FEBRUARY 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 ...6
Risks and Investment Considerations ......6
How to Purchase Shares....................7
How to Redeem Shares .....................7
Net Asset Value ..........................8
Distributions and Income Taxes............8
Investment Return.........................8
Management of the Fund....................9
Organization and Description of Shares...10
For More Information ....................10
<PAGE> 2
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 0.75%
12b-1 Fees None
Other Expenses 0.21%
-----
Total Fund Operating Expenses 0.96%
-----
-----
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 $31 $53 $118
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 information in the
table is based upon actual expenses incurred in the last fiscal
year. 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 in 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 above 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. These
examples do 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 for
the periods shown on a per-share basis and has been audited by
Arthur Andersen LLP, independent public accountants. All of the
auditors' reports were unqualified. This 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 upon request without charge, contains additional performance
information.
<PAGE> 3
<TABLE>
<CAPTION>
Nine
Months
Ended
Years Ended December 31, Sept. 30, Years Ended September 30,
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $17.73 $14.88 $18.41 $16.95 $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Income from Investment
Operations
Net investment income .28 .25 .35 .23 .14 .36 .42 .34 .21 .17 .15
Net realized and
unrealized gains
(losses) on investments (.61) 4.01 2.33 .12 2.16 5.58 (2.10) 4.55 1.50 5.31 .33
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Total from investment
operations (.33) 4.26 2.68 .35 2.30 5.94 (1.68) 4.89 1.71 5.48 .48
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Distributions
Net investment
income (.23) (.19) (.34) (.57) (.01) (.21) (.39) (.34) (.37) (.18) (.21)
Net realized capital
gains (2.29) (.54) (3.80) (3.90) -- (.06) (2.08) (1.32) (.31) (1.16) (1.77)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Total distributions (2.52) (.73) (4.14) (4.47) (.01) (.27) (2.47) (1.66) (.68) (1.34) (1.98)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
NET ASSET VALUE,
END OF PERIOD $14.88 $18.41 $16.95 $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04 $23.54
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------- ------ -----
Ratio of expenses to
average net assets 0.96% 0.92% 0.92% 0.96% *0.99% 0.96% 1.02% 1.04% 0.99% 0.97% 0.96%
Ratio of net investment
income to average
net assets 1.99% 2.07% 1.75% 1.32% *1.31% 2.12% 2.33% 2.11% 0.99% 0.92% 0.91%
Portfolio turnover
rate (a) 89% 96% 116% 103% 42% 85% 70% 50% 40% 42% 58%
Total return (1.01%) 29.41% 14.70% 4.27% 17.94% 40.00% (8.78%) 32.18% 8.96% 27.35% 2.02%
Net assets,
end of period
(000 omitted) $152,071 $278,082 $253,693 $187,997 $224,628 $322,056 $361,065 $587,259 $626,080 $1,076,818 $1,243,885
</TABLE>
*Annualized
(a) For periods ending after December 31, 1984, the portfolio
turnover rate includes long-term U.S. Government securities
transactions. The rate for the year ended December 31, 1984,
which excludes long-term U.S. Government securities, has not
been restated.
(b) For the periods indicated below, bank borrowing activity was
as follows:
<TABLE>
<CAPTION>
Average debt Average shares
Debt outstanding outstanding outstanding Average debt
at end of period during period during period per share
Period Ended (in thousands) (in thousands) (in thousands) during period
- ------------------ ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
December 31, 1984 -- 39 9,856 0.0039
December 31, 1986 -- 203 15,251 0.0133
</TABLE>
The Fund had no bank borrowings during any other periods.
THE FUND
STEINROE SPECIAL 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 such as common stocks. 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
<PAGE> 4
diversification of your investments and simplify your
recordkeeping. The Fund does not impose commissions or charges
when shares are purchased or redeemed.
The Fund is a series of the STEINROE INVESTMENT TRUST (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory, administrative, and bookkeeping and
accounting services to the Fund. The Adviser also manages several
other no-load mutual funds with different investment objectives,
including equity funds, international funds, taxable and 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 1-800-338-2550.
HOW THE FUND INVESTS
The Fund's investment objective is to invest in securities
selected for capital appreciation. Particular emphasis is placed
on securities that are considered to have limited downside risk
relative to their potential for above-average growth, including
securities of undervalued, under-followed or out-of-favor
companies, and companies that are low-cost producers of goods or
services, financially strong or run by well-respected managers.
The Fund may invest in securities of seasoned, established
companies that appear to have appreciation potential, as well as
securities of relatively small, new companies. In addition, it
may invest in securities with limited marketability; new issues of
securities; securities of companies that it appears will benefit
from management change, new technology, new product or service
development, or change in demand; and other securities that the
Adviser believes have capital appreciation possibilities.
However, the Fund does not currently intend to invest, nor has it
invested in the past fiscal year, more than 5% of its net assets
in any of these types of securities. Securities of smaller, newer
companies may be subject to greater price volatility than
securities of larger well-established companies. In addition,
many smaller companies are less well known to the investing public
and may not be as widely followed by the investment community.
The Fund invests primarily in common stocks and other equity-type
securities, including preferred stocks and securities convertible
into equity securities. The Fund may also invest up to 35% of its
total assets in debt securities, but it does not currently intend
to invest, nor in its past fiscal year has it invested, more than
5% of its net assets in debt securities rated below investment
grade. 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.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES.
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. The Fund may
invest up to 35% of its net assets in debt securities that are
rated below investment grade 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. When
the Adviser deems a temporary defensive position advisable, the
Fund may invest, without limitation, in high-quality fixed-income
securities, or hold assets in cash or cash equivalents.
FOREIGN SECURITIES.
The Fund may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in
U.S. dollars, or securities guaranteed by a U.S. person, the Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
The Fund may invest in sponsored and unsponsored ADRs. In
addition to, or in lieu of, such
<PAGE> 5
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 Fund may contract to purchase an amount of foreign
currency sufficient to pay the purchase price of the securities at
the settlement date; such a contract involves the risk that the
value of the foreign currency may decline relative to the value of
the dollar prior to the settlement date, which risk is in addition
to the risk that the value of the foreign security purchased may
decline. The Fund may also enter into foreign currency contracts
as a hedging technique to limit or reduce exposure to currency
fluctuations. In addition, the Fund may use options and futures
contracts, as described below, to limit or reduce exposure to
currency fluctuations. As of September 30, 1994, the Fund's
holdings of foreign companies, as a percentage of net assets, were
13.0% (7.8% in foreign securities and 5.2% in ADRs).
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES.
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. 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 make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information.
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, floating rate
instruments, and other instruments that securitize assets of
various types ("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, and futures options.
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.
The Fund may purchase and write both call options and put options
on securities, indexes and foreign currencies, enter into interest
rate, index and foreign currency futures contracts 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 achieve its desired 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. In addition, 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.
<PAGE> 6
PORTFOLIO TURNOVER.
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The turnover rate may vary
significantly from year to year. At times, the Fund may invest
for short-term capital appreciation. Flexibility of investment
and emphasis on capital appreciation may involve greater portfolio
turnover than that of mutual funds that have the objectives of
income or maintenance of a balanced investment position. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains and losses. (See
Financial Highlights and Distributions and Income Taxes.) The
Fund is not intended to be an income-producing investment,
although it may produce varying amounts of income.
RESTRICTIONS ON THE FUND'S INVESTMENTS
The Fund will not (i) with respect to 75% of its total assets,
invest more than 5% of its total assets in the securities of any
one issuer (except that this restriction does not apply to
securities of the U.S. Government or repurchase agreements for
such securities, and except that the Fund may invest all of its
assets in shares of another investment company having the
identical investment objective); (ii) acquire more than 10% of the
outstanding voting securities of any one issuer (except that the
Fund may invest all of its assets in shares of another investment
company having the identical investment objective); or (iii)
borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then the aggregate borrowings at any one
time (including any reverse repurchase agreements and dollar
rolls) may not exceed 33 1/3% of its total assets (at market).
The Fund will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of total assets. The Fund may invest in
repurchase agreements, /1/ provided that the Fund will not invest
more than 15% of its net assets in repurchase agreements maturing
in more than seven days, and any other illiquid securities.
Policy (iii) above and the policy with respect to concentration of
investments in any one industry described under Risks and
Investment Considerations are fundamental policies and, as such,
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. The Fund's investment objective
is non-fundamental and, as such, may be changed by the Board of
Trustees without shareholder approval. Any such change may result
in the Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. 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. The Fund is designed
for long-term investors who desire to participate in the stock
market with more investment risk and volatility than the stock
market in general, but with less investment risk and volatility
than aggressive capital appreciation funds. The Fund usually
allocates its investments among a number of different industries
rather than concentrating in a particular industry or group of
industries; however, under abnormal circumstances, it may invest
up to 25% of net assets in a particular industry or group of
industries. (See How the Fund Invests.) There can be no
guarantee that the Fund will achieve its objective.
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include less complete financial
- -----------------------
/1/ A sale of securities to the Fund in which the seller agrees to
repurchase the securities at a higher price, which includes an
amount representing interest on the purchase price, within a
specified time. In the event of bankruptcy of the seller, the
Fund could experience both losses and delays in liquidating its
collateral.
<PAGE> 7
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.
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
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
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 SteinRoe 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 SteinRoe 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 SteinRoe 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.
<PAGE> 8
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.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from NASDAQ is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Other assets and securities are valued by a method that the Board
believes represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS.
Income dividends are normally declared and paid annually. 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
gains 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.
<PAGE> 9
Comparison of the Fund's total return with 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. Of course, past
performance is not necessarily indicative of future results.
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 of Trustees. 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").
PORTFOLIO MANAGERS.
E. Bruce Dunn and Richard B. Peterson are co-portfolio managers of
the Fund. Mr. Dunn has been co-portfolio manager of the Fund
since March, 1991 and Mr. Peterson since June, 1991. Each of them
is a vice-president of the Trust and a senior vice president of
the Adviser. Mr. Dunn, a Chartered Investment Counselor, has been
associated with the Adviser since 1964. He received his A.B.
degree from Yale University in 1956 and his M.B.A. from Harvard
University in 1958. Mr. Dunn co-managed $1.5 billion in mutual
fund assets as of September 30, 1994. Mr. Peterson, who began his
investment career at Stein Roe & Farnham in 1965 after graduating
with a B.A. from Carleton College in 1962 and the Woodrow Wilson
School at Princeton University in 1964 with a Masters in Public
Administration, rejoined the Adviser in 1991 after 15 years of
equity research and portfolio management experience with State
Farm Investment Management Corporation. As of September 30, 1994,
he was responsible for co-managing $1.4 billion in mutual fund
assets.
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. The annualized fee is 0.75 of 1%. This fee
is higher than the fees paid by most mutual funds.
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
portfolio securities and options and futures transactions 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
<PAGE> 10
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 8, 1987, which provides that each shareholder shall be
deemed to have agreed to be bound by the terms thereof. The
Declaration of Trust may be amended by a vote of either the
Trust's shareholders or its trustees. The Trust may issue an
unlimited number of shares, in one or more series as the Board may
authorize. Currently, eight 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 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.
FOR MORE INFORMATION
Contact a SteinRoe Retirement Plan Representative at 1-800-322-
1130 for more information about this Fund.
________________
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Prime Equities
SteinRoe Total Return Fund
SteinRoe Growth Stock Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe Capital Opportunities Fund
Supplement to February 1, 1995 Statement
of Additional Information
_________________________
INVESTMENT ADVISORY SERVICES. On September 1, 1995, the
investment advisory agreement with Stein Roe & Farnham
Incorporated (the "Adviser") relating to each Fund other than
Special Venture Fund was replaced with an administrative
agreement and a management agreement. Other than changes in
fee structure, the only material difference between the old
and new agreements is that administrative services and
facilities are furnished to the Funds under a separate
agreement and the provision relating to expense
reimbursements by the Adviser contained in the old investment
advisory agreement (described on page 30 of this Statement of
Additional Information) is contained in the new
administrative agreement (but not the new management
agreement). Please see the supplement dated September 1,
1995 to the Funds' Prospectus for further information on the
new agreements.
TRANSFER AGENT. Effective May 1, 1995, the fees for
transfer agency services described in this Statement of
Additional information under the caption Transfer Agent were
changed. The revised fee schedule calls for each Fund to pay
to SteinRoe Services Inc. at an annual rate of 0.22% of the
Fund's average daily net assets.
The Date of this Supplement is September 1, 1995.
<PAGE> 1
Statement of Additional Information Dated February 1, 1995
STEINROE INVESTMENT TRUST
P.O. Box 804058, Chicago, Illinois 60680
1-800-338-2550
GROWTH AND INCOME FUNDS
SteinRoe Prime Equities
SteinRoe Total Return Fund
GROWTH FUNDS
SteinRoe Growth Stock Fund
SteinRoe Special Fund
SteinRoe Special Venture Fund
SteinRoe Capital Opportunities Fund
The Funds listed above are series of the SteinRoe Investment
Trust (the "Trust"). Each series of the Trust represents shares of
beneficial interest in a separate portfolio of securities and other
assets, with its own objectives and policies. This Statement of
Additional Information is not a prospectus, but provides additional
information that should be read in conjunction with the Funds'
prospectus dated February 1, 1995, and any supplements thereto
("Prospectus"). The Prospectus may be obtained at no charge by
telephoning 1-800-338-2550.
TABLE OF CONTENTS
Page
General Information and History...............2
Investment Policies...........................3
Prime Equities.............................3
Total Return Fund..........................3
Growth Stock Fund..........................4
Special Fund...............................4
Special Venture Fund.......................4
Capital Opportunities Fund.................5
Portfolio Investments and Strategies..........5
Investment Restrictions......................20
Purchases and Redemptions....................24
Management...................................25
Financial Statements.........................27
Principal Shareholders.......................27
Investment Advisory Services.................28
Distributor..................................31
Transfer Agent...............................31
Custodian....................................31
Independent Public Accountants...............32
Portfolio Transactions.......................33
Additional Income Tax Considerations.........35
Investment Performance.......................35
Appendix--Ratings............................41
<PAGE> 2
GENERAL INFORMATION AND HISTORY
As used herein, "Prime Equities," "Total Return Fund," "Growth
Stock Fund," "Special Fund," "Special Venture Fund," and "Capital
Opportunities Fund" refer to the series of the Trust designated
SteinRoe Prime Equities, SteinRoe Total Return Fund, SteinRoe Growth
Stock Fund, SteinRoe Special Fund, SteinRoe Special Venture Fund,
and SteinRoe Capital Opportunities Fund, respectively, and are
referred to collectively as the "Funds." SteinRoe Growth Stock Fund
was named SteinRoe Stock Fund prior to February 1, 1995. Currently
eight series are authorized and outstanding.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment advisory services and administrative services to the
Funds.
Each share of a series is entitled to participate pro rata in
any dividends and other distributions declared by the Board on
shares of that series, and all shares of a series have equal rights
in the event of liquidation of that series.
Each whole share (or fractional share) outstanding on the
record date established in accordance with the By-Laws shall be
entitled to a number of votes on any matter on which it is entitled
to vote equal to the net asset value of the share (or fractional
share) in United States dollars determined at the close of business
on the record date (for example, a share having a net asset value of
$10.50 would be entitled to 10.5 votes). As a business trust, the
Trust is not required to hold annual shareholder meetings. However,
special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies, or approving an
investment advisory contract. If requested to do so by the holders
of at least 10% of the Trust's outstanding shares, the Trust will
call a special meeting for the purpose of voting upon the question
of removal of a trustee or trustees and will assist in the
communications with other shareholders as if the Trust were subject
to Section 16(c) of the Investment Company Act of 1940. All shares
of all series of the Trust are voted together in the election of
trustees. On any other matter submitted to a vote of shareholders,
shares are voted in the aggregate and not by individual series,
except that shares are voted by individual series when required by
the Investment Company Act of 1940 or other applicable law, or when
the Board of Trustees determines that the matter affects only the
interests of one or more series, in which case shareholders of the
unaffected series are not entitled to vote on such matters.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
Each Fund may in the future seek to achieve its objective by
pooling its assets with assets of other mutual funds managed by the
Adviser for investment in another mutual fund having the same
investment objective and substantially the same investment policies
and restrictions as the Fund. The purpose of such an arrangement is
to achieve greater operational efficiencies and reduce costs. The
Adviser is expected to manage any such mutual fund in which a Fund
would invest. Such investment would be subject to determination by
the Trustees that it was in the best interests of the Fund
<PAGE> 3
and its shareholders, and shareholders would receive advance notice
of any such change.
INVESTMENT POLICIES
In pursuing its respective objective, each Fund will invest as
described below and may employ the investment techniques described
in its Prospectus and elsewhere in this Statement of Additional
Information. Investments and strategies that are common to two or
more Funds are described under Portfolio Investments and Strategies.
Each Fund's investment objective is a non-fundamental policy and may
be changed by the Board of Trustees without the approval of a
"majority of the outstanding voting securities" /1/ of that Fund.
PRIME EQUITIES
This Fund's investment objective is growth of capital. It
invests primarily in a broadly diversified portfolio of common
stocks and other equity-type securities (such as preferred stocks,
securities convertible into or exchangeable for common stocks, and
warrants or rights to purchase common stocks). The portfolio
includes securities that offer income potential in addition to
growth of capital, and it is designed to provide shareholders with
more dividend income than a portfolio focused exclusively on growth.
The Fund invests primarily in well-established companies.
Although the Fund may invest in a broad range of securities,
normally it seeks to limit volatility by investing at least 65% of
its total assets in the equity securities of companies having market
capitalizations in excess of $1 billion. The securities of those
companies are believed to be generally less volatile than those of
companies with smaller capitalizations because companies with larger
capitalizations tend to be more established, with a reputation for
quality management, and tend to have broader, more highly
diversified product lines, broader and deeper resources, and easier
access to credit.
TOTAL RETURN FUND
This Fund's investment objective is to obtain current income
and capital appreciation in order to achieve maximum total return
consistent with reasonable investment risk, in the opinion of the
Adviser, through investment in a combination of equity, fixed-income
and convertible securities. The percentages of Fund assets invested
in various types of securities will vary in accordance with the
judgment of the Adviser. There are no limitations on the amount of
the Fund's assets which may be allocated to the various types of
securities. Generally, the equity portion of the Fund's portfolio
will be invested in common stocks that the Adviser believes have
long-term growth possibilities. With respect to the fixed-income
portion of the portfolio, emphasis is placed on acquiring investment
grade securities.
- ----------------------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a meeting
if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy or (ii) more than 50% of
the outstanding shares of the Fund.
<PAGE> 4
GROWTH STOCK FUND
This Fund's investment objective is long-term capital
appreciation, which it attempts to achieve by normally investing at
least 65% of its total assets in common stocks and other equity-type
securities (such as preferred stocks, securities convertible into or
exchangeable for common stocks, and warrants or rights to purchase
common stocks) that, in the opinion of the Adviser, have long-term
appreciation possibilities.
The Fund's investments are selected by the Adviser. Although
the Fund invests primarily in equity securities, it may invest up to
35% of its total assets in investment grade debt securities.
SPECIAL FUND
This Fund's investment objective is to invest in securities
selected for possible capital appreciation. Particular emphasis is
placed on securities that are considered to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, under-followed or out-of-favor companies,
and companies that are low-cost producers of goods or services,
financially strong or run by well-respected managers. The Fund may
invest more than 5% of its net assets in securities of seasoned,
established companies that appear to have appreciation potential, as
well as securities of relatively small, new companies. In addition,
it may invest in securities with limited marketability, new issues
of securities, securities of companies that it appears will benefit
from management change, new technology, new product or service
development or change in demand, and other securities that the
Adviser believes have capital appreciation possibilities; however,
the Fund does not currently intend to invest, nor has it invested in
the past fiscal year, more than 5% of its net assets in any of these
types of securities. Securities of smaller, newer companies may be
subject to greater price volatility than securities of larger more
well-established companies. In addition, many smaller companies are
less well known to the investing public and may not be as widely
followed by the investment community.
The Fund will invest primarily in common stocks and other
equity-type securities, including preferred stocks and securities
convertible into equity securities. The Fund may also invest up to
35% of its total assets in debt securities, but it does not
currently intend to invest, nor in its past fiscal year has it
invested, more than 5% of its net assets in debt securities rated
below investment grade.
SPECIAL VENTURE FUND
The Fund seeks long-term capital appreciation by investing
primarily in a diversified portfolio of common stocks and other
equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed
companies that the Adviser believes represent special opportunities.
The Fund emphasizes investments in financially strong small and
medium-sized companies based principally on
<PAGE> 5
management appraisal and stock valuation. The Adviser considers
"small" and "medium-sized" companies to be those with market
capitalizations of less than $1 billion and $1-3 billion,
respectively.
In both its initial and ongoing appraisals of a company's
management, the Adviser seeks to know both the principal owners and
senior management and to assess their business judgment and
strategies through personal visits. The Adviser favors companies
whose management has an owner/operator, risk averse orientation and
a demonstrated ability to create wealth for investors. Attractive
company characteristics include unit growth, favorable cost
structures or competitive positions, and financial strength that
enables management to execute business strategies under difficult
conditions. A company is attractively valued when its stock can be
purchased at a meaningful discount to the value of the underlying
business.
CAPITAL OPPORTUNITIES FUND
This Fund's investment objective is long-term capital
appreciation, which it attempts to achieve by investing in selected
companies that, in the opinion of the Adviser, offer opportunities
for capital appreciation.
The Fund pursues its objective by investing in aggressive
growth companies. An aggressive growth company, in general, is one
that appears to have the ability to increase its earnings at an
above-average rate. These may include securities of smaller
emerging companies as well as securities of well-seasoned companies
of any size that offer strong earnings growth potential. Such
companies may benefit from new products or services, technological
developments, or changes in management. Securities of smaller
companies may be subject to greater price volatility than securities
of larger companies. In addition, many smaller companies are less
well known to the investing public and may not be as widely followed
by the investment community.
Although it invests primarily in common stocks, the Fund may
invest in all types of equity securities, including preferred stocks
and securities convertible into common stocks. The Fund may also
invest up to 35% of its total assets in debt securities, but it does
not currently intend to invest, nor in its past fiscal year has it
invested, more than 5% of its net assets in debt securities rated
below investment grade.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES
In pursuing its investment objective, each Fund may invest in
debt securities of corporate and governmental issuers. The risks
inherent in debt securities depend primarily on the term and quality
of the obligations in a Fund's portfolio as well as on market
conditions. A decline in the prevailing levels of interest rates
generally increases the value of debt securities, while an increase
in rates usually reduces the value of those securities.
<PAGE> 6
Investments in debt securities by Prime Equities, Total Return
Fund, and Growth Stock Fund are limited to those that are within the
four highest grades (generally referred to as "investment grade")
assigned by a nationally recognized statistical rating organization
or, if unrated, deemed to be of comparable quality by the Adviser.
Special Venture Fund does not expect to invest more than 5% of net
assets in debt securities rated with any credit rating below
investment grade. Capital Opportunities Fund and Special Fund may
invest up to 35% of their net assets in debt securities that are
rated below investment grade.
Securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more likely
to affect the issuer's capacity to pay interest and repay principal.
If the rating of a security held by a 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 that Fund should continue to hold the security.
Securities that are rated below investment grade 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.
When the Adviser determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, the Funds may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash equivalents.
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, floating rate
instruments, and other instruments that securitize assets of various
types ("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.
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 that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. 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
<PAGE> 7
and over-the-counter Derivatives may not be as well regulated and
may be less marketable than exchange-traded Derivatives.
No Fund currently intends to invest, nor has any Fund during
its past fiscal year invested, more than 5% of its net assets in any
type of Derivative, except for options, futures contracts, and
futures options. (See Options and Futures in this Statement of
Additional Information.)
Some mortgage-backed debt securities are of the "modified pass-
through type," which means the interest and principal payments on
mortgages in the pool are "passed through" to investors. During
periods of declining interest rates, there is increased likelihood
that mortgages will be prepaid, with a resulting loss of the full-
term benefit of any premium paid by the Fund on purchase of such
securities; in addition, the proceeds of prepayment would likely be
invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that 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, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments 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
prepayment would likely be invested at lower interest rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on the
underlying loans that finance payments on the securities themselves.
Floating rate instruments 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%.
<PAGE> 8
CONVERTIBLE SECURITIES
By investing in convertible securities, a Fund obtains the
right to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, the Adviser will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities purchased by a Fund are
frequently rated investment grade, the Funds also may purchase
unrated securities or securities rated below investment grade if the
securities meet the Adviser's other investment criteria.
Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being less well known to investors
than either common stock or conventional debt securities. As a
result, the Adviser's own investment research and analysis tends to
be more important in the purchase of such securities than other
factors.
DEFENSIVE INVESTMENTS
When the Adviser considers a temporary defensive position
advisable, each Fund may invest, without limitation, in high-quality
fixed-income securities or hold assets in cash or cash equivalents.
FOREIGN SECURITIES
Each Fund may invest up to 25% of its total assets in foreign
securities, which may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than does investment in securities of
domestic issuers. For this purpose, foreign securities do not
include American Depositary Receipts (ADRs) or securities guaranteed
by a United States person. ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the
underlying securities. The Funds may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, a Fund is
likely to bear its proportionate share of the expenses of the
depository and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored ADR.
No Fund intends to invest, nor during the past fiscal year has any
Fund invested, more than 5% of its net assets in unsponsored ADRs.
As of September 30, 1994, the Funds' holdings of foreign
companies, as a percentage of net assets, were as follows: Prime
Equities, 12.3% (5.1% in foreign securities and 7.2% in ADRs), Total
Return Fund, 6.6% (none in foreign securities and 6.6% in ADRs),
Growth Stock Fund, 10.4% (1.2% in foreign securities and 9.2% in
ADRs), Special Fund, 13.0% (7.8% in foreign securities and 5.2% in
ADRs), and Capital Opportunities Fund, 2.1% (none in foreign
securities and 2.1% in ADRs).
<PAGE> 9
With respect to portfolio securities that are issued by foreign
issuers or denominated in foreign currencies, a Fund's investment
performance is affected by the strength or weakness of the U.S.
dollar against these currencies. For example, if the dollar falls
in value relative to the Japanese yen, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction hedging
and portfolio hedging under Currency Exchange Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions in which are generally denominated in foreign currencies,
and utilization of forward foreign currency exchange contracts
involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in exchange
rates of foreign currencies; possible imposition of exchange control
regulation or currency restrictions that would prevent cash from
being brought back to the United States; less public information
with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities;
lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices;
less liquidity and frequently greater price volatility in foreign
markets than in the United States; possible imposition of foreign
taxes; possible investment in securities of companies in developing
as well as developed countries; and sometimes less advantageous
legal, operational, and financial protections applicable to foreign
sub-custodial arrangements.
Although the Funds will try to invest in companies and
governments of countries having stable political environments, there
is the possibility of expropriation or confiscatory taxation,
seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign
government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these
nations.
Currency Exchange Transactions. Currency exchange transactions
may be conducted either on a spot (i.e., cash) basis at the spot
rate for purchasing or selling currency prevailing in the foreign
exchange market or through forward currency exchange contracts
("forward contracts"). Forward contracts are contractual agreements
to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks and
broker-dealers, are not exchange traded, and are usually for less
than one year, but may be renewed.
Forward currency transactions may involve currencies of the
different countries in which the Funds may invest, and serve as
hedges against possible variations in the exchange rate between
these currencies. Currency transactions are limited to transaction
hedging and portfolio hedging involving either specific transactions
or portfolio positions. Transaction hedging is the purchase or sale
of forward contracts with respect to specific receivables or
payables of a Fund accruing in connection with
<PAGE> 10
the purchase and sale of its portfolio securities. Portfolio
hedging is the use of forward contracts with respect to portfolio
security positions denominated or quoted in a particular currency.
Portfolio hedging allows the Adviser to limit or reduce exposure in
a foreign currency by entering into a forward contract to sell or
buy such foreign currency (or another foreign currency that acts as
a proxy for that currency) so that the U.S. dollar value of certain
underlying foreign portfolio securities can be approximately matched
by an equivalent U.S. dollar liability. A Fund may not engage in
portfolio hedging with respect to the currency of a particular
country to an extent greater than the aggregate market value (at the
time of making such sale) of the securities held in its portfolio
denominated or quoted in that particular currency, except that a
Fund may hedge all or part of its foreign currency exposure through
the use of a basket of currencies or a proxy currency where such
currencies or currency act as an effective proxy for other
currencies. In such a case, a Fund may enter into a forward
contract where the amount of the foreign currency to be sold exceeds
the value of the securities denominated in such currency. The use
of this basket hedging technique may be more efficient and
economical than entering into separate forward contracts for each
currency held in a Fund. A Fund may not engage in "speculative"
currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, a Fund may either sell the portfolio security related to
such contract and make delivery of the currency, or it may retain
the security and either acquire the currency on the spot market or
terminate its contractual obligation to deliver the currency by
purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount
of the currency.
It is impossible to forecast with absolute precision the market
value of portfolio securities at the expiration of a forward
contract. Accordingly, it may be necessary for a Fund to purchase
additional currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the
amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot
market some of the currency received upon the sale of the portfolio
security if its market value exceeds the amount of currency a Fund
is obligated to deliver.
If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to the
extent that there has been movement in forward contract prices. If
a Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should
forward prices decline during the period between a Fund's entering
into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency,
the Fund will realize a gain to the extent the price of the currency
it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, a Fund will
suffer a loss to the extent the price of the currency it has agreed
to purchase exceeds the price of the currency it has agreed to sell.
A default on the contract would deprive the Fund of unrealized
profits or force the Fund to
<PAGE> 11
cover its commitments for purchase or sale of currency, if any, at
the current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value of
the hedged currency should rise. Moreover, it may not be possible
for a Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. The
cost to a Fund of engaging in currency exchange transactions varies
with such factors as the currency involved, the length of the
contract period, and prevailing market conditions. Since currency
exchange transactions are usually conducted on a principal basis, no
fees or commissions are involved.
LENDING OF PORTFOLIO SECURITIES
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, each 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. The Fund would not
have the right to vote the securities during the existence of the
loan but would call the loan to permit voting of the securities if,
in the Adviser's judgment, a material event requiring a shareholder
vote would otherwise occur before the loan was repaid. 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. No Fund loaned portfolio securities during
the fiscal year ended September 30, 1994 nor does it currently
intend to loan more than 5% of its net assets.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE
AGREEMENTS
Each Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time a 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.
The Funds make 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. No Fund had during its last fiscal year, nor does any
<PAGE> 12
Fund currently intend to have, commitments to purchase when-issued
securities in excess of 5% of its net assets.
Each Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which a Fund is the seller of, rather than
the investor in, securities and agrees to repurchase them at an
agreed-upon time and price. Use of a reverse repurchase agreement
may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction
costs. No Fund entered into reverse repurchase agreements during
the fiscal year ended September 30, 1994.
At the time a Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse
repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the Fund
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on the books of the
Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as
borrowing under a line of credit as described below, may increase
net asset value fluctuation.
SHORT SALES
Each Fund may make short sales "against the box." In a short
sale, the Fund sells a borrowed security and is required to return
the identical security to the lender. A short sale "against the
box" involves the sale of a security with respect to which the Fund
already owns an equivalent security in kind and amount. A short
sale "against the box" enables a Fund to obtain the current market
price of a security which it desires to sell but is unavailable for
settlement.
RULE 144A SECURITIES
Each Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the 1933 Act. That Rule permits certain qualified
institutional buyers, such as the Fund, to trade in privately placed
securities that have not been registered for sale under the 1933
Act. The Adviser, under the supervision of the Board of Trustees,
will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund's restriction of investing no
more than 15% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination, the Adviser will
consider the trading markets for the specific security, taking into
account the unregistered nature of a Rule 144A security. In
addition, the Adviser could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored
and, if as a result of changed conditions, it is determined that a
Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any,
steps are required to assure that the
<PAGE> 13
Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect
of increasing the amount of a Fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to
purchase such securities. No Fund expects to invest as much as 5%
of its total assets in Rule 144A securities.
LINE OF CREDIT
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, each Fund may establish
and maintain a line of credit with a major bank in order to permit
borrowing on a temporary basis to meet share redemption requests in
circumstances in which temporary borrowing may be preferable to
liquidation of portfolio securities.
PORTFOLIO TURNOVER
Although the Funds do not purchase securities with a view to
rapid turnover, there are no limitations on the length of time that
portfolio securities must be held. At times, Special Fund and
Capital Opportunities Fund may invest for short-term capital
appreciation. Portfolio turnover can occur for a number of reasons
such as general conditions in the securities markets, more favorable
investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio
investment. Because of the Funds' flexibility of investment and
emphasis on growth of capital, they may have greater portfolio
turnover than that of mutual funds that have primary objectives of
income or maintenance of a balanced investment position. The future
turnover rate may vary greatly from year to year. A high rate of
portfolio turnover in a Fund, if it should occur, would result in
increased transaction expenses, which must be borne by that Fund.
High portfolio turnover may also result in the realization of
capital gains or losses and, to the extent net short-term capital
gains are realized, any distributions resulting from such gains will
be considered ordinary income for Federal income tax purposes. (See
Risks and Investment Considerations and Distributions and Income
Taxes in the Prospectus, and Additional Income Tax Considerations in
this Statement of Additional Information.)
OPTIONS ON SECURITIES AND INDEXES
Each Fund may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized contracts
traded on recognized securities exchanges, boards of trade, or
similar entities, or quoted on NASDAQ. Each Fund may purchase
agreements, sometimes called cash puts, that may accompany the
purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the
purchaser (holder) of the option, in return for a premium, the right
to buy from (call) or sell to (put) the seller (writer) of the
option the security underlying the option (or the cash value of the
index) at a specified exercise price at any time during the term of
the option (normally not exceeding nine months). The writer of an
option on an individual security or on a
<PAGE> 14
foreign currency has the obligation upon exercise of the option to
deliver the underlying security or foreign currency upon payment of
the exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the writer
of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the
specified multiplier for the index option. (An index is designed to
reflect specified facets of a particular financial or securities
market, a specific group of financial instruments or securities, or
certain economic indicators.)
A Fund will write call options and put options only if they are
"covered." For example, in the case of a call option on a security,
the option is "covered" if the Fund owns the security underlying the
call or has an absolute and immediate right to acquire that security
without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount
are held in a segregated account by its custodian) upon conversion
or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by a Fund expires, the Fund
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of the
same series (type, exchange, underlying security or index, exercise
price, and expiration). There can be no assurance, however, that a
closing purchase or sale transaction can be effected when a Fund
desires.
A Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply
and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index, and
the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by a Fund is recorded as a
deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and
asked prices.
Risks Associated with Options on Securities and Indexes. There
are several risks associated with transactions in options. For
example, there are significant differences between the securities
markets, the currency markets, and the options markets that could
result in an imperfect correlation between these markets, causing a
given
<PAGE> 15
transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill
and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected
events.
There can be no assurance that a liquid market will exist when
a Fund seeks to close out an option position. If a Fund were unable
to close out an option that it had purchased on a security, it would
have to exercise the option in order to realize any profit or the
option would expire and become worthless. If a Fund were unable to
close out a covered call option that it had written on a security,
it would not be able to sell the underlying security until the
option expired. As the writer of a covered call option on a
security, a Fund foregoes, during the option's life, the opportunity
to profit from increases in the market value of the security
covering the call option above the sum of the premium and the
exercise price of the call.
If trading were suspended in an option purchased or written by
a Fund, the Fund would not be able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to
exercise an option it has purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Each Fund may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of an
index /2/ at a specified price and time. A public market exists in
futures contracts covering a number of indexes (including, but not
limited to: the Standard & Poor's 500 Index, the Value Line
Composite Index, and the New York Stock Exchange Composite Index) as
well as financial instruments (including, but not limited to: U.S.
Treasury bonds, U.S. Treasury notes, Eurodollar certificates of
deposit, and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
The Funds may purchase and write call and put futures options.
Futures options possess many of the same characteristics as options
on securities, indexes and foreign currencies (discussed above). A
futures option gives the holder the right, in return for the premium
paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price at any time during
the period of the option. Upon exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true. A Fund might, for example, use
futures contracts to hedge against or gain exposure to fluctuations
in the general level of stock prices,
- ----------------------
/2/ A futures contract on an index is an agreement pursuant to which
two parties agree to take or make delivery of an amount of cash
equal to the difference between the value of the index at the close
of the last trading day of the contract and the price at which the
index contract was originally written. Although the value of a
securities index is a function of the value of certain specified
securities, no physical delivery of those securities is made.
<PAGE> 16
anticipated changes in interest rates or currency fluctuations that
might adversely affect either the value of the Fund's securities or
the price of the securities that the Fund intends to purchase.
Although other techniques could be used to reduce or increase that
Fund's exposure to stock price, interest rate and currency
fluctuations, the Fund may be able to achieve its exposure more
effectively and perhaps at a lower cost by using futures contracts
and futures options.
Each Fund will only enter into futures contracts and futures
options that are standardized and traded on an exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
The success of any futures transaction depends on the Adviser
correctly predicting changes in the level and direction of stock
prices, interest rates, currency exchange rates and other factors.
Should those predictions be incorrect, a Fund's return might have
been better had the transaction not been attempted; however, in the
absence of the ability to use futures contracts, the Adviser might
have taken portfolio actions in anticipation of the same market
movements with similar investment results but, presumably, at
greater transaction costs.
When a purchase or sale of a futures contract is made by a
Fund, the Fund is required to deposit with its custodian (or broker,
if legally permitted) a specified amount of cash or U.S. Government
securities or other securities acceptable to the broker ("initial
margin"). The margin required for a futures contract is set by the
exchange on which the contract is traded and may be modified during
the term of the contract. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract,
which is returned to the Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. A Fund
expects to earn interest income on its initial margin deposits. A
futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called "variation margin," equal to
the daily change in value of the futures contract. This process is
known as "marking-to-market." Variation margin paid or received by
a Fund does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount one
would owe the other if the futures contract had expired at the close
of the previous day. In computing daily net asset value, each Fund
will mark-to-market its open futures positions.
Each Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by it.
Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations are
closed out prior to delivery by offsetting purchases or sales of
matching futures contracts (same exchange, underlying security or
index, and delivery month). If an offsetting purchase price is less
than the
<PAGE> 17
original sale price, the Fund engaging in the transaction realizes a
capital gain, or if it is more, the Fund realizes a capital loss.
Conversely, if an offsetting sale price is more than the original
purchase price, the Fund engaging in the transaction realizes a
capital gain, or if it is less, the Fund realizes a capital loss.
The transaction costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a correlation
between price movements in the futures contract and in the portfolio
exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures options
and the related securities, including technical influences in
futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of index
futures contracts, the composition of the index, including the
issuers and the weighting of each issue, may differ from the
composition of the Fund's portfolio, and, in the case of interest
rate futures contracts, the interest rate levels, maturities, and
creditworthiness of the issues underlying the futures contract may
differ from the financial instruments held in the Fund's portfolio.
A decision as to whether, when and how to use futures contracts
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because of
market behavior or unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted
in certain futures contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's
settlement price at the end of the current trading session. Once
the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses
because the limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved to
the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
Stock index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at a
time when a Fund seeks to close out a futures or futures option
position. The Fund would be exposed to possible loss on the
position during the interval of inability to close, and would
continue to be required to meet margin requirements until the
position is closed. In
<PAGE> 18
addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will
develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
each Fund may also use those investment vehicles, provided the Board
of Trustees determines that their use is consistent with the Fund's
investment objective.
A Fund will not enter into a futures contract or purchase an
option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by that Fund plus premiums paid
by it for open futures option positions, less the amount by which
any such positions are "in-the-money,"/3/ would exceed 5% of the
Fund's total assets.
When purchasing a futures contract or writing a put option on a
futures contract, a Fund must maintain with its custodian (or
broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contract. When
writing a call option on a futures contract, the Fund similarly will
maintain with its custodian cash or cash equivalents (including any
margin) equal to the amount by which such option is in-the-money
until the option expires or is closed out by the Fund.
A Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call options
written on indexes if, in the aggregate, the market value of all
such open positions exceeds the current value of the securities in
its portfolio, plus or minus unrealized gains and losses on the open
positions, adjusted for the historical relative volatility of the
relationship between the portfolio and the positions. For this
purpose, to the extent the Fund has written call options on specific
securities in its portfolio, the value of those securities will be
deducted from the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," each Fund will use commodity futures or commodity options
contracts solely for bona fide hedging purposes within the meaning
and intent of Regulation 1.3(z), or, with respect to positions in
commodity futures and commodity options contracts that do not come
within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not
exceed 5% of the fair market value of the assets of a Fund, after
taking into account unrealized profits and unrealized losses on any
such contracts it has entered into [in the case of an option that is
in-the-money at the time of
- ----------------------------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price exceeds
the value of the futures contract that is the subject of the option.
<PAGE> 19
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].
As long as a Fund continues to sell its shares in certain
states, the Fund's options and futures transactions will also be
subject to certain non-fundamental investment restrictions set forth
under Investment Restrictions in this Statement of Additional
Information.
TAXATION OF OPTIONS AND FUTURES
If a Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by a Fund, the difference between the cash
received at exercise and the premium paid is a capital gain or loss.
If a call or put option written by a Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security purchased
(put). For cash settlement options and futures options written by a
Fund, the difference between the cash paid at exercise and the
premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by a Fund was in-the-
money at the time it was written and the security covering the
option was held for more than the long-term holding period prior to
the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding period
of the securities covering an in-the-money option will not include
the period of time the option is outstanding.
If a Fund writes an equity call option /4/ other than a
"qualified covered call option," as defined in the Internal Revenue
Code, any loss on such option transaction, to the extent it does not
exceed the unrealized gains on the securities covering the option,
may be subject to deferral until the securities covering the option
have been sold.
A futures contract held until delivery results in capital gain
or loss equal to the difference between the price at which the
futures contract was entered into and the settlement price on the
earlier of delivery notice date or expiration date. If a Fund
delivers securities under a futures contract, the Fund also realizes
a capital gain or loss on those securities.
For Federal income tax purposes, a Fund generally is required
to recognize as income for each taxable year its net unrealized
gains and losses as of the end of the
- ---------------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to be
traded on a commodity futures exchange (e.g., an option contract on
a sub-index based on the price of nine hotel-casino stocks). The
definition of equity option excludes options on broad-based stock
indexes (such as the Standard & Poor's 500 index).
<PAGE> 20
year on futures, futures options and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized
with respect to such positions (either by year-end mark-to-market or
by actual closing of the positions) is considered to be 60% long-
term and 40% short-term, without regard to the holding periods of
the contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options positions,
the related securities and certain successor positions thereto) may
be deferred to a later taxable year. Sale of futures contracts or
writing of call options (or futures call options) or buying put
options (or futures put options) that are intended to hedge against
a change in the value of securities held by a Fund: (1) will affect
the holding period of the hedged securities; and (2) may cause
unrealized gain or loss on such securities to be recognized upon
entry into the hedge.
If a Fund were to enter into a short index future, short index
futures option or short index option position and the Fund's
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and the Fund's stock positions would be deemed to be positions in a
mixed straddle, subject to the above-mentioned loss deferral rules.
In order for a Fund to continue to qualify for Federal income
tax treatment as a regulated investment company, at least 90% of its
gross income for a taxable year must be derived from qualifying
income; i.e., dividends, interest, income derived from loans of
securities, and gains from the sale of securities or foreign
currencies, or other income (including but not limited to gains from
options, futures, or forward contracts). In addition, gains
realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of the
Fund's annual gross income. Any net gain realized from futures (or
futures options) contracts will be considered gain from the sale of
securities and therefore be qualifying income for purposes of the
90% requirement. In order to avoid realizing excessive gains on
securities held less than three months, the Fund may be required to
defer the closing out of certain positions beyond the time when it
would otherwise be advantageous to do so.
Each Fund distributes to shareholders annually any net capital
gains that have been recognized for Federal income tax purposes
(including year-end mark-to-market gains) on options and futures
transactions. Such distributions are combined with distributions of
capital gains realized on the Fund's other investments, and
shareholders are advised of the nature of the payments.
INVESTMENT RESTRICTIONS
Each Fund operates under the following investment restrictions.
A Fund may not:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the Government of the U.S. or
any of its agencies or instrumentalities or repurchase agreements
for such securities, and
<PAGE> 21
except that all or substantially all of the assets of the Fund may
be invested in another registered investment company having the same
investment objective and substantially similar investment policies
as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
except that all or substantially all of the assets of the Fund may
be invested in another registered investment company having the same
investment objective and substantially similar investment policies
as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, except that all or substantially
all of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except that
it may enter into (a) futures and options on futures and (b) forward
contracts;
(5) make loans, but this restriction shall not prevent the Fund
from (a) buying a part of an issue of bonds, debentures, or other
obligations which are publicly distributed, or from investing up to
an aggregate of 15% of its total assets (taken at market value at
the time of each purchase) in parts of issues of bonds, debentures
or other obligations of a type privately placed with financial
institutions, (b) investing in repurchase agreements, /5/ or (c)
lending portfolio securities, provided that it may not lend
securities if, as a result, the aggregate value of all securities
loaned would exceed 33% of its total assets (taken at market value
at the time of such loan) [the Funds have not lent portfolio
securities during the past year];
(6) borrow, except that it may (a) borrow up to 33 1/3% of its
total assets, taken at market value at the time of such borrowing,
as a temporary measure for extraordinary or emergency purposes, but
not to increase portfolio income (the total of reverse repurchase
agreements and such borrowings will not exceed 33 1/3% of its total
assets, and the Fund will not purchase additional securities when
its borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets) and (b) enter into
transactions in options, futures, and options on futures;
- -------------------------
/5/ A repurchase agreement involves the sale of securities to the
Fund, with the concurrent agreement of the seller to repurchase the
securities at the same price plus an amount representing interest at
an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. Repurchase
agreements entered into by the Fund will be fully collateralized and
will be marked-to-market daily. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the
collateral during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of
access to income during this period; and (c) expenses of enforcing
its rights.
<PAGE> 22
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular industry,
except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities, and except that all or substantially all of the
assets of the Fund may be invested in another registered investment
company having the same investment objective and substantially
similar investment policies as the Fund; or
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions (other than bracketed portions thereof
and, in the case of Special Fund, other than 1 and 2) are
fundamental policies and may not be changed without the approval of
a "majority of the outstanding voting securities" as defined above.
Each Fund and, in the case of Special Fund, together with
restrictions 1 and 2 above, is also subject to the following non-
fundamental restrictions and policies, which may be changed by the
Board of Trustees. A Fund may not:
(a) invest in any of the following: (i) interests in oil, gas,
or other mineral leases or exploration or development programs
(except readily marketable securities, including but not limited to
master limited partnership interests, that may represent indirect
interests in oil, gas, or other mineral exploration or development
programs); (ii) puts, calls, straddles, spreads, or any combination
thereof (except that the Fund may enter into transactions in
options, futures, and options on futures); (iii) shares of other
open-end investment companies, except in connection with a merger,
consolidation, acquisition, or reorganization, and except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund;
and (iv) limited partnerships in real estate unless they are readily
marketable;
(b) invest in companies for the purpose of exercising control
or management, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of the Fund's total assets (valued at time of purchase)
in the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to be
made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets, and except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund;
<PAGE> 23
(d) purchase or hold securities of an issuer if 5% of the
securities of such issuer are owned by those officers, trustees, or
directors of the Trust or of its investment adviser, who each own
beneficially more than 1/2 of 1% of the securities of that issuer;
(e) purchase securities of issuers (other than issuers of
Federal agency obligations or securities issued or guaranteed by any
foreign country or asset-backed securities) that, including their
predecessors or unconditional guarantors, have been in operation for
less than three years, if by reason of such purchase the value of
the Fund's investment in all such securities will exceed 5% of its
total assets (valued at time of purchase), except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund;
(f) mortgage, pledge, or hypothecate its assets, except as may
be necessary in connection with permitted borrowings or in
connection with options, futures, and options on futures;
(g) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American stock
exchange;
(h) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar entity;
(i) invest more than 25% of its total assets (valued at time of
purchase) in securities of foreign issuers (other than securities
represented by American Depositary Receipts (ADRs) or securities
guaranteed by a U.S. person);
(j) buy or sell an option on a security, a futures contract, or
an option on a futures contract unless the option, the futures
contract, or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on a
recognized exchange or similar entity;
(k) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets (less
the amount by which any such positions are in-the-money), excluding
put and call options purchased as closing transactions;
(l) invest more than 5% of its total assets in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A of the Securities Act of 1933;
(m) purchase securities on margin (except for use of short-term
credits as are necessary for the clearance of transactions), or sell
securities short unless (i) the Fund owns or has the right to obtain
securities equivalent in kind and amount to those sold short at no
added cost or (ii) the securities sold are "when issued" or "when
distributed" securities which the Fund expects to receive in a
recapitalization, reorganization, or other exchange for securities
the Fund contemporaneously owns or has the right to obtain and
provided that transactions in options, futures, and options on
futures are not treated as short sales; or
<PAGE> 24
(n) invest more than 15% of its net assets (taken at market
value at the time of each purchase) in illiquid securities,
including repurchase agreements maturing in more than seven days.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus under
the headings How to Purchase Shares, How to Redeem Shares, Net Asset
Value, and Shareholder Services, and that information is
incorporated herein by reference. The Prospectus discloses that you
may purchase (or redeem) shares through investment dealers, banks,
or other institutions. The staff of the Securities and Exchange
Commission has asked the Trust to disclose that it is the
responsibility of any such institution to establish procedures
insuring the prompt transmission to the Trust of any such purchase
order. The state of Texas has asked that the Trust disclose in its
Statement of Additional Information, as a reminder to any such bank
or institution, that it must be registered as a securities dealer in
Texas.
Each Fund's net asset value is determined on days on which the
New York Stock Exchange (the "NYSE") is open for trading. The NYSE
is regularly closed on Saturdays and Sundays and on New Year's Day,
the third Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving, and Christmas. If one of
these holidays falls on a Saturday or Sunday, the NYSE will be
closed on the preceding Friday or the following Monday,
respectively. Net asset value will not be determined on days when
the NYSE is closed unless, in the judgment of the Board of Trustees,
net asset value of a Fund should be determined on any such day, in
which case the determination will be made at 3:00 p.m., Chicago
time.
The Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets of the Trust during any
90-day period for any one shareholder. However, redemptions in
excess of such limit may be paid wholly or partly by a distribution
in kind of securities. If redemptions were made in kind, the
redeeming shareholders might incur transaction costs in selling the
securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, the Trust reserves the right to redeem shares in any
account for their then-current value (which will be promptly paid to
the investor) if at any time the shares in the account do not have a
value of at least $1,000. An investor will be notified that the
value of his account is less than that minimum and allowed at least
30 days to bring the value of the account up to at least $1,000
before the redemption is processed. The Agreement and Declaration
of Trust also authorizes the Trust to redeem shares under certain
other circumstances as may be specified by the Board of Trustees.
The Trust reserves the right to suspend or postpone redemptions
of shares of any Fund during any period when: (a) trading on the
NYSE is restricted, as determined by the Securities and Exchange
Commission, or the NYSE is closed for other than customary weekend
and holiday closings; (b) the Securities and Exchange
<PAGE> 25
Commission has by order permitted such suspension; or (c) an
emergency, as determined by the Securities and Exchange Commission,
exists, making disposal of portfolio securities or valuation of net
assets of such Fund not reasonably practicable.
MANAGEMENT
The following table sets forth certain information with respect
to the trustees and officers of the Trust:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME WITH THE TRUST DURING PAST FIVE YEARS
- ------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
Gary A. Anetsberger Senior Vice-President; Vice-President of Stein Roe & Farnham Incorporated
Controller (the "Adviser") since January, 1991; associate of the Adviser
prior thereto
Timothy K. Armour(1)(2) President; Trustee President of the Mutual Funds division of the Adviser and
Director of the Adviser since June, 1992; senior vice
president and director of marketing of Citibank Illinois prior
thereto
Jilaine Hummel Bauer Executive Vice-President; Senior Vice President (since April, 1992) and Assistant
Secretary Secretary (since May, 1990) of the Adviser; vice president of
the Adviser, prior thereto
Kenneth L. Block (3) Trustee Chairman Emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd (3) Trustee Chairman and Director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products) since 1992; chairman,
president, and chief executive officer of Sterling Plumbing
Group, Inc. prior thereto
N. Bruce Callow Executive Vice-President President of the Investment Counsel division of the Adviser
since June, 1994; senior vice president of trust and financial
services for The Northern Trust prior thereto
Daniel K. Cantor Vice-President Vice President of the Adviser since January, 1992; associate
of the Adviser prior thereto
Robert A. Christensen Vice-President Senior Vice President of the Adviser since January, 1991;
first vice president of the Adviser prior thereto
Lindsay Cook (1) Trustee Senior Vice President of Liberty Financial Companies, Inc.
(the indirect parent of the Adviser)
Kenneth W. Corba Vice-President Senior Vice President of the Adviser
E. Bruce Dunn Vice-President Senior Vice President of the Adviser
Erik P. Gustafson Vice-President Vice President of the Adviser since May, 1994; associate of
the Adviser from April, 1992 to May, 1994; associate attorney
with Fowler White Burnett Hurley Banick & Strickroot prior
thereto
<PAGE> 26
Philip D. Hausken Vice-President Legal Counsel for the Adviser since July, 1994; assistant
regional director, midwest regional office of the Securities
and Exchange Commission prior thereto
Millie Adams Hurwitz Vice-President Associate of the Adviser since 1992; senior vice president of
OLC Corporation prior thereto
Kenneth A. Kalina Treasurer Associate of the Adviser
Stephen P. Lautz Vice-President Vice President of the Adviser since May, 1994; associate of
the Adviser prior thereto
Lynn C. Maddox Vice-President Senior Vice President of the Adviser
Anne E. Marcel Vice-President Manager, Mutual Fund Sales & Services of the Adviser since
October, 1994; supervisor of the Counselor Department of the
Adviser from October, 1992 to October, 1994; vice president of
Selected Financial Services from May, 1990 to March, 1992;
assistant vice president of Carnegie Capital prior thereto
Francis W. Morley (3) Trustee Chairman of Employer Plan Administrators and Consultants Co.
(designer, administrator, and communicator of employee benefit
plans)
Charles R. Nelson (3) Trustee Professor, Department of Economics of the University of
Washington
Nicolette D. Parrish Vice-President; Associate of the Adviser
Assistant Secretary
Richard B. Peterson Vice-President Senior Vice President of the Adviser since June, 1991; officer
of State Farm Investment Management Corporation prior thereto
Janet B. Rysz Assistant Secretary Assistant Secretary of the Adviser
Gloria J. Santella Vice-President Vice President of the Adviser since January, 1992; associate
of the Adviser prior thereto
Thomas P. Sorbo Vice-President Senior Vice President of the Adviser since January, 1994; vice
president of the Adviser from September, 1992 to December,
1993; associate of Travelers Insurance Company prior thereto
Shary Risting Stadler Vice-President Senior Vice President & Director of Marketing of the Adviser
since November, 1993; vice president, marketing of Citicorp
from April, 1990 to October, 1993; assistant vice president of
Citicorp prior thereto
Gordon R. Worley (2)(3) Trustee Private investor
Hans P. Ziegler Executive Vice-President Chief Executive Officer of the Adviser since May, 1994;
president of the Investment Counsel division of the Adviser
from July, 1993 to June, 1994; president and chief executive
officer, Pitcairn Financial Management Group prior thereto
<FN>
<PAGE> 27
(1) Trustee who is an "interested person" of the Trust and of the
Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of auditors
and confers with the auditors regarding the scope and results of
the audit.
</TABLE>
Certain of the trustees and officers of the Trust are trustees
or officers of other investment companies managed by SteinRoe. Ms.
Bauer is a vice president of the Fund's distributor, Liberty
Securities Corporation. The address of Mr. Block is 11 Woodley
Road, Winnetka, Illinois 60093; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, Massachusetts 02210; that of Mr. Morley is 20 North
Wacker Drive, Suite 2275, Chicago, Illinois 60606; that of Mr.
Nelson is Department of Economics, University of Washington,
Seattle, Washington 98195; that of Mr. Worley is 1407 Clinton Place,
River Forest, Illinois 60305; and that of the officers is One South
Wacker Drive, Chicago, Illinois 60606.
The only compensation paid to the trustees and officers of the
Trust for their services as such consists of fees paid to each
trustee who is not an "interested person" of the Trust or the
Adviser. The fee schedule provides for an annual retainer of $8,000
(divided equally among the Funds of the Trust) plus an attendance
fee from each Fund for each meeting of the Board or committee
thereof attended at which business for that Fund is conducted. The
attendance fees (other than for a Nominating Committee meeting) are
based on each Fund's net assets as of the preceding December 31.
For a Fund with net assets of less than $251 million, the fee is
$200 per meeting; with $251 million to $500 million, $350; with $501
million to $750 million, $500; with $750 million to $1 billion,
$650; and with over $1 billion in net assets, $800. Each non-
interested trustee also receives an aggregate of $500 for attending
each meeting of the Nominating Committee. The trustees collectively
received from the Trust an aggregate of $90,600 in fees for the
fiscal year ended September 30, 1994.
FINANCIAL STATEMENTS
Please refer to the Funds' 9/30/94 Financial Statements
(balance sheets and schedules of investments as of 9/30/94 and the
statements of operations, changes in net assets, and notes thereto)
and the report of independent public accountants contained in the
9/30/94 Annual Report of the Funds. The Financial Statements and
the report of independent public accountants (but no other material
from the Annual Report) are incorporated herein by reference. The
Annual Report may be obtained at no charge by telephoning 1-800-338-
2550.
PRINCIPAL SHAREHOLDERS
As of October 31, 1994, the only persons known by the Trust to
own of record or "beneficially" 5% or more of the outstanding shares
of a Fund within the definition
<PAGE> 28
of that term as contained in Rule 13d-3 under the Securities
Exchange Act of 1934 were as follows:
APPROXIMATE PERCENTAGE
OF
NAME AND ADDRESS FUND OUTSTANDING SHARES HELD
- ---------------------- ------------------ ----------------------
First Bank National Prime Equities 16.9%
Association* Total Return Fund 19.9
410 N. Michigan Avenue Growth Stock Fund 19.4
Chicago, IL 60611 Special Fund 16.1
Capital Opportunities
Fund 19.8
Charles Schwab & Co., Prime Equities 18.8
Inc.*, Attn: Mutual Total Return Fund 9.7
Fund Dept. Special Fund 16.7
101 Montgomery Street Capital Opportunities
San Francisco, CA 94104 Fund 13.5
Dunspaugh-Dalton Special Venture Fund 6.6
Foundation
9040 Sunset Drive
Miami, FL 33173
___________________
*Shares held of record, but not beneficially.
The following table shows shares of the Funds held by the
categories of persons indicated, and in each case the approximate
percentage of outstanding shares represented:
CLIENTS OF THE
ADVISER IN THEIR TRUSTEES AND
CLIENT ACCOUNTS OFFICERS
AS OF 10/31/94* AS OF 10/31/94
------------------- --------------------
SHARES HELD PERCENT SHARES HELD PERCENT
----------- ------- ----------- -------
Prime Equities 2,226,997 26.1 47,768 **
Total Return Fund 882,313 93.2 11,497 **
Growth Stock Fund 744,752 8.4 100,560 **
Special Fund 1,406,828 10.5 146,403 **
Special Venture Fund 1,010,217 18.5 1,000 **
Capital Opportunities
Fund 8,155,372 15.4 129,621 **
______________
*The Adviser may have discretionary authority over such shares
and, accordingly, they could be deemed to be owned "beneficially"
by the Adviser under Rule 13d-3. However, the Adviser disclaims
actual beneficial ownership of such shares.
**Represents less than 1% of the outstanding shares.
INVESTMENT ADVISORY SERVICES
The Adviser, Stein Roe & Farnham Incorporated, is a wholly-
owned subsidiary of SteinRoe Services Inc. ("SSI"), the Funds'
transfer agent, which in turn is a wholly-owned indirect subsidiary
of Liberty Mutual Insurance Company ("Liberty Mutual"). Liberty
Mutual is a mutual insurance company, principally in the
property/casualty insurance field, organized under the laws of
Massachusetts in 1912.
The directors of the Adviser are Gary L. Countryman, Kenneth R.
Leibler, Timothy K. Armour, N. Bruce Callow, and Hans P. Ziegler.
Mr. Countryman is Chairman of Liberty Mutual Insurance Company; Mr.
Leibler is President and Chief Operating
<PAGE> 29
Officer of Liberty Financial Companies; Mr. Armour is President of
the Adviser's Mutual Funds division; Mr. Callow is President of the
Adviser's Investment Counsel division; and Mr. Ziegler is Chief
Executive Officer of the Adviser. The business address of Mr.
Countryman is 175 Berkeley Street, Boston, Massachusetts 02117; that
of Mr. Leibler is Federal Reserve Plaza, Boston, Massachusetts
02210; and that of Messrs. Armour, Callow, and Ziegler is One South
Wacker Drive, Chicago, Illinois 60606.
The Adviser and its predecessor have been providing investment
advisory services since 1932. The Adviser acts as investment
adviser to wealthy individuals, trustees, pension and profit sharing
plans, charitable organizations, and other institutional investors.
As of December 31, 1994, the Adviser managed over $22.8 billion in
assets: over $5.4 billion in equities and over $17.4 billion in
fixed-income securities (including $2.3 billion in municipal
securities). The $22.8 billion in managed assets included over $6.4
billion held by open-end mutual funds managed by the Adviser
(approximately 25% of the mutual fund assets were held by clients of
the Adviser). These mutual funds were owned by over 149,000
shareholders. The $6.4 billion in mutual fund assets included over
$504 million in over 33,000 IRA accounts. In managing those assets,
the Adviser utilizes a proprietary computer-based information system
that maintains and regularly updates information for approximately
6,500 companies. The Adviser also monitors over 1,400 issues via a
proprietary credit analysis system. At December 31, 1994, the
Adviser employed 20 research analysts and 42 account managers. The
average investment-related experience of these individuals was 19
years.
SteinRoe Counselor [service mark] and SteinRoe Counselor
Preferred [service mark] are professional investment advisory
services offered to Fund shareholders. Each is designed to help
shareholders construct Fund investment portfolios to suit their
individual needs. Based on information shareholders provide about
their financial circumstances, goals, and objectives in response to
a questionnaire, the Adviser's investment professionals create
customized portfolio recommendations for investments in the Funds
and other mutual funds managed by the Adviser. Shareholders
participating in SteinRoe Counselor [service mark] are free to self
direct their investments while considering the Adviser's
recommendations; shareholders participating in SteinRoe Counselor
Preferred [service mark] enjoy the added benefit of having the
Adviser implement portfolio recommendations automatically for a fee
of 1% or less, depending on the size of their portfolios. In
addition to reviewing shareholders' circumstances, goals, and
objectives periodically and updating portfolio recommendations to
reflect any changes, the shareholders who participate in these
programs are assigned a dedicated Counselor [service mark]
representative. Other distinctive services include specially
designed account statements with portfolio performance and
transaction data, newsletters, and regular investment, economic, and
market updates. A $50,000 minimum investment is required to
participate in either program.
Please refer to the description of the Adviser, advisory
agreements, advisory fees, expense limitations, and transfer agency
services under Management of the Funds in the Prospectus, which is
incorporated herein by reference. The table below shows
<PAGE> 30
gross advisory fees paid by the Funds for the three most recent
fiscal years and any expense reimbursements to them by the Adviser:
YEAR ENDED YEAR ENDED YEAR ENDED
FUND TYPE OF PAYMENT 9/30/94 9/30/93 9/30/92
- ---------------- --------------- ---------- ----------- -----------
Prime Equities Advisory fee $ 688,242 $ 498,157 $ 376,133
Total Return Fund Advisory fee 1,262,296 1,097,007 926,820
Growth Stock Fund Advisory fee 2,544,530 2,850,075 2,405,898
Special Fund Advisory fee 8,804,952 6,238,784 4,472,465
Capital Opportuni-
ties Fund Advisory fee 1,240,569 949,563 972,450
The Adviser provides office space and executive and other
personnel to the Funds, and bears any sales or promotional expenses.
Each Fund pays all expenses other than those paid by the Adviser,
including but not limited to printing and postage charges and
securities registration and custodian fees and expenses incidental
to its organization.
The investment advisory agreement of each Fund provides that
the Adviser shall reimburse the Fund to the extent that total annual
expenses of the Fund (including fees paid to the Adviser, but
excluding taxes, interest, commissions and other normal charges
incident to the purchase and sale of portfolio securities, and
expenses of litigation to the extent permitted under applicable
state law) exceed the applicable limits prescribed by any state in
which shares of the Fund are being offered for sale to the public;
provided, however, the Adviser is not required to reimburse a Fund
an amount in excess of the management fee from the Fund for such
year. The Trust believes that currently the most restrictive state
limit on mutual fund expenses is that of California, which limit
currently is 2 1/2% of the first $30 million of average net assets,
2% of the next $70 million, and 1 1/2% thereafter. In addition, in
the interest of further limiting the expenses Special Venture Fund,
the Adviser has undertaken to reimburse the Fund for certain
expenses, as described in the Prospectus; an expense undertaking
relating to Prime Equities expired on January 31, 1995.
The advisory agreements also provide that neither the Adviser,
nor any of its directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to the
Trust or any shareholder of the Trust for any error of judgment,
mistake of law or any loss arising out of any investment, or for any
other act or omission in the performance by the Adviser of its
duties under the agreement, except for liability resulting from
willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of
its obligations and duties under the agreement.
Any expenses that are attributable solely to the organization,
operation, or business of a Fund shall be paid solely out of that
Fund's assets. Any expenses incurred by the Trust that are not
solely attributable to a particular Fund are apportioned in such
manner as the Adviser determines is fair and appropriate, unless
otherwise specified by the Board of Trustees.
<PAGE> 31
BOOKKEEPING AND ACCOUNTING AGREEMENT
Pursuant to a separate agreement with the Trust, the Adviser
receives a fee for performing certain bookkeeping and accounting
services for each Fund. For these services, the Adviser receives an
annual fee of $25,000 per Fund plus .0025 of 1% of average net
assets over $50 million.
DISTRIBUTOR
Shares of each Fund are distributed by Liberty Securities
Corporation ("LSC") under a Distribution Agreement as described
under Management of the Funds in the Prospectus, which is
incorporated herein by reference. The Distribution Agreement
continues in effect from year to year, provided such continuance is
approved annually (i) by a majority of the trustees or by a majority
of the outstanding voting securities of the Trust, and (ii) by a
majority of the trustees who are not parties to the Agreement or
interested persons of any such party. The Trust has agreed to pay
all expenses in connection with registration of its shares with the
Securities and Exchange Commission and auditing and filing fees in
connection with registration of its shares under the various state
blue sky laws and assumes the cost of preparation of prospectuses
and other expenses. The Adviser bears all sales and promotional
expenses, including payments to LSC for the sales of Fund shares.
The Adviser also makes payments to other broker-dealers, banks, and
other institutions for the sales of Fund shares of 0.20% of the
annual average value of accounts of such shares.
As agent, LSC offers shares of each Fund to investors in states
where the shares are qualified for sale, at net asset value, without
sales commissions or other sales load to the investor. In addition,
no sales commission or "12b-1" payment is paid by any Fund. LSC
offers the Funds' shares only on a best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for the Trust, as
described under Management of the Funds in the Prospectus. For
performing these services, SSI receives the following payments from
each Fund: (1) a fee of $4.00 for each new account opened; (2)
monthly payments of $1.063 per open shareholder account; (3)
payments of $0.367 per closed shareholder account for each month
through June of the calendar year following the year in which the
account is closed; (4) $0.3025 per shareholder account for each
dividend paid; and (5) $1.415 for each shareholder-initiated
transaction. In addition, each Fund reimburses SSI for any charges
for certain services provided to it by DST Systems, Inc. in
connection with transfer agency services to the Funds. The Trust
believes the charges by SSI to the Funds are comparable to those of
other companies performing similar services. (See Investment
Advisory Services.)
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the Trust.
It is responsible for holding all
<PAGE> 32
securities and cash of the Funds, receiving and paying for
securities purchased, delivering against payment securities sold,
receiving and collecting income from investments, making all
payments covering expenses of the Funds, and performing other
administrative duties, all as directed by authorized persons. The
custodian does not exercise any supervisory function in such matters
as purchase and sale of portfolio securities, payment of dividends,
or payment of expenses of the Funds.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or depositories.
Portfolio securities purchased outside of the U.S. are maintained in
the custody of foreign banks and trust companies that are members of
the Bank's Global Custody Network and foreign depositories ("foreign
sub-custodians"). Each of the domestic and foreign custodial
institutions holding portfolio securities has been approved by the
Board of Trustees in accordance with regulations under the
Investment Company Act of 1940.
The Board of Trustees reviews, at least annually, whether it is
in the best interest of each Fund and its shareholders to maintain
Fund assets in each of the countries in which the Fund invests with
particular foreign sub-custodians in such countries, pursuant to
contracts between such respective foreign sub-custodians and the
Bank. The review includes an assessment of the risks of holding
Fund assets in any such country (including risks of expropriation or
imposition of exchange controls), the operational capability and
reliability of each such foreign sub-custodian, and the impact of
local laws on each such custody arrangement. The Board of Trustees
is aided in its review by the Bank, which has assembled the network
of foreign sub-custodians utilized by the Funds, as well as by the
Adviser and counsel. However, with respect to foreign sub-
custodians, there can be no assurance that a Fund, and the value of
its shares, will not be adversely affected by acts of foreign
governments, financial or operational difficulties of the foreign
sub-custodians, difficulties and costs of obtaining jurisdiction
over, or enforcing judgments against, the foreign sub-custodians, or
application of foreign law to a Fund's foreign sub-custodial
arrangements. Accordingly, an investor should recognize that the
non-investment risks involved in holding assets abroad are greater
than those associated with investing in the United States.
The Funds may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Trust are Arthur
Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603. The
accountants audit and report on the Funds' annual financial
statements, review certain regulatory reports and the Funds' Federal
income tax returns, and perform other professional accounting,
auditing, tax and advisory services when engaged to do so by the
Trust.
<PAGE> 33
PORTFOLIO TRANSACTIONS
The Adviser places the orders for the purchase and sale of each
Fund's portfolio securities and options and futures contracts. The
Adviser's overriding objective in effecting portfolio transactions
is to seek to obtain the best combination of price and execution.
The best net price, giving effect to brokerage commissions, if any,
and other transaction costs, normally is an important factor in this
decision, but a number of other judgmental factors may also enter
into the decision. These include: the Adviser's knowledge of
negotiated commission rates currently available and other current
transaction costs; the nature of the security being traded; the size
of the transaction; the desired timing of the trade; the activity
existing and expected in the market for the particular security;
confidentiality; the execution, clearance and settlement
capabilities of the broker or dealer selected and others which are
considered; the Adviser's knowledge of the financial stability of
the broker or dealer selected and such other brokers or dealers; and
the Adviser's knowledge of actual or apparent operational problems
of any broker or dealer. Recognizing the value of these factors, a
Fund may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same
transaction. Evaluations of the reasonableness of brokerage
commissions, based on the foregoing factors, are made on an ongoing
basis by the Adviser's staff while effecting portfolio transactions.
The general level of brokerage commissions paid is reviewed by the
Adviser, and reports are made annually to the Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for a Fund, the
Adviser often selects a broker or dealer that has furnished it with
research products or services such as research reports,
subscriptions to financial publications and research compilations,
compilations of securities prices, earnings, dividends, and similar
data, and computer data bases, quotation equipment and services,
research-oriented computer software and services, and services of
economic and other consultants. Selection of brokers or dealers is
not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, the Adviser uses an internal allocation
procedure to identify those brokers or dealers who provide it with
research products or services and the amount of research products or
services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate,
including the Funds, to such brokers or dealers to ensure the
continued receipt of research products or services the Adviser feels
are useful. In certain instances, the Adviser receives from brokers
and dealers products or services that are used both as investment
research and for administrative, marketing, or other non-research
purposes. In such instances, the Adviser makes a good faith effort
to determine the relative proportions of such products or services
which may be considered as investment research. The portion of the
costs of such products or services attributable to research usage
may be defrayed by the Adviser (without prior agreement or
understanding, as noted above) through brokerage commissions
generated by transactions by clients (including the Funds), while
the portions of the costs attributable to non-research usage of such
products or services is paid by the Adviser in cash. No person
<PAGE> 34
acting on behalf of a Fund is authorized, in recognition of the
value of research products or services, to pay a commission in
excess of that which another broker or dealer might have charged for
effecting the same transaction. Research products or services
furnished by brokers and dealers may be used in servicing any or all
of the clients of the Adviser and not all such research products or
services are used in connection with the management of the Funds.
With respect to a Fund's purchases and sales of portfolio
securities transacted with a broker or dealer on a net basis, the
Adviser may also consider the part, if any, played by the broker or
dealer in bringing the security involved to the Adviser's attention,
including investment research related to the security and provided
to the Fund.
The table below shows information on brokerage commissions paid
by the Funds:
<TABLE>
<CAPTION>
TOTAL GROWTH CAPITAL
PRIME RETURN STOCK SPECIAL OPPORTUNITIES
EQUITIES FUND FUND FUND FUND
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/94 $ 260,263 $ 85,902 $ 275,659 $ 1,915,383 $ 176,246
Amount of commissions paid
to brokers or dealers who
supplied research services
to the Adviser 239,062 84,959 272,219 1,699,535 150,543
Total dollar amount involved
in such transactions 119,155,726 41,070,587 173,392,288 766,055,953 69,764,991
Amount of commissions paid to
brokers or dealers that were
allocated to such brokers or
dealers by the Fund's
portfolio manager because of
research services provided to
the Fund 71,665 17,012 39,100 364,200 38,502
Total dollar amount involved
in such transactions 35,922,000 7,075,000 26,730,000 160,755,000 15,969,000
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/93 132,301 169,445 264,423 1,091,659 145,280
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/92 79,972 94,806 201,617 674,903 123,345
</TABLE>
The Trust has arranged for its custodian to act as a soliciting
dealer to accept any fees available to the custodian as a soliciting
dealer in connection with any tender offer for Fund portfolio
securities. The custodian will credit any such fees received
against its custodial fees. In addition, the Board of Trustees has
reviewed the legal developments pertaining to and the practicability
of attempting to recapture underwriting discounts or selling
concessions when portfolio securities are purchased in underwritten
offerings. However, the Board has been advised by counsel that
recapture by a mutual fund currently is not permitted under the
Rules of Fair Practice of the National Association of Securities
Dealers.
<PAGE> 35
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund intends to comply with the special provisions of the
Internal Revenue Code that relieve it of Federal income tax to the
extent of its net investment income and capital gains currently
distributed to shareholders.
Because dividend and capital gain distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would nonetheless
be taxable to him, even if the net asset value of shares were
reduced below his cost. However, for Federal income tax purposes
the shareholder's original cost would continue as his tax basis.
Each Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent a Fund invests in foreign securities, it may be
subject to withholding and other taxes imposed by foreign countries.
Tax treaties between certain countries and the United States may
reduce or eliminate such taxes. Investors may be entitled to claim
U.S. foreign tax credits with respect to such taxes, subject to
certain provisions and limitations contained in the Code.
Specifically, if more than 50% of the Fund's total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Fund may file an election with the Internal
Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign
income taxes paid by them, and (iii) deduct such pro rata shares in
computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against
their United States income taxes. Shareholders who do not itemize
deductions for Federal income tax purposes will not, however, be
able to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their
share of such taxes in gross income. Shareholders who claim a
foreign tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents income
from each foreign country, if the Fund qualifies to pass along such
credit.
INVESTMENT PERFORMANCE
A Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the net
asset value per share for a period. A "Total Return
<PAGE> 36
Percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of
the period and subtracting one. For a given period, an "Average
Annual Total Return" may be computed by finding the average annual
compounded rate that would equate a hypothetical initial amount
invested of $1,000 to the ending redeemable value.
Average Annual Total Return is computed as follows: ERV =
P(1+T)n
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the end
of the period (or fractional portion thereof).
For example, for a $1,000 investment in a Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at September 30, 1994 were:
TOTAL TOTAL RETURN AVERAGE ANNUAL
RETURN PERCENTAGE TOTAL RETURN
------- ------------ --------------
Prime Equities
1 year $1,040 4.03% 4.03%
5 years 1,646 64.56 10.48
Life of Fund* 1,947 94.71 9.27
Total Return Fund
1 year 1,004 0.36 0.36
5 years 1,543 54.32 9.07
10 years 3,077 207.66 11.89
Growth Stock Fund
1 year 1,021 2.10 2.10
5 years 1,607 60.70 9.95
10 years 3,392 239.23 12.99
Special Fund
1 year 1,020 2.02 2.02
5 years 1,707 70.70 11.29
10 years 4,465 346.46 16.14
Capital Opportunities Fund
1 year 1,023 2.31 2.31
5 years 1,394 39.40 6.87
10 years 2,979 197.88 11.53
______________________________________
*Life of Fund is from its date of public offering, 3/23/87.
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
Federal, state, or local income taxes which shareholders must pay on
a current basis. They are not necessarily indicative of future
results. The performance of a Fund is a result of conditions in the
securities markets, portfolio management, and operating expenses.
Although investment
<PAGE> 37
performance information is useful in reviewing a Fund's performance
and in providing some basis for comparison with other investment
alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time
periods.
In advertising and sales literature, a Fund may compare its
performance with that of other mutual funds, indexes or averages of
other mutual funds, indexes of related financial assets or data, and
other competing investment and deposit products available from or
through other financial institutions. The composition of these
indexes or averages differs from that of the Funds. Comparison of a
Fund to an alternative investment should be made with consideration
of differences in features and expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which the Funds
believe to be generally accurate. A Fund may also note its mention
or recognition in newspapers, magazines, or other media from time to
time. However, the Funds assume no responsibility for the accuracy
of such data. Newspapers and magazines which might mention the
Funds include, but are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Barron's
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Fund Action
Gourmet
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Los Angeles Times
Money
Mutual Fund Letter
Mutual Fund News Service
Mutual Fund Values (Morningstar)
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Smart Money
Smithsonian
Stanger's Investment Adviser
Time
Travel & Leisure
United Mutual Fund Selector
USA Today
U.S. News and World Report
The Wall Street Journal
Working Women
Worth
Your Money
All of the Funds may compare their performance to the Consumer
Price Index (All Urban), a widely recognized measure of inflation.
<PAGE> 38
Each Fund's performance may be compared to the following
indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange
Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
(These indexes are widely recognized (These indexes generally
indicators of general U.S. stock reflect the performance of
market results.) stocks traded in the
indicated markets.)
In addition, the Funds may compare performance as indicated
below:
<TABLE>
<CAPTION>
BENCHMARK FUND(S)
<S> <C>
Value Line Index
(Widely recognized indicator of the
performance of small- and medium-sized company stocks) Capital Opportunities Fund, Special Fund, Special Venture
Fund
Lipper Capital Appreciation Fund Average Capital Opportunities Fund
Lipper Equity Funds Average All
Lipper Equity Income Funds Average Prime Equities, Total Return Fund
Lipper General Equity Funds Average All
Lipper Growth & Income Funds Average Prime Equities, Total Return Fund
Lipper Growth & Income Fund Index Prime Equities, Total Return Fund
Lipper Growth Fund Index Prime Equities, Growth Stock Fund, Special Fund, Special
Venture Fund, Capital Opportunities Fund,
Lipper Growth Funds Average Special Fund, Special Venture Fund, Growth Stock Fund
ICD Aggressive Growth and Long-Term Growth Funds
Average Prime Equities, Growth Stock Fund, Special Fund, Special
Venture Fund, Capital Opportunities Fund
ICD Aggressive Growth Fund Large Index Capital Opportunities Fund, Special Fund, Special Venture
Fund
ICD Aggressive Growth Fund Small Index Capital Opportunities Fund, Special Fund, Special Venture
Fund
ICD Aggressive Growth Funds Average Special Fund, Special Venture Fund, Capital Opportunities
Fund
ICD All Equity Funds Average Growth Stock Fund, Special Fund, Special Venture Fund,
Capital Opportunities Fund
ICD Balanced Funds Average Prime Equities, Total Return Fund
ICD Balance Funds Index Total Return Fund
ICD Both Equity Funds Average Prime Equities, Total Return Fund
ICD General Equity Average* All
ICD Growth & Income Funds Average Prime Equities, Total Return Fund
ICD Growth & Income Funds Index Prime Equities, Total Return Fund
ICD Long-Term Growth Funds Average Prime Equities, Capital Opportunities Fund, Growth Stock
Fund, Special Fund, Special Venture Fund
<PAGE> 39
ICD Long-Term Growth Funds Index Prime Equities, Capital Opportunities Fund, Growth Stock
Fund, Special Fund, Special Venture Fund
ICD Total Return Funds Average Prime Equities, Total Return Fund
ICD Total Return Funds Index Total Return Fund
Morningstar Aggressive Growth Average Capital Opportunities Fund
Morningstar All Equity Funds Average Growth Stock Fund, Special Fund, Special Venture Fund,
Capital Opportunities Fund
Morningstar Equity Fund Average All
Morningstar Equity Income Average Total Return Fund
Morningstar Balanced Average Total Return Fund
Morningstar Both Equity Funds Average Prime Equities, Total Return Fund
Morningstar General Equity Average** All
Morningstar Growth and Income Average Prime Equities, Total Return Fund
Morningstar Growth Average Prime Equities, Special Fund, Special Venture Fund,
Growth Stock Fund
Morningstar Hybrid Fund Average All
Morningstar U.S. Diversified Average All
<FN>
*Includes ICD Aggressive Growth, Growth & Income,
Long-Term Growth, and Total Return averages.
**Includes Morningstar Aggressive Growth, Growth,
Balanced, Equity Income, and Growth & Income averages.
</TABLE>
The ICD Indexes reflect the unweighted average total return of
the largest twenty funds within their respective category as
calculated and published by ICD.
The Lipper averages are unweighted averages of total return
performance as classified, calculated, and published by Lipper.
Lipper Growth Fund index reflects the net asset value weighted total
return of the largest thirty growth funds and thirty growth and
income funds, respectively, as calculated and published by Lipper.
The Lipper, ICD, and Morningstar averages are unweighted
averages of total return performance of mutual funds as classified,
calculated, and published by these independent services that monitor
the performance of mutual funds. The Funds may also use comparative
performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper
or another service reclassify a Fund to a different category or
develop (and place a Fund into) a new category, that Fund may
compare its performance or ranking with those of other funds in the
newly assigned category, as published by the service.
A Fund may also cite its rating, recognition, or other mention
by Morningstar or any other entity. Morningstar's rating system is
based on risk-adjusted total return performance and is expressed in
a star-rating format. The risk-adjusted number is computed by
subtracting a Fund's risk score (which is a function of the Fund's
monthly returns less the 3-month T-bill return) from the Fund's
load-adjusted total return score. This numerical score is then
translated into rating categories, with the top
<PAGE> 40
10% labeled five star, the next 22.5% labeled four star, the next
35% labeled three star, the next 22.5% labeled two star, and the
bottom 10% one star. A high rating reflects either above-average
returns or below-average risk, or both.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Funds may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since 1926)
total return data (including, for example, total return indexes,
total return percentages, average annual total returns and standard
deviations of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
_____________________
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable Investment,
that both investments earn either 6%, 8% or 10% compounded annually,
and that the investor withdrew the entire amount at the end of the
period. (A tax rate of 39.6% is applied annually to the Taxable
Investment and on the withdrawal of earnings on the Tax-Deferred
Investment.)
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 150,484 82,067 97,780 117,014
20 62,943 75,543 91,947 59,362 68,109 78,351
15 41,684 47,304 54,099 40,358 44,675 49,514
10 24,797 26,820 29,098 24,453 26,165 28,006
5 11,178 11,613 12,072 11,141 11,546 11,965
1 2,072 2,096 2,121 2,072 2,096 2,121
Dollar Cost Averaging. Dollar cost averaging is an investment
strategy that requires investing a fixed amount of money in Fund
shares at set intervals. This allows you to purchase more shares
when prices are low and fewer shares when prices are high. Over
time, this tends to lower your average cost per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily declining
market. Dollar cost averaging involves
<PAGE> 41
uninterrupted investing regardless of share price and therefore may
not be appropriate for every investor.
From time to time, a Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax guide,
or other supplemental information to investors and shareholders. It
may also mention the SteinRoe Counselor [service mark] and the
SteinRoe Counselor Preferred [service mark] programs and asset
allocation and other investment strategies.
APPENDIX--RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer. Consequently,
the Adviser believes that the quality of debt securities in which a
Fund invests should be continuously reviewed and that individual
analysts give different weightings to the various factors involved
in credit analysis. A rating is not a recommendation to purchase,
sell or hold a security because it does not take into account market
value or suitability for a particular investor. When a security has
received a rating from more than one service, each rating should be
evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the rating services from
other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
AAA. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change, such
changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
AA. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa bonds or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
<PAGE> 42
A. Bonds rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA. Bonds rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
CA. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues only
in small degree.
A. Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
<PAGE> 43
BBB. Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, AND C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
C1. This rating is reserved for income bonds on which no
interest is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major
rating categories. Foreign debt is rated on the same basis as
domestic debt measuring the creditworthiness of the issuer; ratings
of foreign debt do not take into account currency exchange and
related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or currencies;
certain swaps and options; and interest only and principal only
mortgage securities. The absence of an "r" symbol should not be
taken as an indication that an obligation will exhibit no volatility
or variability in total return.
<PAGE>
STEINROE INVESTMENT TRUST
SteinRoe Young Investor Fund
Supplement to February 1, 1995 Statement
of Additional Information
_________________________
INVESTMENT ADVISORY SERVICES. On September 1, 1995, the
investment advisory agreement with Stein Roe & Farnham
Incorporated ("SteinRoe") relating to the Fund was replaced
with an administrative agreement and a management agreement.
Other than changes in fee structure, the only material
difference between the old and new agreements is that
administrative services and facilities are furnished to the
Fund under a separate agreement and the provision relating to
expense reimbursements by SteinRoe contained in the old
investment advisory agreement (described on page 26 of this
Statement of Additional Information) is contained in the new
administrative agreement (but not the new management
agreement). Please see the supplement dated September 1,
1995 to the Fund's Prospectus for further information on the
new agreements.
TRANSFER AGENT. Effective May 1, 1995, the fees for
transfer agency services described in this Statement of
Additional information under the caption Transfer Agent were
changed. The revised fee schedule calls for the Fund to pay
to SteinRoe Services Inc. at an annual rate of 0.22% of its
average daily net assets.
The Date of this Supplement is September 1, 1995.
<PAGE> 1
Statement of Additional Information Dated February 1, 1995
STEINROE INVESTMENT TRUST
P.O. Box 804058, Chicago, Illinois 60680
1-800-338-2550
STEINROE YOUNG INVESTOR FUND
SteinRoe Young Investor Fund is a series of the SteinRoe
Investment Trust (the "Trust"). Each series of the Trust represents
shares of beneficial interest in a separate portfolio of securities
and other assets, with its own objectives and policies. This
Statement of Additional Information is not a prospectus, but
provides additional information that should be read in conjunction
with the Fund's prospectus dated February 1, 1995, and any
supplements thereto ("Prospectus"). The Prospectus may be obtained
at no charge by telephoning 1-800-403-KIDS (800-403-5437).
TABLE OF CONTENTS
Page
General Information and History....................2
Investment Policies................................3
Portfolio Investments and Strategies...............3
Investment Restrictions...........................17
Purchases and Redemptions.........................20
Management........................................21
Financial Statements..............................24
Principal Shareholders............................24
Investment Advisory Services......................25
Distributor.......................................27
Transfer Agent....................................27
Custodian.........................................28
Independent Public Accountants....................28
Portfolio Transactions............................29
Additional Income Tax Considerations..............30
Investment Performance............................31
Appendix--Ratings.................................35
<PAGE> 2
GENERAL INFORMATION AND HISTORY
As used herein, the "Fund" refers to the series of the SteinRoe
Investment Trust (the "Trust") designated SteinRoe Young Investor
Fund.
Stein Roe & Farnham Incorporated ("SteinRoe") is investment
adviser and provides administrative services to the Fund.
Currently, eight series of the Trust are authorized and
outstanding. The name of the Trust was changed on December 31,
1987, from SteinRoe Equity Portfolio to SteinRoe Equity Trust. On
June 30, 1989, the name of the Trust was changed from SteinRoe
Equity Trust to SteinRoe Investment Trust.
Each share of a series is entitled to participate pro rata in
any dividends and other distributions declared by the Board on
shares of that series, and all shares of a series have equal rights
in the event of liquidation of that series.
Each whole share (or fractional share) outstanding on the
record date established in accordance with the By-Laws shall be
entitled to a number of votes on any matter on which it is entitled
to vote equal to the net asset value of the share (or fractional
share) in United States dollars determined at the close of business
on the record date (for example, a share having a net asset value of
$10.50 would be entitled to 10.5 votes). As a business trust, the
Trust is not required to hold annual shareholder meetings. However,
special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies, or approving an
investment advisory contract. If requested to do so by the holders
of at least 10% of the Trust's outstanding shares, the Trust will
call a special meeting for the purpose of voting upon the question
of removal of a trustee or trustees and will assist in the
communications with other shareholders as if the Trust were subject
to Section 16(c) of the Investment Company Act of 1940. All shares
of all series of the Trust are voted together in the election of
trustees. On any other matter submitted to a vote of shareholders,
shares are voted in the aggregate and not by individual series,
except that shares are voted by individual series when required by
the Investment Company Act of 1940 or other applicable law, or when
the Board of Trustees determines that the matter affects only the
interests of one or more series, in which case shareholders of the
unaffected series are not entitled to vote on such matters.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
The Fund may in the future seek to achieve its objective by
pooling its assets with assets of other mutual funds managed by
SteinRoe for investment in another mutual fund having the same
investment objective and substantially the same investment policies
and restrictions as the Fund. The purpose of such an arrangement is
to achieve greater operational efficiencies and reduce costs.
SteinRoe is expected to manage any such mutual fund in which the
Fund would invest. Such investment would be subject to
determination by the Trustees that it was in the best interests of
<PAGE>3
the Fund and its shareholders, and shareholders would receive
advance notice of any such change.
INVESTMENT POLICIES
In pursuing its objective, the Fund will invest as described
below and may employ the investment techniques described in the
Prospectus and under Portfolio Investments and Strategies in this
Statement of Additional Information. The Fund's investment
objective is a non-fundamental policy and may be changed by the
Board of Trustees without the approval of a "majority of the
outstanding voting securities" /1/ of the Fund.
The Fund's investment objective is long-term capital
appreciation. It seeks to achieve its objective by investing
primarily in common stocks and other equity-type securities that, in
the opinion of SteinRoe, have long-term appreciation potential.
Under normal circumstances, at least 65% of the Fund's total
assets will be invested in securities of companies that, in the
opinion of SteinRoe, directly or through one or more subsidiaries,
affect the lives of children or teenagers. Such companies may
include companies that produce products or services that children or
teenagers use, are aware of, or could potentially have an interest
in.
Although the Fund invests primarily in common stocks and other
equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants or
rights to purchase common stocks), it may invest up to 35% of its
total assets in debt securities. The Fund may also employ
investment techniques described elsewhere in this Statement of
Additional Information. (See Portfolio Investments and Strategies.)
In addition to the Fund's investment objective and policies,
the Fund also has an educational objective. The Fund will seek to
educate its shareholders by providing educational materials
regarding investing as well as materials on the Fund and its
portfolio holdings.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEFENSIVE INVESTMENTS
When SteinRoe considers a temporary defensive position
advisable, the Fund may invest, without limitation, in high-quality
fixed-income securities or hold assets in cash or cash equivalents.
- ------------------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a meeting
if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy or (ii) more than 50% of
the outstanding shares of the Fund.
<PAGE>4
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, floating rate
instruments, and other instruments that securitize assets of various
types ("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.
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 that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an effort
to enhance portfolio returns.
The successful use of Derivatives depends on SteinRoe'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.
The Fund currently does not intend to invest, nor has it during
its past fiscal year invested, more than 5% of its net assets in any
type of Derivative, except for options, futures contracts, and
futures options. (See Options and Futures in this Statement of
Additional Information.)
Some mortgage-backed debt securities are of the "modified pass-
through type," which means the interest and principal payments on
mortgages in the pool are "passed through" to investors. During
periods of declining interest rates, there is increased likelihood
that mortgages will be prepaid, with a resulting loss of the full-
term benefit of any premium paid by the Fund on purchase of such
securities; in addition, the proceeds of prepayment would likely be
invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that 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, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments 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
<PAGE> 5
the Fund on purchase of the CMO, and the proceeds of prepayment
would likely be invested at lower interest rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on the
underlying loans that finance payments on the securities themselves.
Floating rate instruments 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%.
FOREIGN SECURITIES
The Fund may invest up to 25% of its total assets in foreign
securities, which may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than does investment in securities of
domestic issuers. For this purpose, foreign securities do not
include American Depositary Receipts (ADRs) or securities guaranteed
by a United States person. ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the
underlying securities. The Fund may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, the Fund is
likely to bear its proportionate share of the expenses of the
depository and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored ADR.
With respect to portfolio securities that are issued by foreign
issuers or denominated in foreign currencies, the Fund's investment
performance is affected by the strength or weakness of the U.S.
dollar against these currencies. For example, if the dollar falls
in value relative to the Japanese yen, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction hedging
and portfolio hedging under Currency Exchange Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions in which are generally denominated in foreign currencies,
and utilization of forward foreign currency exchange contracts
involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in exchange
rates of foreign currencies; possible imposition of exchange
<PAGE> 6
control regulation or currency restrictions that would prevent cash
from being brought back to the United States; less public
information with respect to issuers of securities; less governmental
supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial
reporting standards; lack of uniform settlement periods and trading
practices; less liquidity and frequently greater price volatility in
foreign markets than in the United States; possible imposition of
foreign taxes; possible investment in securities of companies in
developing as well as developed countries; and sometimes less
advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and
governments of countries having stable political environments, there
is the possibility of expropriation or confiscatory taxation,
seizure or nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign
government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these
nations.
Currency Exchange Transactions. Currency exchange transactions
may be conducted either on a spot (i.e., cash) basis at the spot
rate for purchasing or selling currency prevailing in the foreign
exchange market or through forward currency exchange contracts
("forward contracts"). Forward contracts are contractual agreements
to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks and
broker-dealers, are not exchange traded, and are usually for less
than one year, but may be renewed.
Forward currency transactions may involve currencies of the
different countries in which the Fund may invest, and serve as
hedges against possible variations in the exchange rate between
these currencies. Currency transactions are limited to transaction
hedging. Transaction hedging is the purchase or sale of forward
contracts with respect to specific receivables or payables of the
Fund accruing in connection with the purchase and sale of its
portfolio securities. The Fund may not engage in portfolio hedging
with respect to the currency of a particular country to an extent
greater than the aggregate market value (at the time of making such
sale) of the securities held in its portfolio denominated or quoted
in that particular currency, except that the Fund may hedge all or
part of its foreign currency exposure through the use of a basket of
currencies or a proxy currency where such currencies or currency act
as an effective proxy for other currencies. In such a case, the
Fund may enter into a forward contract where the amount of the
foreign currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency held in the Fund. The
Fund may not engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, the Fund may either sell the portfolio security related to
such contract and make delivery of the currency, or it may retain
the security and either acquire the currency on the spot
<PAGE> 7
market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same currency
trader obligating it to purchase on the same maturity date the same
amount of the currency.
It is impossible to forecast with absolute precision the market
value of portfolio securities at the expiration of a forward
contract. Accordingly, it may be necessary for the Fund to purchase
additional currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the
amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot
market some of the currency received upon the sale of the portfolio
security if its market value exceeds the amount of currency the Fund
is obligated to deliver.
If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to the
extent that there has been movement in forward contract prices. If
the Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should
forward prices decline during the period between the Fund's entering
into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency,
the Fund will realize a gain to the extent the price of the currency
it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will
suffer a loss to the extent the price of the currency it has agreed
to purchase exceeds the price of the currency it has agreed to sell.
A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or
sale of currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value of
the hedged currency should rise. Moreover, it may not be possible
for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. The
cost to the Fund of engaging in currency exchange transactions
varies with such factors as the currency involved, the length of the
contract period, and prevailing market conditions. Since currency
exchange transactions are usually conducted on a principal basis, no
fees or commissions are involved.
LENDING OF FUND SECURITIES
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, 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. Cash collateral for
securities loaned will be invested in liquid high-grade debt
securities. The Fund would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities
loaned, and
<PAGE> 8
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. The Fund would
not have the right to vote the securities during the existence of
the loan but would call the loan to permit voting of the securities
if, in SteinRoe's judgment, a material event requiring a shareholder
vote would otherwise occur before the loan was repaid. 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; REVERSE REPURCHASE
AGREEMENTS
The Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest 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.
The Fund makes such commitments only with the intention of actually
acquiring the securities, but may sell the securities before
settlement date if SteinRoe deems it advisable for investment
reasons.
The Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which the Fund is the seller of, rather than
the investor in, securities and agrees to repurchase them at an
agreed-upon time and price. Use of a reverse repurchase agreement
may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction
costs.
At the time the Fund enters into a binding obligation to
purchase securities on a when-issued basis or enters into a reverse
repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the Fund
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on the books of the
Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as
borrowing under a line of credit as described below, may increase
net asset value fluctuation.
SHORT SALES
The Fund may make short sales "against the box." In a short
sale, the Fund sells a borrowed security and is required to return
the identical security to the lender. A short sale "against the
box" involves the sale of a security with respect to which the Fund
already owns an equivalent security in kind and amount. A short
sale "against the box" enables the Fund to obtain the current market
price of a security which it desires to sell but is unavailable for
settlement.
<PAGE> 9
RULE 144A SECURITIES
The Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the 1933 Act. That Rule permits certain qualified
institutional buyers, such as the Fund, to trade in privately placed
securities that have not been registered for sale under the 1933
Act. SteinRoe, under the supervision of the Board of Trustees, will
consider whether securities purchased under Rule 144A are illiquid
and thus subject to the Fund's restriction of investing no more than
15% of its net assets in illiquid securities. A determination of
whether a Rule 144A security is liquid or not is a question of fact.
In making this determination, SteinRoe will consider the trading
markets for the specific security, taking into account the
unregistered nature of a Rule 144A security. In addition, SteinRoe
could consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make a
market, and (4) nature of the security and of marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored and, if as a result of
changed conditions, it is determined that a Rule 144A security is no
longer liquid, the Fund's holdings of illiquid securities would be
reviewed to determine what, if any, steps are required to assure
that the Fund does not invest more than 5% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect
of increasing the amount of the Fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to
purchase such securities. The Fund does not expect to invest as
much as 5% of its total assets in Rule 144A securities.
LINE OF CREDIT
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, the Fund may establish and
maintain a line of credit with a major bank in order to permit
borrowing on a temporary basis to meet share redemption requests in
circumstances in which temporary borrowing may be preferable to
liquidation of portfolio securities.
FUND TURNOVER
Although the Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time that
portfolio securities must be held. Fund turnover can occur for a
number of reasons such as general conditions in the securities
markets, more favorable investment opportunities in other
securities, or other factors relating to the desirability of holding
or changing a portfolio investment. Because of the Fund's
flexibility of investment and emphasis on growth of capital, they
may have greater portfolio turnover than that of mutual funds that
have primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly from
year to year. A high rate of portfolio turnover in the Fund, if it
should occur, would result in increased transaction expense, which
must be borne by the Fund. High portfolio turnover may also result
in the realization of capital gains or losses and, to the extent net
short-term capital gains are realized,
<PAGE> 10
any distributions resulting from such gains will be considered
ordinary income for Federal income tax purposes. (See Risks and
Investment Considerations and Distributions and Income Taxes in the
Prospectus, and Additional Income Tax Considerations in this
Statement of Additional Information.)
Consistent with its objective, 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 may
purchase or sell options on such futures contracts ("futures
options") in order to achieve its desired investment objective, to
provide additional revenue, or to hedge against changes in security
prices or interest rates. The Fund may purchase and write both call
options and put options on foreign currencies and enter into foreign
currency futures contracts and futures options in order to provide
additional revenue or to hedge against changes in currency
fluctuations. The Fund may also use other types of options, futures
contracts, and futures options currently traded or subsequently
developed and traded, provided the Board of Trustees determines that
their use is consistent with the Fund's investment objective.
OPTIONS ON SECURITIES AND INDEXES
The Fund may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized contracts
traded on recognized securities exchanges, boards of trade, or
similar entities, or quoted on NASDAQ. The Fund may purchase
agreements, sometimes called cash puts, that may accompany the
purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the
purchaser (holder) of the option, in return for a premium, the right
to buy from (call) or sell to (put) the seller (writer) of the
option the security underlying the option (or the cash value of the
index) at a specified exercise price at any time during the term of
the option (normally not exceeding nine months). The writer of an
option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying
security or foreign currency upon payment of the exercise price or
to pay the exercise price upon delivery of the underlying security
or foreign currency. Upon exercise, the writer of an option on an
index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect
specified facets of a particular financial or securities market, a
specific group of financial instruments or securities, or certain
economic indicators.)
The Fund will write call options and put options only if they
are "covered." For example, in the case of a call option on a
security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents
in such amount are held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its
portfolio.
<PAGE> 11
If an option written by the Fund expires, the Fund realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Fund expires, the Fund
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of the
same series (type, exchange, underlying security or index, exercise
price, and expiration). There can be no assurance, however, that a
closing purchase or sale transaction can be effected when the Fund
desires.
The Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply
and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index, and
the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by the Fund is recorded as a
deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and
asked prices.
Risks Associated with Options. There are several risks
associated with transactions in options. For example, there are
significant differences between the securities markets, the currency
markets, and the options markets that could result in an imperfect
correlation between these markets, causing a given transaction not
to achieve its objectives. A decision as to whether, when and how
to use options involves the exercise of skill and judgment, and even
a well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when
the Fund seeks to close out an option position. If the Fund were
unable to close out an option that it had purchased on a security,
it would have to exercise the option in order to realize any profit
or the option would expire and become worthless. If the Fund were
unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until
the option expired. As the writer of a covered call option on a
security, the Fund foregoes, during the option's life, the
opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and
the exercise price of the call.
If trading were suspended in an option purchased or written by
the Fund, the Fund would not be able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to
exercise an option it has purchased.
<PAGE> 12
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Fund may use interest rate futures contracts, index futures
contracts, and foreign currency futures contracts. An interest
rate, index or foreign currency futures contract provides for the
future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of an
index /2/ at a specified price and time. A public market exists in
futures contracts covering a number of indexes (including, but not
limited to: the Standard & Poor's 500 Index; the Value Line
Composite Index; and the New York Stock Exchange Composite Index) as
well as financial instruments (including, but not limited to: U.S.
Treasury bonds; U.S. Treasury notes; Eurodollar certificates of
deposit; and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
The Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as options
on securities, indexes and foreign currencies (discussed above). A
futures option gives the holder the right, in return for the premium
paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price at any time during
the period of the option. Upon exercise of a call option, the
holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true. The Fund might, for example, use
futures contracts to hedge against or gain exposure to fluctuations
in the general level of stock prices, anticipated changes in
interest rates or currency fluctuations that might adversely affect
either the value of the Fund's securities or the price of the
securities that the Fund intends to purchase. Although other
techniques could be used to reduce or increase the Fund's exposure
to stock price, interest rate, and currency fluctuations, the Fund
may be able to achieve its exposure more effectively and perhaps at
a lower cost by using futures contracts and futures options.
The Fund will only enter into futures contracts and futures
options that are standardized and traded on an exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
The success of any futures transaction depends on SteinRoe
correctly predicting changes in the level and direction of stock
prices, interest rates, currency exchange rates and other factors.
Should those predictions be incorrect, the Fund's return might have
been better had the transaction not been attempted; however, in the
absence of the ability to use futures contracts, SteinRoe might have
taken portfolio actions in anticipation of the same market movements
with similar investment results but, presumably, at greater
transaction costs.
- ------------------
/2/ A futures contract on an index is an agreement pursuant to which
two parties agree to take or make delivery of an amount of cash
equal to the difference between the value of the index at the close
of the last trading day of the contract and the price at which the
index contract was originally written. Although the value of a
securities index is a function of the value of certain specified
securities no physical delivery of those securities is made.
<PAGE> 13
When a purchase or sale of a futures contract is made by the
Fund, the Fund is required to deposit with its custodian (or broker,
if legally permitted) a specified amount of cash or U.S. Government
securities or other securities acceptable to the broker ("initial
margin"). The margin required for a futures contract is set by the
exchange on which the contract is traded and may be modified during
the term of the contract. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract,
which is returned to the Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. The Fund
expects to earn interest income on its initial margin deposits. A
futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called "variation margin," equal to
the daily change in value of the futures contract. This process is
known as "marking-to-market." Variation margin paid or received by
the Fund does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount one
would owe the other if the futures contract had expired at the close
of the previous day. In computing daily net asset value, the Fund
will mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by it.
Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations are
closed out prior to delivery by offsetting purchases or sales of
matching futures contracts (same exchange, underlying security or
index, and delivery month). If an offsetting purchase price is less
than the original sale price, the Fund engaging in the transaction
realizes a capital gain, or if it is more, the Fund realizes a
capital loss. Conversely, if an offsetting sale price is more than
the original purchase price, the Fund engaging in the transaction
realizes a capital gain, or if it is less, the Fund realizes a
capital loss. The transaction costs must also be included in these
calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a correlation
between price movements in the futures contract and in the portfolio
exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures options
and the related securities, including technical influences in
futures and futures options
<PAGE> 14
trading and differences between the securities market and the
securities underlying the standard contracts available for trading.
For example, in the case of index futures contracts, the composition
of the index, including the issuers and the weighting of each issue,
may differ from the composition of the Fund's portfolio, and, in the
case of interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in
the Fund's portfolio. A decision as to whether, when and how to use
futures contracts involves the exercise of skill and judgment, and
even a well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected stock price or interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted
in certain futures contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's
settlement price at the end of the current trading session. Once
the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses
because the limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved to
the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
Stock index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at a
time when the Fund seeks to close out a futures or futures option
position. The Fund would be exposed to possible loss on the
position during the interval of inability to close, and would
continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed
above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
LIMITATIONS ON OPTIONS AND FUTURES
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
the Fund may also use those investment vehicles, provided the Board
of Trustees determines that their use is consistent with the Fund's
investment objective.
The Fund will not enter into a futures contract or purchase an
option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by the Fund plus premiums paid
by it for open futures option positions, less the amount by
<PAGE> 15
which any such positions are "in-the-money," /3/ would exceed 5% of
the Fund's total assets.
When purchasing a futures contract or writing a put option on a
futures contract, the Fund must maintain with its custodian (or
broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contract. When
writing a call option on a futures contract, the Fund similarly will
maintain with its custodian cash or cash equivalents (including any
margin) equal to the amount by which such option is in-the-money
until the option expires or is closed out by the Fund.
The Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call options
written on indexes if, in the aggregate, the market value of all
such open positions exceeds the current value of the securities in
its portfolio, plus or minus unrealized gains and losses on the open
positions, adjusted for the historical relative volatility of the
relationship between the portfolio and the positions. For this
purpose, to the extent the Fund has written call options on specific
securities in its portfolio, the value of those securities will be
deducted from the current market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," the Fund will use commodity futures or commodity options
contracts solely for bona fide hedging purposes within the meaning
and intent of Regulation 1.3(z), or, with respect to positions in
commodity futures and commodity options contracts that do not come
within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not
exceed 5% of the fair market value of the assets of the Fund, after
taking into account unrealized profits and unrealized losses on any
such contracts it has entered into [in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount (as
defined in Section 190.01(x) of the Commission Regulations) may be
excluded in computing such 5%].
As long as the Fund continues to sell its shares in certain
states, the Fund's options and futures transactions will also be
subject to certain non-fundamental investment restrictions set forth
under Investment Restrictions in this Statement of Additional
Information.
TAXATION OF OPTIONS AND FUTURES
If the Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by the Fund, the difference between the cash
received at exercise and the premium paid is a capital gain or loss.
- ----------------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price exceeds
the value of the futures contract that is the subject of the option.
<PAGE> 16
If a call or put option written by the Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security purchased
(put). For cash settlement options and futures options written by
the Fund, the difference between the cash paid at exercise and the
premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by the Fund was in-the-
money at the time it was written and the security covering the
option was held for more than the long-term holding period prior to
the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding period
of the securities covering an in-the-money option will not include
the period of time the option is outstanding.
If the Fund writes an equity call option /4/ other than a
"qualified covered call option," as defined in the Internal Revenue
Code, any loss on such option transaction, to the extent it does not
exceed the unrealized gains on the securities covering the option,
may be subject to deferral until the securities covering the option
have been sold.
A futures contract held until delivery results in capital gain
or loss equal to the difference between the price at which the
futures contract was entered into and the settlement price on the
earlier of delivery notice date or expiration date. If the Fund
delivers securities under a futures contract, the Fund also realizes
a capital gain or loss on those securities.
For Federal income tax purposes, the Fund generally is required
to recognize as income for each taxable year its net unrealized
gains and losses as of the end of the year on futures, futures
options and non-equity options positions ("year-end mark-to-
market"). Generally, any gain or loss recognized with respect to
such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40%
short-term, without regard to the holding periods of the contracts.
However, in the case of positions classified as part of a "mixed
straddle," the recognition of losses on certain positions (including
options, futures and futures options positions, the related
securities and certain successor positions thereto) may be deferred
to a later taxable year. Sale of futures contracts or writing of
call options (or futures call options) or buying put options (or
futures put options) that are intended to hedge against a change in
the value of securities held by the Fund: (1) will affect the
holding period of the hedged securities; and (2) may cause
unrealized gain or loss on such securities to be recognized upon
entry into the hedge.
If the Fund were to enter into a short index future, short
index futures option or short index option position and the Fund's
portfolio were deemed to "mimic" the
- ----------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to be
traded on a commodity futures exchange (e.g., an option contract on
a sub-index based on the price of nine hotel-casino stocks). The
definition of equity option excludes options on broad-based stock
indexes (such as the Standard & Poor's 500 index).
<PAGE> 17
performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions would be
deemed to be positions in a mixed straddle, subject to the above-
mentioned loss deferral rules.
In order for the Fund to continue to qualify for Federal income
tax treatment as a regulated investment company, at least 90% of its
gross income for a taxable year must be derived from qualifying
income; i.e., dividends, interest, income derived from loans of
securities, and gains from the sale of securities or foreign
currencies, or other income (including but not limited to gains from
options, futures, or forward contracts). In addition, gains
realized on the sale or other disposition of securities held for
less than three months must be limited to less than 30% of the
Fund's annual gross income. Any net gain realized from futures (or
futures options) contracts will be considered gain from the sale of
securities and therefore be qualifying income for purposes of the
90% requirement. In order to avoid realizing excessive gains on
securities held less than three months, the Fund may be required to
defer the closing out of certain positions beyond the time when it
would otherwise be advantageous to do so.
The Fund distributes to shareholders annually any net capital
gains that have been recognized for Federal income tax purposes
(including year-end mark-to-market gains) on options and futures
transactions. Such distributions are combined with distributions of
capital gains realized on other investments, and shareholders are
advised of the nature of the payments.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment restrictions.
The Fund may not:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the Government of the U.S. or
any of its agencies or instrumentalities or repurchase agreements
for such securities and that all or substantially all of the assets
of the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
except that all or substantially all of the assets of the Fund may
be invested in another registered investment company having the same
investment objective and substantially similar investment policies
as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, except that all or substantially
all of the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
<PAGE> 18
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except that
it may enter into (a) futures and options on futures and (b) forward
contracts for the purpose of facilitating payment for a foreign
security;
(5) make loans, but this restriction shall not prevent it from
(a) buying a part of an issue of bonds, debentures, or other
obligations which are publicly distributed, or from investing up to
an aggregate of 15% of its total assets (taken at market value at
the time of each purchase) in parts of issues of bonds, debentures
or other obligations of a type privately placed with financial
institutions, (b) investing in repurchase agreements, /5/ or (c)
lending portfolio securities, provided that it may not lend
securities if, as a result, the aggregate value of all securities
loaned would exceed 33% of its total assets (taken at market value
at the time of such loan);
(6) borrow, except that it may (a) borrow up to 33 1/3% of its
total assets, taken at market value at the time of such borrowing,
as a temporary measure for extraordinary or emergency purposes, but
not to increase portfolio income (the total of reverse repurchase
agreements and such borrowings will not exceed 33 1/3% of its total
assets, and it will not purchase additional securities when its
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets) and (b) enter into
transactions in options, futures, and options on futures;
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular industry,
except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities and that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund; or
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions are fundamental policies and may not be
changed without the approval of a "majority of the outstanding
voting securities," as defined above. The Fund is also subject to
the following non-fundamental restrictions and policies, which may
be changed by the Board of Trustees. The Fund may not:
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/5/ A repurchase agreement involves the sale of securities to the
Fund, with the concurrent agreement of the seller to repurchase the
securities at the same price plus an amount representing interest at
an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. Repurchase
agreements entered into by the Fund will be fully collateralized and
will be marked-to-market daily. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the
collateral during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of
access to income during this period; and (c) expenses of enforcing
its rights.
<PAGE> 19
(a) invest in any of the following: (i) interests in oil, gas,
or other mineral leases or exploration or development programs
(except readily marketable securities, including but not limited to
master limited partnership interests, that may represent indirect
interests in oil, gas, or other mineral exploration or development
programs); (ii) puts, calls, straddles, spreads, or any combination
thereof (except that it may enter into transactions in options,
futures, and options on futures); (iii) shares of other open-end
investment companies, except in connection with a merger,
consolidation, acquisition, or reorganization, except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund;
and (iv) limited partnerships in real estate unless they are readily
marketable;
(b) invest in companies for the purpose of exercising control
or management, except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of its total assets (valued at time of purchase) in the
case of any one other investment company and 10% of such assets
(valued at time of purchase) in the case of all other investment
companies in the aggregate; any such purchases are to be made in the
open market where no profit to a sponsor or dealer results from the
purchase, other than the customary broker's commission, except for
securities acquired as part of a merger, consolidation or
acquisition of assets and except that all or substantially all of
the assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
(d) purchase or hold securities of an issuer if 5% of the
securities of such issuer are owned by those officers, trustees, or
directors of the Trust or of its investment adviser, who each own
beneficially more than 1/2 of 1% of the securities of that issuer;
(e) purchase securities of issuers (other than issuers of
Federal agency obligations or securities issued or guaranteed by any
foreign country or asset-backed securities) that, including their
predecessors or unconditional guarantors, have been in operation for
less than three years, if by reason of such purchase the value of
its investment in all such securities will exceed 5% of its total
assets (valued at time of purchase), except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the Fund;
(f) mortgage, pledge, or hypothecate its assets, except as may
be necessary in connection with permitted borrowings or in
connection with options, futures, and options on futures;
<PAGE> 20
(g) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American stock
exchange;
(h) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar entity;
(i) invest more than 25% of its total assets (valued at time of
purchase) in securities of foreign issuers (other than securities
represented by American Depositary Receipts (ADRs) or securities
guaranteed by a U.S. person);
(j) buy or sell an option on a security, a futures contract, or
an option on a futures contract unless the option, the futures
contract, or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on a
recognized exchange or similar entity;
(k) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets (less
the amount by which any such positions are in-the-money), excluding
put and call options purchased as closing transactions;
(l) invest more than 5% of its total assets in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A of the Securities Act of 1933;
(m) invest more than 5% of its net assets (taken at market
value at the time of each purchase) in illiquid securities,
including repurchase agreements maturing in more than seven days;
(n) purchase securities on margin (except for use of short-term
credits as are necessary for the clearance of transactions), or sell
securities short unless (i) the Fund owns or has the right to obtain
securities equivalent in kind and amount to those sold short at no
added cost or (ii) the securities sold are "when issued" or "when
distributed" securities which the Fund expects to receive in a
recapitalization, reorganization, or other exchange for securities
the Fund contemporaneously owns or has the right to obtain and
provided that transactions in options, futures, and options on
futures are not treated as short sales.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus under
the headings How to Purchase Shares, How to Redeem Shares, Net Asset
Value, and Shareholder Services, and that information is
incorporated herein by reference. The Prospectus discloses that you
may purchase (or redeem) shares through investment dealers, banks,
or other institutions. The staff of the Securities and Exchange
Commission has asked the Trust to disclose that it is the
responsibility of any such institution to establish procedures
insuring the prompt transmission to the Trust of any such purchase
order. The state of Texas has asked that the Trust disclose in its
Statement of Additional Information, as a reminder to any such bank
or institution, that it must be registered as a securities dealer in
Texas.
<PAGE> 21
The Fund's net asset value is determined on days on which the
New York Stock Exchange (the "NYSE") is open for trading. The NYSE
is regularly closed on Saturdays and Sundays and on New Year's Day,
the third Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving, and Christmas. If one of
these holidays falls on a Saturday or Sunday, the NYSE will be
closed on the preceding Friday or the following Monday,
respectively. Net asset value will not be determined on days when
the NYSE is closed unless, in the judgment of the Board of Trustees,
net asset value of 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 Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets of the Trust during any
90-day period for any one shareholder. However, redemptions in
excess of such limit may be paid wholly or partly by a distribution
in kind of securities. If redemptions were made in kind, the
redeeming shareholders might incur transaction costs in selling the
securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, the Trust reserves the right to redeem shares in any
account for their then-current value (which will be promptly paid to
the investor) if at any time the shares in the account do not have a
value of at least $1,000. An investor will be notified that the
value of his account is less than that minimum and allowed at least
30 days to bring the value of the account up to at least $1,000
before the redemption is processed. The Agreement and Declaration
of Trust also authorizes the Trust to redeem shares under certain
other circumstances as may be specified by the Board of Trustees.
The Trust reserves the right to suspend or postpone redemptions
of shares of the Fund during any period when: (a) trading on the
NYSE is restricted, as determined by the Securities and Exchange
Commission, or the NYSE is closed for other than customary weekend
and holiday closings; (b) the Securities and Exchange Commission has
by order permitted such suspension; or (c) an emergency, as
determined by the Securities and Exchange Commission, exists, making
disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable.
MANAGEMENT
The following table sets forth certain information with respect
to the trustees and officers:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME WITH THE TRUST DURING PAST FIVE YEARS
- ------------------- ------------------------ ----------------------------------------------------------
<S> <C> <C>
Gary A. Anetsberger Senior Vice-President; Vice-President of Stein Roe & Farnham Incorporated
Controller (the "Adviser") since January, 1991; associate of the Adviser
prior thereto
Timothy K. Armour(1)(2) President; Trustee President of the Mutual Funds division of the Adviser and
Director of the Adviser since June, 1992; senior vice
president and director of marketing of Citibank Illinois prior
thereto
<PAGE> 22
Jilaine Hummel Bauer Executive Vice-President; Senior Vice President (since April, 1992) and Assistant
Secretary Secretary (since May, 1990) of the Adviser; vice president of
the Adviser, prior thereto
Kenneth L. Block (3) Trustee Chairman Emeritus of A. T. Kearney, Inc. (international
management consultants)
William W. Boyd (3) Trustee Chairman and Director of Sterling Plumbing Group, Inc.
(manufacturer of plumbing products) since 1992; chairman,
president, and chief executive officer of Sterling Plumbing
Group, Inc. prior thereto
N. Bruce Callow Executive Vice-President President of the Investment Counsel division of the Adviser
since June, 1994; senior vice president of trust and financial
services for The Northern Trust prior thereto
Daniel K. Cantor Vice-President Vice President of the Adviser since January, 1992; associate
of the Adviser prior thereto
Robert A. Christensen Vice-President Senior Vice President of the Adviser since January, 1991;
first vice president of the Adviser prior thereto
Lindsay Cook (1) Trustee Senior Vice President of Liberty Financial Companies, Inc.
(the indirect parent of the Adviser)
Kenneth W. Corba Vice-President Senior Vice President of the Adviser
E. Bruce Dunn Vice-President Senior Vice President of the Adviser
Erik P. Gustafson Vice-President Vice President of the Adviser since May, 1994; associate of
the Adviser from April, 1992 to May, 1994; associate attorney
with Fowler White Burnett Hurley Banick & Strickroot prior
thereto
Philip D. Hausken Vice-President Legal Counsel for the Adviser since July, 1994; assistant
regional director, midwest regional office of the Securities
and Exchange Commission prior thereto
Millie Adams Hurwitz Vice-President Associate of the Adviser since 1992; senior vice president of
OLC Corporation prior thereto
Kenneth A. Kalina Treasurer Associate of the Adviser
Stephen P. Lautz Vice-President Vice President of the Adviser since May, 1994; associate of
the Adviser prior thereto
Lynn C. Maddox Vice-President Senior Vice President of the Adviser
Anne E. Marcel Vice-President Manager, Mutual Fund Sales & Services of the Adviser since
October, 1994; supervisor of the Counselor Department of the
Adviser from October, 1992 to October, 1994; vice president of
Selected Financial Services from May, 1990 to March, 1992;
assistant vice president of Carnegie Capital prior thereto
<PAGE> 23
Francis W. Morley (3) Trustee Chairman of Employer Plan Administrators and Consultants Co.
(designer, administrator, and communicator of employee benefit
plans)
Charles R. Nelson (3) Trustee Professor, Department of Economics of the University of
Washington
Nicolette D. Parrish Vice-President; Associate of the Adviser
Assistant Secretary
Richard B. Peterson Vice-President Senior Vice President of the Adviser since June, 1991; officer
of State Farm Investment Management Corporation prior thereto
Janet B. Rysz Assistant Secretary Assistant Secretary of the Adviser
Gloria J. Santella Vice-President Vice President of the Adviser since January, 1992; associate
of the Adviser prior thereto
Thomas P. Sorbo Vice-President Senior Vice President of the Adviser since January, 1994; vice
president of the Adviser from September, 1992 to December,
1993; associate of Travelers Insurance Company prior thereto
Shary Risting Stadler Vice-President Senior Vice President & Director of Marketing of the Adviser
since November, 1993; vice president, marketing of Citicorp
from April, 1990 to October, 1993; assistant vice president of
Citicorp prior thereto
Gordon R. Worley (2)(3) Trustee Private investor
Hans P. Ziegler Executive Vice-President Chief Executive Officer of the Adviser since May, 1994;
president of the Investment Counsel division of the Adviser
from July, 1993 to June, 1994; president and chief executive
officer, Pitcairn Financial Management Group prior thereto
<FN>
<PAGE> 27
(1) Trustee who is an "interested person" of the Trust and of the
Adviser, as defined in the Investment Company Act of 1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of auditors
and confers with the auditors regarding the scope and results of
the audit.
</TABLE>
Certain of the trustees and officers of the Trust are trustees
or officers of other investment companies managed by SteinRoe. Ms.
Bauer is a vice president of the Fund's distributor, Liberty
Securities Corporation. The address of Mr. Block is 11 Woodley
Road, Winnetka, Illinois 60093; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, Massachusetts 02210; that of Mr. Morley is 20 North
Wacker Drive, Suite 2275, Chicago, Illinois 60606; that of Mr.
Nelson is Department of Economics, University of Washington,
Seattle, Washington 98195; that of Mr. Worley is 1407 Clinton Place,
River Forest, Illinois 60305; and that of the officers is One South
Wacker Drive, Chicago, Illinois 60606.
<PAGE> 24
The only compensation paid to the trustees and officers of the
Trust for their services as such consists of fees paid to each
trustee who is not an "interested person" of the Trust or SteinRoe.
The fee schedule provides for an annual retainer of $8,000 (divided
equally among the Funds of the Trust) plus an attendance fee from
each Fund for each meeting of the Board or committee thereof
attended at which business for that Fund is conducted. The
attendance fees (other than for a Nominating Committee meeting) are
based on each Fund's net assets as of the preceding December 31.
For a Fund with net assets of less than $251 million, the fee is
$200 per meeting; with $251 million to $500 million, $350; with $501
million to $750 million, $500; with $750 million to $1 billion,
$650; and with over $1 billion in net assets, $800. Each non-
interested trustee also receives an aggregate of $500 for attending
each meeting of the Nominating Committee. The trustees collectively
received from the Trust an aggregate of $90,600 in fees for the
fiscal year ended September 30, 1994.
FINANCIAL STATEMENTS
Please refer to the Fund's 9/30/94 Financial Statements
(balance sheets and schedules of investments as of 9/30/94 and the
statements of operations, changes in net assets, and notes thereto)
and the report of independent public accountants contained in the
9/30/94 Annual Report. The Financial Statements and the report of
independent public accountants (but no other material from the
Annual Report) are incorporated herein by reference. The Annual
Report may be obtained at no charge by telephoning 1-800-338-2550.
PRINCIPAL SHAREHOLDERS
As of October 31, 1994, the only person known by the Trust to
own of record or "beneficially" 5% or more of the outstanding shares
of the Fund within the definition of that term as contained in Rule
13d-3 under the Securities Exchange Act of 1934 was as follows:
Approximate Percentage of
Name and Address Outstanding Shares Held
-------------------- --------------------------
Keyport Life Insurance Company 44.7%
125 High Street
Boston, MA 02110
The following table shows shares of the Fund held by the
categories of persons indicated, and in each case the approximate
percentage of outstanding shares represented:
Clients of SteinRoe
in their Client Accounts Trustees and Officers
as of 10/31/94* as of 10/31/94
------------------------ ------------------------
Shares Held Percent Shares Held Percent
----------- ------- ----------- --------
2,456 ** 1,978 **
______________
*SteinRoe may have discretionary authority over such shares and,
accordingly, they could be deemed to be owned "beneficially" by
SteinRoe under Rule 13d-3. However, SteinRoe disclaims actual
beneficial ownership of such shares.
**Represents less than 1% of the outstanding shares.
<PAGE> 25
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated, the Fund's investment
adviser, is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), the Fund's transfer agent, which in turn is a wholly-owned
indirect subsidiary of Liberty Mutual Insurance Company ("Liberty
Mutual"). Liberty Mutual is a mutual insurance company, principally
in the property/casualty insurance field, organized under the laws
of Massachusetts in 1912.
The directors of SteinRoe are Gary L. Countryman, Kenneth R.
Leibler, Timothy K. Armour, N. Bruce Callow, and Hans P. Ziegler.
Mr. Countryman is Chairman of Liberty Mutual Insurance Company; Mr.
Leibler is President and Chief Operating Officer of Liberty
Financial Companies; Mr. Armour is President of SteinRoe's Mutual
Funds division; Mr. Callow is President of SteinRoe's Investment
Counsel division; and Mr. Ziegler is Chief Executive Officer of
SteinRoe. The business address of Mr. Countryman is 175 Berkeley
Street, Boston, Massachusetts 02117; that of Mr. Leibler is Federal
Reserve Plaza, Boston, Massachusetts 02210; and that of Messrs.
Armour, Callow, and Ziegler is One South Wacker Drive, Chicago,
Illinois 60606.
The Adviser and its predecessor have been providing investment
advisory services since 1932. The Adviser acts as investment
adviser to wealthy individuals, trustees, pension and profit sharing
plans, charitable organizations, and other institutional investors.
As of December 31, 1994, the Adviser managed over $22.8 billion in
assets: over $5.4 billion in equities and over $17.4 billion in
fixed-income securities (including $2.3 billion in municipal
securities). The $22.8 billion in managed assets included over $6.4
billion held by open-end mutual funds managed by the Adviser
(approximately 25% of the mutual fund assets were held by clients of
the Adviser). These mutual funds were owned by over 149,000
shareholders. The $6.4 billion in mutual fund assets included over
$504 million in over 33,000 IRA accounts. In managing those assets,
the Adviser utilizes a proprietary computer-based information system
that maintains and regularly updates information for approximately
6,500 companies. The Adviser also monitors over 1,400 issues via a
proprietary credit analysis system. At December 31, 1994, the
Adviser employed 20 research analysts and 42 account managers. The
average investment-related experience of these individuals was 19
years.
SteinRoe Counselor [service mark] and SteinRoe Counselor
Preferred [service mark] are professional investment advisory
services offered to Fund shareholders. Each is designed to help
shareholders construct Fund investment portfolios to suit their
individual needs. Based on information shareholders provide about
their financial circumstances, goals, and objectives in response to
a questionnaire, SteinRoe's investment professionals create
customized portfolio recommendations for investments in the Fund and
other mutual funds managed by SteinRoe. Shareholders participating
in SteinRoe Counselor [service mark] are free to self direct their
investments while considering SteinRoe's recommendations;
shareholders participating in SteinRoe Counselor Preferred [service
mark] enjoy the added benefit of having SteinRoe implement portfolio
recommendations automatically for a fee of 1% or less, depending on
the size of their portfolios. In addition to reviewing
<PAGE> 26
shareholders' circumstances, goals, and objectives periodically and
updating portfolio recommendations to reflect any changes, the
shareholders who participate in these programs are assigned a
dedicated Counselor [service mark] representative. Other
distinctive services include specially designed account statements
with portfolio performance and transaction data, newsletters, and
regular investment, economic, and market updates. A $50,000 minimum
investment is required to participate in either program. Other
similar programs with different fee structures may be offered
through affiliates of SteinRoe.
Please refer to the description of SteinRoe, the advisory
agreement, advisory fee, expense limitations, and transfer agency
services under Management of the Fund in the Prospectus, which is
incorporated herein by reference. From the Fund's inception on
April 29, 1994 through September 30, 1994, pursuant to the expense
undertaking, SteinRoe reimbursed the Fund $82,109, resulting in a
net payment by SteinRoe of $64,954.
SteinRoe provides office space and executive and other
personnel to the Fund and bears any sales or promotional expenses.
The Fund pays all expenses other than those paid by SteinRoe,
including but not limited to printing and postage charges and
securities registration and custodian fees and expenses incidental
to its organization.
The investment advisory agreement provides that SteinRoe shall
reimburse the Fund to the extent that total annual expenses of the
Fund (including fees paid to SteinRoe, but excluding taxes,
interest, brokers' commissions and other normal charges incident to
the purchase and sale of portfolio securities, and expenses of
litigation to the extent permitted under applicable state law)
exceed the applicable limits prescribed by any state in which shares
of the Fund are being offered for sale to the public; provided,
however, that SteinRoe is not required to reimburse the Fund an
amount in excess of the management fee from the Fund for such year.
The Trust believes that currently the most restrictive state limit
on mutual fund expenses is that of California, which limit currently
is 2 1/2% of the first $30 million of average net assets, 2% of the
next $70 million, and 1 1/2% thereafter.
The advisory agreement also provides that neither SteinRoe, nor
any of its directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to the
Trust or any shareholder of the Trust for any error of judgment,
mistake of law or any loss arising out of any investment, or for any
other act or omission in the performance by SteinRoe of its duties
under the agreement, except for liability resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under the agreement.
Any expenses that are attributable solely to the organization,
operation, or business of the Fund shall be paid solely out of the
Fund's assets. Any expenses incurred by the Trust that are not
solely attributable to a particular series are apportioned in such
manner as SteinRoe determines is fair and appropriate, unless
otherwise specified by the Board of Trustees.
<PAGE> 27
BOOKKEEPING AND ACCOUNTING AGREEMENT
Pursuant to a separate agreement with the Trust, SteinRoe
receives a fee for performing certain bookkeeping and accounting
services for the Fund. For these services, SteinRoe receives an
annual fee of $25,000 per Fund plus .0025 of 1% of average net
assets over $50 million.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Securities
Corporation ("LSC") under a Distribution Agreement as described
under Management of the Fund in the Prospectus, which is
incorporated herein by reference. The Distribution Agreement
continues in effect from year to year, provided such continuance is
approved annually (i) by a majority of the trustees or by a majority
of the outstanding voting securities of the Trust, and (ii) by a
majority of the trustees who are not parties to the Agreement or
interested persons of any such party. The Trust has agreed to pay
all expenses in connection with registration of its shares with the
Securities and Exchange Commission and auditing and filing fees in
connection with registration of its shares under the various state
blue sky laws and assumes the cost of preparation of prospectuses
and other expenses. SteinRoe bears all sales and promotional
expenses, including payments to LSC for the sales of Fund shares.
SteinRoe also makes payments to other broker-dealers, banks, and
other institutions for the sales of Fund shares of 0.20% of the
annual average value of accounts of such shares.
As agent, LSC offers shares of the Fund to investors in states
where the shares are qualified for sale, at net asset value, without
sales commissions or other sales load to the investor. In addition,
no sales commission or "12b-1" payment is paid by the Fund. LSC
offers the Fund's shares only on a best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for the Trust, as
described under Management of the Fund in the Prospectus. For
performing these services, SSI receives the following payments from
the Fund: (1) a fee of $4.00 for each new account opened; (2)
monthly payments of $1.063 per open shareholder account; (3)
payments of $0.367 per closed shareholder account for each month
through June of the calendar year following the year in which the
account is closed; (4) $0.3025 per shareholder account for each
dividend paid; and (5) $1.415 for each shareholder-initiated
transaction. In addition, the Fund reimburses SSI for any charges
for certain services provided to it by DST Systems, Inc. in
connection with transfer agency services to the Fund. The Trust
believes the charges by SSI to the Fund are comparable to those of
other companies performing similar services. (See Investment
Advisory Services.)
<PAGE> 28
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225 Franklin
Street, Boston, Massachusetts 02101, is the custodian for the Trust.
It is responsible for holding all securities and cash of the Fund,
receiving and paying for securities purchased, delivering against
payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Fund, and
performing other administrative duties, all as directed by
authorized persons. The custodian does not exercise any supervisory
function in such matters as purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the Fund
.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or depositories.
Portfolio securities purchased outside of the U.S. are maintained in
the custody of foreign banks and trust companies that are members of
the Bank's Global Custody Network, and foreign depositories
("foreign sub-custodians"). Each of the domestic and foreign
custodial institutions holding portfolio securities has been
approved by the Board of Trustees in accordance with regulations
under the Investment Company Act of 1940.
The Board of Trustees reviews, at least annually, whether it is
in the best interest of the Fund and its shareholders for the Fund
to maintain assets in each of the countries in which it invests with
particular foreign sub-custodians in such countries, pursuant to
contracts between such respective foreign sub-custodians and the
Bank. The review includes an assessment of the risks of holding
assets in any such country (including risks of expropriation or
imposition of exchange controls), the operational capability and
reliability of each such foreign sub-custodian, and the impact of
local laws on each such custody arrangement. The Board of Trustees
is aided in its review by the Bank, which has assembled the network
of foreign sub-custodians utilized, as well as by SteinRoe and
counsel. However, with respect to foreign sub-custodians, there can
be no assurance that the Fund, and the value of its shares, will not
be adversely affected by acts of foreign governments, financial or
operational difficulties of the foreign sub-custodians, difficulties
and costs of obtaining jurisdiction over, or enforcing judgments
against, the foreign sub-custodians, or application of foreign law
to the Fund's foreign sub-custodial arrangements. Accordingly, an
investor should recognize that the non-investment risks involved in
holding assets abroad are greater than those associated with
investing in the United States.
The Fund may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Trust are Arthur
Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603. The
accountants audit and report on the Fund's annual financial
statements, review certain regulatory reports and the Fund's Federal
income tax returns, and perform other professional accounting,
auditing, tax and advisory services when engaged to do so by the
Trust.
<PAGE> 29
PORTFOLIO TRANSACTIONS
SteinRoe places the orders for the purchase and sale of the
Fund's portfolio securities and options and futures contracts.
SteinRoe's overriding objective in effecting portfolio transactions
is to seek to obtain the best combination of price and execution.
The best net price, giving effect to brokerage commissions, if any,
and other transaction costs, normally is an important factor in this
decision, but a number of other judgmental factors may also enter
into the decision. These include: SteinRoe's knowledge of
negotiated commission rates currently available and other current
transaction costs; the nature of the security being traded; the size
of the transaction; the desired timing of the trade; the activity
existing and expected in the market for the particular security;
confidentiality; the execution, clearance and settlement
capabilities of the broker or dealer selected and others which are
considered; SteinRoe's knowledge of the financial stability of the
broker or dealer selected and such other brokers or dealers; and
SteinRoe's knowledge of actual or apparent operational problems of
any broker or dealer. Recognizing the value of these factors, the
Fund may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same
transaction. Evaluations of the reasonableness of brokerage
commissions, based on the foregoing factors, are made on an ongoing
basis by SteinRoe's staff while effecting portfolio transactions.
The general level of brokerage commissions paid is reviewed by
SteinRoe, and reports are made annually to the Board of Trustees.
With respect to issues of securities involving brokerage
commissions, when more than one broker or dealer is believed to be
capable of providing the best combination of price and execution
with respect to a particular portfolio transaction for the Fund,
SteinRoe often selects a broker or dealer that has furnished it with
research products or services such as research reports,
subscriptions to financial publications and research compilations,
compilations of securities prices, earnings, dividends, and similar
data, and computer data bases, quotation equipment and services,
research-oriented computer software and services, and services of
economic and other consultants. Selection of brokers or dealers is
not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, SteinRoe uses an internal allocation
procedure to identify those brokers or dealers who provide it with
research products or services and the amount of research products or
services they provide, and endeavors to direct sufficient
commissions generated by its clients' accounts in the aggregate,
including the Fund, to such brokers or dealers to ensure the
continued receipt of research products or services SteinRoe feels
are useful. In certain instances, SteinRoe receives from brokers
and dealers products or services that are used both as investment
research and for administrative, marketing, or other non-research
purposes. In such instances, SteinRoe makes a good faith effort to
determine the relative proportions of such products or services
which may be considered as investment research. The portion of the
costs of such products or services attributable to research usage
may be defrayed by SteinRoe (without prior agreement or
understanding, as noted above) through brokerage commissions
generated by transactions by clients (including the Fund), while the
portions of the costs attributable to non-research usage of such
products or services is paid by SteinRoe in cash. No person acting
on behalf of
<PAGE> 30
the Fund is authorized, in recognition of the value of research
products or services, to pay a commission in excess of that which
another broker or dealer might have charged for effecting the same
transaction. Research products or services furnished by brokers and
dealers may be used in servicing any or all of the clients of
SteinRoe and not all such research products or services are used in
connection with the management of the Fund.
With respect to the Fund's purchases and sales of portfolio
securities transacted with a broker or dealer on a net basis,
SteinRoe may also consider the part, if any, played by the broker or
dealer in bringing the security involved to SteinRoe's attention,
including investment research related to the security and provided
to the Fund.
The table below shows information on brokerage commissions paid
by the Fund:
Total amount of brokerage commissions paid during fiscal
year ended 9/30/94.....................................$ 13,680
Amount of commissions paid to brokers or dealers who
supplied research services to SteinRoe......................10,810
Total dollar amount involved in such transactions..........5,012,827
Amount of commissions paid to brokers or dealers that
were allocated to such brokers or dealers by the
Fund's portfolio manager because of research services
provided to the Fund...........................................535
Total dollar amount involved in such transactions.........$ 251,000
The Trust has arranged for its custodian to act as a soliciting
dealer to accept any fees available to the custodian as a soliciting
dealer in connection with any tender offer for portfolio securities.
The custodian will credit any such fees received against its
custodial fees. In addition, the Board of Trustees has reviewed the
legal developments pertaining to and the practicability of
attempting to recapture underwriting discounts or selling
concessions when portfolio securities are purchased in underwritten
offerings. However, the Board has been advised by counsel that
recapture by a mutual fund currently is not permitted under the
Rules of Fair Practice of the National Association of Securities
Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
The Fund intends to comply with the special provisions of
Subchapter M of the Internal Revenue Code that relieve it of Federal
income tax to the extent of its net investment income and capital
gains currently distributed to shareholders.
Because dividend and capital gain distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would nonetheless
be taxable to him, even if the net asset value of shares were
reduced below his cost. However, for Federal income tax purposes
the shareholder's original cost would continue as his tax basis.
<PAGE> 31
The Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent the Fund invests in foreign securities, it may be
subject to withholding and other taxes imposed by foreign countries.
Tax treaties between certain countries and the United States may
reduce or eliminate such taxes. Investors may be entitled to claim
U.S. foreign tax credits with respect to such taxes, subject to
certain provisions and limitations contained in the Code.
Specifically, if more than 50% of the Fund's total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Fund may file an election with the Internal
Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign
income taxes paid by them, and (iii) deduct such pro rata shares in
computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against
their United States income taxes. Shareholders who do not itemize
deductions for Federal income tax purposes will not, however, be
able to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their
share of such taxes in gross income. Shareholders who claim a
foreign tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents income
from each foreign country, if the Fund qualifies to pass along such
credit.
INVESTMENT PERFORMANCE
The Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the net
asset value per share for a period. A "Total Return Percentage" may
be calculated by dividing the value of a share at the end of a
period by the value of the share at the beginning of the period and
subtracting one. For a given period, an "Average Annual Total
Return" may be computed by finding the average annual compounded
rate that would equate a hypothetical initial amount invested of
$1,000 to the ending redeemable value.
Average Annual Total Return is computed as follows: ERV =
P(1+T)n
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
<PAGE> 32
For example, for a $1,000 investment in the Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at September 30, 1994 were:
Total Return Total Return Percentage
------------- -----------------------
*Life of Fund $1,024 2.40%
________________________
*Life of Fund is from its date of public offering, 4/29/94.
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
Federal, state, or local income taxes which shareholders must pay on
a current basis. They are not necessarily indicative of future
results. The performance of the Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful in
reviewing the Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be used
for comparison with other investments using different reinvestment
assumptions or time periods.
In advertising and sales literature, the Fund may compare its
performance with that of other mutual funds, indexes or averages of
other mutual funds, indexes of related financial assets or data, and
other competing investment and deposit products available from or
through other financial institutions. The composition of these
indexes or averages differs from that of the Fund. Comparison of
the Fund to an alternative investment should be made with
consideration of differences in features and expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which the Fund
believes to be generally accurate. The Fund may also note its
mention or recognition in newspapers, magazines, or other media from
time to time. However, the Fund assumes no responsibility for the
accuracy of such data. Newspapers and magazines which might mention
the Fund include, but are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Barron's
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
Crain's Chicago Business
Consumer Reports
Consumer Digest
Financial World
Forbes
Fortune
Fund Action
Gourmet
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Los Angeles Times
Money
Mutual Fund Letter
Mutual Fund News Service
Mutual Fund Values (Morningstar)
Newsweek
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
<PAGE> 33
Jane Bryant Quinn (syndicated column)
The San Francisco Chronicle
Smart Money
Smithsonian
Stanger's Investment Adviser
Time
Travel & Leisure
United Mutual Fund Selector
USA Today
U.S. News and World Report
The Wall Street Journal
Working Women
Worth
Your Money
The Fund may compare its performance to the Consumer Price
Index (All Urban), a widely recognized measure of inflation.
The Fund's performance may be compared to the following indexes
or averages:
Dow-Jones Industrial Average New York Stock Exchange
Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
(These indexes are widely recognized (These indexes generally
indicators of general U.S. stock reflect the performance of
market results.) stocks traded in the
indicated markets.)
In addition, the Fund may compare performance with the
following indexes:
Lipper Equity Funds Average
Lipper General Equity Funds Average
Lipper Growth Fund Index
Lipper Growth Funds Average
ICD Aggressive Growth and Long-Term Growth Funds Average
ICD All Equity Funds Average
ICD General Equity Average*
ICD Long-Term Growth Funds Average
ICD Long-Term Growth Funds Index
Morningstar All Equity Funds Average
Morningstar Equity Fund Average
Morningstar General Equity Average**
Morningstar Growth Average
Morningstar Hybrid Fund Average
Morningstar U.S. Diversified Average
*Includes ICD Aggressive Growth, Growth & Income, Long-Term Growth,
and Total Return averages
**Includes Morningstar Aggressive Growth, Growth, Balanced, Equity
Income, and Growth & Income averages
The ICD Indexes reflect the unweighted average total return of
the largest twenty funds within their respective category as
calculated and published by ICD.
The Lipper averages are unweighted averages of total return
performance as classified, calculated, and published by Lipper.
Lipper Growth Fund index reflects
<PAGE> 34
the net asset value weighted total return of the largest thirty
growth funds and thirty growth and income funds, respectively, as
calculated and published by Lipper.
The Lipper, ICD, and Morningstar averages are unweighted
averages of total return performance of mutual funds as classified,
calculated, and published by these independent services that monitor
the performance of mutual funds. The Fund may also use comparative
performance as computed in a ranking by Lipper or category averages
and rankings provided by another independent service. Should Lipper
or another service reclassify the Fund to a different category or
develop (and place the Fund into) a new category, the Fund may
compare its performance or ranking with those of other funds in the
newly assigned category, as published by the service.
The Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting the Fund's risk score (which is a function
of the Fund's monthly returns less the 3-month T-bill return) from
the Fund's load-adjusted total return score. This numerical score
is then translated into rating categories, with the top 10% labeled
five star, the next 22.5% labeled four star, the next 35% labeled
three star, the next 22.5% labeled two star, and the bottom 10% one
star. A high rating reflects either above-average returns or below-
average risk, or both.
Of course, past performance is not indicative of future
results.
__________
To illustrate the historical returns on various types of
financial assets, the Fund may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since 1926)
total return data (including, for example, total return indexes,
total return percentages, average annual total returns and standard
deviations of such returns) for the following asset types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
__________
The Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable Investment,
that both investments earn either 6%, 8% or 10% compounded annually,
and that the investor withdrew the entire amount at the end of the
period. (A tax rate of 39.6% is applied annually to the Taxable
Investment and on the withdrawal of earnings on the Tax-Deferred
Investment.)
<PAGE> 35
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
INTEREST RATE 6% 8% 10% 6% 8% 10%
Compounding
Years Tax-Deferred Investment Taxable Investment
30 $124,992 $171,554 $242,340 $109,197 $135,346 $168,852
25 90,053 115,177 150,484 82,067 97,780 117,014
20 62,943 75,543 91,947 59,362 68,109 78,351
15 41,684 47,304 54,099 40,358 44,675 49,514
10 24,797 26,820 29,098 24,453 26,165 28,006
5 11,178 11,613 12,072 11,141 11,546 11,965
1 2,072 2,096 2,121 2,072 2,096 2,121
Dollar Cost Averaging. Dollar cost averaging is an investment
strategy that requires investing a fixed amount of money in Fund
shares at set intervals. This allows you to purchase more shares
when prices are low and fewer shares when prices are high. Over
time, this tends to lower your average cost per share.
Like any investment strategy, dollar cost averaging can't
guarantee a profit or protect against losses in a steadily declining
market. Dollar cost averaging involves uninterrupted investing
regardless of share price and therefore may not be appropriate for
every investor.
From time to time, the Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax guide,
or other supplemental information to investors and shareholders. It
may also mention the SteinRoe Counselor [service mark] and the
SteinRoe Counselor Preferred [service mark] programs and asset
allocation and other investment strategies.
APPENDIX--RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer. Consequently,
SteinRoe believes that the quality of debt securities in which the
Fund invests should be continuously reviewed and that individual
analysts give different weightings to the various factors involved
in credit analysis. A rating is not a recommendation to purchase,
sell or hold a security because it does not take into account market
value or suitability for a particular investor. When a security has
received a rating from more than one service, each rating should be
evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the rating services from
other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
<PAGE> 36
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
AAA. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change, such
changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
AA. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa bonds or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA. Bonds rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
<PAGE> 37
CA. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate
bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues only
in small degree.
A. Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, AND C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
C1. This rating is reserved for income bonds on which no
interest is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major
rating categories. Foreign debt is rated on the same basis as
domestic debt measuring the creditworthiness of the issuer; ratings
of foreign debt do not take into account currency exchange and
related uncertainties.
<PAGE> 38
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or currencies;
certain swaps and options; and interest only and principal only
mortgage securities. The absence of an "r" symbol should not be
taken as an indication that an obligation will exhibit no volatility
or variability in total return.
_________________
<PAGE> 1
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) 1. Financial Statements included in Part A of this Amendment
to the Registration Statement: Financial statements
(investments as of 3/31/95, balance sheets as of 3/31/95,
statements of operations for the period ended 3/31/95,
statements of changes in net assets, and notes thereto)
are incorporated by reference to Registrant's 3/31/95
semiannual reports.
2. Financial statements included in Part B of this Amendment:
None.
(b) Exhibits: [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1933, No.
33-11351. The terms "Pre-Effective Amendment" and "PEA"
refer, respectively, to a pre-effective amendment and a post-
effective amendment to the Registration Statement.]
1. (a) Agreement and Declaration of Trust. (Exhibit 1 to
Registration Statement.)*
(b) Amendment to Agreement and Declaration of Trust dated
December 31, 1987. (Exhibit 1(b) to PEA #6.)*
(c) Amendment to Agreement and Declaration of Trust dated
June 30, 1989. (Exhibit 1(c) to PEA #13.)*
(d) Amendment to Agreement and Declaration of Trust dated
January 17, 1995. (Exhibit 1(d) to PEA #29).*
2. (a) By-Laws of Registrant as amended through October 24,
1990. (Exhibit 2 to PEA #16.)*
(b) Amendment to By-Laws dated February 3, 1993. (Exhibit
2(b) to PEA #19.)*
3. None.
4. Inapplicable.
5. (a) Investment advisory agreements dated February 1, 1995
between Registrant and Stein Roe & Farnham
Incorporated (the "Adviser") relating to the following
series: SteinRoe Prime Equities, SteinRoe Total
Return Fund, SteinRoe Growth Stock Fund, SteinRoe
Capital Opportunities Fund, and SteinRoe Special Fund
. (Exhibit 5(a) to PEA #29.)*
(b) SteinRoe International Fund:
(1) Form of investment advisory agreement between
Registrant and the Adviser relating to the series.
(Exhibit 5(d)(1) to PEA #20).*
(2) Form of portfolio management agreement among
Registrant, the Adviser, and Rockefeller & Co.,
Inc. relating to the series. (Exhibit 5(d)(2) to
PEA #20).*
<PAGE> 2
(c) SteinRoe Young Investor Fund:
(1) Form of investment advisory agreement between
Registrant and the Adviser relating to this
series. (Exhibit 5(e) to PEA #21.)*
(2) Undertaking of Adviser regarding reimbursement of
expenses of this series. (Exhibit 5(e)(2) to PEA
#28.)*
(d) SteinRoe Special Venture Fund:
(1) Form of investment advisory agreement between
Registrant and the Adviser relating to this
series. (Exhibit 5(f) to PEA #25.)*
(2) Form of undertaking of Adviser regarding
reimbursement of expenses of this series.
(Exhibit 5(g) to PEA #25.)*
6. (a) Form of underwriting agreement between Registrant and
Liberty Securities Corporation dated June 22, 1987.
(Exhibit 6 to PEA #1.)*
(b) First amendment to underwriting agreement dated
October 28, 1992. (Exhibit 6(b) to PEA #18).*
7. None.
8. (a) Form of custodian contract between Registrant and
State Street Bank and Trust Company. (Exhibit 8 to
Pre-Effective Amendment #1.)*
(b) Form of amendment to custodian contract. (Exhibit
8(b) to PEA #1.)*
(c) Custodian fee schedule effective May 1, 1988.
(Exhibit 8(d) to PEA #12.)*
(d) Amendment to custodian contract dated January 31,
1990. (Exhibit 8(e) to PEA #15.)*
(e) Amendment to custodian fee schedule dated November 1,
1991. (Exhibit 8(f) to PEA #17.)*
(f) State Street Bank and Trust Company Price Source,
Index and Tolerance Authorization effective May 1,
1992. (Exhibit 8(g) to PEA #18.)*
(g) Amendment to custodian contract dated October 29,
1992. (Exhibit 8(h) to PEA #18.)*
(h) Subcustodian agreement with Investors Fiduciary Trust
Company. (Exhibit 8(h) to PEA #19.)*
(i) Custody-only fee schedule dated August 15, 1994.
(Exhibit 8(i) to PEA #27.)*
9. (a) Transfer agency agreement between Registrant and
SteinRoe Services Inc. as amended through May 1, 1995.
(b) Accounting and Bookkeeping Agreement dated August 1,
1994. (Exhibit 9(f) to PEA #25.)*
10. (a) SteinRoe Prime Equities:
(1) Opinion and consent of Bell, Boyd & Lloyd.
(Exhibit 10(a) to Pre-Effective Amendment #1.)*
(2) Opinion and consent of Ropes & Gray. (Exhibit
10(b) to Pre-Effective Amendment #1.)*
<PAGE> 3
(b) SteinRoe Total Return Fund, SteinRoe Growth Stock,
SteinRoe Capital Opportunities Fund, and SteinRoe
Special Fund:
(1) Opinion and consent of Bell, Boyd & Lloyd.
(Exhibit 10(d)(1) to PEA #7.)*
(2) Opinion and consent of Ropes & Gray. (Exhibit
10(d) (2) to PEA #7.)*
(c) Opinion and consent of Bell, Boyd & Lloyd with respect
to SteinRoe International Fund. (Exhibit 10(c) to PEA
#20).*
(d) Opinion and consent of Bell, Boyd & Lloyd with respect
to SteinRoe Young Investor Fund. (Exhibit 10(d) to
PEA #21.)*
(e) Opinion and consent of Bell, Boyd & Lloyd with respect
to SteinRoe Special Venture Fund. (Exhibit 10(e) to
PEA #26.)*
11. (a) Consent to Arthur Andersen LLP, independent public
accountants.
(b) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#17.)*
12. None.
13. Form of subscription agreement. (Exhibit 13 to Pre-
Effective Amendment #1.)*
14. (a) Stein Roe & Farnham Funds Individual Retirement
Account Plan.**
(b) Stein Roe & Farnham Prototype Paired Defined
Contribution Plan.***
15. None.
16. (a) Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 for SteinRoe Prime Equities, SteinRoe Total
Return Fund, SteinRoe Growth Stock Fund, SteinRoe
Capital Opportunities Fund, and SteinRoe Special Fund.
(Exhibit 16 to PEA #9.)*
(b) Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 for SteinRoe International Fund and SteinRoe
Young Investor Fund. Exhibit 16(b) to PEA #28.)*
17. (a) Financial Data Schedule relating to the series
SteinRoe Prime Equities.
(b) Financial Data Schedule relating to the series
SteinRoe Young Investor Fund.
(c) Financial Data Schedule relating to the series
SteinRoe Special Venture Fund.
(d) Financial Data Schedule relating to the series
SteinRoe Total Return Fund.
( e) Financial Data Schedule relating to the series
SteinRoe Growth Stock Fund.
(f) Financial Data Schedule relating to the series
SteinRoe Capital Opportunities Fund.
(g) Financial Data Schedule relating to the series
SteinRoe Special Fund.
<PAGE> 4
18. (Miscellaneous.)
(a) Fund Application. (Exhibit 17(a) to PEA #28.)*
(b) Funds-on-Call Application. (Exhibit 17(b) to PEA
#28.)*
(c) Automatic Redemption Services Application. (Exhibit
17(c) to PEA #28.)*
(d) SteinRoe Young Investor Fund application. (Exhibit
17(d) to PEA #28.)*
_______________________
*Incorporated by reference.
**Incorporated by reference to Exhibit 14(a) to Post-Effective
Amendment #23 to the Registration Statement on Form N-1A of
SteinRoe Income Trust, #33-02633.
***Incorporated by reference to Exhibit 14(b) to Post-Effective
Amendment #13 to the Registration Statement on Form N-1A of
SteinRoe Income Trust, #33-02633.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
The Registrant does not consider that it is directly or
indirectly controlling, controlled by, or under common control
with other persons within the meaning of this Item. See
"Investment Advisory Services," "Management," and "Transfer Agent"
in the Statement of Additional Information, each of which is
incorporated herein by reference.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
Title of Series as of June 29, 1995
----------------------------------- ------------------------
SteinRoe Prime Equities 4,884
SteinRoe Total Return Fund 8,009
SteinRoe Growth Stock Fund 11,983
SteinRoe Capital Opportunities Fund 7,386
SteinRoe Special Fund 44,646
SteinRoe International Fund 2,420
SteinRoe Young Investor Fund 6,691
SteinRoe Special Venture Fund 1,476
ITEM 27. INDEMNIFICATION.
Article Tenth of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including each person who serves or
has served at Registrant's request as a director, officer, or
trustee of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940
Act") provides that neither the Agreement and Declaration of Trust
nor the By-Laws of Registrant, nor any other instrument pursuant
to which Registrant is organized or administered, shall contain
any provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section
<PAGE> 5
17(h) of the 1940 Act, Article Tenth shall not protect any person
against any liability to Registrant or its shareholders to which
he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article Tenth does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Tenth unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are neither "interested
persons" of Registrant, as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel as expressed in a
written opinion; and
(iii) Registrant will not advance attorneys' fees or other
expenses incurred by a Covered Person in connection with a civil
or criminal action, suit or proceeding unless Registrant receives
an undertaking by or on behalf of the Covered Person to repay the
advance (unless it is ultimately determined that he is entitled to
indemnification) and (a) the Covered Person provides security for
his undertaking, or (b) Registrant is insured against losses
arising by reason of any lawful advances, or (c) a majority of the
disinterested, non-party trustees of Registrant or an independent
legal counsel as expressed in a written opinion, determine, based
on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Any approval of indemnification pursuant to Article Tenth
does not prevent the recovery from any Covered Person of any
amount paid to such Covered Person in accordance with Article
Tenth as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's
action was in, or not opposed to, the best interests of Registrant
or to have been liable to Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such Covered
Person's office.
Article Tenth also provides that its indemnification
provisions are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that
<PAGE> 6
a claim for indemnification against such liabilities (other than
the payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted
by such trustee, officer, or controlling person in connection with
the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment
adviser, the other investment companies advised by the adviser,
and persons affiliated with them are insured against certain
expenses in connection with the defense of actions, suits, or
proceedings, and certain liabilities that might be imposed as a
result of such actions, suits, or proceedings. Registrant will
not pay any portion of the premiums for coverage under such
insurance that would (1) protect any trustee or officer against
any liability to Registrant or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Pursuant to the indemnification agreement among the
Registrant, its transfer agent and its investment adviser dated
January 26, 1994, the Registrant, its trustees, officers and
employees, its transfer agent and the transfer agent's directors,
officers and employees are indemnified by Registrant's investment
adviser against any and all losses, liabilities, damages, claims
and expenses arising out of any act or omission of the Registrant
or its transfer agent performed in conformity with a request of
the investment adviser that the transfer agent and the Registrant
deviate from their normal procedures in connection with the issue,
redemption or transfer of shares for a client of the investment
adviser.
Registrant, its trustees, officers, employees and
representatives and each person, if any, who controls the
Registrant within the meaning of Section 15 of the Securities Act
of 1933 are indemnified by the distributor of Registrant's shares
(the "distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
<PAGE> 7
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Adviser, Stein Roe & Farnham Incorporated, is a wholly-
owned subsidiary of SteinRoe Services Inc. ("SSI"), which in turn
is a wholly-owned subsidiary of Liberty Financial Companies, Inc.,
which in turn is a subsidiary of Liberty Mutual Equity
Corporation, which in turn is a subsidiary of Liberty Mutual
Insurance Company. The Adviser acts as investment adviser to
individuals, trustees, pension and profit-sharing plans,
charitable organizations, and other investors. In addition to
Registrant, it also acts as investment adviser to other no-load
investment companies having different investment policies.
During the past two years, neither the Adviser nor any of its
directors or officers, except for Gary L. Countryman, Kenneth R.
Leibler, Hans P. Ziegler, and N. Bruce Callow has been engaged in
any business, profession, vocation, or employment of a substantial
nature either on their own account or in the capacity of director,
officer, partner, or trustee, other than as an officer or
associate of the Adviser. Mr. Countryman is President and Chief
Executive Officer of Liberty Mutual Insurance Company and Liberty
Mutual Fire Insurance Company; Mr. Leibler is President and Chief
Executive Officer of Liberty Financial Companies, Inc.; Mr.
Ziegler was formerly president and chief executive officer of the
Pitcairn Financial Management Group, from 1989 to July, 1993; Mr.
Callow was senior vice president of trust and financial services
for The Northern Trust prior to June, 1994.
Certain directors and officers of the Adviser also serve and
have during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
SteinRoe Income Trust, SteinRoe Municipal Trust, SR&F Base Trust,
SteinRoe Variable Investment Trust and Liberty Financial Trust,
investment companies managed by the Adviser. A list of such
capacities is given below. (The listed entities, except for
SteinRoe Variable Investment Trust, are located at One South
Wacker Drive, Chicago, Illinois 60606; the address of SteinRoe
Variable Investment Trust is Federal Reserve Plaza, 600 Atlantic
Avenue, Boston, Massachusetts 02210.)
POSITION FORMERLY
HELD WITHIN PAST
CURRENT POSITION TWO YEARS
----------------------- ------------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Gary L. Countryman Director; Chairman
Kenneth J. Kozanda Vice President; Treasurer
Alfred F. Kugel Vice President
Kenneth R. Leibler Director
Keith J. Rudolf Vice President
<PAGE> 8
Hans P. Ziegler Director, President,
Vice Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President;
Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Vice-President
Secretary
Ann H. Benjamin Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President;
Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Vice-President
Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Michael T. Kennedy Vice-President
Stephen P. Lautz Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Lisa N. Wilhelm Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
STEINROE INVESTMENT
TRUST
Gary A. Anetsberger Senior Vice-President;
Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Vice-President
Secretary
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Daniel K. Cantor Vice-President
Robert A. Christensen Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Harvey B. Hirschhorn Vice-President
Alfred F. Kugel Trustee
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
<PAGE> 9
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President;
Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Vice-President
Secretary
Thomas W. Butch Vice-President
N. Bruce Callow Executive Vice-President
Joanne T. Costopoulos Vice-President
Stephen P. Lautz Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
Anthony G. Zulfer, Jr. Trustee
SteinRoe Variable
Investment Trust
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
Robert A. Christensen Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
ITEM 29. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Securities
Corporation, is a wholly-owned subsidiary of Liberty Investment
Services, Inc., which in turn is a wholly-owned subsidiary of
Liberty Financial Companies, Inc., which in turn is a subsidiary
of Liberty Mutual Equity Corporation, which in turn is a
subsidiary of Liberty Mutual Insurance Company. Liberty
Securities Corporation is principal underwriter for the following
investment companies:
SteinRoe Income Trust
SteinRoe Municipal Trust
SteinRoe Investment Trust
Liberty Growth Properties Limited Partnership
Liberty Income Properties Limited Partnership
Liberty/Heritage Limited Partnership II
Liberty/Kuester Limited Partnership III
Liberty/Manhattan Beach Limited Partnership
Liberty/High Income Plus Limited Partnership
Liberty/Overland Park Limited Partnership
<PAGE> 10
Set forth below is information concerning the directors and
officers of Liberty Securities Corporation:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------ ----------------------------- --------------
Kenneth R. Leibler Chairman of the Board; Director None
Ronald S. Robbins Executive Vice Chairman; Director None
Alan H. Blank Vice Chairman None
Ralph E. Nixon President None
John T. Treece, Jr. Senior Vice President & Treasurer None
John W. Reading Sr. Vice President & Assistant
Secretary None
Valerie A. Arendell Senior Vice President None
Peter J. Babnis Senior Vice President None
John B. Knight Senior Vice President None
Stephen M. O'Neill Senior Vice President None
Robert L. Spadafora Senior Vice President None
Paul G. Martins Vice President & Chief
Financial Officer None
Diane L. Basler Vice President None
Jilaine Hummel Bauer Vice President Exec. V-P &
Secretary
Lindsay Cook Vice President Trustee
Patricia O.
Baeckstrom Vice President None
Susan Sweeney Vice President None
Glenn E. Williams Assistant Vice President None
John A. Benning Secretary None
Charles A. Merritt Assistant Treasurer &
Assistant Secretary None
The principal business address of Ms. Bauer is One South
Wacker Drive, Chicago, IL 60606; that of Mr. Williams is Two
Righter Parkway, Wilmington, DE 19803; and that of the other
officers is 600 Atlantic Avenue, Boston, MA 02210.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Registrant maintains the records required to be maintained by
it under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the
Investment Company Act of 1940 at its principal executive offices
at One South Wacker Drive, Chicago, Illinois 60606. Certain
records, including records relating to Registrant's shareholders
and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main office of Registrant's transfer
agent or custodian.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special meeting
for the purpose of voting upon the question of removal of a
trustee or trustees and will assist in the communications with
other
<PAGE> 11
shareholders as if the Trust were subject to Section 16(c) of the
Investment Company Act of 1940.
Since the information called for by Item 5A is contained in
the latest annual reports to shareholders, Registrant undertakes
with respect to each series other than SteinRoe Special Venture
Fund (which is a new series), to furnish each person to whom a
prospectus is delivered with a copy of the latest annual report to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 3rd day of July.
1995.
STEINROE INVESTMENT TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
- --------- ------- --------
TIMOTHY K. ARMOUR President July 3, 1995
Timothy K. Armour,
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President July 3, 1995
Gary A. Anetsberger, and Controller
Principal Financial
and Accounting Officer
KENNETH L. BLOCK Trustee July 3, 1995
Kenneth L. Block
WILLIAM W. BOYD Trustee July 3, 1995
William W. Boyd
LINDSAY COOK Trustee July 3, 1995
Lindsay Cook
FRANCIS W. MORLEY Trustee July 3, 1995
Francis W. Morley
CHARLES R. NELSON Trustee July 3, 1995
Charles R. Nelson
Trustee
Gordon R. Worley
<PAGE>
STEINROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
9(a) Transfer Agency Agreement as amended
11(a) Consent of Arthur Andersen, LLP
17(a) Financial Data Schedule for SteinRoe Prime Equities
17(b) Financial Data Schedule for for SteinRoe Young
Investor Fund
17(c) Financial Data Schedule for SteinRoe Special
Venture Fund
17(d) Financial Data Schedule for SteinRoe Total Return
Fund
17(e) Financial Data Schedule for SteinRoe Growth Stock Fund
17(f) Financial Data Schedule for SteinRoe Capital
Opportunities Fund
17(g) Financial Data Schedule for SteinRoe Special Fund
Exhibit 9(a)
AGENCY AGREEMENT
This Agency Agreement is made this 11th day of February, 1986 by
and among STEINROE HIGH-YIELD BONDS and STEINROE HIGH-YIELD GOVERNMENTS,
Massachusetts business trusts (hereinafter together called the "Funds" or
the "SteinRoe Funds" and individually the "Fund") and WACKER-ADAMS DATA
SERVICE CORP., a Delaware corporation (hereinafter called "Service
Corp.").
WITNESSETH:
1. Appointment. Each Fund hereby appoints Service Corp.,
effective as of the date hereof, as its agent in connection with the
issue, redemption, and transfer of shares of beneficial interest of
the Fund, including shares of each respective series of the Fund
(hereinafter called the "Shares"), and to process investment income
and capital gain distributions with respect to such Shares, to
perform certain duties in connection with the Fund's withdrawal and
other plans, to mail proxy and other materials to the Fund's
shareholders upon the terms and conditions set forth herein, and to
perform such other and further duties as are agreed upon between the
parties from time to time.
2. Acknowledgment. Service Corp. acknowledges that it has
received from each Fund the following documents:
A. A certified copy of the Agreement and Declaration of
Trust of Fund and any amendments thereto;
B. A certified copy of the By-Laws of Fund;
C. A certified copy of the resolution of the Board of
Trustees of Fund authorizing this Agreement;
D. Specimens of all forms of Share certificates as approved
by the Board of Trustees of Fund with a statement of the Secretary of
Fund certifying such approval;
E. Samples of all account application forms and other
documents relating to shareholders accounts, including terms of
Fund's Systematic Withdrawal Plan;
F. Certified copies of any resolutions of the Board of
Trustees authorizing the issue of authorized but unissued Shares;
G. An opinion of counsel for Fund with respect to the
validity of the Shares, the status of repurchased Shares and the
number of Shares with respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the signatures of
the officers of Fund who are authorized to sign Share certificates,
to sign checks and to sign written instructions to Service Corp..
3. Additional Documentation. Each Fund will also furnish
Service Corp. from time to time with the following documents:
A. Certified copies of each amendment to the Agreement and
Declaration of Trust and By-Laws of Fund;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereto with respect to Shares
of Fund;
C. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to Service Corp.;
D. Specimens of all new Share certificates accompanied by
certified copies of Board of Trustees resolutions approving such
forms;
E. Forms and terms with respect to new plans that may be
instituted and such other certificates, documents or opinions that
Service Corp. may from time to time, in its discretion, deem
necessary or appropriate in the proper performance of its duties.
4. Authorized Shares. Each Fund certifies to Service Corp.
that, as of the date of this Agreement, it may issue an unlimited number
of Shares of the same class in one or more series as the Board of
Trustees may authorize with only one such series having been so
authorized bearing the designation of the Fund's name.
5. Registration of Shares. Service Corp. shall record
issuances of Shares based on the information provided by each Fund.
Service Corp. shall have no obligation to the Funds, when
countersigning and issuing Shares, whether evidenced by certificates
or in uncertificated form, to take cognizance of any law relating to
the issuance and sale of Shares, except as specifically agreed in
writing between Service Corp. and the Funds, and shall have no
such obligation to any shareholder except as specifically provided in
Sections 8-205, 8-208 and 8-406 of the Uniform Commercial Code.
Based on data provided by the Funds of Shares registered or qualified
for sale in various states, Service Corp. will advise the Funds
when any sale of Shares to a resident of a state would result in
total sales in that state in excess of the amount registered or
qualified in that state.
6. Share Certificates. Each Fund shall supply Service Corp.
with a sufficient supply of serially pre-numbered blank Share
certificates, which shall contain the appropriate series designation,
if applicable. Such blank certificates shall be properly prepared
and signed by authorized officers of Fund manually or, if authorized
by Fund, by facsimile and shall bear the seal of Fund or a facsimile
thereof. Notwithstanding the death, resignation, or removal of any
officer of Fund authorized to sign certificates, Service Corp.
may continue to countersign certificates which bear the manual or
facsimile signature of such officer as directed by Fund.
7. Checks. Each Fund shall supply Service Corp. with a
sufficient supply of serially pre-numbered blank checks for the
dividend bank accounts and for the principal bank accounts of Fund.
Service Corp. shall prepare and sign by facsimile signature
plates, bearing the facsimiles of the signatures of authorized
signatories of each Fund, dividend account checks for payment of
ordinary income dividends and capital gain distributions and principal
account checks for payment of redemptions of Shares, including those in
connection with each Fund's Withdrawal Plan, refunds on subscriptions and
other capital payments on Shares, in accordance with this Agreement.
Service Corp. shall hold signature facsimile plates for this purpose and
shall exercise reasonable care in their transportation, storage or use.
Service Corp. may deliver such signature facsimile plates to an agent
or contractor to perform the services described herein, but shall not be
relieved of its duties hereunder by any such delivery.
8. Recordkeeping. Service Corp. shall maintain records showing for
each shareholder's account in each Fund (or appropriate series thereof,
if applicable), the Fund, the following information and such other
information as may be mutually agreed to from time to time by such Fund
and Service Corp.:
A. To the extent such information is provided by
shareholders of such Fund: name(s), address, alphabetical sort key,
client number, tax identification number, account number, the
existence of any special service or transaction privilege offered by
the Fund and applicable to the shareholder's account including but
not limited to the telephone exchange privilege, and other similar
information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year regarding the
account of the shareholder, including transactions to date, date of
each transaction, price per share, amount and type of each purchase
and redemption, transfers, amount of accrued dividends, the amount
and date of all distributions paid, price per share, and amount of
all distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for the
calendar year as required under applicable Federal and state laws,
rules and regulations;
G. The certificate number and date of issuance of each
Share certificate outstanding, if any, representing a shareholder's
Shares in each account, the number of Shares so represented, and any
stop legend on each certificate;
H. Information with respect to gross proceeds of all sales
transactions as required under applicable Federal income tax laws,
rules and regulations; and
I. Such other information as may be agreed upon by the Fund
and Service Corp. from time to time.
9. Purchases. Upon receipt of a request for purchase of Shares
containing data required by a Fund for processing of a purchase
transaction, Service Corp. will:
A. Compute the number of Shares of the appropriate series
of such Fund (or the appropriate series, if applicable) to which the
purchaser is entitled and the dollar value of the transaction according
to the price of such Fund Shares as provided by such Fund for purchases
made at that time and date;
B. In the case of a new shareholder, establish an account
for such shareholder, including the information specified in Section 8
hereof; in the case of an Exchange as described in Section 12 below
by telephone or telegraph, such account shall have exactly the same
registration as that of the account of the other SteinRoe fund (or
series thereof, if applicable) from which the Exchange was made;
C. Transmit to the shareholder by mail or electronically a
confirmation of the purchase, as directed by such Fund, in such format
as agreed to by Service Corp. and the Fund, including all
information called for thereby, and, in the case of a purchase for a
new account, shall also furnish the shareholder a current Fund
prospectus;
D. If applicable, prepare a refund check in the amount of
any overpayment of the subscription price and deliver it to such Fund
for signing; and
E. If a certificate is requested by the shareholder,
prepare, countersign, issue and mail, not earlier than 30 days after
the date of purchase, to the shareholder at his address of record a
Share certificate for such full Shares purchased.
10. Redemptions. Instructions to redeem Shares of any Fund (or
series thereof, if applicable) , including instructions for an Exchange
as described in Section 12 below, may be furnished in written form, or by
other means, including but not limited to telephonic or electronic
transmission or by writing a special form of check, as may be
mutually agreed to from time to time by each Fund and Service Corp..
Upon receipt by Service Corp. of instructions to redeem which are in
"good order," as defined in the Prospectus of the Fund and satisfactory
to Service Corp., Service Corp. will:
A. Compute the amount due for the Shares and the total
number of all the Shares redeemed in accordance with the price per
Share as provided by the Fund for redemptions of such Shares at that
time and date, and transmit to the shareholder by mail or
electronically a confirmation of the redemption, as directed by such
Fund, in such format as agreed to by Service Corp. and the Fund,
including all information called for thereby;
B. Confirmations of redemptions that result in the payment
of accrued dividends shall indicate the amount of such payment and
any amounts withheld;
C. In the case of a redemption in written form other than
by Exchange, Service Corp. shall transmit to the shareholder by
check or, as may be mutually agreed to by the Fund and Service
Corp. and requested by the shareholder, electronic means, an
amount equal to the redemption price and any payment of accrued
dividends occasioned by the redemption, net of any amounts withheld
under applicable Federal and state laws, rules and regulations on or
before the seventh calendar day following the date on which
instructions to redeem in "good order" as defined in the Prospectus
of the Fund, which instructions are satisfactory to Service Corp.
as received by Service Corp.. In the case of an Exchange,
Service Corp. shall use the proceeds of the redemption, net of
any amounts withheld under applicable Federal and state laws, rules
and regulations, to purchase Shares of the SteinRoe Fund (or
series thereof, if applicable) selected by the person requesting the
Exchange;
D. In the case of Exchanges by telephone or telegraph,
redemptions by telephone or electronic transmission, Service Corp. shall
deliver to the Fund, on the business day following the effective date of
such transaction, a listing of such transaction data in a format agreed
to by the Fund and Service Corp. from time to time;
E. If any Share certificate or instruction to redeem
tendered to Service Corp. is not satisfactory to Service Corp., it shall
promptly notify the Fund of such fact together with the reason therefor;
F. Service Corp. shall cancel promptly Share
certificates received in proper form for redemption and issue,
countersign and mail new Share certificates for any Shares
represented by certificates so cancelled which are not redeemed;
G. Service Corp. shall advise the Fund and refuse to
process any redemption by electronic transmission or Exchange by
telephone or telegraph, if such transaction would result in the
redemption of Shares represented by outstanding certificates, unless
otherwise instructed by an officer of the Fund.
11. Administration of Withdrawal Plans. A redemption made
pursuant to a Withdrawal Plan offered by a Fund shall be effected
by Service Corp. at the net asset value per Share of the appropriate Fund
(or appropriate series thereof) on the fifth business day prior to the
first day of the month in which the recipient is scheduled to receive the
withdrawal payment. Service Corp. shall prepare and mail to the
recipient on or before the seventh calendar day after the date of
redemption a check in the amount of each required payment, net of any
amounts withheld under applicable Federal and state laws, rules and
regulations, and also furnish the shareholder a confirmation of the
redemption as described in Section 10 above.
12. Exchanges. Upon receipt by Service Corp. of a request
to exchange Shares of a SteinRoe Fund (or series thereof, if applicable)
held in a shareholder's account for those of another SteinRoe Fund (or
series thereof, if applicable) or vice versa in written form, by
telephone or telegraph or by other electronic means, containing data
required by a Fund for processing such a transaction, Service Corp. will:
A. If the request is by telephone, telegraph or other
electronic means, verify that the shareholder has furnished both the
SteinRoe Funds from and to which the Exchange is to be made
authorization, in a form acceptable to such Funds, to accept Exchange
instructions for his account by such means.
B. Process a redemption of the Shares of the SteinRoe
Fund (or series thereof, if applicable) to be redeemed in connection with
the Exchange and apply the proceeds thereof, net of any amounts withheld
under applicable Federal and state laws, rules and regulations, to
purchase shares of another SteinRoe Fund (or series thereof, if
applicable) being acquired in accordance with the respective SteinRoe
Fund's redemption and purchase policies and Sections 9 and 10 of this
Agreement.
Any redemption and purchase pursuant to an Exchange shall be
effected as of the time and prices applicable to an order for
redemption or purchase received at the time the request for Exchange
is received.
13. Transfer of Shares. Upon receipt by Service Corp. of a
request for a transfer of Shares of any Fund (or series thereof, if
applicable), and receipt of a Share certificate for transfer or an order
for the transfer of Shares in the case of an uncertificated account, in
either case with such endorsements, instruments of assignment or
evidence of succession as may be required by Service Corp. and
accompanied by payment of such transfer taxes, if any, as may be
applicable, and satisfaction of any other conditions for
registration of transfers contained in the Fund's By-Laws,
Prospectus, and Supplemental Information Statement, Service Corp.
will verify the balance of Shares of such Fund (or series thereof,
if applicable) in the account; record the transfer of ownership of
such Shares in its Share certificate and shareholder records for
such Fund; cancel Share
certificates for Shares surrendered for transfer; establish an
account pursuant to Section 8 for the transferee if a new
shareholder; prepare, countersign and mail new Share certificates for
a like number of Shares in the case of a certificated account; and
transmit to the shareholder by mail or electronically confirmation of
the transfer for each account affected, in a format agreed to by
Service Corp. and the Fund, including all information called for
thereby. Service Corp. shall be responsible for determining that
certificates, orders for transfer, and supporting documents, if any,
are in proper legal form for the transfer of Shares.
14. Changes in Shareholder Records. Changes in items of
information specified in Section 8 not relating to change in
ownership of Shares will be made by Service Corp. upon receipt of
a request for such change in a format agreed to by Service Corp.
and each Fund. In the case of any change that Service Corp. and
the Fund agree requires confirmation, a confirmation of such change
in a format agreed to by Service Corp. and the Fund shall be
transmitted to the shareholder by mail or electronically.
15. Refusal to Redeem or Transfer. Service Corp. reserves
the right to refuse to redeem or transfer Shares until reasonably
satisfied that the endorsement on the Share certificates or written
request presented is valid and genuine, and for such purpose may
require where reasonably necessary or appropriate a guarantee of
signature. Service Corp. also reserves the right to refuse to
redeem or transfer Shares until satisfied that the requested transfer
or redemption is legally authorized, and it shall incur no liability
for the refusal in good faith to make transfers or redemptions which
it, in its judgment, deems improper or unauthorized. Notwithstanding
the foregoing, Service Corp. shall redeem or transfer Shares even
though not satisfied as to the endorsement or legal authority if it
is first indemnified to its reasonable satisfaction against all
expenses and liabilities to which it might, in its judgment, be
subjected by such action.
16. Dividends and Capital Gain Distributions. Each Fund will
promptly inform Service Corp. of the declaration of any dividend
or other distribution with respect to Shares of that Fund (or series
thereof, if applicable), including the amount of distribution, the amount
of withholding under applicable Federal and state laws, rules and
regulations, if any, dividend number, if any, record date, ex-dividend
date, payable date and price at which dividends or other distributions
are to be reinvested.
In the case of each Fund (or series thereof, if applicable) for
which dividends shall be declared daily and paid monthly or quarterly,
Service Corp. will credit the dividend payable to each shareholder
thereof to a dividend account of the shareholder and will provide Fund on
each business day with reports of the total amount of dividends credited
and such other data as are agreed upon by the Fund and Service
Corp. Promptly after the payable date for the Fund, Service
Corp. will provide the Fund with reports showing the accounts
which have been paid a dividend or other distribution, the amount
received by each account, the amount withheld as required under
applicable Federal and state laws, rules and regulations, if any, the
amount of the dividend or distribution paid in cash or reinvested in
Shares, and the total amount of cash and Shares required for payment
of the dividend or other distribution.
In the case of each other Fund (or series thereof, if applicable),
Service Corp. will provide Fund promptly following the record date
therefore with reports of the total amount of dividends payable with
respect thereto and such other data as are agreed to by Fund and Service
Corp.. Promptly after the payable date therefor, Service Corp. will
provide the Fund with reports showing the accounts which are to be
paid a dividend or other distribution, the amount to be received by
each account, the amount to be withheld as required under applicable
Federal and state laws, rules and regulations, if any, whether such
dividend or distribution is to be paid in cash or reinvested in
Shares, and the total amount of cash and Shares required for the
payment of such dividend or distribution.
At times agreed to by each Fund and Service Corp., Service
Corp. will transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and confirmation
thereof. Where distributions are reinvested, the price and date of
reinvestment will be those supplied by the Fund. Confirmations will be
prepared by Service Corp. in a format agreed to by Service Corp. and
the Fund.
17. Withholding. Under applicable Federal and state laws,
rules and regulations requiring withholding from dividends and other
distributions and payments to shareholders, Service Corp. shall
be responsible for determining the amount to be withheld and each Fund
shall forward that amount to Service Corp., which will deposit
said amount with, and report said amount to, the proper governmental
agency as required thereunder. Liability for any amounts withheld,
whether or not actually withheld, and for any penalties which may be
imposed upon the payor for failure to withhold, report, or deposit
the proper amount, and for any interest due on said amount, shall be
borne by each Fund and Service Corp. as provided in Section 35
hereof.
Upon receipt of a certificate from a shareholder pertaining to
withholding (including exemptions therefrom) containing such
information as required by the Fund of the shareholder under
applicable Federal and state laws, rules and regulations, Service
Corp. shall promptly process the certificate, which shall become
effective as soon as reasonably possible after receipt by Service
Corp., but no later than may be required by applicable Federal and
state laws, rules and regulations.
At the time a shareholder account is established with a Fund,
such Fund shall be responsible for (i) soliciting the shareholder's
tax identification number in the manner and form required under
applicable Federal and state laws, rules and regulations; (ii)
identifying and rejecting an obviously incorrect number (as defined
under applicable Federal and state laws, rules and regulations) and
(iii) furnishing to Service Corp. the number and any related
information provided by or on behalf of the shareholder. Service
Corp. shall be responsible for any subsequent communications to
the shareholder that may be required in this regard.
In the case of withholding an amount in excess of the proper
amount from a payment made by or on behalf of a Fund to a
shareholder except as otherwise provided by applicable Federal and
state laws, rules and regulations, Service Corp., at the
direction of such Fund, shall immediately adjust the shareholder's
account, as well as succeeding deposits; provided, however, that when
an adjustment would result in an adjustment across calendar years,
Service Corp. shall not be required to make such adjustment.
In the case of (i) a failure to withhold the proper amount from
a dividend or other distribution or payment made by or on behalf of a
Fund to a shareholder or (ii) any penalties attributable to (a) a failure
to withhold the proper amount or (b) the shareholder's failure to provide
any Fund or Service Corp. with correct information requested in any to
comply with withholding requirements under applicable Federal and state
laws, rules and regulations, Service Corp., at the direction of such
Fund, shall immediately cause the redemption of Shares from the
shareholder's account with such Fund having a value not exceeding
the sum of such deficit amount and applicable penalties and apply the
proceeds to reimburse whomever has borne the expense resulting from
the shareholder's failure. If the value of the Shares in the
shareholder's account with such Fund is less than the sum of the deficit
amount and applicable penalties, Service Corp. may cause the redemption
of Shares having a value not exceeding such difference from any account,
including a joint account, of the shareholder with any other Fund,
subject to the consent of the other Fund, and apply the proceeds to
reimburse whoever has borne the expense resulting from the shareholder's
failure.
18. Mailings. Service Corp. shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. Service Corp. shall mail financial reports furnished
by each Fund (or series thereof, if applicable) to shareholders as
requested and will mail the current prospectus for each series of the
Fund to shareholders of such series once each year;
B. Service Corp. shall mail to shareholders of each
series of each Fund (or series thereof, if applicable) proxy material for
each duly scheduled meeting of shareholders of such Fund (or series);
C. Service Corp. shall include in any of the above
mailings such other enclosures as are compatible for mailing purposes
as reasonably requested by such Fund;
D. Service Corp. shall make such other mailings upon
such terms and conditions and for such fees as are agreed to by
Service Corp. and each Fund from time to time.
Each Fund shall deliver all material required to be furnished by
it to Service Corp. for any scheduled mailing sufficiently in
advance of the date for such mailing, so that Service Corp. may
effect the scheduled mailing.
19. Tax Information Returns and Reports. Service Corp.
will prepare and file with the appropriate governmental agencies,
such information, returns and reports as are required to be so filed
for reporting (i) dividends and other distributions made, (ii)
amounts withheld on dividends and other distributions and payments
under applicable Federal and state laws, rules and regulations, and
(iii) gross proceeds of sales transactions as required and as each
Fund shall direct Service Corp.. Further, Service Corp. shall prepare
and deliver to each Fund reports showing amounts withheld from
dividends and other distributions and payments made for that
Fund (or, if applicable, for each series thereof).
20. Information to be Furnished to Shareholders. Service
Corp. will prepare and transmit to each shareholder of each Fund
annually in such format as is reasonably requested by the Fund, and
as agreed to by Service Corp., information returns and reports
for reporting dividends and other distribution and payments, amounts
withheld, if any, and gross proceeds of sales transactions as
required under applicable Federal and state laws, rules and
regulations.
21. Stop Orders. Upon receipt of a request from a Fund or a
shareholder that a "stop" should be placed on the shareholder's
account, Service Corp. will maintain a record of such "stop" and
notify the Fund if any transaction request is received from a
shareholder which would reduce the number of Shares in an account on
which a "stop" has been placed. Service Corp. will inform the
Fund of any information Service Corp. receives relating to a
"stop." Service Corp. shall also maintain for the Fund the
record of share certificates on which a "stop" has been placed, it
being understood that a certificate "stop" does not mean a "stop" on
the shareholder's entire account to which a certificate may relate.
22. Share Splits and Share Dividends. If a Fund elects to
declare a Share dividend or split for any series, the services and
fees with respect thereto will be negotiated by the Fund and Service Corp.
23. Replacement of Share Certificates. Service Corp. may
issue a new Share certificate in place of a Share certificate
represented as not having been received or as having been lost,
stolen, seized or destroyed, upon receiving instructions from the
Fund and indemnity satisfactory to Service Corp., and may issue a
new Share certificate in exchange for, and upon surrender of, an
identifiable mutilated Share certificate. Such instructions from the
Fund shall be in such form as has been approved by the Board of
Trustees of the Fund and shall be in accordance with the provisions
of the By-Laws of the Fund governing such matters.
24. Unclaimed and Undelivered Share Certificates. Where a
Share certificate is in the possession of Service Corp. for any
reason, and has not been claimed by the record holder or cannot be
delivered to the record holder, Service Corp. shall cancel said
certificate and reflect as uncertificated Shares on the shareholder's
account record the Shares represented by said cancelled certificate.
25. Reports and Files. Service Corp. shall maintain the
files and furnish the statistical and other information listed on
Schedule B. However, Service Corp. reserves the right to delete,
change or add to the files maintained and information provided so
long as such deletions, additions or changes do not impair the
receipt of services described elsewhere in this Agreement. Service
Corp. shall also use its best efforts to obtain such additional
statistical and other information as each Fund may reasonably request
within the capabilities of Service Corp., for such additional
consideration as may be agreed to by Service Corp. and such Fund.
26. Examination of Daily Transactions. Each Fund will examine
reports reflecting each day's transactions and other data delivered
to it for the accuracy of the transactions reflected therein and
failure to reflect transactions that should have been reflected
therein. If Service Corp. has not received from Fund, within
five (5) business days after delivery of such reports to Fund,
written notice, which may be in the form of an appropriate
transaction instruction submitted by Fund for the purpose of
correcting the error or omission, as to any errors or omissions which
a reasonable inspection and normal audit and control procedure would
reveal, then all transactions reflected in such reports shall be
deemed to be correct and accepted by the Fund, and Service Corp.
shall have no further responsibility for the omission from or correction,
deletion, or inclusion of any transaction reflected or which should have
been reflected therein, or any liability to the Fund or any third person
on account of such error or omission.
27. Disposition of Books, Records, and Cancelled Share
Certificates. Service Corp. will periodically send to each Fund
all books, documents, and records of that Fund no longer needed for
current purposes and Share certificates which have been cancelled in
transfer or in redemption; such books, documents, records, and Share
certificates shall be safely stored by such Fund for future reference
for such period as is required by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other relevant
statutes. Service Corp. shall have no liability for loss or
destruction of said books, documents, records, or Share certificates
after they are returned to such Fund.
28. Inspection of Share Books. In case of any request or
demand for inspection of the books of a Fund reflecting ownership
of the Fund's Shares therein ("Share books"), Service Corp. will
make a reasonable effort to notify such Fund and to secure
instructions as to permitting or refusing such inspection. Service
Corp. reserves the right, however, to exhibit the Share books to
any person in case it is advised by its counsel that it may be held
liable for the failure to exhibit the Share books to such person.
29. Fees. Each Fund shall pay to Service Corp. for its
services hereunder fees computed as set forth in Schedule A hereto.
30. Out-of-Pocket Expenses. Each Fund shall reimburse Service
Corp. for any and all out-of-pocket expenses and charges in
performing services under this Agreement, including but not limited
to, mailing service, postage, printing of shareholder statements, the
cost of any and all forms of the Fund and other materials used by
Service Corp. in communicating with shareholders of the Fund, the
cost of any equipment or service used for communicating with the
Fund's custodian bank or other agent of the Fund, and all costs of
telephone communication with or on behalf of shareholders allocated
in a manner mutually acceptable to the Funds and Service Corp.
31. Instructions, Opinion of Counsel, and Signatures. At any
time Service Corp. may apply to a duly authorized agent of a
Fund for instructions regarding that Fund, and may consult counsel for
such Fund or its own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be liable for any
action taken or omitted by it in good faith in accordance with such
instructions or with the advice or opinion of such counsel. Service
Corp. shall be protected in acting upon any such instruction,
advice, or opinion and upon any other paper or document delivered by
a Fund or such counsel believed by Service Corp. to be genuine
and to have been signed by the proper person or persons and shall not
be held to have notice of any change of authority of any officer or
agent of a Fund, until receipt of written notice thereof from such
Fund.
32. Fund's Legal Responsibility. Each Fund assumes full
responsibility for the preparation, contents, and distribution of
each Prospectus and Supplemental Information Statement of such Fund,
and for complying with all applicable requirements of the Securities Act
of 1933, as amended, the Investment Company Act of 1940, as amended, and
any laws, rules, and regulations of government authorities having
jurisdiction over the Fund except that Service Corp. shall be responsible
for all laws, rules and regulations of government authorities having
jurisdiction over transfer agents and their activities. Service
Corp. assumes full responsibility for complying with due diligence
requirements of payors of reportable dividends and of brokers under
the Internal Revenue Code with respect to shareholder accounts.
33. Registration of Service Corp. as Transfer Agent. Service Corp.
represents that it is registered with the Securities and Exchange
Commission as a transfer agent under Section 17A of the Securities
Exchange Act of 1934 and will notify each Fund promptly if such
registration is revoked or if any proceeding is commenced before the
Securities and Exchange Commission which may lead to such revocation.
34. Confidentiality of Records. Service Corp. agrees not
to disclose any information received from a Fund to any other
customer of Service Corp. or to any other person except Service
Corp.'s employees and agents, and shall use its best efforts to
maintain such information as confidential. Upon termination of this
Agreement, Service Corp. shall return to each Fund all records in
the possession and control of Service Corp. related to such Fund's
activities, other than Service Corp.'s own business records, it
being also understood that any programs and systems used by Service
Corp. to provide the services rendered hereunder will not be given
to any Fund.
Notwithstanding the foregoing, it is understood and agreed that
Service Corp. may maintain with each Fund's records information
and data to be utilized by Service Corp. in providing services to
entities serving as trustees and/or custodians of prototype Tax-
Qualified Retirement Plans, IRA Plans, plans for employees of public
schools or tax-exempt organizations, or other plans which invest in
that Fund's Shares. In the event that this Agreement is terminated,
Service Corp. may transfer and retain from the records maintained
for each Fund such information and data relating to participants in
such aforementioned plans as may be required for Service Corp. to
continue providing its services to such trustees and/or custodians.
35. Liability and Indemnification. Service Corp. shall not
be liable to any Fund for any action taken or thing done by it or its
agents or contractors on behalf of the Fund in carrying out the terms
and provisions of this Agreement if done in good faith and without
negligence or misconduct on the part of Service Corp., its agents
or contractors.
Each Fund shall indemnify and hold Service Corp., and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses, including
reasonable expenses for counsel, incurred by it in connection with
its acceptance of this Agreement, in connection with any action or
omission by it or its agents or contractors in the performance of its
duties hereunder to the Fund, or as a result of acting upon any
instruction believed by it to have been executed by a duly authorized
agent of the Fund or as a result of acting upon information provided
by the Fund in form and under policies agreed to by Service Corp.
and the Fund, provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular series or group of series of Shares, such indemnification
shall be only out of the assets of that series or group of series;
(ii) this indemnification shall not apply to actions or omissions
constituting negligence or misconduct of Service Corp. or its
agents or contractors, including but not limited to willful
misfeasance, bad faith, or gross negligence in the performance of
their duties, or reckless disregard of their obligations and duties
under this Agreement; and (iii) Service Corp. shall give the Fund
prompt notice and reasonable opportunity to defend against any such
claim or action in its own name or in the name of Service Corp..
Service Corp. shall indemnify and hold harmless each Fund
from and against any and all claims, demands, expenses and
liabilities which such Fund may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of Service
Corp. or its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions constituting
negligence or misconduct of such Fund or its other agents or
contractors and (ii) such Fund shall give Service Corp. prompt
notice and reasonable opportunity to defend against any such claim or
action in its own name or in the name of such Fund.
36. Insurance. Service Corp. represents that it has
available to it the insurance coverage set forth on Schedule C
hereto, and agrees to notify each Fund in advance of any proposed
deletion or reduction in said insurance.
37. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
38. Dual Interests. It is understood that some person or
persons may be trustees, directors, officers, or shareholders of both
the Funds and Service Corp., and that the existence of any such
dual interest shall not affect the validity hereof or of any
transactions hereunder except as otherwise provided by specific
provision of applicable law.
39. Amendment and Termination. This Agreement may be modified
or amended from time to time by mutual agreement between the parties
hereto and may be terminated by at least one hundred eighty (180)
days' written notice given by one party to the other. Upon
termination hereof, each Fund shall pay to Service Corp. such
compensation as may be due as of the date of such termination and
shall reimburse Service Corp. for its costs, expenses, and
disbursements payable under this Agreement to such date. In the
event that in connection with termination a successor to any of the
duties or responsibilities of Service Corp. hereunder is
designated by a Fund by written notice to Service Corp., it
shall promptly upon such termination and at the expense of such Fund,
transfer to such successor a certified list of shareholders of such
Fund (with name, address, and tax identification number), a record of
the account of each shareholder and status thereof, and all other
relevant books, records, and data established or maintained by
Service Corp. under this Agreement and shall cooperate in the transfer of
such duties and responsibilities, including provision, at the expense of
such Fund, for assistance from Service Corp. personnel in the
establishment of books, records, and other data by such successor.
40. Assignment. Any interest of Service Corp. under this
Agreement shall not be assigned or transferred, either voluntarily or
involuntarily, by operation of law or otherwise, without the prior
written consent of each Fund.
41. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail, postage
prepaid to the other party at such address as such other party may
designate for the receipt of such notices. Until further notice to
the other parties, it is agreed that the address of each Fund is 300
West Adams Street, Chicago, Illinois 60606, Attention: Secretary, and
that of Service Corp. for this purpose is 300 West Adams Street,
Chicago, Illinois 60606, Attention: Secretary.
42. Non-Liability of Trustees and Shareholders. Any obligation
of a Fund hereunder shall be binding only upon the assets of that
Fund (or the applicable series thereof), as provided in the Agreement
and Declaration of Trust of that Fund, and shall not be binding upon
any Trustee, officer, employee, agent or shareholder of the Fund or
upon any other Fund. Neither the authorization of any action by the
Trustees or the shareholders of a Fund, nor the execution of this
Agreement on behalf of the Fund shall impose any liability upon any
Trustee or any shareholder. Nothing in this Agreement shall protect any
Trustee against any liability to which such Trustee would otherwise be
subject by willful misfeasance, bad faith or gross negligence in the
performance of his duties, or reckless disregard of his obligations and
duties under this Agreement.
43. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein," "hereof," and "hereunder," shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings
are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction
or effect of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
STEINROE HIGH-YIELD GOVERNMENTS
By: JAMES D. WINSHIP
Attest: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE HIGH-YIELD BONDS
By: JAMES D. WINSHIP
Attest: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
WACKER-ADAMS DATA SERVICE CORP.
By: JAMES D. WINSHIP
Attest: Vice President
JILAINE HUMMEL BAUER
Assistant Secretary
<PAGE>
SCHEDULE A TO AGENCY AGREEMENT
This Schedule A is attached to and made part of the Agency
Agreement dated _________, 1986 (the "Agreement") among STEINROE
HIGH-YIELD BONDS and STEINROE HIGH-YIELD GOVERNMENTS (the "Funds"),
and WACKER-ADAMS DATA SERVICE CORP. (the "Service Corp.").
1. Regular fees. Subject to the provisions of Section 39
relating to the modification, amendment and termination of the
Agreement, including this Schedule A, each Fund shall pay to Service
Corp. a fee for each of its accounts holding shares of the same
series at the applicable annual rate as set forth below. The fee per
account will be payable monthly at a rate of one-twelfth of the
annual fee and will be changed with respect to any shareholder
account of the respective series in existence during any part of the
applicable month regardless of the portion of the month for which the
account is active.
(a) Base fee:
Type of Series Annual fee
Non-daily dividend $6.00*
Daily dividend $10.00*
--------------
*Plus $0.25 per dividend paid.
(b) Transaction surcharge:
In addition, for each shareholder-initiated transaction, each Fund
shall pay to Service Corp. an additional fee of (1) $0.75 for
each such automated transaction (which shall include check-writing
and any other type of transaction as the Funds and Service Corp.
shall mutually agree is automated) and (2) $1.25 for each such non-
automated transaction.
For purposes of this Schedule A, shareholder-initiated transactions
shall include any transaction initiated by a shareholder (other than
purchases representing reinvestment of dividends or distributions)
changing the share balance or any other information with respect to
the shareholder's account.
2. Minimum fee. For each Fund or, in the case of a Fund authorized
to issue separate series of Shares, each series thereof, there shall be a
minimum monthly fee, as computed under this schedule, of $500 per
month.
<PAGE>
SCHEDULE B
SYSTEM DESCRIPTION
The following outline sets out the files maintained and reports
produced and identifies sub-systems for specific processing.
I. Basic Shareholder Recordkeeping System
Includes maintaining required files and record and producing reports
reflecting the result of processing transactions.
A. Files Maintained:
1. Shareowner Alpha File (contains a cross reference
between a 10-position alpha code and a shareholder
account number within a specified fund code)
2. Shareowner Master File
3. Shareowner History File
4. Letter of Intent File
5. Cumulative Discount File
6. Systematic Withdrawal File
7. Pre-Authorized Check File
8. Additional Mail File
9. Pending Correspondence File
10. Purchase Reminder File
11. Accrued Dividend File
12. Certificate File
13. Price File
14. Check Reconciliation File
15. Dealer Name and Address File
16. Fail Free (Wire Order File)
17. Expedited Redemption File
18. Corporate Action File
B. Reports Produced:
1. Daily Fund Reports
(a) Daily Recap & Share Control Sheet (shares)
(b) Daily Recap & Share Control Sheet (cash amount)
(c) Daily Distribution of Cash Sheet
2. Daily Wire Order Activity Reports
(a) Daily Batch Balance
(b) Daily Confirmed Deletion Report
(c) Master Activity Report
(d) Daily Confirmed Unpaid Purchase Journal
(e) Daily Confirmed Redemption Journal
(f) Fail/Free Balance Listing - Trade Date Sequence
(g) Fail/Free Balance Listing - Alpha Code Sequence
(h) Daily Confirmed "As Of" Report
3. Additional Activity Reports (microfiche only)
1. Direct Payments Journal
2. Confirmed Payments w/Transfer Inst. Journal
3. Dividend Share Adjustment Journal
4. Issue From Free File Journal
5. Purchase Cancellation Journal
6. Direct Redemption Journal
7. Dividend Cash Adjustment Journal
8. Confirmed Redemptions Journal
9. Redemption Cancellation Journal
10. Exchange Redemption Journal
11. Exchange Purchase Journal
12. Certificate Deposit Journal
13. Certificate Withdrawal Journal
14. Transfer (debit/minus) Journal
15. Transfer (credit/add) Journal
16. Confirmed Payments Without Trans. Journal
17. Keogh Fee Redemption Journal
18. Fiduciary Contribution Journal
19. Wire Instruction Report for Expedited Redemptions
20. Check-Writing Redemption Report
21. Asset Transfer Journal
22. Dividend Reinvestment to Cash Journal
23. Dividend Cash to Reinvestment Journal
24. SWP Redemption Journal
25. Maintenance Update Journal
26. Pending Correspondence Purge Report
27. Decrease W/H-Purchase Shares
28. Decrease W/H-Remit Cash
29. Increase W/H Redeem Shares
30. Increase W/H Collect Cash
............31. Daily "As Of" Report
32. Direct Payments thru Fund Journal
33. Checkwriting Redemption Journal
34. Voluntary Maintenance Journal
35. Expedited Redemption Journal
36. Special Redemptions Journal
37. Replacement Check Journal
38. Daily Dividend Close Out Journal
39. Daily Dividend Decrease Journal
40. Daily Dividend Increase Journal
41. PAC Direct Payments Journal
4. Summary Reports
(a) Fund Share Balance Listing
(b) Net Share Change to Fund
(c) Exchange Distribution Report
(d) Daily CRT Operator Statistics
(e) Staff Summary Statistics
5. Month End Profile Reports
(a) Social Code Report
(b) Shareowner Residence Report
(c) Distribution of Shares Report
(d) Account Summary Report
(e) CWRED Activity Analysis
(f) Monthly Maintenance Journal
(g) 420 Report.
6. Internal Operating Reports
1. Daily Transaction Work File Deletions
2. Additional Mail File Error Listing
3. Daily Fund Share Balance Listing
4. Daily Update Error Listing (MUIDO)
5 Keogh/IRA Excess Contribution Report
6. Fail/As Of Trade Extensions
7. Price Update Report
8. Redemption Check Register
9. Shareowner Check/Confirm Report
10. Transaction Processing Log
11. Fiduciary Asset Report
12. Daily Batch Balance Report
13. Premature Share Removal Report
14. EXRED Warning Report
15. Expedited Redemption Maintenance Journal
16. Dealer File Maintenance Journal
17. Fail/Free Delinquent Trades
18. Purchase Reminder Maintenance Report
19. Requests for Duplicate Confirms
20. Systematic Withdrawal Plan Journal
21. Purchase/Redemption Invoices
22. Pre-Authorized Check Activity Log
23. New Account Verification Report
24. Check Writing Checks
25. SPAC Reports
26. Confirmations
27. Stop Payment Notices
28. Shareowner Master Record (purged account)
29. Daily Calculated Rate Report (095)
30. 007 Report
31. 030 (Falconer tape)
7. Shareowner Maintenance Journal
II. Sub-systems to Basic Shareholder Recordkeeping
A. Pre-Authorized Checks - Produce Pre-Authorized Checks (drafts)
and Updating Shareholder Account
B. Withdrawal Accounting - Generate Checks and Confirmation
Statements for Systematic Withdrawal Plans
C. Keogh/IRA Accounting - Account Processing for Keogh and IRA Plans
to include the following:
1. Establishing and Maintaining Accounts
2. Inception-to-Date Accounting
3. Daily Statement Production
4. Collection of Fees
5. Year End Information - W2P and 1099R Production
D. Corporate Actions
1. Dividends and Capital Gains Processing
2. Corporate Action Reporting
3. 1099-DIV Statement Production
E. Proxy Processing
1. Proxy Production and Mailing
2. Proxy Tabulation
3. Proxy Vote Tabulation
F. Wire Order Processing
1. Processing Buy or Sell Orders
2. Automatic Calculation of the Trade
3. Verify Dealer/Branch
4. Verify Price
5. Generate Invoices
6. Produce Journals
7. Produce Confirmation Statements
8. Produce Redemption Checks
G. Blue Sky Reporting
1. Automatic Reporting of Wire Trades and Subscription
Trade Data
2. Generating Daily and Monthly Blue Sky Sales and Status
Reporting Including the following:
(a) Blue Sky State Sales Report
(b) Blue Sky State Status Report
(c) Blue Sky Daily Warning Report
(d) Blue Sky Monthly Sales Activity Report
(e) Blue Sky Maintenance Journals
(f) Blue Sky Daily Sales Activity Report
<PAGE>
SCHEDULE C
(Revised 9/87)
SCHEDULE OF INSURANCE COVERAGE
Type of Insurance Insurance Underwriter Coverage
Comprehensive Commercial (Note 1)
A. Loss or Damage to Federal Insurance Co. $4,800,000
Property (fire and
extended coverage)
B. Comprehensive Liability Federal Insurance Co. 1,000,000
(bodily injury, property
damage, personal injury)
C. Commercial Umbrella Federal Insurance Co. 10,000,000
(excess liability to
supplement coverage
under primary liability
policies)
Data Processing Insurance (Note 1)
A. Data Processing Equipment Royal Exchange Assurance $2,300,000
(loss or damage) of America, Inc.
B. Blanket media and extra Royal Exchange Assurance 500,000
expense (costs related of America, Inc.
to beginning operations
after a loss)
C. Valuable Papers Royal Exchange Assurance 100,000
of America, Inc.
D. Business Interruption Royal Exchange Assurance 1,000,000
of America, Inc.
E. Contingent Business Royal Exchange Assurance 1,000,000
Interruption of America, Inc.
(Kansas City, MO)
Other (Note 1)
A. Registered Management Federal Insurance Co. $3,000,000
Investment Co. Bond ($50,000
deductible)
B. Errors & Omissions Evanston Insurance Co. 20,000,000
First State Insurance ($5,000
Co. deductible
$150,000
deductible/E&O
American International $250,000
Group deductible/D&O
C. Transfer Agents Mail Federal Insurance Co. $100,000 First
Class Mail
$5,000,000
Registered Mail
Note (1): Insureds include the firm of Stein Roe & Farnham, as well as
each of the SteinRoe Funds.
<PAGE>
FIRST AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 3rd day of March, 1987 (the "First
Amendment"), amends the Agency Agreement (including Schedules A, B and C)
dated February 11, 1986 by and among SteinRoe High-Yield Bonds, SteinRoe
Governments Plus (formerly named SteinRoe High-Yield Governments), each a
Massachusetts business trust, and Wacker-Adams Data Service Corp.
("Service Corp.").
WHEREAS, SteinRoe Equity Portfolio hereby appoints Service Corp.,
effective as of the date hereof, as its agent in connection with the
issue, redemption and transfer of its shares ("Shares") and to process
investment income and capital gain distributions with respect to such
Shares, to perform certain duties in connection with its withdrawal
and other plans, to mail proxy and other materials to its shareholders
upon the terms and conditions set forth in the Agreement, and to perform
such other and further duties as are mutually agreed upon from time to
time;
NOW, THEREFORE, the Agreement is hereby amended as follows:
In the preamble to the Agreement, SteinRoe Equity Portfolio shall be
added as a party and all references to "Funds" and "SteinRoe Funds" shall
hereafter be deemed to refer collectively to SteinRoe Equity Portfolio,
SteinRoe Governments Plus and SteinRoe High-Yield Bonds, and all
references to "Fund" shall hereafter be deemed to refer individually to
each of them.
IN WITNESS WHEREOF, the parties have caused this First Amendment to
be executed as of the date and year first written above.
Attest: STEINROE HIGH-YIELD BONDS
JILAINE HUMMEL BAUER By JAMES D. WINSHIP
Secretary Executive Vice-President
Attest: STEINROE GOVERNMENTS PLUS
JILAINE HUMMEL BAUER By JAMES D. WINSHIP
Secretary Executive Vice-President
Attest: STEINROE EQUITY PORTFOLIO
JILAINE HUMMEL BAUER By JAMES D. WINSHIP
Secretary Executive Vice-President
Attest: WACKER-ADAMS DATA SERVICE CORP.
JILAINE HUMMEL BAUER By JAMES D. WINSHIP
Secretary Executive Vice-President
<PAGE>
SECOND AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 1st day of August, 1988 (the "Second
Amendment"), amends the Agency Agreement (including Schedules A, B,
and C) dated February 11, 1986, as amended by a First Amendment dated
March 3, 1987 (the "Agreement"), by and among SteinRoe Income Trust and
SteinRoe Equity Trust (each a "Fund" and together the "Funds"), each a
Massachusetts business trust and SteinRoe Services (formerly named
Wacker-Adams Data Service Corp. and hereinafter referred to as "Service
Corp.").
WHEREAS, the Board of Trustees of each Fund has approved an
increase in its overall transfer agency fees, as well as the
institution of additional fees for services provided by Service Corp.
that have grown in significance and for which there was no previous
charge, which fees are:
(1) a 10% increase in base, dividend, and transaction fees, and
elimination of the fee differential for automated and manual
transactions;
(2) a direct pass-through to the Fund of the charges by DST, Inc. to
Service Corp. for systems and facilities DST, Inc. provides to
Service Corp. that enable Service Corp. to perform its services under
this Agreement; and
(3) additional fees for services provided with respect to closed
accounts, as well as certain administrative and shareholder services.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 8 of the Agreement entitled "Record-Keeping" is
amended by adding the following sentence at the end thereof.
"Service Corp. shall maintain for any account that is closed
("Closed Account") the aforesaid records through the June of the
calendar year following the year in which the account is closed or
such other period as may be mutually agreed to from time to time by
such Fund and Service Corp."
2. The following are added as new sections of the Agreement
numbered 9 and 10 and the sections currently numbered 9 through 43
are amended by renumbering them as sections 11 through 45:
"9. Administrative Services. Service Corp. shall furnish each
Fund (i) certain administrative services insofar as they relate to
the maintenance of shareholder account records, recordkeeping
systems, and reporting of information to shareholders, in connection
with compliance with applicable securities, tax and other laws and
regulations, and (ii) facilities and personnel to enhance, develop
and implement services, systems and facilities either directly or
through third-party service providers.
"10. Shareholder Services. In addition to the shareholder
recordkeeping and transactional services provided for elsewhere
herein, Service Corp. shall provide each Fund certain shareholder
information services, including but not limited to, responding to
shareholder inquiries in writing or by telephone, generating data for
shareholders with special information needs, and disseminating
information about tax law changes and other developments affecting
shareholders with respect to their accounts in the Funds."
3. Section 30 of the Agreement (renumbered Section 32 by this
Second Amendment) entitled "Out-of-Pocket Expenses" is amended as
follows:
"32. Out-of-Pocket Expenses. Each Fund shall reimburse Service
Corp. for any and all out-of-pocket expenses and charges in
performing services under this Agreement, including but not limited
to, mailing service, postage, printing of shareholder statements, the
cost of any and all forms of the Fund and other materials used by
SteinRoe Services. in communicating with shareholders of the Fund, the
cost of any equipment or service used for communicating with the
Fund's custodian bank or other agent of the Fund, charges of DST,
Inc. to Service Corp. for use of its system and facilities related to
Service Corp.'s services under this Agreement, and all costs of
telephone communication with or on behalf of shareholders allocated
in a manner mutually acceptable to the Fund and Service Corp.."
4. Schedule A to the Agreement is amended and restated in the
form attached hereto.
IN WITNESS WHEREOF, the parties have caused this First Amendment
to be executed as of the day and year first written above.
STEINROE INCOME TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE EQUITY TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: JAMES D. WINSHIP
ATTEST: Executive Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
SCHEDULE A TO AGENCY AGREEMENT
This Schedule A, dated August 1, 1988, is attached to and made
part of the Agency Agreement dated February 11, 1986, as amended by a
First Amendment dated March 3, 1987, and a Second Amendment dated August
1, 1988 (the "Agreement"), by and among SteinRoe Income Trust and
SteinRoe Equity Trust (each a "Fund" and together the "Funds"), each a
Massachusetts business trust and SteinRoe Services Inc.("Service
Corp."). and constitutes Schedule A referred to in Section 31 of the
Agreement (numbered Section 29 prior to the Second Amendment to the
Agreement) for periods commencing and transactions occurring on and after
August 1, 1988.
Subject to the provisions of Section 41 (numbered Section 39 prior to
the SECOND Amendment to the Agreement) relating to the modification,
amendment and termination of the Agreement, including this Schedule
A, each Fund shall pay to Service Corp. the following fees. The
services for which these fees are charged are indicated by cross-
reference to the appropriate section of the Agreement.
1. REGULAR FEES
(A) Open Accounts
Each Fund shall pay to Service Corp. for each of its
accounts a fee at the applicable annual rate set forth below.
The Account Fees shall be payable each month at a rate of one-
twelfth of the annual rate and shall apply to any account open
during any part of a month.
(i) Account Fees
(a) Base Fee (Sections 5, 7, 8, 11-16, and 20-28)
Type of Series Annual Rate
-------------- -----------
No-daily dividend $ 6.60
Daily dividend $11.00
(b) Administration Fee $ 1.50
(Section 9)
(c) Shareholder Service Fee $ 3.50
(Section 10)
(ii) Transaction Fees
(a) Dividends and other $ 0.275
distributions paid on
a single date
(Sections 18 and 19)
(b) Shareholder-initiated $ 1.375
transactions
(Sections 11, 12, 14, 15, and 19)
(B) Closed Accounts (Section 8)
Each Fund shall pay to Service Corp. for each of its Closed
Accounts, as defined in Section 8 of the Agreement, a fee
at the applicable annual rate set forth below beginning
with the month following the month in which an account is
closed, and for each succeeding month the account remains
closed through June of the calendar year following the
year in which the account is closed or such other period
as may be agreed to by the Funds and Service Corp. The fee
shall be payable each month at a rate of one-twelfth of
the annual rate.
Type of Series Annual Rate
-------------- -----------
Non-daily dividend $ 4.40
Daily dividend $ 7.33
For purposes of this Schedule A, (a) an account shall be considered
closed when the share balance is reduced to zero, and (b) a
shareholder-initiated transaction shall include (i) any transaction
initiated by a shareholder (other than purchases representing
reinvestment of dividends or other distributions) changing the share
balance or any other information with respect to the shareholder's
account and (ii) any phone call initiated by a shareholder to an
automated telephone service system maintained by Service Corp. to
service Fund shareholders, not involving either the marketing or
distribution of a Fund or a transaction as defined in (i) above.
2. MINIMUM FEE
For each series of a Fund, there shall be a minimum monthly fee, as
computed under this Schedule, of $500 per month.
<PAGE>
THIRD AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 1st day of February, 1991 (the "Third
Amendment"), amends the Agency Agreement (including Schedules A, B,
and C) dated February 11, 1986, as amended by a First Amendment dated
March 3, 1987, and a Second Amendment dated August 1, 1988 (the
"Agreement"), by and among SteinRoe Income Trust and SteinRoe Investment
Trust (formerly named SteinRoe Equity Trust) (each a "Fund" and together
the "Funds"), each a Massachusetts business trust, and SteinRoe Services
Inc. ("Service Corp."). (hereinafter referred to as "Service Corp.").
WHEREAS, the Board of Trustees of each Fund has approved an
increase in its overall transfer agency fees, as well as the
institution of a separate fee for services provided by Service Corp.
in connection with establishing new accounts which are:
(1) a 10% increase in base, administrative, shareholder
servicing, and dividend fees;
(2) a 3% increase in shareholder-initiated transaction fees; and
(3) an additional fee of $4.00 per account for services provided
in connection with establishing new accounts.
NOW, THEREFORE, Schedule A to the Agreement is hereby amended
and restated in the form attached hereto.
IN WITNESS WHEREOF, the parties have caused this Third
Amendment to be executed as of the day and year first written above.
STEINROE INCOME TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE INVESTMENT TRUST
By: JAMES D. WINSHIP
ATTEST: Executive Vice-President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES. INC.
By: JAMES D. WINSHIP
ATTEST: Executive Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
SCHEDULE A TO AGENCY AGREEMENT
(February 1, 1991)
This Schedule A, dated February 1, 1991, is attached to and made
part of the Agency Agreement February 11, 1986, as amended by a First
Amendment dated March 3, 1987, a Second Amendment dated August 1, 1988,
and a Third Amendment dated February 1, 1991 (the "Agreement"), by and
among SteinRoe Income Trust and SteinRoe Investment Trust (each a
"Fund" and together the "Funds"), each a Massachusetts business trust,
and SteinRoe Services. Inc. ("Service Corp."), and constitutes Schedule A
referred to in Section 31 of the Agreement (numbered Section 29 prior
to the Second Amendment to the Agreement) for periods commencing and
transactions occurring on and after February 1, 1991.
Subject to the provisions of Section 41 (numbered Section 39 prior to
the Second Amendment to the Agreement) relating to the modification,
amendment and termination of the Agreement, including this Schedule
A, each Fund shall pay to Service Corp. the following fees. The
services for which these fees are charged are indicated by cross-
reference to the appropriate section of the Agreement.
1. REGULAR FEES
(A) Open Accounts
Each Fund shall pay to Service Corp. for each of its accounts
a fee at the applicable rate set forth below. The Account
Fees, which are stated at an annual rate, shall be payable
each month at a rate of one-twelfth of the annual rate and
shall apply to any account open during any part of a month.
(i) Account Fees
(a) Base Fee (Sections 5, 7, 8, 11-16, and 20-28)
Type of Series
--------------
Non-daily dividend $ 7.25
Daily dividend $12.10
(b) Administration Fee $ 1.65
(Section 9)
(c) Shareholder Service Fee $ 3.85
(Section 10)
(ii) Transaction Fees
(a) Dividends and other $ 0.3025
distributions paid on
a single date
(Sections 18 and 19)
(b) New account set up fee $ 4.00
(shareholder-initiated)
(Sections 8, 9, 12, and 13)
(c) Other shareholder-initiated $ 1.415
transactions (Sections
11, 12, 14, 15, and 19)
(B) Closed Accounts (Section 8)
Each Fund shall pay to Service Corp. for each of its Closed
Accounts, as defined in Section 8 of the Agreement, a fee
at the applicable annual rate set forth below beginning with the
month following the month in which an account is closed, and for
each succeeding month the account remains closed through June of
the calendar year following the year in which the account is
closed or such other period as may be agreed to by the Funds and
Service Corp. The fee shall be payable each month at a rate of
one-twelfth of the annual rate.
Type of Series
--------------
Non-daily dividend $ 4.40
Daily dividend $ 7.33
For purposes of this Schedule A, (a) an account shall considered new
whenever a new number is assigned to the account, (b) an account
shall be considered closed when the share balance is reduced to zero,
and (c) a shareholder-initiated transaction shall include (i) any
transaction initiated by a shareholder (other than purchases
representing reinvestment of dividends or other distributions)
changing the share balance or any other information with respect to
the shareholder's account and (ii) any phone call initiated by a
shareholder to an automated telephone service system maintained by
Service Corp. to service Fund shareholders, not involving either the
marketing or distribution of a Fund or a transaction as defined in
(i) above.
2. MINIMUM FEE
For each series of a Fund, there shall be a minimum monthly fee, as
computed under this Schedule, of $500 per month.
<PAGE>
FOURTH AMENDMENT TO AGENCY AGREEMENT
This amendment, made this 29th day of July, 1992 (the "Fourth
Amendment"), amends the Agency Agreement dated February 11, 1986, as
amended by amendments dated February 1, 1991, August 1, 1988 and March 3,
1987 (the "Agreement"), by and between SteinRoe Income Trust and SteinRoe
Investment Trust (each a "Fund" and together the "Funds"), each a
Massachusetts business trust, and SteinRoe Services Inc. (hereinafter
referred to as "Service Corp."), a Massachusetts corporation.
WHEREAS, Service Corp. wishes to be able to assign certain of
its duties and responsibilities under the Agreement when the parties
determine it to be in their mutual interest for it to do so;
NOW, THEREFORE, the Agreement is hereby amended by deleting
Section 40 and substituting the following:
"40. Assignment.
"A. Except as provided below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
"B. This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
"C. Service Corp. may subcontract for the performance of any of
its duties or obligations under this Agreement with any person if
such subcontract is approved by the Board of Trustees of the Funds
provided, however, that Service Corp. shall be as fully responsible
to the Funds for the acts and omissions of any subcontractor as it is
for its own acts and omissions."
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment
to be executed as of the day and year first written above.
STEINROE INCOME TRUST
STEINROE INVESTMENT TRUST
By: JILAINE HUMMEL BAUER
ATTEST: Vice-President and Secretary
NICOLETTE D. PARRISH
Assistant Secretary
STEINROE SERVICES INC.
By: JEANNE M. LASHBROOK
ATTEST: Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
FIFTH AMENDMENT TO AGENCY AGREEMENT
This amendment made this lst day of May, 1995 (the "Fifth
Amendment") amends the Agency Agreement dated February 11, 1986, as
amended by amendments dated July 29, 1992, February 1, 1991, August 1,
1998 and March 3, 1987 (the "Agreement") by and between SteinRoe Income
Trust and SteinRoe Investment Trust (each a "Fund" and, collectively,
the "Funds"), each a Massachusetts business trust, and SteinRoe Services
Inc. (hereinafter referred to as "Service Corp."), a Massachusetts
corporation.
By mutual agreement of the parties, the Agreement is hereby
amended as follows:
1. Sections 9, 10, and 32 (added by a second amendment dated
August 1, 1988) of the Agreement are amended and restated to read as
follows:
"9. Administrative Services. Service Corp. shall furnish the
following administrative services to each Fund:
A. Coordination of the printing and dissemination of
prospectuses, financial reports, and other shareholder information as
are agreed to by Service Corp. and the Funds from time to time.
B. Maintenance of data and statistics and preparation of
reports for internal use and for distribution to the Fund's Board of
Trustees concerning shareholder transaction and service activity.
C. Handling of requests from third parties involving
shareholder records, including, but not limited to, record subpoenas,
tax levies, and orders issued by courts or administrative or
regulatory agencies.
D. Development and monitoring of shareholder service
programs that may be offered from time to time, including, but not
limited to, individual retirement account and tax-qualified
retirement plan programs, checkwriting redemption privileges,
automatic purchase, exchange and redemption programs, audio response
services, programs involving electronic transfer of funds, and lock box
facilities.
E. Provision of facilities, hardware and software systems,
and equipment in Chicago (and other locations mutually agreed to by
Service Corp. and the Fund) to meet the needs of shareholders and
prospective shareholders, including, but not limited to, walk-in
facilities, toll-free telephone numbers, electronic audio and other
communication, accounting and recordkeeping systems to handle
shareholder transaction, inquiry and other activity, and to provide
management and other personnel required to staff such facilities and
administer such systems.
10. Shareholder Services. Service Corp. shall provide the
following services as are requested by any Fund in addition to the
transactional and recordkeeping services provided for elsewhere
herein:
A. Responding to communications from shareholders or their
representatives or agents concerning any matters pertaining to shares
registered in their names, including, but not limited to, (i) net
asset value and average cost basis information; (ii) shareholder
services, plans, options, and privileges; and (ii) with respect to
the series of the Fund represented by such shares, information
concerning investment policies, portfolio holdings, performance, and
shareholder distributions and the classification thereof for tax
purposes.
B. Handling of shareholder complaints and correspondence
directed to or brought to the attention of Service Corp.
C. Soliciting and tabulating proxies of shareholders and
answering questions concerning the subject matter thereof.
D. Under the direction of the officers of the Fund,
administering a program whereby shareholders whose mail from the Fund
is returned are identified, current address information for such
shareholders is solicited, and shares and dividend or redemption
proceeds owned by shareholders who cannot be located are escheated to
the proper authorities in accordance with applicable laws and
regulations.
E. Preparing and disseminating special data, notices,
reports, programs, and literature for certain categories of
shareholders based on account characteristics, or for shareholders
generally in light of industry, market, product, tax, or legal
developments.
F. Assisting any institutional servicing or recordkeeping
agent engaged by Service Corp. and approved by the Fund in the
development, implementation, and maintenance of special programs and
systems to enhance overall shareholder servicing capability,
consisting of:
(i) Product and system training for personnel of the
institutional servicing agent.
(ii) Joint programs with the institutional servicing agent
to develop customized shareholder software systems, account
statements, and other information and reports.
(iii) Electronic and telephonic systems and other
technological means by which shareholder information, account data,
and cost of securities may be exchanged among Service Corp., the
institutional servicing agent, and their respective agents or
vendors.
G. Furnishing sub-accounting services for retirement plan
shareholders and other shareholders representing group
relationships with special recordkeeping needs.
H. Providing and supervising the services of employees
whose principal responsibility and function will be to preserve and
strengthen the Fund's relationships with its shareholders.
I. Such other shareholder and shareholder-related services,
whether similar to or different from those described in this section
as the parties may from time to time agree in writing.
32. Out-of-Pocket Expenses. Each Fund shall reimburse Service
Corp. for any and all out-of-pocket expenses and charges in
performing services under this Agreement (other than charges for
normal data processing services and related software, equipment and
facilities) including, but not limited to, mailing service, postage,
printing of shareholder statements, the cost of any and all forms of
the Fund and other materials used by Service Corp. in communicating
with shareholders of the Fund, the cost of any equipment or service
used for communicating with the Fund's custodian bank or other agent
of the Fund, and all costs of telephone communication with or on
behalf of shareholders allocated in a manner mutually acceptable to
the Fund and Service Corp."
2. Schedule A to the Agreement is amended and restated in the
form attached hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
STEINROE INCOME TRUST
STEINROE INVESTMENT TRUST
By: TIMOTHY K. ARMOUR
ATTEST: President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
By: STEPHEN P. LAUTZ
ATTEST: Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE>
Schedule A
Agency Agreement
(as amended on May 1, 1995)
Fees pursuant to Section 31 (previously numbered Section 29) of
the Agency Agreement shall be calculated in accordance with the
following schedule. For each series, the fee shall accrue on each
calendar day and shall be payable monthly on the first business day
of the next succeeding calendar month.
The daily fee accrual shall be computed by multiplying the
fraction of one divided by the number of days in the calendar year by
the applicable annual fee and multiplying this product by the net
assets of the series, determined in the manner established by the
Board of Trustees of the applicable Fund, as of the close of business
on the last preceding business day on which the series' net asset
value was determined.
Type of Series Annual Fee
- --------------- -------------
Equity 0.220% of average daily net assets
Fixed Income (non-money fund) 0.140% of average daily net assets
Fixed Income (money market fund) 0.150% of average daily net assets
Dated: May 1, 1995
Exhibit 11(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of
our report dated November 15,1994, and to all references to our
Firm included in or made a part of this Registration Statement on
Form N-1A of the SteinRoe Investment Trust (comprising the SteinRoe
Total Return Fund, SteinRoe Prime Equities, SteinRoe Stock Fund,
SteinRoe International Fund, SteinRoe Special Fund and SteinRoe
Capital Opportunities Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois,
June 28, 1995.
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of
our report dated October 27,1994, and to all references to our Firm
included in or made a part of this Registration Statement on Form
N-1A of the SteinRoe Investment Trust (comprising the SteinRoe
Young Investor Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois,
June 28, 1995.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEINROE PRIME EQUITIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 100,035
<INVESTMENTS-AT-VALUE> 122,160
<RECEIVABLES> 6,170
<ASSETS-OTHER> 237
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,567
<PAYABLE-FOR-SECURITIES> 3,963
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 174
<TOTAL-LIABILITIES> 4,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,464
<SHARES-COMMON-STOCK> 8,645
<SHARES-COMMON-PRIOR> 8,917
<ACCUMULATED-NII-CURRENT> 199
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,481
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,286
<NET-ASSETS> 124,430
<DIVIDEND-INCOME> 1,009
<INTEREST-INCOME> 381
<OTHER-INCOME> 0
<EXPENSES-NET> 553
<NET-INVESTMENT-INCOME> 837
<REALIZED-GAINS-CURRENT> 2,248
<APPREC-INCREASE-CURRENT> 1,840
<NET-CHANGE-FROM-OPS> 4,925
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,033)
<DISTRIBUTIONS-OF-GAINS> (5,015)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,086
<NUMBER-OF-SHARES-REDEEMED> (1,758)
<SHARES-REINVESTED> 400
<NET-CHANGE-IN-ASSETS> (5,250)
<ACCUMULATED-NII-PRIOR> 395
<ACCUMULATED-GAINS-PRIOR> 4,247
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 362
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 553
<AVERAGE-NET-ASSETS> 122,918
<PER-SHARE-NAV-BEGIN> 14.54
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.39
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> STEINROE YOUNG INVESTOR FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 15,389
<INVESTMENTS-AT-VALUE> 16,944
<RECEIVABLES> 26
<ASSETS-OTHER> 159
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,129
<PAYABLE-FOR-SECURITIES> 470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63
<TOTAL-LIABILITIES> 533
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,092
<SHARES-COMMON-STOCK> 1,465
<SHARES-COMMON-PRIOR> 798
<ACCUMULATED-NII-CURRENT> (15)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (36)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,555
<NET-ASSETS> 16,596
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<NET-INVESTMENT-INCOME> 46
<REALIZED-GAINS-CURRENT> 75
<APPREC-INCREASE-CURRENT> 1,270
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (85)
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<NUMBER-OF-SHARES-SOLD> 666
<NUMBER-OF-SHARES-REDEEMED> (7)
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 8,420
<ACCUMULATED-NII-PRIOR> 24
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 188
<AVERAGE-NET-ASSETS> 12,080
<PER-SHARE-NAV-BEGIN> 10.24
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<PER-SHARE-DIVIDEND> (0.08)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> STEINROE SPECIAL VENTURE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
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<TOTAL-LIABILITIES> 3,612
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,338
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 660
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,514
<NET-ASSETS> 34,512
<DIVIDEND-INCOME> 50
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<OTHER-INCOME> 0
<EXPENSES-NET> 111
<NET-INVESTMENT-INCOME> 45
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<APPREC-INCREASE-CURRENT> 1,515
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-REDEEMED> (45)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 34,512
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 166
<AVERAGE-NET-ASSETS> 19,692
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> (0.03)
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<EXPENSE-RATIO> 1.25
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> STEINROE TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 188,591
<INVESTMENTS-AT-VALUE> 214,766
<RECEIVABLES> 4,324
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<TOTAL-ASSETS> 219,392
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194,127
<SHARES-COMMON-STOCK> 8,629
<SHARES-COMMON-PRIOR> 8,893
<ACCUMULATED-NII-CURRENT> 751
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,229)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,175
<NET-ASSETS> 218,824
<DIVIDEND-INCOME> 3,661
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<EXPENSES-NET> 916
<NET-INVESTMENT-INCOME> 6,069
<REALIZED-GAINS-CURRENT> (2,242)
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<NET-CHANGE-FROM-OPS> 4,195
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 540
<NUMBER-OF-SHARES-REDEEMED> (1,074)
<SHARES-REINVESTED> 270
<NET-CHANGE-IN-ASSETS> (10,450)
<ACCUMULATED-NII-PRIOR> 338
<ACCUMULATED-GAINS-PRIOR> 2,436
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 916
<AVERAGE-NET-ASSETS> 218,775
<PER-SHARE-NAV-BEGIN> 25.78
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> (0.65)
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<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STEINROE GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 226,514
<INVESTMENTS-AT-VALUE> 314,812
<RECEIVABLES> 3,498
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<TOTAL-LIABILITIES> 813
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 14,606
<SHARES-COMMON-PRIOR> 13,636
<ACCUMULATED-NII-CURRENT> 408
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,865
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 88,298
<NET-ASSETS> 317,877
<DIVIDEND-INCOME> 2,058
<INTEREST-INCOME> 506
<OTHER-INCOME> 0
<EXPENSES-NET> 1,478
<NET-INVESTMENT-INCOME> 1,086
<REALIZED-GAINS-CURRENT> 7,127
<APPREC-INCREASE-CURRENT> 11,982
<NET-CHANGE-FROM-OPS> 20,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,950)
<DISTRIBUTIONS-OF-GAINS> (39,914)
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<NUMBER-OF-SHARES-SOLD> 918
<NUMBER-OF-SHARES-REDEEMED> (1,761)
<SHARES-REINVESTED> 1,813
<NET-CHANGE-IN-ASSETS> (3,625)
<ACCUMULATED-NII-PRIOR> 1,272
<ACCUMULATED-GAINS-PRIOR> 35,652
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<GROSS-EXPENSE> 1,478
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<PER-SHARE-NAV-BEGIN> 23.58
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 1.27
<PER-SHARE-DIVIDEND> (0.15)
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<PER-SHARE-NAV-END> 21.76
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEINROE CAPITAL OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 152,599
<INVESTMENTS-AT-VALUE> 195,711
<RECEIVABLES> 2,729
<ASSETS-OTHER> 479
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 198,919
<PAYABLE-FOR-SECURITIES> 937
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 463
<TOTAL-LIABILITIES> 1,400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 149,447
<SHARES-COMMON-STOCK> 5,643
<SHARES-COMMON-PRIOR> 5,564
<ACCUMULATED-NII-CURRENT> 205
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,755
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43,112
<NET-ASSETS> 197,519
<DIVIDEND-INCOME> 247
<INTEREST-INCOME> 837
<OTHER-INCOME> 0
<EXPENSES-NET> 824
<NET-INVESTMENT-INCOME> 260
<REALIZED-GAINS-CURRENT> 9,989
<APPREC-INCREASE-CURRENT> 8,100
<NET-CHANGE-FROM-OPS> 18,349
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (105)
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,638
<NUMBER-OF-SHARES-REDEEMED> (1,562)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 21,832
<ACCUMULATED-NII-PRIOR> 50
<ACCUMULATED-GAINS-PRIOR> (5,234)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 824
<AVERAGE-NET-ASSETS> 175,427
<PER-SHARE-NAV-BEGIN> 31.58
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 3.39
<PER-SHARE-DIVIDEND> (0.02)
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<EXPENSE-RATIO> 0.94
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEINROE SPECIAL FUND
<S> <C>
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<PERIOD-START> SEP-30-1994
<PERIOD-END> MAR-31-1995
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 198,801
<NET-ASSETS> 1,193,306
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<OTHER-INCOME> 0
<EXPENSES-NET> 5,663
<NET-INVESTMENT-INCOME> 3,569
<REALIZED-GAINS-CURRENT> 39,882
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (69,358)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,058
<NUMBER-OF-SHARES-REDEEMED> (8,704)
<SHARES-REINVESTED> 3,391
<NET-CHANGE-IN-ASSETS> (50,579)
<ACCUMULATED-NII-PRIOR> 5,659
<ACCUMULATED-GAINS-PRIOR> 58,662
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.53
<PER-SHARE-DIVIDEND> (0.14)
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<EXPENSE-RATIO> 0.95
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</TABLE>