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. 59 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 60 [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)
[X] 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)
[ ] on (date) 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 Disciplined Stock Fund,
Stein Roe International Fund, Stein Roe Young Investor Fund,
Stein Roe Midcap Growth Fund, Stein Roe Large Company Focus
Fund, Stein Roe Asia Pacific Fund, Stein Roe Small Company
Growth Fund, and Stein Roe Growth Investor Fund.
This amendment to the Registration Statement has also been
signed by SR&F Base Trust.
The prospectuses and statements of additional information
relating to the series of Stein Roe Investment Trust
designated Stein Roe Balanced Fund, Stein Roe Growth
Stock Fund, Stein Roe Capital Opportunities Fund, Stein Roe
Disciplined Stock Fund, Stein Roe International Fund, Stein
Roe Young Investor Fund, Stein Roe Midcap Growth Fund,
Stein Roe Large Company Focus Fund, Stein Roe Asia
Pacific Fund, and Stein Roe Small Company Growth Fund
are not affected by the filing of this Post-Effective
Amendment No. 59.
<PAGE 1>
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1999
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
STEIN ROE ADVISOR GROWTH & INCOME FUND Prospectus, _______, 1999
Class Z Shares
Advised by Stein Roe & Farnham Incorporated
The following eligible institutional investors may purchase Class
Z shares: (i) any retirement plan with aggregate assets of at
least $5 million at the time of purchase of Class Z shares and
which purchases shares directly from Liberty Funds Distributor,
Inc., the Fund's distributor, or through a third-party broker-
dealer; (ii) any registered investment adviser purchasing shares
for its clients; (iii) any insurance company, trust company or
bank purchasing shares for its own account; (iv) any endowment,
investment company or foundation; and (v) any trustee of Stein Roe
Investment Trust, any employee of Stein Roe & Farnham
Incorporated, or any of its affiliates, or any member of the
immediate family of any trustee or employee.
TABLE OF CONTENTS
THE FUND......................2 MANAGING THE FUND....11
Investment Goals..............2 Investment Advisor...11
Primary Investment Strategies.2 Portfolio Manager....11
Primary Investment Risks......2
Performance History...........3 OTHER INVESTMENT
Your Expenses.................4 STRATEGIES AND RISKS.12
YOUR ACCOUNT..................6 FINANCIAL HIGHLIGHTS.14
How to Buy Shares.............6
How to Exchange Shares........7
How to Sell Shares............7
Other Information About
Your Account................8
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is
committing a crime.
Not FDIC Insured May Lose Value
No Bank Guarantee
<PAGE>
THE FUND STEIN ROE ADVISOR GROWTH & INCOME FUND
INVESTMENT GOALS
- ------------------------------------------------------------
The Fund seeks to provide both growth of capital and current
income.
[Callout]
DEFINING CAPITALIZATION
In this prospectus, we refer frequently to market capitalization
as a means to distinguish among companies based on their size. A
company's market capitalization is simply its stock price
multiplied by the number of shares of stock it has issued and
outstanding. In the financial markets, companies generally are
sorted into one of three capitalization-based categories: large
capitalization (large cap); medium capitalization (midcap); or
small capitalization (small cap). In defining a company's market
capitalization, we use capitalization-based categories as defined
by Lipper, Inc.
According to Lipper, Inc., as of August 1999, large-cap companies
had market capitalizations greater than $8.4 billion, midcap
companies had market capitalizations between $1.9 and $8.4 billion
and small-cap companies had market capitalizations less than $1.9
billion. These amounts are subject to change.
[/callout]
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------
The Fund invests all of its assets in SR&F Growth & Income
Portfolio as part of a master fund/feeder fund structure. The
Portfolio invests primarily in common stocks of well-established
companies having large-market capitalizations. The Portfolio may
also invest in companies having midsized market capitalizations.
The Portfolio may invest up to 25% of its assets in foreign
stocks. To select investments for the Portfolio, the portfolio
manager looks for common stocks that have the potential to
appreciate in value and to pay dividends. The portfolio manager
focuses on the stocks of companies that have experienced
management; broad, highly diversified product lines; deep
financial resources; easy access to credit; and a history of
paying dividends.
PRIMARY INVESTMENT RISKS
- --------------------------------------------------------------
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
WHAT ARE MARKET AND MANAGEMENT RISKS?
Management risk means that Stein Roe's stock selections and other
investment decisions might produce losses or cause the Fund to
underperform when compared to other funds with similar goals.
Market risk means that security prices in a market, sector or
industry may move down. Downward movements will reduce the value
of your investment. Because of management and market risk, there
is no guarantee that the Fund will achieve its investment goal or
perform favorably compared with competing funds.
[/callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
Information on other securities and risks appears under "Other
Investment Strategies and Risks."
PERFORMANCE HISTORY
- ------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's calendar year total
returns for its Class S shares. The Fund did not have separate
classes of shares prior to Nov. 15, 1999; on that date, the Fund's
outstanding shares were reclassified as Class S shares. The
performance table following the bar chart shows how the Fund's
average annual returns for Class S shares compare with those of a
broad measure of market performance for 1 year, 5 years and 10
years. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the
Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past
performance does not predict the Fund's future performance.
[callout]
UNDERSTANDING PERFORMANCE
Calendar-year total return shows the Fund's Class S share
performance for each of the last ten complete calendar years. It
includes the effects of Fund expenses.
Average annual total return is a measure of the Fund's Class S
share performance over the past one-year, five-year and ten-year
periods. It includes the effects of Fund expenses.
The Fund's return is compared to the S&P 500 Index, an unmanaged
broad-based measure of market performance. Unlike the Fund,
indices are not investments, do not incur fees or expenses, and
are not professionally managed. It is not possible to invest
directly in indices.
[/callout]
Calendar-Year Total Returns (Class S)
45%
40%
35%
30% 31.00% 32.42% 30.15%
25% 25.71%
20% 21.81%
15% 19.54%
10% 10.01% 12.86%
5%
0%
- -5% -1.72% -0.14%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
The Fund's year-to-date total return through Sept. 30, 1999, was
___%.
Best quarter: 4th quarter 1998, +17.91%
Worst quarter: 3rd quarter 1990, -12.06%
Average Annual Total Returns-
for periods ended December 31, 1998
1 Year 5 Years 10 Years
- -------------------------------------------------------------
Growth & Income Fund Class S (%) 19.54 18.93 17.55
S&P 500 Index (%) 28.60 24.05 19.19
YOUR EXPENSES
- -----------------------------------------------------------------
Expenses are one of several factors to consider before you invest
in a mutual fund. The tables below describe the fees and expenses
you may pay when you buy, hold and sell shares of the Fund.
[Callout]
UNDERSTANDING EXPENSES
Shareholder Fees are paid directly by shareholders to the Fund's
distributor.
Annual Fund Operating Expenses are deducted from the Fund. They
include management fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
Example Expenses helps you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. It uses the
following hypothetical conditions:
* $10,000 initial investment
* 5% total return for each year
* Fund operating expenses remain the same
* No expense reductions in effect
* Redemption at the end of each time period
[/callout]
Annual Fund Operating Expenses(1)(deducted directly from Fund
assets)
Class Z
- ------------------------------------------------------
Management fee (%)(2) 0.75
Distribution and service (12b-1) fees (%) None
Other expenses (%) 0.33
Total annual fund operating expenses (%) 1.08
Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------
Class Z $110 $342 $593 $1,313
(1) There is a $7.50 charge for wiring sale proceeds to your bank.
(2) Management fee includes both the management fee and the
administrative fee charged to the Fund.
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
- ----------------------------------------------------------------
Your financial advisor can help you establish an appropriate
investment portfolio, buy shares and monitor your investments.
When the Fund receives your purchase request in "good form," your
shares will be bought at the next calculated NAV. In "good form"
means that you placed your order with your brokerage firm or your
payment has been received and your application is complete,
including all necessary signatures.
[Callout]
INVESTMENT MINIMUMS (1)
Initial Investment $1,000
Subsequent Investments $50
Automatic Investment Plan $50
Retirement Plans $25
[/callout]
(1) The Fund reserves the right to change the investment minimums.
The Fund also reserves the right to refuse a purchase order
for any reason, including if it believes that doing so would
be in the best interest of the Fund and its shareholders.
Outlined below are various options for buying shares:
Method Instructions
- ----------- --------------------------------------------------
Through your financial advisor Your financial advisor can help
you establish your account and buy Fund shares on
your behalf.
By check
(new account) For new accounts, send a completed application and
check made payable to the Fund to the transfer
agent, Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
By check
(existing account) For existing accounts, fill out and return the
additional investment stub included in your
quarterly statement, or send a letter of
instruction, including your Fund name and account
number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722, Boston,
MA 02105-1722.
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of
the same class of the Fund at no additional cost.
To exchange by telephone, call 1-800-422-3737.
There may be an additional charge when exchanging
from a money market fund.
By wire You may purchase shares by wiring money from your
bank account to your fund account. To wire funds to
your fund account, call 1-800-422-3737 to obtain a
control number and the wiring instructions.
By electronic funds transfer You may purchase shares by
electronically transferring money from your bank
account to your fund account by calling 1-800-422-
3737. Your money may take up to two business days
to be invested. You must set up this feature prior
to your telephone request. Be sure to complete the
appropriate section of the application.
Automatic investment plan You can make monthly or quarterly
investments automatically from your bank account to
your fund account. You can select a pre-authorized
amount to be sent via electronic funds transfer. Be
sure to complete the appropriate section of the
application for this feature.
By dividend diversification You may automatically invest
dividends distributed by one fund into the same
class of shares of another fund at no additional
sales charge. To invest your dividends in another
fund, call 1-800-345-6611.
CHOOSING A SHARE CLASS The Fund offers one class of shares in
this prospectus-Class Z shares, which are available to
institutional and other investors at net asset value without a
sales charge or 12b-1 fee. The Fund also offers Classes A, B, C,
and S shares through separate prospectuses.
HOW TO EXCHANGE SHARES
- ------------------------------------------------------------------
You may exchange your shares for shares of the same share class of
another fund distributed by Liberty Funds Distributor, Inc. at
NAV. Unless your account is part of a tax-deferred retirement
plan, an exchange is a taxable event. Therefore, you may realize
a gain or a loss for tax purposes. The Fund may terminate your
exchange privilege if Stein Roe determines that your exchange
activity is likely to adversely impact its ability to manage the
Fund. To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
- -----------------------------------------------------------------
Your financial advisor can help you determine if and when you
should sell your shares. You may sell shares of the Fund on any
regular business day that the New York Stock Exchange (NYSE) is
open.
When the Fund receives your sales request in "good form," shares
will be sold at the next calculated price. In "good form" means
that money used to purchase your shares is fully collected. When
selling shares by letter of instruction, "good form" means (i)
your letter has complete instructions, the proper signatures and
signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are
attached. For additional documentation required for sales by
corporations, agents, fiduciaries and surviving joint owners,
please call 1-800-345-6611. Retirement Plan accounts have special
requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within
seven days (usually on the next business day after your request is
received in good form). However, if you purchased your shares by
check, the Fund may delay the sale of your shares for up to 15
days after your purchase to protect against checks that are
returned. No interest will be paid on uncashed redemption checks.
Outlined below are the various options for selling shares:
Method Instructions
- ------------ --------------------------------------------------
Through your
financial advisor You may call your financial advisor to place
your sell order. To receive the current trading
day's price, your financial advisor firm must
receive your request prior to the close of the NYSE,
usually 4:00 p.m. Eastern time.
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class
of another fund at no additional cost. To exchange
by telephone, call 1-800-422-3737.
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737 unless
you have notified the Fund of an address change
within the previous 30 days. The dollar limit for
telephone sales is $100,000 in a 30-day period. You
do not need to set up this feature in advance of
your call. Certain restrictions apply to retirement
accounts. For details, call 1-800-345-6611.
By mail You may send a signed letter of instruction or
stock power form along with any certificates to be
sold to the address below. In your letter of
instruction, note your fund's name, share class,
account number, and the dollar value or number of
shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint
owners and individual retirement account (IRA)
owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature
prior to your telephone request. Be sure to
complete the appropriate section of the account
application for this feature.
By electronic
funds transfer You may sell shares and request that the proceeds
be electronically transferred to your bank.
Proceeds may take up to two business days to be
received by your bank. You must set up this feature
prior to your request. Be sure to complete the
appropriate section of the account application for
this feature.
OTHER INFORMATION ABOUT YOUR ACCOUNT
- ------------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of the Fund's
shares is based on its NAV. The NAV is determined at the close of
regular session trading on the NYSE, usually 4:00 p.m. Eastern
time on each business day that the NYSE is open (typically Monday
through Friday).
When you request a transaction, it will be processed at the NAV
next determined after your request is received in good form by the
Distributor. In most cases, in order to receive that day's price,
the Distributor must receive your order before that day's
transactions are processed. If you request a transaction through
your financial advisor's firm, the firm must receive your order by
the close of trading on the NYSE to receive that day's price.
To calculate NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Portfolio's foreign securities may trade on days when the NYSE
is closed. We will not price shares on days that the NYSE is
closed for trading. You will not be able to purchase or redeem
shares until the next NYSE-trading day.
You can find the daily prices of some share classes for the Fund
in most major daily newspapers. You can find daily prices for all
share classes by visiting the Fund's web site at
www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other
than as a result of depreciation in share value), you may be
subject to an annual account fee of $10. This fee is deducted
from the account in June each year. Approximately 60 days prior
to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your
account and bring the value above $1,000 prior to the fee date,
the fee will not be deducted.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential
to make the following distributions:
Types of Distributions
- -----------------------------------------------------------------
Dividend income Represents interest and dividends earned from
securities held by the Portfolio
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and
short-term capital gains, which are gains on
sales of securities held by the Portfolio for a
12-month period or less.
[Callout]
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities the Portfolio holds.
The Fund also may experience capital gains and losses on sales of
the Portfolio's securities. The Fund distributes substantially
all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of
the Fund's income and capital gains based on the number of shares
you own at the time these distributions are declared.
[/callout]
DISTRIBUTION OPTIONS Income dividends are declared and paid
quarterly. Any capital gains are distributed at least annually.
You can choose one of the options listed in the table below for
these distributions when you open your account.(1) To change your
distribution option call 1-800-345-6611.
Distribution Options
- -----------------------------------------------------------------
Reinvest all distributions in additional shares of your current
fund
- -----------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -----------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital
gains(2)
- ------------------------------------------------------------------
Receive all distributions in cash (with one of the following
options)(2)
* send the check to your address of record
* send the check to a third party address
* transfer the money to your bank via electronic funds transfer
(1) If you do not indicate on your application your preference for
handling distributions, the Fund will automatically reinvest
all distributions in additional shares of the Fund.
(2) Distributions of $10 or less will automatically be reinvested
in additional Fund shares. If you elect to receive
distributions by check and the check is returned as
undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution will be
reinvested in additional shares of the Fund.
TAX CONSEQUENCES Regardless of whether you receive your
distributions in cash or reinvest them in additional Fund shares,
all Fund distributions are subject to federal income tax.
Depending on the state where you live, distributions may also be
subject to state and local income taxes.
In general, any distributions of dividends, interest, and short-
term capital gains distributions are taxable as ordinary income.
Distributions of long-term capital gains are generally taxable as
such, regardless of how long you have held your Fund shares. You
will be provided with information each year regarding the ordinary
income and capital gains distributed to you for the previous year
and any portion of your distribution which is exempt from state
and local taxes. Your investment in the Fund may have additional
personal tax implications. Please consult your tax advisor on
federal, state, local or other applicable tax laws.
In addition to the dividends and capital gains distributions made
by the Fund, you may realize a capital gain or loss when selling
and exchanging shares of the Fund. Such transactions may be
subject to federal, state, local, and foreign income tax.
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
- ----------------------------------------------------------------
Stein Roe & Farnham Incorporated (Stein Roe), located at One South
Wacker Drive, Suite 3500, Chicago, Illinois 60606, is the Fund's
investment advisor. In its duties as investment advisor, Stein
Roe runs the Fund's day-to-day business, including placing all
orders for the purchase and sale of portfolio securities for the
Portfolio. Stein Roe has been an investment advisor since 1932.
As of April 30, 1999, Stein Roe managed over $30 billion in
assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit known as Liberty
Funds Group (LFG) that includes several separate legal entities.
LFG includes certain affiliates of Stein Roe, including Colonial
Management Associates, Inc. (Colonial). The LFG business unit is
managed by a single management team. Colonial and other LFG
entities also share personnel, facilities, and systems with Stein
Roe that may be used in providing administrative or operational
services to the Fund. Colonial is a registered investment
adviser. Stein Roe also has a wealth management business that is
not part of LFG and is managed by a different team. Stein Roe and
the other entities that make up LFG are subsidiaries of Liberty
Financial Companies, Inc.
For the fiscal year ended September 30, 1999, the Fund paid ____%
of average net assets in fees to Stein Roe.
Stein Roe may use the services of AlphaTrade, Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Portfolio, pursuant to procedures adopted by the Board of
Trustees.
PORTFOLIO MANAGER
- ------------------------------------------------------------------
Daniel K. Cantor has been portfolio manager of the Portfolio since
its inception in 1997 and has been manager of the Fund since 1995.
He has been portfolio manager of Stein Roe Disciplined Stock Fund
since May 1999. He joined Stein Roe in 1985 as an equity analyst
and served as an advisor to Stein Roe Private Capital Management
from 1992 to 1995. Mr. Cantor is a senior vice president. A
chartered financial analyst, he received a B.A. degree from the
University of Rochester and an M.B.A. degree from the Wharton
School of the University of Pennsylvania.
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Portfolio also may
invest in other securities and use other investment techniques.
The Portfolio may elect not to buy any of these other securities
or use any of these other investment techniques. The Portfolio
may not always achieve its investment goal.
This section describes certain of those other securities and
techniques, and certain risks associated with them. The Statement
of Additional Information contains additional information about
the Fund's securities and investment techniques (including other
securities and techniques) and the risks associated with them.
The Statement of Additional Information also contains the Fund's
fundamental and non-fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
and its non-fundamental investment policies without shareholder
approval.
FUTURES
- --------------------------------------------------------------
The Portfolio uses futures to gain exposure to groups of stocks or
individual issuers. A future is an agreement to buy or sell a
specific amount of a financial instrument or physical commodity
for an agreed-upon price at a certain time in the future. The
Portfolio uses futures to invest cash pending direct investments
in stocks and to enhance its return. These investments are
efficient since they typically cost less than direct investments
in the underlying securities. However, the Fund can lose money if
the portfolio manager does not correctly anticipate the market
movements of those underlying securities.
PORTFOLIO TURNOVER
- ----------------------------------------------------------------
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100%
under normal conditions. Portfolio turnover typically produces
capital gains or losses resulting in tax consequences for Fund
investors. It also increases transaction expenses, which reduce
the Fund's return.
TEMPORARY DEFENSIVE POSITIONS
- ----------------------------------------------------------------
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if the
Portfolio takes a defensive position.
INTERFUND LENDING PROGRAM
- -----------------------------------------------------------------
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
MASTER/FEEDER STRUCTURE
- -----------------------------------------------------------------
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities, which has
investment objectives and policies substantially identical to
those of the Fund. The investment performance of the Fund depends
upon the investment performance of the Portfolio. If the
investment policies of the Portfolio and the Fund became
inconsistent, the Board of Trustees of the Fund can decide what
actions to take. Actions the Board of Trustees may recommend
include withdrawal of the Fund's assets from the Portfolio. For
more information on the master/feeder fund structure, see the
Statement of Additional Information.
YEAR 2000 COMPLIANCE
- -----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Stein Roe,
other service providers, and the issuers in which the Portfolio
invests do not properly process and calculate date-related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's service
providers are taking steps that they believe are reasonably
designed to address the Year 2000 Problem, including working with
vendors who furnish services, software and systems to the Fund, to
provide that date-related information and data can be properly
processed after January 1, 2000. Many of the Fund's service
providers and vendors are in the process of making Year 2000
modifications to their software and systems and believe that such
modifications will be completed on a timely basis prior to January
1, 2000. In addition, Year 2000 readiness is one of the factors
considered by Stein Roe in its ongoing assessment of issuers in
which the Portfolio invests, to the extent that information is
readily available. However, no assurances can be given that the
Fund will not be adversely affected by these matters.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables is intended to help you understand
the financial performance of the Fund. Information is shown for
the Fund's last five fiscal years. The fiscal year runs from
October 1 to September 30. Certain information reflects financial
results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur
Andersen LLP, independent public accountants, whose report, along
with the Fund's financial statements, is included in the annual
report. You can request a free annual report by calling 1-800-
426-3750.
<TABLE>
<CAPTION>
Year ended September 30,
Class S 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 22.91 $ 18.39 $ 16.65 $ 14.54
Income from investment
operations
Net investment income 0.24 0.30 0.27 0.34
Net gains on securities (both
realized and unrealized) 0.55 5.15 3.22 2.56
Total income from investment
operations 0.79 5.45 3.49 2.90
Less distributions
Dividends (from net
investment income) (0.28) (0.28) (0.32) (0.20)
Distributions (from capital
gains) (0.97) (0.65) (1.43) (0.59)
Total distributions (1.25) (0.93) (1.75) (0.79)
Net asset value, end of period $ 22.45 $ 22.91 $ 18.39 $ 16.65
Total return 3.45% 30.81% 22.67% 21.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $351,052 $337,466 $204,387 $139,539
Ratio of net expenses to
average net assets 1.07% 1.13% 1.18% 0.96%
Ratio of net investment
income to average net
assets 1.02% 1.52% 1.65% 1.78%
Portfolio turnover rate 2%(a) 13% 70%
<FN>
(a) Prior to commencement of operations of the Portfolio.
</TABLE>
<PAGE>
FOR MORE INFORMATION
- -----------------------------------------------------------------
You can get more information about the Fund's investments in the
Fund's semi-annual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance over its last fiscal year.
You may wish to read the Statement of Additional Information for
more information on the Fund and the securities in which it
invests. The Statement of Additional Information is incorporated
into this prospectus by reference, which means that it is
considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional
Information, request other information and discuss your questions
about the Fund by writing or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Fund by visiting the
following location and you can obtain copies, upon payment of a
duplicating fee, by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC, 20549-6009
Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Investment Company Act file number:
Stein Roe Investment Trust: 811-4978
* Stein Roe Growth & Income Fund
[LOGO] LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621, 1-800-426-
3750
Visit us at www.libertyfunds.com
- ------------------------------------------------------------------
<PAGE 1>
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1999
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
STEIN ROE ADVISOR GROWTH INVESTOR FUND Prospectus, ______, 1999
Class Z Shares
Advised by Stein Roe & Farnham Incorporated
The following eligible institutional investors may purchase Class
Z shares: (i) any retirement plan with aggregate assets of at
least $5 million at the time of purchase of Class Z shares and
which purchases shares directly from Liberty Funds Distributor,
Inc., the Fund's distributor, or through a third-party broker-
dealer; (ii) any registered investment adviser purchasing shares
for its clients; (iii) any insurance company, trust company or
bank purchasing shares for its own account; (iv) any endowment,
investment company or foundation; and (v) any trustee of Stein Roe
Investment Trust, any employee of Stein Roe & Farnham
Incorporated, or any of its affiliates, or any member of the
immediate family of any trustee or employee.
TABLE OF CONTENTS
THE FUND......................2 MANAGING THE FUND.....11
Investment Goals..............2 Investment Advisor....11
Primary Investment Strategies.2 Portfolio Managers....11
Primary Investment Risks......2
Performance History...........3 OTHER INVESTMENT
Your Expenses.................4 STRATEGIES AND RISKS..12
YOUR ACCOUNT..................6 FINANCIAL HIGHLIGHTS..14
How to Buy Shares.............6
How to Exchange Shares........7
How to Sell Shares............7
Other Information About
Your Account................8
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is
committing a crime.
Not FDIC Insured May Lose Value
No Bank Guarantee
<PAGE>
THE FUND STEIN ROE ADVISOR GROWTH INVESTOR FUND
INVESTMENT GOALS
- -----------------------------------------------------------------
The Fund seeks long-term growth.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
The Fund invests all its assets in SR&F Growth Investor Portfolio
as part of a master fund/feeder fund structure. The Portfolio
invests primarily in common stocks believed to have long-term
growth potential. Under normal market conditions, the Portfolio
invests at least 65% of its assets in common stocks of companies
that Stein Roe believes have long-term appreciation potential.
The Portfolio may invest in companies of any size including
smaller, emerging companies. It emphasizes companies in the
technology sector and various consumer goods sectors, including
personal care products, pharmaceuticals and food products. The
Portfolio may invest up to 25% of its assets in foreign stocks.
To select investments for the portfolio, the portfolio managers
look for companies that are market leaders with growing market
share in their respective industries. The managers also look for
companies with strong financial balance sheets and experienced
management teams.
PRIMARY INVESTMENT RISKS
- --------------------------------------------------------------
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
WHAT ARE MARKET AND MANAGEMENT RISKS?
Management risk means that Stein Roe's stock selections and other
investment decisions might produce losses or cause the Fund to
underperform when compared to other funds with similar goals.
Market risk means that security prices in a market, sector or
industry may move down. Downward movements will reduce the value
of your investment. Because of management and market risk, there
is no guarantee that the Fund will achieve its investment goal or
perform favorably compared with competing funds.
[/callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with its investment strategy may
cause the Fund's total return or yield to decrease.
Due to its focus on companies in the technology sector and various
consumer goods sectors, including personal care products,
pharmaceuticals and food products, the Fund may perform
differently than the stock market. Shares of a small company may
pose greater risks than shares of a large company due to narrow
product lines, limited financial resources, less depth in
management or a limited trading market for its stock.
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
Information on other securities and risks appears under "Other
Investment Strategies and Risks."
PERFORMANCE HISTORY
- ----------------------------------------------------------------
The bar chart below shows the historical performance of Stein Roe
Young Investor Fund, a separate feeder fund of the Portfolio. The
performance table following the bar chart shows how the average
annual returns of Stein Roe Young Investor Fund compare with those
of a broad measure of market performance for the past year and
since inception. The chart and table are intended to illustrate
some of the risks of investing in the Fund by showing the changes
in performance. All returns include the reinvestment of dividends
and distributions. As with all mutual funds, past performance
does not predict the Fund's future performance. Performance
results include the effect of expense reduction arrangements. If
these arrangements were not in place, then the performance results
would have been lower.
[callout]
UNDERSTANDING PERFORMANCE
Calendar-year total return shows the Fund's Class S share
performance for each of the last ten complete calendar years. It
includes the effects of Fund expenses.
Average annual total return is a measure of the Fund's Class S
share performance over the past year and since inception. It
includes the effects of Fund expenses. The table does not take
into effect any expense reduction arrangements discussed in the
footnotes to the Annual Fund Operating Expenses table.
The Fund's return is compared to the S&P 500 Index, an unmanaged
broad-based measure of market performance. Unlike the Fund,
indices are not investments, do not incur fees or expenses, and
are not professionally managed. It is not possible to invest
directly in indices.
[/callout]
Calendar-Year Total Returns (1)
45%
40%
35% 39.79% 35.10%
30%
25% 26.28%
20%
15% 17.65%
10%
5%
0%
- -5%
1995 1996 1997 1998
The Fund's year-to-date total return through Sept. 30, 1999, was
___%.
Best quarter: 4th quarter 1998, +20.82%
Worst quarter: 3rd quarter 1998, -16.46%
(1) Fund performance is the performance of Stein Roe Young
Investor Fund from April 29, 1994 through Dec. 31, 1998.
Average Annual Total Returns(2) -
for periods ended December 31, 1998
Period ending Dec. 31, 1998
1 yr Since Inception
April 29, 1994
Growth Investor Fund* 17.65% 26.62%
S&P 500 Index** 28.60% 26.66%
(2) The one-year performance in the table reflects the restated
performance of the Portfolio combined with the performance of the
Fund's Class S shares since inception. The performance of the
Portfolio is restated to reflect Class S share expenses. Since
Inception performance in the table is the restated performance of
Portfolio combined with the Fund's Class S performance.
YOUR EXPENSES
- -----------------------------------------------------------------
Expenses are one of several factors to consider before you invest
in a mutual fund. The tables below describe the fees and expenses
you may pay when you buy, hold and sell shares of the Fund.
[Callout]
UNDERSTANDING EXPENSES
Shareholder Fees are paid directly by shareholders to the Fund's
distributor.
Annual Fund Operating Expenses are deducted from the Fund. They
include management fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
Example Expenses helps you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. The table
does not take into account any expense reduction arrangements
discussed in the footnotes to the Annual Fund Operating Expenses
table. It uses the following hypothetical conditions:
* $10,000 initial investment
* 5% total return for each year
* Fund operating expenses remain the same
* No expense reductions in effect
* Redemption at the end of each time period
[/callout]
Annual Fund Operating Expenses(1) (deducted directly from Fund
assets)
Class Z
Management fee(2) (%) 0.72
Distribution and service (12b-1) fees (%) None
Other expenses(3) (%) 1.62
Total annual fund operating expenses (%) 2.34
Expense reimbursement (%) 1.24
Net expenses (%) 1.10
Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------
Class Z $237 $730 $1,250 $2,676
(1) There is a $7.50 charge for wiring sale proceeds to your bank.
(2) Management fee includes both the management fee and the
administrative fee charged to the Fund.
(3) The Fund's advisor voluntarily agreed to bear the Fund's
expenses such that "other expenses" do not exceed 1.10%.
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
- --------------------------------------------------------------
Your financial advisor can help you establish an appropriate
investment portfolio, buy shares and monitor your investments.
When the Fund receives your purchase request in "good form," your
shares will be bought at the next calculated NAV. In "good form"
means that you placed your order with your brokerage firm or your
payment has been received and your application is complete,
including all necessary signatures.
[Callout]
INVESTMENT MINIMUMS (1)
Initial Investment $1,000
Subsequent Investments $50
Automatic Investment Plan $50
Retirement Plans $25
[/callout]
(1) The Fund reserves the right to change the investment minimums.
The Fund also reserves the right to refuse a purchase order
for any reason, including if it believes that doing so would
be in the best interest of the Fund and its shareholders.
Outlined below are various options for buying shares:
Method Instructions
- ----------- --------------------------------------------------
Through your financial advisor Your financial advisor can help
you establish your account and buy Fund shares on
your behalf.
By check
(new account) For new accounts, send a completed application and
check made payable to the Fund to the transfer
agent, Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
By check
(existing account) For existing accounts, fill out and return the
additional investment stub included in your
quarterly statement, or send a letter of
instruction, including your Fund name and account
number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722, Boston,
MA 02105-1722.
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of
the same class of the Fund at no additional cost.
To exchange by telephone, call 1-800-422-3737.
There may be an additional charge when exchanging
from a money market fund.
By wire You may purchase shares by wiring money from your
bank account to your fund account. To wire funds to
your fund account, call 1-800-422-3737 to obtain a
control number and the wiring instructions.
By electronic funds transfer You may purchase shares by
electronically transferring money from your bank
account to your fund account by calling 1-800-422-
3737. Your money may take up to two business days
to be invested. You must set up this feature prior
to your telephone request. Be sure to complete the
appropriate section of the application.
Automatic investment plan You can make monthly or quarterly
investments automatically from your bank account to
your fund account. You can select a pre-authorized
amount to be sent via electronic funds transfer. Be
sure to complete the appropriate section of the
application for this feature.
By dividend diversification You may automatically invest
dividends distributed by one fund into the same
class of shares of another fund at no additional
sales charge. To invest your dividends in another
fund, call 1-800-345-6611.
CHOOSING A SHARE CLASS The Fund offers one class of shares in
this prospectus-Class Z shares, which are available to
institutional and other investors at net asset value without a
sales charge or 12b-1 fee. The Fund also offers Classes A, B, C,
and S shares through separate prospectuses.
HOW TO EXCHANGE SHARES
- -----------------------------------------------------------------
You may exchange your shares for shares of the same share class of
another fund distributed by Liberty Funds Distributor, Inc. at
NAV. Unless your account is part of a tax-deferred retirement
plan, an exchange is a taxable event. Therefore, you may realize
a gain or a loss for tax purposes. The Fund may terminate your
exchange privilege if Stein Roe determines that your exchange
activity is likely to adversely impact its ability to manage the
Fund. To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
- ----------------------------------------------------------------
Your financial advisor can help you determine if and when you
should sell your shares. You may sell shares of the Fund on any
regular business day that the New York Stock Exchange (NYSE) is
open.
When the Fund receives your sales request in "good form," shares
will be sold at the next calculated price. In "good form" means
that money used to purchase your shares is fully collected. When
selling shares by letter of instruction, "good form" means (i)
your letter has complete instructions, the proper signatures and
signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are
attached. For additional documentation required for sales by
corporations, agents, fiduciaries and surviving joint owners,
please call 1-800-345-6611. Retirement Plan accounts have special
requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within
seven days (usually on the next business day after your request is
received in good form). However, if you purchased your shares by
check, the Fund may delay the sale of your shares for up to 15
days after your purchase to protect against checks that are
returned. No interest will be paid on uncashed redemption checks.
Outlined below are the various options for selling shares:
Method Instructions
- ------------ --------------------------------------------------
Through your
financial advisor You may call your financial advisor to place
your sell order. To receive the current trading
day's price, your financial advisor firm must
receive your request prior to the close of the NYSE,
usually 4:00 p.m. Eastern time.
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class
of another fund at no additional cost. To exchange
by telephone, call 1-800-422-3737.
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737 unless
you have notified the Fund of an address change
within the previous 30 days. The dollar limit for
telephone sales is $100,000 in a 30-day period. You
do not need to set up this feature in advance of
your call. Certain restrictions apply to retirement
accounts. For details, call 1-800-345-6611.
By mail You may send a signed letter of instruction or
stock power form along with any certificates to be
sold to the address below. In your letter of
instruction, note your fund's name, share class,
account number, and the dollar value or number of
shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint
owners and individual retirement account (IRA)
owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature
prior to your telephone request. Be sure to
complete the appropriate section of the account
application for this feature.
By electronic
funds transfer You may sell shares and request that the proceeds
be electronically transferred to your bank.
Proceeds may take up to two business days to be
received by your bank. You must set up this feature
prior to your request. Be sure to complete the
appropriate section of the account application for
this feature.
OTHER INFORMATION ABOUT YOUR ACCOUNT
- -----------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of the Fund's
shares is based on its NAV. The NAV is determined at the close of
regular session trading on the NYSE, usually 4:00 p.m. Eastern
time on each business day that the NYSE is open (typically Monday
through Friday).
When you request a transaction, it will be processed at the NAV
next determined after your request is received in good form by the
Distributor. In most cases, in order to receive that day's price,
the Distributor must receive your order before that day's
transactions are processed. If you request a transaction through
your financial advisor's firm, the firm must receive your order by
the close of trading on the NYSE to receive that day's price.
To calculate NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Portfolio's foreign securities may trade on days when the NYSE
is closed. We will not price shares on days that the NYSE is
closed for trading. You will not be able to purchase or redeem
shares until the next NYSE-trading day.
You can find the daily prices of some share classes for the Fund
in most major daily newspapers. You can find daily prices for all
share classes by visiting the Fund's web site at
www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other
than as a result of depreciation in share value), you may be
subject to an annual account fee of $10. This fee is deducted
from the account in June each year. Approximately 60 days prior
to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your
account and bring the value above $1,000 prior to the fee date,
the fee will not be deducted.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential
to make the following distributions:
Types of Distributions
- -----------------------------------------------------------------
Dividend income Represents interest and dividends earned from
securities held by the Portfolio
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and
short-term capital gains, which are gains on
sales of securities held by the Portfolio for a
12-month period or less.
[Callout]
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities the Portfolio holds.
The Fund also may experience capital gains and losses on sales of
the Portfolio's securities. The Fund distributes substantially
all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of
the Fund's income and capital gains based on the number of shares
you own at the time these distributions are declared.
[/callout]
DISTRIBUTION OPTIONS Income dividends are declared and paid
annually. Any capital gains are distributed at least annually.
You can choose one of the options listed in the table below for
these distributions when you open your account.(1) To change your
distribution option call 1-800-345-6611.
Distribution Options
- -----------------------------------------------------------------
Reinvest all distributions in additional shares of your current
fund
- -----------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -----------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital
gains(2)
- ------------------------------------------------------------------
Receive all distributions in cash (with one of the following
options)(2)
* send the check to your address of record
* send the check to a third party address
* transfer the money to your bank via electronic funds transfer
(1) If you do not indicate on your application your preference for
handling distributions, the Fund will automatically reinvest
all distributions in additional shares of the Fund.
(2) Distributions of $10 or less will automatically be reinvested
in additional Fund shares. If you elect to receive
distributions by check and the check is returned as
undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution will be
reinvested in additional shares of the Fund.
TAX CONSEQUENCES Regardless of whether you receive your
distributions in cash or reinvest them in additional Fund shares,
all Fund distributions are subject to federal income tax.
Depending on the state where you live, distributions may also be
subject to state and local income taxes.
In general, any distributions of dividends, interest, and short-
term capital gains distributions are taxable as ordinary income.
Distributions of long-term capital gains are generally taxable as
such, regardless of how long you have held your Fund shares. You
will be provided with information each year regarding the ordinary
income and capital gains distributed to you for the previous year
and any portion of your distribution which is exempt from state
and local taxes. Your investment in the Fund may have additional
personal tax implications. Please consult your tax advisor on
federal, state, local or other applicable tax laws.
In addition to the dividends and capital gains distributions made
by the Fund, you may realize a capital gain or loss when selling
and exchanging shares of the Fund. Such transactions may be
subject to federal, state, local, and foreign income tax.
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
- ---------------------------------------------------------------
Stein Roe & Farnham Incorporated (Stein Roe), located at One South
Wacker Drive, Suite 3500, Chicago, Illinois 60606, is the Fund's
investment advisor. In its duties as investment advisor, Stein
Roe runs the Fund's day-to-day business, including placing all
orders for the purchase and sale of portfolio securities for the
Portfolio. Stein Roe has been an investment advisor since 1932.
As of April 30, 1999, Stein Roe managed over $30 billion in
assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit known as Liberty
Funds Group (LFG) that includes several separate legal entities.
LFG includes certain affiliates of Stein Roe, including Colonial
Management Associates, Inc. (Colonial). The LFG business unit is
managed by a single management team. Colonial and other LFG
entities also share personnel, facilities, and systems with Stein
Roe that may be used in providing administrative or operational
services to the Fund. Colonial is a registered investment
adviser. Stein Roe also has a wealth management business that is
not part of LFG and is managed by a different team. Stein Roe and
the other entities that make up LFG are subsidiaries of Liberty
Financial Companies, Inc.
For the period ended September 30, 1999, the Fund paid ____% of
average net assets in fees to Stein Roe.
Stein Roe may use the services of AlphaTrade, Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Portfolio, pursuant to procedures adopted by the Board of
Trustees.
PORTFOLIO MANAGERS
- ----------------------------------------------------------------
Erik P. Gustafson has been co-portfolio manager of the Portfolio
and manager of SR&F Growth Stock Portfolio since their inception
in 1997 and has managed Stein Roe Growth Stock Fund since 1994 and
Stein Roe Young Investor Fund since 1995. Mr. Gustafson joined
Stein Roe in 1992 as a portfolio manager for privately managed
accounts and is a senior vice president. He holds a B.A. degree
from the University of Virginia and M.B.A. and J.D. degrees from
Florida State University.
David P. Brady is co-portfolio manager of the Portfolio. He
joined Stein Roe in 1993 as an associate portfolio manager of
Stein Roe Special Fund. He currently is a senior vice president
and has been portfolio manager of Young Investor Fund since March
1995 and portfolio manager of Stein Roe Large Company Focus Fund
since June 1998. He holds a B.S. in finance, graduating Magna Cum
Laude, from the University of Arizona and an M.B.A. from the
University of Chicago.
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Portfolio also may
invest in other securities and use other investment techniques.
The Portfolio may elect not to buy any of these other securities
or use any of these other investment techniques. The Fund may not
always achieve its investment goal.
This section describes certain of those other securities and
techniques, and certain risks associated with them. The Statement
of Additional Information contains additional information about
the Fund's securities and investment techniques (including other
securities and techniques) and the risks associated with them.
The Statement of Additional Information also contains the Fund's
fundamental and non-fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
and its non-fundamental investment policies without shareholder
approval.
PORTFOLIO TURNOVER
- ----------------------------------------------------------------
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100%
under normal conditions. Portfolio turnover typically produces
capital gains or losses resulting in tax consequences for Fund
investors. It also increases transaction expenses, which reduce
the Fund's return.
TEMPORARY DEFENSIVE POSITIONS
- ---------------------------------------------------------------
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if the
Portfolio takes a defensive position.
INTERFUND LENDING PROGRAM
- ---------------------------------------------------------------
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
MASTER/FEEDER STRUCTURE
- ---------------------------------------------------------------
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities, which has
investment objectives and policies substantially identical to
those of the Fund. The investment performance of the Fund depends
upon the investment performance of the Portfolio. If the
investment policies of the Portfolio and the Fund became
inconsistent, the Board of Trustees of the Fund can decide what
actions to take. Actions the Board of Trustees may recommend
include withdrawal of the Fund's assets from the Portfolio. For
more information on the master/feeder fund structure, see the
Statement of Additional Information.
YEAR 2000 COMPLIANCE
- ----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Stein Roe,
other service providers, and the issuers in which the Portfolio
invests do not properly process and calculate date-related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's service
providers are taking steps that they believe are reasonably
designed to address the Year 2000 Problem, including working with
vendors who furnish services, software and systems to the Fund, to
provide that date-related information and data can be properly
processed after January 1, 2000. Many of the Fund's service
providers and vendors are in the process of making Year 2000
modifications to their software and systems and believe that such
modifications will be completed on a timely basis prior to January
1, 2000. In addition, Year 2000 readiness is one of the factors
considered by Stein Roe in its ongoing assessment of issuers in
which the Portfolio invests, to the extent that information is
readily available. However, no assurances can be given that the
Fund will not be adversely affected by these matters.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
the financial performance of the Fund. Information is shown for
the period of the Fund's operations. The fiscal year runs from
October 1 to September 30. Certain information reflects financial
results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur
Andersen LLP, independent public accountants, whose report, along
with the Fund's financial statements, is included in the annual
report. You can request a free annual report by calling 1-800-
426-3750.
Period ended September 30,
Class S 1999(a)
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income
Net gains on securities (both realized
and unrealized)
Total income from investment operations
Less distributions
Dividends (from net investment income)
Distributions (from capital gains)
Total distributions
Net asset value, end of period
Total return
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
Ratio of net expenses to average net
assets
Ratio of net investment income to
average net assets
Portfolio turnover rate
(a) From commencement of operations on March 31, 1999.
(b) These percentages are for periods of less than one year. They
have been converted to an annual basis making it easier to
compare to prior years.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been ___%.
(d) Computed with the effect of Stein Roe's expense reimbursement.
<PAGE>
FOR MORE INFORMATION
- -----------------------------------------------------------------
You can get more information about the Fund's investments in the
Fund's semi-annual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance over its last fiscal year.
You may wish to read the Statement of Additional Information for
more information on the Fund and the securities in which it
invests. The Statement of Additional Information is incorporated
into this prospectus by reference, which means that it is
considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional
Information, request other information and discuss your questions
about the Fund by writing or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Fund by visiting the
following location and you can obtain copies, upon payment of a
duplicating fee, by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC, 20549-6009
Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Investment Company Act file number:
Stein Roe Investment Trust: 811-4978
* Stein Roe Growth Investor Fund
[LOGO] LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621, 1-800-426-
3750
Visit us at www.libertyfunds.com
- ----------------------------------------------------------------
<PAGE 1>
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1999
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
STEIN ROE ADVISOR GROWTH & INCOME FUND Prospectus, _________,
1999
Class A, B and C Shares
Advised by Stein Roe & Farnham Incorporated
TABLE OF CONTENTS
THE FUND.......................2 MANAGING THE FUND.....14
Investment Goals...............2 Investment Advisor....14
Primary Investment Strategies..2 Portfolio Manager.....14
Primary Investment Risks.......2
Performance History............3 OTHER INVESTMENT
Your Expenses..................4 STRATEGIES AND RISKS..15
YOUR ACCOUNT...................6 FINANCIAL HIGHLIGHTS..17
How to Buy Shares..............6
Sales Charges..................7
How to Exchange Shares........10
How to Sell Shares............10
Distribution and Service Fees.11
Other Information About
Your Account................11
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is
committing a crime.
Not FDIC Insured May Lose Value
No Bank Guarantee
<PAGE>
THE FUND STEIN ROE ADVISOR GROWTH & INCOME FUND
INVESTMENT GOALS
- ----------------------------------------------------------------
The Fund seeks to provide both growth of capital and current
income.
[Callout]
DEFINING CAPITALIZATION
In this prospectus, we refer frequently to market capitalization
as a means to distinguish among companies based on their size. A
company's market capitalization is simply its stock price
multiplied by the number of shares of stock it has issued and
outstanding. In the financial markets, companies generally are
sorted into one of three capitalization-based categories: large
capitalization (large cap); medium capitalization (midcap); or
small capitalization (small cap). In defining a company's market
capitalization, we use capitalization-based categories as defined
by Lipper, Inc.
According to Lipper, Inc., as of August 1999, large-cap companies
had market capitalizations greater than $8.4 billion, midcap
companies had market capitalizations between $1.9 and $8.4 billion
and small-cap companies had market capitalizations less than $1.9
billion. These amounts are subject to change.
[/callout]
PRIMARY INVESTMENT STRATEGIES
- ------------------------------------------------------------------
The Fund invests all of its assets in SR&F Growth & Income
Portfolio as part of a master fund/feeder fund structure. The
Portfolio invests primarily in common stocks of well-established
companies having large-market capitalizations. The Portfolio may
also invest in companies having midsized market capitalizations.
The Portfolio may invest up to 25% of its assets in foreign
stocks. To select investments for the Portfolio, the portfolio
manager looks for common stocks that have the potential to
appreciate in value and to pay dividends. The portfolio manager
focuses on the stocks of companies that have experienced
management; broad, highly diversified product lines; deep
financial resources; easy access to credit; and a history of
paying dividends.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
WHAT ARE MARKET AND MANAGEMENT RISKS?
Management risk means that Stein Roe's stock selections and other
investment decisions might produce losses or cause the Fund to
underperform when compared to other funds with similar goals.
Market risk means that security prices in a market, sector or
industry may move down. Downward movements will reduce the value
of your investment. Because of management and market risk, there
is no guarantee that the Fund will achieve its investment goal or
perform favorably compared with competing funds.
[/callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
Information on other securities and risks appears under "Other
Investment Strategies and Risks."
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's calendar year total
returns for its Class S shares. The Fund did not have separate
classes of shares prior to Nov. 15, 1999; on that date, the Fund's
outstanding shares were reclassified as Class S shares. The
performance table following the bar chart shows how the Fund's
average annual returns for Class S shares compare with those of a
broad measure of market performance for 1 year, 5 years and 10
years. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the
Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past
performance does not predict the Fund's future performance.
[callout]
UNDERSTANDING PERFORMANCE
Calendar-year total return shows the Fund's Class S share
performance for each of the last ten complete calendar years. It
includes the effects of Fund expenses, but does not include sales
charges.
Average annual total return is a measure of the Fund's Class S
share performance over the past one-year, five-year and ten-year
periods. It includes the effects of Fund expenses.
The Fund's return is compared to the S&P 500 Index, an unmanaged
broad-based measure of market performance. Unlike the Fund,
indices are not investments, do not incur fees or expenses, and
are not professionally managed. It is not possible to invest
directly in indices.
[/callout]
CALENDAR-YEAR TOTAL RETURNS (CLASS S)
45%
40%
35%
30% 31.00% 32.42% 30.15%
25% 25.71%
20% 21.81%
15% 19.54%
10% 10.01% 12.86%
5%
0%
- -5% -1.72% -0.14%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
The Fund's year-to-date total return through Sept. 30, 1999, was
___%.
Best quarter: 4th quarter 1998, +17.91%
Worst quarter: 3rd quarter 1990, -12.06%
Average Annual Total Returns-
for periods ended December 31, 1998
1 Year 5 Years 10 Years
- -------------------------------------------------------------
Growth & Income Fund Class S (%) 19.54 18.93 17.55
S&P 500 Index (%) 28.60 24.05 19.19
YOUR EXPENSES
- -----------------------------------------------------------------
Expenses are one of several factors to consider before you invest
in a mutual fund. The tables below describe the fees and expenses
you may pay when you buy, hold and sell shares of the Fund.
[Callout]
UNDERSTANDING EXPENSES
Shareholder Fees are paid directly by shareholders to the Fund's
distributor.
Annual Fund Operating Expenses are deducted from the Fund. They
include management fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
Example Expenses helps you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. It uses the
following hypothetical conditions:
* $10,000 initial investment
* 5% total return for each year
* Fund operating expenses remain the same
* No expense reductions in effect
[/callout]
Shareholder Fees (paid directly from your investment)
Class A Class B Class C
- ------------------------------------------------------------------
Maximum sales charge (load) on
purchases (%) 5.75 0.00 0.00
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
offering price) 1.00(1) 5.00 1.00
Redemption fee (as a percentage of
amount redeemed, if applicable)(2) None None None
Annual Fund Operating Expenses (deducted directly from Fund
assets)
Class A Class B Class C
- ------------------------------------------------------------------
Management fee(3) (%) 0.75 0.75 0.75
Distribution and service (12b-1) fees (%) 0.35 1.00 1.00
Other expenses (%) 0.33 0.33 0.33
Total annual fund operating expenses (%) 1.43 2.08 2.08
Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------
Class A $712 $1,000 $1,310 $2,185
Class B: did not sell your shares $211 $651 $1,117 $2,240
sold all your shares at the
end of the period $711 $951 $1,317 $2,240
Class C: did not sell your shares $211 $651 $1,117 $2,406
sold all your shares at the
end of the period $311 $651 $1,117 $2,406
(1) This charge applies only to purchases of $1 million to $5
million if shares obtained through these purchases are
redeemed within 18 months of purchase.
(2) There is a $7.50 charge for wiring sale proceeds to your bank.
(3) Management fee includes both the management fee and the
administrative fee charged to the Fund.
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
- --------------------------------------------------------------
Your financial advisor can help you establish an appropriate
investment portfolio, buy shares and monitor your investments.
When the Fund receives your purchase request in "good form," your
shares will be bought at the next calculated NAV. In "good form"
means that you placed your order with your brokerage firm or your
payment has been received and your application is complete,
including all necessary signatures.
[Callout]
INVESTMENT MINIMUMS (1)
Initial Investment $1,000
Subsequent Investments $50
Automatic Investment Plan $50
Retirement Plans $25
[/callout]
(1) The Fund reserves the right to change the investment minimums.
The Fund also reserves the right to refuse a purchase order
for any reason, including if it believes that doing so would
be in the best interest of the Fund and its shareholders.
Outlined below are various options for buying shares:
Method Instructions
- ----------- ----------------------------------------------------
Through your
financial advisor Your financial advisor can help you
establish your account and buy Fund shares on your
behalf.
By check
(new account) For new accounts, send a completed application and
check made payable to the Fund to the transfer
agent, Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
By check
(existing account) For existing accounts, fill out and return
the additional investment stub included in your
quarterly statement, or send a letter of
instruction, including your Fund name and account
number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722, Boston,
MA 02105-1722.
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of
the same class of the Fund at no additional cost.
To exchange by telephone, call 1-800-422-3737.
There may be an additional charge when exchanging
from a money market fund.
By wire You may purchase shares by wiring money from your
bank account to your fund account. To wire funds to
your fund account, call 1-800-422-3737 to obtain a
control number and the wiring instructions.
By electronic
funds transfer You may purchase shares by electronically
transferring money from your bank account to your
fund account by calling 1-800-422-3737. Your money
may take up to two business days to be invested.
You must set up this feature prior to your telephone
request. Be sure to complete the appropriate
section of the application.
Automatic
investment plan You can make monthly or quarterly investments
automatically from your bank account to your fund
account. You can select a pre-authorized amount to
be sent via electronic funds transfer. Be sure to
complete the appropriate section of the application
for this feature.
By dividend
diversification You may automatically invest dividends
distributed by one fund into the same class of
shares of another fund at no additional sales
charge. To invest your dividends in another fund,
call 1-800-345-6611.
SALES CHARGES
- ----------------------------------------------------------------
You may be subject to an initial sales charge when you purchase or
a contingent deferred sales charge (CDSC) when you sell shares of
the Fund. These sales charges are described below. In certain
circumstances these sales charges are waived, as described below
and in the Statement of Additional Information.
<Callout>
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in this prospectus-Class
A, B and C. Each share class has its own sales charge and expense
structure. Determining which share class is best for you depends
on the dollar amount you are investing and the number of years for
which you are willing to invest. Purchases of $250,000 or more
but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more are automatically
invested in Class A shares. Based on your personal situation,
your investment advisor can help you decide which class of shares
makes the most sense for you.
The Fund also offers Class S and Z shares, which are available
only to other investors through separate prospectuses.
</callout>
CLASS A SHARES Your purchases of Class A shares generally are at
the public offering price. This price includes a sales charge
that is based on the amount of your investment. The sales charge
is the commission paid to the financial advisor firm on the sale
of Class A shares. The sales charge you pay on additional
investments is based on the total amount of your purchase and the
current value of your account. The amount of the sales charge
differs depending on the amount you invest as shown in the table
below.
THE FUND
% of offering
Amount of Purchase As a % of price re-
the public As a % of tained by
offering your financial
price investment advisor firm
- ------------------------------------------------------------------
Less than $50,000 5.75 6.10 5.00
$ 50,000 to less than $100,000 4.50 4.71 3.75
$100,000 to less than $250,000 3.50 3.63 2.75
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more(1) 0.00 0.00 0.00
(1) Class A shares bought without an initial sales charge in
accounts aggregating between $1 million and $5 million at the time
of purchase may be subject to a 1% CDSC if the shares are sold
within 18 months of the time of purchase. Class A share purchases
that bring your account value above $1 million are subject to a 1%
CDSC if redeemed within 18 months of their purchase date. The 18-
month period begins on the first day of the month following each
purchase.
CLASS A SHARES For Class A share purchases of $1 million or
more, financial advisors receive a commission from Liberty Funds
Distributor, Inc. (Distributor) as follows:
PURCHASES OVER $1 MILLION
Amount Purchased Commission %
- ---------------------------------------
First $3 million 1.00
Next $2 million 0.50
Over $5 million 0.25 (1)
(1) Paid over 12 months but only to the extent the shares remain
outstanding.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways
for you to pay a lower sales charge when purchasing Class A
shares. The first is through Rights of Accumulation. If the
combined value of the Fund accounts maintained by you, your spouse
or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the
lower sales charge. The second is by signing a Statement of
Intent within 90 days of your purchase. By doing so, you would be
able to pay the lower sales charge on all purchases by agreeing to
invest a total of at least $50,000 within 13 months. If your
Statement of Intent purchases are not completed within 13 months,
you will be charged the applicable sales charge on the amount you
had invested to that date. In addition, certain investors may
purchase shares at a reduced sales charge or NAV, which is the
value of a Fund share excluding any sales charges. See the
Statement of Additional Information for a description of these
situations.
<CALLOUT>
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES
Certain investments in Class A, B and C shares are subject to a
CDSC. You will pay the CDSC only on shares you sell within a
certain amount of time after purchase. The CDSC generally
declines each year until there is no charge for selling shares.
The CDSC is applied to the NAV at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the
start of the holding period is the month-end of the month in which
the purchase is made. Shares you purchase with reinvested
dividends or capital gains are not subject to a CDSC. When you
place an order to sell shares, the Fund will automatically sell
first those shares not subject to a CDSC and then those you have
held the longest. This policy helps reduce and possibly eliminate
the potential impact of the CDSC.
</CALLOUT>
CLASS B SHARES Your purchases of Class B shares are at the Fund's
NAV. Class B shares have no front-end sales charge, but carry a
CDSC, that is imposed only on shares sold prior to the completion
of the periods shown in the chart below. The CDSC generally
declines each year and eventually disappears over time. Class B
shares automatically convert to Class A shares after eight years.
The Distributor pays the financial advisor firm an up-front
commission of 5.00% on sales of Class B shares.
THE FUND
Holding period after purchase % deducted when shares are sold
- ---------------------------------------------------------------
Through first year 5.00
Through second year 4.00
Through third year 3.00
Through fourth year 3.00
Through fifth year 2.00
Through sixth year 1.00
Longer than six years 0.00
CLASS C SHARES Like Class B shares, your purchases of Class C
shares are at the Fund's NAV. Although Class C shares have no
front-end sales charge, they carry a CDSC of 1% that is applied to
shares sold within the first year after they are purchased. After
holding shares for one year, you may sell them at any time without
paying a CDSC. Class C Shares do not convert into Class A shares.
The Distributor pays the financial advisor firm an up-front
commission of 1.00% on sales of Class C shares.
THE FUND
Years after purchase % deducted when shares are sold
- -----------------------------------------------------------
Through first year 1.00
Longer than one year 0.00
HOW TO EXCHANGE SHARES
- ------------------------------------------------------------------
- --------------
You may exchange your shares for shares of the same share class of
another fund distributed by Liberty Funds Distributor, Inc. at
NAV. If your shares are subject to a CDSC, you will not be
charged a CDSC upon the exchange. However, when you sell the
shares acquired through the exchange, the shares sold may be
subject to a CDSC, depending upon when you originally purchased
the shares you exchanged. For purposes of computing the CDSC, the
length of time you have owned your shares will be computed from
the date of your original purchase and the applicable CDSC will be
the CDSC of the original Fund. Unless your account is part of a
tax-deferred retirement plan, an exchange is a taxable event.
Therefore, you may realize a gain or a loss for tax purposes. The
Fund may terminate your exchange privilege if Stein Roe determines
that your exchange activity is likely to adversely impact its
ability to manage the Fund. To exchange by telephone, call 1-800-
422-3737.
HOW TO SELL SHARES
- ------------------------------------------------------------------
- -------------
Your financial advisor can help you determine if and when you
should sell your shares. You may sell shares of the Fund on any
regular business day that the New York Stock Exchange (NYSE) is
open.
When the Fund receives your sales request in "good form," shares
will be sold at the next calculated price. In "good form" means
that money used to purchase your shares is fully collected. When
selling shares by letter of instruction, "good form" means (i)
your letter has complete instructions, the proper signatures and
signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are
attached. For additional documentation required for sales by
corporations, agents, fiduciaries and surviving joint owners,
please call 1-800-345-6611. Retirement Plan accounts have special
requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within
seven days (usually on the next business day after your request is
received in good form). However, if you purchased your shares by
check, the Fund may delay the sale of your shares for up to 15
days after your purchase to protect against checks that are
returned. No interest will be paid on uncashed redemption checks.
Outlined below are the various options for selling shares:
Method Instructions
- ----------- ---------------------------------------------------
Through your
financial advisor You may call your financial advisor to place
your sell order. To receive the current trading
day's price, your financial advisor firm must
receive your request prior to the close of the NYSE,
usually 4:00 p.m. Eastern time.
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class
of another fund at no additional cost. To exchange
by telephone, call 1-800-422-3737.
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737 unless
you have notified the Fund of an address change
within the previous 30 days. The dollar limit for
telephone sales is $100,000 in a 30-day period. You
do not need to set up this feature in advance of
your call. Certain restrictions apply to retirement
accounts. For details, call 1-800-345-6611.
By mail You may send a signed letter of instruction or
stock power form along with any certificates to be
sold to the address below. In your letter of
instruction, note your fund's name, share class,
account number, and the dollar value or number of
shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint
owners and individual retirement account (IRA)
owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature
prior to your telephone request. Be sure to
complete the appropriate section of the account
application for this feature.
By electronic
funds transfer You may sell shares and request that the proceeds
be electronically transferred to your bank.
Proceeds may take up to two business days to be
received by your bank. You must set up this feature
prior to your request. Be sure to complete the
appropriate section of the account application for
this feature.
DISTRIBUTION AND SERVICE FEES
- ---------------------------------------------------------------
The Fund has adopted a plan under Rule 12b-1 that permits it to
pay marketing and other fees to support the sale and distribution
of Class A, B and C shares and the services provided to you by
your financial advisor. These annual distribution and service
fees may equal up to 0.35% for Class A shares and 1.00% for each
of Class B and Class C shares and are paid out of the assets of
these classes. Over time, these fees will increase the cost of
your shares and may cost you more than paying other types of sales
charges.(1)
(1) Class B shares automatically convert to Class A shares after
eight years, eliminating a portion of the distribution and service
fee upon conversion.
OTHER INFORMATION ABOUT YOUR ACCOUNT
- ----------------------------------------------------------------
How the Fund's Share Price is Determined The price of the Fund's
shares is based on its NAV. The NAV is determined at the close of
regular session trading on the NYSE, usually 4:00 p.m. Eastern
time on each business day that the NYSE is open (typically Monday
through Friday).
When you request a transaction, it will be processed at the NAV
(plus any applicable sales charge) next determined after your
request is received in good form by the Distributor. In most
cases, in order to receive that day's price, the Distributor must
receive your order before that day's transactions are processed.
If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on
the NYSE to receive that day's price.
To calculate NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Portfolio's foreign securities may trade on days when the NYSE
is closed. We will not price shares on days that the NYSE is
closed for trading. You will not be able to purchase or redeem
shares until the next NYSE-trading day.
You can find the daily prices of some share classes for the Fund
in most major daily newspapers. You can find daily prices for all
share classes by visiting the Fund's web site at
www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other
than as a result of depreciation in share value), you may be
subject to an annual account fee of $10. This fee is deducted
from the account in June each year. Approximately 60 days prior
to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your
account and bring the value above $1,000 prior to the fee date,
the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for
Class B and C shares. Certificates will be issued for Class A
shares only if requested. If you decide to hold share
certificates, you will not be able to sell your shares until you
have endorsed your certificates and returned them to the
Distributor.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential
to make the following distributions:
Types of Distributions
- -----------------------------------------------------------------
Dividend income Represents interest and dividends earned from
securities held by the Portfolio
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and
short-term capital gains, which are gains on
sales of securities held by the Portfolio for a
12-month period or less.
[Callout]
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities the Portfolio holds.
The Fund also may experience capital gains and losses on sales of
the Portfolio's securities. The Fund distributes substantially
all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of
the Fund's income and capital gains based on the number of shares
you own at the time these distributions are declared.
[/callout]
DISTRIBUTION OPTIONS Income dividends are declared and paid
quarterly. Any capital gains are distributed at least annually.
You can choose one of the options listed in the table below for
these distributions when you open your account.(1) To change your
distribution option call 1-800-345-6611.
Distribution Options
- -----------------------------------------------------------------
Reinvest all distributions in additional shares of your current
fund
- -----------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -----------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital
gains(2)
- ------------------------------------------------------------------
Receive all distributions in cash (with one of the following
options)(2)
* send the check to your address of record
* send the check to a third party address
* transfer the money to your bank via electronic funds transfer
(1) If you do not indicate on your application your preference for
handling distributions, the Fund will automatically reinvest
all distributions in additional shares of the Fund.
(2) Distributions of $10 or less will automatically be reinvested
in additional Fund shares. If you elect to receive
distributions by check and the check is returned as
undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution will be
reinvested in additional shares of the Fund.
Tax Consequences Regardless of whether you receive your
distributions in cash or reinvest them in additional Fund shares,
all Fund distributions are subject to federal income tax.
Depending on the state where you live, distributions may also be
subject to state and local income taxes.
In general, any distributions of dividends, interest, and short-
term capital gains distributions are taxable as ordinary income.
Distributions of long-term capital gains are generally taxable as
such, regardless of how long you have held your Fund shares. You
will be provided with information each year regarding the ordinary
income and capital gains distributed to you for the previous year
and any portion of your distribution which is exempt from state
and local taxes. Your investment in the Fund may have additional
personal tax implications. Please consult your tax advisor on
federal, state, local or other applicable tax laws.
In addition to the dividends and capital gains distributions made
by the Fund, you may realize a capital gain or loss when selling
and exchanging shares of the Fund. Such transactions may be
subject to federal, state, local, and foreign income tax.
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
- ------------------------------------------------------------------
Stein Roe & Farnham Incorporated (Stein Roe), located at One South
Wacker Drive, Suite 3500, Chicago, Illinois 60606, is the Fund's
investment advisor. In its duties as investment advisor, Stein
Roe runs the Fund's day-to-day business, including placing all
orders for the purchase and sale of portfolio securities for the
Portfolio. Stein Roe has been an investment advisor since 1932.
As of April 30, 1999, Stein Roe managed over $30 billion in
assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit known as Liberty
Funds Group (LFG) that includes several separate legal entities.
LFG includes certain affiliates of Stein Roe, including Colonial
Management Associates, Inc. (Colonial). The LFG business unit is
managed by a single management team. Colonial and other LFG
entities also share personnel, facilities, and systems with Stein
Roe that may be used in providing administrative or operational
services to the Fund. Colonial is a registered investment
adviser. Stein Roe also has a wealth management business that is
not part of LFG and is managed by a different team. Stein Roe and
the other entities that make up LFG are subsidiaries of Liberty
Financial Companies, Inc.
For the fiscal year ended September 30, 1999, the Fund paid ____%
of average net assets in fees to Stein Roe.
Stein Roe may use the services of AlphaTrade, Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Portfolio, pursuant to procedures adopted by the Board of
Trustees.
PORTFOLIO MANAGER
- ------------------------------------------------------------------
Daniel K. Cantor has been portfolio manager of the Portfolio since
its inception in 1997 and has been manager of the Fund since 1995.
He has been portfolio manager of Stein Roe Disciplined Stock Fund
since May 1999. He joined Stein Roe in 1985 as an equity analyst
and served as an advisor to Stein Roe Private Capital Management
from 1992 to 1995. Mr. Cantor is a senior vice president. A
chartered financial analyst, he received a B.A. degree from the
University of Rochester and an M.B.A. degree from the Wharton
School of the University of Pennsylvania.
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Portfolio also may
invest in other securities and use other investment techniques.
The Portfolio may elect not to buy any of these other securities
or use any of these other investment techniques. The Portfolio
may not always achieve its investment goal.
This section describes certain of those other securities and
techniques, and certain risks associated with them. The Statement
of Additional Information contains additional information about
the Fund's securities and investment techniques (including other
securities and techniques) and the risks associated with them.
The Statement of Additional Information also contains the Fund's
fundamental and non-fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
and its non-fundamental investment policies without shareholder
approval.
FUTURES
- -----------------------------------------------------------------
The Portfolio uses futures to gain exposure to groups of stocks or
individual issuers. A future is an agreement to buy or sell a
specific amount of a financial instrument or physical commodity
for an agreed-upon price at a certain time in the future. The
Portfolio uses futures to invest cash pending direct investments
in stocks and to enhance its return. These investments are
efficient since they typically cost less than direct investments
in the underlying securities. However, the Fund can lose money if
the portfolio manager does not correctly anticipate the market
movements of those underlying securities.
PORTFOLIO TURNOVER
- -----------------------------------------------------------------
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100%
under normal conditions. Portfolio turnover typically produces
capital gains or losses resulting in tax consequences for Fund
investors. It also increases transaction expenses, which reduce
the Fund's return.
TEMPORARY DEFENSIVE POSITIONS
- ------------------------------------------------------------------
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if the
Portfolio takes a defensive position.
INTERFUND LENDING PROGRAM
- ------------------------------------------------------------------
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
MASTER/FEEDER STRUCTURE
- ------------------------------------------------------------------
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities, which has
investment objectives and policies substantially identical to
those of the Fund. The investment performance of the Fund depends
upon the investment performance of the Portfolio. If the
investment policies of the Portfolio and the Fund became
inconsistent, the Board of Trustees of the Fund can decide what
actions to take. Actions the Board of Trustees may recommend
include withdrawal of the Fund's assets from the Portfolio. For
more information on the master/feeder fund structure, see the
Statement of Additional Information.
YEAR 2000 COMPLIANCE
- -----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Stein Roe,
other service providers, and the issuers in which the Portfolio
invests do not properly process and calculate date-related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's service
providers are taking steps that they believe are reasonably
designed to address the Year 2000 Problem, including working with
vendors who furnish services, software and systems to the Fund, to
provide that date-related information and data can be properly
processed after January 1, 2000. Many of the Fund's service
providers and vendors are in the process of making Year 2000
modifications to their software and systems and believe that such
modifications will be completed on a timely basis prior to January
1, 2000. In addition, Year 2000 readiness is one of the factors
considered by Stein Roe in its ongoing assessment of issuers in
which the Portfolio invests, to the extent that information is
readily available. However, no assurances can be given that the
Fund will not be adversely affected by these matters.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
the financial performance of the Fund. Information is shown for
the Fund's last five fiscal years. The fiscal year runs from
October 1 to September 30. Certain information reflects financial
results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur
Andersen LLP, independent public accountants, whose report, along
with the Fund's financial statements, is included in the annual
report. You can request a free annual report by calling 1-800-
426-3750.
<TABLE>
<CAPTION>
Year ended September 30,
Class S 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 22.91 $ 18.39 $ 16.65 $ 14.54
Income from investment
operations
Net investment income 0.24 0.30 0.27 0.34
Net gains on securities (both
realized and unrealized) 0.55 5.15 3.22 2.56
Total income from investment
operations 0.79 5.45 3.49 2.90
Less distributions
Dividends (from net
investment income) (0.28) (0.28) (0.32) (0.20)
Distributions (from capital
gains) (0.97) (0.65) (1.43) (0.59)
Total distributions (1.25) (0.93) (1.75) (0.79)
Net asset value, end of period $ 22.45 $ 22.91 $ 18.39 $ 16.65
Total return 3.45% 30.81% 22.67% 21.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $351,052 $337,466 $204,387 $139,539
Ratio of net expenses to
average net assets 1.07% 1.13% 1.18% 0.96%
Ratio of net investment
income to average net
assets 1.02% 1.52% 1.65% 1.78%
Portfolio turnover rate 2%(a) 13% 70%
<FN>
(a) Prior to commencement of operations of the Portfolio.
</TABLE>
<PAGE>
FOR MORE INFORMATION
- -----------------------------------------------------------------
You can get more information about the Fund's investments in the
Fund's semi-annual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance over its last fiscal year.
You may wish to read the Statement of Additional Information for
more information on the Fund and the securities in which it
invests. The Statement of Additional Information is incorporated
into this prospectus by reference, which means that it is
considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional
Information, request other information and discuss your questions
about the Fund by writing or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Fund by visiting the
following location and you can obtain copies, upon payment of a
duplicating fee, by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC, 20549-6009
Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Investment Company Act file number:
Stein Roe Investment Trust: 811-4978
* Stein Roe Growth & Income Fund
[LOGO] LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621, 1-800-426-
3750
Visit us at www.libertyfunds.com
- -----------------------------------------------------------------
<PAGE 1>
PRELIMINARY PROSPECTUS DATED SEPTEMBER 16, 1999
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
STEIN ROE ADVISOR GROWTH INVESTOR FUND Prospectus,
_________, 1999
Class A, B and C Shares
Advised by Stein Roe & Farnham Incorporated
TABLE OF CONTENTS
THE FUND.......................2 MANAGING THE FUND.....14
Investment Goals...............2 Investment Advisor....14
Primary Investment Strategies..2 Portfolio Managers....14
Primary Investment Risks.......2
Performance History............3 OTHER INVESTMENT
Your Expenses..................4 STRATEGIES AND RISKS..15
YOUR ACCOUNT...................6 FINANCIAL HIGHLIGHTS..17
How to Buy Shares..............6
Sales Charges..................7
How to Exchange Shares........10
How to Sell Shares............10
Distribution and Service Fees.11
Other Information About
Your Account................11
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is truthful or complete. Anyone who tells you otherwise is
committing a crime.
Not FDIC Insured May Lose Value
No Bank Guarantee
<PAGE>
THE FUND STEIN ROE ADVISOR GROWTH INVESTOR FUND
INVESTMENT GOALS
- -----------------------------------------------------------------
The Fund seeks long-term growth.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
The Fund invests all its assets in SR&F Growth Investor Portfolio
as part of a master fund/feeder fund structure. The Portfolio
invests primarily in common stocks believed to have long-term
growth potential. Under normal market conditions, the Portfolio
invests at least 65% of its assets in common stocks of companies
that Stein Roe believes have long-term appreciation potential.
The Portfolio may invest in companies of any size including
smaller, emerging companies. It emphasizes companies in the
technology sector and various consumer goods sectors, including
personal care products, pharmaceuticals and food products. The
Portfolio may invest up to 25% of its assets in foreign stocks.
To select investments for the portfolio, the portfolio managers
look for companies that are market leaders with growing market
share in their respective industries. The managers also look for
companies with strong financial balance sheets and experienced
management teams.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
WHAT ARE MARKET AND MANAGEMENT RISKS?
Management risk means that Stein Roe's stock selections and other
investment decisions might produce losses or cause the Fund to
underperform when compared to other funds with similar goals.
Market risk means that security prices in a market, sector or
industry may move down. Downward movements will reduce the value
of your investment. Because of management and market risk, there
is no guarantee that the Fund will achieve its investment goal or
perform favorably compared with competing funds.
[/callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with its investment strategy may
cause the Fund's total return or yield to decrease.
Due to its focus on companies in the technology sector and various
consumer goods sectors, including personal care products,
pharmaceuticals and food products, the Fund may perform
differently than the stock market. Shares of a small company may
pose greater risks than shares of a large company due to narrow
product lines, limited financial resources, less depth in
management or a limited trading market for its stock.
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
Information on other securities and risks appears under "Other
Investment Strategies and Risks."
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows the historical performance of Stein Roe
Young Investor Fund, a separate feeder fund of the Portfolio. The
performance table following the bar chart shows how the average
annual returns of Stein Roe Young Investor Fund compare with those
of a broad measure of market performance for the past year and
since inception. The chart and table are intended to illustrate
some of the risks of investing in the Fund by showing the changes
in performance. All returns include the reinvestment of dividends
and distributions. As with all mutual funds, past performance
does not predict the Fund's future performance. Performance
results include the effect of expense reduction arrangements. If
these arrangements were not in place, then the performance results
would have been lower.
[callout]
UNDERSTANDING PERFORMANCE
Calendar-year total return shows the Fund's Class S share
performance for each of the last ten complete calendar years. It
includes the effects of Fund expenses, but does not include sales
charges.
Average annual total return is a measure of the Fund's Class S
share performance over the past one year and since inception. It
includes the effects of Fund expenses. The table does not take
into effect any expense reduction arrangements discussed in the
footnotes to the Annual Fund Operating Expenses table.
The Fund's return is compared to the S&P 500 Index, an unmanaged
broad-based measure of market performance. Unlike the Fund,
indices are not investments, do not incur fees or expenses, and
are not professionally managed. It is not possible to invest
directly in indices.
[/callout]
Calendar-Year Total Returns (1)
45%
40%
35% 39.79% 35.10%
30%
25% 26.28%
20%
15% 17.65%
10%
5%
0%
- -5%
1995 1996 1997 1998
The Fund's year-to-date total return through Sept. 30, 1999, was
___%.
Best quarter: 4th quarter 1998, +20.82%
Worst quarter: 3rd quarter 1998, -16.46%
(1) Fund performance is the performance of Stein Roe Young
Investor Fund from April 29, 1994 through Dec. 31, 1998.
Average Annual Total Returns(2) -
for periods ended December 31, 1998
Period ending Dec. 31, 1998
1 yr Since Inception
April 29, 1994
Growth Investor Fund* 17.65% 26.62%
S&P 500 Index** 28.60% 26.66%
(2) The one-year performance in the table reflects the restated
performance of the Portfolio combined with the performance of
the Fund's Class S shares since inception. The performance of
the Portfolio is restated to reflect Class S share expenses
and sales charges. Since Inception performance in the table
is the restated performance of the Portfolio combined with the
Fund's Class S performance.
YOUR EXPENSES
- -----------------------------------------------------------------
Expenses are one of several factors to consider before you invest
in a mutual fund. The tables below describe the fees and expenses
you may pay when you buy, hold and sell shares of the Fund.
[CALLOUT]
UNDERSTANDING EXPENSES
Shareholder Fees are paid directly by shareholders to the Fund's
distributor.
Annual Fund Operating Expenses are deducted from the Fund. They
include management fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
Example Expenses helps you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. The table
does not take into account any expense reduction arrangements
discussed in the footnotes to the Annual Fund Operating Expenses
table. It uses the following hypothetical conditions:
* $10,000 initial investment
* 5% total return for each year
* Fund operating expenses remain the same
* No expense reductions in effect
[/callout]
Shareholder Fees (paid directly from your investment)
Class A Class B Class C
- ------------------------------------------------------------------
Maximum sales charge (load) on
purchases (%) 5.75 0.00 0.00
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
offering price) 1.00(1) 5.00 1.00
Redemption fee (as a percentage of
amount redeemed, if applicable)(2) None None None
Annual Fund Operating Expenses (deducted directly from Fund
assets)
Class A Class B Class C
- ------------------------------------------------------------------
Management fee(3) (%) 0.72 0.72 0.72
Distribution and service (12b-1) fees (%) 0.35 1.00 1.00
Other expenses (4) (%) 1.62 1.62 1.62
Total annual fund operating expenses (%) 2.69 3.34 3.34
Expense reimbursement (%) 1.24 1.24 1.24
Net expenses (%) 1.45 2.10 2.10
Example Expenses (your actual costs may be higher or lower)
Class 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------
Class A $831 $1,362 $1,918 $3,423
Class B: did not sell your shares $337 $1,027 $1,741 $3,484
sold all your shares at the
end of the period $837 $1,327 $1,941 $3,484
Class C: did not sell your shares $337 $1,027 $1,741 $3,631
sold all your shares at the
end of the period $437 $1,027 $1,741 $3,631
(1) This charge applies only to purchases of $1 million to $5
million if shares obtained through these purchases are
redeemed within 18 months of purchase.
(2) There is a $7.50 charge for wiring sale proceeds to your bank.
(3) Management fee includes both the management fee and the
administrative fee charged to the Fund.
(4) The Fund's advisor voluntarily agreed to bear the Fund's
expenses such that "other expenses" do not exceed 1.45% for
Class A shares and 2.10% for Class B and C shares.
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
- -----------------------------------------------------------------
Your financial advisor can help you establish an appropriate
investment portfolio, buy shares and monitor your investments.
When the Fund receives your purchase request in "good form," your
shares will be bought at the next calculated NAV. In "good form"
means that you placed your order with your brokerage firm or your
payment has been received and your application is complete,
including all necessary signatures.
[Callout]
INVESTMENT MINIMUMS (1)
Initial Investment $1,000
Subsequent Investments $50
Automatic Investment Plan $50
Retirement Plans $25
[/callout]
(1) The Fund reserves the right to change the investment minimums.
The Fund also reserves the right to refuse a purchase order
for any reason, including if it believes that doing so would
be in the best interest of the Fund and its shareholders.
Outlined below are various options for buying shares:
Method Instructions
- ----------- ----------------------------------------------------
Through your
financial advisor Your financial advisor can help you
establish your account and buy Fund shares on your
behalf.
By check
(new account) For new accounts, send a completed application and
check made payable to the Fund to the transfer
agent, Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
By check
(existing account) For existing accounts, fill out and return
the additional investment stub included in your
quarterly statement, or send a letter of
instruction, including your Fund name and account
number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722, Boston,
MA 02105-1722.
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of
the same class of the Fund at no additional cost.
To exchange by telephone, call 1-800-422-3737.
There may be an additional charge when exchanging
from a money market fund.
By wire You may purchase shares by wiring money from your
bank account to your fund account. To wire funds to
your fund account, call 1-800-422-3737 to obtain a
control number and the wiring instructions.
By electronic
funds transfer You may purchase shares by electronically
transferring money from your bank account to your
fund account by calling 1-800-422-3737. Your money
may take up to two business days to be invested.
You must set up this feature prior to your telephone
request. Be sure to complete the appropriate
section of the application.
Automatic
investment plan You can make monthly or quarterly investments
automatically from your bank account to your fund
account. You can select a pre-authorized amount to
be sent via electronic funds transfer. Be sure to
complete the appropriate section of the application
for this feature.
By dividend
diversification You may automatically invest dividends
distributed by one fund into the same class of
shares of another fund at no additional sales
charge. To invest your dividends in another fund,
call 1-800-345-6611.
SALES CHARGES
- -----------------------------------------------------------------
You may be subject to an initial sales charge when you purchase,
or a contingent deferred sales charge (CDSC) when you sell shares
of the Fund. These sales charges are described below. In certain
circumstances these sales charges are waived, as described below
and in the Statement of Additional Information.
<CALLOUT>
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in this prospectus-Class
A, B and C. Each share class has its own sales charge and expense
structure. Determining which share class is best for you depends
on the dollar amount you are investing and the number of years for
which you are willing to invest. Purchases of $250,000 or more
but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more are automatically
invested in Class A shares. Based on your personal situation,
your investment advisor can help you decide which class of shares
makes the most sense for you.
The Fund also offers Class S and Z shares, which are available
only to other investors through separate prospectuses.
</CALLOUT>
CLASS A SHARES Your purchases of Class A shares generally are at
the public offering price. This price includes a sales charge
that is based on the amount of your investment. The sales charge
is the commission paid to the financial advisor firm on the sale
of Class A shares. The sales charge you pay on additional
investments is based on the total amount of your purchase and the
current value of your account. The amount of the sales charge
differs depending on the amount you invest as shown in the table
below.
THE FUND
% of offering
Amount of Purchase As a % of price re-
the public As a % of tained by
offering your financial
price investment advisor firm
- ------------------------------------------------------------------
Less than $50,000 5.75 6.10 5.00
$ 50,000 to less than $100,000 4.50 4.71 3.75
$100,000 to less than $250,000 3.50 3.63 2.75
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more(1) 0.00 0.00 0.00
(1) Class A shares bought without an initial sales charge in
accounts aggregating between $1 million and $5 million at the time
of purchase may be subject to a 1% CDSC if the shares are sold
within 18 months of the time of purchase. Class A share purchases
that bring your account value above $1 million are subject to a 1%
CDSC if redeemed within 18 months of their purchase date. The 18-
month period begins on the first day of the month following each
purchase.
CLASS A SHARES For Class A share purchases of $1 million or
more, financial advisors receive a commission from Liberty Funds
Distributor, Inc. (Distributor) as follows:
PURCHASES OVER $1 MILLION
Amount Purchased Commission %
- ---------------------------------------
First $3 million 1.00
Next $2 million 0.50
Over $5 million 0.25 (1)
(1) Paid over 12 months but only to the extent the shares remain
outstanding.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways
for you to pay a lower sales charge when purchasing Class A
shares. The first is through Rights of Accumulation. If the
combined value of the Fund accounts maintained by you, your spouse
or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the
lower sales charge. The second is by signing a Statement of
Intent within 90 days of your purchase. By doing so, you would be
able to pay the lower sales charge on all purchases by agreeing to
invest a total of at least $50,000 within 13 months. If your
Statement of Intent purchases are not completed within 13 months,
you will be charged the applicable sales charge on the amount you
had invested to that date. In addition, certain investors may
purchase shares at a reduced sales charge or NAV, which is the
value of a Fund share excluding any sales charges. See the
Statement of Additional Information for a description of these
situations.
<CALLOUT>
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES
Certain investments in Class A, B and C shares are subject to a
CDSC. You will pay the CDSC only on shares you sell within a
certain amount of time after purchase. The CDSC generally
declines each year until there is no charge for selling shares.
The CDSC is applied to the NAV at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the
start of the holding period is the month-end of the month in which
the purchase is made. Shares you purchase with reinvested
dividends or capital gains are not subject to a CDSC. When you
place an order to sell shares, the Fund will automatically sell
first those shares not subject to a CDSC and then those you have
held the longest. This policy helps reduce and possibly eliminate
the potential impact of the CDSC.
</CALLOUT>
CLASS B SHARES Your purchases of Class B shares are at the Fund's
NAV. Class B shares have no front-end sales charge, but carry a
CDSC, that is imposed only on shares sold prior to the completion
of the periods shown in the chart below. The CDSC generally
declines each year and eventually disappears over time. Class B
shares automatically convert to Class A shares after eight years.
The Distributor pays the financial advisor firm an up-front
commission of 5.00% on sales of Class B shares.
THE FUND
Holding period after purchase % deducted when shares are sold
- ---------------------------------------------------------------
Through first year 5.00
Through second year 4.00
Through third year 3.00
Through fourth year 3.00
Through fifth year 2.00
Through sixth year 1.00
Longer than six years 0.00
CLASS C SHARES Like Class B shares, your purchases of Class C
shares are at the Fund's NAV. Although Class C shares have no
front-end sales charge, they carry a CDSC of 1% that is applied to
shares sold within the first year after they are purchased. After
holding shares for one year, you may sell them at any time without
paying a CDSC. Class C Shares do not convert into Class A shares.
The Distributor pays the financial advisor firm an up-front
commission of 1.00% on sales of Class C shares.
THE FUND
Years after purchase % deducted when shares are sold
- -----------------------------------------------------------
Through first year 1.00
Longer than one year 0.00
HOW TO EXCHANGE SHARES
- -----------------------------------------------------------------
You may exchange your shares for shares of the same share class of
another fund distributed by Liberty Funds Distributor, Inc. at
NAV. If your shares are subject to a CDSC, you will not be
charged a CDSC upon the exchange. However, when you sell the
shares acquired through the exchange, the shares sold may be
subject to a CDSC, depending upon when you originally purchased
the shares you exchanged. For purposes of computing the CDSC, the
length of time you have owned your shares will be computed from
the date of your original purchase and the applicable CDSC will be
the CDSC of the original Fund. Unless your account is part of a
tax-deferred retirement plan, an exchange is a taxable event.
Therefore, you may realize a gain or a loss for tax purposes. The
Fund may terminate your exchange privilege if Stein Roe determines
that your exchange activity is likely to adversely impact its
ability to manage the Fund. To exchange by telephone, call 1-800-
422-3737.
HOW TO SELL SHARES
- -----------------------------------------------------------------
Your financial advisor can help you determine if and when you
should sell your shares. You may sell shares of the Fund on any
regular business day that the New York Stock Exchange (NYSE) is
open.
When the Fund receives your sales request in "good form," shares
will be sold at the next calculated price. In "good form" means
that money used to purchase your shares is fully collected. When
selling shares by letter of instruction, "good form" means (i)
your letter has complete instructions, the proper signatures and
signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are
attached. For additional documentation required for sales by
corporations, agents, fiduciaries and surviving joint owners,
please call 1-800-345-6611. Retirement Plan accounts have special
requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within
seven days (usually on the next business day after your request is
received in good form). However, if you purchased your shares by
check, the Fund may delay the sale of your shares for up to 15
days after your purchase to protect against checks that are
returned. No interest will be paid on uncashed redemption checks.
Outlined below are the various options for selling shares:
Method Instructions
- ----------- ---------------------------------------------------
Through your
financial advisor You may call your financial advisor to place
your sell order. To receive the current trading
day's price, your financial advisor firm must
receive your request prior to the close of the NYSE,
usually 4:00 p.m. Eastern time.
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class
of another fund at no additional cost. To exchange
by telephone, call 1-800-422-3737.
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737 unless
you have notified the Fund of an address change
within the previous 30 days. The dollar limit for
telephone sales is $100,000 in a 30-day period. You
do not need to set up this feature in advance of
your call. Certain restrictions apply to retirement
accounts. For details, call 1-800-345-6611.
By mail You may send a signed letter of instruction or
stock power form along with any certificates to be
sold to the address below. In your letter of
instruction, note your fund's name, share class,
account number, and the dollar value or number of
shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint
owners and individual retirement account (IRA)
owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature
prior to your telephone request. Be sure to
complete the appropriate section of the account
application for this feature.
By electronic
funds transfer You may sell shares and request that the proceeds
be electronically transferred to your bank.
Proceeds may take up to two business days to be
received by your bank. You must set up this feature
prior to your request. Be sure to complete the
appropriate section of the account application for
this feature.
DISTRIBUTION AND SERVICE FEES
- -----------------------------------------------------------------
The Fund has adopted a plan under Rule 12b-1 that permits it to
pay marketing and other fees to support the sale and distribution
of Class A, B and C shares and the services provided to you by
your financial advisor. These annual distribution and service
fees may equal up to 0.35% for Class A shares and 1.00% for each
of Class B and Class C shares and are paid out of the assets of
these classes. Over time, these fees will increase the cost of
your shares and may cost you more than paying other types of sales
charges.(1)
(1) Class B shares automatically convert to Class A shares after
eight years, eliminating a portion of the distribution and service
fee upon conversion.
OTHER INFORMATION ABOUT YOUR ACCOUNT
- -----------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of the Fund's
shares is based on its NAV. The NAV is determined at the close of
regular session trading on the NYSE, usually 4:00 p.m. Eastern
time on each business day that the NYSE is open (typically Monday
through Friday).
When you request a transaction, it will be processed at the NAV
(plus any applicable sales charge) next determined after your
request is received in good form by the Distributor. In most
cases, in order to receive that day's price, the Distributor must
receive your order before that day's transactions are processed.
If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on
the NYSE to receive that day's price.
To calculate NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Portfolio's foreign securities may trade on days when the NYSE
is closed. We will not price shares on days that the NYSE is
closed for trading. You will not be able to purchase or redeem
shares until the next NYSE-trading day.
You can find the daily prices of some share classes for the Fund
in most major daily newspapers. You can find daily prices for all
share classes by visiting the Fund's web site at
www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other
than as a result of depreciation in share value), you may be
subject to an annual account fee of $10. This fee is deducted
from the account in June each year. Approximately 60 days prior
to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your
account and bring the value above $1,000 prior to the fee date,
the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for
Class B and C shares. Certificates will be issued for Class A
shares only if requested. If you decide to hold share
certificates, you will not be able to sell your shares until you
have endorsed your certificates and returned them to the
Distributor.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential
to make the following distributions:
Types of Distributions
- -----------------------------------------------------------------
Dividend income Represents interest and dividends earned from
securities held by the Portfolio
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and
short-term capital gains, which are gains on
sales of securities held by the Portfolio for a
12-month period or less.
[Callout]
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities the Portfolio holds.
The Fund also may experience capital gains and losses on sales of
the Portfolio's securities. The Fund distributes substantially
all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of
the Fund's income and capital gains based on the number of shares
you own at the time these distributions are declared.
[End callout]
DISTRIBUTION OPTIONS Income dividends are declared and paid
annually. Any capital gains are distributed at least annually.
You can choose one of the options listed in the table below for
these distributions when you open your account.(1) To change your
distribution option call 1-800-345-6611.
Distribution Options
- -----------------------------------------------------------------
Reinvest all distributions in additional shares of your current
fund
- -----------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -----------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital
gains(2)
- ------------------------------------------------------------------
Receive all distributions in cash (with one of the following
options)(2)
* send the check to your address of record
* send the check to a third party address
* transfer the money to your bank via electronic funds transfer
(1) If you do not indicate on your application your preference for
handling distributions, the Fund will automatically reinvest
all distributions in additional shares of the Fund.
(2) Distributions of $10 or less will automatically be reinvested
in additional Fund shares. If you elect to receive
distributions by check and the check is returned as
undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution will be
reinvested in additional shares of the Fund.
TAX CONSEQUENCES Regardless of whether you receive your
distributions in cash or reinvest them in additional Fund shares,
all Fund distributions are subject to federal income tax.
Depending on the state where you live, distributions may also be
subject to state and local income taxes.
In general, any distributions of dividends, interest, and short-
term capital gains distributions are taxable as ordinary income.
Distributions of long-term capital gains are generally taxable as
such, regardless of how long you have held your Fund shares. You
will be provided with information each year regarding the ordinary
income and capital gains distributed to you for the previous year
and any portion of your distribution which is exempt from state
and local taxes. Your investment in the Fund may have additional
personal tax implications. Please consult your tax advisor on
federal, state, local or other applicable tax laws.
In addition to the dividends and capital gains distributions made
by the Fund, you may realize a capital gain or loss when selling
and exchanging shares of the Fund. Such transactions may be
subject to federal, state, local, and foreign income tax.
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
- -----------------------------------------------------------------
Stein Roe & Farnham Incorporated (Stein Roe), located at One South
Wacker Drive, Suite 3500, Chicago, Illinois 60606, is the Fund's
investment advisor. In its duties as investment advisor, Stein
Roe runs the Fund's day-to-day business, including placing all
orders for the purchase and sale of portfolio securities for the
Portfolio. Stein Roe has been an investment advisor since 1932.
As of April 30, 1999, Stein Roe managed over $30 billion in
assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit known as Liberty
Funds Group (LFG) that includes several separate legal entities.
LFG includes certain affiliates of Stein Roe, including Colonial
Management Associates, Inc. (Colonial). The LFG business unit is
managed by a single management team. Colonial and other LFG
entities also share personnel, facilities, and systems with Stein
Roe that may be used in providing administrative or operational
services to the Fund. Colonial is a registered investment
adviser. Stein Roe also has a wealth management business that is
not part of LFG and is managed by a different team. Stein Roe and
the other entities that make up LFG are subsidiaries of Liberty
Financial Companies, Inc.
For the period ended September 30, 1999, the Fund paid ____% of
average net assets in fees to Stein Roe.
Stein Roe may use the services of AlphaTrade, Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Portfolio, pursuant to procedures adopted by the Board of
Trustees.
PORTFOLIO MANAGERS
- -----------------------------------------------------------------
Erik P. Gustafson has been co-portfolio manager of the Portfolio
and manager of SR&F Growth Stock Portfolio since their inception
in 1997 and has managed Stein Roe Growth Stock Fund since 1994 and
Stein Roe Young Investor Fund since 1995. Mr. Gustafson joined
Stein Roe in 1992 as a portfolio manager for privately managed
accounts and is a senior vice president. He holds a B.A. degree
from the University of Virginia and M.B.A. and J.D. degrees from
Florida State University.
David P. Brady is co-portfolio manager of the Portfolio. He
joined Stein Roe in 1993 as an associate portfolio manager of
Stein Roe Special Fund. He currently is a senior vice president
and has been portfolio manager of Young Investor Fund since March
1995 and portfolio manager of Stein Roe Large Company Focus Fund
since June 1998. He holds a B.S. in finance, graduating Magna Cum
Laude, from the University of Arizona and an M.B.A. from the
University of Chicago.
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Portfolio also may
invest in other securities and use other investment techniques.
The Portfolio may elect not to buy any of these other securities
or use any of these other investment techniques. The Portfolio
may not always achieve its investment goal.
This section describes certain of those other securities and
techniques, and certain risks associated with them. The Statement
of Additional Information contains additional information about
the Fund's securities and investment techniques (including other
securities and techniques) and the risks associated with them.
The Statement of Additional Information also contains the Fund's
fundamental and non-fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
and its non-fundamental investment policies without shareholder
approval.
PORTFOLIO TURNOVER
- -----------------------------------------------------------------
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100%
under normal conditions. Portfolio turnover typically produces
capital gains or losses resulting in tax consequences for Fund
investors. It also increases transaction expenses, which reduce
the Fund's return.
TEMPORARY DEFENSIVE POSITIONS
- -----------------------------------------------------------------
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if the
Portfolio takes a defensive position.
INTERFUND LENDING PROGRAM
- -----------------------------------------------------------------
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
MASTER/FEEDER STRUCTURE
- -----------------------------------------------------------------
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities, which has
investment objectives and policies substantially identical to
those of the Fund. The investment performance of the Fund depends
upon the investment performance of the Portfolio. If the
investment policies of the Portfolio and the Fund became
inconsistent, the Board of Trustees of the Fund can decide what
actions to take. Actions the Board of Trustees may recommend
include withdrawal of the Fund's assets from the Portfolio. For
more information on the master/feeder fund structure, see the
Statement of Additional Information.
YEAR 2000 COMPLIANCE
- -----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Stein Roe,
other service providers, and the issuers in which the Portfolio
invests do not properly process and calculate date-related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's service
providers are taking steps that they believe are reasonably
designed to address the Year 2000 Problem, including working with
vendors who furnish services, software and systems to the Fund, to
provide that date-related information and data can be properly
processed after January 1, 2000. Many of the Fund's service
providers and vendors are in the process of making Year 2000
modifications to their software and systems and believe that such
modifications will be completed on a timely basis prior to January
1, 2000. In addition, Year 2000 readiness is one of the factors
considered by Stein Roe in its ongoing assessment of issuers in
which the Portfolio invests, to the extent that information is
readily available. However, no assurances can be given that the
Fund will not be adversely affected by these matters.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
the financial performance of the Fund. Information is shown for
the period of the Fund's operations. The fiscal year runs from
October 1 to September 30. Certain information reflects financial
results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur
Andersen LLP, independent public accountants, whose report, along
with the Fund's financial statements, is included in the annual
report. You can request a free annual report by calling 1-800-
426-3750.
Period ended September 30,
Class S 1999(a)
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income
Net gains on securities (both realized
and unrealized)
Total income from investment operations
Less distributions
Dividends (from net investment income)
Distributions (from capital gains)
Total distributions
Net asset value, end of period
Total return
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)
Ratio of net expenses to average net
assets
Ratio of net investment income to
average net assets
Portfolio turnover rate
(a) From commencement of operations on March 31, 1999.
(b) These percentages are for periods of less than one year. They
have been converted to an annual basis making it easier to
compare to prior years.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been ___%.
(d) Computed with the effect of Stein Roe's expense reimbursement.
<PAGE>
FOR MORE INFORMATION
- -----------------------------------------------------------------
You can get more information about the Fund's investments in the
Fund's semi-annual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance over its last fiscal year.
You may wish to read the Statement of Additional Information for
more information on the Fund and the securities in which it
invests. The Statement of Additional Information is incorporated
into this prospectus by reference, which means that it is
considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional
Information, request other information and discuss your questions
about the Fund by writing or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Fund by visiting the
following location and you can obtain copies, upon payment of a
duplicating fee, by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC, 20549-6009
Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Investment Company Act file number:
Stein Roe Investment Trust: 811-4978
* Stein Roe Growth Investor Fund
[LOGO] LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621, 1-800-426-
3750
Visit us at www.libertyfunds.com
- -----------------------------------------------------------------
<PAGE 1>
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 16, 1999
The information in this Statement of Additional Information is not
complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This Statement of Additional
Information is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Statement of Additional Information Dated ______, 1999
STEIN ROE INVESTMENT TRUST
One South Wacker Drive, Chicago, IL 60606
800-338-2550
Stein Roe Growth & Income Fund
Stein Roe Growth Investor Fund
Class A, B, C, and Z Shares
This Statement of Additional Information ("SAI") is not a
prospectus, but provides additional information that should be
read in conjunction with the Funds' prospectus dated _____, 1999,
and any supplements thereto ("Prospectus"). Financial statements,
which are contained in the Funds' Annual Report, are incorporated
by reference into this SAI. The Prospectus and Annual Report 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........................4
Investment Restrictions....................................20
Additional Investment Considerations.......................22
Management.................................................23
Financial
Statements.................................................26
Principal
Shareholders...............................................26
Investment Advisory and Other Services.....................27
Distributor................................................29
Transfer Agent.............................................31
Purchases and Redemptions..................................31
Custodian..................................................40
Independent Public Accountants.............................41
Portfolio Transactions.....................................41
Additional Income Tax Considerations.......................47
Investment Performance.....................................48
Master Fund/Feeder Fund: Structure and Risk Factors........52
Appendix-Ratings...........................................54
<PAGE>
GENERAL INFORMATION AND HISTORY
The mutual funds described in this SAI are the following
separate series of Stein Roe Investment Trust (the "Trust"):
Stein Roe Growth & Income Fund ("Growth & Income Fund")
Stein Roe Growth Investor Fund ("Growth Investor Fund")
The above series are referred to collectively as "the Funds."
On Feb. 1, 1996, the names of the Trust and each then-existing
Fund were changed to separate "SteinRoe" into two words. Prior to
Feb. 1, 1996, Stein Roe Growth & Income Fund was named SteinRoe
Prime Equities. Each Fund offers five classes of shares-Classes
A, B, C, Z, and S. The Funds did not have separate classes until
November 15, 1999.
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, 11 series are authorized and outstanding.
Each series invests in a separate portfolio of securities and
other assets, with its own objectives and policies.
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.
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
Rather than invest in securities directly, the Funds seek to
achieve their objectives by pooling their assets with those of
other investment companies for investment in a master fund having
the identical 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. Each feeder Fund invests all of its net investable
assets in a separate master fund that is a series of SR&F Base
Trust, as follows:
Feeder Fund Master Fund
- ----------------- ----------------------------------------
Growth & Income Fund SR&F Growth & Income Portfolio ("Growth &
Income Portfolio")
Growth Investor Fund SR&F Growth Investor Portfolio ("Growth
Investor Portfolio")
The master funds are referred to collectively as the
"Portfolios." For more information, please refer to Master
Fund/Feeder Fund: Structure and Risk Factors.
Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services to the
Funds and Portfolios and investment management services to the
Portfolio.
INVESTMENT POLICIES
The Trust and SR&F Base Trust are open-end management
investment companies. The Funds and the Portfolios are
diversified, as that term is defined in the Investment Company Act
of 1940.
The investment objectives and policies are described in the
Prospectus under The Funds. In pursuing its objective, a
Portfolio may also employ the investment techniques described
under Portfolio Investments and Strategies in this SAI. 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
Unless otherwise noted, for purposes of discussion under
Portfolio Investments and Strategies, the term "Fund" refers to
each Fund and each Portfolio.
Debt Securities
In pursuing its investment objective, each Fund may invest in
debt securities of corporate and governmental issuers. The risks
inherent in debt securities depend primarily on the term and
quality of the obligations in a Fund's portfolio as well as on
market conditions. A decline in the prevailing levels of interest
rates generally increases the value of debt securities, while an
increase in rates usually reduces the value of those securities.
Investments in debt securities by Growth & Income Portfolio
are limited to those that are within the four highest grades
(generally referred to as "investment grade") assigned by a
nationally recognized statistical rating organization or, if
unrated, deemed to be of comparable quality by Stein Roe. Growth
Investor Portfolio may invest up to 35% of its net assets in debt
securities, but do not expect to invest more than 5% of their net
assets in debt securities that are rated below investment grade.
Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held by a Fund
is lost or reduced below investment grade, the Fund is not
required to dispose of the security, but Stein Roe will consider
that fact in determining whether that Fund should continue to hold
the security.
Securities that are rated below investment grade are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When Stein Roe determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, a Fund may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash
equivalents.
Derivatives
Consistent with its objective, a Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options;
futures contracts; futures options; securities collateralized by
underlying pools of mortgages or other receivables; floating rate
instruments; and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency.
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because using them is
more efficient or less costly than direct investment that cannot
be readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on Stein Roe'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.
No Fund currently intends to invest more than 5% of its net
assets in any type of Derivative except for options, futures
contracts, and futures options. (See Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by the
Fund on purchase of such securities; in addition, the proceeds of
prepayment would likely be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social, and market factors.
If mortgages are prepaid during periods of declining interest
rates, there would be a resulting loss of the full-term benefit of
any premium paid by the Fund on purchase of the CMO, and the
proceeds of prepayment would likely be invested at lower interest
rates.
Non-mortgage asset-backed securities usually have less
prepayment risk than mortgage-backed securities, but have the risk
that the collateral will not be available to support payments on
the underlying loans that finance payments on the securities
themselves.
Floating rate instruments provide for periodic adjustments in
coupon interest rates that are automatically reset based on
changes in amount and direction of specified market interest
rates. In addition, the adjusted duration of some of these
instruments may be materially shorter than their stated
maturities. To the extent such instruments are subject to
lifetime or periodic interest rate caps or floors, such
instruments may experience greater price volatility than debt
instruments without such features. Adjusted duration is an
inverse relationship between market price and interest rates and
refers to the approximate percentage change in price for a 100
basis point change in yield. For example, if interest rates
decrease by 100 basis points, a market price of a security with an
adjusted duration of 2 would increase by approximately 2%.
Convertible Securities
By investing in convertible securities, a Fund obtains the
right to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, Stein Roe will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities purchased by a Fund are
frequently rated investment grade, a Fund may purchase unrated
securities or securities rated below investment grade if the
securities meet Stein Roe'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, Stein Roe's own
investment research and analysis tend to be more important in the
purchase of such securities than other factors.
Foreign Securities
Each Fund may invest up to 25% of its total assets in foreign
securities, which may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than investment in securities of domestic
issuers. For this purpose, foreign securities do not include
American Depositary Receipts (ADRs) or securities guaranteed by a
United States person. ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the
underlying securities. A Fund may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, a Fund is
likely to bear its proportionate share of the expenses of the
depositary and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored
ADR. No Fund intends to invest, nor during the past fiscal year
has any Fund invested, more than 5% of its net assets in
unsponsored ADRs.
As of Sept. 30, 1999, holdings of foreign companies, as a
percentage of net assets, were as follows: Growth & Income
Portfolio, ___% (___% in foreign securities and ___% in ADRs); and
Growth Investor Portfolio, ___% (none in foreign securities and
___% in ADRs and ADSs).
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, a Fund's
investment performance is affected by the strength or weakness of
the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar
value of a yen-denominated stock held in the portfolio will rise
even though the price of the stock remains unchanged. Conversely,
if the dollar rises in value relative to the yen, the dollar value
of the yen-denominated stock will fall. (See discussion of
transaction hedging and portfolio hedging under Currency Exchange
Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions 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 Funds will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
The Funds' 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 a Fund arising in connection with the
purchase and sale of its portfolio securities. Portfolio hedging
is the use of forward contracts with respect to portfolio security
positions denominated or quoted in a particular foreign currency.
Portfolio hedging allows the Fund to limit or reduce its exposure
in a foreign currency by entering into a forward contract to sell
such foreign currency (or another foreign currency that acts as a
proxy for that currency) at a future date for a price payable in
U.S. dollars so that the value of the foreign-denominated
portfolio securities can be approximately matched by a foreign-
denominated liability. A Fund may not engage in portfolio hedging
with respect to the currency of a particular country to an extent
greater than the aggregate market value (at the time of making
such sale) of the securities held in its portfolio denominated or
quoted in that particular currency, except that a Fund may hedge
all or part of its foreign currency exposure through the use of a
basket of currencies or a proxy currency where such currencies or
currency act as an effective proxy for other currencies. In such
a case, a Fund may enter into a forward contract where the amount
of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket
hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency held in
a Fund. No Fund may engage in "speculative" currency exchange
transactions.
At the maturity of a forward contract to deliver a particular
currency, a Fund may either sell the portfolio security related to
such contract and make delivery of the currency, or it may retain
the security and either acquire the currency on the spot market or
terminate its contractual obligation to deliver the currency by
purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same
amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for a Fund to
purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver
and if a decision is made to sell the security and make delivery
of the currency. Conversely, it may be necessary to sell on the
spot market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of
currency a Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to
the extent that there has been movement in forward contract
prices. If a Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between
a Fund's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for
the purchase of the currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward
prices increase, a Fund will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. A default on the contract would
deprive the Fund of unrealized profits or force the Fund to cover
its commitments for purchase or sale of currency, if any, at the
current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates. The cost to a Fund of engaging in currency exchange
transactions varies with such factors as the currency involved,
the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are
involved.
Swaps, Caps, Floors and Collars
A Fund may enter into swaps and may purchase or sell related
caps, floors and collars. A Fund would enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
purchases at a later date. The Funds intend to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream a Fund 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 a Fund's exposure to changes in
the value of an index of securities in which the Fund 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. A Fund may
enter into any form of swap agreement if Stein Roe determines it
is consistent with its investment objective and policies.
A swap agreement tends to shift a Fund's investment exposure
from one type of investment to another. For example, if a Fund
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 a
Fund'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 a
Fund. If a swap agreement calls for payments by a Fund, the Fund
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. A Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction,
the unsecured long-term debt of the counterparty, combined with
any credit enhancements, is rated at least A by Standard & Poor's
or Moody's Investors Service, Inc. or has an equivalent rating
from a nationally recognized statistical rating organization or is
determined to be of equivalent credit quality by Stein Roe.
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 a Fund enters into swap arrangements or purchases
or sells caps, floors or collars, liquid assets of the Fund having
a value at least as great as the commitment underlying the
obligations will be segregated on the books of the Fund and held
by the custodian throughout the period of the obligation.
Lending of Portfolio Securities
Subject to restriction (5) under Investment Restrictions in
this SAI, a Fund may lend its portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current
basis in an amount at least equal to the market value of the
securities loaned by the Fund. The Fund would continue to receive
the equivalent of the interest or dividends paid by the issuer on
the securities loaned, and would also receive an additional return
that may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and
obtain the securities loaned at any time on notice of not more
than five business days. The Fund would not have the right to
vote the securities during the existence of the loan but would
call the loan to permit voting of the securities if, in Stein
Roe's judgment, a material event requiring a shareholder vote
would otherwise occur before the loan was repaid. In the event of
bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses, including (a)
possible decline in the value of the collateral or in the value of
the securities loaned during the period while the Fund seeks to
enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c)
expenses of enforcing its rights. No Fund loaned portfolio
securities during the fiscal year ended Sept. 30, 1999 nor does it
currently intend to loan more than 5% of its net assets.
Repurchase Agreements
A Fund may invest in repurchase agreements, provided that it
will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to a
Fund in which the seller agrees to repurchase the securities at a
higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of
bankruptcy of the seller, a Fund could experience both losses and
delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
A Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time a Fund enters into the
commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have
changed. A Fund make such commitments only with the intention of
actually acquiring the securities, but may sell the securities
before settlement date if Stein Roe deems it advisable for
investment reasons. No Fund had during its last fiscal year, nor
does any Fund currently intend to have, commitments to purchase
when-issued securities in excess of 5% of its net assets.
A Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which a Fund is the seller of, rather than
the investor in, securities and agrees to repurchase them at an
agreed-upon time and price. Use of a reverse repurchase agreement
may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction
costs. No Fund entered into reverse repurchase agreements during
the fiscal year ended Sept. 30, 1999.
At the time a Fund enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the Fund
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on the books of the
Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as
borrowing under a line of credit as described below, may increase
net asset value fluctuation.
Short Sales "Against the Box"
A Fund may sell securities short against the box; that is,
enter into short sales of securities that it currently owns or has
the right to acquire through the conversion or exchange of other
securities that it owns at no additional cost. A Fund 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, a Fund does not deliver from
its portfolio the securities sold. Instead, the Fund borrows the
securities sold short from a broker-dealer through which the short
sale is executed, and the broker-dealer delivers such securities,
on behalf of the Fund, to the purchaser of such securities. The
Fund is required to pay to the broker-dealer the amount of any
dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold
short, the Fund must deposit and continuously maintain in a
separate account with its custodian an equivalent amount of the
securities sold short or securities convertible into or
exchangeable for such securities at no additional cost. A Fund is
said to have a short position in the securities sold until it
delivers to the broker-dealer the securities sold. A Fund may
close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities
sold short, rather than by delivering portfolio securities.
Short sales may protect a Fund against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such portfolio securities should be wholly
or partially offset by a corresponding gain in the short position.
However, any potential gains in such portfolio securities should
be wholly or partially offset by a corresponding loss in the short
position. The extent to which such gains or losses are offset
will depend upon the amount of securities sold short relative to
the amount the Fund owns, either directly or indirectly, and, in
the case where the Fund owns convertible securities, changes in
the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss and if the price declines during this period,
the Fund will realize a short-term capital gain. Any realized
short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium,
dividend or interest which the Fund may have to pay in connection
with such short sale. Certain provisions of the Internal Revenue
Code may limit the degree to which a Fund is able to enter into
short sales. There is no limitation on the amount of a Fund's
assets that, in the aggregate, may be deposited as collateral for
the obligation to replace securities borrowed to effect short
sales and allocated to segregated accounts in connection with
short sales. The Portfolios do not currently expect that more
than 5% of total assets would be involved in short sales against
the box.
Rule 144A Securities
A Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the Securities Act of 1933. That Rule permits certain
qualified institutional buyers, such as a Fund, to trade in
privately placed securities that have not been registered for sale
under the 1933 Act. Stein Roe, 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, Stein Roe will
consider the trading markets for the specific security, taking
into account the unregistered nature of a Rule 144A security. In
addition, Stein Roe could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and
of marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be
monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund
does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the
effect of increasing the amount of a Fund's assets invested in
illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. No Fund expects to invest
as much as 5% of its total assets in Rule 144A securities that
have not been deemed to be liquid by Stein Roe.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this SAI, a Fund may establish and maintain a line of credit with
a major bank in order to permit borrowing on a temporary basis to
meet share redemption requests in circumstances in which temporary
borrowing may be preferable to liquidation of portfolio
securities.
Interfund Borrowing and Lending Program
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, a Fund may lend money to and borrow money
from other mutual funds advised by Stein Roe. A Fund will borrow
through the program when borrowing is necessary and appropriate
and the costs are equal to or lower than the costs of bank loans.
Portfolio Turnover
Although the Funds do 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 Funds'
flexibility of investment and emphasis on growth of capital, they
may have greater portfolio turnover than that of mutual funds that
have primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly
from year to year. A high rate of portfolio turnover in a Fund,
if it should occur, would result in increased transaction
expenses, which must be borne by that Fund. High portfolio
turnover may also result in the realization of capital gains or
losses and, to the extent net short-term capital gains are
realized, any distributions resulting from such gains will be
considered ordinary income for federal income tax purposes.
Options on Securities and Indexes
A Fund may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized
contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on Nasdaq. A Fund may
purchase agreements, sometimes called cash puts, that may
accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)
A Fund will write call options and put options only if they
are "covered." For example, in the case of a call option on a
security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or,
if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities held in
its portfolio.
If an option written by a Fund expires, the Fund realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by a Fund expires, the Fund
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when a Fund desires.
A Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is
less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include
supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index,
and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by a Fund is recorded as a
deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid
and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. If a Fund were
unable to close out an option that it had purchased on a security,
it would have to exercise the option in order to realize any
profit or the option would expire and become worthless. If a Fund
were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying
security until the option expired. As the writer of a covered
call option on a security, a Fund foregoes, during the option's
life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased or written
by a Fund, the Fund would not be able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to
exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
A Fund may use interest rate futures contracts, index futures
contracts, and foreign currency futures contracts. An interest
rate, index or foreign currency futures contract provides for the
future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of
an index/2/ at a specified price and time. A public market exists
in futures contracts covering a number of indexes (including, but
not limited to: the Standard & Poor's 500 Index, the Value Line
Composite Index, and the New York Stock Exchange Composite Index)
as well as financial instruments (including, but not limited to:
U.S. Treasury bonds, U.S. Treasury notes, Eurodollar certificates
of deposit, and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
- ---------------
/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
- --------------=
A Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as
options on securities, indexes and foreign currencies (discussed
above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise of a
call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. A Fund might,
for example, use futures contracts to hedge against or gain
exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations
that might adversely affect either the value of the Fund's
securities or the price of the securities that the Fund intends to
purchase. Although other techniques could be used to reduce or
increase that Fund's exposure to stock price, interest rate and
currency fluctuations, the Fund may be able to achieve its
exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
A Fund will only enter into futures contracts and futures
options that are standardized and traded on an exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
The success of any futures transaction depends on 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, Stein Roe 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 a
Fund, the Fund is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S.
Government securities or other securities acceptable to the broker
("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit on the
futures contract, which is returned to the Fund upon termination
of the contract, assuming all contractual obligations have been
satisfied. A Fund expects to earn interest income on its initial
margin deposits. A futures contract held by a Fund is valued
daily at the official settlement price of the exchange on which it
is traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking-to-market."
Variation margin paid or received by a Fund does not represent a
borrowing or loan by the Fund but is instead settlement between
the Fund and the broker of the amount one would owe the other if
the futures contract had expired at the close of the previous day.
In computing daily net asset value, a Fund will mark-to-market its
open futures positions.
A Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by
it. Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Fund engaging in the
transaction realizes a capital gain, or if it is more, the Fund
realizes a capital loss. Conversely, if an offsetting sale price
is more than the original purchase price, the Fund engaging in the
transaction realizes a capital gain, or if it is less, the Fund
realizes a capital loss. The transaction costs must also be
included in these calculations.
Risks Associated with Futures
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities 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 Fund's portfolio, and, in the case of interest
rate futures contracts, the interest rate levels, maturities, and
creditworthiness of the issues underlying the futures contract may
differ from the financial instruments held in the Fund's
portfolio. A decision as to whether, when and how to use futures
contracts involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected stock price or interest
rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or futures option
position. The Fund would be exposed to possible loss on the
position during the interval of inability to close, and would
continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed
above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
Limitations on Options and Futures
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
a Fund may also use those investment vehicles, provided the Board
of Trustees determines that their use is consistent with the
Fund's investment objective.
A Fund will not enter into a futures contract or purchase an
option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by that Fund plus premiums
paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money,"/3/ would exceed 5% of
the Fund's total assets.
- ---------------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- ---------------
When purchasing a futures contract or writing a put option on
a futures contract, a Fund must maintain with its custodian (or
broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contract. When
writing a call option on a futures contract, the Fund similarly
will maintain with its custodian cash or cash equivalents
(including any margin) equal to the amount by which such option is
in-the-money until the option expires or is closed out by the
Fund.
A Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call
options written on indexes if, in the aggregate, the market value
of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent the Fund has written
call options on specific securities in its portfolio, the value of
those securities will be deducted from the current market value of
the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," a Fund will use commodity futures or commodity options
contracts solely for bona fide hedging purposes within the meaning
and intent of Regulation 1.3(z), or, with respect to positions in
commodity futures and commodity options contracts that do not come
within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not
exceed 5% of the fair market value of the assets of a Fund, after
taking into account unrealized profits and unrealized losses on
any such contracts it has entered into [in the case of an option
that is in-the-money at the time of purchase, the in-the-money
amount (as defined in Section 190.01(x) of the Commission
Regulations) may be excluded in computing such 5%].
Taxation of Options and Futures
If a Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by a Fund, the difference between the cash
received at exercise and the premium paid is a capital gain or
loss.
If a call or put option written by a Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security
purchased (put). For cash settlement options and futures options
written by a Fund, the difference between the cash paid at
exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by a Fund was in-the-
money at the time it was written and the security covering the
option was held for more than the long-term holding period prior
to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
If a Fund writes an equity call option/4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
- ----------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
- ----------------
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If a Fund
delivers securities under a futures contract, the Fund also
realizes a capital gain or loss on those securities.
For federal income tax purposes, a Fund generally is required
to recognize as income for each taxable year its net unrealized
gains and losses as of the end of the year on futures, futures
options and non-equity options positions ("year-end mark-to-
market"). Generally, any gain or loss recognized with respect to
such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held by a Fund:
(1) will affect the holding period of the hedged securities; and
(2) may cause unrealized gain or loss on such securities to be
recognized upon entry into the hedge.
If a Fund were to enter into a short index future, short
index futures option or short index option position and the Fund's
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and the Fund's stock positions would be deemed to be positions in
a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for a Fund to continue to qualify for federal income
tax treatment as a regulated investment company, at least 90% of
its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). 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.
Each Fund distributes to shareholders annually any net
capital gains that have been recognized for federal income tax
purposes (including year-end mark-to-market gains) on options and
futures transactions. Such distributions are combined with
distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the
payments.
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 Funds and the Portfolios operate under the following
investment restrictions. No Fund or Portfolio may:
(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 [Funds 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,
[Funds 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, [Funds 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, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Funds 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
(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. Each Fund is also subject to
the following non-fundamental restrictions and policies, which may
be changed by the Board of Trustees. None of the following
restrictions shall prevent a 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. No Fund or Portfolio may:
(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;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) invest more than 25% of its total assets (valued at time
of purchase) in securities of foreign issuers (other than
securities represented by American Depositary Receipts (ADRs) or
securities guaranteed by a U.S. person);
(g) 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;
(h) 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;
(i) 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;
(j) invest more than 15% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities, including repurchase agreements maturing in more than
seven days.
ADDITIONAL INVESTMENT CONSIDERATIONS
Stein Roe seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
take sensible risks and make intelligent investments 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.
MANAGEMENT
The Board of Trustees of the Trust has overall management
responsibility for the Trust and the Fund. 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 with the Trust during past five years
- ------------------ ------------------------ ---------------------------
<S> <C> <C>
William D. Andrews, 52 (4) Executive Vice-President Executive vice president
of Stein Roe
Gary A. Anetsberger, 43 (4) Senior Vice-President;
Treasurer Chief financial officer
and chief administrative
officer of the Mutual
Funds division of Stein
Roe; senior vice president
of Stein Roe since April
1996; vice president of
Stein Roe prior thereto
John A. Bacon Jr., 71(3)(4) Trustee Private investor
William W. Boyd,72(2)(3)(4) Trustee Chairman and director of
Sterling Plumbing
(manufacturer of plumbing
products)
David P. Brady, 35 (4) Vice-President Senior vice president of
Stein Roe since March
1998; vice president of
Stein Roe from Nov. 1995
to March 1998; portfolio
manager for Stein Roe
since 1993
Thomas W. Butch, 42 (4) President President of the Mutual
Funds division of Stein
Roe since March 1998;
senior vice president of
Stein Roe from Sept. 1994
to March 1998; first vice
president, corporate
communications, of Mellon
Bank Corporation prior
thereto
Daniel K. Cantor, 40 (4) Vice-President Senior vice president of
Stein Roe
Kevin M. Carome, 43 (4) Executive Vice-President;
Assistant Secretary Senior vice president,
legal, Liberty Funds Group
LLC (an affiliate of Stein
Roe) since Jan. 1999;
general counsel and
secretary of Stein Roe
since Jan. 1998; associate
general counsel and vice
president of Liberty
Financial Companies, Inc.
(the indirect parent of
Stein Roe) through Jan.
1999
J. Kevin Connaughton, 35(4) Vice-President Vice president of Colonial
Management Associates,
Inc. ("CMA") , since
February 1998; senior tax
manager, Coopers &
Lybrand, LLP from April
1996 to January 1998; vice
president, 440 Financial
Group/First Data Investor
Services Group prior
thereto
Lindsay Cook, 47 (1)(2)(4) Trustee Executive vice president
of Liberty Financial
Companies, Inc. since
March 1997; senior vice
president prior thereto
William M. Garrison, 33 Vice-President Vice president of Stein
Roe since Feb. 1998;
associate portfolio
manager for Stein Roe
since August 1994
Erik P. Gustafson, 35 (4) Vice-President Senior portfolio manager
of Stein Roe; senior vice
president of Stein Roe
since April 1996; vice
president of Stein Roe
prior thereto
Douglas A. Hacker, 43(3)(4) Trustee Senior vice president and
chief financial officer of
UAL, Inc. (airline)
Loren A. Hansen, 51 (4) Executive Vice-President Chief investment
officer/equity of CMA
since 1997; executive vice
president of Stein Roe
since Dec. 1995; vice
president of The Northern
Trust (bank) prior thereto
James P. Haynie, 36 (4) Vice-President Vice President of Stein
Roe since Oct. 1998; Vice
President of CMA
Harvey B. Hirschhorn, 49(4) Vice-President Executive vice president,
senior portfolio manager,
and chief economist and
investment strategist of
Stein Roe; director of
research of Stein Roe,
1991 to 1995
Timothy J. Jacoby, 47 (4) Vice-President Fund treasurer for Liberty
Funds Group LLC since
Sept. 1996 and chief
financial officer since
Aug. 1997; senior vice
president of Fidelity
Investments prior thereto
Janet Langford Kelly,41(3)(4) Trustee Senior vice president,
secretary and general
counsel of Sara Lee
Corporation (branded,
packaged, consumer-
products manufacturer)
since 1995; partner of
Sidley & Austin (law firm)
prior thereto
Gail D. Knudsen, 37 (4) Vice-President Vice president and
assistant controller of
CMA
Lynn C. Maddox, 58 Vice-President Senior vice president of
Stein Roe
Arthur J. McQueen, 41 Vice-President Senior vice president of
Stein Roe
Charles R. Nelson,57(3)(4) Trustee Van Voorhis Professor of
Political Economy,
Department of Economics of
the University of
Washington
Nicolette D. Parrish, 49(4) Vice-President;
Assistant Secretary Senior legal assistant and
assistant secretary of
Stein Roe
Michael E. Rega, 39 (4) Vice-President Vice President of Stein
Roe since Oct. 1998; Vice
President of CMA since
1996
Janet B. Rysz, 43 (4) Assistant Secretary Senior legal assistant and
assistant secretary of
Stein Roe
Thomas C. Theobald, 62(3)(4) Trustee Managing director, William
Blair Capital Partners
(private equity fund)
Heidi J. Walter, 32 (4) Vice-President;
Secretary Vice president of Stein
Roe since March 1998;
senior legal counsel for
Stein Roe since Feb. 1998;
legal counsel for Stein
Roe March 1995 to Jan.
1998; associate with
Beeler Schad & Diamond, PC
(law firm) prior thereto
<FN>
_______________________
(1) Trustee who is an "interested person" of the Trust and of
Stein Roe, 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 are
trustees or officers of other investment companies managed by
Stein Roe. Mr. Anetsberger, Mr. Butch, and Ms. Walter are also
officers of Liberty Funds Distributor, Inc., the Fund's
distributor. The address of Mr. Bacon is 4N640 Honey Hill Road,
Box 296, Wayne, IL 60184; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, IL 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Hacker is P.O. Box 66100,
Chicago, IL 60666; that of Ms. Kelly is Three First National
Plaza, Chicago, IL 60602; that of Mr. Nelson is Department of
Economics, University of Washington, Seattle, WA 98195; that of
Mr. Theobald is Suite 1300, 222 West Adams Street, Chicago, IL
60606; that of Mr. Cantor is 1330 Avenue of the Americas, New
York, NY 10019; that of Ms. Knudsen, Ms. Rao, and Messrs.
Connaughton, Haynie, Jacoby, and Rega is One Financial Center,
Boston, MA 02111; and that of the other officers is One South
Wacker Drive, Chicago, IL 60606.
Officers and trustees affiliated with Stein Roe 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 Stein Roe 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 during the fiscal
year ended Sept. 30, 1999 to each of the trustees:
Compensation from the
Stein Roe Fund Complex*
-----------------------
Aggregate Compensation Total Average
Name of Trustee from the Trust Compensation Per Series
- ------------------- -------------------- ------------ ----------
Thomas W. Butch** -0- -0- -0-
Lindsay Cook -0- -0- -0-
John A. Bacon Jr.**
William W. Boyd
Douglas A. Hacker
Janet Langford Kelly
Charles R. Nelson
Thomas C. Theobald
_______________
* At Sept. 30, 1999, the Stein Roe Fund Complex consisted of four
series of the Trust, one series of Stein Roe Trust, four series of
Stein Roe Municipal Trust, 12 series of Stein Roe Investment
Trust, five series of Liberty-Stein Roe Advisor Trust, five series
of SteinRoe Variable Investment Trust, 12 portfolios of SR&F Base
Trust, Stein Roe Floating Rate Income Fund, Stein Roe
Institutional Floating Rate Income Fund, and Stein Roe Floating
Rate Limited Liability Company.
** Mr. Butch served as a trustee until Nov. 3, 1998; Mr. Bacon
was elected a trustee effective Nov. 3, 1998.
FINANCIAL STATEMENTS
Please refer to (1) the Sept. 30, 1999 Financial Statements
(statements of assets and liabilities and schedules of investments
as of Sept. 30, 1999 and the statements of operations, changes in
net assets, and notes thereto) and the report of independent
public accountants contained in the Sept. 30, 1999 Annual Report.
The Financial Statements and the report of independent public
accountants (but no other material from the Annual Report) are
incorporated herein by reference. The Annual Report may be
obtained at no charge by telephoning 800-338-2550.
PRINCIPAL SHAREHOLDERS
As of August 31, 1999, the only persons known by the Trust to
own of record or "beneficially" 5% or more of the outstanding
shares of a Fund within the definition of that term as contained
in Rule 13d-3 under the Securities Exchange Act of 1934 were as
follows:
Approximate
Percentage of
Outstanding
Name and Address Fund Shares Held
- --------------------- --------------------------- -------------
U.S. Bank National Growth & Income Fund ____%
Association (1)
410 N. Michigan Avenue
Chicago, IL 60611
Charles Schwab & Co. Growth & Income Fund 31.00%
Inc. Special Custody
Account for the Exclusive
Benefit of Customers (2)
Attn Mutual Funds
101 Montgomery Street
San Francisco., CA 94104-4122
____________________________________
(1) Shares held as custodian.
(2) Shares held for accounts of customers.
The following table shows shares of the Funds held by the
categories of persons indicated as of August 31, 1999, and in each
case the approximate percentage of outstanding shares represented:
Clients of Stein Roe Trustees and
in their Client Accounts* Officers
------------------------ -------------------
Shares Held Percent Shares Held Percent
----------- ------- ----------- -------
Growth & Income Fund
Growth Investor Fund
_________________________
*Stein Roe may have discretionary authority over such shares
and, accordingly, they could be deemed to be owned "beneficially"
by Stein Roe under Rule 13d-3. However, Stein Roe disclaims
actual beneficial ownership of such shares.
**Represents less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Stein Roe & Farnham Incorporated provides investment
management services to each Portfolio and administrative services
to each Fund and each Portfolio. Stein Roe 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 Liberty Corporate Holdings, Inc., which is a wholly
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 Stein Roe are Kenneth R. Leibler, C. Allen
Merritt, Jr., and Thomas W. Butch. Mr. Leibler is President and
Chief Executive Officer of Liberty Financial; Mr. Merritt is Chief
Operating Officer of Liberty Financial; and Mr. Butch is President
of Stein Roe's Mutual Funds division. The business address of
Messrs. Leibler and Merritt is 600 Atlantic Avenue, Boston, MA
02210; and that of Mr. Butch is One South Wacker Drive, Chicago,
IL 60606.
Stein Roe and its predecessor have been providing investment
advisory services since 1932. Stein Roe acts as investment
adviser to wealthy individuals, trustees, pension and profit
sharing plans, charitable organizations, and other institutional
investors. As of June 30, 1999, Stein Roe managed over $22.2
billion in assets: over $6.3 billion in equities and over $15.9
billion in fixed income securities (including $1 billion in
municipal securities). The $22.2 billion in managed assets
included over $9.2 billion held by mutual funds managed by Stein
Roe (approximately 15% of the mutual fund assets were held by
clients of Stein Roe). These mutual funds were owned by over
282,000 shareholders. The $9.2 billion in mutual fund assets
included over $679 million in over 42,000 IRA accounts. In
managing those assets, Stein Roe utilizes a proprietary computer-
based information system that maintains and regularly updates
information for approximately 7,500 companies. Stein Roe also
monitors over 1,400 issues via a proprietary credit analysis
system. At June 30, 1999, Stein Roe employed 18 research analysts
and 54 account managers. The average investment-related
experience of these individuals was 17 years.
Stein Roe CounselorSM is a professional investment advisory
service offered by Stein Roe to Fund shareholders. Stein Roe
CounselorSM is designed to help shareholders construct Fund
investment portfolios to suit their individual needs. Based on
information shareholders provide about their financial goals and
objectives in response to a questionnaire, Stein Roe's investment
professionals create customized portfolio recommendations.
Shareholders participating in Stein Roe CounselorSM are free to
self direct their investments while considering Stein Roe's
recommendations. In addition to reviewing shareholders' goals and
objectives periodically and updating portfolio recommendations to
reflect any changes, Stein Roe provides shareholders participating
in these programs with dedicated representatives. Other
distinctive services include specially designed account statements
with portfolio performance and transaction data, asset allocation
planning tools, newsletters, customized website content, and
regular investment, economic and market updates. A $50,000
minimum investment is required to participate in the program.
In return for its services, Stein Roe is entitled to receive
a monthly administrative fee from each Fund and a monthly
management fee from each non-feeder Fund and each Portfolio. The
table below shows the annual rates of such fees as a percentage of
average net assets (shown in millions), gross fees paid for the
three most recent fiscal years, and any expense reimbursements by
Stein Roe:
<TABLE>
<CAPTION>
Fund/Portfolio Type Current Rates Year Year Year
(dollars shown Ended Ended Ended
in millions) 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C>
Growth & Income
Fund Management N/A N/A $ 484,689
Administrative .15% up to $500,
.125% next $500,
.10% thereafter $ 545,089 422,974
Growth & Income
Portfolio Management .60% up to $500,
.55% next $500,
.50% thereafter 2,187,961 1,191,730
Growth Investor
Fund Administrative .15% up to $500,
.125% next $500,
.10% thereafter N/A N/A
Growth Investor
Portfolio Management .60% up to $500,
.55% next $500,
.50% thereafter 3,758,114 1,567,638
</TABLE>
Stein Roe provides office space and executive and other
personnel to the Funds, and bears any sales or promotional
expenses. Each Fund pays all expenses other than those paid by
Stein Roe, including but not limited to printing and postage
charges, securities registration and custodian fees, and expenses
incidental to its organization.
The administrative agreement provides that Stein Roe shall
reimburse the Fund to the extent that total annual expenses of the
Fund (including fees paid to Stein Roe, but excluding taxes,
interest, commissions and other normal charges incident to the
purchase and sale of portfolio securities, and expenses of
litigation to the extent permitted under applicable state law)
exceed the applicable limits prescribed by any state in which
shares of the Fund are being offered for sale to the public;
provided, however, Stein Roe is not required to reimburse a 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 a Fund, Stein Roe may voluntarily waive its fees
and/or absorb certain expenses, as described under The Funds-Your
Expenses in the Prospectus. Any such reimbursement will enhance
the yield of such Fund.
Each management agreement provides that neither Stein Roe,
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
Stein Roe 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 a series of the Trust are
paid solely out of the assets of that series. Any expenses
incurred by the Trust that are not solely attributable to a
particular series are apportioned in such manner as Stein Roe
determines is fair and appropriate, unless otherwise specified by
the Board of Trustees.
Bookkeeping and Accounting Agreement
Pursuant to a separate agreement with the Trust, Stein Roe
receives a fee for performing certain bookkeeping and accounting
services. For such services, Stein Roe 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, 1997, 1998 and
1999, Stein Roe received aggregate fees of $315,067, $358,936 and
$______, respectively, from the Trust for services performed under
this Agreement.
DISTRIBUTOR
Shares of the Funds are distributed by Liberty Funds
Distributor, Inc. (the "Distributor"), One Financial Center,
Boston, MA 02111, an indirect subsidiary of Liberty Financial,
under a Distribution Agreement. 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 ("independent
trustees"). The Distributor has no obligation, as underwriter, to
buy Fund shares, and purchases shares only upon receipt of orders
from authorized financial service firms or investors. 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.
12b-1 Plans, Contingent Deferred Sales Charges, and Conversion of
Shares
The trustees of the Trust have adopted a plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plan").
The Plan provides that, as compensation for personal service
and/or the maintenance of shareholder accounts, the Distributor
receives a service fee at an annual rate not to exceed 0.25% of
net assets attributed to each class of shares other than Class Z
and S shares. The Plan also provides that as compensation for the
promotion and distribution of shares of a Fund including its
expenses related to sale and promotion of Fund shares, the
Distributor receives from the Fund a fee at an annual rate not
exceeding 0.10% of the average net assets attributed to Class A
shares, and 0.75% of the average net assets attributed to each of
its Class B and Class C shares. The Plan further provides that,
as compensation for services and/or distribution, the Distributor
receives a fee at an annual rate not to exceed 0.25% of the
average net assets attributable to Class Z and S shares. At this
time, the Distributor has voluntarily agreed to limit the Class A
distribution fee to 0.05% annually. The Distributor may terminate
this voluntary limitation without shareholder approval. Class B
shares automatically convert to Class A shares approximately eight
years after the Class B shares are purchased. Class C, Class K,
and Class Z shares do not convert. The Distributor generally pays
this amount to institutions that distribute Fund shares and
provide services to the Funds and their shareholders. Those
institutions may use the payments for, among other purposes,
compensating employees engaged in sales and/or shareholder
servicing. The amount of fees paid by a Fund during any year may
be more or less than the cost of distribution or other services
provided to the Fund. NASD rules limit the amount of annual
distribution fees that may be paid by a mutual fund and impose a
ceiling on the cumulative sales charges paid. The Trust's Plan
complies with those rules.
The trustees believe that the Plan could be a significant
factor in the growth and retention of Fund assets resulting in a
more advantageous expense ratio and increased investment
flexibility which could benefit each class of shareholders. The
Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote
of the trustees, including the independent trustees. The Plan may
not be amended to increase the fee materially without approval by
a vote of a majority of the outstanding voting securities of the
relevant class of shares and all material amendments of the Plan
must be approved by the trustees in the manner provided in the
foregoing sentence. The Plan may be terminated at any time by a
vote of a majority of the independent trustees or by a vote of a
majority of the outstanding voting securities of the relevant
Class of shares.
Each Fund offers five classes of shares (Class A, Class B,
Class C, Class Z, and Class S). The Funds may in the future offer
other classes of shares. Class Z and S shares are offered at net
asset value, subject to a Rule 12b-1 fee. Class A shares are
offered at net asset value plus a front-end sales charge to be
imposed at the time of purchase and are subject to a Rule 12b-1
fee. Class B shares are offered at net asset value subject to a
Rule 12b-1 fee and a declining contingent deferred sales charge on
redemptions made within six years of purchase. Class C shares are
offered at net asset value, subject to a Rule 12b-1 fee and a
contingent deferred sales charge on redemptions made within one
year of purchase. The contingent deferred sales charges are
described in the Prospectus.
No contingent deferred sales charge will be imposed on shares
derived from reinvestment of distributions or amounts representing
capital appreciation. In determining the applicability and rate
of any contingent deferred sales charge, it will be assumed that a
redemption is made first of shares representing capital
appreciation, next of shares representing reinvestment of
distributions, and finally of other shares held by the shareholder
for the longest time.
Eight years after the end of the month in which a Class B
share is purchased, such shares and a pro-rated portion of any
shares issued on the reinvestment of distributions will be
automatically invested into Class A shares of that Fund having an
equal value, which are not subject to the distribution or service
fee.
TRANSFER AGENT
SteinRoe Services Inc. ("SSI"), One South Wacker Drive,
Chicago, IL 60606, is the agent of the Trust for the transfer of
shares, disbursement of dividends, and maintenance of shareholder
accounting records. For performing these services, SSI receives
fees from each Fund based on an annual rate of 0.22% of average
net assets of Class S shares and 0.236% of Class A, B, C, and Z
shares. The Trust believes the charges by SSI to the Funds are
comparable to those of other companies performing similar
services. (See Investment Advisory and Other Services.) Under a
separate agreement, SSI also provides certain investor accounting
services to the Portfolios.
Some financial services firms ("FSF") or other intermediaries
having special selling arrangements with the Distributor,
including certain bank trust departments, wrap fee programs and
retirement plan service providers ("Intermediaries") that maintain
nominee accounts with the Funds for their clients who are Fund
shareholders, may be paid a fee from SSI for shareholder servicing
and accounting services they provide with respect to the
underlying Fund shares.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus
under the heading Your Account, and that information is
incorporated herein by reference. It is the responsibility of any
investment dealers, banks, or other institutions, including
retirement plan service providers, through whom you purchase or
redeem shares to establish procedures insuring the prompt
transmission to the Trust of any order.
The Funds will accept unconditional orders for shares to be
executed at the public offering price based on the net asset value
per share next determined after the order is received in good
order. The public offering price is the net asset value plus the
applicable sales charge, if any. In the case of orders for
purchase of shares placed through FSFs or Intermediaries, the
public offering price will be determined on the day the order is
placed in good order, but only if the FSF or Intermediary receives
the order prior to the time at which shares are valued and
transmits it to the Fund before that day's transactions are
processed. If the FSF or Intermediary fails to transmit before
the Fund processes that day's transactions, the customer's
entitlement to that day's closing price must be settled between
the customer and the FSF or Intermediary. If the FSF or
Intermediary receives the order after the time at which the Fund
values its shares, the price will be based on the net asset value
determined as of the close of the NYSE on the next day it is open.
If funds for the purchase of shares are sent directly to the
Transfer Agent, they will be invested at the public offering price
next determined after receipt in good order. Payment for shares
of the Fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.
Each Fund receives the entire net asset value of shares sold.
For Class A shares, which are subject to an initial sales charge,
the Distributor's commission is the sales charge shown in the
Prospectus less any applicable FSF or Intermediary discount. The
FSF or Intermediary discount is the same for all FSFs or
Intermediaries, except that the Distributor retains the entire
sales charge on any sales made to a shareholder who does not
specify an FSF or Intermediary on the application, and except that
the Distributor may from time to time reallow additional amounts
to all or certain FSFs or Intermediaries. The Distributor
generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such
charges generally reimburse the Distributor for any up-front
and/or ongoing commissions paid to FSFs or Intermediaries.
Checks presented for the purchase of Fund shares which are
returned by the purchaser's bank will subject the purchaser to a
$15 service fee for each check returned.
The Transfer Agent acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, the designated
FSF or Intermediary will receive the applicable sales commission.
Shareholders may change FSFs or Intermediaries at any time by
written notice to the Transfer Agent, provided the new FSF or
Intermediary has a sales agreement with the Distributor.
Determination of Net Asset Value
The net asset value per share for each Class is determined as
of the close of business (normally 3 p.m., Central time, or 4
p.m., Eastern time) 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 of a Fund should be
determined on any such day, in which case the determination will
be made at 3 p.m., Central time.
A Portfolio may invest in securities that are listed
primarily on foreign exchanges that are open and allow trading on
days on which the Funds do not determine net asset value. This
may significantly affect the net asset value of a Fund's
redeemable securities on days when an investor cannot redeem such
securities. Debt securities generally are valued by a pricing
service which determines valuations based upon market transactions
for normal, institutional-size trading units of similar
securities. However, in circumstances where such prices are not
available or where Stein Roe deems it appropriate to do so, an
over-the-counter or exchange bid quotation is used. Securities
listed on an exchange or on Nasdaq are valued at the last sale
price. Listed securities for which there were no sales during the
day and unlisted securities are valued at the last quoted bid
price. Options are valued at the last sale price or in the
absence of a sale, the mean between the last quoted bid and
offering prices. Short-term obligations with a maturity of 60
days or less are valued at amortized cost pursuant to procedures
adopted by the Board of Trustees. The values of foreign
securities quoted in foreign currencies are translated into U.S.
dollars at the exchange rate for that day. Positions for which
there are no such valuations and other assets are valued at fair
value as determined in good faith under the direction of the Board
of Trustees.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the NYSE. Trading on certain foreign
securities markets may not take place on all NYSE business days,
and trading on some foreign securities markets takes place on days
that are not NYSE business days and on which net asset value is
not calculated. The values of these securities used in
determining net asset value are computed as of such times. Also,
because of the amount of time required to collect and process
trading information as to large numbers of securities issues, the
values of certain securities (such as convertible bonds, U.S.
government securities, and tax-exempt securities) are determined
based on market quotations collected earlier in the day at the
latest practicable time prior to the close of the NYSE.
Occasionally, events affecting the value of such securities may
occur between such time and the close of the NYSE which will not
be reflected in the computation of the net asset value. If events
materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair
value following procedures approved by the Board of Trustees.
The Trust intends to pay all redemptions in cash and is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or one percent of the net assets of the Trust during any
90-day period for any one shareholder. However, redemptions in
excess of such limit may be paid wholly or partly by a
distribution in kind of securities. If redemptions were made in
kind, the redeeming shareholders might incur transaction costs in
selling the securities received in the redemptions.
Due to the relatively high cost of maintaining smaller
accounts, the Trust may deduct $10 (payable to the Transfer Agent)
from accounts valued at less than $1,000 unless the account value
has dropped below $1,000 solely as a result of share depreciation.
An investor will be notified that the value of his account is less
than that minimum and allowed at least 60 days to bring the value
of the account up to at least $1,000 before the fee is deducted.
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 Fund 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 of a Fund not reasonably practicable.
Special Purchase Programs/Investor Services
The following special purchase programs/investor services may
be changed or eliminated at any time.
Fundamatic Program (Classes A, B and C only). As a
convenience to investors, Class A, B and C shares of the Funds may
be purchased through the Colonial Fundamatic Program.
Preauthorized monthly bank drafts or electronic funds transfer for
a fixed amount of at least $50 are used to purchase Fund shares at
the public offering price next determined after the Transfer Agent
receives the proceeds from the draft (normally the 5th or 20th of
each month, or the next business day thereafter). If your
Fundamatic purchase is by electronic funds transfer, you may
request the Fundamatic purchase for any day. Further information
and application forms are available from FSFs or Intermediaries or
from the Distributor.
Tax-Sheltered Retirement Plans (Classes A, B and C only).
The Distributor offers prototype tax-qualified plans, including
IRAs and pension and profit-sharing plans for individuals,
corporations, employees and the self-employed. The minimum
initial investment for a retirement account sponsored by the
Distributor is $25. The First National Bank of Boston is the
trustee of the Distributor's prototype plans and charges a $10
annual fee. Detailed information concerning these retirement
plans and copies of the retirement plans are available from the
Distributor.
Participants in other prototype retirement plans (other than
IRAs) also are charged a $10 annual fee unless the plan maintains
an omnibus account with the Transfer Agent. Participants in
prototype plans offered by the Distributor (other than IRAs) who
liquidate the total value of their account will also be charged a
$15 close-out processing fee payable to the Transfer Agent. The
fee is in addition to any applicable contingent deferred sales
charge. The fee will not apply if the participant uses the
proceeds to open an IRA Rollover account in any fund, or if the
plan maintains an omnibus account.
Consultation with a competent financial and tax advisor
regarding these plans and consideration of the suitability of Fund
shares as an investment under the Employee Retirement Income
Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling the Transfer
Agent, shareholders, beneficiaries or their FSF or Intermediary of
record may change an address on a recorded telephone line.
Confirmations of address change will be sent to both the old and
the new addresses. Telephone redemption privileges are suspended
for 30 days after an address change is effected.
Colonial Cash Connection. Dividends and any other
distributions, including Systematic Withdrawal Plan (SWP)
payments, on Class A, Class B or Class C shares may be
automatically deposited to a shareholder's bank account via
electronic funds transfer. Shareholders wishing to avail
themselves of this electronic transfer procedure should complete
the appropriate sections of the Application.
Programs for Reducing or Eliminating Sales Charges
Right of Accumulation and Statement of Intent (Class A shares
only). Reduced sales charges on Class A shares can be effected by
combining a current purchase with prior purchases of Class A, B,
C, T, and Z shares of other funds managed by Colonial Management
Associates, Inc. or distributed by the Distributor (such funds
hereinafter referred to as "Colonial Funds"). The applicable
sales charged is based on the combined total of: (1) the current
purchase and (2) the value at the public offering price at the
close of business on the previous day of all Colonial Funds' Class
A shares held by the shareholder (except shares of any Colonial
money market fund, unless such shares were acquired by exchange
from Class A shares of another Colonial Fund other than a money
market fund and Class B, C, T and Z shares).
The Distributor must be promptly notified of each purchase
which entitles a shareholder to a reduced sales charge. Such
reduced sales charge will be applied upon confirmation of the
shareholder's holdings by the Transfer Agent. A Colonial Fund may
terminate or amend this right of Accumulation.
Any person may qualify for reduced sales charges on purchase
of Class A shares made within a 13-month period pursuant to a
Statement of Intent ("Statement"). A shareholder may include, as
an accumulation credit toward the completion of such Statement,
the value of all Class A, B, C, T and Z shares held by the
shareholder on the date of the Statement in the Trust's Funds and
Colonial Funds (except shares of any Colonial money market fund,
unless such shares were acquired by exchange from Class A shares
of another non-money market Colonial Fund). The value is
determined at the public offering price on the date of the
Statement. Purchases made through reinvestment of distributions
do not count toward satisfaction of the Statement.
During the term of a Statement, the Transfer Agent will hold
shares in escrow to secure payment of the higher sales charge
applicable to Class A shares actually purchased. Dividends and
capital gains will be paid on all escrowed shares and these shares
will be released when the amount indicated has been purchased. A
Statement does not obligate the investor to buy or the Fund to
sell the amount of the Statement.
If a shareholder exceeds the amount of the Statement and
reaches an amount which would qualify for a further quantity
discount, a retroactive price adjustment will be made at the time
of expiration of the Statement. The resulting difference in
offering price will purchase additional shares for the
shareholder's account at the then-current applicable offering
price. As a part of this adjustment, the FSF or Intermediary
shall return to the Distributor the excess commission previously
paid during the 13-month period.
If the amount of the Statement is not purchased, the
shareholder shall remit to the Distributor an amount equal to the
difference between the sales charge paid and the sales charge that
should have been paid. If the shareholder fails within 20 days
after a written request to pay such difference in sales charge,
the Transfer Agent will redeem that number of escrowed Class A
shares equal to such difference. The additional amount of FSF or
Intermediary discount from the applicable offering price shall be
remitted to the shareholder's FSF or Intermediary of record.
Additional information about and the terms of Statements of
Intent are available from your FSF or Intermediary or from the
Transfer Agent at 1-800-345-6611.
Reinstatement Privilege. An investor who has redeemed Fund
shares may, upon request, reinstate within one year a portion or
all of the proceeds of such sale in shares of the same class of
that Fund at the net asset value next determined after the
Transfer Agent receives a written reinstatement request and
payment. Any contingent deferred sales charge paid at the time of
the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the
reinstatement will not be counted in aging the reinstated shares
for purposes of calculating any contingent deferred sales charge
or conversion date. Investors who desire to exercise this
privilege should contact their FSF or Intermediary or the
Distributor. Shareholders may exercise this privilege an
unlimited number of times. Exercise of this privilege does not
alter the federal income tax treatment of any capital gains
realized on the prior sale of Fund shares, but to the extent any
such shares were sold at a loss, some or all of the loss may be
disallowed for tax purposes. Consult your tax advisor.
Shareholders may reinvest all or a portion of a recent cash
distribution without a sales charge. A shareholder request must
be received within 30 calendar days of the distribution. A
shareholder may exercise this privilege only once. No charge is
currently made for reinvestment.
Privileges of Adviser Employees, FSFs or Intermediaries
(Class A shares only). Class A shares may be sold at net asset
value to the following individuals whether currently employed or
retired: Trustees of funds advised or administered by Stein Roe
or an affiliate of Stein Roe; directors, officers and employees of
Stein Roe or an affiliate of Stein Roe, including the Transfer
Agent and the Distributor; registered representatives and
employees of FSFs or Intermediaries (including their affiliates)
that are parties to dealer agreements or other sales arrangements
with the Distributor; and such persons' families and their
beneficial accounts.
Sponsored Arrangements (Class A shares only). Class A shares
may be purchased at reduced or no sales charge pursuant to
sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group
solicitation of, its employees, members or participants in
connection with the purchase of Fund shares on an individual
basis. The amount of the sales charge reduction will reflect the
anticipated reduction in sales expense associated with sponsored
arrangements. The reduction in sales expense, and therefore the
reduction in sales charge, will vary depending on factors such as
the size and stability of the organization's group, the term of
the organization's existence and certain characteristics of the
members of its group. The Fund reserves the right to revise the
terms of or to suspend or discontinue sales pursuant to sponsored
plans at any time.
Class A shares may also be purchased at reduced or no sales
charge by clients of dealers, brokers or registered investment
advisers that have entered into agreements with the Distributor
pursuant to which the Fund is included as an investment option in
programs involving fee-based compensation arrangements.
Waiver of Contingent Deferred Sales Charges (Class A accounts
in excess of $1,000,000, and Classes B and C). Contingent
deferred sales charges may be waived on redemptions in the
following situations with the proper documentation:
1. Death. Contingent deferred sales charges may be waived on
redemptions within one year following the death of (i) the sole
shareholder on an individual account, (ii) a joint tenant where
the surviving joint tenant is the deceased's spouse, or (iii) the
beneficiary of a Uniform Gifts to Minors Act ("UGMA"), Uniform
Transfers to Minors Act ("UTMA") or other custodial account. If,
upon the occurrence of one of the foregoing, the account is
transferred to an account registered in the name of the deceased's
estate, the contingent deferred sales charge will be waived on any
redemption from the estate account occurring within one year after
the death. If the shares are not redeemed within one year of the
death, they will remain subject to the applicable contingent
deferred sales charge, when redeemed from the transferee's
account. If the account is transferred to a new registration and
then a redemption is requested, the applicable contingent deferred
sales charge will be charged.
2. Systematic Withdrawal Plan (SWP). Contingent deferred sales
charges may be waived on redemptions occurring pursuant to a
monthly, quarterly or semiannual SWP established with the Transfer
Agent, to the extent the redemptions do not exceed, on an annual
basis, 12% of the account's value, so long as at the time of the
first SWP redemption the account had distributions reinvested for
a period at least equal to the period of the SWP (e.g., if it is a
quarterly SWP, distributions must have been reinvested at least
for the three month period prior to the first SWP redemption);
otherwise contingent deferred sales charges will be charged on SWP
redemptions until this requirement is met; this requirement does
not apply to Class B or C accounts if the SWP is set up at the
time the account is established, and distributions are being
reinvested. See below under How to Sell Shares-Systematic
Withdrawal Plan.
3. Disability. Contingent deferred sales charges may be waived
on redemptions occurring within one year after the sole
shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in
Section 72(m)(7) of the Internal Revenue Code). To be eligible
for such waiver, (i) the disability must arise after the purchase
of shares and (ii) the disabled shareholder must have been under
age 65 at the time of the initial determination of disability. If
the account is transferred to a new registration and then a
redemption is requested, the applicable contingent deferred sales
charge will be charged.
4. Death of a trustee. Contingent deferred sales charges may be
waived on redemptions occurring upon dissolution of a revocable
living or grantor trust following the death of the sole trustee
where (i) the grantor of the trust is the sole trustee and the
sole life beneficiary, (ii) death occurs following the purchase
and (iii) the trust document provides for dissolution of the trust
upon the trustee's death. If the account is transferred to a new
registration (including that of a successor trustee), the
applicable contingent deferred sales charge will be charged upon
any subsequent redemption.
5. Returns on excess contributions. Contingent deferred sales
charges may be waived on redemptions required to return excess
contributions made to retirement plans or IRAs, so long as the FSF
or Intermediary agrees to return the applicable portion of any
commission paid by the Distributor.
6. Qualified Retirement Plans. Contingent deferred sales charges
may be waived on redemptions required to make distributions from
qualified retirement plans following (i) normal retirement (as
stated in the plan document) or (ii) separation from service. For
shares purchased in a prototype 401K plan after Sept. 1, 1997,
contingent deferred sales charges will not be waived upon
separation from service except if such plan is held in an omnibus
account. Contingent deferred sales charges also will be waived on
SWP redemptions made to make required minimum distributions from
qualified retirement plans that have invested in a Fund for at
least two years.
The contingent deferred sales charge also may be waived where
the FSF or Intermediary agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being
redeemed.
How to Sell ("Redeem") Shares
Shares may be sold on any day the NYSE is open, either
directly to a Fund or through an FSF or Intermediary. Sale
proceeds generally are sent within seven days (usually on the next
business day after your request is received in good form).
However, for shares recently purchased by check, the Fund will
delay sending proceeds for 15 days in order to protect the Fund
against financial losses and dilution in net asset value caused by
dishonored purchase payment checks. To avoid delays in payment,
investors are advised to purchase shares unconditionally, such as
by certified check or other immediately available funds.
To sell shares directly to a Fund, send a signed letter of
instruction to the Transfer Agent. The sale price is the net
asset value next determined (less any applicable contingent
deferred sales charge) after the Fund or an FSF or Intermediary
receives the request in proper form. Signatures must be
guaranteed by a bank, a member firm of a national stock exchange
or another eligible guarantor institution. Additional
documentation is required for sales by corporations, agents,
fiduciaries, surviving joint owners and IRA holders. Call the
Transfer Agent for more information at (800) 345-6611.
FSFs and Intermediaries must receive requests before the time
at which Fund shares are valued to receive that day's price, are
responsible for furnishing all necessary documentation to the
Transfer Agent and may charge for this service.
Systematic Withdrawal Plan (Class A, B and C shares). If a
shareholder's account balance is at least $5,000, the shareholder
may establish a SWP. A specified dollar amount or percentage of
the then-current net asset value of the shareholder's investment
in the Fund designated by the shareholder will be paid monthly,
quarterly or semiannually to a designated payee. The amount or
percentage the shareholder specifies generally may not, on an
annualized basis, exceed 12% of the value, as of the time the
shareholder makes the election of the shareholder's investment.
Withdrawals from Class B and C shares under a SWP will be treated
as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in the
shareholder's account are insufficient to cover plan payments, as
redemptions from the earliest purchased Fund shares in the
shareholder's account. No contingent deferred sales charges apply
to a redemption pursuant to a SWP of 12% or less, even if, after
giving effect to the redemption, the shareholder's account balance
is less than the shareholder's base amount. Qualified plan
participants who are required by Internal Revenue Code regulation
to withdraw more than 12%, on an annual basis, of the value of
their Class B or C share account may do so but will be subject to
a contingent deferred sales charge ranging from 1% to 5% of the
excess over 12%. If a shareholder wishes to participate in a SWP,
the shareholder must elect to have all income dividends and other
distributions payable in Fund shares rather than in cash.
A shareholder or its FSF or Intermediary of record may
establish a SWP account by telephone on a recorded line. However,
SWP checks will be payable only to the shareholder and sent to the
address of record. SWPs from retirement accounts cannot be
established by telephone.
Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is
ordinarily disadvantageous because of duplicative sales charges.
For this reason, a shareholder may not maintain a plan for the
accumulation of shares of a Fund (other than through the
reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may
result in a gain or loss for tax purposes, may involve the use of
principal and may eventually use up all of the shares in a
shareholder's account.
A Fund may terminate a shareholder's SWP if the shareholder's
account balance falls below $5,000 due to any transfer or
liquidation of shares other than pursuant to the SWP. SWP
payments will be terminated on receiving satisfactory evidence of
the death or incapacity of a shareholder. Until this evidence is
received, the Transfer Agent will not be liable for any payment
made in accordance with the provisions of a SWP.
The cost of administering SWPs for the benefit of
shareholders who participate in them is borne by the Funds as an
expense of all shareholders.
Shareholders whose positions are held in "street name" by
certain FSFs or Intermediaries may not be able to participate in a
SWP. If a shareholder's Fund shares are held in "street name,"
the shareholder should consult his or her FSF or Intermediary to
determine whether he or she may participate in a SWP.
Telephone Redemptions. Telephone redemption privileges are
described in the Prospectus.
Non-Cash Redemptions. For redemptions of any single
shareholder within any 90-day period exceeding the lesser of
$250,000 or 1% of a Fund's net asset value, the Fund may make the
payment or a portion of the payment with portfolio securities held
by the Fund instead of cash, in which case the redeeming
shareholder may incur brokerage and other costs in selling the
securities received.
How to Exchange Shares
With respect to Class A, Class B and Class C shares,
exchanges at net asset value may be made among shares of the same
class of any other fund that is a series of the Trust or of most
Colonial Funds. With respect to Class A shares, for a period of
90 days following the purchase of shares, exchanges at net asset
value may be made among Class A shares of Colonial Municipal Money
Market Fund or Colonial Government Money Market Fund (or its
successor). Thereafter, exchanges at net asset value may be made
among Class A shares of any other fund that is a series of the
Trust or of most Colonial Funds. For more information on the
Colonial Funds, see your FSF or Intermediary or call (800) 345-
6611.
With respect to Class K, Class Z, and Class S shares,
exchanges at net asset value may be made among shares of the same
class of any other fund that is a series of the Trust. Shares may
be exchanged on the basis of the net asset value per share at the
time of exchange and only one "round-trip" exchange of Class C
shares may be made per three-month period, measured from the date
of the initial purchase. Before exchanging into another fund, you
should obtain the prospectus for the fund in which you wish to
invest and read it carefully. Prospectuses of Colonial Funds are
available by calling (800) 426-3750. Consult the Transfer Agent
before requesting an exchange.
By calling the Transfer Agent, shareholders or their FSF or
Intermediary of record may exchange among accounts with identical
registrations, provided that the shares are held on deposit.
During periods of unusual market changes and/or shareholder
activity, shareholders may experience delays in contacting the
Transfer Agent by telephone to exercise the telephone exchange
privilege. Because an exchange involves a redemption and
reinvestment in another fund, completion of an exchange may be
delayed under unusual circumstances, such as if a Fund suspends
repurchases or postpones payment for Fund shares being exchanged
in accordance with federal securities law. The Transfer Agent
will also make exchanges upon receipt of a written exchange
request. If the shareholder is a corporation, partnership, agent,
or surviving joint owner, the Transfer Agent will require
customary additional documentation.
A loss to a shareholder may result from an unauthorized
transaction reasonably believed to have been authorized. No
shareholder is obligated to use the telephone to execute
transactions.
In all cases, the shares to be exchanged must be registered
on the records of the Fund in the name of the shareholder desiring
to exchange.
An exchange is a capital sale transaction for federal income
tax purposes. The exchange privilege may be revised, suspended or
terminated at any time.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 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 each Fund, each Portfolio, and their
shareholders to maintain assets in each of the countries in which
a Fund or 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, as well as by Stein Roe and counsel. However,
with respect to foreign sub-custodians, there can be no assurance
that a Fund and the value of its shares will not be adversely
affected by acts of foreign governments, financial or operational
difficulties of the foreign sub-custodians, difficulties and costs
of obtaining jurisdiction over or enforcing judgments against the
foreign sub-custodians, or application of foreign law to the
foreign sub-custodial arrangements. Accordingly, an investor
should recognize that the non-investment risks involved in holding
assets abroad are greater than those associated with investing in
the United States.
The Funds and the Portfolios 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 Funds and the
Portfolios are Arthur Andersen LLP, 33 West Monroe Street,
Chicago, IL 60603. The accountants audit and report on the annual
financial statements, review certain regulatory reports and the
federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trust.
PORTFOLIO TRANSACTIONS
Stein Roe places the orders for the purchase and sale of
portfolio securities and options and futures contracts for its
clients, including private clients and mutual fund clients
("Clients"). Stein Roe's 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 commissions, 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 Stein Roe'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; Stein Roe's knowledge of the financial condition of
the broker or dealer selected and such other brokers and dealers;
and Stein Roe's knowledge of actual or apparent operation problems
of any broker or dealer.
Recognizing the value of these factors, Stein Roe may cause a
Client to pay a brokerage commission in excess of that which
another broker may have charged for effecting the same
transaction. Stein Roe 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 Stein Roe has
discretion to select the broker or dealer by which the transaction
is to be executed. Stein Roe has discretion for all trades of the
Funds. 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 Stein Roe.
Evaluations of the reasonableness of brokerage commissions, based
on the factors described in the preceding paragraph, are made by
Stein Roe's trading personnel while effecting portfolio
transactions. The general level of brokerage commissions paid is
reviewed by Stein Roe, and reports are made annually to the Board
of Trustees.
Stein Roe maintains and periodically updates a list of
approved brokers and dealers which, in Stein Roe's judgment, are
generally capable of providing best price and execution and are
financially stable. Stein Roe's traders are directed to use only
brokers and dealers on the approved list, except in the case of
Client designations of brokers or dealers to effect transactions
for such Clients' accounts. Stein Roe generally posts certain
Client information on the "Alert" broker database system as a
means of facilitating the trade affirmation and settlement
process.
It is Stein Roe's practice, when feasible, to aggregate for
execution as a single transaction orders for the purchase or sale
of a particular security for the accounts of several Clients, in
order to seek a lower commission or more advantageous net price.
The benefit, if any, obtained as a result of such aggregation
generally is allocated pro rata among the accounts of Clients
which participated in the aggregated transaction. In some
instances, this may involve the use of an "average price"
execution wherein a broker or dealer to which the aggregated order
has been given will execute the order in several separate
transactions during the course of a day at differing prices and,
in such case, each Client participating in the aggregated order
will pay or receive the same price and commission, which will be
an average of the prices and commissions for the several separate
transactions executed by the broker or dealer.
Stein Roe sometimes makes use of an indirect electronic
access to the New York Stock Exchange's "SuperDOT" automated
execution system, provided through a NYSE member floor broker, W&D
Securities, Inc., a subsidiary of Jeffries & Co., Inc.,
particularly for the efficient execution of smaller orders in NYSE
listed equities. Stein Roe sometimes uses similar arrangements
through Billings & Co., Inc. and Driscoll & Co., Inc., floor
broker members of the Chicago Stock Exchange, for transactions to
be executed on that exchange. In using these arrangements, Stein
Roe must instruct the floor broker to refer the executed
transaction to another brokerage firm for clearance and
settlement, as the floor brokers do not deal with the public.
Transactions of this type sometimes are referred to as "step-in"
or "step-out" transactions. The brokerage firm to which the
executed transaction is referred may include, in the case of
transactions effected through W&D Securities, brokerage firms
which provide Stein Roe investment research or related services.
Stein Roe places certain trades for the Funds through its
affiliate AlphaTrade, Inc. ("ATI"). ATI is a wholly owned
subsidiary of Colonial Management Associates, Inc. ATI is a fully
disclosed introducing broker that limits its activities to
electronic execution of transactions in listed equity securities.
The Funds pay ATI a commission for these transactions. The Funds
have adopted procedures consistent with Investment Company Act
Rule 17e-1 governing such transactions. Certain of Stein Roe's
officers also serve as officers, directors and/or employees of
ATI.
Consistent with the Rules of Fair Practice of National
Securities Dealers, Inc. and subject to seeking best executing and
such other policies as the trustees of the Funds may determine,
Stein Roe may consider sales of shares of each of the Funds as a
factor in the selection of broker-dealers to execute such mutual
fund securities transactions.
Investment Research Products and Services Furnished by Brokers and
Dealers
Stein Roe engages in the long-standing practice in the money
management industry of acquiring research and brokerage products
and services ("research products") from broker-dealer firms in
return directing trades for Client accounts to those firms. In
effect, Stein Roe is using the commission dollars generated from
these Client accounts to pay for these research products. The
money management industry uses the term "soft dollars" to refer to
this industry practice. Stein Roe may engage in soft dollar
transactions on trades for those Client accounts for which Stein
Roe has the discretion to select the brokers-dealer.
The ability to direct brokerage for a Client account belongs
to the Client and not to Stein Roe. When a Client grants Stein
Roe the discretion to select broker-dealers for Client trades,
Stein Roe has a duty to seek the best combination of net price and
execution. Stein Roe faces a potential conflict of interest with
this duty when it uses Client trades to obtain soft dollar
products. This conflict exists because Stein Roe is able to use
the soft dollar products in managing its Client accounts without
paying cash ("hard dollars") for the product. This reduces Stein
Roe's expenses.
Moreover, under a provision of the federal securities laws
applicable to soft dollars, Stein Roe is not required to use the
soft dollar product in managing those accounts that generate the
trade. Thus, the Client accounts that generate the brokerage
commission used to acquire the soft dollar product may not benefit
directly from that product. In effect, those accounts are cross
subsidizing Stein Roe's management of the other accounts that do
benefit directly from the product. This practice is explicitly
sanctioned by a provision of the Securities Exchange Act of 1934,
which creates a "safe harbor" for soft dollar transactions
conducted in a specified manner. Although it is inherently
difficult, if not impossible, to document, Stein Roe believes that
over time most, if not all, Clients benefit from soft dollar
products such that cross subsidizations even out.
Stein Roe attempts to reduce or eliminate this conflict by
directing Client trades for soft dollar products only if Stein Roe
concludes that the broker-dealer supplying the product is capable
of providing a combination of the best net price and execution on
the trade. As noted above, the best net price, while significant,
is one of a number of judgmental factors Stein Roe considers in
determining whether a particular broker is capable of providing
the best net price and execution. Stein Roe may cause a Client
account to pay a brokerage commission in a soft dollar trade in
excess of that which another broker-dealer might have charged for
the same transaction.
Stein Roe acquires two types of soft dollar research
products: (i) proprietary research created by the broker-dealer
firm executing the trade and (ii) other products created by third
parties that are supplied to Stein Roe through the broker-dealer
firm executing the trade.
Proprietary research consists primarily of traditional
research reports, recommendations and similar materials produced
by the in house research staffs of broker-dealer firms. This
research includes evaluations and recommendations of specific
companies or industry groups, as well as analyses of general
economic and market conditions and trends, market data, contacts
and other related information and assistance. Stein Roe's
research analysts periodically rate the quality of proprietary
research produced by various broker-dealer firms. Based on these
evaluations, Stein Roe develops target levels of commission
dollars on a firm-by-firm basis. Stein Roe attempts to direct
trades to each firm to meet these targets.
Stein Roe also uses soft dollars to acquire products created
by third parties that are supplied to Stein Roe through broker-
dealers executing the trade (or other broker-dealers who "step in"
to a transaction and receive a portion of the brokerage commission
for the trade). These products include the following:
* Database Services-comprehensive databases containing current
and/or historical information on companies and industries.
Examples include historical securities prices, earnings estimates,
and SEC filings. These services may include software tools that
allow the user to search the database or to prepare value-added
analyses related to the investment process (such as forecasts and
models used in the portfolio management process).
* Quotation/Trading/News Systems-products that provide real time
market data information, such as pricing of individual securities
and information on current trading, as well as a variety of news
services.
* Economic Data/Forecasting Tools-various macro economic
forecasting tools, such as economic data and economic and
political forecasts for various countries or regions.
* Quantitative/Technical Analysis-software tools that assist in
quantitative and technical analysis of investment data.
* Fundamental Industry Analysis-industry-specific fundamental
investment research.
* Fixed Income Security Analysis-data and analytical tools that
pertain specifically to fixed income securities. These tools
assist in creating financial models, such as cash flow projections
and interest rate sensitivity analyses, that are relevant to fixed
income securities.
* Other Specialized Tools-other specialized products, such as
specialized economic consulting analyses and attendance at
investment oriented conferences.
Many third-party products include computer software or on-
line data feeds. Certain products also include computer hardware
necessary to use the product.
Certain of these third party services may be available
directly from the vendor on a hard dollar basis. Others are
available only through broker-dealer firms for soft dollars.
Stein Roe evaluates each product to determine a cash ("hard
dollars") value of the product to Stein Roe. Stein Roe then on a
product-by-product basis targets commission dollars in an amount
equal to a specified multiple of the hard dollar value to the
broker-dealer that supplies the product to Stein Roe. In general,
these multiples range from 1.25 to 1.85 times the hard dollar
value. Stein Roe attempts to direct trades to each firm to meet
these targets. (For example, if the multiple is 1.5:1.0, assuming
a hard dollar value of $10,000, Stein Roe will target to the
broker-dealer providing the product trades generating $15,000 in
total commissions.)
The targets that Stein Roe establishes for both proprietary
and for third party research products typically will reflect
discussions that Stein Roe has with the broker-dealer providing
the product regarding the level of commissions it expects to
receive for the product. However, these targets are not binding
commitments, and Stein Roe does not agree to direct a minimum
amount of commissions to any broker-dealer for soft dollar
products. In setting these targets, Stein Roe makes a
determination that the value of the product is reasonably
commensurate with the cost of acquiring it. These targets are
established on a calendar year basis. Stein Roe will receive the
product whether or not commissions directed to the applicable
broker-dealer are less than, equal to or in excess of the target.
Stein Roe generally will carry over target shortages and excesses
to the next year's target. Stein Roe believes that this practice
reduces the conflicts of interest associated with soft dollar
transactions, since Stein Roe can meet the non-binding
expectations of broker-dealers providing soft dollar products over
flexible time periods. In the case of third party products, the
third party is paid by the broker-dealer and not by Stein Roe.
Stein Roe may enter into a contract with the third party vendor to
use the product. (For example, if the product includes software,
Stein Roe will enter into a license to use the software from the
vendor.)
In certain cases, Stein Roe uses soft dollars to obtain
products that have both research and non-research purposes.
Examples of non-research uses are administrative and marketing
functions. These are referred to as "mixed use" products. As of
the date of this SAI, Stein Roe acquires two mixed use products.
These are (i) a fixed income security data service and (ii) a
mutual fund performance ranking service. In each case, Stein Roe
makes a good faith evaluation of the research and non-research
uses of these services. These evaluations are based upon the time
spent by Firm personnel for research and non-research uses. Stein
Roe pays the provider in cash ("hard dollars") for the non-
research portion of its use of these products.
Stein Roe may use research obtained from soft dollar trades
in the management of any of its discretionary accounts. Thus,
consistent with industry practice, Stein Roe does not require that
the Client account that generates the trade receive any benefit
from the soft dollar product obtained through the trade. As noted
above, this may result in cross subsidization of soft dollar
products among Client accounts. As noted therein, this practice
is explicitly sanctioned by a provision of the Securities Exchange
Act of 1934, which creates a "safe harbor" for soft dollar
transactions conducted in a specified manner.
In certain cases, Stein Roe will direct a trade to one
broker-dealer with the instruction that it execute the trade and
pay over a portion of the commission from the trade to another
broker-dealer who provides Stein Roe with a soft dollar research
product. The broker-dealer executing the trade "steps out" of a
portion of the commission in favor of the other broker-dealer
providing the soft dollar product. Stein Roe may engage in step
out transactions in order to direct soft dollar commissions to a
broker-dealer which provides research but may not be able to
provide best execution. Brokers who receive step out commissions
typically are brokers providing a third party soft dollar product
that is not available on a hard dollars basis. Stein Roe has not
engaged in step out transactions as a manner of compensating
broker-dealers that sell shares of investment companies managed by
Stein Roe.
The table below shows information on brokerage commissions
paid by the Funds and the Portfolios (brokerage commissions were
paid by the Fund prior to Feb. 3, 1997 and by its related
Portfolio since that date):
Growth Growth
& Income Investor
Portfolio Portfolio
Total amount of brokerage commissions
paid during fiscal year ended 9/30/99
Amount of commissions paid to brokers
or dealers who supplied
research services to Stein Roe
Total dollar amount involved in such
transactions (000 omitted)
Amount of commissions paid to brokers
or dealers that were allocated to such
brokers or dealers by the Fund's portfolio
manager because of research services
provided to the Fund
Total dollar amount involved in such
transactions (000 omitted) 17,996 88,249
Total amount of brokerage commissions
paid during fiscal year ended
9/30/98 100,196 807,008
Total amount of brokerage commissions
paid during fiscal year ended 9/30/97 120,469 512,584
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.
During the last fiscal year, certain Funds and Portfolios
held securities issued by one or more of their regular broker-
dealers or the parent of such broker-dealers that derive more than
15% of gross revenue from securities-related activities. Such
holdings were as follows at Sept. 30, 1999:
Fund/Portfolio Broker-Dealer Value of Securities
Held (in thousands)
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund and Portfolio intends to qualify under Subchapter M
of the Internal Revenue Code and 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 gains 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.
Each Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent a Fund invests in foreign securities, it may be
subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% of the Fund's total
assets at the close of any fiscal year consist of stock or
securities of foreign corporations, the Fund may file an election
with the Internal Revenue Service pursuant to which shareholders
of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even
though not actually received, (ii) treat such respective pro rata
shares as foreign income taxes paid by them, and (iii) deduct such
pro rata shares in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to
applicable limitations, against their United States income taxes.
Shareholders who do not itemize deductions for federal income tax
purposes will not, however, be able to deduct their pro rata
portion of foreign taxes paid by the Fund, although such
shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit may
be required to treat a portion of dividends received from the Fund
as separate category income for purposes of computing the
limitations on the foreign tax credit available to such
shareholders. Tax-exempt shareholders will not ordinarily benefit
from this election relating to foreign taxes. Each year, the
Funds 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
A 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).
For example, for a $1,000 investment in a Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at Sept. 30, 1999 were:
TOTAL RETURN AVERAGE ANNUAL
TOTAL RETURN PERCENTAGE TOTAL RETURN
------------ ------------- --------------
Growth & Income Fund
1 year
5 years
10 years
Growth Investor Fund
Life of Fund*
_________
*Since inception on March 31, 1999.
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 a Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing a Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
A Fund may note its mention or recognition in newspapers,
magazines, or other media from time to time. However, the Funds
assume no responsibility for the accuracy of such data.
Newspapers and magazines which might mention the Funds 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
In advertising and sales literature, a 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
Funds. Comparison of a 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 Funds believe to be generally accurate. All of the Funds may
compare their performance to the Consumer Price Index (All Urban),
a widely recognized measure of inflation. Each Fund's performance
may be compared to the following indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange
Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials Nasdaq Composite
Russell 2000 Index Nasdaq Industrials
Wilshire 5000
(These indexes are widely (These indexes generally
recognized indicators of reflect the performance of
general U.S. stock market stocks traded in the
results.) indicated markets.)
In addition, the Funds may compare performance to the
indicated benchmarks:
Benchmark Fund(s)
Lipper Equity Fund Average Both Funds
Lipper General Equity Fund Average Both Funds
Lipper Growth & Income Fund Average Growth & Income Fund
Lipper Growth & Income Fund Index Growth & Income Fund
Lipper Growth Fund Average Growth Investor Fund
Lipper Growth Fund Index Growth Investor Fund
Morningstar All Equity Funds Average Both Funds
Morningstar Domestic Stock Average Both Funds
Morningstar Equity Fund Average Both Funds
Morningstar Growth & Income Fund
Average Growth & Income Fund
Morningstar Growth Fund Average Growth Investor Fund
Morningstar Hybrid Fund Average Growth Investor Fund
Morningstar Total Fund Average Both Funds
Morningstar U.S. Diversified Average Growth Investor Fund
Lipper Growth Fund Index reflects the net asset value
weighted total return of the largest thirty growth funds and
thirty growth and income funds, respectively, as calculated and
published by Lipper. The Lipper and Morningstar averages are
unweighted averages of total return performance of mutual funds as
classified, calculated, and published by these independent
services that monitor the performance of mutual funds. The Funds
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
a Fund to a different category or develop (and place a Fund into)
a new category, that Fund may compare its performance or ranking
with those of other funds in the newly assigned category, as
published by the service.
A 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 Funds 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
_____________________
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<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, a 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 CounselorSM
program and asset allocation and other investment strategies.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Each of Fund (which are series of the Trust, an open-end
management investment company) seeks to achieve its objective by
investing all of its assets in another mutual fund having an
investment objective identical to that of the Fund. The
shareholders of each Fund approved this policy of permitting a
Fund to act as a feeder fund by investing in a Portfolio. Please
refer to Investment Policies, Portfolio Investments and
Strategies, and Investment Restrictions for a description of the
investment objectives, policies, and restrictions of the Funds and
the Portfolios. The management fees and expenses of the Funds and
the Portfolios are described under Investment Advisory and Other
Services. Each feeder Fund bears its proportionate share of the
expenses of its master Portfolio.
Stein Roe has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
Each Portfolio is a separate series of SR&F Base Trust
("Base Trust"), a Massachusetts common law trust organized under
an Agreement and Declaration of Trust ("Declaration of Trust")
dated Aug. 23, 1993. The Declaration of Trust of Base Trust
provides that a Fund and other investors in a Portfolio will be
liable for all obligations of that Portfolio that are not
satisfied by the Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to
circumstances in which liability was inadequately insured and a
Portfolio was unable to meet its obligations. Accordingly, the
trustees of the Trust believe that neither the Funds nor their
shareholders will be adversely affected by reason of a Fund's
investing in a Portfolio.
The Declaration of Trust of Base Trust provides that a
Portfolio will terminate 120 days after the withdrawal of a Fund
or any other investor in the Portfolio, unless the remaining
investors vote to agree to continue the business of the Portfolio.
The trustees of the Trust may vote a Fund's interests in a
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objectives of the Funds and the
Portfolios are nonfundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to a Fund's shareholders.
The fundamental policies of each Fund and the corresponding
fundamental policies of its master Portfolio can be changed only
with shareholder approval. If a Fund, as a Portfolio investor, is
requested to vote on a change in a fundamental policy of a
Portfolio or any other matter pertaining to the Portfolio (other
than continuation of the business of the Portfolio after
withdrawal of another investor), the Fund will solicit proxies
from its shareholders and vote its interest in the Portfolio for
and against such matters proportionately to the instructions to
vote for and against such matters received from Fund shareholders.
A Fund will vote shares for which it receives no voting
instructions in the same proportion as the shares for which it
receives voting instructions. There can be no assurance that any
matter receiving a majority of votes cast by Fund shareholders
will receive a majority of votes cast by all investors in a
Portfolio. If other investors hold a majority interest in a
Portfolio, they could have voting control over that Portfolio.
In the event that a Portfolio's fundamental policies were
changed so as to be inconsistent with those of the corresponding
Fund, the Board of Trustees of 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. A Fund's inability to find
a substitute master fund or comparable investment management could
have a significant impact upon its shareholders' investments. Any
withdrawal of a Fund's assets could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution)
to the Fund. Should such a distribution occur, the Fund would
incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund
and could affect the liquidity of the Fund.
Each investor in a Portfolio, including a Fund, may add to or
reduce its investment in the Portfolio on each day the NYSE is
open for business. The investor's percentage of the aggregate
interests in the Portfolio will be computed as the percentage
equal to the fraction (i) the numerator of which is the beginning
of the day value of such investor's investment in the Portfolio on
such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of the
Portfolio on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate
investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio as of the close
of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in a Portfolio, but members of
the general public may not invest directly in the Portfolio.
Other investors in a Portfolio are not required to sell their
shares at the same public offering price as a Fund, might incur
different administrative fees and expenses than the Fund, and
might charge a sales commission. Therefore, Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in a
Portfolio. Investment by such other investors in a Portfolio
would provide funds for the purchase of additional portfolio
securities and would tend to reduce the operating expenses as a
percentage of the Portfolio's net assets. Conversely, large-scale
redemptions by any such other investors in a Portfolio could
result in untimely liquidations of the Portfolio's security
holdings, loss of investment flexibility, and increases in the
operating expenses of the Portfolio as a percentage of its net
assets. As a result, a Portfolio's security holdings may become
less diverse, resulting in increased risk.
Information regarding other investors in a Portfolio may be
obtained by writing to SR&F Base Trust at Suite 3200, One South
Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550.
Stein Roe may provide administrative or other services to one or
more of such investors.
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, Stein Roe believes that the quality of debt
securities 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 ("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 23. EXHIBITS [Note: As used herein, the term "PEA"
refers to a post-effective amendment to the Registration
Statement of the Registrant on Form N-1A under the Securities
Act of 1933, No. 33-11351.]
(a) Restated Agreement and Declaration of Trust dated 8/17/99.
(b)(1) By-Laws of Registrant as amended through February
3, 1993. (Exhibit 2 to PEA #34).*
(2) Amendment to By-Laws dated February 4, 1998.
(Exhibit 2(a) to PEA #45.)*
(c) None.
(d)(1) Management Agreement between Registrant and Stein Roe
& Farnham Incorporated dated 8/15/95, as amended
through 2/2/99. (Exhibit (d)(1) to PEA #58.)*
(2) Management Agreement between SR&F Base Trust and Stein
Roe & Farnham Incorporated dated 8/15/95, as amended
through 6/28/99.
(3) Sub-Advisory Agreement among Registrant, Stein Roe &
Farnham Incorporated, and Newport Pacific Management,
Inc. dated 8/3/99 relating to the series Stein Roe
Asia Pacific Fund.
(e)(1) Underwriting Agreement between Registrant and Liberty
Funds Distributor, Inc. dated 8/4/99.
(2) Specimen copy of selected dealer agreement. (Exhibit
6(b) to PEA #40.)*
(f) None.
(g) Custodian Contract between Registrant and State Street
Bank and Trust Company dated 3/3/87, as amended through
5/8/95.(Exhibit 8 to PEA #31.)*
(h)(1) Restated Transfer Agency Agreement between Registrant and
SteinRoe Services Inc. dated 8/1/95 as amended through
3/31/99. (Exhibit(h)(1) to PEA #58.)*
(2) Accounting and Bookkeeping Agreement between Registrant
and Stein Roe & Farnham Incorporated dated 8/3/99.
(3) Administrative Agreement between Registrant and Stein Roe
& Farnham Incorporated 8/15/95 as amended through 6/28/99.
(4) Sub-Transfer Agent Agreement with Liberty Funds Services,
Inc. (formerly named Colonial Investors Service Center)
dated 7/3/96, as amended through 3/31/99. (Exhibit (h)(4)
to PEA #58.)*
(i)(1) Opinions and consents of Ropes & Gray. (Exhibit
10(a) to PEA #34).*
(2) 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).*
(3) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Growth Opportunities Fund.
(Exhibit 10(d) to PEA #39.)*
(4) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Large Company Focus Fund.
(Exhibit 10(e) to PEA #45.)*
(5) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Asia Pacific Fund. (Exhibit
10(f) to PEA #46.)*
(6) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Small Company Growth Fund.
(Exhibit (i)(6) to PEA #54.)*
(j)(1) None.
(2) Consent of Bell, Boyd & Lloyd. (Exhibit j(3) to PEA
#49.)*
(3) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#34).*
(k) None.
(l) Inapplicable.
(m) Rule 12b-1 Plan.
(n) Rule 18f-3 Plan.
(o) (Miscellaneous.) Mutual Fund Application.
- ------
*Incorporated by reference.
ITEM 24. 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 and Other Services," "Management," and
"Transfer Agent" in the Statement of Additional Information,
each of which is incorporated herein by reference.
ITEM 25. INDEMNIFICATION.
Article Tenth of the Agreement and Declaration of Trust of
Registrant (Exhibit (a)), 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
ADVISER.
Stein Roe & Farnham Incorporated ("Stein Roe"), the investment
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 Liberty Corporation Holdings, Inc., which is a wholly 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. Stein Roe 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
Stein Roe, 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
and Other Services."
Certain directors and officers of Stein Roe also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI, of Colonial Management
Associates, Inc. (which is a subsidiary of Liberty Financial
Companies, Inc.), and of the Registrant and other investment
companies managed by SteinRoe. (The listed entities are located
at One South Wacker Drive, Chicago, Illinois 60606, except for
Colonial Management Associates, Inc., which is located at One
Financial Center, Boston, MA 02111, and SteinRoe Variable
Investment Trust and Liberty Variable Investment Trust, which
are located at Federal Reserve Plaza, Boston, MA 02210.) 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
Thomas W. Butch President; Director; Chmn. Vice President
Kevin M. Carome Assistant Clerk
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
Karl J. Maurer Comptroller
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
COLONIAL MANAGEMENT ASSOCIATES, INC.
Ophelia L. Barsketis Senior Vice President
Kevin M. Carome Senior Vice President
William M. Garrison Vice President
Loren A. Hansen Senior Vice President
Clare M. Hounsell Vice President
James P. Haynie Senior Vice President
Timothy J. Jacoby Senior Vice President
Deborah A. Jansen Senior Vice President
North T. Jersild Vice President
Yvonne T. Shields Vice President
SR&F BASE TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Exec. VP; Asst. Secy. VP
Erik P. Gustafson Vice-President
Loren A. Hansen Exec. Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Jane M. Naeseth Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. VP;
VP; Trustee
Kevin M. Carome Exec. VP; Asst. Secy. VP
Loren A. Hansen Exec. Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE INVESTMENT TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. VP; VP;
Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Exec. VP; Asst. Secy. VP
William M. Garrison Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Exec. Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Heidi J. Walter Vice-President; Secretary
LIBERTY-STEIN ROE ADVISOR TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. VP;
VP; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Exec. VP; Asst. Secy. VP
Erik P. Gustafson Vice-President
Loren A. Hansen Exec. Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE MUNICIPAL TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. VP;
VP; Trustee
Kevin M. Carome Exec. VP; Asst. Secy. VP
Joanne T. Costopoulos Vice-President
Loren A. Hansen Exec. Vice-President
Brian M. Hartford Vice-President
William C. Loring Vice-President
Lynn C. Maddox Vice-President
Maureen G. Newman Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President
Kevin M. Carome Exec. VP; Asst. Secy. VP
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Exec. Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy VP
Jane M. Naeseth Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST, STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
William D. Andrews Exec. Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President; Trustee or Manager
Kevin M. Carome Exec. VP; Asst. Secy. VP
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Exec. Vice-President
Heidi J. Walter Vice-President; Secretary
LIBERTY VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Kevin M. Carome Vice President
ITEM 27. PRINCIPAL UNDERWRITERS.
Registrant's principal underwriter, Liberty Funds Distributor,
Inc., a subsidiary of Colonial Management Associates, Inc.,
acts as underwriter to Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty
Funds Trust V, Liberty Funds Trust VI, Liberty Funds Trust VII,
Liberty Funds Trust IX, Stein Roe Investment Trust, Stein Roe
Income Trust, Stein Roe Municipal Trust, Liberty-Stein Roe
Advisor Trust, Stein Roe Institutional Trust, Stein Roe Trust,
Stein Roe Floating Rate Income Fund, Stein Roe Institutional
Floating Rate Income Fund, and SteinRoe Variable Investment
Trust. The table below lists the directors and officers of
Liberty Funds Distributor, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- -------------
Anderson, Judith Vice President None
Anetsberger, Gary A. Senior Vice President Senior V-P;
Treasurer
Babbitt, Debra VP & Compliance Officer None
Ballou, Rick Senior Vice President None
Bartlett, John Managing Director None
Blakeslee, James Senior Vice President None
Blumenfeld, Alex Vice President None
Bozek, James Senior Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Butch, Thomas W. Senior Vice President President
Campbell, Patrick Vice President None
Chrzanowski, Daniel Vice President None
Clapp, Elizabeth A. Managing Director None
Conlin, Nancy L. Director; Clerk None
Davey, Cynthia Sr. Vice President None
Desilets, Marian H. Vice President None
Devaney, James Senior Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Dupree, Robert Vice President None
Emerson, Kim P. Senior Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Managing Director None
Fifield, Robert Vice President None
Gariepy, Tom 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 Senior Vice President None
Gupta, Neeti Vice President None
Geunard, Brian Vice President None
Harrington, Tom Sr. Vice President None
Harris, Carla L. Vice President None
Hodgkins, Joseph Sr. 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
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
Martin, John Senior Vice President None
Martin, Peter Vice President None
McCombs, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Senior Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morse, Jonathan Vice President None
Nickodemus, Paul Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Place, Jeffrey Managing Director None
Powell, Douglas Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Raftery-Arpino, Linda Senior Vice President None
Ratto, Gregory 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
Santosuosso, Louise Senior Vice President None
Schulman, David Senior Vice President None
Shea, Terence Vice President None
Sideropoulos, Lou Vice President None
Sinatra, Peter Vice President None
Smith, Darren Vice President None
Soester, Trisha Vice President None
Studer, Eric Vice President None
Sweeney, Maureen Vice President None
Tambone, James Chief Executive Officer None
Tasiopoulos, Lou President None
VanEtten, Keith H. Senior Vice President None
Walter, Heidi J. Vice President V-P & Secy.
Wess, Valerie Senior Vice President None
Young, Deborah Vice President None
- ---------
* The address of Ms. Harris, Ms. Riegel, Ms. Walter, and Messrs.
Anetsberger and 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 28. 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 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
<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 16th day of
September, 1999.
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 Sept. 16, 1999
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice- Sept. 16, 1999
Gary A. Anetsberger President; Treasurer
Principal Financial Officer
J. KEVIN CONNAUGHTON Vice-President Sept. 16, 1999
J. Kevin Connaughton
Principal Accounting Officer
JOHN A. BACON JR. Trustee Sept. 16, 1999
John A. Bacon Jr.
WILLIAM W. BOYD Trustee Sept. 16, 1999
William W. Boyd
LINDSAY COOK Trustee Sept. 16, 1999
Lindsay Cook
DOUGLAS A. HACKER Trustee Sept. 16, 1999
Douglas A. Hacker
JANET LANGFORD KELLY Trustee Sept. 16, 1999
Janet Langford Kelly
CHARLES R. NELSON Trustee Sept. 16, 1999
Charles R. Nelson
THOMAS C. THEOBALD Trustee Sept. 16, 1999
Thomas C. Theobald
*Each person signing this amendment is signing in his or her
indicated capacity with the Registrant and also in the same
capacity with SR&F Base Trust.
<PAGE>
STEIN ROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ------------
(a) Declaration of Trust
(d)(2) Management agreement of SR&F Base Trust
(d)(3) Sub-advisory agreement
(e)(1) Underwriting agreement
(h)(2) Accounting and bookkeeping agreement
(h)(3) Administrative agreement
(m) Rule 12b-1 plan
(n) Rule 18f-3 plan
(o) Mutual fund application
<PAGE>
STEIN ROE INVESTMENT TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
THIS RESTATED AGREEMENT AND DECLARATION OF TRUST made at
Boston, Massachusetts this 17th day of August, 1999 by the
Trustees hereunder and the holders of shares of beneficial
interest issued hereunder and to be issued hereunder as
hereinafter provided:
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from
time to time acquire in any manner as Trustee hereunder, IN TRUST
to manage and dispose of the same upon the following terms and
conditions for the benefit of the holders from time to time of
shares in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. This Trust shall be known as Stein Roe Investment
Trust and the Trustees shall conduct the business of the Trust
under that name or any other name as they may from time to time
determine.
Section 2. Definitions. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as amended
from time to time;
(b) "Trustees" refers to the Trustees of the Trust named in
Article IV hereof or elected in accordance with such Article;
(c) "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust or in the Trust
property belonging to any Series of the Trust or in any class of
Shares of the Trust (as the context may require) shall be divided
from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time
to time;
(f) The terms "Commission" and "principal underwriter" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this
Agreement and Declaration of Trust, as amended or restated from
time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust, as
amended from time to time;
(i) "Series Company" refers to the form of registered open-
end investment company described in Section 18(f)(2) of the 1940
Act or in any successor statutory provision;
(j) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of Article
III;
(k) "Multi-Class Series" refers to Series of Shares
established and designated as Multi-Class Series under or in
accordance with the provisions of Article III, Section 6; and
(l) The terms "class" and "class of Shares" refer to each
class of Shares into which the Shares of any Multi-Class Series
may from time to time be divided in accordance with the provisions
of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to provide investors a managed
investment primarily in securities (including options), debt
instruments, commodities, commodity contracts and options thereon.
ARTICLE III
SHARES
Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an
unlimited number of Shares, without par value. Subject to the
provisions of Section 6 of this Article III, each Share shall have
voting rights as provided in Article V hereof, and holders of the
Shares of any Series or class shall be entitled to receive
dividends, when and as declared with respect thereto in the manner
provided in Article VI, Section 1 hereof. Except as otherwise
provided in Section 6 of this Article III with respect to Shares
of Multi-Class Series, no Share shall have any priority or
preference over any other Share of the same Series with respect to
dividends or distributions upon termination of the Trust or of
such Series made pursuant to Article VIII, Section 4 hereof.
Except as otherwise provided in Section 6 of this Article III with
respect to Shares of Multi-Class Series, all dividends and
distributions shall be made ratably among all Shareholders of a
particular Series from the assets belonging to such Series
according to the number of Shares of such Series held of record by
such Shareholders on the record date for any dividend or
distribution or on the date of termination, as the case may be.
Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust.
The Trustees may from time to time divide or combine the Shares of
any particular Series or class into a greater or lesser number of
Shares of that Series or class without thereby changing the
proportionate beneficial interest of the Shares of that Series or
class in the assets belonging to that Series or attributable to
that class or in any way affecting the rights of Shares of any
other Series or class.
Section 2. Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or a transfer or
similar agent for the Trust, which books shall be maintained
separately for the Shares of each Series and class. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the transfer of Shares of each Series and class and similar
matters. The record books of the Trust as kept by the Trust or
any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each Series and class
and as to the number of Shares of each Series and class held from
time to time by each.
Section 3. Investments in the Trust. The Trustees shall
accept investments in the Trust from such persons and on such
terms and for such consideration as they from time to time
authorize.
Section 4. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every Shareholder by
virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same
nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but entitles such representative only to
the rights of said deceased Shareholder under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust property or right to
call for a partition or division of the same or for an accounting,
nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust, shall have any power to bind
personally any Shareholders, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating
to Shares. Notwithstanding any other provisions of this
Declaration of Trust and without limiting the power of the
Trustees to amend the Declaration of Trust as provided elsewhere
herein, the Trustees shall have the power to amend this
Declaration of Trust, at any time and from time to time, in such
manner as the Trustees may determine in their sole discretion,
without the need for Shareholder action, so as to add to, delete,
replace or otherwise modify any provisions relating to the Shares
contained in this Declaration of Trust for the purpose of (i)
responding to or complying with any regulations, orders, rulings
or interpretations of any governmental agency or any laws, now or
hereafter applicable to the Trust, or (ii) designating and
establishing Series or classes in addition to those established in
Section 6 of this Article III; provided that before adopting any
such amendment without Shareholder approval the Trustees shall
determine that it is consistent with the fair and equitable
treatment of all Shareholders. The establishment and designation
of any Series of Shares in addition to the Series established and
designated in Section 6 of this Article III shall be effective
upon the execution by a majority of the then Trustees of an
amendment to this Declaration of Trust, taking the form of a
complete restatement or otherwise, setting forth such
establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such
instrument. The establishment and designation of any class of
Shares shall be effective upon either the execution by a majority
of the then Trustees of an amendment to this Declaration of Trust
or the adoption by vote or written consent of a majority of the
then Trustees of a resolution setting forth such establishment and
designation and the relative rights and preferences of such class
and such eligibility requirements for investment therein as the
Trustees may determine, or as otherwise provided in such amendment
or resolution.
Without limiting the generality of the foregoing, the
Trustees may, for the above-stated purposes, amend the Declaration
of Trust to:
(a) create one or more Series or classes of Shares (in
addition to any Series or classes already existing or otherwise)
with such rights and preferences and such eligibility requirements
for investment therein as the Trustees shall determine and
reclassify any or all outstanding Shares as shares of particular
Series or classes in accordance with such eligibility
requirements;
(b) amend any of the provisions set forth in paragraphs (a)
through (j) of Section 6 of this Article III;
(c) combine one or more Series or classes of Shares into a
single Series or class on such terms and conditions as the
Trustees shall determine;
(d) change or eliminate any eligibility requirements for
investment in Shares of any Series or class, including without
limitation the power to provide for the issue of Shares of any
Series or class in connection with any merger or consolidation of
the Trust with another trust or company or any acquisition by the
Trust of part or all of the assets of another trust or company;
(e) change the designation of any Series or class of Shares;
(f) change the method of allocating dividends among the
various Series and classes of Shares;
(g) allocate any specific assets or liabilities of the Trust
or any specific items of income or expense of the Trust to one or
more Series or classes of Shares; and
(h) specifically allocate assets to any or all Series of
Shares or create one or more additional Series of Shares which are
preferred over all other Series of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust
with respect to any net income, however determined, earned from
the investment and reinvestment of any assets so allocated or
otherwise and provide for any special voting or other rights with
respect to such Series or any classes of Shares thereof.
Section 6. Establishment and Designation of Series and
Classes. Without limiting the authority of the Trustees set forth
in Section 5, inter alia, to establish and designate any further
Series or classes or to modify the rights and preferences of any
Series or class, the following Series shall be, and is hereby,
established and designated as a Multi-Class Series: the "Original
Series."
Shares of each Series established in this Section 6 shall
have the following rights and preferences relative to Shares of
each other Series, and Shares of each class of a Multi-Class
Series shall have such rights and preferences relative to other
classes of the same Series as are set forth below, together with
such other rights and preferences relative to such other classes
as are set forth in any resolution of the Trustees establishing
and designating such class of Shares:
(a) Assets belonging to Series. Subject to the provisions
of paragraph (c) of this Section 6:
All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets belonging to" that Series.
In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively
"General Assets"), the Trustees shall allocate such General Assets
to, between or among any one or more of the Series established and
designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable, and any
General Asset so allocated to a particular Series shall belong to
that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
(b) Liabilities Belonging to Series. Subject to the
provisions of paragraph (c) of this Section 6:
The assets belonging to each particular Series shall be
charged solely with the liabilities of the Trust in respect to
that Series, the expenses, costs, charges and reserves
attributable to that Series, and any general liabilities of the
Trust which are not readily identifiable as belonging to any
particular Series but which are allocated and charged by the
Trustees to and among any one or more of the Series established
and designated from time to time in a manner and on such basis as
the Trustees in their sole discretion deem fair and equitable.
The liabilities, expenses, costs, charges and reserves so charged
to a Series are herein referred to as "liabilities belonging to"
that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
(c) Apportionment of Assets etc. in Case of Multi-Class
Series. In the case of any Multi-Class Series, to the extent
necessary or appropriate to give effect to the relative rights and
preferences of any classes of Shares of such Series, (i) any
assets, income, earnings, profits, proceeds, liabilities,
expenses, charges, costs and reserves belonging or attributable to
that Series may be allocated or attributed to a particular class
of Shares of that Series or apportioned among two or more classes
of Shares of that Series; and (ii) Shares of any class of such
Series may have priority or preference over shares of other
classes of such Series with respect to dividends or distributions
upon termination of the Trust or of such Series or class or
otherwise, provided that no Share shall have any priority or
preference over any other Shares of the same class and that all
dividends and distributions to Shareholders of a particular class
shall be made ratably among all Shareholders of such class
according to the number of Shares of such class held of record by
such Shareholders on the record date for any dividend or
distribution or on the date of termination, as the case may be.
(d) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration,
including, without limitation, Article VI, no dividend or
distribution (including, without limitation, any distribution paid
upon termination of the Trust or of any Series or class) with
respect to, nor any redemption or repurchase of, the Shares of any
Series or class shall be effected by the Trust other than from the
assets belonging to such Series or attributable to such class, nor
shall any Shareholder of any particular Series or class otherwise
have any right or claim against the assets belonging to any other
Series or attributable to any other class except to the extent
that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series or class.
(e) Voting. Notwithstanding any of the other provisions of
this Declaration, including, without limitation, Section 1 of
Article V, the Shareholders of any particular Series or class
shall not be entitled to vote on any matters as to which such
Series or class is not affected. On any matter submitted to a
vote of Shareholders, all Shares of the Trust then entitled to
vote shall, except as otherwise provided in the By-Laws, be voted
in the aggregate as a single class without regard to Series or
class of Shares, except that (1) when required by the 1940 Act or
when the Trustees shall have determined that the matter affects
one or more Series or classes of Shares materially differently,
Shares shall be voted by individual Series or class and (2) when
the matter affects only the interests of one or more Series or
classes, only Shareholders of such Series or classes shall be
entitled to vote thereon. There shall be no cumulative voting in
the election of Trustees.
(f) Equality. Except to the extent necessary or appropriate
to give effect to the relative rights and preferences of any
classes of Shares of a Multi-Class Series, all the Shares of each
particular Series shall represent an equal proportionate interest
in the assets belonging to that Series (subject to the liabilities
belonging to that Series), and each Share of any particular Series
shall be equal to each other Share of that Series. All the Shares
of each particular class of Shares within a Multi-Class Series
shall represent an equal proportionate interest in the assets
belonging to such Series that are attributable to such class
(subject to the liabilities attributable to such class), and each
Share of any particular class within a Multi-Class Series shall be
equal to each other Share of such class.
(g) Fractions. Any fractional Share of a Series or class
shall carry proportionately all the rights and obligations of a
whole Share of that Series or class, including rights with respect
to voting, receipt of dividends and distributions, redemption of
Shares and termination of the Trust.
(h) Exchange Privilege. The Trustees shall have the
authority to provide that the holders of Shares of any Series or
class shall have the right to exchange said Shares for Shares of
one or more other Series or classes of Shares in accordance with
such requirements and procedures as may be established by the
Trustees.
(i) Combination of Series or Classes. The Trustees shall
have the authority, without the approval of the Shareholders of
any Series or class unless otherwise required by applicable law,
to combine the assets and liabilities belonging to any two or more
Series or attributable to any class into assets and liabilities
belonging to a single Series or attributable to a single class.
(j) Elimination of Series or Class. At any time that there
are no Shares outstanding of any particular Series previously
established and designated, the Trustees may amend this
Declaration of Trust to abolish that Series and to rescind the
establishment and designation thereof, such amendment to be
effected in the manner provided in Section 5 of this Article III
for the establishment and designation of Series. At any time that
there are no Shares outstanding of any particular class previously
established and designated of a Multi-Series Class, the Trustees
may abolish that class and rescind the establishment and
designation thereof, either by amending this Declaration of Trust
in the manner provided in Section 5 of this Article III for the
establishment and designation of classes (if such class was
established and designated by an amendment to this Declaration of
Trust), or by vote or written consent of a majority of the then
Trustees (if such class was established and designated by Trustee
vote or written consent).
Section 7. Indemnification of Shareholders. In case any
Shareholder or former Shareholder shall be held to be personally
liable solely by reason of his or her being or having been a
Shareholder of the Trust or of a particular Series or class and
not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal representatives
or, in the case of a corporation or other entity, its corporate or
other general successor) shall be entitled out of the assets of
the Series (or attributable to the class) of which he or she is a
Shareholder or former Shareholder to be held harmless from and
indemnified against all loss and expense arising from such
liability.
Section 8. No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust.
Section 9. Derivative Claims. No Shareholder shall have the
right to bring or maintain any court action, proceeding or claim
on behalf of the Trust or any Series without first making demand
on the Trustees requesting the Trustees to bring or maintain such
action, proceeding or claim. Such demand shall be excused only
when the plaintiff makes a specific showing that irreparable
injury to the Trust or Series would otherwise result. Such demand
shall be mailed to the Secretary of the Trust at the Trust's
principal office and shall set forth in reasonable detail the
nature of the proposed court action, proceeding or claim and the
essential facts relied upon by the Shareholder to support the
allegations made in the demand. The Trustees shall consider such
demand within 45 days of its receipt by the Trust. In their sole
discretion, the Trustees may submit the matter to a vote of
Shareholders of the Trust or Series, as appropriate. Any decision
by the Trustees to bring, maintain or settle (or not to bring,
maintain or settle) such court action, proceeding or claim, or to
submit the matter to a vote of Shareholders, shall be made by the
Trustees in their business judgment and shall be binding upon the
Shareholders. Any decision by the Trustees to bring or maintain a
court action, proceeding or suit on behalf of the Trust or a
Series shall be subject to the right of the Shareholders under
Article V, Section 1 hereof to vote on whether or not such court
action, proceeding or suit should or should not be brought or
maintained.
ARTICLE IV
THE TRUSTEES
Section 1. Election and Tenure. The Trustees shall be John
E. Bacon Jr., William W. Boyd, Lindsay Cook, Douglas A. Hacker,
Janet Langford Kelly, Charles R. Nelson and Thomas C. Theobald.
The Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the
number of Trustees, or remove Trustees with or without cause.
Each Trustee shall serve during the continued lifetime of the
Trust until he or she dies, resigns or is removed, or, if sooner,
until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his
or her successor. Any Trustee may resign at any time by written
instrument signed by him or her and delivered to any officer of
the Trust or to a meeting of the Trustees. Such resignation shall
be effective upon receipt unless specified to be effective at some
other time. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee resigning and no Trustee
removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to
damages on account of such removal. The Shareholders may fix the
number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose and to the
extent required by applicable law, including paragraphs (a) and
(b) of Section 16 of the 1940 Act.
Section 2. Effect of Death, Resignation, etc. of a Trustee.
The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any of them, shall not operate to
annul the Trust or to revoke any existing agency created pursuant
to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed
by the Trustees, and they shall have all powers necessary or
convenient to carry out that responsibility including the power to
engage in securities transactions of all kinds on behalf of the
Trust. Without limiting the foregoing, the Trustees may adopt By-
Laws not inconsistent with this Declaration of Trust providing for
the regulation and management of the affairs of the Trust and may
amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; they may elect and remove
such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number and
terminate one or more committees consisting of two or more
Trustees which may exercise the powers and authority of the
Trustees to the extent that the Trustees determine; they may
employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit
all or any part of such assets in a system or systems for the
central handling of securities or with a Federal Reserve Bank,
retain a transfer agent or a shareholder servicing agent, or both,
provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for
the determination of Shareholders with respect to various matters,
and in general delegate such authority as they consider desirable
to any officer of the Trust, to any committee of the Trustees and
to any agent or employee of the Trust or to any such custodian or
underwriter.
Without limiting the foregoing, the Trustees shall have power
and authority:
(a) To invest and reinvest cash, and to hold cash
uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, write options with respect to or otherwise deal in any
property rights relating to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in its own name or in the name of a custodian
or subcustodian or a nominee or nominees or otherwise;
(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer of any security which is held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by
such corporation or issuer; and to pay calls or subscriptions with
respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to
them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee
as the Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or
other obligations of any person; and to make contracts of guaranty
or suretyship, or otherwise assume liability for payment of such
notes or other obligations;
(l) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business of the Trust, including, without
limitation, insurance policies insuring the assets of the Trust
and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers,
principal underwriters or independent contractors of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken
or omitted by any such person as Trustee, officer, employee,
agent, investment adviser, principal underwriter or independent
contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust
would have the power to indemnify such person against liability;
and
(m) To pay pensions as deemed appropriate by the Trustees
and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of
providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
Trustees. The Trustees shall not be required to obtain any court
order to deal with any assets of the Trust or take any other
action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees
are authorized to pay or cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of
income, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or
in connection with the management thereof, including but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
administrators, investment advisers or managers, principal
underwriter, auditor, counsel, custodian, transfer agent,
shareholder servicing agent, and such other agents or independent
contractors, and such other expenses and charges, as the Trustees
may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The
Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder, or each Shareholder of any
particular Series or class, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer,
shareholder servicing or similar agent, an amount fixed from time
to time by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such
Shareholder and/or by reducing the number of Shares in the account
of such Shareholder by that number of full and/or fractional
Shares which represents the outstanding amount of such charges due
from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all
of the assets of the Trust shall at all times be considered as
vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts.
Subject to such requirements and restrictions as may be set forth
in the By-Laws, the Trustees may, at any time and from time to
time, contract for exclusive or nonexclusive advisory and/or
management services for the Trust or for any Series or class with
any partnership, limited liability company, corporation, trust,
association or other organization (the "Manager"); and any such
contract may contain such other terms as the Trustees may
determine, including without limitation, authority for a Manager
to determine from time to time without prior consultation with the
Trustees what investments shall be purchased, held, sold or
exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to
time, contract with the Manager or any other partnership, limited
liability company, corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor
or principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set forth
in the By-Laws; and any such contract may contain such other terms
as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter, distributor or
affiliate or agent of or for any corporation, trust, association
or other organization, or of or for any parent or affiliate of any
organization, with which an advisory or management contract, or
principal underwriter's or distributor's contract or transfer,
shareholder servicing or other agency contract may have been or
may hereafter be made, or that any such organization, or any
parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have been or
may hereafter be made also has an advisory or management contract,
or principal underwriter's or distributor's contract or transfer,
shareholder servicing or other agency contract with one or more
other corporations, trusts, associations or other organizations,
or has other business or interests
shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power
to vote only (i) for the election of Trustees as provided in
Article IV, Section 1, (ii) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article
VIII, Section 8, (iii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, (iv) with respect to the termination of
the Trust or any Series or class to the extent and as provided in
Article VIII, Section 4, (v) to remove Trustees from office to the
extent and as provided in Article V, Section 7 and (vi) with
respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the By-Laws or any
registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable. 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). There
shall be no cumulative voting in the election of Trustees. Shares
may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the
proxy the Trust receives a specific written notice to the contrary
from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at
or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. At any time when no Shares of a
Series or class are outstanding the Trustees may exercise all
rights of Shareholders of that Series or class with respect to
matters affecting that Series or class and may with respect to
that Series or class take any action required by law, this
Declaration of Trust or the By-Laws to be taken by the
Shareholders thereof.
Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of
electing Trustees as provided in Article IV, Section 1 and for
such other purposes as may be prescribed by law, by this
Declaration of Trust or by the By-Laws. Meetings of the
Shareholders may also be called by the Trustees from time to time
for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of
Shareholders may be held at any place designated by the Trustees.
Notice of any meeting of Shareholders, stating the time and place
of the meeting, shall be given or caused to be given by the
Trustees to each Shareholder by mailing such notice, postage
prepaid, at least seven days before such meeting, at the
Shareholder's address as it appears on the records of the Trust,
or by facsimile or other electronic transmission, at least seven
days before such meeting, to the telephone or facsimile number or
e-mail or other electronic address most recently furnished to the
Trust (or its agent) by the Shareholder. Whenever notice of a
meeting is required to be given to a Shareholder under this
Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the
meeting, shall be deemed equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger
quorum is required by law, by the By-Laws or by this Declaration
of Trust, 30% of the Shares entitled to vote shall constitute a
quorum at a Shareholders' meeting. When any one or more Series or
classes is to vote as a single class separate from any other
Shares which are to vote on the same matters as a separate class
or classes, 30% of the Shares of each such class entitled to vote
shall constitute a quorum at a Shareholders' meeting of that
class. Any meeting of Shareholders may be adjourned from time to
time by a majority of the votes properly cast upon the question,
whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the
original meeting without further notice. When a quorum is present
at any meeting, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, except when a
larger vote is required by any provision of this Declaration of
Trust or the By-Laws or by law. If any question on which the
Shareholders are entitled to vote would adversely affect the
rights of any Series or class of Shares, the vote of a majority
(or such larger vote as is required as aforesaid) of the Shares of
such Series or class which are entitled to vote, voting
separately, shall also be required to decide such question.
Section 4. Action by Written Consent. Any action taken by
Shareholders may be taken without a meeting if Shareholders
holding a majority of the Shares entitled to vote on the matter
(or such larger proportion thereof as shall be required by any
express provision of this Declaration of Trust or by the By-Laws)
and holding a majority (or such larger proportion as aforesaid) of
the Shares of any Series or class entitled to vote separately on
the matter consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series or class who are entitled to vote or
act at any meeting or any adjournment thereof, the Trustees may
from time to time fix a time, which shall be not more than 90 days
before the date of any meeting of Shareholders, as the record date
for determining the Shareholders of such Series or class having
the right to notice of and to vote at such meeting and any
adjournment thereof, and in such case only Shareholders of record
on such record date shall have such right, notwithstanding any
transfer of Shares on the books of the Trust after the record
date. For the purpose of determining the Shareholders of any
Series or class who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time
to time fix a date, which shall be on or before the date for the
payment of such dividend or such other payment, as the record date
for determining the Shareholders of such Series or class having
the right to receive such dividend or distribution. Without
fixing a record date the Trustees may for voting and/or
distribution purposes close the register or transfer books for one
or more Series or classes for all or any part of the period prior
to a meeting of Shareholders or the payment of a distribution.
Nothing in this Section shall be construed as precluding the
Trustees from setting different record dates for different Series
or classes.
Section 6. Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes and meetings and
related matters.
Section 7. Removal of Trustees. No natural person shall
serve as Trustee after the holders of record of not less than two-
thirds of the outstanding Shares have declared that such Trustee
be removed from that office either by declaration in writing filed
with the Trust's custodian or by votes cast in person or by proxy
at a meeting called for the purpose. The Trustees shall promptly
call a meeting of Shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing so to
do by the record holders of not less than 10 per centum of the
outstanding Shares.
Whenever ten or more Shareholders of record who have been
such for at least six months preceding the date of application,
and who hold in the aggregate Shares having a net asset value of
at least 1 per centum of the outstanding Shares, shall apply to
the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to a
request for a meeting pursuant to this Section and accompanied by
a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such
application either (a) afford to such applicants access to a list
of the names and addresses of all Shareholders as recorded on the
books of the Trust; or (b) inform such applicants as to the
approximate number of Shareholders of record, and the approximate
cost of transmitting to them the proposed communication and form
of request. If the Trustees elect to follow the course specified
in clause (b), the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be
transmitted and of the reasonable expenses of transmittal, shall,
with reasonable promptness, transmit such material to all
Shareholders of record at their addresses as recorded on the books
of the Trust (or at the telephone or facsimile number or e-mail or
other electronic address most recently furnished to the Trust (or
its agent) by the Shareholder), unless within five business days
after such tender the Trustees shall transmit to such applicants
and file with the Commission, together with a copy of the material
proposed to be transmitted, a written statement signed by at least
a majority of the Trustees to the effect that in their opinion
either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein
not misleading, or would be in violation of applicable law, and
specifying the basis of such opinion. If the Commission shall
enter an order refusing to sustain any of the objections specified
in the written statement so filed, or if, after the entry of an
order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all
objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall transmit copies of such material to
all Shareholders with reasonable promptness after the entry of
such order and the renewal of such tender.
ARTICLE VI
NET INCOME, DISTRIBUTIONS, AND REDEMPTIONS AND REPURCHASES
Section 1. Distributions of Net Income. The Trustees shall
each year, or more frequently if they so determine in their sole
discretion, distribute to the Shareholders of each Series, in
Shares of that Series, cash or otherwise, an amount approximately
equal to the net income attributable to the assets belonging to
such Series and may from time to time distribute to the
Shareholders of each Series, in Shares of that Series, cash or
otherwise, such additional amounts, but only from the assets
belonging to such Series, as they may authorize. Except as
otherwise permitted by paragraph (c) of Section 6 of Article III
in the case of Multi-Class Series, all dividends and distributions
on Shares of a particular Series shall be distributed pro rata to
the holders of that Series in proportion to the number of Shares
of that Series held by such holders and recorded on the books of
the Trust at the date and time of record established for the
payment of such dividend or distributions.
The manner of determining net income, income, asset values,
capital gains, expenses, liabilities and reserves of any Series or
class may from time to time be altered as necessary or desirable
in the judgment of the Trustees to conform such manner of
determination to any other method prescribed or permitted by
applicable law. Net income shall be determined by the Trustees or
by such person as they may authorize at the times and in the
manner provided in the By-Laws. Determinations of net income of
any Series or class and determinations of income, asset value,
capital gains, expenses and liabilities made by the Trustees, or
by such person as they may authorize, in good faith, shall be
binding on all parties concerned. The foregoing sentence shall
not be construed to protect any Trustee, officer or agent of the
Trust against any liability to the Trust or its security holders
to which he or she 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.
If, for any reason, the net income of any Series or class
determined at any time is a negative amount, the pro rata share of
such negative amount allocable to each Shareholder of such Series
or class shall constitute a liability of such Shareholder to that
Series or class which shall be paid out of such Shareholder's
account at such times and in such manner as the Trustees may from
time to time determine (x) out of the accrued dividend account of
such Shareholder, (y) by reducing the number of Shares of that
Series or class in the account of such Shareholder or (z)
otherwise.
Section 2. Redemptions and Repurchases. The Trust shall
purchase such Shares as are offered by any Shareholder for
redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a person
designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the
Trustees may from time to time authorize; and the Trust will pay
therefor the net asset value thereof, as determined in accordance
with the By-Laws, next determined; provided, however, that with
respect to shares of any Series of the Trust that is authorized
after October 29, 1996, that the amount payable by the Trust upon
redemption shall be reduced by such redemption fee, if any, as
that Trustees may authorize. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the
date on which the request is made. The obligation set forth in
this Section 2 is subject to the provision that in the event that
any time the New York Stock Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the
Commission during periods when trading on the New York Stock
Exchange is restricted or during any emergency which makes it
impracticable for the Trust to dispose of the investments of the
applicable Series or to determine fairly the value of the net
assets belonging to such Series or attributable to any class
thereof or during any other period permitted by order of the
Commission for the protection of investors, such obligations may
be suspended or postponed by the Trustees. The Trust may also
purchase or repurchase Shares at a price not exceeding the net
asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
The redemption price may in any case or cases be paid wholly
or partly in kind if the Trustees determine that such payment is
advisable in the interest of the remaining Shareholders of the
Series the Shares of which are being redeemed. In making any such
payment wholly or partly in kind, the Trust shall, so far as may
be practicable, deliver assets which approximate the
diversification of all of the assets belonging at the time to the
Series the Shares of which are being redeemed. Subject to the
foregoing, the fair value, selection and quantity of securities or
other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the
Trustees. In no case shall the Trust be liable for any delay of
any corporation or other person in transferring securities
selected for delivery as all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The
Trust shall have the right at its option and at any time to redeem
Shares of any Shareholder at the net asset value thereof as
described in Section 1 of this Article VI: (i) if at such time
such Shareholder owns Shares of any Series or class having an
aggregate net asset value of less than an amount determined from
time to time by the Trustees; or (ii) to the extent that such
Shareholder owns Shares equal to or in excess of a percentage
determined from time to time by the Trustees of the outstanding
Shares of the Trust or of any Series or class.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
Section 1 Compensation. The Trustees as such shall be
entitled to reasonable compensation from the Trust; they may fix
the amount of their compensation. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and
payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not
be responsible or liable in any event for any neglect or wrong-
doing of any officer, agent, employee, Manager or principal
underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which
he or she 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 or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued,
executed or done by or on behalf of the Trust or the Trustees or
any of them in connection with the Trust shall be conclusively
deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee,
and such Trustees or Trustee shall not be personally liable
thereon.
ARTICLE VIII
MISCELLANEOUS
Section 1. Trustees, Shareholders, etc. Not Personally
Liable; Notice. All persons extending credit to, contracting with
or having any claim against the Trust or any Series or class shall
look only to the assets of the Trust, or, to the extent that the
liability of the Trust may have been expressly limited by contract
to the assets of a particular Series or attributable to a
particular class, only to the assets belonging to the relevant
Series or attributable to the relevant class, for payment under
such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall
protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued on behalf of the Trust by the Trustees,
by any officer or officers or otherwise shall give notice that
this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was
executed or made by or on behalf of the Trust or by them as
Trustee or Trustees or as officer or officers or otherwise and not
individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are
binding only upon the assets and property of the Trust or upon the
assets belonging to the Series or attributable to the class for
the benefit of which the Trustees have caused the note, bond,
contract, instrument, certificate or undertaking to be made or
issued, and may contain such further recital as he or she or they
may deem appropriate, but the omission of any such recital shall
not operate to bind any Trustee or Trustees or officer or officers
or Shareholders or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No
Bond or Surety. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable for his or her own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act
or omission in accordance with such advice or for failing to
follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees.
No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be
made by the Trustees or to see to the application of any payments
made or property transferred to the Trust or upon its order.
Section 4. Termination of Trust, Series or Class. Unless
terminated as provided herein, the Trust shall continue without
limitation of time. The Trust may be terminated at any time by
vote of at least a majority of the Shares of each Series entitled
to vote and voting separately by Series, or by the Trustees by
written notice to the Shareholders. Any Series or class may be
terminated at any time by vote of at least a majority of the
Shares of that Series or class, or by the Trustees by written
notice to the Shareholders of that Series or class.
Upon termination of the Trust (or any Series or class, as the
case may be), after paying or otherwise providing for all charges,
taxes, expenses and liabilities belonging, severally, to each
Series (or the applicable Series or attributable to the particular
class, as the case may be), whether due or accrued or anticipated
as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets belonging, severally, to
each Series (or the applicable Series or attributable to the
particular class, as the case may be), to distributable form in
cash or shares or other securities, or any combination thereof,
and distribute the proceeds belonging to each Series (or the
applicable Series or attributable to the particular class, as the
case may be), to the Shareholders of that Series (or class, as the
case may be), as a Series (or class, as the case may be), ratably
according to the number of Shares of that Series (or class, as the
case may be) held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause
the Trust to be merged into or consolidated with another trust or
company or its shares exchanged under or pursuant to any state or
federal statute, if any, or otherwise to the extent permitted by
law, if such merger or consolidation or share exchange has been
authorized by vote of a majority of the outstanding Shares;
provided that in all respects not governed by statute or
applicable law, the Trustees shall have power to prescribe the
procedure necessary or appropriate to accomplish a sale of assets,
merger or consolidation.
Section 6. Filing of Copies, Reference, Headings. The
original or a copy of this instrument and of each amendment hereto
shall be kept at the office of the Trust where it may be inspected
by any Shareholder. A copy of this instrument and of each
amendment hereto shall be filed by the Trust with the Secretary of
the Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments have
been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this
instrument and in any such amendment, references to this
instrument, and all expressions like "herein," "hereof" and
"hereunder," shall be deemed to refer to this instrument as
amended or affected by any such amendments. Headings are placed
herein for convenience of reference only and shall not be taken as
a part hereof or to control or affect the meaning, construction or
effect of this instrument. This instrument may be executed in any
number of counterparts each of which shall be deemed an original.
Section 7. Applicable Law. This Declaration of Trust is
made in the Commonwealth of Massachusetts, and it is created under
and is to be governed by and construed and administered according
to the laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and, without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be
amended at any time by an instrument in writing signed by a
majority of the then Trustees when authorized so to do by vote of
a majority of the Shares entitled to vote with respect to such
amendment, except that amendments described in Article III,
Section 5 or Article III, Section 6 hereof or having the purpose
of changing the name of the Trust or of any Series or class of
Shares or of supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by
Shareholder vote.
Section 9. Address and Resident Agent. The post office
address of the principal office of the Trust in the Commonwealth
of Massachusetts is:
c/o CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other office as the Board of Trustees may from time to
time designate.
The name and post office address of the resident agent of the
Trust in the Commonwealth of Massachusetts is:
CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
or such other person as the Board of Trustees may from time to
time designate. Such resident agent is a Massachusetts
corporation.
Section 10. Use of Name. The Trust acknowledges that it is
adopting its trust name, and may adopt the names of various series
of the Trust, through permission of Stein Roe & Farnham
Incorporated, a Delaware corporation, and agrees that Stein Roe &
Farnham Incorporated reserves to itself and any successor to its
business the right to grant the non-exclusive right to use the
name "Stein Roe Investment Trust," or "Stein Roe & Farnham
Investment Trust" or "SR&F ________ Trust" or "SteinRoe
_______Fund" or "Stein Roe & Farnham _________ Fund" or "Stein Roe
______" or "Stein ________" or "SteinRoe," or "Stein Roe," or
"Stein," or any similar name to any other entity, including but
not limited to any investment company of which Stein Roe & Farnham
Incorporated or any subsidiary or affiliate thereof or any
successor to the business thereof shall be the investment adviser.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals for themselves and for their successors and
assigns this 17th day of August, 1999.
JOHN A. BACON JR. CHARLES R. NELSON
John A. Bacon Jr. Charles R. Nelson
Trustee Trustee
WILLIAM W. BOYD JANET LANGFORD KELLY
William W. Boyd Janet Langford Kelly
Trustee Trustee
LINDSAY COOK THOMAS C. THEOBALD
Lindsay Cook Thomas C. Theobald
Trustee Trustee
DOUGLAS A. HACKER
Douglas A. Hacker
Trustee
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named John A. Bacon, Jr. and
acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named William W. Boyd and
acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named Lindsay Cook and
acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named Douglas A. Hacker
and acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named Charles R. Nelson
and acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named Janet Langford Kelly
and acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 17, 1999
Then personally appeared the above named Thomas C. Theobald
and acknowledged the foregoing instrument to be his free act and
deed, before me.
___________________________________
Notary Public
My Commission Expires:_____________
<PAGE>
MANAGEMENT AGREEMENT
BETWEEN
SR&F BASE TRUST AND
STEIN ROE & FARNHAM INCORPORATED
SR&F BASE TRUST, a Massachusetts common law trust
registered under the Investment Company Act of 1940 ("1940 Act")
as an open-end diversified management investment company
("Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation registered under the Investment Advisers
Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and portfolio
management services with respect to the portion of its assets
represented by the shares of beneficial interest issued in each
series listed in Schedule A hereto, as such schedule may be
amended from time to time (each such series hereinafter referred
to as "Portfolio"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage
the investment operations of Trust and each Portfolio, subject
to the terms of this Agreement and to the supervision and
control of Trust's Board of Trustees ("Trustees"). Manager
agrees to perform, or arrange for the performance of, the
following services with respect to each Portfolio:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and commodities
markets, and individual securities, commodities and indices
as it may deem necessary or useful in discharging its
responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in
a manner consistent with and subject to (i) Trust's agreement
and declaration of trust and by-laws; (ii) the Portfolio's
investment objectives, policies, and restrictions as set
forth in written documents furnished by the Trust to Manager;
(iii) all securities, commodities, and tax laws and
regulations applicable to the Portfolio and Trust; and (iv)
any other written limits or directions furnished by the
Trustees to Manager;
(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the
Portfolio, and to implement those decisions, including the
selection of entities with or through which such purchases,
sales or loans are to be effected;
(d) to use reasonable efforts to manage the Portfolio so that it
will qualify as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as
amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Portfolio action, and
any other rights pertaining to Trust or the Portfolio shall
be exercised;
(f) to make available to Trust promptly upon request all of the
Portfolio's records and ledgers and any reports or
information reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the
Trustees, with respect to execution of transactions for Trust on
behalf of a Portfolio, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents
selected by Manager. In connection with the selection of all
such parties for the placement of all such orders, Manager shall
attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor,
purchase and sell Portfolio securities from and to brokers and
dealers who provide Manager with statistical, research and other
information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such
broker or dealer a commission or spread in excess of that which
might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of
the services so provided.
Trust hereby authorizes any entity or person associated
with Manager that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a
Portfolio to the extent permitted by and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder. Trust hereby consents to the retention by
such entity or person of compensation for such transactions in
accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for Trust or one or more
Portfolios in order to obtain best execution or lower brokerage
commissions. In such event, Manager shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair
and consistent with its fiduciary obligations to Trust, the
Portfolios, and Manager's other customers.
Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall,
unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. Administrative Services. Manager shall supervise the
business and affairs of Trust and each Portfolio and shall
provide such services and facilities as may be required for
effective administration of Trust and Portfolios as are not
provided by employees or other agents engaged by Trust; provided
that Manager shall not have any obligation to provide under this
Agreement any such services which are the subject of a separate
agreement or arrangement between Trust and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. Use of Affiliated Companies and Subcontractors. In
connection with the services to be provided by Manager under
this Agreement, Manager may, to the extent it deems appropriate,
and subject to compliance with the requirements of applicable
laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all
such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by
Manager or such parties.
4. Expenses Borne by Trust. Except to the extent
expressly assumed by Manager herein or under a separate
agreement between Trust and Manager and except to the extent
required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the
organization, operations or business of the Trust. Without
limitation, such costs and expenses shall include but not be
limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or
Trust and the custodian, transfer agent or any other agent
selected by Trust;
(c) all charges for administrative and accounting services
provided to Trust by Manager, or any other provider of such
services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their
services to Trust, and all expenses of meetings of the
Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each then-
existing Unitholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident
to the purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of Trust under the 1940 Act and, to the extent no exemption
is available, expenses of registering Trust's shares under
the 1933 Act, of qualifying and maintaining qualification of
Trust and of Trust's shares for sale under securities laws of
various states or other jurisdictions and of registration and
qualification of Trust under all other laws applicable to
Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Portfolio; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association
or other investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses
borne by Trust that are attributable solely to the organization,
operation or business of a Portfolio shall be paid solely out of
Portfolio assets. Any expense borne by Trust which is not
solely attributable to a Portfolio, nor solely to any other
series of shares of Trust, shall be apportioned in such manner
as Manager determines is fair and appropriate, or as otherwise
specified by the Board of Trustees.
6. Expenses Borne by Manager. Manager at its own expense
shall furnish all executive and other personnel, office space,
and office facilities required to render the investment
management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing,
maintaining, and servicing the accounts of Unitholders in each
Portfolio listed in Exhibit A. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian or other agents without additional cost to
Trust.
In the event that Manager pays or assumes any expenses of
Trust or a Portfolio not required to be paid or assumed by
Manager under this Agreement, Manager shall not be obligated
hereby to pay or assume the same or similar expense in the
future; provided that nothing contained herein shall be deemed
to relieve Manager of any obligation to Trust or a Portfolio
under any separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder,
Trust shall pay to Manager out of the assets of each Portfolio
fees at the annual rate for such Portfolio as set forth in
Schedule B to this Agreement. For each Portfolio, the
management fee shall accrue on each calendar day, and shall be
payable monthly on the first business day of the next succeeding
calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in
the calendar year by the applicable annual rate of fee, and
multiplying this product by the net assets of the Portfolio,
determined in the manner established by the Board of Trustees,
as of the close of business on the last preceding business day
on which the Portfolio's net asset value was determined.
8. Retention of Sub-Adviser. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at
Manager's own cost and expense for the purpose of furnishing one
or more of the services described in Section 1 hereof with
respect to Trust or one or more Portfolios. Retention of a sub-
adviser shall in no way reduce the responsibilities or
obligations of Manager under this Agreement, and Manager shall
be responsible to Trust and its Portfolios for all acts or
omissions of any sub-adviser in connection with the performance
of Manager's duties hereunder.
9. Non-Exclusivity. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be
free to render similar services to others.
10. Standard of Care. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to Trust or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties
under this Agreement, except for loss or liability resulting
from willful misfeasance, bad faith or gross negligence on
Manager's part or from reckless disregard by Manager of its
obligations and duties under this Agreement.
11. Amendment. This Agreement may not be amended as to
Trust or any Portfolio without the affirmative votes (a) of a
majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of
Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) of a "majority of the
outstanding shares" of Trust or, with respect to an amendment
affecting an individual Portfolio, a "majority of the
outstanding shares" of that Portfolio. The terms "interested
persons" and "vote of a majority of the outstanding shares"
shall be construed in accordance with their respective
definitions in the 1940 Act and, with respect to the latter
term, in accordance with Rule 18f-2 under the 1940 Act.
12. Effective Date and Termination. This Agreement shall
become effective as to any Portfolio as of the effective date
for that Portfolio specified in Schedule A hereto. This
Agreement may be terminated at any time, without payment of any
penalty, as to any Portfolio by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that
Portfolio, upon at least sixty (60) days' written notice to
Manager. This Agreement may be terminated by Manager at any
time upon at least sixty (60) days' written notice to Trust.
This Agreement shall terminate automatically in the event of its
"assignment" (as defined in the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect
with respect to any Portfolio until the end of the initial term
applicable to that Portfolio specified in Schedule A and
thereafter from year to year only so long as such continuance is
specifically approved with respect to that Portfolio at least
annually (a) by a majority of those Trustees who are not
interested persons of Trust or of Manager, voting in person at a
meeting called for the purpose of voting on such approval, and
(b) by either the Board of Trustees of Trust or by a "vote of a
majority of the outstanding shares" of the Portfolio.
13. Ownership of Records; Interparty Reporting. All
records required to be maintained and preserved by Trust
pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any
other records the parties mutually agree shall be maintained by
Manager on behalf of Trust are the property of Trust and shall
be surrendered by Manager promptly on request by Trust; provided
that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager
such copies of the financial statements, proxy statements,
reports, and other information relating to the business and
affairs of each Unitholder in a Portfolio as Manager may, at any
time or from time to time, reasonably require in order to
discharge its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each
Portfolio statistical data and other information in such form
and at such intervals as Trust may reasonably request.
14. Non-Liability of Trustees and Unitholders. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Portfolio thereof) and shall
not be binding upon any Trustee, officer, employee, agent or
Unitholder of Trust. Neither the authorization of any action by
the Trustees or Unitholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Unitholder.
15. Use of Manager's Name. Trust may use the name "SR&F
Base Trust" and the Portfolio names listed in Schedule A or any
other name derived from the name "Stein Roe & Farnham" only for
so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of Manager as investment adviser. At such time as
this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, Trust
will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as
investment adviser.
16. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 15, 1995
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR, President
Attest:
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
Attest:
KEITH J. RUDOLF
Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Portfolios of SR&F Base Trust currently subject to this
Agreement are as follows:
Effective End of
Date Initial Term
----------- ------------
SR&F Municipal Money Market Portfolio 9/28/95 6/30/97
SR&F High Yield Portfolio 11/01/96 6/30/98
SR&F Growth & Income Portfolio 02/03/97 6/30/98
SR&F International Portfolio 02/03/97 6/30/98
SR&F Growth Investor Portfolio 02/03/97 6/30/98
SR&F Balanced Portfolio 02/03/97 6/30/98
SR&F Growth Stock Portfolio 02/03/97 6/30/98
SR&F Disciplined Stock Portfolio 02/03/97 6/30/98
SR&F Intermediate Bond Portfolio 02/02/98 6/30/99
SR&F Income Portfolio 02/02/98 6/30/99
SR&F High-Yield Municipals Portfolio 02/02/98 6/30/99
SR&F Cash Reserves Portfolio 03/02/98 6/30/99
Dated: June 28, 1999
SR&F BASE TRUST
By: THOMAS W. BUTCH
Thomas W. Butch
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
President, Mutual Funds Division
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of the SR&F Base Trust
Management Agreement shall be calculated in accordance with the
following schedule(s):
SR&F MUNICIPAL MONEY MARKET PORTFOLIO
0.250% of average net assets
SR&F INTERMEDIATE BOND PORTFOLIO
0.35% of average net assets
SR&F HIGH YIELD PORTFOLIO
0.500% on first $500 million,
0.475% thereafter
SR&F HIGH-YIELD MUNICIPALS PORTFOLIO
0.450% up to $100 million,
0.425% next $100 million,
0.400% thereafter
SR&F INCOME PORTFOLIO
0.50% up to $100 million,
0.475% thereafter
SR&F CASH RESERVES PORTFOLIO
0.250% up to $500 million,
0.225% thereafter
SR&F INTERNATIONAL PORTFOLIO
0.85% of average net assets
SR&F DISCIPLINED STOCK PORTFOLIO
0.75% up to $500 million,
0.70% next $500 million,
0.65% next $500 million,
0.60% thereafter
SR&F BALANCED PORTFOLIO
0.55% up to $500 million,
0.50% next $500 million,
0.45% thereafter
SR&F GROWTH & INCOME PORTFOLIO,
SR&F GROWTH INVESTOR PORTFOLIO, AND
SR&F GROWTH STOCK PORTFOLIO
0.60% up to $500 million,
0.55% next $500 million,
0.50% thereafter
Dated: June 28, 1999
SR&F BASE TRUST
By: THOMAS W. BUTCH
Thomas W. Butch
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
President, Mutual Funds Division
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE INVESTMENT TRUST
NEWPORT PACIFIC MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated as of August 3, 1999, among STEIN ROE
INVESTMENT TRUST, a Massachusetts business trust (the "Trust"),
with respect to STEIN ROE ASIA PACIFIC FUND (the "Fund"), STEIN
ROE & FARNHAM INCORPORATED, a Delaware corporation ("Adviser"),
and NEWPORT PACIFIC MANAGEMENT, INC., a California corporation
(the "Sub-Adviser").
In consideration of the promises and covenants herein, the
parties agree as follows:
1. The Sub-Adviser will manage the investment of the assets
of the Fund in accordance with its investment objective, policies
and limitations set forth in the Trust's prospectus and statement
of additional information, as amended from time to time, and will
perform the other services herein set forth, subject to the
supervision of the Adviser and the Board of Trustees of the Trust.
2. In carrying out its investment management obligations,
the Sub-Adviser shall:
(a) evaluate such economic, statistical and financial
information and undertake such investment research as
it shall believe advisable;
(b) purchase and sell securities and other investments for
the Fund in accordance with the procedures described
in the Trust's prospectus and statement of additional
information; and
(c) report results to the Adviser and to the Board of
Trustees.
3. The Sub-Adviser shall be free to render similar services
to others so long as its services hereunder are not impaired
thereby.
4. The Adviser shall pay the Sub-Adviser a monthly fee at
the annual rate of 0.55% of the average daily net assets of the
Fund for managing the investment of the assets of the Fund as
provided in paragraph 1 above. Such fee shall be paid in arrears
on or before the 10th day of the next following calendar month.
5. This Agreement shall become effective on the date first
written above, and (a) unless otherwise terminated, shall continue
until June 30, 2000, and from year to year thereafter so long as
approved annually in accordance with the 1940 Act; (b) may be
terminated without penalty on sixty days' written notice to the
Sub-Adviser either by vote of the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of
the Fund; (c) shall automatically terminate in the event of its
assignment; and (d) may be terminated without penalty by the Sub-
Adviser on sixty days' written notice to the Trust.
6. This Agreement may be amended in accordance with the 1940
Act.
7. For the purpose of the Agreement, the terms "vote of a
majority of the outstanding shares," "affiliated person" and
"assignment" shall have their respective meanings defined in the
1940 Act and exemptions and interpretations issued by the
Securities and Exchange Commission under the 1940 Act.
8. In the absence of willful misfeasance, bad faith and
gross negligence on the part of the Sub-Adviser, or reckless
disregard of its obligations and duties hereunder, the Sub-Adviser
shall not be subject to any liability to the Trust or the Fund, to
any shareholder of the Trust or the Fund or to any other person,
firm or organization, for any act or omission in the course of or
connection with rendering services hereunder.
9. The Fund may use the name "Newport," or any other name
derived from that name, only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect,
including any similar agreement with any organization that shall
have succeeded to the business of the Sub-Adviser. At such time
as this Agreement or any extension, renewal or amendment hereof,
or each such other similar successor organization agreement shall
no longer be in effect, the Fund will cease to use any name
derived from the name "Newport," any name similar thereto, or any
other name indicating that it is advised by or otherwise connected
with the Sub-Adviser, or with any organization which shall have
succeeded to the Sub-Adviser's business as an investment adviser.
10. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations
assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Fund. The Sub-Adviser further
agrees that it shall not seek satisfaction of any such obligation
from the shareholders of the Fund, nor from the Trustees or any
individual Trustee of the Trust.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
STEIN ROE ASIA PACIFIC FUND
BY: STEIN ROE INVESTMENT TRUST
BY: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
NEWPORT PACIFIC MANAGEMENT, INC.
BY: ___________________________
Name: James Carlson
Title: Chief Operating Officer
STEIN ROE & FARNHAM INCORPORATED
BY: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President, Mutual Funds
Division
<PAGE>
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INVESTMENT TRUST
STEIN ROE INCOME TRUST
STEIN ROE MUNICIPAL TRUST
AND LIBERTY FUNDS DISTRIBUTOR, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of the 4th
day of August, 1999 by and between Stein Roe Investment Trust,
Stein Roe Income Trust, and Stein Roe Municipal Trust, each a
business trust organized and existing under the laws of the
Commonwealth of Massachusetts (hereinafter called the "Fund" or
"Funds"), and Liberty Funds Distributor, Inc., a corporation
organized and existing under the laws of the Commonwealth of
Massachusetts (hereinafter called the "Distributor").
WITNESSETH:
WHEREAS, the Funds are 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 Funds desire the Distributor to act as the
distributor in the public offering of its Shares of beneficial
interest (hereinafter called "Shares");
WHEREAS, the Funds shall pay all charges of their 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
of annual or more frequent revisions of the Funds' Prospectus and
Statement of Additional Information ("SAI") and of supplying
copies thereof to shareholders; all expenses of registering and
maintaining the registration of the Funds under ICA-40 and of the
Funds' Shares under the Securities Act of 1933, as amended ("SA-
33"); all expenses of qualifying and maintaining qualification of
such Funds and of each Fund's Shares for sale under securities
laws of various states or other jurisdictions and of registration
and qualification of each Fund under all laws applicable to each
Fund or its business activities; and
WHEREAS, Stein Roe & Farnham Incorporated, investment adviser
to the Funds, or their affiliates, may pay expenses incurred in
the sale and promotion of the Funds except as provided in the
Funds' 12b-1 plan;
NOW, THEREFORE, in consideration of the premises and the
mutual promises hereinafter set forth, the parties hereto agree as
follows:
1. Appointment. The Funds appoint Distributor to act as
principal underwriter (as such term is defined in Sections
2(a)(29) of ICA-40) of its Shares for each series or class of the
Funds set forth on Schedule A hereto.
2. Delivery of Fund Documents. The Funds have 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 Funds
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form of
agreement and authorizing its execution.
The Funds 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 Funds 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. Distribution of Shares.
(a) Subject to the provisions of Paragraphs 6, 7, 10, 11, 12,
13 and 14 hereof, and to such minimum purchase and other
requirements as may from time to time be indicated in the
Funds' Prospectus, Distributor, acting as principal for
its own account and not as agent for the Funds, shall
have the right to purchase Shares from the Funds.
Distributor shall sell Shares only in accordance with the
Funds' Prospectus, on a "best efforts" basis.
Distributor shall purchase Shares from the Funds at a
price equal to the net asset value, shall sell Shares at
the public offering price as defined in Paragraph 8, and
shall retain all sales charges.
(b) The Funds shall pay all expenses associated with notices,
proxy solicitation material, the preparation of annual or
more frequent revisions to the Funds' Prospectus and SAI
and of printing and supplying the currently effective
Prospectus and SAI to shareholders, other than those
necessitated by Distributor's activities or rules and
regulations related to Distributor's activities where
such amendments or supplements result in expenses which
the Funds would not otherwise have incurred.
(c) The Distributor (or its affiliates) shall pay the costs
of printing and supplying all copies of the Prospectus
and SAI that it may reasonably request for use in
connection with the distribution of Shares. The
Distributor will also pay the expenses of the
preparation, excluding legal fees, and printing of all
amendments and supplements to the Funds' Prospectus and
SAI if the amendment or supplement arises from
Distributor's activities or rules and regulations related
to Distributor's activities and those expenses would not
otherwise have been incurred by the Funds. Distributor
will pay all expenses incurred by Distributor in
advertising, promoting and selling Fund Shares.
(d) Prior to the continuous offering of any Fund Shares,
commencing on a date agreed upon by the Fund and the
Distributor, it is contemplated that the Distributor may
solicit subscriptions for such Shares during a
subscription period which shall last for such period as
may be agreed upon by the parties hereto. The
subscriptions will be payable within three business days
after the termination of the subscription period, at
which time the Fund will commence operations.
4. Selling Agreements. Distributor is authorized to enter
into agreements with other broker-dealers providing for the
solicitation of unconditional orders for purchases of the Funds'
Shares authorized for issuance and registered under SA-33 and fix
therein the portion of the sales charge which may be reallowed to
the selected dealers, as permitted under that Fund's prospectus.
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"). Within the United
States, the Distributor shall offer and sell Shares to such
selected dealers as are members in good standing of the NASD;
"banks" as such term is defined in Section 3(a)(6) of the Exchange
Act or a "bank holding company" as such term is defined in the
Bank Holding Company Act of 1956, as amended, duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it was organized; and such other entities or
purchasers as otherwise mutually agreed in writing.
5. Conduct of Business. Other than as set forth in the
Funds' currently effective prospectus, Distributor will not
distribute any sales material or statements except literature or
advertising which conforms to the requirements of federal and
state securities laws and regulations which have been filed, where
necessary, with the appropriate regulatory authorities. Upon any
Fund's request, Distributor will furnish the Fund with copies of
all such materials prior to their use. Any sales material or
statements the substance of which is not included in the
Prospectus or SAI shall be submitted for advance approval by the
Fund.
6. Solicitation of Orders to Purchase Shares by Fund. The
rights granted to the Distributor shall be non-exclusive in that
the Funds reserve the right to solicit purchases from, and sell
its Shares to, investors. Further, the Funds reserve the right to
issue Shares in connection with the merger or consolidation of any
other investment company, trust or personal holding company with
any Fund, or any 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 any Fund to
shareholders by virtue of their being shareholders of the Fund.
7. 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 Funds,
including redeemed or repurchased Shares if and to the extent that
they may be legally sold and if, but only if, a Fund authorizes
the Distributor to sell them.
8. Public Offering Price. The public offering price for the
Funds' Shares will be the net asset value per Share next
determined by the Funds after the Distributor or its appointed
agent receives the order plus any sales charge as set forth in the
Funds' Prospectus. The net asset value per Share shall be
determined in the manner provided in each Fund's Agreement and
Declaration of Trust as now in effect or as they may be amended,
and as reflected in the Funds' then current Prospectus and SAI.
9. Compensation.
(a) Sales Charge. Distributor shall be entitled to charge a
sales charge on the sale or redemption, as appropriate,
of each series and class of each Fund's Shares as set
forth in the Fund's then current Prospectus. Distributor
may allow any dealers with which it has signed selling
agreements such commissions or discounts from and not
exceeding the total sales charge as Distributor shall
deem advisable, so long as any such commissions or
discounts are set forth in the Fund's current Prospectus
to the extent required by the applicable federal and
state securities laws. Distributor may also make
payments to dealers from Distributor's own resources,
subject to the following conditions: (a) any such
payments shall not create any obligation for or recourse
against the Fund or any series or class, and (b) the
terms and conditions of any such payments are consistent
with the Fund's Prospectus and applicable federal and
state securities laws and are disclosed in the Prospectus
or SAI to the extent such laws may require.
(b) Distribution Plans. Distributor shall also be entitled
to compensation for its services as provided in any
Distribution Plan adopted as to any series and class of
any Fund's Shares pursuant to Rule 12b-1 under the 1940
Act.
10. Suspension of Sales. If and whenever the determination
of a Fund's net asset value is suspended and until such suspension
is terminated, the Distributor shall not accept orders for Shares
except for unconditional orders placed before the suspension. In
addition, each Fund reserves the right to suspend sales of Shares
if, in the judgment 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 receipt and acceptance of orders to purchase Shares of the
Fund until otherwise instructed by the Fund and (ii) the
Distributor shall not accept orders to purchase Shares while such
suspension remains in effect unless otherwise directed by the
Board.
11. Orders and Payment for Shares.
(a) Distributor shall direct orders for the purchase of
Shares of any series to the Fund's transfer agent. At or
prior to the time of delivery of any Shares the
Distributor will pay or cause to be paid to the custodian
of the Fund's assets, for the account of such series, an
amount in cash equal to the purchase price of such
Shares. The Fund's custodian and transfer agent shall be
identified in its Prospectus.
(b) The Fund, or any agent of the Fund designated in writing
by the Fund, shall be promptly advised of all purchase
orders for Fund Shares received by the Distributor. Any
order may be rejected by the Fund; provided, however,
that the Fund will not arbitrarily or without reasonable
cause refuse to accept or confirm orders for the purchase
of Fund Shares from eligible investors.
12. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding Fund Shares may be tendered to the
transfer agent for redemption at any time, other than
when the Fund suspends redemptions as permitted by the
Prospectus or applicable law, and the Fund agrees to
repurchase or redeem the Shares so tendered in accordance
with its obligations as set forth in its Agreement and
Declaration of Trust, as amended from time to time, and
in accordance with the applicable provisions set forth
in the Prospectus and SAI. The price to be paid to
redeem or repurchase the Shares shall be equal to the net
asset value calculated in accordance with the provisions
of the Fund's Prospectus and SAI, less any contingent
deferred sales charge ("CDSC"), redemption fee or other
charge(s), if any, set forth in the Prospectus or SAI of
the Fund. All payments by the Fund hereunder shall be
made in the manner set forth below.
(b) If Shares are tendered to the transfer agent for
redemption or repurchase by the Fund within seven
business days after Distributor's acceptance of the
original purchase order for such Shares, Distributor will
immediately refund to the Fund the full sales commission
(net of allowances to dealers or brokers) allowed to
Distributor on the original sale, and will promptly, upon
receipt thereof, pay to the Fund any refunds from dealers
or brokers of the balance of sales commissions reallowed
by Distributor. The transfer agent shall notify
Distributor of such tender for redemption within ten days
of the day on which notice of such tender for redemption
is received by the transfer agent.
(c) The transfer agent shall pay the total amount of the
redemption price as defined in the above paragraph 12(a),
pursuant to the instructions of the Distributor in
Federal Funds on or before the seventh business day
subsequent to its having received the notice of
redemption in proper form except as otherwise provided in
the Prospectus or SAI of the Fund. The proceeds of any
redemption of Shares shall be paid by the transfer agent
as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for
the account of the shareholder, in each case in
accordance with the applicable provision of the
Prospectus and SAI.
13. Purchases for your own Account. Distributor may
purchase Shares for its own investment account upon Distributor's
written assurance that the purchase is for investment purposes and
that the Shares will not be resold except through redemption by
the Fund.
14. Stein Roe & Farnham Incorporated Investment Programs.
In connection with any program under which Stein Roe & Farnham
Incorporated or one of its affiliates offers investment advice to
shareholders, the Distributor is authorized to offer and sell
Shares of the Fund, as principal, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of Shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
15. 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.
16. Registration of Additional Shares. The Fund hereby
agrees to register an indefinite number of Shares pursuant to Rule
24f-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.
17. 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.
18. 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. Distributor may appoint sub-agents or
distribute through dealers or otherwise as Distributor may
determine from time to time, but this Agreement shall not be
construed as authorizing any dealer or other person to accept
orders for sale or repurchase on the Fund's behalf or otherwise
act as the Fund's agent for any purpose.
19. 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 or based upon
(i) any violation of an applicable law, rule or regulation or
wrongful act by Distributor or any of Distributor's directors,
officers, employees or representatives, or (ii) any untrue
statement or alleged untrue statement of a material fact contained
in a registration statement, Prospectus, SAI, 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.
Each 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 or based upon
(i) any violation of applicable law, rule or regulation or
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) any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, Prospectus, SAI, 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.
Each 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.
20. 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 20 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.
21. 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.
22. 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.
23. 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.
24. 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
LIBERTY FUNDS DISTRIBUTOR, INC.
By:_____________________________
ATTEST:
_______________________
STEIN ROE INVESTMENT TRUST
STEIN ROE INCOME TRUST
STEIN ROE MUNICIPAL TRUST
By: THOMAS W. BUTCH
Thomas W. Butch
President
ATTEST:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
Schedule A to Underwriting Agreement
Between the Stein Roe Investment Trust, Stein Roe Income Trust,
and Stein Roe Municipal Trust and
Liberty Funds Distributor, Inc.
The series of the Trust covered by this agreement are:
Stein Roe Investment Trust
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Disciplined Stock Fund
Stein Roe Young Investor Fund
Stein Roe Growth Investor Fund
Stein Roe Capital Opportunities Fund
Stein Roe Midcap Growth Fund
Stein Roe Small Company Growth Fund
Stein Roe Asia Pacific Fund
Stein Roe Large Company Focus Fund
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 Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Dated: August 3, 1999
<PAGE>
STEIN ROE FUNDS
AMENDED AND RESTATED
ACCOUNTING AND BOOKKEEPING AGREEMENT
This Agreement is made this 3rd day of August, 1999 by and
between STEIN ROE INVESTMENT TRUST, a Massachusetts business
trust, (hereinafter referred to as the "Trust") and STEIN ROE &
FARNHAM INCORPORATED ("Stein Roe"), a Delaware corporation.
1. Appointment. The Trust hereby appoints Stein Roe to act as
its agent to perform the services described herein with respect to
each series of shares of the Trust (the "Series") identified in
and beginning on the date specified on Appendix I to this
Agreement, as may be amended from time to time. Stein Roe hereby
accepts appointment as the Trust's agent and agrees to perform the
services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, Stein Roe shall
value all securities and other assets of the Series, and
compute the net asset value per share of such Series, at
such times and dates and in the manner and by such
methodology as is specified in the then currently
effective prospectus and statement of additional
information for such Series, and pursuant to such other
written procedures or instructions furnished to Stein Roe
by the Trust. To the extent procedures or instructions
used to value securities or other assets of a Series under
this Agreement are at any time inconsistent with any
applicable law or regulation, the Trust shall provide
Stein Roe with written instructions for valuing such
securities or assets in a manner which the Trust
represents to be consistent with applicable law and
regulation.
(b) Net Income. Stein Roe shall calculate with such
frequency as the Trust shall direct, the net income of
each Series of the Trust for dividend purposes and on a
per share basis. Such calculation shall be at such times
and dates and in such manner as the Trust shall instruct
Stein Roe in writing. For purposes of such calculation,
Stein Roe shall not be responsible for determining whether
any dividend or interest accruable to the Trust is or will
be actually paid, but will accrue such dividend and
interest unless otherwise instructed by the Trust.
(c) Capital Gains and Losses. Stein Roe shall calculate gains
or losses of each Series of the Trust from the sale or
other disposition of assets of that Series as the Trust
shall direct.
(d) Yields. At the request of the Trust, Stein Roe shall
compute yields for each Series of the Trust for such
periods and using such formula as shall be instructed by
the Trust.
(e) Communication of Information. Stein Roe shall provide the
Trust, the Trust's transfer agent and such other parties
as directed by the Trust with the net asset value per
share, the net income per share and yields for each Series
of the Trust at such time and in such manner and format
and with such frequency as the parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish Stein Roe with any and all instructions,
explanations, information, specifications and
documentation deemed necessary by Stein Roe in the
performance of its duties hereunder, including, without
limitation, the amounts and/or written formula for
calculating the amounts, and times of accrual of
liabilities and expenses of each Series of the Trust. The
Trust shall also at any time and from time to time furnish
Stein Roe with bid, offer and/or market values of
securities owned by the Trust if the same are not
available to Stein Roe from a pricing or similar service
designated by the Trust for use by Stein Roe to value
securities or other assets. Stein Roe shall at no time be
required to commence or maintain any utilization of, or
subscriptions to, any such service which shall be the sole
responsibility and expense of the Trust.
3. Recordkeeping.
(a) Stein Roe shall, as agent for the Trust, maintain and keep
current and preserve the general ledger and other
accounts, books, and financial records of the Trust
relating to activities and obligations under this
Agreement in accordance with the applicable provisions of
Section 31(a) of the General Rules and Regulations under
the Investment Company Act of 1940, as amended (the
"Rules").
(b) All records maintained and preserved by Stein Roe pursuant
to this Agreement which the Trust is required to maintain
and preserve in accordance with the Rules shall be and
remain the property of the Trust and shall be surrendered
to the Trust promptly upon request in the form in which
such records have been maintained and preserved.
(c) Stein Roe shall make available on its premises during
regular business hours all records of a Trust for
reasonable audit, use and inspection by the Trust, its
agents and any regulatory agency having authority over the
Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized agent
of the Trust for instructions regarding the Trust, and may
consult counsel for such Trust or its own counsel, in
respect of any matter arising in connection with this
Agreement, and it shall not be liable for any action taken
or omitted by it in good faith in accordance with such
instructions or with the advice or opinion of such
counsel. Stein Roe shall be protected in acting upon any
such instruction, advice, or opinion and upon any other
paper or document delivered by the Trust or such counsel
believed by Stein Roe to be genuine and to have been
signed by the proper person or persons and shall not be
held to have notice of any change of authority of any
officer or agent of the Trust, until receipt of written
notice thereof from such Trust.
(b) Stein Roe may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as conclusive
evidence of (i) the authority of any person to act in
accordance with such vote or (ii) any determination or any
action by the Board of Trustees pursuant to its Agreement
and Declaration of Trust as described in such vote, and
such vote may be considered as in full force and effect
until receipt by Stein Roe of written notice to the
contrary.
5. Compensation. The Trust shall reimburse Stein Roe from the
assets of the respective applicable Series of the Trust, for any
and all out-of-pocket expenses and charges in performing services
under this Agreement and such compensation as is provided in
Appendix II to this Agreement, as amended from time to time.
Stein Roe shall invoice the Trust as soon as practicable after the
end of each calendar month, with allocation among the respective
Series and full detail, and the Trust shall promptly pay Stein Roe
the invoiced amount.
6. Confidentiality of Records. Stein Roe agrees not to disclose
any information received from the Trust to any other client of
Stein Roe or to any other person except its employees and agents,
and shall use its best efforts to maintain such information as
confidential. Upon termination of this Agreement, Stein Roe shall
return to the Trust all records in the possession and control of
Stein Roe related to such Trust's activities, other than Stein
Roe's own business records, it being also understood and agreed
that any programs and systems used by Stein Roe to provide the
services rendered hereunder will not be given to any Trust.
7. Liability and Indemnification.
(a) Stein Roe shall not be liable to any Trust for any action
taken or thing done by it or its employees or agents on
behalf of the Trust in carrying out the terms and
provisions of this Agreement if done in good faith and
without negligence or misconduct on the part of Stein Roe,
its employees or agents.
(b) The Trust shall indemnify and hold Stein Roe, and its
controlling persons, if any, harmless from any and all
claims, actions, suits, losses, costs, damages, and
expenses, including reasonable expenses for counsel,
incurred by it in connection with its acceptance of this
Agreement, in connection with any action or omission by it
or its employees or agents in the performance of its
duties hereunder to the Trust, or as a result of acting
upon instructions believed by it to have been executed by
a duly authorized agent of the Trust or as a result of
acting upon information provided by the Trust in form and
under policies agreed to by Stein Roe and the Trust,
provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely
to one or more Series, such indemnification shall be only
out of the assets of that Series or group of Series; (ii)
this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on the
part of Stein Roe or its employees or agents, including
but not limited to willful misfeasance, bad faith, or
gross negligence in the performance of their duties, or
reckless disregard of their obligations and duties under
this Agreement; and (iii) Stein Roe shall give the Trust
prompt notice and reasonable opportunity to defend against
any such claim or action in its own name or in the name of
Stein Roe.
(c) Stein Roe shall indemnify and hold harmless the Trust from
and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising
out of, or incurred because of, the negligence or
misconduct of Stein Roe or its agents or contractors, or
the breach by Stein Roe of its obligations under this
Agreement, provided that: (i) this indemnification shall
not apply to actions or omissions constituting negligence
or misconduct on the part of such Trust or its other
agents or contractors and (ii) such Trust shall give Stein
Roe prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or in the
name of such Trust.
8. Further Assurances. Each party agrees to perform such further
acts and execute such further documents as are necessary to
effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some person
or persons may be trustees, officers, or shareholders of both the
Trusts and Stein Roe, and that the existence of any such dual
interest shall not affect the validity hereof or of any
transactions hereunder except as otherwise provided by specific
provision of applicable law.
10. Amendment and Termination. This Agreement may be modified or
amended from time to time, or terminated, by mutual agreement
between the parties hereto and may be terminated by at least one
hundred eighty (180) days' written notice given by one party to
the other. Upon termination hereof, the Trust shall pay to Stein
Roe such compensation as may be due from it as of the date of such
termination, and shall reimburse Stein Roe for its costs,
expenses, and disbursements payable under this Agreement to such
date. In the event that, in connection with termination, a
successor to any of the duties or responsibilities of Stein Roe
hereunder is designated by a Trust by written notice to Stein Roe,
Stein Roe shall promptly upon such termination and at the expense
of such Trust, deliver to such successor all relevant books,
records, and data established or maintained by Stein Roe under
this Agreement and shall cooperate in the transfer of such duties
and responsibilities, including provision, at the expense of such
Trust, for assistance from Stein Roe personnel in the
establishment of books, records, and other data by such successor.
11. Assignment. Any interest of Stein Roe under this Agreement
shall not be assigned or transferred either voluntarily or
involuntarily, by operation of law or otherwise, without prior
written notice to the Trust.
12. Use of Affiliated Companies and Subcontractors. In connection
with the services to be provided by Stein Roe under this
Agreement, Stein Roe may, to the extent it deems appropriate, and
subject to compliance with the requirements of applicable laws and
regulations and upon receipt of approval of the Trustees, make use
of (i) its affiliated companies and their directors, trustees,
officers, and employees and (ii) subcontractors selected by Stein
Roe, provided that Stein Roe shall supervise and remain fully
responsible for the services of all such third parties in
accordance with and to the extent provided by this Agreement. All
costs and expenses associated with services provided by any such
third parties shall be borne by Stein Roe or such parties.
13. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or sent by registered mail, postage
prepaid to the other party at such address as such other party may
designate for the receipt of such notices. Until further notice
to the other parties, it is agreed that the address of the Trust
and Stein Roe is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
14. Non-Liability of Trustees and Shareholders. Any obligation of
the Trust hereunder shall be binding only upon the assets of that
Trust (or the applicable Series thereof), as provided in the
Agreement and Declaration of Trust of that Trust, and shall not be
binding upon any Trustee, officer, employee, agent or shareholder
of the Trust or upon any other Trust. Neither the authorization
of any action by the Trustees or the shareholders of the Trust,
nor the execution of this Agreement on behalf of the Trust shall
impose any liability upon any Trustee or any shareholder. Nothing
in this Agreement shall protect any Trustee against any liability
to which such Trustee would otherwise be subject by willful
misfeasance, bad faith or gross negligence in the performance of
his duties, or reckless disregard of his obligations and duties
under this Agreement. In connection with the discharge and
satisfaction of any claim made by Stein Roe against the Trust
involving more than one Series, the Trust shall have the exclusive
right to determine the appropriate allocations of liability for
any such claim between or among the Series.
15. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such
as "herein," "hereof," and "hereunder," shall be deemed to refer
to this Agreement as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as part hereof or control or affect the
meaning, construction or effect of this Agreement. This Agreement
may be executed in any number of counterparts, each of which shall
be deemed an original.
16. Governing Law. This Agreement shall be governed by the laws
of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
STEIN ROE INVESTMENT TRUST
By: THOMAS W. BUTCH
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: THOMAS W. BUTCH
Thomas W. Butch
Attest: President, Mutual Funds Division
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX I
The series of the Trust currently subject to this Agreement are as
follows:
Series Effective Date
Stein Roe Growth & Income Fund August 3, 1999
Stein Roe International Fund August 3, 1999
Stein Roe Young Investor Fund August 3, 1999
Stein Roe Midcap Growth Fund August 3, 1999
Stein Roe Large Company Focus Fund August 3, 1999
Stein Roe Asia Pacific Fund August 3, 1999
Stein Roe Small Company Growth Fund August 3, 1999
Stein Roe Growth Investor Fund August 3, 1999
Stein Roe Balanced Fund August 3, 1999
Stein Roe Growth Stock Fund August 3, 1999
Stein Roe Capital Opportunities Fund August 3, 1999
Stein Roe Disciplined Stock Fund August 3, 1999
Dated: August 3, 1999
<PAGE>
STEIN ROE INVESTMENT TRUST
ACCOUNTING & BOOKKEEPING AGREEMENT
APPENDIX II
For the services provided under the Accounting & Bookkeeping
Agreement (the "Agreement"), the Trust shall pay Stein Roe an
annual fee with respect to each series, calculated and paid
monthly, equal to $25,000 plus .0025 percent per annum of the
average daily net assets of the series in excess of $50 million.
Such fee shall be paid within thirty days after receipt of monthly
invoice.
<PAGE>
ADMINISTRATIVE AGREEMENT
BETWEEN
STEINROE INVESTMENT TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEINROE INVESTMENT TRUST, a Massachusetts business trust
registered under the Securities Act of 1933 ("1933 Act") and the
Investment Company Act of 1940 ("1940 Act") (the "Trust"), hereby
appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation, of Chicago, Illinois ("Administrator"), to furnish
certain administrative services with respect to the Trust and the
series of the Trust listed in Schedule A hereto, as such schedule
may be amended from time to time (each such series hereinafter
referred to as "Fund").
The Trust and Administrator hereby agree that:
1. ADMINISTRATIVE SERVICES. Subject to the terms of this
Agreement and the supervision and control of the Trust's Board of
Trustees ("Trustees"), Administrator shall provide the following
services with respect to the Trust:
(a) Preparation and maintenance of the Trust's registration
statement with the Securities and Exchange Commission
("SEC");
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Fund
("Prospectus");
(c) Preparation, filing with appropriate regulatory authorities,
and dissemination of various reports for the Fund, including
but not limited to semiannual reports to shareholders under
Section 30(d) of the 1940 Act, annual and semiannual reports
on Form N-SAR, and notices pursuant to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including the
collection of all information required for preparation of
proxy statements, the preparation and filing with appropriate
regulatory agencies of such proxy statements, the supervision
of solicitation of shareholders and shareholder nominees in
connection therewith, tabulation (or supervision of the
tabulation) of votes, response to all inquiries regarding
such meetings from shareholders, the public and the media,
and preparation and retention of all minutes and all other
records required to be kept in connection with such meetings;
(e) Maintenance and retention of all Trust charter documents and
the filing of all documents required to maintain the Trust's
status as a Massachusetts business trust and as a registered
open-end investment company;
(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board of Trustees and
committees thereof and preparation and retention of all
minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax required
to be paid in connection therewith;
(h) Calculation of all Trust and Fund expenses and arrangement
for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of each
Fund;
<PAGE> 2
(j) Determination, after consultation with the officers of the
Trust, of the jurisdictions in which shares of beneficial
interest of each Fund ("Shares") shall be registered or
qualified for sale, or may be sold pursuant to an exemption
from such registration or qualification, and preparation and
maintenance of the registration or qualification of the
Shares for sale under the securities laws of each such
jurisdiction;
(k) Provision of the services of persons who may be appointed as
officers of the Trust by the Board of Trustees (it is agreed
that some person or persons may be officers of both the Trust
and the Administrator, and that the existence of any such
dual interest shall not affect the validity of this Agreement
except as otherwise provided by specific provision of
applicable law);
(l) Preparation and, subject to approval of the Trust's Chief
Financial Officer, dissemination of the Trust's and each
Fund's quarterly financial information to the Board of
Trustees and preparation of such other reports relating to
the business and affairs of the Trust and each Fund as the
officers and Board of Trustees may from time to time
reasonably request;
(m) Administration of the Trust's Code of Ethics and periodic
reporting to the Board of Trustees of Trustee and officer
compliance therewith;
(n) Provision of internal legal, accounting, compliance, audit,
and risk management services and periodic reporting to the
Board of Trustees with respect to such services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to, custody,
tax, transfer agency, disaster recovery, audit, and legal
services;
(p) Negotiation and arrangement for insurance desired or required
of the Trust and administering all claims thereunder;
(q) Response to all inquiries by regulatory agencies, the press,
and the general public concerning the business and affairs of
the Trust, including the oversight of all periodic
inspections of the operations of the Trust and its agents by
regulatory authorities and responses to subpoenas and tax
levies;
(r) Handling and resolution of any complaints registered with the
Trust by shareholders, regulatory authorities, and the
general public;
(s) Monitoring legal, tax, regulatory, and industry developments
related to the business affairs of the Trust and
communicating such developments to the officers and Board of
Trustees as they may reasonably request or as the
Administrator believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of Trustees of
the Trust of modifications to such policies to facilitate the
protection of shareholders or market competitiveness of the
Trust and Fund and to the extent necessary to comply with new
legal or regulatory requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio
information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in connection
with the litigation or settlement of such claims.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Administrator
under this Agreement, Administrator may,
<PAGE> 3
to the extent it deems appropriate, and subject to compliance
with the requirements of applicable laws and regulations and upon
receipt of approval of the Trustees, make use of (i) its
affiliated companies and their directors, trustees, officers, and
employees and (ii) subcontractors selected by Administrator,
provided that Administrator shall supervise and remain fully
responsible for the services of all such third parties in
accordance with and to the extent provided by this Agreement.
All costs and expenses associated with services provided by any
such third parties shall be borne by Administrator or such
parties.
3. INSTRUCTIONS, OPINIONS OF COUNSEL, AND SIGNATURES. At
any time Administrator may apply to a duly authorized agent of
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good faith
in accordance with such instructions or with the advice or
opinion of such counsel. Administrator shall be protected in
acting upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by Administrator to be genuine and to have been signed
by the proper person or persons and shall not be held to have
notice of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
4. EXPENSES BORNE BY TRUST. Except to the extent expressly
assumed by Administrator herein or under a separate agreement
between the Trust and Administrator and except to the extent
required by law to be paid by Administrator, the Trust shall pay
all costs and expenses incidental to its organization, operations
and business. Without limitation, such costs and expenses shall
include but not be limited to:
(a) All charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) All charges for equipment or services used for obtaining
price quotations or for communication between Administrator
or the Trust and the custodian, transfer agent or any other
agent selected by the Trust;
(c) All charges for investment advisory, portfolio management,
and accounting services provided to the Trust by the
Administrator, or any other provider of such services;
(d) All charges for services of the Trust's independent auditors
and for services to the Trust by legal counsel;
(e) All compensation of Trustees, other than those affiliated
with Administrator, all expenses incurred in connection with
their services to the Trust, and all expenses of meetings of
the Trustees or committees thereof;
(f) All expenses incidental to holding meetings of shareholders,
including printing and of supplying each record-date
shareholder with notice and proxy solicitation material, and
all other proxy solicitation expenses;
(g) All expenses of printing of annual or more frequent revisions
of the Trust's prospectus(es) and of supplying each then-
existing shareholder with a copy of a revised prospectus;
(h) All expenses related to preparing and transmitting
certificates representing the Trust's shares;
<PAGE> 4
(i) All expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) All brokers' commissions and other normal charges incident to
the purchase, sale, or lending of Fund securities;
(k) All taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) All expenses of registering and maintaining the registration
of the Trust under the 1940 Act and, to the extent no
exemption is available, expenses of registering the Trust's
shares under the 1933 Act, of qualifying and maintaining
qualification of the Trust and of the Trust's shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Trust under all other laws applicable to the Trust or its
business activities;
(m) All interest on indebtedness, if any, incurred by the Trust
or a Fund; and
(n) All fees, dues and other expenses incurred by the Trust in
connection with membership of the Trust in any trade
association or other investment company organization.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by the Trust that are attributable solely to the
organization, operation or business of a Fund shall be paid
solely out of Fund assets. Any expense borne by the Trust which
is not solely attributable to a Fund, nor solely to any other
series of shares of the Trust, shall be apportioned in such
manner as Administrator determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
6. EXPENSES BORNE BY ADMINISTRATOR. Administrator at its
own expense shall furnish all executive and other personnel,
office space, and office facilities required to render the
services set forth in this Agreement. However, Administrator
shall not be required to pay or provide any credit for services
provided by the Trust's custodian or other agents without
additional cost to the Trust.
In the event that Administrator pays or assumes any expenses
of the Trust or a Fund not required to be paid or assumed by
Administrator under this Agreement, Administrator shall not be
obligated hereby to pay or assume the same or similar expense in
the future; provided that nothing contained herein shall be
deemed to relieve Administrator of any obligation to the Trust or
a Fund under any separate agreement or arrangement between the
parties.
7. ADMINISTRATION FEE. For the services rendered,
facilities provided, and charges assumed and paid by
Administrator hereunder, the Trust shall pay to Administrator out
of the assets of each Fund fees at the annual rate for such Fund
as set forth in Schedule B to this Agreement. For each Fund, the
administrative fee shall accrue on each calendar day, and shall
be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the number
of days in the calendar year by the applicable annual rate of
fee, and multiplying this product by the net assets of the Fund,
determined in the manner established by the Board of Trustees, as
of the close of business on the last preceding business day on
which the Fund's net asset value was determined.
<PAGE> 5
8. STATE EXPENSE LIMITATION. If for any fiscal year of a
Fund, its aggregate operating expenses ("Aggregate Operating
Expenses") exceed the applicable percentage expense limit imposed
under the securities law and regulations of any state in which
Shares of the Fund are qualified for sale (the "State Expense
Limit"), the Administrator shall pay such Fund the amount of such
excess. For purposes of this State Expense Limit, Aggregate
Operating Expenses shall (a) include (i) any fees or expense
reimbursements payable to Administrator pursuant to this
Agreement and (ii) to the extent the Fund invests all or a
portion of its assets in another investment company registered
under the 1940 Act, the pro rata portion of that company's
operating expenses allocated to the Fund, and (iii) any
compensation payable to Administrator pursuant to any separate
agreement relating to the Fund's investment operations and
portfolio management, but (b) exclude any interest, taxes,
brokerage commissions, and other normal charges incident to the
purchase, sale or loan of securities, commodity interests or
other investments held by the Fund, litigation and
indemnification expense, and other extraordinary expenses not
incurred in the ordinary course of business. Except as otherwise
agreed to by the parties or unless otherwise required by the law
or regulation of any state, any reimbursement by Administrator to
a Fund under this section shall not exceed the administrative fee
payable to Administrator by the Fund under this Agreement.
Any payment to a Fund by Administrator hereunder shall be
made monthly, by annualizing the Aggregate Operating Expenses for
each month as of the last day of the month. An adjustment for
payments made during any fiscal year of the Fund shall be made on
or before the last day of the first month following such fiscal
year of the Fund if the Annual Operating Expenses for such fiscal
year (i) do not exceed the State Expense Limitation or (ii) for
such fiscal year there is no applicable State Expense Limit.
9. NON-EXCLUSIVITY. The services of Administrator to the
Trust hereunder are not to be deemed exclusive and Administrator
shall be free to render similar services to others.
10. STANDARD OF CARE. Neither Administrator, nor any of
its directors, officers or stockholders, agents or employees
shall be liable to the Trust, any Fund, or its shareholders for
any action taken or thing done by it or its subcontractors or
agents on behalf of the Trust or the Fund in carrying out the
terms and provisions of this Agreement if done in good faith and
without negligence or misconduct on the part of Administrator,
its subcontractors, or agents.
11. INDEMNIFICATION. The Trust shall indemnify and hold
Administrator and its controlling persons, if any, harmless from
any and all claims, actions, suits, losses, costs, damages, and
expenses, including reasonable expenses for counsel, incurred by
it in connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
subcontractors in the performance of its duties hereunder to the
Trust, or as a result of acting upon any instruction believed by
it to have been executed by a duly authorized agent of the Trust
or as a result of acting upon information provided by the Trust
in form and under policies agreed to by
<PAGE> 6
Administrator and the Trust, provided that: (i) to the extent
such claims, actions, suits, losses, costs, damages, or expenses
relate solely to a particular Fund or group of Funds, such
indemnification shall be only out of the assets of that Fund or
group of Funds; (ii) this indemnification shall not apply to
actions or omissions constituting negligence or misconduct of
Administrator or its agents or subcontractors, including but not
limited to willful misfeasance, bad faith, or gross negligence in
the performance of their duties, or reckless disregard of their
obligations and duties under this Agreement; and (iii)
Administrator shall give the Trust prompt notice and reasonable
opportunity to defend against any such claim or action in its own
name or in the name of Administrator.
Administrator shall indemnify and hold harmless the Trust
from and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising out of,
or incurred because of, the negligence or misconduct of
Administrator or its agents or subcontractors, provided that such
Trust shall give Administrator prompt notice and reasonable
opportunity to defend against any such claim or action in its own
name or in the name of such Trust.
12. EFFECTIVE DATE, AMENDMENT, AND TERMINATION. This
Agreement shall become effective as to any Fund as of the
effective date for that Fund specified in Schedule A hereto and,
unless terminated as hereinafter provided, shall remain in effect
with respect to such Fund thereafter from year to year so long as
such continuance is specifically approved with respect to that
Fund at least annually by a majority of the Trustees who are not
interested persons of Trust or Administrator.
As to any Trust or Fund of that Trust, this Agreement may be
modified or amended from time to time by mutual agreement between
the Administrator and the Trust and may be terminated by
Administrator or Trust by at least sixty (60) days' written
notice given by the terminating party to the other party. Upon
termination as to any Fund, the Trust shall pay to Administrator
such compensation as may be due under this Agreement as of the
date of such termination and shall reimburse Administrator for
its costs, expenses, and disbursements payable under this
Agreement to such date. In the event that, in connection with a
termination, a successor to any of the duties or responsibilities
of Administrator hereunder is designated by the Trust by written
notice to Administrator, upon such termination Administrator
shall promptly, and at the expense of the Trust or Fund with
respect to which this Agreement is terminated, transfer to such
successor all relevant books, records, and data established or
maintained by Administrator under this Agreement and shall
cooperate in the transfer of such duties and responsibilities,
including provision, at the expense of such Fund, for assistance
from Administrator personnel in the establishment of books,
records, and other data by such successor.
13. ASSIGNMENT. Any interest of Administrator under this
Agreement shall not be assigned either voluntarily or
involuntarily, by operation of law or otherwise, without the
prior written consent of Trust.
14. BOOKS AND RECORDS. Administrator shall maintain, or
oversee the maintenance by such other persons as may from time to
time be approved by the Board of
<PAGE> 7
Trustees to maintain, the books, documents, records, and data
required to be kept by the Trust under the 1940 Act, the laws of
the Commonwealth of Massachusetts or such other authorities
having jurisdiction over the Trust or the Fund or as may
otherwise be required for the proper operation of the business
and affairs of the Trust or the Fund (other than those required
to be maintained by any investment adviser retained by the Trust
on behalf of a Fund in accordance with Section 15 of the 1940
Act).
Administrator will periodically send to the Trust all books,
documents, records, and data of the Trust and each of its Funds
listed in Schedule A that are no longer needed for current
purposes or required to be retained as set forth herein.
Administrator shall have no liability for loss or destruction of
said books, documents, records, or data after they are returned
to such Trust.
Administrator agrees that all such books, documents,
records, and data which it maintains shall be maintained in
accordance with Rule 31a-3 of the 1940 Act and that any such
items maintained by it shall be the property of the Trust.
Administrator further agrees to surrender promptly to the Trust
any such items it maintains upon request, provided that the
Administrator shall be permitted to retain a copy of all such
items. Administrator agrees to preserve all such items
maintained under Rule 31a-1 for the period prescribed under Rule
31a-2 of the 1940 Act.
Trust shall furnish or otherwise make available to
Administrator such copies of the financial statements, proxy
statements, reports, and other information relating to the
business and affairs of each Fund of the Trust as Administrator
may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not be
binding upon any Trustee, officer, employee, agent or shareholder
of Trust. Neither the authorization of any action by the
Trustees or shareholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any shareholder.
16. USE OF ADMINISTRATOR'S NAME. The Trust may use its
name and the names of its Funds listed in Schedule A or any other
name derived from the name "Stein Roe & Farnham" only for so long
as this Agreement or any extension, renewal, or amendment hereof
remains in effect, including any similar agreement with any
organization which shall have succeeded to the business of
Administrator as it relates to the services it has agreed to
furnish under this Agreement. At such time as this Agreement or
any extension, renewal or amendment hereof, or such other similar
agreement shall no longer be in effect, Trust will cease to use
any name derived from the name "Stein Roe & Farnham" or otherwise
connected with Administrator, or with any organization which
shall have succeeded to Administrator's business herein
described.
17. REFERENCES AND HEADINGS. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only
<PAGE> 8
and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this Agreement. This
Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
Dated: August 15, 1995
STEINROE INVESTMENT TRUST
Attest: By: TIMOTHY K. ARMOUR
Timothy K. Armour
JILAINE HUMMEL BAUER President
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Hans P. Ziegler
KEITH J. RUDOLF Chief Executive Officer
Keith J. Rudolf
Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are as
follows:
Effective Date
------------------
Stein Roe Growth & Income Fund September 1, 1995
Stein Roe Young Investor Fund September 1, 1995
Stein Roe Balanced Fund September 1, 1995
Stein Roe Growth Stock Fund September 1, 1995
Stein Roe Capital Opportunities Fund September 1, 1995
Stein Roe Disciplined Stock Fund September 1, 1995
Stein Roe International Fund July 1, 1996
Stein Roe Midcap Growth Fund May 9, 1997
Stein Roe Large Company Focus Fund April 30, 1998
Stein Roe Asia Pacific Fund October 19, 1998
Stein Roe Small Company Growth Fund February 2, 1999
Stein Roe Growth Investor Fund March 31, 1999
Dated: June 28, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Assistant Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated with respect to each Fund in accordance with the
following schedule applicable to average daily net assets of the
Fund:
Fund Administrative Fee Schedule B1
- ----------------------------- ------------------------------
Stein Roe Young Investor Fund 0.200% of first $500 million,
0.150% of next $500 million,
0.125% thereafter
Fund Administrative Fee Schedule B2
- -------------------------------- ------------------------------
Stein Roe Growth Stock Fund 0.150% of first $500 million,
Stein Roe Growth & Income Fund 0.125 of next $500 million,
Stein Roe Balanced Fund 0.100% thereafter
Stein Roe Growth Investor Fund
Fund Administrative Fee Schedule B3
- ---------------------------------- ------------------------------
Stein Roe Disciplined Stock Fund 0.150% of first $500 million,
Stein Roe Capital Opportunities 0.125% of next $500 million,
Fund 0.100% of next $500 million,
Stein Roe Midcap Growth Fund 0.075% thereafter
SteinRoe Large Company Focus Fund
Fund Administrative Fee Schedule B4
- ------------------------------- ------------------------------
Stein Roe International Fund 0.150%
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
Dated: June 28, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Assistant Secretary
<PAGE>
Stein Roe Mutual Funds
Rule 12b-1 Distribution Plan
Each Massachusetts Business Trust (Trust) designated in
Appendix 1 as revised from time to time, acting severally, adopts
as of August 3, 1999, the following distribution plan (the Plan)
pursuant to Rule 12b-1 (the Rule) under the Investment Company Act
of 1940 (Act) on behalf of each Fund in that Trust for the purpose
of providing personal service and/or the maintenance of
shareholder accounts and to facilitate the distribution of shares
of the Funds.
I. Plans Applying to Class A, B and C Shares
Except as indicated below, each Fund having Class A, B or C
Shares shall pay a service fee at the annual rate of 0.25% of the
net assets of its Class A, B and C Shares, and a distribution fee
at the annual rate of 0.75% of the average daily net assets of its
Class B and C Shares.
II. Payments of Fees Under the Plan
Each Fund shall make all payments of service and distribution
fees under this Plan to Liberty Funds Distributor, Inc. (LFDI)
monthly, on the 20th day of each month or, if such day is not a
business day, on the next business day thereafter. No Fund shall
pay, nor shall LFDI be entitled to receive, any amount under this
Plan if such payment would result in LFDI receiving amounts in
excess of those permitted by applicable law or by rules of the
National Association of Securities is Dealers, Inc.
III. Use of Fees.
LFDI may pay part or all of the service and distribution fees
it receives from a Fund as commissions to financial service firms
that sell Fund Shares or as reimbursements to financial service
firms or other entities that provide shareholder services to
record or beneficial owners of shares (including third-party
administrators of qualified plans). This provision does not
obligate LFDI to make any such payments nor limit the use that
LFDI may make of the fees it receives.
IV. Reporting
LFDI shall provide to the Trust's Trustees, and the Trustees
shall review, at least quarterly, reports setting forth all Plan
expenditures, and the purposes for those expenditures. Amounts
payable under this paragraph are subject to any limitations on
such amounts prescribed by applicable laws or rules.
V. Other Payments Authorized
Payments by the Trust to LFDI and its affiliates (including
Colonial Management Associates, Inc.) other than as set forth in
Section I which may be indirect financing of distribution costs
are authorized by this Plan.
VI. Continuation; Amendment; Termination
This Plan shall continue in effect with respect to a Class of
Shares only so long as specifically approved for that Class at
least annually as provided in the Rule. The Plan may not be
amended to increase materially the service fee or distribution fee
with respect to a Class of Shares without such shareholder
approval as is required by the Rule and any applicable orders of
the Securities and Exchange Commission, and all material
amendments of the Plan must be approved in the manner described in
the Rule. The Plan may be terminated with respect to any Class of
Shares at any time as provided in the Rule without payment of any
penalty. The continuance of the Plan shall be effective only if
the selection and nomination of the Trust's Trustees who are not
interested persons (as defined under the Act) of the Trust is
effected by such non-interested Trustees as required by the Rule.
Approved by the Trustees as of the date
set forth above:
By: HEIDI J. WALTER
Heidi J. Walter, Secretary For Each
Trust
<PAGE>
APPENDIX 1
Stein Roe Investment Trust
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Disciplined Stock Fund
Stein Roe Young Investor Fund
Stein Roe Growth Investor Fund
Stein Roe Capital Opportunities Fund
Stein Roe Midcap Growth Fund
Stein Roe Small Company Growth Fund
Stein Roe Asia Pacific Fund
Stein Roe Large Company Focus Fund
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 Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Stein Roe Advisor Floating Rate Fund
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE ADVISOR FLOATING RATE FUND
Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940
Effective August 3, 1999
Each Series (each a "Stein Roe Fund") of Stein Roe Income Trust,
Stein Roe Investment Trust, and Stein Roe Municipal Trust, (each a
"Trust") as set forth in Schedule I and Stein Roe Advisor Floating
Rate Fund ("Floating Rate Fund") may from time to time issue one
or more of the following classes of shares as authorized by the
Board of Trustees and as provided for herein: Class A shares,
Class B shares, Class C shares and Class Z shares. Each class is
subject to such investment minimums and other conditions of
eligibility as set forth in the Stein Roe Funds or Floating Rate
Fund's prospectus and statement of additional information as from
time to time in effect. The differences in expenses among these
classes of shares and the conversion and exchange features of each
class of shares, are set forth below. These differences are
subject to change, to the extent permitted by law and by the
Declaration of Trust and By-laws of the Trusts and the Floating
Rate Fund, by action of the Board of Trustees.
CLASS A SHARES
Class A shares of the Stein Roe Funds and Floating Rate Fund are
offered at net asset value ("NAV") plus the initial sales charges
described in the Stein Roe Funds and Floating Rate Fund's
prospectus and statement of additional information as from time to
time in effect. Initial sales charges may not exceed 6.50%, and
may be reduced or waived as permitted by Rule 22d-1 under the
Investment Company Act of 1940 ( the "1940 Act") and as described
in the Stein Roe Funds and Floating Rate Fund's prospectus and
statement of additional information from time to time in effect.
Purchases of $1 million to $5 million of Class A shares that are
redeemed within 18 months from purchase are subject to a
contingent deferred sales charge ("CDSC") of 0.50% of either the
purchase price or the NAV of the shares redeemed, whichever is
less. Purchases in excess of $5 million of Class A shares that
are redeemed within 18 months from purchase are subject to a CDSC
of 0.50% only on assets redeemed below the $5 million level. The
CDSC may be reduced or waived as permitted by Rule 6c-10 under the
1940 Act and as described in the Stein Roe Funds and Floating Rate
Fund's prospectus and statement of additional information as from
time to time in effect.
Class A shares pay distribution and service fees pursuant to a
plan adopted pursuant to Rule 12b-1 under the 1940 Act ("12b-1
Plan") as described in the Stein Roe Funds and Floating Rate
Fund's prospectus and statement of additional information in
effect from time to time. Such fees may be in amounts up to but
may not exceed, respectively, 0.10% and 0.25% per annum of the
average daily net assets attributable to such class.
Class A shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Floating
Rate Fund's prospectus and statement of additional information in
effect from time to time. Total transfer agency fees, including
such service component, may not exceed 0.30% of average annual net
assets attributable to the class.
Class A shares of the Stein Roe Funds and Floating Rate Fund may
be exchanged, at the holder's option, for Class A shares of any
other Stein Roe Fund, Floating Rate Fund, any Liberty-Stein Roe
Advisor Trust Fund ("Advisor Fund") and most funds advised by
Colonial Management Associates, Inc. or distributed by Liberty
Funds Distributor, Inc. ("LFD") or its successor without the
payment of a sales charge, except that if shares of any Stein Roe
Fund, Floating Rate Fund, Advisor Fund or non-money market
Colonial Fund are exchanged within five months after purchase for
shares of another Stein Roe Fund, Floating Rate Fund, Advisor Fund
or Colonial Fund with a higher sales charge, then the difference
in sales charges must be paid on the exchange.
In addition, Class A shares of Stein Roe Funds or Floating Rate
Fund may be exchanged, at the holder's option, for Class A shares
of any other Stein Roe Fund, Floating Rate Fund, any Advisor Fund
or a Colonial Fund offering Class A shares, without the payment of
a CDSC. The holding period for determining the CDSC will include
the holding period of the shares exchanged. If the Class A shares
received in the exchange are subsequently redeemed, the amount of
the CDSC, if any, will be determined by the schedule of the Stein
Roe Fund, Floating Rate Fund, Advisor Fund or Colonial Fund in
which the original investment was made.
CLASS B SHARES
Class B shares are offered at NAV, without an initial sales
charge. Class B shares that are redeemed within the period of
time after purchase (not more than 8 years) specified in each
Stein Roe Funds or Floating Rate Fund's prospectus and statement
of additional information as from time to time in effect are
subject to a CDSC of up to 3% of either the purchase price or the
NAV of the shares redeemed, whichever is less; such percentage may
be lower for certain Funds and declines the longer the shares are
held, all as described in the Stein Roe Funds or Floating Rate
Fund's prospectus and statement of additional information as from
time to time in effect. Class B shares purchased with reinvested
distributions are not subject to a CDSC. The CDSC is subject to
reduction or waiver in certain circumstances, as permitted by Rule
6c-10 under the 1940 Act and as described in the Stein Roe Funds
or Floating Rate Fund's prospectus and statement of additional
information as from time to time in effect.
Class B shares pay distribution and service fees pursuant to a
12b-1 Plan as described in Stein Roe Funds or Floating Rate Fund's
prospectus and statement of additional information in effect from
time to time. Such fees may be in amounts up to but may not
exceed, respectively, 0.55% and 0.25% per annum of the average
daily net assets attributable to such class.
Class B shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Stein
Roe Funds or Floating Rate Fund's prospectus and statement of
additional information in effect from time to time. Total
transfer agency fees, including such service component, may not
exceed 0.30% of average annual net assets attributable to the
class.
Class B shares automatically convert to Class A shares of the same
Stein Roe Fund or Floating Rate Fund eight years after purchase,
except that Class B shares purchased through the reinvestment of
dividends and other distributions on Class B shares convert to
Class A shares proportionally to the amount of Class B shares
otherwise being converted.
Class B shares of Stein Roe Funds and Floating Rate Fund may be
exchanged, at the holder's option, for Class B shares of any other
Stein Roe Fund, Floating Rate Fund, any Advisor Fund or a Colonial
Fund offering Class B shares, without the payment of a CDSC. The
holding period for determining the CDSC and the conversion to
Class A shares will include the holding period of the shares
exchanged. If the Class B shares received in the exchange are
subsequently redeemed, the amount of the CDSC, if any, will be
determined by the schedule of the Stein Roe Fund or Floating Rate
Fund, Advisor Fund or Colonial Fund in which the original
investment was made.
CLASS C SHARES
Class C shares are offered at NAV without an initial sales charge.
Class C shares that are redeemed within up to three years from
purchase may be subject to a CDSC of 1% of either the purchase
price or the NAV of the shares redeemed, whichever is less. Class
C shares purchased with reinvested dividends or capital gain
distributions are not subject to a CDSC. The CDSC may be reduced
or waived in certain circumstances as permitted by Rule 6c-10
under the 1940 Act and as described in the Stein Roe Funds or
Floating Rate Fund's prospectus and statement of additional
information as from time to time in effect.
Class C shares pay distribution and service fees pursuant to a
12b-1 Plan as described in the Stein Roe Funds or Floating Rate
Fund's prospectus and statement of additional information in
effect from time to time. Such fees may be in amounts up to but
may not exceed, respectively, 0.60% and 0.25% per annum of the
average daily net assets attributable to such class.
Class C shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Stein
Roe Funds or Floating Rate Fund's prospectus and statement of
additional information in effect from time to time. Total
transfer agency fees, including such service component, may not
exceed 0.30% of average annual net assets attributable to the
class.
Class C shares of Stein Roe Funds or Floating Rate Fund may be
exchanged, at the holder's option, for Class C shares of any other
Stein Roe Fund, Floating Rate Fund, any Advisor Fund or a Colonial
Fund offering Class C shares, without the payment of a CDSC. The
holding period for determining the CDSC will include the holding
period of the shares exchanged. If the Class C shares received in
the exchange are subsequently redeemed, the amount of the CDSC, if
any, will be determined by the schedule of the Stein Roe Fund or
Floating Rate Fund, Advisor Fund or Colonial Fund in which the
original investment was made. Only one exchange of any Stein Roe
Fund, Floating Rate Fund, Advisor Fund or Colonial Fund's Class C
shares may be made in any three month period. For this purpose,
an exchange into a Stein Roe Fund, Floating Rate Fund, Advisor
Fund or Colonial Fund and a prior or subsequent exchange out of a
Stein Roe Fund, Floating Rate Fund, Advisor Fund or Colonial Fund
constitutes an "exchange."
CLASS Z SHARES
Class Z shares are offered at NAV, without an initial sales
charge, 12b-1 fee or CDSC.
Class Z shares pay service fees equaling a portion of the transfer
agency fee attributable to that class as described in the Stein
Roe Funds or Floating Rate Fund's prospectus and statement of
additional information in effect from time to time. Total
transfer agency fees may not exceed 0.30% of average annual net
assets attributable to the class.
Class Z shares of Stein Roe Funds may be exchanged, at the
holder's option, for Class Z shares of any other Stein Roe Fund.
Class Z shares of any Stein Roe Fund or Floating Rate Fund may not
be exchanged for Class Z shares of any Colonial Fund.
<PAGE>
Schedule I
Stein Roe Investment Trust
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Disciplined Stock Fund
Stein Roe Young Investor Fund
Stein Roe Growth Investor Fund
Stein Roe Capital Opportunities Fund
Stein Roe Midcap Growth Fund
Stein Roe Small Company Growth Fund
Stein Roe Asia Pacific Fund
Stein Roe Large Company Focus Fund
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 Managed Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
<PAGE>
[Logo] Stein Roe Mutual Funds IN40297
Sensible Risks. Intelligent Investments. [service mark]
MUTUAL FUND APPLICATION
Mail to:
STEIN ROE MUTUAL FUNDS
P.O. Box 8900
Boston, MA 02205-8900
This application is for:
[ ] New account
[ ] Change to current account (see Section 13)
1. ACCOUNT REGISTRATION
Please check one box below to indicate the type of account
and complete the related information.
[ ] INDIVIDUAL OR [ ] JOINT* ACCOUNT
______________________________________________
Owner's name (First, middle initial, last)
_______________________________________________
Joint owner's name (First, middle initial, last)
__________________________________________________________________
Owner's Social Security number Joint owner's Social Security
number
*Joint tenants with right of survivorship, unless indicated
otherwise.
[ ] UNIFORM GIFTS (TRANSFERS) TO MINORS ACCOUNT (UGMA/UTMA)
_________________________________________
Name of one custodian only
_________________________________________
Name of one minor only
_________________________________________
State of residence
_________________________________________
Minor's Social Security number
[ ] ORGANIZATION OR OTHER ACCOUNT
Please complete and return the Certificate of Authorization on the
last page of the prospectus.
_______________________________________________
Name of corporation, partnership, estate, etc.
_______________________________________________
Tax identification number
[ ] TRUST OR RETIREMENT ACCOUNT
For a Stein Roe IRA, please call us for a separate application.
_________________________________________
Name of trustee(s)
_________________________________________
_________________________________________
Name of trust
____________________________________________________
Date of trust Trust's tax identification number
_________________________________________
Trust beneficiary(ies)
_________________________________________
Trust beneficiary(ies)
2. ADDRESS
______________________________________________
Street Address or P.O. box
______________________________________________
______________________________________________
City State Zip code
______________________________________________
Owner's citizenship Joint owner's citizenship
______________________________________________
Daytime telephone Evening Telephone
[ ] CONSOLIDATED QUARTERLY STATEMENTS
Check the box above if you would like to link your new Stein Roe
account to an existing Stein Roe account--even if the existing
account is registered to another member in your household.
Linking your accounts allows us to consolidate your Stein Roe
accounts on one quarterly statement. Please provide the existing
Stein Roe account number below. Statements will be sent to the
address on the existing account.
________________________________________________
Existing account number
- -----------------------------------------------------------------
Stein Roe Mutual Funds, P.O. Box 8900, Boston, MA 02205-8900 800-
338-2550
- -----------------------------------------------------------------
3. FUND SELECTION
Fill in the amount you would like to invest in each of the funds
below. The initial minimum is $2,500; for custodial accounts
(UGMAs), the minimum is $1,000. When an Automatic Investment Plan
in Section 6 is established, Stein Roe reduces the minimum initial
investment to $1,000 for each new account ($500 for UGMAs and $100
for Young Investor Fund). If you do not specify a fund, your
investment will be in Stein Roe Cash Reserves Fund, a money market
fund.
MONEY MARKET FUNDS
Cash Reserves Fund (036) $_____
TAX-EXEMPT FUNDS
Municipal Money Market Fund (030) _____
Intermediate Municipals Fund (008)_____
Managed Municipals Fund (037) _____
High-Yield Municipals Fund (028) _____
BOND FUNDS
Intermediate Bond Fund (035) _____
Income Fund (009) _____
High Yield Fund (015) _____
GROWTH AND INCOME FUNDS
Balanced Fund (031) _____
Growth & Income Fund (011) _____
GROWTH FUNDS
Growth Stock Fund (032) *CLOSED
Young Investor Fund (014) _____
Growth Investor Fund (026) _____
Midcap Growth Fund (20) _____
Disciplined Stock Fund (034) _____
Large Company Focus Fund (021) _____
Capital Opportunities (033) _____
International Fund (012) _____
Small Company Growth Fund (025) _____
*This Fund is closed to new investors. If you are a shareholder
in any Stein Roe Fund as of Oct. 15, 1997, you may open an
additional account in your name. See a prospectus for more
information. To verify your status as an eligible shareholder,
please provide existing account number with your new investment
amount below.
_________________________________________________________________
Current Stein Roe Fund account number New Growth Stock Fund
investment amount
4. INVESTMENT METHOD
Check one box below. (Money orders not accepted.)
[ ] BY CHECK: Payable to Stein Roe Mutual Funds
[ ] BY EXCHANGE FROM:
Your account must be registered identically to invest by exchange.
______________________________
Fund name
______________________________________________________________
Account number Number of shares or $ amount
[ ] BY WIRE: Call us for instructions at 800-338-2550
5. TELEPHONE AND ONLINE REDEMPTION OPTIONS
A. Telephone/Online Redemption Options. You can redeem shares by
telephone or online two ways: with Telephone/Online Redemption, a
check is mailed to your address of record; with Telephone/Online
Exchange, redemption proceeds are used to purchase shares in
another Stein Roe Fund. Most shareholders prefer these
conveniences. They apply unless you check the boxes below.
I DO NOT WANT:
[ ] Telephone Redemption [ ] Online Redemption
[ ] Telephone Exchange [ ] Online Exchange
B. ACH Redemption Option. Check either or both boxes if you wish
to be able to redeem shares at any time by telephone or online and
have the proceeds sent to your bank account designated in Section
8. ($50 minimum; $100,000 maximum.)
[ ] ACH Telephone Redemption
[ ] ACH Online Redemption
C. Telephone Redemption by Wire. Check the box below if you wish
to redeem shares at any time and wire the proceeds to your bank
account designated in Section 8. ($1,000 minimum for all funds;
$100,000 maximum for all funds except money market funds.) [ ]
If you decide to add these options at a later date, you will be
required to obtain a signature guarantee.
6. AUTOMATIC INVESTMENT PLAN
Please allow 3 weeks to establish this option.
[ ] A. Regular Investments. This option allows you to make
scheduled investments into your account(s) directly from
your bank account by electronic transfer. When this
option is established, Stein Roe reduces the minimum
initial investment to $1,000 for each new account ($500
for UGMAs and $100 for Young Investor Fund). Please
remember to include a check for the appropriate minimum
and also complete Section 8.
__________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
__________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
I authorize Stein Roe Mutual Funds to draw on my bank account to
purchase shares for the account(s) listed above. Check one box
below to indicate the frequency of your automatic investments.
[ ] Monthly [ ] Quarterly [ ] Every 6 months [ ] Annually
Check one box below to indicate which day of the month your
investment should be made:
[ ] 5th or [ ] 20th day of the month
Please begin: [ ] Immediately or [ ] _______ (Specify month)
[ ] B. Special Investments. You can also make subsequent
purchases by telephone or online and pay for them by
electronic transfer from your bank account on request.
Check the box above for this option, which saves you the
trouble and expense of arranging for a wire transfer or
writing a check. Please also complete Section 8. ($50
minimum; $100,000 maximum).
7. DISTRIBUTION OPTIONS
We will automatically reinvest all distributions for you. If you
want this option, you do not need to fill out this section.
Please check below only if you prefer that your distributions be
invested in shares of another Stein Roe Fund with the same account
registration (a $1,000 minimum applies to the account in which you
are investing); deposited into your bank account; or sent by check
to your registered address.
Dividends Capital Gains
(check one or both)
[ ] A. Distribution purchase [ ] [ ]
Invest into ____________________________________________
Fund name Account number (or "new")
from: ___________________________________________________
Fund name Account number (or "new")
[ ] B. Automatic deposit direct to your bank [ ] [ ]
account. Please also complete Section 8.
[ ] C. Send check to registered address [ ] [ ]
8. BANK INFORMATION
Complete this section if you have selected options from Sections
5B, 5C,6A, 6B, or 7B. You must use the same bank account for
these options.
[ ] Checking [ ] Savings
________________________________________________________________
Name of bank
________________________________________________________________
Street address of bank
________________________________________________________________
City State Zip code
________________________________________________________________
Name(s) on bank account
___________________________ ____________________________________
Bank account number ACH Routing number (see diagram below)
- ------------------------------------------------------
Joe Investor 0000
123 Main Street ______ 19__
Anytown, USA 12345
Pay to the
order of ________________________________ $_________
______________________________________________ Dollars
Anytown Bank USA
Memo ____________ ______________________________
1 000 000000 00 0000000000
- ------------------------------------------------------
ACH ROUTING NUMBER YOUR ACCOUNT NUMBER
A unique nine-digit number Unique to your account at
that allows for the electronic your financial institution
transfer of funds and identi-
fies your financial institution
within the Automatic Clearing
House Network.
9. AUTOMATIC EXCHANGE PLAN
With this option you can authorize Stein Roe to regularly exchange
shares from one existing Stein Roe Fund account to another with
the same account registration. A $1,000 minimum applies to each
account.
________________________________________________________________
Redeem shares from (Fund name) Account number
________________________________________________________________
Amount ($50 minimum)
________________________________________________________________
Purchase shares from (Fund name) Account number
Check one box below to indicate frequency of exchange and fill in
dates between the 1st and 28th of the month:
[ ] Twice monthly on the ___ and ___ beginning ___ (Specify month)
[ ] Monthly on the ______ beginning __________ (Specify month)
[ ] Quarterly on the ______ of _______________ (List four months)
[ ] Twice yearly on the _____ of _____________ (List two months)
[ ] Annually on the _____ of _________________ (Specify month)
10. MONEY MARKET FUND OPTIONS
[ ] FREE CHECK WRITING
Available for Cash Reserves Fund and Municipal Money Market Fund
only.
Check the above box and complete the signature card below if you
wish to write checks ($50 minimum) on your money market fund
account Please also complete Section 12.
PLEASE DO NOT DETACH
- ------------------------------------------------------------------
Bank of Boston Check Writing Signature Card (for money market
funds only)
Select Fund:[ ] Cash Reserves Fund [ ] Municipal Money Market Fund
Account name(s) as registered: ____________________________
By signing this card, I authorize Bank of Boston to honor any
check drawn by me on an account with the bank and to redeem and
pay to bank shares in my Fund account having a redemption price
equal to the amount of such check. I agree to be subject to the
rules governing the Check Writing Redemption option as in effect
from time to time.
Signature (sign as you will on checks): Signature guarantee*
__________________________________________________________________
__________________________________________________________________
Number of signatures on each check/1: __________
*Required if you are adding these options to an existing account;
or if you are requesting check writing for a Trust, Corporation
or other Organization account, guarantee required for any person
signing these cards who has not signed in Section 12. Otherwise
a signature guarantee is not required.
/1 If left blank, only one signature is required for joint tenant
accounts, but all signatures are required for all other types of
accounts.
For office use only: Account no. _______________ Date: __________
You are subject to Fund and bank rules pertaining to checking
accounts under the privilege as in effect from time to time. For
a joint tenancy account with rights of survivorship, each owner
appoints each other owner as attorney-in-fact with power to
authorize redemptions on his behalf by signing checks under the
privilege unless the reverse side indicates all owners must sign
checks.
You agree to hold Fund and its transfer agent free from any
liability resulting from payment of any forged, altered, lost or
stolen check unless you notify Fund and bank of such
misappropriation no later than 14 days after the earliest of the
date on which you (a) discover the misappropriation or (b) receive
a copy of the check cancelled by bank. A copy of a cancelled
check paid during a calendar month is deemed received 6 days after
posting in the U.S. mail to your registered address with Fund
unless you notify Fund of non-receipt by certified mail within 20
days after the close of such month.
You agree to hold Fund and its transfer agent free from any
liability for any other check misappropriated by the same
wrongdoer and paid from proceeds of a redemption made in good
faith on or after the date you notify Fund of the first
misappropriated check.
- ------------------------------------------------------------------
11. TERMS AND CONDITIONS OF SERVICES
Please read carefully before signing in Section 12. By electing
an automatic service, you agree to the following terms and
conditions and those stated in the Fund prospectus as in effect
from time to time.
*By signing this application, you agree that any privilege you
elect may be restricted or terminated at any time without notice
to you. Your termination of a privilege will be effective no
later than five business days after the Fund(s) or its transfer
agent receives 1) your request; 2) notice and proof of your
death, or if a trust, termination thereof; or 3) the closing of
an affected Fund or bank account.
*All privileges except Automatic Dividend Deposit, Dividend
Purchase Option, Automatic Investment Plan, Money Market Fund
Check Writing, Automatic Exchange, Automatic Redemption Plan and
Telephone Redemption by Wire will be transferred automatically to
any new account you open in any other Fund offering the
privileges into which a telephone or written exchange is made.
*You authorize the Fund(s) and its transfer agent to initiate any
and all credit or debit entries (and reversals thereof) to effect
electronic transfers under any privilege and redeem shares of any
Fund(s) you own equal to the amount of any loss incurred by any
of them in effecting any electronic transfer and retain the
proceeds.
12. SIGNATURE(S)
By signing this form, I certify that:
*I have received the current Fund prospectus and have read the
Terms and Conditions of Services in Section 11 and agree to be
bound by their terms as governed by Illinois law. I have full
authority and legal capacity to purchase Fund shares and
establish and use any related privileges.
*By signing below, I certify under penalties or perjury that:
-All information and certifications on this application are true
and correct, including the Social Security or other tax
identification number (TIN) in Section 1.
-If I have not provided a TIN, I have not been issued a number
but have applied (or will apply) for one and understand that if
I do not provide the Fund(s) a TIN within 60 days, the Fund(s)
will withhold 31 percent from all my dividend, capital gain and
redemption payments until I provide one.
-Check one of the following only if applicable:
[ ] The IRS has informed me I am subject to backup withholding as
a result of a failure to report all interest or dividend
income.
[ ] I am a trust or organization that qualifies for the IRS backup
withholding exemption.
*Unless I have declined the Telephone Redemption, Telephone
Exchange, Online Redemption and Online Exchange privileges in
Section 5A, I have authorized the Fund and its agents to act upon
instructions received by telephone or online to redeem my shares
of the Fund or to exchange them for shares of another Stein Roe
Fund, and I agree that, subject to the Fund's employing
reasonable procedures to confirm that such telephone or online
instructions are genuine, neither the Fund, nor any of its agents
will be liable for any loss, injury, damage, or expense as a
result of acting upon, and will not be responsible for the
authenticity of, any telephone or online instructions, and will
hold the Fund and its agents harmless from any loss, claims or
liability arising from its or their compliance with these
instructions. Accordingly, I understand that I will bear any
risk of loss resulting from unauthorized instructions.
*The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required
to avoid backup withholding.
Sign below exactly as your name(s) appears in Section 1.
x________________________________________________________________
Signature Date
_________________________________________________________________
Title (if owner is an organization)
x________________________________________________________________
joint owner's signature Date
_________________________________________________________________
Title (if owner is an organization)
13. SIGNATURE GUARANTEE (IF REQUIRED)
A signature guarantee is not required if you are establishing a
new account. For existing accounts, a signature guarantee is
required if you are adding or making changes to options listed in
Sections 5, 6, 7B, 8 or 10. We are unable to accept
notarizations.
Signature(s) guaranteed by:
________________________________________________________________
Name of institution
________________________________________________________________
Name of authorized officer
________________________________________________________________
Signature of authorized officer
Guarantor's stamp:
If you have any questions, please call us toll free
at 800-338-2550
Please return this completed form to:
Stein Roe Mutual Funds
P.O. Box 8099
Boston, MA 02205-8900
Liberty Funds Distributor, Inc.
MFAPP 5/99
