THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 38 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [X]
STEIN ROE INVESTMENT TRUST
One South Wacker Drive, Chicago, Illinois 60606
Telephone Number: 1-800-338-2550
Jilaine Hummel Bauer Cameron S. Avery
Executive Vice-President Bell, Boyd & Lloyd
& Secretary Three First National Plaza
Stein Roe Investment Trust Suite 3200
One South Wacker Drive 70 W. Madison Street
Chicago, Illinois 60606 Chicago, Illinois 60602
(Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[X] on April 30, 1997 pursuant to paragraph (a)(2) of rule 485
Registrant hereby elects to register pursuant to Rule 24f-2
under the Securities Act of 1933 an indefinite number of its
shares of beneficial interest, without par value, of the
series of shares designated Stein Roe Growth Opportunities
Fund. Registrant has previously elected to register pursuant
to Rule 24f-2 an indefinite number of shares of beneficial
interest of the following series: Stein Roe Growth & Income
Fund, Stein Roe Balanced Fund, Stein Roe Growth Stock Fund,
Stein Roe Capital Opportunities Fund, Stein Roe Special Fund,
Stein Roe International Fund, Stein Roe Young Investor Fund,
Stein Roe Special Venture Fund, and Stein Roe Emerging
Markets Fund. The Rule 24f-2 Notice for the fiscal year
ended September 30, 1996 was filed on November 14, 1996.
<PAGE>
STEIN ROE INVESTMENT TRUST
CROSS REFERENCE SHEET
Item
No. Caption
Part A
1 Front cover
2 Fee Table; Summary
3 (a) Financial Highlights
(b) Financial Highlights
(c) Investment Return
(d) Financial Highlights
4 Organization and Description of Shares; The Fund[s];
Investment Policies; Investment Restrictions; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser,
Fees and Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses; Financial Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see Statement of
Additional Information--General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary
(f) Distributions and Income Taxes; Shareholder Services
(g) Distributions and Income Taxes
(h) Special Considerations Regarding Master Fund/Feeder Fund
Structure
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares;
Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares
(c) How to Redeem Shares
(d) How to Redeem Shares
9 Inapplicable
Part B
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and Strategies;
Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Public Accountants
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to Purchase
Shares, How to Redeem Shares, Shareholder Services
(b) Purchases and Redemptions; see prospectus: Net Asset Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio Investments
and Strategies--Taxation of Options and Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22(a) Inapplicable
(b) Investment Performance
23 Financial Statements
Part C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
The Prospectuses and Statements of Additional Information
relating to Stein Roe Growth & Income Fund, Stein Roe
International Fund, Stein Roe Young Investor Fund, Stein Roe
Special Venture Fund, Stein Roe Emerging Markets Fund, Stein Roe
Balanced Fund, Stein Roe Growth Stock Fund, Stein Roe Capital
Opportunities Fund and Stein Roe Special Fund, each a series of
Stein Roe Investment Trust, are not affected by the filing of
this post-effective amendment No. 38.
<PAGE> 1
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 10, 1997
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET
BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
___________________________
STEIN ROE GROWTH OPPORTUNITIES FUND seeks long-term capital
appreciation. Growth Opportunities Fund invests in a diversified
portfolio of common stocks of large, mid-sized, and small
companies that, in the view of the Adviser, have the ability to
generate and sustain earnings growth at an above-average rate.
The distributor of Growth Opportunities Fund, Liberty Securities
Corporation, is soliciting subscriptions for Fund shares during an
initial offering period currently scheduled from ________, 1997 to
________, 1997 (the "Subscription Period"). The subscription
price will be the Fund's initial net asset value of $10.00 per
share. Orders to purchase shares of the Fund received during the
Subscription Period will be accepted when the Fund commences
operations on ________, 1997. Checks accompanying orders received
during the Subscription Period will be held uninvested until
__________, 1997.
Growth Opportunities Fund is a "no-load" fund. There are no sales
or redemption charges, and Growth Opportunities Fund has no 12b-1
plan. Growth Opportunities Fund is series of Stein Roe Investment
Trust. The Trust is a diversified open-end management investment
company.
This prospectus contains information you should know before
investing in Growth Opportunities Fund. Please read it carefully
and retain it for future reference.
A Statement of Additional Information dated ________, 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. You may
obtain 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 is _______, 1997.
<PAGE> 2
TABLE OF CONTENTS
Page
Summary .................................2
Fee Table ..............................4
The Fund ................................5
Investment Policies .....................5
Portfolio Investments and Strategies ....6
Investment Restrictions .................9
Risks and Investment Considerations.....10
How to Purchase Shares .................11
By Check .............................11
By Wire...............................12
By Electronic Transfer ...............12
By Exchange ..........................12
Conditions of Purchase ...............12
Purchases Through Third Parties.......13
Purchase Price and Effective Date ....13
How to Redeem Shares ...................13
By Written Request ...................13
By Exchange ..........................14
Special Redemption Privileges ........14
General Redemption Policies ..........15
Shareholder Services ...................17
Net Asset Value ........................18
Distributions and Income Taxes .........19
Investment Return ......................20
Management..............................21
Organization and Description of Shares..22
Certificate of Authorization............24
SUMMARY
Stein Roe Growth Opportunities Fund ("Growth Opportunities Fund")
is a series of the Stein Roe Investment Trust, an open-end
diversified management investment company. Growth Opportunities
Fund is a "no-load" fund. There are no sales or redemption
charges. (See The Fund and Organization and Description of
Shares.) This prospectus is not a solicitation in any
jurisdiction in which shares of Growth Opportunities Fund are not
qualified for sale.
INVESTMENT OBJECTIVES AND POLICIES. GROWTH OPPORTUNITIES FUND
seeks long-term capital appreciation. Growth Opportunities Fund
invests in a diversified portfolio of common stocks of large, mid-
sized, and small companies that, in the view of the Adviser have
the ability to generate and sustain earnings growth at an above-
average rate. Growth Opportunities Fund's investments include
securities of both established companies that the Adviser believes
have appreciation potential and emerging companies. Investment in
established companies also tends to moderate the investment risks
associated with investments in emerging, generally smaller
companies. Growth Opportunities Fund invests a portion of its
assets in the securities of small and mid-sized companies. These
companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but may
also involve greater risks. Securities of smaller companies may
be subject to greater price volatility and tend to be less liquid
than securities of larger companies. Small companies, as compared
to larger companies, may have a shorter history of operations, may
not have as great an ability to raise additional capital, may have
a less diversified product line making them more susceptible to
market pressure, and may have a smaller public market for their
shares. In addition, many smaller companies are less well known
to the investing public and may not be as widely followed by the
investment community.
Growth Opportunities Fund seeks to make investment decisions based
on a long-term growth philosophy; that is, it generally makes
investment decisions on the basis of an individual company's
ability to generate and sustain earnings growth over the long-
term, rather than on the basis of the near-term growth prospects
of a particular company or economic sector.
There can be no guarantee that Growth Opportunities Fund will
achieve its investment objective. Please see Investment Policies
and Portfolio Investments and Strategies for further information.
INVESTMENT RISKS. Growth Opportunities Fund is designed for long-
term investors who can accept the fluctuations in portfolio value
and other risks associated with seeking long-term capital
appreciation through investment in a diversified portfolio of
common stocks of large, mid-sized, and small companies.
Since Growth Opportunities Fund may invest in foreign securities,
investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities
involves certain considerations involving both risks and
opportunities not typically associated with investing in U.S.
securities. Such risks include fluctuations in foreign currency
exchange rates, possible imposition of exchange controls, less
complete financial information, political instability, less
liquidity, and greater price volatility.
Please see Investment Policies, Portfolio Investments and
Strategies, and Risks and Investment Considerations for further
information.
PURCHASES. The minimum initial investment for Growth
Opportunities 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 Growth Opportunities
Fund shares, including the special redemption privileges, see How
to Redeem Shares.
NET ASSET VALUE. The purchase and redemption price of Growth
Opportunities Fund's shares is its net asset value per share. The
net asset value is determined as of the close of trading on the
New York Stock Exchange. (For more detailed information, see Net
Asset Value.)
DISTRIBUTIONS. Dividends are normally declared and paid annually.
Distributions will be reinvested in additional Growth
Opportunities Fund shares unless you elect to have them paid in
cash, deposited by electronic transfer into your bank account, or
invested in shares of another Stein Roe Fund. (See Distributions
and Income Taxes and Shareholder Services.)
ADVISER AND FEES. Stein Roe & Farnham Incorporated (the
"Adviser") provides administrative, investment management, and
bookkeeping and accounting services to Growth Opportunities Fund.
For a description of the Adviser and its fees, see Management.
If you have any additional questions about Growth Opportunities
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*..................................None
Exchange Fees.....................................None
ANNUAL FUND OPERATING EXPENSES (after fee
reimbursement; as a percentage of average net
assets)
Management and Administrative Fees (after fee
reimbursement)..................................0.75%
12b-1 Fees........................................None
Other Expenses ...................................0.50%
Total Fund Operating Expenses (after fee -----
reimbursement)..................................1.25%
=====
___________________
* There is a $7.00 charge for wiring redemption proceeds to your
bank.
EXAMPLE. You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return; and (2) redemption at
the end of each time period:
1 year 3 years
------ -------
$13 $40
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 Growth Opportunities Fund. Because
Growth Opportunities Fund has no operating history, the
information in the table is based upon an estimate of expenses,
assuming net assets of $50 million. The figures assume that the
percentage amounts listed under Annual Fund Operating Expenses
remain the same during each of the periods and that all income
dividends and capital gain distributions are reinvested in
additional shares.
From time to time, the Adviser may voluntarily undertake to
reimburse Growth Opportunities Fund for a portion of its operating
expenses. The Adviser has undertaken to reimburse Growth
Opportunities Fund for its operating expenses to the extent such
expenses exceed 1.25% of its annual average net assets. This
commitment expires on January 31, 1998, subject to earlier
termination by the Adviser on 30 days' notice to Growth
Opportunities Fund. Absent such reimbursement, the Management Fee
and Administrative Fee, Other Expenses, and Total Operating
Expenses would be 0.90%, 0.70% and 1.60%, respectively. Any such
reimbursement will lower Growth Opportunities Fund's overall
expense ratio and increase its overall return to investors. (Also
see Management--Fees and Expenses.)
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 Growth Opportunities
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
The mutual fund offered by this prospectus is STEIN ROE GROWTH
OPPORTUNITIES FUND ("Growth Opportunities Fund"). Growth
Opportunities 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. Growth Opportunities Fund does not impose
commissions or charges when shares are purchased or redeemed.
Growth Opportunities Fund is a series of the Stein Roe Investment
Trust ("Investment 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
management, administrative, and bookkeeping and accounting
services to Growth Opportunities Fund. The Adviser also manages
and provides investment advisory services for several other mutual
funds with different investment objectives, including other equity
funds, international funds, taxable and tax-exempt bond funds, and
money market funds. To obtain prospectuses and other information
on any of those mutual funds, please call 800-338-2550.
INVESTMENT POLICIES
The investment objective of Growth Opportunities Fund is long-term
capital appreciation. Growth Opportunities Fund attempts to
achieve its objective by investing in a diversified portfolio of
common stocks of large, mid-sized, and small companies that, in
the view of the Adviser, have the ability to generate and sustain
earnings growth at an above-average rate.
Growth Opportunities Fund's investments include securities of both
established companies that the Adviser believes have appreciation
potential and emerging companies. Investment in established
companies also tends to moderate the investment risks associated
with investments in emerging, generally smaller, companies.
Growth Opportunities Fund invests a portion of its assets in the
securities of small and mid-sized companies. These companies may
present greater opportunities for capital appreciation because of
high potential earnings growth, but may also involve greater
risks. Securities of smaller companies may be subject to greater
price volatility and tend to be less liquid than securities of
larger companies. Small companies, as compared to larger
companies, may have a shorter history of operations, may not have
as great an ability to raise additional capital, may have a less
diversified product line making them more susceptible to market
pressure, and may have a smaller public market for their shares.
In addition, many smaller companies are less well known to the
investing public and may not be as widely followed by the
investment community. Although it invests primarily in common
stocks, Growth Opportunities Fund may invest in all types of
equity securities, including preferred stocks and securities
convertible into common stocks.
Growth Opportunities Fund seeks to make investment decisions based
on a long-term growth philosophy; that is, Growth Opportunities
Fund generally makes investment decisions on the basis of an
individual company's ability to generate and sustain earnings
growth over the long-term, rather than on the basis of the near-
term growth prospects of a particular company or economic sector.
Further information on portfolio investments and strategies may be
found under Portfolio Investments and Strategies in this
prospectus and in the Statement of Additional Information.
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES. In pursuing its investment objective, Growth
Opportunities Fund may invest in debt securities of corporate and
governmental issuers. Investments in unrated debt securities are
limited to those deemed to be of comparable quality by the
Adviser. Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held by Growth
Opportunities Fund is lost or reduced below investment grade, it
is not required to dispose of the security--the Adviser will,
however, consider that fact in determining whether it should
continue to hold the security. Growth Opportunities Fund may
invest up to 35% of its net assets in debt securities, but does
not expect to invest more than 5% of its net assets in debt
securities that are rated below investment grade.
The risks inherent in debt securities depend primarily on the term
and quality of the obligations in the investment portfolio 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. Securities that are rated below investment grade are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation, and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When the Adviser determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, Growth Opportunities Fund may invest without limitation
in high-quality fixed income securities or hold assets in cash or
cash equivalents.
CONVERTIBLE SECURITIES. By investing in convertible securities,
Growth Opportunities Fund obtains the right to benefit from the
capital appreciation potential in the underlying stock upon
exercise of the conversion right, while earning higher current
income than would be available if the stock were purchased
directly. In determining whether to purchase a convertible, the
Adviser will consider substantially the same criteria that would
be considered in purchasing the underlying stock. Although
convertible securities purchased by Growth Opportunities Fund are
frequently rated investment grade, it 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:
- - Tend to be more sensitive to interest rate and economic changes;
- - May be obligations of issuers who are less creditworthy than
issuers of higher quality convertible securities;
- - May be more thinly traded due to the fact that such securities
are 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 than other factors in the purchase of
such securities.
FOREIGN SECURITIES. Growth Opportunities Fund may invest in
foreign securities. Other than American Depositary Receipts
(ADRs), foreign debt securities denominated in U.S. dollars, and
securities guaranteed by a U.S. person, Growth Opportunities Fund
is limited to investing no more than 25% of its total assets in
foreign securities. (See Risks and Investment Considerations.)
Growth Opportunities Fund may invest in sponsored or unsponsored
ADRs. In addition to, or in lieu of, such direct investment,
Growth Opportunities Fund may construct a synthetic foreign debt
position by (a) purchasing a debt instrument denominated in one
currency, generally U.S. dollars; and (b) concurrently entering
into a forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and
at a specified rate of exchange. Because of the availability of a
variety of highly liquid U.S. dollar debt instruments, a synthetic
foreign debt position utilizing such U.S. dollar instruments may
offer greater liquidity than direct investment in foreign currency
debt instruments. In connection with the purchase of foreign
securities, Growth Opportunities Fund may contract to purchase an
amount of foreign currency sufficient to pay the purchase price of
the securities at the settlement date. Such a contract involves
the risk that the value of the foreign currency may decline
relative to the value of the dollar prior to the settlement date--
this risk is in addition to the risk that the value of the foreign
security purchased may decline. Growth Opportunities Fund also
may enter into foreign currency contracts as a hedging technique
to limit or reduce exposure to currency fluctuations. In
addition, Growth Opportunities Fund may use options and futures
contracts, as described below, to limit or reduce exposure to
currency fluctuations.
LENDING PORTFOLIO SECURITIES; WHEN-ISSUED AND DELAYED-DELIVERY
SECURITIES. Growth Opportunities Fund may make loans of its
portfolio securities to broker-dealers and banks subject to
certain restrictions described in the Statement of Additional
Information. Growth Opportunities 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
Growth Opportunities 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. Growth
Opportunities Fund will make such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if it is deemed advisable for
investment reasons.
PORTFOLIO TURNOVER. Although Growth Opportunities 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, and the portfolio turnover rate may vary significantly from
year to year, but is not expected to exceed 100% under normal
market conditions. At times, Growth Opportunities Fund may invest
for short-term capital appreciation. Flexibility of investment
and emphasis on capital appreciation may involve greater portfolio
turnover than that of mutual funds that have the objectives of
income or maintenance of a balanced investment position. A high
rate of portfolio turnover may result in increased transaction
expenses and the realization of capital gains and losses. (See
Financial Highlights and Distributions and Income Taxes.) Growth
Opportunities Fund is not intended to be an income-producing
investment, although it may produce varying amounts of income.
DERIVATIVES. Consistent with its objective, Growth Opportunities
Fund may invest in a broad array of financial instruments and
securities, including conventional exchange-traded and non-
exchange-traded options, futures contracts, futures options,
securities collateralized by underlying pools of mortgages or
other receivables, floating rate instruments, and other
instruments that securitize assets of various types
("Derivatives"). In each case, the value of the instrument or
security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate, or a
currency. Growth Opportunities Fund does not expect to invest
more than 5% of its net assets in any type of Derivative except
for options, futures contracts, and futures options.
Derivatives are most often used to manage investment risk or to
create an investment position indirectly because they are more
efficient or less costly than direct investment. They also may be
used in an effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's ability
to correctly predict changes in the levels and directions of
movements in currency exchange rates, security prices, interest
rates and other market factors affecting the Derivative itself or
the value of the underlying asset or benchmark. In addition,
correlations in the performance of an underlying asset to a
Derivative may not be well established. Finally, privately
negotiated and over-the-counter Derivatives may not be as well
regulated and may be less marketable than exchange-traded
Derivatives. For additional information on Derivatives, please
refer to the Statement of Additional Information.
In seeking to achieve its desired investment objective, provide
additional revenue, or to hedge against changes in security
prices, interest rates or currency fluctuation, Growth
Opportunities Fund may: (1) purchase and write both call options
and put options on securities, indexes and foreign currencies; (2)
enter into interest rate, index and foreign currency futures
contracts; (3) write options on such futures contracts; and (4)
purchase other types of forward or investment contracts linked to
individual securities, indexes or other benchmarks. Growth
Opportunities Fund may write a call or put option only if the
option is covered. As the writer of a covered call option, Growth
Opportunities Fund foregoes, during the option's life, the
opportunity to profit from increases in market value of the
security covering the call option above the sum of the premium and
the exercise price of the call. There can be no assurance that a
liquid market will exist when Growth Opportunities Fund seeks to
close out a position. In addition, because futures positions may
require low margin deposits, the use of futures contracts involves
a high degree of leverage and may result in losses in excess of
the amount of the margin deposit.
SHORT SALES AGAINST THE BOX. Growth Opportunities Fund may sell
short securities it owns or has the right to acquire without
further consideration, a technique called selling short "against
the box." Short sales against the box may protect Growth
Opportunities Fund against the risk of losses in the value of its
portfolio securities because any unrealized losses with respect to
such securities should be wholly or partly offset by a
corresponding gain in the short position. However, any potential
gains in such securities should be wholly or partially offset by a
corresponding loss in the short position. Short sales against the
box may be used to lock in a profit on a security when, for tax
reasons or otherwise, the Adviser does not want to sell the
security. For a more complete explanation, please refer to the
Statement of Additional Information.
INVESTMENT RESTRICTIONS
Growth Opportunities Fund will not invest more than 5% of its
assets in the securities of any one issuer. This restriction
applies only to 75% of an investment portfolio, but does not apply
to securities of the U.S. Government or repurchase agreements /1/
for such securities, and would not prevent Growth Opportunities
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
Growth Opportunities 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, Growth
Opportunities Fund could experience both losses and delays in
liquidating its collateral.
- ---------------
Growth Opportunities Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer. It may, however,
invest all of its assets in shares of another investment company
having the identical investment objective.
Growth Opportunities Fund may not make loans except that it may
(1) purchase money market instruments and enter into repurchase
agreements; (2) acquire publicly-distributed or privately-placed
debt securities; (3) lend its portfolio securities under certain
conditions; and (4) participate in an interfund lending program
with other Stein Roe Funds and Portfolios. Growth Opportunities
Fund may not borrow money, except for non-leveraging, temporary,
or emergency purposes or in connection with participation in the
interfund lending program. Neither aggregate borrowings
(including reverse repurchase agreements) nor aggregate loans at
any one time may exceed 33 1/3% of the value of total assets.
Additional securities may not be purchased when borrowings, less
proceeds receivable from sales of portfolio securities, exceed
5% of total assets.
Growth Opportunities Fund may invest in repurchase agreements,
provided that neither will invest more than 15% of its net assets
in illiquid securities, including repurchase agreements maturing
in more than seven days.
The policies summarized in the first three paragraphs under 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" as defined in the Investment
Company Act of 1940. The investment objective of Growth
Opportunities Fund is non-fundamental and, as such, may be changed
by the Board of Trustees without shareholder approval, subject,
however, to at least 30 days' advance written notice to
shareholders. All of the investment restrictions are set forth in
the Statement of Additional Information.
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Growth Opportunities
Fund is designed for long-term investors who can accept the
fluctuations in portfolio value and other risks associated with
seeking long-term capital appreciation through investment in a
diversified portfolio of common stocks of large, mid-sized and
small companies. Of course, there can be no guarantee that Growth
Opportunities Fund will achieve its objective.
Securities of small and medium-sized companies may be subject to
greater price volatility and tend to be less liquid than
securities of larger companies. Small companies, as compared to
larger companies, may have a shorter history of operations, may
not have as great an ability to raise additional capital, may have
a less diversified product line making them susceptible to market
pressure, and may have a smaller public market for their shares.
In addition, many smaller companies are less well known to the
investing public and may not be as widely followed by the
investment community.
Debt securities rated in the fourth highest grade may have some
speculative characteristics, and changes in economic conditions or
other circumstances may lead to a weakened capacity of the issuers
of such securities to make principal and interest payments.
Securities rated below investment grade may possess speculative
characteristics, and changes in economic conditions are more
likely to affect the issuer's capacity to pay interest or repay
principal.
Growth Opportunities Fund generally allocates its investments
among a number of different industries rather than concentrating
in a particular industry or group of industries. Growth
Opportunities Fund, however, will not invest more than 25% of the
total value of its assets (at the time of investment) in the
securities of companies in any one industry. (See Investment
Policies.)
Investment in foreign securities may represent a greater degree of
risk (including risk related to exchange rate fluctuations, tax
provisions, exchange and currency controls, and expropriation of
assets) than investment in securities of domestic issuers. Other
risks of foreign investing include less complete financial
information on issuers; less market liquidity; more market
volatility; less developed and regulated markets; and greater
political instability. In addition, various restrictions by
foreign governments on investments by non-residents may apply,
including imposition of exchange controls and withholding taxes on
dividends, and seizure or nationalization of investments owned by
non-residents. Foreign investments also tend to involve higher
transaction and custody costs.
MASTER FUND/FEEDER FUND OPTION. Rather than invest in securities
directly, Growth Opportunities 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 Growth Opportunities 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 Growth Opportunities Fund.
Shareholders of Growth Opportunities 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 Growth Opportunities Fund and its shareholders.
HOW TO PURCHASE SHARES
You may purchase shares of Growth Opportunities 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 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] and 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 Growth
Opportunities 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] or 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
Investment 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 Growth
Opportunities 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 Growth Opportunities Fund at the 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
Growth Opportunities Fund nor Investment 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
Attention: SteinRoe Services Inc.
Fund No. ___; Stein Roe Growth Opportunities 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. ___; Stein Roe Growth Opportunities Fund
Account of (exact name(s) in registration)
Counselor Account No. ________
BY ELECTRONIC TRANSFER. You also may 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"). (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 Growth Opportunities 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 Growth
Opportunities Fund must be accepted by an authorized officer of
Investment 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. Investment Trust reserves the right
not to accept any purchase order that it determines not to be in
the best interest of Investment Trust or of Growth Opportunities
Fund's shareholders. Investment Trust also reserves the right to
waive or lower its investment minimums for any reason. Investment
Trust does not issue certificates for shares.
PURCHASES THROUGH THIRD PARTIES. You may purchase (or redeem)
shares through broker-dealers, banks, or other intermediaries
("Intermediaries"). These Intermediaries may charge for their
services or place limitations on the extent to which you may use
the services offered by Investment Trust. There are no charges or
limitations imposed by Investment Trust, other than those
described in this prospectus, if shares are purchased (or
redeemed) directly from Investment Trust.
Some Intermediaries that maintain nominee accounts with Growth
Opportunities 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 Growth Opportunities Fund' transfer
agent share in the expense of these fees, and the Adviser pays all
sales and promotional expenses.
PURCHASE PRICE AND EFFECTIVE DATE. Each purchase of Growth
Opportunities Fund's shares is made at its 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 Growth Opportunities 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 Growth Opportunities Fund receives the
electronic transfer from your bank. A Special Electronic Transfer
Investment instruction received by telephone on a business day
before 3:00 p.m., central time, is effective on the next business
day.
Each purchase of Growth Opportunities Fund shares through an
Intermediary that is an authorized agent of Investment 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
BY WRITTEN REQUEST. You may redeem all or a portion of your
shares of Growth Opportunities 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] Program 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 either the written redemption request must
be guaranteed (a signature guarantee is not a notarization,
but is a widely accepted way to protect you and Growth
Opportunities 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 Investment
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 Growth
Opportunities 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 Growth
Opportunities 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. 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 Privilege, 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 GROWTH OPPORTUNITIES FUND MAY
REFUSE REQUESTS FOR TELEPHONE EXCHANGES IN EXCESS OF FOUR ROUND-
TRIPS (A ROUND-TRIP BEING THE EXCHANGE OUT OF GROWTH OPPORTUNITIES
FUND INTO ANOTHER STEIN ROE FUND, AND THEN BACK TO GROWTH
OPPORTUNITIES FUND). In addition, Investment Trust's general
redemption policies apply to redemptions of shares by Telephone
Exchange. (See General Redemption Policies.)
Investment 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. Investment
Trust believes that use of the Telephone Exchange Privilege by
investors utilizing market-timing strategies adversely affects
Growth Opportunities Fund. THEREFORE, INVESTMENT TRUST GENERALLY
WILL NOT HONOR REQUESTS FOR TELEPHONE EXCHANGES BY SHAREHOLDERS
IDENTIFIED BY INVESTMENT TRUST AS "MARKET-TIMERS." Moreover,
Investment 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 Growth Opportunities Fund, Investment 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 Growth
Opportunities Fund. IF INVESTMENT 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 Growth
Opportunities 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 shares from your account ($1,000 minimum;
$100,000 maximum) 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. You may also request electronic transfers 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. Investment 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 to such redemptions. (See
Shareholder Services--Tax-Sheltered Retirement Plans.) Investment
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 Growth Opportunities
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.
Investment Trust will generally mail payment for shares redeemed
within seven days after proper instructions are received.
However, Investment 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, Investment 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, Investment Trust
recommends that your purchase be made by federal funds wire
through your bank.
Generally, you may not use any Special Redemption Privilege to
redeem shares purchased by check (other than certified or
cashiers' checks) or electronic transfer until 15 days after their
date of purchase.
Investment Trust reserves the right to suspend, limit, modify, or
terminate, at any time without prior notice, any Privilege or its
use in any manner by any person or class.
Neither Investment 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. Growth Opportunities
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
Growth Opportunities 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 Growth Opportunities Fund immediately
if there is a problem. If Growth Opportunities 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.
Investment 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 Growth Opportunities 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 for the purchase of shares, 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 Growth Opportunities 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 Stein Roe Fund, or through an automatic
investment plan will be confirmed to you quarterly. In addition,
Investment Trust will send you semiannual and annual reports
showing portfolio holdings and will provide you annually with tax
information.
FUNDS-ON-CALL [REGISTERED MARK] AUTOMATED TELEPHONE SERVICE. To
access Stein Roe Funds-on-Call [registered mark], just call 800-
338-2550 on any touch-tone telephone and follow the recorded
instructions. Funds-on-Call [registered mark] provides yields,
prices, latest dividends, account balances, last transaction, and
other information 24 hours a day, seven days a week. You also may
use Funds-on-Call [registered mark] 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 Stein Roe
Counselor [SERVICE MARK] and Stein Roe Personal Counselor [SERVICE
MARK] programs are professional investment advisory services
available to shareholders. These programs are designed to provide
investment guidance in helping investors to select a portfolio of
Stein Roe Funds. The Stein Roe Personal Counselor [SERVICE MARK]
program, which automatically adjusts client portfolios among the
Stein Roe Funds, has a fee of up to 1% of assets.
TAX-SHELTERED RETIREMENT PLANS. Booklets describing the following
programs and special forms necessary for establishing them are
available on request. You may use all of the 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 Investment Trust
for additional information and forms.
Dividend Purchase Option--to diversify your Fund investments by
having distributions from one Stein Roe 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; $100,000 maximum).
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.
NET ASSET VALUE
The purchase and redemption price of Growth Opportunities Fund's
shares is its net asset value per share. The net asset value of a
share of Growth Opportunities 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 its 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 Growth Opportunities Fund should be determined on
any such day, in which case the determination will be made at 3:00
p.m., central time.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if
there are no sales that day, at the latest bid quotation. Each
over-the-counter security for which the last sale price on the day
of valuation is available from Nasdaq is valued at that price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Long-term straight-debt obligations and securities convertible
into stocks are valued at a fair value using a procedure
determined in good faith by the Board of Trustees. Pricing
services approved by the Board provide valuations (some of which
may be "readily available market quotations"). These valuations
are reviewed by the Adviser. If the Adviser believes that a
valuation received from the service does not represent a fair
value, it values the obligation using a method that the Board
believes represents fair value. The Board may approve the use of
other pricing services and any pricing service used may employ
electronic data processing techniques, including a so-called
"matrix" system, to determine valuations. Other assets and
securities are valued by a method that the Board believes
represents fair value.
DISTRIBUTIONS AND INCOME TAXES
DISTRIBUTIONS. Income dividends are normally declared and paid
annually. Growth Opportunities Fund intends to distribute by the
end of each calendar year at least 98% of any net capital gains
realized from the sale of securities during the twelve-month
period ended October 31 in that year. Therefore, an additional
dividend may be declared near year end. Growth Opportunities 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. Investment
Trust reserves the right to reinvest the proceeds and future
distributions in additional Growth Opportunities Fund shares if
checks mailed to you for distributions are returned as
undeliverable or are not presented for payment within six months.
INCOME TAXES. Your distributions will be taxable to you, under
income tax law, whether received in cash or reinvested in
additional shares. For federal income tax purposes, any
distribution that is paid in January but was declared in the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to federal income tax at ordinary rates on
income dividends and distributions of net short-term capital gain.
Distributions of net long-term capital gain will be taxable to you
as long-term capital gain regardless of the length of time you
have held your shares.
You will be advised annually as to the source of distributions for
tax purposes. If you are not subject to tax on your income, you
will not be required to pay tax on these amounts.
If you 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, Growth Opportunities Fund is
treated as a separate taxable entity distinct from the other
series of Investment Trust.
This discussion of taxation is not intended to be a full
discussion of income tax laws and their effect on shareholders.
You may wish to consult your own tax advisor. The foregoing
information applies to U.S. shareholders. Foreign shareholders
should consult their tax advisors as to the tax consequences of
ownership of Fund shares.
BACKUP WITHHOLDING. Investment 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 Investment 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. Growth
Opportunities Fund must promptly pay to the IRS all amounts
withheld. Therefore, it is usually not possible for Growth
Opportunities 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 Growth Opportunities 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 Growth Opportunities Fund's total return with
alternative investments should consider differences between Growth
Opportunities 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 ADVISER. The Board of Trustees of Investment Trust
have overall management responsibility for Growth Opportunities
Fund, respectively. 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 managing Growth
Opportunities Fund, subject to the direction of the Board of
Trustees. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940. The Adviser was
organized in 1986 to succeed to the business of Stein Roe &
Farnham, a partnership that had advised and managed mutual funds
since 1949. The Adviser is a wholly owned subsidiary of Liberty
Financial Companies, Inc. ("Liberty Financial"), which in turn is
a majority owned indirect subsidiary of Liberty Mutual Insurance
Company.
PORTFOLIO MANAGERS. Gloria J. Santella and Eric S. Maddix have
been co-portfolio managers of Growth Opportunities Fund since its
inception in 1997. Ms. Santella has been portfolio manager of
Stein Roe Capital Opportunities Fund since October, 1994, and had
been its co-portfolio manager since March, 1991. Ms. Santella is
a senior vice president of the Adviser, having been associated
with the Adviser since 1979. She received her B.B.A. from Loyola
University (1979) and M.B.A. from the University of Chicago
(1983). Mr. Maddix has been co-portfolio manager of Stein Roe
Capital Opportunities Fund since 1996, and was previously its
associate portfolio manager. Mr. Maddix is a vice president of
the Adviser, which he joined in 1987. He received his B.B.A.
degree from Iowa State University (1986) and his M.B.A. from the
University of Chicago (1992). As of December 31, 1996, Ms.
Santella and Mr. Maddix co-managed $1.4 billion in mutual fund net
assets.
FEES AND EXPENSES. The Adviser is entitled to receive a monthly
administrative fee from Growth Opportunities Fund, computed and
accrued daily, at an annual rate of .15% of the first $500
million of average net assets, .125% of the next $500 million ,
.10% of the next $500 million, and .075% thereafter; and a monthly
management fee, computed and accrued daily, at an annual rate of
.75% of the first $500 million of average net assets, .70% of the
next $500 million, .65% of the next $500 million, and .60%
thereafter. However, as noted above under Fee Table, the Adviser
may voluntarily undertake to reimburse Growth Opportunities Fund
for a portion of its operating expenses.
The Adviser provides office space and executive and other
personnel to Investment Trust. All expenses of Growth
Opportunities 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 Growth Opportunities Fund.
Under a separate agreement with Investment Trust, the Adviser
provides certain accounting and bookkeeping services to Growth
Opportunities Fund, including computation of net asset value and
calculation of net income and capital gains and losses on
disposition of assets.
PORTFOLIO TRANSACTIONS. The Adviser places the orders for the
purchase and sale of 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 Investment Trust for the transfer of
shares, disbursement of dividends, and maintenance of shareholder
accounting records.
DISTRIBUTOR. The shares of Growth Opportunities Fund are offered
for sale through Liberty Securities Corporation ("Distributor")
without any sales commissions or charges to Growth Opportunities
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] Program,
who should send orders to SteinRoe Services Inc. at P.O. Box
803938, Chicago, Illinois 60680. All distribution and promotional
expenses are paid by the Adviser, including payments to the
Distributor for sales of Fund shares.
CUSTODIAN. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
Growth Opportunities 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
Investment 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 Investment
Trust's shareholders or its trustees. Investment Trust may issue
an unlimited number of shares, in one or more series as the Board
may authorize. Currently, ten series are authorized and
outstanding.
Under Massachusetts law, shareholders of a Massachusetts business
trust such as Investment 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, Investment
Trust or any particular series shall look only to the assets of
Investment Trust or of the respective series for payment under
such credit, contract or claim, and that the shareholders,
trustees and officers of Investment 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 Investment
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 Investment 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 Investment
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 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 Growth 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
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 10, 1997
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET
BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALES OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION,
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
____________________________
Statement of Additional Information Dated _________, 1997
STEIN ROE INVESTMENT TRUST
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
800-338-2550
STEIN ROE GROWTH OPPORTUNITIES FUND
This Statement of Additional Information is not a prospectus,
but provides additional information that should be read in
conjunction with Growth Opportunities Fund's prospectus dated
________, 1997, and any supplements thereto ("Prospectus"). The
Prospectus may be obtained at no charge by telephoning 800-338-
2550. The distributor of Growth Opportunities Fund, Liberty
Securities Corporation, is soliciting subscriptions for Fund
shares during an initial offering period currently scheduled from
____, 1997 to ____, 1997 (the "Subscription Period"). The
subscription price will be the Fund's initial net asset value of
$10.00 per share. Orders to purchase shares of the Fund received
during the Subscription Period will be accepted when the Fund
commences operations on ____, 1997. Checks accompanying orders
received during the Subscription Period will be held uninvested
until ____, 1997.
TABLE OF CONTENTS
Page
General Information and History...........................2
Investment Policies.......................................3
Portfolio Investments and Strategies......................3
Investment Restrictions..................................20
Additional Investment Considerations.....................23
Purchases and Redemptions................................23
Management...............................................24
Principal Shareholders...................................28
Investment Advisory Services.............................29
Distributor..............................................31
Transfer Agent...........................................31
Custodian................................................31
Independent Public Accountants...........................32
Portfolio Transactions...................................32
Additional Income Tax Considerations.....................34
Investment Performance...................................35
Appendix--Ratings........................................39
<PAGE> 2
GENERAL INFORMATION AND HISTORY
Stein Roe Growth Opportunities Fund ("Growth Opportunities
Fund") is a separate series of Stein Roe Investment Trust
("Investment Trust"). The name of Investment Trust was changed on
February 1, 1996, to separate "SteinRoe" into two words.
As of the date of this Statement of Additional Information,
ten series of Investment Trust are authorized and outstanding.
Each share of a series is entitled to participate pro rata in any
dividends and other distributions declared by the Board on shares
of that series, and all shares of a series have equal rights in
the event of liquidation of that series. Each whole share (or
fractional share) outstanding on the record date established in
accordance with the By-Laws shall be entitled to a number of votes
on any matter on which it is entitled to vote equal to the net
asset value of the share (or fractional share) in United States
dollars determined at the close of business on the record date
(for example, a share having a net asset value of $10.50 would be
entitled to 10.5 votes). As a business trust, Investment 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 Investment Trust's outstanding shares,
Investment 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
Investment Trust were subject to Section 16(c) of the Investment
Company Act of 1940. All shares of all series of Investment 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.
Stein Roe & Farnham Incorporated (the "Adviser") provides
investment management, administrative and accounting and
recordkeeping services to Growth Opportunities Fund.
SPECIAL CONSIDERATIONS REGARDING MASTER FUND/FEEDER FUND STRUCTURE
Rather than invest in securities directly, Growth
Opportunities Fund may in the future act as a "feeder fund;" that
is, it would seek to achieve its objective by pooling its assets
with assets of other investment companies and/or institutional
investors for investment in a "master fund" having the same
investment objective and substantially the same investment
policies and restrictions as the feeder funds. 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 the Fund would invest. Such investment would
be subject to determination by the Board of 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
The investment objective of Growth Opportunities Fund is
long-term capital appreciation. Growth Opportunities Fund
attempts to achieve its objective by investing in a diversified
portfolio of common stocks of large, mid-sized, and small
companies that, in the view of the Adviser, have the ability to
generate and sustain earnings growth at an above-average rate.
Growth Opportunities Fund's investments include securities of
both established companies that the Adviser believes have
appreciation potential and emerging companies. Investment in
established companies also tends to moderate the investment risks
associated with investing in emerging, generally smaller
companies. Growth Opportunities Fund invests a portion of its
assets in the securities of small and mid-sized companies. These
companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but may
also involve greater risks. Securities of smaller companies may
be subject to greater price volatility and tend to be less liquid
than securities of larger companies. Small companies, as compared
to larger companies, may have a shorter history of operations, may
not have as great an ability to raise additional capital, may have
a less diversified product line making them susceptible to market
pressure, and may have a smaller public market for their shares.
In addition, many smaller companies are less well known to the
investing public and may not be as widely followed by the
investment community. Although it invests primarily in common
stocks, Growth Opportunities Fund may invest in all types of
equity securities, including preferred stocks and securities
convertible into common stocks.
Growth Opportunities may employ the investment techniques
Portfolio Investments and Strategies. The investment objective is
a non-fundamental policy and may be changed by the Board of
Trustees without the approval of a "majority of the outstanding
voting securities." /1/
- ----------------
/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 or Portfolio are present or represented by proxy or
(ii) more than 50% of the outstanding shares of the Fund or
Portfolio.
- ---------------
PORTFOLIO INVESTMENTS AND STRATEGIES
DEBT SECURITIES
In pursuing its investment objective, Growth Opportunities
Fund may invest in debt securities of corporate and governmental
issuers. The risks inherent in debt securities depend primarily
on the term and quality of the obligations in its investment
portfolio as well as on market conditions. A decline in the
prevailing levels of interest rates generally increases the value
of debt securities, while an increase in rates usually reduces the
value of those securities.
Growth Opportunities Fund may invest up to 35% of their net
assets in debt securities, but do not expect to invest more than
5% of their net assets in debt securities that are rated below
investment grade.
Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held by Growth
Opportunities Fund is lost or reduced below investment grade,
Growth Opportunities Fund is not required to dispose of the
security, but the Adviser will consider that fact in determining
whether it should continue to hold the security.
Securities that are rated below investment grade are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When the Adviser determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, Growth Opportunities Fund may invest without limitation
in high-quality fixed income securities or hold assets in cash or
cash equivalents.
DERIVATIVES
Consistent with its objective, Growth Opportunities Fund may
invest in a broad array of financial instruments and securities,
including conventional exchange-traded and non-exchange-traded
options, futures contracts, futures options, securities
collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that
securitize assets of various types ("Derivatives"). In each case,
the value of the instrument or security is "derived" from the
performance of an underlying asset or a "benchmark" such as a
security index, an interest rate, or a currency.
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because it is more
efficient or less costly than direct investment that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on the Adviser's
ability to correctly predict changes in the levels and directions
of movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives.
Growth Opportunities Fund currently does not intend to invest
more than 5% of its net assets in any type of Derivative except
for options, futures contracts, and futures options. (See Options
and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by
Growth Opportunities Fund on purchase of such securities; in
addition, the proceeds of prepayment would likely be invested at
lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social, and market factors.
If mortgages are pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by Growth Opportunities Fund on purchase of the
CMO, and the proceeds of prepayment would likely be invested at
lower interest rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans that finance payments on the securities
themselves.
Floating rate instruments provide for periodic adjustments in
coupon interest rates that are automatically reset based on
changes in amount and direction of specified market interest
rates. In addition, the adjusted duration of some of these
instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%.
CONVERTIBLE SECURITIES
By investing in convertible securities, Growth Opportunities
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
Growth Opportunities Fund are frequently rated investment grade,
Growth Opportunities Fund may purchase unrated securities or
securities rated below investment grade if the securities meet the
Adviser's other investment criteria. Convertible securities rated
below investment grade (a) tend to be more sensitive to interest
rate and economic changes, (b) may be obligations of issuers who
are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such
securities being less well known to investors than either common
stock or conventional debt securities. As a result, the Adviser's
own investment research and analysis tends to be more important in
the purchase of such securities than other factors.
FOREIGN SECURITIES
Growth Opportunities Fund may invest up to 25% of its total
assets in foreign securities, which may entail a greater degree of
risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than investment in
securities of domestic issuers. For this purpose, foreign
securities do not include American Depositary Receipts (ADRs) or
securities guaranteed by a United States person. ADRs are
receipts typically issued by an American bank or trust company
evidencing ownership of the underlying securities. Growth
Opportunities Fund may invest in sponsored or unsponsored ADRs.
In the case of an unsponsored ADR, Growth Opportunities 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. Growth Opportunities Fund does not intend to invest more
than 5% of its net assets in unsponsored ADRs.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, Growth
Opportunities Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against these currencies.
For example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the
portfolio will rise even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the yen-denominated stock will fall.
(See discussion of transaction hedging and portfolio hedging under
Currency Exchange Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions in which are generally denominated in foreign
currencies, and utilization of forward foreign currency exchange
contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements.
Although Growth Opportunities Fund will try to invest in
companies and governments of countries having stable political
environments, there is the possibility of expropriation or
confiscatory taxation, seizure or nationalization of foreign bank
deposits or other assets, establishment of exchange controls, the
adoption of foreign government restrictions, or other adverse
political, social or diplomatic developments that could affect
investment in these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
Growth Opportunities Fund's foreign currency exchange
transactions are limited to transaction and portfolio hedging
involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward contracts
with respect to specific receivables or payables of Growth
Opportunities 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 Growth Opportunities 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. Growth Opportunities 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 Growth Opportunities 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,
Growth Opportunities 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
Growth Opportunities Fund. Growth Opportunities Fund may not
engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, Growth Opportunities 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 Growth
Opportunities 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 Growth
Opportunities 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 Growth
Opportunities Fund is obligated to deliver.
If Growth Opportunities Fund retains the portfolio security
and engages in an offsetting transaction, Growth Opportunities
Fund will incur a gain or a loss to the extent that there has been
movement in forward contract prices. If Growth Opportunities 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 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, Growth
Opportunities 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, Growth Opportunities 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 Growth Opportunities Fund of unrealized
profits or force it 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 Growth Opportunities Fund to hedge against a
devaluation that is so generally anticipated that it is not able
to contract to sell the currency at a price above the devaluation
level it anticipates. The cost to Growth Opportunities Fund of
engaging in currency exchange transactions varies with such
factors as the currency involved, the length of the contract
period, and prevailing market conditions. Since currency exchange
transactions are usually conducted on a principal basis, no fees
or commissions are involved.
LENDING OF PORTFOLIO SECURITIES
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, Growth Opportunities
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 Growth Opportunities Fund. Growth Opportunities 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. Growth Opportunities 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.
Growth Opportunities 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, Growth Opportunities
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
Growth Opportunities 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
Growth Opportunities 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.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE
AGREEMENTS
Growth Opportunities 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
Growth Opportunities 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. Growth
Opportunities 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. Growth Opportunities Fund does not currently
intend to have commitments to purchase when-issued securities in
excess of 5% of its net assets.
Growth Opportunities Fund may enter into reverse repurchase
agreements with banks and securities dealers. A reverse
repurchase agreement is a repurchase agreement in which Growth
Opportunities 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 Growth Opportunities 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
Growth Opportunities 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 Growth Opportunities Fund and held by
the custodian throughout the period of the obligation. The use of
these investment strategies, as well as borrowing under a line of
credit as described below, may increase net asset value
fluctuation.
SHORT SALES "AGAINST THE BOX"
Growth Opportunities 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. Growth Opportunities Fund may make short sales of
securities only if at all times when a short position is open
Growth Opportunities 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, Growth Opportunities Fund
does not deliver from its portfolio the securities sold.
Instead, Growth Opportunities 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 Growth Opportunities Fund, to the purchaser of such
securities. Growth Opportunities Fund is required to pay to the
broker-dealer the amount of any dividends paid on shares sold
short. Finally, to secure its obligation to deliver to such
broker-dealer the securities sold short, Growth Opportunities 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. Growth Opportunities Fund is said to have a
short position in the securities sold until it delivers to the
broker-dealer the securities sold. Growth Opportunities 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 Growth Opportunities 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 in
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 short relative to the amount Growth Opportunities
Fund owns, either directly or indirectly, and, in the case where
it 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 Growth Opportunities Fund replaces the borrowed
security, it will incur a loss and if the price declines during
this period, it 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 Growth Opportunities Fund
may have to pay in connection with such short sale. Certain
provisions of the Internal Revenue Code may limit the degree to
which Growth Opportunities Fund is able to enter into short sales.
There is no limitation on the amount of Growth Opportunities
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. It is currently expected that no
more than 5% of the total assets of Growth Opportunities Fund
would be involved in short sales against the box.
RULE 144A SECURITIES
Growth Opportunities 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 Growth Opportunities 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 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, Growth Opportunities Fund's holdings of illiquid
securities would be reviewed to determine what, if any, steps are
required to assure that Growth Opportunities 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 assets invested in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
Growth Opportunities 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 (n) under
Investment Restrictions.)
LINE OF CREDIT
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, Growth Opportunities
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, Growth Opportunities Fund has received
permission to lend money to, and borrow money from, other mutual
funds advised by the Adviser. Growth Opportunities Fund will
borrow through the program when borrowing is necessary and
appropriate and the costs are equal to or lower than the costs of
bank loans.
PORTFOLIO TURNOVER
Although Growth Opportunities 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. At
times, Growth Opportunities Fund may invest for short-term capital
appreciation. Portfolio turnover can occur for a number of
reasons such as general conditions in the securities markets, more
favorable investment opportunities in other securities, or other
factors relating to the desirability of holding or changing a
portfolio investment. Because of Growth Opportunities Fund's
flexibility of investment and emphasis on growth of capital, they
may have greater portfolio turnover than that of mutual funds that
have primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly
from year to year. A high rate of portfolio turnover in Growth
Opportunities Fund, if it should occur, would result in increased
transaction expenses, 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
Growth Opportunities 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. Growth
Opportunities 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.)
Growth Opportunities 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 Growth
Opportunities 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 Growth Opportunities Fund expires, it
realizes a capital gain equal to the premium received at the time
the option was written. If an option purchased by Growth
Opportunities Fund expires, it 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 Growth Opportunities Fund desires.
Growth Opportunities 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, it will realize a capital loss. If the premium received
from a closing sale transaction is more than the premium paid to
purchase the option, it will realize a capital gain or, if it is
less, it 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 Growth Opportunities Fund
is an asset, valued initially at the premium paid for the option.
The premium received for an option written by Growth Opportunities
Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at
the closing price on the exchange on which it is traded or, if not
traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given 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 Growth Opportunities Fund seeks to close out an option
position. If Growth Opportunities 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 Growth Opportunities 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, Growth Opportunities 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 Growth Opportunities Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, Growth
Opportunities Fund might be unable to exercise an option it has
purchased.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Growth Opportunities 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 make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
- --------------
Growth Opportunities 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. Growth Opportunities 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 its portfolio securities or
the price of the securities that it intends to purchase. Although
other techniques could be used to reduce or increase Growth
Opportunities Fund's exposure to stock price, interest rate and
currency fluctuations, it may be able to achieve its exposure more
effectively and perhaps at a lower cost by using futures contracts
and futures options.
Growth Opportunities 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, Growth Opportunities 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
Growth Opportunities Fund, it 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 Growth
Opportunities Fund upon termination of the contract, assuming all
contractual obligations have been satisfied. Growth Opportunities
Fund expects to earn interest income on its initial margin
deposits. A futures contract held by Growth Opportunities Fund is
valued daily at the official settlement price of the exchange on
which it is traded. Each day Growth Opportunities 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 Growth
Opportunities Fund does not represent a borrowing or loan but is
instead settlement between Growth Opportunities 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, Growth Opportunities Fund will
mark-to-market its open futures positions.
Growth Opportunities 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 it holds.
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, Growth Opportunities Fund
realizes a capital gain, or if it is more, it realizes a capital
loss. Conversely, if an offsetting sale price is more than the
original purchase price, Growth Opportunities Fund realizes a
capital gain, or if it is less, it realizes a capital loss. The
transaction costs must also be included in these calculations.
RISKS ASSOCIATED WITH FUTURES
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the investments 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 investment 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 Growth Opportunities Fund seeks to close out a futures
or futures option position. Growth Opportunities 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,
Growth Opportunities Fund may also use those investment vehicles,
provided the Board of Trustees determines that their use is
consistent with its investment objective.
Growth Opportunities Fund will not enter into a futures
contract or purchase an option thereon if, immediately thereafter,
the initial margin deposits for futures contracts it holds 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 its total assets.
- -----------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- -----------
When purchasing a futures contract or writing a put option on
a futures contract, Growth Opportunities 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,
Growth Opportunities 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.
Growth Opportunities 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
Growth Opportunities 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," Growth Opportunities 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 Growth Opportunities 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 Growth Opportunities 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 Growth Opportunities 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 Growth Opportunities 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 Growth Opportunities 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 Growth
Opportunities 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 Growth Opportunities 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 Growth
Opportunities Fund delivers securities under a futures contract,
it also realizes a capital gain or loss on those securities.
For federal income tax purposes, Growth Opportunities 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 Growth
Opportunities 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 Growth Opportunities Fund were to enter into a short index
future, short index futures option or short index option position
and its portfolio were deemed to "mimic" the performance of the
index underlying such contract, the option or futures contract
position and its stock positions would be deemed to be positions
in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for Growth Opportunities 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 its 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, Growth Opportunities Fund may be required to defer
the closing out of certain positions beyond the time when it would
otherwise be advantageous to do so.
Growth Opportunities 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 its
other investments, and shareholders are advised of the nature of
the payments.
INVESTMENT RESTRICTIONS
Growth Opportunities Fund operates under the following
investment restrictions. It 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 [Growth Opportunities Fund only] except that
all or substantially all of its assets 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 its assets 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 its assets 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 it 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, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Growth Opportunities Fund
only] except that all or substantially all of its assets may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies
as the Fund; or
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the outstanding
voting securities" as defined above. Growth Opportunities 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 Growth Opportunities 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. Growth Opportunities
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;
(g) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(h) invest more than 25% of its total assets (valued at time
of purchase) in securities of foreign issuers (other than
securities represented by American Depositary Receipts (ADRs) or
securities guaranteed by a U.S. person);
(i) 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;
(j) 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;
(k) 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;
(l) 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");
(m) invest more than 5% 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;
(n) 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; or
(o) 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.
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 high 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 Investment Trust of any such purchase order. The
state of Texas has asked that Investment Trust disclose in its
Statement of Additional Information, as a reminder to any such
bank or institution, that it must be registered as a securities
dealer in Texas.
Growth Opportunities 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 Growth Opportunities
Fund should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time.
Investment 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 Investment 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, Investment 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 Investment Trust to
redeem shares under certain other circumstances as may be
specified by the Board of Trustees.
Investment Trust reserves the right to suspend or postpone
redemptions of shares of Growth Opportunities Fund during any
period when: (a) trading on the NYSE is restricted, as determined
by the Securities and Exchange Commission, or the NYSE is closed
for other than customary weekend and holiday closings; (b) the
Securities and Exchange Commission has by order permitted such
suspension; or (c) an emergency, as determined by the Securities
and Exchange Commission, exists, making disposal of portfolio
securities or valuation of net assets not reasonably practicable.
MANAGEMENT
The following table sets forth certain information with
respect to the trustees and officers of Investment 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
<FN>
_________________________
(1) Trustee who is an "interested person" of Investment Trust and
of the Adviser, as defined in the Investment Company Act of
1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope and
results of the audit.
</TABLE>
Certain of the trustees and officers of Investment 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 Growth Opportunities 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 Investment Trust. In compensation
for their services to Investment Trust, trustees who are not
"interested persons" of Investment Trust or the Adviser are paid
an annual retainer of $8,000 (divided equally among the series of
Investment 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
Investment Trust for attending each meeting of the Nominating
Committee or Compensation Committee. Investment Trust has no
retirement or pension plan. The following table sets forth
compensation paid by Investment 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 SR&F 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,
Growth Opportunities Fund had only one shareholder, _____, which
held ___ shares.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides investment
management and administrative services to Growth Opportunities
Fund. The Adviser is a wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), Growth Opportunities 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 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, the
management agreement and administrative agreement, fees, expense
limitations, and transfer agency services under Fee Table and
Management in the Prospectus, which are incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to Growth Opportunities Fund, and bears any sales or
promotional expenses. Growth Opportunities 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.
Growth Opportunities Fund's administrative agreement provides
that the Adviser shall reimburse the Fund to the extent its that
total annual expenses (including fees paid to the Adviser, but
excluding taxes, interest, commissions and other normal charges
incident to the purchase and sale of portfolio securities, and
expenses of litigation to the extent permitted under applicable
state law) exceed the applicable limits prescribed by any state in
which shares of Growth Opportunities Fund are being offered for
sale to the public; provided, however, the Adviser is not required
to reimburse Growth Opportunities Fund an amount in excess of fees
paid by the Fund under that agreement for such year. In addition,
in the interest of further limiting expenses of Growth
Opportunities Fund, the Adviser may voluntarily waive its
management fee and/or absorb certain expenses, as described under
Fee Table in the Prospectus. Any such reimbursement will enhance
the yield of Growth Opportunities Fund.
Each management agreement 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 its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under the
agreement.
Any expenses that are attributable solely to the
organization, operation, or business of Growth Opportunities Fund
shall be paid solely out its assets. Any expenses incurred by
Investment 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 Investment Trust, the
Adviser receives a fee for performing certain bookkeeping and
accounting services for Growth Opportunities Fund. For these
services, the Adviser receives an annual fee of $25,000 per Fund
plus .0025 of 1% of average net assets over $50 million. 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 Growth Opportunities Fund are distributed by
Liberty Securities Corporation ("LSC") under a Distribution
Agreement as described under Management 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 Investment Trust,
and (ii) by a majority of the trustees who are not parties to the
Agreement or interested persons of any such party. Investment
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 Growth Opportunities 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 Growth Opportunities Fund. LSC offers the shares of
Growth Opportunities Fund only on a best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for Investment
Trust, as described under Management in the Prospectus. For
performing these services, SSI receives from Growth Opportunities
Fund a fee based on an annual rate of .22 of 1% of Growth
Opportunities Fund's average net assets. Investment Trust
believes the charges by SSI to Growth Opportunities 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
Investment Trust. It is responsible for holding all securities
and cash, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and
collecting income from investments, making all payments covering
expenses, 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.
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.
Each Board of Trustees reviews, at least annually, whether it
is in the best interest of Growth Opportunities Fund and its
shareholders to maintain assets in each of the countries in which
it invests with particular foreign sub-custodians in such
countries, pursuant to contracts between such respective foreign
sub-custodians and the Bank. The review includes an assessment of
the risks of holding 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, as well as by the Adviser and counsel. However, with
respect to foreign sub-custodians, there can be no assurance that
Growth Opportunities 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 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.
Growth Opportunities 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 Investment Trust are
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois
60603. The accountants audit and report on the annual financial
statements, review certain regulatory reports and the 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
Growth Opportunities 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, Growth Opportunities 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 Growth
Opportunities 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 Growth Opportunities 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
receives from brokers and dealers products or services that are
used both as investment research and for administrative,
marketing, or other non-research purposes. In such instances, the
Adviser makes a good faith effort to determine the relative
proportions of such products or services which may be considered
as investment research. The portion of the costs of such products
or services attributable to research usage may be defrayed by the
Adviser (without prior agreement or understanding, as noted above)
through brokerage commissions generated by transactions by clients
(including Growth Opportunities 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 Growth Opportunities 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 also
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 Growth Opportunities
Fund.
With respect to Growth Opportunities 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.
Investment Trust has arranged for its custodian to act as a
soliciting dealer to accept any fees available to the custodian as
a soliciting dealer in connection with any tender offer for
portfolio securities. The custodian will credit any such fees
received against its custodial fees. In addition, the Board of
Trustees has reviewed the legal developments pertaining to and the
practicability of attempting to recapture underwriting discounts
or selling concessions when portfolio securities are purchased in
underwritten offerings. However, the Board has been advised by
counsel that recapture by a mutual fund currently is not permitted
under the Rules of Fair Practice of the National Association of
Securities Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
Growth Opportunities Fund and Growth Opportunities Fund
intend 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.
Growth Opportunities Fund expects that less than 100% of its
dividends will qualify for the deduction for dividends received by
corporate shareholders.
To the extent Growth Opportunities 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 total assets at the close of any fiscal year consist of
stock or securities of foreign corporations, Growth Opportunities
Fund may file an election with the Internal Revenue Service
pursuant to which its shareholders 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 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 Growth Opportunities 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 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, Growth
Opportunities Fund will notify shareholders of the amount of (i)
each shareholder's pro rata share of foreign income taxes paid and
(ii) the portion of Fund dividends which represents income from
each foreign country, if it qualifies to pass along such credit.
INVESTMENT PERFORMANCE
Growth Opportunities 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 Growth Opportunities Fund is a result
of conditions in the securities markets, portfolio management, and
operating expenses. Although investment performance information
is useful in reviewing Growth Opportunities 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, Growth Opportunities
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 Growth Opportunities Fund. Comparison of
Growth Opportunities 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 Investment
Trust believe to be generally accurate. Growth Opportunities Fund
may also note its mention or recognition in newspapers, magazines,
or other media from time to time. However, Investment Trust
assume no responsibility for the accuracy of such data.
Newspapers and magazines which might mention Growth Opportunities
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
Growth Opportunities Fund may compare its performance to the
Consumer Price Index (All Urban), a widely recognized measure of
inflation.
Growth Opportunities 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
recognized indicators of the performance of stocks
general U.S. stock market traded in the indicated
results.) markets.)
In addition, Growth Opportunities Fund may compare its
performance to the following benchmarks:
Lipper Capital Appreciation Fund Average
Lipper Capital Appreciation Fund Index
Lipper Equity Fund Average
Lipper General Equity Fund Average
Morningstar Aggressive Growth Fund Average
Morningstar Domestic Stock Average
Morningstar Total Fund Average
Value Line Index
(Widely recognized indicator of the performance
of small- and medium-sized company stocks)
The Lipper averages are unweighted averages of total return
performance as classified, calculated, and published by Lipper.
Lipper Growth Fund index reflects the net asset value weighted
total return of the largest thirty growth funds and thirty growth
and income funds, respectively, as calculated and published by
Lipper.
The Lipper 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. Growth Opportunities
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
Growth Opportunities Fund to a different category or develop (and
place a Fund into) a new category, it may compare its performance
or ranking with those of other funds in the newly assigned
category, as published by the service.
Growth Opportunities 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 its risk score (which
is a function of a 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, Growth Opportunities 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
_____________________
Growth Opportunities 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, Growth Opportunities 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 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.
<PAGE> 1
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) 1. Financial statements included in Part A of this Amendment
to the Registration Statement: Financial Highlights.
2. Financial statements included in Part B of this Amendment:
Financial statements (investments as of September 30, 1996,
balance sheets as of September 30, 1996, statements of
operations for the year ended September 30, 1996, statements
of changes in net assets for each of the two years in the
period ended September 30, 1996, and notes thereto) are
incorporated by reference to Registrant's September 30, 1996
annual reports.
(b) Exhibits: [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1933, No.
33-11351. The terms "Pre-Effective Amendment" and "PEA"
refer, respectively, to a pre-effective amendment and a post-
effective amendment to the Registration Statement.]
1. (a) Agreement and Declaration of Trust as amended through
February 1, 1996. (Exhibit 1 to PEA #32.)*
(b) Amendment dated December 31, 1996 to Agreement and
Declaration of Trust. (Exhibit 1(b) to PEA #37.)*
2. By-Laws of Registrant as amended through February 3, 1993.
(Exhibit 2 to PEA #34).*
3. None.
4. Inapplicable.
5. (a) Management agreement between Registrant and Stein Roe &
Farnham Incorporated (the "Adviser") as amended through
July 1, 1996. (Exhibit 5(a) to PEA #34.)*
(b) Expense undertakings relating to Stein Roe
International Fund, Stein Roe Young Investor Fund and
Stein Roe Special Venture Fund dated February 1, 1996.
(Exhibit 5(d) to PEA #32.)*
(c) Expense undertaking relating to Stein Roe Special Fund
dated July 1, 1996. (Exhibit 5(c) to PEA #34).*
6. Underwriting agreement between Registrant and Liberty
Securities Corporation dated June 22, 1987 as amended
through October 28, 1992. (Exhibit 6 to PEA #34).*
7. None.
8. Custodian contract between Registrant and State Street
Bank and Trust Company as amended through May 8, 1995.
(Exhibit 8 to PEA #31.)*
9. (a) Restated Transfer Agency Agreement between Registrant
and SteinRoe Services Inc. dated August 1, 1995.(Exhibit
9(a) to PEA #31.)*
(b) Accounting and Bookkeeping Agreement dated August 1,
1994. (Exhibit 9(b) to PEA #34.)*
(c) Administrative Agreement between Registrant and the
Adviser dated August 15, 1995 as amended through July 1,
1996. (Exhibit 9(c) to PEA #34.)*
(d) Sub-transfer agent agreement with Colonial Investors
Service Center dated July 3, 1996. (Exhibit 9(d) to
PEA #36.)*
10. (a) Opinions and consents of Ropes & Gray. (Exhibit 10(a) to
PEA #34).*
(b) Opinions and consents of Bell, Boyd & Lloyd with respect
to SteinRoe Prime Equities (now named Stein Roe Growth &
Income Fund), Stein Roe Capital Opportunities Fund, Stein
Roe Special Fund, SteinRoe Stock Fund (now named Stein Roe
Growth Stock Fund), SteinRoe Total Return Fund (now named
Stein Roe Balanced Fund), Stein Roe International Fund,
Stein Roe Young Investor Fund, and Stein Roe Special
Venture Fund. (Exhibit 10(b) to PEA #34).*
(c) Opinion and consent of Bell, Boyd & Lloyd with respect
to Stein Roe Emerging Markets Fund. (Exhibit 10(c) to
PEA #37.)*
11. (a) Consent of Arthur Andersen LLP, independent public
accountants.
(b) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA #34).*
12. None.
13. Inapplicable.
14. (a) Stein Roe & Farnham Funds Individual Retirement
Account Plan. (Exhibit 14(a) to PEA #33.)*
(b) Stein Roe & Farnham Prototype Paired Defined
Contribution Plan.**
15. None.
16. Schedules for computation of each performance
quotation provided in the Registration Statement in
response to Item 22 for SteinRoe Prime Equities (now
named Stein Roe Growth & Income Fund), Stein Roe Total
Return Fund (now named Stein Roe Balanced Fund), Stein Roe
Stock Fund (now named Stein Roe Growth Stock Fund), Stein
Roe Capital Opportunities Fund, Stein Roe Special Fund,
Stein Roe International Fund, Stein Roe Young Investor Fund,
and Stein Roe Special Venture Fund. (Exhibit 16 to PEA
#34).*
17. (a) Financial Data Schedule--Stein Roe Growth & Income Fund.
(b) Financial Data Schedule--Stein Roe Balanced Fund.
(c) Financial Data Schedule--Stein Roe Growth Stock Fund.
(d) Financial Data Schedule--Stein Roe Capital Opportunities
Fund.
(e) Financial Data Schedule--Stein Roe Special Fund.
(f) Financial Data Schedule--Stein Roe International Fund.
(g) Financial Data Schedule--Stein Roe Young Investor Fund.
(h) Financial Data Schedule--Stein Roe Special Venture Fund.
18. Inapplicable
19. (Miscellaneous.)
(a) Fund Application. (Exhibit 19(a) to PEA #36.)*
(b) Automatic Redemption Services Application. (Exhibit
19(c) to PEA #34).*
_______________________
*Incorporated by reference.
**Incorporated by reference to Exhibit 14(b) to Post-Effective
Amendment No. #13 to the Registration Statement on Form N-1A of
Stein Roe Income Trust, No. 33-02633.
Item 25. Persons Controlled By or Under Common Control with
Registrant.
The Registrant does not consider that it is directly or indirectly
controlling, controlled by, or under common control with other
persons within the meaning of this Item. See "Investment Advisory
Services," "Management," and "Transfer Agent" in the Statement of
Additional Information, each of which is incorporated herein by
reference.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Series as of December 31, 1996
--------------------------------- -------------------------
Stein Roe Growth & Income Fund 7,699
Stein Roe International Fund 4,058
Stein Roe Young Investor Fund 62,921
Stein Roe Special Venture Fund 3,961
Stein Roe Balanced Fund 8,250
Stein Roe Growth Stock Fund 14,080
Stein Roe Capital Opportunities Fund 46,166
Stein Roe Special Fund 43,787
Stein Roe Emerging Markets Fund 0
Item 27. Indemnification.
Article Tenth of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including each person who serves or
has served at Registrant's request as a director, officer, or
trustee of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act")
provides that neither the Agreement and Declaration of Trust nor
the By-Laws of Registrant, nor any other instrument pursuant to
which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section 17(h) of the 1940 Act, Article Tenth shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Unless otherwise permitted under the 1940 Act,
(i) Article Tenth does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Tenth unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are neither "interested
persons" of Registrant, as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel as expressed in a
written opinion; and
(iii) Registrant will not advance attorneys' fees or other
expenses incurred by a Covered Person in connection with a civil
or criminal action, suit or proceeding unless Registrant receives
an undertaking by or on behalf of the Covered Person to repay the
advance (unless it is ultimately determined that he is entitled to
indemnification) and (a) the Covered Person provides security for
his undertaking, or (b) Registrant is insured against losses
arising by reason of any lawful advances, or (c) a majority of the
disinterested, non-party trustees of Registrant or an independent
legal counsel as expressed in a written opinion, determine, based
on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to
indemnification.
Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with Article Tenth as
indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that such Covered Person's action
was in, or not opposed to, the best interests of Registrant or to
have been liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such Covered
Person's office.
Article Tenth also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such trustee,
officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser, and persons
affiliated with them are insured against certain expenses in
connection with the defense of actions, suits, or proceedings, and
certain liabilities that might be imposed as a result of such
actions, suits, or proceedings. Registrant will not pay any
portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to
Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
Pursuant to the indemnification agreement among the Registrant,
its transfer agent and its investment adviser dated July 1, 1995,
the Registrant, its trustees, officers and employees, its transfer
agent and the transfer agent's directors, officers and employees
are indemnified by Registrant's investment adviser against any and
all losses, liabilities, damages, claims and expenses arising out
of any act or omission of the Registrant or its transfer agent
performed in conformity with a request of the investment adviser
that the transfer agent and the Registrant deviate from their
normal procedures in connection with the issue, redemption or
transfer of shares for a client of the investment adviser.
Registrant, its trustees, officers, employees and representatives
and each person, if any, who controls the Registrant within the
meaning of Section 15 of the Securities Act of 1933 are
indemnified by the distributor of Registrant's shares (the
"distributor"), pursuant to the terms of the distribution
agreement, which governs the distribution of Registrant's shares,
against any and all losses, liabilities, damages, claims and
expenses arising out of the acquisition of any shares of the
Registrant by any person which (i) may be based upon any wrongful
act by the distributor or any of the distributor's directors,
officers, employees or representatives or (ii) may be based upon
any untrue or alleged untrue statement of a material fact
contained in a registration statement, prospectus, statement of
additional information, shareholder report or other information
covering shares of the Registrant filed or made public by the
Registrant or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Registrant by the
distributor in writing. In no case does the distributor's
indemnity indemnify an indemnified party against any liability to
which such indemnified party would otherwise be subject by reason
of willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties under the
distribution agreement.
Item 28. Business and Other Connections of Investment Adviser.
The Adviser is a wholly-owned subsidiary of SteinRoe Services Inc.
("SSI"), which in turn is a wholly-owned subsidiary of Liberty
Financial Companies, Inc., which is a majority owned subsidiary
of LFC Holdings, Inc., which in turn is a subsidiary of Liberty
Mutual Equity Corporation, which in turn is a subsidiary of
Liberty Mutual Insurance Company. The Adviser acts as investment
adviser to individuals, trustees, pension and profit-sharing plans,
charitable organizations, and other investors. In addition to
Registrant, it also acts as nvestment adviser to other investment
companies having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
Stein Roe Income Trust, Stein Roe Municipal Trust, SR&F Base
Trust, Stein Roe Trust, Stein Roe Institutional Trust, Stein Roe
Advisor Trust, SteinRoe Variable Investment Trust, and LFC
Utilities Trust. (The listed entities are located at One South
Wacker Drive, Chicago, Illinois 60606, except for SteinRoe Variable
Investment Trust, which is located at Federal Reserve Plaza,
Boston, MA 02210 and LFC Utilities Trust, which is located at One
Financial Center, Boston, MA 02111.) A list of such capacities is
given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President; Secretary
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Hans P. Ziegler Director, President, Vice Chairman
Chairman
SR&F BASE TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President;
Secretary Vice-President
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President
Michael T. Kennedy Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Secy.
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice-President; Secy.
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
Gary A. Anetsberger Senior Vice-President Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Sec'y
Thomas W. Butch Executive Vice-President Vice-President
Joanne T. Costopoulos Vice-President
Philip J. Crosley Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
Anne E. Marcel Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Bruno Bertocci Vice-President
David P. Brady Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Daniel K. Cantor Vice-President
Philip J. Crosley Vice-President
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Richard B. Peterson Vice-President
Gloria J. Santella Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEIN ROE INSTITUTIONAL TRUST and STEIN ROE TRUST
Gary A. Anetsberger Senior Vice-President
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive V-P; Secretary
Ann H. Benjamin Vice-President
Thomas W. Butch Executive Vice-President Vice-President
Philip J. Crosley Vice-President
Michael T. Kennedy Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Anne E. Marcel Vice-President
Jane M. Naeseth Vice-President
Thomas P. Sorbo Vice-President
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Item 29. Principal Underwriters.
Registrant's principal underwriter, Liberty Securities
Corporation, is a wholly owned subsidiary of Liberty Investment
Services, Inc., a wholly owned subsidiary of Liberty Financial
Services, Inc. which, in turn, is a wholly owned subsidiary of
Liberty Financial Companies, Inc. Liberty Financial Companies,
Inc. is a public corporation whose majority shareholder is LFC
Holdings, Inc., a wholly owned subsidiary of Liberty Mutual Equity
Corporation. Liberty Mutual Equity Corporation is a wholly owned
subsidiary of Liberty Mutual Insurance Company.
Liberty Securities Corporation is principal underwriter for the
following investment companies:
Stein Roe Income Trust
Stein Roe Municipal Trust
Stein Roe Investment Trust
Stein Roe Institutional Trust
Stein Roe Advisor Trust
Stein Roe Trust
Set forth below is information concerning the directors and
officers of Liberty Securities Corporation:
Positions
Positions and Offices and Offices
Name with Underwriter with Registrant
- ------------------ -------------------- ---------------
Porter P. Morgan Chairman of the Board; Director None
Frank L. Tarantino President; Chief Operating
Officer; Director None
Robert L. Spadafora Executive Vice President -
Sales and Marketing None
John T. Treece, Jr. Senior Vice President - Operations None
John W. Reading Senior Vice President and
Assistant Secretary None
Valerie A. Arendell Senior Vice President - Sales None
Gerald H. Stanney, Vice President and Compliance
Jr. Officer (Boston) None
Jilaine Hummel Bauer Vice President and Compliance Exec. V-P &
Officer (Chicago) Secretary
Bruce F. Ripepi Vice President, General Counsel None
and Assistant Secretary
Timothy K. Armour Vice President President,
Trustee
Lindsay Cook Vice President Trustee
Ralph E. Nixon Vice President None
Joyce B. Riegel Vice President None
Heidi J. Walter Vice President V-P
Glenn E. Williams Assistant Vice President None
Philip J. Iudice Treasurer None
John A. Benning Secretary None
John A. Davenport Assistant Secretary None
Marjorie M. Pluskota Assistant Secretary None
C. Allen Merritt, Jr. Assistant Treasurer; Assistant
Secretary; Director None
The principal business address of Mr. Armour, Ms. Bauer, Ms.
Pluskota,
Ms. Riegel and Ms. Walter is One South Wacker Drive, Chicago, IL
60606; that of Mr. Williams is Two Righter Parkway, Wilmington, DE
19803; and that of the other officers is 600 Atlantic Avenue,
Boston,
MA 02210-2214.
Item 30. Location of Accounts and Records.
Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at One
South Wacker Drive, Chicago, Illinois 60606. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant
to Rule 31a-3 at the main office of Registrant's transfer agent or
custodian.
Item 31. Management Services.
None.
Item 32. Undertakings.
If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special meeting
for the purpose of voting upon the question of removal of a
trustee or trustees and will assist in the communications with
other shareholders as if the Trust were subject to Section 16(c)
of the Investment Company Act of 1940.
Since the information called for by Item 5A is contained in the
latest annual reports to shareholders, Registrant undertakes with
respect to each series to furnish each person to whom a prospectus
is delivered with a copy of the latest annual report to
shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 7th day of
February, 1997.
STEIN ROE INVESTMENT TRUST
By TIMOTHY K. ARMOUR
Timothy K. Armour, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated:
Signature Title Date
- ------------------------ --------------------- ----------------
TIMOTHY K. ARMOUR President and Trustee February 7, 1997
Timothy K. Armour
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President February 7, 1997
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller February 7, 1997
Sharon R. Robertson
Principal Accounting Officer
KENNETH L. BLOCK Trustee February 7, 1997
Kenneth L. Block
WILLIAM W. BOYD Trustee February 7, 1997
William W. Boyd
LINDSAY COOK Trustee February 7, 1997
Lindsay Cook
__________________ Trustee _________________
Douglas A. Hacker
JANET LANGFORD KELLY Trustee February 7, 1997
Janet Langford Kelly
FRANCIS W. MORLEY Trustee February 7, 1997
Francis W. Morley
CHARLES R. NELSON Trustee February 7, 1997
Charles R. Nelson
THOMAS C. THEOBALD Trustee February 7, 1997
Thomas C. Theobald
STEIN ROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ------------
11(a) Consent of Arthur Andersen LLP
17(a) Financial Data Schedule for Stein Roe Growth & Income
Fund
17(b) Financial Data Schedule for Stein Roe Balanced Fund
17(c) Financial Data Schedule for Stein Roe Growth Stock Fund
17(d) Financial Data Schedule for Stein Roe Capital
Opportunities Fund
17(e) Financial Data Schedule for Stein Roe Special Fund
17(f) Financial Data Schedule for Stein Roe International Fund
17(g) Financial Data Schedule for Stein Roe Young Investor
Fund
17(h) Financial Data Schedule for Stein Roe Special Venture Fund
Exhibit 11(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our report dated November 11, 1996, and to all references to our
firm included in or made a part of this Registration Statement on
Form N-1A of the Stein Roe Investment Trust (comprising the Stein
Roe Growth & Income Fund, Stein Roe Balanced Fund, Stein Roe Growth
Stock Fund, Stein Roe International Fund, Stein Roe Special Fund,
Stein Roe Capital Opportunities Fund and Stein Roe Special Venture
Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1997
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our report dated October 31, 1996, and to all references to our
firm included in or made a part of this Registration Statement on
Form N-1A of the Stein Roe Investment Trust (comprising the Stein
Roe Young Investor Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 150,783
<INVESTMENTS-AT-VALUE> 204,129
<RECEIVABLES> 0
<ASSETS-OTHER> 1,122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 205,251
<PAYABLE-FOR-SECURITIES> 461
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 403
<TOTAL-LIABILITIES> 864
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,141
<SHARES-COMMON-STOCK> 11,116
<SHARES-COMMON-PRIOR> 8,381
<ACCUMULATED-NII-CURRENT> 716
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,047
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53,843
<NET-ASSETS> 204,387
<DIVIDEND-INCOME> 2,719
<INTEREST-INCOME> 1,951
<OTHER-INCOME> 0
<EXPENSES-NET> 1,942
<NET-INVESTMENT-INCOME> 2,728
<REALIZED-GAINS-CURRENT> 7,660
<APPREC-INCREASE-CURRENT> 23,196
<NET-CHANGE-FROM-OPS> 33,584
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,954
<DISTRIBUTIONS-OF-GAINS> 12,376
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,627
<NUMBER-OF-SHARES-REDEEMED> 37,532
<SHARES-REINVESTED> 13,499
<NET-CHANGE-IN-ASSETS> 64,848
<ACCUMULATED-NII-PRIOR> 942
<ACCUMULATED-GAINS-PRIOR> 11,763
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,942
<AVERAGE-NET-ASSETS> 164,903
<PER-SHARE-NAV-BEGIN> 16.65
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> 3.22
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> (1.43)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.39
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> STEIN ROE BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 184,396
<INVESTMENTS-AT-VALUE> 231,776
<RECEIVABLES> 2,575
<ASSETS-OTHER> 1,254
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 235,605
<PAYABLE-FOR-SECURITIES> 3,946
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 596
<TOTAL-LIABILITIES> 4,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 167,769
<SHARES-COMMON-STOCK> 7,685
<SHARES-COMMON-PRIOR> 8,217
<ACCUMULATED-NII-CURRENT> (555)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,469
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47,380
<NET-ASSETS> 231,063
<DIVIDEND-INCOME> 4,190
<INTEREST-INCOME> 6,020
<OTHER-INCOME> 0
<EXPENSES-NET> 2,386
<NET-INVESTMENT-INCOME> 7,824
<REALIZED-GAINS-CURRENT> 15,855
<APPREC-INCREASE-CURRENT> 7,704
<NET-CHANGE-FROM-OPS> 31,383
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,977
<DISTRIBUTIONS-OF-GAINS> 5,662
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,623
<NUMBER-OF-SHARES-REDEEMED> 51,032
<SHARES-REINVESTED> 11,168
<NET-CHANGE-IN-ASSETS> 2,503
<ACCUMULATED-NII-PRIOR> 1,180
<ACCUMULATED-GAINS-PRIOR> 4,694
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,587
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,386
<AVERAGE-NET-ASSETS> 226,675
<PER-SHARE-NAV-BEGIN> 27.82
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 2.96
<PER-SHARE-DIVIDEND> (1.01)
<PER-SHARE-DISTRIBUTIONS> (.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.07
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STEIN ROE GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 258,859
<INVESTMENTS-AT-VALUE> 417,528
<RECEIVABLES> 0
<ASSETS-OTHER> 973
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 418,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 537
<TOTAL-LIABILITIES> 537
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 225,199
<SHARES-COMMON-STOCK> 14,517
<SHARES-COMMON-PRIOR> 13,790
<ACCUMULATED-NII-CURRENT> 957
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,139
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 158,669
<NET-ASSETS> 417,964
<DIVIDEND-INCOME> 3,893
<INTEREST-INCOME> 1,515
<OTHER-INCOME> 0
<EXPENSES-NET> 4,173
<NET-INVESTMENT-INCOME> 1,235
<REALIZED-GAINS-CURRENT> 34,712
<APPREC-INCREASE-CURRENT> 37,878
<NET-CHANGE-FROM-OPS> 73,825
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,400
<DISTRIBUTIONS-OF-GAINS> 32,877
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,575
<NUMBER-OF-SHARES-REDEEMED> 68,437
<SHARES-REINVESTED> 29,942
<NET-CHANGE-IN-ASSETS> 57,628
<ACCUMULATED-NII-PRIOR> 1,122
<ACCUMULATED-GAINS-PRIOR> 31,304
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,895
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,173
<AVERAGE-NET-ASSETS> 386,059
<PER-SHARE-NAV-BEGIN> 26.13
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 5.01
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (2.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.79
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEIN ROE CAPITAL OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 1,363,105
<INVESTMENTS-AT-VALUE> 1,705,389
<RECEIVABLES> 3,890
<ASSETS-OTHER> 14,053
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,723,332
<PAYABLE-FOR-SECURITIES> 35,466
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,328
<TOTAL-LIABILITIES> 38,794
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,353,886
<SHARES-COMMON-STOCK> 54,262
<SHARES-COMMON-PRIOR> 11,173
<ACCUMULATED-NII-CURRENT> (3,208)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,424)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 342,284
<NET-ASSETS> 1,684,538
<DIVIDEND-INCOME> 784
<INTEREST-INCOME> 5,701
<OTHER-INCOME> 0
<EXPENSES-NET> 9,640
<NET-INVESTMENT-INCOME> (3,155)
<REALIZED-GAINS-CURRENT> (8,425)
<APPREC-INCREASE-CURRENT> 261,649
<NET-CHANGE-FROM-OPS> 250,069
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 150
<DISTRIBUTIONS-OF-GAINS> 12,960
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,801,763
<NUMBER-OF-SHARES-REDEEMED> 608,465
<SHARES-REINVESTED> 11,900
<NET-CHANGE-IN-ASSETS> 1,442,157
<ACCUMULATED-NII-PRIOR> 97
<ACCUMULATED-GAINS-PRIOR> 12,961
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,759
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,640
<AVERAGE-NET-ASSETS> 792,502
<PER-SHARE-NAV-BEGIN> 21.69
<PER-SHARE-NII> (.06)
<PER-SHARE-GAIN-APPREC> 10.41
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> (.99)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.04
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEIN ROE SPECIAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 789,199
<INVESTMENTS-AT-VALUE> 1,158,207
<RECEIVABLES> 6,456
<ASSETS-OTHER> 1,327
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,165,990
<PAYABLE-FOR-SECURITIES> 4,434
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,058
<TOTAL-LIABILITIES> 7,492
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 706,675
<SHARES-COMMON-STOCK> 42,299
<SHARES-COMMON-PRIOR> 47,569
<ACCUMULATED-NII-CURRENT> (2,611)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 85,469
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368,965
<NET-ASSETS> 1,158,498
<DIVIDEND-INCOME> 8,589
<INTEREST-INCOME> 4,993
<OTHER-INCOME> 0
<EXPENSES-NET> 13,235
<NET-INVESTMENT-INCOME> 347
<REALIZED-GAINS-CURRENT> 93,001
<APPREC-INCREASE-CURRENT> 89,107
<NET-CHANGE-FROM-OPS> 182,455
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,825
<DISTRIBUTIONS-OF-GAINS> 85,187
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 139,995
<NUMBER-OF-SHARES-REDEEMED> 359,562
<SHARES-REINVESTED> 84,153
<NET-CHANGE-IN-ASSETS> (42,971)
<ACCUMULATED-NII-PRIOR> 4,642
<ACCUMULATED-GAINS-PRIOR> 74,880
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,421
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,235
<AVERAGE-NET-ASSETS> 1,124,506
<PER-SHARE-NAV-BEGIN> 25.26
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 4.14
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> (1.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.39
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> STEIN ROE INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 129,259
<INVESTMENTS-AT-VALUE> 136,859
<RECEIVABLES> 1,601
<ASSETS-OTHER> 455
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 138,915
<PAYABLE-FOR-SECURITIES> 3,062
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 308
<TOTAL-LIABILITIES> 3,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126,003
<SHARES-COMMON-STOCK> 12,369
<SHARES-COMMON-PRIOR> 8,100
<ACCUMULATED-NII-CURRENT> 933
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,010
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,599
<NET-ASSETS> 135,545
<DIVIDEND-INCOME> 2,377
<INTEREST-INCOME> 403
<OTHER-INCOME> 0
<EXPENSES-NET> 1,666
<NET-INVESTMENT-INCOME> 1,114
<REALIZED-GAINS-CURRENT> 2,976
<APPREC-INCREASE-CURRENT> 4,858
<NET-CHANGE-FROM-OPS> 8,948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,075
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62,994
<NUMBER-OF-SHARES-REDEEMED> 19,102
<SHARES-REINVESTED> 760
<NET-CHANGE-IN-ASSETS> 52,525
<ACCUMULATED-NII-PRIOR> 865
<ACCUMULATED-GAINS-PRIOR> (1,936)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,104
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,666
<AVERAGE-NET-ASSETS> 110,374
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> .74
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.96
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> STEIN ROE YOUNG INVESTOR FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 156,453
<INVESTMENTS-AT-VALUE> 179,048
<RECEIVABLES> 1,862
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 47
<TOTAL-ASSETS> 180,957
<PAYABLE-FOR-SECURITIES> 1,579
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 289
<TOTAL-LIABILITIES> 1,868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 148,071
<SHARES-COMMON-STOCK> 9,609
<SHARES-COMMON-PRIOR> 2,197
<ACCUMULATED-NII-CURRENT> 136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,287
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,595
<NET-ASSETS> 179,089
<DIVIDEND-INCOME> 639
<INTEREST-INCOME> 562
<OTHER-INCOME> 0
<EXPENSES-NET> 960
<NET-INVESTMENT-INCOME> 241
<REALIZED-GAINS-CURRENT> 8,332
<APPREC-INCREASE-CURRENT> 17,075
<NET-CHANGE-FROM-OPS> 25,648
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (125)
<DISTRIBUTIONS-OF-GAINS> (1,383)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,324
<NUMBER-OF-SHARES-REDEEMED> 1,017
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> 147,688
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 1,337
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 636
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,623
<AVERAGE-NET-ASSETS> 79,468
<PER-SHARE-NAV-BEGIN> 14.29
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 4.86
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> (.51)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.64
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> STEIN ROE SPECIAL VENTURE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 120,786
<INVESTMENTS-AT-VALUE> 145,850
<RECEIVABLES> 2,322
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,373
<TOTAL-ASSETS> 149,545
<PAYABLE-FOR-SECURITIES> 4,570
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 447
<TOTAL-LIABILITIES> 5,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,699
<SHARES-COMMON-STOCK> 9,106
<SHARES-COMMON-PRIOR> 4,806
<ACCUMULATED-NII-CURRENT> (214)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,979
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,064
<NET-ASSETS> 144,528
<DIVIDEND-INCOME> 335
<INTEREST-INCOME> 643
<OTHER-INCOME> 0
<EXPENSES-NET> 1,186
<NET-INVESTMENT-INCOME> (208)
<REALIZED-GAINS-CURRENT> 9,004
<APPREC-INCREASE-CURRENT> 19,130
<NET-CHANGE-FROM-OPS> 27,926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,016)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 71,954
<NUMBER-OF-SHARES-REDEEMED> 15,765
<SHARES-REINVESTED> 2,896
<NET-CHANGE-IN-ASSETS> 83,995
<ACCUMULATED-NII-PRIOR> (6)
<ACCUMULATED-GAINS-PRIOR> 2,991
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 854
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,271
<AVERAGE-NET-ASSETS> 94,904
<PER-SHARE-NAV-BEGIN> 12.60
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 3.86
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.57)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.87
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
