<PAGE>
Stein Roe Special Venture Fund
a series of Stein Roe Investment Trust
Supplement to Prospectus dated February 2, 1998
Effective October 7, 1998, the portfolio managers for Stein
Roe Special Venture Fund are James P. Haynie and Michael E. Rega,
who are jointly employed by Colonial Management Associates, Inc.
("CMA") and Stein Roe & Farnham Incorporated (each of which is an
indirect wholly owned subsidiary of Liberty Financial Companies,
Inc.). Mr. Haynie has managed or co-managed the Colonial Small
Cap Value Fund since 1993. Mr. Rega has been employed by CMA as
an analyst since 1993 and has co-managed the Colonial Small Cap
Value Fund and another Colonial equity fund since 1996.
The Adviser may use both its own trading facilities and those
of CMA to place orders for the purchase and sale of portfolio
securities for the Fund. For trades placed through CMA, in
selecting broker-dealers, the Adviser may direct CMA to consider
research and brokerage services furnished to the Adviser.
This Supplement is Dated October 9, 1998
<PAGE>
STEIN ROE INVESTMENT TRUST
Stein Roe Special Venture Fund
Supplement to Prospectus Dated Feb. 2, 1998
________________
Special Venture Portfolio emphasizes investments in
financially strong small- and medium-sized companies, based
principally on appraisal of their management and stock valuations.
The Adviser considers "small" companies to be those with market
capitalizations of less than $1 billion and "medium-sized"
companies to track the definition used by Lipper Analytical
Services, Inc. which is currently $1 to $5 billion. (See
Investment Policies.)
This Supplement is Dated Aug. 24, 1998
<PAGE>
Prospectus Feb. 2, 1998
Stein Roe Mutual Funds
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Growth Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Growth & Income Fund* seeks to provide both growth of capital
and current income.
Balanced Fund* seeks long-term growth of capital and current
income, consistent with reasonable investment risk.
Growth Stock Fund* seeks long-term capital appreciation by
investing in common stocks and other equity-type securities. This
Fund is closed to purchases by new investors except for purchases
by eligible investors as described under How to Purchase Shares.
Growth Opportunities Fund seeks long-term capital
appreciation. It 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.
Special Fund* seeks capital appreciation by investing in
securities that are considered to have limited downside risk
relative to their potential for above-average growth, including
securities of undervalued, underfollowed, or out-of-favor
companies.
Special Venture Fund* seeks long-term capital appreciation by
investing primarily in a diversified portfolio of equity securities
of entrepreneurially managed companies. The Fund emphasizes
investments in financially strong small and medium-sized companies,
based principally on management appraisal and stock valuation.
Capital Opportunities Fund seeks long-term capital
appreciation by investing in aggressive growth companies.
*Growth & Income Fund, Balanced Fund, Growth Stock Fund,
Special Fund, and Special Venture Fund each seek to achieve
their respective objectives by investing all of its net
investable assets in a corresponding Portfolio of SR&F Base
Trust that has the same investment objective and substantially
the same investment policies as the Fund. The investment
experience of each Fund will correspond to its respective
Portfolio. (See Master Fund/Feeder Fund: Structure and Risk
Factors.)
Each Fund is a "no-load" fund. There are no sales or
redemption charges, and the Funds have no 12b-1 plans. The Funds
are series of the Stein Roe Investment Trust and the Portfolios are
series of SR&F Base Trust. Each Trust is an open-end management
investment company.
This prospectus contains information you should know before
investing in the Funds. Please read it carefully and retain it for
future reference.
A Statement of Additional Information dated Feb. 2, 1998,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. That
information, material incorporated by reference, and other
information regarding registrants that file electronically with the
SEC is available at the SEC's website, www.sec.gov. This
prospectus is also available electronically by using Stein Roe's
Internet address: www.steinroe.com. You can get a free paper copy
of the prospectus, the Statement of Additional Information, and the
most recent financial statements 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, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE OF CONTENTS
Page
Summary ...............................3
Fee Table............................. 6
Financial Highlights.................. 7
The Funds............................ 16
Investment Policies.................. 17
Growth & Income Fund...............17
Balanced Fund......................17
Growth Stock Fund..................17
Growth Opportunities Fund..........17
Special Fund.......................18
Special Venture Fund...............19
Capital Opportunities Fund.........19
Portfolio Investments and Strategies..20
Investment Restrictions.............. 23
Risks and Investment Considerations...24
How to Purchase Shares................25
Growth Stock Fund Accounts.........26
By Check...........................26
By Wire............................27
By Electronic Transfer............ 27
By Exchange....................... 27
Conditions of Purchase............ 28
Purchases Through Third Parties....28
Purchase Price and Effective Date. 28
How to Redeem Shares................. 29
By Written Request................ 29
By Exchange....................... 29
Special Redemption Privileges..... 30
General Redemption Policies....... 31
Shareholder Services................. 33
Net Asset Value...................... 35
Distributions and Income Taxes....... 35
Investment Return.................... 37
Management............................37
Organization and Description of
Shares.............................41
Master Fund/Feeder Fund: Structure and
Risk Factors.......................42
Certificate of Authorization..........45
SUMMARY
The mutual funds described in this prospectus are series of the
Stein Roe Investment Trust ("Investment Trust"), an open-end
management investment company. Each Fund is a "no-load" fund.
There are no sales or redemption charges. (See The Funds and
Organization and Description of Shares.) This prospectus is not a
solicitation in any jurisdiction in which shares of the Funds are
not qualified for sale.
Investment Objectives and Policies. Each Fund other than Growth
Opportunities Fund and Capital Opportunities Fund has converted to
the master fund/feeder fund structure, under which it seeks to
achieve its objective by investing all of its net investable assets
in a corresponding Portfolio of SR&F Base Trust that has the same
investment objective and substantially the same investment policies
as the Fund.
Growth & Income Fund seeks to provide both growth of capital and
current income. It is designed for investors seeking a diversified
portfolio of securities that offers the opportunity for long-term
growth of capital while also providing a steady stream of income.
Growth & Income Portfolio, in which Growth & Income Fund invests,
invests primarily in well-established companies whose common stocks
are believed to have both the potential to appreciate in value and
to pay dividends to shareholders.
Balanced Fund seeks long-term growth of capital and current income,
consistent with reasonable investment risk. Balanced Portfolio, in
which Balanced Fund invests, allocates its investments among
equities, debt securities, and cash. The portfolio manager
determines those allocations based on the views of the Adviser's
investment strategists regarding economic, market, and other
factors relative to investment opportunities.
Growth Stock Fund seeks long-term capital appreciation. Growth
Stock Portfolio, in which Growth Stock Fund invests, normally
invests at least 65% of its total assets in common stocks and other
equity-type securities that the Adviser believes to have long-term
appreciation possibilities.
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 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
also may 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 large 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.
Special Fund seeks capital appreciation. Special Portfolio, in
which Special Fund invests, places particular emphasis on
securities that are considered to have limited downside risk
relative to their potential for above-average growth--including
securities of undervalued, underfollowed or out-of-favor companies,
and companies that are low-cost producers of goods or services,
financially strong, or run by well-respected managers. Its
investments may include securities of seasoned, established
companies that appear to have appreciation potential, as well as
securities of relatively small, new companies; securities with
limited marketability; new issues of securities; securities of
companies that, in the Adviser's opinion, will benefit from
management change, new technology, new product or service
development, or change in demand; and other securities that the
Adviser believes have capital appreciation possibilities.
Special Venture Fund seeks long-term capital appreciation. Special
Venture Portfolio, in which Special Venture Fund invests, invests
primarily in a diversified portfolio of equity securities of
entrepreneurially managed companies that the Adviser believes
represent special opportunities. It emphasizes investments in
financially strong small and medium-sized companies, based
principally on appraisal of their management and stock valuations.
Capital Opportunities Fund seeks long-term capital appreciation by
investing in aggressive growth companies. An aggressive growth
company, in general, is one that appears to have the ability to
increase its earnings at an above-average rate. These may include
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size that offer strong earnings
growth potential. Such companies may benefit from new products or
services, technological developments, or changes in management.
There can be no guarantee that the Funds or the Portfolios
will achieve their investment objectives. Please see Investment
Policies and Portfolio Investments and Strategies for further
information.
Investment Risks. Growth & Income Fund is designed for long-term
investors who desire to participate in the stock market with
moderate investment risk while seeking to limit market volatility.
Balanced Fund is designed for long-term investors who can accept
the fluctuations in portfolio value and other risks associated with
seeking long-term capital appreciation through investments in
securities. Growth Stock Fund and Special Fund are designed for
long-term investors who desire to participate in the stock market
with more investment risk and volatility than the stock market in
general, but with less investment risk and volatility than
aggressive capital appreciation funds. 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 by investing in a diversified portfolio
of common stocks of large, mid-sized and small companies. Special
Venture Fund is designed for long-term investors who want greater
return potential than is available from the stock market in
general, and who are willing to tolerate the greater investment
risk and market volatility associated with investments in small and
medium-sized companies. Capital Opportunities Fund is an
aggressive growth fund and is designed for long-term investors who
can accept the fluctuations in portfolio value and other risks
associated with seeking long-term capital appreciation through
investments in common stocks.
Since the Funds and the Portfolios may invest in foreign
securities, investors should understand and carefully consider the
risks involved in foreign investing. Investing in foreign
securities involves certain 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 each Fund is $2,500,
and additional investments must be at least $100 (only $50 for
purchases by electronic transfer). Lower initial investment
minimums apply to IRAs, UGMAs, and automatic investment plans.
Shares may be purchased by check, by bank wire, by electronic
transfer, or by exchange from another no-load Stein Roe Fund.
Growth Stock Fund is closed to purchases by new investors except
for purchases by eligible investors. For more detailed
information, see How to Purchase Shares.
Redemptions. For information on redeeming Fund shares, including
the special redemption privileges, see How to Redeem Shares.
Net Asset Value. The purchase and redemption price of a Fund's
shares is its net asset value per share. The net asset value is
determined as of the close of trading on the New York Stock
Exchange. (For more detailed information, see Net Asset Value.)
Distributions. Dividends for Growth & Income Fund and Balanced
Fund are normally declared and paid quarterly, and dividends for
the other Funds are normally declared and paid annually.
Distributions will be reinvested in additional Fund shares unless
you elect to have them paid in cash, deposited by electronic
transfer into your bank account, or invested in shares of another
no-load 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 the Funds and the Portfolios. For a
description of the Adviser and its fees, see Management.
If you have any additional questions about the Funds, please
feel free to discuss them with a Stein Roe account representative
by calling 800-338-2550.
FEE TABLE
Growth Growth Capital
& Growth Oppor- Special Oppor-
Income Balanced Stock tunities Special Venture tunities
Fund Fund Fund Fund Fund Fund Fund
Shareholder Trans-
action Expenses
Sales Load Imposed
on Purchases None None None None None None None
Sales Load Imposed on
Reinvested
Dividends None None None None None None None
Deferred Sales
Load None None None None None None None
Redemption Fees* None None None None None None None
Exchange Fees None None None None None None None
Annual Fund Operating
Expenses (after fee
waiver in the case of
Growth Opportunities Fund;
as a percentage of
average net assets)
Management and Adminis-
trative Fees (after
fee waiver in the case
of Growth Opportunities
Fund) 0.75% 0.70% 0.75% 0.41% 0.86% 0.90% 0.85%
12b-1 Fees None None None None None None None
Other Expenses 0.38% 0.35% 0.32% 0.84% 0.28% 0.39% 0.32%
Total Fund Operating ----- ----- ----- ----- ----- ----- -----
Expenses (after fee
waiver in the case
of Growth Opportun-
ities Fund) 1.13% 1.05% 1.07% 1.25% 1.14% 1.29% 1.17%
===== ===== ===== ===== ===== ===== =====
___________________
* There is a $7.00 charge for wiring redemption proceeds to your
bank.
Examples. You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return; and (2) redemption at the
end of each time period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Growth & Income Fund $12 $36 $62 $137
Balanced Fund 11 33 58 128
Growth Stock Fund 11 34 59 131
Growth Opportunities Fund 13 40 69 151
Special Fund 12 36 63 139
Special Venture Fund 13 41 71 156
Capital Opportunities Fund 12 37 64 142
The purpose of the Fee Table is to assist you in understanding
the various costs and expenses that you will bear directly or
indirectly as an investor in a Fund. The table is based on
expenses incurred in the last fiscal year.
From time to time, the Adviser may voluntarily undertake to
reimburse a 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, 1999, subject to earlier termination by the Adviser on 30 days'
notice to Growth Opportunities Fund. Absent such reimbursement,
the Management and Administrative Fees and Total Operating Expenses
would have been 0.85% and 1.74%, 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.)
Funds participating in the master fund/feeder fund structure
("feeder Funds") pay the Adviser an administrative fee based on the
Fund's average daily net assets, and each Portfolio pays the
Adviser a management fee based on its average daily net assets.
The expenses of both the feeder Funds and Portfolios are summarized
in the Fee Table. (The fees are described under Management.) Each
feeder Fund bears its proportionate share of the fees and expenses
of the corresponding Portfolio. The trustees of Investment Trust
have considered whether the annual operating expenses of each
feeder Fund, including its share of the expenses of the Portfolio,
would be more or less than if the feeder Fund invested directly in
the securities held by the Portfolio. The trustees concluded that
the feeder Funds' expenses would not be greater in such case.
For purposes of the Examples above, the figures assume that
the percentage amounts listed for the respective Funds under Annual
Fund Operating Expenses remain the same in each of the periods;
that all income dividends and capital gains distributions are
reinvested in additional Fund shares; and that, for purposes of fee
breakpoints, net assets remain at the same level as in the most
recently completed fiscal year. The figures in the Examples are
not necessarily indicative of past or future expenses, and actual
expenses may be greater or less than those shown. Although
information such as that shown in the Examples and Fee Table is
useful in reviewing the Funds' expenses and in providing a basis
for comparison with other mutual funds, it should not be used for
comparison with other investments using different assumptions or
time periods.
FINANCIAL HIGHLIGHTS
The following tables reflect the results of operations of the Funds
on a per-share basis for the periods shown and have been audited by
Arthur Andersen LLP, independent public accountants. These tables
should be read in conjunction with the respective Fund's financial
statements and notes thereto. The Funds' annual reports, which may
be obtained from Investment Trust without charge upon request,
contain additional performance information.
Balanced Fund
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30,
Years Ended Sept. 30,
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $25.07 $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57 $25.78 $27.82 $30.07
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from
Investment Operations
Net investment
income 1.32 0.97 1.37 1.28 1.32 1.31 1.26 1.15 1.33 1.00 0.95
Net realized and
unrealized gains
(losses) on invest-
ments (1.06) 0.45 3.10 (2.92) 4.85 1.48 2.37 (1.06) 2.22 2.96 5.61
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations 0.26 1.42 4.47 (1.64) 6.17 2.79 3.63 0.09 3.55 3.96 6.56
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Distributions
Net investment income (1.63) (0.90) (1.34) (1.36) (1.26) (1.34) (1.30) (1.17) (1.23) (1.01) (0.96)
Net realized capital
gains (1.45) (0.11) (0.38) (0.73) (0.51) (0.62) (1.67) (0.71) (0.28) (0.70) (2.26)
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (3.08) (1.01) (1.72) (2.09) (1.77) (1.96) (2.97) (1.88) (1.51) (1.71) (3.22)
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period $22.25 $22.66 $25.41 $21.68 $26.08 $26.91 $27.57 $25.78 $27.82 $30.07 $33.41
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net expenses
to average net assets 0.80% *0.87% 0.90% 0.88% 0.87% 0.85% 0.81% 0.83% 0.87% 1.05% 1.05%
Ratio of net invest-
ment income to
average net assets 5.12% *5.68% 5.83% 5.36% 5.50% 4.94% 4.69% 4.53% 5.14% 3.45% 3.02%
Portfolio turnover
rate 86% 85% 93% 75% 71% 59% 53% 29% 45% 87% 15%(a)
Average commissions
(per share) -- -- -- -- -- -- -- -- -- $0.0537 $0.0594(a)
Total return 0.74% 6.51% 20.76% (6.86%) 29.67% 11.13% 14.57% 0.36% 14.49% 14.83% 23.60%
Net assets, end of
period (000 omitted) $140,279 $134,225 $144,890 $124,592 $150,689 $173,417 $222,292 $229,274 $228,560 $231,063 $284,846
</TABLE>
Growth & Income Fund
<TABLE>
<CAPTION>
Nine
Months
Ended
Sept. 30, Years Ended Sept. 30,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $10.49 $ 8.88 $11.34 $10.49 $12.27 $13.42 $14.83 $14.54 $16.65 $18.39
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income 0.17 0.22 0.26 0.26 0.19 0.17 0.18 0.34 0.27 0.30
Net realized and
unrealized gains
(losses) on
investments (1.64) 2.46 (0.85) 2.17 1.49 2.16 0.40 2.56 3.22 5.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations (1.47) 2.68 (0.59) 2.43 1.68 2.33 0.58 2.90 3.49 5.45
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
Net investment
Income (0.14) (0.22) (0.26) (0.29) (0.18) (0.16) (0.16) (0.20) (0.32) (0.28)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net realized capital
gains -- -- -- (0.36) (0.35) (0.76) (0.71) (0.59) (1.43) (0.65)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.14) (0.22) (0.26) (0.65) (0.53) (0.92) (0.87) (0.79) (1.75) (0.93)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of Period $ 8.88 $11.34 $10.49 $12.27 $13.42 $14.83 $14.54 $16.65 $18.39 $22.91
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net expenses
to average net
assets (b) 1.47% 1.24% 1.08% 1.00% 0.97% 0.88% 0.90% 0.96% 1.18% 1.13%
Ratio of net
investment income
to average net
assets (c) 2.03% 2.28% 2.40% 2.27% 1.46% 1.23% 1.18% 1.78% 1.65% 1.52%
Portfolio turnover
rate 105% 63% 51% 48% 40% 50% 85% 70% 13% 2%(a)
Average commissions
(per share) -- -- -- -- -- -- -- -- $0.0683 $0.0647(a)
Total return (13.90%) 30.63% (5.25%) 24.12% 14.00% 17.98% 4.03% 21.12% 22.67% 30.81%
Net assets,
end of period
(000 omitted) $23,002 $32,562 $43,446 $54,820 $70,724 $100,365 $129,680 $139,539 $204,387 $337,466
</TABLE>
Growth Stock Fund
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $16.97 $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89 $23.58 $26.13 $28.79
------ ------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment
income 0.24 0.19 0.34 0.39 0.33 0.18 0.15 0.13 0.12 0.08 0.01
Net realized and
unrealized gains
(losses) on
investments 0.46 (0.11) 4.51 (1.17) 5.90 3.01 1.14 0.41 5.60 5.01 8.79
------ ------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Total from investment
operations 0.70 0.08 4.85 (0.78) 6.23 3.19 1.29 0.54 5.72 5.09 8.80
------ ------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Distributions
Net investment
Income (0.29) (0.15) (0.34) (0.37) (0.42) (0.16) (0.10) (0.12) (0.15) (0.10) (0.07)
Net realized capital
gains (2.71) -- (0.06) -- (0.92) (1.17) (0.95) (1.73) (3.02) (2.33) (2.23)
------ ------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Total distributions (3.00) (0.15) (0.40) (0.37) (1.34) (1.33) (1.05) (1.85) (3.17) (2.43) (2.30)
------ ------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Net Asset Value,
End of Period $14.67 $14.60 $19.05 $17.90 $22.79 $24.65 $24.89 $23.58 $26.13 $28.79 $35.29
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net
expenses to average
net assets 0.65% *0.76% 0.77% 0.73% 0.79% 0.92% 0.93% 0.94% 0.99% 1.08% 1.07%
Ratio of net
investment income
to average net
assets 1.25% *1.62% 2.05% 2.03% 1.63% 0.75% 0.59% 0.50% 0.56% 0.32% 0.04%
Portfolio turnover
rate 143% 84% 47% 40% 34% 23% 29% 27% 36% 39% 5%(a)
Average commissions
(per share) -- -- -- -- -- -- -- -- -- $0.0528 $0.0582(a)
Total return 5.57% 0.54% 33.86% (4.17%) 36.64% 14.37% 5.09% 2.10% 28.18% 21.04% 33.10%
Net assets,
end of period
(000 omitted) $232,658 $195,641 $206,476 $206,031 $291,767 $372,758 $373,921 $321,502 $360,336 $417,964 $607,699
</TABLE>
Growth Opportunities Fund
Period Ended
Sept. 30,
1997 (d)
-----------
Net Asset Value, Beginning of Period $10.00
------
Income from Investment Operations
Net investment income (loss) --
Net realized and unrealized gains on investments .77
------
Total from investment operations .77
------
Distributions
Net investment income --
Net realized capital gains --
-----
Total distributions --
------
Net Asset Value, End of Period $10.77
======
Ratio of net expenses to average net assets (b) 1.25%*
Ratio of net investment income to average net
assets (c) 0.02%*
Portfolio turnover rate 3%
Average commissions (per share) $0.0708
Total return 7.70%
Net assets, end of period (000 omitted) $49,830
Special Fund
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $16.95 $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04 $23.54 $25.26 $27.39
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment income
(loss) 0.23 0.14 0.36 0.42 0.34 0.21 0.17 0.15 0.13 0.01 (0.06)
Net realized and
unrealized gains
(losses) on
investments 0.12 2.16 5.58 (2.10) 4.55 1.50 5.31 0.33 3.05 4.14 8.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.35 2.30 5.94 (1.68) 4.89 1.71 5.48 0.48 3.18 4.15 8.51
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
Net investment
income (0.57) (0.01) (0.21) (0.39) (0.34) (0.37) (0.18) (0.21) (0.15) (0.11) --
Net realized capital
gains (3.90) -- (0.06) (2.08) (1.32) (0.31) (1.16) (1.77) (1.31) (1.91) (2.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (4.47) (0.01) (0.27) (2.47) (1.66) (0.68) (1.34) (1.98) (1.46) (2.02) (2.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period $12.83 $15.12 $20.79 $16.64 $19.87 $20.90 $25.04 $23.54 $25.26 $27.39 $33.79
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net expenses
to average net
assets 0.96% *0.99% 0.96% 1.02% 1.04% 0.99% 0.97% 0.96% 1.02% 1.18% 1.14%
Ratio of net invest-
ment income (loss)
to average net
assets 1.32% *1.31% 2.12% 2.33% 2.11% 0.99% 0.92% 0.91% 0.56% 0.03% (0.17%)
Portfolio turnover
rate 103% 42% 85% 70% 50% 40% 42% 58% 41% 32% 7%(a)
Average commissions
(per share) -- -- -- -- -- -- -- -- -- $0.0482 $0.0382(a)
Total return 4.27% 17.94% 40.00% (8.78%) 32.18% 8.96% 27.35% 2.02% 14.60% 17.89% 33.67%
Net assets,
end of period
(000 omitted) $187,997 $224,628 $322,056 $361,065 $587,259 $626,080 $1,076,818 $1,243,885 $1,201,469 $1,158,498 $1,327,578
</TABLE>
Special Venture Fund
Period
Ended
Sept. 30, Years Ended Sept.
30,
1995(d) 1996 1997
-------- ------ ------
Net Asset Value, Beginning of Period $10.00 $12.60 $15.87
------ ------ ------
Income from Investment Operations
Net investment income (loss) 0.01 (0.02) (0.02)
Net realized and unrealized gains on
investments 2.67 3.86 3.12
------ ------ ------
Total from investment operations 2.68 3.84 3.10
------ ------ ------
Distributions
Net investment income (0.03) -- --
Net realized capital gains (0.05) (0.57) (1.52)
------ ------ ------
Total distributions (0.08) (0.57) (1.52)
------ ------ ------
Net Asset Value, End of Period $12.60 $15.87 $17.45
====== ====== ======
Ratio of net expenses to average net
assets (b) *1.25% 1.25%
1.29%
Ratio of net investment income(loss)
to average net assets (c) *0.12% (2.19%)
(0.18%)
Portfolio turnover rate 84% 72%
44%(a)
Average commissions (per share) -- $0.0378
$0.0390(a)
Total return 26.96% 31.81%
21.73%
Net assets, end of period (000
omitted) $60,533 $144,528
$235,755
Capital Opportunities Fund
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
Dec. 31, Sept. 30, Years Ended Sept. 30,
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $13.38 $10.62 $10.78 $14.58 $ 7.32 $11.00 $11.56 $15.44 $15.79 $21.69 $31.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Income from
Investment
Operations
Net investment
income (loss) 0.03 0.03 0.05 0.06 0.11 0.06 0.01 0.02 0.01 (0.06) (0.17)
Net realized and
unrealized gains
(losses) on
investments 0.62 0.13 3.86 (4.72) 3.73 0.60 3.91 0.34 5.91 10.41 (1.77)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total from invest-
ment operations 0.65 0.16 3.91 (4.66) 3.84 0.66 3.92 0.36 5.92 10.35 (1.94)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Distributions
Net investment
income (0.05) -- (0.05) (0.06) (0.08) (0.10) (0.04) (0.01) (0.02) (0.01) --
Net realized
capital gains (3.36) -- (0.06) (2.54) (0.08) -- -- -- -- (0.99) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total distribu-
tions (3.41) -- (0.11) (2.60) (0.16) (0.10) (0.04) (0.01) (0.02) (1.00) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Net Asset Value,
End of Period $10.62 $10.78 $14.58 $ 7.32 $11.00 $11.56 $15.44 $15.79 $21.69 $31.04 $29.10
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio of net
expenses to
average net
assets 0.95% *1.01% 1.09% 1.14% 1.18% 1.06% 1.06% 0.97% 1.05% 1.22% 1.17%
Ratio of net invest-
ment income (loss)
to average net
assets 0.18% *0.34% 0.42% 0.43% 1.19% 0.42% 0.09% 0.04% 0.08% (0.40%) (0.69%)
Portfolio turnover
rate 133% 164% 245% 171% 69% 46% 55% 46% 60% 22% 35%
Average commissions
(per share) -- -- -- -- -- -- -- -- -- $0.0555 $0.0487
Total return 9.38% 1.51% 36.68% (37.51%) 53.51% 5.99% 34.01% 2.31% 37.46% 49.55% (6.25%)
Net assets,
end of period
(000 omitted) $171,973 $194,160 $272,805 $86,342 $129,711 $118,726 $153,101 $175,687 $242,381 $1,684,538 $1,110,642
</TABLE>
- --------
*Annualized.
(a) Prior to commencement of operations of the Portfolio. The
portfolio turnover rates for the Portfolios from Feb. 3, 1997,
were as follows: Balanced Portfolio, 21%; Growth & Income
Portfolio, 7%; Growth Stock Portfolio, 22%; Special Portfolio,
8%; and Special Venture Portfolio, 58%.
(b) If the Funds had paid all of their expenses and there had been
no reimbursement by the Adviser, this ratio would have been
1.09% for the year ended Sept. 30, 1990 for Growth & Income
Fund; 2.87% for the period ended Sept. 30, 1995 and 1.34% for
the year ended Sept. 30, 1996 for Special Venture Fund; and
1.74% for the period ended Sept. 30, 1997 for Growth
Opportunities Fund.
(c) Computed giving effect to the Adviser's fee waiver.
(d) From the commencement of operations: Oct. 17, 1994 for Special
Venture Fund and June 30, 1997 for Growth Opportunities Fund.
(e) For Capital Opportunities Fund, all per share amounts and
Average Shares Outstanding During Period on the debt table
reflect a two-for-one stock split effective Aug. 25, 1995.
(f) For the periods indicated below, bank borrowing activity was as
follows:
Average debt Average shares Average
Period Ended Debt outstanding outstanding outstanding debt per
at end of period during period during period share
(in thousands) (in thousands) (in thousands) during period
- --------------- ---------------- ------------- -------------- ------------
Growth Stock Fund
9/30/89 $-- $ 124 11,745 $0.0106
Capital Opportun-
ities Fund
12/31/87 -- 292 16,008 0.0183
9/30/88 -- 56 17,206 0.0033
9/30/89 -- 422 16,066 0.0263
9/30/90 200 1,042 15,944 0.0654
The Funds had no bank borrowings during any other periods.
THE FUNDS
The mutual funds offered by this prospectus are Stein Roe Growth &
Income Fund ("Growth & Income Fund"), Stein Roe Balanced Fund
("Balanced Fund"), Stein Roe Growth Stock Fund ("Growth Stock
Fund"), Stein Roe Growth Opportunities Fund ("Growth Opportunities
Fund"), Stein Roe Special Fund ("Special Fund"), Stein Roe Special
Venture Fund ("Special Venture Fund"), and Stein Roe Capital
Opportunities Fund ("Capital Opportunities Fund") (collectively,
the "Funds"). Each of the Funds is a no-load "mutual fund."
Mutual funds sell their own shares to investors and use the money
they receive to invest in a portfolio of securities such as common
stocks. A mutual fund allows you to pool your money with that of
other investors in order to obtain professional investment
management. Mutual funds generally make it possible for you to
obtain greater diversification of your investments and simplify
your recordkeeping. The Funds do not impose commissions or charges
when shares are purchased or redeemed.
The Funds are series of 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 the Funds and the Portfolios. 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.
On Feb. 3, 1997, Growth & Income Fund, Balanced Fund, Growth Stock
Fund, Special Fund and Special Venture Fund became "feeder funds"-
- -that is, each invested all of its respective assets in a "master
fund" that has an investment objective identical to that of the
Fund. Each master fund is a series of SR&F Base Trust ("Base
Trust"); each master fund is referred to as a "Portfolio." Before
converting to a feeder fund, each Fund invested its assets in a
diversified group of securities. Under the "master fund/feeder
fund structure," a feeder fund and one or more other feeder funds
pool their assets in a master portfolio that has the same
investment objective and substantially the same investment policies
as the feeder funds. The purpose of such an arrangement is to
achieve greater operational efficiencies and reduce costs. The
assets of each Portfolio are managed by the Adviser in the same
manner as the assets of the feeder fund were managed before
conversion to the master fund/feeder fund structure. Growth
Opportunities Fund and Capital Opportunities Fund may at some time
in the future convert into feeder funds. (For more information,
see Master Fund/Feeder Fund: Structure and Risk Factors.)
INVESMENT POLICIES
The Funds invest as described in the section below. Further
information on portfolio investments and strategies may be found
under Portfolio Investments and Strategies in this prospectus and
in the Statement of Additional Information.
The investment objective of Growth & Income Fund is to provide
both growth of capital and current income. Growth & Income Fund
invests all of its net investable assets in SR&F Growth & Income
Portfolio ("Growth & Income Portfolio"). Growth & Income Fund is
designed for investors seeking a diversified portfolio of
securities that offers the opportunity for long-term growth of
capital while also providing a steady stream of income. Growth &
Income Portfolio invests primarily in well-established companies
whose common stocks are believed to have the potential both to
appreciate in value and to pay dividends to shareholders.
Although it may invest in a broad range of securities
(including common stocks, preferred stocks, securities convertible
into or exchangeable for common stocks, and warrants or rights to
purchase common stocks), normally Growth & Income Portfolio
emphasizes investments in equity securities of companies having
market capitalizations in excess of $1 billion. Securities of
these well-established companies are believed to be generally less
volatile than those of companies with smaller capitalizations
because companies with larger capitalizations tend to have
experienced management; broad, highly diversified product lines;
deep resources; and easy access to credit.
The investment objective of Balanced Fund is to seek long-term
growth of capital and current income, consistent with reasonable
investment risk. Balanced Fund invests all of its net investable
assets in SR&F Balanced Portfolio ("Balanced Portfolio"). Balanced
Portfolio allocates its investments among equities, debt
securities, and cash. The portfolio manager determines those
allocations based on the views of the Adviser's investment
strategists regarding economic, market, and other factors relative
to investment opportunities.
The equity portion of the investment portfolio is invested
primarily in well-established companies having market
capitalizations in excess of $1 billion. Fixed income senior
securities will make up at least 25% of Balanced Portfolio's total
assets. Investments in debt securities are limited to those that
are within the four highest grades (generally referred to as
"investment grade") assigned by a nationally recognized statistical
rating organization or, if unrated, determined by the Adviser to be
of comparable quality.
The investment objective of Growth Stock Fund is long-term
capital appreciation. Growth Stock Fund invests all of its net
investable assets in SR&F Growth Stock Portfolio ("Growth Stock
Portfolio"). Growth Stock Portfolio attempts to achieve its
objective by normally investing at least 65% of its total assets in
common stocks and other equity-type securities (such as preferred
stocks, securities convertible into or exchangeable for common
stocks, and warrants or rights to purchase common stocks) that, in
the opinion of the Adviser, have long-term appreciation
possibilities.
The 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 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 also
may 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
large 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.
The investment objective of Special Fund is to invest in
securities selected for capital appreciation. Special Fund invests
all of its net investable assets in SR&F Special Portfolio
("Special Portfolio"). Particular emphasis is placed on securities
that are considered to have limited downside risk relative to their
potential for above-average growth--including securities of
undervalued, underfollowed or out-of-favor companies, and companies
that are low-cost producers of goods or services, financially
strong, or run by well-respected managers. Special Portfolio may
invest in securities of seasoned, established companies that appear
to have appreciation potential, as well as securities of relatively
small, new companies. In addition, it may invest in securities
with limited marketability; new issues of securities; securities of
companies that, in the Adviser's opinion, will benefit from
management change, new technology, new product or service
development, or change in demand; and other securities that the
Adviser believes have capital appreciation possibilities. Special
Portfolio does not, however, currently intend to invest, nor has it
invested in the past fiscal year, more than 5% of its net assets in
any of these types of securities. Securities of smaller, newer
companies may be subject to greater price volatility than
securities of larger, well-established companies. In addition,
many smaller companies are less well known to the investing public
and may not be as widely followed by the investment community.
Although Special Portfolio invests primarily in common stocks, it
may also invest in other equity-type securities, including
preferred stocks and securities convertible into equity securities.
The investment objective of Special Venture Fund is to seek
long-term capital appreciation. Special Venture Fund invests all
of its net investable assets in SR&F Special Venture Portfolio
("Special Venture Portfolio"). Special Venture Portfolio invests
primarily in a diversified portfolio of common stocks and other
equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed
companies that the Adviser believes represent special
opportunities. Special Venture Portfolio emphasizes investments in
financially strong small and medium-sized companies, based
principally on appraisal of their management and stock valuations.
The Adviser considers "small" and "medium-sized" companies to be
those with market capitalizations of less than $1 billion and $1 to
$3 billion, respectively.
In both its initial and ongoing appraisals of a company's
management, the Adviser seeks to know both the principal owners and
senior management and to assess, through personal visits, their
business judgment and strategies. The Adviser favors companies
whose management has an owner/operator, risk-averse orientation and
a demonstrated ability to create wealth for investors. Attractive
company characteristics include unit growth, favorable cost
structures or competitive positions, and financial strength that
enables management to execute business strategies under difficult
conditions. A company is attractively valued when its stock can be
purchased at a meaningful discount to the value of the underlying
business.
Capital Opportunities Fund's investment objective is long-term
capital appreciation, which it attempts to achieve by investing in
selected companies that, in the opinion of the Adviser, offer
opportunities for capital appreciation.
Capital Opportunities Fund pursues its objective by investing
in aggressive growth companies. An aggressive growth company, in
general, is one that appears to have the ability to increase its
earnings at an above-average rate. Investments may include
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size that offer strong earnings
growth potential. Such companies may benefit from new products or
services, technological developments, or changes in management.
Securities of smaller companies may be subject to greater price
volatility than securities of larger companies. In addition, many
smaller companies are less well known to the investing public and
may not be as widely followed by the investment community.
Although it invests primarily in common stocks, Capital
Opportunities Fund may invest in all types of equity securities,
including preferred stocks and securities convertible into common
stocks.
PORTFOLIO INVESTMENTS AND STRATEGIES
For purposes of discussion under Portfolio Investments and
Strategies, the term "Fund" also means "Portfolio."
Debt Securities. In pursuing its investment objective, each Fund
may invest in debt securities of corporate and governmental
issuers. Investments in debt securities by Growth & Income
Portfolio, Balanced Portfolio, and Growth Stock Portfolio are
limited to those that are rated within the four highest grades
(generally referred to as "investment grade") assigned by a
nationally recognized statistical rating organization. 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 a Fund is lost or reduced below investment grade,
the Fund is not required to dispose of the security--the Adviser
will, however, consider that fact in determining whether that Fund
should continue to hold the security. Growth Opportunities Fund,
Special Venture Portfolio, Capital Opportunities Fund, and Special
Portfolio 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.
The risks inherent in debt securities depend primarily on the
term and quality of the obligations in a Fund's portfolio as well
as on market conditions. A decline in the prevailing levels of
interest rates generally increases the value of debt securities.
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, the
Funds may invest without limitation in high-quality fixed income
securities or hold assets in cash or cash equivalents.
Convertible Securities. By investing in convertible securities, a
Fund obtains the right to benefit from the capital appreciation
potential in the underlying stock upon exercise of the conversion
right, while earning higher current income than would be available
if the stock were purchased directly. In determining whether to
purchase a convertible security, the Adviser will consider
substantially the same criteria that would be considered in
purchasing the underlying stock. Although convertible securities
purchased by a Fund are frequently rated investment grade, the
Funds also may purchase unrated securities or securities rated
below investment grade if the securities meet the Adviser's other
investment criteria. Convertible securities rated below investment
grade:
- - 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; and
- - May be more thinly traded due to such securities being less well
known to investors than investment grade convertible securities,
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. Each Fund may invest in foreign securities.
Other than American Depositary Receipts (ADRs), foreign debt
securities denominated in U.S. dollars, and securities guaranteed
by a U.S. person, each Fund is limited to investing no more than
25% of its total assets in foreign securities. (See Risks and
Investment Considerations.) The Funds may invest in sponsored or
unsponsored ADRs. In addition to, or in lieu of, such direct
investment, a Fund may construct a synthetic foreign 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, the Funds may contract to purchase an amount of foreign
currency sufficient to pay the purchase price of the securities at
the settlement date. Such a contract involves the risk that the
value of the foreign currency may decline relative to the value of
the dollar prior to the settlement date--this risk is in addition
to the risk that the value of the foreign security purchased may
decline. The Funds also may enter into foreign currency contracts
as a hedging technique to limit or reduce exposure to currency
fluctuations. In addition, the Funds may use options and futures
contracts, as described below, to limit or reduce exposure to
currency fluctuations.
As of Sept. 30, 1997, holdings of foreign companies, as a
percentage of net assets, were as follows: Balanced Portfolio,
11.4% (3.9% in foreign securities and 7.5% in ADRs); Growth &
Income Portfolio, 3.1% (0.5% in foreign securities and 2.6% in
ADRs); Growth Stock Portfolio, 4.8% (1.6% in foreign securities and
3.2% in ADRs); Growth Opportunities Fund, 2.2% (none in foreign
securities and 2.2% in ADRs); Special Portfolio, 7.8% (5.3% in
foreign securities and 2.5% in ADSs); Special Venture Portfolio,
3.2% (1.7% in foreign securities and 1.5% in ADRs); and Capital
Opportunities Fund, 2.2% (none in foreign securities and 2.2% in
ADRs).
Lending Portfolio Securities; When-Issued and Delayed-Delivery
Securities. Each Fund may make loans of its portfolio securities
to broker-dealers and banks subject to certain restrictions
described in the Statement of Additional Information. Each Fund
may participate in an interfund lending program, subject to certain
restrictions described in the Statement of Additional Information.
Each Fund may invest in securities purchased on a when-issued or
delayed-delivery basis. Although the payment terms of these
securities are established at the time the Fund enters into the
commitment, the securities may be delivered and paid for a month or
more after the date of purchase, when their value may have changed.
A Fund will make such commitments only with the intention of
actually acquiring the securities, but may sell the securities
before settlement date if it is deemed advisable for investment
reasons.
Portfolio Turnover. Although the Funds do not purchase securities
with a view to rapid turnover, there are no limitations on the
length of time portfolio securities must be held, and the portfolio
turnover rate may vary significantly from year to year. Under
normal circumstances, Special Venture Portfolio expects to
experience moderate portfolio turnover with an investment time
horizon of three to five years, but its portfolio turnover is not
expected to exceed 100%. At times, Special Portfolio and Capital
Opportunities Fund may invest for short-term capital appreciation.
Flexibility of investment and emphasis on capital appreciation may
involve greater portfolio turnover than that of mutual funds that
have the objectives of income or maintenance of a balanced
investment position. A high rate of portfolio turnover may result
in increased transaction expenses and the realization of capital
gains and losses. (See Financial Highlights and Distributions and
Income Taxes.) Growth Stock Fund, Special Fund, Special Venture
Fund, and Capital Opportunities Fund are not intended to be income-
producing investments, although they may produce varying amounts of
income.
Derivatives. Consistent with its objective, each Fund may invest
in a broad array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options;
futures contracts; futures options; securities collateralized by
underlying pools of mortgages or other receivables; floating rate
instruments; and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency. No Fund expects to invest more than
5% of its net assets in any type of Derivative except for options,
futures contracts, and futures options.
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because 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 hedge against changes in security
prices, interest rates or currency fluctuation, each 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. A Fund may write a call or put option only if
the option is covered. As the writer of a covered call option, a
Fund foregoes, during the option's life, the opportunity to profit
from increases in market value of the security covering the call
option above the sum of the premium and the exercise price of the
call. There can be no assurance that a liquid market will exist
when a Fund seeks to close out a position. In addition, because
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. Each 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 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
Each Fund and Portfolio is diversified as that term is defined in
the Investment Company Act of 1940.
No Fund or Portfolio will 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 a Fund from investing all of its
assets in shares of another investment company having the identical
investment objective under a master/feeder structure.
- --------
/1/ A repurchase agreement involves a sale of securities to a Fund
or Portfolio 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 or Portfolio could
experience both losses and delays in liquidating its collateral.
- -----------------
No Fund or Portfolio will acquire more than 10% of the
outstanding voting securities of any one issuer. Each Fund may,
however, invest all of its assets in shares of another investment
company having the identical investment objective under a
master/feeder structure.
While no Fund or Portfolio may make loans, each may (1)
purchase money market instruments and enter into repurchase
agreements; (2) acquire publicly distributed or privately placed
debt securities; (3) lend portfolio securities under certain
conditions; and (4) participate in an interfund lending program
with other Stein Roe Funds and Portfolios. No Fund or Portfolio
may borrow money, except for nonleveraging, 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.
The Funds and Portfolios may invest in repurchase agreements,
provided that none 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 second, third, and fourth
paragraphs under this section (except for the second and third
paragraphs as they relate to Special Fund and Special Portfolio)
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
objectives of the Funds and the Portfolios are nonfundamental 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. Any such change may result
in a Fund having an investment objective different from the
objective the shareholder considered appropriate at the time of
investment in the Fund. All of the investment restrictions are set
forth in the Statement of Additional Information.
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Growth & Income Fund is
designed for long-term investors who desire to participate in the
stock market with moderate investment risk while seeking to limit
market volatility. Balanced Fund is designed for long-term
investors who can accept the fluctuations in portfolio value and
other risks associated with seeking long-term capital appreciation
through investments in securities. Growth Stock Fund and Special
Fund are designed for long-term investors who desire to participate
in the stock market with more investment risk and volatility than
the stock market in general, but with less investment risk and
volatility than aggressive capital appreciation funds. 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 by investing
in a diversified portfolio of common stocks of large, mid-sized and
small companies. Special Venture Fund is designed for long-term
investors who want greater return potential than is available from
the stock market in general, and who are willing to tolerate the
greater investment risk and market volatility associated with
investments in small and medium-sized companies. Capital
Opportunities Fund is an aggressive growth fund and is designed for
long-term investors who can accept the fluctuations in portfolio
value and other risks associated with seeking long-term capital
appreciation through investments in common stocks. Of course,
there can be no guarantee that a Fund will achieve its objective.
Securities of small and medium-sized companies may be subject
to greater price volatility than securities of larger companies and
tend to have a lower degree of market liquidity. They also may be
more sensitive to changes in economic and business conditions, and
may react differently than securities of larger companies. In
addition, such companies are less well known to the investing
public and may not be as widely followed by the investment
community.
Debt securities rated in the fourth highest grade may have
some speculative characteristics, and changes in economic
conditions or other circumstances may lead to a weakened capacity
of the issuers of such securities to make principal and interest
payments. Securities rated below investment grade may possess
speculative characteristics, and changes in economic conditions are
more likely to affect the issuer's capacity to pay interest or
repay principal.
Although Growth & Income Portfolio, Balanced Portfolio,
Special Portfolio, Special Venture Portfolio, Growth Opportunities
Fund, and Capital Opportunities Fund do not attempt to reduce or
limit risk through wide industry diversification of investment,
they usually allocate their investments among a number of different
industries rather than concentrating in a particular industry or
group of industries. Growth Stock Portfolio seeks to reduce risk
by investing in a diversified portfolio, but this does not
eliminate all risk. No Fund or Portfolio, however, will invest
more than 25% of the total value of its assets (at the time of
investment) in the securities of companies in any one industry.
(See 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; different accounting, auditing,
and financial reporting standards; different settlement practices;
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
nonresidents may apply, including imposition of exchange controls
and withholding taxes on dividends, and seizure or nationalization
of investments owned by nonresidents. Foreign investments also
tend to involve higher transaction and custody costs.
HOW TO PURCHASE SHARES
You may purchase shares of any of the Funds by check, by wire, by
electronic transfer, or by exchange from your account with another
no-load 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} program 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.)
Growth Stock Fund Accounts. Growth Stock Fund is closed to
purchases (including exchanges) by new investors except for
purchases by eligible investors as described below. Investment
Trust has taken this step to facilitate management of the Fund's
portfolio. If you are already a shareholder of Growth Stock Fund,
you may continue to add to your account or open another account
with the Fund in your name. In addition, you may open a new
account if:
- - you are a shareholder of any other Stein Roe Fund, having
purchased shares directly from Stein Roe, as of Oct. 15, 1997
and you are opening a new account by exchange or by dividend
reinvestment as described in the prospectus;
- - you are a client of the Adviser;
- - you are a trustee of Investment Trust; an employee of the
Adviser, or any of its affiliated companies; or a member of the
immediate family of any trustee or employee;
- - you purchase shares (i) under an asset allocation program
sponsored by a financial advisor, broker-dealer, bank, trust
company or other intermediary or (ii) from certain financial
advisors who charge a fee for services and who, as of Oct. 15,
1997, have one or more clients who were Growth Stock Fund
shareholders; or
- - you purchase shares for an employee benefit plan, the records for
which are maintained by a trust company or third party
administrator under an investment program with Growth Stock
Fund.
The Board of Trustees of Investment Trust concluded that
permitting the additional investments described above would not
adversely affect the ability of the Adviser to manage Growth Stock
Fund effectively. If you have questions about your eligibility to
purchase shares of Growth Stock Fund, please call 800-338-2550.
By Check. To make an initial purchase of shares of a 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}
program 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.
Money orders will not be accepted for initial purchases into new
accounts. Credit card convenience checks will not be accepted for
initial or subsequent purchases into your account. 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 a Fund be cancelled because your
check does not clear, you will be responsible for any resulting
loss incurred by that Fund.
By Wire. You also may pay for shares by instructing your bank to
wire federal funds (monies of member banks within the Federal
Reserve System) to the Funds 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 the Funds 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 _____ Fund
Account of (exact name(s) in registration)
Shareholder Account No. ________
Fund Numbers:
11--Growth & Income Fund
31--Balanced Fund
32--Growth Stock Fund
20--Growth Opportunities Fund
34--Special Fund
16--Special Venture Fund
33--Capital Opportunities Fund
Participants in the Stein Roe Counselor [service mark} program
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 _____ 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 prescheduled
intervals ("Regular Investments"). (See Shareholder Services.)
Electronic transfer purchases are subject to a $50 minimum and a
$100,000 maximum. You may not open a new account through
electronic transfer. Should an order to purchase shares of a Fund
be cancelled because your electronic transfer does not clear, you
will be responsible for any resulting loss incurred by that Fund.
By Exchange. You may purchase shares by exchange of shares from
another no-load 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 a 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 that 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 interests
of Investment Trust or of a 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 certain 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.
An Intermediary, who accepts orders that are processed at the
net asset value next determined after receipt of the order by the
Intermediary, accepts such orders as agent of the Funds. The
Intermediary is required to segregate any orders received on a
business day after the close of regular session trading on the New
York Stock Exchange and transmit those orders separately for
execution at the net asset value next determined after that
business day.
Some Intermediaries that maintain nominee accounts with the
Funds for their clients for whom they hold Fund shares charge an
annual fee of up to 0.25% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. The Adviser
and the Funds' 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 a Fund's
shares made directly with the Fund is made at that Fund's net asset
value (see Net Asset Value) next determined after receipt of an
order in good form, including receipt of payment as follows:
A purchase by check or wire transfer is made at the net asset
value next determined after the Fund receives the check or wire
transfer of funds in payment of the purchase.
A purchase by electronic transfer is made at the net asset
value next determined after the Fund receives the electronic
transfer from your bank. A Special Electronic Transfer Investment
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 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 a 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, in English and must indicate
the number of shares or the dollar amount to be redeemed and
identify the shareholder's account number;
(2) The request must be signed by the shareholder(s) exactly as
the shares are registered;
(3) The request must be accompanied by any certificates for the
shares, either properly endorsed for transfer, or accompanied
by a stock assignment properly endorsed exactly as the shares
are registered;
(4) The signatures on either the written redemption request or the
certificates (or the accompanying stock power) must be
guaranteed (a signature guarantee is not a notarization, but is
a widely accepted way to protect you and the Funds by verifying
your signature);
(5) Corporations and associations must submit with each request a
completed Certificate of Authorization included in this
prospectus (or a form of resolution acceptable to Investment
Trust); and
(6) The request must include other supporting legal documents as
required from organizations, executors, administrators,
trustees, or others acting on accounts not registered in their
names.
By Exchange. You may redeem all or any portion of your Fund shares
and use the proceeds to purchase shares of any other no-load 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 no-load Stein
Roe Fund in which you wish to invest and read it carefully. The
registration of the account to which you are making an exchange
must be exactly the same as that of the Fund account from which the
exchange is made and the amount you exchange must meet any
applicable minimum investment of the no-load Stein Roe Fund being
purchased. An exchange may be made by following the redemption
procedure described under By Written Request and indicating the no-
load 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.
You may not use any of the Special Redemption Privileges if
you hold certificates for any of your Fund shares. The Telephone
Redemption by Check Privilege, Telephone Redemption by Wire
Privilege, and Special Electronic Transfer Redemptions are not
available to redeem shares held by a tax-sheltered retirement plan
sponsored by the Adviser. (See also General Redemption Policies.)
Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four Telephone
Exchange round-trips per year and the Funds may refuse requests for
Telephone Exchanges in excess of four round-trips (a round-trip
being the exchange out of a Fund into another no-load Stein Roe
Fund, and then back to that 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 the
Funds. Therefore, regardless of the number of telephone exchange
round-trips made by an investor, Investment Trust generally will
not honor requests for Telephone Exchanges by shareholders
identified by Investment Trust as "market-timers" if the officers
of Investment Trust determine the order not to be in the best
interests of Investment Trust or its shareholders. Investment
Trust generally identifies as a "market-timer" an investor whose
investment decisions appear to be based on actual or anticipated
near-term changes in the securities markets rather than for
investment considerations. 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 the Funds,
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 the Funds. 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 Fund
account for investment in another no-load 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 that Fund's net asset
value per share at the time of redemption, it may be more or less
than the price you originally paid for the shares and may result in
a realized capital gain or loss.
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 will
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. The Funds employ
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege or
the Special Electronic Transfer Redemption Privilege are genuine.
Use of any Special Redemption Privilege or the Special Electronic
Transfer Redemption Privilege authorizes the Funds and their
transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If a Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses due
to unauthorized or fraudulent instructions.
Investment Trust reserves the right to redeem shares in any
account and send the proceeds to the owner of record if the shares
in the account do not have a value of at least $1,000. If the
value of the account is more than $10, 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.
Investment Trust reserves the right to redeem any account with a
value of $10 or less without prior written notice to the
shareholder. Due to the proportionately higher costs of
maintaining small accounts, the transfer agent may charge and
deduct from the account a $5 per quarter minimum balance fee if the
account is a regular account with a balance below $2,000 or an UGMA
account with a balance below $800. This minimum balance fee does
not apply to Stein Roe IRAs, other Stein Roe prototype retirement
plans, accounts with automatic investment plans (unless regular
investments have been discontinued), or omnibus or nominee
accounts. The transfer agent may waive the fee, at its discretion,
in the event of significant market corrections.
Shares in any account you maintain with a Fund or any of the
other Stein Roe Funds may be redeemed to the extent necessary to
reimburse any Stein Roe Fund for any loss you cause it to sustain
(such as loss from an uncollected check or electronic transfer for
the purchase of shares, or any liability under the Internal Revenue
Code provisions on backup withholding).
SHAREHOLDER SERVICES
Reporting to Shareholders. You will receive a confirmation
statement reflecting each of your purchases and redemptions of
shares of a Fund, as well as periodic statements detailing
distributions made by that Fund. Shares purchased by reinvestment
of dividends, by cross-reinvestment of dividends from another Fund,
or 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.
To reduce the volume of mail you receive, only one copy of
certain materials, such as prospectuses and shareholder reports,
will be mailed to your household (same address). Please call 800-
338-2550 if you wish to receive additional copies free of charge.
This policy may not apply if you purchased shares through an
Intermediary.
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.) Information regarding your account is available
to you via Funds-on-Call [registered mark] only after you follow an
activation process the first time you call. Your account
information is protected by a personal identification number (PIN)
that you establish.
Stein Roe Counselor [service mark} Program. The Stein Roe
Counselor [service mark} program is a professional investment
advisory service available to shareholders. This program is
designed to provide investment guidance in helping investors to
select a portfolio of Stein Roe Funds.
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 no-load 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--diversify your Fund investments by
having distributions from one no-load Stein Roe Fund account
automatically invested in another no-load Stein Roe Fund account.
Before establishing this option, you should obtain and carefully
read 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)--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--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)--redeem shares
at any time and have the proceeds deposited directly to your bank
account ($50 minimum; $100,000 maximum).
Regular Investments (electronic transfer)--purchase Fund
shares at regular intervals directly from your bank account ($50
minimum; $100,000 maximum).
Special Investments (electronic transfer)--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--automatically redeem a fixed dollar
amount from your Fund account and invest it in another no-load
Stein Roe Fund account on a regular basis ($50 minimum; $100,000
maximum).
Automatic Redemptions (electronic transfer)--have a fixed
dollar amount redeemed and sent at regular intervals directly to
your bank account ($50 minimum; $100,000 maximum).
Systematic Withdrawals--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 or redemption price of each Fund's shares is its net
asset value per share. The net asset value of a share of each Fund
is determined as of the close of regular session 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 a
Fund should be determined on any such day, in which case the
determination will be made at 3:00 p.m., central time. Each
Portfolio allocates net asset value, income, and expenses among its
feeder funds in proportion to their respective interests in the
Portfolio.
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 for Growth & Income Fund and
Balanced Fund are normally declared and paid quarterly; and income
dividends for Growth Stock Fund, Growth Opportunities Fund, Special
Fund, Special Venture Fund, and Capital Opportunities Fund are normally
declared and paid annually. Each Fund intends to distribute by the
end of each calendar year at least 98% of any net capital gains
realized from the sale of securities during the 12-month period
ended Oct. 31 in that year. Therefore, an additional dividend may
be declared near year end. The Funds intend to distribute any
undistributed net investment income and net realized capital gains
in the following year.
All of your income dividends and capital gains 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 no-load Stein Roe Fund; or (4) applied to
purchase shares in a no-load 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 no-load Stein Roe
Fund account occurs on the payable date. If a shareholder elected
to receive dividends and/or capital gains distributions in cash and
the postal or other delivery service selected by the transfer agent
is unable to deliver checks to the shareholder's address of record,
such shareholder's distribution option will automatically be
converted to having all dividend and other distributions reinvested
in additional shares. 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 Fund shares if checks mailed to you for
distributions are returned as undeliverable or are not presented
for payment within six months. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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 Jan. but was declared in the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to federal income tax at ordinary rates on
income dividends and distributions of net short-term capital gains.
Distributions of net long-term capital gains will be taxable to you
as long-term capital gains 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
gains distributions you have received with respect to those shares.
The Taxpayer Relief Act of 1997 (the "Act") reduced from 28%
to 20% the maximum tax rate on long-term capital gains. This
reduced rate generally applies to securities held for more than 18
months and sold after July 28, 1997, and securities held for more
than one year and sold between May 6, 1997 and July 29, 1997.
For federal income tax purposes, each 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. The Funds
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for a Fund to reimburse you for amounts
withheld. 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 a Fund is measured by the
distributions received (assuming reinvestment), plus or minus the
change in the net asset value per share for a given period. A
total return percentage may be calculated by dividing the value of
a share at the end of the period (including reinvestment of
distributions) by the value of the share at the beginning of the
period and subtracting one. For a given period, an average annual
total return may be calculated by finding the average annual
compounded rate that would equate a hypothetical $1,000 investment
to the ending redeemable value.
Comparison of a Fund's total return with alternative
investments should consider differences between the Fund and the
alternative investments, the periods and methods used in
calculation of the return being compared, and the impact of taxes
on alternative investments. Of course, past performance is no
guarantee of future results.
MANAGEMENT
Trustees and Adviser. The Board of Trustees of Investment Trust
and the Board of Base Trust have overall management responsibility
for the Funds and the Portfolios, respectively. See the Statement
of Additional Information for the names of and additional
information about the trustees and officers. Since Investment
Trust and Base Trust have the same trustees, the trustees have
adopted conflict of interest procedures to monitor and address
potential conflicts between the interests of the Funds and the
Portfolios.
The Adviser, Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, Illinois 60606, is responsible for managing
the Funds and the Portfolios, subject to the direction of the
respective Board of Trustees. The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940. The
Adviser and its predecessor have advised and managed mutual funds
since 1949. The Adviser is a wholly owned indirect subsidiary of
Liberty Financial Companies, Inc. ("Liberty Financial"), which in
turn is a majority owned indirect subsidiary of Liberty Mutual
Insurance Company.
In approving the use of a single combined prospectus, the
Boards considered the possibility that one Fund or Portfolio might
be liable for misstatements in the prospectus regarding information
concerning another Fund or Portfolio.
Portfolio Managers. Daniel K. Cantor has been portfolio manager of
Growth & Income Portfolio since its inception in 1997 and had been
portfolio manager of Growth & Income Fund since 1995. He is a
senior vice president of the Adviser, which he joined in 1985. A
chartered financial analyst, he received a B.A. degree from the
University of Rochester (1981) and an M.B.A. from the Wharton
School of the University of Pennsylvania (1985). As of Sept. 30,
1997, Mr. Cantor was responsible for managing $338 million in
mutual fund net assets. Jeffrey C. Kinzel is associate portfolio
manager. Mr. Kinzel received a B.A. from Northwestern University
(1979), a J.D. from the University of Michigan Law School (1983),
and an M.B.A. from the Wharton School of the University of
Pennsylvania (1991). Mr. Kinzel is a vice president and
intermediate research analyst with the Adviser. Before joining the
Adviser in 1991 as an equity research analyst, Mr. Kinzel was
employed by the law firm of Butler and Binion; the law firm of
Miller, Canfield, Paddock and Stone; and 1838 Investment Advisers.
Harvey B. Hirschhorn has been portfolio manager of Balanced
Portfolio since its inception in 1997 and had been portfolio
manager of Balanced Fund since Apr., 1996. He is executive vice
president and chief economist and investment strategist of the
Adviser, which he joined in 1973. He received an A.B. degree from
Rutgers College (1971) and an M.B.A. from the University of Chicago
(1973), and is a chartered financial analyst. Mr. Hirschhorn was
responsible for managing $615 million in mutual fund net assets at
Sept. 30, 1997. William Garrison and Sandra Knight are associate
portfolio managers. Mr. Garrison joined the Adviser in 1989. He
received his A.B. from Princeton University (1988) and an M.B.A.
from the University of Chicago (1995). Ms. Knight is a vice
president and quantitative analyst with the Adviser, which she
joined in 1991. She earned a B.S. degree from Lawrence
Technological University (1984) and an M.B.A. from Loyola
University of Chicago (1991).
Erik P. Gustafson has been portfolio manager of Growth Stock
Portfolio since its inception in 1997 and had managed Growth Stock
Fund since 1994. Mr. Gustafson is a senior vice president and
senior portfolio manager with the Adviser, which he joined in 1992.
From 1989 to 1992 he was an attorney with Fowler, White, Burnett,
Hurley, Banick & Strickroot. He holds a B.A. from the University
of Virginia (1985) and M.B.A. and J.D. degrees from Florida State
University (1989). Mr. Gustafson was responsible for managing $1.3
billion in mutual fund net assets at Sept. 30, 1997. David P.
Brady is associate portfolio manager. Mr. Brady is a vice
president of the Adviser, which he joined the Adviser in 1993, and
was an equity investment analyst with State Farm Mutual Automobile
Insurance Company from 1986 to 1993.
Gloria J. Santella and Eric S. Maddix are co-portfolio
managers of Capital Opportunities Fund and Growth Opportunities
Fund. Arthur J. McQueen also co-manages Growth Opportunities Fund.
They have managed Growth Opportunities Fund since its inception in
1997. Ms. Santella has been portfolio manager of Capital
Opportunities Fund since Oct. 1994, and had previously been co-
portfolio manager since Mar. 1991. Ms. Santella is a senior vice
president of the Adviser, having been associated with it since
1979. She received her B.B.A. from Loyola University (1979) and
M.B.A. from the University of Chicago (1983). Mr. Maddix became
co-portfolio manager of Capital Opportunities Fund in 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). Mr. McQueen, a senior vice
president of the Adviser, joined it in 1987. He received a B.S.
from Villanova University (1980) and an M.B.A. from the Wharton
School of the University of Pennsylvania (1987). As of Sept. 30,
1997, Ms. Santella and Mr. Maddix co-managed $1.1 billion in mutual
fund net assets and Mr. McQueen co-managed $50 million in mutual
fund net assets.
Richard B. Peterson has been co-manager of Special Venture
Portfolio since its inception in 1997 and had been portfolio
manager of Special Venture Fund since its inception in 1994; John
S. McLandsborough has been co-portfolio manager since July 1997.
Mr. Peterson, who began his investment career at Stein Roe &
Farnham in 1965 after graduating with a B.A. from Carleton College
(1962) and the Woodrow Wilson School at Princeton University (1964)
with a Masters in Public Administration, rejoined the Adviser in
1991 after 15 years of equity research and portfolio management
experience with State Farm Investment Management Corp. Prior to
joining the Adviser in April 1996, Mr. McLandsborough was an equity
research analyst with CS First Boston from June 1994 until January
1996 and with National City Bank of Cleveland prior thereto. Mr.
McLandsborough, a chartered financial analyst, earned a bachelor's
degree in finance in 1989 from Miami University and a master's
degree in 1992 from Indiana University. As of Sept. 30, 1997,
Messrs. Peterson and McLandsborough were responsible for co-
managing $507 million in mutual fund net assets.
M. Gerard Sandel has been manager of Special Portfolio and
senior vice president and principal of the Adviser since July 1997.
Prior to joining the Adviser in July 1997, Mr. Sandel was portfolio
manager of the Marshall Mid-Cap Value Fund and its predecessor fund
and vice president of M&I Investment Management Corporation since
October 1993. Prior thereto, he was vice president of Acorn Asset
Management Corporation. A chartered financial analyst, Mr. Sandel
earned a bachelor's degree in 1977 from the University of Southern
Mississippi and a master's degree in 1984 from the American
Graduate School. As of Sept. 30, 1997, he was responsible for
managing $1.3 billion in mutual fund net assets.
Fees and Expenses. In return for its services, the Adviser is
entitled to receive a management fee from each Portfolio, a
management fee from Capital Opportunities Fund and Growth
Opportunities Fund, and an administrative fee from each Fund.
Prior to the conversion to the master fund/feeder fund structure on
Feb. 3, 1997, management fees were paid by each Fund. The annual
rates, as a percentage of average net assets (dollar amounts shown
in millions), are as follows:
Fund Management Fee Administrative Fee
Growth & Income
Fund; Growth Stock
Fund N/A .15% up to $500,
.125% next $500,
.10% thereafter
Growth & Income
Portfolio; Growth
Stock Portfolio .60% up to $500,
.55% next $500,
.50% thereafter N/A
Balanced Fund N/A .15% up to $500,
.125% next $500,
.10% thereafter
Balanced Portfolio .55% up to $500,
.50% next $500,
.45% thereafter N/A
Special Fund N/A .15% up to $500,
.125% next $500,
.10% next $500,
.075% thereafter
Special Portfolio .75% up to $500,
.70% next $500,
.65% next $500,
.60% thereafter N/A
Capital Opportunities
Fund; Growth
Opportunities Fund .75% up to $500, .15% up to $500,
.70% next $500, .125% next $500,
.65% next $500, .10% next $500,
.60% thereafter .075% thereafter
Special Venture Fund N/A .15%
Special Venture
Portfolio .75% N/A
For the period ended Sept. 30., 1997, total expenses as a
percentage of average net assets, after the fee waiver for Growth
Opportunities Fund described under Fee Table, were 1.05%, 1.13%,
1.07%, 1.14%, 1.17%, 1.25% and 1.29% for Balanced Fund, Growth &
Income Fund, Growth Stock Fund, Special Fund, Capital Opportunities
Fund, Growth Opportunities Fund and Special Venture Fund,
respectively. At Sept. 30,1997, Balanced Fund owned 99.96% of
Balanced Portfolio, Growth & Income Fund owned 99.97% of Growth &
Income Portfolio, Growth Stock Fund owned 99.96% of Growth Stock
Portfolio, Special Fund owned 99.99% of Special Portfolio and
Special Venture Fund owned 99.95% of Special Venture Portfolio.
Under a separate agreement with each Trust, the Adviser
provides certain accounting and bookkeeping services to the Funds
and the Portfolios, 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. Fund shares are distributed by Liberty Financial
Investments, Inc. ("Distributor"), One Financial Center, Boston,
Massachusetts 02111. The Distributor is a subsidiary of Colonial
Management Associates, Inc., which is an indirect subsidiary of
Liberty Financial. Fund shares are offered for sale without any
sales commissions or charges to the Funds or to their shareholders.
All distribution and promotional expenses are paid by the Adviser,
including payments to the Distributor for sales of Fund shares.
All correspondence (including purchase and redemption orders)
should be mailed to SteinRoe Services Inc. at P.O. Box 8900,
Boston, Massachusetts 02205. Participants in the Stein Roe
Counselor [service mark} program should send orders to SteinRoe
Services Inc. at P.O. Box 803938, Chicago, Illinois 60680.
Custodian. State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
the Funds and the Portfolios. 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 Jan. 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, 10 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 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 also is 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.
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.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Each of Growth & Income Fund, Balanced Fund, Growth Stock Fund,
Special Fund, and Special Venture Fund (which are series of
Investment Trust, an open-end management investment company) seeks
to achieve its objective by investing all of its assets in another
mutual fund having an investment objective identical to that of the
Fund. The shareholders of each Fund approved this policy of
permitting a Fund to act as a feeder fund by investing in a
Portfolio. Please refer to Investment Policies, Portfolio
Investments and Strategies, and Investment Restrictions for a
description of the investment objectives, policies, and
restrictions of the Funds and the Portfolios. The management fees
and expenses of the Funds and the Portfolios are described under
Fee Table and Management. Each feeder Fund bears its proportionate
share of the expenses of its master Portfolio.
The Adviser has provided investment management services in
connection with other mutual funds employing the master fund/feeder
fund structure since 1991.
Each Portfolio is a separate series of SR&F Base Trust ("Base
Trust"), a Massachusetts common law trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
Aug. 23, 1993. The Declaration of Trust of Base Trust provides
that a Fund and other investors in a Portfolio will be liable for
all obligations of that Portfolio that are not satisfied by the
Portfolio. However, the risk of a Fund incurring financial loss on
account of such liability is limited to circumstances in which
liability was inadequately insured and a Portfolio was unable to
meet its obligations. Accordingly, the trustees of Investment
Trust believe that neither the Funds nor their shareholders will be
adversely affected by reason of a Fund's investing in a Portfolio.
The Declaration of Trust of Base Trust provides that a
Portfolio will terminate 120 days after the withdrawal of a Fund or
any other investor in the Portfolio, unless the remaining investors
vote to agree to continue the business of the Portfolio. The
trustees of Investment Trust may vote a Fund's interests in a
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objectives of the Funds and the
Portfolios are nonfundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to a Fund's shareholders.
The fundamental policies of each Fund and the corresponding
fundamental policies of its master Portfolio can be changed only
with shareholder approval. If a Fund, as a Portfolio investor, is
requested to vote on a change in a fundamental policy of a
Portfolio or any other matter pertaining to the Portfolio (other
than continuation of the business of the Portfolio after withdrawal
of another investor), the Fund will solicit proxies from its
shareholders and vote its interest in the Portfolio for and against
such matters proportionately to the instructions to vote for and
against such matters received from Fund shareholders. A Fund will
vote shares for which it receives no voting instructions in the
same proportion as the shares for which it receives voting
instructions. There can be no assurance that any matter receiving
a majority of votes cast by Fund shareholders will receive a
majority of votes cast by all investors in a Portfolio. If other
investors hold a majority interest in a Portfolio, they could have
voting control over that Portfolio.
In the event that a Portfolio's fundamental policies were
changed so as to be inconsistent with those of the corresponding
Fund, the Board of Trustees of Investment Trust would consider what
action might be taken, including changes to the Fund's fundamental
policies, withdrawal of the Fund's assets from the Portfolio and
investment of such assets in another pooled investment entity, or
the retention of an investment adviser to invest those assets
directly in a portfolio of securities. Any of these actions would
require the approval of a Fund's shareholders. A Fund's inability
to find a substitute master fund or comparable investment
management could have a significant impact upon its shareholders'
investments. Any withdrawal of a Fund's assets could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) to the Fund. Should such a distribution occur, the
Fund would incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in
kind could result in a less diversified portfolio of investments
for the Fund and could affect the liquidity of the Fund.
Each investor in a Portfolio, including a Fund, may add to or
reduce its investment in the Portfolio on each day the NYSE is open
for business. The investor's percentage of the aggregate interests
in the Portfolio will be computed as the percentage equal to the
fraction (i) the numerator of which is the beginning of the day
value of such investor's investment in the Portfolio on such day
plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio
effected on such day; and (ii) the denominator of which is the
aggregate beginning of the day net asset value of the Portfolio on
such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in a Portfolio, but members of
the general public may not invest directly in the Portfolio. Other
investors in a Portfolio are not required to sell their shares at
the same public offering price as a Fund, might incur different
administrative fees and expenses than the Fund, and might charge a
sales commission. Therefore, Fund shareholders might have
different investment returns than shareholders in another
investment company that invests exclusively in a Portfolio.
Investment by such other investors in a Portfolio would provide
funds for the purchase of additional portfolio securities and would
tend to reduce the operating expenses as a percentage of the
Portfolio's net assets. Conversely, large-scale redemptions by any
such other investors in a Portfolio could result in untimely
liquidations of the Portfolio's security holdings, loss of
investment flexibility, and increases in the operating expenses of
the Portfolio as a percentage of its net assets. As a result, a
Portfolio's security holdings may become less diverse, resulting in
increased risk.
Information regarding other investors in a Portfolio may be
obtained by writing to SR&F Base Trust at Suite 3200, One South
Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550. The
Adviser may provide administrative or other services to one or more
of such investors.
<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") and
that the following
(Name of Corporation/Association)
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*
Corporate
Seal
Here
*Only required if the person signing the Certificate is the only
person named as "Authorized Person."
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
The Stein Roe Funds
Stein Roe Cash Reserves 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 Growth Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe International Fund
Stein Roe Emerging Markets Fund
Stein Roe Mutual Funds
P.O. Box 8900
Boston, Massachusetts 02205-0593
Financial Advisors call: 1-800-322-0593
Shareholders call: 1-800-338-2550
www.steinroe.com
In Chicago, visit our Fund Center at One South Wacker Drive, Suite 3200
Liberty Financial Investments, Inc., Distributor
Member SIPC
<PAGE>
Stein Roe Special Venture Fund
a series of Stein Roe Investment Trust
Supplement to Prospectus dated February 2, 1998
Effective October 7, 1998, the portfolio managers for Stein
Roe Special Venture Fund are James P. Haynie and Michael E. Rega,
who are jointly employed by Colonial Management Associates, Inc.
("CMA") and Stein Roe & Farnham Incorporated (each of which is an
indirect wholly owned subsidiary of Liberty Financial Companies,
Inc.). Mr. Haynie has managed or co-managed the Colonial Small
Cap Value Fund since 1993. Mr. Rega has been employed by CMA as
an analyst since 1993 and has co-managed the Colonial Small Cap
Value Fund and another Colonial equity fund since 1996.
The Adviser may use both its own trading facilities and those
of CMA to place orders for the purchase and sale of portfolio
securities for the Fund. For trades placed through CMA, in
selecting broker-dealers, the Adviser may direct CMA to consider
research and brokerage services furnished to the Adviser.
This Supplement is Dated October 7, 1998
<PAGE>
STEIN ROE INVESTMENT TRUST
Stein Roe Special Venture Fund
Supplement to Prospectus Dated Feb. 2, 1998
________________
Special Venture Portfolio emphasizes investments in
financially strong small- and medium-sized companies, based
principally on appraisal of their management and stock valuations.
The Adviser considers "small" companies to be those with market
capitalizations of less than $1 billion and "medium-sized"
companies to track the definition used by Lipper Analytical
Services, Inc. which is currently $1 to $5 billion. (See
Investment Policies.)
This Supplement is Dated Aug. 24, 1998
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
PROSPECTUS Feb. 2, 1998
Defined Contribution Plans
Stein Roe Special Venture Fund
The investment objective of Special Venture Fund is to provide
long-term capital appreciation. Special Venture Fund invests all
of its net investable assets in SR&F Special Venture Portfolio,
which has the same investment objective and substantially the same
investment policies as Special Venture Fund. The investment
experience of special Venture Fund will correspond to Special
Venture Portfolio. (See Master Fund/Feeder Fund: Structure and
Risk Factors.) Special Venture Portfolio invests primarily in
a diversified portfolio of equity securities of entrepreneurially
managed companies. It emphasizes investments in financially
strong small and medium-sized companies, based principally
on management appraisal and stock valuation.
This prospectus relates only to shares of Special Venture Fund
purchased through eligible employer-sponsored defined contribution
plans ("defined contribution plans").
Special Venture Fund is a "no-load" fund. There are no sales or
redemption charges, and Special Venture Fund has no 12b-1 plan.
Special Venture Fund is a series of the Stein Roe Investment Trust
and Special Venture Portfolio is a series of SR&F Base Trust. Each
Trust is an open-end management investment company.
This prospectus contains information you should know before
investing in Special Venture Fund. Please read it carefully and
retain it for future reference.
A Statement of Additional Information dated Feb. 2, 1998,
containing more detailed information, has been filed with the
Securities and Exchange Commission and (together with any
supplements thereto) is incorporated herein by reference. The
Statement of Additional Information and the most recent financial
statements may be obtained without charge by writing to the Stein
Roe Mutual Funds at Suite 3200, One South Wacker Drive, Chicago, IL
60606 or by calling 800-322-1130. The Statement of Additional
Information contains information relating to other series of the
Stein Roe Investment Trust that may not be available as investment
vehicles for your defined contribution plan.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, 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.
Table of Contents
Page
Fee Table...................................2
Financial Highlights........................2
The Fund....................................3
Investment Policies.........................4
Portfolio Investments and Strategies........4
Investment Restrictions.....................6
Risks and Investment Considerations.........7
How to Purchase Shares......................7
How to Redeem Shares........................8
Net Asset Value.............................8
Distributions and Income Taxes..............9
Investment Return...........................9
Management..................................9
Organization and Description of Shares.....11
Master Fund/Feeder Fund: Structure
and Risk Factors........................11
For More Information.......................13
__________________________
Fee Table
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management and Administrative Fees 0.90%
12b-1 Fees None
Other Expenses 0.39%
Total Operating Expenses 1.29%
Example.
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; and (2) redemption at the end of
each time period:
1 year 3 years 5 years 10 years
$13 $41 $71 $156
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 Special Venture Fund. The table is
based upon actual expenses incurred in the last fiscal year.
Special Venture Fund pays the Adviser an administrative fee based
on the Fund's average daily net assets, and Special Venture
Portfolio pays the Adviser a management fee based on its average
daily net assets. The expenses of both Special Venture Fund and
Special Venture Portfolio are summarized in the Fee Table. (The
fees are described under Management.) Special Venture Fund bears
its proportionate share of the fees and expenses of Special Venture
Portfolio. The trustees of Stein Roe Investment Trust ("Investment
Trust") have considered whether the annual operating expenses of
Special Venture Fund, including its share of the expenses of
Special Venture Portfolio, would be more or less than if Special
Venture Fund invested directly in the securities held by Special
Venture Portfolio. The trustees concluded that Special Venture
Fund's expenses would not be greater in such case.
For purposes of the Example above, the figures assume that the
percentage amounts listed under Annual Fund Operating Expenses
remain the same in each of the periods and that all income
dividends and capital gains distributions are reinvested in
additional Special Venture Fund shares. The figures in the Example
are not necessarily indicative of past or future expenses, and
actual expenses may be greater or less than those shown. Although
information such as that shown in the Example and Fee Table is
useful in reviewing Special Venture Fund's expenses and in
providing a basis for comparison with other mutual funds, it should
not be used for comparison with other investments using different
assumptions or time periods. The Example does not reflect any
charges or expenses related to your employer's plan.
__________________________
Financial Highlights
The following table reflects the results of operations of Special
Venture Fund for the periods shown on a per-share basis and has
been audited by Arthur Andersen LLP, independent public
accountants. This table should be read in conjunction with Special
Venture Fund's financial statements and notes thereto. The annual
report, which may be obtained from Investment Trust without charge
upon request, contains additional performance information.
Period
Ended
Sept. 30, Years Ended Sept. 30,
1995(d) 1996 1997
-------- ------ ------
Net Asset Value, Beginning of Period $10.00 $12.60 $15.87
------ ------ ------
Income from Investment Operations
Net investment income (loss) 0.01 (0.02) (0.02)
Net realized and unrealized gains on
investments 2.67 3.86 3.12
------ ------ ------
Total from investment operations 2.68 3.84 3.10
------ ------ ------
Distributions
Net investment income (0.03) -- --
Net realized capital gains (0.05) (0.57) (1.52)
------ ------ ------
Total distributions (0.08) (0.57) (1.52)
------ ------ ------
Net Asset Value, End of Period $12.60 $15.87 $17.45
====== ====== ======
Ratio of net expenses to average net
assets (b) *1.25% 1.25% 1.29%
Ratio of net investment income(loss)
to average net assets (c) *0.12% (2.19%) (0.18%)
Portfolio turnover rate 84% 72% 44%(a)
Average commissions (per share) -- $0.0378 $0.0390(a)
Total return 26.96% 31.81% 21.73%
Net assets, end of period (000
omitted) $60,533 $144,528 $235,755
- -----------
*Annualized.
(a) From the commencement of operations on Oct. 17, 1994 . The
portfolio turnover of Special Venture Portfolio from Feb. 3,
1997 was 58%.
(b) If Special Venture Fund had paid all of its expenses and there
had been no reimbursement by the Adviser, this ratio would have
been 2.87% for the period ended Sept. 30, 1995 and 1.34% for
the year ended Sept. 30, 1996.
(c) Computed giving effect to the Adviser's fee waiver.
(d) Prior to commencement of operations of Special Venture
Portfolio.
__________________________
The Fund
Stein Roe Special Venture Fund ("Special Venture Fund") is a no-
load "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. Special Venture Fund
does not impose commissions or charges when shares are purchased or
redeemed.
Special Venture Fund is a series of 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
investment management, administrative, and bookkeeping and
accounting services to Special Venture Fund and Special Venture
Portfolio. The Adviser also manages 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
opening a regular account in any of these mutual funds, please call
800-338-2550.
On Feb. 3, 1997, Special Venture Fund became a "feeder fund"--that
is, it invested all of its assets in SR&F Special Venture Portfolio
("Special Venture Portfolio"), a "master fund" that has an
investment objective identical to that of Special Venture Fund.
Special Venture Portfolio is a series of SR&F Base Trust ("Base
Trust"). Before converting to a feeder fund, Special Venture Fund
invested its assets in a diversified group of securities. Under
the "master fund/feeder fund structure," a feeder fund and one or
more other feeder funds pool their assets in a master portfolio
that has the same investment objective and substantially the same
investment policies as the feeder funds. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs. The assets of Special Venture Portfolio, Special
Venture Fund's master fund, are managed by the Adviser in the same
manner as the assets of Special Venture Fund were managed before
conversion to the master fund/feeder fund structure. (For more
information, see Master Fund/Feeder Fund: Structure and Risk
Factors.)
__________________________
Investment Policies
The investment objective of Special Venture Fund is to seek long-
term capital appreciation. Special Venture Fund invests all of its
net investable assets in Special Venture Portfolio, which has the
same investment objective and substantially the same investment
policies as Special Venture Fund. Special Venture Portfolio
invests primarily in a diversified portfolio of common stocks and
other equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed
companies that the Adviser believes represent special
opportunities. Special Venture Portfolio emphasizes investments in
financially strong small and medium-sized companies, based
principally on appraisal of their management and stock valuations.
The Adviser considers "small" and "medium-sized" companies to be
those with market capitalizations of less than $1 billion and $1 to
$3 billion, respectively.
In both its initial and ongoing appraisals of a company's
management, the Adviser seeks to know both the principal owners and
senior management and to assess, through personal visits, their
business judgment and strategies. The Adviser favors companies
whose management has an owner/operator, risk-averse orientation and
a demonstrated ability to create wealth for investors. Attractive
company characteristics include unit growth, favorable cost
structures or competitive positions, and financial strength that
enables management to execute business strategies under difficult
conditions. A company is attractively valued when its stock can be
purchased at a meaningful discount to the value of the underlying
business. 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, Special Venture Portfolio may
invest in debt securities of corporate and governmental issuers.
Special Venture Portfolio may invest up to 35% of its net assets in
debt securities, but it does not currently intend to invest more
than 5% of its net assets in debt securities rated below investment
grade. 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, while an increase in rates usually reduces the value of
those securities. Securities that are rated below investment grade
are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal according to
the terms of the obligation and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When the Adviser determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, Special Venture Portfolio may invest without limitation
in high-quality fixed income securities or hold assets in cash or
cash equivalents.
Foreign Securities.
Special Venture Portfolio may invest in foreign securities. Other
than American Depositary Receipts (ADRs), foreign debt securities
denominated in U.S. dollars, or securities guaranteed by a U.S.
person, Special Venture Portfolio is limited to investing no more
than 25% of its total assets in foreign securities. (See Risks and
Investment Considerations.) Special Venture Portfolio may invest
in sponsored and unsponsored ADRs. In addition to, or in lieu of,
such direct investment, Special Venture Portfolio 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, Special Venture
Portfolio 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. Special Venture Portfolio also may enter into foreign
currency contracts as a hedging technique to limit or reduce
exposure to currency fluctuations. In addition, Special Venture
Portfolio may use options and futures contracts, as described
below, to limit or reduce exposure to currency fluctuations. As of
Sept. 30, 1997, Special Venture Portfolio's holdings of foreign
companies amounted to 3.2% of net assets (1.7% in foreign
securities and 1.5% in ADRs).
When-Issued and Delayed-Delivery Securities.
Special Venture Portfolio 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 Special Venture
Portfolio 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. Special Venture Portfolio 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. Special Venture
Portfolio may make loans of its portfolio securities to broker-
dealers and banks subject to certain restrictions described in the
Statement of Additional Information. It may participate in an
interfund lending program, subject to certain restrictions
described in the Statement of Additional Information.
Portfolio Turnover
Under normal circumstances, Special Venture Portfolio expects to
experience moderate portfolio turnover with an investment time
horizon of three to five years. Although the portfolio turnover
rate is not expected to exceed 100% under normal market conditions,
there are no limitations on the length of time that portfolio
securities must be held. Flexibility of investment and emphasis on
capital appreciation may involve greater portfolio turnover than
that of mutual funds that have the objectives of income or
maintenance of a balanced investment position. A high rate of
portfolio turnover may result in increased transaction expenses and
the realization of capital gains and losses. (See Distributions
and Income Taxes.) Special Venture Fund is not intended to be an
income-producing investment.
Derivatives.
Consistent with its objective, Special Venture Portfolio 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. Special Venture Portfolio 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 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 hedge against changes in security prices,
interest rates or currency fluctuations, Special Venture Portfolio
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. Special Venture Portfolio may write a
call or put option only if the option is covered. As the writer of
a covered call option, Special Venture Portfolio 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 Special Venture
Portfolio 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.
Special Venture Portfolio 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 Special Venture Portfolio 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
Each of Special Venture Fund and Special Venture Portfolio is
diversified as that term is defined in the Investment Company Act
of 1940.
Neither Special Venture Fund nor Special Venture Portfolio will
invest more than 5% of its assets in the securities of any one
issuer. This restriction applies only to 75% of the investment
portfolio, but does not apply to securities of the U.S. Government
or repurchase agreements /1/ for such securities, and would not
prevent Special Venture Fund from investing all of its assets in
shares of another investment company having the identical
investment objective under a master/feeder structure.
- ------
/1/ A repurchase agreement involves a sale of securities to Special
Venture Portfolio 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, Special Venture Portfolio could
experience both losses and delays in liquidating its collateral.
- ------
Neither Special Venture Fund nor Special Venture Portfolio will
acquire more than 10% of the outstanding voting securities of any
one issuer. Special Venture Fund may, however, invest all of its
assets in shares of another investment company having the identical
investment objective under a master/feeder structure.
While neither Special Venture Fund nor Special Venture Portfolio
may make loans, each may (1) purchase money market instruments and
enter into repurchase agreements; (2) acquire publicly distributed
or privately placed debt securities; (3) lend portfolio securities
under certain conditions; and (4) participate in an interfund
lending program with other Stein Roe Funds and Portfolios. Neither
may borrow money, except for nonleveraging, 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.
Special Venture Portfolio may invest in repurchase agreements,
provided that it will not 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 second, third, and fourth paragraphs
of this section and the policy with respect to concentration of
investments in any one industry described under Risks and
Investment Considerations are fundamental policies and, as such,
can be changed only with the approval of a "majority of the
outstanding voting securities" as defined in the Investment Company
Act of 1940. The common investment objective of Special Venture
Fund and Special Venture Portfolio is nonfundamental 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 Special Venture Fund's shareholders. Any such change may
result in Special Venture Fund having an investment objective
different from the objective the shareholder considered appropriate
at the time of investment in Special Venture Fund. All of the
investment restrictions are set forth in the Statement of
Additional Information.
__________________________
Risks and Investment Considerations
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. Special Venture Fund is
designed for long-term investors who want greater return potential
than available from the stock market in general, and who are
willing to tolerate the greater investment risk and market
volatility associated with investments in small and medium-sized
companies. Securities of such companies may be subject to greater
price volatility than securities of larger companies and tend to
have a lower degree of market liquidity. They also may be more
sensitive to changes in economic and business conditions, and may
react differently than securities of larger companies. In
addition, such companies are less well known to the investing
public and may not be as widely followed by the investment
community. There can be no guarantee that Special Venture Fund
will achieve its objective.
Debt securities rated in the fourth highest grade may have some
speculative characteristics, and changes in economic conditions or
other circumstances may lead to a weakened capacity of the issuers
of such securities to make principal and interest payments.
Securities rated below investment grade may possess speculative
characteristics, and changes in economic conditions are more likely
to affect the issuer's capacity to pay interest or repay principal.
Although Special Venture Portfolio does not attempt to reduce or
limit risk through wide industry diversification of investment, it
usually allocates its investments among a number of different
industries rather than concentrating in a particular industry or
group of industries. Special Venture Portfolio will not invest
more than 25% of its total assets (at the time of investment) in
the securities of companies in any one industry.
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, different accounting, auditing and
financial reporting standards, different settlement practices, 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
nonresidents may apply, including imposition of exchange controls
and withholding taxes on dividends, and seizure or nationalization
of investments owned by nonresidents. Foreign investments also
tend to involve higher transaction and custody costs.
__________________________
How to Purchase Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
shares of Special Venture Fund through your employer or limitations
on the amount that may be purchased, please consult your employer.
Shares are sold to eligible defined contribution plans at Special
Venture Fund's net asset value (see Net Asset Value) next
determined after receipt of an order in good form, including
receipt of payment by Special Venture Fund. Each purchase of
shares through a broker-dealer, bank, or other intermediary
("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.
Each purchase order 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 Special Venture 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 interests of Investment Trust or of Special
Venture Fund's shareholders.
Shares purchased by reinvestment of dividends will be confirmed
quarterly. All other purchases and redemptions will be confirmed
as transactions occur.
__________________________
How to Redeem Shares
Subject to restrictions imposed by your employer's plan, Special
Venture Fund shares may be redeemed any day the New York Stock
Exchange is open. For more information about how to redeem your
shares of Special Venture Fund through your employer's plan,
including any charges that may be imposed by the plan, please
consult with your employer.
Exchange Privilege.
Subject to your plan's restrictions, you may redeem all or any
portion of your Special Venture Fund shares and use the proceeds to
purchase shares of any other no-load Stein Roe Fund available
through your employer's defined contribution plan. (An exchange is
commonly referred to as a "transfer.") Before exercising the
Exchange Privilege, you should obtain the prospectus for the no-
load Stein Roe Fund in which you wish to invest and read it
carefully. Contact your plan administrator for instructions on how
to exchange your shares or to obtain prospectuses of other no-load
Stein Roe Funds available through your plan. Special Venture Fund
reserves the right to suspend, limit, modify, or terminate the
Exchange Privilege or its use in any manner by any person or class;
shareholders would be notified of such a change.
General Redemption Policies.
Redemption instructions may not be cancelled or revoked once they
have been received and accepted by Investment Trust. Investment
Trust cannot accept a redemption request that specifies a
particular date or price for redemption or any special conditions.
The price at which your redemption order will be executed is the
net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon Special Venture 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.
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Net Asset Value
The purchase or redemption price of Special Venture Fund's shares
is its net asset value per share. The net asset value of a share
of Special Venture Fund is determined as of the close of regular
session 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 should be determined on any such day,
in which case the determination will be made at 3:00 p.m., central
time. Special Venture Portfolio allocates net asset value, income,
and expenses to Special Venture Fund and any other of its feeder
funds in proportion to their respective interests in Special
Venture Portfolio.
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.
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Distributions and Income Taxes
Distributions.
Income dividends are normally declared and paid annually. Special
Venture 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 12-month period ended Oct. 31 in that year.
It intends to distribute any undistributed net investment income
and net realized capital gains in the following year.
The terms of your plan will govern how you may receive
distributions from Special Venture Fund. Generally, dividend and
capital gains distributions will be reinvested in additional shares
of Special Venture Fund.
Income Taxes.
Special Venture Fund intends to qualify as a "regulated investment
company" for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gain it distributes. Special Venture Fund will
distribute substantially all of its ordinary income and net capital
gains on a current basis. Generally, Special Venture Fund
distributions are taxable as ordinary income, except that any
distributions of net long-term capital gains will be taxed as such.
However, distributions by Special Venture Fund to employer-
sponsored defined contribution plans that qualify for tax-exempt
treatment under federal income tax laws will not be taxable.
Special tax rules apply to investments through such plans. You
should consult your tax advisor to determine the suitability of
Special Venture Fund as an investment through such a plan and the
tax treatment of distributions (including distributions of amounts
attributable through an investment in Special Venture Fund) from
such a plan. This section is not intended to be a full discussion
of income tax laws and their effect on shareholders.
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Investment Return
The total return from an investment in Special Venture 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 Special Venture Fund's total return with alternative
investments should consider differences between Special Venture
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. Special Venture Fund's total
return does not reflect any charges or expenses related to your
employer's plan. Of course, past performance is no guarantee of
future results.
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Management
Trustees and Investment Adviser.
The Board of Trustees of Investment Trust and the Board of Base
Trust have overall management responsibility for Special Venture
Fund and Special Venture Portfolio, respectively. See the
Statement of Additional Information for the names of and additional
information about the trustees and officers. Since Investment
Trust and Base Trust have the same trustees, the trustees have
adopted conflict of interest procedures to monitor and address
potential conflicts between the interests of Special Venture Fund
and Special Venture Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South Wacker
Drive, Chicago, Illinois 60606, is responsible for managing Special
Venture Fund and Special Venture Portfolio, subject to the
direction of the respective Board of Trustees. The Adviser is
registered as an investment adviser under the Investment Advisers
Act of 1940. The Adviser and its predecessor have advised and
managed mutual funds since 1949. The Adviser is a wholly owned
indirect subsidiary of Liberty Financial Companies, Inc. ("Liberty
Financial"), which in turn is a majority owned indirect subsidiary
of Liberty Mutual Insurance Company.
Portfolio Managers.
Richard B. Peterson has been co-manager of Special Venture
Portfolio since its inception in 1997 and had been portfolio
manager of Special Venture Fund since its inception in 1994; John
S. McLandsborough has been co-portfolio manager since July 1997.
Mr. Peterson, who began his investment career at Stein Roe &
Farnham in 1965 after graduating with a B.A. from Carleton College
(1962) and the Woodrow Wilson School at Princeton University (1964)
with a Masters in Public Administration, rejoined the Adviser in
1991 after 15 years of equity research and portfolio management
experience with State Farm Investment Management Corp. Prior to
joining the Adviser in April 1996, Mr. McLandsborough was an equity
research analyst with CS First Boston from June 1994 until January
1996 and with National City Bank of Cleveland prior thereto. Mr.
McLandsborough, a chartered financial analyst, earned a bachelor's
degree in finance in 1989 from Miami University and a master's
degree in 1992 from Indiana University. As of Sept. 30, 1997,
Messrs. Peterson and McLandsborough were responsible for co-
managing $507 million in mutual fund net assets.
Fees and Expenses.
In return for its services, the Adviser is entitled to receive a
management fee from Special Venture Portfolio based on an annual
rate of .75% of average net assets; and an administrative fee from
Special Venture Fund based on an annual rate of .15% of average net
assets. Prior to conversion to the master fund/feeder fund
structure on Feb. 3, 1997, the management fee was paid by Special
Venture Fund. For the fiscal year ended Sept. 30, 1997, total
expenses amounted to 1.29% of the average net assets of Special
Venture Fund. At Sept. 30, 1997, Special Venture Fund owned 99.95%
of Special Venture Portfolio.
Under a separate agreement with each Trust, the Adviser provides
certain accounting and bookkeeping services to Special Venture Fund
and Special Venture Portfolio, 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 Special Venture Fund are offered for sale through
Liberty Financial Investments, Inc. ("Distributor") without any
sales commissions or charges to Special Venture Fund or to its
shareholders. The Distributor is a subsidiary of Colonial
Management Associates, Inc., which is an indirect subsidiary of
Liberty Financial. The business address of the Distributor is One
Financial Center, Boston, Massachusetts 02111; however, all Fund
correspondence (including purchase and redemption orders) should be
mailed to SteinRoe Services Inc., P.O. Box 8900, Boston,
Massachusetts 02205. 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 Special
Venture Fund and Special Venture Portfolio. 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.)
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Organization and Description of Shares
Investment Trust is a Massachusetts business trust organized under
an Agreement and Declaration of Trust ("Declaration of Trust")
dated Jan. 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, 10 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
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 also
is 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.
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.
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Master Fund/Feeder Fund:
Structure and Risk Factors
Special Venture Fund, which is an open-end management investment
company, seeks to achieve its objective by investing all of its
assets in another mutual fund having an investment objective
identical to that of Special Venture Fund. The shareholders of
Special Venture Fund approved this policy of permitting Special
Venture Fund to act as a feeder fund by investing in Special
Venture Portfolio. Please refer to Investment Policies, Portfolio
Investments and Strategies, and Investment Restrictions for a
description of the investment objectives, policies, and
restrictions of Special Venture Fund and Special Venture Portfolio.
The management fees and expenses of Special Venture Fund and
Special Venture Portfolio are described under Fee Table and
Management. Special Venture Fund bears its proportionate share of
Special Venture Portfolio's expenses.
The Adviser has provided investment management services in
connection with other mutual funds employing the master fund/feeder
fund structure since 1991.
Special Venture Portfolio is a separate series of SR&F Base Trust
("Base Trust"), a Massachusetts common law trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
Aug. 23, 1993. The Declaration of Trust of Base Trust provides
that Special Venture Fund and other investors in Special Venture
Portfolio will be liable for all obligations of Special Venture
Portfolio that are not satisfied by Special Venture Portfolio.
However, the risk of Special Venture Fund incurring financial loss
on account of such liability is limited to circumstances in which
liability was inadequately insured and Special Venture Portfolio
was unable to meet its obligations. Accordingly, the trustees of
Investment Trust believe that neither Special Venture Fund nor its
shareholders will be adversely affected by reason of Special
Venture Fund's investing in Special Venture Portfolio.
The Declaration of Trust of Base Trust provides that Special
Venture Portfolio will terminate 120 days after the withdrawal of
Special Venture Fund or any other investor in Special Venture
Portfolio, unless the remaining investors vote to agree to continue
the business of Special Venture Portfolio. The trustees of
Investment Trust may vote Special Venture Fund's interests in
Special Venture Portfolio for such continuation without approval of
Special Venture Fund's shareholders.
The common investment objective of Special Venture Fund and Special
Venture Portfolio is nonfundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to Special Venture Fund's shareholders.
The fundamental policies of Special Venture Fund and the
corresponding fundamental policies of Special Venture Portfolio can
be changed only with shareholder approval. If Special Venture
Fund, as a Portfolio investor, is requested to vote on a change in
a fundamental policy of Special Venture Portfolio or any other
matter pertaining to Special Venture Portfolio (other than
continuation of the business of Special Venture Portfolio after
withdrawal of another investor), Special Venture Fund will solicit
proxies from its shareholders and vote its interest in Special
Venture Portfolio for and against such matters proportionately to
the instructions to vote for and against such matters received from
Fund shareholders. Special Venture Fund will vote shares for which
it receives no voting instructions in the same proportion as the
shares for which it receives voting instructions. There can be no
assurance that any matter receiving a majority of votes cast by
Fund shareholders will receive a majority of votes cast by all
investors in the Portfolio. If other investors hold a majority
interest in Special Venture Portfolio, they could have voting
control over Special Venture Portfolio.
In the event that Special Venture Portfolio's fundamental policies
were changed so as to be inconsistent with those of Special Venture
Fund, the Board of Trustees of Investment Trust would consider what
action might be taken, including changes to Special Venture Fund's
fundamental policies, withdrawal of Special Venture Fund's assets
from Special Venture Portfolio and investment of such assets in
another pooled investment entity, or the retention of an investment
adviser to invest those assets directly in a portfolio of
securities. Any of these actions would require the approval of
Special Venture Fund's shareholders. Special Venture Fund's
inability to find a substitute master fund or comparable investment
management could have a significant impact upon its shareholders'
investments. Any withdrawal of Special Venture Fund's assets could
result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) to Special Venture Fund. Should
such a distribution occur, Special Venture Fund would incur
brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for Special
Venture Fund and could affect the liquidity of Special Venture
Fund.
Each investor in Special Venture Portfolio, including Special
Venture Fund, may add to or reduce its investment in Special
Venture Portfolio on each day the NYSE is open for business. The
investor's percentage of the aggregate interests in Special Venture
Portfolio will be computed as the percentage equal to the fraction
(i) the numerator of which is the beginning of the day value of
such investor's investment in Special Venture Portfolio on such day
plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in Special Venture
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of Special
Venture Portfolio on such day plus or minus, as the case may be,
the amount of the net additions to or withdrawals from the
aggregate investments in Special Venture Portfolio by all investors
in Special Venture Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest
in Special Venture Portfolio as of the close of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in Special Venture Portfolio, but
members of the general public may not invest directly in Special
Venture Portfolio. Other investors in Special Venture Portfolio
are not required to sell their shares at the same public offering
price as Special Venture Fund, might incur different administrative
fees and expenses than Special Venture Fund, and might charge a
sales commission. Therefore, Special Venture Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in Special
Venture Portfolio. Investment by such other investors in Special
Venture Portfolio would provide funds for the purchase of
additional portfolio securities and would tend to reduce the
operating expenses as a percentage of Special Venture Portfolio's
net assets. Conversely, large-scale redemptions by any such other
investors in Special Venture Portfolio could result in untimely
liquidations of Special Venture Portfolio's security holdings, loss
of investment flexibility, and increases in the operating expenses
of Special Venture Portfolio as a percentage of Special Venture
Portfolio's net assets. As a result, Special Venture Portfolio's
security holdings may become less diverse, resulting in increased
risk.
Information regarding other investors in Special Venture Portfolio
may be obtained by writing to SR&F Base Trust at Suite 3200, One
South Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550.
The Adviser may provide administrative or other services to one or
more of such investors.
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For More Information
Contact a Stein Roe Retirement Plan Representative at 800-322-1130
for more information about Special Venture Fund.
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