A DIFFERENT
KIND OF
ANNUAL REPORT
FOR A DIFFERENT KIND OF MUTUAL FUND
Annual Report
September 30, 1996 Stein Roe
YOUNG INVESTOR FUND
Photographic image of man holding young child.
<PAGE>
CONTENTS
From the President............................................... 1
Tim Armour's thoughts on Young Investor Fund
The Companies We Invest In....................................... 2
The Fund's top 10 holdings
Q&A.............................................................. 4
An interview with the Fund's portfolio managers
Fund Highlights.................................................. 10
Information about the Fund
Investments...................................................... 13
A complete list of the Fund's investments with market values
Financial Statements............................................. 21
Balance sheet, statements of operations and changes in net assets
Notes to Financial Statements.................................... 24
Financial Highlights............................................. 27
Selected per-share data
Report of Independent Auditors................................... 28
General Information.............................................. 29
A guide to products and services
This report must be accompanied or preceded by
a prospectus.
<PAGE>
TO OUR SHAREHOLDERS
DEAR INVESTOR,
As you know, Stein Roe Young Investor Fund was created with two purposes in
mind:
o to educate young people and their parents about basic investment concepts
and financial principles; and, most importantly,
o to provide outstanding investment returns by investing a substantial
portion of its assets in companies that are familiar to young people.
Many people ask if it limits the Fund in any way to focus primarily on
companies that cater to young people. Not in our opinion. In fact, the biggest
problem we encounter is not in finding potentially attractive candidates, it's
choosing among the hundreds we find. That's because we've found that many of
the companies that provide the products and services that appeal to young
people also happen to be among what we believe are the finest companies in the
world. After all, children are savvy consumers. Therefore, in order to capture
the attention of and succeed with today's children, we believe companies must
have good products at the right price, forward-looking management and good
business practices.
We think that formula for success also can translate into successful
results for the Fund, as it did for the year ended September 30, 1996, when
Young Investor Fund posted a return of 35.55 percent. In our opinion, this
result, combined with the Fund's educational materials, confirms that the Fund
is a good investment, not just for young people, but for investors of all
ages.
As always, we enjoy receiving your comments, and hope that you will
continue to send us your ideas and suggestions. We look forward to hearing
from you.
Sincerely,
/s/ Timothy K. Armour
Timothy K. Armour
President, Stein Roe Mutual Funds
October 24, 1996
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of capital
gains distributions. The Fund's adviser currently limits expenses to 1.25
percent of average net assets, subject to termination on 30 days' notice to
the Fund. Absent past expense limits, the Fund's total return would have been
less.
<PAGE>
THE COMPANIES WE INVEST IN
Diversification means investing the Fund's assets (money) in many
different kinds of companies to help reduce risk. We think Young Investor Fund
is broadly diversified because the top 10 holdings made up only 18.3 percent
of the Fund's total net assets as of September 30, 1996.
In 1913, Edward Noble approached Clarence Crane, the inventor of the
peppermint Life Saver,(R) with a business proposal. Noble wanted to
produce the candy in several different flavors. Crane didn't want any part of
this plan, but he did agree to sell Noble the rights to the candy and the
name Life Saver(R) for the then princely sum of $2,900.
It seems that Noble, unlike Crane, understood the value of
diversification. He realized that it simply didn't make good business sense to
base the success of the company on just one flavor of candy. Instead, he
believed that by adding different flavors, he could attract more customers. At
the same time, he could help protect the business in case any flavor lost its
appeal with candy buyers. Today, Life Savers,(R) a division of Nabisco Foods
(0.9 percent of Young Investor Fund's total net assets), is a
multibillion-dollar business.
Like Edward Noble, smart investors understand the value of diversification.
We think the benefits of spreading your dollars among a variety of investments
cannot be overstated. Remember: no investment performs well under all
conditions. That's why one of the main benefits of choosing a variety of
investments is that you will have some protection should one of them experience
a downturn.
It seems to us that variety is not only the spice of life -- it's also
the foundation of a good investment plan.
Source: Nabisco Foods
<PAGE>
Young Investor Fund invests in the stocks of many different companies, both to
pursue its investment objective and to help diversify its holdings. Below,
you'll find the 10 largest holdings in the Fund as of September 30, 1996.
<TABLE>
<CAPTION>
% of Total
Net Assets
on 9/30/96 Symbol Exchange
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Outdoor Systems 2.9% OSIA NASDAQ*
- ----------------------------------------------------------------------------------------------------
2 Intel Corporation 1.9 INTC NASDAQ
- ----------------------------------------------------------------------------------------------------
3 Eli Lilly & Company 1.8 LLY NYSE**
- ----------------------------------------------------------------------------------------------------
4 Remedy Corporation 1.8 RMDY NASDAQ
- ----------------------------------------------------------------------------------------------------
5 Cisco Systems, Inc. 1.8 CSCO NASDAQ
- ----------------------------------------------------------------------------------------------------
6 Johnson & Johnson 1.7 JNJ NYSE
- ----------------------------------------------------------------------------------------------------
7 Procter & Gamble 1.6 PG NYSE
- ----------------------------------------------------------------------------------------------------
8 The Gillette Company 1.6 G NYSE
- ----------------------------------------------------------------------------------------------------
9 Boston Scientific 1.6 BSX NYSE
- ----------------------------------------------------------------------------------------------------
10 McDonald's Corporation 1.6 MCD NYSE
- ----------------------------------------------------------------------------------------------------
* National Association of Securities Dealers Automated Quotation
** New York Stock Exchange
</TABLE>
<PAGE>
AN INTERVIEW WITH THE PORTFOLIO MANAGERS
Art McQueen joined the Fund as co-portfolio manager in April 1996.
Q. HOW HAS THE FUND PERFORMED THIS YEAR?
A. The Fund had a very successful year. For the one-year period ended
September 30, 1996, the Fund posted a return of 35.55 percent, which
significantly outpaced the 20.32 percent return of the S&P 500 -- the most
widely used index that measures the performance of U.S. stocks. In addition,
according to Lipper Analytical Services, this performance placed the Fund in
the top 2 percent of all equity funds, both for the one-year period (#55 of
3,679 funds) and since its inception (#36 out of 2,461 funds).
Q. WHY HAS THE FUND PERFORMED BETTER THAN ITS PEERS THIS YEAR?
A. There are two reasons for the Fund's solid performance. The first is that
many of our holdings have performed well over the past year. Standouts include
Intel, one of the world's top producers of microcomputer chips, which reported
stronger-than-expected earnings; Outdoor Systems, the nation's largest
billboard company, which profited from the lucrative acquisition of a
competitor's outdoor advertising business; Telemundo, a Spanish-language
television broadcaster, and Heftel, a Spanish-language radio company, both of
which benefited from increased investor interest in companies that serve
America's growing Hispanic population (1.9 percent, 2.9 percent, 1.5 percent
and 1.2 percent of total net assets, respectively).
In addition to good stock selection, we think our performance also was
driven by our market capitalization strategy. By "market capitalization"
strategy, we mean that, on average, we try to invest 50 percent of the Fund in
"large-cap" stocks, 30 percent in "mid-cap" stocks, and the remaining 20
percent in "small-cap" stocks.
A company's capitalization is simply the total value of all of its
outstanding shares of stock, which are owned by investors like you. By
"large-cap," we are referring to well-established companies with market
capitalizations, or "caps," of $5 billion or more. Some large-cap stocks that
we own include McDonald's, Walt Disney and Johnson & Johnson (1.6 percent, 1.4
percent and 1.7 percent of total net assets, respectively).
<PAGE>
As you can see, these are well-known companies whose products you may use on a
regular basis. In contrast, small- and mid-cap stocks are not quite as big. A
mid-cap stock usually will have a total market value of some where between
$1 billion and $5 billion, while a small-cap stock's market cap usually will be
less than $1 billion. small- and mid-cap holdings may not be quite as
well-known as our large-cap holdings, so you may not be quite as familiar with
them -- not yet, anyway.
The idea behind our strategy is that our large-cap holdings make up the
foundation of the portfolio. That means they help provide the Fund's core,
stable growth over the long term. Our mid- and small-cap holdings, on the
other hand, provide even greater growth potential that can help boost the
Fund's performance. This year, our market capitalization strategy has really
worked to our advantage, since both smaller- and larger-cap stocks had periods
when they led the market. By owning both smaller- and larger-cap stocks, we
were able to outperform our peers.
Photographic image of: David Bradley, Erik Gustafson, Art McQueen
Q. IT SEEMED LIKE THE STOCK MARKET HAD MORE UPS AND DOWNS THIS YEAR. WHY?
A. These ups and downs are also known as market volatility. There are a number
of factors that can cause the market to be volatile. This year, however, the
stock market's swings were primarily caused by two things. Early this year,
the ups and downs were caused by what many considered to be conflicting
economic reports, which left investors wondering which way the economy was
headed. Later in the summer, in addition to these inconsistent reports,
several high-profile companies reported earnings shortfalls, which caused the
stock market to stumble.
<PAGE>
AN INTERVIEW WITH THE PORTFOLIO MANAGERS
(Continued)
The Gross Domestic Product (GDP) is an economic statistic published by
the U.S. government. It is commonly used to demonstrate economic growth. The
GDP is the total value of all goods and services produced.
Q. WHY DID THESE REPORTS HAVE SUCH A NEGATIVE EFFECT ON THE STOCK MARKET?
A. Every month, the government releases new statistics that tell us how the
economy is doing. These reports cover all kinds of things -- everything from
how many new jobs were created to how many cars people bought. Early in the
year, these reports showed that the economy was slowing down. In fact, many
people were worried that the economy might actually be headed for a recession.
A recession is when the demand for goods and services slows down. Economists
define a recession as three consecutive quarters of negative growth in Gross
Domestic Product (GDP). When economic growth is negative, it usually means
people don't buy as many goods. That means factories have fewer orders. As a
result, they don't need to hire workers, and ultimately people lose their
jobs.
But, in early March, the government released stronger-than-expected
reports, which showed that the number of new jobs created was much higher than
previously thought. In response, both the stock and bond markets tumbled.
That might appear curious to you. After all, it probably seems like a
good thing that more jobs were created. But what's good for Main Street isn't
always good for Wall Street. When more jobs are created, it's usually because
demand has increased, which means factories have to produce more goods. In
order to do that, they have to hire more people to keep up with this increased
demand. Initially, this is a good thing because it means more people have jobs
and the economy grows. But, in the long run, if factories can't produce enough
to satisfy the demand, prices tend to rise. This increase in prices is known
as inflation, or when too much money is chasing too few goods.
Although different from a recession, inflation also is bad news for the
economy. As a result, many investors thought the Federal Reserve, the nation's
central bank, would raise interest rates in an attempt to prevent an outbreak
of inflation. The Federal Reserve raises interest rates -- the "cost" of
borrowing money -- in order to slow down the economy. Higher interest rates
are bad for the stock market, however. That's because high interest rates make
it harder for companies to take out loans because it's more difficult to repay
them. As a result, higher interest rates can cause stock valuations to go
down.
In the end, the Federal Reserve left interest rates unchanged. But we
think this should help you understand that the best economy is a balanced
economy, and that too much or too little growth can be bad for the stock
market.
Q. THIS SUMMER, THE MARKET EXPERIENCED ANOTHER DOWNWARD SLIDE. WAS IT ALSO
CAUSED BY CONFLICTING SIGNALS?
A. Yes. Once again, the government released stronger-than-expected economic
reports, which raised fears of higher inflation and a possible interest rate
hike. Over the next week, however, investors suddenly changed their minds
about the direction of the economy, when several companies reported they
would not meet their earnings expectations. That one-two punch -- the
possibility of higher inflation combined with lower earnings -- was enough to
cause the stock market to experience its first significant correction in
nearly six years.
Q. WHAT IS A MARKET CORRECTION? IS IT BAD FOR INVESTORS?
A. A market correction is when stock prices fall. A correction is measured by
the percentage change in stock prices from their highs to their lows.
Depending on how severe the correction is, the stock market, as measured by a
market index, usually will fall somewhere between 5 percent and 20 percent. A
decrease of more than 20 percent is called a bear market. In the first two
weeks of July, the Dow Jones Industrial Average, an index that measures
blue-chip stock performance, shed 344 points, or 6 percent. The Nasdaq
Composite Index, the most widely followed index of over-the-counter stocks,
fell nearly 11 percent over the same time period.
AN INTERVIEW WITH THE PORTFOLIO MANAGERS (Continued)
<PAGE>
These corrections have historically been a normal part of the investment
cycle, occurring about every two to five years. It may help to think of a
market correction like this: you are on your way somewhere, and to get there,
you take a few steps forward, and one step back. Eventually, you will probably
still get where you are going, it just may take a little longer. A market
correction is similar, except it's when the stock market takes one step
backwards.
While these corrections can be scary, they also can be a good thing.
That's because they tend to get rid of speculative excesses -- when companies
trade at prices that are well above what experts believe they are worth --
that tend to build up in a bull market. In addition, a correction often
provides us with the opportunity to buy more of our favorite stocks at lower
prices.
Q. ACCORDING TO THE U.S. GOVERNMENT, MORE THAN 51 MILLION AMERICAN
SCHOOLCHILDREN WILL ATTEND KINDERGARTEN THROUGH GRADE 12 THIS YEAR.* THAT
BREAKS A RECORD THAT HAD BEEN IN PLACE FOR MORE THAN 25 YEARS! DOES THIS SURGE
OF YOUNG PEOPLE OFFER ANY INTERESTING INVESTMENT POSSIBILITIES FOR YOUNG
INVESTOR FUND?
A. It certainly does. We are excited about the long-term
prospects for a number of industries that cater to the needs of the growing
youth market. From purely a consumption point of view, there are plenty of
companies, particularly retailers, that stand to benefit from this trend.
That's because parents will always spend money on their children, and children
and teens will always spend money on themselves. If there are more children,
then more money is spent. The big risk with retailers, however -- even with a
perennial favorite like the Gap (1.3 percent of total net assets) -- is that
they are subject to fashion whims, and we pity the poor retailer whose clothes
kids suddenly decide are uncool.
That's why we also are looking at other industries, which offer products
and services that might appeal to young people. For instance, we think Apollo
Group (0.7 percent of total net assets), which provides higher education
programs for working adults, also could benefit from this trend. That's
because we think a growing share of high school graduates may look to other
sources to provide higher education, especially as the traditional four-year
college experience becomes too expensive for many families.
The youth explosion isn't just happening here in the United States,
however. Many countries, particularly nations like China and India, also have
growing young populations. As these countries become more developed, peoples'
standards of living rise. As this happens, we have found that people often
want to spend their money on American products. That means they want to drink
Coca-Cola, eat McDonald's hamburgers, use Gillette razors and watch Disney
movies. As a result, we think companies that provide the products and services
that these people want are well positioned.
* Source: U.S. Census Bureau, 1996
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of September 30, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
capital gains distributions. The Fund's Adviser currently limits expenses to
1.25 percent of average net assets, subject to termination on 30 days' notice
to the Fund. Absent past expense limits, the Fund's total return would have
been less. The S&P 500, the Dow Jones Industrial Average and the Nasdaq
Composite are unmanaged groups of stocks that differ from the composition of
Young Investor Fund; they are not available for direct investment. According
to Lipper Analytical Services, Inc., an independent monitor of mutual fund
performance, the median returns for all equity funds for the one-year and Life
of Fund periods ended September 30, 1996, were 14.07 percent and 15.61
percent, respectively.
<PAGE>
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
as of September 30, 1996
Average Annual Total Returns
- ------------------------------------------------------------------------
Life
One-Year of Fund*
<S> <C> <C>
- ------------------------------------------------------------------------
YOUNG INVESTOR FUND 35.55% 31.82%
S&P 500 20.32 22.18
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions.
<FN>
* 4/29/94 through 9/30/96
</FN>
</TABLE>
Fund Data
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE:
Seeks to achieve long-term capital appreciation by investing primarily in
common stocks and other equity-type securities that we believe have
long-term appreciation potential. The Fund also has an educational
objective to teach children and teenagers about basic economic principles
and personal finance through a variety of educational materials prepared
and paid for by the Fund.
FUND INCEPTION: 4/29/94
TOTAL NET ASSETS: $179.1 MILLION
You can get an idea of how Young Investor Fund performed by comparing it
to a general measure of the stock market's performance, such as the S&P 500
Index. The S&P 500 is an unmanaged group of stocks that differs from the
composition of the Fund. It is not available for direct investment. The Index
consists of approximately 400 industrial, 40 financial, 40 utility and 20
transportation stocks.
<PAGE>
<TABLE>
<CAPTION>
Economic Sector Breakdown
- ----------------------------------------------------------------------------
Portfolio S&P 500
- ----------------------------------------------------------------------------
<S> <C> <C>
Consumer Cyclical 30% 13%
Technology 29 15
Consumer Noncyclical 25 24
Financial 10 14
Basic Materials 2 5
Industrial 2 10
Utilities 2 10
Energy -- 9
- ------------------------------------------------------------------------------
Total 100% 100%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
Comparison of change in value of $10,000 investment
- ------------------------------------------------------------------------------
Graph
DATE YIF S&P 500
<S> <C> <C>
4/29/94 10,000 10,000
6/30/94 9,700 9,915
9/30/94 10,240 10,399
12/31/94 10,739 10,397
3/31/95 11,414 11,408
6/30/95 12,723 12,496
9/30/95 14,395 13,488
12/31/96 15,011 14,300
3/31/96 16,466 15,068
6/30/96 18,799 15,743
9/30/96 19,511 16,229
</TABLE>
- ------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR A LOSS WHEN YOU SELL SHARES. This
graph compares the performance of Young Investor Fund to the S&P 500 Index, an
unmanaged group of stocks that differs from the composition of the Fund. The
S&P 500 is not available for direct investment. Total return performance
includes changes in share price and reinvestment of income and capital gains
distributions.
<PAGE>
SHAREHOLDERS APPROVE THREE PROPOSALS
Periodically, you and Young Investor Fund's other shareholders are invited to
attend a shareholders' meeting. At the meeting, shareholders vote on issues
affecting the Fund. Each share you own is worth one vote. Therefore, the more
shares you own, the more votes you can cast. Most people don't have time to go
to the meeting, however. That's why we send out something called a Proxy. A
Proxy is a special ballot that enables you to cast your vote by mail when you
can't attend the shareholder meeting.
At a special meeting on June 18, 1996, Young Investor Fund shareholders voted
to approve proposals relating to the election of the Fund's Board of Trustees
and modifications to certain investment policies. The approved proposals
include:
(A) Expansion of Board of Trustees
The Fund's board was expanded from seven to nine members; nine members were
elected to the board. This expansion will help make it easier for Stein Roe to
transfer responsibilities from retiring board members to new board members
over an 18-month period.
(B) Interfund Borrowing
(C) Interfund Lending
Cash management is an important part of the investment process for mutual
funds. An interfund lending program -- a program that allows mutual funds to
borrow cash from and lend cash to each other -- gives Young Investor Fund an
additional way to meet emergency cash needs at terms that would be at least as
favorable as a third party transaction, such as a bank line of credit. Stein
Roe expects to engage in interfund borrowing only when we think it would be
more favorable to both funds than borrowing from a third party.
<TABLE>
<CAPTION>
RECORD TOTAL SHARE
DATE SHARE POSITION
POSITION VOTED AFFIRMATIVE WITHHOLD
<S> <C> <C> <C> <C>
Young Investor Fund 4,588,005 2,760,607
A)
Timothy K. Armour 2,719,487 41,120
Kenneth L. Block 2,701,804 58,803
William W. Boyd 2,705,689 54,918
Lindsay Cook 2,718,497 42,110
Douglas A. Hacker 2,700,220 60,387
Francis W. Morley 2,702,085 58,522
Charles R. Nelson 2,709,554 51,053
Thomas C. Theobald 2,709,161 51,446
Gordon R. Worley 2,700,957 59,650
FOR AGAINST ABSTENTIONS
<CAPTION>
<S> <C> <C> <C>
B) 2,112,275 144,747 503,585
C) 2,113,295 142,725 504,587
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments as of September 30, 1996
(Dollar amounts in thousands)
Number Market
EQUITY-RELATED SECURITIES (88.2%) of Shares Value
<S> <C> <C>
Common Stocks (86.9%)
Automobiles/Vehicles (1.2%)
Volvo AB ADRs
(Manufactures cars, trucks, buses, marine
engines and aerospace equipment) 100,000 $ 2,175
Banks (5.3%)
Citicorp
(Provides a broad range of financial services) 25,000 2,266
MBNA Corp.
(Issues premium and standard bank credit cards) 70,000 2,432
Texas Regional Bancshares, Class A
(Commercial bank operating in the Rio Grande
Valley of Texas) 80,000 2,300
Wells Fargo & Co.
(Provides a broad array of financial products
and services) 10,000 2,600
------
9,598
Computer Software and Services (6.6%)
*Fore Systems Inc.
(Produces network management software for data
communications and computer applications) 50,000 2,069
*Industri-Matematik International Corp.
(Develops, markets and supports client/server
that helps manage ordering and distribution
logistics) 75,000 928
*International Network Services
(Provides services for complex enterprise
networks) 3,300 116
*Microsoft Corporation
(Manufactures software products) 20,000 2,637
*Remedy Corp.
(Manufactures help desk software) 40,000 3,200
*Sterling Commerce Inc.
(Global provider of electronic commerce software
products and network services) 60,000 1,770
*TCSI Corp.
(Provides software and services to
telecommunications service providers) 75,000 994
------
11,714
<PAGE>
See accompanying notes to financial statements.
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
<S> <C> <C>
Consumer-Related (6.2%)
*CUC International Inc.
(Consumer marketing company) 65,000 $ 2,592
The Gillette Company
(Shaving and personal care products) 40,000 2,885
General Electric Company
(Appliances, broadcasting, communications,
and transportation) 30,000 2,730
The Procter & Gamble Company
(Personal care products, pharmaceuticals, food
and beverages) 30,000 2,925
------
11,132
Data Processing (1.2%)
Automatic Data Processing
(Offers a variety of data processing services) 50,000 2,181
Distribution-Retail (11.2%)
*Abercrombie & Fitch Company, Class A
(Retailer of casual apparel for men and women) 12,400 304
*Corporate Express Inc.
(Sells office supply products through its telephone
ordering system, facsimile and electronic data
interchange) 50,000 1,944
Gap Inc.
(Operates stores that sell casual apparel) 80,000 2,310
The Home Depot Inc.
(Home improvement retail chain) 45,000 2,559
*Hot Topic Inc.
(Retails music-related apparel) 2,600 61
Johnson & Johnson
(Manufactures and markets a broad range of
health care and other products) 60,000 3,075
Mattel Inc.
(Designs, manufactures and markets children's
toys) 90,000 2,329
*PETsMART Inc.
(Operates pet food and pet supply stores) 100,000 2,587
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
<S> <C> <C>
Distribution-Retail (Continued)
Sears Roebuck & Co.
(Retailer of apparel, home and automotive
products and services) 50,000 $ 2,237
Walgreen Company
(Large retail drugstore chain in the United
States) 70,000 2,590
------
19,996
Educational Services (1.7%)
*Apollo Group Inc., Class A
(Provides higher education programs for working
adults) 50,000 1,338
*Children's Comprehensive Services
(Provides services for at-risk youth) 100,000 1,775
------
3,113
Electrical Equipment (7.6%)
*Cisco Systems Inc.
(Produces, markets and supports multi-protocol
internetworking systems) 50,000 3,103
Hewlett-Packard Co.
(Designs, manufactures and services computers,
calculators, workstations, printers, and medical
diagnostic devices) 50,000 2,438
Intel Corp.
(Produces and sells microcomputer components and
related products) 35,000 3,340
Motorola, Inc.
(Producer of electronic and telecommunication
equipment) 50,000 2,581
*Sipex Corporation
(Manufactures, markets and sells analog
integrated circuits) 100,000 2,100
------
13,562
Entertainment (2.4%)
Cedar Fair L.P.
(Owns and operates four amusement theme parks) 50,000 1,844
Disney (Walt) Company
(Operates theme parks and resorts and produces
motion pictures) 40,000 2,535
------
4,379
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
<S> <C> <C>
Financial Institutions (4.2%)
Federal Home Loan Mortgage Corp.
(Purchases mortgages from lenders and resells
in pools or packages ) 25,000 $ 2,447
Federal National Mortgage Association
(Purchases mortgages and issues guaranteed
mortgage-backed securities) 75,000 2,616
Household International Inc.
(Provides financial and banking services) 30,000 2,467
------
7,530
Food & Beverage (3.0%)
The Coca-Cola Company
(Producer and distributor of soft drink products) 40,000 2,035
Nabisco Holdings Corp.
(Manufacturer and marketer of packaged foods) 50,000 1,581
Wrigley (Wm) Jr. Company
(Chewing gum manufacturer) 30,000 1,808
------
5,424
Health Care (1.2%)
United Healthcare Corp.
(Owns and manages health maintenance
organizations) 50,000 2,081
Leisure Products (1.3%)
Callaway Golf Company
(Produces and markets golf clubs) 70,000 2,389
Medical/Pharmaceutical (6.0%)
*Applied Analytical Industries, Inc.
(Provides product development and support
services to pharmaceutical and biotechnology
industries) 6,000 136
*Biovail Corp. International
(Formulates, develops and registers oral
controlled release versions of existing
pharmaceutical products) 60,000 2,145
Eli Lilly & Co.
(Involved in discovery, development, manufacture
and sale of pharmaceutical products) 50,000 3,225
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
SmithKline Beecham Plc is a multinational corporation headquartered in the
United Kingdom. ADR stands for American Depository Receipt. An ADR lets
Americans buy shares of a foreign-based company in a U.S. stock market,
instead of in an overseas market using foreign currency. The receipt
represents ownership of shares held in the vault of a U.S. bank and it
entitles the receiptholder to all the dividends and capital gains from the
stock.
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
<S> <C> <C>
Medical/Pharmaceutical (Continued)
Merck & Co., Inc.
(Manufactures and produces human
and animal health products and
services) 40,000 $ 2,815
SmithKline Beecham Plc ADR
(Develops, manufactures
and markets pharmaceuticals) 40,000 2,435
------
10,756
Medical-Instruments (5.6%)
Baxter International Inc.
(Develops, manufactures and
distributes hospital supplies
and related medical equipment) 50,000 2,337
*Boston Scientific Corp.
(Develops, produces and
markets medical devices) 50,000 2,875
Idexx Laboratories Inc.
(Develops and manufactures
biotechnology-based
detection systems for
veterinarians) 50,000 2,263
Medtronic Inc.
(Manufactures various cardiovascular
medical instruments) 40,000 2,565
------
10,040
Publishing, Broadcasting and Media (9.6%)
*Clear Channel Communications Inc.
(Owns, operates and manages radio and
television stations) 30,800 2,726
*Heftel Broadcasting Corp., Class A
(Spanish language radio broadcasting company) 50,000 2,181
*International Family Entertainment
(Produces and distributes entertainment
programming) 100,000 1,638
*Outdoor Systems Inc.
(Outdoor advertising company) 109,500 5,147
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
Publishing, Broadcasting and Media (Continued)
<S> <C> <C>
*Scholastic Corp.
(Publisher and distributor of children's books
and other educational materials) 35,000 $ 2,537
*Telemundo Group Inc., Class A
(Develops and produces Spanish language
television programming and advertising) 80,000 2,740
*Univision Communications Inc.
(Spanish language broadcaster in the United
States) 8,000 268
------
17,237
Rental Services (0.7%)
*Rental Service Corp.
(Rents a broad range of industrial, manufacturing
and construction equipment) 55,000 1,189
Restaurant/Hotel (3.1%)
*HFS Inc.
(Franchiser of hotel chains, real estate and car
rental firms) 40,000 2,675
McDonald's Corporation
(Develops, licenses, leases and services a
worldwide system of restaurants) 60,000 2,842
------
5,517
Specialty Chemicals (1.5%)
Minerals Technologies Inc.
(Develops, produces and markets specialty minerals,
mineral-based and synthetic mineral products) 70,000 2,616
Telecommunications (7.3%)
*Advanced Fibre Communication
(Produces, markets and services telecommunications
delivery systems) 5,100 128
*Associated Group Inc., Class A
(Wireless cable company) 80,000 2,540
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
<CAPTION>
Number Market
Common Stocks (Continued) of Shares Value
Telecommunications (Continued)
<S> <C> <C>
*Ascend Communications Inc.
(Produces, markets and services high-speed
digital wide area network access products) 40,000 $ 2,645
Lucent Technologies Inc.
(Produces public and private networks,
communication systems and software) 50,000 2,294
*Glenayre Technologies Inc.
(Manufactures telecommunications equipment
and software) 100,000 2,300
*Orckit Communications Ltd.
(Produces digital subscriber line systems) 20,000 368
*Tellabs Inc.
(Designs, assembles, markets and services voice
and data networking products) 40,000 2,825
-------
13,100
-------
TOTAL COMMON STOCKS
(Cost $133,466) 155,729
PREFERRED STOCK (1.3%)
Nokia Corp. ADSs
(International electronics group)
(Cost $1,880) 50,000 2,212
-------
TOTAL EQUITY-RELATED SECURITIES
(Cost $135,346) 157,941
-------
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Investments (Continued)
(Dollar amounts in thousands)
The portfolio managers will sometimes have a large amount of money to invest
but may not want to buy stocks with it right away. To put the money to work,
they will invest in short-term instruments like commercial paper. These are
like short-term loans (between one and 270 days long) to large corporations or
banks. For example, the Fund made a loan to Lehman Brothers Holdings Corp.
that came due one day after the date of this report.
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
SHORT-TERM OBLIGATIONS (11.8%)
Commercial Paper (11.8%)
Lehman Brothers Holdings Corp.
5.900% 10/1/96 $ 5,910 $ 5,910
Pooled Accounts Receivable Capital
Corporation 5.350% 10/2/96 8,000 7,999
Rite Aid 5.500% 10/3/96 7,200 7,198
-------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $21,107) 21,107
-------
TOTAL INVESTMENTS (100%)
(Cost $156,453) 179,048
OTHER ASSETS, LESS LIABILITIES (0.0%) 41
-------
TOTAL NET ASSETS (100%) $179,089
=======
<FN>
*Non-Income Producing
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
BALANCE SHEET
September 30, 1996
(Amounts in thousands, except per-share amount)
- -------------------------------------------
Assets
Investments, at market value $179,048
Receivable for fund shares sold 1,629
Receivable from investment adviser 118
Dividends receivable 115
Cash and other assets 47
--------
Total Assets $180,957
========
- ---------------------------------------------
Liabilities
Payable for investments purchased $ 1,579
Other liabilities 289
--------
Total Liabilities 1,868
--------
- ----------------------------------------------
Capital
Paid-in capital 148,071
Net unrealized appreciation 22,595
Accumulated undistributed net investment income 136
Accumulated net realized gains on investments 8,287
--------
Total Capital (Net Assets) 179,089
--------
Total Liabilities and Capital 180,957
========
- -----------------------------------------------
Shares Outstanding (Unlimited Number Authorized) 9,609
========
Net Asset Value (Capital) Per Share $ 18.64
========
See accompanying notes to financial statements.
<PAGE>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
Here's what it cost to manage and operate the Fund during this reporting
period. The man age ment fees, for example, are paid to the investment
adviser (Stein Roe) for researching, buying and selling stocks, and
for developing an investment strategy. The transfer agent fees pay for
processing shareholder transactions and for keeping track of all shareholder
accounts.
STATEMENT OF OPERATIONS
For The Year Ended
September 30, 1996
(Amounts in thousands)
- --------------------------------------
Investment Income
Dividends $ 639
Interest 562
-------
Total Investment Income 1,201
-------
- ---------------------------------------
Expenses
Printing and postage 544
Management fees 477
Transfer agent fees 175
Administrative fees 159
Registration fees 69
Accounting fees 26
Legal and audit fees 25
Custodian fees 19
Trustees' fees 19
Other expenses 110
-------
1,623
Reimbursement of expenses
by investment adviser (663)
-------
Total Expenses 960
-------
Net Investment Income 241
-------
- -----------------------------------------------------
Realized and Unrealized Gains on Investments
Net realized gains on investments 8,332
Net change in unrealized appreciation or
depreciation of investments 17,075
-------
Net Gains on Investments 25,407
-------
- ------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $25,648
=======
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STEIN ROE INVESTMENT TRUST
YOUNG INVESTOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
For The Years Ended September 30, 1995 and 1996
(Amounts in thousands)
1995 1996
------- -----
- -----------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 81 $ 241
Net realized gains on investments 1,448 8,332
Net change in unrealized appreciation or
depreciation of investments 5,236 17,075
------- --------
Net Increase in Net Assets Resulting
from Operations 6,765 25,648
------- --------
- ------------------------------------------------------
Distributions to Shareholders
Dividends from net investment income (85) (125)
Capital gains distributions -- (1,383)
------ --------
Total Distributions to Shareholders (85) (1,508)
------- --------
- -------------------------------------------------------
Share Transactions
Subscriptions to fund shares 17,073 139,130
Investment income dividends reinvested 84 108
Capital gains distributions reinvested -- 1,368
Redemptions of fund shares (612) (17,058)
------- --------
Net Increase from Share Transactions 16,545 123,548
------- --------
Net Increase in Net Assets 23,225 147,688
- ---------------------------------------------------------
Total Net Assets
Beginning of year 8,176 31,401
------- --------
End of year $31,401 $179,089
======= ========
- ---------------------------------------------------------
Accumulated Undistributed Net Investment
Income at End of Year $ 20 $ 136
======= ========
- ----------------------------------------------------------
Analyses of Changes in Shares of Beneficial Interest
Subscriptions to fund shares 1,439 8,324
Investment income dividends reinvested 8 8
Capital gains distributions reinvested -- 97
Redemptions of fund shares (48) (1,017)
------- --------
Net increase in fund shares 1,399 7,412
Shares outstanding at beginning of year 798 2,197
------- --------
Shares outstanding at end of year 2,197 9,609
======= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------------
The following are the significant accounting policies of the Stein
Roe Young Investor Fund (the "Fund"), a series of the Stein Roe
Investment Trust (a Massachusetts business trust). The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
SECURITY VALUATIONS
All securities are valued as of September 30, 1996, the last business
day of the period. Securities traded on national securities exchanges
are valued at the last reported sales price or, if there are no
sales, at the latest bid quotation. Each over-the-counter security
for which the last sale price 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 of the Fund are valued by a method that
the Board of Trustees believes represents a fair value.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since the Fund elects
to be taxed as a "regulated investment company" and make such
distributions to its shareholders as to be relieved of all federal
income taxes under provisions of current federal tax law.
DISTRIBUTION TO SHAREHOLDERS
Distributions in excess of tax basis earnings are reported in the
financial statements as a return of capital. Differences in the
recognition or classification of income between the financial
statements and tax earnings that result in temporary
overdistributions are classified as distributions in excess of net
investment income or net realized gains, and any permanent
differences are reclassified to paid-in capital.
A mutual fund's financial statements provide standardized information
about its investment transactions and accounting activities. These
"Notes" provide additional clarification and information about
practices that affect Young Investor Fund's operations.
OTHER INFORMATION
Realized gains or losses from sales of securities are determined on
the specific identified cost basis.
All amounts, except per-share amounts, are shown in thousands.
NOTE 2. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
- ----------------------------------------------------------------
The Fund pays monthly management fees and administrative fees to
Stein Roe & Farnham Incorporated (the "Adviser"), an indirect,
majority-owned subsidiary of Liberty Mutual Insurance Company, for
its services as investment adviser and manager.
The management and administrative fees for the Fund are computed
at annual rates as a percentage of annual average net assets as
follows:
Management Fee Administrative Fee
0.60% up to $500 million 0.20% up to $500 million
0.55% of next $500 million 0.15% of next $500 million
0.50% thereafter 0.125% thereafter
The administrative agreement provides that the Adviser will
reimburse the Fund to the extent that its annual expenses, excluding
certain expenses, exceed the applicable limits prescribed by any
state in which the Fund's shares are offered for sale. In addition,
effective February 1, 1996, the Adviser agreed to reimburse the Fund
to the extent that its expenses exceed 1.25 percent of annual average
net assets. The expense limitation expires January 31, 1997, subject
to earlier termination by the Adviser on 30 days' notice. Prior to
February 1, 1996, the Adviser limited expenses to 0.99 percent of
annual average net assets.
<PAGE>
At September 30, 1996, Keyport Life Insurance Company, an
indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company, owned 419 shares of the Fund with a net asset value of
$7,805.
The transfer agent fees are paid to SteinRoe Services Inc. (SSI),
an indirect, majority-owned subsidiary of Liberty Mutual Insurance
Company. Effective July 3, 1996, SSI entered into an agreement with
Colonial Investors Service Center, Inc., an indirect, majority-owned
subsidiary of Liberty Mutual Insurance Company, to act as
sub-transfer agent for the Fund.
The Adviser also provides certain accounting services. For the
period ended September 30, 1996, the Fund incurred charges of $26.
Certain officers and trustees of the Trust are also officers of
the Adviser. The compensation of trustees not affiliated with the
Adviser for the Fund for the period ended September 30, 1996, was
$19. No remuneration was paid to any other trustee or officer of the
Trust.
NOTE 3. SHORT-TERM DEBT
- -------------------------------------------------------------------
To facilitate portfolio liquidity, the Fund maintains borrowing
arrangements under which it can borrow against portfolio securities.
The Fund had no borrowings during the year ended September 30, 1996.
NOTE 4. INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------
The aggregate cost of purchases and proceeds from sales or maturities
of securities (excluding short-term obligations) for the year ended
September 30, 1996, were $175,400 and $70,292, respectively.
At September 30, 1996, the cost of investments for federal
income tax purposes and for financial reporting were $156,461 and
$156,453, respectively. Unrealized appreciation and depreciation on a
tax basis were $24,546 and $1,959, respectively.
<PAGE>
<TABLE>
<CAPTION>
NOTE 5. FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------
Selected per-share data (for a share outstanding throughout the
period), ratios and supplemental data.
Period Year Year
Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30,
1994(a) 1995 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.24 $14.29
------ ------ ------
Income from investment operations
Net investment income............. 0.03 0.06 0.05
Net realized and unrealized gains on
investments..................... 0.21 4.07 4.86
------ ------ ------
Total from Investment Operations.... 0.24 4.13 4.91
DISTRIBUTIONS
Net investment income............. -- (0.08) (0.05)
Net realized capital gains........ -- -- (0.51)
------ ------ ------
Total Distributions............. -- (0.08) (0.56)
------ ------ ------
NET ASSET VALUE, END OF PERIOD...... $10.24 $14.29 $18.64
====== ====== ======
Ratio of net expenses to average net
assets (b)........................ 0.99%* 0.99% 1.21%
Ratio of net investment income to average
net assets (c).................... 1.07%* 0.47% 0.30%
Portfolio turnover rate............. 12%** 55% 98%
Average commissions (per share)..... -- -- $0.0603
Total return........................ 2.40%** 40.58% 35.55%
Net assets, end of period........... $8,176 $31,401 $179,089
This number (arrow pointing to portfolio turnover rate) tells you how much
stock and bond trading the Fund did during the period covered by the report.
The higher the number, the more trading the Fund did.
<FN>
* Annualized
** Not annualized
(a) The Fund commenced operations on April 29, 1994.
(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 4.58 percent for the period ended September 30, 1994, and 2.87 percent
and 2.04 percent for the years ended September 30, 1995 and September 30,
1996, respectively.
(c) Computed giving effect to the investment adviser's expense limitation
undertaking.
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
Stein Roe Young Investor Fund
We have audited the accompanying balance sheet, including the schedule of
investments, of the Stein Roe Young Investor Fund as of September 30, 1996,
and the related statements of operations, changes in net assets and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 1996, by correspondence with the custodian and
brokers. As to securities purchased but not received, we requested
confirmation from brokers and, when replies were not received, we carried out
alternative auditing procedures. An audit also includes assessing the
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly the
financial position of the Stein Roe Young Investor Fund at September 30, 1996,
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated thereon, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 31, 1996
Independent public accountants who are not employed by Stein Roe audit the
information in the annual report to ensure that the financial statements are
free of material errors. This letter tells you that they have performed their
audit.
<PAGE>
TO CONTACT US...
BY PHONE 800-338-2550
You can discuss your investment questions with a Stein Roe account
representative by calling us toll free. We'll be happy to answer questions
about your current account, or to provide you with information about opening a
Stein Roe Fund account, including Stein Roe IRAs. We're available seven days a
week, from 7 a.m. to 8 p.m. weekdays and from 8 a.m. to 5 p.m. Saturday and
Sunday (central time).
STEIN ROE'S FUNDS-ON-CALL(R) 24-HOUR SERVICE LINE
Using a touch-tone phone, call our toll-free number, day or night, for
your current account balance, the latest Stein Roe fund prices and yields, and
other information. In addition, if you have a Personal Identification Number
(PIN), you may place orders for the following transactions 24 hours a day: o
Exchange shares between your Stein Roe accounts; o Purchase shares by
electronic transfer; o Order additional account statements and money market
fund checks; o Redeem shares by check, wire or electronic transfer.
RETIREMENT PLAN ACCOUNTS
Call us for information about how we can assist you with your defined
contribution plan, including 401(k) plans. You can reach us toll free at
800-322-1130. For information on IRA plans, call us toll free at 800-338-2550.
BY MAIL OR E-MAIL
If you prefer to contact us by mail, please address all correspondence to:
P.O. Box 8900, Boston, MA 02205-8900. You also may visit our Internet site --
www.steinroe.com -- to contact us by e-mail.
IN PERSON
If you are in the Chicago area, please visit our Investor Center located in
downtown Chicago at One South Wacker Drive, 32nd Floor. Our account
representatives can answer questions about your current fund investments or
provide you with infor mation about any of the Stein Roe funds and retirement
plans. Stop by weekdays between 8 a.m. and 5:15 p.m.
This report must be preceded or accompanied by a prospectus.
<PAGE>
FUNDS FOR EVERY INVESTMENT OBJECTIVE
The Stein Roe family of 100 percent no-load mutual funds offers a variety of
funds so you can select the right fund, or combination of funds, to meet your
investment objec tives. Call us at 800-338-2550 for a prospectus and more
complete information on any of the funds, including management fees and
expenses. Please read the pro spectus carefully before you invest or send
money.
MONEY MARKET FUNDS
Money market funds seek to provide income while preserving principal and
maintaining liquidity. These funds offer free check writing.
o Government Reserves Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies and instrumentalities.*
o Cash Reserves Fund -- Invests in high-quality money market securities
such as certificates of deposit, banker's acceptances and commercial
paper.*
BOND FUNDS
Bond funds seek high current income by investing pri marily in fixed income
securities.
o Government Income Fund -- Invests primarily in securities issued or
guaranteed by the U.S. government and its agencies.*
o Intermediate Bond Fund-- Invests primarily in marketable debt securities
with an average life of three to 10 years.*
o Income Fund -- Pursues a higher level of current income by investing
primarily in medium- and lower-quality bonds.
o High Yield Fund -- Seeks total return by investing for a high level of
current income and capital growth.
TAX-EXEMPT FUNDS
These funds help investors keep more of their earnings by investing in
instruments that earn income free from federal income tax. Income may be
subject to federal alternative minimum tax and state and local taxes; capital
gains are subject to state, local and federal taxes.
o Municipal Money Market Fund -- Seeks to provide the liquidity and
stability of a money market fund plus current tax-free income. Free check
writing available.*
o Intermediate Municipals Fund -- Seeks high current yield through
investments primarily in the three highest grades of intermediate-term
municipal securities.
*Money market mutual funds strive to maintain a $1 per share net asset value,
but there is no assurance that the fund will be able to maintain a stable net
asset value. The net asset value of a fund that invests in securities issued
or guaranteed by the U.S. government is not guaranteed.
<PAGE>
o Managed Municipals Fund -- Pursues high tax-free income by investing in a
quality-conscious portfolio of long-term municipal bonds.
o High-Yield Municipals Fund -- Seeks a higher level of tax-free income
from long-term municipal securities, primarily of medium or lower
quality.
GROWTH AND INCOME FUNDS
These funds seek to provide a conservative investment that is well positioned
for long-term growth and current income. Each fund's approach is designed to
limit the effects of market volatility.
o Balanced Fund --- Seeks long-term growth of capital and current income
consistent with reasonable investment risk by investing in equities, debt
securities and cash equivalents.
o Growth & Income Fund -- Pursues income and long-term capital growth by
investing primarily in large, well-established companies.
GROWTH FUNDS
Growth funds offer long-term capital appreciation potential by investing
primarily in various types of stocks.
o Growth Stock Fund -- Pursues long-term capital appreciation from stocks
with strong growth potential.
o Special Fund -- Invests in securities believed to have limited downside
risk relative to their potential for above-average growth, including
securities of undervalued, under followed or out-of-favor companies.
o Special Venture Fund -- Seeks capital appreciation through equity
securities of entre preneurially managed companies.
o Young Investor Fund -- Invests in securities of companies that affect the
lives of children or teenagers.
o Capital Opportunities Fund --- Takes a long-term approach to emerging
growth by selecting quality companies with the potential to generate high
levels of earnings growth over a three- to five-year period.
o International Fund -- Invests in a diversified portfolio of foreign
securities.
+Formerly Total Return Fund; name and investment objective change effective
April 17, 1996. Capital Opportunities Fund is closed to new investors as of
September 30, 1996, in accordance with the conditions set forth in the
prospectus supplement dated September 30, 1996.
<PAGE>
STEIN ROE INVESTMENT TRUST
TRUSTEES
- ---------------------------------------------------------------------
Timothy K. Armour
President, Mutual Fund Division and Director, Stein Roe & Farnham Incorporated
Kenneth L. Block
Chairman Emeritus, A.T. Kearney, Inc.
William W. Boyd
Chairman and Director, Sterling Plumbing Group Inc.
Lindsay Cook
Senior Vice President, Liberty Financial Companies, Inc.
Douglas A. Hacker
Senior Vice President and Chief Financial Officer, United Airlines
Francis W. Morley
Chairman, Employer Plan Administrators and Consultants Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy, University of Washington
Thomas C. Theobald
Managing Partner, William Blair Capital Partners
Gordon R. Worley
Private Investor
AGENTS AND ADVISERS
- -----------------------------------------------------------------------
Stein Roe & Farnham Incorporated
Investment Adviser
State Street Bank and Trust Company
Custodian
SteinRoe Services, Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Trust
Arthur Andersen LLP
Independent Public Accountants
A custodian holds the stock certificates and otherassets of a mutual fund
for safekeeping. State Street Bank and Trust Company of Boston, Massachusetts,
is the custodian for Young Investor Fund.
<PAGE>
STEIN ROE INVESTMENT TRUST
(Continued)
OFFICERS
- ------------------------------------------------------------------------
Timothy K. Armour, President
Jilaine H. Bauer, Executive Vice President, Secretary
Hans P. Ziegler, Executive Vice President
Gary A. Anetsberger, Senior Vice President, Chief Financial Officer
Bruno Bertocci, Vice President
David P. Brady, Vice President
Thomas W. Butch, Vice President
Daniel K. Cantor, Vice President
Philip J. Crosley, Vice President
E. Bruce Dunn, Vice President
Erik P. Gustafson, Vice President
David P. Harris, Vice President
Harvey B. Hirschhorn, Vice President
Eric S. Maddix, Vice President
Lynn C. Maddox, Vice President
Anne E. Marcel, Vice President
Nicolette D. Parrish, Vice President, Assistant Secretary
Cynthia A. Prah, Vice President
Richard B. Peterson, Vice President
Gloria J. Santella, Vice President
Thomas P. Sorbo, Vice President
Heidi J. Walter, Vice President
Sharon R. Robertson, Controller
Margaret O. Zwick, Treasurer
Janet B. Rysz, Assistant Secretary
<PAGE>
STEIN ROE MUTUAL FUNDS
----------------------------
Building Wealth for Generations(sm)
THE STEIN ROE FUNDS
STEIN ROE GOVERNMENT RESERVES FUND
STEIN ROE CASH RESERVES FUND
STEIN ROE GOVERNMENT INCOME FUND
STEIN ROE INTERMEDIATE BOND FUND
STEIN ROE INCOME FUND
STEIN ROE HIGH YIELD FUND
STEIN ROE MUNICIPAL MONEY MARKET FUND
STEIN ROE INTERMEDIATE MUNICIPALS FUND
STEIN ROE MANAGED MUNICIPALS FUND
STEIN ROE HIGH-YIELD MUNICIPALS FUND
STEIN ROE BALANCED FUND
STEIN ROE GROWTH AND INCOME FUND
STEIN ROE GROWTH STOCK FUND
STEIN ROE YOUNG INVESTOR FUND
STEIN ROE SPECIAL FUND
STEIN ROE SPECIAL VENTURE FUND
STEIN ROE CAPITAL OPPORTUNITIES FUND
STEIN ROE INTERNATIONAL FUND
P.O. BOX 8900
Bostonn Massachusetts 02205-8900
800-338-2550
http://www.steinroe.com
In Chicago, visit our Fund center at One South Wacker Drive
Liberty Securities Corporation, Distributor
Member SIPC. 11/96
YI11A
