File No. 33-11351
                                              Rule 497(e)

<PAGE> 1

       

STEIN ROE MUTUAL FUNDS
Prospectus
February 3, 1997

Emerging Markets Fund

[logo] STEIN ROE MUTUAL FUNDS
Building Wealth for Generations

<PAGE> 

EMERGING MARKETS FUND

Emerging Markets Fund seeks capital appreciation primarily through 
investing in stocks of companies in emerging markets.  While the 
Adviser believes that emerging markets investing offers strong 
reward potential, many investments in emerging markets can be 
considered speculative, and the value of those investments can be 
more volatile than is typical in more developed foreign markets.  
Emerging Markets Fund should not be considered a complete 
investment program.

The Fund is a "no-load" fund.  There are no sales charges, and the 
Fund has no 12b-1 plan.  There is a 1% redemption fee retained by 
the Fund which is imposed only on redemptions of shares held less 
than 90 days.  The Fund is a series of the Stein Roe 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 3, 1997, 
containing more detailed information, has been filed with the 
Securities and Exchange Commission and (together with any 
supplements thereto) is incorporated herein by reference.  This 
prospectus is available electronically by using Stein Roe's 
Internet address:  http://www.steinroe.com.  You can get a free 
paper copy of the prospectus and the Statement of Additional 
Information by calling 800-338-2550 or by writing to Stein Roe 
Funds, Suite 3200, One South Wacker Drive, Chicago, Illinois 
60606.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE 
SECURITIES AND EXCHANGE COMMISSION 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 February 3, 1997.


TABLE OF CONTENTS
                                      Page
Summary ..............................2
Fee Table  ...........................4
The Fund .............................5
Investment Policies...................5
Portfolio Investments and Strategies..7
Investment Restrictions ..............9
Risks and Investment Considerations..10
How to Purchase Shares ..............12
  By Check ..........................13
  By Wire ...........................13
  By Electronic Transfer ............13
  By Exchange .......................15
  Conditions of Purchase ............14
  Purchases Through Third Parties....14
  Purchase Price and Effective Date .14
How to Redeem Shares ................15
  Redemption Fee.....................15
  By Written Request ................15
  By Exchange .......................16
  Special Redemption Privileges .....16
  General Redemption Policies .......17
Shareholder Services ................19
Net Asset Value .....................20
Distributions and Income Taxes ......21
Investment Return ...................23
Management...........................23
Organization and Description of 
  Shares.............................25
Certificate of Authorization.........26

SUMMARY

Stein Roe Emerging Markets Fund (the "Fund") is a series of the 
Stein Roe Investment Trust, an open-end diversified management 
investment company.  The Fund is a "no-load" fund.  There are no 
sales charges. The Fund is intended to be a long-term investment.  
There is a 1% redemption fee retained by the Fund which is imposed 
only on redemptions of shares held less than 90 days.  (See The 
Fund and Organization and Description of Shares.)  This prospectus 
is not a solicitation in any jurisdiction in which shares of the 
Fund are not qualified for sale.

INVESTMENT OBJECTIVE AND POLICIES.  The Fund seeks capital 
appreciation primarily through investing in stocks of companies in 
emerging markets.  Under normal market conditions, the Fund will 
invest at least 65% of its total assets (taken at market value) in 
equity securities of emerging markets issuers.  The Fund is 
designed to provide investors an efficient mechanism for investing 
in companies within, and participating in the growth of, emerging 
markets throughout the world.

The Fund does not concentrate investments in any particular 
industry.  In addition, there is no limitation on the amount the 
Fund can invest in a specific country or region of the world.  
However, the Fund intends to diversify its investments among 
several countries.

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 intended for long-term investors 
seeking to diversify their portfolios and not for short-term 
trading purposes.  It should not be considered a complete 
investment program.

Since the Fund invests primarily 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 exchange rates on foreign 
currencies, less public information, less government supervision, 
less liquidity, and greater price volatility.  Investments in 
securities of emerging markets issuers may present greater risks 
than investments in more developed foreign markets.  Many 
investments in emerging markets can be considered speculative, and 
the value of those investments can be more volatile than is 
typical in the more developed foreign markets.

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 
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 Stein Roe Fund.  For more detailed information, see How to 
Purchase Shares.

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

NET ASSET VALUE.  The purchase price of the Fund's shares is its 
net asset value per share.  The redemption price of the Fund's 
shares is it net asset value per share minus a redemption fee if 
shares are redeemed within 90 days of purchase.  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 the Fund are normally declared and 
paid annually.  Distributions will be reinvested in additional 
Fund shares unless you elect to have them paid in cash, deposited 
by electronic transfer into your bank checking account, or 
invested in shares another Stein Roe Fund.  (See Distributions and 
Income Taxes and Shareholder Services.)

ADVISER AND FEES.  Stein Roe & Farnham Incorporated (the 
"Adviser") provides administrative, management and investment 
advisory services to the Fund.  For a description of the Adviser 
and the advisory fees paid by the Fund, see Management.

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

FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES      
Sales Load Imposed on Purchases                     None
Sales Load Imposed on Reinvested Dividends          None
Deferred Sales Load                                 None
Redemption Fees                                     1.00*
Exchange Fees                                       None
ANNUAL FUND OPERATING EXPENSES (after 
 reimbursement; as a percentage of average 
 net assets)  
Management and Administrative Fees (after 
  reimbursement)                                    1.10%
12b-1 Fees                                          None
Other Expenses (after reimbursement)                0.90%
                                                    -----
Total Fund Operating Expenses (after reimbursement) 2.00%
                                                    =====
__________
* There is a $7.00 charge for wiring redemption proceeds to your 
bank.  There is a 1% fee retained by Emerging Markets Fund which 
is imposed only on redemptions of shares held less than 90 days.

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
               --------        -------
                $20              $63

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.  Because Emerging Markets 
Fund has no operating history, the information in the table is 
based upon an estimate of expenses, assuming net assets of $50 
million.  

From time to time, the Adviser may voluntarily undertake to 
reimburse the Fund for a portion of its operating expenses.  The 
Adviser has undertaken to reimburse the Fund for its operating 
expenses to the extent that such expenses on an annualized basis 
exceed 2.00% of its annual average net assets through February 1, 
1998, subject to earlier review and possible termination by the 
Adviser on 30 days' notice to the Fund.  Any such reimbursement 
will lower the Fund's overall expense ratio and increase its 
overall return to investors.  Absent such reimbursement, the 
estimated Management and Administrative Fees, Other Expenses and 
Total Operating Expenses for the Emerging Markets Fund would be 
1.25%, 1.00% and 2.25%.  (Also see Management--Fees and Expenses.)

For purposes of the Example above, the figures assume that the 
percentage amounts listed for the Fund under Annual Fund Operating 
Expenses remain the same 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 in the 
Example and Fee Table is useful in reviewing the Fund's expenses 
and in providing a basis for comparison with other mutual funds, 
it should not be used for comparison with other investments using 
different assumptions or time periods.

THE FUND

STEIN ROE EMERGING MARKETS 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.  There is 
a 1% redemption fee retained by the Fund which is imposed only on 
redemptions of shares held less than 90 days.

The Fund is a series of the Stein Roe 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 and 
provides investment advisory services for several other mutual 
funds with different investment objectives, including other equity 
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 800-338-2550.

INVESTMENT POLICIES

The Fund invests as described below.  Further information on 
portfolio investments and strategies may be found under Portfolio 
Investments and Strategies in this prospectus and in the Statement 
of Additional Information.

The Fund's investment objective is to seek capital appreciation 
primarily through investing in stocks of companies in emerging 
markets.  Under normal market conditions, the Fund will invest at 
least 65% of its total assets (taken at market value) in equity 
securities of emerging market issuers. The Fund does not intend to 
concentrate investments in any particular industry.  In addition, 
there is no limitation on the amount the Fund can invest in a 
specific country or region of the world.  However, the Fund 
intends to diversify its investment among several countries.  The 
Fund has no current intent of investing more than 5% of its total 
assets in Russian securities.

The Fund considers "emerging markets" to include any country that 
is defined as an emerging or developing country by (i) the World 
Bank, (ii) the International Finance Corporation or (iii) the 
United Nations or its authorities.  The Fund's investments will 
include, but are not limited to, securities of companies located 
within countries in Asia, Africa, Latin America and certain parts 
of Europe.

The Fund considers an issuer to be an "emerging markets issuer" 
if:

- - the issuer is organized under the laws of an emerging market 
  country;
- - the principal securities trading market for the issuer's 
  securities is in an emerging market country;
- - the issuer derives at least 50% of its revenue from goods 
  produced or services rendered in emerging market countries; or
- - at least 50% of the issuer's assets are located in emerging 
  market countries.

The Fund invests primarily in 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).  The Fund may invest in securities of smaller 
emerging companies as well as securities of well-seasoned 
companies of any size.  The Adviser believes that smaller 
companies may offer opportunities for significant capital 
appreciation.  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 is designed to provide investors an efficient mechanism 
for investing in companies located within, and participating in 
the growth of, emerging markets throughout the world.  The Adviser 
believes that emerging markets possess strong economic growth 
potential and that, over the next decade, economic growth in such 
markets is likely to outpace that in industrial markets.  The 
Adviser expects that this growth, in turn, should create 
attractive investment opportunities in these markets.  The Fund 
will seek to take advantage of these opportunities on behalf of 
investors by investing in companies that offer superior relative 
growth.

The Fund intends to use a value approach to investing in emerging 
markets by investing in securities of companies with attractive 
growth prospects that appear to be undervalued.

If investment in emerging markets securities appears to be 
relatively unattractive in the judgment of the Adviser because of 
actual or anticipated adverse political or economic conditions, 
the Fund may hold cash equivalents or invest any portion of its 
assets in securities of the U.S. Government and equity and debt 
securities of U.S. companies, as a temporary defensive strategy.  
To meet liquidity needs, the Fund may also hold cash in domestic 
and foreign currencies and invest in domestic and foreign money 
market securities (including repurchase agreements and foreign 
money market positions).

In the past the U.S. Government has from time to time imposed 
restrictions, through taxation and other methods, on foreign 
investments by U.S. investors such as the Fund.  If such 
restrictions should be reinstated, it might become necessary for 
the Fund to invest all or substantially all of its assets in U.S. 
securities.  In such an event, the Fund would review its 
investment objective and policies to determine whether changes are 
appropriate.

The Fund may purchase foreign securities in the form of American 
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), 
or other securities representing underlying shares of foreign 
issuers.  The Fund may invest in sponsored or unsponsored ADRs.  
(For a description of ADRs and EDRs, see the Statement of 
Additional Information.)

PORTFOLIO INVESTMENTS AND STRATEGIES

DEBT SECURITIES.  In pursuing its investment objective, the Fund 
may invest up to 35% of its total assets in debt securities.  The 
Fund has established no minimum rating criteria for the emerging 
market and domestic debt securities in which it may invest, and 
such securities may be unrated.  The Fund does not intend to 
purchase debt securities that are in default or which the Adviser 
believes will be in default.  The Fund may also invest in "Brady 
Bonds," which are debt securities issued under the framework of 
the Brady Plan as a mechanism for debtor countries to restructure 
their outstanding bank loans.  Most "Brady Bonds" have their 
principal collateralized by zero coupon U.S. Treasury bonds.

The risks inherent in debt securities held in the Fund's portfolio 
depend primarily on the term and quality of the particular 
obligations, as well as on market conditions.  A decline in the 
prevailing levels of interest rates generally increases the value 
of debt securities.  Conversely, an increase in rates usually 
reduces the value of debt securities.  Medium-quality debt 
securities are considered to have speculative characteristics.  
Lower-quality debt securities rated lower than Baa by Moody's 
Investor Services Inc. or lower than BBB by Standard & Poor's 
Corp., and unrated securities of comparable quality, are 
considered to be below investment grade.  These type of debt 
securities are commonly referred to as "junk bonds" and involve 
greater investment risk, including the possibility of issuer 
default or bankruptcy.  During a period of adverse economic 
changes, issuers of junk bonds may experience difficulty in 
servicing their principal and interest payment obligations.  The 
Fund does not expect to invest more than 5% of its net assets in 
high-yield ("junk") bonds.

SETTLEMENT TRANSACTIONS.  When the Fund enters into a contract for 
the purchase or sale of a foreign portfolio security, it usually 
is required to settle the purchase transaction in the relevant 
foreign currency or receive the proceeds of the sale in that 
currency.  In either event, the Fund is obliged to acquire or 
dispose of an appropriate amount of foreign currency by selling or 
buying an equivalent amount of U.S. dollars.  At or near the time 
of the purchase or sale of the foreign portfolio security, the 
Fund may wish to lock in the U.S. dollar value of a transaction at 
the exchange rate or rates then prevailing between the U.S. dollar 
and the currency in which the security is denominated.  Known as 
"transaction hedging," this may be accomplished by purchasing or 
selling such foreign securities on a "spot," or cash, basis.  
Transaction hedging also may be accomplished on a forward basis, 
whereby the Fund purchases or sells a specific amount of foreign 
currency, at a price set at the time of the contract, for receipt 
or delivery at either a specified date or at any time within a 
specified time period.  In so doing, the Fund will attempt to 
insulate itself against possible losses and gains resulting from a 
change in the relationship between the U.S. dollar and the foreign 
currency during the period between the date the security is 
purchased or sold and the date on which payment is made or 
received.  Similar transactions may be entered into by using other 
currencies if the Fund seeks to move investments denominated in 
one currency to investments denominated in another.

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.  
Accordingly, the portfolio turnover rate may vary significantly 
from year to year, but is not expected to exceed 100% under normal 
market conditions.  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 
Distributions and Income Taxes.)  The Fund is not intended to be 
an income-producing investment.

OTHER TECHNIQUES.  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, 
though the Fund does not have a current intent to do so.  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 utilize spot and forward foreign exchange 
transactions to reduce the risk caused by exchange rate 
fluctuations between one currency and another when securities are 
purchased or sold on a when-issued basis.  The Fund may also 
invest in synthetic money market instruments, structured notes, 
swaps and Eurodollar instruments.  The Fund may invest in 
repurchase agreements, provided that it 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 Fund does 
not currently intend to enter into repurchase agreements.  It may 
participate in an interfund lending program, subject to certain 
restrictions described in the Statement of Additional Information.  

In addition, and consistent with its investment 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").  The Fund may also sell short securities the Fund 
owns or has the right to acquire without further consideration, a 
technique called selling short "against the box."  For further 
information on Derivatives and short sales against the box, see 
the Statement of Additional Information.

The Fund may also invest in closed-end investment companies 
investing primarily in the emerging markets.  To the extent the 
Fund invests in such closed-end investment companies, shareholders 
will incur certain duplicate fees and expenses.  Such closed-end 
investment company investments will generally only be made when 
market access or liquidity restricts direct investment in the 
market.  (See the Statement of Additional Information.)

INVESTMENT RESTRICTIONS

The Fund will not invest more than 5% of its assets in the 
securities of any one issuer.  This restriction applies only to 
75% of the Fund's portfolio, but does not apply to securities of 
the U.S. Government or repurchase agreements /1/ for such 
securities, and would not prevent the Fund from investing all of 
its assets in shares of another investment company having the 
identical investment objective.
- -------------------
/1/ A repurchase agreement involves 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.
- ------------------

The Fund will not acquire more than 10% of the outstanding voting 
securities of any one issuer.  The Fund may, however, invest all 
of its assets in shares of another investment company having the 
identical investment objective.

To maintain liquidity, the Fund may borrow from banks.  The Fund 
will not borrow money, except for non-leveraging temporary, or 
emergency purposes or in connection with participation in an 
interfund lending program with other Stein Roe Funds.  In such a 
case, the aggregate borrowings at any one time--including any 
reverse repurchase agreements and dollar rolls--may not exceed 33 
1/3% of the Fund's 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.  If the Fund borrows money, its share price may be subject 
to greater fluctuation until the borrowing is paid off.  The Fund 
does not expect to borrow for investment purposes.

The Fund may invest in repurchase agreements, provided that the 
Fund will not invest more than 15% of its net assets in illiquid 
securities, including repurchase agreements maturing in more than 
seven days.  The Fund does not currently intend to invest in 
repurchase agreements.  

The policies summarized in the first three paragraphs of this 
section 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.  All of the investment 
restrictions are set forth in the Statement of Additional 
Information.

Nothing in the investment restrictions outlined here shall be 
deemed to prohibit the Fund from purchasing the securities of any 
issuer pursuant to the exercise of subscription rights distributed 
to the Fund by the issuer.  No such purchase may be made if, as a 
result, the Fund will no longer be a diversified investment 
company as defined in the Investment Company Act of 1940 or if the 
Fund will fail to meet the diversification requirements of the 
Internal Revenue Code.

RISKS AND INVESTMENT CONSIDERATIONS

All investments, including those in mutual funds, have risks.  No 
investment is suitable for all investors.  The Fund seeks capital 
appreciation primarily through investing in stocks of companies in 
emerging markets.  The Fund is intended for long-term investors 
and not for short-term trading purposes.  It should not be 
considered a complete investment program.  While the Fund offers 
the potential for substantial price appreciation over time, it 
also involves above-average investment risk.  To encourage a long-
term investment horizon, a 1% redemption fee, described more fully 
below, is payable to the Fund for the benefit of remaining 
shareholders on shares held less than 90 days.  Of course, there 
can be no guarantee that the Fund will achieve its objective.

The Fund does not concentrate investments in any particular 
industry.  In addition, there is no limitation on the amount the 
Fund can invest in a specific country or region of the world.  
However, the Fund intends to diversify its investments among 
several countries.  The Fund has no current intent of investing 
more than 5% of its total assets in Russian securities.

FOREIGN INVESTING.  Non-U.S. investments may be attractive because 
they increase diversification, compared to a portfolio comprising 
U.S. investments alone.  In addition, many foreign economies have, 
from time to time, grown faster than the U.S. economy, and the 
returns on investments in these countries have exceeded those of 
similar U.S. investments.  In addition, many emerging market 
countries have experienced economic growth rates well in excess of 
those found in the U.S. and other developed markets.  However, 
there can be no assurance that these conditions will continue.  
International diversification allows the Fund and an investor to 
take advantage of changes in foreign economies and market 
conditions.

Investors should understand and consider carefully the greater 
risks involved in foreign investing.  Investing in foreign 
securities--positions 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 regulations 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 the 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.  These risks are greater for emerging market 
countries.

Investments in emerging markets securities include special risks 
in addition to those generally associated with foreign investing.  
Many investments in emerging markets can be considered 
speculative, and the value of those investments can be more 
volatile than is typical in more developed foreign markets.  This 
difference reflects the greater uncertainties of investing in less 
established markets and economies.  Emerging markets also have 
different clearance and settlement procedures, and in certain 
markets there have been times when settlements have not kept pace 
with the volume of securities transactions, making it difficult to 
conduct such transactions.  Delays in settlement could result in 
temporary periods when a portion of the assets of the Fund is 
uninvested and no return is earned thereon.  The inability of the 
Fund to make intended security purchases due to settlement 
problems could cause the Fund to miss attractive investment 
opportunities.  Inability to dispose of portfolio securities due 
to settlement problems could result either in losses to the Fund 
due to subsequent declines in the value of those securities or, if 
the Fund has entered into a contract to sell a security, in 
possible liability to the purchaser.  Costs associated with 
transactions in emerging markets securities are typically higher 
than costs associated with transactions in U.S. securities.  Such 
transactions also involve additional costs for the purchase or 
sale of foreign currency.  

Volume and liquidity of securities transactions in most emerging 
markets are lower than in the U.S.  In addition, many emerging 
markets have experienced substantial rates of inflation.  
Inflation and rapid fluctuations in inflation rates have had, and 
may continue to have, adverse effects on the economies and 
securities markets of certain emerging market countries.

Investment in foreign securities exposes the Fund to 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, and other adverse political, social or 
diplomatic developments that could affect investment in these 
nations.

The price of securities of small, rapidly growing companies is 
expected to fluctuate more widely than the general market due to 
the difficulty in assessing financial prospects of companies 
developing new products or operating in countries with developing 
markets.

The strategy for selecting investments in the Fund will be based 
on various criteria.  A company considered for investment may have 
a good market position in a fast-growing segment of the economy, 
strong management, preferably a leading position in its business, 
prospects of superior financial returns, and securities available 
for purchase at an attractive market valuation.  Information on 
some of the above factors may be difficult, if not impossible, to 
obtain.

To the extent portfolio securities 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.  If the dollar falls relative to 
the Japanese yen, for example, 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 the discussion of portfolio and 
transaction hedging under Portfolio Investments and Strategies.)

Certain foreign markets (including emerging markets) may require 
governmental approval for the repatriation of investment income, 
capital or the proceeds of sales of securities by foreign 
investors.  In addition, if a deterioration occurs in an emerging 
market's balance of payments or for other reasons, a country could 
impose temporary restrictions on foreign capital remittances.  The 
Fund could be adversely affected by delays in, or a refusal to 
grant, required governmental approval for repatriation of capital, 
as well as by the application to the Fund of any restrictions on 
investments.

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 
investment companies for investment in another investment company 
having the same investment objective and substantially the same 
investment policies 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 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.  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 the Fund by check, by wire, by 
electronic transfer, or by exchange from your account with another 
Stein Roe Fund.  The initial purchase minimum per Fund account is 
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act 
("UGMA") accounts is $1,000; the minimum for accounts established 
under an automatic investment plan (i.e., Regular Investments, 
Dividend Purchase Option, or the Automatic Exchange Plan) is 
$1,000 for regular accounts and $500 for UGMA accounts; and the 
minimum per account for Stein Roe IRAs is $500.  The initial 
purchase minimum is waived for shareholders who participate in the 
Stein Roe Counselor [SERVICE MARK] or Stein Roe Personal Counselor 
[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 the Fund by 
check, please complete and sign the Application and mail it, 
together with a check made payable to Stein Roe Mutual Funds, to 
SteinRoe Services Inc. at P.O. Box 8900, Boston, Massachusetts 
02205.  Participants in the Stein Roe Counselor [SERVICE MARK]and 
Personal Counselor [SERVICE MARK] Programs should send orders to 
SteinRoe Services Inc. at P.O. Box 803938, Chicago, Illinois 
60680.

You may make subsequent investments by submitting a check along 
with either the stub from your Fund account confirmation statement 
or a note indicating the amount of the purchase, your account 
number, and the name in which your account is registered.  Each 
individual check submitted for purchase must be at least $100, and 
the Trust generally will not accept cash, drafts, third or fourth 
party checks, or checks drawn on banks outside 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 also may pay for shares by instructing your bank to 
wire federal funds (monies of member banks within the Federal 
Reserve System) to First National Bank of Boston.  Your bank may 
charge you a fee for sending the wire.  If you are opening a new 
account by wire transfer, you must first call 800-338-2550 to 
request an account number and furnish your social security or 
other tax identification number.  Neither the 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:

First National Bank of Boston
Boston, Massachusetts
ABA Routing No. 011000390
Boston, Massachusetts
Attention:  SteinRoe Services Inc.
Fund No. 18; Stein Roe Emerging Markets Fund
Account of (exact name(s) in registration)
Shareholder Account No. _________

Participants in the Stein Roe Counselor [SERVICE MARK] and 
Personal Counselor [SERVICE MARK] Programs should address their 
wires as follows:

First National Bank of Boston
Boston, Massachusetts
ABA Routing No. 011000390
Attention:  SteinRoe Services Inc.
Fund No.18; Stein Roe Emerging Markets Fund
Account of (exact names(s) in registration)
Counselor Account No. _________

BY ELECTRONIC TRANSFER.  You may also make subsequent investments 
by an electronic transfer of funds from your bank account.  
Electronic transfer allows you to make purchases at your request 
("Special Investments") by calling 800-338-2550 or at pre-
scheduled intervals ("Regular Investments") elected on your 
application.  (See Shareholder Services.)  Electronic transfer 
purchases are subject to a $50 minimum and a $100,000 maximum.  
You may not open a new account through electronic transfer.  
Should an order to purchase shares of 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 Stein Roe Fund account either by phone (if the Telephone 
Exchange Privilege has been established on the account from which 
the exchange is being made), by mail, in person, or automatically 
at regular intervals (if you have elected the Automatic Exchange 
Privilege).  Restrictions apply; please review the information on 
the Exchange Privilege under How to Redeem Shares--By Exchange.

CONDITIONS OF PURCHASE.  Each purchase order for the Fund must be 
accepted by an authorized officer of the Trust or its authorized 
agent 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;  you may, however, redeem the shares.  
The Trust reserves the right not to accept any purchase order that 
it determines not to be in the best interests of the Trust or of 
the Fund's shareholders.  The Trust also reserves the right to 
waive or lower its investment minimums for any reason.  The Trust 
does not issue share certificates.

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

Some Intermediaries 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 Adviser and the 
Fund's transfer agent share in the expenses of these fees, and the 
Adviser pays all sales and promotional expenses.

PURCHASE PRICE AND EFFECTIVE DATE.  Each purchase of the Fund's 
shares made directly with the Fund is made at the Fund's net asset 
value (see Net Asset Value) next determined after receipt of an 
order in good form, including receipt of payment as follows:

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

A purchase by electronic transfer is made at the net asset value 
next determined after the Fund receives the electronic transfer 
from your bank.  A Special Electronic Transfer Investment order 
received by telephone on a business day before 3:00 p.m., central 
time, is effective on the next business day.

Each purchase of Fund shares through an Intermediary that is an 
authorized agent of the Trust for the receipt of orders is made at 
the net asset value next determined after the receipt of the order 
by the Intermediary.

HOW TO REDEEM SHARES

REDEMPTION FEE.  Upon the redemption of shares held less than 90 
days, a fee of 1% of the current net asset value of the shares 
redeemed will be assessed and retained by the Fund for the benefit 
of remaining shareholders.  The fee is waived for all shares 
purchased through certain retirement plans, including 401(k) 
plans, 403(b) plans, 457 plans, Keogh accounts and Profit Sharing 
and Money Purchase Pension Plans.  However, if such shares are 
purchased through an Intermediary maintaining an omnibus account 
for the shares, such fee waiver may not apply.  Before purchasing 
shares, please check with your account representative concerning 
the availability of the fee waiver.  In addition, the fee waiver 
does not apply to IRA and SEP-IRA accounts.  The redemption fee is 
intended encourage long-term investment in the Fund, to avoid 
transaction and other expenses caused by early redemptions and to 
facilitate portfolio management.  The fee does not benefit the 
Adviser in any way.  The Fund reserves the right to modify the 
terms of or terminate this fee at any time.

The redemption fee applies to redemptions from the Fund, but not 
to dividend or capital gains distributions which have been 
automatically reinvested in the Fund.  The fee is applied to the 
shares being redeemed on a first-in, first-out basis.  For more 
information, see Purchases and Redemptions in the Statement of 
Additional Information.

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 SteinRoe Services Inc. at P.O. Box 8900, Boston, Massachusetts 
02205.  Participants in the Stein Roe Counselor [SERVICE MARK] or 
Stein Roe Personal Counselor [SERVICE MARK] Programs should send 
redemption requests to SteinRoe Services Inc. at P.O. Box 803938, 
Chicago, Illinois 60680.  A redemption request will be considered 
to have been received in good order if the following conditions 
are satisfied:

(1) The request must be in writing, and must 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) 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
(5) The request must include other supporting legal documents as 
    required from organizations, executors, administrators, 
    trustees, or others acting on accounts not registered in their 
    names.

BY EXCHANGE.  You may redeem all or any portion of your Fund 
shares and use the proceeds to purchase shares of any other Stein 
Roe Fund offered for sale in your state if your signed, properly 
completed Application is on file.  AN EXCHANGE TRANSACTION IS A 
SALE AND PURCHASE OF SHARES FOR FEDERAL INCOME TAX PURPOSES AND 
MAY RESULT IN CAPITAL GAIN OR LOSS.  Before exercising the 
Exchange Privilege, you should obtain the prospectus for the Stein 
Roe Fund in which you wish to invest and read it carefully.  The 
registration of the account to which you are making an exchange 
must be exactly the same as that of the Fund account from which 
the exchange is made and the amount you exchange must meet any 
applicable minimum investment of the Stein Roe Fund being 
purchased.  Unless you have elected to receive your dividends in 
cash, on an exchange of all shares, any accrued unpaid dividends 
will be invested in the Stein Roe Fund to which you exchange on 
the next business day.  An exchange may be made by following the 
redemption procedure described under By Written Request and 
indicating the Stein Roe Fund to be purchased--a signature 
guarantee normally is not required.  (See also the discussion 
below of the Telephone Exchange Privilege and Automatic 
Exchanges.)

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

The Telephone Redemption by Check, Telephone Redemption by Wire 
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 $50 or more from your account 
by calling 800-338-2550 or by sending a telegram; new accounts 
opened by exchange are subject to the $2,500 initial purchase 
minimum.  GENERALLY, YOU WILL BE LIMITED TO FOUR TELEPHONE 
EXCHANGE ROUND-TRIPS PER YEAR AND THE 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 STEIN ROE FUND, 
AND THEN BACK TO THE FUND).  In addition, the Trust's general 
redemption policies apply to redemptions of shares by Telephone 
Exchange.  (See General Redemption Policies.)

The Trust reserves the right to suspend or terminate, at any time 
and without prior notice, the use of the Telephone Exchange 
Privilege by any person or class of persons.  The Trust believes 
that use of the Telephone Exchange Privilege by investors 
utilizing market-timing strategies adversely affects the 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 to 
suspend, limit, modify, or terminate, at any time and without 
prior notice, the Telephone Exchange Privilege in its entirety.  
Because such a step would be taken only if the Board of Trustees 
believes it would be in the best interests of the 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 Stein Roe Fund account on a regular basis.

Telephone Redemption by Check Privilege.  You may use the 
Telephone Redemption by Check Privilege to redeem an amount of 
$1,000 or more from your account by calling 800-338-2550.  The 
proceeds will be sent by check to your registered address.

Telephone Redemption by Wire Privilege.  You may use this 
Privilege to redeem an amount of $1,000 or more from your account 
by calling 800-338-2550.  The proceeds will be transmitted by wire 
to your account at a commercial bank previously designated by you 
that is a member of the Federal Reserve System.  The fee for 
wiring proceeds (currently $7.00 per transaction) will be deducted 
from the amount wired.

Electronic Transfer Privilege.  You may redeem shares by calling 
800-338-2550 and requesting an electronic transfer ("Special 
Redemption") of the proceeds to a bank account previously 
designated by you at a bank that is a member of the Automated 
Clearing House or at scheduled intervals ("Automatic Redemptions"-
- -see Shareholder Services).  Electronic transfers are subject to a 
$50 minimum and a $100,000 maximum.  A Special Redemption request 
received by telephone after 3:00 p.m., central time, is deemed 
received on the next business day.

GENERAL REDEMPTION POLICIES.  You may not cancel or revoke your 
redemption order once instructions have been received and 
accepted.  The Trust cannot accept a redemption request that 
specifies a particular date or price for redemption or any special 
conditions.  Please call 800-338-2550 if you have any questions 
about requirements for a redemption before submitting your 
request.  If you wish to redeem shares held by a tax-sheltered 
retirement plan sponsored by the Adviser, special procedures of 
those plans apply.  (See Shareholder Services--Tax-Sheltered 
Retirement Plans.)  The Trust reserves the right to require a 
properly completed Application before making payment for shares 
redeemed.

The price at which your redemption order will be executed is the 
net asset value next determined after proper redemption 
instructions are received.  (See Net Asset Value.)  Because the 
redemption price you receive depends upon 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.  However, the 
Trust normally intends to pay proceeds of a Telephone Redemption 
paid by wire on the next business day.  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 Special Redemption Privilege to 
redeem shares purchased by check (other than certified or 
cashiers' checks) or electronic transfer until 15 days after their 
date of purchase.

The Trust reserves the right to suspend, limit, modify, or 
terminate, at any time and without prior notice, 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 that the shareholder 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 would be 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 Stein Roe Funds may be redeemed to the extent necessary to 
reimburse any Stein Roe Fund for any loss it sustains that is 
caused by you (such as losses from uncollected checks and 
electronic transfers or any Stein Roe Fund liability under the 
Internal Revenue Code provisions on backup withholding).

SHAREHOLDER SERVICES

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

FUNDS-ON-CALL [REGISTERED] AUTOMATED TELEPHONE TRANSACTIONS.  To 
access the Stein Roe Funds-on-Call [registered], just call 800-
338-2550 on any touch-tone telephone and follow the recorded 
instructions.  Funds-on-Call [registered] provides yields, prices, 
latest dividends, account balances, last transaction and other 
information 24 hours a day, seven days a week.  You may also use 
Funds-on-Call [registered] to make Special Investments and 
Redemptions, Telephone Exchanges, and Telephone Redemptions by 
Check.  These transactions are subject to the terms and conditions 
of the individual privileges.  (See How to Purchase Shares and How 
to Redeem Shares.) 

STEIN ROE COUNSELOR [SERVICE MARK] PROGRAM.  The Adviser offers 
Stein Roe Counselor [SERVICE MARK] and Personal Counselor [SERVICE 
MARK] Programs.  These programs are designed to provide investment 
guidance in helping investors to select a portfolio of Stein Roe 
Mutual Funds.  The Stein Roe Personal Counselor [SERVICE MARK] 
Program, which automatically adjusts client portfolios, 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 Stein Roe Funds, 
except those investing primarily in tax-exempt securities, in 
these plans.  Please read the prospectus for each Fund in which 
you plan to invest before making your investment.

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

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

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

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

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

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

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

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

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

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

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

Automatic Redemptions* (electronic transfer)--to have a fixed 
dollar amount redeemed and sent at regular intervals directly to 
your bank 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.

*A 1% redemption fee is imposed on redemptions of shares held less 
than 90 days.

NET ASSET VALUE

The purchase price of the Fund's shares is its net asset value per 
share.  The redemption price of the Fund's shares is at its net 
asset value per share minus a redemption fee if shares are 
redeemed within 90 days of purchase.  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., central 
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., central time.

In computing the net asset value of the Fund, the values of 
portfolio securities are generally based upon market quotations. 
Depending upon local convention or regulation, these market 
quotations may be the last sale price, last bid or asked price, or 
the mean between the last bid and asked prices as of, in each 
case, the close of the appropriate exchange or other designated 
time.  Trading in securities on European and Far Eastern 
securities exchanges and over-the-counter markets is normally 
completed at various times before the close of business on each 
day on which the NYSE is open.  Trading of these securities may 
not take place on every NYSE business day.  In addition, trading 
may take place in various foreign markets on Saturdays or on other 
days when the NYSE is not open and on which the Fund's net asset 
value is not calculated.  Therefore, such calculation does not 
take place contemporaneously with the determination of the prices 
of many of the portfolio securities used in such calculation and 
the value of the Fund's portfolio may be significantly affected on 
days when shares of the Fund may not be purchased or redeemed.

DISTRIBUTIONS AND INCOME TAXES

DISTRIBUTIONS.  Income dividends for the Fund 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 account; (3) applied to 
purchase shares in your account with another Stein Roe Fund; or 
(4) applied to purchase shares in a Stein Roe Fund account of 
another person.  (See Shareholder Services.)  Reinvestment into 
the same Fund account normally occurs one business day after the 
record date.  Investment of distributions into another Stein Roe 
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.

U.S. FEDERAL 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 
gains.  Distributions of net long-term capital gains 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 realize a loss on the sale or exchange of Fund shares held 
for six months or less, your short-term loss is recharacterized as 
long-term to the extent of any long-term capital gain 
distributions 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.

FOREIGN INCOME TAXES.  Investment income received by the Fund from 
sources within foreign countries may be subject to foreign income 
taxes withheld at the source.  The United States has entered into 
tax treaties with many foreign countries that entitle the Fund to 
a reduced rate of tax or exemption from tax on such income.  It is 
impossible to determine the effective rate of foreign tax in 
advance since the amount of the Fund's assets to be invested 
within various countries will fluctuate and the extent to which 
tax refunds will be recovered is uncertain.  The Fund intends to 
operate so as to qualify for treaty-reduced tax rates where 
applicable.

To the extent that the Fund is liable for foreign income taxes 
withheld at the source, the Fund also intends to operate so as to 
meet the requirements of the U.S. Internal Revenue Code to "pass 
through" to the Fund's shareholders foreign income taxes paid, but 
there can be no assurance that the Fund will be able to do so.

This discussion of U.S. and foreign 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.  The Trust may be required to withhold federal 
income tax ("backup withholding") from certain payments to you, 
generally redemption proceeds.  Backup withholding may be required 
if:

- - You fail to furnish your properly certified social security or 
  other tax identification number;
- - You fail to certify that your tax identification number is 
  correct or that you are not subject to backup withholding due to 
  the underreporting of certain income;
- - The Internal Revenue Service informs the Trust that your tax 
  identification number is incorrect.

These certifications are contained in the Application that you 
should complete and return when you open an account.  The 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.   You may, however, claim the amount withheld as a 
credit on your federal income tax return.

INVESTMENT RETURN

The total return from an investment in 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.  Of course, past performance is not necessarily 
indicative of future results.

MANAGEMENT

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 additional information about the trustees and officers.

The Adviser, Stein Roe & Farnham Incorporated, One South Wacker 
Drive, Chicago, Illinois 60606, is responsible for investment 
portfolio and business affairs of the Fund and the Trust, subject 
to the direction of the Board.  The Adviser is registered as an 
investment adviser under the Investment Advisers Act of 1940.  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 Financial Companies, Inc. ("Liberty 
Financial"), which in turn is a majority owned indirect subsidiary 
of Liberty Mutual Insurance Company.

PORTFOLIO MANAGERS.  Bruno Bertocci and David P. Harris have been 
co-portfolio managers of the Fund since its inception in 1997.  In 
addition, they have been co-portfolio managers of SR&F 
International Portfolio since its inception in 1997 and of its 
corresponding "feeder" fund, Stein Roe International Fund, since 
its inception in 1994 (Mr. Harris served as an associate portfolio 
manager until May 1995).  They joined the Adviser in 1995, as 
senior vice president and vice president, respectively, to create 
Stein Roe Global Capital Management, a dedicated global and 
international equity management unit.  Messrs. Bertocci and Harris 
are also employed by Colonial Management Associates, Inc., a 
subsidiary of Liberty Financial, as vice presidents.  As of 
December 31, 1996, Messrs. Bertocci and Harris were responsible 
for co-managing $141 million in mutual fund net assets.

Prior to joining the Adviser, Mr. Bertocci was a senior global 
equity portfolio manager with Rockefeller & Co. ("Rockefeller") 
from 1983 to 1995.  While at Rockefeller, he served as portfolio 
manager for Stein Roe International Fund, when Rockefeller was 
that Fund's sub-adviser.  Mr. Bertocci managed Rockefeller's 
London office from 1987 to 1989 and its Hong Kong office from 1989 
to 1990.  Prior to working at Rockefeller, he served for three 
years at T. Rowe Price Associates.  Mr. Bertocci is a graduate of 
Oberlin College and holds an M.B.A. from Harvard University.

Mr. Harris was a portfolio manager with Rockefeller from 1990 to 
1995.  After earning a bachelor's degree from the University of 
Michigan, he was an actuarial associate for GEICO before returning 
to school to earn an M.B.A. from Cornell University.

FEES AND EXPENSES.  In return for its services, the Adviser is 
entitled to receive monthly management and administrative fees 
from the Fund, computed and accrued daily, at an annual rate of 
1.25% of average net assets.  These fees are higher than the fees 
paid by most mutual funds.  As noted under Fee Table, the Adviser 
may voluntarily waive a portion of its fees.

The Adviser provides office space and executive and other 
personnel to the Fund.  All expenses of the 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 the Fund.

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

PORTFOLIO TRANSACTIONS.  The Adviser places the orders for the 
purchase and sale of the Fund's portfolio securities and options 
and futures transactions.  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 subsidiary of Liberty 
Financial, is the agent of the Trust for the transfer of shares, 
disbursement of dividends, and maintenance of shareholder 
accounting records.

DISTRIBUTOR.  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 subsidiary of Liberty Financial.  
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 
SteinRoe Services Inc. at P.O. Box 8900, Boston, Massachusetts 
02205 except for participants in the Stein Roe Counselor [SERVICE 
MARK] and Personal Counselor [SERVICE MARK] Programs, who should 
send orders to SteinRoe Services Inc. at P.O. Box 803938, Chicago, 
Illinois 60680.  All distributions 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, nine 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> 
Stein Roe Mutual Funds
Certificate of Authorization
for use by corporations and associations only

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

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

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

                   AUTHORIZED PERSONS
____________________        ________________________
Name                        Title
____________________        ________________________
Name                        Title
____________________        ________________________
Name                        Title

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

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

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

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

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

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

                                   ___________________________
                                   Secretary
                                   ___________________________
                                   Signature Guarantee*
                                   *Only required if the person 
                                   signing the Certificate is the 
                                   only person named as 
                                   "Authorized Person." 
CORPORATE
SEAL
HERE

<PAGE> 

The Stein Roe Mutual 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 & 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
Stein Roe Emerging Markets Fund


Stein Roe Mutual Funds
P. O. Box 8900
Boston, Massachusetts 02205-8900
Financial Advisors call: 1-800-322-0593
Shareholders call 1-800-338-2550
http://www.steinroe.com

In Chicago, visit our Fund Center at One South Wacker Drive, 
Suite 3200

Liberty Securities Corporation, Distributor
Member, SIPC


<PAGE> 1

       

   Statement of Additional Information Dated February 3, 1997

                  STEIN ROE INVESTMENT TRUST
  Suite 3200, One South Wacker Drive, Chicago, Illinois  60606
                         800-338-2550

                STEIN ROE EMERGING MARKETS FUND

     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 3, 1997, and 
any supplements thereto ("Prospectus").  The Prospectus may be 
obtained at no charge by telephoning 800-338-2550.


                        TABLE OF CONTENTS
                                                   Page
General Information and History......................2
Investment Policies..................................3
Special Considerations...............................3
Portfolio Investments and Strategies.................7
Investment Restrictions.............................24
Additional Investment Considerations................27
Purchases and Redemptions...........................28
Management..........................................29
Principal Shareholders..............................33
Investment Advisory Services........................33
Distributor.........................................35
Transfer Agent......................................36
Custodian...........................................36
Independent Public Accountants......................37
Portfolio Transactions..............................37
Additional Income Tax Considerations................38
Appendix--Ratings...................................43

                 GENERAL INFORMATION AND HISTORY

     Stein Roe Emerging Markets Fund (the "Fund") is a series of 
the Stein Roe 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.  On February 1, 1996, the name of the Trust was 
changed from SteinRoe Investment Trust to Stein Roe Investment 
Trust.

     Stein Roe & Farnham Incorporated (the "Adviser") provides 
investment advisory and administrative services to the Fund 
through its Global Capital Management division.

     As of the date of this Statement of Additional Information, 
nine series of the Trust are authorized and outstanding.  Each 
share of a series, without par value, is entitled to participate 
pro rata in any dividends and other distributions declared by the 
Board on shares of that series, and all shares of a series have 
equal rights in the event of liquidation of that series.  Each 
whole share (or fractional share) 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 investment companies for 
investment in another investment company having the same 
investment objective and substantially the same investment 
policies  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 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 non-fundamental and may be changed by the Board of 
Trustees without the approval of a "majority of the outstanding 
voting securities" /1/ of the Fund.
- -------------
/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.
- --------------

    The Fund's investment objective is to seek capital 
appreciation primarily through investing in companies in emerging 
markets.  Under normal markets conditions, the Fund will invest at 
least 65% of its total assets (taken at market value) in equity 
securities of emerging market issuers.  The Fund does not intend 
to concentrate investments in any particular industry.  In 
addition, there is no limitation on the amount the Fund can invest 
in a specific country or region of the world.  However, the Fund 
intends to diversify its investment among several countries. 

     The Fund is intended for long-term investors and not for 
short-term trading purposes.  It should not be considered a 
complete investment program.  Many investments in emerging markets 
can be considered speculative, and the value of those investments 
can be more volatile than is typical in more developed foreign 
markets.

     The Fund considers "emerging markets" to include any country 
that is defined as an emerging or developing country by (i) the 
World Bank, (ii) the International Finance Corporation or (iii) 
the United Nations or its authorities.  The Fund's investments 
will include, but are not limited to, securities of companies 
located within countries in Asia, Africa, Latin America and 
certain parts of Europe.  The Fund considers an issuer to be an 
"emerging markets issuer" if:

- - the issuer is organized under the laws of an emerging market 
  country;
- - the principal securities trading market for the issuer's 
  securities is in an emerging market country;
- - the issuer derives at least 50% of its revenue from goods 
  produced or services rendered in emerging market countries; or
- - at least 50% of the issuer's assets are located in emerging 
  market countries.

                       SPECIAL CONSIDERATIONS

FOREIGN INVESTING

     The Fund invests primarily in foreign securities (including 
emerging market securities), which may entail a greater degree of 
risk (including risks relating to exchange rate fluctuations, tax 
provisions, or expropriation of assets) than investment in 
securities of domestic issuers.  The Fund may also purchase 
foreign securities in the form of American Depositary Receipts 
(ADRs), European Depositary Receipts (EDRs), or other securities 
representing underlying shares of foreign issuers.  Positions in 
these securities are not necessarily denominated in the same 
currency as the common stocks into which they may be converted.  
ADRs are receipts typically issued by an American bank or trust 
company evidencing ownership of the underlying securities.  EDRs 
are European receipts evidencing a similar arrangement.  
Generally, ADRs, in registered form, are designed for the U.S. 
securities markets and EDRs, in bearer form, are designed for use 
in European securities markets.  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 
depositary 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 Portfolio 
Investments and Strategies--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.  The risks are greater for emerging market 
countries.

INVESTING IN EMERGING MARKETS

     Investments in emerging markets securities include special 
risks in addition to those generally associated with foreign 
investing.  Many investments in emerging markets can be considered 
speculative, and the value of those investments can be more 
volatile than in more developed foreign markets.  This difference 
reflects the greater uncertainties of investing in less 
established markets and economies.  Emerging markets also have 
different clearance and settlement procedures, and in certain 
markets there have been times when settlements have not kept pace 
with the volume of securities transactions, making it difficult to 
conduct such transactions.  Delays in settlement could result in 
temporary periods when a portion of the assets of the Fund is 
uninvested and no return is earned thereon.  The inability of the 
Fund to make intended security purchases due to settlement 
problems could cause the Fund to miss attractive investment 
opportunities.  Inability to dispose of portfolio securities due 
to settlement problems could result either in losses to the Fund 
due to subsequent declines in the value of those securities or, if 
the Fund has entered into a contract to sell a security, in 
possible liability to the purchaser.  Costs associated with 
transactions in emerging markets securities are typically higher 
than costs associated with transactions in U.S. securities.  Such 
transactions also involve additional costs for the purchase or 
sale of foreign currency.  

     Certain foreign markets (including emerging markets) may 
require governmental approval for the repatriation of investment 
income, capital or the proceeds of sales of securities by foreign 
investors.  In addition, if a deterioration occurs in an emerging 
market's balance of payments or for other reasons, a country could 
impose temporary restrictions on foreign capital remittances.  The 
Fund could be adversely affected by delays in, or a refusal to 
grant, required governmental approval for repatriation of capital, 
as well as by the application to the Fund of any restrictions on 
investments.

     The risk also exists that an emergency situation may arise in 
one or more emerging markets.  As a result, trading of securities 
may cease or may be substantially curtailed and prices for the 
Fund's securities in such markets may not be readily available.  
The Fund may suspend redemption of its shares for any period 
during which an emergency exists, as determined by the Securities 
and Exchange Commission (the "SEC").  Accordingly, if the Fund 
believes that appropriate circumstances exist, it will promptly 
apply to the SEC for a determination that such an emergency is 
present.  During the period commencing from the Fund's 
identification of such condition until the date of the SEC action, 
the Fund's securities in the affected markets will be valued at 
fair value determined in good faith by or under the direction of 
the Trust's Board of Trustees.

     Volume and liquidity in most foreign markets are lower than 
in the U.S.  Fixed commissions on foreign securities exchanges are 
generally higher than negotiated commissions on U.S. exchanges, 
although the Fund endeavors to achieve the most favorable net 
results on its portfolio transactions.  There is generally less 
government supervision and regulation of business and industry 
practices, securities exchanges, brokers, dealers and listed 
companies than in the U.S.  Mail service between the U.S. and 
foreign countries may be slower or less reliable than within the 
U.S., thus increasing the risk of delayed settlements of portfolio 
transactions or loss of certificates for portfolio securities.  In 
addition, with respect to certain emerging markets, there is the 
possibility of expropriation or confiscatory taxation, political 
or social instability, or diplomatic developments which could 
affect the Fund's investments in those countries.  Moreover, 
individual emerging market economies may differ favorably or 
unfavorably from the U.S. economy in such respects as growth of 
gross national product, rate of inflation, capital reinvestment, 
resource self-sufficiency and balance of payments position.

     Income from securities held by the Fund could be reduced by a 
withholding tax on the source or other taxes imposed by the 
emerging market countries in which the Fund invests.  The Fund's 
net asset value may also be affected by changes in the rates of 
methods or taxation applicable to the Fund or to entities in which 
the Fund has invested.  The Adviser will consider the cost of any 
taxes in determining whether to acquire any particular 
investments, but can provide no assurance that the taxes will not 
be subject to change.

     Many emerging markets have experienced substantial rates of 
inflation for many years.  Inflation and rapid fluctuations in 
inflation rates have had and may continue to have adverse effects 
on the economies and securities markets of certain emerging market 
countries.  In an attempt to control inflation, wage and price 
controls have been imposed in certain countries.  Of these 
countries, some, in recent years, have begun to control inflation 
through prudent economic policies.

     Emerging market governmental issuers are among the largest 
debtors to commercial banks, foreign governments, international 
financial organizations and other financial institutions.  Certain 
emerging market governmental issuers have not been able to make 
payments of interest or principal on debt obligations as those 
payments have come due.  Obligations arising from past 
restructuring agreements may affect the economic performance and 
political and social stability of those issuers.

     Governments of many emerging market countries have exercised 
and continue to exercise substantial influence over many aspects 
of the private sector through ownership or control of many 
companies, including some of the largest in any given country.  As 
a result, government actions in the future could have a 
significant effect on economic conditions in emerging markets, 
which in turn, may adversely affect companies in the private 
sector, general market conditions and prices and yields of certain 
of the securities in the Fund's portfolio.  Expropriation, 
confiscatory taxation, nationalization, political, economic or 
social instability or other similar developments have occurred 
frequently over the history of certain emerging markets and could 
adversely affect the Fund's assets should these conditions recur.

     The ability of emerging market country governmental issuers 
to make timely payments on their obligations is likely to be 
influenced strongly by the issuer's balance of payments, including 
export performance, and its access to international credits and 
investments.  An emerging market whose exports are concentrated in 
a few commodities could be vulnerable to a decline in the 
international prices of one or more of those commodities.  
Increased protectionism on the part of an emerging market's 
trading partners could also adversely affect the country's exports 
and diminish its trade account surplus, if any.  To the extent 
that emerging markets receive payment for their exports in 
currencies other than dollars or non-emerging market currencies, 
their ability to make debt payments denominated in dollars or non-
emerging market currencies could be affected.

     Another factor bearing on the ability of an emerging market 
country to repay debt obligations is the level of international 
reserves of the country.  Fluctuations in the level of these 
reserves affect the amount of foreign exchange readily available 
for external debt payments and thus could have a bearing on the 
capacity of emerging market countries to make payments on these 
debt obligations.

     To the extent that an emerging market country cannot generate 
a trade surplus, it must depend on continuing loans from foreign 
governments, multilateral organizations or private commercial 
banks, aid payments from foreign governments and on inflows of 
foreign investment.  The access of emerging markets to these forms 
of external funding may not be certain, and a withdrawal of 
external funding could adversely affect the capacity of emerging 
market country governmental issuers to make payments on their 
obligations.  In addition, the cost of servicing emerging market 
debt obligations can be affected by a change in international 
interest rates since the majority of these obligations carry 
interest rates that are adjusted periodically based upon 
international rates.

                PORTFOLIO INVESTMENTS AND STRATEGIES

MEDIUM- AND LOWER-QUALITY DEBT SECURITIES

     The Fund may invest in medium- and lower-quality debt 
securities.  Medium-quality debt securities, although considered 
investment grade, have some speculative characteristics.  Lower-
quality securities, commonly referred to as "junk bonds," are 
those rated below the fourth highest rating category or those of 
comparable quality.

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

     Lower-quality debt securities are obligations of issuers that 
are considered predominantly speculative with respect to the 
issuer's capacity to pay interest and repay principal according to 
the terms of the obligation.  These securities carry greater 
investment risk, including the possibility of issuer default and 
bankruptcy, and are commonly referred to as "junk bonds."  The 
lowest rating assigned by Moody's is for bonds that can be 
regarded as having extremely poor prospects of ever attaining any 
real investment standing.

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

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

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, 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, 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 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.

     The Fund does not currently intend to invest more than 5% of 
its net assets in any type of Derivative.

DEFENSIVE INVESTMENTS

     When the Adviser 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.

FOREIGN SECURITIES

     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.

     The Fund's foreign currency exchange transactions are limited 
to transaction hedging and portfolio hedging involving either 
specific transactions or portfolio positions, except to the extent 
described below under "Synthetic Foreign Money Market Positions."  
Transaction hedging is the purchase or sale of forward contracts 
with respect to specific receivables or payables of the Fund 
arising in connection with 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 foreign currency.  Portfolio hedging allows the 
Fund to limit or reduce its exposure in a foreign currency by 
entering into a forward contract to sell such foreign currency (or 
another foreign currency that acts as a proxy for that currency) 
at a future date for a price payable in U.S. dollars so that the 
value of the foreign-denominated portfolio securities can be 
approximately matched by a foreign-denominated liability.  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 
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.

     Synthetic Foreign Money Market Positions.  The Fund may 
invest in money market instruments denominated in foreign 
currencies.  In addition to, or in lieu of, such direct 
investment, the Fund may construct a synthetic foreign money 
market position by (a) purchasing a money market 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.  
For example, a synthetic money market position in Japanese yen 
could be constructed by purchasing a U.S. dollar money market 
instrument, and entering concurrently into a forward contract to 
deliver a corresponding amount of U.S. dollars in exchange for 
Japanese yen on a specified date and at a specified rate of 
exchange.  Because of the availability of a variety of highly 
liquid short-term U.S. dollar money market instruments, a 
synthetic money market position utilizing such U.S. dollar 
instruments may offer greater liquidity than direct investment in 
foreign currency money market instruments.  The result of a direct 
investment in a foreign currency and a concurrent construction of 
a synthetic position in such foreign currency, in terms of both 
income yield and gain or loss from changes in currency exchange 
rates, in general should be similar, but would not be identical 
because the components of the alternative investments would not be 
identical.  Except to the extent a synthetic foreign money market 
position consists of a money market instrument denominated in a 
foreign currency, the synthetic foreign money market position 
shall not be deemed a "foreign security" for purposes of the 
policy that, under normal conditions, the Fund will invest at 
least 65% of its total assets in foreign securities.

BRADY BONDS

     The Fund may invest in "Brady Bonds," which are debt 
securities issued under the framework of the Brady Plan as a 
mechanism for debtor countries to restructure their outstanding 
bank loans.  Most "Brady Bonds" have their principal 
collateralized by zero coupon U.S. Treasury bonds.  Brady Bonds 
have been issued only in recent years, and, accordingly, do not 
have a long payment history.

     U.S. dollar-denominated, collateralized Brady Bonds, which 
may be fixed rate par bonds or floating rate discount bonds, are 
generally collateralized in full as to principal due at maturity 
by U.S. Treasury zero coupon obligations which have the same 
maturity as the Brady Bonds.  Interest payments on these Brady 
Bonds generally are collateralized by cash or securities in an 
amount that, in the case of fixed rate bonds, is equal to at least 
one year of rolling interest payments or, in the case of floating 
rate bonds, initially is equal to at least one year's rolling 
interest payments based on the applicable interest rate at the 
time and is adjusted at regular intervals thereafter.  Certain 
Brady Bonds are entitled to "value recovery payments" in certain 
circumstances, which in effect constitute supplemental interest 
payments but generally are not collateralized.  Brady Bonds are 
often viewed as having three or four valuation components:  (i) 
the collateralized repayment of principal at final maturity; (ii) 
the collateralized interest payments; (iii) the uncollateralized 
interest payments; and (iv) any uncollateralized repayment of 
principal at maturity (these uncollateralized amounts constitute 
the "residual risk").  In the event of a default with respect to 
collateralized Brady Bonds as a result of which the payment 
obligations of the issuer are accelerated, the U.S. Treasury zero 
coupon obligations held as collateral for the payment of principal 
will not be distributed to investors, nor will such obligations be 
sold and the proceeds distributed.  The collateral will be held to 
the scheduled maturity of the defaulted Brady Bonds by the 
collateral agent, at which time the face amount of the collateral 
will equal the principal payments which would have then been due 
on the Brady Bonds in the normal course.  In addition, in light of 
the residual risk of the Brady Bonds and, among other factors, the 
history of defaults with respect to commercial bank loans by 
public and private entities of countries issuing Brady Bonds, 
investments in Brady Bonds will be viewed as speculative.

SOVEREIGN DEBT OBLIGATIONS


     The Fund may purchase sovereign debt instruments issued or 
guaranteed by foreign governments or their agencies, including 
debt of emerging market countries.  Sovereign debt of emerging 
market countries may involve a high degree of risk, and may be in 
default or present the risk of default.  Governmental entities 
responsible for repayment of the debt may be unable or unwilling 
to repay principal and interest when due, and may require 
renegotiation or rescheduling of debt payments.  In addition, 
prospects for repayment of principal and interest may depend on 
political as well as economic factors.

LENDING OF PORTFOLIO 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.  
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.

REPURCHASE AGREEMENTS

     The Fund may invest in repurchase agreements, provided that 
it will not invest more than 15% of net assets in repurchase 
agreements maturing in more than seven days and any other illiquid 
securities.  A repurchase agreement is a sale of securities to 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.

STRUCTURED NOTES

     Structured Notes are Derivatives on which the amount of 
principal repayment and or interest payments is based upon the 
movement of one or more factors.  These factors include, but are 
not limited to, currency exchange rates, interest rates (such as 
the prime lending rate and the London Interbank Offered Rate 
("LIBOR")) and stock indices such as the S&P 500 Index.  In some 
cases, the impact of the movements of these factors may increase 
or decrease through the use of multipliers or deflators.  The use 
of Structured Notes allows the Fund to tailor its investments to 
the specific risks and returns the Adviser wishes to accept while 
avoiding or reducing certain other risks.

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 the Adviser deems it advisable for 
investment reasons.  The Fund may utilize spot and forward foreign 
currency exchange transactions to reduce the risk inherent in 
fluctuations in the exchange rate between one currency and another 
when securities are purchased or sold on a when-issued or delayed-
delivery basis.

     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.

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.  While 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.

SHORT SALES AGAINST THE BOX

     The Fund may sell securities short against the box; that is 
enter into short sales of securities that it currently owns or has 
the right to acquire through the conversion or exchange of other 
securities that it owns at no additional cost.  The Fund may make 
short sales of securities only if at all times when a short 
position is open the Fund owns at least an equal amount of such 
securities or securities convertible into or exchangeable for 
securities of the same issue as, and equal in amount to, the 
securities sold short, at no additional cost.

     In a short sale against the box, a Fund does not deliver from 
its portfolio the securities sold.  Instead, the Fund borrows the 
securities sold short from a broker-dealer through which the short 
sale is executed, and the broker-dealer delivers such securities, 
on behalf of the Fund, to the purchaser of such securities.  The 
Fund is required to pay to the broker-dealer the amount of any 
dividends paid on shares sold short.  Finally, to secure its 
obligations to deliver to such broker-dealer the securities sold 
short, the Fund must deposit and continuously maintain in a 
separate account with its custodian an equivalent amount of the 
securities sold short or securities convertible into or 
exchangeable for such securities at no additional cost.  The Fund 
is said to have a short position in the securities sold until it 
delivers to the broker-dealer the securities sold.  The Fund may 
close out a short position by purchasing on the open market and 
delivering to the broker-dealer an equal amount of the securities 
sold short, rather than by delivering portfolio securities.

     Short sales may protect the Fund against the risk of losses 
in the value of its portfolio securities because any unrealized 
losses with respect to such portfolio securities should be wholly 
or partially offset by a corresponding gain the short position.  
However, any potential gains in such portfolio securities should 
be wholly or partially offset by a corresponding loss in the short 
position.  The extent to which such gains or losses are offset 
will depend upon the amount of securities sold relative to the 
amount the Fund owns, either directly or indirectly, and, in the 
case where the Fund owns convertible securities, changes in the 
conversion premium.

     Short sale transactions involve certain risks.  If the price 
of the security sold short increases between the time of the short 
sale and the time the Fund replaces the borrowed security, the 
Fund will incur a loss and if the price declines during this 
period, the Fund will realize a short-term capital gain.  Any 
realized short-term capital gain will be decreased, and any 
incurred loss increased, by the amount of transaction costs and 
any premium, dividend or interest which the Fund may have to pay 
in connection with such short sale.  Certain provisions of the 
Internal Revenue Code may limit the degree to which the Fund is 
able to enter into short sales.  There is no limitation on the 
amount of the Fund's assets that, in the aggregate, may be 
deposited as collateral for the obligation to replace securities 
borrowed to effect short sales and allocated to segregated 
accounts in connection with short sales.  The Fund does not 
currently expect that more than 5% of its total assets would be 
involved in short sales against the box.

CLOSED-END INVESTMENT COMPANIES

     The Fund may also invest in closed-end investment companies 
investing primarily in the emerging markets.  To the extent the 
Fund invests in such closed-end investment companies, shareholders 
will incur certain duplicate fees and expenses.  Such closed-end 
investment company investments will generally only be made when 
market access or liquidity restricts direct investment in the 
market.

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.  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 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 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 that have not been deemed to be liquid by the Adviser.  
(See restriction (m) under Investment Restrictions.)

SWAPS, CAPS, FLOORS AND COLLARS

     The Fund may enter into interest rate, currency and index 
swaps and the purchase or sale of related caps, floors and 
collars.  The Fund would enter into these transactions primarily 
to preserve a return or spread on a particular investment or 
portion of its portfolio, to protect against currency 
fluctuations, as a duration management technique or to protect 
against any increase in the price of securities the Fund 
anticipates purchasing at a later date.  The Fund intends to use 
these techniques as hedges and not as speculative investments and 
will not sell interest rate caps or floors where it does not own 
securities or other instruments providing the income stream the 
Fund may be obligated to pay.  Interest rate swaps involve the 
exchange by the Fund with another party of their respective 
commitments to pay or receive interest; e.g., an exchange of 
floating rate payments for fixed rate payments with respect to a 
notional amount of principal.  A currency swap is an agreement to 
exchange cash flows on a notional amount of two or more currencies 
based on the relative value differential among them and an index 
swap is an agreement to swap cash flows on a notional amount based 
on changes in the values of the reference indices.  The purchase 
of a cap entitles the purchaser to receive payments on a notional 
principal amount from the party selling such cap to the extent 
that a specified index exceeds a predetermined interest rate or 
amount.  The purchase of a floor entitles the purchaser to receive 
payments on a notional principal amount from the party selling 
such floor to the extent that a specified index falls below a 
predetermined interest rate or amount.  A collar is a combination 
of a cap and a floor that preserves a certain return within a 
predetermined range of interest rates or values.

     The Fund will usually enter into swaps on a net basis; i.e., 
the two payment streams are netted out in a cash settlement on the 
payment date or dates specified in the instrument, with the Fund 
receiving or paying, as the case may be, only the net amount of 
the two payments.  Inasmuch as these swaps, caps, floors and 
collars are entered into for good faith hedging purposes, the 
Adviser and the Fund believe such obligations do not constitute 
senior securities under the Investment Company Act of 1940 and, 
accordingly, will not treat them as being subject to its borrowing 
restrictions.  The Fund will not enter into any swap, cap, floor 
or collar transaction unless, at the time of entering into such 
transaction, the unsecured long-term debt of the counterparty, 
combined with any credit enhancements, is rated at least A by 
Standard & Poor's Corporation or Moody's or has an equivalent 
rating from a nationally recognized statistical rating 
organization or is determined to be of equivalent credit quality 
by the Adviser.  If there is a default by the counterparty, the 
Fund may have contractual remedies pursuant to the agreements 
related to the transaction.  The swap market has grown 
substantially in recent years with a large number of banks and 
investment banking firms acting both as principals and as agents 
utilizing standardized swap documentation.  As a result, the swap 
market has become relatively liquid.  Caps, floors and collars are 
more recent innovations for which standardized documentation has 
not yet been fully developed and, accordingly, they are less 
liquid than swaps.  At the time the Fund enters into swap 
arrangements or purchases or sells caps, floors or collars, liquid 
assets of the Fund having a value at least as great as the 
commitment underlying the obligations will be segregated on the 
books of the Fund and held by the custodian throughout the period 
of the obligation.

EURODOLLAR INSTRUMENTS

     The Fund may make investments in Eurodollar instruments.  
Eurodollar instruments are U.S. dollar-denominated futures 
contracts or options thereon which are linked to LIBOR, although 
foreign currency-denominated instruments are available from time 
to time.  Eurodollar future contracts enable purchasers to obtain 
a fixed rate for the lending of funds and sellers to obtain a 
fixed rate for borrowings.  The Fund might use Eurodollar futures 
contracts and options thereon to hedge against changes in LIBOR, 
to which many interest rate swaps and fixed income instruments are 
linked.

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.

INTERFUND BORROWING AND LENDING PROGRAM

     Pursuant to an exemptive order issued by the Securities and 
Exchange Commission, the Fund has received permission to lend 
money to, and borrow money from, other mutual funds advised by the 
Adviser.  The Fund will borrow through the program when borrowing 
is necessary or appropriate and the costs are equal to or lower 
than the costs of bank loans.

PORTFOLIO 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.  Accordingly, the 
portfolio turnover rate may vary significantly from year to year, 
but is not expected to exceed 100% under normal market conditions.  
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 Fund's flexibility of investment and 
emphasis on growth of capital, it may have greater portfolio 
turnover than that of mutual funds that have primary objectives of 
income or maintenance of a balanced investment position.  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, 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

     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.

     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.

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.
- ----------------
/2/ A futures contract on an index is an agreement pursuant to 
which two parties agree to take or more delivery of an amount of 
cash equal to the difference between the value of the index at the 
close of the last trading day of the contract and the price at 
which the index contract was originally written.  Although the 
value of a securities index is a function of the value of certain 
specified securities, no physical delivery of those securities is 
made.
- ----------------

     The 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 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, 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, 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 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 realizes a capital 
gain, or if it is more, the Fund realizes a capital loss.  
Conversely, if an offsetting sale price is more than the original 
purchase price, the Fund realizes a capital gain, or if it is 
less, the Fund realizes a capital loss.  The transaction costs 
must also be included in these calculations.

RISKS ASSOCIATED WITH FUTURES

     There are several risks associated with the use of futures 
contracts and futures options.  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 markets 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 which 
any such positions are "in-the-money," /3/ would exceed 5% of the 
Fund's total assets.
- -------------
/3/ A call option is "in-the-money" if the value of the futures 
contract that is the subject to 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.
- -------------

     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%.

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.

     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.
- -------------
/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).
- -------------

     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 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 the Fund's 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 U.S. Government, or any 
of its agencies or instrumentalities or repurchase agreements for 
such securities 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;

     (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, although it may (a) lend portfolio securities 
and participate in an interfund lending program with other Stein 
Roe Funds and Portfolios provided that no such loan may be made 
if, as a result, the aggregate of such loans would exceed 33 1/3% 
of the value of its total assets (taken at market value at the 
time of such loans); (b) purchase money market instruments and 
enter into repurchase agreements; and (c) acquire publicly-
distributed or privately-placed debt securities; 

     (6)  borrow except that it may (a) borrow for non-leveraging, 
temporary or emergency purposes, (b) engage in reverse repurchase 
agreements and make other borrowings, provided that the 
combination of (a) and (b) shall not exceed 33 1/3% of the value 
of its total assets (including the amount borrowed) less 
liabilities (other than borrowings) or such other percentage 
permitted by law, and (c) enter into futures and options 
transactions; it may borrow from banks, other Stein Roe Funds and 
Portfolios, and other persons to the extent permitted by 
applicable law;

     (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, /5/ 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
- -----------------
/5/ For purposes of this investment restriction, the Fund uses 
industry classifications contained in Morgan Stanley Capital 
International Perspective, which is published by Morgan Stanley, 
an international investment banking and brokerage firm.
- -----------------

     (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.  None of the following 
restrictions shall prevent the Fund from investing all or 
substantially all of its assets in another investment company 
having the same investment objective and substantially the same 
investment policies as the Fund.  The 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 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; and (iv) limited partnerships in real estate 
unless they are readily marketable;

     (b) invest in companies for the purpose of exercising control 
or management;

     (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;

     (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) 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;

     (f) 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 or a recognized foreign exchange;

     (g) write an option on a security unless the option is issued 
by the Options Clearing Corporation, an exchange, or similar 
entity;

     (h) 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;

     (i) 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;

     (j) 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) it 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 it expects to 
receive in a recapitalization, reorganization, or other exchange 
for securities it contemporaneously owns or has the right to 
obtain and provided that transactions in options, futures, and 
options on futures are not treated as short sales;

     (k)  invest more than 5% of its total assets (taken at market 
value at the time of a particular investment) in securities of 
issuers (other than issuers of federal agency obligations or 
securities issued or guaranteed by any foreign country or asset-
backed securities) that, together with any predecessors or 
unconditional guarantors, have been in continuous operation for 
less than three years ("unseasoned issuers");

     (l)  invest more than 10% of its total assets (taken at 
market value at the time of a particular investment) in restricted 
securities, other than securities eligible for resale pursuant to 
Rule 144A under the Securities Act of 1933;

     (m)  invest more than 15% of its total assets (taken at 
market value at the time of a particular investment) in restricted 
securities and securities of unseasoned issuers;

     (n)  invest more than 15% of its net assets (taken at market 
value at the time of a particular investment) in illiquid 
securities, including repurchase agreements maturing in more than 
seven days.

     Notwithstanding the foregoing investment restrictions, the 
Fund may purchase securities pursuant to the exercise of 
subscription rights, subject to the condition that such purchase 
will not result in the Fund's ceasing to be a diversified 
investment company.  Far Eastern and European corporations 
frequently issue additional capital stock by means of subscription 
rights offerings to existing shareholders at a price substantially 
below the market price of the shares.  The failure to exercise 
such rights would result in the Fund's interest in the issuing 
company being diluted.  The market for such rights is not well 
developed in all cases and, accordingly, the Fund may not always 
realize full value on the sale of rights.  The exception applies 
in cases where the limits set forth in the investment restrictions 
would otherwise be exceeded by exercising rights or would have 
already been exceeded as a result of fluctuations in the market 
value of the Fund's portfolio securities with the result that the 
Fund would be forced either to sell securities at a time when it 
might not otherwise have done so, to forego exercising the rights.

                  ADDITIONAL INVESTMENT CONSIDERATIONS

     The Adviser seeks to provide superior long-term investment 
results through a disciplined, research-intensive approach to 
investment selection and prudent risk management.  In working to 
build wealth for generations it has been guided by three primary 
objectives which it believes are the foundation of a successful 
investment program.  These objectives are preservation of capital, 
limited volatility through managed risk, and consistent above-
average returns as appropriate for the particular client or 
managed account.  Because every investor's needs are different, 
Stein Roe mutual funds are designed to accommodate different 
investment objectives, risk tolerance levels, and time horizons.  
In selecting a mutual fund, investors should ask the following 
questions:

What are my investment goals?
It is important to a choose a fund that has investment objectives 
compatible with your investment goals.

What is my investment time frame?
If you have a short investment time frame (e.g., less than three 
years), a mutual fund that seeks to provide a stable share price, 
such as a money market fund, or one that seeks capital 
preservation as one of its objectives may be appropriate.  If you 
have a longer investment time frame, you may seek to maximize your 
investment returns by investing in a mutual fund that offers 
greater yield or appreciation potential in exchange for greater 
investment risk.

What is my tolerance for risk?
All investments, including those in mutual funds, have risks which 
will vary depending on investment objective and security type.  
However, mutual funds seek to reduce risk through professional 
investment management and portfolio diversification.

     In general, equity mutual funds emphasize long-term capital 
appreciation and tend to have more volatile net asset values than 
bond or money market mutual funds.  Although there is no guarantee 
that they will be able to maintain a stable net asset value of 
$1.00 per share,  money market funds emphasize safety of principal 
and liquidity, but tend to offer lower income potential than bond 
funds.  Bond funds tend to offer higher income potential than 
money market funds but tend to have greater risk of principal and 
yield volatility.  

     In addition, the Adviser believes that investment in a high 
yield fund provides an opportunity to diversify an investment 
portfolio because the economic factors that affect the performance 
of high-yield, high-risk debt securities differ from those that 
affect the performance of higher quality debt securities or equity 
securities.

                       PURCHASES AND REDEMPTIONS

     Purchases and redemptions are discussed in the Prospectus 
under the headings How to Purchase Shares, How to Redeem Shares, 
Net Asset Value, and Shareholder Services, and that information is 
incorporated herein by reference.  The Prospectus discloses that 
you may purchase (or redeem) shares through investment dealers, 
banks, or other institutions.  It is the responsibility of any 
such institution to establish procedures insuring the prompt 
transmission to the Trust of any such purchase order.

     The 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 SEC, or 
the NYSE is closed for other than customary weekend and holiday 
closings; (b) the SEC has by order permitted such suspension; or 
(c) an emergency, as determined by the SEC, 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 of the Trust:

<TABLE>
<CAPTION>
                            POSITION(S) HELD              PRINCIPAL OCCUPATION(S)
NAME                 AGE    WITH THE TRUST                DURING PAST FIVE YEARS
<S>                  <C> <C>                       <C>
Gary A. Anetsberger  41  Senior Vice-President     Chief Financial Officer of the Mutual Funds 
                                                   division of Stein Roe & Farnham Incorporated (the 
                                                   "Adviser"); senior vice president of the Adviser 
                                                   since April, 1996; vice president of the Adviser 
                                                   prior thereto

Timothy K. Armour    48  President; Trustee        President of the Mutual Funds division of the 
  (1)(2)                                           Adviser and director of the Adviser since June, 
                                                   1992; senior vice president and director of 
                                                   marketing of Citibank Illinois prior thereto

Jilaine Hummel Bauer 41  Executive Vice-President; General counsel and secretary of the Adviser since 
                         Secretary                 November 1995; senior vice president of the Adviser 
                                                   since April, 1992; vice president of the Adviser 
                                                   prior thereto

Bruno Bertocci       42  Vice-President            Vice president of Colonial Management Associates, 
                                                   Inc. since January, 1996; senior vice president of 
                                                   the Adviser since May, 1995; global equity portfolio 
                                                   manager with Rockefeller & Co. prior thereto

Kenneth L. Block     76  Trustee                   Chairman emeritus of A. T. Kearney, Inc. 
 (3)                                               (international management consultants)

William W. Boyd (3)  70  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

David P. Brady       32  Vice-President            Vice president of the Adviser since November, 1995; 
                                                   portfolio manager for the Adviser since 1993; 
                                                   equity investment analyst, State Farm Mutual 
                                                   Automobile Insurance Company prior thereto

Thomas W. Butch      40  Executive Vice-President  Senior vice president of the Adviser since 
                                                   September, 1994; first vice president, corporate 
                                                   communications, of Mellon Bank Corporation prior 
                                                   thereto

Daniel K. Cantor     37  Vice-President            Senior vice president of the Adviser 

Lindsay Cook (1)     44  Trustee                   Senior vice president of Liberty Financial 
                                                   Companies, Inc. (the indirect parent of the 
                                                   Adviser)

Philip J. Crosley    50  Vice-President            Senior Vice President of the Adviser since 
                                                   February, 1996; Vice President, Institutional 
                                                   Sales-Advisor Sales, Invesco Funds Group prior 
                                                   thereto

E. Bruce Dunn        62  Vice-President            Senior vice president of the Adviser

Erik P. Gustafson    33  Vice-President            Senior portfolio manager of the Adviser; senior 
                                                   vice president of the Adviser since April, 1996; 
                                                   vice president of the Adviser from May, 1994 to 
                                                   April, 1996; associate of the Adviser from April, 
                                                   1992 to May, 1994; associate attorney with Fowler 
                                                   White Burnett Hurley Banick & Strickroot prior 
                                                   thereto

Douglas A. Hacker    41  Trustee                   Senior vice president and chief financial officer, 
  (3)                                              United Airlines, since July, 1994; senior vice 
                                                   president, finance, United Airlines, February, 1993 
                                                   to July, 1994; vice president, American Airlines 
                                                   prior thereto

David P. Harris      32  Vice-President            Vice president of Colonial Management Associates, 
                                                   Inc. since January, 1996;  vice president of the 
                                                   Adviser since May, 1995; global equity portfolio 
                                                   manager with Rockefeller & Co. prior thereto

Harvey B. Hirschhorn 47  Vice-President            Executive vice president, senior portfolio manager, and 
                                                   chief economist, and investment strategeist of the Adviser; 
                                                   director of research of the Adviser, 1991 to 1995

Janet Langford Kelly 39  Trustee                   Senior Vice President, Secretary and General 
   (3)                                             Counsel, Sara Lee Corporation (branded, packaged, 
                                                   consumer-products manufacturer), since 1995; 
                                                   partner, Sidley & Austin (law firm), 1991 through 
                                                   1994

Eric S. Maddix       33  Vice-President            Vice president of the Adviser since November, 1995; 
                                                   portfolio manager or research assistant for the 
                                                   Adviser since 1987

Lynn C. Maddox       56  Vice-President            Senior vice president of the Adviser

Anne E. Marcel       39  Vice-President            Vice president of the Adviser since April, 1996; 
                                                   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 prior thereto

Francis W. Morley    76  Trustee                   Chairman of Employer Plan Administrators and 
 (3)                                               Consultants Co. (designer, administrator, and 
                                                   communicator of employee benefit plans)

Charles R. Nelson    54  Trustee                   Van Voorhis Professor of Political Economy, 
  (3)                                              Department of Economics of the University of 
                                                   Washington

Nicolette D. Parrish 47  Vice-President;           Senior compliance administrator and assistant 
                         Assistant Secretary       secretary of the Adviser since November, 1995; 
                                                   senior legal assistant for the Adviser prior 
                                                   thereto

Richard B. Peterson  56  Vice-President            Senior vice president of the Adviser since June, 
                                                   1991; officer of State Farm Investment Management 
                                                   Corp. prior thereto

Cynthia A. Prah      34  Vice-President            Manager of Shareholder Transaction Processing for 
                                                   the Adviser

Sharon R. Robertson  35  Controller                Accounting manager for the Adviser's Mutual Funds 
                                                   division

Janet B. Rysz        41  Assistant Secretary       Senior compliance administrator and assistant 
                                                   secretary of the Adviser

Gloria J. Santella   39  Vice-President            Senior vice president of the Adviser since 
                                                   November, 1995; vice president of the Adviser 
                                                   prior thereto

Thomas P. Sorbo      36  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

Thomas C. Theobald   59  Trustee                   Managing director, William Blair Capital Partners 
   (3)                                             (private equity fund) since 1994; chief executive 
                                                   officer and chairman of the Board of Directors of 
                                                   Continental Bank Corporation, 1987-1994

Heidi J. Walter      29  Vice-President            Legal counsel for the Adviser since March, 1995; 
                                                   associate with Beeler Schad & Diamond, P.C., prior 
                                                   thereto

Stacy H. Winick      31  Vice-President            Senior legal counsel for the Adviser since October, 
                                                   1996; associate of Bell, Boyd & Lloyd (law firm), June, 
                                                   1993 to September, 1996; associate of Debevoise & 
                                                   Plimpton prior thereto

Hans P. Ziegler      55  Executive Vice-President  Chief executive officer of the Adviser since May, 
                                                   1994; president of the Investment Counsel division 
                                                   of the Adviser from July, 1993 to June, 1994; 
                                                   president and chief executive officer, Pitcairn 
                                                   Financial Management Group prior thereto

Margaret O. Zwick    30  Treasurer                 Compliance manager for the Adviser's Mutual Funds 
                                                   division since August 1995; compliance accountant, 
                                                   January 1995 to July 1995; section manager, January 
                                                   1994 to January 1995; supervisor, February 1990 to 
                                                   December 1993 
</TABLE>
______________________________
(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.

     Certain of the trustees and officers of the Trust are 
trustees or officers of other investment companies managed by the 
Adviser.  Mr. Armour, Ms. Bauer, Mr. Cook, and Ms. Walter are vice 
presidents 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. Hacker is P.O. 
Box 66100, Chicago, IL 60666; that of Ms. Kelly is Three First 
National Plaza, Chicago, Illinois 60602; 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. Theobald is Suite 3300, 222 
West Adams Street, Chicago, IL 60606; that of Messrs. Bertocci, 
Cantor, and Harris is 1330 Avenue of the Americas, New York, New 
York 10019; and that of the other officers is One South Wacker 
Drive, Chicago, Illinois 60606.

     Officers and trustees affiliated with the Adviser serve 
without any compensation from the Trust.  In compensation for 
their services to the Trust, trustees who are not "interested 
persons" of the Trust or the Adviser are paid an annual retainer 
of $8,000 (divided equally among the series of the Trust) plus an 
attendance fee from each series for each meeting of the Board or 
standing committee thereof attended at which business for that 
series is conducted.  The attendance fees (other than for a 
Nominating Committee or Compensation Committee meeting) are based 
on each series' net assets as of the preceding December 31.  For a 
series with net assets of less than $50 million, the fee is $50 
per meeting; with $51 to $250 million, the fee is $200 per 
meeting; with $251 million to $500 million, $350; with $501 
million to $750 million, $500; with $751 million to $1 billion, 
$650; and with over $1 billion in net assets, $800.  For a series 
participating in the master fund/feeder fund structure, the 
trustees' attendance fee is paid solely by the master portfolio.  
Each non-interested trustee also receives $500 from the Trust for 
attending each meeting of the Nominating Committee or Compensation 
Committee.  The Trust has no retirement or pension plan.  The 
following table sets forth compensation paid by the Trust during 
the fiscal year ended September 30, 1996 to each of the trustees:

                         Aggregate       Total Compensation
                         Compensation    from the
       Name of Trustee   from the Trust  Stein Roe Fund Complex
    ------------------  ---------------  ---------------------- 
    Timothy K. Armour        -0-               -0-
    Lindsay Cook             -0-               -0-
    Janet Langford Kelly     -0-               -0-
    Douglas A. Hacker     $  4,700           $11,650
    Thomas C. Theobald       4,700            11,650
    Kenneth L. Block        35,750            81,817
    William W. Boyd         37,750            88,317
    Francis W. Morley       35,750            82,017
    Charles R. Nelson       37,750            88,317
    Gordon R. Worley        36,150            82,217
_______________
 * During this period, the Stein Roe Fund Complex consisted of the 
six series of Stein Roe Income Trust, four series of Stein Roe 
Municipal Trust, eight series of Investment Trust, and one series 
of Base Trust.  Messrs. Hacker and Theobald were elected trustees 
on June 18, 1996; Mr. Worley retired as a trustee on December 31, 
1996; and Ms. Kelly became a trustee on January 1, 1997.

                        PRINCIPAL SHAREHOLDERS

     As of the date of this Statement of Additional Information, 
the Fund had no shareholders.

                     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 is a wholly owned 
subsidiary of Liberty Financial Companies, Inc. ("Liberty 
Financial"), which is a majority owned subsidiary of LFC Holdings, 
Inc., which is a wholly owned subsidiary of Liberty Mutual Equity 
Corporation, which is a wholly owned subsidiary of Liberty Mutual 
Insurance Company.  Liberty Mutual Insurance Company is a mutual 
insurance company, principally in the property/casualty insurance 
field, organized under the laws of Massachusetts in 1912.

     The directors of the Adviser are Kenneth R. Leibler, Harold 
W. Cogger, C. Allen Merritt, Jr., Timothy K. Armour, and Hans P. 
Ziegler.  Mr. Leibler is President and Chief Executive Officer of 
Liberty Financial; Mr. Cogger is Executive Vice President of 
Liberty Financial; Mr. Merritt is Senior Vice President and 
Treasurer of Liberty Financial; Mr. Armour is President of the 
Adviser's Mutual Funds division; and Mr. Ziegler is Chief 
Executive Officer of the Adviser.  The business address of Messrs. 
Leibler, Cogger, and Merritt is Federal Reserve Plaza, Boston, 
Massachusetts 02210; and that of Messrs. Armour, 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, 1996, the Adviser 
managed over $26.7 billion in assets: over $8 billion in equities 
and over $18.7 billion in fixed income securities (including $1.6 
billion in municipal securities).  The $26.7 billion in managed 
assets included over $7.5 billion held by open-end mutual funds 
managed by the Adviser (approximately 16% of the mutual fund 
assets were held by clients of the Adviser).  These mutual funds 
were owned by over 227,000 shareholders.  The $7.5 billion in 
mutual fund assets included over $743 million in over 47,000 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, 1996, the Adviser 
employed 19 research analysts and 55 account managers.  The 
average investment-related experience of these individuals was 22 
years.

     Stein Roe Counselor [SERVICE MARK] and Stein Roe Personal 
Counselor [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 Fund 
and other mutual funds managed by the Adviser.  Shareholders 
participating in Stein Roe Counselor [SERVICE MARK] are free to 
self direct their investments while considering the Adviser's 
recommendations; shareholders participating in Stein Roe Personal 
Counselor [SERVICE MARK] enjoy the added benefit of having the 
Adviser implement portfolio recommendations automatically for a 
fee of 1% or less, depending on the size of their portfolios.  In 
addition to reviewing shareholders' 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, 
administrative agreement, management agreement, fees, expense 
limitation, and transfer agency services under Fee Table and 
Management of the Fund in the Prospectus, which is incorporated 
herein by reference.

     The Adviser 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 the Adviser, 
including but not limited to printing and postage charges and 
securities registration and custodian fees and expenses incidental 
to its organization.

     The administrative agreement 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, 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 the Adviser shall not be required to 
reimburse the Fund an amount in excess of the management fee from 
the Fund for such year.  In addition, in the interest of further 
limiting expenses of the Fund, the Adviser may voluntarily waive 
its management fee and/or absorb certain expenses for the Fund, as 
described under Fee Table in the Prospectus.  Any such 
reimbursement will enhance the yield of the Fund.

     The management agreement also provides that neither the 
Adviser nor any of its directors, officers, stockholders (or 
partners of stockholders), agents, or employees shall have any 
liability to the Trust or any shareholder of the 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 their 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 the Adviser determines is fair and 
appropriate, unless otherwise specified by the Board of Trustees.

BOOKKEEPING AND ACCOUNTING AGREEMENT

     Pursuant to a separate agreement with the Trust, the Adviser 
receives a fee for performing certain bookkeeping and accounting 
services for the Fund.  For these services, the Adviser receives 
an annual fee of $25,000 per series plus .0025 of 1% of average 
net assets over $50 million.  During the fiscal years ended 
September 30, 1995 and 1996, the Adviser received aggregate fees 
of $192,479 and $265,246, respectively, from Investment Trust for 
services performed under this Agreement.

                              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.

     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 from the Fund a fee based 
on an annual rate of .22 of 1% of average net assets. The Trust 
believes the charges by SSI to the Fund 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 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 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 Fund, as well as by the Adviser 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.

                        PORTFOLIO TRANSACTIONS

     The Adviser places the orders for the purchase and sale of 
the 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, 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 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 the 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 Fund, 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 
may receive 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 will make 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 Fund), while the portion of the costs attributable 
to non-research usage of such products or services is paid by the 
Adviser in cash.  No person acting on behalf of the 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.  The Adviser may receive research in connection with 
selling concessions and designations in fixed price offerings in 
which the Fund participates.  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 Fund.

     With respect to the 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 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.  The Board of Trustees has been advised by 
counsel that recapture in foreign securities underwritings is 
permitted and has directed the Adviser to attempt to recapture to 
the extent consistent with best price and execution.

                 ADDITIONAL INCOME TAX CONSIDERATIONS

     The 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.

     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.

     Passive Foreign Investment Companies.  The Fund may purchase 
the securities of certain foreign investment funds or trusts 
called passive foreign investment companies ("PFICs").  In 
addition to bearing their proportionate share of the Fund's 
expenses (management fees and operating expenses), shareholders 
will also indirectly bear similar expenses of PFICs. Capital gains 
on the sale of PFIC holdings will be deemed to be ordinary income 
regardless of how long the Fund holds its investment.  In 
addition, the Fund may be subject to corporate income tax and an 
interest charge on certain dividends and capital gains earned from 
PFICs, regardless of whether such income and gains are distributed 
to shareholders.

     In accordance with tax regulations, the Fund intends to treat 
PFICs as sold on the last day of the Fund's fiscal year and 
recognize any gains for tax purposes at that time; losses will not 
be recognized.  Such gains will be considered ordinary income 
which the Fund will be required to distribute even though it has 
not sold the security and received cash to pay such distributions.

                      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.

                                                                n
Average Annual Total Return is computed as follows: ERV = P(1+T)

 Where:   P  =  a hypothetical initial payment of $1,000
          T  =  average annual total return
          n  =  number of years
        ERV  =  ending redeemable value of a hypothetical $1,000 
                payment made at the beginning of the period at the 
                end of the period (or fractional portion thereof).

     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
Associated Press
Barron's
Bloomberg
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Decoder
Gourmet
Individual Investor
Investment Adviser
Investment Dealers' Digest
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
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
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
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         (These indexes generally reflect the
ecognized indicators of general   performance of stocks traded in the
U.S. stock market results.)        indicated markets.)
EAFE Index                        Financial Times Actuaries World Index 
                                       (Ex-U.S.)
Morgan Stanley Capital            Morgan Stanley Capital International
  International World Index        Emerging Markets Global Index
(These indexes are widely recognized 
indicators of the international markets)      

     In addition, the Fund may compare performance to the indices 
indicated below:

Lipper International & Global Funds Average
Lipper General Equity Funds Average
Lipper Equity Funds Average
Lipper International Fund Index
(The Lipper averages are unweighted averages of total 
return performance as classified, calculated, and 
published by Lipper.)
Morningstar International Stock Average
Morningstar U.S. Diversified Average
Morningstar Equity Fund Average
Morningstar Hybrid Fund Average
Morningstar All Equity Funds Average
Morningstar General Equity Average*
*Includes Morningstar Aggressive Growth, Growth, Balanced, 
Equity Income, and Growth & Income Averages.

     The Lipper International Fund index reflects the net asset 
value weighted return of the ten largest international funds.

     The Lipper, and Morningstar averages are unweighted averages 
of total return performance of mutual funds as classified, 
calculated, and published by these independent services that 
monitor the performance of mutual funds.  The 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 a fund's risk score (which is a function 
of the fund's monthly returns less the 3-month T-bill return) from 
its load-adjusted total return score.  This numerical score is 
then translated into rating categories, with the top 10% labeled 
five star, the next 22.5% labeled four star, the next 35% labeled 
three star, the next 22.5% labeled two star, and the bottom 10% 
one star.  A high rating reflects either above-average returns or 
below-average risk, or both.

     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.)

              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 Stein Roe Counselor 
[SERVICE MARK] and the Stein Roe Personal Counselor [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 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.

     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.

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.

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.
                   _______________________



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission