1933 Act Registration No. 33-11351
1940 Act File No. 811-4978
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 46 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 47 [X]
STEIN ROE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-338-2550
Heidi J. Walter Cameron S. Avery
Vice-President & Secretary Bell, Boyd & Lloyd
Stein Roe Investment Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602
(Name and Address of Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[X] on August 26, 1998 pursuant to paragraph (a)(2) of rule 485
Registrant has previously elected to register pursuant to Rule
24f-2 an indefinite number of shares of beneficial interest of
the following series: Stein Roe Growth & Income Fund, Stein Roe
Balanced Fund, Stein Roe Growth Stock Fund, Stein Roe Capital
Opportunities Fund, Stein Roe Special Fund, Stein Roe
International Fund, Stein Roe Young Investor Fund, Stein Roe
Special Venture Fund, Stein Roe Emerging Markets Fund, Stein Roe
Growth Opportunities Fund, and Stein Roe Large Company Focus
Fund. Registrant elects to register pursuant to Rule 24f-2 an
indefinite number of shares of beneficial interest of the series
designated Stein Roe Asia Pacific Fund.
This amendment to the Registration Statement has also been
signed by SR&F Base Trust as it relates to Stein Roe Growth &
Income Fund, Stein Roe Balanced Fund, Stein Roe Growth Stock
Fund, Stein Roe Young Investor Fund, Stein Roe Special Fund,
Stein Roe Special Venture Fund, Stein Roe International
Fund, and Stein Roe Asia Pacific Fund.
<PAGE>
STEIN ROE INVESTMENT TRUST
CROSS REFERENCE SHEET
Item
No. Caption
Part A
1 Front cover
2 Fee Table; Summary
3 (a) [Funds other than Large Company Focus Fund and Asia
Pacific Fund] Financial Highlights
(b) [Funds other than Large Company Focus Fund and Asia
Pacific Fund] Financial Highlights
(c) Investment Return
(d) [Funds other than Large Company Focus Fund and Asia
Pacific Fund] Financial Highlights
4 Organization and Description of Shares; The Fund[s];
Investment Policies; Investment Restrictions; Risks
and Investment Considerations; Portfolio Investments and
Strategies; Summary--Investment Risks
5 (a) Management--Trustees and Investment Adviser
(b) Management--Trustees and Investment Adviser,
Fees and Expenses
(c) Management--Portfolio Managers
(d) Inapplicable
(e) Management--Transfer Agent
(f) Management--Fees and Expenses; [Funds other than Large
Company Focus Fund and Asia Pacific Fund] Financial
Highlights
(g) Inapplicable
5A Inapplicable
6 (a) Organization and Description of Shares; see Statement of
Additional Information--General Information and History
(b) Inapplicable
(c) Organization and Description of Shares
(d) Organization and Description of Shares
(e) Summary
(f) Distributions and Income Taxes; Shareholder Services
(g) Distributions and Income Taxes
(h) Master Fund/Feeder Fund Structure
7 How to Purchase Shares
(a) Management--Distributor
(b) How to Purchase Shares;
Net Asset Value
(c) Inapplicable
(d) How to Purchase Shares
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
8 (a) How to Redeem Shares; Shareholder Services
(b) How to Purchase Shares
(c) How to Redeem Shares
(d) How to Redeem Shares
9 Inapplicable
Part B
10 Cover page
11 Table of Contents
12 General Information and History
13 Investment Policies; Portfolio Investments and
Strategies; Investment Restrictions
14 Management
15(a) Inapplicable
(b) Principal Shareholders
(c) Principal Shareholders
16(a) Investment Advisory Services; Management; see prospectus:
Management
(b) Investment Advisory Services
(c) Inapplicable
(d) Investment Advisory Services
(e) Inapplicable
(f) Inapplicable
(g) Inapplicable
(h) Custodian; Independent Public Accountants
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Inapplicable
(c) Portfolio Transactions
(d) Portfolio Transactions
(e) Inapplicable
18 General Information and History
19(a) Purchases and Redemptions; see prospectus: How to
Purchase Shares, How to Redeem Shares, Shareholder
Services
(b) Purchases and Redemptions; see prospectus: Net Asset
Value
(c) Purchases and Redemptions
20 Additional Income Tax Considerations; Portfolio
Investments and Strategies--Taxation of Options and
Futures
21(a) Distributor
(b) Inapplicable
(c) Inapplicable
22(a) Inapplicable
(b) Investment Performance
23 [Funds other than Large Company Focus Fund and Asia
Pacific Fund] Financial Statements
Part C
24 Financial Statements and Exhibits
25 Persons Controlled By or Under Common Control with
Registrant
26 Number of Holders of Securities
27 Indemnification
28 Business and Other Connections of Investment Adviser
29 Principal Underwriters
30 Location of Accounts and Records
31 Management Services
32 Undertakings
<PAGE>
The prospectuses and statements of additional information relating
to the series of Stein Roe Investment Trust relating to the series
designated Stein Roe Growth & Income Fund, Stein Roe International
Fund, Stein Roe Young Investor Fund, Stein Roe Special Venture
Fund, Stein Roe Emerging Markets Fund, Stein Roe Growth
Opportunities Fund, Stein Roe Large Company Focus Fund, Stein Roe
Balanced Fund, Stein Roe Growth Stock Fund, Stein Roe Capital
Opportunities Fund, and Stein Roe Special Fund are not affected by
the filing of this Post-Effective Amendment No. 46.
<PAGE>
PRELIMINARY PROSPECTUS DATED JUNE 12, 1998
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET
BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
-----------------------
Prospectus _______, 1998
Stein Roe Mutual Funds
Stein Roe Asia Pacific Fund
The investment objective of Stein Roe Asia Pacific Fund is to seek
growth of capital. The Fund invests all of its net investable
assets in SR&F Asia Pacific Portfolio, which has the same
investment objective and substantially the same investment
policies as the Fund. The investment experience of the Fund will
correspond to the Portfolio. (See Master Fund/Feeder Fund:
Structure and Risk Factors.) The Portfolio invests primarily in
the common stocks and equity-related securities of medium to large
capitalization growth companies located in the Pacific Basin.
The Fund is a "no-load" fund. There are no sales or
redemption charges, and the Fund has no 12b-1 plan. The Fund is a
series of Stein Roe Investment Trust and the 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 the Fund. Please read it carefully and retain it for
future reference.
A Statement of Additional Information dated ______, 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 and the Statement of Additional Information
by calling 800-338-2550 or by writing to Stein Roe Funds, Suite
3200, One South Wacker Drive, Chicago, Illinois 60606.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, 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 ...................................2
Fee Table ................................4
The Fund ..................................5
Investment Policies .......................5
Portfolio Investments and Strategies.......6
Investment Restrictions....................8
Risks and Investment Considerations........9
How to Purchase Shares ...................11
By Check ..............................11
By Wire ...............................11
By Electronic Transfer.................12
By Exchange ...........................12
Conditions of Purchase.................12
Purchases Through Third Parties........13
Purchase Price and Effective Date......13
How to Redeem Shares .....................13
By Written Request ....................13
By Exchange ...........................14
Special Redemption Privileges .........14
General Redemption Policies ...........15
Shareholder Services .....................17
Net Asset Value ..........................19
Distributions and Income Taxes ...........19
Investment Return ........................21
Management ...............................21
Organization and Description of Shares....23
Master Fund/Feeder Fund: Structure and
Risk Factors............................24
SUMMARY
Stein Roe Asia Pacific Fund (the "Fund") is a series of Stein Roe
Investment Trust (the "Trust"), an open-end management investment
company. The Fund is a "no-load" fund, which means that there are
no sales or redemption charges. (See The Fund and Organization
and Description of Shares.) This prospectus is not a solicitation
in any jurisdiction in which Fund shares are not qualified for
sale.
Investment Objective and Policies. The Fund seeks growth of
capital. It invests all of its net investable assets in SR&F Asia
Pacific Portfolio (the "Portfolio"), which has the same investment
objective and substantially the same investment policies as the
Fund. The Portfolio invests primarily in the common stocks and
equity-related securities of medium to large capitalization growth
companies, defined as those companies with market capitalizations
of at least $500 million, located in the Pacific Basin. Under
normal conditions, the Portfolio will invest at least 65% of its
total assets in equity securities issued by companies in the
Pacific Basin.
There can be no guarantee that the Fund or the Portfolio will
achieve their common investment objective. Please see Investment
Policies and Portfolio Investments and Strategies for further
information.
Investment Risks. The Fund is intended for long-term investors
seeking international diversification of their investments. It
should not be considered a complete investment program.
Since the Portfolio invests primarily in foreign securities,
investors should understand and consider carefully 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 exchange rates on foreign currencies, less public
information, less government supervision, less liquidity, and
greater price volatility. Investments in securities of emerging
markets issuers may present greater risks than investments in more
developed foreign markets. Many investments in emerging markets
can be considered speculative, and the value of those investments
can be more volatile than is typical in the more developed foreign
markets.
Please see Investment Policies, Portfolio Investments and
Strategies, and Risks and Investment Considerations for further
information.
Purchases. The minimum initial investment 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. For
more detailed information, see How to Purchase Shares.
Redemptions. For information on redeeming Fund shares, see How to
Redeem Shares.
Net Asset Value. The purchase and redemption price of the Fund's
shares is its net asset value per share. The net asset value is
determined as of the close of regular session trading on the New
York Stock Exchange. (For more detailed information, see Net
Asset Value.)
Distributions. Dividends are normally declared and paid annually.
Distributions will be reinvested in additional 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.)
Management and Fees. Stein Roe & Farnham Incorporated (the
"Adviser") provides overall management services to the Portfolio
and administrative and bookkeeping and accounting services to the
Fund and the Portfolio. Newport Fund Management, Inc. ("Newport")
has been engaged as sub-adviser to provide investment advisory
services to the Portfolio, subject to overall management by the
Adviser. For a description of the Adviser, Newport and their
fees, see Management.
If you have any additional questions about the Fund, please
feel free to discuss them with a Stein Roe account representative
by calling 800-338-2550.
FEE TABLE
Shareholder Transaction Expenses
Sales Load Imposed on Purchases.........................None
Sales Load Imposed on Reinvested Dividends..............None
Deferred Sales Load.....................................None
Redemption Fees*........................................None
Exchange Fees...........................................None
Annual Fund Operating Expenses (as a percentage of
average net assets; after fee waiver)
Management and Administrative Fees (after fee waiver)...1.00%
12b-1 Fees.......... None
Other Expenses..........................................1.00%
-----
Total Fund Operating Expenses (after fee waiver)...2.00%
=====
__________
*There is a $7.00 charge for wiring redemption proceeds to your
bank. A fee of $5 per quarter may be charged for accounts that
fall below stated minimums. See How to Redeem Shares-General
Redemption Policies.
Example. You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return; and (2) redemption at
the end of each time period:
1 year 3 years
------ -------
$20 $63
The purpose of the Fee Table is to assist you in
understanding the various costs and expenses that you will bear
directly or indirectly as an investor in the Fund. The table is
based upon an estimate of expenses, assuming net assets of $50
million. The figures assume that the percentage amounts listed
under Annual Fund Operating Expenses remain the same during each
of the periods and that all income dividends and capital gains
distributions are reinvested in additional shares.
From time to time, the Adviser may voluntarily undertake to
reimburse the Fund for a portion of its operating expenses. The
Adviser has undertaken to reimburse the Fund for its operating
expenses to the extent that such expenses exceed 2.00% of its
average annual net assets. This commitment expires on January 31,
1999, subject to earlier termination by the Adviser on 30 days'
notice to the Fund. Absent such reimbursement, the Management and
Administrative Fees and Total Operating Expenses would be 1.10%
and 2.10%, respectively. Any such reimbursement will lower the
Fund's overall expense ratio and increase its overall return to
investors. (Also see Management-Fees and Expenses.)
The Fund pays the Adviser an administrative fee based on the
Fund's average daily net assets, and the Portfolio pays the
Adviser a management fee based on its average daily net assets.
The expenses of both the Fund and the Portfolio are summarized in
the Fee Table (the fees are described under Management). The Fund
bears its proportionate share of Portfolio fees and expenses. The
trustees of the Trust have considered whether the annual operating
expenses of the Fund, including its proportionate share of the
expenses of the Portfolio, would be more or less than if the Fund
invested directly in the securities held by the Portfolio. The
trustees concluded that the Fund's expenses would not be greater
in such case.
The figures in the Example are not necessarily indicative of
past or future expenses, and actual expenses may be greater or
less than those shown. Although information such as that shown in
the Example and Fee Table is useful in reviewing the Fund's
expenses and in providing a basis for comparison with other mutual
funds, it should not be used for comparison with other investments
using different assumptions or time periods.
THE FUND
Stein Roe Asia Pacific Fund (the "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. The Fund does not impose commissions
or charges when shares are purchased or redeemed.
The Fund is a series of Stein Roe Investment Trust (the
"Trust"), an open-end management investment company, which is
authorized to issue shares of beneficial interest in separate
series. Each series represents interests in a separate portfolio
of securities and other assets, with its own investment objectives
and policies.
Stein Roe & Farnham Incorporated (the "Adviser") provides
administrative, overall management and accounting and bookkeeping
services to the Fund and the Portfolio. Newport Fund Management,
Inc. ("Newport"), as the sub-adviser, has been engaged to provide
investment advisory services to the Portfolio, subject to overall
management by the Adviser. The Adviser also manages and provides
investment advisory services for several other mutual funds with
different investment objectives, including equity funds, other
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.
The Fund is a "feeder fund"--that is, it invests all of its
assets in SR&F Asia Pacific Portfolio (the "Portfolio"), a "master
fund" that has an investment objective identical to that of the
Fund. The Portfolio is a series of SR&F Base Trust ("Base
Trust"). 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. (For more information,
see Master Fund/Feeder Fund: Structure and Risk Factors.)
INVESTMENT POLICIES
The Fund seeks growth of capital. It invests all of its net
investable assets in the Portfolio, which has the same investment
objective and substantially the same investment policies as the
Fund. The Portfolio seeks to achieve its objective by investing
primarily in the common stocks and equity-related securities of
medium to large capitalization growth companies, defined as those
companies with market capitalizations of at least $500 million,
located in the Pacific Basin. The Portfolio will invest in
companies that Newport believes have long-term growth prospects
and credible management.
The Portfolio seeks to provide investors with international
diversification and capital appreciation by investing primarily in
equity securities of medium and large capitalization companies in
the Pacific Basin, including Japan, Hong Kong/China, Singapore,
South Korea, Taiwan, Malaysia, Thailand, Indonesia, the
Philippines, Australia, and New Zealand. Under normal conditions,
the Portfolio will invest at least 65% of its total assets in
equity securities issued by companies in the Pacific Basin. The
Portfolio may invest up to 35% of its total assets in equity and
debt securities of companies located anywhere in the world,
including the United States.
Under normal market conditions, the Portfolio intends to be
fully invested in equity securities in the Pacific Basin
economies. However, should Newport consider that prevailing
market, economic, political or currency conditions warrant, the
Portfolio may establish and maintain reserves for defensive
purposes or to enable it to take advantage of buying
opportunities.
The Portfolio will consider an issuer of securities to be
located in the Pacific Basin if: (i) it is organized under the
laws of a country in the Pacific Basin and has a principal office
in a country in the Pacific Basin, (ii) it derives 50% or more of
its total revenues from business in the Pacific Basin, or (iii)
its equity securities are traded principally on a securities
exchange in the Pacific Basin.
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities. In pursuing its investment objective, the
Portfolio may invest up to 35% of its total assets in debt
securities. The Portfolio has established no minimum rating
criteria for the emerging market and domestic debt securities in
which it may invest, and such securities may be unrated. The
Portfolio does not intend to purchase debt securities that are in
default or which the Adviser or Newport believes will be in
default. The Portfolio may also invest in "Brady Bonds," which
are debt securities issued under the framework of the Brady Plan
as a mechanism for debtor countries to restructure their
outstanding bank loans. Most "Brady Bonds" have their principal
collateralized by zero coupon U.S. Treasury bonds.
The risks inherent in debt securities held in the portfolio
depend primarily on the term and quality of the particular
obligations, as well as on market conditions. A decline in the
prevailing levels of interest rates generally increases the value
of debt securities. Conversely, an increase in rates usually
reduces the value of debt securities. Medium-quality debt
securities are considered to have speculative characteristics.
Lower-quality debt securities rated lower than Baa by Moody's
Investors Service, Inc. or lower than BBB by Standard & Poor's
Corp., and unrated securities of comparable quality are considered
to be below investment grade. These types of debt securities are
commonly referred to as "junk bonds" and involve greater
investment risk, including the possibility of issuer default or
bankruptcy. During a period of adverse economic changes, issuers
of junk bonds may experience difficulty in servicing their
principal and interest payment obligations. The Portfolio does
not expect to invest more than 5% of its net assets in high-yield
("junk") bonds.
Settlement Transactions. When the Portfolio enters into a
contract for the purchase or sale of a foreign portfolio security,
it usually is required to settle the purchase transaction in the
relevant foreign currency or receive the proceeds of the sale in
that currency. In either event, the Portfolio is obliged to
acquire or dispose of an appropriate amount of foreign currency by
selling or buying an equivalent amount of U.S. dollars. At or
near the time of the purchase or sale of the foreign portfolio
security, the Portfolio may wish to lock in the U.S. dollar value
of a transaction at the exchange rate or rates then prevailing
between the U.S. dollar and the currency in which the security is
denominated. Known as "transaction hedging," this may be
accomplished by purchasing or selling such foreign securities on a
"spot," or cash, basis. Transaction hedging also may be
accomplished on a forward basis, whereby the Portfolio purchases
or sells a specific amount of foreign currency, at a price set at
the time of the contract, for receipt or delivery at either a
specified date or at any time within a specified time period. In
so doing, the Portfolio will attempt to insulate itself against
possible losses and gains resulting from a change in the
relationship between the U.S. dollar and the foreign currency
during the period between the date the security is purchased or
sold and the date on which payment is made or received. Similar
transactions may be entered into by using other currencies if the
Portfolio seeks to move investments denominated in one currency to
investments denominated in another.
Portfolio Turnover. Although the Portfolio does not purchase
securities with a view to rapid turnover, there are no limitations
on the length of time portfolio securities must be held.
Accordingly, the portfolio turnover rate may vary significantly
from year to year, but is not expected to exceed 100% under normal
market conditions. Flexibility of investment and emphasis on
capital appreciation may involve greater portfolio turnover than
that of mutual funds that have the objectives of income or
maintenance of a balanced investment position. A high rate of
portfolio turnover may result in increased transaction expenses
and the realization of capital gains and losses. (See
Distributions and Income Taxes.) The Fund is not intended to be
an income-producing investment.
Other Techniques. The Portfolio may make loans of its portfolio
securities to broker-dealers and banks subject to certain
restrictions described in the Statement of Additional Information,
though the Portfolio does not have a current intent to do so. The
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 the 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. The 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. The Portfolio may utilize spot and
forward foreign exchange transactions to reduce the risk caused by
exchange rate fluctuations between one currency and another when
securities are purchased or sold on a when-issued basis. The
Portfolio may participate in an interfund lending program, subject
to certain restrictions described in the Statement of Additional
Information. The Portfolio may also invest in synthetic money
market instruments, structured notes, swaps and Eurodollar
instruments. The Portfolio may invest in repurchase agreements,
provided that it will not invest more than 15% of its net assets
in repurchase agreements maturing in more than seven days and any
other illiquid securities. The Portfolio does not currently
intend to enter into repurchase agreements.
In addition, and consistent with its investment objective,
the 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,
forward contracts, securities collateralized by underlying pools
of mortgages or other receivables, floating rate instruments, and
other instruments that securitize assets of various types
("Derivatives"). The Portfolio may also sell short securities it
owns or has the right to acquire without further consideration, a
technique called selling short "against the box." For further
information on Derivatives and short sales against the box, see
the Statement of Additional Information.
The Portfolio may also invest in closed-end investment
companies investing primarily in the emerging markets. To the
extent it invests in such closed-end investment companies,
shareholders will incur certain duplicate fees and expenses.
Generally, securities of closed-end investment companies will be
purchased only when market access or liquidity restricts direct
investment in the market. (See the Statement of Additional
Information.)
INVESTMENT RESTRICTIONS
Each of the Fund and the Portfolio is diversified as that term is
defined in the Investment Company Act of 1940.
Neither the Fund nor the Portfolio may 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 the 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 the
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 Portfolio could experience both
losses and delays in liquidating its collateral.
- --------------
Neither the Fund nor the Portfolio may acquire more than 10%
of the outstanding voting securities of any one issuer. The Fund
may, however, invest all of its assets in shares of another
investment company having the identical investment objective under
a master/feeder structure.
While neither the Fund nor the 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 or Portfolios. Neither
may not borrow money, except for nonleveraging, temporary, or
emergency purposes or in connection with participation in the
interfund lending program. Neither the 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 Portfolio may invest in repurchase agreements, provided
that it will not invest more than 15% of net assets in illiquid
securities, including repurchase agreements maturing in more than
seven days. An investment in illiquid securities could involve
relatively greater risks and costs.
The investment restrictions described in the second through
fourth paragraphs of this section 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 the Fund
and the 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
shareholders. All of the investment restrictions are set forth in
the Statement of Additional Information.
Nothing in the investment restrictions shall be deemed to
prohibit the Portfolio from purchasing the securities of any
issuer pursuant to the exercise of subscription rights distributed
to it by the issuer. No such purchase may be made if, as a
result, the Fund will no longer be a diversified investment
company as defined in the Investment Company Act of 1940 or would
fail to meet the diversification requirements of the Internal
Revenue Code.
RISKS AND INVESTMENT CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Fund is intended
for long-term investors and not for short-term trading purposes.
It should not be considered a complete investment program. While
the Fund offers the potential for substantial price appreciation
over time, it also involves above-average investment risk. Of
course, there can be no guarantee that the Fund or the Portfolio
will achieve its objective. The Portfolio does not concentrate
investments in any particular industry.
Foreign Investing. The Fund provides long-term investors with an
opportunity to invest a portion of their assets in a diversified
portfolio of foreign securities. Non-U.S. investments may be
attractive because they increase diversification, as compared to a
portfolio comprised solely of U.S. investments. In addition, many
foreign economies have, from time to time, grown faster than the
U.S. economy, and the returns on investments in these countries
have exceeded those of similar U.S. investments. In addition,
many emerging market countries have experienced economic growth
rates well in excess of those found in the U.S. and other
developed markets. There can be no assurance, however, that these
conditions will continue. International diversification also
allows the Fund and an investor to take advantage of changes in
foreign economies and market conditions.
Investors should understand and consider carefully the
greater risks involved in foreign investing. Investing in foreign
securities--positions which are generally denominated in foreign
currencies--and utilization of forward foreign currency exchange
contracts involve certain risks and opportunities not typically
associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulations or
currency restrictions that would prevent cash from being brought
back to the United States; less public information with respect to
issuers of securities; less governmental supervision of stock
exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing, and financial reporting standards;
lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign
markets than in the United States; possible imposition of foreign
taxes; possible investment in the securities of companies in
developing as well as developed countries; and sometimes less
advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements. These risks are
greater for emerging market countries.
Investments in emerging markets securities include special
risks in addition to those generally associated with foreign
investing. Many investments in emerging markets can be considered
speculative, and the value of those investments can be more
volatile than is typical in more developed foreign markets. This
difference reflects the greater uncertainties of investing in less
established markets and economies. Emerging markets also have
different clearance and settlement procedures, and in certain
markets there have been times when settlements have not kept pace
with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets is uninvested and
no return is earned thereon. The inability of the Portfolio to
make intended security purchases due to settlement problems could
cause it to miss attractive investment opportunities. Inability
to dispose of portfolio securities due to settlement problems
could result either in losses due to subsequent declines in the
value of those securities or, if the Portfolio has entered into a
contract to sell a security, in possible liability to the
purchaser. Costs associated with transactions in emerging markets
securities are typically higher than costs associated with
transactions in U.S. securities. Such transactions also involve
additional costs for the purchase or sale of foreign currency.
Volume and liquidity of securities transactions in most
emerging markets are lower than in the U.S. In addition, many
emerging markets have experienced substantial rates of inflation.
Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, adverse effects on the economies and
securities markets of certain emerging market countries.
Investments in foreign securities expose the Portfolio to the
possibility of expropriation or confiscatory taxation, seizure or
nationalization of foreign bank deposits or other assets,
establishment of exchange controls, the adoption of foreign
government restrictions, and other adverse political, social or
diplomatic developments that could adversely affect investment in
these nations.
The strategy for selecting investments will be based on
various criteria. A company considered for investment should have
a good market position in a fast-growing segment of the economy,
strong management, preferably a leading position in its business,
prospects of superior financial returns, and securities available
for purchase at an attractive market valuation. Information on
some of the above factors may be difficult, if not impossible, to
obtain.
To the extent portfolio securities are issued by foreign
issuers or denominated in foreign currencies, investment
performance is affected by the strength or weakness of the U.S.
dollar against these currencies. If the dollar falls relative to
the Japanese yen, for example, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See the discussion of portfolio and
transaction hedging under Portfolio Investments and Strategies.)
Certain foreign markets (including emerging markets) may
require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging
market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The
Portfolio could be adversely affected by delays in, or a refusal
to grant, required governmental approval for repatriation of
capital, as well as by the application to the Portfolio of any
restrictions on investments.
HOW TO PURCHASE SHARES
You may purchase Fund shares 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 account is
$2,500; the minimum for Uniform Gifts/Transfers to Minors Act
("UGMA") accounts is $1,000; the minimum for accounts established
under an automatic investment plan (i.e., Regular Investments,
Dividend Purchase Option, or the Automatic Exchange Plan) is
$1,000 for regular accounts and $500 for UGMA accounts; and the
minimum per account for Stein Roe IRAs is $500. The initial
purchase minimum is waived for shareholders who participate in the
Stein Roe Counselor [service mark] 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.)
By Check. To make an initial purchase of Fund shares 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., P.O. Box 8900, Boston, Massachusetts 02205.
Participants in the Stein Roe Counselor [service mark] program
should send orders to SteinRoe Services Inc., 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 $50, and
the Fund generally will not accept cash, drafts, third or fourth
party checks, or checks drawn on banks outside the United States.
Should an order to purchase shares of the Fund be cancelled
because your check does not clear, you will be responsible for any
resulting loss incurred by the Fund.
By Wire. You also may pay for shares by instructing your bank to
wire federal funds (monies of member banks within the Federal
Reserve System) to 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 Fund nor the Trust
will be responsible for the consequences of delays, including
delays in the banking or Federal Reserve wire systems. Your bank
must include the full name(s) in which your account is registered
and your Fund account number, and should address its wire as
follows:
First National Bank of Boston
Boston, Massachusetts
ABA Routing No. 011000390
Attention: SteinRoe Services Inc.
Fund No. ___; Stein Roe Asia Pacific Fund
Account of (exact name(s) in registration)
Shareholder Account No. ________
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 Asia Pacific Fund
Account of (exact name(s) in registration)
Counselor Account No. ________
By Electronic Transfer. You may also make subsequent investments
by an electronic transfer of funds from your bank account.
Electronic transfer allows you to make purchases at your request
("Special Investments") by calling 800-338-2550 or at prescheduled
intervals ("Regular Investments") elected on your application.
(See Shareholder Services.) Electronic transfer purchases are
subject to a $50 minimum and a $100,000 maximum. You may not open
a new account through electronic transfer. Should an order to
purchase shares of the Fund be cancelled because your electronic
transfer does not clear, you will be responsible for any resulting
loss incurred by the Fund.
By Exchange. You may purchase shares by exchange of shares from
another 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 Fund shares must
be accepted by an authorized officer of the Trust or its
authorized agent or designee and is not binding until accepted and
entered on the books of the Fund. Once your purchase order has
been accepted, you may not cancel or revoke it; you may, however,
redeem the shares. The Trust reserves the right not to accept any
purchase order that it determines not to be in the best interests
of the Trust or of the Fund's shareholders. The Trust also
reserves the right to waive or lower its investment minimums for
any reason.
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 the Trust. There are no
charges or limitations imposed by the Trust, other than those
described in this prospectus, if shares are purchased (or
redeemed) directly from the Trust.
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 or authorized designee
of the Fund. 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
Fund for their clients for whom they hold Fund shares charge an
annual fee of up to 0.25% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. The Adviser
and the Fund's transfer agent share in the expense of these fees,
and the Adviser pays all sales and promotional expenses.
Purchase Price and Effective Date. Each purchase of shares made
directly with the Fund is made at its net asset value (see Net
Asset Value) next determined after receipt of an order in good
form, including receipt of payment as follows:
A purchase by check or wire transfer is made at the net asset
value next determined after 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 or designee of the Trust for the receipt of
orders is made at the net asset value next determined after the
receipt of the order by the Intermediary.
HOW TO REDEEM SHARES
By Written Request. You may redeem all or a portion of your Fund
shares by submitting a written request in "good order" to SteinRoe
Services Inc., P.O. Box 8900, Boston, MA 02205. Participants in
the Stein Roe Counselor [service mark] program should send
redemption requests to SteinRoe Services Inc., P.O. Box 803938,
Chicago, IL 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 signatures on the written redemption request must be
guaranteed (a signature guarantee is not a notarization, but
is a widely accepted way to protect you and the Fund by
verifying your signature);
(4) 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.
The Telephone Redemption by Check Privilege, Telephone
Redemption by Wire Privilege, and Special Electronic Transfer
Redemptions may not be used to redeem shares held by a tax-
sheltered retirement plan sponsored by Stein Roe. (See also
General Redemption Policies.)
Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four
Telephone Exchange round-trips per year and the Fund may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of the Fund into another no-load
Stein Roe Fund, and then back to the Fund). In addition, the
Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange. (See General Redemption Policies.)
The Trust reserves the right to suspend or terminate, at any
time and without prior notice, the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Fund.
Therefore, regardless of the number of telephone exchange round-
trips made by an investor, the Trust generally will not honor
requests for Telephone Exchanges by shareholders identified by the
Trust as "market-timers" if the officers of the Trust determine
the order not to be in the best interests of the Trust or its
shareholders. The 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
other than for investment considerations. Moreover, the Trust
reserves the right to suspend, limit, modify, or terminate, at any
time and without prior notice, the Telephone Exchange Privilege in
its entirety. Because such a step would be taken only if the
Board of Trustees believes it would be in the best interests of
the Fund, the Trust expects that it would provide shareholders
with prior written notice of any such action unless the resulting
delay in the suspension, limitation, modification, or termination
of the Telephone Exchange Privilege would adversely affect the
Fund. If the Trust were to suspend, limit, modify, or terminate
the Telephone Exchange Privilege, a shareholder expecting to make
a Telephone Exchange might find that an exchange could not be
processed or that there might be a delay in the implementation of
the exchange. (See How to Redeem Shares--By Exchange.) During
periods of volatile economic and market conditions, you may have
difficulty placing your exchange by telephone.
Automatic Exchanges. You may use the Automatic Exchange
Privilege to automatically redeem a fixed amount from your Fund
account for investment in another no-load Stein Roe Fund account
on a regular basis.
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.
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.
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. The Trust cannot accept a redemption request that
specifies a particular date or price for redemption or any special
conditions. Please call 800-338-2550 if you have any questions
about requirements for a redemption before submitting your
request. The Trust reserves the right to require a properly
completed application before making payment for shares redeemed.
The price at which your redemption order will be executed is
the net asset value next determined after proper redemption
instructions are received. (See Net Asset Value.) Because the
redemption price you receive depends upon the net asset value per
share at the time of redemption, it may be more or less than the
price you originally paid for the shares and may result in a
realized capital gain or loss.
The Trust will generally mail payment for shares redeemed
within seven days after proper instructions are received.
However, the Trust normally intends to pay proceeds of a Telephone
Redemption paid by wire on the next business day. If you attempt
to redeem shares within 15 days after they have been purchased by
check or electronic transfer, the Trust 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, the 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.
The Trust reserves the right at any time without prior notice
to suspend, limit, modify, or terminate any Privilege or its use
in any manner by any person or class.
Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Fund employs
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Fund and
its transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.
The Trust reserves the right to redeem shares in any account
and send the proceeds to the owner 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. The
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 the Fund or any of
the other Stein Roe Funds may be redeemed to the extent necessary
to reimburse any Stein Roe Fund for any loss 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
Fund shares. Shares purchased by reinvestment of dividends, by
cross-reinvestment of dividends from another no-load Stein Roe
Fund, or through an automatic investment plan will be confirmed to
you quarterly. The Trust will send you quarterly materials on the
Fund and portfolio holdings, will send you semiannual and annual
reports, 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] Automated Telephone Service. To access
Stein Roe Funds-on-Call [registered], just call 800-338-2550 on
any touch-tone telephone and follow the recorded instructions.
Funds-on-Call [registered] provides yields, prices, latest
dividends, account balances, last transaction, and other
information 24 hours a day, seven days a week. You also may use
Funds-on-Call [registered] to make Special Investments and
Redemptions, Telephone Exchanges, and Telephone Redemptions by
Check. These transactions are subject to the terms and conditions
of the individual privileges. (See How to Purchase Shares and How
to Redeem Shares.) Information regarding your account is
available to you via Funds-on-Call [registered] 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 Stein Roe
Fund in which you plan to invest before making your investment.
Individual Retirement Accounts ("IRAs") for employed persons
and their non-employed spouses.
Prototype Money Purchase Pension and Profit-Sharing Plans for
self-employed individuals, partnerships, and corporations.
Simplified Employee Pension Plans permitting employers to
provide retirement benefits to their employees by utilizing IRAs
while minimizing administration and reporting requirements.
Special Services. The following special services are available to
shareholders. Please call 800-338-2550 or write the Trust for
additional information and forms.
Dividend Purchase Option--diversify your Fund investments by
having distributions from one Fund account automatically invested
in another no-load Stein Roe Fund account. Before establishing
this option, you should obtain and 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.
Automatic Dividend Deposit (electronic transfer)--have income
dividends and capital gains 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 Fund shares is the net asset
value per share. The net asset value of a share of the 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. The Portfolio
allocates net asset value, income, and expenses to the Fund and
any other feeder funds in proportion to their respective interests
in the Portfolio. 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.
In computing the net asset value, the values of portfolio
securities are generally based upon market quotations. Depending
upon local convention or regulation, these market quotations may
be the last sale price, last bid or asked price, or the mean
between the last bid and asked prices as of, in each case, the
close of the appropriate exchange or other designated time.
Trading in securities on Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times
before the close of business on each day on which the NYSE is
open. Trading of these securities may not take place on every
NYSE business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the NYSE is not
open and on which net asset value is not calculated. Therefore,
such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities
used in such calculation and the value of the investment portfolio
may be significantly affected on days when shares of the Fund may
not be purchased or redeemed.
DISTRIBUTIONS AND INCOME TAXES
Distributions. Income dividends are normally declared and paid
annually. The Fund intends to distribute by the end of each
calendar year at least 98% of any net capital gains realized from
the sale of securities during the 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.
All of your income dividends and capital gains distributions
will be reinvested in additional shares of the Fund unless you
elect to have distributions either (1) paid by check; (2)
deposited by electronic transfer into your bank account; (3)
applied to purchase shares in your account with another Stein Roe
Fund; or (4) applied to purchase shares in a Stein Roe Fund
account of another person. (See Shareholder Services.)
Reinvestment into the same Fund account normally occurs one
business day after the record date. Investment of distributions
into another Stein Roe Fund account occurs on the payable date.
If 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. The Trust reserves the right to reinvest the
proceeds and future distributions in additional Fund shares if
checks mailed to you for distributions are returned as
undeliverable or are not presented for payment within six months.
No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
U.S. Federal Income Taxes. Your distributions will be taxable to
you, under income tax law, whether received in cash or reinvested
in additional shares. For federal income tax purposes, any
distribution that is paid in January but was declared in the prior
calendar year is deemed paid in the prior calendar year.
You will be subject to federal income tax at ordinary rates
on income dividends and distributions of net short-term capital
gains. Distributions of net long-term capital gains will be
taxable to you as long-term capital 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.
For federal income tax purposes, the Fund is treated as a
separate taxable entity distinct from the other series of the
Trust.
Foreign Income Taxes. Investment income received by the Fund from
sources within foreign countries may be subject to foreign income
taxes withheld at the source. The United States has entered into
tax treaties with many foreign countries that entitle the Fund to
a reduced rate of tax or exemption from tax on such income. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of assets to be invested within various
countries will fluctuate and the extent to which tax refunds will
be recovered is uncertain. The Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
To the extent that the Fund is liable for foreign income
taxes withheld at the source, it also intends to operate so as to
meet the requirements of the U.S. Internal Revenue Code to "pass
through" to shareholders the foreign income taxes paid, but there
can be no assurance that it will be able to do so.
This discussion of U.S. and foreign taxation is not intended
to be a full discussion of income tax laws and their effect on
shareholders. You may wish to consult your own tax advisor. The
foregoing information applies to U.S. shareholders. Foreign
shareholders should consult their tax advisors as to the tax
consequences of ownership of Fund shares.
Backup Withholding. The Trust may be required to withhold federal
income tax ("backup withholding") from certain payments to you--
generally redemption proceeds. Backup withholding may be required
if:
- - You fail to furnish your properly certified Social Security or
other tax identification number;
- - You fail to certify that your tax identification number is
correct or that you are not subject to backup withholding due to
the underreporting of certain income;
- - The Internal Revenue Service informs the Trust that your tax
identification number is incorrect.
These certifications are contained in the application that
you should complete and return when you open an account. The Fund
must promptly pay to the IRS all amounts withheld. Therefore, it
is usually not possible for the Fund to reimburse you for amounts
withheld. You may, however, claim the amount withheld as a credit
on your federal income tax return.
INVESTMENT RETURN
The total return from an investment in the Fund is measured by the
distributions received (assuming reinvestment of dividends and
capital gains), plus or minus the change in the net asset value
per share for a given period. A total return percentage may be
calculated by dividing the value of a share at the end of the
period (including reinvestment of distributions) by the value of
the share at the beginning of the period and subtracting one. For
a given period, an average annual total return may be calculated
by finding the average annual compounded rate that would equate a
hypothetical $1,000 investment to the ending redeemable value.
Comparison of the Fund's total return with alternative
investments should consider differences between the Fund and the
alternative investments, the periods and methods used in
calculation of the return being compared, and the impact of taxes
on alternative investments. Of course, past performance is no
guarantee of future results.
MANAGEMENT
Trustees and Adviser. The Board of Trustees of the Trust and the
Board of Trustees of Base Trust have overall management
responsibility for the Fund and the Portfolio, respectively. See
the Statement of Additional Information for the names of and
additional information about the trustees and officers. Since the
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 Fund and the
Portfolio.
The Adviser, Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, Illinois 60606, is responsible for managing
the business affairs of the Fund, the Portfolio, and the Trusts,
subject to the direction of the respective Boards. The Adviser is
registered as an investment adviser under the Investment Advisers
Act of 1940. The Adviser (or its predecessor) has 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.
The sub-adviser, Newport Fund Management, Inc., 580
California Street, Suite 1960, San Francisco, California 94104, is
subject to the overall supervision of the Adviser and provides the
Portfolio with investment advisory services, including portfolio
management. Newport is registered as an investment adviser under
the Investment Advisers Act of 1940 and specializes in investing
in the Pacific region. Newport, an affiliate of the Adviser, is a
wholly owned indirect subsidiary of Liberty Financial. As noted
above, Liberty Financial is a majority owned indirect subsidiary
of Liberty Mutual Insurance Company. As of March 31, 1998,
Newport managed approximately $1.5 billion in assets, all of which
were invested in foreign securities.
Portfolio Managers. John M. Mussey, Thomas R. Tuttle, Christopher
Legallet, and David Smith have been portfolio managers of the Fund
since its inception in 1998.
Mr. Mussey is President and Chief Investment Officer and a
Director of Newport and of Newport Pacific Management, Inc.
("Newport Pacific"), Newport's immediate parent. Mr. Mussey
founded Newport Pacific in 1983. He received a B.A. from the
University of Redlands in 1963 and an M.B.A. from University of
California at Berkley in 1965.
Mr. Tuttle is Senior Vice President of Newport and of Newport
Pacific. Mr. Tuttle has been affiliated with Newport since 1983.
He received a B.S. from Williams College in 1964.
Mr. Legallet is a Senior Vice President of Newport. Prior to
his affiliation with Newport, Mr. Legallet was a Managing Director
of Jupiter Tyndall (Asia) Ltd. in Hong Kong, serving as lead
manager for investment in Asia and, prior to 1992, a Vice
President of Salomon Brothers Inc. in New York. He received his
B.A. from UCLA in 1983 and an M.B.A. from UCLA in 1988.
Mr. Smith is a Senior Vice President of Newport, which he joined
in 1994. He has 29 years of experience in the investment business as
a money manager, institutional broker, and investment banker. He
graduated from San Francisco State University with a degree in
finance and economics.
Fees and Expenses. In return for its services, the Adviser is
entitled to receive an administrative fee from the Fund at an
annual rate of .150% of average net assets, and a management fee
from the Portfolio at an annual rate of 0.95% of average net
assets. The Adviser pays Newport a fee of 0.55% of average net
assets.
The Adviser provides office space and executive and other
personnel to the Trust. All Fund expenses (other than those paid
by the Adviser), including, but not limited to, printing and
postage charges, securities registration fees, custodian and
transfer agency fees, legal and auditing fees, compensation of
trustees not affiliated with the Adviser, and expenses incidental
to its organization, are paid out of the Fund's assets.
Under a separate agreement with each Trust, the Adviser
provides certain accounting and bookkeeping services to the Fund
and the Portfolio, including computation of net asset value and
calculation of its net income and capital gains and losses on
disposition of assets.
Portfolio Transactions. Newport places the orders for the
purchase and sale of portfolio securities and options and futures
transactions. In doing so, Newport seeks to obtain the best
combination of price and execution, which involves a number of
judgmental factors.
Transfer Agent. SteinRoe Services Inc., One South Wacker Drive,
Chicago, Illinois 60606, a wholly owned subsidiary of Liberty
Financial, is the agent of the Trust for the transfer of shares,
disbursement of dividends, and maintenance of shareholder
accounting records.
Distributor. Shares of the Fund are distributed by Liberty
Funds Distributor, Inc., One Financial Center, Boston,
Massachusetts 02111, a subsidiary of Colonial Management
Associates, Inc., which is an indirect subsidiary of Liberty
Financial. Shares of the Fund are offered for sale without any
sales commissions or charges to the Fund or to its shareholders.
All distribution and promotional expenses are paid by the Adviser,
including payments to the Distributor for sales of 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 Fund and the 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.)
ORGANIZATION AND DESCRIPTION OF SHARES
The 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 the Trust's
shareholders or its trustees. The Trust may issue an unlimited
number of shares, in one or more series as the Board may
authorize. Currently, 12 series are authorized and outstanding.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as the Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against, the Trust or
any particular series shall look only to the assets of the Trust
or of the respective series for payment under such credit,
contract or claim, and that the shareholders, trustees and
officers shall have no personal liability therefor. The
Declaration of Trust requires that notice of such disclaimer of
liability be given in each contract, instrument or undertaking
executed or made on behalf of the Trust. The Declaration of Trust
provides for indemnification of any shareholder against any loss
and expense arising from personal liability solely by reason of
being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder
liability is believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the
Trust was unable to meet its obligations.
The risk of a particular series incurring financial loss on
account of unsatisfied liability of another series of the Trust
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, the Trust is not required to hold annual
shareholder meetings. However, special meetings may be called for
purposes such as electing or removing trustees, changing
fundamental policies, or approving an investment advisory
contract.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
The 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 the Fund. The shareholders of the Fund approved this
policy of permitting the Fund to act as a feeder fund by investing
in the 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 Fund and the Portfolio. The management fees
and expenses of the Fund and the Portfolio are described under Fee
Table and Management. The Fund bears its proportionate share of
the 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.
The 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 the Fund and other investors in the Portfolio will be liable
for all obligations of the Portfolio that are not satisfied by the
Portfolio. However, the risk of the Fund incurring financial loss
on account of such liability is limited to circumstances in which
liability was inadequately insured and the Portfolio was unable to
meet its obligations. Accordingly, the trustees of the Trust
believe that neither the Fund nor its shareholders will be
adversely affected by reason of the Fund's investing in the
Portfolio.
The Declaration of Trust of Base Trust provides that the
Portfolio will terminate 120 days after the withdrawal of the 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 the Trust may vote the Fund's interests in the
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objective of the Fund and the Portfolio
is nonfundamental and may be changed without shareholder approval,
subject, however, to at least 30 days' advance written notice to
the Fund's shareholders.
The fundamental policies of the Fund and the corresponding
fundamental policies of the Portfolio can be changed only with
shareholder approval. If the Fund, as a Portfolio investor, is
requested to vote on a change in a fundamental policy of the
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.
The 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 the
Portfolio, they could have voting control over the Portfolio.
In the event that the Portfolio's fundamental policies were
changed so as to be inconsistent with those of the Fund, the Board
of Trustees of the 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 the Fund's shareholders. The 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 the 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 the Portfolio, including the 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 the Portfolio, but members of
the general public may not invest directly in the Portfolio.
Other investors in the Portfolio are not required to sell their
shares at the same public offering price as the Fund, might incur
different administrative fees and expenses than the Fund, and
might charge a sales commission. Therefore, the Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in the
Portfolio. Investment by such other investors in the 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 the 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 the
Portfolio's net assets. As a result, the Portfolio's security
holdings may become less diverse, resulting in increased risk.
Information regarding other investors in the 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>
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 Special Fund
Stein Roe Special Venture Fund
Stein Roe Growth Opportunities Fund
Stein Roe Capital Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe International Fund
Stein Roe Emerging Markets Fund
Stein Roe Asia Pacific 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
In Chicago, visit our Fund Center at One South Wacker Drive, Suite
3200
Liberty Funds Distributor, Inc., Distributor
<PAGE>
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 12, 1998
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET
BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
Statement of Additional Information Dated ______, 1998
STEIN ROE INVESTMENT TRUST
Suite 3200, One South Wacker Drive, Chicago, Illinois 60606
800-338-2550
Stein Roe Asia Pacific Fund
This Statement of Additional Information is not a prospectus,
but provides additional information that should be read in
conjunction with the prospectus of Stein Roe Asia Pacific Fund
dated ______, 1998, and any supplements thereto ("Prospectus").
The Prospectus may be obtained at no charge by telephoning 800-
338-2550.
TABLE OF CONTENTS
Page
General Information and History............................2
Investment Policies........................................3
Portfolio Investments and Strategies.......................3
Investment Restrictions...................................23
Additional Investment Considerations......................26
Purchases and Redemptions.................................27
Management................................................28
Principal Shareholders....................................31
Investment Advisory Services..............................31
Distributor...............................................34
Transfer Agent............................................34
Custodian.................................................34
Independent Public Accountants............................35
Portfolio Transactions....................................35
Additional Income Tax Considerations......................37
Investment Performance....................................38
Appendix-Ratings..........................................41
GENERAL INFORMATION AND HISTORY
Stein Roe Asia Pacific Fund (the "Fund") is a series of Stein
Roe Investment Trust (the "Trust"). On Feb. 1, 1996, the name of
the Trust was changed to separate "SteinRoe" into two words.
As of the date of this Statement of Additional Information,
12 series of the Trust are authorized and outstanding. Each share
of a series, without par value, is entitled to participate pro
rata in any dividends and other distributions declared by the
Board on shares of that series, and all shares of a series have
equal rights in the event of liquidation of that series. Each
whole share (or fractional share) outstanding on the record date
established in accordance with the By-Laws shall be entitled to a
number of votes on any matter on which it is entitled to vote
equal to the net asset value of the share (or fractional share) in
United States dollars determined at the close of business on the
record date (for example, a share having a net asset value of
$10.50 would be entitled to 10.5 votes). As a business trust, the
Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as
electing or removing trustees, changing fundamental policies, or
approving an investment advisory contract. If requested to do so
by the holders of at least 10% of its outstanding shares, the
Trust will call a special meeting for the purpose of voting upon
the question of removal of a trustee or trustees and will assist
in the communications with other shareholders as if the Trust were
subject to Section 16(c) of the Investment Company Act of 1940.
All shares of all series of the Trust are voted together in the
election of trustees. On any other matter submitted to a vote of
shareholders, shares are voted in the aggregate and not by
individual series, except that shares are voted by individual
series when required by the Investment Company Act of 1940 or
other applicable law, or when the Board of Trustees determines
that the matter affects only the interests of one or more series,
in which case shareholders of the unaffected series are not
entitled to vote on such matters.
Special Considerations Regarding Master Fund/Feeder Fund Structure
The Fund is a "feeder fund"; that is, rather than invest in
securities directly, it seeks to achieve its objective by pooling
its assets with those of other investment companies for investment
in a separate "master fund" having the same investment objective
and substantially the same investment policies as its feeder
funds. The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. The Fund's master
fund, SR&F Asia Pacific Portfolio (the "Portfolio"), is a series
of SR&F Base Trust. For more information, please refer to the
Prospectus under the caption Master Fund/Feeder Fund: Structure
and Risk Factors.
Stein Roe & Farnham Incorporated (the "Adviser") provides
overall management services to the Portfolio and administrative
and bookkeeping and accounting services to the Fund and the
Portfolio. Newport Fund Management, Inc. ("Newport") has been
engaged as sub-adviser to provide investment advisory services to
the Portfolio, subject to overall management by the Adviser.
INVESTMENT POLICIES
The Fund seeks to achieve its objective by investing in the
Portfolio, which has the same investment objective and
substantially the same investment policies. The investment
objective and policies are described in the prospectus under
Investment Policies. In pursuing its objective, the Portfolio may
also employ the investment techniques described under Portfolio
Investments and Strategies in the Prospectus and in this Statement
of Additional Information. The investment objective is a
nonfundamental policy and may be changed by the Board of Trustees
without the approval of a "majority of the outstanding voting
securities." /1/
- --------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding shares
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- ---------------
PORTFOLIO INVESTMENTS AND STRATEGIES
Debt Securities
In pursuing its investment objective, the Portfolio may
invest up to 35% of its total assets in debt securities. The
Portfolio has established no minimum rating criteria for the
emerging market and domestic debt securities in which it may
invest, and such securities may be unrated. The Portfolio does
not intend to purchase debt securities that are in default or
which the Adviser or Newport believes will be in default. The
Portfolio may also invest in "Brady Bonds," which are debt
securities issued under the framework of the Brady Plan as a
mechanism for debtor countries to restructure their outstanding
bank loans. Most "Brady Bonds" have their principal
collateralized by zero coupon U.S. Treasury bonds.
The risks inherent in debt securities held in the portfolio
depend primarily on the term and quality of the particular
obligations, as well as on market conditions. A decline in the
prevailing levels of interest rates generally increases the value
of debt securities. Conversely, an increase in rates usually
reduces the value of debt securities. Medium-quality debt
securities are considered to have speculative characteristics.
Lower-quality debt securities rated lower than Baa by Moody's
Investors Service, Inc. ("Moody's")or lower than BBB by Standard &
Poor's Corp. ("S&P"), and unrated securities of comparable quality
are considered to be below investment grade. These types of debt
securities are commonly referred to as "junk bonds" and involve
greater investment risk, including the possibility of issuer
default or bankruptcy. During a period of adverse economic
changes, issuers of junk bonds may experience difficulty in
servicing their principal and interest payment obligations. The
Portfolio does not expect to invest more than 5% of its net assets
in high-yield ("junk") bonds.
When Newport determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, the Portfolio may invest without limitation in high-
quality fixed income securities or hold assets in cash or cash
equivalents.
Derivatives
Consistent with its objective, the 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.
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 that cannot be
readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on Newport's
ability to correctly predict changes in the levels and directions
of movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives.
The Portfolio currently intends to invest no more than 5% of
its net assets in any type of Derivative other than options,
futures contracts, futures options, and forward contracts. (See
Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid on
purchase of such securities; in addition, the proceeds of
prepayment would likely be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social, and market factors.
If mortgages are pre-paid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid on purchase of the CMO, and the proceeds of
prepayment would likely be invested at lower interest rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans that finance payments on the securities
themselves.
Floating rate instruments provide for periodic adjustments in
coupon interest rates that are automatically reset based on
changes in amount and direction of specified market interest
rates. In addition, the adjusted duration of some of these
instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%.
Convertible Securities
By investing in convertible securities, the Portfolio 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, Newport will consider substantially the same criteria
that would be considered in purchasing the underlying stock.
While convertible securities purchased by the Portfolio are
frequently rated investment grade, the Portfolio may purchase
unrated securities or securities rated below investment grade if
the securities meet Newport's other investment criteria.
Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being less well known to investors
than investment grade convertible securities, common stock or
conventional debt securities. As a result, Newport's own
investment research and analysis tend to be more important in the
purchase of such securities than other factors.
Foreign Securities
The Portfolio invests primarily in foreign securities, which
may entail a greater degree of risk (including risks relating to
exchange rate fluctuations, tax provisions, or expropriation of
assets) than investment in securities of domestic issuers. For
this purpose, foreign securities do not include American
Depositary Receipts (ADRs) or securities guaranteed by a United
States person. ADRs are receipts typically issued by an American
bank or trust company evidencing ownership of the underlying
securities. The Portfolio may invest in sponsored or unsponsored
ADRs. In the case of an unsponsored ADR, the Portfolio is likely
to bear its proportionate share of the expenses of the depositary
and it may have greater difficulty in receiving shareholder
communications than it would have with a sponsored ADR. The
Portfolio does not intend to invest more than 5% of its net assets
in unsponsored ADRs. It may also purchase foreign securities in
the form of European Depositary Receipts (EDRs) or other
securities representing underlying shares of foreign issuers.
Positions in these securities are not necessarily denominated in
the same currency as the common stocks into which they may be
converted. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed
for the U.S. securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, investment
performance is affected by the strength or weakness of the U.S.
dollar against these currencies. For example, if the dollar falls
in value relative to the Japanese yen, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction
hedging and portfolio hedging under Currency Exchange
Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions which are generally denominated in foreign currencies,
and utilization of forward foreign currency exchange contracts
involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements. These risks are greater for emerging markets.
Although the Portfolio will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Investing in Emerging Markets. Investments in emerging
markets securities include special risks in addition to those
generally associated with foreign investing. Many investments in
emerging markets can be considered speculative, and the value of
those investments can be more volatile than in more developed
foreign markets. This difference reflects the greater
uncertainties of investing in less established markets and
economies. Emerging markets also have different clearance and
settlement procedures, and in certain markets there have been
times when settlements have not kept pace with the volume of
securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary
periods when a portion of the assets is uninvested and no return
is earned thereon. The inability to make intended security
purchases due to settlement problems could cause the Portfolio to
miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result
either in losses to the Portfolio due to subsequent declines in
the value of those securities or, if the Portfolio has entered
into a contract to sell a security, in possible liability to the
purchaser. Costs associated with transactions in emerging markets
securities are typically higher than costs associated with
transactions in U.S. securities. Such transactions also involve
additional costs for the purchase or sale of foreign currency.
Certain foreign markets (including emerging markets) may
require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging
market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The
Portfolio could be adversely affected by delays in, or a refusal
to grant, required governmental approval for repatriation of
capital, as well as by the application to the Portfolio of any
restrictions on investments.
The risk also exists that an emergency situation may arise in
one or more emerging markets. As a result, trading of securities
may cease or may be substantially curtailed and prices for the
Portfolio's securities in such markets may not be readily
available. The Portfolio may suspend redemption of its shares for
any period during which an emergency exists, as determined by the
Securities and Exchange Commission (the "SEC"). Accordingly, if
the Portfolio believes that appropriate circumstances exist, it
will promptly apply to the SEC for a determination that such an
emergency is present. During the period commencing from the
Portfolio's identification of such condition until the date of the
SEC action, the Portfolio's securities in the affected markets
will be valued at fair value determined in good faith by or under
the direction of the Trust's Board of Trustees.
Volume and liquidity in most foreign markets are lower than
in the U.S. Fixed commissions on foreign securities exchanges are
generally higher than negotiated commissions on U.S. exchanges,
although the Portfolio endeavors to achieve the most favorable net
results on its portfolio transactions. There is generally less
government supervision and regulation of business and industry
practices, securities exchanges, brokers, dealers and listed
companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less reliable than within the
U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. In
addition, with respect to certain emerging markets, there is the
possibility of expropriation or confiscatory taxation, political
or social instability, or diplomatic developments which could
affect the Portfolio's investments in those countries. Moreover,
individual emerging market economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
Income from securities held by the Portfolio could be reduced
by a withholding tax on the source or other taxes imposed by the
emerging market countries in which the Portfolio invests. Net
asset value may also be affected by changes in the rates of
methods or taxation applicable to the Portfolio or to entities in
which it has invested. Newport will consider the cost of any
taxes in determining whether to acquire any particular
investments, but can provide no assurance that the taxes will not
be subject to change.
Many emerging markets have experienced substantial rates of
inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have adverse effects
on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries. Of these
countries, some, in recent years, have begun to control inflation
through prudent economic policies.
Emerging market governmental issuers are among the largest
debtors to commercial banks, foreign governments, international
financial organizations and other financial institutions. Certain
emerging market governmental issuers have not been able to make
payments of interest or principal on debt obligations as those
payments have come due. Obligations arising from past
restructuring agreements may affect the economic performance and
political and social stability of those issuers.
Governments of many emerging market countries have exercised
and continue to exercise substantial influence over many aspects
of the private sector through ownership or control of many
companies, including some of the largest in any given country. As
a result, government actions in the future could have a
significant effect on economic conditions in emerging markets,
which in turn, may adversely affect companies in the private
sector, general market conditions and prices and yields of certain
of the securities in the portfolio. Expropriation, confiscatory
taxation, nationalization, political, economic or social
instability or other similar developments have occurred frequently
over the history of certain emerging markets and could adversely
affect the Portfolio's assets should these conditions recur.
The ability of emerging market country governmental issuers
to make timely payments on their obligations is likely to be
influenced strongly by the issuer's balance of payments, including
export performance, and its access to international credits and
investments. An emerging market whose exports are concentrated in
a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities.
Increased protectionism on the part of an emerging market's
trading partners could also adversely affect the country's exports
and diminish its trade account surplus, if any. To the extent
that emerging markets receive payment for their exports in
currencies other than dollars or non-emerging market currencies,
their ability to make debt payments denominated in dollars or non-
emerging market currencies could be affected.
Another factor bearing on the ability of an emerging market
country to repay debt obligations is the level of international
reserves of the country. Fluctuations in the level of these
reserves affect the amount of foreign exchange readily available
for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these
debt obligations.
To the extent that an emerging market country cannot generate
a trade surplus, it must depend on continuing loans from foreign
governments, multilateral organizations or private commercial
banks, aid payments from foreign governments and on inflows of
foreign investment. The access of emerging markets to these forms
of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of emerging
market country governmental issuers to make payments on their
obligations. In addition, the cost of servicing emerging market
debt obligations can be affected by a change in international
interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon
international rates.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
Foreign currency exchange transactions are limited to
transaction and portfolio hedging involving either specific
transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward contracts with respect to specific
receivables or payables of the Portfolio arising in connection
with the purchase and sale of its portfolio securities. Portfolio
hedging is the use of forward contracts with respect to portfolio
security positions denominated or quoted in a particular foreign
currency. Portfolio hedging allows the Portfolio to limit or
reduce its exposure in a foreign currency by entering into a
forward contract to sell such foreign currency (or another foreign
currency that acts as a proxy for that currency) at a future date
for a price payable in U.S. dollars so that the value of the
foreign-denominated portfolio securities can be approximately
matched by a foreign-denominated liability. The Portfolio may not
engage in portfolio hedging with respect to the currency of a
particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in
its portfolio denominated or quoted in that particular currency,
except that the Portfolio may hedge all or part of its foreign
currency exposure through the use of a basket of currencies or a
proxy currency where such currencies or currency act as an
effective proxy for other currencies. In such a case, the
Portfolio may enter into a forward contract where the amount of
the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket
hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency held in
the Portfolio. The Portfolio may not engage in "speculative"
currency exchange transactions.
At the maturity of a forward contract to deliver a particular
currency, the Portfolio may either sell the portfolio security
related to such contract and make delivery of the currency, or it
may retain the security and either acquire the currency on the
spot market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same
currency trader obligating it to purchase on the same maturity
date the same amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for it to
purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is
less than the amount of currency it is obligated to deliver and if
a decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot
market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of
currency the Portfolio is obligated to deliver.
If the Portfolio retains the portfolio security and engages
in an offsetting transaction, it will incur a gain or a loss to
the extent that there has been movement in forward contract
prices. If the Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between
entering into a forward contract for the sale of a currency and
the date it enters into an offsetting contract for the purchase of
the currency, the Portfolio will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices
increase, the Portfolio will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. A default on the contract would
deprive the Portfolio of unrealized profits or force the Portfolio
to cover its commitments for purchase or sale of currency, if any,
at the current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for the Portfolio to hedge against a devaluation that is
so generally anticipated that the Portfolio is not able to
contract to sell the currency at a price above the devaluation
level it anticipates. The cost to the Portfolio of engaging in
currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and
prevailing market conditions. Since currency exchange
transactions are usually conducted on a principal basis, no fees
or commissions are involved.
Synthetic Foreign Money Market Positions. The Portfolio may
invest in money market instruments denominated in foreign
currencies. In addition to, or in lieu of, such direct
investment, it may construct a synthetic foreign money market
position by (a) purchasing a money market instrument denominated
in one currency, generally U.S. dollars, and (b) concurrently
entering into a forward contract to deliver a corresponding amount
of that currency in exchange for a different currency on a future
date and at a specified rate of exchange. For example, a
synthetic money market position in Japanese yen could be
constructed by purchasing a U.S. dollar money market instrument,
and entering concurrently into a forward contract to deliver a
corresponding amount of U.S. dollars in exchange for Japanese yen
on a specified date and at a specified rate of exchange. Because
of the availability of a variety of highly liquid short-term U.S.
dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity
than direct investment in foreign currency money market
instruments. The result of a direct investment in a foreign
currency and a concurrent construction of a synthetic position in
such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be
similar, but would not be identical because the components of the
alternative investments would not be identical. Except to the
extent a synthetic foreign money market position consists of a
money market instrument denominated in a foreign currency, the
synthetic foreign money market position shall not be deemed a
"foreign security" for purposes of the policy that, under normal
conditions, the Portfolio will invest at least 65% of total assets
in foreign securities issued by companies in the Pacific Basin.
Structured Notes
Structured Notes are Derivatives on which the amount of
principal repayment and or interest payments is based upon the
movement of one or more factors. These factors include, but are
not limited to, currency exchange rates, interest rates (such as
the prime lending rate and the London Interbank Offered Rate
("LIBOR")), stock indices such as the S&P 500 Index and the price
fluctuations of a particular security. In some cases, the impact
of the movements of these factors may increase or decrease through
the use of multipliers or deflators. The use of Structured Notes
allows the Portfolio to tailor its investments to the specific
risks and returns Newport wishes to accept while avoiding or
reducing certain other risks.
Eurodollar Instruments
The Portfolio may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to LIBOR, although
foreign currency-denominated instruments are available from time
to time. Eurodollar future contracts enable purchasers to obtain
a fixed rate for the lending of funds and sellers to obtain a
fixed rate for borrowings. The Portfolio might use Eurodollar
futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income
instruments are linked.
Brady Bonds
The Portfolio may invest in "Brady Bonds," which are debt
securities issued under the framework of the Brady Plan as a
mechanism for debtor countries to restructure their outstanding
bank loans. Most "Brady Bonds" have their principal
collateralized by zero coupon U.S. Treasury bonds. Brady Bonds
have been issued only in recent years, and, accordingly, do not
have a long payment history.
U.S. dollar-denominated, collateralized Brady Bonds, which
may be fixed rate par bonds or floating rate discount bonds, are
generally collateralized in full as to principal due at maturity
by U.S. Treasury zero coupon obligations which have the same
maturity as the Brady Bonds. Interest payments on these Brady
Bonds generally are collateralized by cash or securities in an
amount that, in the case of fixed rate bonds, is equal to at least
one year of rolling interest payments or, in the case of floating
rate bonds, initially is equal to at least one year's rolling
interest payments based on the applicable interest rate at the
time and is adjusted at regular intervals thereafter. Certain
Brady Bonds are entitled to "value recovery payments" in certain
circumstances, which in effect constitute supplemental interest
payments but generally are not collateralized. Brady Bonds are
often viewed as having three or four valuation components: (i)
the collateralized repayment of principal at final maturity; (ii)
the collateralized interest payments; (iii) the uncollateralized
interest payments; and (iv) any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute
the "residual risk"). In the event of a default with respect to
collateralized Brady Bonds as a result of which the payment
obligations of the issuer are accelerated, the U.S. Treasury zero
coupon obligations held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be held to
the scheduled maturity of the defaulted Brady Bonds by the
collateral agent, at which time the face amount of the collateral
will equal the principal payments which would have then been due
on the Brady Bonds in the normal course. In addition, in light of
the residual risk of the Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds will be viewed as speculative.
Sovereign Debt Obligations
The Portfolio may purchase sovereign debt instruments issued
or guaranteed by foreign governments or their agencies, including
debt of emerging market countries. Sovereign debt of emerging
market countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities
responsible for repayment of the debt may be unable or unwilling
to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition,
prospects for repayment of principal and interest may depend on
political as well as economic factors.
Closed-End Investment Companies
The Portfolio may also invest in closed-end investment
companies investing primarily in the emerging markets. To the
extent the Portfolio invests in such closed-end investment
companies, shareholders will incur certain duplicate fees and
expenses. Generally, securities of closed-end investment
companies will be purchased only when market access or liquidity
restricts direct investment in the market.
Swaps, Caps, Floors and Collars
The Portfolio may enter into swaps and may purchase or sell
related caps, floors and collars. The Portfolio would enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
purchases at a later date. The Portfolio intends to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream the Portfolio may be
obligated to pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease the Portfolio's exposure to
changes in the value of an index of securities in which it might
invest, the value of a particular security or group of securities,
or foreign currency values. Swap agreements can take many
different forms and are known by a variety of names. The
Portfolio may enter into any form of swap agreement if Newport
determines it is consistent with its investment objective and
policies.
A swap agreement tends to shift the Portfolio's investment
exposure from one type of investment to another. For example, if
the Portfolio agrees to exchange payments in dollars at a fixed
rate for payments in a foreign currency the amount of which is
determined by movements of a foreign securities index, the swap
agreement would tend to increase exposure to foreign stock market
movements and foreign currencies. Depending on how it is used, a
swap agreement may increase or decrease the overall volatility of
the Portfolio's investments and its net asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from the
Portfolio. If a swap agreement calls for payments by the
Portfolio, it must be prepared to make such payments when due. If
the counterparty's creditworthiness declines, the value of a swap
agreement would be likely to decline, potentially resulting in a
loss. The Portfolio will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty,
combined with any credit enhancements, is rated at least A by S&P
or Moody's or has an equivalent rating from a nationally
recognized statistical rating organization or is determined to be
of equivalent credit quality by Newport.
The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is
a combination of a cap and floor that preserves a certain return
within a predetermined range of interest rates or values.
At the time the Portfolio enters into swap arrangements or
purchases or sells caps, floors or collars, liquid assets having a
value at least as great as the commitment underlying the
obligations will be segregated on the books of the Portfolio and
held by the custodian throughout the period of the obligation.
Lending of Portfolio Securities
Subject to restriction (5) under Investment Restrictions in
this Statement of Additional Information, the Portfolio may lend
its portfolio securities to broker-dealers and banks. Any such
loan must be continuously secured by collateral in cash or cash
equivalents maintained on a current basis in an amount at least
equal to the market value of the securities loaned by the
Portfolio. The Portfolio would continue to receive the equivalent
of the interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The
Portfolio would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five
business days. The Portfolio would not have the right to vote the
securities during the existence of the loan but would call the
loan to permit voting of the securities if, in Newport's judgment,
a material event requiring a shareholder vote would otherwise
occur before the loan was repaid. In the event of bankruptcy or
other default of the borrower, the Portfolio could experience both
delays in liquidating the loan collateral or recovering the loaned
securities and losses, including (a) possible decline in the value
of the collateral or in the value of the securities loaned during
the period while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of
access to income during this period, and (c) expenses of enforcing
its rights. The Portfolio does not currently intend to loan more
than 5% of its net assets.
Repurchase Agreements
The Portfolio may invest in repurchase agreements, provided
that it will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to the
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 Portfolio could experience both
losses and delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
The Portfolio may purchase securities on a when-issued or
delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time the 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. The Portfolio makes such commitments only
with the intention of actually acquiring the securities, but may
sell the securities before settlement date if Newport deems it
advisable for investment reasons. The Portfolio does not
currently intend to have commitments to purchase when-issued
securities in excess of 5% of its net assets. It may utilize spot
and forward foreign currency exchange transactions to reduce the
risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a
when-issued or delayed-delivery basis.
The Portfolio may enter into reverse repurchase agreements
with banks and securities dealers. A reverse repurchase agreement
is a repurchase agreement in which it is the seller of, rather
than the investor in, securities and agrees to repurchase them at
an agreed-upon time and price. Use of a reverse repurchase
agreement may be preferable to a regular sale and later repurchase
of securities because it avoids certain market risks and
transaction costs.
At the time the Portfolio enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the
Portfolio having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books
of the Portfolio and held by the custodian throughout the period
of the obligation. The use of these investment strategies, as
well as borrowing under a line of credit as described below, may
increase net asset value fluctuation.
Short Sales "Against the Box"
The Portfolio may sell securities short against the box; that
is, enter into short sales of securities that it currently owns or
has the right to acquire through the conversion or exchange of
other securities that it owns at no additional cost. The
Portfolio may make short sales of securities only if at all times
when a short position is open it owns at least an equal amount of
such securities or securities convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short, at no additional cost.
In a short sale against the box, the Portfolio does not
deliver from its portfolio the securities sold. Instead, the
Portfolio borrows the securities sold short from a broker-dealer
through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Portfolio, to the
purchaser of such securities. The Portfolio is required to pay to
the broker-dealer the amount of any dividends paid on shares sold
short. Finally, to secure its obligation to deliver to such
broker-dealer the securities sold short, the Portfolio must
deposit and continuously maintain in a separate account with its
custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities at
no additional cost. The Portfolio is said to have a short
position in the securities sold until it delivers to the broker-
dealer the securities sold. The Portfolio may close out a short
position by purchasing on the open market and delivering to the
broker-dealer an equal amount of the securities sold short, rather
than by delivering portfolio securities.
Short sales may protect the Portfolio against the risk of
losses in the value of its portfolio securities because any
unrealized losses with respect to such portfolio securities should
be wholly or partially offset by a corresponding gain in the short
position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding
loss in the short position. The extent to which such gains or
losses are offset will depend upon the amount of securities sold
short relative to the amount the Portfolio owns, either directly
or indirectly, and, in the case where it owns convertible
securities, changes in the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time the Portfolio replaces the borrowed security, it
will incur a loss and if the price declines during this period, it
will realize a short-term capital gain. Any realized short-term
capital gain will be decreased, and any incurred loss increased,
by the amount of transaction costs and any premium, dividend or
interest which the Portfolio may have to pay in connection with
such short sale. Certain provisions of the Internal Revenue Code
may limit the degree to which the Portfolio is able to enter into
short sales. There is no limitation on the amount of assets that,
in the aggregate, may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales
and allocated to segregated accounts in connection with short
sales. The Portfolio currently expects that no more than 5% of
its total assets would be involved in short sales against the box.
Rule 144A Securities
The Portfolio may purchase securities that have been
privately placed but that are eligible for purchase and sale under
Rule 144A under the 1933 Act. That Rule permits certain qualified
institutional buyers, such as the Portfolio, to trade in privately
placed securities that have not been registered for sale under the
1933 Act. Newport, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the restriction of investing
no more than 15% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, Newport will
consider the trading markets for the specific security, taking
into account the unregistered nature of a Rule 144A security. In
addition, Newport could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and
of marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be
monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the
Portfolio's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the
Portfolio does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the
effect of increasing the amount of the Portfolio's assets invested
in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. The Portfolio does not
expect to invest as much as 5% of its total assets in Rule 144A
securities that have not been deemed to be liquid by Newport.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this Statement of Additional Information, the Portfolio may
establish and maintain a line of credit with a major bank in order
to permit borrowing on a temporary basis to meet share redemption
requests in circumstances in which temporary borrowing may be
preferable to liquidation of portfolio securities.
Interfund Borrowing and Lending Program
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Portfolio has received permission to lend
money to, and borrow money from, other mutual funds advised by the
Adviser. The Portfolio will borrow through the program when
borrowing is necessary and appropriate and the costs are equal to
or lower than the costs of bank loans.
Portfolio Turnover
Although the Portfolio does not purchase securities with a
view to rapid turnover, there are no limitations on the length of
time that portfolio securities must be held. Portfolio turnover
can occur for a number of reasons such as general conditions in
the securities markets, more favorable investment opportunities in
other securities, or other factors relating to the desirability of
holding or changing a portfolio investment. Because of the
Portfolio's flexibility of investment and emphasis on growth of
capital, it may have greater portfolio turnover than that of
mutual funds that have primary objectives of income or maintenance
of a balanced investment position. The future turnover rate may
vary greatly from year to year, but is not expected to exceed 100%
under normal market conditions. A high rate of portfolio
turnover, if it should occur, would result in increased
transaction expenses, which it must bear. High portfolio turnover
may also result in the realization of capital gains or losses and,
to the extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered
ordinary income for federal income tax purposes. (See Risks and
Investment Considerations and Distributions and Income Taxes in
the Prospectus, and Additional Income Tax Considerations in this
Statement of Additional Information.)
Options on Securities and Indexes
The Portfolio may purchase and sell put options and call
options on securities, indexes or foreign currencies in
standardized contracts traded on recognized securities exchanges,
boards of trade, or similar entities, or quoted on Nasdaq. The
Portfolio may purchase agreements, sometimes called cash puts,
that may accompany the purchase of a new issue of bonds from a
dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)
The Portfolio will write call options and put options only if
they are "covered." For example, in the case of a call option on
a security, the option is "covered" if the Portfolio owns the
security underlying the call or has an absolute and immediate
right to acquire that security without additional cash
consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount are held in a segregated
account by its custodian) upon conversion or exchange of other
securities held in its portfolio.
If an option written by the Portfolio expires, it realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Portfolio expires, it
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when the Portfolio desires.
The Portfolio will realize a capital gain from a closing
purchase transaction if the cost of the closing option is less
than the premium received from writing the option, or, if it is
more, the Portfolio will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium
paid to purchase the option, the Portfolio will realize a capital
gain or, if it is less, it will realize a capital loss. The
principal factors affecting the market value of a put or a call
option include supply and demand, interest rates, the current
market price of the underlying security or index in relation to
the exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration
date.
A put or call option purchased by the Portfolio is an asset
of the Portfolio, valued initially at the premium paid for the
option. The premium received for an option written by the
Portfolio is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is
valued at the closing price on the exchange on which it is traded
or, if not traded on an exchange or no closing price is available,
at the mean between the last bid and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when the Portfolio seeks to close out an option position. If the
Portfolio were unable to close out an option that it had purchased
on a security, it would have to exercise the option in order to
realize any profit or the option would expire and become
worthless. If the Portfolio were unable to close out a covered
call option that it had written on a security, it would not be
able to sell the underlying security until the option expired. As
the writer of a covered call option on a security, the Portfolio
foregoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call
option above the sum of the premium and the exercise price of the
call.
If trading were suspended in an option purchased or written
by the Portfolio, it would not be able to close out the option.
If restrictions on exercise were imposed, the Portfolio might be
unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
The Portfolio may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of
a specified quantity of a financial instrument or the cash value
of an index /2/ at a specified price and time. A public market
exists in futures contracts covering a number of indexes
(including, but not limited to: the Standard & Poor's 500 Index,
the Value Line Composite Index, and the New York Stock Exchange
Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies).
Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts
will be developed and traded.
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/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
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The Portfolio may purchase and write call and put futures
options. Futures options possess many of the same characteristics
as options on securities, indexes and foreign currencies
(discussed above). A futures option gives the holder the right,
in return for the premium paid, to assume a long position (call)
or short position (put) in a futures contract at a specified
exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true. The
Portfolio might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of
stock prices, anticipated changes in interest rates or currency
fluctuations that might adversely affect either the value of its
securities or the price of the securities that the Portfolio
intends to purchase. Although other techniques could be used to
reduce or increase exposure to stock price, interest rate and
currency fluctuations, the Portfolio may be able to achieve its
exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
The Portfolio will only enter into futures contracts and
futures options that are standardized and traded on an exchange,
board of trade, or similar entity, or quoted on an automated
quotation system.
The success of any futures transaction depends on accurate
predictions of changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should
those predictions be incorrect, the return might have been better
had the transaction not been attempted; however, in the absence of
the ability to use futures contracts, Newport might have taken
portfolio actions in anticipation of the same market movements
with similar investment results but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by the
Portfolio, it is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S.
Government securities or other securities acceptable to the broker
("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit on the
futures contract, which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations
have been satisfied. The Portfolio expects to earn interest
income on its initial margin deposits. A futures contract held by
the Portfolio is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Portfolio pays
or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking-to-market." Variation margin paid or received by the
Portfolio does not represent a borrowing or loan by the Portfolio
but is instead settlement between the Portfolio and the broker of
the amount one would owe the other if the futures contract had
expired at the close of the previous day. In computing daily net
asset value, the Portfolio will mark-to-market its open futures
positions.
The Portfolio is also required to deposit and maintain margin
with respect to put and call options on futures contracts written
by it. Such margin deposits will vary depending on the nature of
the underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held by the Portfolio.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Portfolio realizes a
capital gain, or if it is more, it realizes a capital loss.
Conversely, if an offsetting sale price is more than the original
purchase price, the Portfolio realizes a capital gain, or if it is
less, it realizes a capital loss. The transaction costs must also
be included in these calculations.
Risks Associated with Futures
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the portfolio, and, in the case of interest rate
futures contracts, the interest rate levels, maturities, and
creditworthiness of the issues underlying the futures contract may
differ from the financial instruments held in the portfolio. A
decision as to whether, when and how to use futures contracts
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected stock price or interest rate
trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when the Portfolio seeks to close out a futures or futures
option position. The Portfolio would be exposed to possible loss
on the position during the interval of inability to close, and
would continue to be required to meet margin requirements until
the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a
significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue
to exist.
Limitations on Options and Futures
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
the Portfolio may also use those investment vehicles, provided the
Board of Trustees determines that their use is consistent with the
investment objective.
The Portfolio will not enter into a futures contract or
purchase an option thereon if, immediately thereafter, the initial
margin deposits for futures contracts held plus premiums paid by
it for open futures option positions, less the amount by which any
such positions are "in-the-money," /3/ would exceed 5% of total
assets.
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/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
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When purchasing a futures contract or writing a put option on
a futures contract, the Portfolio must maintain with its custodian
(or broker, if legally permitted) cash or cash equivalents
(including any margin) equal to the market value of such contract.
When writing a call option on a futures contract, the Portfolio
similarly will maintain with its custodian cash or cash
equivalents (including any margin) equal to the amount by which
such option is in-the-money until the option expires or is closed
out by the Portfolio.
The Portfolio may not maintain open short positions in
futures contracts, call options written on futures contracts or
call options written on indexes if, in the aggregate, the market
value of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent the Portfolio has
written call options on specific securities in its portfolio, the
value of those securities will be deducted from the current market
value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," the Portfolio will use commodity futures or commodity
options contracts solely for bona fide hedging purposes within the
meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the
assets, after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into [in
the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].
Taxation of Options and Futures
If the Portfolio exercises a call or put option that it
holds, the premium paid for the option is added to the cost basis
of the security purchased (call) or deducted from the proceeds of
the security sold (put). For cash settlement options and futures
options exercised by the Portfolio, the difference between the
cash received at exercise and the premium paid is a capital gain
or loss.
If a call or put option written by the Portfolio is
exercised, the premium is included in the proceeds of the sale of
the underlying security (call) or reduces the cost basis of the
security purchased (put). For cash settlement options and futures
options written by the Portfolio, the difference between the cash
paid at exercise and the premium received is a capital gain or
loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by the Portfolio was
in-the-money at the time it was written and the security covering
the option was held for more than the long-term holding period
prior to the writing of the option, any loss realized as a result
of a closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
If the Portfolio writes an equity call option /4/ other than
a "qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
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/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
- ---------
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If the
Portfolio delivers securities under a futures contract, the
Portfolio also realizes a capital gain or loss on those
securities.
For federal income tax purposes, the Portfolio generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on futures,
futures options and non-equity options positions ("year-end mark-
to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held: (1) will
affect the holding period of the hedged securities; and (2) may
cause unrealized gain or loss on such securities to be recognized
upon entry into the hedge.
If the Portfolio were to enter into a short index future,
short index futures option or short index option position and the
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and the Portfolio's stock positions would be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss
deferral rules.
In order for the Portfolio to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). Any net gain
realized from futures (or futures options) contracts will be
considered gain from the sale of securities and therefore be
qualifying income for purposes of the 90% requirement.
The Fund distributes to shareholders annually any net capital
gains that have been recognized for federal income tax purposes
(including year-end mark-to-market gains) on options and futures
transactions. Such distributions are combined with distributions
of capital gains realized on the other investments, and
shareholders are advised of the nature of the payments.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio operate under the following
investment restrictions. The Fund and the Portfolio may not:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the U. S. Government or any
of its agencies or instrumentalities or repurchase agreements for
such securities, and [Fund only] except that all or substantially
all of the assets of the Fund may be invested in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
[Fund only] except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, [Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(5) make loans, although it may (a) lend portfolio securities
and participate in an interfund lending program with other Stein
Roe Funds and Portfolios provided that no such loan may be made
if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the
time of such loans); (b) purchase money market instruments and
enter into repurchase agreements; and (c) acquire publicly
distributed or privately placed debt securities;
(6) borrow except that it may (a) borrow for nonleveraging,
temporary or emergency purposes, (b) engage in reverse repurchase
agreements and make other borrowings, provided that the
combination of (a) and (b) shall not exceed 33 1/3% of the value
of its total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law, and (c) enter into futures and options
transactions; it may borrow from banks, other Stein Roe Funds and
Portfolios, and other persons to the extent permitted by
applicable law;
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular
industry, /5/ except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or
- -------------
/5/ For purposes of this investment restriction, the Portfolio
uses industry classifications contained in Morgan Stanley Capital
International Perspective, which is published by Morgan Stanley,
an international investment banking and brokerage firm.
- -------------
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the outstanding
voting securities" as defined above. The Fund and the Portfolio
are also subject to the following nonfundamental restrictions and
policies, which may be changed by the Board of Trustees. None of
the following restrictions shall prevent the Fund from investing
all or substantially all of its assets in another investment
company having the same investment objective and substantially the
same investment policies as the Fund. The Fund and the Portfolio
may not:
(a) invest in any of the following: (i) interests in oil,
gas, or other mineral leases or exploration or development
programs (except readily marketable securities, including but not
limited to master limited partnership interests, that may
represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles,
spreads, or any combination thereof (except that it may enter into
transactions in options, futures, and options on futures); (iii)
shares of other open-end investment companies, except in
connection with a merger, consolidation, acquisition, or
reorganization; and (iv) limited partnerships in real estate
unless they are readily marketable;
(b) invest in companies for the purpose of exercising control
or management;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of its total assets (valued at time of purchase) in
the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to
be made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets;
(d) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchange a recognized foreign exchange;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(g) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions),
or sell securities short unless (i) it owns or has the right to
obtain securities equivalent in kind and amount to those sold
short at no added cost or (ii) the securities sold are "when
issued" or "when distributed" securities which it expects to
receive in a recapitalization, reorganization, or other exchange
for securities it contemporaneously owns or has the right to
obtain and provided that transactions in options, futures, and
options on futures are not treated as short sales;
(h) invest more than 5% of its total assets (taken at market
value at the time of a particular investment) in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933;
(i) invest more than 15% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities, including repurchase agreements maturing in more than
seven days.
Notwithstanding the foregoing investment restrictions, the
Portfolio may purchase securities pursuant to the exercise of
subscription rights, subject to the condition that such purchase
will not result in its ceasing to be a diversified investment
company. Far Eastern and European corporations frequently issue
additional capital stock by means of subscription rights offerings
to existing shareholders at a price substantially below the market
price of the shares. The failure to exercise such rights would
result in the interest of the Portfolio in the issuing company
being diluted. The market for such rights is not well developed
in all cases and, accordingly, the Portfolio may not always
realize full value on the sale of rights. The exception applies
in cases where the limits set forth in the investment restrictions
would otherwise be exceeded by exercising rights or would have
already been exceeded as a result of fluctuations in the market
value of the portfolio securities with the result that it would be
forced either to sell securities at a time when it might not
otherwise have done so, to forego exercising the rights.
ADDITIONAL INVESTMENT CONSIDERATIONS
The Adviser seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
build wealth for generations it has been guided by three primary
objectives which it believes are the foundation of a successful
investment program. These objectives are preservation of capital,
limited volatility through managed risk, and consistent above-
average returns as appropriate for the particular client or
managed account. Because every investor's needs are different,
Stein Roe mutual funds are designed to accommodate different
investment objectives, risk tolerance levels, and time horizons.
In selecting a mutual fund, investors should ask the following
questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
In addition, the Adviser believes that investment in a high
yield fund provides an opportunity to diversify an investment
portfolio because the economic factors that affect the performance
of high-yield, high-risk debt securities differ from those that
affect the performance of high quality debt securities or equity
securities.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the headings How to Purchase Shares, How to Redeem Shares,
Net Asset Value, and Shareholder Services, and that information is
incorporated herein by reference. The Prospectus discloses that
you may purchase (or redeem) shares through investment dealers,
banks, or other institutions. It is the responsibility of any
such institution to establish procedures insuring the prompt
transmission to the Trust of any such purchase order. The state
of Texas has asked that mutual funds disclose in their statements
of additional information, as a reminder to any such bank or
institution, that it must be registered as a securities dealer in
Texas.
The net asset value of the Fund is determined on days on
which the New York Stock Exchange (the "NYSE") is open for
trading. The NYSE is regularly closed on Saturdays and Sundays
and on New Year's Day, the third Monday in January, the third
Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving, and Christmas. If one
of these holidays falls on a Saturday or Sunday, the NYSE will be
closed on the preceding Friday or the following Monday,
respectively. Net asset value will not be determined on days when
the NYSE is closed unless, in the judgment of the Board of
Trustees, net asset value should be determined on any such day, in
which case the determination will be made at 3:00 p.m., Chicago
time.
The Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets of the Trust during any
90-day period for any one shareholder. However, redemptions in
excess of such limit may be paid wholly or partly by a
distribution in kind of securities. If redemptions were made in
kind, the redeeming shareholders might incur transaction costs in
selling the securities received in the redemptions.
The 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. The
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. The Agreement and Declaration of Trust also
authorizes the Trust to redeem shares under certain other
circumstances as may be specified by the Board of Trustees.
The Trust reserves the right to suspend or postpone
redemptions of shares during any period when: (a) trading on the
NYSE is restricted, as determined by the Securities and Exchange
Commission, or the NYSE is closed for other than customary weekend
and holiday closings; (b) the Securities and Exchange Commission
has by order permitted such suspension; or (c) an emergency, as
determined by the Securities and Exchange Commission, exists,
making disposal of portfolio securities or valuation of net assets
not reasonably practicable.
MANAGEMENT
The following table sets forth certain information with
respect to the trustees and officers of the Trust:
<TABLE>
<CAPTION>
Position(s) held Principal occupation(s)
Name, Age with the Trust During past five years
- ------------------------- ----------------------- ---------------------------------------------
<S> <C> <C>
William D. Andrews, 50(4) Executive Vice-President Executive vice president of Stein Roe & Farnham
Incorporated (the "Adviser")
Gary A. Anetsberger, 42(4) Senior Vice-President Chief financial officer and chief administrative
officer of the Mutual Funds division
of the Adviser; senior vice president of the Adviser
since April 1996; vice president of the Adviser prior
thereto
William W. Boyd, 71 Trustee Chairman and director of Sterling Plumbing Group,
(2)(3)(4) Inc. (manufacturer of plumbing products)
David P. Brady, 34 Vice-President Portfolio manager for the Adviser; senior vice
president of the Adviser since March 1998; vice
president of the Adviser from Nov. 1995 to March 1998;
equity investment analyst, State Farm Mutual
Automobile Insurance Company prior thereto
Thomas W. Butch, 41 Trustee; President President of the Mutual Funds division of the Adviser
(1) (2) (4) since March 1998; senior vice president of the Adviser
from Sept. 1994 to March 1998; first vice president,
corporate communications, of Mellon Bank Corporation
prior thereto
Daniel K. Cantor, 38 Vice-President Senior vice president of the Adviser
Kevin M. Carome, 42 (4) Vice-President; Associate general counsel and (since Feb. 1995)
Assistant Secretary vice president, Liberty Financial Companies, Inc.;
general counsel and secretary of the Adviser since
Jan. 1998
Lindsay Cook, 46 (1)(4) Trustee Executive vice president of Liberty Financial
Companies, Inc. (the indirect parent of the Adviser)
since March 1997; senior vice president prior thereto
Erik P. Gustafson, 34 Vice-President Senior portfolio manager of the Adviser; senior vice
president of the Adviser since April 1996; vice
president of the Adviser from May 1994 to April 1996;
associate of the Adviser prior thereto
Douglas A. Hacker,42(3)(4) Trustee Senior vice president and chief financial officer of
United Airlines since July 1994; senior vice
president, finance, United Airlines prior thereto
Loren A. Hansen, 50 (4) Executive Vice-President Chief investment officer of Colonial Management
Associates, Inc. since 1997; executive vice president
of the Adviser since Dec. 1995; vice president of The
Northern Trust (bank) prior thereto
David P. Harris, 33 Vice-President Senior vice president of the Adviser since March 1998;
vice president of Colonial Management Associates, Inc.
since Jan. 1996; vice president of the Adviser from
May 1995 to March 1998; global equity portfolio
manager with Rockefeller & Co. prior thereto
Harvey B. Hirschhorn, 48 Vice-President Executive vice president, senior portfolio manager,
and chief economist and investment strategist of the
Adviser; director of research of the Adviser, 1991 to
1995
Janet Langford Kelly, 40 Trustee Senior vice president, secretary and general counsel
(3)(4) of Sara Lee Corporation (branded, packaged, consumer-
products manufacturer), since 1995; partner of Sidley
& Austin (law firm) prior thereto
Eric S. Maddix, 34 Vice-President Senior vice president of the Adviser since March 1998;
vice president of the Adviser from Nov. 1995 to March
1998; portfolio manager or research assistant for the
Adviser since 1987
Lynn C. Maddox, 57 Vice-President Senior vice president of the Adviser
John S. McLandsborough, 31 Vice-President Vice president of the Adviser since March 1998;
portfolio manager for the Adviser since April, 1996;
securities analyst, CS First Boston from June 1993 to
Dec. 1995
Arthur J. McQueen, 40 Vice-President Senior vice president of the Adviser
Charles R. Nelson,55(3)(4) Trustee Van Voorhis Professor of Political Economy, Department
of Economics of the University of Washington
Nicolette D. Parrish, 48 Vice-President; Senior legal assistant and assistant
(4) Assistant Secretary secretary of the Adviser
Richard B. Peterson, 57 Vice-President Senior vice president of the Adviser
Sharon R. Robertson, 36(4) Controller Accounting manager for the Adviser's Mutual Funds
division
Janet B. Rysz, 42 (4) Assistant Secretary Senior legal assistant and assistant secretary of the
Adviser
M. Gerard Sandel, 43 Vice-President Senior vice president of the Adviser since July 1997;
vice president of M&I Investment Management
Corporation from Oct. 1993 to June 1997; vice
president of Acorn Asset Management Corporation prior
thereto
Gloria J. Santella, 40 Vice-President Senior vice president of the Adviser since Nov. 1995;
vice president of the Adviser prior thereto
Thomas C. Theobald, 61 Trustee Managing director, William Blair Capital Partners
(3)(4) (private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation, 1987-1994
Scott E. Volk, 27 (4) Treasurer Financial reporting manager for the Adviser's Mutual
Funds division since Oct. 1997; senior auditor with
Ernst & Young LLP from Sept. 1993 to April 1996 and
from Oct. 1996 to Sept.1997; financial analyst with
John Nuveen & Company Inc. from May 1996 to Sept.
1996; full-time student prior to Sept. 1993
Heidi J. Walter, 30 (4) Vice-President; Secretary Vice president of the Adviser since March 1998; legal
counsel for the Adviser since March 1995; associate
with Beeler Schad & Diamond, PC (law firm) prior
thereto
Hans P. Ziegler, 57 (4) Executive Vice-President Chief executive officer of the Adviser since May 1994;
president of the Investment Counsel division of the
Adviser prior thereto
Margaret O. Zwick, 31 (4) Assistant Treasurer Project manager for the Adviser's Mutual Funds
division since April 1997; compliance manager from
Aug. 1995 to April 1997; compliance accountant, Jan.
1995 to July 1995; section manager, Jan. 1994 to Jan.
1995; supervisor prior thereto
<FN>
______________________
(1) Trustee who is an "interested person" of the Trust and of
the Adviser, as defined in the Investment Company Act of
1940.
(2) Member of the Executive Committee of the Board of Trustees,
which is authorized to exercise all powers of the Board with
certain statutory exceptions.
(3) Member of the Audit Committee of the Board, which makes
recommendations to the Board regarding the selection of
auditors and confers with the auditors regarding the scope
and results of the audit.
(4) This person holds the corresponding officer or trustee position
with SR&F Base Trust.
</TABLE>
Certain of the trustees and officers of the Trust and SR&F
Base Trust are trustees or officers of other investment companies
managed by the Adviser. Ms. Walter and Mr. Butch are also vice
presidents of Liberty Funds Distributor, Inc., the Fund's
distributor. The address of Mr. Boyd is 2900 Golf Road, Rolling
Meadows, Illinois 60008; that of Mr. Cook is 600 Atlantic Avenue,
Boston, Massachusetts 02210; that of Mr. Hacker is P.O. Box
66100, Chicago, IL 60666; that of Ms. Kelly is Three First
National Plaza, Chicago, Illinois 60602; that of Mr. Nelson is
Department of Economics, University of Washington, Seattle,
Washington 98195; that of Mr. Theobald is Suite 3300, 222 West
Adams Street, Chicago, IL 60606; that of Messrs. Cantor and Harris
is 1330 Avenue of the Americas, New York, New York 10019; and that
of the other officers is One South Wacker Drive, Chicago, Illinois
60606.
Officers and trustees affiliated with the Adviser serve
without any compensation from the Trust. In compensation for
their services to the Trust, trustees who are not "interested
persons" of the Trust or the Adviser are paid an annual retainer
plus an attendance fee for each meeting of the Board or standing
committee thereof attended. The Trust has no retirement or
pension plan. The following table sets forth compensation paid by
the Trust during the fiscal year ended Sept. 30, 1997 to each of
the trustees:
Name of Trustee Aggregate Compensation Total Compensation from
from the Trust the Stein Roe Fund Complex*
- -------------------- ---------------------- -------------------------
Timothy K. Armour** -0- -0-
Thomas W. Butch** -0- -0-
Lindsay Cook -0- -0-
Kenneth L. Block** $21,076 $84,743
Douglas A. Hacker 21,926 90,643
Janet Langford Kelly 17,650 77,500
William W. Boyd 22,426 92,164
Francis W. Morley** 21,926 90,993
Charles R. Nelson 22,426 92,643
Thomas C. Theobald 21,926 90,643
Gordon R. Worley** 4,276 13,143
_______________
* At Sept. 30, 1997, the Stein Roe Fund Complex consisted of ten
series of Investment Trust, seven series of Stein Roe Advisor
Trust, six series of Stein Roe Income Trust, four series of
Stein Roe Municipal Trust, one series of Stein Roe
Institutional Trust, one series of Stein Roe Trust, and nine
series of Base Trust.
** Mr. Worley retired as a trustee on Dec., 31, 1996 and Messrs. Block
and Morley on Dec. 31, 1997. Mr. Armour resigned as a trustee and
Mr. Butch was elected a trustee on April 14, 1998.
PRINCIPAL SHAREHOLDERS
As of the date of this Statement of Additional Information,
the Fund had no shareholders.
INVESTMENT ADVISORY SERVICES
Stein Roe & Farnham Incorporated provides investment
management services to the Portfolio and administrative services
to the Fund. The Adviser is a wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), the Fund's transfer agent, which is a
wholly owned subsidiary of Liberty Financial Companies, Inc.
("Liberty Financial"), which is a majority owned subsidiary of LFC
Holdings, Inc., which is a wholly owned subsidiary of Liberty
Mutual Equity Corporation, which is a wholly owned subsidiary of
Liberty Mutual Insurance Company. Liberty Mutual Insurance
Company is a mutual insurance company, principally in the
property/casualty insurance field, organized under the laws of
Massachusetts in 1912.
The directors of the Adviser are Kenneth R. Leibler, Harold
W. Cogger, C. Allen Merritt, Jr., Thomas W. Butch, and Hans P.
Ziegler. Mr. Leibler is President and Chief Executive Officer of
Liberty Financial; Mr. Cogger is Executive Vice President of
Liberty Financial; Mr. Merritt is Chief Operating Officer of
Liberty Financial; Mr. Butch is President of the Adviser's Mutual
Funds division; and Mr. Ziegler is Chief Executive Officer of the
Adviser. The business address of Messrs. Leibler, Cogger, and
Merritt is Federal Reserve Plaza, Boston, Massachusetts 02210; and
that of Messrs. Butch and Ziegler is One South Wacker Drive,
Chicago, Illinois 60606.
The Adviser and its predecessor have been providing
investment advisory services since 1932. The Adviser acts as
investment adviser to wealthy individuals, trustees, pension and
profit sharing plans, charitable organizations, and other
institutional investors. As of Dec. 31, 1997, the Adviser managed
over $27.5 billion in assets: over $9.8 billion in equities and
over $17.7 billion in fixed income securities (including $1.7
billion in municipal securities). The $27.5 billion in managed
assets included over $7.1 billion held by open-end mutual funds
managed by the Adviser (approximately 15% of the mutual fund
assets were held by clients of the Adviser). These mutual funds
were owned by over 268,000 shareholders. The $7.1 billion in
mutual fund assets included over $714 million in over 41,000 IRA
accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 9,000 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At Dec. 31, 1997, the Adviser employed 18
research analysts and 55 account managers. The average
investment-related experience of these individuals was 24 years.
The sub-adviser, Newport Fund Management, Inc., 580
California Street, Suite 1960, San Francisco, CA 94104, is subject
to the overall supervision of the Adviser and provides the
Portfolio with investment advisory services, including portfolio
management. Newport is registered as an investment adviser under
the Investment Advisers Act of 1940 and specializes in investing
in the Pacific region. Newport, an affiliate of the Adviser, is a
wholly owned subsidiary of Newport Pacific Management, Inc., which
is a wholly owned subsidiary of Liberty Financial. As of March
31, 1998, Newport managed approximately $1.5 billion in assets,
all of which were invested in foreign securities. The directors
of Newport are Sabino Marinella, John M. Mussey, Kenneth R.
Leibler, Lindsay Cook, Thomas R. Tuttle, Pamela Frantz and Linda
Couch.
Stein Roe Counselor [service mark] and Stein Roe Personal
Counselor [service mark] are professional investment advisory
services offered to Fund shareholders. Each is designed to help
shareholders construct Fund investment portfolios to suit their
individual needs. Based on information shareholders provide about
their financial circumstances, goals, and objectives in response
to a questionnaire, the Adviser's investment professionals create
customized portfolio recommendations for investments in the mutual
funds managed by the Adviser. Shareholders participating in Stein
Roe Counselor [service mark] are free to self direct their
investments while considering the Adviser's recommendations;
shareholders participating in Stein Roe Personal Counselor
[service mark] enjoy the added benefit of having the Adviser
implement portfolio recommendations automatically for a fee of 1%
or less, depending on the size of their portfolios. In addition
to reviewing shareholders' circumstances, goals, and objectives
periodically and updating portfolio recommendations to reflect any
changes, the shareholders who participate in these programs are
assigned a dedicated Counselor [service mark] representative.
Other distinctive services include specially designed account
statements with portfolio performance and transaction data,
newsletters, and regular investment, economic, and market updates.
A $50,000 minimum investment is required to participate in either
program.
Please refer to the descriptions of the Adviser and Newport,
management agreement, administrative agreement, fees, expense
limitations, and transfer agency services under Fee Table and
Management in the Prospectus, which is incorporated herein by
reference.
The Adviser provides office space and executive and other
personnel to the Fund, and bears any sales or promotional
expenses. Newport pays the cost of maintaining the staff and
personnel necessary for it to perform its services to the
Portfolio, including the expenses of office rent, telephone and
other facilities necessary to enable it to perform its investment
management services. The Fund pays all expenses other than those
paid by the Adviser, including but not limited to printing and
postage charges and securities registration and custodian fees and
expenses incidental to its organization.
The administrative agreement provides that the Adviser shall
reimburse the Fund to the extent that its total annual expenses
(including fees paid to the Adviser, but excluding taxes,
interest, commissions and other normal charges incident to the
purchase and sale of portfolio securities, and expenses of
litigation to the extent permitted under applicable state law)
exceed the applicable limits prescribed by any state in which its
shares are being offered for sale to the public; provided,
however, the Adviser is not required to reimburse the Fund an
amount in excess of fees paid by the Fund under that agreement for
such year. In addition, in the interest of further limiting
expenses of the Fund, the Adviser may voluntarily waive its
management fee and/or absorb certain expenses, as described under
Fee Table in the Prospectus. Any such reimbursement will enhance
the yield of the Fund.
The management agreement provides that neither the Adviser,
nor any of its directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to the
Trust or any shareholder of the Trust for any error of judgment,
mistake of law or any loss arising out of any investment, or for
any other act or omission in the performance by the Adviser of its
duties under the agreement, except for liability resulting from
willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by
it of its obligations and duties under the agreement.
Any expenses that are attributable solely to the organization,
operation, or business of the Fund shall be paid solely out of its
assets. Any expenses incurred by the Trust that are not solely
attributable to a particular series are apportioned in such manner
as the Adviser determines is fair and appropriate, unless
otherwise specified by the Board of Trustees.
Bookkeeping and Accounting Agreement
Pursuant to separate agreements with the Trust and SR&F Base
Trust, the Adviser receives a fee for performing certain
bookkeeping and accounting services for the Fund and the
Portfolio. For services provided to the Trust, the Adviser
receives an annual fee of $25,000 per series plus .0025 of 1% of
average net assets over $50 million. During the fiscal years
ended Sept. 30, 1995, 1996 and 1997, the Adviser received
aggregate fees of $192,479, $265,246 and $315,067, respectively,
from the Trust for services performed under this Agreement.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Funds
Distributor, Inc. ("Distributor") under a Distribution Agreement
as described under Management in the Prospectus, which is
incorporated herein by reference. The Distributor is a subsidiary
of Colonial Management Associates, Inc., which is an indirect
subsidiary of Liberty Financial. The Distribution Agreement
continues in effect from year to year, provided such continuance
is approved annually (i) by a majority of the trustees or by a
majority of the outstanding voting securities of the Trust, and
(ii) by a majority of the trustees who are not parties to the
Agreement or interested persons of any such party. The Trust has
agreed to pay all expenses in connection with registration of its
shares with the Securities and Exchange Commission and auditing
and filing fees in connection with registration of its shares
under the various state blue sky laws and assumes the cost of
preparation of prospectuses and other expenses.
As agent, the Distributor offers shares to investors in
states where the shares are qualified for sale, at net asset
value, without sales commissions or other sales load to the
investor. In addition, no sales commission or "12b-1" payment is
paid by the Fund. The Distributor offers Fund shares only on a
best-efforts basis.
TRANSFER AGENT
SSI performs certain transfer agency services for the Trust,
as described under Management in the Prospectus. For performing
these services, SSI receives from the Fund a fee based on an
annual rate of .22 of 1% of average net assets. The Trust
believes the charges by SSI to the Fund are comparable to those of
other companies performing similar services. (See Investment
Advisory Services.) Under a separate agreement, SSI also provides
certain investor accounting services to the Portfolio.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, Massachusetts 02101, is the custodian for
the Trust and SR&F Base Trust. It is responsible for holding all
securities and cash, receiving and paying for securities
purchased, delivering against payment securities sold, receiving
and collecting income from investments, making all payments
covering expenses, and performing other administrative duties, all
as directed by authorized persons. The Bank does not exercise any
supervisory function in such matters as purchase and sale of
portfolio securities, payment of dividends, or payment of
expenses.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S.
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network and foreign
depositories ("foreign sub-custodians"). Each of the domestic and
foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with
regulations under the Investment Company Act of 1940.
Each Board of Trustees reviews, at least annually, whether it
is in the best interests of the Portfolio and the Fund and its
shareholders to maintain assets in each of the countries in which
the Portfolio invests with particular foreign sub-custodians in
such countries, pursuant to contracts between such respective
foreign sub-custodians and the Bank. The review includes an
assessment of the risks of holding assets in any such country
(including risks of expropriation or imposition of exchange
controls), the operational capability and reliability of each such
foreign sub-custodian, and the impact of local laws on each such
custody arrangement. Each Board of Trustees is aided in its
review by the Bank, which has assembled the network of foreign
sub-custodians utilized by the Portfolio, as well as by the
Adviser and counsel. However, with respect to foreign sub-
custodians, there can be no assurance that the Portfolio, and the
value of its shares, will not be adversely affected by acts of
foreign governments, financial or operational difficulties of the
foreign sub-custodians, difficulties and costs of obtaining
jurisdiction over, or enforcing judgments against, the foreign
sub-custodians, or application of foreign law to the foreign sub-
custodial arrangements. Accordingly, an investor should recognize
that the non-investment risks involved in holding assets abroad
are greater than those associated with investing in the United
States.
The Portfolio may invest in obligations of the Bank and may
purchase or sell securities from or to the Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Trust and the
Portfolio are Arthur Andersen LLP, 33 West Monroe Street, Chicago,
Illinois 60603. The accountants audit and report on the annual
financial statements, review certain regulatory reports and the
federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trust on behalf of the Fund.
PORTFOLIO TRANSACTIONS
Newport places the orders for the purchase and sale of
portfolio securities and options and futures contracts. The
overriding objective in selecting brokers and dealers to effect
portfolio transactions is to seek the best combination of net
price and execution. The best net price, giving effect to
brokerage commission, if any, is an important factor in this
decision; however, a number of other judgmental factors may also
enter into the decision. These factors include Newport's
knowledge of negotiated commission rates currently available and
other current transaction costs; the nature of the security being
purchased or sold; the size of the transaction; the desired timing
of the transaction; the activity existing and expected in the
market for the particular security; confidentiality; the
execution, clearance and settlement capabilities of the broker or
dealer selected and others considered; Newport's knowledge of the
financial condition of the broker or dealer selected and such
other brokers and dealers; and its knowledge of actual or apparent
operation problems of any broker or dealer. Recognizing the value
of these factors, Newport may cause a client to pay a brokerage
commission in excess of that which another broker may have charged
for effecting the same transaction.
Newport has established internal policies for the guidance of
its trading personnel, specifying minimum and maximum commissions
to be paid for various types and sizes of transactions and
effected for clients in those cases where Newport has discretion
to select the broker or dealer by which the transaction is to be
executed. Transactions which vary from the guidelines are subject
to periodic supervisory review. These guidelines are reviewed and
periodically adjusted, and the general level of brokerage
commissions paid is periodically reviewed by Newport. Evaluations
of the reasonableness of brokerage commissions, based on the
factors described in the preceding paragraph, are made by
Newport's trading personnel while effecting portfolio
transactions. The general level of brokerage commissions paid is
reviewed by the Adviser and Newport, and reports are made annually
to the Board of Trustees.
Where more than one broker or dealer is believed to be
capable of providing a combination of best net price and execution
with respect to a particular portfolio transaction, Newport often
selects a broker or dealer that has furnished it with investment
research products or services such as: economic, industry or
company research reports or investment recommendations;
subscriptions to financial publications or research data
compilations; compilations of securities prices, earnings,
dividends, and similar data; computerized data bases; quotation
equipment and services; research or analytical computer software
and services; or services of economic and other consultants. Such
selections are not made pursuant to any agreement or understanding
with any of the brokers or dealers. However, Newport does in some
instances request a broker to provide a specific research or
brokerage product or service which may be proprietary to the
broker or produced by a third party and made available by the
broker and, in such instances, the broker in agreeing to provide
the research or brokerage product or service frequently will
indicate to Newport a specific or minimum amount of commissions
which it expects to receive by reason of its provision of the
product or service. Newport does not agree with any broker to
direct such specific or minimum amounts of commissions; however,
it does maintain an internal procedure to identify those brokers
who provide it with research products or services and the value of
such products or services, and endeavors to direct sufficient
commissions on client transactions (including commissions on
transactions in fixed income securities effected on an agency
basis and, in the case of transactions for certain types of
clients, dealer selling concessions on new issues of securities)
to ensure the continued receipt of research products or services
it feels are useful.
In a few instances, Newport receives from brokers products or
services which are used both for investment research and for
administrative, marketing, or other non-research or brokerage
purposes. In such instances, Newport makes a good faith effort to
determine the relative proportion of its use of such product or
service which is for investment research or brokerage, and that
portion of the cost of obtaining such product or service may be
defrayed through brokerage commissions generated by client
transactions, while the remaining portion of the costs of
obtaining the product or service is paid by Newport in cash.
Newport may also receive research in connection with selling
concessions and designations in fixed income offerings.
The Fund does not believe it pays brokerage commissions
higher than those obtainable from other brokers in return for
research or brokerage products or services provided by brokers.
Research or brokerage products or services provided by brokers may
be used in servicing any or all of its clients and such research
products or services may not necessarily be used in connection
with client accounts which paid commissions to the brokers
providing such products or services.
Each Trust has arranged for its custodian to act as a
soliciting dealer to accept any fees available to the custodian as
a soliciting dealer in connection with any tender offer for
portfolio securities. The custodian will credit any such fees
received against its custodial fees. In addition, the Board of
Trustees has reviewed the legal developments pertaining to and the
practicability of attempting to recapture underwriting discounts
or selling concessions when portfolio securities are purchased in
underwritten offerings. However, the Board has been advised by
counsel that recapture by a mutual fund currently is not permitted
under the Rules of the Association of the National Association of
Securities Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
The Fund and the Portfolio intend to comply with the special
provisions of the Internal Revenue Code that relieve it of federal
income tax to the extent of its net investment income and capital
gains currently distributed to shareholders.
Because dividend and capital gain distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would
nonetheless be taxable to him, even if the net asset value of
shares were reduced below his cost. However, for federal income
tax purposes the shareholder's original cost would continue as his
tax basis.
The Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent the Portfolio invests in foreign securities, it
may be subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% of total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Fund may file an election with the Internal
Revenue Service pursuant to which its shareholders will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign
income taxes paid by them, and (iii) deduct such pro rata shares
in computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against
their United States income taxes. Shareholders who do not itemize
deductions for federal income tax purposes will not, however, be
able to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their
share of such taxes in gross income. Shareholders who claim a
foreign tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents
income from each foreign country, if the Fund qualifies to pass
along such credit.
INVESTMENT PERFORMANCE
The Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the
net asset value per share for a period. A "Total Return
Percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of
the period and subtracting one. For a given period, an "Average
Annual Total Return" may be computed by finding the average annual
compounded rate that would equate a hypothetical initial amount
invested of $1,000 to the ending redeemable value.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion thereof).
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of the Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
In advertising and sales literature, the Fund may compare its
performance with that of other mutual funds, indexes or averages
of other mutual funds, indexes of related financial assets or
data, and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes or averages differs from that of the
Fund. Comparison of the Fund to an alternative investment should
be made with consideration of differences in features and expected
performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which the Fund
believes to be generally accurate. The Fund may also note its
mention or recognition in newspapers, magazines, or other media
from time to time. However, the Fund assumes no responsibility
for the accuracy of such data. Newspapers and magazines which
might mention the Fund include, but are not limited to, the
following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Atlantic Monthly
Associated Press
Barron's
Bloomberg
Boston Globe
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Investment Advisor
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Marketing Alert
Gourmet
Individual Investor
Investment Dealers' Digest
Investment News
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Money on Line
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsday
Newsweek
New York Daily News
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
Reuters
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Street.com
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
The Fund may compare its performance to the Consumer Price
Index (All Urban), a widely recognized measure of inflation. Its
performance also may be compared to the following indexes or
averages:
Dow-Jones Industrial Average
New York Stock Exchange Composite Index
Standard & Poor's 500 Stock Index
American Stock Exchange Composite Index
Standard & Poor's 400 Industrials
Nasdaq Composite
Wilshire 5000
Nasdaq Industrials
(These indexes are widely recognized indicators of general U.S.
stock market results.)(These indexes generally reflect the
performance of stocks traded in the indicated markets.)
In addition, the Fund may compare its performance to the
following benchmarks:
Lipper Equity Fund Average
Lipper General Equity Fund Average
Lipper International & Global Funds Average
Lipper International Fund Index
Lipper Pacific Region Index
Morningstar All Equity Funds Average
Morningstar Equity Fund Average
Morningstar General Equity Average
Morningstar Hybrid Fund Average
Morningstar International Stock Average
Morningstar Total Fund Average
Morningstar U.S. Diversified Average
MSCI AC Far East Index
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated, and published by these independent services that
monitor the performance of mutual funds. The Fund may also use
comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent
service. Should Lipper or another service reclassify the Fund to
a different category or develop (and place it into) a new
category, the Fund may compare its performance or ranking with
those of other funds in the newly assigned category, as published
by the service.
The Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function
of the fund's monthly returns less the 3-month T-bill return) from
its load-adjusted total return score. This numerical score is
then translated into rating categories, with the top 10% labeled
five star, the next 22.5% labeled four star, the next 35% labeled
three star, the next 22.5% labeled two star, and the bottom 10%
one star. A high rating reflects either above-average returns or
below-average risk, or both.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Fund may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
_____________________
The Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on Jan. 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<TABLE>
<CAPTION>
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
Interest
Rate 3% 5% 7% 9% 3% 5%
7% 9%
- ------------------------------------------------------------------
- --------------
Com-
pound-
ing
Years Tax-Deferred Investment Taxable
Investment
- ---- ------------------------------------ ----------------------
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
30 $82,955 $108,031 $145,856 $203,239 $80,217 $98,343
$121,466 $151,057
25 65,164 80,337 101,553 131,327 63,678 75,318
89,528 106,909
20 49,273 57,781 68,829 83,204 48,560 55,476
63,563 73,028
15 35,022 39,250 44,361 50,540 34,739 38,377
42,455 47,025
10 22,184 23,874 25,779 27,925 22,106 23,642
25,294 27,069
5 10,565 10,969 11,393 11,840 10,557 10,943
11,342 11,754
1 2,036 2,060 2,085 2,109 2,036 2,060
2,085 2,109
</TABLE>
Dollar Cost Averaging. Dollar cost averaging is an investment
strategy that requires investing a fixed amount of money in Fund
shares at set intervals. This allows you to purchase more shares
when prices are low and fewer shares when prices are high. Over
time, this tends to lower your average cost per share. Like any
investment strategy, dollar cost averaging can't guarantee a
profit or protect against losses in a steadily declining market.
Dollar cost averaging involves uninterrupted investing regardless
of share price and therefore may not be appropriate for every
investor.
From time to time, the Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor
[service mark] and the Stein Roe Personal Counselor [service mark]
programs and asset allocation and other investment strategies.
APPENDIX-RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However,
the ratings are general and are not absolute standards of quality
or guarantees as to the creditworthiness of an issuer.
Consequently, Newport believes that the quality of debt securities
in which a fund invests should be continuously reviewed and that
individual analysts give different weightings to the various
factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in
each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest
is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES: The ratings from AA to CCC may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing
within the major rating categories. Foreign debt is rated on the
same basis as domestic debt measuring the creditworthiness of the
issuer; ratings of foreign debt do not take into account currency
exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or
currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will
exhibit no volatility or variability in total return.
_______________________
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) 1. Financial statements included in Part A of this
Amendment to the Registration Statement: None.
2. Financial statements included in Part B of this
Amendment:
Financial statements (investments as of September
30, 1997, balance sheets as of September 30, 1997,
statements of operations for the year ended
September 30, 1997, statements of changes in net
assets for each of the two years in the period ended
September 30, 1997, and notes thereto) and report of
independent public accountants are incorporated by
reference to Registrant's September 30, 1997 annual
reports relating to Stein Roe Balanced Fund, Stein
Roe Growth & Income Fund, Stein Roe Growth Stock
Fund, Stein Roe Special Fund, Stein Roe Special
Venture Fund, Stein Roe Growth Opportunities Fund,
Stein Roe Capital Opportunities Fund, Stein Roe
International Fund, Stein Roe Emerging Markets Fund,
and Stein Roe Young Investor Fund.
(b) Exhibits: [Note: As used herein, the term "Registration
Statement" refers to the Registration Statement of the
Registrant on Form N-1A under the Securities Act of 1933,
No. 33-11351. The terms "Pre-Effective Amendment" and
"PEA" refer, respectively, to a pre-effective amendment and
a post-effective amendment to the Registration Statement.]
1. (a) Agreement and Declaration of Trust as amended
through February 1, 1996. (Exhibit 1 to PEA #32.)*
(b) Amendment dated December 31, 1996 to Agreement and
Declaration of Trust. (Exhibit 1(b) to PEA #37.)*
2. (a) By-Laws of Registrant as amended through February
3, 1993. (Exhibit 2 to PEA #34).*
(b) Amendment to By-Laws dated February 4, 1998.
(Exhibit 2(a) to PEA #45.)*
3. None.
4. Inapplicable.
5. Management agreement between Registrant and Stein Roe
& Farnham Incorporated (the "Adviser") as amended
through July 1, 1996. (Exhibit 5(a) to PEA #34.)*
6. (a) Underwriting agreement between Registrant and
Liberty Financial Investments, Inc.
(b) Specimen copy of selected dealer agreement.
(Exhibit 6(b) to PEA #40.)*
7. None.
8. Custodian contract between Registrant and State Street
Bank and Trust Company as amended through May 8, 1995.
(Exhibit 8 to PEA #31.)*
9. (a) Restated Transfer Agency Agreement between
Registrant and SteinRoe Services Inc. dated August
1, 1995.(Exhibit 9(a) to PEA #31.)*
(b) Accounting and Bookkeeping Agreement dated August
1, 1994. (Exhibit 9(b) to PEA #34.)*
(c) Administrative Agreement between Registrant and the
Adviser dated August 15, 1995 as amended through
July 1, 1996. (Exhibit 9(c) to PEA #34.)*
(d) Sub-transfer agent agreement with Colonial
Investors Service Center as amended through April
30, 1998.
10. (a) Opinions and consents of Ropes & Gray. (Exhibit
10(a) to PEA #34).*
(b) Opinions and consents of Bell, Boyd & Lloyd with
respect to SteinRoe Prime Equities (now named Stein
Roe Growth & Income Fund), Stein Roe Capital
Opportunities Fund, Stein Roe Special Fund,
SteinRoe Stock Fund (now named Stein Roe Growth
Stock Fund), SteinRoe Total Return Fund (now named
Stein Roe Balanced Fund), Stein Roe International
Fund, Stein Roe Young Investor Fund, and Stein Roe
Special Venture Fund. (Exhibit 10(b) to PEA #34).*
(c) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Emerging Markets Fund.
(Exhibit 10(c) to PEA #37.)*
(d) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Growth Opportunities Fund.
(Exhibit 10(d) to PEA #39.)*
(e) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Large Company Focus Fund.
(Exhibit 10(e) to PEA #45.)*
(f) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Asia Pacific Fund.
11. (a) Consent of Arthur Andersen LLP, independent public
accountants.
(b) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#34).*
12. None.
13. Inapplicable.
14. (a) Stein Roe & Farnham Funds Individual Retirement
Account Plan. (Exhibit 14 to PEA #41.)*
(b) Stein Roe & Farnham Prototype Paired Defined
Contribution Plan.**
15. None.
16. (a) Schedules for computation of each performance
quotation provided in the Registration Statement in
response to Item 22 for SteinRoe Prime Equities
(now named Stein Roe Growth & Income Fund), Stein
Roe Total Return Fund (now named Stein Roe Balanced
Fund), Stein Roe Stock Fund (now named Stein Roe
Growth Stock Fund), Stein Roe Capital Opportunities
Fund, Stein Roe Special Fund, Stein Roe
International Fund, Stein Roe Young Investor Fund,
and Stein Roe Special Venture Fund. (Exhibit 16 to
PEA #34).*
(b) Schedules for computation of each performance
quotation provided in the Registration Statement in
response to Item 22 for Stein Roe Emerging Markets
Fund and Stein Roe Growth Opportunities Fund.
(Exhibit 16(b) to PEA #44.)*
17. (a) Financial Data Schedule--Stein Roe Growth & Income
Fund.
(b) Financial Data Schedule--Stein Roe Balanced Fund.
(c) Financial Data Schedule--Stein Roe Growth Stock
Fund.
(d) Financial Data Schedule--Stein Roe Capital
Opportunities Fund.
(e) Financial Data Schedule--Stein Roe Special Fund.
(f) Financial Data Schedule--Stein Roe International
Fund.
(g) Financial Data Schedule--Stein Roe Young Investor
Fund.
(h) Financial Data Schedule--Stein Roe Special Venture
Fund.
(i) Financial Data Schedule--Stein Roe Emerging Markets
Fund
(j) Financial Data Schedule--Stein Roe Growth
Opportunities Fund
18. Inapplicable
19. (Miscellaneous.)
(a) Mutual Fund Application. (Exhibit 19(a) to PEA
#44.)*
(b) Automatic Redemption Services Application.
(Exhibit 19(c) to PEA #34).*
_______________________
*Incorporated by reference.
**Incorporated by reference to Exhibit 14(b) to post-effective
amendment No. 33 to the Registration Statement on Form N-1A of
Stein Roe Income Trust, No. 33-02633.
Item 25. Persons Controlled By or Under Common Control with
Registrant.
The Registrant does not consider that it is directly or
indirectly controlling, controlled by, or under common control
with other persons within the meaning of this Item. See
"Investment Advisory Services," "Management," and "Transfer
Agent" in the Statement of Additional Information, each of which
is incorporated herein by reference.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Series as of April 30, 1998
--------------------------------- ------------------------
Stein Roe Growth & Income Fund 11,004
Stein Roe International Fund 4,388
Stein Roe Young Investor Fund 123,729
Stein Roe Special Venture Fund 4,891
Stein Roe Emerging Markets Fund 2,895
Stein Roe Growth Opportunities Fund 3,774
Stein Roe Large Company Focus Fund 0
Stein Roe Balanced Fund 6,110
Stein Roe Growth Stock Fund 15,429
Stein Roe Capital Opportunities Fund 29,843
Stein Roe Special Fund 32,124
Stein Roe Asia Pacific Fund 0
Item 27. Indemnification.
Article Tenth of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide
indemnification of its trustees and officers (including each
person who serves or has served at Registrant's request as a
director, officer, or trustee of another organization in which
Registrant has any interest as a shareholder, creditor or
otherwise) ("Covered Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940 Act")
provides that neither the Agreement and Declaration of Trust nor
the By-Laws of Registrant, nor any other instrument pursuant to
which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
In accordance with Section 17(h) of the 1940 Act, Article Tenth
shall not protect any person against any liability to Registrant
or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office.
Unless otherwise permitted under the 1940 Act,
(i) Article Tenth does not protect any person against any
liability to Registrant or to its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
(ii) in the absence of a final decision on the merits by a
court or other body before whom a proceeding was brought that a
Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Tenth unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are neither
"interested persons" of Registrant, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested, non-party trustees"), or (b) an independent
legal counsel as expressed in a written opinion; and
(iii) Registrant will not advance attorneys' fees or other
expenses incurred by a Covered Person in connection with a civil
or criminal action, suit or proceeding unless Registrant
receives an undertaking by or on behalf of the Covered Person to
repay the advance (unless it is ultimately determined that he is
entitled to indemnification) and (a) the Covered Person provides
security for his undertaking, or (b) Registrant is insured
against losses arising by reason of any lawful advances, or (c)
a majority of the disinterested, non-party trustees of
Registrant or an independent legal counsel as expressed in a
written opinion, determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the Covered Person ultimately
will be found entitled to indemnification.
Any approval of indemnification pursuant to Article Tenth does
not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with Article Tenth as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered
Person's action was in, or not opposed to, the best interests of
Registrant or to have been liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Article Tenth also provides that its indemnification provisions
are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is
asserted by such trustee, officer, or controlling person in
connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment adviser,
the other investment companies advised by the adviser, and
persons affiliated with them are insured against certain
expenses in connection with the defense of actions, suits, or
proceedings, and certain liabilities that might be imposed as a
result of such actions, suits, or proceedings. Registrant will
not pay any portion of the premiums for coverage under such
insurance that would (1) protect any trustee or officer against
any liability to Registrant or its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect its
investment adviser or principal underwriter, if any, against any
liability to Registrant or its shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence, in the performance of its duties, or
by reason of its reckless disregard of its duties and
obligations under its contract or agreement with the Registrant;
for this purpose the Registrant will rely on an allocation of
premiums determined by the insurance company.
Pursuant to the indemnification agreement among the Registrant,
its transfer agent and its investment adviser dated July 1,
1995, the Registrant, its trustees, officers and employees, its
transfer agent and the transfer agent's directors, officers and
employees are indemnified by Registrant's investment adviser
against any and all losses, liabilities, damages, claims and
expenses arising out of any act or omission of the Registrant or
its transfer agent performed in conformity with a request of the
investment adviser that the transfer agent and the Registrant
deviate from their normal procedures in connection with the
issue, redemption or transfer of shares for a client of the
investment adviser.
Registrant, its trustees, officers, employees and
representatives and each person, if any, who controls the
Registrant within the meaning of Section 15 of the Securities
Act of 1933 are indemnified by the distributor of Registrant's
shares (the "distributor"), pursuant to the terms of the
distribution agreement, which governs the distribution of
Registrant's shares, against any and all losses, liabilities,
damages, claims and expenses arising out of the acquisition of
any shares of the Registrant by any person which (i) may be
based upon any wrongful act by the distributor or any of the
distributor's directors, officers, employees or representatives
or (ii) may be based upon any untrue or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, statement of additional information, shareholder
report or other information covering shares of the Registrant
filed or made public by the Registrant or any amendment thereof
or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading if such
statement or omission was made in reliance upon information
furnished to the Registrant by the distributor in writing. In
no case does the distributor's indemnity indemnify an
indemnified party against any liability to which such
indemnified party would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the performance
of its or his duties or by reason of its or his reckless
disregard of its or his obligations and duties under the
distribution agreement.
Item 28. Business and Other Connections of Investment Adviser.
The Adviser is a wholly-owned subsidiary of SteinRoe Services
Inc. ("SSI"), which in turn is a wholly-owned subsidiary of
Liberty Financial Companies, Inc., which is a majority owned
subsidiary of LFC Holdings, Inc., which in turn is a subsidiary
of Liberty Mutual Equity Corporation, which in turn is a
subsidiary of Liberty Mutual Insurance Company. The Adviser
acts as investment adviser to individuals, trustees, pension and
profit-sharing plans, charitable organizations, and other
investors. In addition to Registrant, it also acts as
investment adviser to other investment companies having
different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the statement of additional
information (part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and
have during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
SR&F Base Trust, and/or other investment companies managed by
the Adviser. (The listed entities are located at One South
Wacker Drive, Chicago, Illinois 60606, except for SteinRoe
Variable Investment Trust and Liberty Variable Investment Trust,
which are located at Federal Reserve Plaza, Boston, MA 02210
and LFC Utilities Trust, which is located at One Financial
Center, Boston, MA 02111.) A list of such capacities is given
below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
Hans P. Ziegler Director, President,
Chairman
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Kevin M. Carome Vice-President; Asst. Secy.
Thomas W. Butch President Executive V-P
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P; V-P
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P; V-P
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
John McLandsborough Vice-President
Richard B. Peterson Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P; V-P
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
David P. Harris Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
John McLandsborough Vice-President
Arthur J. McQueen Vice-President
Richard B. Peterson Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P; V-P
Kevin M. Carome Vice-President; Asst. Secy.
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive Vice-President
Lynn C. Maddox Vice-President
M. Jane McCart Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
Gary A. Anetsberger Treasurer
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
John McLandsborough Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
William M. Wadden IV Vice President
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Item 29. Principal Underwriters.
Registrant's principal underwriter, Liberty Financial Investments,
Inc. (to be renamed Liberty Funds Distributor, Inc. on July 20,
1998), a subsidiary of Colonial Management Associates, Inc., also
acts in the same capacity to Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial
Trust VI, Colonial Trust VII, Stein Roe Advisor Trust, Stein Roe
Income Trust, Stein Roe Municipal Trust, Stein Roe Institutional
Trust and Stein Roe Trust; and sponsor for Colony Growth Plans
(public offering of which was discontinued on June 14, 197l).
The table below lists each director or officer of Liberty Financial
Investments, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- ---------------
Anderson, Judith Vice President None
Babbitt, Debra VP & Compliance Officer None
Ballou, Rich Vice President None
Balzano, Christine R. Vice President None
Bartlett, John Managing Director None
Blumenfeld, Alex Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Butch, Thomas W. Senior Vice President Pres., Trustee
Campbell, Patrick Vice President None
Chrzanowski, Daniel Vice President None
Claiborne, Douglas Vice President None
Clapp, Elizabeth A. Senior Vice President None
Conlin, Nancy L. Director, Clerk None
Davey, Cynthia Senior Vice President None
Desilets, Marian Vice President None
Devaney, James Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Emerson, Kim P. Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Senior Vice President None
Fifield, Robert Vice President None
Gauger, Richard Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director, Chairman of Board None
Goldberg, Matthew Vice President None
Geunard, Brian Vice President None
Harrington, Tom Senior Vice President None
Hodgkins, Joseph Senior Vice President None
Hussey, Robert Senior Vice President None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia Vice President None
Jones, Jonathan Vice President None
Karagiannis, Marilyn Managing Director None
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
McCombe, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morner, Patrick Vice President None
Morse, Jonathan Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Reed, Christopher B. Senior Vice President None
Riegel, Joyce B. Vice President None
Robb, Douglas Vice President None
Sandberg, Travis Vice President None
Scarlott, Rebecca Vice President None
Schulman, David Vice President None
Scoon, Davey Director None
Scott, Michael W. Senior Vice President None
Sideropoulos, Lou Vice President None
Smith, Darren Vice President None
Studer, Eric Vice President None
Sutton, R. Andrew Vice President None
Tambone, James Chief Executive Officer None
Tasiopoulos, Lou President None
Tuttle, Brian Vice President None
Van Etten, Keith Vice President None
Villanova, Paul Vice President None
Wallace, John Vice President None
Walter, Heidi J. Vice President V-P & Secy.
Wess, Valerie Vice President None
Young, Deborah Vice President None
- ---------
* The address of Ms. Riegel, Ms. Walter, and Mr. Butch is One
South Wacker Drive, Chicago, IL 60606. The address of each
other director and officer is One Financial Center, Boston,
MA 02111.
Item 30. Location of Accounts and Records.
Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the
Investment Company Act of 1940 at its principal executive
offices at One South Wacker Drive, Chicago, Illinois 60606.
Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities, may
be maintained pursuant to Rule 31a-3 at the main office of
Registrant's transfer agent or custodian.
Item 31. Management Services.
None.
Item 32. Undertakings.
If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special
meeting for the purpose of voting upon the question of removal
of a trustee or trustees and will assist in the communications
with other shareholders as if the Trust were subject to Section
16(c) of the Investment Company Act of 1940.
Since the information called for by Item 5A is contained in the
latest annual reports to shareholders, Registrant undertakes
with respect to each series to furnish each person to whom a
prospectus is delivered with a copy of the latest annual report
to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of
Chicago and State of Illinois on the 12th day of June, 1998.
STEIN ROE INVESTMENT TRUST
By THOMAS W. BUTCH
Thomas W. Butch
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:
Signature* Title Date
- ------------------------ --------------------- --------------
THOMAS W. BUTCH President and Trustee June 12, 1998
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice-President June 12, 1998
Gary A. Anetsberger
Principal Financial Officer
SHARON R. ROBERTSON Controller June 12, 1998
Sharon R. Robertson
Principal Accounting Officer
WILLIAM W. BOYD Trustee June 12, 1998
William W. Boyd
LINDSAY COOK Trustee June 12, 1998
Lindsay Cook
DOUGLAS A. HACKER Trustee June 12, 1998
Douglas A. Hacker
JANET LANGFORD KELLY Trustee June 12, 1998
Janet Langford Kelly
CHARLES R. NELSON Trustee June 12, 1998
Charles R. Nelson
THOMAS C. THEOBALD Trustee June 12, 1998
Thomas C. Theobald
*This amendment to the Registration Statement has also been
signed by the above persons in their capacities as trustees and
officers of SR&F Base Trust.
<PAGE>
STEIN ROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ------------
6(a) Underwriting agreement
9(d) Sub-transfer agent agreement
10(f) Opinion of Bell, Boyd & Lloyd
11(a) Consent of Arthur Andersen LLP
17(a) Financial Data Schedule--Stein Roe Growth & Income Fund
17(b) Financial Data Schedule--Stein Roe Balanced Fund
17(c) Financial Data Schedule--Stein Roe Growth Stock Fund
17(d) Financial Data Schedule--Stein Roe Capital
Opportunities Fund
17(e) Financial Data Schedule--Stein Roe Special Fund
17(f) Financial Data Schedule--Stein Roe International Fund
17(g) Financial Data Schedule--Stein Roe Young Investor Fund
17(h) Financial Data Schedule--Stein Roe Special Venture Fund
17(i) Financial Data Schedule--Stein Roe Emerging Markets
Fund
17(j) Financial Data Schedule--Stein Roe Growth Opportunities
Fund
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
AND LIBERTY FINANCIAL INVESTMENTS, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 1st day of January 1998 by and between Stein Roe Income
Trust, Stein Roe Investment Trust, Stein Roe Municipal
Trust, Stein Roe Trust and Stein Roe Institutional Trust,
each a business trust organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter
collectively referred to as the "Fund"), and Liberty
Financial Investments, Inc., a corporation organized and
existing under the laws of the State of Delaware
(hereinafter call the "Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the
Investment Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and, the laws of each state (including the
District of Columbia and Puerto Rico) in which it engages in
business to the extent such law requires, and is a member of
the National Association of Securities Dealers ("NASD")
(such registrations and membership are referred to
collectively as the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its
transfer, shareholder recordkeeping, dividend disbursing and
redemption agents, if any; all expenses of notices, proxy
solicitation material and reports to shareholders; all
expenses of preparation and printing of annual or more
frequent revisions of the Fund's Prospectus and Statement of
Additional Information and of supplying copies thereof to
shareholders; all expenses of registering and maintaining
the registration of the Fund under ICA-40 and of the Fund's
Shares under the Securities Act of 1933, as amended ("SA-
33"); all expenses of qualifying and maintaining
qualification of such Fund and of the Fund's Shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Fund under all laws applicable to the Fund or its business
activities;
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, shall pay all expenses incurred in the
sale and promotion of the Fund;
NOW, THEREFORE, in consideration of the premises and
the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in
Sections 2(a)(29) of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form
of agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as may
from time to time be indicated in the Fund's Prospectus,
Distributor is authorized to solicit, as agent on behalf of
the Fund, unconditional orders for purchases of the Fund's
Shares authorized for issuance and registered under SA-33,
provided that:
(1) Distributor shall act solely as a disclosed agent
on behalf of and for the account of the Fund;
(2) In all cases except for orders transmitted through
the FundSERV/NSCC system, the Fund or its transfer
agent shall receive directly from investors all
payments for the purchase of the Fund's Shares and
also shall pay directly to shareholders amounts
due to them for the redemption or repurchase of
all the Fund's Shares with Distributor having no
rights or duties to accept such payment or to
effect such redemptions or repurchases;
(3) The Distributor shall receive directly from
financial intermediaries which trade through the
FundSERV/NSCC system all payments for the purchase
of the Fund's Shares and shall also cause to be
paid directly to such intermediaries amounts due
to them for the redemption or repurchase of all
the Fund's Shares. The Distributor shall be
acting as the Fund's agent in accepting payment
for the orders and not be acting in a principal
capacity.
(4) Distributor shall confirm all orders received for
purchase of the Fund's Shares which confirmation
shall clearly state (i) that Distributor is acting
as agent of the Fund in the transaction (ii) that
all certificates for redemption, remittances, and
registration instructions should be sent directly
to the Fund, and (iii) the Fund's mailing address;
(5) Distributor shall have no liability for payment
for purchases of the Fund's Shares it sells as
agent; and
(5) Each order to purchase Shares of the Fund received
by Distributor shall be subject to acceptance by
an officer of the Fund in Chicago and entry of the
order on the Fund's records or shareholder
accounts and is not binding until so accepted and
entered.
The purchase price to the public of the Fund's Shares
shall be the public offering price as defined in Paragraph 6
hereof.
(b) In consideration of the rights granted to the
Distributor under this Agreement, Distributor will use its
best efforts (but only in states in which Distributor may
lawfully do so) to solicit from investors unconditional
orders to purchase Shares of the Fund. The Fund shall make
available to the Distributor without cost to the Distributor
such number of copies of the Fund's currently effective
Prospectus and Statement of Additional Information and
copies of all information, financial statements and other
papers which the Distributor may reasonably request for use
in connection with the distribution of Shares.
3.A. Selling Agreements. Distributor is authorized,
as agent on behalf of each Fund, to enter into agreements
with other broker-dealers providing for the solicitation of
unconditional orders for purchases of Fund's Shares
authorized for issuance and registered under SA-33. All
such agreements shall be either in the form of agreement
attached hereto or in such other form as may be approved by
the officers of the Fund ("Selling Agreement"). All
solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
5. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares
that are duly authorized and registered and available for
sale by the Fund, including redeemed or repurchased Shares
if and to the extent that they may be legally sold and if,
but only if, the Fund authorizes the Distributor to sell
them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders
to purchase Shares of the Fund at the public offering price.
The public offering price for each accepted subscription for
the Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription.
The net asset value per share shall be determined in the
manner provided in the Fund's Agreement and Declaration of
Trust as now in effect or as they may be amended, and as
reflected in the Fund's then current Prospectus and
Statement of Additional Information.
7. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, no further orders for
Shares shall be accepted by the Fund except such
unconditional orders placed with the Fund and accepted by it
before the suspension. In addition, the Fund reserves the
right to suspend sales of Shares if, in the judgement of the
Board of the Fund, it is in the best interest of the Fund to
do so, such suspension to continue for such period as may be
determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to
purchase Shares shall be accepted by the Fund while such
suspension remains in effect unless otherwise directed by
its Board.
8. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any
representations in connection with the sale of Shares other
than the information and representations contained in the
Fund's registration statement filed with the SEC under SA-33
and/or ICA-40, covering Shares, as such registration
statement or the Fund's prospectus may be amended or
supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on
behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is
authorized to act as principal underwriter (as such term is
defined in ICA-40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register either (i) an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, or (ii) a definite
number of Shares as the Fund shall deem advisable pursuant
to Rule 24e-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the
Fund, and to maintain such qualification; provided, however,
that nothing herein shall be deemed to prevent the Fund from
registering its shares without approval of the Distributor
in any state it deems appropriate.
10. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform
in all respects with applicable federal and state laws and
the rules and regulations of the NASD. Distributor will use
its best efforts to maintain its Registrations in good
standing during the term of this Agreement and will promptly
notify the Fund and Stein Roe & Farnham Incorporated in the
event of the suspension or termination of any of the
Registrations.
11. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
12. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the
meaning of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to
which the Fund or such of the members of its Board and of
its officers, employees, representatives, or controlling
person or persons may become subject under SA-33, under any
other statute, at common law, or otherwise, arising out of
the acquisition of any Shares of the Fund by any person
which (i) may be based upon any wrongful act by Distributor
or any of Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement
of Additional Information, shareholder report or other
information covering Shares of the Fund filed or made public
by the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon information furnished
to the Fund by Distributor in writing. In no case (i) is
Distributor's indemnity in favor of the Fund, or any person
indemnified, to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund
or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties
under this Agreement or (ii) is Distributor to be liable
under its indemnity agreement contained in this paragraph
with respect to any claim made against the Fund or any
person indemnified unless the Fund or such person, as the
case may be, shall have notified Distributor in writing of
the claim within a reasonable time after the summons, or
other first written notification, giving information of the
nature of the claim served upon the Fund or upon such person
(or after the Fund or such person shall have received notice
of such service on any designated agent). However, failure
to notify Distributor of any such claim shall not relieve
Distributor from any liability which Distributor may have to
the Fund or any person against whom such action is brought
otherwise than on account of Distributor's indemnity
agreement contained in this Paragraph.
Distributor shall be entitled to participate, at its
own expense, in the defense, or, if Distributor so elects,
to assume the defense of any suit brought to enforce any
such claim but, if Distributor elects to assume the defense,
such defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain
such legal counsel, persons indemnified who are defendants
in the suit shall bear the fees and expenses of any
additional legal counsel retained by them. If Distributor
does not elect to assume the defense of any such suit,
Distributor will reimburse persons indemnified who are
defendants in such suit for the reasonable fees of any legal
counsel retained by them in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33
against any and all losses, liabilities, damages, claims or
expenses (including the damage, claim or expense and
reasonable legal counsel fees incurred in connection
therewith) to which Distributor or such of its directors,
officers, employees, representatives or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise arising out of the
acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Fund or any of the
members of the Fund's Board, or the Fund's officers,
employees or representatives other than Distributor, or (ii)
may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, Prospectus, Statement of Additional Information,
shareholder report or other information covering Shares
filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon
information furnished by Distributor to the Fund. In no
case (i) is the Fund's indemnity in favor of the Distributor
or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability
to which Distributor or such indemnified person would
otherwise be subject by reason of willful misfeasance, bad
faith, or negligence in the performance of its or his duties
or by reason of its or his reckless disregard of its or his
obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in
this Paragraph with respect to any claim made against
Distributor or any person indemnified unless Distributor, or
such person, as the case may be, shall have notified the
Fund in writing of the claim within a reasonable time after
the summons, or other first written notification, giving
information of the nature of the claim served upon
Distributor or upon such person (or after Distributor or
such person shall have received notice of such service on
any designated agent). However, failure to notify a Fund of
any such claim shall not relieve the Fund from any liability
which the Fund may have to Distributor or any person against
whom such action is brought otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but,
if the Fund elects to assume the defense, such defense shall
be conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants
in the suit. In the event that the Fund elects to assume
the defense of any such suit and retain such legal counsel,
the persons indemnified who are defendants in the suit shall
bear the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the
persons indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained
by them in such litigation.
13. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement
shall become effective upon its execution ("Effective Date")
and unless terminated as provided herein, shall remain in
effect through June 30, 1998, and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually (a) by a vote of
majority of the members of the Board of the Fund who are not
interested persons of the Distributor or of the Fund, voting
in person at a meeting called for the purpose of voting on
such approval, and (b) by the vote of either the Board of
the Fund or a majority of the outstanding shares of the
Fund. This Agreement may be terminated by and between an
individual Fund and Distributor at any time, without the
payment of any penalty (a) on 60 days' written notice, by
the Board of the Fund or by a vote of a majority of the
outstanding Shares of the Fund, or by Distributor, or (b)
immediately, on written notice by the Board of the Fund, in
the event of termination or suspension of any of the
Registrations. This Agreement will automatically terminate
in the event of its assignment. In interpreting the
provisions of this Paragraph 13, the definitions contained
in Section 2(a) of ICA-40 (particularly the definitions of
"interested person", "assignment", and "majority of the
outstanding shares") shall be applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best
interests of the Fund that any amendment of this Agreement
be made in order to comply with the recommendations or
requirements of the SEC or any other governmental authority
or to obtain any advantage under state or Federal tax laws
and notifies Distributor of the form of such amendment, and
the reasons therefor, and if Distributor should decline to
assent to such amendment, the Fund may terminate this
Agreement forthwith. If Distributor should at any time
request that a change be made in the Fund's Agreement and
Declaration of Trust or By-Laws or in its methods of doing
business, in order to comply with any requirements of
Federal law or regulations of the SEC, or of a national
securities association of which Distributor is or may be a
member, relating to the sale of Shares, and the Fund should
not make such necessary changes within a reasonable time,
Distributor may terminate this Agreement forthwith.
15. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. A copy of the
Declaration of Trust and of each amendment thereto has been
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City
of Boston, as well as any other governmental office where
such filing may from time to time be required.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other
party at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: One Financial Center
Boston, Massachusetts 02111
Attn: Secretary
If to Stein Roe & Farnham
Incorporated: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY FINANCIAL INVESTMENTS, INC.
By: TIMOTHY K. ARMOUR
ATTEST:
MARJORIE M. PLUSKOTA
Assistant Clerk
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: HANS P. ZIEGLER
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
<PAGE>
Revised Exhibit A to Underwriting Agreement
Between Stein Roe Investment Trust, Stein Roe Income Trust,
Stein Roe Municipal Trust, Stein Roe Trust and Stein Roe
Institutional Trust and
Liberty Financial Investments, Inc.
STEIN ROE INCOME TRUST STEIN ROE INVESTMENT TRUST
Stein Roe Income Fund Stein Roe Growth & Income Fund
Stein Roe High Yield Fund Stein Roe International Fund
Stein Roe Intermediate Bond Stein Roe Young Investor Fund
Fund Stein Roe Special Venture Fund
Stein Roe Cash Reserves Fund Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital
Opportunities Fund
STEIN ROE MUNICIPAL TRUST Stein Roe Special Fund
Stein Roe Managed Municipals Stein Roe Emerging Markets
Fund Fund
Stein Roe Municipal Money Stein Roe Growth
Market Fund Opportunities Fund
Stein Roe High Yield Municipals
Fund
Stein Roe Intermediate
Municipals Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
<PAGE>
Date _____________
LIBERTY FINANCIAL INVESTMENTS, INC.
STEIN ROE ____ FUND
SELLING AGREEMENT
Dear Sirs:
As the principal underwriter of Stein Roe ____ Fund
(the "Fund"), a series of Stein Roe _____ Trust (the
"Trust"), a Massachusetts business trust registered under
the Investment Company Act of 1940 as an open-end investment
company, we invite you as agent for your customer to
participate in the distribution of shares of beneficial
interest in the Fund ("Shares"), subject to the following
terms and conditions:
1. We hereby grant to you the right to make Shares
available to, and to solicit orders to purchase Shares by,
the public, subject to applicable federal and state law, the
Agreement and Declaration of Trust and By-laws of the Trust,
and the current Prospectus and Statement of Additional
Information relating to the Fund attached hereto (the
"Prospectus"). You will forward to us or to the Trust's
transfer agent, as we may direct from time to time, all
orders for the purchase of Shares obtained by you, subject
to such terms and conditions as to the form of payment,
minimum initial and subsequent purchase and otherwise, and
in accordance with such procedures and directions, as we may
specify from time to time. All orders are subject to
acceptance by an authorized officer of the Trust in Chicago
and the Trust reserves the right in its sole discretion to
reject any order. Share purchases are not binding on the
Trust until accepted and entered on the books of the Fund.
No Share purchase shall be effective until payment is
received by the Trust in the form of Federal funds. If a
Share purchase by check is cancelled because the check does
not clear, you will be responsible for any loss to the Fund
or to us resulting therefrom.
2. The public offering price of the Shares shall be
the net asset value per share of the outstanding Shares
determined in accordance with the then current Prospectus.
No sales charge shall apply.
3. As used in this Agreement, the term "Registration
Statement" with regard to the Fund shall mean the
Registration Statement most recently filed by the Trust with
the Securities and Exchange Commission and effective under
the Securities Act of 1933, as such Registration Statement
is amended by any amendments thereto at the time in effect,
and the terms "prospectus" and "statement of additional
information" with regard to the Fund shall mean the form of
prospectus and statement of additional information relating
to the Fund as attached hereto filed by the Trust as part of
the Registration Statement, as such form of prospectus and
statement of additional information may be amended or
supplemented from time to time.
4. You hereby represent that you are and will remain
during the term of this Agreement duly registered as a
broker-dealer under the Securities Exchange Act of 1934 and
under the securities laws of each state where your
activities require such registration, and that you are and
will remain during the term of this Agreement a member in
good standing of the National Association of Securities
Dealers, Inc. ("NASD"). In the conduct of your activities
hereunder, you will abide by all applicable rules and
regulations of the NASD, including, without limitation, Rule
26 of the Rules of Fair Practice of the NASD as in effect
form time to time, and all applicable federal and state
securities laws, including without limitation, the
prospectus delivery requirements of the Securities Act of
1933.
5. This Agreement is subject to the right of the Trust
at any time to withdraw all offerings of the Shares by
written notice to us at our principal office. You
acknowledge that the Trust will not issue certificates
representing Shares.
6. Your obligations under this Agreement are not to be
deemed exclusive, and you shall be free to render similar
services to others so long as your services hereunder are
not impaired thereby.
7. You will sell Shares only to residents of states or
other jurisdictions where we have notified you that the
Shares have been registered or qualified for sale to the
public or are exempt from such qualification or
registration. Neither we nor the Trust will have any
obligation to register or qualify the Shares in any
particular jurisdiction. We shall not be liable or
responsible for the issue, form validity, enforceability or
value of the Shares or for any matter in connection
therewith, except lack of good faith on our part, and no
obligation not expressly assumed by us in this Agreement
shall be implied therefrom. Nothing herein contained,
however, shall be deemed to be a condition, stipulation or
provision binding any person acquiring any Shares to waive
compliance with any provision of the Securities Act of 1933,
or to relieve the parties hereto from any liability arising
thereunder.
8. You are not authorized to make any representations
concerning the Fund, the Trust or the Shares except those
contained in the then current prospectus and statement of
additional information relating to the Fund, or printed
information issued by the Trust or by us as information
supplemental to such prospectus and statement of additional
information. We will supply you with a reasonable number of
copies of the then current prospectus and statement of
additional information of the Fund, and reasonable
quantities of any supplemental sales literature, sales
bulletins, and additional information as may be issued by us
or the Trust. You will not use any advertising or sales
material relating to the Fund other than materials supplied
by the Trust or us, unless such other material is approved
in writing by us in advance of such use.
9. You will not have any authority to act as agent for
the Trust, for us or for any other dealer. All transactions
between you and us contemplated by this Agreement shall be
as agents.
10. Either party to this Agreement may terminate this
Agreement by giving written notice to the other. Such
notice shall be deemed to have been given on the date on
which it is either delivered personally to the other party,
is mailed postpaid or delivered by telecopier to the other
party at its address listed below. This Agreement may be
amended by us at any time, and your placing of an order
after the effective date of any such amendment shall
constitute your acceptance thereof.
Liberty Financial Investments, Inc. Dealer
One Financial Center ________________
Boston, Massachusetts 02211 ________________
Attention: ________________ ________________
Telecopier: _______________
with copy to:
Stein Roe _____ Trust
One South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
Telecopier: ________
11. This Agreement constitutes the entire agreement
between you and us relating to the subject matter hereof and
supersedes all prior or written agreements between us. This
Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and shall be binding upon
both parties hereto when signed by us and accepted by you in
the space provided below.
Very truly yours,
LIBERTY FINANCIAL INVESTMENTS, INC.
BY: ____________________
The undersigned hereby accepts your invitation to
participate in the distribution of Shares and agrees to each
of the terms and conditions set forth in this letter.
___________________________
Dealer
Date: ____________________ By: _______________________
(Signature of Officer)
Pay Office of Dealer:
__________________________ ___________________________
Street Address (Print Name of Officer)
__________________________
City/State/Zip
__________________________
Telephone Number
<PAGE> 1
EXHIBIT 9(d)
SUB-TRANSFER AGENT AGREEMENT
Agreement dated as of July 3, 1996, between SteinRoe
Services Inc. ("SSI"), a Massachusetts corporation, for
itself and on behalf SteinRoe Municipal Trust, SteinRoe
Income Trust and SteinRoe Investment Trust, each a
Massachusetts business trust (all referred to herein as the
"Trust") comprised of the series of portfolios listed in
Schedule A (as the same may from time to time be amended to
add or to delete one or more series, all referred to herein
as the "Fund"), and Colonial Investors Service Center, Inc.
("CISC"), a Massachusetts corporation.
WHEREAS, the Trust has appointed SSI as Transfer Agent,
Registrar and Dividend Disbursing Agent for the Fund, a
registered investment company, pursuant to Restated Agency
Agreement dated August 1, 1995 ("Transfer Agent Agreement");
WHEREAS, SSI is a registered transfer agent duly
authorized to appoint CISC as its agent for purposes of
performing certain transfer agency, registration and dividend
disbursement services in respect of the Trust;
WHEREAS, CISC desires to accept such appointment and to
perform such services upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Stein Roe & Farnham, Inc. ("SRF") is the
investment adviser to the Fund and Liberty Securities
Corporation is the principal underwriter of its shares.
NOW THEREFORE, in consideration of the mutual promises
and covenants set forth herein, the parties hereto agree as
follows:
1. Appointment. SSI hereby appoints CISC to act as its
agent in respect of the purchase, redemption and transfer of
Fund shares and dividend disbursing services in connection
with such shares other than with respect to Fund shares (a)
held under Stein Roe Counselor [service mark] for which SSI
shall perform such services and (b) held in omnibus accounts
with respect to which such services are performed by third
party financial institutions as described in the Fund's
Prospectus from time to time. CISC accepts such appointments
and will perform the duties and functions described herein in
the manner hereinafter set forth. In respect of its duties
and obligations pursuant to this Agreement, CISC will act as
agent of SSI and not as agent of the Trust nor the Fund.
CISC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations
hereunder in accordance with the practice of transfer agents
of investment companies registered with the Securities and
Exchange Commission and in compliance with all laws
applicable to mutual fund transfer agents and the Fund.
<PAGE> 2
CISC agrees that it shall perform usual and ordinary
services as transfer agent, registrar and dividend disbursing
agent, which are necessary and appropriate for investment
companies registered with the Securities and Exchange
Commission, except as otherwise specifically excluded herein,
including but not limited to: receiving and processing
payments for purchases of Fund shares, opening shareholder
accounts, receiving and processing requests for liquidation
of Fund shares , transferring and canceling stock
certificates, maintaining all shareholder accounts, preparing
annual shareholder meetings lists, corresponding with
shareholders regarding transaction rejections, providing
order room services to brokers, withholding taxes on
accounts, disbursing income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department
Form 1099 for shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable
transactions in shareholder accounts, recording reinvestment
of dividends and distributions in Fund shares, and causing
liquidation of shares and disbursements to be made to
withdrawal plan holders. The services to be performed by
CISC under this Agreement may be set forth in a procedures
manual and other documents as mutually agreed to by CISC and
SSI. Specifically excluded from the services to be provided
by CISC are the following: mailing proxy materials,
receiving and tabulating proxies, mailing shareholder reports
and prospectuses, account research, shareholder
correspondence and telephone services regarding general
inquiries, information requests and all other matters except
transaction rejections, all of which SRS agrees to continue
to perform directly on behalf of the Trust and the Fund.
2. Fees and Charges. SSI will pay CISC for the services
provided hereunder in accordance with and in the manner set
forth in Schedule B to this Agreement.
3. Representations and Warranties of CISC. CISC
represents and warrants to SSI that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
by this Agreement and it is in compliance and shall
continue during the term of this Agreement to be in
compliance with all such applicable laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement; and
<PAGE> 3
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission, it is duly
registered as a transfer agent as provided in Section
17Ac of the Securities and Exchange Act of 1934, and
it will remain so registered and will comply with all
state and federal laws and regulations relating to
transfer agents throughout the term of this
Agreement.
4. Representations and Warranties of SSI. SSI
represents and warrants to CISC that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
State of Illinois;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
in this Agreement and in the Transfer Agent Agreement
and it is in compliance and shall continue during the
term of this Agreement to be in compliance with the
Transfer Agent Agreement and all such applicable
laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement and the Transfer Agent Agreement; and
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission; it is duly
registered as a Transfer Agent as provided in Section
17Ac of the Securities Exchange Act of 1934; and it
will remain so registered and comply with all state
and federal laws and regulations relating to transfer
agents throughout the term of this Agreement.
5. Representations and Warranties of the Trust. The
Trust represents and warrants to CISC that:
(a) It is a business trust duly organized and existing
and in good standing under the laws of the State of
Massachusetts;
(b) The Fund is an open-end diversified management
investment company registered under the Investment
Company Act of 1940;
<PAGE> 4
(c) Registration statements under the Securities Act of
1933 and applicable state laws are currently
effective and will remain effective at all times with
respect to all shares of the Fund being offered for
sale;
(d) The Trust is empowered under applicable laws and
regulations and by its Agreement and Declaration of
Trust and By-Laws to enter into and perform this
Agreement; and
(e) All requisite proceedings and actions have been
taken to authorize it to enter into and perform this
Agreement.
6. Copies of Documents. SSI promptly from time to time
will furnish CISC with copies of the following Trust and Fund
documents and all amendments or supplements thereto: the
Agreement and Declaration of Trust ; the By-Laws; and the
Registration Statement under Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended,
together with any other information reasonably requested by
CISC. The Prospectus and Statement of Additional Information
contained in such Registration Statement, as from time to
time amended and supplemented, are herein collectively
referred to as the "Fund's Prospectus."
On or before the date of effectiveness of this
Agreement, or as soon thereafter as is reasonably
practicable, and from time-to-time thereafter, SSI will
furnish CISC with certified copies of the resolutions of the
Trustees of the Trust authorizing this Agreement and
designating authorized persons to give instructions to CISC;
if applicable, a specimen of the certificate for shares of
the Fund in the form approved by the Trustees of the Trust,
with a certificate of the Secretary of the Trust as to such
approval; and certificates as to any change in any officer,
director, or authorized person of the SSI and the Trust.
7. Share Certificates. The Fund has resolved that all
of the Fund's shares shall hereafter be issued in
uncertificated form. Thus, CISC shall not be responsible for
the issuance of certificates representing shares in the Fund.
However, CISC shall maintain a record of each certificate
previously issued and outstanding, the number of shares
represented thereby, and the holder of record of such shares.
8. Lost or Destroyed Certificates. In case of the
alleged loss or destruction of any share certificate, no new
certificate shall be issued in lieu thereof, unless there
shall first be furnished to CISC an affidavit of loss or non-
receipt by the holder of shares with respect to which a
certificate has been lost or destroyed, supported by an
appropriate bond paid for by the shareholder which is
satisfactory to CISC and issued by a surety company
satisfactory to CISC. CISC shall place and maintain stop
transfer instructions on all lost certificates as to which it
receives notice.
9. Receipt of Funds for Investment. CISC will maintain
one or more accounts with The First National Bank of Boston
("Bank"),in the name of SSI into which
<PAGE> 5
it will deposit funds payable to CISC or SSI as agent for, or
otherwise identified as being for the account of, the Trust
or the Fund.
10. Shareholder Accounts. Upon receipt of any funds
referred to in paragraph 9, CISC will compute the number of
shares purchased by the shareholder according to the net
asset value of Fund shares determined in accordance with
applicable federal laws and regulations and as described in
the Prospectus of the Fund and:
(a) In the case of a new shareholder, open and maintain
an open account for such shareholder in the name or
names set forth in the subscription application form;
(b) Send to the shareholder a confirmation indicating the
amount of full and fractional shares purchased (in
the case of fractional shares, rounded to three
decimal places) and the price per share;
(c) In the case of a request to establish a plan or
program being offered by the Fund's Prospectus, open
and maintain such plan or program for the shareholder
in accordance with the terms thereof; and
(d) Perform such other services and initiate and maintain
such other books and records as are customarily
undertaken by transfer agents in maintaining
shareholder accounts for registered investment
company investors;
all subject to requirements set forth in the Fund's
Prospectus with respect to rejection of orders.
For closed accounts, CISC will maintain account records
through June of the calendar year following the year in which
the account is closed, or such other period of time as CISC
and SSI shall mutually agree in writing from time to time.
11. Unpaid Checks; Accounts Assigned for Collection.
If any check or other order for payment of money on the
account of any shareholder or new investor is returned unpaid
for any reason, CISC will:
(a) Give prompt notification to SRS of such non-payment
by facsimile sent prior to 9 a.m. E.S.T.; and
(b) Upon SSI's written instruction, received by facsimile
delivery not later than 11 a.m. E.S.T., authorize
payment of such order notwithstanding insufficient
shareholder account funds, on the condition that SSI
shall indemnify CISC and payor bank in respect of
such payment.
12. Dividends and Distributions. SSI will promptly
notify CISC of the declaration of any dividend or
distribution with respect to Fund shares, the amount of
<PAGE> 6
such dividend or distribution, the date each such dividend or
distribution shall be paid, and the record date for
determination of shareholders entitled to receive such
dividend or distribution. As dividend disbursing agent, CISC
will, on or before the payment date of any such dividend or
distribution, notify the Trust's custodian of the estimated
amount of cash required to pay such dividend or distribution,
and the Trust agrees that on or before the mailing date of
such dividend or distribution it will instruct its custodian
to make available to CISC sufficient funds in the dividend
and distribution account maintained by CISC with the Bank.
As dividend disbursing agent, CISC will prepare and
distribute to shareholders any funds to which they are
entitled by reason of any dividend or distribution and, in
the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, CISC
will make appropriate credits to their accounts and cause to
be prepared and mailed to shareholders confirmation
statements and, of such additional shares. CISC will maintain
all records necessary to reflect the crediting of dividends
and distributions which are reinvested in shares of the Fund.
13. Redemptions. CISC will receive and process for
redemption in accordance with the Fund's Prospectus, share
certificates and requests for redemption of shares as
follows:
(a) If such certificate or request complies with
standards for redemption, CISC will, in accordance
with the Fund's current Prospectus, pay to the
shareholder from funds deposited by the Fund from
time to time in the redemption account maintained by
CISC with the Bank, the appropriate redemption price
as set forth in the Fund's Prospectus; and
(b) If such certificate or request does not comply with
the standards for redemption, CISC will promptly
notify the shareholder and shall effect the
redemption at the price in effect at the time of
receipt of documents complying with the standard.
14. Transfer and Exchanges. CISC will review and
process transfers of shares of the Fund and to the extent, if
any, permitted in the Prospectus of the Fund, exchanges
between series of the Trust received by CISC. If shares to
be transferred are represented by outstanding certificates,
CISC will, upon surrender to it of the certificates in proper
form for transfer, credit the same to the transferee on its
books. If shares are to be exchanged for shares of another
Fund, CISC will process such exchange in the same manner as a
redemption and sale of shares, in accordance with the Fund's
Prospectus may in its.
15. Plans. CISC will process such plans or programs
for investing in shares, and such systematic withdrawal
plans, as are provided for in the Fund's Prospectus.
16. Tax Returns and Reports. CISC will prepare and
file tax returns and reports with the Internal Revenue
Service and any other federal, state or local governmental
agency which may require such filings, including state
abandoned
<PAGE> 7
property laws, and conduct appropriate communications
relating thereto, and, if required, mail to shareholders such
forms for reporting dividends and distributions paid by the
Fund as are required by applicable laws, rules and
regulations, and CISC will withhold such sums as are required
to be withheld under applicable Federal and state income tax
laws, rules and regulations. CISC will periodically provide
SSI with reports showing dividends and distributions paid and
any amounts withheld. CISC will also make reasonable attempt
to obtain such tax withholding information from shareholders
as is required to be obtained on behalf of the Trust under
applicable federal or state laws.
17. Record Keeping. CISC will maintain records, which
at all times will be the property of the Trust and available
for inspection by SSI, showing for each shareholder's account
the following information and such other information as CISC
and SSI shall mutually agree in writing from time to time:
(a) Name, address, and United States taxpayer
identification or Social Security number, if provided
(or amounts withheld with respect to dividends and
distributions on shares if a taxpayer identification
or Social Security number is not provided);
(b) Number of shares held for which certificates have not
been issued and for which certificates have been
issued;
(c) Historical information regarding the account of each
shareholder, including dividends and distributions
paid, if any, gross proceeds of sales transactions,
and the date and price for transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account of which SSI has notified CISI;
(e) Information with respect to withholdings of taxes as
required under applicable Federal and state laws and
regulations;
(f) Any capital gain or dividend reinvestment order and
plan application relating to the current maintenance
of a shareholder's account; and
(g) Any instructions as to record addresses and any
correspondence or instructions relating to the
current maintenance of a shareholder's account.
SSI hereby agrees that CISC shall have no liability or
obligation with respect to the accuracy or completeness of
shareholder account information received by CISC on or about
the Operational Date.
<PAGE> 8
By mutual agreement of CISC and SSI, CISC shall
administer a program whereby reasonable attempt is made to
identify current address information from shareholders whose
mail from the Trust is returned.
CISC shall maintain at its expense those records
necessary to carry out its duties under this Agreement. In
addition, CISC shall maintain at its expense for periods
prescribed by law all records which the Fund or CISC is
required to keep and maintain pursuant to any applicable
statute, rule or regulation, including without limitation
Rule 31(a)-1 under the Investment Company Act of 1940,
relating to the maintenance of records in connection with the
services to be provided hereunder. Upon mutual agreement of
CISC and SSI, CISC shall also maintain other records
requested from time to time by SSI, at SSI's expense.
At the end of the period in which records must be
retained by law, such records and documents will either be
provided to the Trust or destroyed in accordance with prior
written authorization from the Trust.
18. Retirement Plan Services. CISC shall provide sub-
accounting services for retirement plan shareholders
representing group relationships with special recordkeeping
needs.
19. Other Information Furnished. CISC will furnish to
SSI such other information, including shareholder lists and
statistical information as may be agreed upon from time to
time between CISC and SSI. CISC shall notify SSI and the
Trust of any request or demand to inspect the share records
of the Fund, and will not permit or refuse such inspection
until receipt of written instructions from the Trust as to
such permission or refusal unless required by law.
CISC shall provide to the Trust any results of studies
and evaluations of systems of internal accounting controls
performed for the purpose of meeting the requirements of
Regulation 240.17Ad-13(a) of the Securities Exchange Act of
1934.
20. Shareholder Inquiries. CISC will not respond to
written correspondence from fund shareholders or others
relating to the Fund other than those regarding transaction
rejections and clarification of transaction instructions, but
shall forward all such correspondence to SSI.
21. Communications to Shareholders and Meetings. CISC
will determine all shareholders entitled to receive, and will
cause to be addressed and mailed, all communications by the
Fund to its shareholders, including quarterly and annual
reports, proxy material for meetings, and periodic
communications. CISC will cause to be received, examined and
tabulated return proxy cards for meetings of shareholders and
certify the vote to the Trust Fund.
22. Other Services by CISC. CISC shall provide SSI,
with the following additional services:
<PAGE> 9
(a) All CTRAN, CIMAGE, Price Waterhouse Blue Sky 2, and
Pegashares functionality and enhancements (on a
remote basis) as they now exist and as they are
developed and made available to CISC clients;
(b) Initial programs and report enhancements to the CTRAN
System which are necessary to accommodate the Fund as
a no-load fund group;
(c) Development, systems training, technical support,
implementation, and maintenance of special programs
and systems to enhance overall shareholder servicing
capability;
(d) Product and system training for personnel of
institutional servicing agents.
23. Insurance. CISC will not reduce or allow to lapse
any of its insurance coverages from time to time in effect,
including but not limited to errors and omissions, fidelity
bond and electronic data processing coverage, without the
prior written consent of SSI. Attached as Schedule D to this
Agreement is a list of the insurance coverage which CISC has
in effect as of the date of execution of this Agreement and,
if different, will have in effect on the Operational Date.
24. Duty of Care and Indemnification. CISC will at all
times use reasonable care, due diligence and act in good
faith in performing its duties hereunder. CISC will not be
liable or responsible for delays or errors by reason of
circumstances beyond its control, including without
limitation acts of civil or military authority, national or
state emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or
power supply.
CISC may rely on certifications of those individuals
designated as authorized persons to give instructions to CISC
as to proceedings or facts in connection with any action
taken by the shareholders of the Fund or Trustees of the
Trust, and upon instructions not inconsistent with this
Agreement from individuals who have been so authorized. Upon
receiving authorization from an individual designated as an
authorized person to give instructions to CISC, CISC may
apply to counsel for the Trust, or counsel for SSI or the
Fund's investment adviser, at the Fund's expense, for advice.
With respect to any action reasonably taken on the basis of
such certifications or instructions or in accordance with the
advice of counsel of the Trust, or counsel for SSI or the
Fund's investment adviser, the Fund will indemnify and hold
harmless CSC from any and all losses, claims, damages,
liabilities and expenses (including reasonable counsel fees
and expenses).
SSI will indemnify CISC against and hold CISC harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect of any claim, demand, action or suit not resulting
from CISC's bad faith, negligence, lack of due diligence or
willful misconduct and arising out of, or in connection with
its duties under this Agreement.
<PAGE> 10
CISC shall indemnify SSI against and hold SSI harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit resulting from
CISC's bad faith, negligence, lack of due diligence or
willful misconduct, and arising out of, or in connection
with, its duties under this Agreement. For purposes of this
Sub-Transfer Agent Agreement, "lack of due diligence" shall
mean the processing by CISC of a Fund share transaction in
accordance with a practice that is not substantially in
compliance with (1) a transaction processing practice of SSI
approved by Fund Trustees, (2) insurance coverages, or (3)
generally accepted industry practices of mutual fund agents.
CISC shall also be indemnified and held harmless by SSI
against any loss, claim, damage, liability and expenses
(including reasonable counsel fees and expenses) by reason of
any act done by it in good faith with due diligence and in
reasonable reliance upon any instrument or certificate for
shares reasonably believed by it (a) to be genuine and (b) to
be signed, countersigned or executed by any person or persons
authorized to sign, countersign, or execute such instrument
or certificate.
In addition, SSI will indemnify and hold CISC harmless
against any loss, claim, damage, liability and expense
(including reasonable counsel fees and expenses) in respect
of any claim, demand, action or suit as a result of the
negligence of the Fund, Trust SRF or SSI, or as a result of
CISC's acting upon any instructions reasonably believed by
CISC to have been executed or orally communicated by a duly
authorized officer or employee of the Fund, Trust SRF or SSI,
or as a result of acting in reliance upon written or oral
advice reasonably believed by CISC to have been given by
counsel for the Fund, Trust SRF or SSI.
In any case in which a party to this Agreement may be
asked to indemnify or hold harmless the other party hereto,
the party seeking indemnification shall advise the other
party of all pertinent facts concerning the situation giving
rise to the claim or potential claim for indemnification, and
each party shall use reasonable care to identify and notify
the other promptly concerning any situation which presents or
appears likely to present a claim for indemnification.
Prior to admitting to or agreeing to settle any claim subject
to this Section, each party shall give the other reasonable
opportunity to defend against said claim in either party's
name.
25. Employees. CISC and SSI are separately
responsible for the employment, control and conduct of their
respective agents and employees and for injury to such agents
or employees or to others caused by such agents or employees.
CISC and SSI severally assume full responsibility for their
respective agents and employees under applicable statues and
agree to pay all employer taxes thereunder. The conduct of
their respective agents and employees shall be included in
any reference to the conduct of CISC or SSI for all purposes
hereunder.
26. Termination and Amendment. This Agreement shall
continue in effect for eighteen (18) months from the
Operational Date, and will automatically be
<PAGE> 11
renewed for successive one year terms thereafter. After
eighteen (18) months from the Operational Date the Agreement
may be terminated at any time by not less than one hundred
eighty (180) days written notice. Upon termination hereof,
SSI shall pay CISC such compensation as may be due to CISC as
of the date of such termination for services rendered and
expenses incurred, as described in Schedule B. This
Agreement may be modified or amended from time to time by
mutual agreement between SSI and CISC.
27. Successors. In the event that in connection with
termination of this Agreement a successor to any of CISC's
duties or responsibilities hereunder is designated by SSI by
written notice to CISC, CISC shall promptly at the expense of
SSI, transfer to such successor, or if no successor is
designated, transfer to the Trust, a certificate list of the
shareholders of the Fund (with name, address and taxpayer
identification or Social Security number), a historical
record of the account of each shareholder and the status
thereof, all other relevant books, records, correspondence
and other data established or maintained by CISC under this
Agreement in machine readable form and will cooperate in the
transfer of such duties and responsibilities, and in the
establishment of books, records and other data by such
successor. CISC shall be entitled to reimbursement of its
reasonable out-of-pocket expenses in respect of assistance
provided in accordance with the preceding sentence.
28. Miscellaneous. This Agreement shall be construed
in accordance with and governed by the laws of The
Commonwealth of Massachusetts.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit
any of the provisions of this Agreement or otherwise affect
their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
CISC shall keep confidential all records and information
provided to CISC by the Trust, SSI, SRF, and prior, present
or prospective shareholders of the Fund, except, after notice
to SSI , to the extent disclosures are required by this
Agreement, by the Fund's registration statement, or by a
reasonable request or a valid subpoena or warrant issued by a
court, state or federal agency or other governmental
authority.
Neither CISC nor SSI may use each other's name in any
written material without written consent of such other party,
provided , however, that such consent shall not unreasonably
withheld. CISC and SSI hereby consent to all uses of their
respective names which refer in accurate terms to appointment
and duties under this Agreement or which are required by any
governmental or regulatory authority including required
filings. SSI, SRF, the Trust and the Fund consent to use of
their respective names and logos by CISC for shareholder
correspondence and statements
This Agreement shall be binding upon and shall inure to
the benefit of SSI and CISC and their respective successors
and assigns. Neither SSI nor CISC shall assign this
<PAGE> 12
Agreement nor its rights and obligations under this Agreement
without the express written consent of the other party.
This Agreement may be amended only in writing by mutual
agreement of the parties.
Any notice and other instrument in writing authorized or
required by this Agreement t be given to SSI or CISC shall
sufficiently be given if addressed to that party and mailed
or delivered to it as its office set for the below or at such
other place as it may from time to time designate in writing.
SSI, the Trust and the Fund:
SteinRoe Services Inc.
One South Wacker Drive
Suite 3300
Chicago, Illinois 60606
Attn: Jilaine Hummel Bauer, Esq.
CISC:
Colonial Investors Service Center, Inc.
One Financial Center
Boston, Massachusetts 02111
Attn: Mary McKenzie; with a separate copy to
Attn: Nancy L. Conlin, Esq., Legal Department
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and sealed as of the date first
above written.
STEINROE SERVICES INC.
By: TIMOTHY K. ARMOUR
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: D.S. SCOON
Name: Davey S. Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
By: TIMOTHY K. ARMOUR
Name: Timothy K. Armour
Title: President
<PAGE>
SCHEDULE A
Stein Roe Mutual Funds (the "Fund"), consists of the
following series of portfolios:
Stein Roe Investment Trust
- --------------------------
Stein Roe Growth & Income Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Income Trust
- ----------------------
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Municipal Trust
- -------------------------
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Stein Roe Managed Municipals Fund
<PAGE>
SCHEDULE B
This Schedule B is attached to and is part of a certain
Sub-Transfer Agent Agreement ("Agreement") dated July 3, 1996
between SteinRoe Services Inc. ("SSI") and Colonial Investors
Center, Inc. ("CISC").
A. SSI will pay CISC for services rendered under the
Agreement and in accordance with a negotiated allocation of
revenues and reimbursement of costs as follows:
1. As of the Operational Date, CISC and SSI shall agree upon
a fixed monthly per account fee to be paid under the
Agreement, which shall be in an amount equal to 1/12 (a) the
estimated total, determined on an annualized basis, of (1)
all incremental costs incurred by CISC in connection with the
sub-transfer agency relationship, plus (2) 1/2 the net
economic benefit derived by Liberty Financial Companies, the
parent company of both CISC and SSI, as a result of the sub-
transfer agency relationship, (b) divided by the number of
shareholder accounts to be serviced by CISC pursuant to the
Agreement as of the Operational Date.
2. For the first eighteen (18) months of the Agreement, SSI
shall pay CISC, monthly in arrears, commencing with the first
day of August, 1996, and on the first day of each month
thereafter, the greater of (a) the product of the fixed per
account fee determined as provided in paragraph 1. above
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month, and (b) 1/12 the annualized estimated total costs and
benefit determined pursuant to (a) of paragraph 1. above.
All estimates under this paragraph shall be determined no
later than September 30, 1996. The annual fee for the first
eighteen months shall not be less than $1.4 million.
3. Commencing January 1, 1998, and during each calendar year
thereafter, SSI shall pay CISC a fee equal to CISC's budgeted
annual per account expense of providing services pursuant to
the Agreement. Said fee shall be paid monthly in arrears, on
the first day of each month, in an amount equal to the
product of 1/12 the budgeted annual per account fee
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month. All budgeted numbers under this paragraph shall be
determined no later than November 30 each year.
B. The Fund shall be credited each month with balance
credits earned on all Fund cash balances.
Upon thirty (30) days' notice to SSI, CISC may increase
the fees it charges to the extent the cost to CISC of
providing services increases (i) because of changes in the
Fund's Prospectus, or (ii) on account of any change after the
date hereof in law or regulations governing performance of
obligations hereunder.
Fees for any additional services not provided herein, ad
hoc reports or special programming requirements to be
provided by CISC shall be agreed upon by SSI and CISC at such
time as CISC agrees to provide any such services.
In addition to paying CISC fees as described herein, SSI
agrees to reimburse CISC for any and all out-of-pocket
expenses and charges in performing services under the
Agreement (other than charges for normal data processing
services and related software, equipment and facilities)
including, but not limited to, mailing service, postage,
printing of shareholder statements, the cost of any and all
forms of the Trust and other materials used in communicating
with shareholders of the Trust, the cost of any equipment or
service used for communicating with the Trust's custodian
bank or other agent of the Trust, and all costs of telephone
communication with or on behalf of shareholders allocated in
a manner mutually acceptable to CISC and SSI.
<PAGE>
SCHEDULE C
SRS and CSC hereby agree that the date on which the
complete services began ("Operational Date") under the Sub-
Transfer Agent Agreement between them dated July 3, 1996, is:
July , 1996
STEINROE SERVICES INC.
By:________________________________________
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By:________________________________________
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of January 1, 1997, and
effective that date unless otherwise indicated below, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust and Stein Roe Investment Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add Stein Roe Advisor Trust
(effective February 14, 1997), Stein Roe Institutional Trust
(effective January 2, 1997) and Stein Roe Trust (effective
February 14, 1997), comprised of the Series listed on
Schedule A, as amended, and assenting parties to the
contract and to add new series of the existing Trusts. The
amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY DILLON MCKENZIE
Name: Mary Dillon McKenzie
Title: Senior Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: JILAINE HUMMEL BAUER
Name: Jilaine Hummel Bauer
Title: Executive Vice President and Secretary
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of June 30, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to add additional
series of the existing Trusts. The amended Schedule A is as
follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: JOHN W. BYRNE
Name: John W. Byrne
Title: Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 15, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to remove Stein Roe
Advisor Trust as a party to this agreement. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 17, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to remove two series of Income Trust
from Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: ANNE E. MARCEL
Name: Anne E. Marcel
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of April 30, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add one series of Investment Trust
to Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
EXHIBIT 10(f)
<PAGE> 1
BELL, BOYD & LLOYD
THREE FIRST NATIONAL PLAZA
70 WEST MADISON STREET, SUITE 3300
CHICAGO, ILLINOIS 60602-4207
312 372-1121
FAX 312 372-2098
June 11, 1998
Stein Roe Investment Trust
One South Wacker Drive, #3300
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
Stein Roe Investment Trust
We have acted as counsel for Stein Roe Investment
Trust (the "Trust") in connection with the registration under
the Securities Act of 1933 (the "Act") of an indefinite
number of shares of beneficial interest (the "Shares") of the
series of the Trust designated Stein Roe Asia Pacific
Fund (the "Fund") in registration statement no. 33-11351 on
form N-1A as amended by post-effective amendment no. 46 thereto
(the "Registration Statement").
In this connection we have examined originals, or copies
certified or otherwise identified to our satisfaction, of
such documents, corporate and other records, certificates and
other papers as we deemed it necessary to examine for the
purpose of this opinion, including the agreement and
declaration of trust (the "Trust Agreement") and by-laws (the
"By-laws") of the Trust, actions of the board of trustees of
the Trust authorizing the issuance of shares of the Fund and
the Registration Statement.
We assume that, upon sale of the Shares, the Trust will
receive the authorized consideration therefor, which will at
least equal the net asset value of the Shares.
Based upon the foregoing, we are of the opinion that
the Trust is authorized to issue an unlimited number of
Shares, and that, when the Shares are issued and sold after
the post-effective amendment to the Registration Statement
has been declared effective and the authorized consideration
therefor is received by the Trust, they will be validly
issued, fully paid and nonassessable by the Trust
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust or any
series of the Trust (a "Series"). However, the Agreement
and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust or any Series and
requires that notice of such disclaimer be given in every
note, bond, contract, instrument, certificate or other
undertaking issued by or on behalf of the Trust. The
<PAGE> 2
Stein Roe Investment Trust
June 11, 1998
Page two
Agreement and Declaration of Trust provides for indemnification
out of property of a particular Series for all loss and expense
of any shareholder of that Series held personally liable for
obligations of that Series. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability
is limited to circumstances in which the relevant Series would
be unable to meet its obligations.
In rendering the foregoing opinion, we have relied upon
the opinion of Ropes & Gray expressed in their letter to us
dated June 10, 1998.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not
admit that we are in the category of persons whose consent is
required under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
Exhibit 11(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our reports dated November 7, 1997 and November 11, 1997, and to
all references to our Firm included in or made a part of this
Registration Statement on Form N-1A of the Stein Roe Investment
Trust (comprising the Stein Roe Growth & Income Fund, Stein Roe
Balanced Fund, Stein Roe International Fund, Stein Roe Growth Stock
Fund, Stein Roe Special Fund, Stein Roe Young Investor Fund, Stein
Roe Capital Opportunities Fund, Stein Roe Special Venture Fund,
Stein Roe Emerging Markets Fund and Stein Roe Growth Opportunities
Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 1, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 212,463
<INVESTMENTS-AT-VALUE> 337,631
<RECEIVABLES> 363
<ASSETS-OTHER> 77
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 338,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 605
<TOTAL-LIABILITIES> 605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 212,463
<SHARES-COMMON-STOCK> 14,731
<SHARES-COMMON-PRIOR> 11,116
<ACCUMULATED-NII-CURRENT> 1,295
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,111
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 112,597
<NET-ASSETS> 337,466
<DIVIDEND-INCOME> 4,127
<INTEREST-INCOME> 3,350
<OTHER-INCOME> 0
<EXPENSES-NET> 3,189
<NET-INVESTMENT-INCOME> 4,288
<REALIZED-GAINS-CURRENT> 12,317
<APPREC-INCREASE-CURRENT> 58,865
<NET-CHANGE-FROM-OPS> 75,470
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,709
<DISTRIBUTIONS-OF-GAINS> 8,004
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,996
<NUMBER-OF-SHARES-REDEEMED> 3,826
<SHARES-REINVESTED> 445
<NET-CHANGE-IN-ASSETS> 133,079
<ACCUMULATED-NII-PRIOR> 716
<ACCUMULATED-GAINS-PRIOR> 7,047
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 485
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,189
<AVERAGE-NET-ASSETS> 279,941
<PER-SHARE-NAV-BEGIN> 18.39
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 5.15
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (0.65)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.91
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> STEIN ROE BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 191,100
<INVESTMENTS-AT-VALUE> 284,829
<RECEIVABLES> 410
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 285,351
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 505
<TOTAL-LIABILITIES> 505
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 191,100
<SHARES-COMMON-STOCK> 8,526
<SHARES-COMMON-PRIOR> 7,685
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84,181
<NET-ASSETS> 284,846
<DIVIDEND-INCOME> 2,685
<INTEREST-INCOME> 8,157
<OTHER-INCOME> 0
<EXPENSES-NET> 2,805
<NET-INVESTMENT-INCOME> 8,037
<REALIZED-GAINS-CURRENT> 11,658
<APPREC-INCREASE-CURRENT> 36,801
<NET-CHANGE-FROM-OPS> 56,496
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,239
<DISTRIBUTIONS-OF-GAINS> 18,744
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,769
<NUMBER-OF-SHARES-REDEEMED> 1,678
<SHARES-REINVESTED> 750
<NET-CHANGE-IN-ASSETS> 53,783
<ACCUMULATED-NII-PRIOR> (555)
<ACCUMULATED-GAINS-PRIOR> 16,469
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 493
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,805
<AVERAGE-NET-ASSETS> 264,191
<PER-SHARE-NAV-BEGIN> 30.07
<PER-SHARE-NII> 0.95
<PER-SHARE-GAIN-APPREC> 5.61
<PER-SHARE-DIVIDEND> (0.96)
<PER-SHARE-DISTRIBUTIONS> (2.26)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.41
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STEIN ROE GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 307,598
<INVESTMENTS-AT-VALUE> 608,119
<RECEIVABLES> 518
<ASSETS-OTHER> 121
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 608,758
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,089
<TOTAL-LIABILITIES> 1,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 307,598
<SHARES-COMMON-STOCK> 17,218
<SHARES-COMMON-PRIOR> 14,517
<ACCUMULATED-NII-CURRENT> 55
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34,207
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 265,809
<NET-ASSETS> 607,669
<DIVIDEND-INCOME> 4,186
<INTEREST-INCOME> 1,492
<OTHER-INCOME> 0
<EXPENSES-NET> 5,480
<NET-INVESTMENT-INCOME> 198
<REALIZED-GAINS-CURRENT> 34,268
<APPREC-INCREASE-CURRENT> 107,140
<NET-CHANGE-FROM-OPS> 141,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,100
<DISTRIBUTIONS-OF-GAINS> 33,200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,268
<NUMBER-OF-SHARES-REDEEMED> 4,578
<SHARES-REINVESTED> 1,011
<NET-CHANGE-IN-ASSETS> 189,705
<ACCUMULATED-NII-PRIOR> 957
<ACCUMULATED-GAINS-PRIOR> 33,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,480
<AVERAGE-NET-ASSETS> 508,490
<PER-SHARE-NAV-BEGIN> 28.79
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 8.79
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> (2.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 35.29
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEIN ROE CAPITAL OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 783,381
<INVESTMENTS-AT-VALUE> 1,118,126
<RECEIVABLES> 4,647
<ASSETS-OTHER> 232
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,123,005
<PAYABLE-FOR-SECURITIES> 2,583
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,780
<TOTAL-LIABILITIES> 12,363
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 895,253
<SHARES-COMMON-STOCK> 38,173
<SHARES-COMMON-PRIOR> 54,262
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (119,356)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 334,745
<NET-ASSETS> 1,110,642
<DIVIDEND-INCOME> 1,266
<INTEREST-INCOME> 4,987
<OTHER-INCOME> 0
<EXPENSES-NET> 15,061
<NET-INVESTMENT-INCOME> (8,808)
<REALIZED-GAINS-CURRENT> (110,932)
<APPREC-INCREASE-CURRENT> (7,539)
<NET-CHANGE-FROM-OPS> (127,279)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,657
<NUMBER-OF-SHARES-REDEEMED> 35,746
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (573,896)
<ACCUMULATED-NII-PRIOR> (3,208)
<ACCUMULATED-GAINS-PRIOR> (8,424)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,098
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,061
<AVERAGE-NET-ASSETS> 1,282,295
<PER-SHARE-NAV-BEGIN> 31.04
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> (1.77)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 29.07
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEIN ROE SPECIAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 615,803
<INVESTMENTS-AT-VALUE> 1,328,513
<RECEIVABLES> 472
<ASSETS-OTHER> 174
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,329,159
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,581
<TOTAL-LIABILITIES> 1,581
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 615,803
<SHARES-COMMON-STOCK> 39,288
<SHARES-COMMON-PRIOR> 42,299
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 110,545
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 601,230
<NET-ASSETS> 1,327,578
<DIVIDEND-INCOME> 6,750
<INTEREST-INCOME> 4,568
<OTHER-INCOME> 0
<EXPENSES-NET> 13,301
<NET-INVESTMENT-INCOME> (1,983)
<REALIZED-GAINS-CURRENT> 113,915
<APPREC-INCREASE-CURRENT> 232,265
<NET-CHANGE-FROM-OPS> 344,197
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 86,856
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,195
<NUMBER-OF-SHARES-REDEEMED> 12,222
<SHARES-REINVESTED> 3,016
<NET-CHANGE-IN-ASSETS> 169,080
<ACCUMULATED-NII-PRIOR> (2,611)
<ACCUMULATED-GAINS-PRIOR> 85,469
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,638
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,301
<AVERAGE-NET-ASSETS> 1,162,903
<PER-SHARE-NAV-BEGIN> 27.39
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 8.57
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.11
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.79
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> STEIN ROE INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 145,658
<INVESTMENTS-AT-VALUE> 166,323
<RECEIVABLES> 240
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 166,591
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 503
<TOTAL-LIABILITIES> 503
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,658
<SHARES-COMMON-STOCK> 14,090
<SHARES-COMMON-PRIOR> 12,369
<ACCUMULATED-NII-CURRENT> 554
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,627
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,249
<NET-ASSETS> 166,088
<DIVIDEND-INCOME> 3,067
<INTEREST-INCOME> 372
<OTHER-INCOME> 0
<EXPENSES-NET> 2,268
<NET-INVESTMENT-INCOME> 802
<REALIZED-GAINS-CURRENT> 8,273
<APPREC-INCREASE-CURRENT> 4,650
<NET-CHANGE-FROM-OPS> 13,725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,000
<DISTRIBUTIONS-OF-GAINS> 1,837
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,883
<NUMBER-OF-SHARES-REDEEMED> 3,365
<SHARES-REINVESTED> 203
<NET-CHANGE-IN-ASSETS> 30,543
<ACCUMULATED-NII-PRIOR> 933
<ACCUMULATED-GAINS-PRIOR> 1,010
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,268
<AVERAGE-NET-ASSETS> 146,918
<PER-SHARE-NAV-BEGIN> 10.96
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.99
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.79
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> STEIN ROE YOUNG INVESTOR FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 365,322
<INVESTMENTS-AT-VALUE> 475,423
<RECEIVABLES> 690
<ASSETS-OTHER> 74
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 476,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 681
<TOTAL-LIABILITIES> 681
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 365,322
<SHARES-COMMON-STOCK> 20,899
<SHARES-COMMON-PRIOR> 9,609
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,149
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 103,035
<NET-ASSETS> 475,506
<DIVIDEND-INCOME> 2,552
<INTEREST-INCOME> 1,771
<OTHER-INCOME> 0
<EXPENSES-NET> 4,981
<NET-INVESTMENT-INCOME> (658)
<REALIZED-GAINS-CURRENT> 7,157
<APPREC-INCREASE-CURRENT> 80,440
<NET-CHANGE-FROM-OPS> 86,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 250
<DISTRIBUTIONS-OF-GAINS> 8,295
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,131
<NUMBER-OF-SHARES-REDEEMED> 9,287
<SHARES-REINVESTED> 446
<NET-CHANGE-IN-ASSETS> 296,417
<ACCUMULATED-NII-PRIOR> 136
<ACCUMULATED-GAINS-PRIOR> 8,287
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 502
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,178
<AVERAGE-NET-ASSETS> 343,734
<PER-SHARE-NAV-BEGIN> 18.64
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 4.78
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.62)
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<PER-SHARE-NAV-END> 22.75
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<TABLE> <S> <C>
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<NAME> STEIN ROE SPECIAL VENTURE FUND
<S> <C>
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<TABLE> <S> <C>
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<NAME> STEIN ROE EMERGING MARKETS FUND
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<TABLE> <S> <C>
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<SERIES>
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<NAME> STEIN ROE GROWTH OPPORTUNITIES FUND
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