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. 54 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 55 [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)
[X] on February 2, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 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 Special Fund, Stein Roe
International Fund, Stein Roe Young Investor Fund, Stein Roe
Special Venture Fund, Stein Roe Growth Opportunities Fund,
Stein Roe Large Company Focus Fund, Stein Roe Asia Pacific
Fund, Stein Roe Small Company Growth Fund, and Stein Roe
Investor Fund.
<PAGE>
The prospectuses and statements of additional information
relating to the series of Stein Roe Investment Trust
designated Stein Roe Growth & Income Fund, Stein Roe Balanced
Fund, Stein Roe Growth Stock Fund, Stein Roe Capital
Opportunities Fund, Stein Roe Special Fund, Stein Roe
International Fund, Stein Roe Young Investor Fund, Stein Roe
Special Venture Fund, Stein Roe Growth Opportunities Fund,
Stein Roe Large Company Focus Fund, Stein Roe Asia Pacific
Fund, and Stein Roe Investor Fund are not affected
by the filing of this Post-Effective Amendment No. 54.
<PAGE>
[Cover Page]
Stein Roe Small Company Growth Fund
Prospectus
Feb. 2, 1999
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether this prospectus
is accurate or complete. Anyone who tells you otherwise is
committing a crime.
<PAGE>
The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
Financial Highlights
Your Account
Purchasing Shares
Opening an Account
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
Other Investments and Risks
Market Capitalization
Short Sales
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
THE FUND
[CALLOUT]
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).
As of Dec. 31, 1998, large-cap companies had market
capitalizations greater than $6.6 billion, midcap companies had
market capitalizations between $1.8 and $6.6 billion and small-cap
companies had market capitalizations less than $1.8 billion.
These amounts will change as the S&P Mid-Cap 400 and S&P Small-Cap
600 indices change.
(For more information, see page 25.)
[/CALLOUT]
INVESTMENT GOAL
Stein Roe Small Company Growth Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Under normal market conditions, the Fund invests at least 65
percent of its assets in common stocks of small-cap companies.
The Fund may invest in new issuers during periods when new issues
are being brought to market. The Fund may also invest in midcap
companies. The Fund invests in companies that compete within
large and growing markets and that have the ability to grow their
market share. To find companies with these growth
characteristics, the portfolio managers seek out companies that
are-or, in the portfolio managers' judgment, have the potential to
be-a market share leader within their respective industry. They
also look for companies with strong management teams that
participate in the ownership of the companies.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. Investments in small-
and medium-cap companies may increase these risks relative to
investments in larger-cap companies. These risks may cause you to
lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
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.
[End of callout]
Small- and Medium-Cap Companies
The securities the Fund purchases may involve certain special
risks. Small- and medium-sized companies and new issuers often
have limited product lines, operating histories, markets, or
financial resources. They also may depend heavily on a small
management group. Small-cap companies in particular are more
likely to fail or prove unable to grow. Their securities may
trade less frequently, in smaller volumes, and fluctuate more
sharply in price than securities of larger companies. The price
of the Fund's shares-its net asset value (NAV)-may fluctuate daily
in response to changes in the market value of the securities. In
addition, these risks could negatively impact the Fund's
performance or yield.
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.
For more information on the Fund's investment techniques, please
refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in the Fund if you:
* are a long-term investor who seeks the potentially greater
growth opportunities of small-cap stocks and can tolerate their
greater risks
* can tolerate fluctuations in the Fund's NAV due to greater
volatility of small-cap companies
The Fund is not appropriate for investors who:
* already have significant holdings in small-cap stocks or mutual
funds
* can't tolerate volatility or possible losses
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
The following charts show the Fund's performance. The returns
include the reinvestment of dividends and distributions. As with
all mutual funds, past performance is no guarantee of future
results.
Year-by-Year Total Returns
Year-by-year calendar returns show the Fund's volatility over a
period of time. This chart illustrates performance differences
for each calendar year and provides an indication of the risks of
investing in the Fund.
YEAR-BY-YEAR TOTAL RETURNS*
30%
25%
20%
15% 19.93%
10%
5% 7.85%
0%
- -5%
1997 1998
Best quarter: 4th quarter 1998, +20.21%
Worst quarter: 3rd quarter 1998, -19.32%
*On Feb. 2, 1999, the Colonial Aggressive Growth Fund (Predecessor
Fund) was reorganized into the Fund. The Predecessor Fund had
multiple classes of shares, consisting of Class A, Class B, and
Class C shares. The performance information contained in the
chart is based on the historical returns of the Predecessor Fund's
Class A shares, which, unlike the Fund, had a 0.25 percent 12b-1
fee. The chart does not reflect the sales load of the Predecessor
Fund's Class A shares.
Average Annual Total Returns
Average annual total returns measure the Fund's performance over
time. We compare the Fund's returns with returns for the S&P
Small-Cap 600 Index, which is a measure of market performance for
small-cap companies. We show returns for calendar years to be
consistent with the way other mutual funds report performance in
their prospectuses. This allows you to accurately compare similar
mutual fund investments and provides an indication of the risks of
investing in the Fund.
AVERAGE ANNUAL TOTAL RETURNS
Periods ending Dec. 31, 1998
1 yr Since Inception
Small Company Growth Fund* -11.38% 8.60%
S&P Small-Cap 600 Index** -1.31% 13.67%
______
*In February 1999, the Colonial Aggressive Growth Fund
(Predecessor Fund) was reorganized into the Fund. The Predecessor
Fund had multiple classes of shares, consisting of Class A, Class
B, and Class C shares. The performance information contained in
the table is based on the historical returns of the Predecessor
Fund's Class A shares, which, unlike the Fund, had a 0.25% 12b-1
fee. The table does not reflect the sales load of the Predecessor
Fund's Class A shares.
**The S&P Small-Cap 600 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment. Since inception performance for the S&P Small-
Cap 600 Index is from March 31, 1996 to Dec. 31, 1998.
YOUR EXPENSES
This table shows fees and expenses you may pay if you buy and hold
shares of the Fund. You do not pay any sales charge when you
purchase or sell your shares.(a) However, you pay various other
indirect expenses because the Fund pays fees and other expenses
that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (b)
(expenses that are deducted from Fund assets)
Management fees (c) 1.00%
Distribution (12b-1) fees None
Other expenses 0.64%
Total annual fund operating expenses(d) 1.64%
Less expense reimbursement 0.14%
Net expenses 1.50%
(a) There is a $7 charge for wiring redemption proceeds to your
bank. A fee of $5 per quarter may be charged to accounts that
fall below the required minimum balance.
(b) Management fees reflect increases effective February 1999.
Other Expenses are based on projected average annual assets of
$50 million. In addition, the Fund's 12b-1 fee of 0.25% and
load of 5.75% were eliminated effective February 1999.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
(d) Stein Roe will reimburse the Fund if its annual ordinary
operating expenses exceed 1.50% of average daily net assets.
This commitment expires on Jan. 31, 2000. After
reimbursement, management fees will be 0.86%. A reimbursement
lowers the expense ratio and increases overall return to
investors.
Expense Example
This example compares the cost of investing in the Fund to the
cost of investing in a similar mutual fund. It uses the same
hypothetical assumptions that other funds use in their
prospectuses:
* $10,000 initial investment
* 5 percent total return each year
* the Fund's operating expenses remain constant as a percent of
net assets
* redemption at the end of each time period
Your actual costs may be higher or lower because in reality fund
returns and operating expenses change. Expenses based on these
assumptions are:
EXPENSE EXAMPLE
1 yr 3 yrs 5 yrs 10 yrs
Small Company Growth Fund $167 $517 $892 $1,944
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table explains the Fund's financial
performance. Consistent with other mutual funds, we show
information for the last five fiscal years or for the period of
the Fund's operations (if shorter). The Predecessor Fund's fiscal
year ran from July 1 to June 30. The total returns in the table
represent the return that investors earned assuming that they
reinvested all dividends and distributions. Certain information
in the table reflects the financial results for a single share of
Class A of the Predecessor Fund, outstanding throughout the period
from March 31, 1996 through June 30, 1998. The information has
been derived from the financial statements of the Predecessor
Fund. Pricewaterhouse Coopers LLP, independent accountants,
audited this information and issued an unqualified report that
appears in the Predecessor Fund's 1998 annual report along with
the financial statements. To request the Predecessor Fund's
annual report, please call 800-338-2550.
Small Company Fund
Per Share Data Period
For years ended
ended June 30, June 30,
1998 1997 1996(a)
Net asset value, beginning of period $12.65 $11.30 $10.11
Income from investment operations
Net investment loss (e) (0.14) (0.11) (0.01)
Net gains on securities (both
realized and unrealized) 2.78 1.48 1.20
Total income from investment
operations 2.64 1.37 1.19
Less distributions
Dividends (from net investment income) - (0.01) -
Distributions (from capital gains) (0.90) (0.01) -
Total distributions (0.90) (0.02) -
Net asset value, end of period $14.39 $12.65 $11.30
Total return (b) 21.56% 12.14% 11.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000 omitted) $3,867 $3,185 $2,826
Ratio of net expenses to average net
assets (d) 1.55% 1.55% 1.55%(c)
Ratio of net investment loss to
average net assets (b) (1.04)% (0.99)% (0.58)%(c)
Portfolio turnover rate 70% 54% -%
_____________________
(a) The Predecessor Fund commenced operation on March 25, 1996.
The activity shown is from the effective date of registration
(March 31, 1996) with the Securities and Exchange Commission.
The Predecessor Fund was not publicly offered and may have
been managed differently than a publicly offered fund.
(b) Computed with the effect of the expense reimbursement.
(c) 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.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement by the previous investment adviser, this ratio
would have been 3.76% and 4.12% for the years ended June 30,
1998 and 1997, and 2.93% for the period ended June 30, 1996.
(e) Per share data was calculated using average shares outstanding
during the period.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
You may purchase shares of the Fund without a sales charge. Your
purchases are made at NAV next determined after the Fund receives
your check, wire transfer or electronic transfer. If the Fund
receives your check, wire transfer or electronic transfer after
the close of regular trading on the New York Stock Exchange
(NYSE)-normally 3 p.m. Central time-your purchase is effective on
the next business day. If you participate in the Stein Roe
Counselor [service mark] program or are a client of Stein Roe
Private Capital Management, the minimum initial investment is
determined by those programs.
Purchases through Third Parties
If you purchase Fund shares through certain broker-dealers, banks
or other intermediaries (intermediaries), they may charge a fee
for their services. They may also place limits on your ability to
use services the Fund offers. There are no charges or limitations
if you purchase shares directly from the Fund, except those fees
described in this prospectus.
If an intermediary is an agent or designee of the Fund, orders are
processed at the NAV next calculated after the intermediary
receives the order. The intermediary must segregate any orders it
receives after the close of regular trading on the NYSE and
transmit those orders separately for execution at the NAV next
determined.
Conditions of Purchase
An order to purchase Fund shares is not binding unless and until
an authorized officer, agent or designee of the Fund accepts and
enters it on the Fund's books. Once we accept your purchase
order, you may not cancel or revoke it; however, you may redeem
your shares. The Fund may reject any purchase order if it
determines that the order is not in the best interests of the Fund
and its shareholders. The Fund may waive or lower its investment
minimums for any reason.
ACCOUNT MINIMUMS
Minimum to Minimum Minimum
Type of Account Open an Account Addition Balance
- -------------------------------------------------------------
Regular $2,500 $100 $1,000
Custodial (UGMA/UTMA) $1,000 $100 $1,000
Automatic Investment Plan $1,000 $50 -
Roth and Traditional IRA $500 $50 $500
Educational IRA $500 $50 $500
Opening an Account
OPENING OR ADDING TO AN ACCOUNT
BY MAIL: Opening an Account
Complete the application.
Make check payable to Stein Roe Mutual Funds.
Mail application and check to:
SteinRoe Services Inc.
P.O. Box 8900
Boston, MA 02205
If you participate in the Stein Roe Counselor
program, mail application and check to:
SteinRoe Services Inc.
P.O. Box 803938
Chicago, IL 60680
Adding to an Account
Make check payable to Stein Roe Mutual Funds. Be
sure to write your account number on the check.
Fill out investment slip (stub from your statement or
confirmation) or include a note indicating the amount
of your purchase, your account number, and the name
in which your account is registered.
Mail check with investment slip or note to the
appropriate address above.
BY WIRE: Opening an Account
Mail your application to the address listed on the
left, then call 800-338-2550 to obtain an account
number. Include your Social Security Number. To
wire funds, use the instructions below.
Adding to an Account
Wire funds to:
First National Bank of Boston
ABA: 011000390
Attn.: SSI, Account No. 560-99696
Fund No. 25; Stein Roe Small Company Growth Fund
Your name (exactly as in the registration).
Account number
(Counselor Account No. if you participate in the
Stein Roe Counselor program).
BY ELECTRONIC FUNDS TRANSFER: Opening an Account
You cannot open a new account via electronic
transfer.
Adding to an Account
Call 800-338-2550 to make your purchase. To set up
prescheduled purchases, be sure to elect the
Automatic Investment Plan option on your application.
BY EXCHANGE: Opening an Account
By mail, phone, in person or automatically (be sure
to elect the Automatic Exchange Privilege on your
Application).
Adding to an Account
By mail, phone, in person or automatically (be sure
to elect the Automatic Exchange Privilege on your
application).
THROUGH AN INTERMEDIARY: Opening an Account
Contact your financial professional.
Adding to an Account
Contact your financial professional.
All checks must be made payable in U. S. dollars and drawn on U.S.
banks. Third-party checks will not be accepted. Money orders
will not be accepted for initial purchases.
Determining Share Price
The Fund's share price is its NAV next determined. NAV is the
difference between the values of the Fund's assets and liabilities
divided by the number of shares outstanding. We determine NAV at
the close of regular trading on the NYSE-normally 3 p.m. Central
time. If you place an order after that time, you receive the
share price determined on the next business day.
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.
Selling Shares
You may sell your shares any day the Fund is open for business.
Please follow the instructions below.
SELLING SHARES
By Mail: Send a letter of instruction, in English, including
your account number and the dollar value or number
of shares you wish to sell. Sign the request
exactly as the account is registered. Be sure to
include a signature guarantee. All supporting legal
documents as required from executors, trustees,
administrators, or others acting on accounts not
registered in their names, must accompany the
request. We will send the check to your registered
address.
By Phone: This feature is automatically added to your account
unless you decline it on your application. Call
800-338-2550 to redeem an amount of $1,000 or more.
We will send the check to your registered address.
By Wire: Fill out the appropriate areas of the account
application for this feature. Proceeds of $1,000 or
more ($100,000 maximum) may be wired to your
predesignated bank account. Call 800-338-2550 to
give instructions to Stein Roe. There is a $7
charge for wiring redemption proceeds to your bank.
By Electronic Transfer: Fill out the appropriate areas of the
account application for this feature. To request an
electronic transfer (not less than $50; not more
than $100,000), call 800-338-2550. We will transfer
your sale proceeds electronically to your bank. The
bank must be a member of the Automated Clearing
House.
By Exchange: Call 800-338-2550 to exchange any portion of your
Fund shares for shares in any other Stein Roe no-
load fund.
By Automatic Exchange: Fill out the appropriate areas of the
account application for this feature. Redeem a fixed
amount on a regular basis (not less than $50 per
month; not more than $100,000) from the Fund for
investment in another Stein Roe no-load fund.
What You Need to Know When Selling Shares
Once we receive and accept your order to sell shares, you may not
cancel or revoke it. We cannot accept an order to sell that
specifies a particular date or price or any other special
conditions. If you have any questions about the requirements for
selling your shares, please call 800-338-2550 before submitting
your order.
The Fund redeems shares at the NAV next determined after an order
has been accepted. We mail the proceeds within seven days after
the sale. The Fund normally pays wire redemption or electronic
transfer proceeds on the next business day.
We will not pay sale proceeds until your shares are paid for. If
you attempt to sell shares purchased by check or electronic
transfer within 15 days of the purchase date, we will delay
sending the sale proceeds until we can verify that those shares
are paid for. You may avoid this delay by purchasing shares by a
federal funds wire.
We use procedures reasonably designed to confirm that telephone
instructions are genuine. These include recording the
conversation, testing the identity of the caller by asking for
account information, and sending prompt written confirmation of
the transaction to the shareholder of record. If these procedures
are followed, the Fund and its service providers will not be
liable for any losses due to unauthorized or fraudulent
instructions.
If the amount you redeem is large enough to affect the Fund's
operation, the Fund may pay the redemption "in kind." This is
payment in portfolio securities rather than cash. If this occurs,
you may incur transaction costs when you sell the securities.
Involuntary Redemption
If your account value falls below $1,000, the Fund may redeem your
shares and send the proceeds to the registered address. You will
receive notice 30 days before this happens. If your account falls
below $10, the Fund may redeem your shares without notice to you.
Low Balance Fee
Due to the expense of maintaining accounts with low balances, if
your account balance falls below $2,000 ($800 for custodial
accounts), you will be charged a low balance fee of $5 per
quarter. The low balance fee does not apply to: (1) shareholders
whose accounts in the Stein Roe Funds total $50,000 or more; (2)
Stein Roe IRAs; (3) other Stein Roe prototype retirement plans;
(4) accounts with automatic investment plans (unless regular
investments have been discontinued); or (5) omnibus or nominee
accounts. The Fund can waive the fee, at its discretion, in the
event of significant market corrections.
Exchanging Shares
You may exchange Fund shares for shares of other Stein Roe no-load
funds. Call 800-338-2550 to request a prospectus and application
for the fund you wish to exchange into. Please be sure to read
the prospectus carefully before you exchange your shares.
The account you exchange into must be registered exactly the same
as the account you exchange from. You must meet all investment
minimum requirements for the fund you wish to exchange into before
we can process your exchange transaction.
An exchange is a redemption and purchase of shares for tax
purposes, and you may realize a gain or a loss when you exchange
Fund shares for shares of another fund.
We may change, suspend or eliminate the exchange service after
notification to you.
Generally, we limit you to four telephone exchanges "roundtrips"
per year. A roundtrip is an exchange out of the Fund into another
Stein Roe no-load fund and then back to the Fund.
Reporting to Shareholders
To reduce the volume of mail you receive, only one copy of certain
materials, such as prospectuses and shareholder reports, will be
mailed to your household (same address). Please call 800-338-2550
if you want to receive additional copies free of charge. This
policy may not apply if you purchase shares through an
intermediary.
Dividends and Distributions
The Fund distributes, at least once a year, virtually all of its
net investment income and net realized capital gains.
A dividend from net investment income represents the income the
Fund earns from dividends and interest paid on its investments,
after payment of the Fund's expenses.
A capital gain is the increase in value of a security that the
Fund holds. The gain is "unrealized" until the security is sold.
Each realized capital gain is either short-term or long-term
depending on whether the Fund held the security for one year or
less or more than one year, regardless of how long you have held
your Fund shares.
When the Fund makes a distribution of income or capital gains, the
distribution is automatically invested in additional shares of the
Fund unless you elect on the account application to have
distributions paid by check.
[CALLOUT]
OPTIONS FOR RECEIVING DISTRIBUTION AND REDEMPTION PROCEEDS:
* by check
* by electronic transfer into your bank account
* a purchase of shares of another Stein Roe fund
* a purchase of shares in a Stein Roe fund account of another
person
[/CALLOUT]
If you elect to receive distributions by check and a distribution
check is returned to the Fund as undeliverable, or if you do not
present a distribution check for payment within six months, we
will change the distribution option on your account and reinvest
the proceeds of the check in additional shares of the Fund. You
will not receive any interest on amounts represented by uncashed
distribution or redemption checks.
Tax Consequences
You are subject to federal income tax on both dividends and
capital gains distributions whether you elect to receive them in
cash or reinvest them in additional shares of the Fund. If the
Fund declares a distribution in December, but does not pay it
until after December 31, you will be taxed as if the distribution
were paid in December. Stein Roe will process your distributions
and send you a statement for tax purposes each year showing the
source of distributions for the preceding year.
TRANSACTION TAX STATUS
Income dividend Ordinary income
Short-term capital gain distribution Ordinary income
Long-term capital gain distribution Capital gain
Sale of shares owned one year or less Gain is ordinary income;
loss is subject to
special rules
Sale of shares owned more than one year Capital gain or loss
If you sell or exchange your shares, any gain or loss is a taxable
event. You may also be subject to state and local income taxes on
dividends or capital gains from the sale or exchange of Fund
shares.
This tax information provides only a general overview. It does
not apply if you invest in a tax-deferred retirement account such
as an IRA. Please consult your own tax advisor about the tax
consequences of an investment in the Fund.
If you have any account questions, you may call 800-338-2550. We
are here seven days a week to help you.
<PAGE>
OTHER INVESTMENTS AND RISKS
The Fund's primary investment strategies and risks are described
in this prospectus. (See "The Fund.") This section and the
Statement of Additional Information (SAI) describe other
investments that the Fund may make and risks associated with them.
The Board of Trustees can change the Fund's investment objective
without shareholder approval.
The Fund's portfolio managers generally make decisions on buying
and selling portfolio investments based upon their judgment that
the decision will improve the Fund's investment return and further
its investment goal. The portfolio managers may also be required
to sell portfolio investments to fund redemptions.
Market 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).
To sort companies in this manner, we compare a company's
capitalization with the capitalization of an appropriate index.
(An index is a statistical composite that measures a group of
stocks.) We utilize two indices in grouping stocks: the S&P Mid-
Cap 400 Index and the S&P Small-Cap 600 Index.
We consider a company to be large cap if its market capitalization
is at least 90 percent of the weighted market capitalization of
the S&P Mid-Cap 400 Index.
We consider a company to be midcap if its market capitalization is
less than 90 percent of the weighted market capitalization of the
S&P Mid-Cap 400 Index and at least 90 percent of the weighted
market capitalization of the S&P Small-Cap 600 Index.
We consider a company to be small cap if its market capitalization
is less than 90 percent of the weighted market capitalization of
the S&P Small-Cap 600 Index.
As of Dec. 31, 1998, large-cap companies had market
capitalizations greater than $6.6 billion, midcap companies had
market capitalizations between $1.8 and $6.6 billion and small-cap
companies had market capitalizations less than $1.8 billion.
These amounts will change as the S&P Mid-Cap 400 and S&P Small-Cap
600 indices change.
Short Sales
The Fund may make short sales of securities. Short selling
involves the sale of borrowed securities. When the Fund thinks
the price of a stock will decline, it borrows the stock and then
sells the borrowed stock. When the Fund has to return the
borrowed stock, it tries to buy the stock at a lower price. If
the Fund is successful, it has a capital gain. If the Fund is
unsuccessful and buys the stock at a higher price than the price
at which it sold the stock, the Fund has a capital loss. The
Fund's capital gains and losses may result in federal income tax
consequences to the Fund's shareholders. Short selling involves
certain risks. The Fund could have a loss if the borrowed
security increases in value and if the purchased security declines
in value.
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
percent under normal conditions. Portfolio turnover typically
produces capital gains or losses for Fund shareholders resulting
in tax consequences for the Fund's shareholders. 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 Fund 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 it takes a defensive
position.
Interfund Lending Program
The Fund may lend money to and borrow money from other funds
advised by Stein Roe. The Fund 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.
<PAGE>
THE FUND'S MANAGEMENT
Investment Adviser
Stein Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
IL 60606, manages the day-to-day operations of the Fund. Stein
Roe (and its predecessor) has advised and managed mutual funds
since 1949. As of Sept. 30, 1998, Stein Roe managed more than $28
billion in assets. The Fund pays Stein Roe (1) an annual
management fee of 0.85% of average net assets and (2) an annual
administrative fee of 0.15% of average net assets. For the most
recent fiscal year, the Fund paid 1.00% of average net assets to
Colonial Management Associates, Inc. (CMA). CMA is an affiliate
of Stein Roe and was investment adviser to the Fund from March 25,
1996 to September 1998. For providing services to the Fund, CMA
received an annual management fee of 0.85% of average net assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are managed together with that of its affiliate,
Colonial Management Associates, Inc. (CMA), by a combined
management team of employees from both companies. CMA also shares
personnel, facilities, and systems with Stein Roe that may be used
in providing administrative or operational services to the Fund.
CMA is a registered investment adviser. Both Stein Roe and CMA
are subsidiaries of Liberty Financial Companies, Inc.
Stein Roe can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Fund's
Board of Trustees.
Portfolio Managers
William M. Garrison and Steven M. Salopek have been the portfolio
managers for the Fund since September 1998. Mr. Garrison joined
Stein Roe in 1989 as an equity research analyst and is a vice
president. In addition, Mr. Garrison has served as associate
portfolio manager for SR&F Balanced Portfolio since 1995. He
earned an A.B. degree from Princeton University and an M.B.A.
degree from the University of Chicago.
Mr. Salopek joined Stein Roe as a research analyst in June 1996
and is a vice president. He was an analyst with Banc One
Investment Advisors from 1990 to May 1996. Mr. Salopek earned a
B.A. degree and an M.B.A. degree from The Ohio State University.
Master/Feeder Fund Structure
The Fund could convert into a "feeder" fund in a "master/feeder"
structure at some future date. This means that all of the Fund's
assets would be invested in a larger "master" portfolio of
securities that has investment objectives and policies
substantially identical to those of the Fund.
Year 2000 Readiness
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 and
other service providers do not properly process and calculate
date-related information and data from and after Jan. 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
communicating with vendors who furnish services, software and
systems to the Fund to provide that date-related information and
data can be properly processed after Jan. 1, 2000. Many Fund
service providers and vendors, including the Fund's service
providers, 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 Jan. 1, 2000.
However, no assurances can be given that all modifications
required to ensure proper data processing and calculation on and
after Jan. 1, 2000, will be made on a timely basis or that
services to the Fund will not be adversely affected.
<PAGE>
[BACK COVER]
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to shareholders. These reports
discuss the market conditions and investment strategies that
affected the Fund's performance over the past six months and year.
You may wish to read the Fund's SAI for more information. The SAI
is incorporated into this prospectus by reference, which means
that it is legally considered to be part of this prospectus and
you are deemed to have been told of its contents.
To obtain free copies of the Fund's semiannual and annual reports
or SAI or to request other information about the Fund, write or
call:
Stein Roe Mutual Funds
One South Wacker Drive
Suite 3200
Chicago, IL 60606
800-338-2550
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the Securities and Exchange Commission (SEC) at
www.sec.gov. You can also obtain copies by visiting the SEC's
Public Reference Room in Washington, DC, by calling 800-SEC-0330,
or by sending your request and the appropriate fee to the SEC's
public reference section, Washington, DC 20549-6009.
Investment Company Act file number: 811-04978
Liberty Funds Distributor, Inc.
<PAGE>
Statement of Additional Information Dated Feb. 2, 1999
STEIN ROE INVESTMENT TRUST
Suite 3200, One South Wacker Drive, Chicago, IL 60606
800-338-2550
Stein Roe Small Company Growth Fund
This Statement of Additional Information ("SAI") is not a
prospectus, but provides additional information that should be
read in conjunction with the prospectus of Stein Roe Small Company
Growth Fund dated Feb. 2, 1999, and any supplements thereto
("Prospectus"). The Prospectus may be obtained at no charge by
telephoning 800-338-2550.
TABLE OF CONTENTS
Page
General Information.......................................2
Investment Policies.......................................3
Portfolio Investments and Strategies......................3
Investment Restrictions..................................19
Additional Investment Considerations.....................21
Purchases and Redemptions................................22
Management...............................................26
Financial Statements.....................................29
Principal Shareholders...................................29
Investment Advisory and Other Services...................29
Distributor..............................................31
Transfer Agent...........................................32
Custodian................................................32
Independent Public Accountants...........................33
Portfolio Transactions...................................33
Additional Income Tax Considerations.....................35
Investment Performance...................................35
Appendix-Ratings.........................................39
GENERAL INFORMATION
Stein Roe Small Company Growth Fund (the "Fund") is a series
of Stein Roe Investment Trust (the "Trust"). The Trust is a
Massachusetts business trust organized under an Agreement and
Declaration of Trust ("Declaration of Trust") dated Jan. 8, 1987,
which provides that each shareholder shall be deemed to have
agreed to be bound by the terms thereof. The Declaration of Trust
may be amended by a vote of either the Trust's shareholders or its
trustees. The Trust may issue an unlimited number of shares, in
one or more series as the Board may authorize. Currently, 12
series are authorized and outstanding. On Feb. 1, 1996, the name
of the Trust was changed to separate "SteinRoe" into two words.
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.
Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services and
investment management services to the Fund.
Special Considerations Regarding Master Fund/Feeder Fund Structure
The Fund has the ability to convert into a "feeder fund";
that is, rather than invest in securities directly, it may seek to
achieve its objective by pooling its assets with those of other
investment companies for investment in a separate "master fund"
having the same investment objective and substantially the same
investment policies as its feeder funds. The purpose of such an
arrangement is to achieve greater operational efficiencies and
reduce costs.
INVESTMENT POLICIES
The Trust is an open-end management investment company. The
Fund is diversified, as that term is defined in the Investment
Company Act of 1940.
The investment objective and policies are described in the
Prospectus under The Fund. In pursuing its objective, the Fund
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
Debt Securities
In pursuing its investment objective, the 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 the investment portfolio as well as
on market conditions. A decline in the prevailing levels of
interest rates generally increases the value of debt securities,
while an increase in rates usually reduces the value of those
securities.
Debt securities within the four highest grades are generally
referred to as "investment grade"). The Fund may invest up to 35%
of its net assets in debt securities, but does not expect to
invest more than 5% of its net assets in debt securities that are
rated below investment grade.
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 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 to 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, the Fund may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash
equivalents.
Derivatives
Consistent with its objective, the Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options,
futures contracts, futures options, 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. The Fund does not
currently intend to invest more than 5% of its net assets in any
type of Derivative except for options, futures contracts, and
futures options. (See Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by 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 pre-paid 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, the Fund obtains the
right to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, Stein Roe will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities it purchases are frequently
rated investment grade, the 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
The 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. The Fund may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, the Fund is
likely to bear its proportionate share of the expenses of the
depositary and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored
ADR. The Fund does not intend to invest, nor during the past
fiscal year has it invested, more than 5% of its net assets in
unsponsored ADRs.
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, 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.
Although the Fund will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
The Fund's foreign currency exchange transactions are limited
to transaction and portfolio hedging involving either specific
transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward contracts with respect to specific
receivables or payables of the Fund arising in connection with the
purchase and sale of its portfolio securities. Portfolio hedging
is the use of forward contracts with respect to portfolio security
positions denominated or quoted in a particular foreign currency.
Portfolio hedging allows it to limit or reduce its exposure in a
foreign currency by entering into a forward contract to sell such
foreign currency (or another foreign currency that acts as a proxy
for that currency) at a future date for a price payable in U.S.
dollars so that the value of the foreign-denominated portfolio
securities can be approximately matched by a foreign-denominated
liability. The Fund may not engage in portfolio hedging with
respect to the currency of a particular country to an extent
greater than the aggregate market value (at the time of making
such sale) of the securities held in its portfolio denominated or
quoted in that particular currency, except that it may hedge all
or part of its foreign currency exposure through the use of a
basket of currencies or a proxy currency where such currencies or
currency act as an effective proxy for other currencies. In such
a case, the Fund may enter into a forward contract where the
amount of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket
hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency it
holds. The Fund may not engage in "speculative" currency exchange
transactions.
At the maturity of a forward contract to deliver a particular
currency, the Fund may either sell the portfolio security related
to such contract and make delivery of the currency, or it may
retain the security and either acquire the currency on the spot
market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same
currency trader obligating it to purchase on the same maturity
date the same amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for the Fund
to purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is
less than the amount of currency it is obligated to deliver and if
a decision is made to sell the security and make delivery of the
currency. Conversely, it may be necessary to sell on the spot
market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of
currency it is obligated to deliver.
If the Fund retains the portfolio security and engages in an
offsetting transaction, it will incur a gain or a loss to the
extent that there has been movement in forward contract prices.
If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between
the Fund's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for
the purchase of the currency, it will realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to purchase. Should forward prices
increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. A default on the contract would
deprive it of unrealized profits or force it to cover its
commitments for purchase or sale of currency, if any, at the
current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that it is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The cost to the Fund of engaging in currency exchange transactions
varies with such factors as the currency involved, the length of
the contract period, and prevailing market conditions. Since
currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
Swaps, Caps, Floors and Collars
The Fund may enter into swaps and may purchase or sell
related caps, floors and collars. It 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 Fund intends to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream it may be obligated to pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease the 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. The 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 the Fund's investment
exposure from one type of investment to another. For example, if
it 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 its
investments and its net asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from the
Fund. If a swap agreement calls for payments by the Fund, it must
be prepared to make such payments when due. If the counterparty's
creditworthiness declines, the value of a swap agreement would be
likely to decline, potentially resulting in a loss. The Fund will
not enter into any swap, cap, floor or collar transaction unless,
at the time of entering into such transaction, the unsecured long-
term debt of the counterparty, combined with any credit
enhancements, is rated at least A by Standard & Poor's Corporation
or Moody's 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 the Fund enters into swap arrangements or
purchases or sells caps, floors or collars, liquid assets having a
value at least as great as the commitment underlying the
obligations will be segregated on the books of the 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, the Fund may lend its portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current
basis in an amount at least equal to the market value of the
securities loaned by the Fund. It 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. It 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. It 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, it 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 it seeks to enforce its rights thereto, (b) possible
subnormal levels of income and lack of access to income during
this period, and (c) expenses of enforcing its rights.
Repurchase Agreements
The Fund may invest in repurchase agreements, provided that
it will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to the
Fund in which the seller agrees to repurchase the securities at a
higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of
bankruptcy of the seller, the Fund could experience both losses
and delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
The Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time the Fund enters into the
commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have
changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities
before settlement date if Stein Roe deems it advisable for
investment reasons. During its last fiscal year, the Fund did
not, nor does it currently intend to have, commitments to purchase
when-issued securities in excess of 5% of its net assets.
The Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which the Fund is the seller of, rather
than the investor in, securities and agrees to repurchase them at
an agreed-upon time and price. Use of a reverse repurchase
agreement may be preferable to a regular sale and later repurchase
of securities because it avoids certain market risks and
transaction costs.
At the time the Fund enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the Fund
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on the books of the
Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as
borrowing under a line of credit as described below, may increase
net asset value fluctuation.
Short Sales "Against the Box"
The Fund may sell securities short against the box; that is,
enter into short sales of securities that it currently owns or has
the right to acquire through the conversion or exchange of other
securities that it owns at no additional cost.
In a short sale against the box, the Fund does not deliver
from its portfolio the securities sold. Instead, it borrows the
securities sold short from a broker-dealer through which the short
sale is executed, and the broker-dealer delivers such securities,
on its behalf, 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, it must
deposit and continuously maintain in a separate account with its
custodian an equivalent amount of the securities sold short or
securities convertible into or exchangeable for such securities at
no additional cost. The Fund is said to have a short position in
the securities sold until it delivers to the broker-dealer the
securities sold. It 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 against the risk of losses in the
value of 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 it
owns, either directly or indirectly, and, in the case where it
owns convertible securities, changes in the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, it will
incur a loss and if the price declines during this period, it will
realize a short-term capital gain. Any realized short-term
capital gain will be decreased, and any incurred loss increased,
by the amount of transaction costs and any premium, dividend or
interest which it may have to pay in connection with such short
sale. Certain provisions of the Internal Revenue Code may limit
the degree to which the Fund is able to enter into short sales.
There is no limitation on the amount of assets that, in the
aggregate, may be deposited as collateral for the obligation to
replace securities borrowed to effect short sales and allocated to
segregated accounts in connection with short sales. The Fund
currently expects that no more than 5% of its total assets would
be involved in short sales against the box.
Rule 144A Securities
The Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the Securities Act of 1933. That Rule permits certain
qualified institutional buyers, such as the Fund, to trade in
privately placed securities that have not been registered for sale
under the 1933 Act. 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 it does
not invest more than 15% of its assets in illiquid securities.
Investing in Rule 144A securities could have the effect of
increasing the amount of assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such
securities. The Fund does not expect to invest as much as 5% of
its total assets in Rule 144A securities that have not been deemed
to be liquid by Stein Roe.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this SAI, the Fund may establish and maintain a line of credit
with a major bank in order to permit borrowing on a temporary
basis to meet share redemption requests in circumstances in which
temporary borrowing may be preferable to liquidation of portfolio
securities.
Interfund Borrowing and Lending Program
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Fund may lend money to and borrow money
from other mutual funds advised by Stein Roe. The 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 Fund does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
that portfolio securities must be held. 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. The Fund may have
greater portfolio turnover than that of a mutual funds that have
the 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, if it
should occur, would result in increased transaction expenses,
which must be borne by the Fund. High portfolio turnover may also
result in the realization of capital gains or losses and, to the
extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered
ordinary income for federal income tax purposes.
Options on Securities and Indexes
The Fund may purchase and sell put options and call options
on securities, indexes or foreign currencies in standardized
contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on Nasdaq. The Fund may
purchase agreements, sometimes called cash puts, that may
accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)
The Fund will write call options and put options only if they
are "covered." For example, in the case of a call option on a
security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or,
if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities held in
its portfolio.
If an option written by the Fund expires, it realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Fund expires, it
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when it is desired.
The Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, it
will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is
less, it will realize a capital loss. The principal factors
affecting the market value of a put or a call option include
supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index,
and the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by the Fund is recorded as
a deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid
and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position. If it 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 it
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, it foregoes, during the option's life,
the opportunity to profit from increases in the market value of
the security covering the call option above the sum of the premium
and the exercise price of the call.
If trading were suspended in an option purchased or written
by the Fund, it would not be able to close out the option. If
restrictions on exercise were imposed, it might be unable to
exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
The Fund may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of
a specified quantity of a financial instrument or the cash value
of an index /2/ at a specified price and time. A public market
exists in futures contracts covering a number of indexes
(including, but not limited to: the Standard & Poor's 500 Index,
the Value Line Composite Index, and the New York Stock Exchange
Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies).
Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts
will be developed and traded.
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/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
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The Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as
options on securities, indexes and foreign currencies (discussed
above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise of a
call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. The Fund
might, for example, use futures contracts to hedge against or gain
exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations
that might adversely affect either the value of its securities or
the price of the securities that it intends to purchase. Although
other techniques could be used to reduce or increase exposure to
stock price, interest rate and currency fluctuations, the Fund may
be able to achieve its exposure more effectively and perhaps at a
lower cost by using futures contracts and futures options.
The Fund will only enter into futures contracts and futures
options that are standardized and traded on an exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
The success of any futures transaction depends on 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 the
Fund, it is required to deposit with its custodian (or broker, if
legally permitted) a specified amount of cash or U.S. Government
securities or other securities acceptable to the broker ("initial
margin"). The margin required for a futures contract is set by
the exchange on which the contract is traded and may be modified
during the term of the contract. The initial margin is in the
nature of a performance bond or good faith deposit on the futures
contract, which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its
initial margin deposits. A futures contract held is valued daily
at the official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking-to-market."
Variation margin paid or received by the Fund does not represent a
borrowing or loan by it but is instead settlement between it and
the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In
computing daily net asset value, the Fund will mark-to-market its
open futures positions.
The Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by
it. Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Fund realizes a capital
gain, or if it is more, it realizes a capital loss. Conversely,
if an offsetting sale price is more than the original purchase
price, it realizes a capital gain, or if it is less, it realizes a
capital loss. The transaction costs must also be included in
these calculations.
Risks Associated with Futures
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the investment portfolio, and, in the case of
interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in
the investment portfolio. A decision as to whether, when and how
to use futures contracts involves the exercise of skill and
judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when the Fund seeks to close out a futures or futures
option position. The Fund would be exposed to possible loss on
the position during the interval of inability to close, and would
continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed
above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
Limitations on Options and Futures
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
the Fund may also use those investment vehicles, provided the
Board of Trustees determines that their use is consistent with the
investment objective.
The Fund will not enter into a futures contract or purchase
an option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by it plus premiums paid by it
for open futures option positions, less the amount by which any
such positions are "in-the-money,"/3/ would exceed 5% of total
assets.
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/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
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When purchasing a futures contract or writing a put option on
a futures contract, the 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.
The Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call
options written on indexes if, in the aggregate, the market value
of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent it has written call
options on specific securities in its portfolio, the value of
those securities will be deducted from the current market value of
the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," the Fund will use commodity futures or commodity
options contracts solely for bona fide hedging purposes within the
meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the
assets of the Fund, after taking into account unrealized profits
and unrealized losses on any such contracts it has entered into
[in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].
Taxation of Options and Futures
If the Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by it, the difference between the cash received
at exercise and the premium paid is a capital gain or loss.
If a call or put option written by the Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security
purchased (put). For cash settlement options and futures options
written by it, the difference between the cash paid at exercise
and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by the Fund was in-
the-money at the time it was written and the security covering the
option was held for more than the long-term holding period prior
to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
If the Fund writes an equity call option /4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
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/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
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A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If the
Fund delivers securities under a futures contract, it also
realizes a capital gain or loss on those securities.
For federal income tax purposes, the Fund generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on futures,
futures options and non-equity options positions ("year-end mark-
to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held: (1) will
affect the holding period of the hedged securities; and (2) may
cause unrealized gain or loss on such securities to be recognized
upon entry into the hedge.
If the Fund were to enter into a short index future, short
index futures option or short index option position and its
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and its stock positions would be deemed to be positions in a mixed
straddle, subject to the above-mentioned loss deferral rules.
In order for the Fund to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). Any net gain
realized from futures (or futures options) contracts will be
considered gain from the sale of securities and therefore be
qualifying income for purposes of the 90% requirement.
The Fund distributes to shareholders annually any net capital
gains that have been recognized for federal income tax purposes
(including year-end mark-to-market gains) on options and futures
transactions. Such distributions are combined with distributions
of capital gains realized on its other investments, and
shareholders are advised of the nature of the payments.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment
restrictions. It may not:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities or repurchase agreements for
such securities, and except that all or substantially all of the
assets of the Fund may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
except that all or substantially all of the assets of the Fund may
be invested in another registered investment company having the
same investment objective and substantially similar investment
policies as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(5) make loans, although it may (a) lend portfolio securities
and participate in an interfund lending program with other Stein
Roe Funds and Portfolios provided that no such loan may be made
if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the
time of such loans); (b) purchase money market instruments and
enter into repurchase agreements; and (c) acquire publicly
distributed or privately placed debt securities;
(6) borrow except that it may (a) borrow for 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 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. The Fund is also subject to
the following nonfundamental restrictions and policies, which may
be changed by the Board of Trustees. None of the following
restrictions shall prevent the Fund from investing all or
substantially all of its assets in another investment company
having the same investment objective and substantially the same
investment policies as the Fund. The Fund may not:
(a) invest in any of the following: (i) interests in oil,
gas, or other mineral leases or exploration or development
programs (except readily marketable securities, including but not
limited to master limited partnership interests, that may
represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles,
spreads, or any combination thereof (except that it may enter into
transactions in options, futures, and options on futures); (iii)
shares of other open-end investment companies, except in
connection with a merger, consolidation, acquisition, or
reorganization; and (iv) limited partnerships in real estate
unless they are readily marketable;
(b) invest in companies for the purpose of exercising control
or management;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of its total assets (valued at time of purchase) in
the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to
be made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets;
(d) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchange;
(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);
(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.
PURCHASES AND REDEMPTIONS
Purchases Through Third Parties
You may purchase (or redeem) shares through certain broker-
dealers, banks, or other intermediaries ("Intermediaries"). The
state of Texas has asked that investment companies disclose in
their Statements of Additional Information, as a reminder to any
such bank or institution, that it must be registered as a
securities dealer in Texas. Intermediaries may charge for their
services or place limitations on the extent to which you may use
the services offered by the Trust. It is the responsibility of
any such Intermediary to establish procedures insuring the prompt
transmission to the Trust of any such purchase order. An
Intermediary, who accepts orders that are processed at the net
asset value next determined after receipt of the order by the
Intermediary, accepts such orders as authorized agent or designee
of the Fund. The Intermediary is required to segregate any orders
received on a business day after the close of regular session
trading on the New York Stock Exchange and transmit those orders
separately for execution at the net asset value next determined
after that business day.
Some Intermediaries that maintain nominee accounts with the
Fund for their clients for whom they hold Fund shares charge an
annual fee of up to 0.35% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. Stein Roe and
the Fund's transfer agent share in the expense of these fees, and
Stein Roe pays all sales and promotional expenses.
Net Asset Value
The net asset value of the Fund is determined on days on
which the New York Stock Exchange (the "NYSE") is open for regular
session 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 the Fund should be determined on any
such day, in which case the determination will be made at 3 p.m.,
Central time. Please refer to Your Account-Determining Share
Price in the Prospectus for additional information on how the
purchase and redemption price of Fund shares is determined.
General Redemption Policies
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 during any 90-day period
for any one shareholder. However, redemptions in excess of such
limit may be paid wholly or partly by a distribution in kind of
securities. If redemptions were made in kind, the redeeming
shareholders might incur transaction costs in selling the
securities received in the redemptions.
The Trust reserves the right to suspend or postpone
redemptions of shares during any period when: (a) trading on the
NYSE is restricted, as determined by the Securities and Exchange
Commission, or the NYSE is closed for other than customary weekend
and holiday closings; (b) the Securities and Exchange Commission
has by order permitted such suspension; or (c) an emergency, as
determined by the Securities and Exchange Commission, exists,
making disposal of portfolio securities or valuation of net assets
not reasonably practicable.
You may not cancel or revoke your redemption order once
instructions have been received and accepted. The Trust cannot
accept a redemption request that specifies a particular date or
price for redemption or any special conditions. Please call 800-
338-2550 if you have any questions about requirements for a
redemption before submitting your request. The Trust reserves the
right to require a properly completed application before making
payment for shares redeemed.
The Trust will generally mail payment for shares redeemed
within seven days after proper instructions are received.
However, the Trust normally intends to pay proceeds of a Telephone
Redemption paid by wire on the next business day. If you attempt
to redeem shares within 15 days after they have been purchased by
check or electronic transfer, the Trust will delay payment of the
redemption proceeds to you until it can verify that payment for
the purchase of those shares has been (or will be) collected. To
reduce such delays, the Trust recommends that your purchase be
made by federal funds wire through your bank.
Generally, you may not use any Special Redemption Privilege
to redeem shares purchased by check (other than certified or
cashiers' checks) or electronic transfer until 15 days after their
date of purchase. The Trust reserves the right at any time
without prior notice to suspend, limit, modify, or terminate any
Privilege or its use in any manner by any person or class.
Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Fund employs
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Fund and
its transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.
Shares in any account you maintain with the Fund or any of
the other Stein Roe Funds may be redeemed to the extent necessary
to reimburse any Stein Roe Fund for any loss you cause it to
sustain (such as loss from an uncollected check or electronic
transfer for the purchase of shares, or any liability under the
Internal Revenue Code provisions on backup withholding).
The Trust reserves the right to suspend or terminate, at any
time and without prior notice, the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Fund.
Therefore, regardless of the number of telephone exchange round-
trips made by an investor, the Trust generally will not honor
requests for Telephone Exchanges by shareholders identified by the
Trust as "market-timers" if the officers of the Trust determine
the order not to be in the best interests of the Trust or its
shareholders. The Trust generally identifies as a "market-timer"
an investor whose investment decisions appear to be based on
actual or anticipated near-term changes in the securities markets
other than for investment considerations. Moreover, the Trust
reserves the right to suspend, limit, modify, or terminate, at any
time and without prior notice, the Telephone Exchange Privilege in
its entirety. Because such a step would be taken only if the
Board of Trustees believes it would be in the best interests of
the Fund, the Trust expects that it would provide shareholders
with prior written notice of any such action unless the resulting
delay in the suspension, limitation, modification, or termination
of the Telephone Exchange Privilege would adversely affect the
Fund. If the Trust were to suspend, limit, modify, or terminate
the Telephone Exchange Privilege, a shareholder expecting to make
a Telephone Exchange might find that an exchange could not be
processed or that there might be a delay in the implementation of
the exchange. During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by
telephone.
The Telephone Exchange Privilege and the Telephone Redemption
by Check Privilege will be established automatically for you when
you open your account unless you decline these Privileges on your
application. Other Privileges must be specifically elected. A
signature guarantee may be required to establish a Privilege after
you open your account. If you establish both the Telephone
Redemption by Wire Privilege and the Electronic Transfer
Privilege, the bank account that you designate for both Privileges
must be the same. The Telephone Redemption by Check Privilege,
Telephone Redemption by Wire Privilege, and Special Electronic
Transfer Redemptions may not be used to redeem shares held by a
tax-sheltered retirement plan sponsored by Stein Roe.
Redemption Privileges
Exchange Privilege. You may redeem all or any portion of
your Fund shares and use the proceeds to purchase shares of any
other no-load Stein Roe Fund offered for sale in your state if
your signed, properly completed application is on file. An
exchange transaction is a sale and purchase of shares for federal
income tax purposes and may result in capital gain or loss.
Before exercising the Exchange Privilege, you should obtain the
prospectus for the no-load Stein Roe Fund in which you wish to
invest and read it carefully. The registration of the account to
which you are making an exchange must be exactly the same as that
of the Fund account from which the exchange is made and the amount
you exchange must meet any applicable minimum investment of the
no-load Stein Roe Fund being purchased.
Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four
Telephone Exchange round-trips per year and the Fund may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of the Fund into another no-load
Stein Roe Fund, and then back to the Fund). In addition, the
Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange.
Automatic Exchanges. You may use the Automatic Exchange
Privilege to automatically redeem a fixed amount from your Fund
account for investment in another no-load Stein Roe Fund account
on a regular basis ($50 minimum; $100,000 maximum).
Telephone Redemption by Wire Privilege. You may use this
Privilege to redeem shares from your account ($1,000 minimum;
$100,000 maximum) by calling 800-338-2550. The proceeds will be
transmitted by wire to your account at a commercial bank
previously designated by you that is a member of the Federal
Reserve System. The fee for wiring proceeds (currently $7.00 per
transaction) will be deducted from the amount wired.
Telephone Redemption by Check Privilege. You may use the
Telephone Redemption by Check Privilege to redeem an amount of
$1,000 or more from your account by calling 800-338-2550. The
proceeds will be sent by check to your registered address.
Electronic Transfer Privilege. You may redeem shares by
calling 800-338-2550 and requesting an electronic transfer
("Special Redemption") of the proceeds to a bank account
previously designated by you at a bank that is a member of the
Automated Clearing House. You may also request electronic
transfers at scheduled intervals ("Automatic Redemptions"). A
Special Redemption request received by telephone after 3 p.m.,
central time, is deemed received on the next business day. You
may purchase Fund shares directly from your bank account either at
regular intervals ("Regular Investments") or upon your request
("Special Investments"). Electronic transfers are subject to a
$50 minimum and a $100,000 maximum. You may also have income
dividends and capital gains distributions deposited directly into
your bank account ("Automatic Dividend Deposits").
Systematic Withdrawals. You may have a fixed dollar amount,
declining balance, or fixed percentage of your account redeemed
and sent at regular intervals by check to you or another payee.
Dividend Purchase Option. You may have distributions from
one Fund account automatically invested in another no-load Stein
Roe Fund account. Before establishing this option, you should
obtain and read the prospectus of the Stein Roe Fund into which
you wish to have your distributions invested. The account from
which distributions are made must be of sufficient size to allow
each distribution to usually be at least $25.
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, 51 Executive Vice-President Executive vice president of Stein Roe
Gary A. Anetsberger, 43 Senior Vice-President; Chief financial officer and chief
Controller 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) Trustee Private investor
William W. Boyd, 72 (2)(3) Trustee Chairman and director of Sterling Plumbing
(manufacturer of plumbing products)
David P. Brady, 34 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 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, 39 Vice-President Senior vice president of Stein Roe
Kevin M. Carome, 42 Vice-President; Assistant Senior vice president, legal, COGRA LLC (an
Secretary 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, 34 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 from March,1994 to April, 1996
Lindsay Cook, 46 (1)(2) Trustee Executive vice president of Liberty Financial
Companies, Inc. since March 1997; senior vice
president prior thereto
Erik P. Gustafson, 35 Vice-President Senior portfolio manager of Stein Roe; senior vice
president of Stein Roe since April 1996; vice
president of Stein Roe from May 1994 to April 1996;
associate of Stein Roe prior thereto
Douglas A. Hacker, 43 (3) Trustee Senior vice president and chief financial officer of
UAL, Inc. (airline) since July 1994; senior vice
president, finance of UAL, Inc. prior thereto
Loren A. Hansen, 50 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 Vice-President Vice President of Stein Roe since Oct. 1998; Vice
President of CMA since 1993
Harvey B. Hirschhorn, 49 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, 46 Vice-President Fund treasurer for The Colonial Group since Sept.
1996; chief financial officer for Fidelity Investments
since August 1997; senior vice president of Fidelity
Investments from Sept. 1993 to Sept. 1996
Janet Langford Kelly, 41 Trustee Senior vice president, secretary and general
(3) counsel of Sara Lee Corporation (branded, packaged,
consumer-products manufacturer) since 1995; partner of
Sidley & Austin (law firm) prior thereto
Gail D. Knudsen, 36 Vice-President Vice president and assistant controller of CMA
Eric S. Maddix, 35 Vice-President Senior vice president of Stein Roe since March 1998;
vice president of Stein Roe from Nov. 1995 to March
1998; portfolio manager or research assistant for
Stein Roe since 1987
Lynn C. Maddox, 58 Vice-President Senior vice president of Stein Roe
Arthur J. McQueen, 40 Vice-President Senior vice president of Stein Roe
Charles R. Nelson, 56 (3) Trustee Van Voorhis Professor of Political Economy, Department
of Economics of the University of Washington
Nicolette D. Parrish, 49 Vice-President; Assistant Senior legal assistant and assistant secretary
Secretary of Stein Roe
Gita R. Rao, 39 Vice-President Vice President of Stein Roe since Oct. 1998; vice
president and portfolio manager CMA since 1995; global
equity research analyst at Fidelity Management &
Research Company prior thereto
Michael E. Rega, 39 Vice-President Vice President of Stein Roe since Oct. 1998; Vice
President of CMA since 1996
Janet B. Rysz, 43 Assistant Secretary Senior legal assistant and assistant secretary of
Stein Roe
M. Gerard Sandel, 44 Vice-President Senior vice president of Stein Roe since July 1997;
vice president of M&I Investment Management
Corporation prior thereto
Gloria J. Santella, 41 Vice-President Senior vice president of Stein Roe since Nov. 1995;
vice president of Stein Roe prior thereto
Thomas C. Theobald, 61 (3) Trustee Managing director, William Blair Capital Partners
(private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation, 1987-1994
Scott E. Volk, 27 Treasurer Financial reporting manager for Stein Roe 's Mutual
Funds division since Oct. 1997; senior auditor with
Ernst & Young LLP from Sept. 1993 to April 1996 and
from Oct. 1996 to Sept. 1997; financial analyst with
John Nuveen & Company Inc. from May 1996 to Sept. 1996
Heidi J. Walter, 31 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
Hans P. Ziegler, 57 Executive Vice-President Chief executive officer of Stein Roe since May 1994;
president of the Investment Counsel division of Stein
Roe 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.
</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 3300, 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, 1998 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
- ------------------- -------------------- ------------ ----------
Timothy K. Armour** -0- -0- -0-
Thomas W. Butch** -0- -0- -0-
Lindsay Cook -0- -0- -0-
John A. Bacon Jr.** -0- -0- -0-
Kenneth L. Block** $ 3,800 $ 23,100 $ 525
William W. Boyd 21,700 109,902 2,498
Douglas A. Hacker 19,050 101,148 2,299
Janet Langford Kelly 19,050 97,950 2,226
Francis W. Morley** 3,800 23,100 525
Charles R. Nelson 21,700 109,552 2,490
Thomas C. Theobald 19,050 101,148 2,299
_______________
* At Sept. 30, 1998, the Stein Roe Fund Complex consisted of 11
series of the Trust, 10 series of Stein Roe Advisor Trust, four
series of Stein Roe Income Trust, four series of Stein Roe
Municipal Trust, one series of Stein Roe Institutional Trust, one
series of Stein Roe Trust, and 13 series of SR&F Base Trust.
**Messrs. Block and Morley retired as trustees on Dec. 31, 1997.
Mr. Armour resigned as a trustee on April 14, 1998. Mr. Butch
served as a trustee from April 14, 1998 to Nov. 3, 1998. Mr.
Bacon was elected a trustee effective Nov. 3, 1998.
FINANCIAL STATEMENTS
Please refer to the June 30, 1998, Financial Statements
(statement of assets and liabilities and schedule of investments
as of June 30, 1998, and the statement of operations, changes in
net assets, financial highlights for the periods then ended, and
notes thereto) and the report of independent accountants contained
in the June 30, 1998, Annual Report of Colonial Aggressive Growth
Fund, the Fund's predecessor. The Financial Statements and the
report of independent 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 the date of this SAI, the Fund had no outstanding
shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Stein Roe & Farnham Incorporated provides investment
management services and administrative services to the Fund.
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., Thomas W. Butch, and Hans P. Ziegler. Mr. Leibler
is President and Chief Executive Officer of Liberty Financial; Mr.
Merritt is Chief Operating Officer of Liberty Financial; Mr. Butch
is President of Stein Roe's Mutual Funds division; and Mr. Ziegler
is Chief Executive Officer of Stein Roe. The business address of
Messrs. Leibler and Merritt is 600 Atlantic Avenue, Federal
Reserve Plaza, Boston, MA 02210; and that of Messrs. Butch and
Ziegler 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 Sept. 30, 1998, Stein Roe managed over $28.3
billion in assets: over $9.4 billion in equities and over $18.9
billion in fixed income securities (including $1.1 billion in
municipal securities). The $28.3 billion in managed assets
included over $8.3 billion held by open-end mutual funds managed
by Stein Roe (approximately 14% of the mutual fund assets were
held by clients of Stein Roe). These mutual funds were owned by
over 295,000 shareholders. The $8.3 billion in mutual fund assets
included over $637 million in over 43,000 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 Sept. 30, 1998, Stein Roe employed 18 research
analysts and 55 account managers. The average investment-related
experience of these individuals was 17 years.
Stein Roe Counselor [service mark] and Stein Roe Personal
Counselor [service mark] are professional investment advisory
services offered to Fund shareholders. Each is designed to help
shareholders construct Fund investment portfolios to suit their
individual needs. Based on information shareholders provide about
their financial circumstances, goals, and objectives in response
to a questionnaire, Stein Roe's investment professionals create
customized portfolio recommendations for investments in the mutual
funds managed by Stein Roe. Shareholders participating in Stein
Roe Counselor [service mark] are free to self direct their
investments while considering Stein Roe's recommendations;
shareholders participating in Stein Roe Personal Counselor
[service mark] enjoy the added benefit of having Stein Roe
implement portfolio recommendations automatically for a fee of 1%
or less, depending on the size of their portfolios. In addition
to reviewing shareholders' circumstances, goals, and objectives
periodically and updating portfolio recommendations to reflect any
changes, the shareholders who participate in these programs are
assigned a dedicated Counselor [service mark] representative.
Other distinctive services include specially designed account
statements with portfolio performance and transaction data,
newsletters, and regular investment, economic, and market updates.
A $50,000 minimum investment is required to participate in either
program.
In return for its services, Stein Roe is entitled to receive
from the Fund a monthly administrative fee at an annual rate of
0.15% of average net assets and a monthly management fee at an
annual rate of 0.85% of average net assets.
Stein Roe provides office space and executive and other
personnel to the Fund, and bears any sales or promotional
expenses. The Fund pays all expenses other than those paid by
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 its total annual expenses
(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 its shares are being
offered for sale to the public; provided, however, Stein Roe is
not required to reimburse the Fund an amount in excess of fees
paid by the Fund under that agreement for such year. In addition,
in the interest of further limiting expenses of the Fund, Stein
Roe may voluntarily waive its fees and/or absorb certain expenses,
as described under The Fund-Your Expenses in the Prospectus. Any
such reimbursement will enhance the yield of the Fund.
The 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 the Fund are paid solely
out of its assets. Any expenses incurred by the Trust that are
not solely attributable to a particular series are apportioned in
such manner as 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 the Fund. For services provided to the Trust, 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, 1996, 1997 and 1998, Stein Roe received aggregate
fees of $265,246, $315,067 and $358,936, respectively, from the
Trust for services performed under this Agreement.
DISTRIBUTOR
Shares of the Fund are distributed by Liberty Funds
Distributor, Inc. ("Distributor"), One Financial Center, Boston,
MA 02111, under a Distribution Agreement. The Distributor is a
subsidiary of Colonial Management Associates, Inc., which is an
indirect subsidiary of Liberty Financial. The Distribution
Agreement continues in effect from year to year, provided such
continuance is approved annually (i) by a majority of the trustees
or by a majority of the outstanding voting securities of the
Trust, and (ii) by a majority of the trustees who are not parties
to the Agreement or interested persons of any such party. The
Trust has agreed to pay all expenses in connection with
registration of its shares with the Securities and Exchange
Commission and auditing and filing fees in connection with
registration of its shares under the various state blue sky laws
and assumes the cost of preparation of prospectuses and other
expenses.
As agent, the Distributor offers shares to investors in
states where the shares are qualified for sale, at net asset
value, without sales commissions or other sales load to the
investor. In addition, no sales commission or "12b-1" payment is
paid by the Fund. The Distributor offers Fund shares only on a
best-efforts basis.
TRANSFER AGENT
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
from the Fund a fee based on an annual rate of .22 of 1% of
average net assets. The Trust believes the charges by SSI to the
Fund are comparable to those of other companies performing similar
services. (See Investment Advisory and Other Services.)
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 02101, is the custodian for the Trust.
It is responsible for holding all securities and cash, receiving
and paying for securities purchased, delivering against payment
securities sold, receiving and collecting income from investments,
making all payments covering expenses, and performing other
administrative duties, all as directed by authorized persons. The
Bank does not exercise any supervisory function in such matters as
purchase and sale of portfolio securities, payment of dividends,
or payment of expenses.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S.
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network and foreign
depositories ("foreign sub-custodians"). Each of the domestic and
foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with
regulations under the Investment Company Act of 1940.
Each Board of Trustees reviews, at least annually, whether it
is in the best interests of the Fund and its shareholders to
maintain assets in each of the countries in which the Fund invests
with particular foreign sub-custodians in such countries, pursuant
to contracts between such respective foreign sub-custodians and
the Bank. The review includes an assessment of the risks of
holding 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 the Fund, and the value
of its shares, will not be adversely affected by acts of foreign
governments, financial or operational difficulties of the foreign
sub-custodians, difficulties and costs of obtaining jurisdiction
over or enforcing judgments against the foreign sub-custodians, or
application of foreign law to the foreign sub-custodial
arrangements. Accordingly, an investor should recognize that the
non-investment risks involved in holding assets abroad are greater
than those associated with investing in the United States.
The Fund may invest in obligations of the Bank and may
purchase or sell securities from or to the Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund 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. 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. 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.
Where more than one broker or dealer is believed to be
capable of providing a combination of best net price and execution
with respect to a particular portfolio transaction, Stein Roe
often selects a broker or dealer that has furnished it with
investment research products or services such as: economic,
industry or company research reports or investment
recommendations; subscriptions to financial publications or
research data compilations; compilations of securities prices,
earnings, dividends, and similar data; computerized data bases;
quotation equipment and services; research or analytical computer
software and services; or services of economic and other
consultants. Such selections are not made pursuant to any
agreement or understanding with any of the brokers or dealers.
However, Stein Roe does in some instances request a broker to
provide a specific research or brokerage product or service which
may be proprietary to the broker or produced by a third party and
made available by the broker and, in such instances, the broker in
agreeing to provide the research or brokerage product or service
frequently will indicate to Stein Roe a specific or minimum amount
of commissions which it expects to receive by reason of its
provision of the product or service. Stein Roe does not agree
with any broker to direct such specific or minimum amounts of
commissions; however, Stein Roe does maintain an internal
procedure to identify those brokers who provide it with research
products or services and the value of such products or services,
and Stein Roe endeavors to direct sufficient commissions on client
transactions (including commissions on transactions in fixed
income securities effected on an agency basis and, in the case of
transactions for certain types of clients, dealer selling
concessions on new issues of securities) to ensure the continued
receipt of research products or services Stein Roe believes are
useful.
In a few instances, Stein Roe receives from a broker a
product or service which is used by Stein Roe both for investment
research and for administrative, marketing, or other non-research
or brokerage purposes. In such an instance, Stein Roe makes a
good faith effort to determine the relative proportion of its use
of such product or service which is for investment research or
brokerage, and that portion of the cost of obtaining such product
or service may be defrayed through brokerage commissions generated
by client transactions, while the remaining portion of the costs
of obtaining the product or service is paid by Stein Roe in cash.
Stein Roe may also receive research in connection with selling
concessions and designations in fixed income offerings.
The Fund does not believe it pays brokerage commissions
higher than those obtainable from other brokers in return for
research or brokerage products or services provided by brokers.
Research or brokerage products or services provided by brokers may
be used by Stein Roe in servicing any or all of the clients of
Stein Roe and such research products or services may not
necessarily be used by Stein Roe in connection with client
accounts which paid commissions to the brokers providing such
products or services.
The Trust has arranged for its custodian to act as a
soliciting dealer to accept any fees available to the custodian as
a soliciting dealer in connection with any tender offer for
portfolio securities. The custodian will credit any such fees
received against its custodial fees. In addition, the Board of
Trustees has reviewed the legal developments pertaining to and the
practicability of attempting to recapture underwriting discounts
or selling concessions when portfolio securities are purchased in
underwritten offerings. However, the Board has been advised by
counsel that recapture by a mutual fund currently is not permitted
under the Rules of the Association of the National Association of
Securities Dealers.
ADDITIONAL INCOME TAX CONSIDERATIONS
The Fund 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 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.
The Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent the Fund invests in foreign securities, it may
be subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% of total assets at the
close of any fiscal year consist of stock or securities of foreign
corporations, the Fund may file an election with the Internal
Revenue Service pursuant to which its shareholders will be
required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of
foreign income taxes paid by the Fund even though not actually
received, (ii) treat such respective pro rata shares as foreign
income taxes paid by them, and (iii) deduct such pro rata shares
in computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against
their United States income taxes. Shareholders who do not itemize
deductions for federal income tax purposes will not, however, be
able to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their
share of such taxes in gross income. Shareholders who claim a
foreign tax credit may be required to treat a portion of dividends
received from the Fund as separate category income for purposes of
computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily
benefit from this election relating to foreign taxes. Each year,
the Fund will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents
income from each foreign country, if the Fund qualifies to pass
along such credit.
INVESTMENT PERFORMANCE
The Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the
net asset value per share for a period. A "Total Return
Percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of
the period and subtracting one. For a given period, an "Average
Annual Total Return" may be computed by finding the average annual
compounded rate that would equate a hypothetical initial amount
invested of $1,000 to the ending redeemable value.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion).
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of the Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
The Fund may note its mention or recognition in newspapers,
magazines, or other media from time to time. However, the Fund
assumes no responsibility for the accuracy of such data.
Newspapers and magazines which might mention the Fund include, but
are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Atlantic Monthly
Associated Press
Barron's
Bloomberg
Boston Globe
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Investment Advisor
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Marketing Alert
Gourmet
Individual Investor
Investment Dealers' Digest
Investment News
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Money on Line
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsday
Newsweek
New York Daily News
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
Reuters
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Street.com
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
In advertising and sales literature, the Fund may compare its
performance with that of other mutual funds, indexes or averages
of other mutual funds, indexes of related financial assets or
data, and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes or averages differs from that of the
Fund. Comparison of the Fund to an alternative investment should
be made with consideration of differences in features and expected
performance. All of the indexes and averages noted below will be
obtained from the indicated sources or reporting services, which
the Trust believes to be generally accurate.
The Fund may compare its performance to the Consumer Price
Index (All Urban), a widely recognized measure of inflation. Its
performance also may be compared to the following indexes or
averages:
Dow-Jones Industrial Average New York Stock Exchange Composite
Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials Nasdaq Composite
Standard & Poor's 600 Index Nasdaq Industrials
Wilshire 5000 Russell 2000 Index
(These indexes are widely (These indexes generally
recognized indicators of general reflect the performance
U.S. stock market results.) of stocks traded in the
indicated markets.)
In addition, the Fund may compare its performance to the
following benchmarks:
Lipper Equity Fund Average
Lipper General Equity Fund Average
Lipper Growth Fund Average
Lipper Growth Fund Index
Morningstar All Equity Funds Average
Morningstar Domestic Stock Average
Morningstar Equity Fund Average
Morningstar General Equity Average*
Morningstar Growth Fund Average
Morningstar Hybrid Fund Average
Morningstar Total Fund Average
Morningstar U.S. Diversified Average
_________
*Includes Morningstar Aggressive Growth, Growth, Balanced, Equity
Income, and Growth and Income Averages.
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 Fund
may also use comparative performance as computed in a ranking by
Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify
the Fund to a different category or develop (and place it into) a
new category, it may compare its performance or ranking with those
of other funds in the newly assigned category, as published by the
service.
The Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function
of the fund's monthly returns less the 3-month T-bill return) from
its load-adjusted total return score. This numerical score is
then translated into rating categories, with the top 10% labeled
five star, the next 22.5% labeled four star, the next 35% labeled
three star, the next 22.5% labeled two star, and the bottom 10%
one star. A high rating reflects either above-average returns or
below-average risk, or both.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Fund may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
_____________________
The Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<TABLE>
<CAPTION>
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
Interest
Rate 3% 5% 7% 9% 3% 5% 7% 9%
- --------------------------------------------------------------------------------
Com-
pound-
ing
Years Tax-Deferred Investment Taxable Investment
- ---- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 $82,955 $108,031 $145,856 $203,239 $80,217 $98,343 $121,466 $151,057
25 65,164 80,337 101,553 131,327 63,678 75,318 89,528 106,909
20 49,273 57,781 68,829 83,204 48,560 55,476 63,563 73,028
15 35,022 39,250 44,361 50,540 34,739 38,377 42,455 47,025
10 22,184 23,874 25,779 27,925 22,106 23,642 25,294 27,069
5 10,565 10,969 11,393 11,840 10,557 10,943 11,342 11,754
1 2,036 2,060 2,085 2,109 2,036 2,060 2,085 2,109
</TABLE>
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share. Like any investment strategy, dollar cost averaging
can't guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
From time to time, the Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor
[service mark] and the Stein Roe Personal Counselor [service mark]
programs and asset allocation and other investment strategies.
APPENDIX-RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However,
the ratings are general and are not absolute standards of quality
or guarantees as to the creditworthiness of an issuer.
Consequently, Stein Roe believes that the quality of debt
securities in which a fund invests should be continuously reviewed
and that individual analysts give different weightings to the
various factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in
each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest
is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within the
major rating categories. Foreign debt is rated on the same basis
as domestic debt measuring the creditworthiness of the issuer;
ratings of foreign debt do not take into account currency exchange
and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or
currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will
exhibit no volatility or variability in total return.
_______________________
<PAGE>
JUNE 30, 1998
FINANCIAL STATEMENTS OF
COLONIAL AGGRESSIVE GROWTH FUND
INVESTMENT PORTFOLIO
JUNE 30, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 96.6% SHARES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 4.5%
BUILDING CONSTRUCTION
Standard Pacific Corp. 10 $ 208
-----------
.............................................................................
FINANCE, INSURANCE & REAL ESTATE - 3.3%
DEPOSITORY INSTITUTIONS - 1.5%
First Union Corp. 1 68
-----------
INSURANCE CARRIERS - 1.0%
FPA Medical Management, Inc. 1 1
Loews Corp. 1 44
-----------
45
-----------
NONDEPOSITORY CREDIT INSTITUTIONS - 0.8%
Aames Financial Corp. (a) 3 41
-----------
.............................................................................
MANUFACTURING - 24.2%
APPAREL - 0.9%
Nautica Enterprises, Inc. (a) 2 43
-----------
CHEMICALS & ALLIED PRODUCTS - 3.6%
Serologicals Corp. (a) 1 45
Watson Pharmaceuticals, Inc. (a) 3 122
-----------
167
-----------
COMMUNICATIONS EQUIPMENT - 5.5%
Comverse Technology, Inc. (a) 3 145
Inter-Tel, Inc. 2 26
Lucent Technologies, Inc. 1 83
-----------
254
-----------
ELECTRONIC COMPONENTS - 2.4%
SCI Systems, Inc. (a) 3 109
-----------
FOOD & KINDRED PRODUCTS - 1.1%
Interstate Bakeries Corp. 2 53
-----------
HOUSEHOLD APPLIANCES - 1.0%
Helen of Troy Ltd. (a) 2 44
-----------
MACHINERY & COMPUTER EQUIPMENT - 4.2%
Compaq Computer Corp. 1 40
</TABLE>
6
<PAGE>
Investment Portfolio/June 30, 1998
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SPS Technologies, Inc. (a) 1 $ 47
Tyco International Ltd. 2 107
-----------
194
-----------
MEASURING & ANALYZING INSTRUMENTS - 2.7%
Respironics, Inc. (a) 5 73
Sybron International Corp. Wisconsin (a) 2 51
-----------
124
-----------
PRINTING & PUBLISHING - 1.8%
Harte-Hanks Communications 1 36
Hollinger International, Inc. 3 48
-----------
84
-----------
STONE, CLAY, GLASS & CONCRETE - 1.0%
Lone Star Industries, Inc. 1 46
-----------
.............................................................................
RETAIL TRADE - 7.9%
APPAREL & ACCESSORY STORES - 1.0%
St. John Knits, Inc. 1 46
-----------
FOOD STORES - 1.0%
General Nutrition Companies, Inc. 2 47
-----------
GENERAL MERCHANDISE STORES - 2.3%
Ames Department Stores, Inc. (a) 4 105
-----------
MISCELLANEOUS RETAIL - 2.4%
Michaels Stores, Inc. (a) 2 53
Office Depot, Inc. (a) 2 57
-----------
110
-----------
RESTAURANTS - 1.2%
Showbiz Pizza Time, Inc. (a) 1 56
-----------
.............................................................................
SERVICES - 49.1%
BUSINESS SERVICES - 12.1%
Advo, Inc. 5 132
Cendant Corp. (a) 3 55
Concord EFS, Inc. 4 98
Interim Services, Inc. (a) 2 51
Norrell Corp. 2 36
Robert Half International, Inc. (a) 3 151
Romac International, Inc. (a) 1 37
-----------
560
-----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1998
- ------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
SERVICES - CONT.
COMPUTER RELATED SERVICES - 11.4%
Analysts International Corp. 6 $ 158
Autodesk, Inc. 2 73
Cadence Design Systems, Inc. (a) 2 75
HBO & Co. 3 113
Physician Computer Network, Inc. (a) 6 2
Renters Choice, Inc. (a) 4 108
-----------
529
-----------
COMPUTER SOFTWARE - 18.4%
BMC Software, Inc. (a) 2 83
Computer Horizons Corp. (a) 1 35
Computer Task Group, Inc. 2 70
Hyperion Software Corp. (a) 2 66
Microsoft Corp. (a) 2 217
Network Associates, Inc. (a) 2 109
Peoplesoft, Inc. (a) 4 169
Platinum Technology, Inc. (a) 1 37
Symantec Corp. (a) 1 29
VERITAS Software Corp. (a) 1 37
-----------
852
-----------
ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 1.2%
Paychex, Inc. 1 55
-----------
HEALTH SERVICES - 3.1%
Curative Health Services, Inc. (a) 1 20
PhyCor, Inc. (a) 3 42
Total Renal Care Holdings, Inc. (a) 2 83
-----------
145
-----------
HOTELS, CAMPS & LODGING - 0.9%
Fairfield Communities, Inc. (a) 2 40
-----------
PERSONAL SERVICES - 2.0%
Stewart Enterprises, Inc. 3 91
-----------
.............................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.8%
CABLE - 1.4%
United Video Satellite Group, Inc. (a) 2 63
-----------
WATER TRANSPORTATION - 1.4%
Tidewater, Inc. 2 66
-----------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
WHOLESALE TRADE - 4.9%
DURABLE GOODS - 4.2%
Anixter International, Inc. (a) 5 $ 92
PSS World Medical, Inc. 3 51
VWR Corp. 2 52
-----------
195
-----------
NONDURABLE GOODS - 0.7%
AmeriSource Health Corp., Class A (a) (b) 30
-----------
TOTAL COMMON STOCKS (cost of $3,216)(c) 4,470
-----------
SHORT TERM OBLIGATIONS - 2.8% PAR
-----------------------------------------------------------------------------
Repurchase agreement ABN AMRO Chicago Corp.,
dated 6/30/98, due 07/01/98 at 6.100%
collateralized by U.S. Treasury notes and bill with
various maturities to 2027, market value $133
(repurchase proceeds $130) $ 130 130
-----------
OTHER ASSETS & LIABILITIES, NET - 0.6% 25
-----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 4,625
===========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
-----------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purposes is the same.
See notes to financial statements.
9
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1998
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $3,216) $ 4,470
Short-term obligations 130
-------------
4,600
Cash $ 1
Receivable for:
Dividends 1
Deferred organization expenses 29 31
-------------- -------------
Total Assets 4,631
LIABILITIES
Payable to Adviser 4
Accrued:
Deferred Trustee fees 1
Other 1
--------------
Total Liabilities 6
-------------
NET ASSETS $ 4,625
=============
Net asset value & redemption price per share -
Class A ($3,867/269) $ 14.39
=============
Maximum offering price per share - Class A
($14.39/0.9425) $ 15.27(a)
=============
Net asset value & offering price per share -
Class B ($379/27) $ 14.15(b)
=============
Net asset value & offering price per share -
Class C ($379/27) $ 14.15(b)
=============
COMPOSITION OF NET ASSETS
Capital paid in $ 3,264
Overdistributed net investment income (2)
Accumulated net realized gain 109
Net unrealized appreciation 1,254
-------------
$ 4,625
=============
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
10
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Dividends $ 9
Interest 13
-------------
Total investment income 22
EXPENSES
Management fee $ 36
Service fee 11
Distribution fee - Class B 3
Distribution fee - Class C 3
Transfer agent 10
Bookkeeping fee 27
Trustees fee 9
Custodian fee 2
Audit fee 13
Legal fee 4
Registration fee 30
Reports to shareholders 3
Amortization of deferred
organization expenses 11
Other 4
--------------
166
Fees and expenses waived or borne
by the Adviser (94) 72
-------------- -------------
Net Investment Loss (50)
-------------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 256
Net unrealized appreciation during the period 610
--------------
Net Gain 866
-------------
Increase in Net Assets from Operations $ 816
=============
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended June 30
------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 (a) 1997
<S> <C> <C>
Operations:
Net investment loss $ (50) $ (39)
Net realized gain 256 194
Net unrealized appreciation 610 250
------- -------
Net Increase from Operations 816 405
Distributions:
From net investment income - Class A -- (1)
From realized gain - Class A (227) (4)
From realized gain - Class B (23) (b)
From realized gain - Class C (23) (b)
------- -------
543 400
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 8 27
Value of distributions reinvested - Class A 227 5
Cost of shares repurchased - Class A (12) (9)
------- -------
223 23
------- -------
Receipts for shares sold - Class B -- --
Value of distributions reinvested - Class B 23 (b)
Cost of shares repurchased - Class B -- --
------- -------
23 --
------- -------
Receipts for shares sold - Class C -- --
Value of distributions reinvested - Class C 23 (b)
Cost of shares repurchased - Class C -- --
------- -------
23 --
------- -------
Net Increase from Fund Share
Transactions 269 23
------- -------
Total Increase 812 423
NET ASSETS
Beginning of period 3,813 3,390
------- -------
End of period (net of overdistributed
net investment income of $2 and $1,
respectively) $ 4,625 $ 3,813
======= =======
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Rounds to less than one.
Continued on next page.
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(continued)
<TABLE>
<CAPTION>
Year ended June 30
------------------------
1998 (a) 1997
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 1 2
Issued for distributions reinvested - Class A 17 1
Repurchased - Class A (1) (1)
-------- --------
17 2
-------- --------
Sold - Class B -- --
Issued for distributions reinvested - Class B 2 (b)
Repurchased - Class B -- --
-------- --------
2 (b)
-------- --------
Sold - Class C -- --
Issued for distributions reinvested - Class C 2 (b)
Repurchased - Class C -- --
-------- --------
2 (b)
-------- --------
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial Aggressive Growth Fund (the Fund), is a diversified
portfolio of a Massachusetts business trust registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Fund's investment objective is to seek capital appreciation. The Fund may
issue an unlimited number of shares. The Fund offers three classes of shares:
Class A, Class B and Class C. Class A shares are sold with a front-end sales
charge and Class B shares are subject to an annual distribution fee and a
contingent deferred sales charge. Class B shares will convert to Class A shares
when they have been outstanding approximately eight years. Effective July 1,
1997, Class D shares were redesignated Class C shares. Class C shares are
subject to a contingent deferred sales charge on redemptions made within one
year after purchase and an annual distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class C distribution fees) and realized and
unrealized gains (losses) are allocated to each class proportionately on a daily
basis for purposes of determining the net asset value of each class.
14
<PAGE>
Notes to Financial Statements/June 30, 1998
- -------------------------------------------------------------------------------
Per share data was calculated using the average shares outstanding during the
period. In addition, Class B and Class C net investment income per share data
reflects the distribution fee applicable to Class B and Class C shares only.
Class B and Class C ratios are calculated by adjusting the expense and net
investment income ratios for the Fund for the entire period by the distribution
fee applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $53,332 in
connection with its organization, initial registration with the Securities and
Exchange Commission and with various states, and the initial public offering of
its shares. These expenses were deferred and are being amortized on a
straight-line basis over five years.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received. The Fund's custodian takes
possession through the federal book-entry system of securities collateralizing
repurchase agreements. Collateral is marked-to-market daily to ensure that the
market value of the underlying assets remains sufficient to protect the Fund.
The Fund may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
15
<PAGE>
Notes to Financial Statements/June 30, 1998
- ----------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- ---------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.85% annually of the Fund's
average net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.25% annually of the Fund's average net assets and receives reimbursement
for certain out-of-pocket expenses.
Effective October 1, 1997 and continuing through September 1998, the Transfer
Agent fee will be reduced by .0012% in cumulative monthly increments, resulting
in a decrease in the fee from 0.25% to 0.236% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc., (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
During the year ended June 30, 1998, the Fund has been advised that the
Distributor retained no net underwriting discounts on sales of the Fund's Class
A shares and received no contingent deferred sales charges on Class B and Class
C share redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee to
the Distributor equal to 0.25% annually of the Fund's net assets as of the 20th
of each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% annually of the average net assets attributable to
Class B shares and Class C shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service fees, distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 1.30% annually of the Fund's average net
assets.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
16
<PAGE>
Notes to Financial Statements/June 30, 1998
- ----------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
- ----------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended June 30, 1998, purchases and sales of
investments, other than short-term obligations, were $3,046,000 and $2,812,256,
respectively.
Unrealized appreciation (depreciation) at June 30, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 1,489,586
Gross unrealized depreciation (235,025)
--------------
Net unrealized appreciation $ 1,254,561
===============
</TABLE>
OTHER: The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 4. OTHER RELATED PARTY TRANSACTIONS
- -------------------------------------------------------------------------------
At June 30, 1998, Keyport Life Insurance Company owned 99.6% of the Fund's Class
A shares outstanding and 100% of the Fund's Class B and Class C shares
outstanding.
NOTE 5. SHAREHOLDER MEETING (UNAUDITED)
- -------------------------------------------------------------------------------
On July 7, the Special Meeting of Shareholders was held to approve a new
Management Agreement with Stein Roe & Farnham Incorporated. On June 12, 1998,
the record date for the meeting, the Fund had outstanding 322,250 shares of
beneficial interest. The votes cast at the meeting were as follows:
Approval of a new Management Agreement with Stein Roe and Farnham, Incorporated:
<TABLE>
<CAPTION>
For Against Broker Non-Votes
<S> <C> <C> <C>
321,632 - -
</TABLE>
The new management Agreement will be effective at such time as Colonial
Management Associates, Inc. and Stein Roe & Farnham Incorporated agree.
17
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
------------------------------------------------
1998
Class A Class B Class C(f)
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 12.650 $ 12.540 $ 12.540
========== ========== ==========
INCOME FROM INVESTMENT OPERATIONS:
Net investment
loss (a)(b) (0.143) (0.244) (0.244)
Net realized and
unrealized gain 2.783 2.754 2.754
---------- ---------- ----------
Total from Investment
Operations 2.640 2.510 2.510
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains (0.900) (0.900) (0.900)
---------- ---------- ----------
Net asset value -
End of period $ 14.390 $ 14.150 $ 14.150
========== ========== ==========
Total return (c)(d) 21.56% 20.68% 20.68%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.55% 2.30% 2.30%
Fees and expenses waived
or borne by the Adviser (e) 2.21% 2.21% 2.21%
Net investment loss (e) (1.04%) (1.79%) (1.79%)
Portfolio turnover 70% 70% 70%
Net assets at end
of period (000) $ 3,867 $ 379 $ 379
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted
to:
$ 0.301 $ 0.301 $ 0.301
(b) Per share data was calculated using average shares outstanding during
the period.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Class D shares were redesignated Class C shares on July 1, 1997.
- -------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended June 30,1998, the Fund earned $171,969 of long term
capital gains of which $14,887 and $157,082 are 28% and 20% rate gains,
respectively.
- -------------------------------------------------------------------------------
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
------------------------------------------------
1997
Class A Class B Class C
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.300 $ 11.280 $ 11.280
========== ========== ==========
INCOME FROM INVESTMENT OPERATIONS:
Net investment
loss (a)(b) (0.114) (0.200) (0.200)
Net realized and
unrealized gain 1.484 1.475 1.475
---------- ---------- ----------
Total from Investment
Operations 1.370 1.275 1.275
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.005) -- --
From net realized gains (0.015) (0.015) (0.015)
---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.020) (0.015) (0.015)
---------- ---------- ----------
Net asset value -
End of period $ 12.650 $ 12.540 $ 12.540
========== ========== ==========
Total return (c)(d) 12.14% 11.31% 11.31%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.55% 2.30% 2.30%
Fees and expenses waived
or borne by the Adviser (e) 2.57% 2.57% 2.57%
Net investment loss (e) (0.99%) (1.74%) (1.74%)
Portfolio turnover 54% 54% 54%
Net assets at end
of period (000) $ 3,185 $ 314 $ 314
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted
to:
$ 0.297 $ 0.297 $ 0.297
(b) Per share data was calculated using average shares outstanding during
the period.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
19
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Period ended June 30
------------------------------------------------
1996 (c)
Class A Class B Class C
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 10.110 $ 10.110 $ 10.110
========== ========== ==========
INCOME FROM INVESTMENT OPERATIONS:
Net investment
loss (a)(b) (0.016) (0.036) (0.036)
Net realized and
unrealized gain 1.206 1.206 1.206
---------- ---------- ----------
Total from Investment
Operations 1.190 1.170 1.170
---------- ---------- ----------
Net asset value -
End of period $ 11.300 $ 11.280 $ 11.280
========== ========== ==========
Total return (d)(e)(f) 11.77% 11.57% 11.57%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS
Expenses (g)(h) 1.55% 2.30% 2.30%
Fees and expenses waived
or borne by the Adviser (g)(h) 1.38% 1.38% 1.38%
Net investment loss (g)(g) (0.58%) (1.33%) (1.33%)
Portfolio turnover (f) 0% 0% 0%
Net assets at end
of period (000) $ 2,826 $ 282 $ 282
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted
to
$ 0.038 $ 0.038 $ 0.038
(b) Per share data was calculated using average shares outstanding during
the period.
(c) The Fund commenced investment operations on March 25, 1996. The
activity shown is from the effective date of registration (March 31,
1996) with the Securities and Exchange Commission.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) Annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST VI AND THE SHAREHOLDERS OF COLONIAL AGGRESSIVE
GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Aggressive Growth Fund
(the "Fund") (a series of Colonial Trust VI) at June 30, 1998, the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and the financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio positions at June 30, 1998 by correspondence with the
custodian provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 1998
21
<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) (1) Agreement and Declaration of Trust as amended
through February 1, 1996. (Exhibit 1 to PEA #32.)*
(2) Amendment dated December 13, 1996 to Agreement and
Declaration of Trust. (Exhibit 1(b) to PEA #37.)*
(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) Management agreement between Registrant and Stein Roe
& Farnham Incorporated (the "Adviser") as amended
through October 19, 1998. (Exhibit (d) to PEA #53.)*
(e) (1) Underwriting agreement between Registrant and
Liberty Financial Investments, Inc. (Exhibit
6(a) to PEA #46.)*
(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 as amended through May
8, 1995.(Exhibit 8 to PEA #31.)*
(h) (1) Restated Transfer Agency Agreement between
Registrant and SteinRoe Services Inc. dated August
1, 1995.(Exhibit 9(a) to PEA #31.)*
(2) Accounting and Bookkeeping Agreement dated August
1, 1994. (Exhibit 9(b) to PEA #34.)*
(3) Administrative Agreement between Registrant and the
Adviser dated August 15, 1995 as amended through
October 19, 1998. (Exhibit (h)(3) to PEA #53.)*
(4) Sub-transfer agent agreement with Colonial
Investors Service Center as amended through April
30, 1998. (Exhibit 9(d) to PEA #46.)*
(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.
(j) (1) Consent of Pricewaterhouse Coopers LLP.
(2) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#34).*
(3) Consent of Bell, Boyd & Lloyd. (Exhibit (j)(3) to PEA
#49.)*
(k) None.
(l) Inapplicable.
(m) None
(n) Financial Data Schedules:
(1) Stein Roe Growth & Income Fund.
(2) Stein Roe Balanced Fund.
(3) Stein Roe Growth Stock Fund.
(4) Stein Roe Capital Opportunities Fund.
(5) Stein Roe Special Fund.
(6) Stein Roe International Fund.
(7) Stein Roe Young Investor Fund.
(8) Stein Roe Special Venture Fund.
(9) Stein Roe Growth Opportunities Fund.
(10) Stein Roe Large Company Focus Fund.
(o) Inapplicable
(p) (Miscellaneous.) Mutual Fund Application. (Exhibit
19(a) to PEA #44.)*
- ------
*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 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.
The Adviser is a wholly owned subsidiary of SteinRoe Services
Inc. ("SSI"), which in turn is a wholly owned subsidiary of
Liberty Financial Companies, Inc., which is a majority owned
subsidiary of 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. The Adviser
acts as investment adviser to individuals, trustees, pension and
profit-sharing plans, charitable organizations, and other
investors. In addition to Registrant, it also acts as investment
adviser to other investment companies having different investment
policies.
For a two-year business history of officers and directors of
the Adviser, please refer to the Form ADV of Stein Roe &
Farnham Incorporated and to the section of the statement of
additional information (Part B) entitled "Investment Advisory
and Other Services."
Certain directors and officers of the Adviser also serve and
have during the past two years served in various capacities as
officers, directors, or trustees of SSI and of the Registrant,
and other investment companies managed by the Adviser. (The
listed entities are located at One South Wacker Drive,
Chicago, Illinois 60606, except for SteinRoe Variable
Investment Trust and Liberty Variable Investment Trust, which
are located at Federal Reserve Plaza, Boston, MA 02210 and
LFC Utilities Trust, which is located at One Financial Center,
Boston, MA 02111.) A list of such capacities is given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- -------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
Hans P. Ziegler Director; President; Chairman
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
Thomas W. Butch President Exec. V-P;
Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive 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
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Controller Treasurer
Thomas W. Butch President
Kevin M. Carome Vice-President; Asst. Secretary
E. Bruce Dunn Vice President
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice Pres.
Jane M. Naeseth Vice President
Steven M. Salopek Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
Hans P. Ziegler Executive Vice-President
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President; Controller
Thomas W. Butch President; Manager
Kevin M. Carome Vice-President; Asst. Secretary
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President; Controller
Thomas W. Butch President; Trustee
Kevin M. Carome Vice-President; Asst. Secretary
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
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., also
acts in the same capacity to Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial
Trust VI, Colonial Trust VII, Stein Roe Advisor Trust, Stein Roe
Income Trust, Stein Roe Municipal Trust, Stein Roe Institutional
Trust and Stein Roe Trust; and sponsor for Colony Growth Plans
(public offering of which was discontinued on June 14, 197l).
The table below lists 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
Babbitt, Debra Vice President 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, Stacy Vice President None
Butch, Thomas W. Senior Vice President Pres., Trustee
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 Vice President None
Devaney, James Senior Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Emerson, Kim P. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Managing Director None
Fifield, Robert Vice President None
Gauger, Richard Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director, Chairman of Board None
Goldberg, Matthew Senior 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
Karagiannis, Marilyn Managing Director None
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
Martin, Peter Vice President None
McCombs, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morse, Jonathan Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Place, Jeffrey Managing Director None
Pollard, Brian S. Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Raftery-Arpino, Linda 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 Vice President None
Scarlott, Rebecca Vice President None
Schulman, David Senior Vice President None
Scoon, Davey S. Director None
Shea, Terence Vice President None
Sideropoulos, Lou Vice President None
Smith, Darren Vice President None
Studer, Eric Vice President None
Soester, Trisha Vice President None
Sweeney, Maureen Managing Director 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.
Young, Deborah Vice President None
Zarker, Cynthia Erickson Senior Vice President None
- ---------
* The address of Ms. Harris, Ms. Riegel, Ms. Walter, and Messrs.
Anetsberger, Butch and Pollard 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and 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 1st day of February, 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 Feb. 1, 1999
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice- Feb. 1, 1999
Gary A. Anetsberger President; Controller
Principal Financial and
Accounting Officer
JOHN A. BACON JR. Trustee Feb. 1, 1999
John A. Bacon Jr.
WILLIAM W. BOYD Trustee Feb. 1, 1999
William W. Boyd
LINDSAY COOK Trustee Feb. 1, 1999
Lindsay Cook
DOUGLAS A. HACKER Trustee Feb. 1, 1999
Douglas A. Hacker
JANET LANGFORD KELLY Trustee Feb. 1, 1999
Janet Langford Kelly
CHARLES R. NELSON Trustee Feb. 1, 1999
Charles R. Nelson
THOMAS C. THEOBALD Trustee Feb. 1, 1999
Thomas C. Theobald
<PAGE>
STEIN ROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ------------
(i)(6) Opinion of counsel
(j)(1) Consent of Pricewaterhouse Coopers LLP.
(n) Financial Data Schedules:
(1) Stein Roe Growth & Income Fund
(2) Stein Roe Balanced Fund
(3) Stein Roe Growth Stock Fund
(4) Stein Roe Capital Opportunities Fund
(5) Stein Roe Special Fund
(6) Stein Roe International Fund
(7) Stein Roe Young Investor Fund
(8) Stein Roe Special Venture Fund
(9) Stein Roe Growth Opportunities Fund
(10) Stein Roe Large Company Focus Fund
BELL, BOYD & LLOYD
1615 L STREET, N.W. SUITE 1200
WASHINGTON, D.C. 20036-5610
202 466-6300
FAX 202 463-0678
TELEX 989966
January 29, 1999
Stein Roe Investment Trust
One South Wacker Drive, #3300
Chicago, Illinois 60606-4685
Ladies and Gentlemen:
Stein Roe Investment Trust
We have acted as counsel for Stein Roe Investment Trust (the
"Trust") in connection with the registration under the Securities
Act of 1933 (the "Act") of an indefinite number of shares of
beneficial interest (the "Shares") of the series of the Trust
designated Stein Roe Small Company Growth Fund (the "Fund") in
registration statement no. 33-11351 on form N-1A as amended by
post-effective amendment no. 54 thereto (the "Registration
Statement").
In this connection we have examined originals, or copies certified
or otherwise identified to our satisfaction, of such documents,
corporate and other records, certificates and other papers as we
deemed it necessary to examine for the purpose of this opinion,
including the agreement and declaration of trust (the "Trust
Agreement") and by-laws (the "By-laws") of the Trust, actions of
the board of trustees of the Trust authorizing the issuance of
shares of the Fund and the Registration Statement.
We assume that, upon sale of the Shares, the Trust will receive
the authorized consideration therefor, which will at least equal
the net asset value of the Shares.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when
the Shares are issued and sold after the post-effective amendment
to the Registration Statement has been declared effective and the
authorized consideration therefor is received by the Trust, they
will be validly issued, fully paid and nonassessable by the Trust.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust or any series
of the Trust (a "Series"). However, the Agreement and Declaration
of Trust disclaims shareholder liability for acts or obligations
of the Trust or any Series and requires that notice of such
disclaimer be given in every note, bond, contract, instrument,
certificate or other undertaking issued by or on behalf of the
Trust. The Agreement and Declaration of Trust provides for
indemnification out of property of a particular Series for all
loss and expense of any shareholder of that Series held personally
liable for obligations of that Series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the relevant Series
would be unable to meet its obligations.
In rendering the foregoing opinion, we have relied upon the
opinion of Ropes & Gray expressed in their letter to us dated
January 29, 1999.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit
that we are in the category of persons whose consent is required
under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Statement of Additional Information constituting part of this
Post-Effective Amendment No. 51 to the registration statement of
Stein Roe Investment Trust on Form N-1A (the "Registration
Statement") of our report dated August 11, 1998, relating to the
financial statements and financial highlights appearing in the
June 30, 1998 Annual Report to Shareholders of Colonial Aggressive
Growth Fund, a series of Colonial Trust VI, which are also
incorporated by reference into the Registration Statement. We
also consent to the reference to us under the heading "Financial
Highlights" in the Prospectus.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 29, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 351,183
<RECEIVABLES> 222
<ASSETS-OTHER> 53
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 351,458
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 406
<TOTAL-LIABILITIES> 406
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 233,215
<SHARES-COMMON-STOCK> 15,634
<SHARES-COMMON-PRIOR> 14,731
<ACCUMULATED-NII-CURRENT> 855
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 112,368
<NET-ASSETS> 351,052
<DIVIDEND-INCOME> 4,404
<INTEREST-INCOME> 3,194
<OTHER-INCOME> 0
<EXPENSES-NET> 3,902
<NET-INVESTMENT-INCOME> 3,696
<REALIZED-GAINS-CURRENT> 7,267
<APPREC-INCREASE-CURRENT> (229)
<NET-CHANGE-FROM-OPS> 10,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,131
<DISTRIBUTIONS-OF-GAINS> 14,181
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,902
<NUMBER-OF-SHARES-REDEEMED> 3,635
<SHARES-REINVESTED> 636
<NET-CHANGE-IN-ASSETS> 13,586
<ACCUMULATED-NII-PRIOR> 1,295
<ACCUMULATED-GAINS-PRIOR> 11,111
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,902
<AVERAGE-NET-ASSETS> 363,393
<PER-SHARE-NAV-BEGIN> 22.91
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.55
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.45
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> STEIN ROE BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 248,128
<RECEIVABLES> 21
<ASSETS-OTHER> 61
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 248,210
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 358
<TOTAL-LIABILITIES> 358
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 175,957
<SHARES-COMMON-STOCK> 8,074
<SHARES-COMMON-PRIOR> 8,526
<ACCUMULATED-NII-CURRENT> 573
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,117
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56,205
<NET-ASSETS> 247,852
<DIVIDEND-INCOME> 2,361
<INTEREST-INCOME> 8,542
<OTHER-INCOME> 0
<EXPENSES-NET> 2,857
<NET-INVESTMENT-INCOME> 8,046
<REALIZED-GAINS-CURRENT> 22,004
<APPREC-INCREASE-CURRENT> (27,976)
<NET-CHANGE-FROM-OPS> 2,074
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,492
<DISTRIBUTIONS-OF-GAINS> 16,945
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 668
<NUMBER-OF-SHARES-REDEEMED> 1,735
<SHARES-REINVESTED> 615
<NET-CHANGE-IN-ASSETS> (36,994)
<ACCUMULATED-NII-PRIOR> 182
<ACCUMULATED-GAINS-PRIOR> 9,383
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,857
<AVERAGE-NET-ASSETS> 277,843
<PER-SHARE-NAV-BEGIN> 33.41
<PER-SHARE-NII> 0.95
<PER-SHARE-GAIN-APPREC> (0.90)
<PER-SHARE-DIVIDEND> 0.76
<PER-SHARE-DISTRIBUTIONS> 2.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.70
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> STEIN ROE GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 615,756
<RECEIVABLES> 237
<ASSETS-OTHER> 80
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 616,073
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 728
<TOTAL-LIABILITIES> 728
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 323,268
<SHARES-COMMON-STOCK> 17,730
<SHARES-COMMON-PRIOR> 17,218
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,589)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 295,666
<NET-ASSETS> 615,345
<DIVIDEND-INCOME> 4,698
<INTEREST-INCOME> 1,399
<OTHER-INCOME> 0
<EXPENSES-NET> 6,749
<NET-INVESTMENT-INCOME> (652)
<REALIZED-GAINS-CURRENT> (894)
<APPREC-INCREASE-CURRENT> 29,857
<NET-CHANGE-FROM-OPS> 28,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 36,957
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,955
<NUMBER-OF-SHARES-REDEEMED> 3,319
<SHARES-REINVESTED> 876
<NET-CHANGE-IN-ASSETS> 7,676
<ACCUMULATED-NII-PRIOR> 55
<ACCUMULATED-GAINS-PRIOR> 34,207
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,749
<AVERAGE-NET-ASSETS> 657,231
<PER-SHARE-NAV-BEGIN> 35.29
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 1.61
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.71
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STEIN ROE CAPITAL OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 544,869
<INVESTMENTS-AT-VALUE> 683,729
<RECEIVABLES> 15,854
<ASSETS-OTHER> 113
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 699,676
<PAYABLE-FOR-SECURITIES> 16,172
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,391
<TOTAL-LIABILITIES> 18,563
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 551,069
<SHARES-COMMON-STOCK> 26,962
<SHARES-COMMON-PRIOR> 38,173
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,796)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 138,860
<NET-ASSETS> 681,133
<DIVIDEND-INCOME> 860
<INTEREST-INCOME> 3,662
<OTHER-INCOME> 0
<EXPENSES-NET> 11,313
<NET-INVESTMENT-INCOME> (6,791)
<REALIZED-GAINS-CURRENT> 110,560
<APPREC-INCREASE-CURRENT> (195,885)
<NET-CHANGE-FROM-OPS> (92,116)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,722
<NUMBER-OF-SHARES-REDEEMED> 19,933
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (429,509)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (119,356)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,828
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,313
<AVERAGE-NET-ASSETS> 940,411
<PER-SHARE-NAV-BEGIN> 29.10
<PER-SHARE-NII> (0.25)
<PER-SHARE-GAIN-APPREC> (3.60)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 25.25
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEIN ROE SPECIAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 917,000
<RECEIVABLES> 215
<ASSETS-OTHER> 146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 917,361
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,711
<TOTAL-LIABILITIES> 5,711
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 591,705
<SHARES-COMMON-STOCK> 37,241
<SHARES-COMMON-PRIOR> 39,288
<ACCUMULATED-NII-CURRENT> 2,198
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 158,186
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 159,561
<NET-ASSETS> 911,650
<DIVIDEND-INCOME> 7,362
<INTEREST-INCOME> 9,114
<OTHER-INCOME> 0
<EXPENSES-NET> 13,914
<NET-INVESTMENT-INCOME> 2,562
<REALIZED-GAINS-CURRENT> 212,315
<APPREC-INCREASE-CURRENT> (441,669)
<NET-CHANGE-FROM-OPS> (226,792)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 130,064
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,671
<NUMBER-OF-SHARES-REDEEMED> 12,731
<SHARES-REINVESTED> 4,013
<NET-CHANGE-IN-ASSETS> (415,928)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 110,545
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,914
<AVERAGE-NET-ASSETS> 1,232,669
<PER-SHARE-NAV-BEGIN> 33.79
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (6.06)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 3.32
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.48
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> STEIN ROE INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 114,418
<RECEIVABLES> 11
<ASSETS-OTHER> 56
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 114,485
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 241
<TOTAL-LIABILITIES> 241
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 128,439
<SHARES-COMMON-STOCK> 12,474
<SHARES-COMMON-PRIOR> 14,090
<ACCUMULATED-NII-CURRENT> 745
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,375)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,565)
<NET-ASSETS> 114,244
<DIVIDEND-INCOME> 2,828
<INTEREST-INCOME> 355
<OTHER-INCOME> 0
<EXPENSES-NET> 2,264
<NET-INVESTMENT-INCOME> 919
<REALIZED-GAINS-CURRENT> (7,353)
<APPREC-INCREASE-CURRENT> (18,814)
<NET-CHANGE-FROM-OPS> (25,248)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,450
<DISTRIBUTIONS-OF-GAINS> 8,026
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,773
<NUMBER-OF-SHARES-REDEEMED> 8,127
<SHARES-REINVESTED> 738
<NET-CHANGE-IN-ASSETS> (51,844)
<ACCUMULATED-NII-PRIOR> 554
<ACCUMULATED-GAINS-PRIOR> 7,627
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,264
<AVERAGE-NET-ASSETS> 147,921
<PER-SHARE-NAV-BEGIN> 11.79
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (2.01)
<PER-SHARE-DIVIDEND> 0.11
<PER-SHARE-DISTRIBUTIONS> 0.58
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.16
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> STEIN ROE YOUNG INVESTOR FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 686,067
<RECEIVABLES> 806
<ASSETS-OTHER> 49
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 686,922
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 898
<TOTAL-LIABILITIES> 898
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 595,652
<SHARES-COMMON-STOCK> 30,245
<SHARES-COMMON-PRIOR> 20,899
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,217
<NET-ASSETS> 686,024
<DIVIDEND-INCOME> 4,239
<INTEREST-INCOME> 2,204
<OTHER-INCOME> 0
<EXPENSES-NET> 8,189
<NET-INVESTMENT-INCOME> (1,746)
<REALIZED-GAINS-CURRENT> 18,158
<APPREC-INCREASE-CURRENT> (31,047)
<NET-CHANGE-FROM-OPS> (14,635)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 7,157
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,030
<NUMBER-OF-SHARES-REDEEMED> 8,999
<SHARES-REINVESTED> 315
<NET-CHANGE-IN-ASSETS> 210,518
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,189
<AVERAGE-NET-ASSETS> 624,812
<PER-SHARE-NAV-BEGIN> 22.75
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.32
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.68
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> STEIN ROE SPECIAL VENTURE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 116,302
<RECEIVABLES> 2
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 116,336
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 257
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 148,402
<SHARES-COMMON-STOCK> 11,046
<SHARES-COMMON-PRIOR> 13,511
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,068)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25,255)
<NET-ASSETS> 116,079
<DIVIDEND-INCOME> 813
<INTEREST-INCOME> 778
<OTHER-INCOME> 0
<EXPENSES-NET> 2,615
<NET-INVESTMENT-INCOME> (1,024)
<REALIZED-GAINS-CURRENT> 910
<APPREC-INCREASE-CURRENT> (67,561)
<NET-CHANGE-FROM-OPS> (67,675)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 24,530
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,547
<NUMBER-OF-SHARES-REDEEMED> 7,665
<SHARES-REINVESTED> 1,653
<NET-CHANGE-IN-ASSETS> (119,676)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 16,736
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,615
<AVERAGE-NET-ASSETS> 203,836
<PER-SHARE-NAV-BEGIN> 17.45
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> (5.08)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.77
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.51
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> STEIN ROE GROWTH OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 47,094
<INVESTMENTS-AT-VALUE> 49,874
<RECEIVABLES> 217
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,122
<PAYABLE-FOR-SECURITIES> 29
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 119
<TOTAL-LIABILITIES> 148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,005
<SHARES-COMMON-STOCK> 4,802
<SHARES-COMMON-PRIOR> 4,625
<ACCUMULATED-NII-CURRENT> (26)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,785)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,780
<NET-ASSETS> 49,974
<DIVIDEND-INCOME> 137
<INTEREST-INCOME> 194
<OTHER-INCOME> 0
<EXPENSES-NET> 678
<NET-INVESTMENT-INCOME> (347)
<REALIZED-GAINS-CURRENT> (1,412)
<APPREC-INCREASE-CURRENT> (942)
<NET-CHANGE-FROM-OPS> (2,701)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,178
<NUMBER-OF-SHARES-REDEEMED> 2,001
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 144
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> (373)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 781
<AVERAGE-NET-ASSETS> 54,258
<PER-SHARE-NAV-BEGIN> 10.77
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> (0.29)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> STEIN ROE LARGE COMPANY FOCUS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
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</TABLE>
